MITH, BELL & CO., LTD VS. VICENTE SOTELO MATTI
G.R. No. L-16570 March 9, 1922
FACTS:
Smith Bell and Co. entered into contract with Mr. Vicente Sotelo in August 1918. Two steel tanks were to be sold to Sotelo in the amount of P21,000.00; two expellers at P25,000.00 each and two electric motors at P2,000.00 each. The steel tanks are to be delivered within 3 or 4 months; the expellers to be delivered in September 1918 or as soon as possible; electric motors approximate delivery within 90 days and is not guaranteed. The tanks arrived at Manila on the 27th of April, 1919: the expellers on the 26th of October, 1918; and the motors on the 27th of February, 1919. The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of these goods, but Mr. Sotelo refused to receive them and to pay the prices stipulated.
The plaintiff brought suit against the defendant, based on four separate causes of action, 1.) alleging, among other facts, that it 2.) immediately notified the defendant of the arrival of the goods, and 3.) asked instructions from him as to the delivery thereof, and that the defendant 4.) refused to receive any of them and to pay their price. The plaintiff, further, alleged that the expellers and the motors were in good condition.
In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil Refining and By-Products Co., Inc., denied the plaintiff's allegations as to the shipment of these goods and their arrival at Manila, the notification to the defendant, Mr. Sotelo, the latter's refusal to receive them and pay their price, and the good condition of the expellers and the motors, alleging as special defense that Mr. Sotelo had made the contracts in question as manager of the intervenor, the Manila Oil Refining and By-Products Co., Inc which fact was known to the plaintiff, and that "it was only in May, 1919, that it notified the intervenor that said tanks had arrived, the motors and the expellers having arrived incomplete and long after the date stipulated." As a counterclaim or set-off, they also allege that, as a consequence of the plaintiff's delay in making delivery of the goods, which the intervenor intended to use in the manufacture of cocoanut oil, the intervenor suffered damages in the sums of one hundred sixteen thousand seven hundred eighty-three pesos and ninety-one centavos (P116,783.91) for the nondelivery of the tanks, and twenty-one thousand two hundred and fifty pesos (P21,250) on account of the expellers and the motors not having arrived in due time.
ISSUE:
Was the condition dependent upon chance or upon will of third persons?
RULING:
Yes. And as the export of the machinery in question was, as stated in the contract, contingent upon the sellers obtaining certificate of priority and permission of the United States Government, subject to the rules and regulations, as well as to railroad embargoes, then the delivery was subject to a condition the fulfillment of which depended not only upon the effort of the herein plaintiff, but upon the will of third persons who could in no way be compelled to fulfill the condition. In cases like this, which are not expressly provided for, but impliedly covered, by the Civil Code, the obligor will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in reality.
In such cases, the decisions prior to the Civil Code have held that the obligee having done all that was in his power, was entitled to enforce performance of the obligation. This performance, which is fictitious � not real � is not expressly authorized by the Code, which limits itself only to declare valid those conditions and the obligation thereby affected; but it is neither disallowed, and the Code being thus silent, the old view can be maintained as a doctrine.
BORROMEO VS. FRANCO
5 PHIL 49
FACTS:
On April 19, 1902, the Francos executed a contract to sell their property to Borromeo wherein the latter was given six months from the execution of the instrument to arrange and complete the documents and papers relating to the said property. On January 7, 1903, Borromeo filed a complaint praying that defendants be compelled to sell to him the property in question under the terms of the contract. He had already taken steps to complete the documents and papers relating to the property but he was unable to complete it. The Francos answered and asked that the complaint be dismissed for Borromeo failed to comply with the condition of completing the documents and papers related to the property.
ISSUE:
Can the petitioner demand fulfillment from the respondent?
RULING:
The Court held that the contract in question is a bilateral one containing mutual obligations and the fulfillment of which may be demanded. The failure of the petitioner to complete the documents and papers related to the property is not an essential part of the contract and cannot be an obstacle for the fulfillment thereof. The obligation to buy the property is correlative with the obligation to sell it. The obligation of Borromeo to perfect the papers of the property is not correlative with the obligation to sell the property. These obligations do not arise from the same cause. They create no reciprocal rights between the contracting parties; so that the failure to comply with this stipulation does not give the defendants the right to cancel the obligation which they imposed upon themselves in accordance with Article 1191 of the Civil Code, since no real juridical bilaterality or reciprocity existed between the two obligations. One obligation is entirely independent of the other.
UNIVERSITY OF THE PHILIPPINES VS. DE LOS ANGELES
35 SCRA 102
FACTS:
On November 2, 1960, UP and ALUMCO entered into a logging agreement whereby the latter was granted exclusive authority to cut, collect and remove timber from the Land Grant for a period starting from the date of agreement to December 31, 1965, extendible for a period of 5 years by mutual agreement.
On December 8, 1964, ALUMCO incurred an unpaid account of P219,362.94. Despite repeated demands, ALUMCO still failed to pay, so UP sent a notice to rescind the logging agreement. On the other hand, ALUMCO executed an instrument entitled “Acknowledgment of Debt and Proposed Manner of Payments. It was approved by the president of UP, which stipulated the following:
3. In the event that the payments called for are not sufficient to liquidate the foregoing indebtedness, the balance outstanding after the said payments have been applied shall be paid by the debtor in full no later than June 30, 1965.
5. In the event that the debtor fails to comply with any of its promises, the Debtor agrees without reservation that Creditor shall have the right to consider the Logging Agreement rescinded, without the necessity of any judicial suit…
ALUMCO continued its logging operations, but again incurred an unpaid account. On July 19,1965, UP informed ALUMCO that it had, as of that date, considered rescinded and of no further legal effect the logging agreement, and that UP had already taken steps to have another concessionaire take over the logging operation. ALUMCO filed a petition to enjoin UP from conducting the bidding. The lower court ruled in favor of ALUMCO, hence, this appeal.
ISSUE:
Can petitioner UP treat its contract with ALUMCO rescinded, and may disregard the same before any judicial pronouncement to that effect?
RULING:
Yes. In the first place, UP and ALUMCO had expressly stipulated that upon default by the debtor, UP has the right and the power to consider the Logging Agreement of December 2, 1960 as rescinded without the necessity of any judicial suit. As to such special stipulation and in connection with Article 1191 of the Civil Code, the Supreme Court, stated in Froilan vs. Pan Oriental Shipping Co:
“There is nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof, even without court intervention. In other words, it is not always necessary for the injured party to resort to court for rescission of the contract.”
PHILIPPINE AMUSEMENT ENTERPRISES VS. NATIVIDAD
21 SCRA 284
FACTS:
On January 6, 1961 the plaintiff, Philippine Amusement Enterprises, Inc., entered into a contract with the defendant Soledad Natividad, whereby the former leased to the latter an automatic phonograph, more popularly known as "jukebox". Sometime thereafter, Natividad wrote a letter to plaintiff requesting for the return of the jukebox to the company. Natividad reasoned out that said jukebox is defective. The plaintiff however, contended that the stocking up of coins is quite normal in any coin-operated phonograph. It then rightfully re-installed a new jukebox in replacement of the first one.
On August 4 and October 16, 1961, plaintiff demanded from defendant spouses the compliance to renew the lease contract. Defendants refused the demand and ordered for the rescission of the contract in their favor by reason of the plaintiff's failure to perform its obligation to render the automatic phonograph suitable for the purpose for which it was intended.
ISSUE:
Is defendant entitled to rescission?
RULING:
No. Rescission by judicial action under Article 1191 will be ordered only where the breach complained of is substantial as to defeat the object of the parties in entering into the agreement. It will not be granted where the breach is slight or casual. The defendants asked the plaintiff to retrieve its phonograph, claiming that there were times when the coins dropped into the slot would get stuck, resulting in its failure to play the desired music. But apart from this bare statement, there is nothing in the evidence which shows the frequency with which the jukebox failed to function properly. The expression "there are times" connotes occasional failure of the phonograph to operate, not frequent enough to render it unsuitable and unserviceable.
ROQUE VS. LAPUS
96 SCRA 741
FACTS:
Sometime in 1964, plaintiff and defendant entered into an agreement of sale covering Lots 1, 2 and 9, Block 1, of said property, payable in 120 equal monthly installments at the rate of P16.00, P15.00 per square meter, respectively. In accordance with said agreement, defendant paid to plaintiff the sum of P150.00 as deposit and the further sum of P740.56 to complete the payment of four monthly installments covering the months of July, August, September, and October, 1954.
On January 24, 1955, defendant requested plaintiff that he be allowed to abandon and substitute Lots 1, 2 and 9, the subject with Lots 4 and 12, Block 2 of the Rockville Subdivision, which are corner lots, to which request plaintiff graciously acceded. The evidence discloses that defendant proposed to plaintiff modification of their previous contract to sell because he found it quite difficult to pay the monthly installments on the three lots, and besides the two lots he had chosen were better lots, being corner lots. In addition, it was agreed that the purchase price of these two lots would be at the uniform rate of P17.00 per square meter payable in 120 equal monthly installments, with interest at 8% annually on the balance unpaid. Pursuant to this new agreement, defendant occupied and possessed Lots 4 and 12, and enclosed them, including the portion where his house now stands, with barbed wires and adobe walls. However, aside from the deposit of P150.00 and the amount of P740.56, which were paid under their previous agreement, defendant failed to make any further payment on account of the agreed monthly installments for the two lots in dispute, under the new contract to sell. Plaintiff demanded upon defendant not only to pay the stipulated monthly installments in arrears, but also to make up-to-date his payments, but defendant refused to comply with plaintiff's demands.
On or about November 3, 1957, plaintiff demanded upon defendant to vacate the lots in question and to pay the reasonable rentals thereon at the rate of P60.00 per month from August, 1955. On January 22, 1960, petitioner Felipe C, Roque filed the complaint against defendant Nicanor Lapuz for rescission and cancellation of the agreement of sale between them involving the two lots in question and prayed that judgment be rendered ordering the rescission and cancellation of the agreement of sale, the defendant to vacate the two parcels of land and remove his house therefrom and to pay to the plaintiff the reasonable rental thereof at the rate of P60.00 a month from August 1955 until such time as he shall have vacated the premises, and to pay the sum of P2,000.00 as attorney's fees, costs of the suit and award such other relief or remedy as may be deemed just and equitable in the premises.
The Court of Appeals rendered its decision that the defendant Nicanor Lapuz is granted a period of ninety (90) days from entry hereof within which to pay the balance. Hence, this appeal.
ISSUE:
Can private respondent be entitled to the Benefits of the third paragraph of Article 1191, New Civil Code, for the fixing of period
RULING:
No. Respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC Having been in default and acted in bad faith, he is not entitled to the new period of 90 days from entry of judgment within which to pay petitioner the balance of P11,434.44 with interest due on the purchase price of P12,325.00 for the two lots. To allow and grant respondent an additional period for him to pay the balance of the purchase price, which balance is about 92% of the agreed price, would be tantamount to excusing his bad faith and sanctioning the deliberate infringement of a contractual obligation that is repugnant and contrary to the stability, security and obligatory force of contracts. Moreover, respondent's failure to pay the succeeding 116 monthly installments after paying only 4 monthly installments is a substantial and material breach on his part, not merely casual, which takes the case out of the application of the benefits of pa paragraph 3, Art. 1191, N.C.C.
Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages which the trial court and the appellate court, in the latter's original decision, granted in the form of rental at the rate of P60.00 per month from August, 1955 until respondent shall have actually vacated the premises, plus P2,000.00 as attorney's fees. The Court affirmed the same to be fair and reasonable. The Court also sustained the right of the petitioner to the possession of the land, ordering thereby respondent to vacate the same and remove his house therefrom.
BOYSAW VS. INTERPHIL PROMOTIONS
148 SCRA 635
FACTS:
Solomon Boysaw and his then Manager, Willie Ketchum, signed with Interphil Promotions, Inc. represented by Lope Sarreal, Sr., a contract to engage Gabriel "Flash" Elorde in a boxing contest for the junior lightweight championship of the world. It was stipulated that the bout would be held at the Rizal Memorial Stadium in Manila on September 30, 1961 or not later than thirty [30] days thereafter should a postponement be mutually agreed upon, and that Boysaw would not, prior to the date of the boxing contest, engage in any other such contest without the written consent of Interphil Promotions, Inc.
However, before September 30, 1961, Boysaw entered into a non-title bout on June 19, 1961 and without consent from Interphil, Ketchum assigned to Amado Araneta the managerial rights over Boysaw. Amado Araneta in turn transferred the earlier acquired managerial rights to Alfredo again without the consent from Interphil. Yulo thereafter informed Interphil Boysaw’s readiness to comply with the boxing contract of May 1, 1961. The GAB after a series of conferences of both parties scheduled the Elorde-Boysaw fight on November 4, 1961. Yulo refused to accept the charge in the fight date even after Sarreal offered to advance the fight date to October 28, 1961. However, he changed his mind and decided to accept the fight date on November 4, 1961. While an Elorde-Boysaw fight was eventually staged, the fight contemplated in the May 1, 1961 boxing contract never materialized.
As a result, Yulo and Boysaw sued Interphil for damages allegedly due to the latter’s refusal to honor their commitments under the boxing contract of May 1, 1961.
ISSUES:
1. Was there a violation of the fight contract of May 1, 1961?
2. In reciprocal obligations, who has the power to rescind?
RULING:
1. Yes. On the issue pertaining to the violation of the May 1, 1961 fight contract, the evidence established that the contract was violated by appellant Boysaw himself when, without the approval or consent of Interphil, he fought Louis Avila on June 19, 1961 in Las Vegas Nevada. Appellant Yulo admitted this fact during the trial. Another violation of the contract in question was the assignment and transfer, first to J. Amado Araneta, and subsequently, to appellant Yulo, Jr., of the managerial rights over Boysaw without the knowledge or consent of Interphil.
2. The power to rescind obligations is implied, in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. There is no doubt that the contract in question gave rise to reciprocal obligations. "Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other"The power to rescind is given to the injured party. "Where the plaintiff is the party who did not perform the undertaking which he was bound by the terms of the agreement to perform 4 he is not entitled to insist upon the performance of the contract by the defendant, or recover damages by reason of his own breach "
On the validity of the fight postponement, the violations of the terms of the original contract by appellants vested the appellees with the right to rescind and repudiate such contract altogether. That they sought to seek an adjustment of one particular covenant of the contract, is under the circumstances, within the appellee's rights.
EARTH MINERALS VS. MACARAIG
194 SCRA 1
FACTS:
On September 11, 1980, Zambales Chromite, owner of 10 patentable chromite mining claims, and Philzea, as operator and the herein respondent, entered into a “Contract of Development, Exploitation and Productive Operation” on the ten (10) patentable mining claims. During the lifetime of such contract, Earth Minerals Exploration, Inc., the herein petitioner, submitted a Letter of Intent on to Zambales Chromite whereby the former proposed and the latter agreed to operate the same mining area subject of the earlier agreement between Zambales Chromite and Philzea Mining. Consequently, the same mining property of Zambales Chromite became the subject of different agreements with two separate and distinct operators.
Earth Minerals filed a petition for cancellation of the contract between Zambales Chromite and Philzea Mining to the Bureau of Mines and Geo-Sciences (BMGS). Earth Minerals alleged that Philzea Mining committed grave and serious violations of the latter’s contract because of failure to produce the agreed volume of chromite ores; failure to pay ad valorem taxes; failure to put up assay buildings and offices, all resulting in the non-productivity and non-development of the mining area.
Philzea Mining filed a motion to dismiss on the ground that Earth Minerals is not the proper party in interest. BMGS denied the petition, so Philzea elevated the case to Ministry of Natural Resources (MNR) to dismiss the appeal. MNR on the other hand ordered BMGS to investigate and found out that Philzea grossly violated the terms and conditions of the contract. BMGS rendered a decision canceling the said mining contract.
ISSUE:
Is Earth Minerals the proper party to seek cancellation of the operating agreement between Philzea Mining and Zambales Chromite?
RULING:
Yes. Petitioner Earth Minerals seeks the cancellation of the contract between Zambales Chromite and Philzea Mining, not as a party to the contract but because his rights are prejudiced by the said contract. The prejudice and detriment to the rights and interest of petitioner stems from the continued existence of the contract between Zambales Chromite and private respondent Philzea Mining. Unless and until the contract between Zambales Chromite and Philzea Mining is cancelled, petitioner's contract with the former involving the same mining area cannot be in effect and it cannot perform its own obligations and derive benefits under its contract. The Director of Mines and Geo-Sciences in his order denying Philzea Mining's motion to dismiss the petition for cancellation of the operating agreement between Philzea Mining and Zambales Chromite stated:
From the documentary evidence submitted by the petitioner, the Letter of Intent and Operating Agreement between Zambales Chromite and Earth Minerals, it may be gleaned that, at least, there appears some color of right on the part of petitioner to request for cancellation/rescission of the contract dated September 11, 1980 between Zambales Chromite and Philzea Mining.
GIMENEZ VS. COURT OF APPEALS
195 SCRA 1
FACTS:
Spouses Gimenez entered into a conditional contract of sale of a house and lot with Mercado for the price of Php 500,000 subject to the following conditions:
1. A downpayment of the ONE HUNDRED THOUSAND (P100,000.00) PESOS in cash will be paid by Mr. Jose Mercado to Mr. Alfredo Gimenez upon signing of this agreement.
2. The premises shall be ready for occupancy on July 6, 1975, furnished.
3. The balance less the GSIS loan on said property shall be paid by the buyer in two or more equal installments but not later than one year.
4. A deed of absolute sale shall be executed in favor of Mr. Jose Mercado, Jr. upon payment of the 40% of the total selling price. The cost of the preparation of the deed of sale and the cost of the necessary documentary stamps shall be borne by the seller while the cost of the registration fees to be borne by the buyer.
5. However, if the balance is not fully paid within one year period, the total payments received by the seller shall be considered as advance payments to the rental of the house in the amount of P5,000.00.
Mercado was only able to pay Php 20,000. More than two years after, the parties executed another agreement wherein Mercado promise to pay the balance of P370,000 on or before October 6, 1977 plus 1% interest on the balance from July 6, 1976 to September 6, 1977 and the unpaid interest on the GSIS. Five years after the parties executed the contract to sell, Mercado had paid only P343,000 on the price of the Gimenez property. Gimenez demanded that Mercado pay his rents in arrears and vacate the premises. The Metropolitan Trial Court rendered a decision in favor of Spouses Gimenez. However, on appeal, the RTC dismissed the complaint on the ground of prematurity because the conflict arising from the condition Contract of Sale and subsequent agreements relative thereto entered into between the parties should first be resolved and to determine whether or not a cause of action for ejectment exists.
On June 20, 1988, the trial court dismissed the petition filed by the spouses for annulment of contract, recovery of possession, and damages based on Article 1191 of the New Civil Code, and ordered them to execute a Deed of Sale with Assumption of Mortgage over the property in favor of Mercado. Upon appeal, CA affirmed with modification the decision of the trial court.
ISSUE:
Can the Spouses Gimenez still rescind the contract to sell?
RULING:
Yes. Under the circumstances, and considering how much real estate prices have jumped since 1975, it would be a travesty of justice to deny the seller’s right to cancel the sale under Article 1911 of the New Civil Code. There is not gainsaying Mercado’s breach of the contract to sell. He failed to pay the stipulated purchase price of Php 500,000 within one-year period originally fixed in the agreement which expire on July 5, 1976 nor within the extended period fixed in their supplemental agreement which expired on October 6, 1977,nor within the other extensions he sought thereafter. Such breaches entitled the sellers to ask for the cancellation of the contract to sell with damages. Therefore, the decision of CA was annulled and set aside. The contract to sell and the supplemental agreement were cancelled and annulled. Respondent Mercado was ordered to vacate the property of the Spouses Gimenez and restore its possession to them. He was further ordered to pay the sum of Php 5,000 per month from September 1984 until he vacates the same plus Php 20,000 as attorney’s fees.
JACINTO VS. KAPARAZ
G.R. No. 81158 May 22, 1992
FACTS:
On 11 March 1966, petitioners and private respondents entered into an agreement under which the private respondents agreed to sell and convey to petitioners a portion consisting of 600 square meters of a lot located in Davao Oriental for a total amount of P1,800.00 with a downpayment of P800.00 upon execution of the Agreement. The balance of P1,000.00 was to be paid by petitioners on installment at the rate of P100.00 a month to the Development Bank of the Philippines to be applied to private respondents' loan accounts. The pertinent portions of the Agreement read as follows:
6. That the PARTY OF THE FIRST PART hereby agrees, promises and binds himself to sell, cede, transfer, and convey absolutely to the PARTY OF THE SECOND PART 600 -square meter portion of the property together with all the improvements thereon…
9. That the PARTY OF THE FIRST PART agrees and binds himself to acknowledge receipt of every and all monthly payments remitted to the Development Bank of the Philippines by the PARTY OF THE SECOND PART and further agrees and binds himself to execute the final deed of absolute sale of the 600 square meters herein above referred to in favor of the PARTY OF THE SECOND PART as soon as the settlement or partition of the estate of the deceased Narcisa Kaparaz shall have been consummated and effected, but not later than March 31, 1967.
Upon the execution of the agreement, petitioners paid the downpayment of P800.00 and were placed in possession of the portion described therein. As to the P1,000.00 which was to be paid directly to the DBP, petitioners claim that they had even made an excess payment of P100.00.In view of the refusal of private respondents to execute the deed of sale, petitioners filed against them a complaint for specific performance with the Court of First Instance.Private respondents alleged that the sale did not materialize because of the failure of petitioners to fulfill their promise to make timely payments on the stipulated price to the DBP; as a result of such failure, they (private respondents) failed to secure the release of the mortgage on the property. They then prayed for the dismissal of the case and a declaration that the agreement is null and void.
ISSUE:
Are respondents entitled to rescind the agreement?
RULING:
No. Since in a contract of sale, the non-payment of the price is a resolutory condition, 13 the remedy of the seller under Article 1191 of the Civil Code is to exact fulfillment or to rescind the contract. In respect, however, to the sale of immovable property, this Article must be read together with Article 1592 of the same Code:
Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term.
In the case at bar, there was non-compliance with the requirements prescribed in there provisions. It is not controverted that private respondents had neither filed an action for specific performance nor demand the rescission of the agreement either judicially or by a notarial act before the filing of the complaint. It is only in their Answer that they belatedly raised the defense of resolution of the contract pursuant to Article 1191 by reason of petitioner’s breach of their obligation. Moreover, the delay incurred by petitioners was but a casual or slight breach of the agreement, which did not defeat the object of the parties in entering in the agreement. A mere casual breach does not justify rescission. Rescission of the agreement was not available to private respondents.
KALALO VS. LUZ
GR 27782 July 31, 1970
FACTS:
On November 17, 1959, Octavio A. Kalalo (appellee) entered into an agreement with Alfredo J . Luz (appellant) whereby the former was to render engineering design services to the latter for fees, as stipulated in the agreement. Pursuant to said agreement, appellee rendered engineering services to appellant.
On December 11, 1961, appellee sent to appellant a statement of account, to which was attached an itemized statement of defendant-appellant's account, according to which the total engineering fee asked by appellee for services rendered amounted to P116,565.00 from which sum was to be deducted the previous payments made in the amount of P57,000.00, thus leaving a balance due in the amount of P59,565.00.
On May 18, 1962 appellant sent appellee a resume of fees due to the latter. Said fees, according to appellant. amounted to P10,861.08 instead of the amount claimed by the appellee. On June 14, 1962 appellant sent appellee a check for said amount, which appellee refused to accept as full payment of the balance of the fees due him. The appellant further contended that the appellee’s services were not complete or were performed in violation of the agreement and otherwise unsatisfactory.
In order to settle the dispute, and upon agreement of the parties, the trial court authorized the case to be heard before a Commissioner. The Commissioner rendered a report which, in resume, states that the amount due to appellee was $28,000.00 (U.S.) as his fee in the International Research Institute Project which was twenty percent (20%) of the $140,000.00 that was paid to appellant, and P51,539.91 for the other projects, less the sum of P69,475.46 which was already paid by the appellant.
ISSUES:
1. Was the recommendation in the Report that the payment of the amount due to Kalalo in dollars legally permissible?
2. If not, what rate of exchange should it be in pesos?
RULING:
1. No. Under the agreement,Kalalo was entitled to 20% of $140,000.00, or the amount of $28,000.00. Kalalo, however, cannot oblige the appellant to pay him in dollars, even if appellant himself had received his fee for the IRRI project in dollars. This payment in dollars is prohibited by Republic Act 529 which was enacted on June 16, 1950.
2. Under Republic Act 529, if the obligation was incurred prior to the enactment of the Act and require payment in a particular kind of coin or currency other than the Philippine currency the same shall be discharged in Philippine currency measured at the prevailing rate of exchange at the time the obligation was incurred.Republic Act 529 does not provide for the rate of exchange for the payment of obligation incurred after the enactment of said Act. The logical Conclusion, therefore, is that the rate of exchange should be that prevailing at the time of payment for such contracts.
CABARROGUIS VS. VICENTE
107 PHIL 340
FACTS:
Plaintiff Cabarroguis, a registered nurse and midwife, sustained physical injuries as a result of an accident when the AC jeepney of which she was a passenger hit another vehicle at a street corner. To avoid court litigation, defendant Vicente, owner and operator of the jeepney entered a compromise agreement with the plaintiff, obligating himself to pay 2,500 as actual and compensatory, exemplary and moral damages suffered by plaintiff. Defendant has paid a total amount of 1,500 leaving a balance of 1,000. It was stipulated in the agreement that should defendant fail to complete payment within 60 days, he would pay an additional amount of 200.00 as liquidated damages.
As defendant failed to pay, notwithstanding repeated demands, plaintiff brought a suit in the Municipal Court of Davao and rendered judgment in favor of plaintiff. Defendant appealed to the Court of First Instance which ordered the defendant to pay the plaintiff the amount of 1,200 with interest at legal rate from the date of the filing of the complaint until full payment.
ISSUE:
Did the lower court err in sentencing the defendant to pay interest from the date of the filing of the complaint until full payment?
RULING:
No. As a rule, if the obligation consists in a sum of money, the only damage a creditor may recover, if the debtor incurs in delay, is the payment of the interest agreed upon or the legal interest, unless contrary is stipulated (Article 2209). However, the creditor may also claim other damages. Such as moral or exemplary damages, in addition to interest, the award of which is left to the discretion of the court.
In obligations with a penal clause, as provided in Article 1226 of the Civil Code, the penalty shall substitute the indemnity for damages and the payment of interests. The exceptions to this rule, according to the same article, are: (1) when the contrary is stipulated; (2) when the debtor refuses to pay the penalty imposed in the obligation, in which case the creditor is entitled to interest on the amount of the penalty, in accordance with article 2209; and (3) when the obligor is guilty of fraud in the fulfillment of the obligation.
Applying the law, it is evident that no interest can be awarded on the principal obligation of defendant, the penalty of 200.00 agreed upon having taken the place of the payment of such interest and the indemnity for damages. No stipulation to the contrary was made and while defendant was sued for breach of the compromise agreement, the breach was not occasioned by fraud.
This case, however, takes a different aspect with respect to the penalty attached to the principal obligation. It has been held that in obligations for the payment of a sum of money when a penalty is stipulated for default, both the principal obligation and the penalty can be demanded by the creditor. Defendant having refused to pay when demand was made by plaintiff, the latter clearly is entitled to interest on the amount of the penalty. It is well observe that Article 2210 of the Civil Code provides that in the discretion of the court, interest may be alleged upon damages awarded for breach of contract. This interest is recoverable from the time of delay that is to say, from the date of demand, either judicial or extrajudicial. And if there is no showing as to when demand for payment was made, plaintiff must be considered to have made such demand only from the filing of the complaint.
Wherefore, with the modification that the interest shall be allowed on the amount of the penalty, the decision appealed from is affirmed.
ARRIETA VS. NARIC
10 SCRA 79
FACTS:
Paz Arrieta was awarded by NARIC the contract of delivery of 20,000 metric tons of Burmese rice at $203 per metric ton. On the other hand, the corporation committed itself to pay for the imported rice by means of an irrevocable, confimed, and assignable letter of credit in US currency in favor of Arrieta or supplier in Burma immediately. However, the corporation took the first step to open a letter of credit a full month from the execution of the contract only July 30, 1952. On the same day, Arrieta advised the corporation of the extreme necessity for the immediate opening of the letter of credit since she had by then made a tender to her supplier in Ragoon Burma. Consequently, the credit instrument applied for was opened only on September 8, 1952, since the corporation was not in financial capacity to pay the 50% marginal cash deposit when the credit instrument was approved on August 4, 1952.
As a result of the delay, the allocation of Arrieta was cancelled and the 5% deposit, approximately Php 200,000, was forfeited. Arrieta tried to restore the cancelled Burmese rice allocation, but failed. Arrieta then instead offered to substitute Thailand rice to NARIC, communicating that such was a solution which should be beneficial for both parties. However, the corporation rejected the substitution. Hence, Arrieta sent a letter to the corporation, demanding for the compensation for the damages caused her.
ISSUE:
1. Was the failure to open immediately the letter of credit in dispute amounted to a breach of the contract for which the corporation should be held liable?
2. Was there any waiver on the part of Arrieta?
RULING:
1. Yes. It was clear from the records that the sole and principal reason for the cancellation of the allocation contracted by Arrieta in Ragoon, Burma was the failure of the letter of credit to be opened. The failure, therefore, was the immediate cause for the consequent damage which resulted. It was clear from the records that the delay in the opening of the letter of credit was due to the inability of the corporation to meet the condition imposed by the bank for the granting the same.
Furthermore, the liability of the corporation stemmed not alone from failure or inability to satisfy the requirements of the bank, but its culpability arose from is willful and deliberate assumption of contractual obligations even as it was well aware of its financial incapacity to undertake the prestation. Under Article 1170, “those who in the performance of their obligation are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable in damages.” The terms “in any manner contravene the tenor thereof” includes any illicit act which impairs the strict and faithful fulfillment of the obligation, or every kind or defective performance. In general also, every debtor who fails in the performance of his obligation is bound to indemnify for the losses and damages caused thereby.
The payment for damages or the award to be given should be converted into the Philippine peso at the rate of exchange prevailing at the time the obligation was incurred pursuant to RA 527.
2. No. The subsequent offer to substitute the Thailand rice for the originally contracted Burmese did not constitute a waiver. Waivers are not presumed. It must be clearly and convincingly shown either by express stipulations or acts admitting no other reasonable explanation. In this case, no such intent to waive had been established.
MAKATI DEVELOPMENT CORP. VS. EMPIRE INSURANCE CO.
G. R. NO. 21780 JUNE 30, 1967
FACTS:
On March 31, 1959, Makati Development Corporation sold a lot to Rodolfo P. Andal, in Urdaneta Village, Makati, Rizal, for P55,615. A so-called "special condition" contained in the deed of sale provides that the vendee shall construct and complete at least 50% of its residence on the property within two (2) years from March 31, 1959 to the satisfaction of the vendor and, in the event of its failure to do so, the bond which the vendee has delivered to the vendor in the sum of P11,123.00 to insure faithful compliance with the above special condition will be forfeited. Andal gave a surety bond on April 10, 1959 wherein he, as principal, and the Empire Insurance Company, as surety, jointly and severally, undertook to pay the Makati Development Corporation the sum of P12,000 in case Andal failed to comply with his obligation under the deed of sale.
Andal sold the lot to Juan Carlos on January 18, 1960. As neither Andal nor Juan Carlos built a house on the lot within the stipulated period, the Makati Development Corporation, on April 3, 1961, after the lapse of the two-year period, sent a notice of claim to the Empire Insurance Co. advising it of Andal's failure to comply with his undertaking. Demand for the payment of P12,000 was refused, whereupon the Makati Development Corporation filed a complaint in the Court of First Instance against the Empire Insurance Co. to recover on the bond in the full amount, plus attorney's fees. In due time, the Empire Insurance Co. filed its answer with a third-party complaint against Andal. It asked that the complaint be dismissed or, in the event of a judgment in favor of the Makati Development Corporation, that judgment be rendered ordering Andal to pay the Empire Insurance Co. whatever amount it maybe ordered to pay the Makati Development Corporation, plus interest at 12%, from the date of the filing of the complaint until said amount was fully reimbursed, and attorney's fees.
In his answer, Andal admitted the execution of the bond but alleged that the "special condition" in the deed of sale was contrary to law, morals and public policy. He averred that, at any rate, Juan Carlos had started construction of a house on the lot. The lower court rendered judgment, sentencing the Empire Insurance Co. to pay the Makati Development Corporation the amount of P1,500, with interest at the rate of 12% from the time of the filing of the complaint until the amount was fully paid, and to pay attorney's fees in the amount of P500, and the proportionate part of the costs. The court directed that in case the amount of the judgment was paid by the Empire Insurance Co., Andal should in turn pay the former the sum of P1,500 with interest at 12% from the time of the filing of the complaint to the time of payment and to pay attorney's fees in the sum of P500 and proportionate part of the costs. The Makati Development Corporation appealed directly to this Court.
The appellant argues that Andal became liable for the full amount of his bond upon his failure to build a house within the two-year period which expired on March 31, 1961 and that the trial court was without authority to reduce Andal's liability on the basis of Carlos' construction of a house a month after the stipulated period because there was no privity of contract between Carlos and the Makati Development Corporation.
ISSUE:
Is Andal liable for the full amount of his bond upon his failure to comply with the special condition stipulated?
RULING:
No. While it is true that in obligations with a penal sanction the penalty takes the place of damages and the payment of interest in case of non-compliance and that the obligee is entitled to recover upon the breach of the obligation without the need of proving damages,it is nonetheless true that in certain instances a mitigation of the obligor's liability is allowed. Thus article 1229 of the Civil Code states:
The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.
Trial court found that Juan Carlos had finished more than 50 per cent of his house by April, 1961, or barely a month after the expiration on March 31, 1961 of the stipulated period. There was therefore a partial performance of the obligation within the meaning and intendment of article 1229. The penal clause in this case was inserted not to indemnify the Makati Development Corporation for any damage it might suffer as a result of a breach of the contract but rather to compel performance of the so-called "special condition" and thus encourage home building among lot owners in the Urdaneta Village. Considering that a house had been built shortly after the period stipulated, the substantial, if tardy, performance of the obligation, having in view the purpose of the penal clause, fully justified the trial court in reducing the penalty. Still it is insisted that Carlos' construction of a house on the lot sold cannot be considered a partial performance of Andal's obligation because Carlos bears no contractual relation to the Makati Development Corporation. Indeed the stipulation in this case to commence the construction and complete at least 50 per cent of the vendee's house within two years cannot be construed as imposing a strictly personal obligation on Andal. To adopt such a construction would be to limit Andal's right to dispose of the lot. There is nothing in the deed of sale restricting Andal's right to sell the lot at least within the two-year period and we think it plain that a reading of such a limitation on one of the rights of ownership must rest on more explicit language in the contract.
COMMISSIONER VS. BURGOS
G.R. No. L-36706 March 31, 1980
FACTS:
Private Respondent Victoria Amigable is an owner of a parcel of land in Cebu City that was taken by the Government sometime in 1924 for road-right-of-way purpose. In 1959, private respondent filed a complaint to recover ownership and possession of the said land, damages for illegal occupation of the Government of the same said land and Php5,000.00 for attorney’s fees. Petitioner-defendant, in its answer, alleged that the above-mentioned land was either donated or sold by its owners to the province of Cebu, also private respondent is already barred by estoppel and statute of limitations, and invoked the non-suitability of the Government. Based on the allegations of the petitioner-defendant, the trial court rendered a decision for the petitioner-defendant. However, on appeal to the Supreme Court, the Court reversed the decision and remanded the case to the court of origin for the determination of the compensation to be made to private respondent and attorney’s fees.
During the hearing for the determination of the compensation, the Government proved the value of the land through the certification issued by the Bureau of Records Management that the value of the said land was only Php2.37 per square meter. On the other hand, private respondent presented a newspaper clipping of Manila Times showing that the value of peso was Php6.775 to a dollar during the middle of 1972. Upon consideration, the trial court rendered a decision directing the Government to pay private respondent Php49,459.34 for the value of the land with 6% interest per annum and 10% attorney’s fees of the total amount due, totaling to Php214,356.75. Thereafter, the Solicitor General, representing the Government, appealed to the Supreme Court contending that the trial court erred in applying Article 1250 in the case at bar.
ISSUE:
Should Article 1250 be applied in determining the compensation for the disputed land?
RULING:
No. It is clear that Article 1250 applies only to cases where a contract or agreement is involved. It does not apply where the obligation to pay arises from law, independent of contract. The taking of private property by the Government in the exercise of its power of eminent domain does not give rise to a contractual obligation.
Moreover, the law as quoted, clearly provides that the value of the currency at the time of the establishment of the obligation shall be the basis of payment which, in cases of expropriation, would be the value of the peso at the time of the taking of the property when the obligation of the Government to pay arises. It is only when there is an "agreement to the contrary" that the extraordinary inflation will make the value of the currency at the time of payment, not at the time of the establishment of the obligation, the basis for payment. In other words, an agreement is needed for the effects of an extraordinary inflation to be taken into account to alter the value of the currency at the time of the establishment of the obligation which, as a rule, is always the determinative element, to be varied by agreement that would find reason only in the supervention of extraordinary inflation or deflation.
The correct amount of compensation due private respondent for the taking of her land for a public purpose would be not P49,459.34, as fixed by the respondent court, but only P14,615.79 at P2.37 per square meter, the actual value of the land of 6,167 square meters when it was taken in 1924. The interest in the sum of P145,410.44 at the rate of 6% from 1924 up to the time respondent court rendered its decision, as was awarded by the said court should accordingly be reduced.
J.M. TUASON & CO., INC. VS. JAVIER
G.R. NO. L-28569 February 27, 1970
FACTS:
On September 7, 1954, petitioner J.M. Tuason & Co., Inc. entered a contract to sell with respondent Ligaya Javier a parcel of land known as Lot No. 28, Block No. 356, PSD 30328, of the Sta. Mesa Heights Subdivision for the sum of Php3,691.20 with 10% interest per annum; Php396.12 will be payable upon execution of the contract, and an installment of Php43.92 monthly for a period of ten (10) years. It was further stipulated in the contract, particularly the sixth paragraph, that upon failure of respondent to pay the monthly installment, she is given a one month grace period to pay such installment together with the monthly installment falling on the said grace period. Furthermore, failure to pay both monthly installments, respondent will pay an additional 10% interest. And after 90 days from the end of the grace period, petitioner can rescind the contract, the payments made by respondent will be considered as rentals.
Upon the execution of the contract, respondent religiously paid the monthly installment until January 5, 1962. Respondent, however, was unable to the pay the monthly installments within the grace period which petitioner, subsequently, sent a letter to respondent on May 22, 1964 that the contract has been rescinded and asked the respondent to vacate the said land. So, upon failure of respondent to vacate the said land, petitioner filed an action to the Court of First Instance of Rizal for the rescission of the contract. The CFI rendered a decision in favor of respondent in applying Article 1592 of the New Civil Code. Hence, petitioner made an appeal to the Supreme Court alleging that since Article 1592 of the New Civil applies only to contracts of sale and not in contracts to sell.
ISSUE:
Did the CFI erroneously apply Article 1592 of the New Civil Code?
RULING:
Yes. Regardless, however, of the propriety of applying Article 1592, petitioner has not been denied substantial justice under Article 1234 of the New Civil Code. In this connection, respondent religiously satisfied the monthly installments for almost eight (8) years or up to January 5, 1962. It has been shown that respondent had already paid Php4,134.08 as of January 5, 1962 which is beyond the stipulated amount of Php3,691.20. Also, respondent has offered to pay all installments overdue including the stipulated interest, attorney’s fees and the costs which the CFI accordingly sentenced respondent to pay such installment, interest, fees and costs. Thus, petitioner will be able recover everything that was due thereto. Under these circumstances, the SC feel that, in the interest of justice and equity, the decision appealed from may be upheld upon the authority of Article 1234 of the New Civil Code.
LEGARDA VS. SALDAÑA
G.R. No. L-26578, January 28, 1974
FACTS:
Saldaña had entered into two written contracts with Legarda, a subdivision owner, whereby Legarda agreed to sell to him two of his lots for 1,500 per lot, payable over a span of 10 years on 120 monthly installments with 10% interest per annum. Saldaña paid for eight consecutive years but did not make any further payments due to Legarda’s failure to make the necessary improvement on the said lot which was promised by their representative, the said Mr. Cenon. Saldaña already paid a total of Php3,582.06. The statement of account shows that Saldaña paid Php1,682.28 of the principal and Php1,889.78 for the interest. It did not distinguish which of the two said lots was paid. Petitioner, then, rescinded the contract based on the stipulation of the contract that payments made by respondent shall be considered as rentals and any improvements made shall be forfeited in favor of the petitioner. The lower court ruled sustaining petitioner’s cancellation of contract. So respondent appealed and judgment was reversed in favor of the respondent ordering petitioners to deliver to plaintiff one of the two lots at the choice of the defendant and execute the deed of conveyance. Hence this petition.
ISSUE:
Was the cancellation of the sale of contract valid?
RULING:
No, even though it was stipulated that failure to complete the payment would result to the cancellation of the contract, it was still not valid. As clearly shown in the statement of account, Saldaña was able to pay one of the two said lots. Under Article 1234 of the New Civil Code, “if the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee”. Hence, under the authority of Article 1234 of the New Civil Code, Saladaña is entitled to one of the two lots of his choice and the interest paid shall be forfeited in favor of the petitioners.
SAURA VS. DBP
G.R. No. L-24968 April 27, 1972
FACTS:
Plaintiff Saura, Inc. applied to the Rehabilitation Finance Corporation (RFC), before its conversion into DBP, for an industrial loan of P500,000.00, to be used as follows: P250,000.00 for the construction of a factory building (for the manufacture of jute sacks); P240,900.00 to pay the balance of the purchase price of the jute mill machinery and equipment; and P9,100.00 as additional working capital. It was also stated in the loan, among others, that China Engineers, Ltd. will be one of the joint signatories of the loan, and Saura, Inc. will use local raw materials in the manufacture of jute sacks. Saura, Inc. had already purchased the jute mill machinery on the strength of the letter of credit extended by Prudential Bank and Trust Co. At first, China Engineers, Ltd. did not want to sign the said contract and instead Saura, Inc. suggested that in lieu of that, Saura, Inc. will put up a bond of Php123,500.00, equivalent to China Engineers, Ltd.’s subscription. But later on, agreed to sign the contract. However, RFC reduced the said loan from Php500,000.00 to Php300,000.00 despite the formal execution of the loan agreement. Then, China Engineers, Ltd. withdrew its signature to the said loan. Thereafter, Saura, Inc. demanded the release of the originally approved loan of Php500,000.00 and China Engineers, Ltd. will reinstate its signature to the said loan. RFC agreed but the loan was subject to the condition that Saura, Inc. will get the necessary certification from Department of Agriculture and Natural Resources that there will be enough supply of raw materials and will there be an increase of production of the said raw materials in its vicinity. Saura, Inc. was not able to get the necessary certification and instead requested to release the loan as follows: (1) P250,000.00 for the payment of the receipt for jute mill machineries with Prudential Bank &Trust Company , (2) P182,413.91 for the purchase of materials and equipment per attached list to enable the jute mill to operate 182,413.91, (3) P67,586.09 for raw materials and labor {(a) P25,000.00 to be released on the opening of the letter of credit for raw jute for $25,000.00, (b) P25,000.00 to be released upon arrival of raw jute, and (c) P17,586.09 to be released as soon as the mill is ready to operate.} RFC, afterward, denied such request which prompted Saura, Inc. to execute a deed of cancellation of the mortgage.
Due to Saura, Inc.’s failure to proceed with the said loan with RFC, Prudential Bank and Trust Co. sued them for their failure to pay its obligation with said bank. After almost nine years, Saura, Inc. filed a suit alleging that owing to RFC’s failure to release the proceeds of the said loan thereby preventing them from paying their obligation in regards to the jute mill project. The trial court rendered judgment for the plaintiff. Hence this petition.
ISSUE:
Was there a perfected contract between Saura, Inc. and RFC?
RULING:
Yes. However, when RFC turned down the request in its letter, the negotiations which had been going on for the implementation of the agreement reached an impasse. Saura, Inc. obviously was in no position to comply with RFC's conditions. So instead of doing so and insisting that the loan be released as agreed upon, Saura, Inc. asked that the mortgage be cancelled. The action thus taken by both parties was in the nature of mutual desistance, what Manresa terms "mutuo disenso", which is a mode of extinguishing obligations. It is a concept that derives from the principle that since mutual agreement can create a contract, mutual disagreement by the parties can cause its extinguishment.
The subsequent conduct of Saura, Inc. confirms this desistance. It did not protest against any alleged breach of contract by RFC, or even point out that the latter's stand was legally unjustified. Its request for cancellation of the mortgage carried no reservation of whatever rights it believed it might have against RFC for the latter's non-compliance. It was nine years after the loan agreement had been cancelled at its own request, that Saura, Inc. brought this action for damages. All these circumstances demonstrate beyond doubt that the said agreement had been extinguished by mutual desistance, and that on the initiative of the plaintiff-appellee itself.
GALAR VS. SASI
47 O.G. 6241
FACTS:
Luis Galar borrowed Php 15,000 from Juan Isasi for which the former drew two promissory notes. As a payment, Galar paid to PNB on behalf of Aberri Inc., which was controlled by Isasi and his wife, the outstanding balance of Php 15,848.90. In turn, PNB cancelled the indebtedness of Aberri Inc., released the mortgage that had been constituted, and delivered the title to Galar. Upon notifying Isasi of the payment made, Isasi refused to recognize the payment of Galar to PNB. Hence the attorney of Galar advised Isasi that they would consign in the court the sum of Php 20,000, representing the face value of the promissory notes. They then filed a case in the court to declare the promissory notes paid and discharged.
Isasi, on the other hand, tendered the sum of Php 15,848.90 paid by Galar to the PNB for the account and in the name of Aberri Inc. Upon refusal by Galar, Isasi, on behalf of the company, consigned the amount in the CFI of Manila and filed a complaint, praying that Galar be ordered to restore to Aberri Inc. all documents relative to the obligation formerly due to the PNB and to reimburse the amount paid by Galar to the bank be considered cancelled in view of the consignation.
ISSUE:
1. Can Luis Galar legally pay the debt without awaiting the demand on the part of Isasi?
2. Should Galar’s payment of the debt of Aberri Inc. to the bank be set off against the notes?
RULING:
1. Yes. A demand note was subject neither to suspensive condition nor a suspensive period. The demand was not a condition precedent since the effectivity and binding effect of the note does not depend upon the making of the demand. The note was binding even before the demand is made. Neither did the note constitute an implied suspensive period since there was nothing to prevent the creditor for making demand at any time. It follows, therefore, that the demand note was strictly a pure obligation as defined in Article 1179. The periods of 15 and 30 days after demand stipulated in the promissory notes could have no other purpose but to protect the debtor by giving him sufficient time to raise money to meet the demand. The period being solely for the debtor’s protection and benefit, the debtor could renounce it validly at any time. Galar was lawfully entitled to make payment even if no demand had yet been made by Isasi.
2. Yes. The payment of Galar of the indebtedness of Aberri Inc to the PNB redounded to the benefit of Isasi who had absolute control of said corporation. Thus, said payment was valid and discharged the obligation, even if such payment was not authorized by Isasi or Aberri Inc., for which Galar had the right to demand reimbursement for the amount paid. However, such reimbursement was unnecessary. Such reimbursement was extinguished by its total absorption in the larger amount due from Galar to Isasi. The consignation, therefore, of Isasi was invalid since it no longer had any obligation towards Galar. On the other hand, the balance of Php 4,151.10 due and owing from Galar to Isasi was extinguished upon the consignation of Galar in the court the sum of Php 20,000.
FAUSTINO LICHAUCO VS. FIGUERAS HERMANOS
G.R. No. L-3308
FACTS:
The Quartermaster's Department of the Army of the United States advertises semiannually for proposals to furnish lighterage for its use in the port of Manila. The service required is divided into two classes, regular and emergency. The price paid for emergency service is naturally higher than that paid for regular service wherein the lorcha are steadily employed for the entire contract period of six months.
The defendants submitted a bid for the quartermaster's contract of lighterage for the semiannual period from the 1st of July to the 31st of December, 1905, but when the proposals were opened on the 2d of May, 1905, their bid and all others were rejected. On the 16th of May, 1905, the letting of the contract was again advertised, and the defendant and other submitted new proposals which were opened on the 27th of May, 1905, and on this occasion the contract was divided and the defendants bid for the emergency service was accepted, while a third party was awarded the contract for the regular service.
There were no new negotiations entered into between the plaintiff and the defendants after the failure of defendants to secure the contract at the opening of the bids on May 2, 1905, but on the 1st of July the plaintiff Lorchas Chata and Lolin were furnished to the quartermaster under the defendants' contract for the emergency service, and were thus employed in that service for the first twenty-three and twenty-seven days of August, when they were released by the quartermaster, and the plaintiff immediately notified by the defendants that they were at his disposal.
Plaintiff claims that defendants made use of these lorchas, under the terms of the contract of April 20; that is, that the lorchas shall be rented from July 1 to Dec. 31, 1905.
ISSUE:
Is the respondent obliged to pay the rentals for the days that the lorchas were not used?
RULING:
No. It was plainly conditioned upon the defendants' securing the entire contract of lighterage and not upon their securing a part thereof. There is nothing in the contract between the parties to indicate that either one had in mind the division of the lighterage contract and indeed the language of the entire amendment suggests that both parties had in contemplation no other thing that the complete success or the complete failure of defendants to secure the lighterage contract with the Government.
In conditional obligations, the acquisition of rights, as well as the extinction or loss of those already acquired, shall depend upon the event constituting the condition.
The defendants, by taking and using these lorchas for the purpose of carrying out their contract with the quartermaster without any new agreement the obligation with the plaintiffs, impliedly and tacitly assumed the obligation of the original contract together with the amendment, so that their use of the lorcha was subject to its terms. They required no new contract with the plaintiff, express or implied, to authorize them to do so, and no sufficient reason has been suggested to justify the inference that they assumed an oppressive and dangerous risk when all that they did was in exact compliance with a written contract securing to them the right to use these lorchas on favorable and reasonable terms.
RONQUILLO VS. COURT OF APPEALS
G.R. No. L-55138
FACTS:
Petitioner Ernesto V. Ronquillo was one of four (4) defendants for the collection of the sum of P117,498.98 plus attorney's fees and costs. The other defendants were Offshore Catertrade, Inc., Johnny Tan and Pilar Tan.
On December 13, 1979, the lower court rendered its Decision based on the compromise agreement, which stipulates, among others, that the Plaintiff agrees to reduce its total claim of P117,498.95 to only P110,000.00 and defendants agree to acknowledge the validity of such claim and further bind themselves to initially pay out of the total indebtedness of P110,000.00 the amount of P55,000.00 on or before December 24, 1979, the balance of P55,000.00, defendants individually and jointly agree to pay within a period of six months from January 1980, or before June 30, 1980.
Upon the defendant’s default, herein private respondent (then plaintiff) filed a Motion for Execution. Ronquillo and another defendant Pilar Tan offered to pay their shares of the 55,000 already due.
But on January 22, 1980, private respondent Antonio So moved for the reconsideration and/or modification of the aforesaid Order of execution and prayed instead for the "execution of the decision in its entirety against all defendants, jointly and severally.
Petitioner opposed the said motion arguing that under the decision of the lower court being executed which has already become final, the liability of the four (4) defendants was not expressly declared to be solidary, consequently each defendant is obliged to pay only his own pro-rata or 1/4 of the amount due and payable.
ISSUE:
What is the nature of the liability of the defendants (including petitioner), was it merely joint, or was it several or solidary?
RULING:
SOLIDARY.
In this regard, Article 1207 and 1208 of the Civil Code provides -
"Art. 1207. The concurrence of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.
Art. 1208. If from the law, or the nature or the wording of the obligation to which the preceding article refers the contrary does not appear, the credit or debt shall be presumed to be divided into as many equal shares as there are creditors and debtors, the credits or debts being considered distinct from one another, subject to the Rules of Court governing the multiplicity of suits."
Clearly then, by the express term of the compromise agreement, the defendants obligated themselves to pay their obligation "individually and jointly."
The term "individually" has the same meaning as "collectively", "separately", "distinctively", respectively or "severally". An agreement to be "individually liable" undoubtedly creates a several obligation, and a "several obligation" is one by which one individual binds himself to perform the whole obligation.
The obligation in the case at bar being described as "individually and jointly", the same is therefore enforceable against one of the numerous obligors.
VERMEN REALTY DEVELOPMENT CORPORATION VS. COURT OF APPEALS G.R. No. 101762
FACTS:
Under the conditions of the so-called “Offsetting Agreement”, Vermen Realty (the first party in the contract) and Seneca Hardware (the second party) were under a reciprocal obligation. Seneca Hardware shall deliver to Vermen Realty construction materials worth P552,000.00. Vermen Realty's obligation under the agreement is three-fold: he shall pay Seneca Hardware P276,000.00 in cash; he shall deliver possession of units 601 and 602, Phase I, Vermen Pines Condominiums (with total value of P276,000.00) to Seneca Hardware; upon completion of Vermen Pines Condominiums Phase II, Seneca Hardware shall be given option to transfer to similar units therein.
As found by the appellate court and admitted by both parties, Seneca Hardware had paid Vermen Realty the amount of P110,151.75, and at the same time delivered construction materials worth P219,727.00. Pending completion of Phase II of the Vermen Pines Condominiums, Vermen Realty delivered to Seneca Hardware units 601 and 602 at Phase I of the Vermen Pines Condominiums (Rollo, p. 28). In 1982, the Vermen Realty repossessed unit 602. As a consequence of the repossession, the officers of the Seneca Hardware corporation had to rent another unit for their use when they went to Baguio on April 8, 1982.
In its reply the Vermen Realty corporation averred that Room 602 was leased to another tenant because Seneca Hardware corporation had not paid anything for purchase of the condominium unit. Vermen Realty corporation demanded payment of P27,848.25 representing the balance of the purchase price of Room 601.
On June 21, 1985, Seneca Hardware filed a complaint with the Regional Trial Court of Quezon City (Branch 92) for rescission of the Offsetting Agreement with damages. In said complaint, Seneca Hardware alleged that Vermen Realty Vermen Realty Corporation had stopped issuing purchase orders of construction materials after April, 1982, without valid reason, thus resulting in the stoppage of deliveries of construction materials on its (Seneca Hardware) part, in violation of the Offsetting Agreement.
After conducting hearings, the trial court rendered a decision dismissing the complaint and ordering the plaintiff (Seneca Hardware in this petition) to pay defendant (Vermen Realty in this petition) on its counterclaim in the amount of P27,848.25 representing the balance due on the purchase price of condominium unit 601.
On appeal, respondent court reversed the trial court's decision as adverted to above.
ISSUE:
Do the circumstances of the case warrant rescission of the Offsetting Agreement as prayed for by Seneca Hardware?
RULING:
Yes. The Court ruled in favor of Seneca Hardware. There is no controversy that the provisions of the Offsetting Agreement are reciprocal in nature. Reciprocal obligations are those created or established at the same time, out of the same cause, and which results in a mutual relationship of creditor and debtor between parties. In reciprocal obligations, the performance of one is conditioned on the simultaneous fulfillment of the other obligation Under the agreement, Seneca Hardware shall deliver to Vermen Realty construction materials. Vermen Realty's obligation under the agreement is three-fold: he shall pay Seneca Hardware P276,000.00 in cash; he shall deliver possession of units 601 and 602, Phase I, Vermen Pines Condominiums (with total value of P276,000.00) to Seneca Hardware; upon completion of Vermen Pines Condominiums Phase II, Seneca Hardware shall be given option to transfer to similar units therein.
Article 1191 of the Civil Code provides the remedy of rescission in (more appropriately, the term is "resolution") in case of reciprocal obligations, where one of the obligors fails to comply with what is incumbent upon him.
In the case at bar, Vermen Realty argues that it was Seneca Hardware who failed to perform its obligation in the Offsetting Agreement.
Seneca Hardware, on the other hand, points out that the subject of the Offsetting Agreement is Phase II of the Vermen Pines Condominiums. It alleges that since construction of Phase II of the Vermen Pines Condominiums has failed to begin it has reason to move for rescission of the Offsetting Agreement, as it cannot forever wait for the delivery of the condominium units to it.
It is evident from the facts of the case that Seneca Hardware did not fail to fulfill its obligation in the Offsetting Agreement. The discontinuance of delivery of construction materials to Vermen Realty stemmed from the failure of Vermen Realty to send purchase orders to Seneca Hardware.
The impossibility of fulfillment of the obligation on the part of Vermen Realty necessitates resolution of the contract for indeed, the non-fulfillment of the obligation aforementioned constitutes substantial breach of the Offsetting Agreement.
Robes-Francisco Realty & Development Corp. vs. CFI of Rizal
86 SCRA 59
Facts:
This is an appeal from the decision of the CFI of Rizal rendering judgment against Robes-Francisco Corporation to register the deed of absolute sale in favor of Millan with the Register of Deeds of Caloocan City and secure the corresponding title within ten days and if not possible said Corporation shall pay Millan the total amount she paid P5,193.63 with interest at 4% per annum from June 22, 1972 until fully paid. In either case Robes Corporation is sentenced to pay Millan nominal damages of P20,000.00 plus P5,000.00 attorney’s fees.
Petitioner Corporation questions the award of P20,000.00 nominal damages and P5,000.00 attorney’s fees alleging such to be excessive and unjustified.
In May 1962, Robes Corporation entered into a contract of sale with Millan for a parcel of land in the amount of 3,864.00 payable in installments. Millan complied with her obligation and made her final payment on December 22, 1971 for a total payment of P5,193.63 including interests and expenses for registration of title. On March 2, 1973 the deed of absolute sale was executed but the transfer certificate of title could not be executed because the parcel of land conveyed to Millan was included among other properties of the corporation mortgaged to GSIS to secure an obligation of P10 million, hence, the owner’s duplicate certificate of title of the subdivision was in the possession of the GSIS.
Issue:
Is the 4% interest provision of the contract a penal clause?
Ruling:
No. Said clause does not convey any penalty, for even without it, pursuant to Article 2209 of the Civil Code, the vendee would be entitled to recover the amount paid by her with legal rate of interest which is even more than the 4% provided for in the clause.
A penal clause is an accessory undertaking to assume greater liability in case of breach. From this alone, the 4% provision does not come to be penal in character, hence, Robes Corporation’s contention that the penalty shall substitute the indemnity for damages and the payment of interest in case of non-compliance does not hold water.
Unfortunately, Millan failed to show the actual damages she suffered as a result of the nonperformance. Nonetheless, the facts show that the right of the vendee was violated and this entitles her at the very least to nominal damages.
“In the situation before Us, We are of the view that the amount of P20,000.00 is excessive.” Bad faith can not be presumed. Petitioner Corporation expected that arrangements were possible for the GSIS to make partial releases of the subdivision lots from the overall real estate mortgage. It was only unfortunate for it not to succeed in that regard. Hence, the sum of ten thousand pesos by way of nominal damages is fair and just.
VELASCO VS. MERALCO
42 SCRA 556
FACTS:
Appellee, Manila Electric Company’s substation emitted noise above 50 decibel level. The intensity of the noise emitted by appelle’s transformers is most objectionable at night, when people are endeavoring to rest and sleep. The court ordered the appellee to bring down the noise to 50 decibel level upon complaint of appellant, Velasco. The appellee argued that instead of lowering the noise, wall barrier will be erected to separate the substation from the property but it was not push thru due to objections of appellant’s wife. Since Velasco, the appellant was the one who complained his wife’s objection should not suffice to constitute a waiver of this claim.
The appellant claimed for damages from the company but was not satisfied with the decision of the court for he believed that the decision has incorrectly assessed appellant’s damages and unreasonably reduced the amount of the claim. Appellant urged that the damages awarded him are inadequate considering the present high cost of living and calls attention to Article 1250 of the New Civil Code.
ISSUE:
Was the court correct in not applying Article 1250 of the New Civil Code?
RULING:
Yes. In Article 1250, it can be seen that the provision envisages contractual obligations where the parties selected specific currency as a medium of payment; hence it is not applicable to obligations arising from tort and not from contract as in the case at bar. Besides, there has been no showing that the factual assumption of the article has come into existence.
The damages awarded to herein appellant were by no means full compensatory damages, since the decision makes clear that appellant, by his failure to minimize his damages by means easily within his reach, was declared entitled only to a reduce award for nuisance sued upon. And the amount granted him had already taken into account the changed economic circumstances.
PEOPLE’S CAR VS. COMMANDO SECURITY SERVICE AGENCY
51 SCRA 40
FACTS:
People’s Car Inc. acquired the services of the Commando Security Service Agency to “safeguard and protect the business premises of the [People’s Car Inc.] from theft, pilferage, robbery, vandalism, and all other unlawful acts of any person or persons prejudicial to the interest of the [company].”
On April 5, 1970, the security guard brought out of the compound a client’s car and drove the car to places unknown without the consent, authority, approval, and knowledge of the company. While driving the said car, the security guard lost control of the car, which fell into a ditch. As a result of the incident, the car of the client suffered extensive damages in the total amount of Php 8,489.10, including the rental value.
The company claimed that the defendant was liable for the entire amount. On the other hand, service agency contended that its liability should not exceed Php 1,000.00 as indicated in the contract agreed upon.
The trial court ruled in favor of the service agency, hence, the appeal.
ISSUE:
Should the service agency be liable for the total actual damages incurred?
RULING:
Yes. The decision of the trial court was erroneous, since it misread the contractual provisions as agreed upon by the parties. The liability of the service agency falls under the paragraph 5 and not paragraph 4 of the said contract.
Paragraph 4 of the contract pertains to the liability of the service agency if there is any loss or damage through the negligence of its guards during watch hours. However, in the case, the security was not negligent. But rather, he acted unlawfully and wrongfully drove out a client’s car out of the premises. Therefore, the service agency was held liable for the total actual damages pursuant to paragraph 5 of the contract.
PERLA COMPANIA DE SEGUROS, INC. VS. COURT OF APPEALS
185 SCRA 741
FACTS:
Milagros Cayas was an owner of passenger vehicle, which she insured with Perla Compania de Seguros (PCSI) on February 3, 1978. On December, the vehicle figured in an accident, resulting to the injury of several passengers. Three passengers, who were injured in the accident, agreed to a settlement of Php 4,000.00 each. However, 19 year old Edgardo Perea sued Cayas for damages. The court rendered a decision in favor of Perea with cost against Cayas of Php 22,000.00. Consequently, Cayas filed a complaint for a sum of money and damages against PCSI. She sought reimbursement from PCSI with the contention that her claim was within PCSI’s contractual liability under the insurance policy. The court rendered judgment in favor of Cayas, ordering PCSI to pay Cayas Php 50,000.00 as compensation for the injured parties, Php 5,000.00 for moral damages, and Php 5,000.00 attorney’s fees. PCSI then filed a motion for reconsideration. They sought to limit its liability only to the payment made by Cayas to Perea and only up to Php 12,000.00 and denied the liability for payments made to Cayas to the other three injured parties based on the provision of the policy. The decision of the Court of Appeals was modified. PCSI should pay Cayas the amount of Php 12,000.00 plus the legal interest and attorney’s fee in the amount of Php 5,000.00
ISSUE:
Should PCSI be liable to reimburse Cayas the amount ordered by the trial court?
RULING:
No. PCSI cannot be held liable to pay Cayas the amount ordered by the trial court, because the insurance policy clearly and categorically placed PCSI’s liability for all damages arising out of death or bodily injury sustained by one person as a result of any single accident at Php 12,000.00. The said amount was in compliance with the minimum fixed by the prevailing law. PCSI’s liability under the insurance contract not being less than Php 12,000.00 was not contrary to law, good morals, good customs, and public policy. The said stipulation must be upheld as effective, valid, and biding between parties.
The condition requiring Cayas to secure a written permission of PCSI before effecting any payment in settlement of any claims against PCSI was required to safeguard its interest. There was nothing unreasonable in the stipulation aw would warrant nullification.
G.R. No. L-16570 March 9, 1922
FACTS:
Smith Bell and Co. entered into contract with Mr. Vicente Sotelo in August 1918. Two steel tanks were to be sold to Sotelo in the amount of P21,000.00; two expellers at P25,000.00 each and two electric motors at P2,000.00 each. The steel tanks are to be delivered within 3 or 4 months; the expellers to be delivered in September 1918 or as soon as possible; electric motors approximate delivery within 90 days and is not guaranteed. The tanks arrived at Manila on the 27th of April, 1919: the expellers on the 26th of October, 1918; and the motors on the 27th of February, 1919. The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of these goods, but Mr. Sotelo refused to receive them and to pay the prices stipulated.
The plaintiff brought suit against the defendant, based on four separate causes of action, 1.) alleging, among other facts, that it 2.) immediately notified the defendant of the arrival of the goods, and 3.) asked instructions from him as to the delivery thereof, and that the defendant 4.) refused to receive any of them and to pay their price. The plaintiff, further, alleged that the expellers and the motors were in good condition.
In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil Refining and By-Products Co., Inc., denied the plaintiff's allegations as to the shipment of these goods and their arrival at Manila, the notification to the defendant, Mr. Sotelo, the latter's refusal to receive them and pay their price, and the good condition of the expellers and the motors, alleging as special defense that Mr. Sotelo had made the contracts in question as manager of the intervenor, the Manila Oil Refining and By-Products Co., Inc which fact was known to the plaintiff, and that "it was only in May, 1919, that it notified the intervenor that said tanks had arrived, the motors and the expellers having arrived incomplete and long after the date stipulated." As a counterclaim or set-off, they also allege that, as a consequence of the plaintiff's delay in making delivery of the goods, which the intervenor intended to use in the manufacture of cocoanut oil, the intervenor suffered damages in the sums of one hundred sixteen thousand seven hundred eighty-three pesos and ninety-one centavos (P116,783.91) for the nondelivery of the tanks, and twenty-one thousand two hundred and fifty pesos (P21,250) on account of the expellers and the motors not having arrived in due time.
ISSUE:
Was the condition dependent upon chance or upon will of third persons?
RULING:
Yes. And as the export of the machinery in question was, as stated in the contract, contingent upon the sellers obtaining certificate of priority and permission of the United States Government, subject to the rules and regulations, as well as to railroad embargoes, then the delivery was subject to a condition the fulfillment of which depended not only upon the effort of the herein plaintiff, but upon the will of third persons who could in no way be compelled to fulfill the condition. In cases like this, which are not expressly provided for, but impliedly covered, by the Civil Code, the obligor will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in reality.
In such cases, the decisions prior to the Civil Code have held that the obligee having done all that was in his power, was entitled to enforce performance of the obligation. This performance, which is fictitious � not real � is not expressly authorized by the Code, which limits itself only to declare valid those conditions and the obligation thereby affected; but it is neither disallowed, and the Code being thus silent, the old view can be maintained as a doctrine.
BORROMEO VS. FRANCO
5 PHIL 49
FACTS:
On April 19, 1902, the Francos executed a contract to sell their property to Borromeo wherein the latter was given six months from the execution of the instrument to arrange and complete the documents and papers relating to the said property. On January 7, 1903, Borromeo filed a complaint praying that defendants be compelled to sell to him the property in question under the terms of the contract. He had already taken steps to complete the documents and papers relating to the property but he was unable to complete it. The Francos answered and asked that the complaint be dismissed for Borromeo failed to comply with the condition of completing the documents and papers related to the property.
ISSUE:
Can the petitioner demand fulfillment from the respondent?
RULING:
The Court held that the contract in question is a bilateral one containing mutual obligations and the fulfillment of which may be demanded. The failure of the petitioner to complete the documents and papers related to the property is not an essential part of the contract and cannot be an obstacle for the fulfillment thereof. The obligation to buy the property is correlative with the obligation to sell it. The obligation of Borromeo to perfect the papers of the property is not correlative with the obligation to sell the property. These obligations do not arise from the same cause. They create no reciprocal rights between the contracting parties; so that the failure to comply with this stipulation does not give the defendants the right to cancel the obligation which they imposed upon themselves in accordance with Article 1191 of the Civil Code, since no real juridical bilaterality or reciprocity existed between the two obligations. One obligation is entirely independent of the other.
UNIVERSITY OF THE PHILIPPINES VS. DE LOS ANGELES
35 SCRA 102
FACTS:
On November 2, 1960, UP and ALUMCO entered into a logging agreement whereby the latter was granted exclusive authority to cut, collect and remove timber from the Land Grant for a period starting from the date of agreement to December 31, 1965, extendible for a period of 5 years by mutual agreement.
On December 8, 1964, ALUMCO incurred an unpaid account of P219,362.94. Despite repeated demands, ALUMCO still failed to pay, so UP sent a notice to rescind the logging agreement. On the other hand, ALUMCO executed an instrument entitled “Acknowledgment of Debt and Proposed Manner of Payments. It was approved by the president of UP, which stipulated the following:
3. In the event that the payments called for are not sufficient to liquidate the foregoing indebtedness, the balance outstanding after the said payments have been applied shall be paid by the debtor in full no later than June 30, 1965.
5. In the event that the debtor fails to comply with any of its promises, the Debtor agrees without reservation that Creditor shall have the right to consider the Logging Agreement rescinded, without the necessity of any judicial suit…
ALUMCO continued its logging operations, but again incurred an unpaid account. On July 19,1965, UP informed ALUMCO that it had, as of that date, considered rescinded and of no further legal effect the logging agreement, and that UP had already taken steps to have another concessionaire take over the logging operation. ALUMCO filed a petition to enjoin UP from conducting the bidding. The lower court ruled in favor of ALUMCO, hence, this appeal.
ISSUE:
Can petitioner UP treat its contract with ALUMCO rescinded, and may disregard the same before any judicial pronouncement to that effect?
RULING:
Yes. In the first place, UP and ALUMCO had expressly stipulated that upon default by the debtor, UP has the right and the power to consider the Logging Agreement of December 2, 1960 as rescinded without the necessity of any judicial suit. As to such special stipulation and in connection with Article 1191 of the Civil Code, the Supreme Court, stated in Froilan vs. Pan Oriental Shipping Co:
“There is nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof, even without court intervention. In other words, it is not always necessary for the injured party to resort to court for rescission of the contract.”
PHILIPPINE AMUSEMENT ENTERPRISES VS. NATIVIDAD
21 SCRA 284
FACTS:
On January 6, 1961 the plaintiff, Philippine Amusement Enterprises, Inc., entered into a contract with the defendant Soledad Natividad, whereby the former leased to the latter an automatic phonograph, more popularly known as "jukebox". Sometime thereafter, Natividad wrote a letter to plaintiff requesting for the return of the jukebox to the company. Natividad reasoned out that said jukebox is defective. The plaintiff however, contended that the stocking up of coins is quite normal in any coin-operated phonograph. It then rightfully re-installed a new jukebox in replacement of the first one.
On August 4 and October 16, 1961, plaintiff demanded from defendant spouses the compliance to renew the lease contract. Defendants refused the demand and ordered for the rescission of the contract in their favor by reason of the plaintiff's failure to perform its obligation to render the automatic phonograph suitable for the purpose for which it was intended.
ISSUE:
Is defendant entitled to rescission?
RULING:
No. Rescission by judicial action under Article 1191 will be ordered only where the breach complained of is substantial as to defeat the object of the parties in entering into the agreement. It will not be granted where the breach is slight or casual. The defendants asked the plaintiff to retrieve its phonograph, claiming that there were times when the coins dropped into the slot would get stuck, resulting in its failure to play the desired music. But apart from this bare statement, there is nothing in the evidence which shows the frequency with which the jukebox failed to function properly. The expression "there are times" connotes occasional failure of the phonograph to operate, not frequent enough to render it unsuitable and unserviceable.
ROQUE VS. LAPUS
96 SCRA 741
FACTS:
Sometime in 1964, plaintiff and defendant entered into an agreement of sale covering Lots 1, 2 and 9, Block 1, of said property, payable in 120 equal monthly installments at the rate of P16.00, P15.00 per square meter, respectively. In accordance with said agreement, defendant paid to plaintiff the sum of P150.00 as deposit and the further sum of P740.56 to complete the payment of four monthly installments covering the months of July, August, September, and October, 1954.
On January 24, 1955, defendant requested plaintiff that he be allowed to abandon and substitute Lots 1, 2 and 9, the subject with Lots 4 and 12, Block 2 of the Rockville Subdivision, which are corner lots, to which request plaintiff graciously acceded. The evidence discloses that defendant proposed to plaintiff modification of their previous contract to sell because he found it quite difficult to pay the monthly installments on the three lots, and besides the two lots he had chosen were better lots, being corner lots. In addition, it was agreed that the purchase price of these two lots would be at the uniform rate of P17.00 per square meter payable in 120 equal monthly installments, with interest at 8% annually on the balance unpaid. Pursuant to this new agreement, defendant occupied and possessed Lots 4 and 12, and enclosed them, including the portion where his house now stands, with barbed wires and adobe walls. However, aside from the deposit of P150.00 and the amount of P740.56, which were paid under their previous agreement, defendant failed to make any further payment on account of the agreed monthly installments for the two lots in dispute, under the new contract to sell. Plaintiff demanded upon defendant not only to pay the stipulated monthly installments in arrears, but also to make up-to-date his payments, but defendant refused to comply with plaintiff's demands.
On or about November 3, 1957, plaintiff demanded upon defendant to vacate the lots in question and to pay the reasonable rentals thereon at the rate of P60.00 per month from August, 1955. On January 22, 1960, petitioner Felipe C, Roque filed the complaint against defendant Nicanor Lapuz for rescission and cancellation of the agreement of sale between them involving the two lots in question and prayed that judgment be rendered ordering the rescission and cancellation of the agreement of sale, the defendant to vacate the two parcels of land and remove his house therefrom and to pay to the plaintiff the reasonable rental thereof at the rate of P60.00 a month from August 1955 until such time as he shall have vacated the premises, and to pay the sum of P2,000.00 as attorney's fees, costs of the suit and award such other relief or remedy as may be deemed just and equitable in the premises.
The Court of Appeals rendered its decision that the defendant Nicanor Lapuz is granted a period of ninety (90) days from entry hereof within which to pay the balance. Hence, this appeal.
ISSUE:
Can private respondent be entitled to the Benefits of the third paragraph of Article 1191, New Civil Code, for the fixing of period
RULING:
No. Respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC Having been in default and acted in bad faith, he is not entitled to the new period of 90 days from entry of judgment within which to pay petitioner the balance of P11,434.44 with interest due on the purchase price of P12,325.00 for the two lots. To allow and grant respondent an additional period for him to pay the balance of the purchase price, which balance is about 92% of the agreed price, would be tantamount to excusing his bad faith and sanctioning the deliberate infringement of a contractual obligation that is repugnant and contrary to the stability, security and obligatory force of contracts. Moreover, respondent's failure to pay the succeeding 116 monthly installments after paying only 4 monthly installments is a substantial and material breach on his part, not merely casual, which takes the case out of the application of the benefits of pa paragraph 3, Art. 1191, N.C.C.
Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages which the trial court and the appellate court, in the latter's original decision, granted in the form of rental at the rate of P60.00 per month from August, 1955 until respondent shall have actually vacated the premises, plus P2,000.00 as attorney's fees. The Court affirmed the same to be fair and reasonable. The Court also sustained the right of the petitioner to the possession of the land, ordering thereby respondent to vacate the same and remove his house therefrom.
BOYSAW VS. INTERPHIL PROMOTIONS
148 SCRA 635
FACTS:
Solomon Boysaw and his then Manager, Willie Ketchum, signed with Interphil Promotions, Inc. represented by Lope Sarreal, Sr., a contract to engage Gabriel "Flash" Elorde in a boxing contest for the junior lightweight championship of the world. It was stipulated that the bout would be held at the Rizal Memorial Stadium in Manila on September 30, 1961 or not later than thirty [30] days thereafter should a postponement be mutually agreed upon, and that Boysaw would not, prior to the date of the boxing contest, engage in any other such contest without the written consent of Interphil Promotions, Inc.
However, before September 30, 1961, Boysaw entered into a non-title bout on June 19, 1961 and without consent from Interphil, Ketchum assigned to Amado Araneta the managerial rights over Boysaw. Amado Araneta in turn transferred the earlier acquired managerial rights to Alfredo again without the consent from Interphil. Yulo thereafter informed Interphil Boysaw’s readiness to comply with the boxing contract of May 1, 1961. The GAB after a series of conferences of both parties scheduled the Elorde-Boysaw fight on November 4, 1961. Yulo refused to accept the charge in the fight date even after Sarreal offered to advance the fight date to October 28, 1961. However, he changed his mind and decided to accept the fight date on November 4, 1961. While an Elorde-Boysaw fight was eventually staged, the fight contemplated in the May 1, 1961 boxing contract never materialized.
As a result, Yulo and Boysaw sued Interphil for damages allegedly due to the latter’s refusal to honor their commitments under the boxing contract of May 1, 1961.
ISSUES:
1. Was there a violation of the fight contract of May 1, 1961?
2. In reciprocal obligations, who has the power to rescind?
RULING:
1. Yes. On the issue pertaining to the violation of the May 1, 1961 fight contract, the evidence established that the contract was violated by appellant Boysaw himself when, without the approval or consent of Interphil, he fought Louis Avila on June 19, 1961 in Las Vegas Nevada. Appellant Yulo admitted this fact during the trial. Another violation of the contract in question was the assignment and transfer, first to J. Amado Araneta, and subsequently, to appellant Yulo, Jr., of the managerial rights over Boysaw without the knowledge or consent of Interphil.
2. The power to rescind obligations is implied, in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. There is no doubt that the contract in question gave rise to reciprocal obligations. "Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other"The power to rescind is given to the injured party. "Where the plaintiff is the party who did not perform the undertaking which he was bound by the terms of the agreement to perform 4 he is not entitled to insist upon the performance of the contract by the defendant, or recover damages by reason of his own breach "
On the validity of the fight postponement, the violations of the terms of the original contract by appellants vested the appellees with the right to rescind and repudiate such contract altogether. That they sought to seek an adjustment of one particular covenant of the contract, is under the circumstances, within the appellee's rights.
EARTH MINERALS VS. MACARAIG
194 SCRA 1
FACTS:
On September 11, 1980, Zambales Chromite, owner of 10 patentable chromite mining claims, and Philzea, as operator and the herein respondent, entered into a “Contract of Development, Exploitation and Productive Operation” on the ten (10) patentable mining claims. During the lifetime of such contract, Earth Minerals Exploration, Inc., the herein petitioner, submitted a Letter of Intent on to Zambales Chromite whereby the former proposed and the latter agreed to operate the same mining area subject of the earlier agreement between Zambales Chromite and Philzea Mining. Consequently, the same mining property of Zambales Chromite became the subject of different agreements with two separate and distinct operators.
Earth Minerals filed a petition for cancellation of the contract between Zambales Chromite and Philzea Mining to the Bureau of Mines and Geo-Sciences (BMGS). Earth Minerals alleged that Philzea Mining committed grave and serious violations of the latter’s contract because of failure to produce the agreed volume of chromite ores; failure to pay ad valorem taxes; failure to put up assay buildings and offices, all resulting in the non-productivity and non-development of the mining area.
Philzea Mining filed a motion to dismiss on the ground that Earth Minerals is not the proper party in interest. BMGS denied the petition, so Philzea elevated the case to Ministry of Natural Resources (MNR) to dismiss the appeal. MNR on the other hand ordered BMGS to investigate and found out that Philzea grossly violated the terms and conditions of the contract. BMGS rendered a decision canceling the said mining contract.
ISSUE:
Is Earth Minerals the proper party to seek cancellation of the operating agreement between Philzea Mining and Zambales Chromite?
RULING:
Yes. Petitioner Earth Minerals seeks the cancellation of the contract between Zambales Chromite and Philzea Mining, not as a party to the contract but because his rights are prejudiced by the said contract. The prejudice and detriment to the rights and interest of petitioner stems from the continued existence of the contract between Zambales Chromite and private respondent Philzea Mining. Unless and until the contract between Zambales Chromite and Philzea Mining is cancelled, petitioner's contract with the former involving the same mining area cannot be in effect and it cannot perform its own obligations and derive benefits under its contract. The Director of Mines and Geo-Sciences in his order denying Philzea Mining's motion to dismiss the petition for cancellation of the operating agreement between Philzea Mining and Zambales Chromite stated:
From the documentary evidence submitted by the petitioner, the Letter of Intent and Operating Agreement between Zambales Chromite and Earth Minerals, it may be gleaned that, at least, there appears some color of right on the part of petitioner to request for cancellation/rescission of the contract dated September 11, 1980 between Zambales Chromite and Philzea Mining.
GIMENEZ VS. COURT OF APPEALS
195 SCRA 1
FACTS:
Spouses Gimenez entered into a conditional contract of sale of a house and lot with Mercado for the price of Php 500,000 subject to the following conditions:
1. A downpayment of the ONE HUNDRED THOUSAND (P100,000.00) PESOS in cash will be paid by Mr. Jose Mercado to Mr. Alfredo Gimenez upon signing of this agreement.
2. The premises shall be ready for occupancy on July 6, 1975, furnished.
3. The balance less the GSIS loan on said property shall be paid by the buyer in two or more equal installments but not later than one year.
4. A deed of absolute sale shall be executed in favor of Mr. Jose Mercado, Jr. upon payment of the 40% of the total selling price. The cost of the preparation of the deed of sale and the cost of the necessary documentary stamps shall be borne by the seller while the cost of the registration fees to be borne by the buyer.
5. However, if the balance is not fully paid within one year period, the total payments received by the seller shall be considered as advance payments to the rental of the house in the amount of P5,000.00.
Mercado was only able to pay Php 20,000. More than two years after, the parties executed another agreement wherein Mercado promise to pay the balance of P370,000 on or before October 6, 1977 plus 1% interest on the balance from July 6, 1976 to September 6, 1977 and the unpaid interest on the GSIS. Five years after the parties executed the contract to sell, Mercado had paid only P343,000 on the price of the Gimenez property. Gimenez demanded that Mercado pay his rents in arrears and vacate the premises. The Metropolitan Trial Court rendered a decision in favor of Spouses Gimenez. However, on appeal, the RTC dismissed the complaint on the ground of prematurity because the conflict arising from the condition Contract of Sale and subsequent agreements relative thereto entered into between the parties should first be resolved and to determine whether or not a cause of action for ejectment exists.
On June 20, 1988, the trial court dismissed the petition filed by the spouses for annulment of contract, recovery of possession, and damages based on Article 1191 of the New Civil Code, and ordered them to execute a Deed of Sale with Assumption of Mortgage over the property in favor of Mercado. Upon appeal, CA affirmed with modification the decision of the trial court.
ISSUE:
Can the Spouses Gimenez still rescind the contract to sell?
RULING:
Yes. Under the circumstances, and considering how much real estate prices have jumped since 1975, it would be a travesty of justice to deny the seller’s right to cancel the sale under Article 1911 of the New Civil Code. There is not gainsaying Mercado’s breach of the contract to sell. He failed to pay the stipulated purchase price of Php 500,000 within one-year period originally fixed in the agreement which expire on July 5, 1976 nor within the extended period fixed in their supplemental agreement which expired on October 6, 1977,nor within the other extensions he sought thereafter. Such breaches entitled the sellers to ask for the cancellation of the contract to sell with damages. Therefore, the decision of CA was annulled and set aside. The contract to sell and the supplemental agreement were cancelled and annulled. Respondent Mercado was ordered to vacate the property of the Spouses Gimenez and restore its possession to them. He was further ordered to pay the sum of Php 5,000 per month from September 1984 until he vacates the same plus Php 20,000 as attorney’s fees.
JACINTO VS. KAPARAZ
G.R. No. 81158 May 22, 1992
FACTS:
On 11 March 1966, petitioners and private respondents entered into an agreement under which the private respondents agreed to sell and convey to petitioners a portion consisting of 600 square meters of a lot located in Davao Oriental for a total amount of P1,800.00 with a downpayment of P800.00 upon execution of the Agreement. The balance of P1,000.00 was to be paid by petitioners on installment at the rate of P100.00 a month to the Development Bank of the Philippines to be applied to private respondents' loan accounts. The pertinent portions of the Agreement read as follows:
6. That the PARTY OF THE FIRST PART hereby agrees, promises and binds himself to sell, cede, transfer, and convey absolutely to the PARTY OF THE SECOND PART 600 -square meter portion of the property together with all the improvements thereon…
9. That the PARTY OF THE FIRST PART agrees and binds himself to acknowledge receipt of every and all monthly payments remitted to the Development Bank of the Philippines by the PARTY OF THE SECOND PART and further agrees and binds himself to execute the final deed of absolute sale of the 600 square meters herein above referred to in favor of the PARTY OF THE SECOND PART as soon as the settlement or partition of the estate of the deceased Narcisa Kaparaz shall have been consummated and effected, but not later than March 31, 1967.
Upon the execution of the agreement, petitioners paid the downpayment of P800.00 and were placed in possession of the portion described therein. As to the P1,000.00 which was to be paid directly to the DBP, petitioners claim that they had even made an excess payment of P100.00.In view of the refusal of private respondents to execute the deed of sale, petitioners filed against them a complaint for specific performance with the Court of First Instance.Private respondents alleged that the sale did not materialize because of the failure of petitioners to fulfill their promise to make timely payments on the stipulated price to the DBP; as a result of such failure, they (private respondents) failed to secure the release of the mortgage on the property. They then prayed for the dismissal of the case and a declaration that the agreement is null and void.
ISSUE:
Are respondents entitled to rescind the agreement?
RULING:
No. Since in a contract of sale, the non-payment of the price is a resolutory condition, 13 the remedy of the seller under Article 1191 of the Civil Code is to exact fulfillment or to rescind the contract. In respect, however, to the sale of immovable property, this Article must be read together with Article 1592 of the same Code:
Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term.
In the case at bar, there was non-compliance with the requirements prescribed in there provisions. It is not controverted that private respondents had neither filed an action for specific performance nor demand the rescission of the agreement either judicially or by a notarial act before the filing of the complaint. It is only in their Answer that they belatedly raised the defense of resolution of the contract pursuant to Article 1191 by reason of petitioner’s breach of their obligation. Moreover, the delay incurred by petitioners was but a casual or slight breach of the agreement, which did not defeat the object of the parties in entering in the agreement. A mere casual breach does not justify rescission. Rescission of the agreement was not available to private respondents.
KALALO VS. LUZ
GR 27782 July 31, 1970
FACTS:
On November 17, 1959, Octavio A. Kalalo (appellee) entered into an agreement with Alfredo J . Luz (appellant) whereby the former was to render engineering design services to the latter for fees, as stipulated in the agreement. Pursuant to said agreement, appellee rendered engineering services to appellant.
On December 11, 1961, appellee sent to appellant a statement of account, to which was attached an itemized statement of defendant-appellant's account, according to which the total engineering fee asked by appellee for services rendered amounted to P116,565.00 from which sum was to be deducted the previous payments made in the amount of P57,000.00, thus leaving a balance due in the amount of P59,565.00.
On May 18, 1962 appellant sent appellee a resume of fees due to the latter. Said fees, according to appellant. amounted to P10,861.08 instead of the amount claimed by the appellee. On June 14, 1962 appellant sent appellee a check for said amount, which appellee refused to accept as full payment of the balance of the fees due him. The appellant further contended that the appellee’s services were not complete or were performed in violation of the agreement and otherwise unsatisfactory.
In order to settle the dispute, and upon agreement of the parties, the trial court authorized the case to be heard before a Commissioner. The Commissioner rendered a report which, in resume, states that the amount due to appellee was $28,000.00 (U.S.) as his fee in the International Research Institute Project which was twenty percent (20%) of the $140,000.00 that was paid to appellant, and P51,539.91 for the other projects, less the sum of P69,475.46 which was already paid by the appellant.
ISSUES:
1. Was the recommendation in the Report that the payment of the amount due to Kalalo in dollars legally permissible?
2. If not, what rate of exchange should it be in pesos?
RULING:
1. No. Under the agreement,Kalalo was entitled to 20% of $140,000.00, or the amount of $28,000.00. Kalalo, however, cannot oblige the appellant to pay him in dollars, even if appellant himself had received his fee for the IRRI project in dollars. This payment in dollars is prohibited by Republic Act 529 which was enacted on June 16, 1950.
2. Under Republic Act 529, if the obligation was incurred prior to the enactment of the Act and require payment in a particular kind of coin or currency other than the Philippine currency the same shall be discharged in Philippine currency measured at the prevailing rate of exchange at the time the obligation was incurred.Republic Act 529 does not provide for the rate of exchange for the payment of obligation incurred after the enactment of said Act. The logical Conclusion, therefore, is that the rate of exchange should be that prevailing at the time of payment for such contracts.
CABARROGUIS VS. VICENTE
107 PHIL 340
FACTS:
Plaintiff Cabarroguis, a registered nurse and midwife, sustained physical injuries as a result of an accident when the AC jeepney of which she was a passenger hit another vehicle at a street corner. To avoid court litigation, defendant Vicente, owner and operator of the jeepney entered a compromise agreement with the plaintiff, obligating himself to pay 2,500 as actual and compensatory, exemplary and moral damages suffered by plaintiff. Defendant has paid a total amount of 1,500 leaving a balance of 1,000. It was stipulated in the agreement that should defendant fail to complete payment within 60 days, he would pay an additional amount of 200.00 as liquidated damages.
As defendant failed to pay, notwithstanding repeated demands, plaintiff brought a suit in the Municipal Court of Davao and rendered judgment in favor of plaintiff. Defendant appealed to the Court of First Instance which ordered the defendant to pay the plaintiff the amount of 1,200 with interest at legal rate from the date of the filing of the complaint until full payment.
ISSUE:
Did the lower court err in sentencing the defendant to pay interest from the date of the filing of the complaint until full payment?
RULING:
No. As a rule, if the obligation consists in a sum of money, the only damage a creditor may recover, if the debtor incurs in delay, is the payment of the interest agreed upon or the legal interest, unless contrary is stipulated (Article 2209). However, the creditor may also claim other damages. Such as moral or exemplary damages, in addition to interest, the award of which is left to the discretion of the court.
In obligations with a penal clause, as provided in Article 1226 of the Civil Code, the penalty shall substitute the indemnity for damages and the payment of interests. The exceptions to this rule, according to the same article, are: (1) when the contrary is stipulated; (2) when the debtor refuses to pay the penalty imposed in the obligation, in which case the creditor is entitled to interest on the amount of the penalty, in accordance with article 2209; and (3) when the obligor is guilty of fraud in the fulfillment of the obligation.
Applying the law, it is evident that no interest can be awarded on the principal obligation of defendant, the penalty of 200.00 agreed upon having taken the place of the payment of such interest and the indemnity for damages. No stipulation to the contrary was made and while defendant was sued for breach of the compromise agreement, the breach was not occasioned by fraud.
This case, however, takes a different aspect with respect to the penalty attached to the principal obligation. It has been held that in obligations for the payment of a sum of money when a penalty is stipulated for default, both the principal obligation and the penalty can be demanded by the creditor. Defendant having refused to pay when demand was made by plaintiff, the latter clearly is entitled to interest on the amount of the penalty. It is well observe that Article 2210 of the Civil Code provides that in the discretion of the court, interest may be alleged upon damages awarded for breach of contract. This interest is recoverable from the time of delay that is to say, from the date of demand, either judicial or extrajudicial. And if there is no showing as to when demand for payment was made, plaintiff must be considered to have made such demand only from the filing of the complaint.
Wherefore, with the modification that the interest shall be allowed on the amount of the penalty, the decision appealed from is affirmed.
ARRIETA VS. NARIC
10 SCRA 79
FACTS:
Paz Arrieta was awarded by NARIC the contract of delivery of 20,000 metric tons of Burmese rice at $203 per metric ton. On the other hand, the corporation committed itself to pay for the imported rice by means of an irrevocable, confimed, and assignable letter of credit in US currency in favor of Arrieta or supplier in Burma immediately. However, the corporation took the first step to open a letter of credit a full month from the execution of the contract only July 30, 1952. On the same day, Arrieta advised the corporation of the extreme necessity for the immediate opening of the letter of credit since she had by then made a tender to her supplier in Ragoon Burma. Consequently, the credit instrument applied for was opened only on September 8, 1952, since the corporation was not in financial capacity to pay the 50% marginal cash deposit when the credit instrument was approved on August 4, 1952.
As a result of the delay, the allocation of Arrieta was cancelled and the 5% deposit, approximately Php 200,000, was forfeited. Arrieta tried to restore the cancelled Burmese rice allocation, but failed. Arrieta then instead offered to substitute Thailand rice to NARIC, communicating that such was a solution which should be beneficial for both parties. However, the corporation rejected the substitution. Hence, Arrieta sent a letter to the corporation, demanding for the compensation for the damages caused her.
ISSUE:
1. Was the failure to open immediately the letter of credit in dispute amounted to a breach of the contract for which the corporation should be held liable?
2. Was there any waiver on the part of Arrieta?
RULING:
1. Yes. It was clear from the records that the sole and principal reason for the cancellation of the allocation contracted by Arrieta in Ragoon, Burma was the failure of the letter of credit to be opened. The failure, therefore, was the immediate cause for the consequent damage which resulted. It was clear from the records that the delay in the opening of the letter of credit was due to the inability of the corporation to meet the condition imposed by the bank for the granting the same.
Furthermore, the liability of the corporation stemmed not alone from failure or inability to satisfy the requirements of the bank, but its culpability arose from is willful and deliberate assumption of contractual obligations even as it was well aware of its financial incapacity to undertake the prestation. Under Article 1170, “those who in the performance of their obligation are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable in damages.” The terms “in any manner contravene the tenor thereof” includes any illicit act which impairs the strict and faithful fulfillment of the obligation, or every kind or defective performance. In general also, every debtor who fails in the performance of his obligation is bound to indemnify for the losses and damages caused thereby.
The payment for damages or the award to be given should be converted into the Philippine peso at the rate of exchange prevailing at the time the obligation was incurred pursuant to RA 527.
2. No. The subsequent offer to substitute the Thailand rice for the originally contracted Burmese did not constitute a waiver. Waivers are not presumed. It must be clearly and convincingly shown either by express stipulations or acts admitting no other reasonable explanation. In this case, no such intent to waive had been established.
MAKATI DEVELOPMENT CORP. VS. EMPIRE INSURANCE CO.
G. R. NO. 21780 JUNE 30, 1967
FACTS:
On March 31, 1959, Makati Development Corporation sold a lot to Rodolfo P. Andal, in Urdaneta Village, Makati, Rizal, for P55,615. A so-called "special condition" contained in the deed of sale provides that the vendee shall construct and complete at least 50% of its residence on the property within two (2) years from March 31, 1959 to the satisfaction of the vendor and, in the event of its failure to do so, the bond which the vendee has delivered to the vendor in the sum of P11,123.00 to insure faithful compliance with the above special condition will be forfeited. Andal gave a surety bond on April 10, 1959 wherein he, as principal, and the Empire Insurance Company, as surety, jointly and severally, undertook to pay the Makati Development Corporation the sum of P12,000 in case Andal failed to comply with his obligation under the deed of sale.
Andal sold the lot to Juan Carlos on January 18, 1960. As neither Andal nor Juan Carlos built a house on the lot within the stipulated period, the Makati Development Corporation, on April 3, 1961, after the lapse of the two-year period, sent a notice of claim to the Empire Insurance Co. advising it of Andal's failure to comply with his undertaking. Demand for the payment of P12,000 was refused, whereupon the Makati Development Corporation filed a complaint in the Court of First Instance against the Empire Insurance Co. to recover on the bond in the full amount, plus attorney's fees. In due time, the Empire Insurance Co. filed its answer with a third-party complaint against Andal. It asked that the complaint be dismissed or, in the event of a judgment in favor of the Makati Development Corporation, that judgment be rendered ordering Andal to pay the Empire Insurance Co. whatever amount it maybe ordered to pay the Makati Development Corporation, plus interest at 12%, from the date of the filing of the complaint until said amount was fully reimbursed, and attorney's fees.
In his answer, Andal admitted the execution of the bond but alleged that the "special condition" in the deed of sale was contrary to law, morals and public policy. He averred that, at any rate, Juan Carlos had started construction of a house on the lot. The lower court rendered judgment, sentencing the Empire Insurance Co. to pay the Makati Development Corporation the amount of P1,500, with interest at the rate of 12% from the time of the filing of the complaint until the amount was fully paid, and to pay attorney's fees in the amount of P500, and the proportionate part of the costs. The court directed that in case the amount of the judgment was paid by the Empire Insurance Co., Andal should in turn pay the former the sum of P1,500 with interest at 12% from the time of the filing of the complaint to the time of payment and to pay attorney's fees in the sum of P500 and proportionate part of the costs. The Makati Development Corporation appealed directly to this Court.
The appellant argues that Andal became liable for the full amount of his bond upon his failure to build a house within the two-year period which expired on March 31, 1961 and that the trial court was without authority to reduce Andal's liability on the basis of Carlos' construction of a house a month after the stipulated period because there was no privity of contract between Carlos and the Makati Development Corporation.
ISSUE:
Is Andal liable for the full amount of his bond upon his failure to comply with the special condition stipulated?
RULING:
No. While it is true that in obligations with a penal sanction the penalty takes the place of damages and the payment of interest in case of non-compliance and that the obligee is entitled to recover upon the breach of the obligation without the need of proving damages,it is nonetheless true that in certain instances a mitigation of the obligor's liability is allowed. Thus article 1229 of the Civil Code states:
The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.
Trial court found that Juan Carlos had finished more than 50 per cent of his house by April, 1961, or barely a month after the expiration on March 31, 1961 of the stipulated period. There was therefore a partial performance of the obligation within the meaning and intendment of article 1229. The penal clause in this case was inserted not to indemnify the Makati Development Corporation for any damage it might suffer as a result of a breach of the contract but rather to compel performance of the so-called "special condition" and thus encourage home building among lot owners in the Urdaneta Village. Considering that a house had been built shortly after the period stipulated, the substantial, if tardy, performance of the obligation, having in view the purpose of the penal clause, fully justified the trial court in reducing the penalty. Still it is insisted that Carlos' construction of a house on the lot sold cannot be considered a partial performance of Andal's obligation because Carlos bears no contractual relation to the Makati Development Corporation. Indeed the stipulation in this case to commence the construction and complete at least 50 per cent of the vendee's house within two years cannot be construed as imposing a strictly personal obligation on Andal. To adopt such a construction would be to limit Andal's right to dispose of the lot. There is nothing in the deed of sale restricting Andal's right to sell the lot at least within the two-year period and we think it plain that a reading of such a limitation on one of the rights of ownership must rest on more explicit language in the contract.
COMMISSIONER VS. BURGOS
G.R. No. L-36706 March 31, 1980
FACTS:
Private Respondent Victoria Amigable is an owner of a parcel of land in Cebu City that was taken by the Government sometime in 1924 for road-right-of-way purpose. In 1959, private respondent filed a complaint to recover ownership and possession of the said land, damages for illegal occupation of the Government of the same said land and Php5,000.00 for attorney’s fees. Petitioner-defendant, in its answer, alleged that the above-mentioned land was either donated or sold by its owners to the province of Cebu, also private respondent is already barred by estoppel and statute of limitations, and invoked the non-suitability of the Government. Based on the allegations of the petitioner-defendant, the trial court rendered a decision for the petitioner-defendant. However, on appeal to the Supreme Court, the Court reversed the decision and remanded the case to the court of origin for the determination of the compensation to be made to private respondent and attorney’s fees.
During the hearing for the determination of the compensation, the Government proved the value of the land through the certification issued by the Bureau of Records Management that the value of the said land was only Php2.37 per square meter. On the other hand, private respondent presented a newspaper clipping of Manila Times showing that the value of peso was Php6.775 to a dollar during the middle of 1972. Upon consideration, the trial court rendered a decision directing the Government to pay private respondent Php49,459.34 for the value of the land with 6% interest per annum and 10% attorney’s fees of the total amount due, totaling to Php214,356.75. Thereafter, the Solicitor General, representing the Government, appealed to the Supreme Court contending that the trial court erred in applying Article 1250 in the case at bar.
ISSUE:
Should Article 1250 be applied in determining the compensation for the disputed land?
RULING:
No. It is clear that Article 1250 applies only to cases where a contract or agreement is involved. It does not apply where the obligation to pay arises from law, independent of contract. The taking of private property by the Government in the exercise of its power of eminent domain does not give rise to a contractual obligation.
Moreover, the law as quoted, clearly provides that the value of the currency at the time of the establishment of the obligation shall be the basis of payment which, in cases of expropriation, would be the value of the peso at the time of the taking of the property when the obligation of the Government to pay arises. It is only when there is an "agreement to the contrary" that the extraordinary inflation will make the value of the currency at the time of payment, not at the time of the establishment of the obligation, the basis for payment. In other words, an agreement is needed for the effects of an extraordinary inflation to be taken into account to alter the value of the currency at the time of the establishment of the obligation which, as a rule, is always the determinative element, to be varied by agreement that would find reason only in the supervention of extraordinary inflation or deflation.
The correct amount of compensation due private respondent for the taking of her land for a public purpose would be not P49,459.34, as fixed by the respondent court, but only P14,615.79 at P2.37 per square meter, the actual value of the land of 6,167 square meters when it was taken in 1924. The interest in the sum of P145,410.44 at the rate of 6% from 1924 up to the time respondent court rendered its decision, as was awarded by the said court should accordingly be reduced.
J.M. TUASON & CO., INC. VS. JAVIER
G.R. NO. L-28569 February 27, 1970
FACTS:
On September 7, 1954, petitioner J.M. Tuason & Co., Inc. entered a contract to sell with respondent Ligaya Javier a parcel of land known as Lot No. 28, Block No. 356, PSD 30328, of the Sta. Mesa Heights Subdivision for the sum of Php3,691.20 with 10% interest per annum; Php396.12 will be payable upon execution of the contract, and an installment of Php43.92 monthly for a period of ten (10) years. It was further stipulated in the contract, particularly the sixth paragraph, that upon failure of respondent to pay the monthly installment, she is given a one month grace period to pay such installment together with the monthly installment falling on the said grace period. Furthermore, failure to pay both monthly installments, respondent will pay an additional 10% interest. And after 90 days from the end of the grace period, petitioner can rescind the contract, the payments made by respondent will be considered as rentals.
Upon the execution of the contract, respondent religiously paid the monthly installment until January 5, 1962. Respondent, however, was unable to the pay the monthly installments within the grace period which petitioner, subsequently, sent a letter to respondent on May 22, 1964 that the contract has been rescinded and asked the respondent to vacate the said land. So, upon failure of respondent to vacate the said land, petitioner filed an action to the Court of First Instance of Rizal for the rescission of the contract. The CFI rendered a decision in favor of respondent in applying Article 1592 of the New Civil Code. Hence, petitioner made an appeal to the Supreme Court alleging that since Article 1592 of the New Civil applies only to contracts of sale and not in contracts to sell.
ISSUE:
Did the CFI erroneously apply Article 1592 of the New Civil Code?
RULING:
Yes. Regardless, however, of the propriety of applying Article 1592, petitioner has not been denied substantial justice under Article 1234 of the New Civil Code. In this connection, respondent religiously satisfied the monthly installments for almost eight (8) years or up to January 5, 1962. It has been shown that respondent had already paid Php4,134.08 as of January 5, 1962 which is beyond the stipulated amount of Php3,691.20. Also, respondent has offered to pay all installments overdue including the stipulated interest, attorney’s fees and the costs which the CFI accordingly sentenced respondent to pay such installment, interest, fees and costs. Thus, petitioner will be able recover everything that was due thereto. Under these circumstances, the SC feel that, in the interest of justice and equity, the decision appealed from may be upheld upon the authority of Article 1234 of the New Civil Code.
LEGARDA VS. SALDAÑA
G.R. No. L-26578, January 28, 1974
FACTS:
Saldaña had entered into two written contracts with Legarda, a subdivision owner, whereby Legarda agreed to sell to him two of his lots for 1,500 per lot, payable over a span of 10 years on 120 monthly installments with 10% interest per annum. Saldaña paid for eight consecutive years but did not make any further payments due to Legarda’s failure to make the necessary improvement on the said lot which was promised by their representative, the said Mr. Cenon. Saldaña already paid a total of Php3,582.06. The statement of account shows that Saldaña paid Php1,682.28 of the principal and Php1,889.78 for the interest. It did not distinguish which of the two said lots was paid. Petitioner, then, rescinded the contract based on the stipulation of the contract that payments made by respondent shall be considered as rentals and any improvements made shall be forfeited in favor of the petitioner. The lower court ruled sustaining petitioner’s cancellation of contract. So respondent appealed and judgment was reversed in favor of the respondent ordering petitioners to deliver to plaintiff one of the two lots at the choice of the defendant and execute the deed of conveyance. Hence this petition.
ISSUE:
Was the cancellation of the sale of contract valid?
RULING:
No, even though it was stipulated that failure to complete the payment would result to the cancellation of the contract, it was still not valid. As clearly shown in the statement of account, Saldaña was able to pay one of the two said lots. Under Article 1234 of the New Civil Code, “if the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee”. Hence, under the authority of Article 1234 of the New Civil Code, Saladaña is entitled to one of the two lots of his choice and the interest paid shall be forfeited in favor of the petitioners.
SAURA VS. DBP
G.R. No. L-24968 April 27, 1972
FACTS:
Plaintiff Saura, Inc. applied to the Rehabilitation Finance Corporation (RFC), before its conversion into DBP, for an industrial loan of P500,000.00, to be used as follows: P250,000.00 for the construction of a factory building (for the manufacture of jute sacks); P240,900.00 to pay the balance of the purchase price of the jute mill machinery and equipment; and P9,100.00 as additional working capital. It was also stated in the loan, among others, that China Engineers, Ltd. will be one of the joint signatories of the loan, and Saura, Inc. will use local raw materials in the manufacture of jute sacks. Saura, Inc. had already purchased the jute mill machinery on the strength of the letter of credit extended by Prudential Bank and Trust Co. At first, China Engineers, Ltd. did not want to sign the said contract and instead Saura, Inc. suggested that in lieu of that, Saura, Inc. will put up a bond of Php123,500.00, equivalent to China Engineers, Ltd.’s subscription. But later on, agreed to sign the contract. However, RFC reduced the said loan from Php500,000.00 to Php300,000.00 despite the formal execution of the loan agreement. Then, China Engineers, Ltd. withdrew its signature to the said loan. Thereafter, Saura, Inc. demanded the release of the originally approved loan of Php500,000.00 and China Engineers, Ltd. will reinstate its signature to the said loan. RFC agreed but the loan was subject to the condition that Saura, Inc. will get the necessary certification from Department of Agriculture and Natural Resources that there will be enough supply of raw materials and will there be an increase of production of the said raw materials in its vicinity. Saura, Inc. was not able to get the necessary certification and instead requested to release the loan as follows: (1) P250,000.00 for the payment of the receipt for jute mill machineries with Prudential Bank &Trust Company , (2) P182,413.91 for the purchase of materials and equipment per attached list to enable the jute mill to operate 182,413.91, (3) P67,586.09 for raw materials and labor {(a) P25,000.00 to be released on the opening of the letter of credit for raw jute for $25,000.00, (b) P25,000.00 to be released upon arrival of raw jute, and (c) P17,586.09 to be released as soon as the mill is ready to operate.} RFC, afterward, denied such request which prompted Saura, Inc. to execute a deed of cancellation of the mortgage.
Due to Saura, Inc.’s failure to proceed with the said loan with RFC, Prudential Bank and Trust Co. sued them for their failure to pay its obligation with said bank. After almost nine years, Saura, Inc. filed a suit alleging that owing to RFC’s failure to release the proceeds of the said loan thereby preventing them from paying their obligation in regards to the jute mill project. The trial court rendered judgment for the plaintiff. Hence this petition.
ISSUE:
Was there a perfected contract between Saura, Inc. and RFC?
RULING:
Yes. However, when RFC turned down the request in its letter, the negotiations which had been going on for the implementation of the agreement reached an impasse. Saura, Inc. obviously was in no position to comply with RFC's conditions. So instead of doing so and insisting that the loan be released as agreed upon, Saura, Inc. asked that the mortgage be cancelled. The action thus taken by both parties was in the nature of mutual desistance, what Manresa terms "mutuo disenso", which is a mode of extinguishing obligations. It is a concept that derives from the principle that since mutual agreement can create a contract, mutual disagreement by the parties can cause its extinguishment.
The subsequent conduct of Saura, Inc. confirms this desistance. It did not protest against any alleged breach of contract by RFC, or even point out that the latter's stand was legally unjustified. Its request for cancellation of the mortgage carried no reservation of whatever rights it believed it might have against RFC for the latter's non-compliance. It was nine years after the loan agreement had been cancelled at its own request, that Saura, Inc. brought this action for damages. All these circumstances demonstrate beyond doubt that the said agreement had been extinguished by mutual desistance, and that on the initiative of the plaintiff-appellee itself.
GALAR VS. SASI
47 O.G. 6241
FACTS:
Luis Galar borrowed Php 15,000 from Juan Isasi for which the former drew two promissory notes. As a payment, Galar paid to PNB on behalf of Aberri Inc., which was controlled by Isasi and his wife, the outstanding balance of Php 15,848.90. In turn, PNB cancelled the indebtedness of Aberri Inc., released the mortgage that had been constituted, and delivered the title to Galar. Upon notifying Isasi of the payment made, Isasi refused to recognize the payment of Galar to PNB. Hence the attorney of Galar advised Isasi that they would consign in the court the sum of Php 20,000, representing the face value of the promissory notes. They then filed a case in the court to declare the promissory notes paid and discharged.
Isasi, on the other hand, tendered the sum of Php 15,848.90 paid by Galar to the PNB for the account and in the name of Aberri Inc. Upon refusal by Galar, Isasi, on behalf of the company, consigned the amount in the CFI of Manila and filed a complaint, praying that Galar be ordered to restore to Aberri Inc. all documents relative to the obligation formerly due to the PNB and to reimburse the amount paid by Galar to the bank be considered cancelled in view of the consignation.
ISSUE:
1. Can Luis Galar legally pay the debt without awaiting the demand on the part of Isasi?
2. Should Galar’s payment of the debt of Aberri Inc. to the bank be set off against the notes?
RULING:
1. Yes. A demand note was subject neither to suspensive condition nor a suspensive period. The demand was not a condition precedent since the effectivity and binding effect of the note does not depend upon the making of the demand. The note was binding even before the demand is made. Neither did the note constitute an implied suspensive period since there was nothing to prevent the creditor for making demand at any time. It follows, therefore, that the demand note was strictly a pure obligation as defined in Article 1179. The periods of 15 and 30 days after demand stipulated in the promissory notes could have no other purpose but to protect the debtor by giving him sufficient time to raise money to meet the demand. The period being solely for the debtor’s protection and benefit, the debtor could renounce it validly at any time. Galar was lawfully entitled to make payment even if no demand had yet been made by Isasi.
2. Yes. The payment of Galar of the indebtedness of Aberri Inc to the PNB redounded to the benefit of Isasi who had absolute control of said corporation. Thus, said payment was valid and discharged the obligation, even if such payment was not authorized by Isasi or Aberri Inc., for which Galar had the right to demand reimbursement for the amount paid. However, such reimbursement was unnecessary. Such reimbursement was extinguished by its total absorption in the larger amount due from Galar to Isasi. The consignation, therefore, of Isasi was invalid since it no longer had any obligation towards Galar. On the other hand, the balance of Php 4,151.10 due and owing from Galar to Isasi was extinguished upon the consignation of Galar in the court the sum of Php 20,000.
FAUSTINO LICHAUCO VS. FIGUERAS HERMANOS
G.R. No. L-3308
FACTS:
The Quartermaster's Department of the Army of the United States advertises semiannually for proposals to furnish lighterage for its use in the port of Manila. The service required is divided into two classes, regular and emergency. The price paid for emergency service is naturally higher than that paid for regular service wherein the lorcha are steadily employed for the entire contract period of six months.
The defendants submitted a bid for the quartermaster's contract of lighterage for the semiannual period from the 1st of July to the 31st of December, 1905, but when the proposals were opened on the 2d of May, 1905, their bid and all others were rejected. On the 16th of May, 1905, the letting of the contract was again advertised, and the defendant and other submitted new proposals which were opened on the 27th of May, 1905, and on this occasion the contract was divided and the defendants bid for the emergency service was accepted, while a third party was awarded the contract for the regular service.
There were no new negotiations entered into between the plaintiff and the defendants after the failure of defendants to secure the contract at the opening of the bids on May 2, 1905, but on the 1st of July the plaintiff Lorchas Chata and Lolin were furnished to the quartermaster under the defendants' contract for the emergency service, and were thus employed in that service for the first twenty-three and twenty-seven days of August, when they were released by the quartermaster, and the plaintiff immediately notified by the defendants that they were at his disposal.
Plaintiff claims that defendants made use of these lorchas, under the terms of the contract of April 20; that is, that the lorchas shall be rented from July 1 to Dec. 31, 1905.
ISSUE:
Is the respondent obliged to pay the rentals for the days that the lorchas were not used?
RULING:
No. It was plainly conditioned upon the defendants' securing the entire contract of lighterage and not upon their securing a part thereof. There is nothing in the contract between the parties to indicate that either one had in mind the division of the lighterage contract and indeed the language of the entire amendment suggests that both parties had in contemplation no other thing that the complete success or the complete failure of defendants to secure the lighterage contract with the Government.
In conditional obligations, the acquisition of rights, as well as the extinction or loss of those already acquired, shall depend upon the event constituting the condition.
The defendants, by taking and using these lorchas for the purpose of carrying out their contract with the quartermaster without any new agreement the obligation with the plaintiffs, impliedly and tacitly assumed the obligation of the original contract together with the amendment, so that their use of the lorcha was subject to its terms. They required no new contract with the plaintiff, express or implied, to authorize them to do so, and no sufficient reason has been suggested to justify the inference that they assumed an oppressive and dangerous risk when all that they did was in exact compliance with a written contract securing to them the right to use these lorchas on favorable and reasonable terms.
RONQUILLO VS. COURT OF APPEALS
G.R. No. L-55138
FACTS:
Petitioner Ernesto V. Ronquillo was one of four (4) defendants for the collection of the sum of P117,498.98 plus attorney's fees and costs. The other defendants were Offshore Catertrade, Inc., Johnny Tan and Pilar Tan.
On December 13, 1979, the lower court rendered its Decision based on the compromise agreement, which stipulates, among others, that the Plaintiff agrees to reduce its total claim of P117,498.95 to only P110,000.00 and defendants agree to acknowledge the validity of such claim and further bind themselves to initially pay out of the total indebtedness of P110,000.00 the amount of P55,000.00 on or before December 24, 1979, the balance of P55,000.00, defendants individually and jointly agree to pay within a period of six months from January 1980, or before June 30, 1980.
Upon the defendant’s default, herein private respondent (then plaintiff) filed a Motion for Execution. Ronquillo and another defendant Pilar Tan offered to pay their shares of the 55,000 already due.
But on January 22, 1980, private respondent Antonio So moved for the reconsideration and/or modification of the aforesaid Order of execution and prayed instead for the "execution of the decision in its entirety against all defendants, jointly and severally.
Petitioner opposed the said motion arguing that under the decision of the lower court being executed which has already become final, the liability of the four (4) defendants was not expressly declared to be solidary, consequently each defendant is obliged to pay only his own pro-rata or 1/4 of the amount due and payable.
ISSUE:
What is the nature of the liability of the defendants (including petitioner), was it merely joint, or was it several or solidary?
RULING:
SOLIDARY.
In this regard, Article 1207 and 1208 of the Civil Code provides -
"Art. 1207. The concurrence of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.
Art. 1208. If from the law, or the nature or the wording of the obligation to which the preceding article refers the contrary does not appear, the credit or debt shall be presumed to be divided into as many equal shares as there are creditors and debtors, the credits or debts being considered distinct from one another, subject to the Rules of Court governing the multiplicity of suits."
Clearly then, by the express term of the compromise agreement, the defendants obligated themselves to pay their obligation "individually and jointly."
The term "individually" has the same meaning as "collectively", "separately", "distinctively", respectively or "severally". An agreement to be "individually liable" undoubtedly creates a several obligation, and a "several obligation" is one by which one individual binds himself to perform the whole obligation.
The obligation in the case at bar being described as "individually and jointly", the same is therefore enforceable against one of the numerous obligors.
VERMEN REALTY DEVELOPMENT CORPORATION VS. COURT OF APPEALS G.R. No. 101762
FACTS:
Under the conditions of the so-called “Offsetting Agreement”, Vermen Realty (the first party in the contract) and Seneca Hardware (the second party) were under a reciprocal obligation. Seneca Hardware shall deliver to Vermen Realty construction materials worth P552,000.00. Vermen Realty's obligation under the agreement is three-fold: he shall pay Seneca Hardware P276,000.00 in cash; he shall deliver possession of units 601 and 602, Phase I, Vermen Pines Condominiums (with total value of P276,000.00) to Seneca Hardware; upon completion of Vermen Pines Condominiums Phase II, Seneca Hardware shall be given option to transfer to similar units therein.
As found by the appellate court and admitted by both parties, Seneca Hardware had paid Vermen Realty the amount of P110,151.75, and at the same time delivered construction materials worth P219,727.00. Pending completion of Phase II of the Vermen Pines Condominiums, Vermen Realty delivered to Seneca Hardware units 601 and 602 at Phase I of the Vermen Pines Condominiums (Rollo, p. 28). In 1982, the Vermen Realty repossessed unit 602. As a consequence of the repossession, the officers of the Seneca Hardware corporation had to rent another unit for their use when they went to Baguio on April 8, 1982.
In its reply the Vermen Realty corporation averred that Room 602 was leased to another tenant because Seneca Hardware corporation had not paid anything for purchase of the condominium unit. Vermen Realty corporation demanded payment of P27,848.25 representing the balance of the purchase price of Room 601.
On June 21, 1985, Seneca Hardware filed a complaint with the Regional Trial Court of Quezon City (Branch 92) for rescission of the Offsetting Agreement with damages. In said complaint, Seneca Hardware alleged that Vermen Realty Vermen Realty Corporation had stopped issuing purchase orders of construction materials after April, 1982, without valid reason, thus resulting in the stoppage of deliveries of construction materials on its (Seneca Hardware) part, in violation of the Offsetting Agreement.
After conducting hearings, the trial court rendered a decision dismissing the complaint and ordering the plaintiff (Seneca Hardware in this petition) to pay defendant (Vermen Realty in this petition) on its counterclaim in the amount of P27,848.25 representing the balance due on the purchase price of condominium unit 601.
On appeal, respondent court reversed the trial court's decision as adverted to above.
ISSUE:
Do the circumstances of the case warrant rescission of the Offsetting Agreement as prayed for by Seneca Hardware?
RULING:
Yes. The Court ruled in favor of Seneca Hardware. There is no controversy that the provisions of the Offsetting Agreement are reciprocal in nature. Reciprocal obligations are those created or established at the same time, out of the same cause, and which results in a mutual relationship of creditor and debtor between parties. In reciprocal obligations, the performance of one is conditioned on the simultaneous fulfillment of the other obligation Under the agreement, Seneca Hardware shall deliver to Vermen Realty construction materials. Vermen Realty's obligation under the agreement is three-fold: he shall pay Seneca Hardware P276,000.00 in cash; he shall deliver possession of units 601 and 602, Phase I, Vermen Pines Condominiums (with total value of P276,000.00) to Seneca Hardware; upon completion of Vermen Pines Condominiums Phase II, Seneca Hardware shall be given option to transfer to similar units therein.
Article 1191 of the Civil Code provides the remedy of rescission in (more appropriately, the term is "resolution") in case of reciprocal obligations, where one of the obligors fails to comply with what is incumbent upon him.
In the case at bar, Vermen Realty argues that it was Seneca Hardware who failed to perform its obligation in the Offsetting Agreement.
Seneca Hardware, on the other hand, points out that the subject of the Offsetting Agreement is Phase II of the Vermen Pines Condominiums. It alleges that since construction of Phase II of the Vermen Pines Condominiums has failed to begin it has reason to move for rescission of the Offsetting Agreement, as it cannot forever wait for the delivery of the condominium units to it.
It is evident from the facts of the case that Seneca Hardware did not fail to fulfill its obligation in the Offsetting Agreement. The discontinuance of delivery of construction materials to Vermen Realty stemmed from the failure of Vermen Realty to send purchase orders to Seneca Hardware.
The impossibility of fulfillment of the obligation on the part of Vermen Realty necessitates resolution of the contract for indeed, the non-fulfillment of the obligation aforementioned constitutes substantial breach of the Offsetting Agreement.
Robes-Francisco Realty & Development Corp. vs. CFI of Rizal
86 SCRA 59
Facts:
This is an appeal from the decision of the CFI of Rizal rendering judgment against Robes-Francisco Corporation to register the deed of absolute sale in favor of Millan with the Register of Deeds of Caloocan City and secure the corresponding title within ten days and if not possible said Corporation shall pay Millan the total amount she paid P5,193.63 with interest at 4% per annum from June 22, 1972 until fully paid. In either case Robes Corporation is sentenced to pay Millan nominal damages of P20,000.00 plus P5,000.00 attorney’s fees.
Petitioner Corporation questions the award of P20,000.00 nominal damages and P5,000.00 attorney’s fees alleging such to be excessive and unjustified.
In May 1962, Robes Corporation entered into a contract of sale with Millan for a parcel of land in the amount of 3,864.00 payable in installments. Millan complied with her obligation and made her final payment on December 22, 1971 for a total payment of P5,193.63 including interests and expenses for registration of title. On March 2, 1973 the deed of absolute sale was executed but the transfer certificate of title could not be executed because the parcel of land conveyed to Millan was included among other properties of the corporation mortgaged to GSIS to secure an obligation of P10 million, hence, the owner’s duplicate certificate of title of the subdivision was in the possession of the GSIS.
Issue:
Is the 4% interest provision of the contract a penal clause?
Ruling:
No. Said clause does not convey any penalty, for even without it, pursuant to Article 2209 of the Civil Code, the vendee would be entitled to recover the amount paid by her with legal rate of interest which is even more than the 4% provided for in the clause.
A penal clause is an accessory undertaking to assume greater liability in case of breach. From this alone, the 4% provision does not come to be penal in character, hence, Robes Corporation’s contention that the penalty shall substitute the indemnity for damages and the payment of interest in case of non-compliance does not hold water.
Unfortunately, Millan failed to show the actual damages she suffered as a result of the nonperformance. Nonetheless, the facts show that the right of the vendee was violated and this entitles her at the very least to nominal damages.
“In the situation before Us, We are of the view that the amount of P20,000.00 is excessive.” Bad faith can not be presumed. Petitioner Corporation expected that arrangements were possible for the GSIS to make partial releases of the subdivision lots from the overall real estate mortgage. It was only unfortunate for it not to succeed in that regard. Hence, the sum of ten thousand pesos by way of nominal damages is fair and just.
VELASCO VS. MERALCO
42 SCRA 556
FACTS:
Appellee, Manila Electric Company’s substation emitted noise above 50 decibel level. The intensity of the noise emitted by appelle’s transformers is most objectionable at night, when people are endeavoring to rest and sleep. The court ordered the appellee to bring down the noise to 50 decibel level upon complaint of appellant, Velasco. The appellee argued that instead of lowering the noise, wall barrier will be erected to separate the substation from the property but it was not push thru due to objections of appellant’s wife. Since Velasco, the appellant was the one who complained his wife’s objection should not suffice to constitute a waiver of this claim.
The appellant claimed for damages from the company but was not satisfied with the decision of the court for he believed that the decision has incorrectly assessed appellant’s damages and unreasonably reduced the amount of the claim. Appellant urged that the damages awarded him are inadequate considering the present high cost of living and calls attention to Article 1250 of the New Civil Code.
ISSUE:
Was the court correct in not applying Article 1250 of the New Civil Code?
RULING:
Yes. In Article 1250, it can be seen that the provision envisages contractual obligations where the parties selected specific currency as a medium of payment; hence it is not applicable to obligations arising from tort and not from contract as in the case at bar. Besides, there has been no showing that the factual assumption of the article has come into existence.
The damages awarded to herein appellant were by no means full compensatory damages, since the decision makes clear that appellant, by his failure to minimize his damages by means easily within his reach, was declared entitled only to a reduce award for nuisance sued upon. And the amount granted him had already taken into account the changed economic circumstances.
PEOPLE’S CAR VS. COMMANDO SECURITY SERVICE AGENCY
51 SCRA 40
FACTS:
People’s Car Inc. acquired the services of the Commando Security Service Agency to “safeguard and protect the business premises of the [People’s Car Inc.] from theft, pilferage, robbery, vandalism, and all other unlawful acts of any person or persons prejudicial to the interest of the [company].”
On April 5, 1970, the security guard brought out of the compound a client’s car and drove the car to places unknown without the consent, authority, approval, and knowledge of the company. While driving the said car, the security guard lost control of the car, which fell into a ditch. As a result of the incident, the car of the client suffered extensive damages in the total amount of Php 8,489.10, including the rental value.
The company claimed that the defendant was liable for the entire amount. On the other hand, service agency contended that its liability should not exceed Php 1,000.00 as indicated in the contract agreed upon.
The trial court ruled in favor of the service agency, hence, the appeal.
ISSUE:
Should the service agency be liable for the total actual damages incurred?
RULING:
Yes. The decision of the trial court was erroneous, since it misread the contractual provisions as agreed upon by the parties. The liability of the service agency falls under the paragraph 5 and not paragraph 4 of the said contract.
Paragraph 4 of the contract pertains to the liability of the service agency if there is any loss or damage through the negligence of its guards during watch hours. However, in the case, the security was not negligent. But rather, he acted unlawfully and wrongfully drove out a client’s car out of the premises. Therefore, the service agency was held liable for the total actual damages pursuant to paragraph 5 of the contract.
PERLA COMPANIA DE SEGUROS, INC. VS. COURT OF APPEALS
185 SCRA 741
FACTS:
Milagros Cayas was an owner of passenger vehicle, which she insured with Perla Compania de Seguros (PCSI) on February 3, 1978. On December, the vehicle figured in an accident, resulting to the injury of several passengers. Three passengers, who were injured in the accident, agreed to a settlement of Php 4,000.00 each. However, 19 year old Edgardo Perea sued Cayas for damages. The court rendered a decision in favor of Perea with cost against Cayas of Php 22,000.00. Consequently, Cayas filed a complaint for a sum of money and damages against PCSI. She sought reimbursement from PCSI with the contention that her claim was within PCSI’s contractual liability under the insurance policy. The court rendered judgment in favor of Cayas, ordering PCSI to pay Cayas Php 50,000.00 as compensation for the injured parties, Php 5,000.00 for moral damages, and Php 5,000.00 attorney’s fees. PCSI then filed a motion for reconsideration. They sought to limit its liability only to the payment made by Cayas to Perea and only up to Php 12,000.00 and denied the liability for payments made to Cayas to the other three injured parties based on the provision of the policy. The decision of the Court of Appeals was modified. PCSI should pay Cayas the amount of Php 12,000.00 plus the legal interest and attorney’s fee in the amount of Php 5,000.00
ISSUE:
Should PCSI be liable to reimburse Cayas the amount ordered by the trial court?
RULING:
No. PCSI cannot be held liable to pay Cayas the amount ordered by the trial court, because the insurance policy clearly and categorically placed PCSI’s liability for all damages arising out of death or bodily injury sustained by one person as a result of any single accident at Php 12,000.00. The said amount was in compliance with the minimum fixed by the prevailing law. PCSI’s liability under the insurance contract not being less than Php 12,000.00 was not contrary to law, good morals, good customs, and public policy. The said stipulation must be upheld as effective, valid, and biding between parties.
The condition requiring Cayas to secure a written permission of PCSI before effecting any payment in settlement of any claims against PCSI was required to safeguard its interest. There was nothing unreasonable in the stipulation aw would warrant nullification.
PUBLISHING COMPANY VS. PERFECTO
13 SCRA 762
FACTS:
On May 3, 1955, Perfecto Tabora bought from Lawyers Cooperative Publishing Company one complete set of American jurisprudence, in an installment basis amounting to Php 1,682.40, including freight charges. He made a partial payment of Php 300.00. The books were then delivered on May 15, 1955. However, on that same day, a big fire broke out, which destroyed the buildings, including the law office and library of Tabora. When Tabora reported the incident to the company, they replied in good will and sent him free books.
Subsequently, Tabora failed to pay the installments agreed upon, even when demanded by them. So the company filed a case to recover the balance plus 25 percent of the amount due as damages. Tabora used force majeure as a defense. He contended that since the loss was due to fortuitous event he cannot be held liable for the loss. The court ruled in favor of the company. So Tabora took the case to the Court of Appeals, which later modified the decision, eliminating the portion that referred to liquidated damages.
ISSUE:
Should Tabora be exempted from liability because of fortuitous event?
RULING:
No. Though it was agreed that the title of the ownership of the books should remain with the seller until the purchase price shall have been fully paid, it was also expressly agreed upon that the loss or damage after delivery shall be borne by the buyer. In pursuance of the contract, the ownership of the goods has been retained by the seller merely to secure performance by the buyer of his obligation. Moreover, the goods were at the buyer’s risk from the time of the delivery.
NAGA TELEPHONE CO. INC. (NATELCO) AND LUYCIANO MAGGAY VS. COURT OF APPEALS AND CAMARINES SUR II ELECTRIC COOPERATIVE INC. (CASURECO II)
230 SCRA 351
FACTS:
NATELCO is a telephone company rendering local and long distance telephone service in Naga City. While CASURECO is a private corporation established for purpose of operating and electric power service in the same city.
In 1977, the parties entered into a contract for the use of the electric light post of CASURECO by NATELCO in operation of its telephone service. In consideration, NATELCO agreed to install free of charge ten-telephone connection for the use of CASURECO. The term of the contract shall be as long as NATELCO has need for the electric light post of the CASURECO, it being understood that the same contract shall be terminated by any reason whatsoever, if CASURECO is forced to stop or abandon its operation as a public service.
After 10 years, CASURECO filed a case against NATELCO for the reformation of contract with damages on the ground that it was too-one sided in favor of NATELCO. That after 11 years, the cable strung by NATELCO was much heavier due to the increase in volume of their subscribers, worsened by the fact that their linemen bore holes through the post at which points those post were broken during typhoons. NATELCO used posts in the towns outside Naga without any contract or permission from CASURECO. After filing the complaints, NATELCO had refused to pay despite the demands made. NATELCO’s answered that CASURECO did not sufficiently state the cause of action for the reformation of contract and that it was barred by the prescription because it was filed after 10 years.
The trial court ruled in favor of CASURECO, ordering the reformation of contract and ordering NATELCO to pay CASURECO the compensation for the use of their post in Naga. Moreover, CASURECO was ordered to pay the monthly bills for the use of the telephones. Disagreeing with the judgment, NATELCO appealed to the Court of Appeals. The Court of Appeals affirmed the decision.
ISSUE:
1. Was reformation of the contract a proper remedy for NASURECO?
2. Was the contract subject to potestative condition?
RULING:
1. No. NASURECO cannot correctly invoke reformation of contract as a proper remedy, because there had been no showing of mistake or error in said contract on the part of any of the parties, so as to result in its failure to express their true intent.
2. No. A potestative condition is a condition wherein the fulfillment of which depends upon the sole sill of the debtor, in which conditional obligation is void. Based on the provision in the contract, the term shall be as long as NATELCO had need for the electric post of the CASURECO, which was a potestative condition. But it should be noted that the same provision also stated that the contract shall terminate when for any reason whatsoever, CASURECO was to stop or abandon its operation as a public service and it becomes necessary to remove the electric light post, which were casual condition since they depend on chance, hazard, or the will of the third person. The contract was subject to mixed conditions, depending partly in the will of the debtor and partly on chance or will of a third person that would not invalidate the provision.
TAGUBA VS. DE LEON
132 SCRA 722
FACTS:
Berlin Taguba married to Sebastiana Domingo (petitioner) is the owner of a residential lot with an area of 3,129 square meters. Souses |Pedro Asuncion and Marita Lungab (also petitioner) and private respondent Maria Peralta Vda de De Leon, were separately occupying portions of the aforementioned lot as lessees.
Taguba sold a portion of the said lot consisting of 400 square meters to private respondent Maria Peralta Vda de De Leon for P18,000. The portion sold comprises the area occupied by the Asuncions and private respondent Vda de De Leon. The deed evidencing said sale was denominated as “Deed of Conditional Sale,” which included the following term:
“c.) That failure to pay the VENDOR the whole balance on December 31, 1972, the VENDEE shall be given an extension of Six (6) months with interest (legal rate) after which VENDOR may INCREASE the purchase price to P50.00 per square meter which the VENDEE agrees should she fail to pay within said period of time.”
Alleging that private respondent had already paid P12,500 and had tendered payment of the balance of P5,500 to complete the stipulated purchase price of P18,000 to petitioner Taguba within the grace period but the latter refused to receive payment; and that since negotiations for settlement with the intervention of Governor Dy failed, private respondent instituted a complaint for Specific Performance.
In their answer, spouses Taguba admitted the sale of the property, but claimed that private respondent failed to comply with her obligation under the Deed of Conditional Sale despite the several extensions granted her, by reason of which petitioner was compelled, but with the express knowledge and consent and even upon the proposal of private respondent, to negotiate the sale of a portion of the property sold to the spouses Asuncion who were actually in possession thereof.
ISSUE:
Did the seller validly rescind the Contract of Conditional Sale?
RULING:
No. The Court held that nowhere in the said contract in question is there a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full payment of the purchase price. There is also no stipulation giving the vendor (petitioner Taguba) the right to unilaterally rescind the contract the moment the vendee (private respondent de Leon) fails to pay within a fixed period.
Considering the nature of the transaction between petitioner and private respondent, which is, affirm and sustain to be a contract of sale, absolute in nature the applicable provision is Article 1592 of the New Civil Code, which states
“Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by notarial act. After the demand the court may not grant him a new term.”
In the case at bar, it is undisputed that petitioner Taguba never notified private respondent by notarial act that he was rescinding the contract, and neither had he filed a suit in court to rescind the sale.
Finally, it has been ruled that “where time is not of the essence of the agreement, a slight delay on the part of one party in the performance of his obligation is not a sufficient ground for the rescission of the agreement. Considering that in the instant case, private respondent had already actually paid the sum of P12,500 of the total stipulated purchase price of P18,000 and had tendered payment of the balance of P5,500 within the grace period of six months, equity and justice mandate that she be given additional period within which to complete payment of the purchase price.
BOSQUE VS. YU CHIPCO
G.R. No. 3862 September 6, 1909
FACTS:
Plaintiff Juan G. Bosque and defendant Yu Chipco entered into a contract by which the latter was to construct a house for the former and to complete the same within a period of four months after the contract was signed and delivered. Late, Bosque made some changes in and additions to the original plans of the house, which changes were agreed to by the defendant and a new contract was made relating thereto. However, Bosque failed to procure the necessary permit for the additional changes in the construction with proper authorities which prevented Yu Chipco from continuing his work. For the construction of the house Bosque had furnished several pieces of timber, alleged to be worth P132. Yu Chipco, on the other hand, proved that he had expanded in labor and money upon the additions made to the house in the sum of P500. Yu Chipco alleges and proves that by reason of the fact that the Bosque failed to make the payments in accordance with the terms of the contract that he was unable to proceed with the construction of the house. Finally, the house was totally destroyed by a baguio before its completion.
Bosque commenced the present action for the purpose of recovering of the defendant the sum of P132, the value of the said pieces of material furnished by him to Yu Chipco, and the sum of P600 damages for failure of Yu Chipco to complete the house within the period of four months provided for in the first contract. Yu Chipco answered the said complaint, denied really all of the material allegations of the complaint, set out the original contract, alleged the new contract and the fact that Bosque had refused to make payments in accordance with the terms of the contract, and asked for a judgment against Bosque in the sum of P1,928.56.
ISSUE:
Was Bosque’s action tenable?
RULING:
No. Bosque claims that the lower court committed an error in not deciding that each of the parties was absolved from any further liability under the said contract, by virtue of the provisions of Article 1124 of the Civil Code(Article 1191 of the New Civil Code). Upon this question, the SC is of the opinion and so holds that while the court did not expressly pronounce that the parties were absolved from any further obligation upon the contract, yet, by the very terms of the judgment the said parties must necessarily be absolved from any further action or liability upon the said contract.
It is clear that Bosque did not perform the undertaking which he was bound by the terms of his agreement to perform; consequently he is not entitled to insist upon the performance of the contract by Yu Chipco or to recover damages by reason of his own breach. The SC thinks the judgment of the lower court absolved each party from any further liability upon the said contract.
Bosque alleges that the lower court committed an error in not making Yu Chipco, the contractor of the building which was destroyed, liable for the loss and damage which he suffered by such destruction. The building was destroyed by a baguio. The proof is not sufficient to show that the destruction was due to defects in the construction of the building, and until that fact had been established, certainly Bosque would not be entitled to damages under the said article.
GAITE VS FONACIER
2 SCRA 381
FACTS:
Defendant-appellant Isabelo Fonacier was the owner and/or holder of 11 iron lode mineral claims, known as the Dawahan Group. By a “Deed of Assignment”, Fonacier appointed Fernando A. Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical person for the exploration and development of the mining claims on a royalty basis. On 19 March 1954, Gaite in turn executed a general assignment conveying the development and exploitation of said mining claims unto the Larap Iron Mines, owned solely by him after which he embarked upon the development and exploitation of the mining claims.
Subsequently, Isabelo Fonacier decided to revoke the authority granted by him to Gaite, and Gaite assented thereto subject to certain conditions. A document was drawn wherein Gaite transferred to Fonacier all his rights and interests on all the roads, improvements, and facilities in or outside said claims, the right to use the business name "Larap Iron Mines" and its goodwill, and all the records and documents relative to the mines. Gaite also transferred all his rights and interests over the “24,000 tons of iron ore, more or less” that the former had already extracted from the mineral claims, in consideration of the sum of P75,000, P10,000, of which was paid upon the signing of the agreement, and the balance to be paid out of the first letter of credit covering the first shipment of iron ores or the first amount derived from the local sale of iron ore made by the Larap Mines & Smelting Co. To secure the payment of the balance, Fonacier promised to execute in favor of Gaite a surety bond; with Fonacier as principal and the Larap Mines and Smelting Co. and its stockholders as sureties. A second bond was executed by the parties to the first bond, on the same day, with the Far Eastern Surety and Insurance Co. as additional surety, but it provided that the liability of the surety company would attach only when there had been an actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less than P65,000.. On 8 December 1955, the bond with respect to the Far Eastern Surety and Insurance Company expired with no sale of the approximately 24,000 tons of iron ore, nor had the 65,000 balance of the price of said ore been paid to Gaite by Fonacier and his sureties. Gaite demanded from Fonacier and his sureties payment of said amount.
When Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed a complaint against them in the CFI Manila for the payment of the P65,000 balance of the price of the ore, consequential damages, and attorney’s fees. Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to pay him, jointly and severally, P65,000 with interest at 6% per annum from 9 December 1955 until full payment, plus costs. From this judgment, defendants jointly appealed to the Supreme Court as the claims involved aggregate to more than P200,000.
ISSUE:
Is the obligation of appellant Fonacier to pay appellee Gaite the P65,000.00 (balance of the price of the iron ore in question) one with a suspensive period or term and not a suspensive condition?
RULING:
Yes. The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment of the balance of P65,000, but was only a suspensive period or term. What characterizes a conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its demandability) is subordinated to the happening of a future and uncertain event; so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.
The contract stipulates that “the balance of Sixty-Five Thousand Pesos (P65,000) will be paid out of the first letter of credit covering the first shipment of iron ore . . .” etc. There is no uncertainty that the payment will have to be made sooner or later; what is undetermined is merely the exact date at which it will be made. By the very terms of the contract, therefore, the existence of the obligation to pay is recognized; only its maturity or demandability is deferred.
To subordinate the obligation to pay the remaining P65,000 to the sale or shipment of the ore as a condition precedent, would be tantamount to leaving the payment at the discretion of the debtor, for the sale or shipment could not be made unless the appellants took steps to sell the ore. Appellants would thus be able to postpone payment indefinitely. Such construction of the contract should be avoided.
MARIA LACHICA VS. GREGORIO ARANETA
47 OG 5699 August 19, 1949
FACTS:
Gregorio Araneta, Inc. (through President Jose Araneta) offered for sale a parcel of land with the improvements thereon. This property was bought by Investment Corporation through Maria Lachica, the wife of the Esteban Sadang who was sales agent of defendant corporation.
The terms of the contract stated that the price was P20,000, of which P8,000 was to be paid in cash and the balance of P12,000 in installments of –
P 1,000 on or before December 31, 1943
P 1,000 on or before December 31, 1944
P 10,000 on or before December 31, 1945.
What the parties signed was a contract of exact content as stated, which however omitted the words “or before.” Thus, it would appear that the payment of the installments would be “on” and not “on or before” the dates as specified.
The contract further added that “this same property will be mortgaged to us to guarantee the unpaid balance, and the same will bear an interest of 8 percent per annum; said interest to be paid monthly in advance.”
The terms were complied with, together with some resolved differences, until on Sept. 5, 1944, plaintiff Sadang went to see Araneta to pay the entire balance, including the interest thereon and ask for the cancellation of the mortgage, but Araneta refused to accept the tender of payment. Araneta gave as his reason for his non-acceptance that such payment was not in accordance with the terms of the deed of sale with mortgage.
Plaintiff, through counsel, deposited the sum (balance) supposed to be paid to Araneta with the CFI of Manila by way of consignation, and at the same time presented the complaint.
The defendant alleges that payment should be on the date specified, not before; the plaintiffs claim that such payment may be made on or before the date specified.
ISSUE:
Should Araneta be compelled to accept the payment?
RULING:
Yes. The contract does not prohibit if it is done before (p.5706, no. 2). A term is fixed and “it is presumed to have been established for the benefit of the creditor as sell as that of the debtor, unless from its tenor or from other circumstances it should appear that the terms as established for the benefit of one or the other.” (Art. 1127, now 1196 Civil Code). And the contract specifically provides that “these periods of payment have been agreed for the benefit of the vendor and the vendee.” Such mutual benefit has been interpreted to consist of the time granted a debtor to find means to comply with his obligation, and the fruits, such as interest, accruing to the creditor.
From the SC decision in Villaseñor vs. Javellana, the only impediment to a debtor making payment before the term fixed, is the denial to the creditor of the benefits, such as interests, accruing to the later by reason of the fixed term. This, coupled with the fact that the contract did not prohibit payment before the fixed date, justifies the conclusion that under the terms signed, plaintiffs could do so. To hold otherwise, would be virtually compelling an obligor to assume an obligation later when he offers to, and could very well, discharge it earlier. The law should not be interpreted as to compel a debtor to remain so, when he is in a position to release himself.
Further, the acceleration clause in the contract signed by the parties state that “in the event of defaults in payment of any amount due, either for capital or interest, the whole balance shall automatically become due and payable, and the vendor shall have the right to foreclose the mortgage in its entirety.” While the clause is standard one contained in most mortgage deeds where the mortgage loan is payable in several installments, still we cannot escape the conclusion, derived from the clause itself, that payments may be made by the vendee before the dates stated in the contract .
PONCE DE LEON VS SYJUCO
90 PHIL. 311
FACTS :
The appellee, Philippine National Bank, was the owner of two parcels of land in Negros Occidental. On March 9, 1936 the Bank executed a contract to sell the said properties to Jose Ponce de Leon for the total price of P26,300.
Subsequently, Ponce de Leon obtained a loan from Santiago Syjuco, Inc in the amount of P200,000 in Japanese Military Notes, payable within one (1) year from May 5, 1948. It was also provided that the Ponce de Leon could not pay, and Syjuco could not demand, the payment of said note except within the aforementioned period. To secure the payment of said obligation, Ponce de Leon mortgaged the parcels of land which he agreed to purchase from the Bank. Using the loan, Ponce de Leon was able to pay the Bank and a deed of absolute sale was executed in his name.
Ponce de Leon further obtained an additional loan from Syjuco. On several occasions in October, 1944, Ponce de Leon tendered to Syjuco the amount of P254,880 in Japanese military notes in full payment of his indebtedness which was refused by Syjuco which Ponce de Leon deposited with the Clerk of Court of the CFI. He then filed a petition with the CFI for the reconstitution of transfer of the certificates of the lot in the name of the Bank which was granted by the court. Syjuco filed a second amended answer to Ponce de Leon's complaint claiming that Ponce de Leon, by reconstituting the titles in the name of the Bank, by causing the Register of Deeds to have the said titles transferred in his name, and by subsequently mortgaging the said properties to the Bank as a guaranty for his overdraft account, had violated the conditions of the morgage which Ponce de Leon has executed in its favor during the Japanese occupation. Syjuco prayed that the mortgage executed by Ponce de Leon in favor of the Bank be declared null and void.
On June 24, 1949, the lower court rendered a decision absolving Syjuco from Ponce de Leon's complaint and condemning Ponce de Leon to pay Syjuco the total amount of P23,130 with interest at the legal rate from May 6, 1949, until fully paid
ISSUE :
Is the consignation made by the plaintiff valid in the light of the law and the stipulations agreed upon in the two promissory notes signed by the plaintiff?
RULING :
No. In order that consignation may be effective, the debtor must first comply with certain requirements prescribed by law. The debtor must show (1) that there was a debt due; (2) that the consignation of the obligation had been made bacause the creditor to whom tender of payment was made refused to accept it, or because he was absent for incapacitated, or because several persons claimed to be entitled to receive the amount due (Art. 1176); (3) that previous notice of the consignation have been given to the person interested in the performance of the obligation (Art. 1177); (4) that the amount due was placed at the disposal of the court (Art 1178); and (5) that after the consignation had been made the person interested was notified thereof (Art. 1178). In the instant case, while it is admitted a debt existed, that the consignation was made because of the refusal of the creditor to accept it, and the filing of the complaint to compel its acceptance on the part of the creditor can be considered sufficient notice of the consignation to the creditor, nevertheless, it appears that at least two of the above requirements have not been complied with. Thus, it appears that plaintiff, before making the consignation with the clerk of the court, failed to give previous notice thereof to the person interested in the performance of the obligation. It also appears that the obligation was not yet due and demandable when the money was consigned, because, as already stated, by the very express provisions of the document evidencing the same, the obligation was to be paid within one year after May 5, 1948, and the consignation was made before this period matured. The failure of these two requirements is enough ground to render the consignation ineffective. And it cannot be contended that plaintiff is justified in accelerating the payment of the obligation because he was willing to pay the interests due up to the date of its maturity, because, under the law, in a monetary obligation contracted with a period, the presumption is that the same is deemed constituted in favor of both the creditor and the debtor unless from its tenor or from other circumstances it appears that the period has been established for the benefit of either one of them (Art. 1127). Here no such exception or circumstance exists.
It may be argued that the creditor has nothing to lose but everything to gain by the acceleration of payment of the obligation because the debtor has offered to pay all the interests up to the date it would become due, but this argument loses force if we consider that the payment of interests is not the only reason why a creditor cannot be forced to accept payment contrary to the stipulation. There are other reasons why this cannot be done. One of them is that the creditor may want to keep his money invested safely instead of having it in his hands. Another reason is that the creditor by fixing a period protects himself against sudden decline in the purchasing power of the currency loaned specially at a time when there are many factors that influence the fluctuation of the currency. And all available authorities on the matter are agreed that, unless the creditor consents, the debtor has no right to accelerate the time of payment even if the premature tender "included an offer to pay principal and interest in full."
ARANETA VS PHIL. SUGAR ESTATES DEVELOPMENT CO.
20 SCRA 330
FACTS:
J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City, and on July 28, 1950, [through Gregorio Araneta, Inc.] sold a portion thereof to Philippine Sugar Estates Development Co., Ltd.
The parties stipulated, among in the contract of purchase and sale with mortgage, that the buyer will build on the said parcel land the Sto. Domingo Church and Convent while the seller for its part will construct streets. But the seller, Gregorio Araneta, Inc., which began constructing the streets, is unable to finish the construction of the street in the Northeast side because a certain third-party, by the name of Manuel Abundo, who has been physically occupying a middle part thereof, refused to vacate the same;
Both buyer and seller know of the presence of squatters that may hamper the construction of the streets by the seller. On May 7, 1958, Philippine Sugar Estates Development Co., Lt. filed its complaint against J. M. Tuason & Co., Inc., and instance, seeking to compel the latter to comply with their obligation, as stipulated in the above-mentioned deed of sale, and/or to pay damages in the event they failed or refused to perform said obligation.
The lower court and the appellate court ruled in favor of Phil. Sugar estates, and gave defendant Gregorio Araneta, Inc., a period of two (2) years from notice hereof, within which to comply with its obligation under the contract, Annex "A".
Gregorio Araneta, Inc. resorted to a petition for review by certiorari to this Court.
ISSUES:
Was there a period fixed?
RULING:
Yes. The fixing of a period by the courts under Article 1197 of the Civil Code of the Philippines is sought to be justified on the basis that petitioner (defendant below) placed the absence of a period in issue by pleading in its answer that the contract with respondent Philippine Sugar Estates Development Co., Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable time within which to comply with its obligation to construct and complete the streets." If the contract so provided, then there was a period fixed, a "reasonable time;" and all that the court should have done was to determine if that reasonable time had already elapsed when suit was filed if it had passed, then the court should declare that petitioner had breached the contract,
Was it within the powers of the lower court to set the performance of the obligation in two years time?
NO. Even on the assumption that the court should have found that no reasonable time or no period at all had been fixed (and the trial court's amended decision nowhere declared any such fact) still, the complaint not having sought that the Court should set a period, the court could not proceed to do so unless the complaint included it as first amended;
Granting, however, that it lay within the Court's power to fix the period of performance, still the amended decision is defective in that no basis is stated to support the conclusion that the period should be set at two years after finality of the judgment. The list paragraph of Article 1197 is clear that the period can not be set arbitrarily. The law expressly prescribes that “the Court shall determine such period as may under the circumstances been probably contemplated by the parties.”
It must be recalled that Article 1197 of the Civil Code involves a two-step process. The Court must first determine that "the obligation does not fix a period" (or that the period is made to depend upon the will of the debtor)," but from the nature and the circumstances it can be inferred that a period was intended" (Art. 1197, pars. 1 and 2). This preliminary point settled, the Court must then proceed to the second step, and decide what period was "probably contemplated by the parties" (Do., par. 3). So that, ultimately, the Court can not fix a period merely because in its opinion it is or should be reasonable, but must set the time that the parties are shown to have intended. As the record stands, the trial Court appears to have pulled the two-year period set in its decision out of thin air, since no circumstances are mentioned to support it. Plainly, this is not warranted by the Civil Code.
Does “reasonable time” mean that the date of performance would be indefinite?
The Court of Appeals objected to this conclusion that it would render the date of performance indefinite. Yet, the circumstances admit no other reasonable view; and this very indefiniteness is what explains why the agreement did not specify any exact periods or dates of performance.
ORIT VS BALDROGAN
106 SCRA 800
FACTS:
On 22 November 1955 the plaintiff brought an action with the CFI to collect from the defendant the sum of P5.000, the balance of an account due to export logs purchased by the latter from the former. On 25 September 1956 the parties, assisted by their respective counsel, entered into a stipulation of facts and submitted it to Court which provided among others that “for failure of the parties to submit to the Court the agreed date of payment on November 6, 1956, they mutually agreed that the Court shall have the full power to fix a reasonable time when the defendant should pay, and a judgment therefor shall issue based upon this stipulation of facts.”
The parties failed to submit to the Court the date when the defendant had to pay its debt to the plaintiff. On 6 November 1956 the plaintiff filed an ex-parte motion praying that judgment be rendered upon the stipulation of facts and that the Court fix the time in which the defendant should pay the sum due to the plaintiff. On 28 November 1956 the Court rendered judgment as prayed for ordering defendant to pay the plaintiff within thirty days from receipt of notice of judgment the sum of P5,000 with legal interest from 8 December 1955 until fully paid and to pay the costs. On 21 January 1957 the Court denied the defendant's motion for reconsideration dated 12 January 1957. The defendant has appealed.
Citing article 1196 of the new Civil Code in support of its appeal, the appellant claims that the period of thirty days fixed by the Court rebounded to the benefit only of the creditor, the appellee, and not mutually to the creditor and the debtor. In its brief, the appellant prays that it be granted at least a year within which to pay the appellee.
ISSUE:
Is the contention meritorious?
RULING:
No. The article cited by the appellant cannot be applied to the case at bar where the parties entered into a compromise agreement ending a controversy and authorizing the Court to fix a reasonable time within which the appellant should pay its debt to the appellee, if they fail to agree upon a date for payment and submit it to the Court. It applies where the parties to a contract themselves have fixed a period.
As they failed to set a date for payment and submit it to the Court on motion on the appellee, the Court rendered judgment upon the stipulation of facts and ordered the appellant to pay the appellee within thirty days from receipt of notice of judgment. The judgment rendered by the Court was but in pursuance of the compromise agreement embodied in the stipulation of facts entered freely and voluntarily by the parties with the assistance of their respective counsel. The appellant cannot now claim and complain that the period fixed by the Court is unreasonable.
QUIZANA VS. GAUDENCIO REDUGERIOI AND JOSEFA POSTRADO
50 OG 2444
FACTS:
Defendant appellants are indebted to plaintiff in the amount of P550.00, which in addition to such, the contract/document stipulated that in case of failure to pay the debt on the day fixed, defendants are to deliver a mortgage on a property of theirs.
The main issue raised in this appeal is the nature and effect of the actionable document as mentioned above. The CFI of Marinduque rendered a decision wherein the defendant appellants are ordered to pay the plaintiff appelle the sum of P550.00, with interest from the time of the filing of the complaint. The trial court evidently ignored the second part of defendants-appellants’ written obligation, and enforced its last first part, which fixed payment on Jan. 31, 1949.
ISSUE:
Whether the second part of the written obligation, in which the obligors agreed and promised to deliver a mortgage over the parcel of land described therein, upon failure to pay the debt on a date specified in the preceding paragraph, is valid and binding and effective upon the plaintiff appellee, the creditor?
RULING:
This second part of the obligation in question is what is known in law as a facultative obligation, defined in Art. 1206 of the Civil Code of the Philippines. This is a new provision and is not found in the old Spanish Civil Code, which was the one in force at the time of the execution of the agreement.
There is nothing in the agreement which would argue against its enforcement. It is not contrary to law or public morals or public policy, and notwithstanding the absence of any legal provision at the time it was entered into governing it, as the parties had freely and voluntarily entered into governing it, as the parties had freely and voluntarily entered into it, there is no ground why it should into be given effect. It is a new right which should be declare effective at once, in consonance with the provisions of article 2253 of the Civil Code of the Philippines.
PHILIPPINE NATIONAL BANK, VS. CONCEPCION MINING COMPANY, INC., ET AL.
5 SCRA 745
FACTS:
The present action was instituted by the plaintiff to recover from the defendants the face of a promissory note the pertinent part of which reads as follows:
NINETY DAYS after date, for value received, I promise to pay to the order of the Philippine National Bank . . . .In case it is necessary to collect this note by or through an attorney-at-law, the makers and indorsers shall pay ten percent (10%) of the amount due on the note as attorney's fees, which in no case shall be less than P100.00 exclusive of all costs and fees allowed by law as stipulated in the contract of real estate mortgage. Demand and Dishonor Waived. Holder may accept partial payment reserving his right of recourse again each and all indorsers.
CONCEPCION MINING COMPANY, INC.,
By:
(Sgd.) VICENTE LEGARDA
President
(Sgd.) VICENTE LEGARDA
(Sgd.) JOSE S SARTE
The co-maker the promissory note Don Vicente L. Legarda died on February 24, 1946 and his estate is in the process of judicial determination in Special Proceedings. On the basis of this allegation it is prayed, as a special defense, that the estate of said deceased Vicente L. Legarda be included as party-defendant. The court in its decision ruled that the inclusion of said defendant is unnecessary and immaterial, in accordance with the provisions of Article 1216 of the New Civil Code. Defendants presented a petition for relief, asking that the effects of the judgment be suspended for the reason that the deceased Vicente L. Legarda should have been included as a party-defendant and his liability should be determined in pursuance of the provisions of the promissory note.
ISSUE:
Is the defendant’s contention valid?
RULING:
No. In view of Article 1216 of the New Civil Code and as the promissory note was executed jointly and severally by the same parties, namely, Concepcion Mining Company, Inc. and Vicente L. Legarda and Jose S. Sarte, the payee of the promissory note had the right to hold any one or any two of the signers of the promissory note responsible for the payment of the amount of the note.
Our attention has been attracted to the discrepancies in the printed record on appeal. The title of the complaint set forth in the record on appeal does not contain the name of Jose Sarte, when it should, as two defendants are named in the complaint and the only defense of the defendants is the non-inclusion of the deceased Vicente L. Legarda as a defendant in the action. The promissory note which is set forth in the record on appeal does not also contain the name of the third maker Jose S. Sarte while the brief sets forth said name of Jose S. Sarte as one of the co-maker of the promissory note. Evidently, there is an attempt to mislead the court into believing that Jose S. Sarte is no one of the co-makers. Jose S. Sarte is orderes to explain why in his record on appeal his own name as one of the defendants does not appear and neither does his name appear as one of the co-signers of the promissory note in question.
WILSON vs. BERKENKOTTER
49 OG 1410
FACTS:
Plaintiff Samuel J. Wilson, defendant B.H. Berkenkotter, and one Paul A. Gulick jointly and severally signed a promissory note in the amount of P90, 000 in favor of the Chartered Bank of India, Australia and China payable on demand with interest thereon at the rate of 7 per cent per annum payable monthly. After the Philippines had been occupied by the Japanese Forces, the Bank of Taiwan became the liquidator of all enemy banks, among which was the Chartered Bank of India, Australia and China;
Defendant upon demand by the Taiwan Bank paid the promissory note referred to above, plus the corresponding interests which amounted in all, principal and interests to P112, 591.22. After liberation, defendant demanded payment from his co-debtors of their corresponding shares in the obligation contracted by them jointly and severally. For reasons of personal consideration defendant accepted payment from Paul A. Gulick only in the amount of P18, 902, while plaintiff refused to pay to defendant the full amount of P37, 530.40 in Philippine currency, and because of the refusal of defendant to receive from the plaintiff the amount of P625.51 which is the equivalent value as of November, 1944 of the P37, 530.40 in Japanese military notes, said plaintiff consigned with this court the said amount of P625.51. After hearing, the trial court rendered judgment in favor of plaintiff and ordered the defendant to receive from the clerk of court the P625.51 consigned by plaintiff as the just and full payment of the indebtedness. From that decision defendant appealed to the SP on question of law.
ISSUES:
1. Is the Balantyne schedule of values in determining the amount to be reimbursed by the plaintiff as a co-solidary debtor of the defendant applicable?
2. Is defendant Berkenkotter liable to pay the full amount in Philippine currency?
RULING:
1. Yes. The application of the Balantyne schedule this court has held that said schedule is applicable to obligations contracted during the Japanese occupation where said obligations are made payable on demand or during said Japanese occupation but not after the war or at a specified date or period which may indicate that the parties were speculating on the continuation or cessation of the war at the time of the payment. If the obligation on the part of Wilson to pay Berkenkotter the amount paid by the latter to wipe out their debt to the bank was created during the occupation, then the Balantyne schedule is applicable; but if said obligation was created before the war, particularly on the date when plaintiff and defendant signed the promissory not in favor of the bank, then the Balantyne schedule may not be applied.
2. No. According to Article 1145 of the Civil Code (Art. 1217 New Civil Code), payment by one of the solidary debtors entitles him to claim fro his debtors only the share pertaining to each with interest on the amount advanced, and this is what the appellant is doing, only that he wants to collect the whole amount paid by him for Wilson in genuine Philippine currency instead of the equivalent thereof under the Balantyne schedule. When appellant paid the entire loan plus interests in November, 1944, the whole obligation was extinguished. The solidary co-debtors were no longer under any obligation to the bank but a new obligation was created in favor of the appellant and against the appellee. Moreover, on grounds of equity appellant may not be allowed to collect from the appellee more than the real value of what he paid for him specially when the difference between the military notes and the genuine Philippine currency in November, 1944, was so great.
ELEIZEGUI VS MANILA LAWN TENNIS CLUB
G.R. 967
FACTS:
This suit concerns the lease of a piece of land for a fixed consideration and to endure at the will of the lessee. By the contract of lease the lessee is expressly authorized to make improvements upon the land, by erecting buildings of both permanent and temporary character, by making fills, laying pipes, and making such other improvements as might be considered desirable for the comfort and amusement of the members.
With respect to the term of the lease the present question has arisen. In its decision three theories have been presented: One which makes the duration depend upon the will of the lessor, who, upon one month's notice given to the lessee, may terminate the lease so stipulated; another which, on the contrary, makes it dependent upon the will of the lessee, as stipulated; and the third, in accordance with which the right is reversed to the courts to fix the duration of the term.
The first theory is that which has prevailed in the judgment below, as appears from the language in which the basis of the decision is expressed: "The court is of the opinion that the contract of lease was terminated by the notice given by the plaintiff on August 28 of last year . . . ." And such is the theory maintained by the plaintiffs, which expressly rests upon article 1581 of the Civil Code, the law which was in force at the time the contract was entered into (January 25, 1890). The judge, in giving to this notice the effect of terminating the lease, undoubtedly considers that it is governed by the article relied upon by the plaintiffs, which is of the following tenor: "When the term has not been fixed for the lease, it is understood to be for years when an annual rental has been fixed, for months when the rent is monthly. . . ." The second clause of the contract provides as follows: "The rent of the said land is fixed at 25 pesos per month."
ISSUE:
Was there a conventional term, a duration, agreed upon in the contract in question?
RULING:
Yes. The obligations which, with the force of law, the lessors assumed by the contract entered into, so far as pertaining to the issues, are the following: "First. . . . They lease the above-described land to Mr. Williamson, who takes it on lease . . . for all the time the members of the said club may desire to use it . . . Third. . . . the owners of the land undertake to maintain the club as tenant as long as the latter shall see fit, without altering in the slightest degree the conditions of this contract, even though the estate be sold."
In view of these clauses, it can not be said that there is no stipulation with respect to the duration of the lease, or that, notwithstanding these clauses, article 1581, in connection with article 1569, can be applied. If this were so, it would be necessary to hold that the lessors spoke in vain that their words are to be disregarded a claim which can not be advanced by the plaintiffs nor upheld by any court without citing the law which detracts all legal force from such words or despoils them of their literal sense.
PEDRO D. DIOQUINO VS. LAUREANO
G.R. No. L-25906 May 28, 1970
FACTS:
Attorney Pedro Dioquino is the owner of a car. He went to the office of the MVO, Masbate, to register the same where he met the defendant Federico Laureano, a patrol officer of said MVO office. Dioquino requested Laureano to introduce him to one of the clerks in the MVO Office, who could facilitate the registration of his car and the request was attended to. Laureano rode on the car of Atty. Dioquino on his way to the P.C. Barracks at Masbate. While about to reach their destination, the car driven by plaintiff's driver and with Laureano as the sole passenger was stoned by some 'mischievous boys,' and its windshield was broken. Laureano chased the boys and he was able to catch one of them. The plaintiff and Laureano with the boy returned to the P.C. barracks and the father of the boy was called, but no satisfactory arrangements were made about the damage to the windshield.
It was likewise noted in the decision now on appeal: "The defendant Federico Laureano refused to file any charges against the boy and his parents because he thought that the stone-throwing was merely accidental and that it was due to force majeure. So he did not want to take any action and after delaying the settlement, after perhaps consulting a lawyer, the defendant Federico Laureano refused to pay the windshield himself and challenged that the case be brought to court for judicial adjudication. There is no question that the plaintiff tried to convince the defendant Federico Laureano just to pay the value of the windshield and he even came to the extent of asking the wife to convince her husband to settle the matter amicably but the defendant Federico Laureano refused to make any settlement, clinging [to] the belief that he could not be held liable because a minor child threw a stone accidentally on the windshield and therefore, the same was due to force majeure."
ISSUE:
Is Federico Laureano liable for the payment of the windshield of Atty Dioquino?
RULING:
No.The law being what it is, such a belief on the part of defendant Federico Laureano was justified. The express language of Art. 1174 of the present Civil Code which is a restatement of Art. 1105 of the Old Civil Code, except for the addition of the nature of an obligation requiring the assumption of risk, compels such a conclusion. It reads thus: "Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be, foreseen, or which, though foreseen were inevitable." Even under the old Civil Code then, as stressed by us in the first decision dating back to 1908, in an opinion by Justice Mapa, the rule was well-settled that in the absence of a legal provision or an express covenant, "no one should be held to account for fortuitous cases." Its basis, as Justice Moreland stressed, is the Roman law principle major casus est, cui humana infirmitas resistere non potest. Authorities of repute are in agreement, more specifically concerning an obligation arising from contract "that some extraordinary circumstance independent of the will of the obligor, or of his employees, is an essential element of a caso fortuito." If it could be shown that such indeed was the case, liability is ruled out. There is no requirement of "diligence beyond what human care and foresight can provide."
The error committed by the lower court in holding defendant Federico Laureano liable appears to be thus obvious. Its own findings of fact repel the motion that he should be made to respond in damages to the plaintiff for the broken windshield. What happened was clearly unforeseen. It was a fortuitous event resulting in a loss which must be borne by the owner of the car. It was misled, apparently, by the inclusion of the exemption from the operation of such a provision of a party assuming the risk, considering the nature of the obligation undertaken. A more careful analysis would have led the lower court to a different and correct interpretation. The very wording of the law dispels any doubt that what is therein contemplated is the resulting liability even if caused by a fortuitous event where the party charged may be considered as having assumed the risk incident in the nature of the obligation to be performed. It would be an affront, not only to the logic but to the realities of the situation, if in the light of what transpired, as found by the lower court, defendant Federico Laureano could be held as bound to assume a risk of this nature. There was no such obligation on his part.
The decision of the lower court of November 2, 1965 insofar as it orders defendant Federico Laureano to pay plaintiff the amount of P30,000.00 as damages plus the payment of costs, is hereby reversed. It is affirmed insofar as it dismissed the case against the other two defendants, Juanita Laureano and Aida de Laureano, and declared that no moral damages should be awarded the parties.
LASAM VS. SMITH
45 PHIL 657
FACTS:
The defendant was the owner of a public garage in the town of San Fernando, La Union, and engaged in the business of carrying passengers for hire from one point to another in the Province of La Union and the surrounding provinces. Defendant undertook to convey the plaintiffs from San Fernando to Currimao, Ilocos Norte, in a Ford automobile. On leaving San Fernando, the automobile was operated by a licensed chauffeur, but after having reached the town of San Juan, the chauffeur allowed his assistant, Bueno, to drive the car. Bueno held no driver’s license, but had some experience in driving. The car functioned well until after the crossing of the Abra River in Tagudin, when, according to the testimony of the witnesses for the plaintiffs, defects developed in the steering gear so as to make accurate steering impossible, and after zigzagging for a distance of about half kilometer, the car left the road and went down a steep embankment. The automobile was overturned and the plaintiffs pinned down under it. Mr. Lasam escaped with a few contusions and a dislocated rib, but his wife, Joaquina, received serious injuries, among which was a compound fracture of one of the bones in her left wrist. She also suffered nervous breakdown from which she has not fully recovered at the time of trial.
The complaint was filed about a year and a half after and alleges that the accident was due to defects in the automobile as well as to the incompetence and negligence of the chauffeur.
The trial court held, however, that the cause of action rests on the defendant’s breach of the contract of carriage and that, consequently, articles 1101-1107 of the Civil Code, and not article 1903, are applicable. The court further found that the breach of contact was not due to fortuitous events and that, therefore the defendant was liable in damages.
ISSUE:
Is the trial court correct in its findings that the breach of contract was not due to a fortuitous event?
RULING:
Yes. It is sufficient to reiterate that the source of the defendant’s legal liability is the contract of carriage; that by entering into that contract he bound himself to carry the plaintiffs safely and securely to their destination; and that having failed to do so he is liable in damages unless he shows that the failure to fulfill his obligation was due to causes mentioned in article 1105 of the Civil Code, which reads:
“No one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable, with the exception of the cases in which the law expressly provides otherwise and those in which the obligation itself imposes such liability.”
As will be seen, some extraordinary circumstances independent of the will of the obligor, or of his employees, is an essential element of a caso fortuito. In the present case, this element is lacking. It is not suggested that the accident in question was due to an act of God or to adverse road conditions which could have been foreseen. As far as the record shows, the accident was caused either by defects in the automobile or else through the negligence of its driver. That is not a caso fortuito.
AIR FRANCE VS. CARRASCOSO
L-21438, September 28, 1996
FACTS:
Rafael Carrascoso, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes.
Air France, through its authorized agent, Philippine Air Lines, Inc., issued to Carrascoso a ‘frist class’ round trip airplane ticket from Manila to Rome. From Manila to Bangkok, he traveled in ‘first class’, but at Bangkok, the Manager of the airline forced Carrascoso to vacate the ‘first class’ seat that he was occupying because, in the words of the witness Ernesto Cuento, there was a ‘white man’, who, the Manager alleged, had a ‘better right’ to the seat. When asked to vacate his seat, Carrascoso, as was to be expected, refused; a commotion ensued. After several Filipino passengers approached and pacified Carrascoso, he reluctantly gave his ‘first class’ seat in the plane.
Carrascoso is now asking for damages from Air France as well as the difference in fare between first class and tourist class for the portion of the trip Bangkok-Rome.
ISSUE:
Does Rafael Carrascoso have a course of action against Air France?
RULLNG:
Yes. Carrascoso may base his action against Air France from two possible sources: first, from breach of contract of carriage and second, by virtue of petitioner - air carrier’s violation of public duty – a case of quasi–delict.
There was a contract to furnish plaintiff a fist class passage covering, amongst other, the Bangkok-Teheran leg. This contract was breached when petitioner failed to furnish first class transportation at Bangkok.
There was bad faith when petitioner’s employee compelled Carrascoso to leave his first class accommodation berth “after he was already seated” and to take a seat in the tourist class, by reason of which he suffered inconvenience, embarrassment and humiliation.
The manager not only prevented Carrascoso from enjoying his right to a first class seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him suffer the humiliation of having to go to the tourist class compartment — just to give way to another passenger whose right thereto has not been established.
The responsibility of an employer for the tortuous act of its employees-need not be essayed. It is well settled in law. For the willful malevolent act of petitioner's manager, petitioner's his employer, must answer.
A contract to transport passengers is quite different in kind and degree from any other contractual relation; this is because of the relation which an air-carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could give ground for an action for damages.
Passengers do not contract merely for transportation. They have a light to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. That any rude or discourteous conduct on the part of employees towards a passenger gives the latter an action for damages against the carrier.
Although the relation of passenger and carrier is "contractual both in origin and nature" nevertheless "the act that breaks the contract may be also a tort".
Petitioner's contract with Carrascoso is one attended with public duty. The stress of Carrascoso's action, is placed upon his wrongful expulsion. This is a violation of public duty by the petitioner-air carrier — a case of quasi-delict. Damages are proper.
PICZON VS. PICZON
G.R. No. L-29139, November 15, 1974
FACTS:
This an appeal from the decision of the Court of First Instance of Samar in its Civil Case No. 5156, entitled Consuelo P. Piczon, et al. vs. Esteban Piczon, et al., sentencing defendants-appellees, Sosing Lobos and Co., Inc., as principal, and Esteban Piczon, as guarantor, to pay plaintiffs-appellants "the sum of P12,500.00 with 12% interest from August 6, 1964 until said principal amount of P12,500.00 shall have been duly paid, and the costs."
Annex "A", the actionable document of appellants reads thus:
AGREEMENT OF LOAN
KNOW YE ALL MEN BY THESE PRESENTS:
That I, ESTEBAN PICZON, of legal age, married, Filipino, and resident of and with postal address in the municipality of Catbalogan, Province of Samar, Philippines, in my capacity as the President of the corporation known as the "SOSING-LOBOS and CO., INC.," as controlling stockholder, and at the same time as guarantor for the same, do by these presents contract a loan of Twelve Thousand Five Hundred Pesos (P12,500.00), Philippine Currency, the receipt of which is hereby acknowledged, from the "Piczon and Co., Inc." another corporation, the main offices of the two corporations being in Catbalogan, Samar, for which I undertake, bind and agree to use the loan as surety cash deposit for registration with the Securities and Exchange Commission of the incorporation papers relative to the "Sosing-Lobos and Co., Inc.," and to return or pay the same amount with Twelve Per Cent (12%) interest per annum, commencing from the date of execution hereof, to the "Piczon and Co., Inc., as soon as the said incorporation papers are duly registered and the Certificate of Incorporation issued by the aforesaid Commission.
IN WITNESS WHEREOF, I hereunto signed my name in Catbalogan, Samar, Philippines, this 28th day of September, 1956.
(signed)
Esteban Piczon
ISSUE:
Was the trial court correct in its decision that defendant will only have to pay the interest from August 6, 1964 instead of September 28, 1956?
RULING:
No. Instead of requiring appellees to pay interest at 12% only from August 6, 1964, the trial court should have adhered to the terms of the agreement which plainly provides that Esteban Piczon had obligated Sosing-Lobos and Co., Inc. and himself to "return or pay (to Piczon and Co., Inc.) the same amount (P12,500.00) with Twelve Per Cent (12%) interest per annum commencing from the date of the execution hereof", Annex A, which was on September 28, 1956. Under Article 2209 of the Civil Code "(i)f the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum." In the case at bar, the "interest agreed upon" by the parties in Annex A was to commence from the execution of said document.
Appellees' contention that the reference in Article 2209 to delay incurred by the debtor which can serve as the basis for liability for interest is to that defined in Article 1169 of the Civil Code is untenable. In Quiroz vs. Tan Guinlay, 5 Phil. 675, it was held that the article cited by appellees (which was Article 1100 of the Old Civil Code read in relation to Art. 1101) is applicable only when the obligation is to do something other than the payment of money. And in Firestone Tire & Rubber Co. (P.I.) vs. Delgado, 104 Phil. 920, the Court squarely ruled that if the contract stipulates from what time interest will be counted, said stipulated time controls, and, therefore interest is payable from such time, and not from the date of the filing of the complaint (at p. 925). Were that not the law, there would be no basis for the provision of Article 2212 of the Civil Code providing that "(I)nterest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point." Incidentally, appellants would have been entitled to the benefit of this article, had they not failed to plead the same in their complaint. Their prayer for it in their brief is much too late. Appellees had no opportunity to meet the issue squarely at the pre-trial.
CHAVES VS. GONZALES
32 SCRA 547
FACTS:
Plaintiff Chaves delivered to defendant Gonzales a typewriter for routine cleaning and servicing. The defendant was not able to finish the job after some time despite repeated reminders by plaintiff. Eventually, Chaves took back his typewriter which was returned to him in shambles with some parts missing. Chaves had the typewriter fixed by someone else which cost him a total of Php 89.85.
Subsequently, Chaves filed a case before the CFI demanding Php 90 as actual damages among others. The CFI found for the plaintiff but ruled that the total cost of Php 89.85 should not be fully charged against the defendant and that only the total value of the missing parts at Php 31.10 should be paid by Gonzales to Chaves.
Chaves appealed to the Supreme Court with the contention that under Article 1167 defendant should pay him the whole cost of labor and materials that went into the repair of the machine. Gonzales, on the other hand, contended that he is not liable at all for anything because his contract with Chaves did not contain a period and that Chaves should have first filed a petition for the court to fix the period under 1167 of the Civil Code.
ISSUE:
Does the contract contain a period?
RULING:
Yes. Based on the facts it was clear that both parties had a perfected contract for cleaning and servicing a typewriter; that they intended that the defendant was to finish it at some future time although such time was not specified; and that such time had passed without the work having been accomplished. The time for compliance having evidently expired, and there being a breach of contract by non-performance, it was academic for plaintiff to have first petitioned the court to fix a period. Defendant cannot invoke Article 1197 of the Civil Code for he virtually admitted non-performance by returning the typewriter that he was obliged to repair in a non-working condition with essential parts missing. For such contravention, Gonzales is liable under Article 1167 of the Civil Code which makes him liable for the cost of executing the obligation in a proper manner. In addition, he is likewise liable under Article 1170 of the Code for cost of the missing parts, in the amount of Php 31.10 for in his obligation to repair the typewriter he was bound, but failed or neglected to return it in the same condition it was when he received it.
FIRESTONE TIRE VS. DELGADO
G.R. No. L-11162, December 4, 1958
FACTS:
On September 22, 23, and 25, 1953, the defendants, Mario Delgado and Leonor Delgado Dee, doing business under the trade name of Caltex Quick Service Station, in Cebu City, received from the plaintiff Firestone Tire Rubber, Co., goods and merchandise valued at P6,966.73, payable on October 31, 1953, subject to the condition that in case of default, defendants would pay interest of 12 per cent a year from the date of default, plus 25 per cent of the said amount as attorney's fees and liquidated damages in case of suit. Demand for payment was duly made by the plaintiff. and defendants in a letter dated May 21, 1954, proposed to pay the outstanding balance of P5,865.00 according to the following schedule: May-P500.00, June-500.00, July-,500.00, August-1,500.00, September-1,600.00 and October-1,265.00. In a letter dated June 12, 1954, plaintiff accepted the proposal on the condition, however, "that if you fail to comply with your schedule, we will immediately refer the balance of your account to our lawyer for collection without further notice." Defendants paid the May installment of P500.00 on May 16, 1954. On account of the June installment, they paid P200.00 on June 25, 1954 and P250.00 on July 10, 1954, or a total of P450.00. After said payments, there remained a balance of P4,915.62, which the defendants had not paid up to the present time. In view of said failure, plaintiff brought the present action on July 19, 1954 to collect said unpaid balance.
ISSUE:
May the Plaintiff enforce a judicial action against defendant for failure to meet the obligation?
RULING:
Yes. This case is a plain case of a debtor failing, without any valid reason, to pay for goods and merchandise bought and received by him on the date he promised to pay. He made a proposition to the vendor to pay the balance of the value of the goods in six monthly installments, and the vendor, out of consideration, granted the request, but with the condition that failure to strictly observe the installments payments would result in a judicial suit without further notice for the recovery of the whole amount.
After paying less than two monthly installments, and without any satisfactory explanation, the debtor simply failed and refused to pay the balance of over P4,000.00 up to the present time. The courts cannot look with favor upon such delinquency in the performance of a clear obligation, especially when, as in this case, a debtor presumably a merchant and trader, received the goods bought and presumably had sold them and received the price and benefits of the sale.
AGCAOILI VS. GSIS
No. L-30056, August 30, 1988
FACTS:
The appellant Government Service Insurance System (GSIS) approved the application of the appellee Marcelo Agcaoili for the purchase of the house and lot in the GSIS Housing Project at Nangka, Marikina, Rizal, but said application was subject to the condition that the latter should forthwith occupy the house. Agcaoili lost no time in occupying the house but he could not stay in it and had to leave the very next day because the house was nothing more than a shell, in such a state that civilized occupation was not possible: ceiling, stairs, double walling, lighting facilities, water connection, bathroom, toilet kitchen, drainage, were inexistent. Agcaoili did however asked a homeless friend, a certain Villanueva, to stay in the premises as some sort of watchman, pending the completion of the construction of the house. He thereafter complained to the GSIS but to no avail.
Subsequently, the GSIS asked Agcaoili to pay the monthly amortizations of P35.56 and other fees. He paid the first monthly amortizations and incidental fees, but refused to make further payments until and unless the GSIS completed the housing unit. Thereafter, GSIS cancelled the award and required Agcaoili to vacate the premise. The house and lot was consequently awarded to another applicant. Agcaoili reacted by instituting suit in the Court of First Instance of Manila for specific performance and damages. The judgment was rendered in favor of Agcaoili. GSIS then appealed from that judgment.
ISSUE:
Was the cancellation by GSIS of the award in favor of petitioner Agcaoili just and proper?
RULING:
No. It was the duty of the GSIS, as seller, to deliver the thing sold in a condition suitable for its enjoyment by the buyer for the purpose contemplated. There would be no sense to require the awardee to immediately occupy and live in a shell of a house, structure consisting only of four walls with openings, and a roof. GSIS had an obligation to deliver to Agcaoili a reasonably habitable dwelling in return for his undertaking to pay the stipulated price. Since GSIS did not fulfill that obligation, and was not willing to put the house in habitable state, it cannot invoke Agcaoili’s suspension of payment of amortizations as cause to cancel the contract between them. It is axiomatic that “In reciprocal obligations, neither party incurs in delay if the other does not comply in a proper manner with what is incumbent upon him.”
NEW PACIFIC TIMBER & SUPPLY CO. INC. VS. SENERIS
10 SCRA 686
FACTS:
Petitioner, New Pacific Timber & Supply Co. Inc. was the defendant in a complaint for collection of money filed by private respondent, Ricardo A. Tong. In this complaint, respondent Judge rendered a compromise judgment based on the amicable settlement entered by the parties wherein petitioner will pay to private respondent P54,500.00 at 6% interest per annum and P6,000.00 as attorney’s fee of which P5,000.00 has been paid.
Upon failure of the petitioner to pay the judgment obligation, a writ of execution worth P63,130.00 was issued levied on the personal properties of the petitioner. Before the date of the auction sale, petitioner deposited with the Clerk of Court in his capacity as the Ex-Officio Sheriff P50,000.00 in Cashier’s Check of the Equitable Banking Corporation and P13,130.00 in cash for a total of P63,130.00. Private respondent refused to accept the check and the cash and requested for the auction sale to proceed. The properties were sold for P50,000.00 to the highest bidder with a deficiency of P13,130.00. Petitioner subsequently filed an ex-parte motion for issuance of certificate of satisfaction of judgment which was denied by the respondent Judge. Hence this present petition, alleging that the respondent Judge capriciously and whimsically abused his discretion in not granting the requested motion for the reason that the judgment obligation was fully satisfied before the auction sale with the deposit made by the petitioner to the Ex-Officio Sheriff.
In upholding the refusal of the private respondent to accept the check, the respondent Judge cited Article 1249 of the New Civil Code which provides that payments of debts shall be made in the currency which is the legal tender of the Philippines and Section 63 of the Central Bank Act which provides that checks representing deposit money do not have legal tender power. In sustaining the contention of the private respondent to refuse the acceptance of the cash, the respondent Judge cited Article 1248 of the New Civil Code which provides that creditor cannot be compelled to accept partial payment unless there is an express stipulation to the contrary.
ISSUE:
Can the check be considered a valid payment of the judgment obligation?
RULING:
Yes. It is to be emphasized that it is a well-known and accepted practice in the business sector that a Cashier’s Check is deemed cash. Moreover, since the check has been certified by the drawee bank, this certification implies that the check is sufficiently funded in the drawee bank and the funds will be applied whenever the check is presented for payment. The object of certifying a check is to enable the holder to use it as money. When the holder procures the check to be certified, it operates as an assignment of a part of the funds to the creditors. Hence, the exception provided in Section 63 of the Central Bank Act which states that checks which have been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor in cash the amount equal to that which is credited to his account. The Cashier’s Check and the cash are valid payment of the obligation of the petitioner. The private respondent has no valid reason to refuse the acceptance of the check and cash as full payment of the obligation.
ELCANO VS. HILL
G.R. No. L-24803 May 26, 1977
FACTS:
Defendant Reginald Hill, a minor, married at the time of the occurrence, and was still living with his father, the defendant Marvin Hill, killed the son of the plaintiff Agapito Elcano. The accused was acquitted on the ground that his act was not criminal, because of lack of intent to kill, coupled with mistake. Elcano appealed from the decision of the Court of First Instance of Quezon City, alleging inter alia, that the lower court erred in dismissing the case and upholding the claim of defendant that the principles of quasi-delicts of the Civil Code are inapplicable in the instant case.
ISSUE:
May Article 2180 (2nd and last paragraphs) of the Civil Code be applied against Atty. Hill, notwithstanding the undisputed fact that at the time of the occurrence complained of. Reginald, though a minor, living with and getting subsistence from his father, was already legally married?
RULING:
No. Under Article 2180, "The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. The father and, in case of his death or incapacity, the mother, are responsible. The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children who live in their company." In the instant case, it is not controverted that Reginald, although married, was living with his father and getting subsistence from him at the time of the occurrence in question. Factually, therefore, Reginald was still subservient to and dependent on his father, a situation which is not unusual.
It must be borne in mind that, according to Manresa, the reason behind the joint and solidary liability of presuncion with their offending child under Article 2180 is that is the obligation of the parent to supervise their minor children in order to prevent them from causing damage to third persons. On the other hand, the clear implication of Article 399, in providing that a minor emancipated by marriage may not, nevertheless, sue or be sued without the assistance of the parents, is that such emancipation does not carry with it freedom to enter into transactions or do any act that can give rise to judicial litigation. And surely, killing someone else invites judicial action. Otherwise stated, the marriage of a minor child does not relieve the parents of the duty to see to it that the child, while still a minor, does not give answerable for the borrowings of money and alienation or encumbering of real property which cannot be done by their minor married child without their consent.
13 SCRA 762
FACTS:
On May 3, 1955, Perfecto Tabora bought from Lawyers Cooperative Publishing Company one complete set of American jurisprudence, in an installment basis amounting to Php 1,682.40, including freight charges. He made a partial payment of Php 300.00. The books were then delivered on May 15, 1955. However, on that same day, a big fire broke out, which destroyed the buildings, including the law office and library of Tabora. When Tabora reported the incident to the company, they replied in good will and sent him free books.
Subsequently, Tabora failed to pay the installments agreed upon, even when demanded by them. So the company filed a case to recover the balance plus 25 percent of the amount due as damages. Tabora used force majeure as a defense. He contended that since the loss was due to fortuitous event he cannot be held liable for the loss. The court ruled in favor of the company. So Tabora took the case to the Court of Appeals, which later modified the decision, eliminating the portion that referred to liquidated damages.
ISSUE:
Should Tabora be exempted from liability because of fortuitous event?
RULING:
No. Though it was agreed that the title of the ownership of the books should remain with the seller until the purchase price shall have been fully paid, it was also expressly agreed upon that the loss or damage after delivery shall be borne by the buyer. In pursuance of the contract, the ownership of the goods has been retained by the seller merely to secure performance by the buyer of his obligation. Moreover, the goods were at the buyer’s risk from the time of the delivery.
NAGA TELEPHONE CO. INC. (NATELCO) AND LUYCIANO MAGGAY VS. COURT OF APPEALS AND CAMARINES SUR II ELECTRIC COOPERATIVE INC. (CASURECO II)
230 SCRA 351
FACTS:
NATELCO is a telephone company rendering local and long distance telephone service in Naga City. While CASURECO is a private corporation established for purpose of operating and electric power service in the same city.
In 1977, the parties entered into a contract for the use of the electric light post of CASURECO by NATELCO in operation of its telephone service. In consideration, NATELCO agreed to install free of charge ten-telephone connection for the use of CASURECO. The term of the contract shall be as long as NATELCO has need for the electric light post of the CASURECO, it being understood that the same contract shall be terminated by any reason whatsoever, if CASURECO is forced to stop or abandon its operation as a public service.
After 10 years, CASURECO filed a case against NATELCO for the reformation of contract with damages on the ground that it was too-one sided in favor of NATELCO. That after 11 years, the cable strung by NATELCO was much heavier due to the increase in volume of their subscribers, worsened by the fact that their linemen bore holes through the post at which points those post were broken during typhoons. NATELCO used posts in the towns outside Naga without any contract or permission from CASURECO. After filing the complaints, NATELCO had refused to pay despite the demands made. NATELCO’s answered that CASURECO did not sufficiently state the cause of action for the reformation of contract and that it was barred by the prescription because it was filed after 10 years.
The trial court ruled in favor of CASURECO, ordering the reformation of contract and ordering NATELCO to pay CASURECO the compensation for the use of their post in Naga. Moreover, CASURECO was ordered to pay the monthly bills for the use of the telephones. Disagreeing with the judgment, NATELCO appealed to the Court of Appeals. The Court of Appeals affirmed the decision.
ISSUE:
1. Was reformation of the contract a proper remedy for NASURECO?
2. Was the contract subject to potestative condition?
RULING:
1. No. NASURECO cannot correctly invoke reformation of contract as a proper remedy, because there had been no showing of mistake or error in said contract on the part of any of the parties, so as to result in its failure to express their true intent.
2. No. A potestative condition is a condition wherein the fulfillment of which depends upon the sole sill of the debtor, in which conditional obligation is void. Based on the provision in the contract, the term shall be as long as NATELCO had need for the electric post of the CASURECO, which was a potestative condition. But it should be noted that the same provision also stated that the contract shall terminate when for any reason whatsoever, CASURECO was to stop or abandon its operation as a public service and it becomes necessary to remove the electric light post, which were casual condition since they depend on chance, hazard, or the will of the third person. The contract was subject to mixed conditions, depending partly in the will of the debtor and partly on chance or will of a third person that would not invalidate the provision.
TAGUBA VS. DE LEON
132 SCRA 722
FACTS:
Berlin Taguba married to Sebastiana Domingo (petitioner) is the owner of a residential lot with an area of 3,129 square meters. Souses |Pedro Asuncion and Marita Lungab (also petitioner) and private respondent Maria Peralta Vda de De Leon, were separately occupying portions of the aforementioned lot as lessees.
Taguba sold a portion of the said lot consisting of 400 square meters to private respondent Maria Peralta Vda de De Leon for P18,000. The portion sold comprises the area occupied by the Asuncions and private respondent Vda de De Leon. The deed evidencing said sale was denominated as “Deed of Conditional Sale,” which included the following term:
“c.) That failure to pay the VENDOR the whole balance on December 31, 1972, the VENDEE shall be given an extension of Six (6) months with interest (legal rate) after which VENDOR may INCREASE the purchase price to P50.00 per square meter which the VENDEE agrees should she fail to pay within said period of time.”
Alleging that private respondent had already paid P12,500 and had tendered payment of the balance of P5,500 to complete the stipulated purchase price of P18,000 to petitioner Taguba within the grace period but the latter refused to receive payment; and that since negotiations for settlement with the intervention of Governor Dy failed, private respondent instituted a complaint for Specific Performance.
In their answer, spouses Taguba admitted the sale of the property, but claimed that private respondent failed to comply with her obligation under the Deed of Conditional Sale despite the several extensions granted her, by reason of which petitioner was compelled, but with the express knowledge and consent and even upon the proposal of private respondent, to negotiate the sale of a portion of the property sold to the spouses Asuncion who were actually in possession thereof.
ISSUE:
Did the seller validly rescind the Contract of Conditional Sale?
RULING:
No. The Court held that nowhere in the said contract in question is there a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full payment of the purchase price. There is also no stipulation giving the vendor (petitioner Taguba) the right to unilaterally rescind the contract the moment the vendee (private respondent de Leon) fails to pay within a fixed period.
Considering the nature of the transaction between petitioner and private respondent, which is, affirm and sustain to be a contract of sale, absolute in nature the applicable provision is Article 1592 of the New Civil Code, which states
“Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by notarial act. After the demand the court may not grant him a new term.”
In the case at bar, it is undisputed that petitioner Taguba never notified private respondent by notarial act that he was rescinding the contract, and neither had he filed a suit in court to rescind the sale.
Finally, it has been ruled that “where time is not of the essence of the agreement, a slight delay on the part of one party in the performance of his obligation is not a sufficient ground for the rescission of the agreement. Considering that in the instant case, private respondent had already actually paid the sum of P12,500 of the total stipulated purchase price of P18,000 and had tendered payment of the balance of P5,500 within the grace period of six months, equity and justice mandate that she be given additional period within which to complete payment of the purchase price.
BOSQUE VS. YU CHIPCO
G.R. No. 3862 September 6, 1909
FACTS:
Plaintiff Juan G. Bosque and defendant Yu Chipco entered into a contract by which the latter was to construct a house for the former and to complete the same within a period of four months after the contract was signed and delivered. Late, Bosque made some changes in and additions to the original plans of the house, which changes were agreed to by the defendant and a new contract was made relating thereto. However, Bosque failed to procure the necessary permit for the additional changes in the construction with proper authorities which prevented Yu Chipco from continuing his work. For the construction of the house Bosque had furnished several pieces of timber, alleged to be worth P132. Yu Chipco, on the other hand, proved that he had expanded in labor and money upon the additions made to the house in the sum of P500. Yu Chipco alleges and proves that by reason of the fact that the Bosque failed to make the payments in accordance with the terms of the contract that he was unable to proceed with the construction of the house. Finally, the house was totally destroyed by a baguio before its completion.
Bosque commenced the present action for the purpose of recovering of the defendant the sum of P132, the value of the said pieces of material furnished by him to Yu Chipco, and the sum of P600 damages for failure of Yu Chipco to complete the house within the period of four months provided for in the first contract. Yu Chipco answered the said complaint, denied really all of the material allegations of the complaint, set out the original contract, alleged the new contract and the fact that Bosque had refused to make payments in accordance with the terms of the contract, and asked for a judgment against Bosque in the sum of P1,928.56.
ISSUE:
Was Bosque’s action tenable?
RULING:
No. Bosque claims that the lower court committed an error in not deciding that each of the parties was absolved from any further liability under the said contract, by virtue of the provisions of Article 1124 of the Civil Code(Article 1191 of the New Civil Code). Upon this question, the SC is of the opinion and so holds that while the court did not expressly pronounce that the parties were absolved from any further obligation upon the contract, yet, by the very terms of the judgment the said parties must necessarily be absolved from any further action or liability upon the said contract.
It is clear that Bosque did not perform the undertaking which he was bound by the terms of his agreement to perform; consequently he is not entitled to insist upon the performance of the contract by Yu Chipco or to recover damages by reason of his own breach. The SC thinks the judgment of the lower court absolved each party from any further liability upon the said contract.
Bosque alleges that the lower court committed an error in not making Yu Chipco, the contractor of the building which was destroyed, liable for the loss and damage which he suffered by such destruction. The building was destroyed by a baguio. The proof is not sufficient to show that the destruction was due to defects in the construction of the building, and until that fact had been established, certainly Bosque would not be entitled to damages under the said article.
GAITE VS FONACIER
2 SCRA 381
FACTS:
Defendant-appellant Isabelo Fonacier was the owner and/or holder of 11 iron lode mineral claims, known as the Dawahan Group. By a “Deed of Assignment”, Fonacier appointed Fernando A. Gaite as his true and lawful attorney-in-fact to enter into a contract with any individual or juridical person for the exploration and development of the mining claims on a royalty basis. On 19 March 1954, Gaite in turn executed a general assignment conveying the development and exploitation of said mining claims unto the Larap Iron Mines, owned solely by him after which he embarked upon the development and exploitation of the mining claims.
Subsequently, Isabelo Fonacier decided to revoke the authority granted by him to Gaite, and Gaite assented thereto subject to certain conditions. A document was drawn wherein Gaite transferred to Fonacier all his rights and interests on all the roads, improvements, and facilities in or outside said claims, the right to use the business name "Larap Iron Mines" and its goodwill, and all the records and documents relative to the mines. Gaite also transferred all his rights and interests over the “24,000 tons of iron ore, more or less” that the former had already extracted from the mineral claims, in consideration of the sum of P75,000, P10,000, of which was paid upon the signing of the agreement, and the balance to be paid out of the first letter of credit covering the first shipment of iron ores or the first amount derived from the local sale of iron ore made by the Larap Mines & Smelting Co. To secure the payment of the balance, Fonacier promised to execute in favor of Gaite a surety bond; with Fonacier as principal and the Larap Mines and Smelting Co. and its stockholders as sureties. A second bond was executed by the parties to the first bond, on the same day, with the Far Eastern Surety and Insurance Co. as additional surety, but it provided that the liability of the surety company would attach only when there had been an actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less than P65,000.. On 8 December 1955, the bond with respect to the Far Eastern Surety and Insurance Company expired with no sale of the approximately 24,000 tons of iron ore, nor had the 65,000 balance of the price of said ore been paid to Gaite by Fonacier and his sureties. Gaite demanded from Fonacier and his sureties payment of said amount.
When Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed a complaint against them in the CFI Manila for the payment of the P65,000 balance of the price of the ore, consequential damages, and attorney’s fees. Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to pay him, jointly and severally, P65,000 with interest at 6% per annum from 9 December 1955 until full payment, plus costs. From this judgment, defendants jointly appealed to the Supreme Court as the claims involved aggregate to more than P200,000.
ISSUE:
Is the obligation of appellant Fonacier to pay appellee Gaite the P65,000.00 (balance of the price of the iron ore in question) one with a suspensive period or term and not a suspensive condition?
RULING:
Yes. The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the payment of the balance of P65,000, but was only a suspensive period or term. What characterizes a conditional obligation is the fact that its efficacy or obligatory force (as distinguished from its demandability) is subordinated to the happening of a future and uncertain event; so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.
The contract stipulates that “the balance of Sixty-Five Thousand Pesos (P65,000) will be paid out of the first letter of credit covering the first shipment of iron ore . . .” etc. There is no uncertainty that the payment will have to be made sooner or later; what is undetermined is merely the exact date at which it will be made. By the very terms of the contract, therefore, the existence of the obligation to pay is recognized; only its maturity or demandability is deferred.
To subordinate the obligation to pay the remaining P65,000 to the sale or shipment of the ore as a condition precedent, would be tantamount to leaving the payment at the discretion of the debtor, for the sale or shipment could not be made unless the appellants took steps to sell the ore. Appellants would thus be able to postpone payment indefinitely. Such construction of the contract should be avoided.
MARIA LACHICA VS. GREGORIO ARANETA
47 OG 5699 August 19, 1949
FACTS:
Gregorio Araneta, Inc. (through President Jose Araneta) offered for sale a parcel of land with the improvements thereon. This property was bought by Investment Corporation through Maria Lachica, the wife of the Esteban Sadang who was sales agent of defendant corporation.
The terms of the contract stated that the price was P20,000, of which P8,000 was to be paid in cash and the balance of P12,000 in installments of –
P 1,000 on or before December 31, 1943
P 1,000 on or before December 31, 1944
P 10,000 on or before December 31, 1945.
What the parties signed was a contract of exact content as stated, which however omitted the words “or before.” Thus, it would appear that the payment of the installments would be “on” and not “on or before” the dates as specified.
The contract further added that “this same property will be mortgaged to us to guarantee the unpaid balance, and the same will bear an interest of 8 percent per annum; said interest to be paid monthly in advance.”
The terms were complied with, together with some resolved differences, until on Sept. 5, 1944, plaintiff Sadang went to see Araneta to pay the entire balance, including the interest thereon and ask for the cancellation of the mortgage, but Araneta refused to accept the tender of payment. Araneta gave as his reason for his non-acceptance that such payment was not in accordance with the terms of the deed of sale with mortgage.
Plaintiff, through counsel, deposited the sum (balance) supposed to be paid to Araneta with the CFI of Manila by way of consignation, and at the same time presented the complaint.
The defendant alleges that payment should be on the date specified, not before; the plaintiffs claim that such payment may be made on or before the date specified.
ISSUE:
Should Araneta be compelled to accept the payment?
RULING:
Yes. The contract does not prohibit if it is done before (p.5706, no. 2). A term is fixed and “it is presumed to have been established for the benefit of the creditor as sell as that of the debtor, unless from its tenor or from other circumstances it should appear that the terms as established for the benefit of one or the other.” (Art. 1127, now 1196 Civil Code). And the contract specifically provides that “these periods of payment have been agreed for the benefit of the vendor and the vendee.” Such mutual benefit has been interpreted to consist of the time granted a debtor to find means to comply with his obligation, and the fruits, such as interest, accruing to the creditor.
From the SC decision in Villaseñor vs. Javellana, the only impediment to a debtor making payment before the term fixed, is the denial to the creditor of the benefits, such as interests, accruing to the later by reason of the fixed term. This, coupled with the fact that the contract did not prohibit payment before the fixed date, justifies the conclusion that under the terms signed, plaintiffs could do so. To hold otherwise, would be virtually compelling an obligor to assume an obligation later when he offers to, and could very well, discharge it earlier. The law should not be interpreted as to compel a debtor to remain so, when he is in a position to release himself.
Further, the acceleration clause in the contract signed by the parties state that “in the event of defaults in payment of any amount due, either for capital or interest, the whole balance shall automatically become due and payable, and the vendor shall have the right to foreclose the mortgage in its entirety.” While the clause is standard one contained in most mortgage deeds where the mortgage loan is payable in several installments, still we cannot escape the conclusion, derived from the clause itself, that payments may be made by the vendee before the dates stated in the contract .
PONCE DE LEON VS SYJUCO
90 PHIL. 311
FACTS :
The appellee, Philippine National Bank, was the owner of two parcels of land in Negros Occidental. On March 9, 1936 the Bank executed a contract to sell the said properties to Jose Ponce de Leon for the total price of P26,300.
Subsequently, Ponce de Leon obtained a loan from Santiago Syjuco, Inc in the amount of P200,000 in Japanese Military Notes, payable within one (1) year from May 5, 1948. It was also provided that the Ponce de Leon could not pay, and Syjuco could not demand, the payment of said note except within the aforementioned period. To secure the payment of said obligation, Ponce de Leon mortgaged the parcels of land which he agreed to purchase from the Bank. Using the loan, Ponce de Leon was able to pay the Bank and a deed of absolute sale was executed in his name.
Ponce de Leon further obtained an additional loan from Syjuco. On several occasions in October, 1944, Ponce de Leon tendered to Syjuco the amount of P254,880 in Japanese military notes in full payment of his indebtedness which was refused by Syjuco which Ponce de Leon deposited with the Clerk of Court of the CFI. He then filed a petition with the CFI for the reconstitution of transfer of the certificates of the lot in the name of the Bank which was granted by the court. Syjuco filed a second amended answer to Ponce de Leon's complaint claiming that Ponce de Leon, by reconstituting the titles in the name of the Bank, by causing the Register of Deeds to have the said titles transferred in his name, and by subsequently mortgaging the said properties to the Bank as a guaranty for his overdraft account, had violated the conditions of the morgage which Ponce de Leon has executed in its favor during the Japanese occupation. Syjuco prayed that the mortgage executed by Ponce de Leon in favor of the Bank be declared null and void.
On June 24, 1949, the lower court rendered a decision absolving Syjuco from Ponce de Leon's complaint and condemning Ponce de Leon to pay Syjuco the total amount of P23,130 with interest at the legal rate from May 6, 1949, until fully paid
ISSUE :
Is the consignation made by the plaintiff valid in the light of the law and the stipulations agreed upon in the two promissory notes signed by the plaintiff?
RULING :
No. In order that consignation may be effective, the debtor must first comply with certain requirements prescribed by law. The debtor must show (1) that there was a debt due; (2) that the consignation of the obligation had been made bacause the creditor to whom tender of payment was made refused to accept it, or because he was absent for incapacitated, or because several persons claimed to be entitled to receive the amount due (Art. 1176); (3) that previous notice of the consignation have been given to the person interested in the performance of the obligation (Art. 1177); (4) that the amount due was placed at the disposal of the court (Art 1178); and (5) that after the consignation had been made the person interested was notified thereof (Art. 1178). In the instant case, while it is admitted a debt existed, that the consignation was made because of the refusal of the creditor to accept it, and the filing of the complaint to compel its acceptance on the part of the creditor can be considered sufficient notice of the consignation to the creditor, nevertheless, it appears that at least two of the above requirements have not been complied with. Thus, it appears that plaintiff, before making the consignation with the clerk of the court, failed to give previous notice thereof to the person interested in the performance of the obligation. It also appears that the obligation was not yet due and demandable when the money was consigned, because, as already stated, by the very express provisions of the document evidencing the same, the obligation was to be paid within one year after May 5, 1948, and the consignation was made before this period matured. The failure of these two requirements is enough ground to render the consignation ineffective. And it cannot be contended that plaintiff is justified in accelerating the payment of the obligation because he was willing to pay the interests due up to the date of its maturity, because, under the law, in a monetary obligation contracted with a period, the presumption is that the same is deemed constituted in favor of both the creditor and the debtor unless from its tenor or from other circumstances it appears that the period has been established for the benefit of either one of them (Art. 1127). Here no such exception or circumstance exists.
It may be argued that the creditor has nothing to lose but everything to gain by the acceleration of payment of the obligation because the debtor has offered to pay all the interests up to the date it would become due, but this argument loses force if we consider that the payment of interests is not the only reason why a creditor cannot be forced to accept payment contrary to the stipulation. There are other reasons why this cannot be done. One of them is that the creditor may want to keep his money invested safely instead of having it in his hands. Another reason is that the creditor by fixing a period protects himself against sudden decline in the purchasing power of the currency loaned specially at a time when there are many factors that influence the fluctuation of the currency. And all available authorities on the matter are agreed that, unless the creditor consents, the debtor has no right to accelerate the time of payment even if the premature tender "included an offer to pay principal and interest in full."
ARANETA VS PHIL. SUGAR ESTATES DEVELOPMENT CO.
20 SCRA 330
FACTS:
J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City, and on July 28, 1950, [through Gregorio Araneta, Inc.] sold a portion thereof to Philippine Sugar Estates Development Co., Ltd.
The parties stipulated, among in the contract of purchase and sale with mortgage, that the buyer will build on the said parcel land the Sto. Domingo Church and Convent while the seller for its part will construct streets. But the seller, Gregorio Araneta, Inc., which began constructing the streets, is unable to finish the construction of the street in the Northeast side because a certain third-party, by the name of Manuel Abundo, who has been physically occupying a middle part thereof, refused to vacate the same;
Both buyer and seller know of the presence of squatters that may hamper the construction of the streets by the seller. On May 7, 1958, Philippine Sugar Estates Development Co., Lt. filed its complaint against J. M. Tuason & Co., Inc., and instance, seeking to compel the latter to comply with their obligation, as stipulated in the above-mentioned deed of sale, and/or to pay damages in the event they failed or refused to perform said obligation.
The lower court and the appellate court ruled in favor of Phil. Sugar estates, and gave defendant Gregorio Araneta, Inc., a period of two (2) years from notice hereof, within which to comply with its obligation under the contract, Annex "A".
Gregorio Araneta, Inc. resorted to a petition for review by certiorari to this Court.
ISSUES:
Was there a period fixed?
RULING:
Yes. The fixing of a period by the courts under Article 1197 of the Civil Code of the Philippines is sought to be justified on the basis that petitioner (defendant below) placed the absence of a period in issue by pleading in its answer that the contract with respondent Philippine Sugar Estates Development Co., Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable time within which to comply with its obligation to construct and complete the streets." If the contract so provided, then there was a period fixed, a "reasonable time;" and all that the court should have done was to determine if that reasonable time had already elapsed when suit was filed if it had passed, then the court should declare that petitioner had breached the contract,
Was it within the powers of the lower court to set the performance of the obligation in two years time?
NO. Even on the assumption that the court should have found that no reasonable time or no period at all had been fixed (and the trial court's amended decision nowhere declared any such fact) still, the complaint not having sought that the Court should set a period, the court could not proceed to do so unless the complaint included it as first amended;
Granting, however, that it lay within the Court's power to fix the period of performance, still the amended decision is defective in that no basis is stated to support the conclusion that the period should be set at two years after finality of the judgment. The list paragraph of Article 1197 is clear that the period can not be set arbitrarily. The law expressly prescribes that “the Court shall determine such period as may under the circumstances been probably contemplated by the parties.”
It must be recalled that Article 1197 of the Civil Code involves a two-step process. The Court must first determine that "the obligation does not fix a period" (or that the period is made to depend upon the will of the debtor)," but from the nature and the circumstances it can be inferred that a period was intended" (Art. 1197, pars. 1 and 2). This preliminary point settled, the Court must then proceed to the second step, and decide what period was "probably contemplated by the parties" (Do., par. 3). So that, ultimately, the Court can not fix a period merely because in its opinion it is or should be reasonable, but must set the time that the parties are shown to have intended. As the record stands, the trial Court appears to have pulled the two-year period set in its decision out of thin air, since no circumstances are mentioned to support it. Plainly, this is not warranted by the Civil Code.
Does “reasonable time” mean that the date of performance would be indefinite?
The Court of Appeals objected to this conclusion that it would render the date of performance indefinite. Yet, the circumstances admit no other reasonable view; and this very indefiniteness is what explains why the agreement did not specify any exact periods or dates of performance.
ORIT VS BALDROGAN
106 SCRA 800
FACTS:
On 22 November 1955 the plaintiff brought an action with the CFI to collect from the defendant the sum of P5.000, the balance of an account due to export logs purchased by the latter from the former. On 25 September 1956 the parties, assisted by their respective counsel, entered into a stipulation of facts and submitted it to Court which provided among others that “for failure of the parties to submit to the Court the agreed date of payment on November 6, 1956, they mutually agreed that the Court shall have the full power to fix a reasonable time when the defendant should pay, and a judgment therefor shall issue based upon this stipulation of facts.”
The parties failed to submit to the Court the date when the defendant had to pay its debt to the plaintiff. On 6 November 1956 the plaintiff filed an ex-parte motion praying that judgment be rendered upon the stipulation of facts and that the Court fix the time in which the defendant should pay the sum due to the plaintiff. On 28 November 1956 the Court rendered judgment as prayed for ordering defendant to pay the plaintiff within thirty days from receipt of notice of judgment the sum of P5,000 with legal interest from 8 December 1955 until fully paid and to pay the costs. On 21 January 1957 the Court denied the defendant's motion for reconsideration dated 12 January 1957. The defendant has appealed.
Citing article 1196 of the new Civil Code in support of its appeal, the appellant claims that the period of thirty days fixed by the Court rebounded to the benefit only of the creditor, the appellee, and not mutually to the creditor and the debtor. In its brief, the appellant prays that it be granted at least a year within which to pay the appellee.
ISSUE:
Is the contention meritorious?
RULING:
No. The article cited by the appellant cannot be applied to the case at bar where the parties entered into a compromise agreement ending a controversy and authorizing the Court to fix a reasonable time within which the appellant should pay its debt to the appellee, if they fail to agree upon a date for payment and submit it to the Court. It applies where the parties to a contract themselves have fixed a period.
As they failed to set a date for payment and submit it to the Court on motion on the appellee, the Court rendered judgment upon the stipulation of facts and ordered the appellant to pay the appellee within thirty days from receipt of notice of judgment. The judgment rendered by the Court was but in pursuance of the compromise agreement embodied in the stipulation of facts entered freely and voluntarily by the parties with the assistance of their respective counsel. The appellant cannot now claim and complain that the period fixed by the Court is unreasonable.
QUIZANA VS. GAUDENCIO REDUGERIOI AND JOSEFA POSTRADO
50 OG 2444
FACTS:
Defendant appellants are indebted to plaintiff in the amount of P550.00, which in addition to such, the contract/document stipulated that in case of failure to pay the debt on the day fixed, defendants are to deliver a mortgage on a property of theirs.
The main issue raised in this appeal is the nature and effect of the actionable document as mentioned above. The CFI of Marinduque rendered a decision wherein the defendant appellants are ordered to pay the plaintiff appelle the sum of P550.00, with interest from the time of the filing of the complaint. The trial court evidently ignored the second part of defendants-appellants’ written obligation, and enforced its last first part, which fixed payment on Jan. 31, 1949.
ISSUE:
Whether the second part of the written obligation, in which the obligors agreed and promised to deliver a mortgage over the parcel of land described therein, upon failure to pay the debt on a date specified in the preceding paragraph, is valid and binding and effective upon the plaintiff appellee, the creditor?
RULING:
This second part of the obligation in question is what is known in law as a facultative obligation, defined in Art. 1206 of the Civil Code of the Philippines. This is a new provision and is not found in the old Spanish Civil Code, which was the one in force at the time of the execution of the agreement.
There is nothing in the agreement which would argue against its enforcement. It is not contrary to law or public morals or public policy, and notwithstanding the absence of any legal provision at the time it was entered into governing it, as the parties had freely and voluntarily entered into governing it, as the parties had freely and voluntarily entered into it, there is no ground why it should into be given effect. It is a new right which should be declare effective at once, in consonance with the provisions of article 2253 of the Civil Code of the Philippines.
PHILIPPINE NATIONAL BANK, VS. CONCEPCION MINING COMPANY, INC., ET AL.
5 SCRA 745
FACTS:
The present action was instituted by the plaintiff to recover from the defendants the face of a promissory note the pertinent part of which reads as follows:
NINETY DAYS after date, for value received, I promise to pay to the order of the Philippine National Bank . . . .In case it is necessary to collect this note by or through an attorney-at-law, the makers and indorsers shall pay ten percent (10%) of the amount due on the note as attorney's fees, which in no case shall be less than P100.00 exclusive of all costs and fees allowed by law as stipulated in the contract of real estate mortgage. Demand and Dishonor Waived. Holder may accept partial payment reserving his right of recourse again each and all indorsers.
CONCEPCION MINING COMPANY, INC.,
By:
(Sgd.) VICENTE LEGARDA
President
(Sgd.) VICENTE LEGARDA
(Sgd.) JOSE S SARTE
The co-maker the promissory note Don Vicente L. Legarda died on February 24, 1946 and his estate is in the process of judicial determination in Special Proceedings. On the basis of this allegation it is prayed, as a special defense, that the estate of said deceased Vicente L. Legarda be included as party-defendant. The court in its decision ruled that the inclusion of said defendant is unnecessary and immaterial, in accordance with the provisions of Article 1216 of the New Civil Code. Defendants presented a petition for relief, asking that the effects of the judgment be suspended for the reason that the deceased Vicente L. Legarda should have been included as a party-defendant and his liability should be determined in pursuance of the provisions of the promissory note.
ISSUE:
Is the defendant’s contention valid?
RULING:
No. In view of Article 1216 of the New Civil Code and as the promissory note was executed jointly and severally by the same parties, namely, Concepcion Mining Company, Inc. and Vicente L. Legarda and Jose S. Sarte, the payee of the promissory note had the right to hold any one or any two of the signers of the promissory note responsible for the payment of the amount of the note.
Our attention has been attracted to the discrepancies in the printed record on appeal. The title of the complaint set forth in the record on appeal does not contain the name of Jose Sarte, when it should, as two defendants are named in the complaint and the only defense of the defendants is the non-inclusion of the deceased Vicente L. Legarda as a defendant in the action. The promissory note which is set forth in the record on appeal does not also contain the name of the third maker Jose S. Sarte while the brief sets forth said name of Jose S. Sarte as one of the co-maker of the promissory note. Evidently, there is an attempt to mislead the court into believing that Jose S. Sarte is no one of the co-makers. Jose S. Sarte is orderes to explain why in his record on appeal his own name as one of the defendants does not appear and neither does his name appear as one of the co-signers of the promissory note in question.
WILSON vs. BERKENKOTTER
49 OG 1410
FACTS:
Plaintiff Samuel J. Wilson, defendant B.H. Berkenkotter, and one Paul A. Gulick jointly and severally signed a promissory note in the amount of P90, 000 in favor of the Chartered Bank of India, Australia and China payable on demand with interest thereon at the rate of 7 per cent per annum payable monthly. After the Philippines had been occupied by the Japanese Forces, the Bank of Taiwan became the liquidator of all enemy banks, among which was the Chartered Bank of India, Australia and China;
Defendant upon demand by the Taiwan Bank paid the promissory note referred to above, plus the corresponding interests which amounted in all, principal and interests to P112, 591.22. After liberation, defendant demanded payment from his co-debtors of their corresponding shares in the obligation contracted by them jointly and severally. For reasons of personal consideration defendant accepted payment from Paul A. Gulick only in the amount of P18, 902, while plaintiff refused to pay to defendant the full amount of P37, 530.40 in Philippine currency, and because of the refusal of defendant to receive from the plaintiff the amount of P625.51 which is the equivalent value as of November, 1944 of the P37, 530.40 in Japanese military notes, said plaintiff consigned with this court the said amount of P625.51. After hearing, the trial court rendered judgment in favor of plaintiff and ordered the defendant to receive from the clerk of court the P625.51 consigned by plaintiff as the just and full payment of the indebtedness. From that decision defendant appealed to the SP on question of law.
ISSUES:
1. Is the Balantyne schedule of values in determining the amount to be reimbursed by the plaintiff as a co-solidary debtor of the defendant applicable?
2. Is defendant Berkenkotter liable to pay the full amount in Philippine currency?
RULING:
1. Yes. The application of the Balantyne schedule this court has held that said schedule is applicable to obligations contracted during the Japanese occupation where said obligations are made payable on demand or during said Japanese occupation but not after the war or at a specified date or period which may indicate that the parties were speculating on the continuation or cessation of the war at the time of the payment. If the obligation on the part of Wilson to pay Berkenkotter the amount paid by the latter to wipe out their debt to the bank was created during the occupation, then the Balantyne schedule is applicable; but if said obligation was created before the war, particularly on the date when plaintiff and defendant signed the promissory not in favor of the bank, then the Balantyne schedule may not be applied.
2. No. According to Article 1145 of the Civil Code (Art. 1217 New Civil Code), payment by one of the solidary debtors entitles him to claim fro his debtors only the share pertaining to each with interest on the amount advanced, and this is what the appellant is doing, only that he wants to collect the whole amount paid by him for Wilson in genuine Philippine currency instead of the equivalent thereof under the Balantyne schedule. When appellant paid the entire loan plus interests in November, 1944, the whole obligation was extinguished. The solidary co-debtors were no longer under any obligation to the bank but a new obligation was created in favor of the appellant and against the appellee. Moreover, on grounds of equity appellant may not be allowed to collect from the appellee more than the real value of what he paid for him specially when the difference between the military notes and the genuine Philippine currency in November, 1944, was so great.
ELEIZEGUI VS MANILA LAWN TENNIS CLUB
G.R. 967
FACTS:
This suit concerns the lease of a piece of land for a fixed consideration and to endure at the will of the lessee. By the contract of lease the lessee is expressly authorized to make improvements upon the land, by erecting buildings of both permanent and temporary character, by making fills, laying pipes, and making such other improvements as might be considered desirable for the comfort and amusement of the members.
With respect to the term of the lease the present question has arisen. In its decision three theories have been presented: One which makes the duration depend upon the will of the lessor, who, upon one month's notice given to the lessee, may terminate the lease so stipulated; another which, on the contrary, makes it dependent upon the will of the lessee, as stipulated; and the third, in accordance with which the right is reversed to the courts to fix the duration of the term.
The first theory is that which has prevailed in the judgment below, as appears from the language in which the basis of the decision is expressed: "The court is of the opinion that the contract of lease was terminated by the notice given by the plaintiff on August 28 of last year . . . ." And such is the theory maintained by the plaintiffs, which expressly rests upon article 1581 of the Civil Code, the law which was in force at the time the contract was entered into (January 25, 1890). The judge, in giving to this notice the effect of terminating the lease, undoubtedly considers that it is governed by the article relied upon by the plaintiffs, which is of the following tenor: "When the term has not been fixed for the lease, it is understood to be for years when an annual rental has been fixed, for months when the rent is monthly. . . ." The second clause of the contract provides as follows: "The rent of the said land is fixed at 25 pesos per month."
ISSUE:
Was there a conventional term, a duration, agreed upon in the contract in question?
RULING:
Yes. The obligations which, with the force of law, the lessors assumed by the contract entered into, so far as pertaining to the issues, are the following: "First. . . . They lease the above-described land to Mr. Williamson, who takes it on lease . . . for all the time the members of the said club may desire to use it . . . Third. . . . the owners of the land undertake to maintain the club as tenant as long as the latter shall see fit, without altering in the slightest degree the conditions of this contract, even though the estate be sold."
In view of these clauses, it can not be said that there is no stipulation with respect to the duration of the lease, or that, notwithstanding these clauses, article 1581, in connection with article 1569, can be applied. If this were so, it would be necessary to hold that the lessors spoke in vain that their words are to be disregarded a claim which can not be advanced by the plaintiffs nor upheld by any court without citing the law which detracts all legal force from such words or despoils them of their literal sense.
PEDRO D. DIOQUINO VS. LAUREANO
G.R. No. L-25906 May 28, 1970
FACTS:
Attorney Pedro Dioquino is the owner of a car. He went to the office of the MVO, Masbate, to register the same where he met the defendant Federico Laureano, a patrol officer of said MVO office. Dioquino requested Laureano to introduce him to one of the clerks in the MVO Office, who could facilitate the registration of his car and the request was attended to. Laureano rode on the car of Atty. Dioquino on his way to the P.C. Barracks at Masbate. While about to reach their destination, the car driven by plaintiff's driver and with Laureano as the sole passenger was stoned by some 'mischievous boys,' and its windshield was broken. Laureano chased the boys and he was able to catch one of them. The plaintiff and Laureano with the boy returned to the P.C. barracks and the father of the boy was called, but no satisfactory arrangements were made about the damage to the windshield.
It was likewise noted in the decision now on appeal: "The defendant Federico Laureano refused to file any charges against the boy and his parents because he thought that the stone-throwing was merely accidental and that it was due to force majeure. So he did not want to take any action and after delaying the settlement, after perhaps consulting a lawyer, the defendant Federico Laureano refused to pay the windshield himself and challenged that the case be brought to court for judicial adjudication. There is no question that the plaintiff tried to convince the defendant Federico Laureano just to pay the value of the windshield and he even came to the extent of asking the wife to convince her husband to settle the matter amicably but the defendant Federico Laureano refused to make any settlement, clinging [to] the belief that he could not be held liable because a minor child threw a stone accidentally on the windshield and therefore, the same was due to force majeure."
ISSUE:
Is Federico Laureano liable for the payment of the windshield of Atty Dioquino?
RULING:
No.The law being what it is, such a belief on the part of defendant Federico Laureano was justified. The express language of Art. 1174 of the present Civil Code which is a restatement of Art. 1105 of the Old Civil Code, except for the addition of the nature of an obligation requiring the assumption of risk, compels such a conclusion. It reads thus: "Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be, foreseen, or which, though foreseen were inevitable." Even under the old Civil Code then, as stressed by us in the first decision dating back to 1908, in an opinion by Justice Mapa, the rule was well-settled that in the absence of a legal provision or an express covenant, "no one should be held to account for fortuitous cases." Its basis, as Justice Moreland stressed, is the Roman law principle major casus est, cui humana infirmitas resistere non potest. Authorities of repute are in agreement, more specifically concerning an obligation arising from contract "that some extraordinary circumstance independent of the will of the obligor, or of his employees, is an essential element of a caso fortuito." If it could be shown that such indeed was the case, liability is ruled out. There is no requirement of "diligence beyond what human care and foresight can provide."
The error committed by the lower court in holding defendant Federico Laureano liable appears to be thus obvious. Its own findings of fact repel the motion that he should be made to respond in damages to the plaintiff for the broken windshield. What happened was clearly unforeseen. It was a fortuitous event resulting in a loss which must be borne by the owner of the car. It was misled, apparently, by the inclusion of the exemption from the operation of such a provision of a party assuming the risk, considering the nature of the obligation undertaken. A more careful analysis would have led the lower court to a different and correct interpretation. The very wording of the law dispels any doubt that what is therein contemplated is the resulting liability even if caused by a fortuitous event where the party charged may be considered as having assumed the risk incident in the nature of the obligation to be performed. It would be an affront, not only to the logic but to the realities of the situation, if in the light of what transpired, as found by the lower court, defendant Federico Laureano could be held as bound to assume a risk of this nature. There was no such obligation on his part.
The decision of the lower court of November 2, 1965 insofar as it orders defendant Federico Laureano to pay plaintiff the amount of P30,000.00 as damages plus the payment of costs, is hereby reversed. It is affirmed insofar as it dismissed the case against the other two defendants, Juanita Laureano and Aida de Laureano, and declared that no moral damages should be awarded the parties.
LASAM VS. SMITH
45 PHIL 657
FACTS:
The defendant was the owner of a public garage in the town of San Fernando, La Union, and engaged in the business of carrying passengers for hire from one point to another in the Province of La Union and the surrounding provinces. Defendant undertook to convey the plaintiffs from San Fernando to Currimao, Ilocos Norte, in a Ford automobile. On leaving San Fernando, the automobile was operated by a licensed chauffeur, but after having reached the town of San Juan, the chauffeur allowed his assistant, Bueno, to drive the car. Bueno held no driver’s license, but had some experience in driving. The car functioned well until after the crossing of the Abra River in Tagudin, when, according to the testimony of the witnesses for the plaintiffs, defects developed in the steering gear so as to make accurate steering impossible, and after zigzagging for a distance of about half kilometer, the car left the road and went down a steep embankment. The automobile was overturned and the plaintiffs pinned down under it. Mr. Lasam escaped with a few contusions and a dislocated rib, but his wife, Joaquina, received serious injuries, among which was a compound fracture of one of the bones in her left wrist. She also suffered nervous breakdown from which she has not fully recovered at the time of trial.
The complaint was filed about a year and a half after and alleges that the accident was due to defects in the automobile as well as to the incompetence and negligence of the chauffeur.
The trial court held, however, that the cause of action rests on the defendant’s breach of the contract of carriage and that, consequently, articles 1101-1107 of the Civil Code, and not article 1903, are applicable. The court further found that the breach of contact was not due to fortuitous events and that, therefore the defendant was liable in damages.
ISSUE:
Is the trial court correct in its findings that the breach of contract was not due to a fortuitous event?
RULING:
Yes. It is sufficient to reiterate that the source of the defendant’s legal liability is the contract of carriage; that by entering into that contract he bound himself to carry the plaintiffs safely and securely to their destination; and that having failed to do so he is liable in damages unless he shows that the failure to fulfill his obligation was due to causes mentioned in article 1105 of the Civil Code, which reads:
“No one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable, with the exception of the cases in which the law expressly provides otherwise and those in which the obligation itself imposes such liability.”
As will be seen, some extraordinary circumstances independent of the will of the obligor, or of his employees, is an essential element of a caso fortuito. In the present case, this element is lacking. It is not suggested that the accident in question was due to an act of God or to adverse road conditions which could have been foreseen. As far as the record shows, the accident was caused either by defects in the automobile or else through the negligence of its driver. That is not a caso fortuito.
AIR FRANCE VS. CARRASCOSO
L-21438, September 28, 1996
FACTS:
Rafael Carrascoso, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes.
Air France, through its authorized agent, Philippine Air Lines, Inc., issued to Carrascoso a ‘frist class’ round trip airplane ticket from Manila to Rome. From Manila to Bangkok, he traveled in ‘first class’, but at Bangkok, the Manager of the airline forced Carrascoso to vacate the ‘first class’ seat that he was occupying because, in the words of the witness Ernesto Cuento, there was a ‘white man’, who, the Manager alleged, had a ‘better right’ to the seat. When asked to vacate his seat, Carrascoso, as was to be expected, refused; a commotion ensued. After several Filipino passengers approached and pacified Carrascoso, he reluctantly gave his ‘first class’ seat in the plane.
Carrascoso is now asking for damages from Air France as well as the difference in fare between first class and tourist class for the portion of the trip Bangkok-Rome.
ISSUE:
Does Rafael Carrascoso have a course of action against Air France?
RULLNG:
Yes. Carrascoso may base his action against Air France from two possible sources: first, from breach of contract of carriage and second, by virtue of petitioner - air carrier’s violation of public duty – a case of quasi–delict.
There was a contract to furnish plaintiff a fist class passage covering, amongst other, the Bangkok-Teheran leg. This contract was breached when petitioner failed to furnish first class transportation at Bangkok.
There was bad faith when petitioner’s employee compelled Carrascoso to leave his first class accommodation berth “after he was already seated” and to take a seat in the tourist class, by reason of which he suffered inconvenience, embarrassment and humiliation.
The manager not only prevented Carrascoso from enjoying his right to a first class seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him suffer the humiliation of having to go to the tourist class compartment — just to give way to another passenger whose right thereto has not been established.
The responsibility of an employer for the tortuous act of its employees-need not be essayed. It is well settled in law. For the willful malevolent act of petitioner's manager, petitioner's his employer, must answer.
A contract to transport passengers is quite different in kind and degree from any other contractual relation; this is because of the relation which an air-carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could give ground for an action for damages.
Passengers do not contract merely for transportation. They have a light to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. That any rude or discourteous conduct on the part of employees towards a passenger gives the latter an action for damages against the carrier.
Although the relation of passenger and carrier is "contractual both in origin and nature" nevertheless "the act that breaks the contract may be also a tort".
Petitioner's contract with Carrascoso is one attended with public duty. The stress of Carrascoso's action, is placed upon his wrongful expulsion. This is a violation of public duty by the petitioner-air carrier — a case of quasi-delict. Damages are proper.
PICZON VS. PICZON
G.R. No. L-29139, November 15, 1974
FACTS:
This an appeal from the decision of the Court of First Instance of Samar in its Civil Case No. 5156, entitled Consuelo P. Piczon, et al. vs. Esteban Piczon, et al., sentencing defendants-appellees, Sosing Lobos and Co., Inc., as principal, and Esteban Piczon, as guarantor, to pay plaintiffs-appellants "the sum of P12,500.00 with 12% interest from August 6, 1964 until said principal amount of P12,500.00 shall have been duly paid, and the costs."
Annex "A", the actionable document of appellants reads thus:
AGREEMENT OF LOAN
KNOW YE ALL MEN BY THESE PRESENTS:
That I, ESTEBAN PICZON, of legal age, married, Filipino, and resident of and with postal address in the municipality of Catbalogan, Province of Samar, Philippines, in my capacity as the President of the corporation known as the "SOSING-LOBOS and CO., INC.," as controlling stockholder, and at the same time as guarantor for the same, do by these presents contract a loan of Twelve Thousand Five Hundred Pesos (P12,500.00), Philippine Currency, the receipt of which is hereby acknowledged, from the "Piczon and Co., Inc." another corporation, the main offices of the two corporations being in Catbalogan, Samar, for which I undertake, bind and agree to use the loan as surety cash deposit for registration with the Securities and Exchange Commission of the incorporation papers relative to the "Sosing-Lobos and Co., Inc.," and to return or pay the same amount with Twelve Per Cent (12%) interest per annum, commencing from the date of execution hereof, to the "Piczon and Co., Inc., as soon as the said incorporation papers are duly registered and the Certificate of Incorporation issued by the aforesaid Commission.
IN WITNESS WHEREOF, I hereunto signed my name in Catbalogan, Samar, Philippines, this 28th day of September, 1956.
(signed)
Esteban Piczon
ISSUE:
Was the trial court correct in its decision that defendant will only have to pay the interest from August 6, 1964 instead of September 28, 1956?
RULING:
No. Instead of requiring appellees to pay interest at 12% only from August 6, 1964, the trial court should have adhered to the terms of the agreement which plainly provides that Esteban Piczon had obligated Sosing-Lobos and Co., Inc. and himself to "return or pay (to Piczon and Co., Inc.) the same amount (P12,500.00) with Twelve Per Cent (12%) interest per annum commencing from the date of the execution hereof", Annex A, which was on September 28, 1956. Under Article 2209 of the Civil Code "(i)f the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum." In the case at bar, the "interest agreed upon" by the parties in Annex A was to commence from the execution of said document.
Appellees' contention that the reference in Article 2209 to delay incurred by the debtor which can serve as the basis for liability for interest is to that defined in Article 1169 of the Civil Code is untenable. In Quiroz vs. Tan Guinlay, 5 Phil. 675, it was held that the article cited by appellees (which was Article 1100 of the Old Civil Code read in relation to Art. 1101) is applicable only when the obligation is to do something other than the payment of money. And in Firestone Tire & Rubber Co. (P.I.) vs. Delgado, 104 Phil. 920, the Court squarely ruled that if the contract stipulates from what time interest will be counted, said stipulated time controls, and, therefore interest is payable from such time, and not from the date of the filing of the complaint (at p. 925). Were that not the law, there would be no basis for the provision of Article 2212 of the Civil Code providing that "(I)nterest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point." Incidentally, appellants would have been entitled to the benefit of this article, had they not failed to plead the same in their complaint. Their prayer for it in their brief is much too late. Appellees had no opportunity to meet the issue squarely at the pre-trial.
CHAVES VS. GONZALES
32 SCRA 547
FACTS:
Plaintiff Chaves delivered to defendant Gonzales a typewriter for routine cleaning and servicing. The defendant was not able to finish the job after some time despite repeated reminders by plaintiff. Eventually, Chaves took back his typewriter which was returned to him in shambles with some parts missing. Chaves had the typewriter fixed by someone else which cost him a total of Php 89.85.
Subsequently, Chaves filed a case before the CFI demanding Php 90 as actual damages among others. The CFI found for the plaintiff but ruled that the total cost of Php 89.85 should not be fully charged against the defendant and that only the total value of the missing parts at Php 31.10 should be paid by Gonzales to Chaves.
Chaves appealed to the Supreme Court with the contention that under Article 1167 defendant should pay him the whole cost of labor and materials that went into the repair of the machine. Gonzales, on the other hand, contended that he is not liable at all for anything because his contract with Chaves did not contain a period and that Chaves should have first filed a petition for the court to fix the period under 1167 of the Civil Code.
ISSUE:
Does the contract contain a period?
RULING:
Yes. Based on the facts it was clear that both parties had a perfected contract for cleaning and servicing a typewriter; that they intended that the defendant was to finish it at some future time although such time was not specified; and that such time had passed without the work having been accomplished. The time for compliance having evidently expired, and there being a breach of contract by non-performance, it was academic for plaintiff to have first petitioned the court to fix a period. Defendant cannot invoke Article 1197 of the Civil Code for he virtually admitted non-performance by returning the typewriter that he was obliged to repair in a non-working condition with essential parts missing. For such contravention, Gonzales is liable under Article 1167 of the Civil Code which makes him liable for the cost of executing the obligation in a proper manner. In addition, he is likewise liable under Article 1170 of the Code for cost of the missing parts, in the amount of Php 31.10 for in his obligation to repair the typewriter he was bound, but failed or neglected to return it in the same condition it was when he received it.
FIRESTONE TIRE VS. DELGADO
G.R. No. L-11162, December 4, 1958
FACTS:
On September 22, 23, and 25, 1953, the defendants, Mario Delgado and Leonor Delgado Dee, doing business under the trade name of Caltex Quick Service Station, in Cebu City, received from the plaintiff Firestone Tire Rubber, Co., goods and merchandise valued at P6,966.73, payable on October 31, 1953, subject to the condition that in case of default, defendants would pay interest of 12 per cent a year from the date of default, plus 25 per cent of the said amount as attorney's fees and liquidated damages in case of suit. Demand for payment was duly made by the plaintiff. and defendants in a letter dated May 21, 1954, proposed to pay the outstanding balance of P5,865.00 according to the following schedule: May-P500.00, June-500.00, July-,500.00, August-1,500.00, September-1,600.00 and October-1,265.00. In a letter dated June 12, 1954, plaintiff accepted the proposal on the condition, however, "that if you fail to comply with your schedule, we will immediately refer the balance of your account to our lawyer for collection without further notice." Defendants paid the May installment of P500.00 on May 16, 1954. On account of the June installment, they paid P200.00 on June 25, 1954 and P250.00 on July 10, 1954, or a total of P450.00. After said payments, there remained a balance of P4,915.62, which the defendants had not paid up to the present time. In view of said failure, plaintiff brought the present action on July 19, 1954 to collect said unpaid balance.
ISSUE:
May the Plaintiff enforce a judicial action against defendant for failure to meet the obligation?
RULING:
Yes. This case is a plain case of a debtor failing, without any valid reason, to pay for goods and merchandise bought and received by him on the date he promised to pay. He made a proposition to the vendor to pay the balance of the value of the goods in six monthly installments, and the vendor, out of consideration, granted the request, but with the condition that failure to strictly observe the installments payments would result in a judicial suit without further notice for the recovery of the whole amount.
After paying less than two monthly installments, and without any satisfactory explanation, the debtor simply failed and refused to pay the balance of over P4,000.00 up to the present time. The courts cannot look with favor upon such delinquency in the performance of a clear obligation, especially when, as in this case, a debtor presumably a merchant and trader, received the goods bought and presumably had sold them and received the price and benefits of the sale.
AGCAOILI VS. GSIS
No. L-30056, August 30, 1988
FACTS:
The appellant Government Service Insurance System (GSIS) approved the application of the appellee Marcelo Agcaoili for the purchase of the house and lot in the GSIS Housing Project at Nangka, Marikina, Rizal, but said application was subject to the condition that the latter should forthwith occupy the house. Agcaoili lost no time in occupying the house but he could not stay in it and had to leave the very next day because the house was nothing more than a shell, in such a state that civilized occupation was not possible: ceiling, stairs, double walling, lighting facilities, water connection, bathroom, toilet kitchen, drainage, were inexistent. Agcaoili did however asked a homeless friend, a certain Villanueva, to stay in the premises as some sort of watchman, pending the completion of the construction of the house. He thereafter complained to the GSIS but to no avail.
Subsequently, the GSIS asked Agcaoili to pay the monthly amortizations of P35.56 and other fees. He paid the first monthly amortizations and incidental fees, but refused to make further payments until and unless the GSIS completed the housing unit. Thereafter, GSIS cancelled the award and required Agcaoili to vacate the premise. The house and lot was consequently awarded to another applicant. Agcaoili reacted by instituting suit in the Court of First Instance of Manila for specific performance and damages. The judgment was rendered in favor of Agcaoili. GSIS then appealed from that judgment.
ISSUE:
Was the cancellation by GSIS of the award in favor of petitioner Agcaoili just and proper?
RULING:
No. It was the duty of the GSIS, as seller, to deliver the thing sold in a condition suitable for its enjoyment by the buyer for the purpose contemplated. There would be no sense to require the awardee to immediately occupy and live in a shell of a house, structure consisting only of four walls with openings, and a roof. GSIS had an obligation to deliver to Agcaoili a reasonably habitable dwelling in return for his undertaking to pay the stipulated price. Since GSIS did not fulfill that obligation, and was not willing to put the house in habitable state, it cannot invoke Agcaoili’s suspension of payment of amortizations as cause to cancel the contract between them. It is axiomatic that “In reciprocal obligations, neither party incurs in delay if the other does not comply in a proper manner with what is incumbent upon him.”
NEW PACIFIC TIMBER & SUPPLY CO. INC. VS. SENERIS
10 SCRA 686
FACTS:
Petitioner, New Pacific Timber & Supply Co. Inc. was the defendant in a complaint for collection of money filed by private respondent, Ricardo A. Tong. In this complaint, respondent Judge rendered a compromise judgment based on the amicable settlement entered by the parties wherein petitioner will pay to private respondent P54,500.00 at 6% interest per annum and P6,000.00 as attorney’s fee of which P5,000.00 has been paid.
Upon failure of the petitioner to pay the judgment obligation, a writ of execution worth P63,130.00 was issued levied on the personal properties of the petitioner. Before the date of the auction sale, petitioner deposited with the Clerk of Court in his capacity as the Ex-Officio Sheriff P50,000.00 in Cashier’s Check of the Equitable Banking Corporation and P13,130.00 in cash for a total of P63,130.00. Private respondent refused to accept the check and the cash and requested for the auction sale to proceed. The properties were sold for P50,000.00 to the highest bidder with a deficiency of P13,130.00. Petitioner subsequently filed an ex-parte motion for issuance of certificate of satisfaction of judgment which was denied by the respondent Judge. Hence this present petition, alleging that the respondent Judge capriciously and whimsically abused his discretion in not granting the requested motion for the reason that the judgment obligation was fully satisfied before the auction sale with the deposit made by the petitioner to the Ex-Officio Sheriff.
In upholding the refusal of the private respondent to accept the check, the respondent Judge cited Article 1249 of the New Civil Code which provides that payments of debts shall be made in the currency which is the legal tender of the Philippines and Section 63 of the Central Bank Act which provides that checks representing deposit money do not have legal tender power. In sustaining the contention of the private respondent to refuse the acceptance of the cash, the respondent Judge cited Article 1248 of the New Civil Code which provides that creditor cannot be compelled to accept partial payment unless there is an express stipulation to the contrary.
ISSUE:
Can the check be considered a valid payment of the judgment obligation?
RULING:
Yes. It is to be emphasized that it is a well-known and accepted practice in the business sector that a Cashier’s Check is deemed cash. Moreover, since the check has been certified by the drawee bank, this certification implies that the check is sufficiently funded in the drawee bank and the funds will be applied whenever the check is presented for payment. The object of certifying a check is to enable the holder to use it as money. When the holder procures the check to be certified, it operates as an assignment of a part of the funds to the creditors. Hence, the exception provided in Section 63 of the Central Bank Act which states that checks which have been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor in cash the amount equal to that which is credited to his account. The Cashier’s Check and the cash are valid payment of the obligation of the petitioner. The private respondent has no valid reason to refuse the acceptance of the check and cash as full payment of the obligation.
ELCANO VS. HILL
G.R. No. L-24803 May 26, 1977
FACTS:
Defendant Reginald Hill, a minor, married at the time of the occurrence, and was still living with his father, the defendant Marvin Hill, killed the son of the plaintiff Agapito Elcano. The accused was acquitted on the ground that his act was not criminal, because of lack of intent to kill, coupled with mistake. Elcano appealed from the decision of the Court of First Instance of Quezon City, alleging inter alia, that the lower court erred in dismissing the case and upholding the claim of defendant that the principles of quasi-delicts of the Civil Code are inapplicable in the instant case.
ISSUE:
May Article 2180 (2nd and last paragraphs) of the Civil Code be applied against Atty. Hill, notwithstanding the undisputed fact that at the time of the occurrence complained of. Reginald, though a minor, living with and getting subsistence from his father, was already legally married?
RULING:
No. Under Article 2180, "The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. The father and, in case of his death or incapacity, the mother, are responsible. The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children who live in their company." In the instant case, it is not controverted that Reginald, although married, was living with his father and getting subsistence from him at the time of the occurrence in question. Factually, therefore, Reginald was still subservient to and dependent on his father, a situation which is not unusual.
It must be borne in mind that, according to Manresa, the reason behind the joint and solidary liability of presuncion with their offending child under Article 2180 is that is the obligation of the parent to supervise their minor children in order to prevent them from causing damage to third persons. On the other hand, the clear implication of Article 399, in providing that a minor emancipated by marriage may not, nevertheless, sue or be sued without the assistance of the parents, is that such emancipation does not carry with it freedom to enter into transactions or do any act that can give rise to judicial litigation. And surely, killing someone else invites judicial action. Otherwise stated, the marriage of a minor child does not relieve the parents of the duty to see to it that the child, while still a minor, does not give answerable for the borrowings of money and alienation or encumbering of real property which cannot be done by their minor married child without their consent.
ANGELES VS. CALASANZ
135 SCRA 323
FACTS:
On December 19, 1957, defendants-appellants Ursula Torres Calasanz and plaintiffs-appellees Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in Cainta, Rizal for the amount of P3,920.00 plus 7% interest per annum. The plaintiffs-appellees made a downpayment of P392.00 upon the execution of the contract. They promised to pay the balance in monthly installments of P41.20 until fully paid, the installment being due and payable on the 19th day of each month. The plaintiffs-appellees paid the monthly installments until July 1966, when their aggregate payment already amounted to P4,533.38.
On December 7, 1966, the defendants-appellants wrote the plantiffs-appellees a letter requesting the remittance of past due accounts. On January 28, 1967, the defendants-appellants cancelled the said contract because the plaintiffs failed to meet subsequent payments. The plaintiffs’ letter with their plea for reconsideration of the said cancellation was denied by the defendants.
The plaintiffs-appellees filed a case before the Court of First Instance to compel the defendant to execute in their favor the final deed of sale alleging inter alia that after computing all subsequent payments for the land in question, they found out that they have already paid the total amount including interests, realty taxes and incidental expenses. The defendants alleged in their answer that the plaintiffs violated par. 6 of the contract to sell when they failed and refused to pay and/or offer to pay monthly installments corresponding to the month of August, 1966 for more than 5 months, thereby constraining the defendants to cancel the said contract.
The Court of First Instance rendered judgment in favor of the plaintiffs, hence this appeal.
ISSUE:
Has the Contract to Sell been automatically and validly cancelled by the defendants-appellants?
RULING:
No. While it is true that par.2 of the contract obligated the plaintiffs-appellees to pay the defendants the sum of P3,920 plus 7% interest per annum, it is likewise true that under par 12 the seller is obligated to transfer the title to the buyer upon payment of the said price.
The contract to sell, being a contract of adhesion, must be construed against the party causing it. The Supreme Court agree with the observation of the plaintiffs-appellees to the effect that the terms of a contract must be interpreted against the party who drafted the same, especially where such interpretation will help effect justice to buyers who, after having invested a big amount of money, are now sought to be deprived of the same thru the prayed application of a contract clever in its phraseology, condemnable in its lopsidedness and injurious in its effect which, in essence, and its entirety is most unfair to the buyers.
Thus, since the principal obligation under the contract is only P3,920.00 and the plaintiffs-appellees have already paid an aggregate amount of P4,533.38, the courts should only order the payment of the few remaining installments but not uphold the cancellation of the contract. Upon payment of the balance of P671.67 without any interest thereon, the defendant must immediately execute the final deed of sale in favor of the plaintiffs and execute the necessary transfer of documents, as provided in par.12 of the contract.
JUNTILLA VS. FONTANAR
136 SCRA 624
FACTS:
Plaintiff Juntilla was a passenger of a public utility jeepney on the course of the trip from Danao City to Cebu City. The jeepney was driven by defendant Berfol Camoro. It was registered under the franchise of defendant Clemente Fontanar but was actually owned by defendant Fernando Banzon. When the jeepney reached Mandaue City, the right rear tire exploded causing the vehicle to turn turtle. In the process, the plaintiff who was sitting at the front seat was thrown out of the vehicle. He obtained a lacerated wound on his right palm and injuries on his left arm, right thigh and on his back. Because of his shock and injuries, he went back to Danao City but on the way, he discovered that his `Omega' wrist watch was lost. Upon his arrival, he immediately entered the Danao City Hospital to attend to his injuries, and also requested his father-in-law to proceed immediately to the place of the accident and look for the watch which he bought for P852.70. The watch, however, could no longer be found.
Juntilla filed a civil case for breach of contract with damages before the City Court. The respondents filed their answer, alleging inter alia that the accident that caused losses to the petitioner was beyond the control of the respondents taking into account that the tire that exploded was newly bought and was only slightly used. The City Court rendered judgment in favor of Juntilla and ordered defendants, jointly and severally, to pay him reimbursement for the lost Omega wrist watch, unrealized salary of the plaintiff from his employer, the doctor's fees and medicine, an additional sum for attorney's fees and the costs.
The defendants appealed to the CFI who reversed the earlier judgment, exonerating the defendants from any liability. The motion for reconsideration having been denied, Juntilla appealed to the Supreme Court. Juntilla contends that the CFI erred in failing to take cognizance of the fact that defendants and/or their employee failed to exercise 'utmost and/or extraordinary diligence' required of common carriers contemplated under Art. 1755 of the Civil Code of the Philippines.
ISSUE:
Was the blow-out of the jeepney tire due to the negligence of respondents and thus should be held liable?
RULING:
Yes. In the case at bar, there are specific acts of negligence on the part of the respondents. The evidence shows that the passenger jeepney was running at a very fast speed before the accident. The Court agreed with the observation of the petitioner that a public utility jeep running at a regular and safe speed will not jump into a ditch when its right rear tire blows up. There is also evidence to show that the passenger jeepney was overloaded at the time of the accident. The petitioner stated that there were three (3) passengers in the front seat and fourteen (14) passengers in the rear.
In the case at bar, the cause of the unforeseen and unexpected occurrence was not independent of the human will. The accident was caused either through the negligence of the driver or because of mechanical defects in the tire. Common carriers should teach their drivers not to overload their vehicles, not to exceed safe and legal speed limits, and to know the correct measures to take when a tire blows up thus insuring the safety of passengers at all times.
It is sufficient to reiterate that the source of a common carrier's legal liability is the contract of carriage, and by entering into the said contract, it binds itself to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with a due regard for all the circumstances. The records show that this obligation was not met by the respondents.
National Marketing Corporation vs. Federation of United Namarco Distributors, Inc.
49 scra 238
Facts:
On November 16, 1959, the NAMARCO and the FEDERATION entered into a Contract of Sale stipulating among others that Two Hundred Thousand Pesos (P200,000.00) be paid as part payment, and FEDERATION deposits with the NAMARCO upon signing of the items and/or merchandise a cash basis payment upon delivery of the duly indorsed negotiable shipping document covering the same. To insure payment of the goods by the FEDERATION, the NAMARCO accepted three domestic letters of credit which is an accepted draft and duly executed trust receipt approved by the Philippine National Bank.
Upon arrival of the goods in Manila in January, 1960, the NAMARCO billed FEDERATION Statement of Account for P277,357.91, covering shipment of the 2,000 cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, and 500 cartons of Adams Chicklets; Statement of Account of P135,891.32, covering shipment of the 168 cartons of Blue Denims; and Statement of Account of P197,824.12, covering shipment of the 183 bales of Khaki Twill, or a total of P611,053.35. Subsequently, it was received by FEDERATION on January 29, 1960. However, on March 2, 1960 FEDERATION filed a complaint against Namarco for undelivery of some items contained in the contract of sale. FEDERATION refuses to pay acknowledge the domestic letters of credit until full delivery is done by NAMARCO.
ISSUE:
Should FEDERATION be obliged to pay the amount of the merchandise even if there was still incomplete delivery of items by NAMARCO?
RULING:
Yes. The right of the NAMARCO to the cost of the goods existed upon delivery of the said goods to the FEDERATION which, under the Contract of Sale, had to pay for them. Therefore, the claim of the NAMARCO for the cost of the goods delivered arose out of the failure of the FEDERATION to pay for the said goods, and not out of the refusal of the NAMARCO to deliver the other goods to the FEDERATION. Furthermore, FEDERATION’s non-payment would result to it being unjustly enriched. However, the lower court erred in imposing interest at the legal rate on the amount due, "from date of delivery of the merchandise", and not from extra-judicial demand. In the absence of any stipulations on the matter, the rule is that the obligor is considered in default only from the time the obligee judicially or extra-judicially demands fulfillment of the obligation and interest is recoverable only from the time such demand is made. There being no stipulation as to when the aforesaid payments were to be made, the FEDERATION is therefore liable to pay interest at the legal rate only from June 7, 1960, the date when NAMARCO made the extra-judicial demand upon said party.
INCHAUSTI & CO. VS. YULO
34 Phil 978
FACTS:
Gregorio Yulo, for himself and in representation of his brothers, executed a notarial instrument admitting an indebtedness to the plaintiff in the sum of P203,221.27. On August 12, 1909, Gregorio Yulo, for himself and in representation of his brother Manuel Yulo, and in their own behalf, Pedro, Fransisco, Carmen, and Concepcion Yulo executed another notarial instrument whereby they modified the previous instrument , and at the same time, acknowledged jointly and severally their indebtedness to the plaintiff in the sum of P253,445.42, obligating themselves to pay said the indebtedness in five installments with interests at 10% per annum, the first installment to be paid on June 30, 1910. They also expressly stipulated that the instrument shall be confirmed and ratified by Mariano Yulo, another brother who was not a party to the execution of the said instrument, and that default in the payment of any of the installments will result in the maturity of all the installments. Since the instrument was not ratified or confirmed by Mariano and the first installment was not paid, Inchausti & Co. brought an action against Gregorio Yulo for the payment of the whole amount plus interests of P42, 944.76.
While the case was pending on May 12, 1911, Fransisco, Manuel and Carmen Yulo executed another notarial document in recognition of the debt and providing that the debt be reduced for them to P225,000.00, the interest be likewise reduced to 6%, from March 15, 1911, the installments are increased to eight, the first of P20,000.00 beginning on June 30, 1912, and the rest of P30,000.00 each on the same date of each successive year until the total obligation shall be finally and satisfactorily paid on June 30, 1919.
So, Inchausti and Company withdrew the claims pending against Fransisco, Manuel and Carmen but still continue the claims against Gregorio and Pedro sentencing them to pay the total amount of the obligation acknowledged by them in the August 12, 1909 instrument. Gregorio Yulo alleged the following defenses that:
ISSUE:
RULING:
The obligation being solidary, the remission of any part of the debt made by a creditor in favor of one or more of the solidary debtors necessarily benefits the others, and therefore there can be no doubt that, in accordance with the provision of Art 1143 of the Civil Code, the defendant has the right to enjoy the benefits of the partial remission of the debt granted by the creditor.”
The defendant Gregorio cannot be ordered to pay the P253,445.42 claimed from him in the suit here, because he has been benefited by the remission made by the plaintiff to three of his co-debtors. But as it cannot be enforced against the defendant except as to the 3/6 part which is what he can recover from his joint co-debtors Fransisco, Manuel and Carmen, judgment can be rendered only as to the P112,500.
Gutierrez vs. Gutierrez
56 PHIL 177
Facts:
On February 2, 1930, a passenger track and an automobile of private ownership collided while attempting to pass each other on the Talon Bridge on the Manila South Road in Las Pinas, Rizal. The truck was driven by Abelardo Velasco, and owned by Saturnino Cortez. The automobile was operated by Bonifacio Gutierrez, 18 years old, and owned by Bonifacio¢s parents, Mr. and Mrs. Manuel Gutierrez. At the time of the collision, the father was not in the car, but the mother, together with several members of the Gutierrez family, was accommodated therein. As a result of the collision between the truck and the automobile, Narciso Gutierrez, herein plaintiff and a passenger in the truck suffered a fractured right leg which required medical attendance for a considerable period of time.
The owner of the passenger truck was made a defendant, although a chauffeur was driving the truck, and the owner of the private automobile was also made a defendant, although he was not in the car, which was driven by his 18 year old son and in which members of his family were riding.
IsSue:
Were both drivers negligent?
Ruling:
Yes. The court found both drivers negligent, basing the liability of the owner of the truck to the plaintiff on the contract of carriage; while the liability of the owner of the private automobile was based on Article 2180 of the Civil Code. As against the owner of the truck, there was culpa contractual or negligence in the performance of a contract, while as against the owner of the automobile there was culpa acquiliana or negligence as a source of an obligation.
The youth Bonifacio was an incompetent chauffeur. He was driving at an excessive rate of speed, and that, on approaching the bridge and the truck, he lost his head and so contributed by his negligence to the accident. The guarantee given by the father at the time the son was granted a license to operate motor vehicles made the father responsible for the acts of his son. Based on these facts, pursuant to the provisions of Article 1903, of the Civil Code, the father alone and not the minor or the mother, would be liable for the damages caused by the minor.
PAY VS. VDA. DE PALANCA
57 SCRA 618
FACTS:
The late Justo Palanca and Rosa Gonzales Vda. De Carlos Palanca entered into a promise to pay with George Pay on January 30, 1952 which promissory note states ‘For value received from time to time since 1947, we jointly and severally promise to pay to Mr. George Pay at his office at the China Banking Corporation the sum of twenty six thousand nine hundred pesos with interest of 12% per annum upon receipt by either of the undersigned of cash payment from the Estate of Don Carlos Palanca or upon demand.”
The petition was filed on August 26, 1967 asking the surviving spouse of Justo Palanca to interpose as administratix. As there was refusal on the part of Segundina de Palanca to act as adminitratix; they claim that the property no longer belonged to the debtor and that Mr. Pay’s action has already prescribed, hence, this appeal.
ISSUE:
Had George Pay’s action really prescribed?
RULING:
Yes. Under Art 1179 of the Civil Code “every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties is demandable at once. Furthermore, under the discussion by Tolentino, the above promissory note falls under pure obligation because for a contract to fall under conditional obligation, the condition must be future and uncertain. The debtors being the heirs of Don Carlos Palanca, the receiving of the mentioned “condition” was not uncertain. The obligation being pure obligation was demandable at once.
Being demandable at once, the actionable period of George Pay started to commence the very moment the contract was executed. Hence, Art 1144 of the Civil Code which states that one has to bring his action upon a written contract from the right to do so accrues within ten years applies. Fifteen years was then much too late.
Unreported cases
ABAYA VS. STANDARD VACUUM OIL CO.
The errors assigned boils down to the singles question of whether or not the appellant is entitled to the damages, compensatory as well as moral and exemplary, supposedly sustained as a consequences of appealles’ refusal to appoint him operator of the station in controversy. The trial court correctly termed the stipulation of appointing the appellant as operator subject to the condition of the “operator’s agreement” as a reciprocal obligation.
In reciprocal obligations, the performance of one is conditioned on the simultaneous fulfillment of the other. When one party to the reciprocal obligation refuses to assume and perform the obligation imposed on him, the other party does not incur in delay, Article 119 of the Civil Code provides that “the power to rescind obligation is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him”. There is no reason here to sustain the contention that in the circumstances fulfillment of the obligation was impossible.
ARRIETA VS. NATIONAL RICE AND CORN CORPORATION
GR L-15645 January 31, 1964
FACTS:
On May 19, 1952, plaintiff-appellee Mrs. Paz Arrieta participated in a public bidding called by NARIC for the supply of 20,000 metric tons of Burmese rice. As her bid of $203, 000 per metric ton was the lowest, she was awarded he contract for the same. On July 1, 1952, Arrieta and NARIC entered into Contract of Sale of Rice under the term of which the former obligated herself to deliver to the latter 20, 000 metric tons of Burmese rice at $203, 000 per metric ton. In turn, NARIC committed itself to pay for the imported rice “by means of an irrevocable, confirmed and assignable letter of credit in US currency in favor of Arrieta and/or supplier in Burma, immediately.”
However, it was only on July 30, 1952 that NARIC took the first step to open a letter of credit by forwarding to the PNB its application for Commercial Letter of Credit. On the same day, Arrieta, thru counsel, advised NARIC of the extreme necessity for the opening of the letter of credit since she had by then made a tender to her supplier in Rangoon, Burma equivalent to 5% of the F.O.B. price of 20, 000 tons at $180.70 and in compliance with the regulations in Rangoon, this 5% will be confiscated if the required letter of credit is not received by them before August 4, 1952.
On August 4, PNB informed NARIC that its application for a letter of credit has been approved by the Board of Directors with the condition that 50% marginal cash deposit be paid and that drafts a5e to be paid upon presentment. It turned out that NARIC was not in financial position to meet the condition. As a result of the delay, the allocation of Arrieta’s supplier in Rangoon was cancelled and the 5% deposit amounting to 524 kyats or approximately P200, 000 was forfeited.
ISSUE:
Was NARIC liable for damages?
RULING:
Yes.One who assumes a contractual obligation and fails to perform the same on account of his inability to meet certain bank which inability he knew and was aware of when he entered into contract, should be held liable in damages for breach of contract.
Under Article 1170 of the Civil Code, not only debtors guilty of fraud, negligence or default but also debtor of every, in general, who fails in the performance of his obligations is bound to indemnify for the losses and damages caused thereby.
MAKATI DEVELOPMENT CORP. VS. EMPIRE INSURANCE CO. AND RODOLFO P. ANDAL
G. R. No. 21780 June 30, 1967
FACTS:
Makati Development Corporation sold a lot to Rodolfo P. Andal on March 31, 1959,a so-called "special condition" contained in the deed of sale provides that the vendee(Andal) shall construct and complete at least 50% of its residence on the property within two (2) years from March 31, 1959, in the event of its failure to do so, the bond with the above special condition will be forfeited. Andal gave a surety bond wherein he, as principal, and the Empire Insurance Company, as surety, jointly and severally, undertook to pay the Makati Development Corporation the sum of P12,000 in case Andal failed to comply with his obligation under the deed of sale.
Andal sold the lot to Juan Carlos on January 18, 1960. As neither Andal nor Juan Carlos built a house on the lot within the stipulated period, the Makati Development Corporation, on April 3, 1961, after the lapse of the two-year period, sent a notice of claim to the Empire Insurance Co. advising it of Andal's failure to comply with his undertaking. Demand for the payment of P12,000 was refused, whereupon the Makati Development Corporation filed a complaint in the Court of First Instance against the Empire Insurance Co. to recover on the bond in the full amount, plus attorney's fees. In due time, the Empire Insurance Co. filed its answer with a third-party complaint against Andal. It asked that the complaint be dismissed or, in the event of a judgment in favor of the Makati Development Corporation, that judgment be rendered ordering Andal to pay the Empire Insurance Co. whatever amount it maybe ordered to pay the Makati Development Corporation.
In his answer, Andal averred that, at any rate, Juan Carlos had started construction of a house on the lot and in fact had the entire area fenced with stone walls and building materials was already stock in the premise. The lower court rendered judgment, sentencing the Empire Insurance Co. to pay the Makati Development Corporation the amount of P1,500, with interest at the rate of 12% from the time of the filing of the complaint until the amount was fully paid, and to pay attorney's fees in the amount of P500. The court directed that in case the amount of the judgment was paid by the Empire Insurance Co., Andal should in turn pay the former the same.
But the appellant argues that Andal became liable for the full amount of his bond upon his failure to build a house within the two-year period which expired on March 31, 1961 and that the trial court was without authority to reduce Andal's liability on the basis of Carlos' construction of a house a month after the stipulated period because there was no privity of contract between Carlos and the Makati Development Corporation.
ISSUE:
Is Andal liable for the full amount of his bond upon his failure to comply with the special condition stipulated?
RULING:
No. While it is true that in obligations with a penal sanction the penalty takes the place of damages and the payment of interest in case of non-compliance and that the obligee is entitled to recover upon the breach of the obligation without the need of proving damages,it is nonetheless true that in certain instances a mitigation of the obligor's liability is allowed. Thus article 1229 of the Civil Code states:
The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.
Trial court found that Juan Carlos had finished more than 50 per cent of his house barely a month after the expiration of the stipulated period. There was therefore a partial performance of the obligation within the meaning and intendment of article 1229. The penal clause in this case was inserted not to indemnify the Makati Development Corporation for any damage it might suffer as a result of a breach of the contract but rather to compel performance of the so-called "special condition". Considering that a house had been built shortly after the period stipulated, the substantial, if tardy, performance of the obligation, having in view the purpose of the penal clause, fully justified the trial court in reducing the penalty.
In the stipulation in this case to commence the construction and complete at least 50 per cent of the vendee's house within two years cannot be construed as imposing a strictly personal obligation on Andal. To adopt such a construction would be to limit Andal's right to dispose of the lot. There is nothing in the deed of sale restricting Andal's right to sell the lot at least within the two-year period and it the plain reading of such a limitation on one of the rights of ownership must rest on more explicit language in the contract.
ROSE PACKING VS. CA AND PCIB
G.R. No. L-33084 November 14, 1988
FACTS:
On December 12, 1962 respondent bank (PCIB) approved a letter-request by petitioner for the reactivation of its overdraft line of P50,000.00 discounting line of P100,000.00 and a letter of credit-trust receipt line of P550,000.00 as well as an application for a loan of P300,000.00, on fully secured real estate and chattel mortgage and on the further condition that respondent PCIB appoint as it is did appoint its executive vice-president Roberto S. Benedicto as its representative in petitioner's board of directors.
On November 3, 1965 the National Investment & Development Corporation (NIDC), the wholly owned investment subsidiary of the Philippine National Bank, approved a P2.6 million loan application of petitioner with certain conditions. NIDC had only released a total of P200,000 to petitioner corporation. Thereafter, the NIDC refused to make further releases on the approved loan of petitioner.
On January 5, 1968 respondent PCIB filed a complaint against petitioner and Rene Knecht, its president for the collection of petitioner's indebtedness as Civil Case No. 71697 of the Court of First Instance of Manila.
On January 22, 1968, PCIB gave petitioner notice that it would cause the real estate mortgage to be foreclosed at an auction sale, which it scheduled for February 27, 1968. Thus, respondent Sheriff served notice of sheriff's sale.
ISSUES:
1. Was petitioner corporation in default, justifying the foreclosure of mortgaged property?
2. Did PCIB effectively deliver the consideration expected from it by petitioner corporation?
3. Can the real estate mortgage of petitioner be entirely foreclosed to satisfy its debt with PCIB?
RULING:
1. No. The loans of petitioner corporation from respondent bank were supposed to become due only at the time that it receives from the NIDC and PDCP the proceeds of the approved financing scheme. As it is, the conditions did not happen. NIDC refused to make further releases after it had made two releases totaling P200,000.00. The efficacy or obligatory force of a conditional obligation is subordinated to the happening of a future and uncertain event so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.
For an obligation to become due there must generally be a demand. Default generally begins from the moment the creditor demands the performance of the obligation. Without such demand, judicial or extrajudicial, the effects of default will not arise (Namarco v. Federation of United Namarco Distributors, Inc. 49 SCRA 238 [1973
2. No. The loan agreements between petitioner and respondent Bank are reciprocal obligations (the obligation or promise of each party is the consideration for that of the other) The promise of petitioner to pay is the consideration for the obligation of respondent bank to furnish the loan.
Respondent bank's designation of its own choice of people holding key positions in petitioner corporation tied the hands of petitioner's board of directors to make decisions for the interest of petitioner corporation, in fact, undermined the latter's financial stability.
In a similar case, Filipinas Marble Corporation v. Intermediate Appellate Court (142 SCRA 180 [1986] where the lending institution took over the management of the borrowing corporation and led that corporation to bankruptcy through mismanagement or misappropriation of the funds, defeating the very purpose of the loan which is to develop the projects of the corporation, the Court ruled that it is as if the loan was never delivered to it and thus, there was failure on the part of the respondent DBP to deliver the consideration for which the mortgage and the assignment of deed were executed.
3. No. Respondent bank was in default in fulfilling its reciprocal obligation under their loan agreement. By its own admission it failed to release the P710,000.00 loan it approved on October 13, 1966 in which case, petitioner corporation, under Article 1191 of the Civil Code, may choose between specific performance or rescission with damages in either case.
As a consequence, the real estate mortgage of petitioner corporation cannot be entirely foreclosed to satisfy its total debt to respondent bank.
The issue of whether the foreclosure sale of the mortgaged properties en masse was valid or not must be answered in the negative. The rule of indivisibility of a real estate mortgage refers to the provisions of Article 2089 of the Civil Code.
The rule in Article 2089 is not applicable to the instant case as it presupposes several heirs of the debtor or creditor which does not obtain in this case. Furthermore, the rule of indivisibility of mortgage cannot apply where there was failure of consideration on the part of respondent bank for the mismanagement of the affairs of petitioner corporation and where said bank is in default in complying with its obligation to release to petitioner corporation the amount of P710,000.00. Finally, it is noted that as already stated hereinabove, the exact amount of petitioner's total debt was still unknown.
PENACO VS. RUAYA
110SCRA45
FACTS:
On January 14, 1957, the defendant spouses Ruaya executed a document dominated: “Pacto de Retro of Residential Building as Public Land applicant on the lot on which constructed.” The terms and condition are:
“spouses Ruaya, in consideration of sum of P1000 whereof in full is hereby acknowledge and paid by Pershing Tan Queto, do these presents hereby sell, cede and convey by way of Pacto de Retro…one two-storey residential building…in the name of Zoilo Ruaya and therein assessed at P1500 and erected on a public land along the road to the wharf, city of ozami.”
The vendors a retro failed to exercise their right to repurchase in the said period. On sept. 10, 1960, the trial court rendered judgment declaring that the title is consolidated in the vendee, Pershing Tan Queto, On April 18, 1961, Queto assigned his rights to plaintiff Penaco. Thereafter, Penaco demanded to relinquish and complete transfer of their legal rights but defendant refused. The defendant answered that the condition in the contract Pacto re Retro , is void for want of consideration, there being no price mentioned therein and that the parcel of land which is sought to be transferred has not been identified.
ISSUE:
Is the defendant’s contention valid?
RULING:
No. There were only one contract entered into by the appellant and Queto and which is a sale of a residential building for P1000 with the condition that: the vendor may repurchase the same within a period of 1 year by paying back the vendee, upon failure to repurchase, the building shall pass and become vested in the vendee, and transfer relinquish and effect legal transfer of all their rights. Article 1350 of the civil code provides that, “in onerous contracts the cause is understood to be, for each contracting party the prestation or promise of a thing or service by the other.” Besides, article 1354 provides, “it is presumed that consideration exist and is lawful, unless the debtor proves the contrary. The second contention that parcel of land on which the building sold a retro is constructed has not been identified if likewise without merit. The vendors a retro are obligated to transfer to the vendee a retro and his assigns all their rights, interest and participation , as public claimant, in and the lot on which the building sold a retro has consolidated his title over the building sold a retro.
135 SCRA 323
FACTS:
On December 19, 1957, defendants-appellants Ursula Torres Calasanz and plaintiffs-appellees Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in Cainta, Rizal for the amount of P3,920.00 plus 7% interest per annum. The plaintiffs-appellees made a downpayment of P392.00 upon the execution of the contract. They promised to pay the balance in monthly installments of P41.20 until fully paid, the installment being due and payable on the 19th day of each month. The plaintiffs-appellees paid the monthly installments until July 1966, when their aggregate payment already amounted to P4,533.38.
On December 7, 1966, the defendants-appellants wrote the plantiffs-appellees a letter requesting the remittance of past due accounts. On January 28, 1967, the defendants-appellants cancelled the said contract because the plaintiffs failed to meet subsequent payments. The plaintiffs’ letter with their plea for reconsideration of the said cancellation was denied by the defendants.
The plaintiffs-appellees filed a case before the Court of First Instance to compel the defendant to execute in their favor the final deed of sale alleging inter alia that after computing all subsequent payments for the land in question, they found out that they have already paid the total amount including interests, realty taxes and incidental expenses. The defendants alleged in their answer that the plaintiffs violated par. 6 of the contract to sell when they failed and refused to pay and/or offer to pay monthly installments corresponding to the month of August, 1966 for more than 5 months, thereby constraining the defendants to cancel the said contract.
The Court of First Instance rendered judgment in favor of the plaintiffs, hence this appeal.
ISSUE:
Has the Contract to Sell been automatically and validly cancelled by the defendants-appellants?
RULING:
No. While it is true that par.2 of the contract obligated the plaintiffs-appellees to pay the defendants the sum of P3,920 plus 7% interest per annum, it is likewise true that under par 12 the seller is obligated to transfer the title to the buyer upon payment of the said price.
The contract to sell, being a contract of adhesion, must be construed against the party causing it. The Supreme Court agree with the observation of the plaintiffs-appellees to the effect that the terms of a contract must be interpreted against the party who drafted the same, especially where such interpretation will help effect justice to buyers who, after having invested a big amount of money, are now sought to be deprived of the same thru the prayed application of a contract clever in its phraseology, condemnable in its lopsidedness and injurious in its effect which, in essence, and its entirety is most unfair to the buyers.
Thus, since the principal obligation under the contract is only P3,920.00 and the plaintiffs-appellees have already paid an aggregate amount of P4,533.38, the courts should only order the payment of the few remaining installments but not uphold the cancellation of the contract. Upon payment of the balance of P671.67 without any interest thereon, the defendant must immediately execute the final deed of sale in favor of the plaintiffs and execute the necessary transfer of documents, as provided in par.12 of the contract.
JUNTILLA VS. FONTANAR
136 SCRA 624
FACTS:
Plaintiff Juntilla was a passenger of a public utility jeepney on the course of the trip from Danao City to Cebu City. The jeepney was driven by defendant Berfol Camoro. It was registered under the franchise of defendant Clemente Fontanar but was actually owned by defendant Fernando Banzon. When the jeepney reached Mandaue City, the right rear tire exploded causing the vehicle to turn turtle. In the process, the plaintiff who was sitting at the front seat was thrown out of the vehicle. He obtained a lacerated wound on his right palm and injuries on his left arm, right thigh and on his back. Because of his shock and injuries, he went back to Danao City but on the way, he discovered that his `Omega' wrist watch was lost. Upon his arrival, he immediately entered the Danao City Hospital to attend to his injuries, and also requested his father-in-law to proceed immediately to the place of the accident and look for the watch which he bought for P852.70. The watch, however, could no longer be found.
Juntilla filed a civil case for breach of contract with damages before the City Court. The respondents filed their answer, alleging inter alia that the accident that caused losses to the petitioner was beyond the control of the respondents taking into account that the tire that exploded was newly bought and was only slightly used. The City Court rendered judgment in favor of Juntilla and ordered defendants, jointly and severally, to pay him reimbursement for the lost Omega wrist watch, unrealized salary of the plaintiff from his employer, the doctor's fees and medicine, an additional sum for attorney's fees and the costs.
The defendants appealed to the CFI who reversed the earlier judgment, exonerating the defendants from any liability. The motion for reconsideration having been denied, Juntilla appealed to the Supreme Court. Juntilla contends that the CFI erred in failing to take cognizance of the fact that defendants and/or their employee failed to exercise 'utmost and/or extraordinary diligence' required of common carriers contemplated under Art. 1755 of the Civil Code of the Philippines.
ISSUE:
Was the blow-out of the jeepney tire due to the negligence of respondents and thus should be held liable?
RULING:
Yes. In the case at bar, there are specific acts of negligence on the part of the respondents. The evidence shows that the passenger jeepney was running at a very fast speed before the accident. The Court agreed with the observation of the petitioner that a public utility jeep running at a regular and safe speed will not jump into a ditch when its right rear tire blows up. There is also evidence to show that the passenger jeepney was overloaded at the time of the accident. The petitioner stated that there were three (3) passengers in the front seat and fourteen (14) passengers in the rear.
In the case at bar, the cause of the unforeseen and unexpected occurrence was not independent of the human will. The accident was caused either through the negligence of the driver or because of mechanical defects in the tire. Common carriers should teach their drivers not to overload their vehicles, not to exceed safe and legal speed limits, and to know the correct measures to take when a tire blows up thus insuring the safety of passengers at all times.
It is sufficient to reiterate that the source of a common carrier's legal liability is the contract of carriage, and by entering into the said contract, it binds itself to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with a due regard for all the circumstances. The records show that this obligation was not met by the respondents.
National Marketing Corporation vs. Federation of United Namarco Distributors, Inc.
49 scra 238
Facts:
On November 16, 1959, the NAMARCO and the FEDERATION entered into a Contract of Sale stipulating among others that Two Hundred Thousand Pesos (P200,000.00) be paid as part payment, and FEDERATION deposits with the NAMARCO upon signing of the items and/or merchandise a cash basis payment upon delivery of the duly indorsed negotiable shipping document covering the same. To insure payment of the goods by the FEDERATION, the NAMARCO accepted three domestic letters of credit which is an accepted draft and duly executed trust receipt approved by the Philippine National Bank.
Upon arrival of the goods in Manila in January, 1960, the NAMARCO billed FEDERATION Statement of Account for P277,357.91, covering shipment of the 2,000 cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, and 500 cartons of Adams Chicklets; Statement of Account of P135,891.32, covering shipment of the 168 cartons of Blue Denims; and Statement of Account of P197,824.12, covering shipment of the 183 bales of Khaki Twill, or a total of P611,053.35. Subsequently, it was received by FEDERATION on January 29, 1960. However, on March 2, 1960 FEDERATION filed a complaint against Namarco for undelivery of some items contained in the contract of sale. FEDERATION refuses to pay acknowledge the domestic letters of credit until full delivery is done by NAMARCO.
ISSUE:
Should FEDERATION be obliged to pay the amount of the merchandise even if there was still incomplete delivery of items by NAMARCO?
RULING:
Yes. The right of the NAMARCO to the cost of the goods existed upon delivery of the said goods to the FEDERATION which, under the Contract of Sale, had to pay for them. Therefore, the claim of the NAMARCO for the cost of the goods delivered arose out of the failure of the FEDERATION to pay for the said goods, and not out of the refusal of the NAMARCO to deliver the other goods to the FEDERATION. Furthermore, FEDERATION’s non-payment would result to it being unjustly enriched. However, the lower court erred in imposing interest at the legal rate on the amount due, "from date of delivery of the merchandise", and not from extra-judicial demand. In the absence of any stipulations on the matter, the rule is that the obligor is considered in default only from the time the obligee judicially or extra-judicially demands fulfillment of the obligation and interest is recoverable only from the time such demand is made. There being no stipulation as to when the aforesaid payments were to be made, the FEDERATION is therefore liable to pay interest at the legal rate only from June 7, 1960, the date when NAMARCO made the extra-judicial demand upon said party.
INCHAUSTI & CO. VS. YULO
34 Phil 978
FACTS:
Gregorio Yulo, for himself and in representation of his brothers, executed a notarial instrument admitting an indebtedness to the plaintiff in the sum of P203,221.27. On August 12, 1909, Gregorio Yulo, for himself and in representation of his brother Manuel Yulo, and in their own behalf, Pedro, Fransisco, Carmen, and Concepcion Yulo executed another notarial instrument whereby they modified the previous instrument , and at the same time, acknowledged jointly and severally their indebtedness to the plaintiff in the sum of P253,445.42, obligating themselves to pay said the indebtedness in five installments with interests at 10% per annum, the first installment to be paid on June 30, 1910. They also expressly stipulated that the instrument shall be confirmed and ratified by Mariano Yulo, another brother who was not a party to the execution of the said instrument, and that default in the payment of any of the installments will result in the maturity of all the installments. Since the instrument was not ratified or confirmed by Mariano and the first installment was not paid, Inchausti & Co. brought an action against Gregorio Yulo for the payment of the whole amount plus interests of P42, 944.76.
While the case was pending on May 12, 1911, Fransisco, Manuel and Carmen Yulo executed another notarial document in recognition of the debt and providing that the debt be reduced for them to P225,000.00, the interest be likewise reduced to 6%, from March 15, 1911, the installments are increased to eight, the first of P20,000.00 beginning on June 30, 1912, and the rest of P30,000.00 each on the same date of each successive year until the total obligation shall be finally and satisfactorily paid on June 30, 1919.
So, Inchausti and Company withdrew the claims pending against Fransisco, Manuel and Carmen but still continue the claims against Gregorio and Pedro sentencing them to pay the total amount of the obligation acknowledged by them in the August 12, 1909 instrument. Gregorio Yulo alleged the following defenses that:
- An accumulation of interest had taken place;
- In the instrument of August 12, 1909, two conditions were agreed one of which ought to be approved by the Court of First Instance, and that their brother Mariano shall ratify and confirm the instrument, neither of which was complied with;
- With regard to the same debt, claims were presented before the commissioners in the special proceedings over the inheritances of Teodoro and Gregoria pending the present suit; and
- The instrument of August 12, 1909 was novated by that of May 12, 1911, executed by Manuel, Fransisco and Carmen Yulo.
ISSUE:
- Can plaintiff sue Gregorio alone, there being other obligors?
- Is the May 12, 1911 instrument constitutes a novation of the prior instrument of August 12, 1909?
RULING:
- With respect to the first, it cannot be doubted that, the debtors having obligated themselves in solidum, the creditor can bring its action in toto against any one of them, inasmuch as this was surely its purpose in demanding that the obligation contracted in its favor should be solidary having in mind the principle of law that “when the obligation is constituted as a conjoint and solidary obligation each one of the debtors is bound to perform in full the undertaking which is the subject matter of such obligation.” (Civil Code, Art 1137 and 1144). And even though the creditor may have stipulated with some of the solidary debtors diverse installments and conditions, as in this case, Inchausti and Company did with its debtors Manuel, Fransisco and Carmen Yulo through the instrument of May 12, 1911, this does not lead to the conclusion that the solidarity stipulated in the instrument of August 12, 1909 is broken, as we already know that law provides that “solidarity may exist even though the debtors are not bound in the same manner and for the same periods and under the same conditions.”
- There can be no doubt that the contract of May 12, 1911, does not constitute a novation of the former one of August 12, 1909, with respect to the other debtors who executed this contract, or more concretely, with respect to the defendant Gregorio Yulo. It is always necessary to state that it is the intention of the contracting parties to extinguish the former obligation by the new one.
The obligation being solidary, the remission of any part of the debt made by a creditor in favor of one or more of the solidary debtors necessarily benefits the others, and therefore there can be no doubt that, in accordance with the provision of Art 1143 of the Civil Code, the defendant has the right to enjoy the benefits of the partial remission of the debt granted by the creditor.”
The defendant Gregorio cannot be ordered to pay the P253,445.42 claimed from him in the suit here, because he has been benefited by the remission made by the plaintiff to three of his co-debtors. But as it cannot be enforced against the defendant except as to the 3/6 part which is what he can recover from his joint co-debtors Fransisco, Manuel and Carmen, judgment can be rendered only as to the P112,500.
Gutierrez vs. Gutierrez
56 PHIL 177
Facts:
On February 2, 1930, a passenger track and an automobile of private ownership collided while attempting to pass each other on the Talon Bridge on the Manila South Road in Las Pinas, Rizal. The truck was driven by Abelardo Velasco, and owned by Saturnino Cortez. The automobile was operated by Bonifacio Gutierrez, 18 years old, and owned by Bonifacio¢s parents, Mr. and Mrs. Manuel Gutierrez. At the time of the collision, the father was not in the car, but the mother, together with several members of the Gutierrez family, was accommodated therein. As a result of the collision between the truck and the automobile, Narciso Gutierrez, herein plaintiff and a passenger in the truck suffered a fractured right leg which required medical attendance for a considerable period of time.
The owner of the passenger truck was made a defendant, although a chauffeur was driving the truck, and the owner of the private automobile was also made a defendant, although he was not in the car, which was driven by his 18 year old son and in which members of his family were riding.
IsSue:
Were both drivers negligent?
Ruling:
Yes. The court found both drivers negligent, basing the liability of the owner of the truck to the plaintiff on the contract of carriage; while the liability of the owner of the private automobile was based on Article 2180 of the Civil Code. As against the owner of the truck, there was culpa contractual or negligence in the performance of a contract, while as against the owner of the automobile there was culpa acquiliana or negligence as a source of an obligation.
The youth Bonifacio was an incompetent chauffeur. He was driving at an excessive rate of speed, and that, on approaching the bridge and the truck, he lost his head and so contributed by his negligence to the accident. The guarantee given by the father at the time the son was granted a license to operate motor vehicles made the father responsible for the acts of his son. Based on these facts, pursuant to the provisions of Article 1903, of the Civil Code, the father alone and not the minor or the mother, would be liable for the damages caused by the minor.
PAY VS. VDA. DE PALANCA
57 SCRA 618
FACTS:
The late Justo Palanca and Rosa Gonzales Vda. De Carlos Palanca entered into a promise to pay with George Pay on January 30, 1952 which promissory note states ‘For value received from time to time since 1947, we jointly and severally promise to pay to Mr. George Pay at his office at the China Banking Corporation the sum of twenty six thousand nine hundred pesos with interest of 12% per annum upon receipt by either of the undersigned of cash payment from the Estate of Don Carlos Palanca or upon demand.”
The petition was filed on August 26, 1967 asking the surviving spouse of Justo Palanca to interpose as administratix. As there was refusal on the part of Segundina de Palanca to act as adminitratix; they claim that the property no longer belonged to the debtor and that Mr. Pay’s action has already prescribed, hence, this appeal.
ISSUE:
Had George Pay’s action really prescribed?
RULING:
Yes. Under Art 1179 of the Civil Code “every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties is demandable at once. Furthermore, under the discussion by Tolentino, the above promissory note falls under pure obligation because for a contract to fall under conditional obligation, the condition must be future and uncertain. The debtors being the heirs of Don Carlos Palanca, the receiving of the mentioned “condition” was not uncertain. The obligation being pure obligation was demandable at once.
Being demandable at once, the actionable period of George Pay started to commence the very moment the contract was executed. Hence, Art 1144 of the Civil Code which states that one has to bring his action upon a written contract from the right to do so accrues within ten years applies. Fifteen years was then much too late.
Unreported cases
ABAYA VS. STANDARD VACUUM OIL CO.
The errors assigned boils down to the singles question of whether or not the appellant is entitled to the damages, compensatory as well as moral and exemplary, supposedly sustained as a consequences of appealles’ refusal to appoint him operator of the station in controversy. The trial court correctly termed the stipulation of appointing the appellant as operator subject to the condition of the “operator’s agreement” as a reciprocal obligation.
In reciprocal obligations, the performance of one is conditioned on the simultaneous fulfillment of the other. When one party to the reciprocal obligation refuses to assume and perform the obligation imposed on him, the other party does not incur in delay, Article 119 of the Civil Code provides that “the power to rescind obligation is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him”. There is no reason here to sustain the contention that in the circumstances fulfillment of the obligation was impossible.
ARRIETA VS. NATIONAL RICE AND CORN CORPORATION
GR L-15645 January 31, 1964
FACTS:
On May 19, 1952, plaintiff-appellee Mrs. Paz Arrieta participated in a public bidding called by NARIC for the supply of 20,000 metric tons of Burmese rice. As her bid of $203, 000 per metric ton was the lowest, she was awarded he contract for the same. On July 1, 1952, Arrieta and NARIC entered into Contract of Sale of Rice under the term of which the former obligated herself to deliver to the latter 20, 000 metric tons of Burmese rice at $203, 000 per metric ton. In turn, NARIC committed itself to pay for the imported rice “by means of an irrevocable, confirmed and assignable letter of credit in US currency in favor of Arrieta and/or supplier in Burma, immediately.”
However, it was only on July 30, 1952 that NARIC took the first step to open a letter of credit by forwarding to the PNB its application for Commercial Letter of Credit. On the same day, Arrieta, thru counsel, advised NARIC of the extreme necessity for the opening of the letter of credit since she had by then made a tender to her supplier in Rangoon, Burma equivalent to 5% of the F.O.B. price of 20, 000 tons at $180.70 and in compliance with the regulations in Rangoon, this 5% will be confiscated if the required letter of credit is not received by them before August 4, 1952.
On August 4, PNB informed NARIC that its application for a letter of credit has been approved by the Board of Directors with the condition that 50% marginal cash deposit be paid and that drafts a5e to be paid upon presentment. It turned out that NARIC was not in financial position to meet the condition. As a result of the delay, the allocation of Arrieta’s supplier in Rangoon was cancelled and the 5% deposit amounting to 524 kyats or approximately P200, 000 was forfeited.
ISSUE:
Was NARIC liable for damages?
RULING:
Yes.One who assumes a contractual obligation and fails to perform the same on account of his inability to meet certain bank which inability he knew and was aware of when he entered into contract, should be held liable in damages for breach of contract.
Under Article 1170 of the Civil Code, not only debtors guilty of fraud, negligence or default but also debtor of every, in general, who fails in the performance of his obligations is bound to indemnify for the losses and damages caused thereby.
MAKATI DEVELOPMENT CORP. VS. EMPIRE INSURANCE CO. AND RODOLFO P. ANDAL
G. R. No. 21780 June 30, 1967
FACTS:
Makati Development Corporation sold a lot to Rodolfo P. Andal on March 31, 1959,a so-called "special condition" contained in the deed of sale provides that the vendee(Andal) shall construct and complete at least 50% of its residence on the property within two (2) years from March 31, 1959, in the event of its failure to do so, the bond with the above special condition will be forfeited. Andal gave a surety bond wherein he, as principal, and the Empire Insurance Company, as surety, jointly and severally, undertook to pay the Makati Development Corporation the sum of P12,000 in case Andal failed to comply with his obligation under the deed of sale.
Andal sold the lot to Juan Carlos on January 18, 1960. As neither Andal nor Juan Carlos built a house on the lot within the stipulated period, the Makati Development Corporation, on April 3, 1961, after the lapse of the two-year period, sent a notice of claim to the Empire Insurance Co. advising it of Andal's failure to comply with his undertaking. Demand for the payment of P12,000 was refused, whereupon the Makati Development Corporation filed a complaint in the Court of First Instance against the Empire Insurance Co. to recover on the bond in the full amount, plus attorney's fees. In due time, the Empire Insurance Co. filed its answer with a third-party complaint against Andal. It asked that the complaint be dismissed or, in the event of a judgment in favor of the Makati Development Corporation, that judgment be rendered ordering Andal to pay the Empire Insurance Co. whatever amount it maybe ordered to pay the Makati Development Corporation.
In his answer, Andal averred that, at any rate, Juan Carlos had started construction of a house on the lot and in fact had the entire area fenced with stone walls and building materials was already stock in the premise. The lower court rendered judgment, sentencing the Empire Insurance Co. to pay the Makati Development Corporation the amount of P1,500, with interest at the rate of 12% from the time of the filing of the complaint until the amount was fully paid, and to pay attorney's fees in the amount of P500. The court directed that in case the amount of the judgment was paid by the Empire Insurance Co., Andal should in turn pay the former the same.
But the appellant argues that Andal became liable for the full amount of his bond upon his failure to build a house within the two-year period which expired on March 31, 1961 and that the trial court was without authority to reduce Andal's liability on the basis of Carlos' construction of a house a month after the stipulated period because there was no privity of contract between Carlos and the Makati Development Corporation.
ISSUE:
Is Andal liable for the full amount of his bond upon his failure to comply with the special condition stipulated?
RULING:
No. While it is true that in obligations with a penal sanction the penalty takes the place of damages and the payment of interest in case of non-compliance and that the obligee is entitled to recover upon the breach of the obligation without the need of proving damages,it is nonetheless true that in certain instances a mitigation of the obligor's liability is allowed. Thus article 1229 of the Civil Code states:
The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.
Trial court found that Juan Carlos had finished more than 50 per cent of his house barely a month after the expiration of the stipulated period. There was therefore a partial performance of the obligation within the meaning and intendment of article 1229. The penal clause in this case was inserted not to indemnify the Makati Development Corporation for any damage it might suffer as a result of a breach of the contract but rather to compel performance of the so-called "special condition". Considering that a house had been built shortly after the period stipulated, the substantial, if tardy, performance of the obligation, having in view the purpose of the penal clause, fully justified the trial court in reducing the penalty.
In the stipulation in this case to commence the construction and complete at least 50 per cent of the vendee's house within two years cannot be construed as imposing a strictly personal obligation on Andal. To adopt such a construction would be to limit Andal's right to dispose of the lot. There is nothing in the deed of sale restricting Andal's right to sell the lot at least within the two-year period and it the plain reading of such a limitation on one of the rights of ownership must rest on more explicit language in the contract.
ROSE PACKING VS. CA AND PCIB
G.R. No. L-33084 November 14, 1988
FACTS:
On December 12, 1962 respondent bank (PCIB) approved a letter-request by petitioner for the reactivation of its overdraft line of P50,000.00 discounting line of P100,000.00 and a letter of credit-trust receipt line of P550,000.00 as well as an application for a loan of P300,000.00, on fully secured real estate and chattel mortgage and on the further condition that respondent PCIB appoint as it is did appoint its executive vice-president Roberto S. Benedicto as its representative in petitioner's board of directors.
On November 3, 1965 the National Investment & Development Corporation (NIDC), the wholly owned investment subsidiary of the Philippine National Bank, approved a P2.6 million loan application of petitioner with certain conditions. NIDC had only released a total of P200,000 to petitioner corporation. Thereafter, the NIDC refused to make further releases on the approved loan of petitioner.
On January 5, 1968 respondent PCIB filed a complaint against petitioner and Rene Knecht, its president for the collection of petitioner's indebtedness as Civil Case No. 71697 of the Court of First Instance of Manila.
On January 22, 1968, PCIB gave petitioner notice that it would cause the real estate mortgage to be foreclosed at an auction sale, which it scheduled for February 27, 1968. Thus, respondent Sheriff served notice of sheriff's sale.
ISSUES:
1. Was petitioner corporation in default, justifying the foreclosure of mortgaged property?
2. Did PCIB effectively deliver the consideration expected from it by petitioner corporation?
3. Can the real estate mortgage of petitioner be entirely foreclosed to satisfy its debt with PCIB?
RULING:
1. No. The loans of petitioner corporation from respondent bank were supposed to become due only at the time that it receives from the NIDC and PDCP the proceeds of the approved financing scheme. As it is, the conditions did not happen. NIDC refused to make further releases after it had made two releases totaling P200,000.00. The efficacy or obligatory force of a conditional obligation is subordinated to the happening of a future and uncertain event so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.
For an obligation to become due there must generally be a demand. Default generally begins from the moment the creditor demands the performance of the obligation. Without such demand, judicial or extrajudicial, the effects of default will not arise (Namarco v. Federation of United Namarco Distributors, Inc. 49 SCRA 238 [1973
2. No. The loan agreements between petitioner and respondent Bank are reciprocal obligations (the obligation or promise of each party is the consideration for that of the other) The promise of petitioner to pay is the consideration for the obligation of respondent bank to furnish the loan.
Respondent bank's designation of its own choice of people holding key positions in petitioner corporation tied the hands of petitioner's board of directors to make decisions for the interest of petitioner corporation, in fact, undermined the latter's financial stability.
In a similar case, Filipinas Marble Corporation v. Intermediate Appellate Court (142 SCRA 180 [1986] where the lending institution took over the management of the borrowing corporation and led that corporation to bankruptcy through mismanagement or misappropriation of the funds, defeating the very purpose of the loan which is to develop the projects of the corporation, the Court ruled that it is as if the loan was never delivered to it and thus, there was failure on the part of the respondent DBP to deliver the consideration for which the mortgage and the assignment of deed were executed.
3. No. Respondent bank was in default in fulfilling its reciprocal obligation under their loan agreement. By its own admission it failed to release the P710,000.00 loan it approved on October 13, 1966 in which case, petitioner corporation, under Article 1191 of the Civil Code, may choose between specific performance or rescission with damages in either case.
As a consequence, the real estate mortgage of petitioner corporation cannot be entirely foreclosed to satisfy its total debt to respondent bank.
The issue of whether the foreclosure sale of the mortgaged properties en masse was valid or not must be answered in the negative. The rule of indivisibility of a real estate mortgage refers to the provisions of Article 2089 of the Civil Code.
The rule in Article 2089 is not applicable to the instant case as it presupposes several heirs of the debtor or creditor which does not obtain in this case. Furthermore, the rule of indivisibility of mortgage cannot apply where there was failure of consideration on the part of respondent bank for the mismanagement of the affairs of petitioner corporation and where said bank is in default in complying with its obligation to release to petitioner corporation the amount of P710,000.00. Finally, it is noted that as already stated hereinabove, the exact amount of petitioner's total debt was still unknown.
PENACO VS. RUAYA
110SCRA45
FACTS:
On January 14, 1957, the defendant spouses Ruaya executed a document dominated: “Pacto de Retro of Residential Building as Public Land applicant on the lot on which constructed.” The terms and condition are:
“spouses Ruaya, in consideration of sum of P1000 whereof in full is hereby acknowledge and paid by Pershing Tan Queto, do these presents hereby sell, cede and convey by way of Pacto de Retro…one two-storey residential building…in the name of Zoilo Ruaya and therein assessed at P1500 and erected on a public land along the road to the wharf, city of ozami.”
The vendors a retro failed to exercise their right to repurchase in the said period. On sept. 10, 1960, the trial court rendered judgment declaring that the title is consolidated in the vendee, Pershing Tan Queto, On April 18, 1961, Queto assigned his rights to plaintiff Penaco. Thereafter, Penaco demanded to relinquish and complete transfer of their legal rights but defendant refused. The defendant answered that the condition in the contract Pacto re Retro , is void for want of consideration, there being no price mentioned therein and that the parcel of land which is sought to be transferred has not been identified.
ISSUE:
Is the defendant’s contention valid?
RULING:
No. There were only one contract entered into by the appellant and Queto and which is a sale of a residential building for P1000 with the condition that: the vendor may repurchase the same within a period of 1 year by paying back the vendee, upon failure to repurchase, the building shall pass and become vested in the vendee, and transfer relinquish and effect legal transfer of all their rights. Article 1350 of the civil code provides that, “in onerous contracts the cause is understood to be, for each contracting party the prestation or promise of a thing or service by the other.” Besides, article 1354 provides, “it is presumed that consideration exist and is lawful, unless the debtor proves the contrary. The second contention that parcel of land on which the building sold a retro is constructed has not been identified if likewise without merit. The vendors a retro are obligated to transfer to the vendee a retro and his assigns all their rights, interest and participation , as public claimant, in and the lot on which the building sold a retro has consolidated his title over the building sold a retro.