1) BAYLA V. SILANG TRAFFIC CO.

73 PHIL 557
Group 1 (Pelayo, Prieto, Da Silva, Hernandez, Talatala)
G.R. Nos. L-48195
May 1, 1942
SOFRONIO T. BAYLA, ET AL., petitioners, vs.SILANG TRAFFIC CO., INC.,
respondent.
Facts:
The case is about recovery by petitioners of a certain sum of money which
they had paid severally to respondent corporation on account of shares of stock
they individually agreed to take and pay for a certain specified terms and
conditions.
Respondent, Silang Traffic Co., Inc., entered into an agreement for the sale
on installment of its shares of stock with various individuals, including the
petitioners Sofrio Bayla. After the latter had paid several installments for the
purchase price of said shares of stock, the petitioners defaulted in the payment of
the subsequent installments. Thus, the board of directors passed a resolution
authorizing for the refund of the amounts paid and the reversion of the shares of
stock to the corporation. Despite the said board resolution, the amounts paid by
petitioners were not returned to them since the board resolution was revoked and
cancelled by a subsequent resolution. Thus, petitioners instituted an action in the
Court of First Instance of Cavite to recover the sums of money paid. The
respondent contends that the resolution does not apply to petitioners as at the time
the resolution was passed, the shares had already automatically been reverted back
to the corporation, and that the resolution was no longer effective as it was
cancelled by a subsequent resolution passed by the Board. The Court of First
Instance declared that the shares of stock had already been forfeited and absolved
the respondent from the complaint.
Issues:
Whether or not, the failure to pay any installment of the purchase price of
the shares of stock would result in its automatic forfeiture in favor of the
corporation.
Held:
The contract herein involved is one of sale and not of subscription as it is an
independent agreement between the individual purchaser, which is the petitioners,
and respondent corporation to buy the shares of stock at a stipulated price. It does

not involve a mutual agreement of the subscribers to take and pay for the stock of
the corporation. Whether a particular contract is a purchase or a subscription of
shares of stock is a matter of construction and depends upon its terms and the
intention of the parties. It has been held that a subscription to stock in an existing
corporation is, as between the subscriber and the corporation, simply a contract of
purchase and sale.
As to forfeiture, the contract did not expressly provide that the failure of the
purchaser to pay any installment would give rise to the forfeiture and cancellation
without the necessity of any demand from the seller. However, being a contract of
sale, it may be rescinded by mutual agreement of the parties. In the subsequent
board resolution, it was stated that the contracts were rescinded for the good of the
corporation and in order to terminate a pending civil case involving the validity of
such sales of the shares. To such rescission, petitioners apparently agreed, as
shown by their demand for the refund of the amount they had already paid to the
corporation. Moreover, provisions in the contract regarding interest on deferred
payments would not have been inserted if it had been the intention of the parties to
provide for automatic forfeiture and cancelation of the contract. The Civil code
states that persons obliged to deliver or do something are not in default until the
moment the creditor demands of them judicially or extra judicially the fulfillment
of their obligation, unless (1) the obligation or the law expressly provides that
demand shall not be necessary in order that default may arise, (2) by reason of the
nature and circumstances of the obligation it shall appear that the designation of
the time at which that thing was to be delivered or the service rendered was the
principal inducement to the creation of the obligation. Wherefore, the judgment of
the court of appeals is hereby reversed and another judgment will be entered
against the defendant Silang Traffic Co., Inc., ordering it to pay to the petitioners
Sofronio T. Bayla, Venancio Toledo, Josefa Naval, and Paz Toledo.

2) PICART V. SMITH, 37 PHIL 809

PICART VS SMITH
GR # L-12219
Justice Street

FACTS:
On December 12, 1912, Amado Picart was riding his pony over the Carlatan
Bridge at San Fernando, La Union. Halfway across the bridge, Frank Smith
approached in an automobile from the opposite direction and gave a honk when he
saw Picart riding his pony was in the middle of the road. Picart confused on how to
react to the speed of Smiths approach, veered instead on the wrong side of the
road. Instead of slowing down or halting, Smith maintained his speed. The
approach of the automobile startled the animal, thus leading to an accident. Picart
received contusions and temporary unconsciousness and required medical attention
for several days. The pony sustained injuries and died soon after. Picart filed an
action to recover damages caused by the automobile driven by Smith. The Court of
First Instance absolved Smith from civil liabilities, to which Picart appeals.

ISSUE:
Whether or not Smith was guilty of negligence in his method of driving his
automobile as to give rise to a civil obligation.

HELD:
Yes. The court finds Smith liable. Control of the situation is within Smith.
The test to determine negligence is to see if a prudent man would have acted the
same as the person accused of negligence. The court determined that there was
negligence on the part of smith. Had he acted in a prudent manner, he would have
instead slowed down his automobile or put it to a stop. The judgment of the lower
court is reversed and rendered the plaintiff to recover damages.

3) CANGCO V. MLA RAILROAD 38 PHIL 768

Cangco vs Manila Railroad Co.
38 Phil 768
Facts: Jose Cangco, was in the employment of Manila Railroad Company in the
capacity of clerk, with a monthly wage of P25. He lived in the pueblo of San
Mateo, in the province of Rizal, which is located upon the line of the defendant
railroad company; and in coming daily by train to the company's office in the city
of Manila where he worked, he used a pass, supplied by the company, which
entitled him to ride upon the company's trains free of charge. One day, during his
ride on the train, he met an accident. When the train was still in motion and had
proceeded a little farther from the platform, plaintiff Jose Cangco stepped off from
the train, but one or both of his feet came in contact with a sack of watermelons
with the result that his feet slipped from under him and he fell violently on the
platform. His body at once rolled from the platform and was drawn under the
moving car, where his right arm was badly crushed and lacerated. It appears that
after the plaintiff alighted from the train the car moved forward possibly six meters
before it came to a full stop.
The explanation of the presence of a sack of melons on the platform where
the plaintiff alighted is found in the fact that it was the customary season for
harvesting these melons and a large lot had been brought to the station for the
shipment to the market. It is clear that the fall of the plaintiff was due to the fact
that his foot alighted upon one of these melons at the moment he stepped upon the
platform. His statement that he failed to see these objects in the darkness is readily
to be credited since the accident happened at around 7PM-8PM. Cangco incurred
very serious injuries which necessitated the amputation of his arm. When the result
of his operation was unsatisfactory, he was amputated again in another hospital.
His total expenses were P790.25 for medical and surgical fees. On August 31,
1915, he instituted this proceeding in the Court of First Instance of the city of
Manila to recover damages of the defendant company, founding his action upon
the negligence of the servants and employees of the defendant in placing the sacks
of melons upon the train platform. At the hearing in the Court of First Instance, his
Honor, the trial judge, found that the plaintiff himself had failed to use due caution
in alighting from the coach and was therefore precluded from recovering. Cangco
appealed.
The railroad company's defense involves the assumption that even granting
that the negligent conduct of its servants in placing an obstruction upon the
platform was a breach of its contractual obligation to maintain safe means of

approaching and leaving its trains, the direct and proximate cause of the injury
suffered by plaintiff was his own contributory negligence in failing to wait until the
train had come to a complete stop before alighting. In this particular instance, that
the train was barely moving when plaintiff alighted is shown conclusively by the
fact that it came to stop within six meters from the place where he stepped from it.
Thousands of persons alight from trains under these conditions every day of the
year, and sustain no injury where the company has kept its platform free from
dangerous obstructions. There is no reason to believe that plaintiff would have
suffered any injury whatever in alighting as he did had it not been for defendant's
negligent failure to perform its duty to provide a safe alighting place.
Issue: Whether or not Cancgo can recover damages from Manila Railroad Co. for
the negligence of their servants and employees in placing the sacks of melons upon
the train platform.
Held: The test by which to determine whether the passenger has been guilty of
negligence in attempting to alight from a moving railway train, is that of ordinary
or reasonable care. It is to be considered whether an ordinarily prudent person, of
the age, sex and condition of the passenger, would have acted as the passenger
acted under the circumstances disclosed by the evidence. This care has been
defined to be, not the care which may or should be used by the prudent man
generally, but the care which a man of ordinary prudence would use under similar
circumstances, to avoid injury." (Thompson, Commentaries on Negligence, vol. 3,
sec. 3010.)
As the case now before us presents itself, the only fact from which a
conclusion can be drawn to the effect that plaintiff was guilty of contributory
negligence is that he stepped off the car without being able to discern clearly the
condition of the platform and while the train was yet slowly moving. In
considering the situation thus presented, it should not be overlooked that the
plaintiff was, as we find, ignorant of the fact that the obstruction which was caused
by the sacks of melons piled on the platform existed; and as the defendant was
bound by reason of its duty as a public carrier to afford to its passengers facilities
for safe egress from its trains, the plaintiff had a right to assume, in the absence of
some circumstance to warn him to the contrary, that the platform was clear. The
place, as we have already stated, was dark, or dimly lighted, and this also is proof
of a failure upon the part of the defendant in the performance of a duty owing by it
to the plaintiff; for if it were by any possibility concede that it had right to pile
these sacks in the path of alighting passengers, the placing of them adequately so
that their presence would be revealed.

It may be noted that the place was perfectly familiar to the plaintiff as it was
his daily custom to get on and off the train at this station. There could, therefore, be
no uncertainty in his mind with regard either to the length of the step which he was
required to take or the character of the platform where he was alighting. The
Courts conclusion is that the conduct of the plaintiff in undertaking to alight while
the train was yet slightly under way was not characterized by imprudence and that
therefore he was not guilty of contributory negligence.
The decision of lower court is reversed, and judgment is hereby rendered
plaintiff for the sum of P3,290.25, and for the costs of both instances (permanent
disability in the sum of P2,500 and P790.25 for medical attention, hospital
services, and other incidental expenditures connected with the treatment of his
injuries).

4) LUZON STEVEDORING V. REPUBLIC (21 SCRA 279)

REPUBLIC VS LUZON STEVEDORING CO.,
21 SCRA 279

Facts: Two tugboats (Bangus and Barbero) towed down barge L-1892 on the Pasig
River on the afternoon of August 17, 1960. The three boats were owned by the
Luzon Stevedoring Corporation, herein defendant. As there was torrential rain in
Manila and the surrounding provinces on August 15 and 16, the river was swollen
and there was a swift current so the barge rammed against a wooden pile of the
Nagtahan bailey bridge. L-1892 smashed the posts of the said bridge and caused
the bridge to tilt. The Republic of the Philippines, herein plaintiff, sued the
defendant for actual and consequential damages caused by its employees; the
defendant denied having any liability, claiming it exercised due diligence in
selecting and supervising its employees and that the destruction of the bridge was
due to force majeure. It further claimed that the plaintiff did not have any capacity
to sue and that the bridge was an obstruction to navigation. After due trial, the
defendant was held liable for the damage on the bridge and was ordered to pay the
plaintiff the actual cost of the repair of the bridge (Php 192, 561.72) with legal
interest from the time the complaint was filed. The defendant directly appealed to
the Supreme Court, therefore this case.
Issue: Whether or not the collision of Luzon Stevedoring Corporations barge with
the Nagtahan bridge was in law caused by a fortuitous event or force majeure
Held: Given the fact that the bridge is an immovable structure and stationary object
and uncontrovertibly provided adequate openings for vessels to traverse the river,
negligence could be presumed on the part of the defendant as it is quite unusual
that the barge, which was under its exclusive control, would hit the supports of
Nagtahan bridge. As provided for by Article 1174 of the Civil Code, force majeure
are extraordinary events which are unforeseen or unavoidable, or if foreseen, were
inevitable. No credit is given to the defendant even if it assigned two of its most
powerful tugboats to tow the barge and assigned the most competent and
experienced patrons and double checked and inspected the towlines, equipment
and engines. The defendant knew the dangers posed by a swollen river and the
swift current but still proceeded with the towing, therefore assuring the risk. It
cannot be absolved of responsibility simply due to its insufficient precautions. The
contention of force majeure was not honoured. The decision of the Court of First
Instance holding the defendant liable was affirmed.

4.2) AUSTRIA VS CA
29 SCRA 527
FACTS:
On January 30, 1961, Maria Abad received one pendant with diamonds worth
P4,500.00 from Guillermo Austria. She was obliged to sell it on commission basis
or to return it on demand.
On February 1, 1961, Abads purse, containing jewelry and cash, was robbed from
her by two men. Included in the purse was the consigned pendant. The incident
became the subject of a criminal case filed in CFI of Rizal.
Despite Austrias demand, Abad failed to return the pendant or pay for its value.
Thus, the former filed an action against the latter and her husband for the recovery
of the pendant or of its value, including damages. The spouses averred that the
alleged robbery extinguished their obligation.
The trial court decided in favour of Austria as the spouses failed to prove the fact
of robbery or even if such was committed, Abad was negligent when she went
home alone after nightfall while carrying a large amount of cash and valuables.
Such negligence did not free her from liability for damages for the loss of the
jewelry.
The spouses appealed to the CA and prayed for the reversal of the judgment. The
appellate court overruled the decision of the trial court and declared spouses not
accountable for the loss of the jewelry due to a fortuitous event. They were
relieved from liability for damages.
Thus, the present petition for review of the decision rendered by the Court of
Appeals.
Petitioner invoked Article 1174 of the new Civil Code and asserted that for robbery
to be considered a fortuitous event and relieve the obligor from his obligation
under a contract, there must be a prior finding on the guilt of the accused and that
the fact of robbery should be proven by a final judgment of conviction in the
criminal case.
ISSUE: WON the spouses should be held liable for the loss of the jewelry
HELD:

No. They are not liable for the loss of the jewelry due to fortuitious event. To
exempt a person from liability due to fortuitious event, the following requisites
should be present: (1) the event must be independent of the human will; (2) the
occurrence must render it impossible for the debtor to fulfill the obligation in a
normal manner; and that (3) the obligor must be free of participation in or
aggravation of the injury to the creditor. A fortuitous event can be produced by
nature or by the act of man such as robbery provided that the requisites are present.
It was not disputed that Abad was a victim of robbery. However, to avail of the
exemption granted under Article 1174, it is not necessary that the persons
responsible for the occurrence should be found or punished. It is sufficient that an
enforceable event, such as robbery, did take place without any concurrent fault on
the debtor's part. Abad was not negligent when she walked home alone after
nightfall while carrying jewelry and cash as the event happened when the
incidence of crimes against persons and property was not high.

5) LA MALLORCA V. DE JESUS (17 SCRA 23)

La Mallorca and Pampanga Bus Company vs Valentin De Jesus (GR. L-21486)
FACTS: De Jesus and Tolentino filed a case for damages against petitioner. The
trial court awarded P10,000.00 worth of moral damages, among others, which was
affirmed by the CA. Petitioner contests the awarding of moral damages to
petitioners.
The suit arose by reason of the death of Lolita de Jesus, 20-year old daughter of De
Jesus and wife of Tolentino, in a head-on collision between petitioners bus, on
which she was a passenger, and a freight truck traveling in the opposite direction,
in a barrio in Marilao Bulacan. The immediate cause of the collision was the fact
that the driver of the bus lost control of the wheel when its left front tire suddenly
exploded. Petitioner maintains that a tire blow-out is a fortuitous event and gives
rise to no liability for negligence, citing the rulings of the Court of Appeals in
Rodriguez vs. Red Line Transportation Co. and People vs. Palapad.
ISSUE:
(1) Whether or not a blow-out of one of the tires of the bus and in not considered
as caso fortuito, and
(2) Whether or not petitioners are liable for moral damages.
HELD: On the first issue, the rulings on the cases cited by petitioners not only are
not binding on the SC but were based on considerations quite different from those
that obtain in the at bar. The appellate Court in said cases made no findings of any
specified acts of negligence on the part of the defendants therein and confined
itself to the question of whether or not a tire blow-out, by itself alone and without a
showing as to the causative factors, would generate liability. In the present case,
the cause of the blow-out was known. The inner tube of the left front tire,
according to petitioners own evidence and as found by the Court of Appeals was
pressed between the inner circle of the left wheel and the rim which had slipped
out of the wheel. This was, as CA correctly held, a mechanical defect of the
conveyance or a fault in its equipment which was easily discoverable if the bus had
been subjected to a more thorough, or rigid check-up before it took to the road that
morning. Both the trial court and the CA found as a fact that the bus was running
quite fast immediately before the accident. Considering that the tire which
exploded was not new petitioner describes it as hindi masyadong kalbo, or not
so very worn out the plea of caso fortuito cannot be entertained.

The second issue raised by petitioner is already a settled one. In this jurisdiction
moral damages are recoverable by reason of the death of apassenger caused by the
breach of contract of a common carrier, as provided in Article 1764, in relation to
Article 2206, of the Civil Code.

6) TUGADE V. CA (85 SCRA 226)

INOCENCIO TUGADE, petitioner, vs.
COURT OF PEALS, and PEOPLE OF THE PHILIPPINES, respondents.

G.R. No. L-47772 August 31, 1978

FACTS
At about 9:15 o'clock in the morning of January 4, 1972, Rodolfo [Rayan- dayan]
was driving a Hodlen Kingswood car (the [Holden] car), plate No. 52-19V (LRizal '71) owned by the Sta. Ines Corp. and assigned for use of its manager. In
Ayala Avenue in Makati, Rizal, going northwards, at the intersection of Ayala
Avenue and Makati Avenue, [Rayan-dayan] was going to turn left on Makati
Avenue but he stopped to wait for the left-turn signal and because a jeep in front of
him was also at a stop ... While in that sup position, the [Holden] car was bumped
from behind by Blue Car Taxi bearing Plate No. 55-71R (TX-QC '71) and by
Inocencio [Tugade] causing damage to the [Holden] car, the repairs of which cost
P778.10 ... [Tugade] was then charged with Reckless Imprudence Resulting in
Damage to Property. He pleaded not guilty and while admitting that the collision
was caused by faulty brakes of his taxicab, sought to expeculate himself with an
explanation that this fault could not and should not be traced to him.The lower
court held that accused Inocencio Tugade guilty beyond reasonable doubt of the
crime of reckless imprudence resulting in damage to property. [Tugade], appealed
from the judgment reiterating that 'the malfunctioning of the brakes at the time of
the accident was due to a mechanical defect which even the exercise of due
diligence of a good father of a family cannot have prevented. Respondent Court of
Appeals, after stating that upon review of the record, it agreed with the trial court,
its decision affirming in toto their judgment appealed from.
ISSUE
Whether or not malfunctioning of the brakes is a fortuitous event.

HELD
The Supreme Court held that it does not constitute a fortuitous event. Petitioner
maintains that a tire blow-out is a fortuitous event and gives rise to no liability for
negligence, citing the rulings of the Court of Appeals in Rodriguez V. Red Line
Transportation Co., CA-G.R. No. 8136, December 29, 1954, and People v. Palapal,
CA-G.R. No. 18480, June 27, 1958. These rulings, however, not only are not
binding on this Court but were based on considerations, quite different from those
that obtain in the case at bar." It is this Supreme Court, not respondent Court of
Appeals, that speaks authoritatively.
As will be seen, these authorities agree that some extraordinary circumstance
independent of the will of the obligor, or of his employees, is an essential element
of a caso fortuito. Turning to the present case, it is at once apparent that 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 not 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."
WHEREFORE, The decision of respondent Court of Appeals of December 15,
1977 is affirmed. No costs.

7) TANGUILIG V. CA & HERCE, January 2, 1997

7. TANGUILIG v. CA & HERCE
G.R. No. 117190; January 2, 1997

FACTS: Petitioner, Jacinto M. Tanguilig doing business under the name and style
J.M.T. Engineering and General Merchandising, had an agreement with
respondent, Vicente Herce Jr., to construct a windmill system for the respondent
for P60,000.00 with a one-year guaranty. Respondent paid petitioner a down
payment of P30,000.00 and an installment payment of P15,000.00, leaving a
balance of P15,000.00.
Respondent refused and failed to pay the balance to the petitioner, thus, the
petitioner filed a complaint to collect the amount. Respondent denied the claim
saying that he had already paid to San Pedro General Merchandising Inc. (SPGMI)
which constructed the deep well to which the windmill system was to be
connected. According to respondent, since the deep well was part of the windmill
system, his payment to SPGMI should be credited to his account by petitioner.
Also, this should compensate the defects in the windmill system which caused the
structure to collapse after a strong wind hit their place.
Petitioner said that the P60,000.00 was solely for the windmill assembly and its
installation, exclusive of other incidental materials needed for the project. He also
disowned any obligation to repair or reconstruct the system because its collapse
was attributable to a typhoon, a force majeure, which relieved him of any liability,
and insisted that he delivered it in good and working condition to respondent who
accepted the same without protest.
The trial court held that the construction of the deep well was not part of the
windmill project as evidenced clearly by the letter proposals submitted by
petitioner to respondent. Also, the trial court found that there is no clear and
convincing proof that the windmill system fell down due to the defect of the
construction.
The Court of Appeals ruled that the construction of the deep well was included in
the agreement of the parties because the term "deep well" was mentioned in both
proposals. Also, respondent's witness, Guillermo Pili, the proprietor of SPGMI
which installed the deep well, stated that petitioner told him that the cost of
constructing the deep well would be deducted from the contract price of
P60,000.00. Therefore, the appellate court concluded that respondent's payment of

P15,000.00 to SPGMI should be applied to his remaining balance with petitioner,

thus, effectively extinguishing his contractual obligation. However, it rejected
petitioner's claim of force majeure and ordered the latter to reconstruct the
windmill in accordance with the stipulated one-year guaranty.
The Court of Appeals denied his motion for reconsideration, thus, this petition.
ISSUES:
1.
Whether or not the agreement to construct the windmill system included the
installation of a deep well
2.
Whether or not petitioner is under obligation to reconstruct the windmill
after it collapsed

HELD: The court held that there was no agreement to construct the windmill
system in the installation of a deep well, neither was it mentioned in any of the
proposals. The court further held that petitioner failed to show that the collapse of
the windmill was due solely to a fortuitous event. Petitioner only stated that there
was a "strong wind" on the day that the windmill collapsed which does not fall
under the requisites of a fortuitous event. The court has consistently held that in
order for a party to claim exemption from liability by reason of fortuitous event
under Art. 1174 of the Civil Code the event should be the sole and proximate cause
of the loss or destruction of the object of the contract and that four (4) requisites
must concur: (a) the cause of the breach of the obligation must be independent of
the will of the debtor; (b) the event must be either unforeseeable or unavoidable;
(c) the event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and, (d) the debtor must be free from any
participation in or aggravation of the injury to the creditor. It can clearly be
inferred that a strong wind in this case cannot be fortuitous unforeseeable nor
unavoidable as it is necessary for the windmills to turn and operate. Furthermore,
respondent cannot be made liable for his own loss as he has not incurred any delay.
It is said that neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him in reciprocal
obligations. Article 1167 of the Civil Code is explicit on this point that if a person
obliged to do something fails to do it, the same shall be executed at his cost, and
therefore petitioner should bear the cost in reconstructing the windmill.

8 )BISHOP OF JARO V. DE LA PEA, 26 PHIL 144

The Roman Catholic Bishop of Jaro vs Gregorio De la Pena
Facts:
This is an appeal by the defendant from a judgment of the Court of First Instance
of Iloilo, awarding to the plaintiff the sum of P6,641, with interest at the legal rate
from the beginning of the action.
The plaintiff is the trustee of a charitable bequest made for the construction of a
leper hospital. The defendant is the administrator of the estate of Father De la
Pea, as a trustee he deposited P6,641, collected by him for the charitable
purposes. In the same year he deposited in his personal account. Shortly thereafter
and during the war of the revolution, Father De la Pea was arrested as a political
prisoner. The arrest of Father De la Pea and the confiscation of the funds in the
bank were the result of the claim of the military authorities that he was an
insurgent and that the funds thus deposited had been collected by him for
revolutionary purposes. The money was taken from the bank by the military
authorities by virtue of such order, was confiscated and turned over to the
Government.
Issue:
Whether or not Father de la Pea is liable for the loss of the money under his trust?
That he did not preserve the money as a good father of a family.
Ruling:
Civil Code states that "a person obliged to give something is also bound to
preserve it with the diligence pertaining to a good father of a family. Father De la
Pea was not responsible for its loss. Whether he acted more or less negligently by
depositing the money in the bank than he would if he had left it in his home; or
whether he was more or less negligent by depositing the money in his personal
account than he would have been if he had deposited it in a separate account as
trustee. By placing the money in the bank and mixing it with his personal funds. If
it had been forcibly taken from his pocket during a state of war, it is clear that
under the provisions of the Civil Code he would have been exempt from
responsibility. The fact that he placed the trust fund in the bank in his personal
account does not add to his responsibility. Such deposit did not make him a debtor
who must respond at all hazards.

9) GUTIERREZ V. FUENTEBELLA, 13 PHIL 741

FACTS:

On August 26, 2903, Mariano Fuentebella (defendant) signed a document which

stated that he is indebted $22,509.03, Mexican currency to the late Don Tomas R.
Perez which he will pay to his widow, Dona Concepcion Valero.

When the plaintiffs as assignees of Dona Concepcion Valero brought this action
against the amount mentioned in Exhibit A, he claimed that there were two
mistakes had been committed against him.

First, he claimed that on the 12th and 23d of October, 1902, he had delivered hemp
of the value of 5,424.30 pesos which had not been credited to him at the time when
he signed Exhibit A and never has been credited to him. He himself produced a
statement of account which was marked Exhibit 1, delivered to him by the agent of
Dona Concepcion Valero some days before Exhibit A was signed and which
formed the basis of the settlement and showed that he was given credit for this
hemp at the time of the settlement and effectually disposes of his claim to the
contrary.

The other mistake relates to a delivery of hemp on the 20th of November, 1901, of
the value of 1,612.20 pesos. The doubt entry of this amount upon Exhibit 1 is
explained by the witnesses for the plaintiffs who testified that this particular hemp
was delivered by one Miguel Estela; that it was credited to the defendant because it
was at first thought that it was his hemp, and that it was afterwards charged back to
him on the theory that it was the hemp of Estela.

The defendant having signed Exhibit A, is bound by it unless at least he shows

affirmatively that there was some mistake or error in the settlement. The burden of
proof was on him to show such mistake or error, and, if this amount of 1,612.20

pesos was not included in the 6,178.62 pesos it was his duty to show it as he easily
could have done. He testified that he himself kept books of account, but he did not
offer them in evidence at the trial. Having before him when he signed Exhibit A
his own books, showing the amount of hemp he had delivered, in which book the
amount represented by this 1,612.20 pesos must have appeared, it is impossible to
believe that he did not then make a claim for an allowance on account of that
delivery.
The business between the parties was entirely closed on the 20th of June, 1904.
This action was commenced on the 22nd of June, 1906. The defendant claims that
the balance which appeared against him on the 20th of June, 1904, constituted a
mercantile loan made by the creditor to him and that, in accordance with the
provisions of the Code of Commerce, no action could be maintained upon it until a
notarial demand for its payment had been made by the creditor, and no such
demand having been made, the action was prematurely brought. The account
between the parties was an ordinary current account between a commercial house
in Manila and a dealer in the provinces and embraces a great variety of
transactions. It is apparent that the balance which results from the settlement of
such a current account can in o sense be called a mercantile loan

ISSUE:

W/N the plaintiffs are entitled to interest only from the time of the presentation of
the complaint

HELD:

The court below allowed the plaintiffs interest from the 20th of June, 1904. The
court erred and that the plaintiffs are entitled to interest only from the time of the
presentation of their complaint. There was no agreement as to interest. The
transaction did not constitute a mercantile loan so as to fall within the provisions of
article 316 of the Code of Commerce relating to interest. Nor can the balance due

on a current account be said to be due for the sale of merchandise, so as to bring

the case within article 341 of the same code. It rather falls under articles 1108 and
1100 of the Civil Code. No demand for payment having been made before the
bringing of this suit, interest can be allowed only from the presentation of the
complaint.

The judgment of the court below is modified by providing for interest only from
the 22nd day of June, 1906. In all other respects it is affirmed, with the costs of this
instance against the appellant.

10) ALBERT V. UNIVERSITY PUBLISHING, 55 OG 1348

Mariano A. Albert vs. University Publishing Co., Inc.
GR No. L-9300. April 18, 1958
Facts:
Mariano A. Albert sued University Publishing Co. Inc. for an alleged breach of
contract. The said company was given the exclusive right to publish a manuscript
containing commentaries on The Revised Penal Code of the Philippines and in
turn the publishing company agreed to pay Albert P30,000 payable in 8 quarterly
payments. This contract was executed on July 19, 1948. Unfortunately, Mariano
died before the case proceeded to trial, and Justo R. Albert, his estates
administrator substituted.
Albert claimed that defendant failed to pay him the the full amount of the
installment for the first quarter despite him delivering to the publishing company
the said manuscripts not later than December 31, 1948. Evidence show that on
December 16, 1948 he wrote a letter advising the defendant corporation that The
manuscripts of my Commentaries on the Revised Penal Code, subject matter of our
Contract executed on July 19, 1948, is now at your disposal. They agreed to sell
1,000 copies are to and another 1,500 are to be reprinted.
On the other hand, the defendant corporation only paid a total of P7,000 and made
no other or further payement to Albert on account of the contract. They contended
that Albert failed to deliver the manuscripts on the date stipulated in the contract
and for that reason it was no longer under obligation to pay the unpaid balance of
the installments. While denying to have received the letter from Albert, they also
claimed that the manuscripts was not ready for publication.
Issue: Whether or not there is a breach of contract.
Held:
The courts said that the first point that should be determined is whether the
plaintiff had performed his part of the contract.
According to the court, the mere denial by the defendant corporation is not
sufficient to overcome the evidence showing that they have at their disposal the
said manuscripts. The defendant corporation failed to pay on or before the first
installment due (October 15, 1948) because they have only paid in partial (P2,000).
However, the delay in payment may not amount to a breach to justify the
enforcement of the stipulation set forth in the contract because the plaintiff

accepted the payment of P2,000 on November 10, 1948, which completed and paid
the full amount of the first installment due and the balance of P250 to be credited
to the second installment. As the defendant corporation has made no further
payment, the stipulation in the contract has to be enforced.
The action brought by the plaintiff is not for recission of a contract, under which
theory or belief both parties seem to have proceeded and labored, but for a
resolution of reciprocal obligations because one of the obligors failed to comply
with that which was incumbent upon him. The injured party could choose between
requiring specific performance of the obligation or its resolution with indemnity
for losses and payment of interested.
The counterclaim of the defendant was correctly dismissed by the trial court,
because it found that the one who had breached the contract is the defendant
corporation. Such being the case, the defendant corporation cannot claim any
damage against the plaintiff.
Although the defendant corporation breached the contract, as found by the trial
court, and there is no reason which may find support in the evidence for disturbing
such finding. However, the courts find that the amount of liquidated damages is
rather excessive highlighting the testimony of the defendant corporation that all
expenses like the cost of paper, printing, binding, advertising, sales promotion and
other incidental disbursements should be deducted from the gross proceeds.
For that reason and in accordance with the provisions of article 2227 of the new
Civil Code, the reasonable amount of liquidated damages that must be awarded to
the plaintiff as a result of the breach by the defendant corporation of the contract is
equitably reduced to P15,000.
With this modification as to the amount of liquidated damages, the judgment
appealed from is affirmed, with costs against the appellant.

11) PSBA ET AL V. CA, Feb. 2, 1992

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION (PSBA) ET AL vs.
COURT OF APPEALS

FACTS:
Carlitos Bautista, a third year commerce student in the Philippine School of
Business Administration (PSBA) was stabbed on the second-floor premises of the
school by assailants who were not members of the schools academic community.
His parents then filed a suit in the RTC of Manila for damages against PSBA and
its corporate officers.
The plaintiffs (now private respondents) sought to adjudge them liable for the
victims untimely demise due to their alleged negligence, recklessness and lack of
security precautions, means and methods before, during and after the attack on the
victim.
Defendants (now petitioners) sought to have the suit dismissed, alleging that since
they are sued under Article 2180 of the Civil Code, the complaint states no cause
of action and not within the scope of the said provision since it is an academic
institution. The trial court, however, overruled the petitioners contention and its
decision was later affirmed by the appellate court.
ISSUE:
Whether or not the decision of the appellate court anchored on the law of
quasi-delicts is valid.

HELD:
The Supreme Court held that although they agreed on the decision of the
Court of Appeals to deny the petition of motion to dismiss by the PSBA, they do
not agree to the premises stated by the appellate courts ruling.
Article 2180, in the conjunction with Article 2176 of the Civil Code establishes the
rule of in loco parentis, they cannot be held liable to the acts of Carlitos assailants
which were not students of the PSBA and because of the contractual relationship.
When an academic institution accepts students for enrollment, there is a contract
between them, resulting in bilateral obligations which both parties are bound to

comply with. The institution must provide their students with an atmosphere that
promotes or assists its primary undertaking of imparting knowledge and maintain
peace and order within its premises.
In the circumstances, there is no finding that the contract between the school
and Bautista had been breached thru the formers negligence in providing proper
security measures.
Therefore, the Supreme Court dismissed the petition and the case was
remanded to the Trial Court to determine if the school neglected its obligation to
perform based on the contractual relation of them and the students.

12) ONGSIAKO V. IAC, 152 SCRA 627

ANTONIO RAMN ONGSIAKO v. INTERMEDIATE APPELATE COURT
G.R. No. L-69901

JULY 31, 1987

FACTS:
On December 30, 1981, at around 4 pm, petitioners car collided with a jeep
being driven by Robert Ha at MacArthur Highway, in Moncada, Tarlac. The
petitioner was with Len Miguel Heras. Ha was at the wheel of his vehicle, which
had seven passengers on board. Ongsiako was southbound toward Manila, and the
jeep was headed toward the opposite direction; that a Philippine Rabbit bus ahead
of the jeep swerved into the petitioners lane to overtake and bypass a tricycle; and,
as a result, the petitioner, wishing to avoid a head-on collision, immediately veered
his car to the shoulder of the highway. The car went out of control when it hit the
soft shoulder, moved back diagonally across the highway and then collided with
Has jeep, damaging it and causing multiple physical injuries to its passengers. The
Philippine Rabbit bus sped away.
Prosecuted for reckless imprudence resulting in multiple physical injuries
and damage to property, Antonio Ongsiako was convicted by the trial court of
simple negligence resulting in serious physical injuries and damage to property. He
was sentenced to two months of arresto mayor and to pay an indemnity of P143,
131.04 for medical expenses. On appeal, the conviction was affirmed but the
Intermediate Appellate Court reduced the moral damages to P61, 131.04.

ISSUE:

Whether or not Antonio Ongsiako had enough opportunity to avoid the

collision with Robert Has jeep.

Whether or not Antonio Ongsiako should be liable for damages caused on

the jeep passengers and operator out of criminal negligence.

RULING:

The Court ruled that the petitioner shall not be liable for damages caused by
criminal negligence. It had reviewed the allegations given by the parties in the
proceedings and reversed those that did not conform to the facts. The trial court,
and the respondent court, affirmed that the jeep was still 150 meters away from the
Philippine Rabbit bus when the accused drove his car toward the shoulder of the
road to avoid the collision with the oncoming bus, meaning that Ongsiako had
feasible time to avoid hitting the jeep. The judge should have been more careful in
reaching its conclusion for it was not founded on the facts established. The
evidence on record was that the distance was not 150 meters but 150 feet. The
correct distance, incidentally, was established by the trial court itself which, in its
examination of Robert Ha, elicited from him the said information.

The respondent court carelessly rejected the petitioners side of the story on
the grounds that the police sketch of the collision scene failed to reveal any skid
marks of the appellants car on the highway. Both the trial court and the IAC did
not consider that the sketch was made five days after the collision, as emphasized
by the petitioner, and that the skid marks would have already disappeared by that
time. The IAC also carelessly concluded that petitioners failure to present Heras
as his primary witness much to the adversity of his cause. In fact, Heras was
presented as petitioners witness, and Heras did testify in support of the petitioner,
substantially corroborating the petitioners account of the collision.

The real culprit of the collision should have been the driver of the Philippine
Rabbit bus that caused Ongsiakos car to go out of control and accidentally hit
Has jeep. Unfortunately, the bus was not sought after nor its driver was
investigated by the authorities.

There is no question that Antonio Ongsiako must be acquitted from the

crime of simple negligence for lack of proof beyond reasonable doubt given the
trial court and IACs misappreciation of evidence of record.

While the quantum of proof necessary for conviction had not been
established, there is preponderance of evidence to hold the petitioner liable for
damages sustained by the victims of the accident. A little more caution and
discretion on his part in reacting to the threat of a head-on collision with the bus
could have been used by the petitioner so as to avoid the accident. Petitioner is
liable for the hospitalization expenses and unearned salaries of the victims as
itemized by the trial court and affirmed by respondent court. His total civil liability
was to be reduced to P46, 131.04.

13) SANTOS VENTURA HACORMA FOUNDATION, INC. V. ERNESTO

SANTOS, ET AL , Nov. 5, 2004
Santos Ventura Hocorma Foundation, Inc. VS. Ernesto V. Santos and Riverland,
Inc.

Facts:
The petition for review of certiorari is presented in its decision dated January 30,
2002, as well as the resolution filed in the court of appeals dated April 12, 2002.

Santos had filed several civil cases against Santos Ventura Hocorma Foundation,
Inc. (SVHFI). They developed and executed a Compromise Agreement on October
26, 1990 which would end all pending litigations subject to the following; (1) The
defendant foundation shall pay plaintiff Santos P14.5 Million upon execution of
the agreement and (2) the mode of payment shall either be in lump sum or
installment with the discretion of the foundation and upon payment the civil cases
to be filed shall be dropped without prejudice. (3) Failure of compliance of any of
the forgoing terms shall entitle the aggrieved party a writ of execution for the
enforcement of the agreement.
The balance of P14.5 million was then cut down to P13 Million when the
respondent paid a sum of P1.5 Million. However after being pushed to pay the
remainder of the debt the petitioner filed a writ of execution of the compromise
agreement and was granted.

Issue:
Whether or Not there was delay on the part of SVHFI, which will result to, legal
interest in the case at bar, the compromise agreement was entered as a consensual
contract between the parties and becomes the source of the rights and obligations
of the parties thereto. The terms and conditions posted in the compromise
agreement are clear and unambiguous.

WHEREFORE, the petition is denied for lack of merit.

Held:
The courts ruled that the obligation is demandable and liquidated. Due to the lapse
of 2 years from the execution of the contract. When the respondent gave a demand
letter, the obligation was already due

14) DBP V. LICUANAN, Feb. 26, 2007, 516 SCRA 644

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner
vs.
ALEJANDRO and ADELAIDA LICUANAN, Respondents.
G.R. No. 150097

February 26, 2007

FACTS:
The Respondent loaned from DBP the following amount: (1) P4,700
evidenced by a promissory note dated September 20, 1974 and secured by a real
estate mortgage, (2) an additional loan of P12,000 evidenced by a promissory note
dated May 29, 1975 payable on or before the year 1980 and was secured by a real
estate mortgage over four parcels of land and (3) another loan of P22,000
evidenced by a promissory note maturing on October 3, 1985 which was secured
by a real estate mortgage executed in favor of petitioner over three parcels of land.
On August 6, 1979, petitioner and respondents restructured the P12,000
loan, extending the maturity date from June 22, 1979 to June 22, 1982 and also
executed a promissory note for P12,320.73 and another for P6,519.90.
On July 6, 1981, petitioner sent a letter informing petitioner that the
conditions of the mortgage had been breached, petitioner would have the
mortgaged properties sold by the sheriff and the total amount due from the three
loans had by then ballooned to P75,298.32. Petitioner later filed an application for
extrajudicial foreclosure and the mortgaged properties were sold in a public
auction on December 16, 1981. Petitioner acquired the said land as the highest
bidder.
On October 16, 1984, petitioner wrote respondents informing them that the
properties would be disposed of by public auction; petitioner published an
advertisement stating that on November 14, 1984, the properties would be sold by
oral bidding. On this date, however, there were no bidders. On November 16,
1984, petitioner sent respondents a letter informing them that the properties could
be reacquired by negotiated sale for cash or installment Three days later the
properties were sold through negotiated sale to one Emelita A. Peralta.
Respondents were informed of the sale by petitioner through a letter dated
December 6, 1984. On the same day, petitioner executed a deed of conditional sale

in favor of Peralta. On December 11, 1984, respondents offered to repurchase the

properties from petitioner but they had already been sold to Peralta.
Respondents then filed a complaint for recovery of real properties and damages on
July 18, 1985 in the Regional Trial Court (RTC) of Lingayen, Pangasinan, Branch
39 against petitioner and Peralta. The RTC rendered judgment dated September 17,
1991 in favor of respondents and the CA affirmed the RTC but decreased the
amount of nominal damages from P75,000 to P50,000.

ISSUE:
1) Whether a demand for payment of the loans was made before the mortgage was
foreclosed;
2) Whether demand is necessary to make respondents guilty of default;

HELD:
Unless demand is proven, one cannot be held in default. Petitioners cause of
action did not accrue on the maturity dates stated in the promissory notes. It is only
when demand to pay is made and subsequently refused that respondents can be
considered in default and petitioner obtains the right to file an action to collect the
debt or foreclose the mortgage.
Cause of action has three elements, to wit, (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created; (2) an obligation on
the part of the named defendant to respect or not to violate such right; and (3) an
act or omission on the part of such defendant violative of the right of the plaintiff
or constituting a breach of the obligation of the defendant to the plaintiff.
The cause of action cannot be said to accrue on the uniform maturity date of the
Home Notes as petitioner suggests because at that point, the third essential element
of a cause of action, namely, an act or omission on the part of petitioner violative
of the right of private respondent or constituting a breach of the obligation of
petitioner to private respondent, had not yet occurred
The trial court found that there was no demand for payment prior to the
extrajudicial foreclosure. Thus, the foreclosure proceedings were null and void. It
ordered Peralta to reconvey the properties to respondents subject to Peraltas right

to be paid by respondents the amount of P104,000 in consideration of such

reconveyance.
Since the petitioner did not deal fairly with respondents they were made liable for
nominal and moral damages to the latter. The RTC further ordered petitioner to
pay respondents attorneys fees and litigation expenses, which the SC court
affirmed.

15) BARZAGA V. CA, 268 SCRA 105

BARZAGA VS CA
G.R. NO. 115129
FACTS :
On the nineteenth of December Ignacio Barzaga's wife before joining our creator
expressed her dying wish to be buried before Christmas day to let her family not
grieve on the said day. Ignacio Barzaga, herein petitioner, set out to arrange for
her interment on the twenty-fourth of December. Petitioner then went to the
hardware store of respondent Angelito Alviar to inquire about the availability of
certain materials to be used in the construction of a niche for his wife. The
storekeeper agreed to deliver the items and so Barzaga purchased the materials and
paid in the full amount.
On the day that materials should be transported, no delivery was made. Barzaga
then decided to dismiss his laborers for the day and proceeded to the nearest police
station and filed a complaint against Alviar. In the afternoon of that day, petitioner
was able to buy from another store and was able to finish the niche but it was
already behind the schedule.
On 21 January 1991, tormented perhaps by his inability to fulfill his wife's dying
wish, Barzaga wrote private respondent Alviar demanding recompense for the
damage he suffered. Alviar did not respond. Consequently, petitioner sued him
before the Regional Trial Court. The trial court favored Barzaga, and asked
respondent to pay for the damages, but Alviar filed an appeal where the decision
was then reversed. Alviar defends that it was a fortuitous event, since his truck
suffered a flat tire on the way to pick up the materials.
ISSUE:
Whether or not Alviar is liable to compensate the damages incurred by Barzaga for
the delay of the materials delivery even with respondents claim of fortuitous event
HELD:
Yes. Respondents defense of a fortuitous event of a flat tire was forseeable
according to the trial court, and as such should have been reasonably guarded
against. The nature of private respondent's business requires that he should be
ready at all times to meet contingencies of this kind. This case is clearly one of
non-performance of a reciprocal obligation. In their contract of purchase and sale,
petitioner had already complied fully with what was required of him as purchaser,

i.e., the payment of the purchase price of P2,110.00. It was incumbent upon
respondent to immediately fulfill his obligation to deliver the goods otherwise
delay would attach.
The court then affirmed the trial courts decision but deleted the temperate
damages.

16) PHIL. COMMUNICATION SATELLITE CORP. V. GLOBE TELECOM,

May 25, 2004
G.R. No. 147324

May 25, 2004

PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION,

vs.
GLOBE TELECOM, INC.
FACTS:
For several years, Globe Mckay Cable and Radio Corporation (now
Globe Telecom) had been engaged in the coordination of the provision of various
communication facilities for the military bases of the USA in Clark Air Base,
Angeles, Pampanga and Subic Naval Base in Cubi Point, Zambales for the
exclusive use of the US Defense Communications Agency (USDCA), and for
security reasons, were operated only by its personnel or those of American
companies contracted by it to operate said facilities. The USDCA contracted with
said American companies, and the latter, in turn, contracted with Globe for the use
of the facilities. Globe, on the other hand, contracted with local service providers
such as the Philippine Communications Satellite Corporation (Philcomsat) for the
provision of the communication facilities.
Philcomsat and Globe entered into an Agreement whereby Philcomsat obligated
itself to establish, operate and provide an IBS Standard B earth station (earth
station) within Cubi Point for the exclusive use of the USDCA. The term of the
contract was for 60 months, or five (5) years. In turn, Globe promised to pay
Philcomsat monthly rentals for each leased circuit involved.
At the time of the execution of the Agreement, both parties knew that the Military
Bases Agreement between the Republic of the Philippines and the US (RP-US
Military Bases Agreement), which was the basis for the occupancy of the Clark Air
Base and Subic Naval Base in Cubi Point, was to expire in 1991. Under Section
25, Article XVIII of the 1987 Constitution, foreign military bases, troops or
facilities shall not be allowed in the Philippines unless a new treaty is duly
concurred in by the Senate and ratified by a majority of the votes cast by the
people in a national referendum when the Congress so requires, and such new
treaty is recognized as such by the US Government.
Subsequently, Philcomsat installed and established the earth station at Cubi Point
and the USDCA made use of the same.

The Senate passed and adopted Senate Resolution No. 141, expressing its decision
not to concur in the ratification of the Treaty of Friendship, Cooperation and
Security.
The Philippine Government sent a Note Verbale to the US Government through
the US Embassy, notifying it of the Philippines termination of the RP-US Military
Bases Agreement and that the withdrawal of all US military forces from Subic
Naval Base should be effected.
In a letter Globe notified Philcomsat of its intention to discontinue the use of the
earth station in view of the withdrawal of US military personnel from Subic Naval
Base after the termination of the RP-US Military Bases Agreement. Globe invoked
as basis for the letter of termination Section 8 (Default) of the Agreement, which
provides:
Neither party shall be held liable or deemed to be in default for any failure to
perform its obligation under this Agreement if such failure results directly or
indirectly from force majeure or fortuitous event. Either party is thus precluded
from performing its obligation until such force majeure or fortuitous event shall
terminate.
Philcomsat sent a reply letter to Globe, stating that "we expect [Globe] to know its
commitment to pay the stipulated rentals for the remaining terms of the Agreement
even after [Globe] shall have discontinue[d] the use of the earth station.
After the US military forces left Subic Naval Base, Philcomsat demanded payment
of its outstanding obligations under the Agreement amounting to US$4,910,136.00.
However, Globe refused to heed Philcomsats demand.
Philcomsat filed with the RTC a Complaint against Globe, praying that the latter
be ordered to pay liquidated damages under the Agreement with damages. Globe
filed an Answer, insisting that it was constrained to end the Agreement due to the
termination of the RP-US Military Bases Agreement and the non-ratification by the
Senate of the Treaty of Friendship and Cooperation, which events constituted force
majeure under the Agreement. Globe explained that the occurrence of said events
exempted it from paying rentals for the remaining period of the Agreement. The
trial court rendered its Decision ordering the defendant to pay the plaintiff the
amount representing rentals until the amount is fully paid;
Both parties appealed the trial courts Decision to the Court of Appeals. The Court
of Appeals promulgated its Decision dismissing Philcomsats appeal for lack of
merit and affirming the trial courts finding that certain events constituting force

majeure occurred and justified the non-payment by Globe of rentals for the
remainder of the term of the Agreement.
ISSUE: Whether or not the termination of the RP-US Military Bases Agreement,
the non-ratification of the Treaty of Friendship, Cooperation and Security, and the
consequent withdrawal of US military forces and personnel from Cubi Point
constitute force majeure which would exempt Globe from complying with its
obligation to pay rentals under its Agreement with Philcomsat
HELD: Yes. Article 1174, which exempts an obligor from liability on account of
fortuitous events or force majeure, refers not only to events that are unforeseeable,
but also to those which are foreseeable, but inevitable:
A fortuitous event under Article 1174 may either be an "act of God," or natural
occurrences such as floods or typhoons, or an "act of man," such as riots, strikes or
wars.
There is no merit is Philcomsats argument that Section 8 of the Agreement cannot
be given effect because the enumeration of events constituting force majeure
therein unduly expands the concept of a fortuitous event under Article 1174 of the
Civil Code and is therefore invalid.
Furthermore, under Article 1306 of the Civil Code, parties to a contract may
establish such stipulations, clauses, terms and conditions as they may deem fit, as
long as the same do not run counter to the law, morals, good customs, public order
or public policy.
Courts cannot stipulate for the parties nor amend their agreement where the same
does not contravene law, morals, good customs, public order or public policy, for
to do so would be to alter the real intent of the parties, and would run contrary to
the function of the courts to give force and effect thereto.
In order that Globe may be exempt from non-compliance with its obligation to pay
rentals, the concurrence of the following elements must be established:
(1) the event must be independent of the human will; (2) the occurrence must
render it impossible for the debtor to fulfill the obligation in a normal manner; and
(3) the obligor must be free of participation in, or aggravation of, the injury to the
creditor.31
The Court ruled that the abovementioned requisites are present in the instant case.
Philcomsat and Globe had no control over the non-renewal of the term of the RPUS Military Bases Agreement when the same expired in 1991, because the

prerogative to ratify the treaty extending the life thereof belonged to the Senate.
Neither did the parties have control over the subsequent withdrawal of the US
military forces and personnel from Cubi Point.These events made impossible the
continuation of the Agreement until the end of its five-year term without fault on
the part of either party. Thus, it would be unjust to require Globe to continue
paying rentals even though Philcomsat cannot be compelled to perform its
corresponding obligation under the Agreement.

17) CO V. CA, 353 PHIL 305

SICAM, ET AL V. JORGE, August 8, 2007
JIMMY CO, doing business under the name & style DRAGON METAL
MANUFACTURING, petitioner, vs. COURT OF APPEALS and BROADWAY
MOTOR SALES CORPORATION, respondents.
G.R. No. 124922 June 22, 1998

FACTS
On July 18, 1990, petitioner Co entrusted his car to private respondent, Broadway
Motor Sales Corp. for repair services including battery replacement, the latter
undertaking to return the vehicle on July 21, 1990 fully serviced and supplied in
accordance with the job contract. However when the date agreed upon came, the
respondent could not release the vehicle as its battery was weak and was not yet
replaced. Left with no option, petitioner himself bought a new battery nearby and
delivered it to respondent for installation on the same day. However, the battery
was not installed and the delivery of the car was rescheduled to July 24, 1990.
When petitioner sought to reclaim his car on the stated date, he was told that it was
carnapped earlier that morning while being road-tested by an employee of
respondent.
The RTC, in a suit for damages filed by petitioner against private respondent,
found the latter guilty of delay in the performance of its obligation and held it
liable to petitioner for the value of the lost vehicle and its accessories plus interest
and attorney's fees. On appeal, the Court of Appeals reversed the lower court's
ruling. It ruled that the vehicle was lost due to a fortuitous event; hence the petition
for review.
ISSUE
Whether or not a repair shop can be held liable for the loss of a customer's vehicle
while the same is in its custody for repair or other job services

HELD
The Supreme Court reversed the ruling of the Court of Appeals. It was held that
carnapping per se cannot be considered as a fortuitous event. To be considered as

such, carnapping entails more than the mere forceful taking of another's property.
It must be proved and established that the event was an act of God or was done
solely by third parties and that neither the claimant nor the person alleged to be
negligent has any participation.
Even assuming arguendo that carnapping was duly established as a fortuitous
event, Article 1165 of the New Civil Code makes an obligor who is guilty of delay
responsible even for a fortuitous event until he has effected the delivery, hence
respondent may still be liable. In the case at bar, respondent was already in delay
as it was supposed to deliver petitioner's car three (3) days before it was lost.
Agreement to the rescheduled delivery does not defeat petitioners claim as
respondent had already breached its obligation.
Moreover, pursuant to Articles 1174 and 1262 of the New Civil Code, liability
attaches even if the loss was due to a fortuitous event if "the nature of the
obligation requires the assumption of risk". Carnapping is considered a normal
business risk for those engaged in the repair of motor vehicles. Hence, repair shops
are required to first register with the Department of Trade and Industry (DTI) and
to secure an insurance policy as a pre-requisite for such registration/accreditation.
Violation of this statutory duty constitutes negligence per se. Having taken custody
of the vehicle, private respondent is obliged not only to repair the vehicle but must
also provide the customer with some form of security for his property over which
he loses immediate control.
On the assumption that private respondent's repair business is duly registered, it
presupposes that its shop is covered by insurance from which it may recover the
loss. If private respondent can recover from its insurer, then it would be unjustly
enriched if it will not compensate petitioner to whom no fault can be attributed.
Otherwise, if the shop is not registered, then the presumption of negligence applies.
With respect to the value of the lost vehicle and its accessories for which the repair
shop is liable, it should be based on the fair market value that the property would
command at the time it was entrusted to it or such other value as agreed upon by
the parties subsequent to the loss. Such recoverable value is fair and reasonable
considering that the value of the vehicle depreciates.

17.2) SICAM, ET AL V. JORGE, August 8, 2007

ROBERTO C. SICAM and AGENCIA de R.C. SICAM, INC., petitioners,
vs.
LULU V. JORGE and CESAR JORGE, respondents.
FACTS
A Petition for Review on Certiorari was filed by Roberto C. Sicam, Jr. and
Agencia deR.C. Sicam, Inc., seeking to annul the decision of the Court of Appeals.
On different dates from September to October 1987, respondent Jorge pawned
several pieces of jewelry with petitioner-corporation Agencia de R. C. Sicam to
secure a loan in the total amount of P59,500.00. On October 19, 1987, two armed
men entered the pawnshop and took away whatever cash and jewelry found inside
the pawnshop vault.
Sicam sent respondent a letter informing her of the loss of her jewelry due to the
robbery incident in the pawnshop. Respondent expressed disbelief stating that
when the robbery happened, all jewelry pawned were deposited with Far East Bank
near the pawnshop since it had been the practice that before they could withdraw,
advance notice must be given to the pawnshop so it could withdraw the jewelry
from the bank. Respondent requested petitioner to prepare the pawned jewelry for
withdrawal however petitioner Sicam failed to return the jewelry.
Respondent Lulu is seeking indemnification for the loss of pawned jewelry and
payment of damages. Petitioner is interposing the defense of caso fortuito on the
robber committed against the pawnshop.
The RTC rendered its decision dismissing respondents complaint as well as
petitioners counterclaim. Respondents appealed the RTC Decision to the CA
which reversed the formers ruling, ordering Sicam to pay Jorge the actual value of
the lost jewelry.

ISSUE
Whether or not petitioner may be liable for the loss of the pawned articles in their
possession
HELD

The Supreme Court sustained the CA ruling. It was held that fortuitous events by
definition are extraordinary events not foreseeable or avoidable. It is not enough
that the event should not have been foreseen or anticipated, as is commonly
believed but it must be one impossible to foresee or to avoid. The mere difficulty
to foresee the happening is not impossibility to foresee the same. To constitute a
fortuitous event, the following elements must concur: (a) the cause of the
unforeseen and unexpected occurrence or of the failure of the debtor to comply
with obligations must be independent of human will; (b) it must be impossible to
foresee the event that constitutes the caso fortuito or, if it can be foreseen, it must
be impossible to avoid; (c) the occurrence must be such as to render it impossible
for the debtor to fulfill obligations in a normal manner; and, (d) the obligor must be
free from any participation in the aggravation of the injury or loss.
A review of the records clearly shows that petitioners failed to exercise reasonable
care and caution that an ordinarily prudent person would have used in the same
situation. Petitioner were guilty of negligence in the operation of their pawnshop
business since there was no sufficient precaution and vigilance adopted by
petitioner to protect the pawnshop from unlawful intrusion. Moreover, there was
no clear showing that there was any security guard at all.
Sicams admission that the vault was open at the time of robbery is clearly a proof
of petitioners failure to observe the care, precaution and vigilance that the
circumstances justly demanded. Petitioner Sicam testified that once the pawnshop
was open, the combination was already off. Instead of taking the precaution to
protect them, they let open the vault, providing no difficulty for the robbers to cart
away the pawned articles.
The robbery in this case happened in petitioners pawnshop and was negligent in
not exercising the precautions justly demanded of a pawnshop, hence liable for the
loss of the jewelry.

18) NPC V. CA, May 16, 1998

18. NPC v. CA

FACTS: On August 4, 1964, plaintiff Engineering Construction, Inc. (ECI)

executed a contract in Manila with the National Waterworks and Sewerage
Authority (NAWASA), whereby the former undertook to furnish all tools, labor,
equipment, and to construct the proposed 2nd lpo - Bicti Tunnel in Norzagaray,
Bulacan.
By September 1967, plaintiff ECI already completed the tunnel excavation work.
However, some portions of the outworks at the Bicti site were still under
construction. As soon as the plaintiff corporation had finished the tunnel
excavation work at the Bicti site, all the equipment no longer needed there were
transferred to the Ipo site where some projects were yet to be completed.
On November 4,1967, typhoon 'Welming' hit Central Luzon, passing through the
Angat Dam at lpo, Norzagaray, Bulacan. Due to the heavy downpour, the water in
the reservoir of the Angat Dam was rising dangerously. To prevent the overflow of
water from the dam, defendant NPC caused the opening of the spillway gates. A
large volume of water rushed out of the gates, and hit the equipment and
construction works of ECI at the lpo site. As a result, the ECIs materials, camp
facilities, structures and accessories were either washed away, lost or destroyed.
ISSUES:
1.

Whether or not NPC is liable for damages.

2.
Whether or not there was negligence on the part of NPC when it opened the
spillway gates of the Angat Dam.

HELD: The Court ruled that NPC was undoubtedly negligent because it opened the
spillway gates of the Angat Dam only at the height of typhoon when it knew very
well that it was safer to have opened the dam gradually and earlier. Also, NPC
knew of the coming typhoon at least four days before it actually struck. And even
though the typhoon was an act of God or what we may call force majeure, NPC
cannot escape liability because its negligence was the proximate cause of the loss
and damage.

The obligor cannot escape liability, if upon the happening of a fortuitous event or
an act of God, there concurs a corresponding fraud, negligence, delay or violation
or contravention in any manner of the tenor of the obligation as provided for in
Article 1170 of the Civil Code which results in loss or damage.

19) RCPI V. VA, August 29, 1986

Radio Communications of the Philippines vs Court of Appeals and Loreto Dionela
G.R. No. L-44748. August 29, 1986
Facts:
The complaint is based on a telegram sent by the defendant corporation through its
Manila office to petitioner Dionela. The said telegram contained defamatory words
Sa iyo walang pakinabang dumating ka diyan wala kang padala dito kahit
bulbul mo which not only caused petitioners feelings to be wounded but also
caused him undue embarrassment and affected his business. The defendant
corporation alleges that such words were not intended for the petitioner Dionela
but instead was a private joke between the sending and receiving operators. The
telegram was detached from the machine and place inside a sealed envelope and
mistakenly included the additional words in Tagalog. The trial court ruled that
there is no question that the additional words in Tagalog are libellous and it is
immaterial whether or not they were intended for the petitioner for the effects of
receiving such are the same. The defendant corporation is to transmit telegrams
which will open doors to frauds if it will not be held liable for acting, through its
employees, beyond the scope of their assigned task. Also, the office file which
contains the copies of telegrams received are open and held together only by a
metal fastener which makes it accessible to third parties. According to the trial
court, the defendant corporation is liable for the violation of articles 19, 20 and 33
of the Civil Code of the Philippines.
The respondent appellate court confirmed the findings of the lower court. The
additional Tagalog words were correctly found by the lower court libellous. The
proximate cause, which resulted to injury to the petitioner Dionela, is negligence
imputable to the defendant corporation and not to its employees because it failed to
take precautionary measure to avoid the possibility of such incident to happen. The
law implies damages in this instance.
After a motion for reconsideration was denied by the appellate court, the RCPI
petitioned for review by certiorari of the decision of the CA. The contentions are
that the CA erred in holding that the petitioner corporation should answer directly
and primarily for the civil liability arising from the criminal act of its employee
and that the liability of petitioner-corporation is predicated on Articles 19 and 20 of
the Civil Code.

Issue:
Whether or not the petitioner corporation should answer directly and primarily for
the civil liability arising from the criminal act of its employee and that the liability
of petitioner-corporation is predicated on Articles 19 and 20 of the Civil Code.

Ruling:
The court held that the action for damages filed in the lower court is directly
against the RCPI and not as an employer. The cause of action is based on Articles
19 and 20 of the Civil Code as well as on the RCPIs breach of contract through
negligence of its own employees. The RCPI is a business engaged in receiving and
transmitting messages. When a person transmits a message through the RCPI, a
contract is entered into and it is expected that the message will be delivered
accurately. There is a clear case of breach of contract by the RCPI in adding
extraneous and libellous matters in the message sent to Loreto Dionela. This
business can act only through its employees therefore the acts of the latter are acts
of the former. Hence, the corporation is directly liable for the acts of its employees.

20) RURAL BANK OF STA. MARIA, PANGASINAN V. CA (Sept. 14, 1999)

Rural Bank of Sta Maria Pangasinan vs CA: 110672

Facts:
The Court Finds that a parcel of land of about 49,969 square meters, located in
Residence Section J, Camp 7, Baguio City is registered in the name of Manuel
Behis, married to Cristina Behis. Said land originally was part of a bigger tract of
land owned by Behis, father of Manuel Behis. And upon the latters death on
September 24, 1971, his children in an extrajudicial settlement with Simultaneous
Sale of Inheritance dated September 28, 1978, agreed to sell the land to Manuel
Behis, married to Cristina Behis but which subsequently was explained as only an
arrangement adopted by them to facilitate transactions over the land in a
Confirmation of Rights of Co-Ownership over real Property dated September 26,
1983, showing that the Behis brothers and sisters, including Manuel Behis, are still
co-owners Manuel Behis mortgaged said land in favor of the Bank in a Real Estate
Mortgage dated October 23, 1978 as security for loans obtained, covered by six
promissory notes and trust receipts under the Supervised Credit Program in the
total sum of P156,750.00 The mortgage, the promissory notes and trust receipts
bear the signatures of both Manuel Behis and Cristina Behis.
Unfortunately thereafter, Manuel Behis was delinquent in paying his debts.
And then a Deed of Absolute Sale with Assumption of Mortgage was executed
between Manuel Behis as vendor/assignor and Rayandayan and Arceo as
vendees/assignees for the sum of P250,000.00. On the same day, Rayandayan and
Arceo together with Manuel Behis executed another Agreement embodying the
real consideration of the sale of the land in the sum of P2,400,000.00. Thereafter,
Rayandayan andArceo negotiated with the principal stockholder of the bank,
Engr. Edilberto Natividad in Manila, for the assumption of the indebtedness of
Manuel Behis and the subsequent release of the mortgage on theproperty by the
bank.Rayandayan and Arceo did not show to the bank the Agreement with
Manuel Behis providing for the real consideration of P2,400,000.00 for the sale of
the property to the former. Subsequently, the bankconsented to the substitution of
plaintiffs as mortgage debtors in place of Manuel Behis in a Memorandum of
Agreement between private respondents and the bank with restructured and
liberalized terms for the payment of the mortgage debt. Instead of the bank
foreclosing immediately for non-payment of the delinquent account, petitioner
bank agreed to receive only a partial payment of P143,000.00 by installment on

specified dates. After payment thereof, the bank agreed to release the mortgage of
Manuel Behis; to give its consent to the transfer of title to the private respondents;
and to the payment of the balance of P200,000.00 under new terms with anew
mortgage to be executed by the private respondents over the same land. However,
petitioner bank did not comply with the MEMORANDUM OF AGREEMENT
with respondents because of a supervening event namely the protest made by
Cristina Behis, wife of Manual Behis, alleging that she did not consent to the
negotiation made as regards the Deed of absolute sale with Assumption of
Mortgage by her husband with the respondents and that her signature was forged
by respondents. The petitioner bank then told respondents to settle the matter with
Mrs. Behis. At that point, petitioner bank cancelled its MEMORANDUM OF
AGREEMENT with respondents because: first, the latter failed to settle the protest
of Mrs. Behis; and, secondly, the terms of the Memorandum of Agreement have
not been fully complied with as the payments were not made on time on the dates
fixed therein; and third, their consent to the Memorandum of Agreement was
secured by the plaintiffs thru fraud as the Bank was not shown the Agreement
containing the real consideration of P2,400.000.00 of the sale of the land of
Manuel Behis to plaintiffs. Thereafter, the petitioner bank returned the initial
payment of P143,000.00 to respondents. In the meantime, petitioner entered into an
agreement with Halsema Bank that the latter would assume the mortgage of
Manuel Behis in consideration of P521,765.45. Thereafter, respondents brought the
matter before the RTC which ruled that the MEMORANDUM OF AGREEMENT
is valid. The case was elevated to the CA on certiorari. The respondent Court
affirmed the validity of the MEMORANDUM OF AGREEMENT dismissing the
claim of the respondent that their consent to the agreement made with respondents
to assume the mortgage of Manuel Behis, and awarding the respondents for
damages. Hence this present appeal.

Issues:
Whether or not respondents are guilty of fraud when it did not show or it concealed
from the petitioner the Agreement between respondents and Manuel Behis the
consideration of P2.4m, and rather what was only shown was the first agreement
with regard to the Deed of Sale with Assumption of Mortgage?
Held:
No. This brings us to the first issue raised by petitioner bank that the Memorandum
of Agreement is voidable on the ground that its consent to enter said agreement
was vitiated by fraud because private respondents withheld from petitioner bank

the material information that the real consideration for the sale with assumption of
mortgage of the property by Manuel Behis to Rayandayan and Arceo
isP2,400,000.00, and not P250,000.00 as represented to petitioner bank. According
to petitioner bank, had it known of the real consideration for the sale, it would not
have consented into entering the Memorandum of Agreement with Rayandayan
and Arceo as it was put in the dark as to the real capacity and financial standing
of private respondents to assume the mortgage from Manuel Behis. Petitioner bank
pointed out that it would not have assented to the agreement, as it could not expect
the private respondents to pay the bank the approximately P343,000.00 mortgage
debt when private respondents have to pay at the same time P2,400,000.00 to
Manuel Behis on the sale of the land.
The kind of fraud that will vitiate a contract refers to those insidious words or
machinations resorted to by one of the contracting parties to induce the other to
enter into a contract which without them he would not have agreed to.
Simply stated, the fraud must be the determining cause of the contract, or must
have caused the consent to be given. It is believed that the non-disclosure to the
bank of the purchase price of the sale of the land between private respondents and
Manuel Behis cannot be the fraud contemplated by Article 1338 of the Civil
Code.
From the sole reason submitted by the petitioner bank that it was kept in the dark
as to the financial capacity of private respondents, we cannot see how the omission
or concealment of the real purchase price could have induced the bank into giving
its consent to the agreement; or that the bank would not have otherwise given its
consent had it known of the real purchas e price. The deceit which voids the
contract exists where the party who obtains the consent does so by means of
concealing or omitting to state material facts, with intent to deceive, by reason of
which omission or concealment the other party was induced to give a consent
which he would not otherwise have given (Tolentino, Commentaries and
Jurisprudence on the Civil Code, Vol. IV, p. 480). In this case, the consideration
for the sale with assumption of mortgage was not the inducement to defendant
bank to give a consent which it would not otherwise have given. Consequently, not
all the elements of fraud vitiating consent for purposes of annulling a contract
concur, to wit: (a) It was employed by a contracting party upon the other; (b) It
induced the other party to enter into the contract; (c) It was serious; and; (d) It
resulted in damages and injury to the party seeking annulment.
Petitioner bank has not sufficiently shown that it was induced to enter into the
agreement by the non-disclosure of the purchase price, and that the same resulted

in damages to the bank. Indeed, the general rule is that whosoever alleges fraud or
mistake in any transaction must substantiate his allegation, since it is presumed that
a person takes ordinary care for his concerns and that private transactions have
been fair and regular. Petitioner banks allegation of fraud and deceit have not been
established sufficiently and competently to rebut the presumption of regularity and
due execution of the agreement.
the petition was DENIED and the decision of the Court of Appeals, dated March
17, 1993 is AFFIRMED. No cost.

21) ARIETA V. NATIONAL RIVRE AND COMM CORP, 10 SCRA 79

Arrieta vs National Rice and Corn Corporation
Facts:
Paz Arrieta is a rice dealer/importer. In May 1952, she participated in a public
bidding held by the National Rice and Corn Corporation (NARIC). NARIC was
looking for someone to supply 20,000 metric tons of Burmese Rice. Arrieta was
the lowest bidder at $203.00 per metric ton hence she won the bidding. So a
contract was made whereby Arrieta is to deliver the rice supply and NARIC is to
pay for the imported rice by means of an irrevocable, confirmed and assignable
letter of credit in U.S. currency in favor of the Arrieta and/or supplier in Burma,
immediately. Arrieta then proceeded to contact her supplier in Burma (Thiri
Setkya) and arranged the sale of the 20k metric ton of Burmese Rice, Arrieta
promised Setkya that he will be paid by NARIC on August 4, 1952. Arrieta also
made a 5% deposit (P200k) as advance payment to Setkya.
Meanwhile, NARIC tried to open a letter of credit ion the amount of
$3,614,000.00 with the Philippine National Bank. PNB agreed to open the letter of
credit but only on the condition that NARIC deposits 50% of the said amount.
NARIC failed to do this and the letter of credit was not opened when the obligation
to pay Setkya became due. Because of this, Arrieta lost the opportunity to profit
from the sale as the agreement was eventually forfeited. Her 5% depoit was
likewise forfeited pursuant to Burma laws.
ISSUE: Whether or not Arrieta is entitled to damages.
HELD:
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.

Art. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof,
are liable for damages.

22) MAGUT V. MEDIALDEN, April 20, 1983

VICTORINO D. MAGAT VS. HON. LEO D. MEDIALDEA AND SANTIAGO
A. GUERRERO
FACTS:
The Defendant (herein private respondent) entered into a contract with the
U.S. Navy Exchange in Subic Bay for the operation of a fleet of taxicabs with a
required taximeter and radio transceiver. An agent acting on the Defendant's behalf
proposed to the Plaintiff (herein petitioner) to import such taximeters and radio
transceivers from Japan through the latter's business connections to fulfill the
former's contract. The Plaintiff, through various dealings, was a regular supplier of
materials or goods for the U.S. Navy in the Philippines from either the local origin
or imported from U.S. or Japan. As such, the Defendant and his agent were able to
import the taximeters required in the contract with the help of the Plaintiff and his
Japanese business associates. The Defendant's agent then made representations
with the Plaintiff to procure radio transceivers, amounting to $77,620.59, to be
delivery to the Defendant within 60-90 days after the receipt of the proper radio
frequency. While awaiting for it, the Plaintiff had instructed his agent to secure the
radio transceivers. Later upon receiving the said required frequency of 34.2 MHZ
and the instruction of the Defendant to proceed with the order, the Plaintiff waited
for the former to open the letter of credit before delivering such goods. As a
common practice in foreign importation, the buyer opens a letter of credit in favor
of the foreign supplier. Contrary to what was communicated to the Plaintiff, the
Defendant advice his banker not to give due course to the letter of credit and
therefore did not pay for the said goods ordered despite affirmations that the latter
had financial capabilities to do so.
Eventually, the Plaintiff learned that the Defendant had been operating
without radio transceivers and when questioned by the U.S. Navy Authorities, the
latter cited the former for reason of delay. The Plaintiff, through counsel, sent a
letter to the Defendant questioning whether or not there was still an intention to
fulfill the agreements or on the cancellation of such however there's was no reply.
Subsequently, the Plaintiff filed for damages and loses which may be incurred by
his business in the future. The Defendant's counsel however moved to dismiss the
complaint for lack of cause of action on the grounds that the loss or damage
suffered are non-existing which is a mere anticipation in the future. The Court of
First Instance of Rizal's presiding Judge Medialdea grants such Motion to Dismiss.
ISSUE:

Whether or not Plaintiff has cause of action?

HELD:
Yes. Elements of cause of action are: [1] the existence of a legal right to the
plaintiff; [2] a correlative duty of the defendant and [3] an act or omission of the
defendant in violation of the plaintiff's right, with consequent injury or damage to
the latter for which he may maintain an action for recovery of damages or other
appropriate relief.
In the complaint of the Plaintiff detailing the beginning of transaction up to
the refusal of open the letter of credit by the Defendant, there is reasonable legal
sufficiency for cause of action to be satisfied for the failure to fulfill an obligation
by either of the contracting parties which would then cause loss of expected profit.
It is recoverable under Article 1170 of the Civil Code whereby, 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 for damages.
The damages which the obligor is liable for includes not only the value of
the loss suffered by the obligee [dao emergente] but also the profits which the
latter failed to obtain [lucro cesante]. If the obligor acted in good faith, he shall be
liable for those damages that are the natural and probable consequences of the
breach of the obligation and which the parties have foreseen or could have
reasonably foreseen at the time the obligation was constituted; and in case of fraud,
bad faith, malice or wanton attitude, he shall be liable for all damages which may
be reasonably attributed to the non-performance of the obligation.
Case is remanded to the court of origin for further proceedings. No costs.

23) GERALDEZ V. CA, Feb. 23, 1994

G.R. No. 108253 February 23, 1994
LYDIA L GERALDEZ, petitioner, vs. HON. COURT OF APPEALS and
KENSTAR TRAVEL CORPORATION, respondents.
FACTS:
An action for damages by reason of contractual breach was filed by petitioner
Lydia L. Geraldez against private respondent Kenstar Travel Corporation.
Sometime in October 1989, petitioner came to know about Kenstar Travel Co.
from advertisements in newspapers regarding tours in Europe. She contacted
private respondent by phone and the latter sent its representative who gave her the
brochure for the tour. Petitioner chose the classification denominated as "VOLARE
3" covering a 22-day tour of Europe for $2,990.00. She paid the total equivalent
amount of P190,000.00 charged by private respondent for her and her sister.
Petitioner claimed that, during the tour, she was very uneasy and disappointed
when it turned out that, contrary to what was stated in the brochure, there was no
European tour manager for their group of tourists, the hotels in which she and the
group were billeted were not first-class, the UGC Leather Factory which was
specifically added as a highlight of the tour was not visited, and the Filipino lady
tour guide, in the person of Rowena Zapanta, by private respondent was
performing her duties and responsibilities as such for the first time.
On July 9, 1991, the court rendered its decision ordering private respondent to pay
petitioner moral, nominal, and exemplary damages totaling P1,000,000 and
P50,000 as attorneys fees. On appeal, the Court of Appeals deleted the award for
moral and exemplary damages, and reduced the awards for nominal damages and
attorney's fees to P30,000.00 and P10,000.00, respectively.
ISSUE:
Whether or not Kenstar Travel Corporation acted in bad faith or with gross
negligence in discharging its obligations under the contract
HELD:
Yes. Private respondent committed fraudulent misrepresentations amounting to bad
faith, to the prejudice of petitioner and the members of the tour group. By
providing the Volare 3 tourist group with an inexperienced and a first timer tour

escort, private respondent manifested its indifference to the convenience,

satisfaction and peace of mind of its clients during the trip.
The inability of the group to visit the leather factory is likewise reflective of the
neglect and ineptness of Zapanta in attentively following the itinerary of the day.
This incompetence must necessarily be traced to the lack of due diligence on the
part of private respondent in the selection of its employees. Therefore, private
respondent's choice of Zapanta as the tour guide is a manifest disregard of its
specific assurances to the tour group, resulting in agitation and anxiety on their
part, and which deliberate omission is contrary to the elementary rules of good
faith and fair play.
The failure of Kenstar Travel Co. to provide a European Tour Manager although it
specifically advertised and promised to do so is also a contractual breach. Kenstar
Travel Co. expressly stated in its advertisement that a European Tour Manager
would be present. Private respondent contends, however, that the term "European
Tour Manager" does not refer to an individual but to an organization.
The Court, on the other hand, held that the contemplated European tour manager is
a natural person, and not a juridical one as private respondent asserts. A corporate
entity could not possibly accompany the members of the tour group to places in
Europe; neither can it answer questions from the tourists during the tour.
Private respondent likewise committed a grave misrepresentation when it assured
in its Volare 3 tour package that the hotels it had chosen would provide the tourists
complete amenities and were conveniently located along the way for the daily
itineraries. It turned out that some of the hotels were not sufficiently equipped
with even the basic facilities and were at a distance from the cities covered by the
projected tour.
The fact that Kenstar could only book them in such hotels because of budget
constraints is not the fault of the tour group. Kenstar contends that it could only
book them in such hotels because what they paid will only allow them to pay for
such accommodations do not also hold. Kenstar should not have promised such
accommodations if they couldnt afford it. Kenstar should have increased the price
to enable it to arrange for the promised first-class accommodations.
Furthermore, the respondent court erred in deleting the award for moral and
exemplary damages. Moral damages may be awarded in breaches of contract
where the obligor acted fraudulently or in bad faith. From the facts narrated,
private respondent can be faulted with fraud in the inducement which is employed
by a party in securing the consent of the other. This fraud or dolo which is present

or employed at the time of birth or perfection of the contract may either be dolo
causante or dolo incidente. In either case, whether Kenstar has committed dolo
causante or dolo incidente, private respondent is indubitably liable for damages
both moral and exemplary.

24) PANTELEON V. AMERICAN EXPRESS, May 8, 2009

Pantaleon vs American Express
G.R. No. 174269, May 8 2009
Facts:
Petitioner Atty. Polo Pantaleon and his family joined a Western Europe tour in
October 1991. On the second to the last day of the tour, the tour group arrived late
in Amsterdam so they failed to engage in their sight seeing activities. Given this
delay, the group decided to start early the next day before they end the tour.
On the last day of the tour, the group arrived at the Coster Diamond House in
Amsterdam 10 minutes before 9:00 am. The tour should last for 30 minutes so they
can still have a guided city tour of Amsterdam.
Mrs. Pantaleon decided to purchase even before the tour a 2.5 karat diamond
brilliant cut, wherein she luckily found in the Coster Diamond House during the
tour. She also decided to purchase a pendant and a chain along with the diamond
which totalled U.S $ 13,826.00. She used her American Express Credit Card to pay
for these purchases.
Mrs. Pantaleon was not given an approval for her purchases right away but was
delayed for almost one hour that led to the delay of the tour group for further
touring around Amsterdam. Before heading home to Manila, the family stopped
over in the US and the same delay happened with several purchases that they made
with the AmEx credit card.
When the family arrived in Manila from their tour, Atty. Pantaleon sent a letter
through counsel to respondent demanding an apology for the "inconvenience,
humiliation and embarrassment he and his family thereby suffered" for
respondent's refusal to provide credit authorization for the aforementioned
purchases. However, American Express International, Inc. refused to give an
apology which led to Atty. Pantaleon instituting a complaint for damages before
the Makati RTC.
Makati RTC rendered a decision in favor of Atty. Pantaleon; but the CA found that
Amexs delay was not attended by bad faith, malice, or gross negligence" and that
Amex had exercised diligent efforts to effect the approval of the purchase
because the purchases were not in accordance with the charge pattern of Atty.
Pantaleon since at the Coster Diamond House, he was making his very first single
charge purchase of US$13,826, and the record of [his] past spending with

[Amex] at the time [did] not favorably support his ability to pay for such
purchase.

Issue:
Whether or not American Express International, Inc. had committed a breach of its
obligations to Atty. Pantaleon and is liable for damages.

Held:
American Express International, Inc. has committed a breach of its obligations and
is liable for damages; not just because of the incurred delay, but because the delay,
for which culpability lies in Article 1170, led to the particular injuries under
Article 2217 of the Civil Code for which moral damages are remunerative.
The SC, however, held that Atty. Pantaleon was instead correct in citing the
principle of mora solvendi (delay on the part of the debtor to fulfill his obligation),
not mora accipiendi. The traditional role of a credit card company as creditor
applies when the cardholder has already incurred a debt. In this case, the debt had
not yet been created; the purchase was still pending approval or disapproval by
Amex. Thus, under mora solvendi, Amex is not creditor but debtor insofar as it
has the obligation to the customer to act promptly on its purchases on credit.
The delay committed by defendant was clearly attended by unjustified neglect and
bad faith, since it alleges that it took more than an hour to look for the records of
the petitioner when all data are already stored and readily available. Likewise, it
was also attested that there were no history in the petitioner's billing history that
would warrant the imprudent suspension in the processing of the purchase.
Wherefore, the petition is GRANTED. The assailed Decision of the Court of
Appeals is REVERSED and SET ASIDE. The Decision of the Regional Trial
Court of Makati, Branch 145 in Civil Case No. 92-1665 is hereby REINSTATED.
Cost against respondent.

25) QUIROS V. TAN-GUINLAY, 5 PHIL 675

G.R. No. L-1904 March 3, 1906

FRANCISCO GONZALEZ QUIROS,Plaintiff-Appellee,

PALANCA TAN-GUINLAY,Defendant-Appellant.

vs.

CARLOS

FACTS:

The case is about alleged damges caused by defendant to plaintiff by the failure of
the defendant to pay for the goods at the time agreed upon. The defendant in his
answer denied all the allegations of the complaint, and further, alleged the
pendency of another action for the same cause; a counterclaim to the amount of
40,000 pesos, for damages suffered by the defendant by reason of an attachment
wrongfully secured by the plaintiff in 1893; and a further counterclaim for
damages caused by reason of a prosecution for estafa instituted against him
maliciously by the plaintiff. plaintiff. The court below ordered judgment in favor
of the plaintiff for the value of the goods sold and delivered to the defendant, with
interest thereon.

(1) Claim was that no evidence to show value of goods sold by plaintiff to
defendant, and that the documents introduced for the purpose of proving the value
were not properly received

(2) The goods referred to in the complaint were sold to th defendant in two parcels.
The value of the first lot was 2,235.95 pesos. For the purpose of paying this sum
the defendant delivered to the plaintiff a bill of exchange for 2,700 pesos,
purporting to be drawn by Juan Vy-Teco to the order of Chua-Sengco on Lucio
Icaza. The plaintiff neglected to have the bill of exchange protested for this
nonpayment. The defendant claims that the court committed an error in ordering
judgment for the full value of the goods sold, inasmuch as the plaintiff, by reason
of his failure to protest the bill of exchange, must suffer the loss occasioned by its

nonpayment. This contention, we thin, should be sustained. Article 1170 of the

Civil Code is as follows:

Payments of debts of money shall be made in the specie stipulated and, should it
not be possible to deliver the specie, then in legal silver or gold coin current in
Spain.

(3) In order to prove the first special defense set out by the defendant in his answer,
viz, the pendency of another suit for the same cause of action, he presented in
evidence a certified copy of a complaint presented in 1895 by the plaintiff against
the defendant. No evidence was presented to show that the complaint had ever
been answered.

(4) It appears from the evidence that the goods of the defendant were seized under
the plaintiff's attachment upon the 5th of December, 18933; that upon the 28th of
January, 1894, the same goods were again attached in a suit by Germann & Co.
against this defendant. There was no evidence to show how much the goods had
been damaged, if at all, while they were in the possession of the plaintiff, nor was
there any evidence to show how much they had been damaged after the 28th of
January, and while they were subject to both attachments. The only evidence in
regard to damages which the defendant offered was evidence relating to the value
of the goods when they were seized under the plaintiff's attachment.

(5) In 1894 the plaintiff presented a criminal complaint against the defendant for
estafa, by reason whereof the defendant was arrested and kept in confinement for
nearly two years. On the 27th of November, 1900, the plaintiff presented another
criminal complaint for estafa against the defendant, based upon the same facts as
was the first one. This complaint was later dismissed by the court, and the
defendant discharged from custody, Article 326 of the Penal Code provides, as we
have held in the case of United States vs. Agustina Barrera 2 (3 Off. Gaz., 411),
that no prosecution for a false accusation or complaint in a criminal case. The
judgment dismissing the complaint against this defendant contained no such
provision. We hold that this article applies not only to a criminal proceeding
against the complaining witness, but also to civil proceedings, and that no action to
recover damages in a civil suit can be maintained by the person arrested against the

person presenting the complaint, unless in the order acquitting the person arrested
the judge certifies that the complaint was malicious, as required by said article 326.

(6) The plaintiff also appealed, and claims that he is entitled to recover 60,000
pesos as damages which he suffered by reason of the nonpayment by the defendant
of the amount due for goods sold to him by the plaintiff, saying that if the
defendant had paid for the good as he agreed to do, the plaintiff could, by using the
money so paid, have made 60,000 pesos in his business. This claim is based upon
article 1101 of the Civil Code, which is as follows:

Those who in fulfilling their obligations are guilty of fraud, negligence, or delay,
and those who in any manner whatsoever act in contravention of the stipulations of
the same, shall be subject to indemnify for the losses and damages caused thereby.

ISSUE:
Whether or not defendant maybe held liable for sum of damages to plaintiff?
Whether or not defendant acted with fraud?

RULING:
The case at bar held, reversed and the case remanded, with instructions to enter
judgment for the plaintiff for 7,981.80 pesos, with interest thereon at 6 per cent per
annum from the 1st day of January, 1894, and for costs. No costs will be allowed
to either party in this court. So ordered.

Defendent did not acted in a fradulent manner, damages may still be recovered
under this article 1108 of the Civil Code, which is as follows:

Should the obligation consist in the payment of a sum of money, and the debtor
should be in default, the indemnity for losses and damages, should there not be a

stipulation to the contrary, shall consist in the payment of the interest agreed upon,
and should there be no agreement, in that of the legal interest.

The plaintiff therefore, is entitled to judgment against the defendant for the sum of
7,981.80 pesos, with interest at the rate of six per cent per annum from the 1st day
of January, 1894, until the amount is paid, and the costs of this suit.

26) RCBC V. CA, March 25, 1999

RIZAL COMMERCIAL BANKING CORPORATION vs. COURT OF APPEALS
and FELIPE LUSTRE
G.R. No. 133107. March 25, 1999
FACTS
On March 10, 1993, private respondent Atty. Felipe Lustre purchased a Toyota
Corolla from Toyota Shaw, Inc. for which he made a down payment of
P164,620.00, the balance of the purchase price to be paid in 24 equal monthly
installments. Private respondent thus issued 24 postdated checks for the amount of
P14,976.00 each. The first was dated April 10, 1991 and the subsequent checks
were dated every 10th day of each succeeding month.
To secure the balance, private respondent executed a contract of chattel mortgage
over the vehicle in favor of Toyota Shaw, Inc. The contract of chattel mortgage, in
paragraph 11, provided for an acceleration clause stating that should the mortgagor
default in the payment of any installment, the whole amount remaining unpaid
shall become due. In addition, the mortgagor shall be liable for 25% of the
principal due as liquidated damages.
All the checks dated April 10, 1991 to January 10, 1993 were encashed and debited
by RCBC from respondent's account, except for RCBC Check No. 279805
representing the payment for August 10, 1991, which was unsigned. Check No.
279805 was then recalled and re-credited to him. Because of the recall, the last
two checks, dated February 10, 1993 and March 10, 1993, were no longer
presented for payment.
On the theory that respondent defaulted in his payments for Check No. 279805
petitioner, in a letter, demanded from private respondent the payment of the
balance of the debt, including damages. Private respondent refused, in which
petitioner filed an action for damages before the Pasay City RTC. Private
respondent, interposed a counterclaim for damages. On appeal, the Court of
Appeals affirmed the decision of the RTC, thus the case at bar. Petitioner
contended delay on the part of private respondent by virtue of paragraph 11, which
treated the entire balance of the obligation as due and demandable; that despite
such, private respondent refused to pay the balance of the debt.
ISSUE

Whether or not private respondent defaulted in his payments for the mortgage due
to the unsigned Check No. 279805.
HELD
NO. The "default" was not a case of failure to pay, the check being sufficiently
funded. Petitioner had already debited the value of the unsigned check from private
respondent's account only to re-credit it much later to him. Petitioner encashed
checks subsequently dated, then abruptly refused to encash the last two (February
10, 1993 and March 10, 1993). All these actions RCBC did on its own without
notifying defendant until sixteen months later when it wrote its demand letter.
Notably, all the other checks issued by the private respondent dated subsequent to
August 10, 1991, were duly encashed. This fact should have already prompted the
appellant bank to review its action relative to the unsigned check or to simply call
up private respondent and ask him to sign the check.
Moreover, the delay in the performance of the obligation, however, must be either
malicious or negligent. The contention that by virtue of paragraph 11, petitioner
was justified in treating the entire balance of the obligation as due and demandable
cannot be subscribed. There is no imputation, that private respondent acted with
malice or negligence in failing to sign the check. Such omission was mere
"inadvertence" on the part of private respondent. Thus, the decision of the Court of
Appeals is affirmed.

27) LORENZO SHIPPING CORP. V. BJ MATHEL INTERNATIONAL, Nov. 19,

2004
G.R. No. 145483. November 19, 2004
LORENZO SHIPPING CORP vs. BJ MARTHEL INTERNATIONAL, INC.

FACTS: Respondent (a business entity engaged in trading, marketing, and selling

of various industrial commodities) supplied Petitioner (a domestic corporation
engaged in coastwise shipping) with spare parts for the latters marine engines.
Petitioner asked respondent for a quotation for various machine parts. Acceding to
this request, respondent furnished petitioner with a formal quotation declaring the
total FOB price of
P2,745,900.00, to be delivered within 2 months with terms
of 25% down payment upon delivery, balance payable in 5 bi-monthly equal
installments not to exceed 90 days. Petitioner thereafter issued to respondent
Purchase Order for the procurement of one set of cylinder liner, valued at
P477,000, to be used for their own cargo vessel M/V Dadiangas Express.
Instead of paying the 25% down payment for the first cylinder liner, petitioner
issued in favor of respondent ten postdated checks to be drawn against the formers
account with Allied Banking Corporation. The checks were supposed to represent
the full payment of the aforementioned cylinder liner.
Subsequently, petitioner issued Purchase Order for yet another unit of cylinder
liner with the same terms as that of the first purchase order but did not state the
date of the cylinder liners delivery. Respondent deposited petitioners check,
however, the same was dishonored by the drawee bank due to insufficiency of
funds. The remaining checks were eventually returned by respondent to petitioner.
Respondent thereafter sent a Statement of Accountto petitioner. While the other
items listed in said statement of account were fully paid by petitioner, the two
cylinder liners delivered to petitioner remained unsettled.
Consequently
respondent sent a demand letter to petitioner requiring the latter to pay the value of
the cylinder liners. Instead of heeding the demand of respondent for the full
payment of the value of the cylinder liners, petitioner sent the former a letter
offering to pay only P150,000 for the cylinder liners. In said letter, petitioner
claimed that as the cylinder liners were delivered late and due to the scrapping of
the M/V Dadiangas Express, it would have to sell the cylinder liners and pay the
balance from the proceeds of said sale.

Due to the failure of the parties to settle the matter, respondent filed an action for
sum of money and damages before the RTC. Respondent prayed that petitioner be
ordered to pay for the value of the cylinder liners plus accrued interest of P111,300
and additional interestuntil the full payment of the principal. Respondent filed an
amended complaint with preliminary attachment praying that the amendments also
pertained to the issuance by petitioner of the postdated checks and the amounts of
damages claimed.
Petitioner afterwards filed its Answer alleging therein that time was of the essence
in the delivery of the cylinder liners and that the delivery of said items was late as
respondent committed to deliver said items within two (2) months after receipt of
firm order from petitioner.
After trial, the court a quo dismissed the action. The trial court held respondent
bound to the quotation it submitted to petitioner particularly with respect to the
terms of payment and delivery of the cylinder liners. It also declared that
respondent had agreed to the cancellation of the contract of sale when it returned
the postdated checks issued by petitioner.
Aggrieved by the findings of the trial court, respondent filed an appeal with the
Court of Appeals[26] which reversed and set aside the Decision of the court a quo.
The appellate court brushed aside petitioners claim that time was of the essence in
the contract of sale between the parties herein considering the fact that a significant
period of time had lapsed between respondents offer and the issuance by
petitioner of its purchase orders.
The Court of Appeals also held that respondent could not have incurred delay in
the delivery of cylinder liners as no demand, judicial or extrajudicial, was made by
respondent upon petitioner in contravention of the express provision of Article
1169.
ISSUE: Whether or not there the late delivery of the subjects of the contract of sale
to justify petitioner to disregard the terms of the contract considering that time was
of the essence thereof?
HELD: In determining whether time is of the essence in a contract, the ultimate
criterion is the actual or apparent intention of the parties and before time may be so
regarded by a court, there must be a sufficient manifestation, either in the contract
itself or the surrounding circumstances of that intention. Petitioner insists that
although its purchase orders did not specify the dates when the cylinder liners were
supposed to be delivered, nevertheless, respondent should abide by the term of
delivery appearing on the quotation it submitted to petitioner. Petitioner theorizes

that the quotation embodied the offer from respondent while the purchase order
represented its (petitioners) acceptance of the proposed terms of the contract of
sale. Thus, petitioner is of the view that these two documents cannot be taken
separately as if there were two distinct contracts. The Court did not agree.
It is a cardinal rule in interpretation of contracts that if the terms thereof are clear
and leave no doubt as to the intention of the contracting parties, the literal meaning
shall control. However, in order to ascertain the intention of the parties, their
contemporaneous and subsequent acts should be considered. While it is recognized
the principle that contracts are respected as the law between the contracting parties,
this principle is tempered by the rule that the intention of the parties is primordial
and once the intention of the parties has been ascertained, that element is deemed
as an integral part of the contract as though it has been originally expressed in
unequivocal terms.
In the present case, The Court did not subscribe to the position of petitioner that
the documents, by themselves, embody the terms of the sale of the cylinder liners.
One can easily glean the significant differences in the terms as stated in the formal
quotation and Purchase Order with regard to the due date of the down payment for
the first cylinder liner and the date of its delivery as well as Purchase Order with
respect to the date of delivery of the second cylinder liner. While the quotation
provided by respondent evidently stated that the cylinder liners were supposed to
be delivered within two months from receipt of the firm order of petitioner and that
the 25% down payment was due upon the cylinder liners delivery, the purchase
orders prepared by petitioner clearly omitted these significant items. The
petitioners first Purchase Order made no mention at all of the due dates of
delivery of the first cylinder liner and of the payment of 25% down payment. Its
second Purchase Order likewise did not indicate the due date of delivery of the
second cylinder liner.
[a] contract undergoes three distinct stages preparation or negotiation, its
perfection, and finally, its consummation. Negotiation begins from the time the
prospective contracting parties manifest their interest in the contract and ends at
the moment of agreement of the parties. The perfection or birth of the contract
takes place when the parties agree upon the essential elements of the contract. The
last stage is the consummation of the contract wherein the parties fulfill or perform
the terms agreed upon in the contract, culminating in the extinguishment thereof.
In the instant case, the formal quotation provided by respondent represented the
negotiation phase of the subject contract of sale between the parties. As of that
time, the parties had not yet reached an agreement as regards the terms and

conditions of the contract of sale of the cylinder liners. Petitioner could very well
have ignored the offer or tendered a counter-offer to respondent while the latter
could have, under the pertinent provision of the Civil Code,[38] withdrawn or
modified the same. The parties were at liberty to discuss the provisions of the
contract of sale prior to its perfection. In this connection, we turn to the testimonies
of Pajarillo and Kanaan, Jr., that the terms of the offer were, indeed, renegotiated
prior to the issuance of the first Purchase Order.
Notably, petitioner was the one who caused the preparation of both Purchase
Orders yet it utterly failed to adduce any justification as to why said documents
contained terms which are at variance with those stated in the quotation provided
by respondent. The only plausible reason for such failure on the part of petitioner
is that the parties had, in fact, renegotiated the proposed terms of the contract of
sale. Moreover, as the obscurity in the terms of the contract between respondent
and petitioner was caused by the latter when it omitted the date of delivery of the
cylinder liners in the purchase orders and varied the term with respect to the due
date of the down payment,[41] said obscurity must be resolved against it.
Relative to the above discussion, the case of Smith, Bell & Co., Ltd. v. Matti, is
instructive. There, we held that When the time of delivery is not fixed or is
stated in general and indefinite terms, time is not of the essence of the contract. . . .
In such cases, the delivery must be made within a reasonable time.
The law implies, however, that if no time is fixed, delivery shall be made within a
reasonable time, in the absence of anything to show that an immediate delivery
intended. . . .
Therefore, it was held that in the subject contracts, time was not of the essence.
The delivery of the cylinder liners was made within a reasonable period of time
considering that respondent had to place the order for the cylinder liners with its
principal in Japan and that the latter was, at that time, beset by heavy volume of
work.[47]
There having been no failure on the part of the respondent to perform its
obligation, the power to rescind the contract is unavailing to the petitioner. Article
1191 of the New Civil Code runs as follows: 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.

28) SOLAR HARVEST V. DAVAO CORRUGATED CARTON CORP, July 26

2010
SOLAR HARVEST INC v. DAVAO CORRUGATED CARTON CORP.
FACTS:
In the first quarter of 1998, Solar Harvest (SOLAR) entered into an
agreement, not reduced into writing, with Davao Corrugated Carton Corp. (DCCC)
for the purchase of 36,500 corrugated carton boxes, sold at US$1.10 per box. The
boxes were specifically intended for the exporting of fresh bananas from Davao to
Chinese Zero Food, a Chinese company who ordered the same. Thereafter,
SOLAR deposited its corresponding full payment to the latters US Dollar Savings
Account, however, the former failed to receive the boxes. In 2001, SOLAR
demanded for reimbursement but DCCC contends that the boxes had already been
completed in April of 1998 and that it only failed to pick up the boxes from
DCCCs warehouse 30 days from completion, as agreed upon. Contrary to
SOLARs claims, DCCC averred that the former asked for an additional order of
24,000 boxes, out of which, 14,000 had been manufactured without any advanced
payment.
DCCC then demanded SOLAR the following: a) to remove the boxes from
the factory because it had been occupying warehouse space; b) to pay the
corresponding storage fee per square meter for every month from April 1998; c) to
pay the outstanding balance for the additional boxes. It also mentioned that in
October 1998, the latters representative Bobby Que (Que) went to the warehouse
space and saw that the boxes were there but had no print of SOLARs logo.
SOLAR denied these claims and asserted that due to DCCCs non-performance to
deliver the carton boxes on time, it was already late for SOLAR to meet their
commitment to ship the bananas to China. On the other hand, DCCC claimed
that the reason why SOLAR did not pick up the boxes was that the ship that was to
carry the bananas did not arrive.
ISSUE: Whether or not DCCC is guilty of breach of contract.
HELD:
The Court held that there is no reversible error in the decision of the Court of
Appeals that would justify the grant of this petition.
Petitioner's claim for reimbursement is actually one for rescission of contract under
Article 1191 of the Civil Code, which states that 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. The injured party may choose between the fulfillment and
the rescission of the obligation, with the payment of damages in either case. He
may also seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.
The right to rescind a contract arises once the other party defaults in the
performance of his obligation. In determining when default occurs, Art. 1191
should be taken in conjunction with Art. 1169 of the same law, which states that
those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may
exist:
(1) When the obligation or the law expressly so declares; or
(2) When from the nature and the circumstances of the obligation it appears that
the designation of the time when the thing is to be delivered or the service is to be
rendered was a controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his
power to perform.
It was shown from the records and even from the allegations in the complaint that
the petitioner lacked the demand upon respondent to fulfil its obligation to
manufacture and deliver the boxes. The Complaint only alleged that petitioner
made a "follow-up" upon respondent, which, would not qualify as a demand for the
fulfilment of the obligation. Petitioner's witness also testified that they made a
follow-up of the boxes, but not a demand.
Regarding their claim for
reimbursement, the Complaint alleged and the witness testified that a demand letter
was sent to respondent without a previous demand for the fulfilment of the
obligation. In the absence of a demand, one cannot be considered already in breach
of an obligation. The testimony of Estanislao who accompanied Que to the factory,
declaring that, during their first visit to the company, they saw the pile of
petitioner's boxes and Que took samples thereof. Que, petitioner's witness, himself
confirmed this incident which was contrary to petitioners claim that the boxes
were not produced.
The Court finds that petitioner failed to establish a cause of action for rescission,
the evidence having shown that respondent did not commit any breach of its
contractual obligation.

Therefore the petition is denied. The Court of Appeals decision are affirmed.
Petitioner is given a period of 30 days from notice within which to cause the
removal of the boxes from respondent's warehouse. If the petitioner fails to effect
such removal, respondent shall have the right to dispose of the boxes in any
manner it may deem fit.

29) CATHAY PACIFIC AIRWAY V. VASQUEZ, 14 March 2003

CATHAY PACIFIC AIRWAYS LTD. v. VASQUEZ
399 SCRA 207

FACTS: Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa

Madrigal Vazquez are frequent flyers of Cathay and are Gold Card members of its
Marco Polo Club. On 24 September 1996, the Vasquezes, together with their maid
and two friends Pacita Cruz and Josefina Vergel de Dios, went to Hongkong for
pleasure and business.
For their return flight to Manila on 28 September 1996, they were booked on
Cathays Flight CX-905, with Business Class boarding passes for the Vasquezes
and their two friends, and Economy Class for their maid. They then proceeded to
the Business Class passenger lounge. However, due to overbooking and their being
Gold Card Members of its Marco Polo Club their seats were automatically
upgraded to first class.
The spouses refused said upgrade because they plan on discussing business matters
with their friends during the flight. However, due to the persistency of the ground
stewardess they were convinced to take the First class seats.
Upon return to Manila, the Vasquezes instituted before the Regional Trial Court of
Makati City an action for damages against Cathay, praying for the payment to each
of them the amounts of P250,000 as temperate damages; P500,000 as moral
damages; P500,000 as exemplary or corrective damages; and P250,000 as
attorneys fees. The RTC ruled in favor of respondents. The Court of Appeals
affirmed the RTC decision with modification in the award of damages.

ISSUE: Whether or not by upgrading the seat accommodation of the Vasquezes

from Business Class to First Class Cathay breached its contract of carriage with the
Vasquezes

HELD: It was held that the Vasquezes never denied that they were members of
Cathays Marco Polo Club. They knew that as members of the Club, they had
priority for upgrading of their seat accommodation at no extra cost when an
opportunity arises. But, just like other privileges, such priority could be waived.

The Vasquezes should have been consulted first whether they wanted to avail
themselves of the privilege or would consent to a change of seat accommodation
before their seat assignments were given to other passengers. Normally, one
would appreciate and accept an upgrading, for it would mean a better
accommodation. But, whatever their reason was and however odd it might be, the
Vasquezes had every right to decline the upgrade and insist on the Business Class
accommodation they had booked for and which was designated in their boarding
passes. They clearly waived their priority or preference when they asked that
other passengers be given the upgrade. It should not have been imposed on them
over their vehement objection. By insisting on the upgrade, Cathay breached its
contract of carriage with the Vasquezes.

30) MERALCO V. RAMOS, 4 March 2008

Meralco vs Ramos
March 4, 2008
Facts:
In the year 1987 the National Power Corporation (NPC) filed with the MTC
Quezon City a case for ejectment against several persons allegedly illegally
occupying its properties in Baesa, Quezon City. Among the defendants in the
ejectment case was Leoncio Ramoy, one of the plaintiffs in the case at bar. The
defendants failed to file an answer in spite of summons duly served. The MTC Br.
36, Quezon City rendered judgment for the plaintiff (MERALCO) and ordered the
defendants to demolish or remove the building and structures they built on the land
of the plaintiff and to vacate the premises.
NPC wrote to Meralco requesting for the immediate disconnection of electric
power supply to all residential and commercial establishments beneath the NPC
transmission lines along Baesa, Quezon City. Meralco decided to comply with
NPCs request and issued notices of disconnection to all establishments affected.
Meralco thereafter requested NPC for a joint survey to determine all the
establishments which are considered under NPC property. A joint survey was
conducted and the NPC personnel pointed out the electric meters to be
disconnected. In due time, the electric service connection of the plaintiffs [herein
respondents] was disconnected. When the Meralco employees were disconnecting
plaintiffs' power connection, plaintiff Leoncio Ramoy objected by informing the
Meralco foreman that his property was outside the NPC property and pointing out
the monuments showing the boundaries of his property. However, he was
threatened and told not to interfere by the armed men who accompanied the
Meralco employees. After the electric power in Ramoy's apartment was cut off, the
plaintiffs-lessees left the premises. During the ocular inspection ordered by the
Court and attended by the parties, it was found out that the residence of plaintiffsspouses Leoncio and Matilde Ramoy was indeed outside the NPC property. This
was confirmed by defendant's witness R.P. Monsale III on cross-examination.
Monsale also admitted that he did not inform his supervisor about this fact nor did
he recommend re-connection of plaintiffs' power supply. At the request of NPC,
defendant Meralco re-connected the electric service of four customers previously
disconnected.

The RTC decided in favor of MERALCO by dismissing herein respondents' claim

for moral damages, exemplary damages and attorney's fees. However, the RTC
ordered MERALCO to restore the electric power supply of respondents.
Respondents then appealed to the CA. In its Decision dated December 16, 2002,
the CA faulted MERALCO for not requiring from National Power Corporation
(NPC) a writ of execution or demolition and in not coordinating with the court
sheriff or other proper officer before complying with the NPC's request. Thus, the
CA held MERALCO liable for moral and exemplary damages and attorney's fees.
MERALCO's motion for reconsideration of the Decision was denied.

Issue:
Whether or not CA gravely erred when it found MERALCO negligent when it
disconnected the subject electric service of respondents.

Ruling:
No. Clearly, respondents' cause of action against MERALCO is anchored on culpa
contractual or breach of contract for the latter's discontinuance of its service to
respondents under Article 1170 of the Civil Code which provides:
Article 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the tenor
thereof, are liable for damages.
As a public utility, MERALCO has the obligation to discharge its functions
with utmost care and diligence. The utmost care and diligence required of
MERALCO necessitates such great degree of prudence on its part, and failure to
exercise the diligence required means that MERALCO was at fault and negligent
in the performance of its obligation.

31) ARCOLA V. CA & PRUDENTIAL GUARANTEE & INSURANCE

SANTOS B. AREOLA and LYDIA D. AREOLA, petitioners-appellants, vs.
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE,
INC., respondents-appellees.

FACTS
On June 29, 1985, respondent insurance company unilaterally cancelled petitioner
Santos Areolas personal accident insurance policy upon his failure to pay his
premiums. On August 3, 1985, respondent insurance company offered to reinstate
same policy and even proposed to extend its lifetime to December 17, 1985, upon a
finding that the cancellation was erroneous and that the premiums were paid in full
but were not remitted by Teofilo M. Malapit, respondent insurance companys
branch manager. Thus, petitioner instituted an action for damages due to breach of
contract against respondent insurance company. The trial court, on June 30, 1987,
rendered a judgment in favor of petitioner-insured that there was a breach of
contract and that respondent insurance company acted in bad faith in unilaterally
cancelling subject insurance policy despite full payment, ordering respondent
insurance company to pay the former actual, moral and exemplary damages,
attorneys fees and the costs. Respondent insurance company, denying bad faith on
its part in unilaterally cancelling subject insurance policy challenged the ruling on
appeal where the appellate court issued a reversal for the decision of the trial court,
observing that the following acts indicate that convinced that respondent insurance
company did not act in bad faith a) the investigation conducted if petitionerinsured had indeed paid the premium; (b) the letter confirming that the premium
had been paid (c) the reinstatement of the policy with a proposal to extend its
effective period (d) respondent insurance company's apologies for the
"inconvenience" and that respondent even relieved Malapit, its manager, of his job
by forcing him to resign. Petitioner-insured moved for the reconsideration of the
said decision which the Court of Appeals denied. Hence, this petition for review on
certiorari.

ISSUE:
Whether or not respondent Court of Appeals is guilty of grave abuse of discretion
and committed a serious and reversible error in not holding respondent insurance
company liable.

HELD:
The court ruled that Malapit's fraudulent act of misappropriating the premiums
paid by petitioner-insured is directly imputable to respondent insurance company.
A corporation, such as respondent insurance company, acts solely thru its
employees. Thus, Malapits receipt of said premiums is receipt by private
respondent insurance company who, by provision of law, particularly under Article
1910 of the Civil Code, is bound by the acts of its agent. A contract of insurance
creates reciprocal obligations and the relationship as creditor and debtor between
the parties arose by reason of their agreement to enter into a contract of insurance.
Under the law, the injured party, petitioner-insured, is given a choice between
fulfillment or rescission of the obligation in case one of the obligors fails to
comply with what is incumbent upon him. However, said article entitles the injured
party to payment of damages, regardless of whether he demands fulfillment or
rescission of the obligation. The damages to be awarded, however, should be
nominal damages. Although the erroneous cancellation of the insurance policy
constituted a breach of contract, private respondent insurance company, within a
reasonable time took steps to rectify the wrong committed by reinstating the
insurance policy of petitioner. Moreover, no actual or substantial damage or injury
was inflicted on petitioner Areola.
WHEREFORE, the petition for review on certiorari is hereby GRANTED and the
decision of the Court of Appeals in CA-G.R. No. 16902 on May 31, 1990,
REVERSED. The decision the trial court is REINSTATED subject to the
following modifications: (a) that nominal damages of P30,000.00 (b) respondent
insurance company is ORDERED to pay the legal rate of interest computed from
date of filing of complaint until final payment thereof.

32) NAKPIL & SONS V. CA, 3 October 1986

NAKPIL & SONS v. CA
G.R. No. L-47851 October 3, 1986
FACTS:
The Philippine Bar Association (PBA) decided to construct an office building in
Intramuros, Manila. On an administration basis, United Construction, Inc. (UCI)
undertook the construction. Juan Nakpil and Sons prepared the plans and
specifications for the building. In June 1966, the building was completed.
On August 2, 1968, a strong earthquake hit Manila and devastated the office
building of PBA, causing it to tilt forward dangerously. UCI shored up the building
as a temporary remedy at the cost of P13,661.28.
PBA filed a complaint for damages, alleging that the partial collapse of their
building was caused by the defects in construction, the failure of the contractors to
follow plans and specifications and violations by the defendants of the terms of the
contract.
In turn, UCI sued the architects who prepared the plans and specifications, alleging
that the damages were a result of a defect in the said plans and specifications.
However, Juan F. Nakpil & Sons presented a written stipulation that UCI may no
longer have to include them in the complaint as a party, and that they are not
denying liability if ever the courts may find any.
The Commissioner that the Supreme Court appointed to investigate about the
issues found out that the damage was also caused by third-party defendants'
architects, deviations from said plans and specifications by the defendant
contractors and failure of the latter to observe the requisite workmanship in the
construction of the building.
The UCI and the Nakpils averred that it was an Act of God which caused the
damage, thus exempting them from liability.
ISSUE: WoN an act of God which caused the failure of the building, exempts from
liability, parties who are otherwise liable because of their negligence
HELD:
No. The general rule is that no person shall be responsible for events which could
not be foreseen or which though foreseen, were inevitable. (Art. 1174, NCC)

An act of God has been defined as an accident, due directly and exclusively to
natural causes without human intervention, which by no amount of foresight, pains
or care, reasonably to have been expected, could have been prevented. However, If
upon the happening of a fortuitous event or an act of God, there concurs a
corresponding fraud, negligence, delay or violation or contravention in any manner
of the tenor of the obligation as provided for in Article 1170 of the Civil Code,
which results in loss or damage, the obligor cannot escape liability.
Thus, in the case at bar, the facts clearly point up to the wanton negligence of both
the defendant and the third party defendants in effecting the plans, designs,
specifications, and construction of the PBA Building and thus the court deem such
as equivalent to bad faith in the performance of their respective tasks. The decision
was modified, ordering the defendant as well as the third party defendants to
indemnify Philippine Bar Association Five Million (P5000000) Pesos and One
Hundred Thousand (P100,000.00) Pesos as and for attorneys fees, as well as
twelve (12%) interest per annum upon afore-mentioned amounts from finality until
paid.

33) FEBTC V. CA
FAR EAST BANK AND TRUST COMPANY, petitioner, vs. THE
HONORABLE COURT OF APPEALS, LUIS A. LUNA and CLARITA S.
LUNA, respondents.
FACTS:
Private respondent Luis Luna applied for, and was accorded, a FAREASTCARD
issued by Petitioner (FEBTC). The bank also issued a supplemental card to
private respondent Clarita Luna upon request of Luis.
In August 1988, Clarita lost her credit card and immediately informed FEBTC. In
cases of this nature, the banks internal security procedures and policy would
appear to be to meanwhile so record the lost card, along with the principal card, as
a "Hot Card" or "Cancelled Card" in its master file.
This case arose when Luis felt embarrassed in the incident where he tendered a
despedida lunch at the Bahia Rooftop Restaurant of the Hotel Intercontinental
Manila. He then presented his card, but was not honored, so Luis was forced to pay
in cash the bill amounting to P588.13.
Still feeling aggrieved despite the apologies made by the vice president of the
FEBTC, Luis filed a complaint for damages. RTC favored Luis and rendered a
decision ordering FEBTC to pay private respondents (a) P300,000.00 moral
damages; (b) P50,000.00 exemplary damages; and (c) P20,000.00 attorney's fees.
On appeal, the appellate court, affirmed the decision of the lower court. Hence, this
petition.

ISSUE:
Whether or not the damages awarded is valid?
HELD:
No. The Supreme Court held that in culpa contractual, moral damages may be
recovered where the defendant is shown to have acted in bad faith or with malice
in the breach of the contract. Bad faith, in this context, includes gross, but not
simple, negligence. Concededly, the bank was remiss in indeed neglecting to
personally inform Luis of his own cards cancellation but such negligence cannot
be considered so gross as to amount to malice or bad faith. The Court finds,

therefore, the award of moral damages made by the court a quo, affirmed by the
appellate court, to be inordinate and substantially devoid of legal basis.
Exemplary or corrective damages, in turn, are intended to serve as an example or
as correction for the public good in addition to moral, temperate, liquidated or
compensatory damages but it would also be just as arduous to sustain the
exemplary damages granted by the courts below.
Therefore, the appealed decision is MODIFIED by the Supreme Court by deleting
the award of moral and exemplary damages to private respondents; in its stead,
petitioner is ordered to pay private respondent Luis A. Luna an amount of
P5,000.00 by way of nominal damages. In all other respects, the appealed decision
is AFFIRMED.

34) SALAGADA V FEU, April 30, 2008

SALUDAGA vs. FAR EASTERN UNIVERSITY G.R. No. 179337 April 30, 2008
FACTS:
On August 18, 1996, Joseph Saludaga was a sophomore law student of Far Eastern
University when he was shot by Alejandro Rosete, one of the security guards on
duty at the school premises. Rosete was brought to the police station where he
explained that the shooting was accidental. He was eventually released considering
that no formal complaint was filed against him. Respondents, in turn, filed a ThirdParty Complaint against Galaxy Development and Management Corporation
(Galaxy), the agency contracted by respondent FEU to provide security services
within its premises and Mariano D. Imperial (Galaxys President), to indemnify
them for whatever would be adjudged in favor of petitioner. Petitioner is suing
respondents for damages based on the alleged breach of student-school contract for
a safe and secure environment and an atmosphere conducive to learning.
ISSUE: Whether or not FEU was not negligent and such shooting was tantamount
to a caso fortuito.
HELD: NO, it was negligent and such is not a fortuitous case. It is undisputed that
Saludaga was enrolled as a sophomore law student in FEU. As such, there was
created a contractual obligation between the two parties. It is settled that in culpa
contractual, the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief. In the instant case
when Saludaga was shot inside the campus by no less the security guard who was
hired to maintain peace and secure the premises, there is a prima facie showing that
FEU failed to comply with its obligation to provide a safe and secure environment
to its students. The Supreme Court found that FEU failed to discharge the burden
of proving that they exercised due diligence in providing a safe learning
environment for their students. They failed to prove that they ensured that the
guards assigned in the campus met the requirements stipulated in the Security
Service Agreement. Indeed, certain documents about Galaxy were presented
during trial; however, no evidence as to the qualifications of Rosete as a security
guard for the university was offered. Consequently, FEU's defense of force
majeure must fail. In order for force majeure to be considered, FEU must show that
no negligence or misconduct was committed that may have occasioned the loss. An
act of God cannot be invoked to protect a person who has failed to take steps to
forestall the possible adverse consequences of such a loss. One's negligence may
have concurred with an act of God in producing damage and injury to another;
nonetheless, showing that the immediate or proximate cause of the damage or

injury was a fortuitous event would not exempt one from liability. When the effect
is found to be partly the result of a person's participation - whether by active
intervention, neglect or failure to act - the whole occurrence is humanized and
removed from the rules applicable to acts of God. Article 1170 of the Civil Code
provides that those who are negligent in the performance of their obligations are
liable for damages. Accordingly, for breach of contract due to negligence in
providing a safe learning environment, respondent FEU is liable to petitioner for
damages. It is essential in the award of damages that the claimant must have
satisfactorily proven during the trial the existence of the factual basis of the
damages and its causal connection to defendant's acts.

35) JUNTILLA V. FONTANAR, 136 SCRA 624

JUNTILLA V. FONTANAR, 136 SCRA 624

Facts:
Roberto Juntilla, petitioner, was a passenger on a jeep traveling from Danao City to
Cebu City. The jeepney was driven by Berfol Camoro. It was registered under the
name of respondent Clemente Fontanar but was actually owned by Fernando
Banzon. When the jeep reached Mandaue City, the rear right tire suddenly
exploded causing the jeep to tumble. During the accident, the petitioner who was
sitting at the front seat was thrown out of the vehicle and suffered a lacerated
wound on his right palm and other injuries on his left arm, right thigh and on his
back. Furthermore, he also lost his Omega wrist watch during the accident.
Petitioner filed a case for breach of contract with damages before the City Court of
Cebu. In their reply, respondents contends that the tire blow out was beyond their
control since it was newly bought, they argued that they should not be held liable
for damages because the event was fortuitious in nature. But there are specific acts
of negligence on the part of the respondents. The evidence shows that the jeep was
running at a very fast speed before the accident. If it was running at a regular and
safe speed, it 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 3 passengers in the front seat and 14
passengers in the rear.

Issue: Whether or not the respondents should be liable for damages.

Held: 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. The cause of the unforeseen
and unexpected occurrence was not independent of the human will. The accident
was caused either through the negligenceameri 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. Therefore, judgment is hereby rendered in favor of the
plaintiff and against the defendants and the latter are hereby ordered, jointly and
severally, to pay the plaintiff for damages.