1

OBLIGATIONS
Nature and Concept of Obligations, 1156

Ang Yu Asuncion vs. CA, 238 SCRA 602 (1994)

Facts: Ang Yu Asuncion and Keh Tiong et al. Are tenants and commercial spaces owned
by Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan located in Ongpin st., Binondo
Manila since 1935. Sometime before October 9, 1986 the owners informed the tenants
that they will be selling the rented spaces and they are giving the tenants priority by
virtue of first refusal. The offer given by the owners is 6 million while the tenants
made a counter offer of 5 million. The owners then put their offer into writing and sent
it to the tenants, then the tenants replied asking them the specific terms and
conditions of the offer but did not receive any reply. Another letter containing the
same request was sent to the owners again on January 28, 1987, but again to no avail.
Upon receiving information that the owners are about to sell the property to someone
else, they filed a complaint to compel the owners to sell the property to them.
Issue: Can the defendants be compelled to sell the property to the petitioners?
Ruling: No. What Ang Yu Asuncion and Keh Tiong et Al are entitled as tenants is only
the right to first refusal. In a right of first refusal, while the object might be made
determinate, the exercise of the right, however, would be dependent not only on the
grantor's eventual intention to enter into a binding juridical relation with another but
also on the terms. For the failure of the owners to honor the right of first refusal, it will
not result to the compulsion of said owners to sell their property to the tenants but will
only result to recovery of damages pursuant to Article 19 of the Civil Code.

Sagrada Orden vs. Nacoco 91 Phil. 503 (1952)

Facts:
Herein plaintiff, Sagrada Orden owned a land which was acquired by a Japanese
corporation (Taiwan Tekkosho) during the Japanese military occupation. After the
liberation, the Alien Property Custodian took possession, control and custody of the
land under Sec 12 of the Trading with the Enemy Act for the reason that it belong to
an enemy national. The Copra Export Management Company occupied the property
and when it vacated, the defendant, National Coconut Corporation occupied it through
the representation made by the Philippine Government to the Alien Property
Custodian. Plaintiff made claim to the property before the Alien Property Custodian of
the United States, but as this was denied, it brought an action in court to annul the
sale of property of Taiwan Tekkosho, and recover its possession. The Republic of the
Philippines was allowed to intervene in the action. The case did not come for trial
because the parties presented a joint petition in which it is claimed by plaintiff that the
sale in favour of the Taiwan Tekkosho was null and void because it was executed under
threats, duress, and intimidation, and it was agreed that the title issued in the name of
the Taiwan Tekkosho be cancelled and the original title of plaintiff re-issued; that the
claims, rights, title, and interest of the Alien Property Custodian be cancelled and held
for naught; that the occupant National Coconut Corporation has until February 28,
1949, to recover its equipment from the property and vacate the premises. Sagrada
Orden was also given the right to recover from National Coconut Corporation
reasonable rentals for the use and occupation of the premises. The present action is to

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recover the reasonable rentals from August, 1946, the date when the defendant
began to occupy the premises, to the date it vacated it. The defendant does not
contest its liability for the rentals from February 28, 1949 (the date of judgement
annulling the contract of sale between plaintiff and Taiwan Tekkosho), but resists the
claim therefor prior to this date. It interposes the defense that it occupied the property
in good faith, under no obligation whatsoever to pay rentals for the use and
occupation of the warehouse. Judgement was rendered in favour of the plaintiff.
Against this judgement, this appeal has been interposed.
Issue:
Was National Coconut Corporation liable for rentals prior to the date the property was
returned to Sagrada Orden?
Ruling:
No. The court cannot understand how the trial court so easily jumped to the
conclusion that the occupant is liable for the value of such use and occupation. If
defendant-appellant is liable at all, its obligations, must arise from any of the four
sources of obligations, namely, law, contract or quasi-contract, crime, or negligence.
(Article 1089, Spanish Civil Code.) Defendant-appellant is not guilty of any offense at
all, because it entered the premises and occupied it with the permission of the entity
which had the legal control and administration thereof, the Alien Property
Administration. Neither was there any negligence on its part. There was also no privity
(of contract or obligation) between the Alien Property Custodian and the Taiwan
Tekkosho, which had secured the possession of the property from the plaintiff-appellee
by the use of duress, such that the Alien Property Custodian or its permittee
(defendant-appellant) may be held responsible for the supposed illegality of the
occupation of the property by the said Taiwan Tekkosho.

Pe vs. CA, 195 SCRA 137 (1991)

FACTS
Spouses Francisco and Anita Pe entered into a contract to sell their 5 parcels of land.
These parcels of land were mortgaged with different banking institutions. Lots Nos. 40
and 41 were mortgaged to the Philippine Veterans Bank (PVB) for P351,162.59; Lots
Nos. 42 and 45 were mortgaged to the Development Bank of the Philippines (DBP) for
P189,322.49; and Lot No. 47 to Philippine Commercial and Industrial Bank (PCIB) for
P57,000. On September 20, 1976, the plaintiffs executed a contract to sell. The
plaintiffs were paid the total amount of 351,162.59 to PVB for lots 40 and 41. On the
same date, they executed a deed of sale in favor of Domingo Sy over Lots Nos. 42 and
45 after payment by the latter of the former's account with the DBP in the amount of
P189,322.49. Consequently, a contract to sell and a corresponding deed of sale
covering Lot No. 47 were prepared but the deed did not materialize as the buyers
offer of P49,454.92, as payment for Lot No. 47, was rejected by the Pe spouses, the
latter insisted on the full payment of their obligation with the (PCIB) in the amount of
P383,615.97 and P620,000 as the alleged consideration stipulated in the Contract to
Sell. Pe allege that the consideration of the Contract to Sell was P1,544,161.05 and
not P620,000.
ISSUE:

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Should the consideration of the Contract to Sell mean that respondents where to pay
P1,544,161.05 and not P620,000?
RULING:
No. The words of the Contract to Sell were clear and left no doubt upon the true
intention of the contracting parties. The condition laid down in paragraph (2) of the
contract did not provide for an additional consideration, but only for the manner in
which the consideration was to be applied. It clearly provided that payment shall be
applied to petitioners' obligations with the bank where the respective properties were
mortgaged, and upon their release, petitioners shall execute the final deed of sale.
The subsequent acts of the parties conformed with this condition. Thus, the parties
should be bound by such written contract. It should also be noted that at the time of
the execution of the Contract to Sell, the total obligation due to the PCIB as regards
Lot No. 47 was only P 99,374.89. The rise of the same obligation to P383,615.96 was
brought about by subsequent loans the petitioners obtained with the same bank for
which the tractor and an "Offset Discharrow" were given as additional security.
Contracts are respected as the law between the contracting parties. The parties may
establish such stipulations, clauses, terms and conditions as they may want to include.
As long as such agreements are not contrary to law, morals, good customs, public
policy or public order, they shall have the force of law between.

Perla Compania del Seguro vs. CA 185 SCRA 741 (1990)

This is a petition for review on certiorari of the decision of the CA affirming in toto the
decision of the RTC rendering Perla Compania de Seguros, Inc. (petitioner) to pay
plaintiff Milagros Cayas (respondent) the sum of P50,000.00 under its maximum
liability as provided for in the insurance policy; and the sum of P5,000.00 as
reasonable attorney's fee.
Facts: Milagros Cayas was an owner of passenger vehicle (Mazda Bus), which she
insured with Perla Compania de Seguros (PCSI) on February 3, 1978. On December,
the vehicle figured in an accident, resulting to the injury of several passengers. Three
passengers, who were injured in the accident, agreed to a settlement of Php 4,000.00
each. However, 19 year old Edgardo Perea sued Cayas for damages. The court
rendered a decision in favor of Perea with cost against Cayas of Php 32,000.00.
Consequently, Cayas filed a complaint for a sum of money and damages against PCSI.
She sought reimbursement from PCSI with the contention that her claim was within
PCSIs contractual liability under the insurance policy. The court rendered judgment in
favor of Cayas, ordering PCSI to pay Cayas Php 50,000.00 as compensation for the
injured parties, Php 5,000.00 for moral damages, and Php 5,000.00 attorneys fees.
PCSI then filed a motion for reconsideration. They sought to limit its liability only to the
payment made by Cayas to Perea and only up to Php 12,000.00 and denied the
liability for payments made to Cayas to the other three injured parties based on the
provision of the policy. Thus, the main issue of the case.
Issue: Should PCSI pay Php 50,000.00 under its maximum liability as provided for in
the insurance policy? Should PCSI be liable to reimburse Cayas the amount ordered by
the trial court?
Ruling: No. In this case, the insurance policy clearly and categorically placed
petitioner's liability for all damages arising out of death or bodily injury sustained by
one person as a result of any one accident at P12,000.00. Said amount complied with

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the minimum fixed by the prevailing law. Petitioner's liability under the insurance
contract not being less than P12,000.00, and therefore not contrary to law, morals,
good customs, public order or public policy, said stipulation must be upheld as
effective, valid and binding as between the parties.
Secondly, The Court rule as valid and binding upon private respondent the condition
requiring her to secure the written permission of petitioner before effecting any
payment in settlement of any claim against her. There is nothing unreasonable,
arbitrary or objectionable in this stipulation as would warrant its nullification. The
same was obviously designed to safeguard the insurer's interest against collusion
between the insured and the claimants. The Respondents failure to secure the written
consent of the petitioner is considered breach of contract.
The fundamental principle that contracts are respected as the law between the
contracting parties finds application in the present case.
Source of Obligations, 1157-1162; 2142; 2154; 2176; 19-36; Family Code, 195

Leung vs. O'Brien, 28 Phil. 182

Facts:
PJ OBrien instituted an action in the Court of First Instance in Manila to recover from
Leung Ben the sum of P15, 000.00 alleged to have been lost by the latter to OBrien in
a series of gambling, banking and percentage games. He asked for an attachment
against the property of Leung Ben on the ground that the latter was about to depart
from the Philippines with intent to defraud his creditors. The attachment was issued
and acting under the authority, the sheriff attached Leung Bens P15, 000.00 which
was deposited with the International Banking Corporation.
Leung Ben moved the court to quash the attachment but said motion was dismissed,
hence, the application for writ of certiorari.
Issue:
Is the statutory obligation to restore money won at gaming an obligation arising from
contract, express or implied?
Held:
Yes. General principles recognized both in the civil and common law, money lost in
gaming which are voluntarily paid by the loser to the winner cannot in the absence of
a statute, be recovered in civil action. But Act No. 1757 of the Philippine Commission,
which defines and penalizes several forms of gambling, contains numerous provisions
recognizing the right to recover money lost in gambling or in the playing of certain
games. Section 7 of said Act further declares that an action may be brought against
the banker by any person losing money at a banking or percentage game.
The duty of the defendant to refund the money which he won from the plaintiff at
gaming is a duty imposed by statute. It therefore arises ex lege. Furthermore, it is a
duty to return a certain sum which had passed from the plaintiff to the defendant. By
all the criteria which the common law supplies, this is a duty in the nature of a debt
and is properly classified as an implied contract. It is well settled by the English
authorities that money lost in gambling or by lottery, if recoverable at all, can be
recovered by the loser in an action of indebitatus assumpsit for money had and
received. This means that in the common law, the duty to return the money won in
gaming or gambling is an implied contract, or quasi-contract.

Sagrada Orden, supra

Ex lege

Pelayo vs. Lauron 12 Phil. 453

FACTS:

Petitioner Pelayo, a physician, rendered a medical assistance during the child

delivery of the daughter-in-law of the defendants. After the consultation he found
necessary to remove the fetus on account of difficult birth which took until the
following morning. The just and equitable value of services rendered by him was
P500.00 which the defendants refused to pay without alleging any good reason. With
this, the plaintiff prayed that the judgment be entered in his favor as against the
defendants for the sum of P500.00 and costs.
The defendants denied all of the allegation of the plaintiff, contending as a
defense that their daughter-in-law had died in consequence of the child-birth, and that
when she was alive, she lived with her husband independently and in a separate
house, that on the day she gave birth she was in the house of the defendants and her
stay there was accidental and due to fortuitous circumstances
ISSUE:
Can the defendants be held liable to pay for the obligation?
RULING:
No. According to article 1157 of the Civil Code, obligations are created by law,
by contracts, by quasi-contracts, and by illicit acts and omissions or by those in which
any
kind
of
fault
or
negligence
occurs.
Obligations arising from law are not presumed. Those expressly determined in the
code or in special laws, etc., are the only demandable ones. Obligations arising from
contracts have legal force between the contracting parties and must be fulfilled in
accordance
with
their
stipulations.
The rendering of medical assistance in case of illness was comprised among the
mutual obligations to which the spouses were bound by way of mutual support.
If every obligation consists in giving, doing or not doing something, and spouses were
mutually bound to support each other, there can be no question but that, when either
of them by reason of illness should be in need of medical assistance, the other was
under the unavoidable obligation to furnish the necessary services of a physician in
order that health may be restored, and he or she may be freed from the sickness by
which life is jeopardized. The party bound to furnish such support was therefore liable
for all expenses, including the fees of the medical expert for his professional services.
In the face of the above legal precepts, it was unquestionable that the person bound
to pay the fees due to the plaintiff for the professional services that he rendered to the

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daughter-in-law of the defendants during her childbirth, was the husband of the
patient and not her father and mother- in-law of the defendants herein.
Delicts

Diana vs. Batangas Transportation Co., 93 Phil 391

FACTS:
The present appeal stems from a case originally instituted in the Court of First
Instance of Laguna wherein plaintiffs seek to recover from defendant as a party
subsidiarily liable for the crime committed by an employee in the discharge of his
duty.
On June 21, 1945, while Florenio Diana was riding in Truck No. 14m belonging to the
defendant, driven by Vivencio Bristol, the truck ran into a ditch at Bay, Laguna,
resulting in the death of Florenio Diana and other passengers. Vivencio Bristol was
charged and convicted of multopl homicide through reckless imprudence wherein,
among other thingsm he was order to indemnify the heirs of the deceased. When the
decision became final, a writ of execution was issued in order that the indemnity may
be satisfied but the sheriff filed a return stating that the accused had no visible
leviable property.
Defendant filed a motion to dismiss on the ground that there was another action
pending between the same parties for the same case in which the same plaintiffs
herein sought to recover from the same defendant the amount of Php 4,500 as
damages resulting from the death of Florenia Diana who died while on board a truck of
defendant due to negligent act of the driver.
Plaintiffs filed a written opposition to the motion to dismiss. The lower court, having
found the motion well founded, dismissed the complaint, without special
pronouncement as to costs; and their motion for reconsideration having been denied,
plaintiffs took the present appeal.
ISSUE:
Whether the lower court correctly dismissed the complain on the sole ground that
there was another action pending between the same parties for the same cause under
Rule 8, section 1(d) of the Rules of Court?
RULING:
No. Considering the distinguishing characteristics of the two cases, which involve two
different remedies, it can hardly be said that there is identity of reliefs in both actions
as to make the present case fall under the operation Rule 8, Section 1(d) of the Rules
of Court. In other words, it is a mistake to say that the present action should be
dismissed because of the pendency of another action between the same parties
involving the same cause. Evidently, both cases involve different causes of action. In
fact, when the CA dismissed the action based on culpa aquiliana, this distinction was
stressed. It was there said that the negligent act committed by defendants employee
is not a quasi crime, for such negligence is punished by law.
Quasi delicts, 1162; 2176; 2180
Facts:

Barredo vs. Garcia and Almario, 73 Phil. 607

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On May 3, 1936, a head-on collision occurred between a Malate Taxicab
and a carretela in the intersection of Malabon and Navotas, Rizal. The cab was driven
by Pedro Fontanilla, who was employed by petitioner Barredo and the carretela was
guided by Pedro Dimapalis. The accident resulted in injury and death of one 16-year
old boy, Faustino Garcia (child of respondents), two days after. CFI Rizal convicted and
sentenced Pedro Dimapalis of homicide due to reckless imprudence.
In the criminal case, the lower court granted the petition to file a separate
civil action, be reserved. Respondents Severino Garcia and Timotea Almario, the
parents of the boy, bought an action to CFI Manila. The court awarded damages in
favor of the plaintiff amounting to P2,000 plus legal interest to the date of the
complaint.
The CA affirmed the decision in the criminal case but modified the amount
to be paid, which became P1,000 with legal interest.

The Court ascertained the

criminal liability of Fontanilla who was negligent by driving on the wrong side of the
road, at high speeds.

It also explained that the petitioner Barredo was careless in

employing Fontanilla who had been caught several times for violation of the
Automobile Law (this appeared in the records of Bureau of Public Works and
Highways). Petitioner is liable to indemnify respondents.
In defense, petitioner argues that the liability of Fausto Barredo is
governed by the RPC; hence, his liability is merely subsidiary. Since there was no civil
action against Fontanilla, the person criminally liable, Barredo cannot be held
responsible in the civil case.

CA disagreed with petitioner.

It expressed that the

liability sought to be imposed on his is not a civil obligation arising from a felony or
misdemeanor but an obligation imposed in article 1903 of the Civil Code by reason of
negligence in the selection or supervision of his servant or employee.
Issue:
Can the plaintiffs bring a separate civil action against petitioner, thus
making him primarily and directly responsible under article 1903 of the Civil Code?
Ruling:

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Yes. SC explained that culpa aquiliana or quasi-delict is a separate legal
institution under the Civil code with a substantivity all its own, and individually,
entirely apart and independent from delict or crime. The following provisions need to
be clarified:
Civil Code
ART. 1089 Obligations arise from law, from contracts and quasi-contracts, and
from acts and omissions which are unlawful or in which any kind of fault or
negligence intervenes.
xxx
ART. 1092. Civil obligations arising from felonies or misdemeanors shall be
governed by the provisions of the Penal Code.
ART. 1093. Those which are derived from acts or omissions in which fault or
negligence, not punishable by law, intervenes shall be subject to the provisions
of Chapter II, Title XVI of this book.
xxx
ART 1902. Any person who by an act or omission causes damage to another by
his fault or negligence shall be liable for the damage so done.
ART. 1903. The obligation imposed by the next preceding article is enforcible,
not only for personal acts and omissions, but also for those of persons for whom
another is responsible.
ART. 1904. Any person who pays for damage caused by his employees may
recover from the latter what he may have paid.
xxx
Owners or directors of an establishment are equally liable for any
damages caused by their employees while engaged in the branch of the service in
which employed, or on occasion of the performance of their duties. (Compare against
the PC provisions)
Penal Code

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ART. 100. Civil liability of a person guilty of felony. Every person criminally
liable for a felony is also civilly liable.
ART. 101. Rules regarding civil liability in certain cases. The exemption from
criminal liability established in subdivisions 1, 2, 3, 5, and 6 of article 12 and in
subdivision 4 of article 11 of this Code does not include exemption from civil
liability
xxx
ART. 102. Subsidiary civil liability of innkeepers, tavern keepers and proprietors
of establishment. In default of persons criminally liable, innkeepers, tavern
keepers, and any other persons or corporation shall be civilly liable for crimes
committed in their establishments, in all cases where a violation of municipal
ordinances or some general or special police regulation shall have been
committed by them or their employees.
ART. 103. Subsidiary civil liability of other persons. The subsidiary liability
established in the next preceding article shall also apply to employers, teachers,
persons, and corporations engaged in any kind of industry for felonies
committed by their servants, pupils, workmen, apprentices, or employees in the
discharge of their duties.
xxx
ART. 365. Imprudence and negligence. Any person who, by reckless
imprudence, shall commit any act which, had it been intentional, would
constitute a grave felony, shall suffer the penalty of arresto mayor in its
maximum period to prision correccional in its minimum period; if it would have
constituted a less grave felony, the penalty of arresto mayor in its minimum and
medium periods shall be imposed.
Any person who, by simple imprudence or negligence, shall commit an act
which would otherwise constitute a grave felony, shall suffer the penalty of
arresto mayor in its medium and maximum periods; if it would have constituted
a less serious felony, the penalty of arresto mayor in its minimum period shall
be imposed."

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The confusion seems to arise from Article 365 of the PC, when it quoted
and punished negligence acts. However, this does not destroy the distinction between
civil liability arising from crime and the responsibility for cuasi-delitos which have been
expressly stated in Articles 1902-1910 of the Civil Code.
The individuality of cuasi-delito or or culpa-extra-contractual have an
ancient lineage from Lex Aquilia in the Roman Law. Some of the differences between
crimes punishable under the PC and the culpa-aquiliana under the Civil Code are:
1. That crimes affect the public interest, while cuasi-delitos are only of private
concern.
2. That, consequently, the Penal Code punishes or corrects the criminal act,
while the Civil Code, by means of indemnification, merely repairs the damage.
3. That delicts are not as broad as quasi-delicts, because the former are
punished only if there is a penal law clearly covering them, while the
latter, cuasi-delitos, include all acts in which "any king of fault or negligence
intervenes." However, it should be noted that not all violations of the penal law
produce civil responsibility, such as begging in contravention of ordinances,
violation of the game laws, infraction of the rules of traffic when nobody is hurt.
In the case at bar, the same negligent act created a civil liability. It was
not intended to be merged with criminal liability. Where a party is civilly liable for a
negligent act or omission, it is not required that a third person be criminally liable.
This is not a condition precedent to the enforcement of a civil right.

The liability

referred in article 1903 of the CC establishes the liability for negligence as well as
when it terminates.
The owner of the taxi company is not a respondent superior but pater
familias (father/ head of the family) that must exercise due diligence in ensuring the
actions of his employees are within the bounds of law and carefully exercises. This is
due to the aforementioned principle that the liability of the master is his own
negligence and not that of his servant.

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The exemption from civil liability established in article 1903 of the Civil Code for
all who have acted with the diligence of a good father of the family, is not applicable
to the subsidiary civil liability in art. 20 of RPC. PC punishes not only reckless but also
simple negligence. The literal interpretation of article 1903 of the CC would have very
little scope or application in real life. The petitioner-defendants argument renders the
law absurd.
SC intends to restore the responsibility for fault or negligence under the CC to its
full rigor. Quasi-delict must no longer be diverted into that of a crime under PC. It is a
better safeguarding of private rights because it re-establishes ancient and additional
remedy, not depending on issues and limitations of criminal prosecution. Decision of
CA is AFFIRMED, costs against defendant-petitioner.

Elcano vs. Hill, 77 SCRA 98

Facts:
This is a complaint of plaintiff for recovery of damages from defendant Reginald Hill or
killing the son of the plaintiffs, named Agapito Elcano. And also his father, defendant
Marvin Hill, with whom he was living and getting subsistence. Defendant Reginald Hill
was a minor and married at the time of the occurrence. It appeared, after due trial, he
was acquitted on the gound that his act was not criminal because of "lack of intent to
kill coupled with mistake."
Issue/s:
1. Is the present civil action for damages barred by the acquittal of Reginald in th
criminal case, wherein the action for civil liability was not reserved?
2. May Article 2180 (2nd and last paragraph) of the Civil Code be applied against Atty.
Hill, notwithstanding the undisputed fact that at the time of the occurrence
complained of, Reginald, though a minor, living with and getting subsistence from his
father was already lagally married?
Held:
1. The acquittal of the defendant in the criminal case has not extinguished his liablity
for quasi-delict, hence that acquittal is not a bar to the instant action against him.
Article 2177 states that, responsibility for fault or negligence under the preceding
article (2176, quasi delict) is entirely separate and distinct from the civil liability
arising from negligence under the Penal Code. But the plaintiff cannot recover
damages twice for the same act or omission of the defendant. While the latter is
violation of the criminal law, the former is a 'culpa-aquiliana' or quasi-delito, having
always had its own foundaton and individuality, separate from criminal negligence.
Therefore, under Article 2177, acquittal from an accusation of criminal negligance,
whether on reasonable doubt or not, shall not be a bar to a subsequent civil action,
not for civil liability arising from criminal negligence, but for damages due to a quasidelict. Also, the new Civil Code definitively establishes the separability and
independence of liability in a civil action for acts criminal in character from the civil
responsibility arising from crime fixed by Article 100 of the RPC. Consequently, the

12
extinction of liability is on the civil liability founded under Art. 100 of the RPC, whereas
the civil liability for the same act considered as a quasi-delict only and not as a crime
is not extinguished even by declaration in the criminal case that the criminal act
charged has not happened or has not been committed by the accused.
2. Article 2180 applies to Atty. Hill notwithstanding the emancipation by marriage of
Reginald. However, inasmuch as it is evident that Reginald is of age, now, as a matter
of equity, the liabiliy of the Father has become milling, subsidiary to that of his son.
While it is true tha parental authority is terminated upon emancipation of the child,
and under Art. 397, emancipation takes place "by the marriage of the minor", it is
however also clear that persuant to Art 399, emancipation by marriage of the minor is
not really full or absolute. The clear implication regarding a minor by marriage may
not, nevertheless, sue or be sued without the assistance of the parents, is that such
emancipation does not carry with it freedom to enter into transactions or do any act
that can give rise to judicial litigation. Under Art. 2180, the obligation I posed by
article 2176 is demandable not only for one's own acts or omissions, but also for those
of persons for whom one is responsible. The reason is that it is the obligation of the
parents to supervise their minor children in order to prevent them from causing
damage to third persons.

Baksh vs. CA. 219 SCRA 115 (1993)

FACTS:
Private respondent: Marilou is 22 yrs old, single, a Filipina of good moral
character
Petitioner: an Iranian citizen (Mr. Baksh), residing at the Lozano Apartments in
Guilig, Dagupan City, exchange student of medicine at the Lyceum Northwestern
Collleges in Dagupan City
Both met after being introduced by the manager of Mabuhay Luncheonette,
Johnny Rabino. Marilou worked there as a waitress, while Baksh frequented the
place to dine.
He proposed to marry her on August 20, 1987, so they both agreed to get
married at the end of the semester, October 1987, with the permission of
Marilous parents, as Baksh went to her hometown in Banaga, Bugallon,
Pangasinan, to seek their approval.
The couple started to live with each other, but he started maltreating her, giving
her a drug that would make her fall asleep from 4am until the evening, and
enforced a drug on her to abort a child that they supposedly had.
She was a virgin before they lived together.
Petitioner, however, repudiated their marriage, and told her that he didnt want
to marry her anymore, also because he was already married to someone from
Bacolod City (such fact proved to be false, as this woman also was only his
common-law wife when he studied B.S. Biology in the said city for 7 years)
Bakshs defense as regards the repudiation of marriage is that he asked
Marilou to no longer live with him because he caught her stealing his money
and taking away his passport.
Lower courts decision: in favor of the private respondent. Petitioner had to pay
the latter damages and attorneys fees.

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Petitioner appealed, but the Court of Appeals affirmed the decision of the lower
court.

ISSUE: Does a breach of a promise to marry constitute an action in court?

RULING: Breach of a promise to marry PER SE, does not constitute an action in court.
However, in this case, a case can be filed, and damages may be claimed, because of
the fraud and deceit behind it. Where a mans promise to marry is in fact the
proximate cause of the acceptance of his love by a woman, and his representation to
fulfill that promise becomes the proximate cause of her giving herself to him in a
sexual relationship, when in fact, it is proven, that he had no intention to do so, and
that it was only a scheme to get her to agree to a sexual relationship, could justify the
award of damages. Further, there was the willful injury to her honor and reputation.

Diana vs. Batangas, supra

Valenzuela vs. CA, 253 SCRA 303 (1996)

FACTS: A case was filed by Ma. Lourdes Valenzuela, which was an action to recover
damages based on quasi-delict, for serious physical injuries sustained in a vehicular
accident. Because of the impact, her left leg was severed up to the middle of her
thigh, with only some skin and sucle connected to the rest of the body, and she was
found to traumatic amputation, leg, left up to distal thigh (above knee). She was
confined in the hospital for twenty (20) days and was eventually fitted with an artificial
leg.
After trial, the lower court sustained Ma. Lourdes Valenzuelas submissions and found
Richard Li guilty of gross negligence and liable for damages under Article 2176 of the
Civil Code. The trial court likewise held Alexander Commercial, Inc., Lis employer,
jointly and severally liable for damages pursuant to Article 2180.
Upon appeal, the Court of Appeals agreed with the decision of the lower court of the
liability sustained by Richard Li. However, it absolved Lis employer, Alexander
Commercial, Inc. from any liability towards petitioner Lourdes Valenzuela and reduced
the amount of moral damages.
Hence, both parties assail the respondents courts decision by filing two separate
petitions.
ISSUE(S):
1. Whether or not Ma. Lourdes Valenzuela is guilty of contributory negligence
2. Whether or not Alexander Commercial Inc. Should be jointly and severally liable for
damages pursuant to Article 2180 of the Civil Code
RULING:
1. No. Contributory negligence is conduct on the part of the injured party, contributing
as a legal cause to the harm he has suffered, which falls below the standard to which
he is required to conform for his own protection. Courts have traditionally been
compelled to recognize that an actor who is confronted with an emergency is not to be
held up to the standard of conduct normally applied to an individual who is in no such
situation. Under the "emergency rule" adopted by this Court in Gan vs. Court of
Appeals, an individual who suddenly finds himself in a situation of danger and is
required to act without much time to consider the best means that may be adopted to

14
avoid the impending danger, is not guilty of negligence if he fails to undertake what
subsequently and upon reflection may appear to be a better solution, unless the
emergency was brought by his own negligence.
In the instant case, Valenzuela, upon reaching that portion of Aurora Boulevard close
to A. Lake St., noticed that she had a flat tire. To avoid putting herself and other
motorists in danger, she did what was best under the situation. "She stopped at a
lighted place where there were people, to verify whether she had a flat tire and to
solicit help if needed. Having been told by the people present that her rear right tire
was flat and that she cannot reach her home she parked along the sidewalk, about 1
1/2 feet away, behind a Toyota Corona Car." Under the circumstances described,
Valenzuela did exercise the standard reasonably dictated by the emergency and could
not be considered to have contributed to the unfortunate circumstances which
eventually led to the amputation of one of her lower extremities. The emergency
which led her to park her car on a sidewalk in Aurora Boulevard was not of her own
making, and it was evident that she had taken all reasonable precautions.
"Negligence, as it is commonly understood is conduct which creates an undue risk of
harm to others."23It is the failure to observe that degree of care, precaution, and
vigilance which the circumstances justly demand, whereby such other person suffers
injury.
2. Yes. The Court agreed with the CA that the relationship in question is not based on
the principle of respondeat superior, which holds the master liable for acts of the
servant, but that of pater familias, in which the liability ultimately falls upon the
employer, for his failure to exercise the diligence of a good father of the family in the
selection and supervision of his employees. Under the concept of pater familias, his
liability is relieved upon showing that he exercised the diligence of a good father of
the family in the selection and supervision of its employees. Once evidence is
introduced showing that the employer exercised the required amount of care in
selecting its employees, half of the employer's burden is overcome. The question of
diligent supervision, however, depends on the circumstances of employment.
Alexander Commercial, inc. has not demonstrated, to the satisfaction of the Court,
that it exercised the care and diligence of a good father of the family in entrusting its
company car to Li. No allegations were made as to whether or not the company took
the steps necessary to determine or ascertain the driving proficiency and history of Li,
to whom it gave full and unlimited use of a company car. Not having been able to
overcome the burden of demonstrating that it should be absolved of liability for
entrusting its company car to Li, said company, based on the principle of bonus pater
familias, ought to be jointly and severally liable with the former for the injuries
sustained by Ma. Lourdes Valenzuela during the accident.
Manila Railroad Co. vs. Compania Transatlantica, 38 Phil 875
FACTS:
On March 1914, the steamship Alicante, belonging to the Compaia
Transatlantica de Barcelona, arrived at Manila with two locomotive boilers aboard, the
property of the Manila Railroad Company. The latter contracted the former to deliver
the
items
from
Europe.
The
equipment of the ship for discharging heavy cargo was not sufficiently strong to
handle these boilers, so they employed the Atlantic, Gulf and Pacific Company to

15
unload them. Atlantic unloaded the boilers at the port of Manila using their cranes and
under
the
supervision
of
Leyden. Unfortunately, one of the boilers was so damaged during the unloading that it
had to be reshipped to England where it was rebuilt, and afterwards was returned to
Manila. Thus, the Railroad Company incurred additional expenses by reason of the
cost of repairs, delivery and loss of the use of the boiler. Accordingly, an action for
damages was instituted by the Manila Railroad against the Compaia Transatlantica.
The latter caused the Atlantic Company to be brought in as a codefendant, and
insisted that whatever liability existed should borne by the Atlantic Company as an
independent contractor who had undertaken to discharge the boilers and caused the
damage
through
the
negligence
of
Leyden.
ISSUES:
1.
a

Was the Steamship Company liable to Manila Railroad for delivering the boiler in
damaged
condition?

2.
Was Atlantic Company liable to the Steamship Company for the amount it may
be required to pay the plaintiff?
3. Was Atlantic Company directly liable to plaintiff as held by the trial court?

RULING:
There was a contractual relation between the Steamship Company and Manila
Railroad. There was also a contractual relation between the Steamship Company and
Atlantic. But there was no contractual relation between the Railroad Company and
Atlantic
Company.
There was no question that the Steamship Company was liable to Manila Railroad
as it had the obligation to transport the boiler in a proper manner safe and securely
under the circumstances required by law and customs. The Steamship Company
cannot escape liability simply because it employed a competent independent
contractor
to
discharge
the
boiler.
Atlantic Company claimed that it was not liable, because it had employed all the
diligence of a good father of a family and proper care in the selection of Leyden. Said
argument was not tenable, because said defense was not applicable to negligence
arising in the course of the performance of a contractual obligation. The same can be
said with respect to the liability of Atlantic Company upon its contract with the
Steamship Company. There was a distinction between negligence in the performance
of a contractual obligation (culpa contractual) and negligence considered as an
independent source of obligation (Culpa Aquiliana). Atlantic Company was liable to
the Steamship Company for the damage brought upon the latter by the failure of
Atlantic Company to use due care in discharging the boiler, regardless of the fact that

16
the damage was caused by the negligence of an employee who was qualified for the
work,
duly
chose
with
due
care.
Since there was no contract between the Railroad Company and Atlantic Company,
Railroad Company can had no right of action to recover damages from Atlantic
Company for the wrongful act which constituted the violation of the contract. The
rights of Manila Railroad can only be made effective through the Steamship Company
with whom the contract of affreightment was made.
One act, two possible sources

Air France vs. Carrascoso, L- 21438, Sept. 28, 1996.

Facts: Rafael Carrascoso was among the 48 Filipino Pilgrims who left Manila for
Lourdes with Air France as their airline. Philippine Airlines, the authorized agent of Air
France, issued Carrascoso a first class round trip ticket from Manila to Rome. From
Manila to Bangkok, he had first class accommodation but in Bangkok, the Manager
of Air France forced Carrascoso to vacate his first class seat because there was a
white man who, according to the Manager, had a better right to the seat.
Issue: Will neglect or malfeasance by the carriers employee give action for damages?
Ruling: Yes. A contract to transport passengers is quite different in kind and degree
from any other contractual relation. The contract of air carriage, therefore, generates
a relation attended with a public duty. Passengers do not contract merely for
transportation. They have a right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration. They are entitled to be protected
against personal misconduct, injurious language, indignities and abuses from such
employees. So it is, that any rule or discourteous conduct on the part of employees
towards a passenger gives the latter an action for damages against the carrier.
Nature and effect of Obligations, 1163

Chavez vs. Gonzales, 32 SCRA 547 (1970)

Facts:
In the early part of July 1963, Rosendo Chaves delivered to Fructouso Gonzales, who
was a typewriter repairer, a portable typewriter for routine cleaning and servicing. The
defendant was not able to finish the job despite repeated reminders from the plaintiff.
The defendant merely gave assurances and kept failing to comply with the same. In
October 1963, the defendant asked for P6.00 from the plaintiff for the purchase of
spare parts. Exasperated, on October 26, 1963, the plaintiff went to the house of the
defendant and asked for the return of the typewriter. The defendant delivered the
typewriter in a wrapped package. On reaching home, the plaintiff discovered that the
typewriter was in shambles with the interior cover and some parts and screws
missing. On October 29, 1963, the plaintiff sent a letter to the defendant formally
demanding the return of the missing parts, the interior cover and the sum of P6.00.
The following day, the defendant returned some of the missing parts, the interior
cover and the P6.00.
On August 29, 1964, the plaintiff had his typewriter repaired by Freixas Business
Machines that cost him a total of P89.85, including labor and materials. On August 23,
1965, plaintiff commenced this action before the City Court of Manila for attorneys
fees and the actual, compensatory, temperate and moral damages from the

17
defendant.
Issue:
Is the defendant, Fructouso Gonzales, not liable at all because his contract with
plaintiff, Rosendo Chaves, did not contain a period?
Held:
No. As inferred from the facts, the plaintiff and the defendant had a perfected contract
for cleaning and servicing a typewriter. The intention was for the defendant to finish it
at some future time although such time was not specified. Such time had passed
without work having been accomplished and defendant returned the typewriter
cannibalized and unrepaired, which in itself was a breach of his obligation. Where the
defendant virtually admitted non-performance by returning the typewriter he was
obliged to repair in a non-working condition, with essential parts missing, he could not
invoke Article 1197 of the Civil Code.
The time for compliance having evidently expired, and there being a breach of
contract by non-performance, the fixing of a period would thus be a mere formality
and would serve no purpose than to delay.
Under Article 1170 of the Civil Code, 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. And under Article 1173, the fault or
negligence of the obligor consists in the omission of that diligence which is required by
the nature of the obligation and corresponds with the circumstances of the persons, of
the time and of the place. When negligence shows bad faith, the provisions of Articles
1171 and 2201, paragraph 2 shall apply. If the law or contract does not state the
diligence which is to be observed in the performance, that which is expected of a good
father of a family shall be required.

Rose Packing Co. vs. CA, 167 SCRA 309 (1988)

FACTS
This is a petition for review on certiorari of the decision 1 of the Court of Appeals in
CA-G.R. No. 43198-R promulgated on December 16,1970.
On December 12, 1962 respondent bank (PCIB) approved a letter- request by
petitioner for the reactivation of its overdraft line of P50,000.00, discounting line of
P100,000.00 and a letter of credit-trust receipt line of P550,000.00 as wen as an
application for a loan of P300,000.00, on fully secured real estate and chattel
mortgage and on the further condition that respondent PCIB appoint as it did appoint
its executive vice-president Roberto S. Benedicto as its representative in petitioner's
board of directors.
On November 3, 1965 the National Investment & Development Corporation (NIDC),
the wholly owned investment subsidiary of the Philippine National Bank, approved a
P2.6 million loan application of petitioner with certain conditions. Pursuant thereto, the
NIDC released to petitioner on November 7, 1965 the amount of P100,000.00.
Subsequently, petitioner purchased five (5) parcels of land in Pasig, Rizal making a
down payment thereon.
On January 5,1966, the NIDC released another P100,000.00 to petitioner and on
January 12, 1966, the aforesaid releases totalling P200,000.00 were applied to the
payment of preferred stock which NIDC subscribed in petitioner corporation to partially
implement its P1,000,000.00 investment scheme as per agreement. Thereafter, the

18
NIDC refused to make further releases on the approved loan of petitioner.
On August 3, 1966 and October 5, 1966, respondent PCIB approved additional
accomodations to petitioner consisting of a P710,000.00 loan for the payment of the
balance of the purchase price of those lots in Pasig required to be bought,
P500,000.00 loan for operating capital, P200,000.00 loan to be paid directly to
petitioner's creditors, while consolidating all previous accommodations at
P1,597,000.00all of which were still secured by chattel and real estate mortgages.
However, PCIB released only P300,000.00 of the P710,000.00 approved loan for the
payment of the Pasig lands and some P300,000.00 for operating capital.
On January 5, 1968 respondent PCIB filed a complaint against petitioner and Rene
Knecht, its president for the collection of petitioner's indebtedness to respondent
bank, which complaint was docketed as Civil Case No. 71697 of the Court of First
Instance of Manila.
PCIB gave petitioner notice that it would cause the real estate mortgage to be
foreclosed at auction sale, which is scheduled for February 27, 1968. Thus, respondent
Sheriff served notice of sheriffs sale. Subsequently, petitioner filed a complaint
docketed as Civil Case No. 11015 in the CFI of Rizal. Petitioner also prayed, pending
final judgment, for the issuance ex-parte of a writ of preliminary injunction enjoining
herein respondents from proceeding with the foreclosure sale scheduled to be held on
July 18, 1968.
Issue:
Whether or not private respondents have the right to the extrajudicial foreclosure sale
of petitioners mortgaged properties before trial on the merits?
Ruling:
The issue of whether the foreclosure sale of the mortgaged properties en masse was
valid or not must be answered in the negative. The rule of indivisibility of a real estate
mortgage refers to the provisions of Article 2089 of the Civil Code, which provides:
Art. 2089. A pledge or mortgage is indivisible, even though the debt may be divided
among the successors in interest of the debtor or of the creditor.
Therefore the debtor's heir who has paid a part of the debt cannot ask for the
proportionate extinguishment of the pledge or mortgage as the debt is not completely
satisfied.
Neither can the creditor's heir who received his share of the debt return the pledge or
cancel the mortgage, to the prejudice of the other heirs who have not been paid.
From these provisions is excepted the case in which, there being several things given
in mortgage or pledge, each one of them guarantees only a determinate portion of the
credit.
The debtor, in this case, shall have a right to the extinguishment of the pledge or
mortgage as the portion of the debt for which each thing is specially answerable is
satisfied.
Respondent bank cites the above-quoted article in its argument that the mortgage
contract is indivisible and that the loan it secures cannot be divided among the
different lots (Brief for Respondent, p. 27). Respondent Court upheld the validity of the
sale en masse (Rollo, p. 246).
The rule, however, is not applicable to the instant case as it presupposes several heirs
of the debtor or creditor which does not obtain in this case (Central Bank of the
Philippines v. Court of Appeals, supra.) Furthermore, granting that there was
consolidation of the entire loan of petitioner corporations approved by respondent

19
bank, the rule of indivisibility of mortgage cannot apply where there was failure of
consideration on the part of respondent bank for the mismanagement of the affairs of
petitioner corporation and where said bank is in default in complying with its
obligation to release to petitioner corporation the amount of P710,000.00. In fact the
real estate mortgage itself becomes unenforceable (Central Bank of the Philippines v.
Court of Appeals, supra). Finally, it is noted that as already stated hereinabove, the
exact amount of petitioner's total debt was still unknown.

Namarco vs. Federated Distributors, 49 SCRA 238

(CID)

Picson vs. Picson, 61 SCRA (1974)

Facts: This petition is an appeal from the decision of the Court of First Instance of
Samar in its Civil Case, entitled Consuelo P. Piczon, et al. vs. Esteban Piczon, et al.,
sentencing defendants-appellees, Sosing Lobos and Co., Inc., as principal, and Esteban
Piczon, as guarantor, to pay plaintiffs-appellants "the sum of P12,500.00 with 12%
interest from August 6, 1964 until said principal amount of P12,500.00 shall have been
duly paid, and the costs." In other words, the trial court sustained that the defendants
will only pay the interest at the time when plaintiffs made the first demand.
In the agreement of loan contracted between plaintiff and defendants, Esteban Piczon
declared to be the guarantor of a loan amounting Php 12, 500.00 and consequently to
return or pay the same amount with Twelve Per Cent (12%) interest per annum,
commencing from the date of execution hereof.
Issue: Will the payment of twelve per cent interest of P12,500.00 commence to run
from August 6, 1964 when plaintiffs made the first demand or from August 29, 1956
when the obligation becomes due and demandable?
Ruling: It should be on August 29, 1956 when the obligation becomes due and
demandable. The Court held instead of requiring appellees to pay interest at 12% only
from August 6, 1964, the trial court should have adhered to the terms of the
agreement which plainly provides that Esteban Piczon had obligated "return or pay (to
Piczon and Co., Inc.) the same amount (P12,500.00) with Twelve Per Cent (12%)
interest per annum commencing from the date of the execution hereof. Under Article
2209 of the Civil Code "(i)f the obligation consists in the payment of a sum of money,
and the debtor incurs in delay, the indemnity for damages, there being no stipulation
to the contrary, shall be the payment of the interest agreed upon, and in the absence
of stipulation, the legal interest, which is six per cent per annum." In the case at bar,
the "interest agreed upon" by the parties was to commence from the execution of said
document.
Appellees' contention that the reference in Article 2209 to delay incurred by the
debtor which can serve as the basis for liability for interest is to that defined in Article
1169 (pls. check this article) of the Civil Code is untenable. In Quiroz vs. Tan Guinlay, 5
Phil. 675, it was held that the article cited by appellees is applicable only when the
obligation is to do something other than the payment of money. And in Firestone Tire
& Rubber Co. (P.I.) vs. Delgado, 104 Phil. 920, the Court squarely ruled that if the
contract stipulates from what time (the) interest will be counted, said stipulated time
controls, and, therefore interest is payable from such time, and not from the date of
the filing of the complaint.

20

Firestone Tire vs. Delgado, 104 Phil 920 (1958)

FACTS:
On September 22, 23, and 25, 1953, the defendants, Mario Delgado and Leonor
Delgado Dee, doing business under the trade name of Caltex Quick Service Station, in
Cebu City, received from the plaintiff Firestone Tire Rubber, Co., goods and
merchandise valued at P6,966.73, payable on October 31, 1953, subject to the
condition that in case of default, defendants would pay interest of 12 per cent a year
from the date of default, plus 25 per cent of the said amount as attorney's fees and
liquidated damages in case of suit. Demand for payment was duly made by the
plaintiff. and defendants in a letter dated May 21, 1954, proposed to pay the
outstanding balance of P5,865.00 according to the following schedule: May-P500.00,
June-500.00, July-,500.00, August-1,500.00, September-1,600.00 and October1,265.00. In a letter dated June 12, 1954, plaintiff accepted the proposal on the
condition, however, "that if you fail to comply with your schedule, we will immediately
refer the balance of your account to our lawyer for collection without further notice."
Defendants paid the May installment of P500.00 on May 16, 1954. On account of the
June installment, they paid P200.00 on June 25, 1954 and P250.00 on July 10, 1954, or
a total of P450.00. After said payments, there remained a balance of P4,915.62, which
the defendants had not paid up to the present time. In view of said failure, plaintiff
brought the present action on July 19, 1954 to collect said unpaid balance.
ISSUE:
May the Plaintiff enforce a judicial action against defendant for failure to meet the
obligation?
RULING:
Yes. This case is a plain case of a debtor failing, without any valid reason, to pay for
goods and merchandise bought and received by him on the date he promised to pay.
He made a proposition to the vendor to pay the balance of the value of the goods in
six monthly installments, and the vendor, out of consideration, granted the request,
but with the condition that failure to strictly observe the installments payments would
result in a judicial suit without further notice for the recovery of the whole amount.
After paying less than two monthly installments, and without any satisfactory
explanation, the debtor simply failed and refused to pay the balance of over P4,000.00
up to the present time. The courts cannot look with favor upon such delinquency in
the performance of a clear obligation, especially when, as in this case, a debtor
presumably a merchant and trader, received the goods bought and presumably had
sold them and received the price and benefits of the sale.

Inducil vs. de los Santos, 17 SCRA 332 (1966)

Facts:
Petitioner Inducil entered into a contract of services with Respondent De Los Santos,
the PROPRIETOR of a transportation business called Ricalinda Bus. Stipulations in
the contract include the following:
1) Respondent hires the services of petitioner as the REPAIRER, for 3 years from Oct.

21
1, 1956 to Oct. 31, 1959;
2) Proprietor compensates the repairer P325 for the first month, P350 for the second
month, P375 for the third month, and P400 a month thereafter until the expiration of
the contract;
3) Repairer shall be obliged to render services of repairing, reconditioning or mending
of all 30 buses of the proprietor,
4) Proprietor shall provide all necessary parts or items for repairs,
5) Repairs, reconditioning or mending shall be done at the repairers shopafter which
the proprietor must collect the units from the shop,
6) Services to be rendered shall be limited to the existing 30 buses of proprietor,
7) To bind themselves to the following stipulations, the penal sum of 500 pesos must
be paid to the failing party as liquidated damages,
8) Repairer shall do the marks specified with reasonable dispatch and guarantee to
avoid dislocation on the proper functioning of the proprietors business.
From the contract date until April 1957, the petitioner-repairer overhauled and
repaired a total of 26 buses. Since March 1957, the payments were delayed. After
serving the respondent-proprietor with a demand letter for payment, the proprietor
served notice that he would only pay on a piece-work basis beginning May 1957. Upon
rejection by the petitioner, the respondent no longer sent him buses for repair.
The repairman, thus, initiated a suit in the CFI Manila for specific performance praying
that he be paid P400 from May 1957 until the full duration of the contract, and P1,000
in attorneys fees. The Proprietor contended that the work of the repairman was
unsatisfactory as complained by him in his letters to the repairer. CFI awarded the
remedy sought by repairer.
From the said order, the proprietor appealed to the CA stating that he should only pay
P500-the amount stipulated in the contracted as liquidated damages. CA modified the
decision of CFI as per the appeal of proprietor. Petitioner appealed to the SC.
Issue:
Is the CA correct in interpreting the decision of the CFI as a rescission of the contract
between parties?
Ruling:
No. The CA erred in interpreting the CFIs resolution regarding its silence on rights and
obligations of the parties concerning the P400 monthly payments. It also erred in
basing the rescission on the fact that there was no work after May 1957; hence, the
petitioner was not entitled to compensation for the contract period and only entitled
him to the amount stated in the penal clause.
SC affirmed the decision of CFI because the said judgment expressly ordered the
respondent to comply with the original contract on October 12, 1956. The monthly
payments of P400 began on May 1, 1957 up to present... During that time, there
was no failure yet on the part of the respondent to perform such action. Hence, it was
unnecessary for the lower court to order the respondent to do so. Clearly, the suit was
about specific performance. The order of the CFI was specific performance. Therefore,
the conclusion of the CA regarding rescission of the contract cannot stand.
Since the contract has already expired. It became necessary for the SC to expressly
order the respondent to pay the petitioner P400 for the period from May 1957 up to
October 31,1959 plus interest due on each payment. The decision of the CA is

22
REVERSED and SET ASIDE. Respondent must pay interest at the legal rate on each
delayed monthly payment until fully paid; plus P1,000 in attorneys fees.
Delay or Mora, 1169-1170

Vermen Realty vs. CA 224 SCRA 549 (1993)

Facts:
Petitioner seeks a review of the decision of the Court of Appeals which set aside the
decision of the Regional Trial Court. On March 2, 1981, petitioner Vermen Realty and
Development Corporation, as First Party, and private respondent Seneca Hardware
Co., Inc., as Second Party, entered into a contract denominated as "Offsetting
Agreement". Under some of the conditions of the so-called Offsetting Agreement,
Vermen Realty and Seneca Hardware were under a reciprocal obligation. Seneca
Hardware shall deliver to Vermen Realty construction materials worth P552,000.00.
Vermen Realty's obligation under the agreement is threefold: he shall pay Seneca
Hardware P276,000.00 in cash; he shall deliver possession of units 601 and 602,
Phase I, Vermen Pines Condominiums (with total value of P276,000.00) to Seneca
Hardware; upon completion of Vermen Pines Condominiums Phase II (subject of this
contract), Seneca Hardware shall be given option to transfer to similar units therein.
As found by the appellate court and admitted by both parties, private respondent had
paid petitioner and at the same time delivered construction materials pursuant to the
contract. Pending completion of Phase II of the Vermen Pines Condominiums,
petitioner delivered to private respondent units 601 and 602 at Phase I of the Vermen
Pines Condominiums. However, petitioner repossessed unit 602. Petitioner corporation
averred that Room 602 was leased to another tenant because private respondent
corporation had not paid anything for purchase of the condominium unit. In 1983, the
loan application for the construction of the Vermen Pines Condominium Phase II was
denied. Consequently, construction of the condominium project stopped and has not
been resumed since then. Private respondent filed a complaint with the Regional Trial
Court of Quezon City for rescission of the Offsetting Agreement alleging that petitioner
Vermen Realty Corporation had stopped issuing purchase orders of construction
materials after April, 1982, without valid reason, thus resulting in the stoppage of
deliveries of construction materials on its (Seneca Hardware) part, in violation of the
Offsetting Agreement. Petitioner on the contrary alleged that the fault lay with private
respondent (plaintiff therein): although petitioner issued purchase orders, it was
private respondent who could not deliver the supplies ordered, alleging that they were
out of stock. After conducting hearings, the trial court rendered a decision dismissing
the complaint. On appeal, respondent court reversed the trial court's decision.
Issue:
Do the circumstances of the case warrant rescission of the Offsetting Agreement as
prayed for by Private Respondent when he instituted the case before the trial court?
Yes. There is no controversy that the provisions of the Offsetting Agreement are
reciprocal in nature. Reciprocal obligations are those created or established at the
same time, out of the same cause, and which results in a mutual relationship of
creditor and debtor between parties. In reciprocal obligations, the performance of one
is conditioned on the simultaneous fulfillment of the other obligation. Article 1191 of

23
the Civil Code provides the remedy of rescission in (more appropriately, the term is
"resolution") in case of reciprocal obligations, where one of the obligors fail to comply
with what is incumbent upon him. The general rule is that rescission of a contract will
not be permitted for a slight or causal breach, but only for such substantial and
fundamental breach as would defeat the very object of the parties in executing the
agreement. The question of whether a breach of contract is substantial depends upon
the attendant circumstances. Petitioner would never able to fulfill its obligation in
allowing private respondent to exercise the option to transfer from Phase I to Phase II,
as the construction of Phase II has ceased and the subject condominium units will
never be available.

Abaya vs. Std. Vacuum, 101 Phil 1262 (1957)

FACTS: The errors assigned by the appellant boil down to the single question of
whether or not the appellant is entitled to damages, compensatory as well as moral
and exemplary, supposedly sustained as a consequence of appelles refusal to appoint
him operator of the station in controversy. The trial court correctly termed the
stipulation of appointing the appellant as operator subject to the conditions of the
Operators Agreement as a reciprocal obligation.
HELD: In reciprocal obligations the performance of one is conditioned on the
simultaneous fulfilment of the other. When one party to the reciprocal obligation
refuses to assume and perform the obligation imposed on him, the other party does
not incur in delay.
Article 119 of the Civil Code- 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.

Penacio vs. Ruaya, 110 SCRA 45 (1981)

Facts: On January 14, 1957, the defendants, spouses Zoilo H. Ruaya and Felicitas E.
Ruaya, executed a document donominated: "PACTO DE RETROSALE OF RESIDENTIAL
BUILDING WITH GUARANTY TO RELINQUISH RIGHTS AS PUBLIC LAND APPLICANT ON
THE LOT ON WHICH CONSTRUCTED," with the ff terms:virtual law library
That we, ZOILO H. RUAYA and FELICITAS E. RUAYA, husband and wife, 41 years old,
Filipinos and residents of Ozamis City for One Thousand Pesos (Pl,000.00), receipt
whereof in full is hereby acknowledged and to us paid by PERSHING TAN QUETO, 44
years old, married to Cristina Yap Sick Tin Filipino citizen and resident of Ozamis, do by
these presents hereby sell, cede and convey by way of PACTO DE RETRO unto the said
Pershing Tan Queto, his heirs, successors and assigns, one (1) two-storey residential
building of 88 square meters floor area declared for taxation purposes under Tax Dec.
No. 36964 in the name of Zoilo H. Ruaya and therein assessed at P 1,500.00 and
erected on a public land along the road to the wharf, City of Ozamis, claimed by herein
vendors with a right as actual claimant-applicant given standing and recognition by
the Bureau of Lands in B.L. Claim No. 181 (N), Portion of Lot 373 of the Misamis
Cadastre, as per the decision of the Director of Lands dated June 8, 1954, certified
true copy of which is hereto attached as Annex 'A' and made an integral part of the
document; and which residential building we are the absolute owners with a perfect
right to convey the same and that it is free of all liens charges and encumbrances and
we hereby warrant to defend the rights of the herein vendee against the lawful claims
of any persons whomsoever on the same.

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IT IS A CONDITION OF THIS SALE that we hereby reserve unto ourselves, our heirs,
successors and assigns the right to repurchase the herein conveyed building by
paying back and returning to the vendee, Pershing Tan Queto, his heirs, successors
and assigns the agreed purchase price of P1,000.00 within the period of one (1) year
after the lapse of one (1) year from the date of the execution hereof; and that upon
our failure to exercise the right of repurchase within the period herein stipulated, title
to the building shall pass to and become vested unto the vendee, his heirs, successors
and assigns, as in the law made and provided; and in the event of consolidation of title
to the building unto the vendee, we hereby promise, covenant and guarantee to
relinquish and effect complete legal transfer of an our rights, interests and
participation in and to the lot on which the building is constructed, as public land
claimants thereof by virtue of the decision of the Bureau of Lands.
The vendors a retro failed to exercise their right to repurchase in the said period. On
sept. 10, 1960, the trial court rendered judgment declaring that the title is
consolidated in the vendee, Pershing Tan Queto, On April 18, 1961, Queto assigned his
rights to plaintiff Penaco. Thereafter, Penaco demanded to relinquish and complete
transfer of their legal rights but defendant refused. The defendant answered that the
condition in the contract Pacto re Retro , is void for want of consideration, there being
no price mentioned therein and that the parcel of land which is sought to be
transferred has not been identified.
Issue: Is the defendants contention valid?
Ruling: No. There were only one contract entered into by the appellant and Queto and
which is a sale of a residential building for P1000 with the condition that: the vendor
may repurchase the same within a period of 1 year by paying back the vendee, upon
failure to repurchase, the building shall pass and become vested in the vendee, and
transfer relinquish and effect legal transfer of all their rights. Article 1350 of the civil
code provides that, in onerous contracts the cause is understood to be, for each
contracting party the prestation or promise of a thing or service by the other.
Besides, article 1354 provides, it is presumed that consideration exist and is lawful,
unless the debtor proves the contrary. The second contention that parcel of land on
which the building sold a retro is constructed has not been identified if likewise
without merit. The vendors a retro are obligated to transfer to the vendee a retro and
his assigns all their rights, interest and participation , as public claimant, in and the lot
on which the building sold a retro has consolidated his title over the building sold a
retro.

Agcaoili vs. CA, 165 SCRA 1 (1988)

Arrieta vs. Natl. Rice and Corn Corp., GR L-15645 (Jan.
31, 1964)

FACTS:
On May 19, 1952, plaintiff-appellee Mrs. Paz Arrieta participated in a public bidding
called by NARIC for the supply of 20,000 metric tons of Burmese rice. As her bid of
$203, 000 per metric ton was the lowest, she was awarded he contract for the same.
On July 1, 1952, Arrieta and NARIC entered into Contract of Sale of Rice under the
term of which the former obligated herself to deliver to the latter 20, 000 metric tons
of Burmese rice at $203, 000 per metric ton. In turn, NARIC committed itself to pay for
the imported rice by means of an irrevocable, confirmed and assignable letter of

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credit in US currency in favor of Arrieta and/or supplier in Burma, immediately.
However, it was only on July 30, 1952 that NARIC took the first step to open a letter of
credit by forwarding to the PNB its application for Commercial Letter of Credit. On the
same day, Arrieta, thru counsel, advised NARIC of the extreme necessity for the
opening of the letter of credit since she had by then made a tender to her supplier in
Rangoon, Burma equivalent to 5% of the F.O.B. price of 20, 000 tons at $180.70 and in
compliance with the regulations in Rangoon, this 5% will be confiscated if the required
letter of credit is not received by them before August 4, 1952. On August 4, PNB
informed NARIC that its application for a letter of credit has been approved by the
Board of Directors with the condition that 50% marginal cash deposit be paid and that
drafts a5e to be paid upon presentment. It turned out that NARIC was not in financial
position to meet the condition. As a result of the delay, the allocation of Arrietas
supplier in Rangoon was cancelled and the 5% deposit amounting to 524 kyats or
approximately P200, 000 was forfeited.
ISSUE:
Was NARIC liable for damages?
RULING:
Yes. One who assumes a contractual obligation and fails to perform the same on
account of his inability to meet certain bank which inability he knew and was aware of
when he entered into contract, should be held liable in damages for breach of
contract.
Under Article 1170 of the Civil Code, not only debtors guilty of fraud, negligence or
default but also debtor of every, in general, who fails in the performance of his
obligations is bound to indemnify for the losses and damages caused thereby.

Vda de Villaruel vs. Manila Motor (104 Phil. 926)

Facts: In 1940, Villaruel and Manila Motor entered into a 5-year lease contract and was
renewable for another 5 years the following premises:
(a) Five hundred (500) square meters of floor space of a building of strong materials
for automobile showroom, offices, and store room for automobile spare parts;
(b) Another building of strong materials for automobile repair shop; and
(c) A 5-bedroom house of strong materials for residence of the Bacolod Branch
Manager of the defendant company.
Manila Motor was deprived of enjoying the premises from June 1, 1942 to March 29,
1945 because the Japanese used the property as their quarters. No payment of rentals
was made during that period. After the property was vacated by the army, Rafael Grey
(manager) exercised the option to renew the contract of lease for another 5 years.
Thereafter, Villaruel asked for payment of rentals from June 1, 1942-March 31, 1945
(period occupied by army) in the amount of P11,900. Sometime in July, when Grey
tendered payment, payment was not made because the parties could not agree on
the context of such receipt. The building was then completely razed by fire thereafter.
Issue:
Did any of the parties commit delay?
Ruling:

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Yes. In evicting Manila Motor Co., Inc. from the leased buildings and occupying the
same as quarters for troops, the Japanese authorities acted pursuant to a right
recognized by international and domestic law. Its act of dispossession, therefore, did
not constitute perturbacion de hecho but a perturbacion de derecho for which the
Villaruel (and not Manila Motor) were liable (Art. 1560, supra) and for the
consequences of which Villaruel must respond, since the result of the disturbance was
the deprivation of the lessee of the peaceful use and enjoyment of the property
leased. Manila Motors corresponding obligation to pay rentals ceased during such
deprivation. Hence, their refusal to accept the current rentals without qualification
placed them in default (mora creditoris or accipiendi) with the result that thereafter,
they had to bear all supervening risks of accidental injury or destruction of the leased
premises. While not expressly declared by the Code of 1889, this result is clearly
inferable from the nature and effects of mora, and from Articles 1185, 1452 [par. 3]
and 1589).