OBLIGATIONS (Articles 1156-1304)

Case No. 1
John F. Villaroel vs. Bernardino Estrada
G.R. No. L-47362
December 19, 1940
Ponente: AVANCEA
En Banc Decision
FACTS:
On May 9 1912, Alejandra F. Callao mother of the petitioner obtained from the
Spouses Mariano Estrada and Severina a loan of 1000 pesos payable in 6 years.
Alejandra died leaving petitioner as the sole heir. The Spouses Mariano Estrada and
Severina died as well leaving the respondent as the sole heir. On Aug 9 1930,
petitioner signed a document assuming the obligation to pay the respondent 1000
plus 12% per annum interest. Hence the action filed to recover said amount.
ISSUE:
Whether or not the present action may prosper notwithstanding the
prescription of the action to recover the original debt?
HELD:
The Court ruled in the affirmative. The present action is not based on the
original debt contracted by petitioners mother, which has already prescribed, but
on petitioners undertaking on Aug 9 1930 to assume the original obligation. For
the petitioner who is the sole heir of the original debtor with rights to the latters
inheritance, the debt legally contracted by his mother even if it has already lost
enforceability due to prescription, has become a moral obligation which is a
sufficient consideration to make the obligation he voluntarily assumed on Aug 9
1930 enforceable and legally demandable.

Case No. 2
PRIMITIVO ANSAY, ETC., ET AL., vs. THE BOARD OF DIRECTORS OF
THE NATIONAL DEVELOPMENT COMPANY, ET AL
G.R. No. L-13667
April 29, 1960
PONENTE: PARAS
En
Banc Decision
FACTS:
On July 25, 1956, Ansay et al. filed against NDC et al. in the Court of
First Instance of Manila a complaint praying for a 20% Christmas bonus for the years
1954 and 1955. Ansay et al. admit that respondents are not under legal duty to give
such bonus but argued that such bonus be given to them because it is a moral
obligation of NDC et al. to give such. The lower court dismissed the case stating that
a bonus is an act a bonus is an act of liberality and the court takes it that it is not
within its judicial powers to command respondents to be liberal and that the Court
has no power to compel a party to comply with a moral obligation. The motion for
reconsideration was denied.
ISSUE:
Whether or not the grant of a Christmas bonus arises as a natural obligation.
HELD:
The Court ruled in the negative. Article 1423 of the New Civil Code classifies
obligations into civil or natural. "Civil obligations are a right of action to compel their
performance. Natural obligations, not being based on positive law but on equity and
natural law, do not grant a right of action to enforce their performance, but after
voluntary fulfillment by the obligor, they authorize the retention of what has been
delivered or rendered by reason thereof".
An element of natural obligation before it can be cognizable by the court is
voluntary fulfillment by the obligor. Certainly retention can be ordered but only after
there has been voluntary performance. But here there has been no voluntary
performance. In fact, the court cannot order the performance.

CASE NO. 3
DEVELOPMENT BANK OF THE PHILIPPINES (DBP) vs. THE HONORABLE
MIDPAINTAO L. ADIL, Judge of the Second Branch of the Court of First
Instance of Iloilo and SPOUSES PATRICIO CONFESOR and JOVITA
VILLAFUERTE
G.R. No. L-48889
May 11,
1989
PONENTE: GANCAYCO
Decided
by : First Division
FACTS:
On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte
obtained an agricultural loan from the Development of the Philippines (DBP), in the
sum of P2,000.00, as evidenced by a promissory note of said date whereby they
bound themselves jointly and severally to pay the account in ten (10) equal yearly
amortizations. As the obligation remained outstanding and unpaid even after the
lapse of the aforesaid ten-year period, Confesor, who was by then a member of the
Congress of the Philippines, executed a second promissory note on April 11, 1961
expressly acknowledging said loan and promising to pay the same on or before June
15, 1961.
The spouses not having paid the obligation on the specified date, the DBP
filed a complaint dated September 11, 1970 in the City Court of Iloilo City against
the spouses for the payment of the loan.
ISSUE:
Whether or not a promissory which was executed in consideration of a
previous promissory note which has already been barred by prescription is valid.
HELD:
The Court ruled in the affirmative. There is no doubt that prescription has set
in as to the first promissory note of February 10, 1940. However, when respondent
Confesor executed the second promissory note on April 11, 1961 whereby he
promised to pay the amount covered by the previous promissory note on or before
June 15, 1961, and upon failure to do so, agreed to the foreclosure of the mortgage,
said respondent thereby effectively and expressly renounced and waived his right to
the prescription of the action covering the first promissory note.
This is not a mere case of acknowledgment of a debt that has prescribed but
a new promise to pay the debt. The consideration of the new promissory note is the
pre-existing obligation under the first promissory note. The statutory limitation bars
the remedy but does not discharge the debt.

CASE NO. 4 XXX

FAUSTINO CRUZ, vs. J. M. TUASON & COMPANY, INC., and GREGORIO
ARANETA, INC
G.R. No. L-23749
April 29,
1977
PONENTE: BARREDO
Decided by:
Second Division
FACTS:
As requested by the Deudors, the family of Telesforo Deudor who laid claim in
question on the strength of an informacion posesoria, Cruz made permanent
improvements on the said land having an area of more or less 20 quinones. The
improvements were valued at P30,400 and for which he incurred expenses
amounting to P7,781.74. In 1952, Tuason & Co. availed of Cruz services as an
intermediary with the Deudors, to work for the amicable settlement in a civil case.
The said case involved 50 quiones of land, of which the 20 quiones of land
mentioned formed part.
A compromise agreement between the Deudors and Tuason & Co. was entered into
on 1963 which was approved by court. Cruz alleged that Tuason & Co. promised to
convey him the 3,000 sq. meters of land occupied by him which was part of the 20
quiones of land within 10 years from the date of signing of the compromise
agreement between the Deudors and the latter as consideration of his services. The
said land was not conveyed to him by Tuason & Co. Cruz further alleged that Tuason
& Co. was unjustly enriched at his expense since they enjoyed the benefits of the
improvements he made on the land acquired by the latter. The trial court dismissed
the case on the ground that there was no cause of action.
ISSUE:
Whether or not a presumed quasi-contract be emerged as against one part
when the subject matter thereof is already covered by a contract with another party.
HELD:
From the very language of this provision, it is obvious that a presumed
qauasi-contract cannot emerge as against one party when the subject mater thereof
is already covered by an existing contract with another party. Predicated on the
principle that no one should be allowed to unjustly enrich himself at the expense of
another, Article 2124 creates the legal fiction of a quasi-contract precisely because
of the absence of any actual agreement between the parties concerned. Corollarily,
if the one who claims having enriched somebody has done so pursuant to a contract
with a third party, his cause of action should be against the latter, who in turn may,
if there is any ground therefor, seek relief against the party benefited. It is essential
that the act by which the defendant is benefited must have been voluntary and
unilateral on the part of the plaintiff. As one distinguished civilian puts it, "The act is
voluntary. because the actor in quasi-contracts is not bound by any pre-existing
obligation to act. It is unilateral, because it arises from the sole will of the actor who
is not previously bound by any reciprocal or bilateral agreement. The reason why
the law creates a juridical relations and imposes certain obligation is to prevent a
situation where a person is able to benefit or take advantage of such lawful,
voluntary and unilateral acts at the expense of said actor." In the case at bar, since
appellant has a clearer and more direct recourse against the Deudors with whom he

had entered into an agreement regarding the improvements and expenditures

made by him on the land of appellees. It cannot be said, in the sense contemplated
in Article 2142, that appellees have been enriched at the expense of appellant.

CASE NO. 5
GUTIERREZ HERMANOS vs. ENGRACIO ORENSE
G.R. No. L-9188
4, 1914
PONENTE: TORRES
Decision

December
En Banc

FACTS:
On and before February 14, 1907, the defendant Orense had been the owner
of a parcel of land, with the buildings and improvements thereon, situated in the
pueblo of Guinobatan, Albay. Orense continued occupying the land by virtue of a
contract of lease. After the lapse of four years, Gutierrez asked Orense to deliver the
property to the company and to pay rentals for the use of the property. Orense
refused to do so. He claimed that the sale was void because it was done without his
authority and that he did not authorize his nephew Duran to enter into such
contract.
During trial, Orense was presented as witness of the defense. He states that
the sale was done with his knowledge and consent. Because of such testimony, it
was ascertained that he did give his nephew, Duran, authority to convey the land.
Duran was acquitted of criminal charges and the company demanded that Orense
execute the proper deed of conveyance of the property.
ISSUE:
Whether or not Orense is bound by Durans act of selling the formers
property.
HELD:
The Court ruled in the affirmative. It having been proven at the trial that he
gave his consent to the said sale, it follows that the defendant conferred verbal, or
at least implied, power of agency upon his nephew Duran, who accepted it in the
same way by selling the said property. The principal must therefore fulfill all the
obligations contracted by the agent, who acted within the scope of his authority.
Even should it be held that the said consent was granted subsequently to the sale,
it is unquestionable that the defendant, the owner of the property, approved the
action of his nephew, who in this case acted as the manager of his uncle's business,
and Orense'r ratification produced the effect of an express authorization to make
the said sale.
Article 1259 of the Civil Code prescribes: "No one can contract in the name of
another without being authorized by him or without his legal representation
according to law. A contract executed in the name of another by one who has
neither his authorization nor legal representation shall be void, unless it should be
ratified by the person in whose name it was executed before being revoked by the
other contracting party.

CASE NO. 6
RUSTICO ADILLE vs. THE HONORABLE COURT OF APPEALS, EMETERIA
ASEJO, TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA ASEJO and SANTIAGO
ASEJO
G.R. No. L-44546
January 29,
1988
PONENTE: SARMIENTO
Decided by:
Second Division
FACTS:
The property in dispute was located in Legazpi City, originally belonged to
Felisa Alzul who got married twice. Her child in the first marriage was petitioner
Rustico Adile and her children in the second marriage were respondents Emetria
Asejo et al. During her lifetime, Felisa Alzul sodl the property in pacto de retro with a
three-year repurchase period. Felisa died before she could repurchase the property.
During the redemption period, Rustico Adille repurchased the property by
himself alone at his own expense, and after that, he executed a deed of extrajudicial partition representing himself to be the only heir and child of his mother
Felisa. Consequently, he was able to secure title in his name alone. His half-siblings,
herein respondents, filed a case for partition and accounting claiming that Rustico
was only a trustee on an implied trust when he redeemed the property, and thus, he
cannot claim exclusive ownership of the entire property.
ISSUE:
Whether or not Rustico had constituted himself a negotiorum gestor.
HELD:
The Court ruled in the affirmative. Rustico, in taking over the property, did so
either on behalf of his co-heirs, in which event, he had constituted himself a
negotiorum gestor under Article 2144 of the Civil Code, or for his exclusive benefit,
in which case, he is guilty of fraud, and must act as trustee, the private respondents
being the beneficiaries, under the Article 1456. The evidence, of course, points to
the second alternative the petitioner having asserted claims of exclusive ownership
over the property and having acted in fraud of his co-heirs. He cannot therefore be
said to have assume the mere management of the property abandoned by his coheirs, the situation Article 2144 of the Code contemplates. In any case, as the
respondent Court itself affirms, the result would be the same whether it is one or
the other. The petitioner would remain liable to the Private respondents, his coheirs.

CASE NO. 7
DOMETILA M. ANDRES, doing business under the name and style "IRENE'S
WEARING APPAREL," vs. MANUFACTURERS HANOVER & TRUST
CORPORATION and COURT OF APPEALS
G.R. No. 82670
September
15, 1989
PONENTE: CORTES
Decided by:
Third Division
FACTS:
Andres, using the business name Irenes Wearing Apparel was engaged in
the manufacture of ladies garments, childrens wear, mens apparel and linens for
local and foreign buyers. Among its foreign buyers was Facts of the United States.
Sometime in August 1980, Facts instructed the First National State Bank (FNSB) of
New Jersey to transfer $10,000 to Irenes Wearing Apparel via Philippine National
Bank (PNB) Sta. Cruz, Manila branch. FNSB instructed Manufacturers Hanover and
Trust Corporation (Mantrust) to effect the transfer by charging the amount to the
account of FNSB with private respondent.After Mantrust effected the transfer, the
payment was not effected immediately because the payee designated in the telex
was only Wearing Apparel. Private respondent sent PNB another telex stating that
the payment was to be made to Irenes Wearing Apparel. On August 28, 1980,
petitioner received the remittance of $10,000.
After learning about the delay, Facets informed FNSB about the situation.
Facts, unaware that petitioner had already received the remittance, informed
private respondent and amended its instruction by asking it to effect the payment
to Philippine Commercial and Industrial Bank (PCIB) instead of PNB. Private
respondent, also unaware that petitioner had already received the remittance,
instructed PCIB to pay $10,000 to petitioner. Hence, petitioner received another
$10,000 which was charged again to the account of Facets with FNSB. FNSB
discovered that private respondent had made a duplication of remittance. Private
respondent asked petitioner to return the second remittance of $10,000 but the
latter refused to do so contending that the doctrine of solution indebiti does not
apply because there was negligence on the part of the respondents and that they
were not unjustly enriched since Facets still has a balance of $49,324.
ISSUE:
Whether or not the private respondent has the right to recover the second
$10,000 remittance it had delivered to petitioner.
HELD:
The Court ruled in the affirmative. According to Art. 2154, If something
received when there is no right to demand it, and it was unduly delivered through
mistake, the obligation to return it arises. For this article to apply the following
requisites must concur: "(1) that he who paid was not under obligation to do so;
and, (2) that payment was made by reason of an essential mistake of fact".
There was a mistake in the second remittance of US $10,000.00 is borne out
by the fact that both remittances have the same reference invoice number which is
263 80. Plaintiff-appellant made the second remittance on the wrong assumption
that defendant-appellee did not receive the first remittance of US $10,000.00.

CASE NO. 8
GONZALO PUYAT & SONS, INC vs. CITY OF MANILA AND MARCELO
SARMIENTO, as City Treasurer of Manila
G.R. No. L-17447
April 30, 1963
PONENTE: PAREDES
En
Banc Decision
FACTS:
Plaintiff Gonzalo Puyat & Sons Inc, a corporation duly organized and existing
according to the laws of the Philippines with offices at Manila, is engaged in the
business of manufacturing and selling all kinds of furniture. Acting pursuant to Sec.
1. group II, of Ordinance No. 3364, the defendant City Treasurer of Manila assessed
from plaintiff retail dealers tax the sales of furniture manufactured and sold by it
and its factory site.
All assessments were paid by plaintiff without protest in the erroneous belief
that it was liable thereof not knowing that pursuant to an ordinance, it is exempt
from the payment of taxes being a manufacturer of various kinds of furniture. After
learning about the ordinance, plaintiff filed with defendant City Treasurer of Manila a
formal request for refund of the retail dealers taxes unduly paid. The City Treasurer,
however, denied the said request for refund.
ISSUE:
Whether or not the amounts paid by plaintiff as retail dealer's taxes under
Ordinance No. 3364 of the City of Manila, without protest, are refundable.
HELD:
The Court ruled in the affirmative. With the admission of the City Treasurer, it
would seem clear that the taxes collected from appellee were paid, thru an error or
mistake, which places said act of payment within the pale of the new Civil Code
provision on solutio indebiti. The appellant City of Manila, at the very start,
notwithstanding the Ordinance imposing the Retailer's Tax, had no right to demand
payment thereof. According to Art. 2154, NCC, "If something is received when there
is no right to demand it, and it was unduly delivered through mistake, the obligation
to return it arises".
Appelle categorically stated that the payment was not voluntarily made, but
on the erronoues belief, that they were due. Under this circumstance, the amount
paid, even without protest is recoverable. "If the payer was in doubt whether the
debt was due, he may recover if he proves that it was not due" (Art. 2156, NCC).
Appellee had duly proved that taxes were not lawfully due. There is, therefore, no
doubt that the provisions of solutio indebtiti, the new Civil Code, apply to the
admitted facts of the case.

CASE NO. 9
JOSEPH SALUDAGA vs. FAR EASTERN UNIVERSITY and EDILBERTO C. DE
JESUS in his capacity as President of FEU
G.R. No. 179337
April
30, 2008
PONENTE: YNARES-SANTIAGO
Decided
by: Third Division
FACTS:
Petitioner Joseph Saludaga was a sophomore law student of respondent Far
Eastern University when he was shot by Alejandro Rosete, one of the security
guards on duty at the school premises on August 18, 1996. 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.
Petitioner thereafter filed a complaint for damages against respondents on
the ground that they breached their obligation to provide students with a safe and
secure environment and an atmosphere conducive to learning. Respondents, in
turn, filed a Third-Party 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.
ISSUE:
Whether or not the respondents are liable for breach of school-student
contract.
HELD:
The Court ruled in the affirmative. It is undisputed that petitioner was
enrolled as a sophomore law student in respondent FEU. As such, there was created
a contractual obligation between the two parties. On petitioner's part, he was
obliged to comply with the rules and regulations of the school. On the other hand,
respondent FEU, as a learning institution is mandated to impart knowledge and
equip its students with the necessary skills to pursue higher education or a
profession. At the same time, it is obliged to ensure and take adequate steps to
maintain peace and order within the campus. 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, we find that,
when petitioner 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 respondents failed to comply with its obligation to provide a safe and secure
environment to its students.
Incidentally, although the main cause of action in the instant case is the
breach of the school-student contract, petitioner, in the alternative, also holds
respondents vicariously liable under Article 2180 of the Civil Code, which provides,
The obligation imposed by Article 2176 is demandable not only for one's own acts
or omissions, but also for those of persons for whom one is responsible. x x x x
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry. x x x x The responsibility
treated of in this article shall cease when the persons herein mentioned prove that

they observed all the diligence of a good father of a family to prevent damage.
Respondents cannot be held liable for damages under Art. 2180 of the Civil Code
because respondents are not the employers of Rosete. The latter was employed by
Galaxy. The instructions issued by respondents' Security Consultant to Galaxy and
its security guards are ordinarily no more than requests commonly envisaged in the
contract for services entered into by a principal and a security agency. They cannot
be construed as the element of control as to treat respondents as the employers of
Rosete.

CASE NO. 10
SAGRADA ORDEN DE PREDICADORES DEL SANTISMO ROSARIO DE
FILIPINAS, vs. NATIONAL COCONUT CORPORATION
G.R. No. L-3756
June 30, 1952
PONENTE: LABRADOR
En
Banc Decision
FACTS:
Plaintiff Sagrada Ordens land was acquired during the Japanese occupation
by Taiwan Tekkosho for the sum of P140,000, and the titled was issued in the
Japanese corporations name. After liberation, the Alien Property Custodian of USA
took possession, control, and custody of the land by virtue of the Trading with the
Enemy Act as it belonged to an enemy national. Then it was occupied by NACOCO.
Plaintiff then claimed the property through an action in court. The parties then
presented a joint petition where plaintiff claims that the sale in favor of Taiwan
Tekkosho was void as it was executed under threats, duress, and intimidation. It was
agreed that the title would be cancelled and re-issued in the name of plaintiff. It was
also agreed that the interest of the Alien Property Custodian of USA over the
property be cancelled and that NACOCO leave the premises.
NACOCO does not contest that he is liable for rent after the judgment was rendered
with regard to plaintiffs claim over the property.
ISSUE:
Whether or not the defendant company can be held liable to pay rentals from
the date when it began to occupy until the date it vacated.
HELD:
The Court ruled in the negative. 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. NACOCO 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 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 (defendantappellant) may be held responsible for the supposed illegality of the occupation of
the property by the said Taiwan Tekkosho. The Alien Property Administration had the
control and administration of the property not as successor to the interests of the
enemy holder of the title, the Taiwan Tekkosho. Neither is it a trustee of the former
owner, the plaintiff-appellee herein, but a trustee of then Government of the United
States, in its own right, to the exclusion of, and against the claim or title of, the
enemy owner. From August, 1946, when defendant-appellant took possession, to
the late of judgment on February 28, 1948, Alien Property Administration had the
absolute control of the property as trustee of the Government of the United States,
with power to dispose of it by sale or otherwise, as though it were the absolute
owner. Therefore, even if defendant-appellant were liable to the Alien Property

Administration for rentals, these would not accrue to the benefit of the plaintiffappellee, the owner, but to the United States Government.

CASE NO. 11
PEOPLE'S CAR INC., vs. COMMANDO SECURITY SERVICE AGENCY
G.R. No. L-36840
May 22,
1973
PONENTE: TEEHANKE
En
Banc Decision
FACTS:
Peoples Car entered into a contract with Commando Security to safeguard
and protect the business premises of the plaintiff from theft, pilferage, robbery,
vandalism, and all other unlawful acts of any person/s prejudicial to the interest of
the plaintiff. On April 5, 1970, around 1:00am, defendants security guard on duty at
plaintiffs premises, without any authority, consent, approval, or orders of the
plaintiff and/or defendant brought out the compound of the plaintiff a car belonging
to its customer and drove said car to a place or places unknown, abandoning his
post and while driving the car lost control of it causing it to fall into a ditch. As a
result of these wrongful acts of defendant's security guard, the car of plaintiff's
customer, Joseph Luy, which had been left with plaintiff for servicing and
maintenance, "suffered extensive damage in the total amount of P7,079." besides
the car rental value "chargeable to defendant" in the sum of P1,410.00 for a car
that plaintiff had to rent and make available to its said customer to enable him to
pursue his business and occupation for the period of forty-seven (47) days that it
took plaintiff to repair the damaged car, or total actual damages incurred by plaintiff
in the sum of P8,489.10
Plaintiff instituted a claim against defendant for the actual damages it
incurred due to the unlawful act of defendants personnel citing paragraph 5 of the
contract wherein defendant accepts sole responsibility for the acts done during their
watch hours. Defendant claimed that they may be liable but its liability is limited
under paragraph 4 of the contract which provides that its liability shall not exceed
P1,000 per guard post for loss or damage through the negligence of its guards
during the watch hours provided that it is reported within 24 hours of the incident.
ISSUE:
Whether or not the defendant is obliged to indemnify the plaintiff for the
entire costs as result of the incident.
HELD:
The Court ruled in the affirmative. Defendant is therefore undoubtedly liable
to indemnify plaintiff for the entire damages thus incurred, since under paragraph 5
of their contract it "assumed the responsibility for the proper performance by the
guards employed of their duties and (contracted to) be solely responsible for the
acts done during their watch hours" and "specifically released (plaintiff) from any
and all liabilities ... to the third parties arising from the acts or omissions done by
the guards during their tour of duty." As plaintiff had duly discharged its liability to
the third party, its customer, Joseph Luy, for the undisputed damages of P8,489.10
caused said customer, due to the wanton and unlawful act of defendant's guard,
defendant in turn was clearly liable under the terms of paragraph 5 of their contract
to indemnify plaintiff in the same amount.
Plaintiff was in law liable to its customer for the damages caused the
customer's car, which had been entrusted into its custody. Plaintiff therefore was in

law justified in making good such damages and relying in turn on defendant to
honor its contract and indemnify it for such undisputed damages, which had been
caused directly by the unlawful and wrongful acts of defendant's security guard in
breach of their contract. As ordained in Article 1159, Civil Code, "obligations arising
from contracts have the force of law between the contracting parties and should be
complied with in good faith."

CASE NO. 11
JOSE CANGCO vs. MANILA RAILROAD CO.,
G.R. No. L-12191
14, 1918
PONENTE: FISHER
Banc Decision

October
En

FACTS:
Jose Cangco, was in the employment of Manila Railroad Company (MRC) in
the capacity of clerk. 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. On January 20, 1915, the
plaintiff arose from his seat in the second class-car where he was riding and,
making, his exit through the door, took his position upon the steps of the coach,
seizing the upright guardrail with his right hand for support. When the train had
proceeded a little farther the plaintiff Jose Cangco stepped off, 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.
It was established that the employees of MRC were negligent in piling the
sacks of watermelons. MRC raised as a defense the fact that Cangco was also
negligent as he failed to exercise diligence in alighting from the train as he did not
wait for it to stop.
ISSUE:
Whether or not Manila Railroad Co., is liable for damages for breach of
contract.
HELD:
The Court ruled in the affirmative. The contract of defendant to transport
plaintiff carried with it, by implication, the duty to carry him in safety and to provide
safe means of entering and leaving its trains (civil code, article 1258). That duty,
being contractual, was direct and immediate, and its non-performance could not be
excused by proof that the fault was morally imputable to defendant's servants.
Every legal obligation must of necessity be extra-contractual or contractual.
Extra-contractual obligation has its source in the breach or omission of those mutual
duties which civilized society imposes upon it members, or which arise from these
relations, other than contractual, of certain members of society to others, generally
embraced in the concept of status. The legal rights of each member of society
constitute the measure of the corresponding legal duties, mainly negative in
character, which the existence of those rights imposes upon all other members of
society. The breach of these general duties whether due to willful intent or to mere
inattention, if productive of injury, give rise to an obligation to indemnify the injured
party. The fundamental distinction between obligations of this character and those
which arise from contract, rests upon the fact that in cases of non-contractual
obligation it is the wrongful or negligent act or omission itself which creates the
vinculum juris, whereas in contractual relations the vinculum exists independently

of the breach of the voluntary duty assumed by the parties when entering into the
contractual relation.

CASE NO. 12
NARCISO GUTIERREZ vs. BONIFACIO GUTIERREZ, MARIA V. DE GUTIERREZ,
MANUEL GUTIERREZ, ABELARDO VELASCO, and SATURNINO CORTEZ
G.R. No. 34840
September 23, 1931
PONENTE: MALCOLM
En
Banc Decision
FACTS:
On February 2, 1930, an automobile was being operated by Bonifacio
Gutierrez, a lad 18 years of age, and was owned by Bonifacio's father and mother.
At the time of the collision, the father was not in the car, but the mother, together
will several other members of the Gutierrez family, seven in all, were
accommodated therein. A passenger in the autobus, by the name of Narciso
Gutierrez, was en route from San Pablo, Laguna, to Manila. The collision between
the bus and the automobile resulted in Narciso Gutierrez suffering a fracture right
leg which required medical attendance for a considerable period of time, and which
even at the date of the trial appears not to have healed properly.
It is conceded that the collision was caused by negligence pure and simple.
The difference between the parties is that, while the plaintiff blames both sets of
defendants, the owner of the passenger truck blames the automobile, and the
owner of the automobile, in turn, blames the truck.
ISSUE:
Whether or not both the driver of the truck and automobile are liable for
damages and indemnification due to their negligence.
HELD:
The Court ruled in the affirmative. Bonifacio Gutierrezs obligation arises from
culpa aquiliana. On the other hand, Saturnino Cortezs and his chauffeur Abelardo
Velascos obligation rise from culpa contractual.
In the United States, it is uniformly held that the head of a house, the owner
of an automobile, who maintains it for the general use of his family is liable for its
negligent operation by one of his children, whom he designates or permits to run it,
where the car is occupied and being used at the time of the injury for the pleasure
of other members of the owner's family than the child driving it. The theory of the
law is that the running of the machine by a child to carry other members of the
family is within the scope of the owner's business, so that he is liable for the
negligence of the child because of the relationship of master and servant.
The liability of Saturnino Cortez, the owner of the truck, and of his chauffeur
Abelardo Velasco rests on a different basis, namely, that of contract which, we think,
has been sufficiently demonstrated by the allegations of the complaint, not
controverted, and the evidence. The reason for this conclusion reaches to the
findings of the trial court concerning the position of the truck on the bridge, the
speed in operating the machine, and the lack of care employed by the chauffeur.
While these facts are not as clearly evidenced as are those which convict the other
defendant, we nevertheless hesitate to disregard the points emphasized by the trial
judge. In its broader aspects, the case is one of two drivers approaching a narrow
bridge from opposite directions, with neither being willing to slow up and give the
right of way to the other, with the inevitable result of a collision and an accident.

CASE NO. 14
HONGKONG AND SHANGHAI BANKING CORP., LTD. STAFF RETIREMENT
PLAN, Retirement Trust Fund, Inc.) vs. SPOUSES BIENVENIDO AND EDITHA
BROQUEZA
G.R. No. 178610
November
17, 2010
PONENTE: CARPIO
Decided
by: Second Division
FACTS:
Gerong and Editha Broqueza are employees of Hongkong and Shanghai
Banking Corporation (HSBC). They are also members of respondent Hongkong
Shanghai Banking Corporation, Ltd. Staff Retirement Plan (HSBCL-SRP) which is a
retirement plan established by HSBC through its Board of Trustees for the benefit of
the employees. On October 1, 1990, petitioner Editha Broqueza obtained a car loan
in the amount of Php175,000.00. On December 12, 1991, she again applied and
was granted an appliance loan in the amount of Php24,000.00. On the other hand,
petitioner Gerong applied and was granted an emergency loan in the amount of
Php35,780.00 on June 2, 1993. These loans are paid through automatic salary
deduction.
In 1993, a labor dispute arose between HSBC and its employees. Majority of
HSBCs employees were terminated, among whom are petitioners Editha Broqueza
and Fe Gerong. The employees then filed an illegal dismissal case before the
National Labor Relations Commission (NLRC) against HSBC. Because of their
dismissal, petitioners were not able to pay the monthly amortizations of their
respective loans. Thus, respondent HSBCL-SRP considered the accounts of
petitioners delinquent. Demands to pay the respective obligations were made upon
petitioners, but they failed to pay
ISSUE:
Whether or not HSBCL-SRP has a legal right to demand immediate settlement
of the unpaid balance of Gerong and Editha Broquezas.
HELD:
The Court ruled in the affirmative. In ruling for HSBCL-SRP, the Court apply
the first paragraph of Article 1179 of the Civil Code, Every obligation whose
performance does not depend upon a future or uncertain event, or upon a past
event unknown to the parties, is demandable at once. The Court affirm the findings
of the MeTC and the RTC that there is no date of payment indicated in the
Promissory Notes. The RTC is correct in ruling that since the Promissory Notes do not
contain a period, HSBCL-SRP has the right to demand immediate payment. Article
1179 of the Civil Code applies. The spouses Broquezas obligation to pay HSBCL-SRP
is a pure obligation. The fact that HSBCL-SRP was content with the prior monthly
check-off from Editha Broquezas salary is of no moment. Once Editha Broqueza
defaulted in her monthly payment, HSBCL-SRP made a demand to enforce a pure
obligation.
In their Answer, the spouses Broqueza admitted that prior to Editha
Broquezas dismissal from HSBC in December 1993, she "religiously paid the loan
amortizations, which HSBC collected through payroll check-off." A definite amount is
paid to HSBCL-SRP on a specific date. Editha Broqueza authorized HSBCL-SRP to

make deductions from her payroll until her loans are fully paid. Editha Broqueza,
however, defaulted in her monthly loan payment due to her dismissal. Despite the
spouses Broquezas protestations, the payroll deduction is merely a convenient
mode of payment and not the sole source of payment for the loans. HSBCL-SRP
never agreed that the loans will be paid only through salary deductions. Neither did
HSBCL-SRP agree that if Editha Broqueza ceases to be an employee of HSBC, her
obligation to pay the loans will be suspended. HSBCL-SRP can immediately demand
payment of the loans at anytime because the obligation to pay has no period.
Moreover, the spouses Broqueza have already incurred in default in paying the
monthly installments.

CASE NO. 15
IN THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA, Deceased,
GEORGE PAY vs. SEGUNDINA CHUA VDA. DE PALANCA
G.R. No. L-29900
June
28,
1974
PONENTE: FERNANDO
Decided by:
Second Division
FACTS:
Petitioner George Pay is a creditor of the Late Justo Palanca who died in
Manila on July 3, 1963. The claim of the petitioner is based on a promissory note
dated January 30, 1952, whereby the late Justo Palanca and Rosa Gonzales Vda. de
Carlos Palanca promised to pay George Pay the amount of P26,900.00, with interest
thereon at the rate of 12% per annum. The promissory note, dated January 30,
1962, is worded thus: " For value received from time to time since 1947, we [jointly
and severally promise to] pay to Mr. [George Pay] at his office at the China Banking
Corporation the sum of [Twenty Six Thousand Nine Hundred Pesos] (P26,900.00),
with interest thereon at the rate of 12% per annum upon receipt by either of the
undersigned of cash payment from the Estate of the late Don Carlos Palanca or
upon demand'. . . . This promissory note is signed by Rosa Gonzales Vda. de Carlos
Palanca and Justo Palanca. Since it was dated January 30, 1952, it was clear that
more "than ten (10) years has already transpired from that time until to date. The
action, therefore, of the creditor has definitely prescribed."
ISSUE:
Whether or not a creditor is barred by prescription in his attempt to collect on
a promissory note executed more than fifteen years earlier with the debtor sued
promising to pay either upon receipt by him of his share from a certain estate or
upon demand, the basis for the action being the latter alternative.
HELD:
The Court ruled in the affirmative. From the manner in which the promissory
note was executed, it would appear that petitioner was hopeful that the satisfaction
of his credit could he realized either through the debtor sued receiving cash
payment from the estate of the late Carlos Palanca presumptively as one of the
heirs, or, as expressed therein, "upon demand." There is nothing in the record that
would indicate whether or not the first alternative was fulfilled. What is undeniable
is that on August 26, 1967, more than fifteen years after the execution of the
promissory note on January 30, 1952, this petition was filed. The defense interposed
was prescription. Its merit is rather obvious. Article 1179 of the Civil Code provides:
"Every obligation whose performance does not depend upon a future or uncertain
event, or upon a past event unknown to the parties, is demandable at once."
The obligation being due and demandable, it would appear that the filing of
the suit after fifteen years was much too late. For again, according to the Civil Code,
which is based on Section 43 of Act No. 190, the prescriptive period for a written
contract is that of ten years. This is another instance where this Court has
consistently adhered to the express language of the applicable norm. There is no
necessity therefore of passing upon the other legal questions as to whether or not it
did suffice for the petition to fail just because the surviving spouse refuses to be
made administratrix, or just because the estate was left with no other property.

CASE NO. 16
SMITH, BELL & CO., LTD., vs. VICENTE SOTELO MATTI
G.R. No. L-16570
March 9, 1922
PONENTE: ROMUALDEZ
Decision

En Banc

FACTS:
In August, 1918, the plaintiff and the defendant, entered into contracts whereby
the former obligated itself to sell, and the latter to purchase from it, two steel tanks, for
the total price of twenty-one thousand pesos (P21,000), the same to be shipped from
New York and delivered at Manila "within three or four months;" two expellers at the
price of twenty five thousand pesos (P25,000) each, which were to be shipped from San
Francisco in the month of September, 1918, or as soon as possible; and two electric
motors at the price of two thousand pesos (P2,000) each, as to the delivery of which
stipulation was made, couched in these words: "Approximate delivery within ninety
days. This is not guaranteed."
The tanks arrived at Manila on the 27th of April, 1919: the expellers on the 26th
of October, 1918; and the motors on the 27th of February, 1919. The plaintiff
corporation notified the defendant, Mr. Sotelo, of the arrival of these goods, but Mr.
Sotelo refused to receive them and to pay the prices stipulated. The plaintiff brought
suit against the defendant.
In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil
Refining and By-Products Co., Inc., denied the plaintiff's allegations as to the shipment
of these goods and their arrival at Manila, the notification to the defendant, Mr. Sotelo,
the latter's refusal to receive them and pay their price, and the good condition of the
expellers and the motors, alleging as special defense that Mr. Sotelo had made the
contracts in question as manager of the intervenor, the Manila Oil Refining and ByProducts Co., Inc which fact was known to the plaintiff, and that "it was only in May,
1919, that it notified the intervenor that said tanks had arrived, the motors and the
expellers having arrived incomplete and long after the date stipulated."
ISSUE:
Whether or not, under the contracts entered into and the circumstances
established in the record, the plaintiff has fulfilled, in due time, its obligation to bring the
goods in question to Manila.
HELD:
The Court ruled in the affirmative. The oral evidence falls short of fixing such
period. From the record it appears that these contracts were executed at the time of the
world war when there existed rigid restrictions on the export from the United States of
articles like the machinery in question, and maritime, as well as railroad, transportation
was difficult, which fact was known to the parties; hence clauses were inserted in the
contracts, regarding "Government regulations, railroad embargoes, lack of vessel space,
the exigencies of the requirements of the United States Government," in connection
with the tanks and "Priority Certificate, subject to the United State Government
requirements," with respect to the motors. At the time of the execution of the contracts,
the parties were not unmindful of the contingency of the United States Government not
allowing the export of the goods, nor of the fact that the other foreseen circumstances
therein stated might prevent it.
Considering these contracts in the light of the civil law, we cannot but conclude
that the term which the parties attempted to fix is so uncertain that one cannot tell just

whether, as a matter of fact, those articles could be brought to Manila or not. If that is
the case, as we think it is, the obligations must be regarded as conditional. Obligations
for the performance of which a day certain has been fixed shall be demandable only
when the day arrives. A day certain is understood to be one which must necessarily
arrive, even though its date be unknown.
If the uncertainty should consist in the arrival or non-arrival of the day, the obligation is
conditional and shall be governed by the rules of the next preceding section. (referring
to pure and conditional obligations). (Art. 1125, Civ. Code.)

CASE NO. 17
ROSENDO O. CHAVES, vs. FRUCTUOSO GONZALES
G.R. No. L-27454
30, 1970
PONENTE: REYES, J.B.L.
En Banc Decision

April

FACTS:
On July 1963, the plaintiff Chaves delivered to the defendant Gonzales, who is
a typewriter repairer, a portable typewriter for routine cleaning and servicing. The
defendant was not able to finish the job after some time despite repeated reminders
made by the plaintiff. In October, 1963, the defendant asked from the plaintiff the
sum of P6.00 for the purchase of spare parts, which amount the plaintiff gave to the
defendant. On October 26, 1963, after getting exasperated with the delay of the
repair of the typewriter, the plaintiff went to the house of the defendant and asked
for the return of the typewriter. On reaching home, the plaintiff examined the
typewriter returned to him by the defendant and found out that the same 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 to the plaintiff some of the missing parts, the interior cover and
the P6.00.
The plaintiff had his typewriter repaired by Freixas Business Machines, and
the repair job cost him a total of P89.85, including labor and materials. On August
23, 1965, the plaintiff commenced this action before the City Court of Manila,
demanding from the defendant the payment of P90.00 as actual and compensatory
damages, P100.00 for temperate damages, P500.00 for moral damages, and
P500.00 as attorneys fees.
ISSUE:
Whether or not there has been breach of contract for non-performance.
HELD:
The Court ruled in the affirmative. The inferences derivable from these
findings of fact are that the appellant and the appellee had a perfected contract for
cleaning and servicing a typewriter; that they intended that the defendant was to
finish it at some future time although such time was not specified; and that such
time had passed without the work having been accomplished, far the defendant
returned the typewriter cannibalized and unrepaired, which in itself is a breach of
his obligation, without demanding that he should be given more time to finish the
job, or compensation for the work he had already done. The time for compliance
having evidently expired, and there being a breach of contract by non-

performance, it was academic for the plaintiff to have first petitioned the court to
fix a period for the performance of the contract before filing his complaint in this
case. Defendant cannot invoke Article 1197 of the Civil Code for he virtually
admitted non-performance by returning the typewriter that he was obliged to
repair in a non-working condition, with essential parts missing. The fixing of a
period would thus be a mere formality and would serve no purpose than to delay.
It is clear that the defendant-appellee contravened the tenor of his obligation
because he not only did not repair the typewriter but returned it "in shambles",
according to the appealed decision. For such contravention, as appellant contends,
he is liable under Article 1167 of the Civil Code. for the cost of executing the
obligation in a proper manner. The cost of the execution of the obligation in this
case should be the cost of the labor or service expended in the repair of the
typewriter, which is in the amount of P58.75. because the obligation or contract
was to repair it.
In addition, the defendant-appellee is likewise liable, under Article 1170 of
the Code, for the cost of the missing parts, in the amount of P31.10, for in his
obligation to repair the typewriter he was bound, but failed or neglected, to return
it in the same condition it was when he received it.

CASE NO. 18
VICENTE SINGSON ENCARNACION vs. JACINTA BALDOMAR, ET AL
G.R. No. L-264
October 4, 1946
PONENTE: HILADO
En
Banc Decision
FACTS:
Vicente Singson Encarnacion, leased a house to Jacinto Baldomar and her
son, Lefrado Fernando, upon a month-to-month basis for the monthly rental of P35.
After Manila was liberated in the last war, plaintiff Singson Encarnacion notified
defendants, to vacate the house on or before April 15, 1945, because plaintiff
needed it for his offices as a result of the destruction of the building where said
plaintiff had said offices before. Despite this demand, defendants insisted on
continuing their occupancy.
The defense interposed by defendants, the contract which they had
celebrated with plaintiff since the beginning authorized them to continue occupying
the house indefinitely and while they should faithfully fulfill their obligations as
respects the payment of the rentals, and that this agreement had been ratified
when another ejectment case between the parties filed during the Japanese regime
concerning the same house was allegedly compounded in the municipal.
ISSUE:
Whether or not the contact of lease is for an indefinite period.
HELD:
The Court ruled in the negative. The defense thus set up by defendant
Lefrado Fernando would leave to the sole and exclusive will of one of the
contracting parties (defendants in this case) the validity and fulfillment of the
contract of lease, within the meaning of article 1256 of the Civil Code, since the
continuance and fulfillment of the contract would then depend solely and
exclusively upon their free and uncontrolled choice between continuing paying the
rentals or not, completely depriving the owner of all say in the matter. If this
defense were to be allowed, so long as defendants elected to continue the lease by
continuing the payment of the rentals, the owner would never be able to
discontinue it; conversely, although the owner should desire the lease to continue,
the lessees could effectively thwart his purpose if they should prefer to terminate
the contract by the simple expedient of stopping payment of the rentals. This, of
course, is prohibited by the aforesaid article of the Civil Code

CASE NO. 19
DARIO AND GAUDENCIO ELEIZEGUI vs. THE MANILA LAWN TENNIS CLUB
G.R. No. 967
May 19, 1903
PONENTE: ARELLANO
En
Banc Decision
FACTS:
A contract of lease was executed on January 25, 1980 over a piece of land
owned by the plaintiffs Eleizegui (Lessor) to the Manila Lawn Tennis Club, an English
association, represented by Mr. Williamson for a fixed consideration of P25 per
month and accordingly, to last at the will of the lessee. Under the contract, the
lessee can make improvements deemed desirable for the comfort and amusement
of its members. It appeared that the plaintiffs terminated the lease right on the first
month. The defendant is in the belief that there can be no other mode of
terminating the lease than by its own will, as what they believe has been stipulated.
As a result the plaintiff filed a case for unlawful detainer for the restitution of
the land claiming that article 1569 of the Civil Code provided that a lessor may
judicially dispossess the lessee upon the expiration of the conventional term or of
the legal term; the conventional term that is, the one agreed upon by the parties;
the legal term, in defect of the conventional, fixed for leases by articles 1577 and
1581. The Plaintiffs argued that the duration of the lease depends upon the will of
the lessor on the basis of Art. 1581 which provides that, "When the term has not
been fixed for the lease, it is understood to be for years when an annual rental has
been fixed, for months when the rent is monthly. . . ." The second clause of the
contract provides as follows: "The rent of the said land is fixed at 25 pesos per
month."
ISSUE:
Whether or not the parties have agreed upon the duration of the lease
contract.
HELD:
The Court ruled in the affirmative. It having been demonstrated that the legal
term cannot be applied, there being a conventional term, this destroys the
assumption that the contract of lease was wholly terminated by the notice given by
the plaintiffs, this notice being necessary only when it becomes necessary to have
recourse to the legal term. Nor had the plaintiffs, under the contract, any right to
give such notice. It is evident that they had no intention of stipulating that they
reserved the right to give such notice. Clause 3 begins as follows: "Mr. Williamson,
or whoever may succeed him as secretary of said club, may terminate this lease
whenever desired without other formality than that of giving a month's notice. The
owners of the land undertake to maintain the club as tenant as long as the latter
shall see fit." The right of the one and the obligation of the others being thus placed
in antithesis, there is something more, much more, than the inclusio unius, exclusio
alterius. It is evident that the lessors did not intend to reserve to themselves the
right to rescind that which they expressly conferred upon the lessee by establishing
it exclusively in favor of the latter.
It would be the greatest absurdity to conclude that in a contract by which the
lessor has left the termination of the lease to the will of the lessee, such a lease can
or should be terminated at the will of the lessor.

CASE NO. 20
PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA
SANTOS Y CANON FAUSTINO, deceased vs. LUI SHE in her own behalf and
as administratrix of the intestate estate of Wong Heng, deceased
FACTS:
Justina Santos and her sister Lorenzo were the owners in common of a piece
of land in Manila. The sisters lived in one of the houses, while Wong Heng, a
Chinese, lived with his family in the restaurant. Wong had been a long-time lessee
of a portion of the property, paying a monthly rental of P2,620.
On September 22, 1957 Justina Santos became the owner of the entire
property as her sister died with no other heir. Then already well advanced in years,
being at the time 90 years old, blind, crippled and an invalid, she was left with no
other relative to live with, but she was taken cared of by Wong. "In grateful
acknowledgment of the personal services of the Lessee to her," Justina Santos
executed on November 15, 1957, a contract of lease in favor of Wong, covering the
portion then already leased to him and another portion fronting Florentino Torres
street. The lease was for 50 years, although the lessee was given the right to
withdraw at any time from the agreement; the monthly rental was P3,120. Ten days
later (November 25), the contract was amended so as to make it cover the entire
property, including the portion on which the house of Justina Santos stood, at an
additional monthly rental of P360.
On November 18, 1958 she executed two other contracts, one extending the
term of the lease to 99 years, and another fixing the term of the option at 50 years.
Both contracts are written in Tagalog. In two wills executed on August 24 and 29,
1959, she bade her legatees to respect the contracts she had entered into with
Wong, but in a codicil of a later date (November 4, 1959) she appears to have a
change of heart. Claiming that the various contracts were made by her because of
machinations and inducements practised by him, she now directed her executor to
secure the annulment of the contracts.
Both parties however died, Wong Heng on October 21, 1962 and Justina
Santos on December 28, 1964. Wong was substituted by his wife, Lui She, the other
defendant in this case, While Justina Santos was substituted by the Philippine
Banking Corporation.
ISSUE:
Whether or not the insertion in the contract of a resolutory condition,
permitting the cancellation of the contract by one of the parties, valid?
HELD:
The Court ruled in the affirmative. In the case of Taylor v. Uy Tieng Piao,
Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment
to the insertion in a contract for personal service of a resolutory condition
permitting the cancellation of the contract by one of the parties. Such a stipulation,
as can be readily seen, does not make either the validity or the fulfillment of the
contract dependent upon the will of the party to whom is conceded the privilege of
cancellation; for where the contracting parties have agreed that such option shall
exist, the exercise of the option is as much in the fulfillment of the contract as any
other act which may have been the subject of agreement. Indeed, the cancellation
of a contract in accordance with conditions agreed upon beforehand is fulfillment.

And so it was held in Melencio v. Dy Tiao Lay that a "provision in a lease

contract that the lessee, at any time before he erected any building on the land,
might rescind the lease, can hardly be regarded as a violation of article 1256 [now
art. 1308] of the Civil Code."

CASE NO. 21
LOURDES VALERIO LIM vs. PEOPLE OF THE PHILIPPINES
G.R. No. L-34338
November 21, 1984
PONENTE: RELOVA
Decided
by: First Division
FACTS:
On January 10, 1966, appellant Lourdes Valerion Lim who is a
businesswoman went to the house of Maria Ayroso and proposed to sell Ayrosos
tobacco consisting of 615 kilos at P1.30 a kilo. The appellant was to receive the over
price for which she could sell the tobacco. This agreement was made in the
presence of the plaintiffs sister, Salud Bantug. Salvador Bantug drew the document
which apprised of a certification that appellant had received from Ayroso the
amount of 615 kilos of leaf tobacco to be sold at P1.30 per kilo. It is also stated
there that the proceeds in the amount of P799.50 will be given to Ayroso as soon as
it was sold. It was signed by the appellant and witnessed by the complainants sister
Salud Bantug and the latters maid Genoveva Ruiz.
The appellant that time was bringing jeep, and the tobacco was simply
loaded in the jeep. However, of the total value of P799.50, the appellant had paid to
Ayroso only P240.00 and this was paid on three different times. As no further
amount was paid, complainant Ayroso filed a complaint against appellant Lim for
estafa. Judgment was rendered against appellant. In this petition for review on
certiorari, appellant claimed that the obligation does not fix a period and that the
court should fix the duration thereof pursuant to Article 1197 of the Civil Code.
ISSUE:
Whether or not Article 1197 shall apply that, Court should fix the duration of
the obligation if it does not fix a period.
HELD:
The Court ruled in the negative. It is clear in the agreement, Exhibit "A", that
the proceeds of the sale of the tobacco should be turned over to the complainant as
soon as the same was sold, or, that the obligation was immediately demandable as
soon as the tobacco was disposed of. Hence, Article 1197 of the New Civil Code,
which provides that the courts may fix the duration of the obligation if it does not fix
a period, does not apply.
Anent the argument that petitioner was not an agent because Exhibit "A"
does not say that she would be paid the commission if the goods were sold, the
Court of Appeals correctly resolved the matter as follows: ... Aside from the fact that
Maria Ayroso testified that the appellant asked her to be her agent in selling
Ayroso's tobacco, the appellant herself admitted that there was an agreement that
upon the sale of the tobacco she would be given something. The appellant is a
businesswoman, and it is unbelievable that she would go to the extent of going to
Ayroso's house and take the tobacco with a jeep which she had brought if she did
not intend to make a profit out of the transaction. Certainly, if she was doing a favor
to Maria Ayroso and it was Ayroso who had requested her to sell her tobacco, it
would not have been the appellant who would have gone to the house of Ayroso,
but it would have been Ayroso who would have gone to the house of the appellant
and deliver the tobacco to the appellant.

The fact that appellant received the tobacco to be sold at P1.30 per kilo and
the proceeds to be given to complainant as soon as it was sold, strongly negates
transfer of ownership of the goods to the petitioner. The agreement (Exhibit "A')
constituted her as an agent with the obligation to return the tobacco if the same
was not sold.

CASE NO. 22
GREGORIO ARANETA, INC. vs. THE PHILIPPINE SUGAR ESTATES
DEVELOPMENT CO., LTD
G.R. No. L-22558
May
31, 1967
PONENTE: REYES, JBL
En
Banc Decision
FACTS:
On July 28, 1950, J. M. Tuason & Co., Inc., owner of a big tract land situated in
Quezon City, through Gregorio Araneta, Inc. sold a portion thereoffor the sum of
P430,514.00, to Philippine Sugar Estates Development Co., Ltd. The parties stipulated in
the contract of purchase and sale with mortgage, that the buyer will build on the said
parcel land the Sto. Domingo Church and Convent while the seller for its part will
construct streets on the NE and NW and SW sides of the land herein sold so that the
latter will be a block surrounded by streets on all four sides; and the street on the NE
side shall be named "Sto. Domingo Avenue;"
The buyer, Philippine Sugar Estates Development Co., Ltd., finished the
construction of Sto. Domingo Church and Convent, but the seller, Gregorio Araneta, Inc.,
which began constructing the streets, is unable to finish the construction of the street in
the Northeast side because a certain third-party who has been physically occupying a
middle part thereof, refused to vacate the same. Philippine Sugar Estates Development
Co., Lt. filed its complaint against J. M. Tuason & Co., Inc., seeking to compel the latter
to comply with their obligation.
ISSUE:
Whether or not the parties agreed that the petitioner should have reasonable
time to perform its part of the bargain.
HELD:
The Court ruled in the negative. The fixing of a period by the courts under Article
1197 of the Civil Code of the Philippines is sought to be justified on the basis that
petitioner (defendant below) placed the absence of a period in issue by pleading in its
answer that the contract with respondent Philippine Sugar Estates Development Co.,
Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable time within which to comply with
its obligation to construct and complete the streets." Neither of the courts below seems
to have noticed that, on the hypothesis stated, what the answer put in issue was not
whether the court should fix the time of performance, but whether or not the parties
agreed that the petitioner should have reasonable time to perform its part of the
bargain. If the contract so provided, then there was a period fixed, a "reasonable time;"
and all that the court should have done was to determine if that reasonable time had
already elapsed when suit was filed if it had passed, then the court should declare that
petitioner had breached the contract, as averred in the complaint, and fix the resulting
damages. On the other hand, if the reasonable time had not yet elapsed, the court
perforce was bound to dismiss the action for being premature. But in no case can it be
logically held that under the plea above quoted, the intervention of the court to fix the
period for performance was warranted, for Article 1197 is precisely predicated on the
absence of any period fixed by the parties.
It must be recalled that Article 1197 of the Civil Code involves a two-step
process. The Court must first determine that "the obligation does not fix a period" (or
that the period is made to depend upon the will of the debtor)," but from the nature and
the circumstances it can be inferred that a period was intended" (Art. 1197, pars. 1 and

2). This preliminary point settled, the Court must then proceed to the second step, and
decide what period was "probably contemplated by the parties" (Do., par. 3In this
connection, it is to be borne in mind that the contract shows that the parties were fully
aware that the land described therein was occupied by squatters, because the fact is
expressly mentioned therein.
As the parties must have known that they could not take the law into their own
hands, but must resort to legal processes in evicting the squatters, they must have
realized that the duration of the suits to be brought would not be under their control nor
could the same be determined in advance. The conclusion is thus forced that the parties
must have intended to defer the performance of the obligations under the contract until
the squatters were duly evicted, as contended by the petitioner Gregorio Araneta, Inc.

CASE NO. 23
PACIFICA MILLARE vs. HON. HAROLD M. HERNANDO, In his capacity
as Presiding Judge, Court of Instance of Abra, Second Judicial District,
Branch I, ANTONIO CO and ELSA CO
G.R. No. L-55480
June 30,
1987
PONENTE: FELICIANO
Decided
by: First Division
FACTS:
Petitioner Pacifica Millare as lessor and private respondent Elsa Co, as lessee
executed a 5-year contract of lease. The parties agreed to rent out a commercial
unit for a monthly rate of P350. Before the expiration of the lease contract, the
lessor informed them that the lessee can continue renting the unit as they were
amenable to paying increased rentals of P1,200.00 a month. In response, a
counteroffer of P700.00 a month was made by the lessee. At this point, the lessor
allegedly stated that the amount of monthly rentals could be resolved at a later
time since "the matter is simple among us", which alleged remark was supposedly
taken by the spouses Co to mean that the Contract of Lease had been renewed. On
22 July 1980, Mrs. Millare wrote the Co spouses requesting them to vacate the
leased premises as she had no intention of renewing the Contract of Lease. Lessees
responded by reiterated their unwillingness to pay the Pl,200.00 monthly rentals
and by depositing the P700 monthly rentals in court. On 1 September 1980, Mrs.
Millare filed an ejectment case against the Co spouses in the Municipal Court of
Bangued, Abra. The judge rendered a "Judgment by Default" ordering the renewal of
the lease contract for a term of 5 years counted from the expiration date of the
original lease contract, and fixing monthly rentals thereunder at P700.00 a month,
payable in arrears.
ISSUE:
Whether or not there was a renewal of the lease contract between the
parties.
HELD:
The Court ruled in the negative. The first paragraph of Article 1197 is clearly
inapplicable, since the Contract of Lease did in fact fix an original period of five
years, which had expired. It is also clear from paragraph 13 of the Contract of Lease
that the parties reserved to themselves the faculty of agreeing upon the period of
the renewal contract. The second paragraph of Article 1197 is equally clearly
inapplicable since the duration of the renewal period was not left to the wiu of the
lessee alone, but rather to the will of both the lessor and the lessee. Most
importantly, Article 1197 applies only where a contract of lease clearly exists. Here,
the contract was not renewed at all, there was in fact no contract at all the period of
which could have been fixed.
The respondents themselves, public and private, do not pretend that the
continued occupancy of the leased premises after 31 May 1980, the date of
expiration of the contract, was with the acquiescence of the lessor. Even if it be
assumed that tacite reconduccion had occurred, the implied new lease could not
possibly have a period of five years, but rather would have been a month-to-month
lease since the rentals (under the original contract) were payable on a monthly
basis. At the latest, an implied new lease (had one arisen) would have expired as of

the end of July 1980 in view of the written demands served by the petitioner upon
the private respondents to vacate the previously leased premises.
Contractual terms and conditions created by a court for two parties are a
contradiction in terms. If they are imposed by a judge who draws upon his own
private notions of what morals, good customs, justice, equity and public policy"
demand, the resulting "agreement" cannot, by definition, be consensual or
contractual in nature. It would also follow that such coerced terms and conditions
cannot be the law as between the parties themselves. Contracts spring from the
volition of the parties. That volition cannot be supplied by a judge and a judge who
pretends to do so, acts tyrannically, arbitrarily and in excess of his jurisdiction.
CASE NO. 24
ROLITO CALANG and PHILTRANCO SERVICE ENTERPRISES, INC. vs. PEOPLE
OF THE PHILIPPINES
G.R. No. 190696
August 3, 2010
PONENTE: BRION, J.
Decided
by: Third Division
FACTS:
At around 2:00 p.m. of April 22, 1989, Rolito Calang was driving Philtranco
Bus, owned by Philtranco along Sta. Margarita, Samar when its rear left side hit the
front left portion of a Sarao jeep coming from the opposite direction. As a result of
the collision, Cresencio Pinohermoso, the jeeps driver, lost control of the vehicle,
and bumped and killed Jose Mabansag, a bystander who was standing along the
highways shoulder. The jeep turned turtle three (3) times before finally stopping at
about 25 meters from the point of impact. Two of the jeeps passengers, Armando
Nablo and an unidentified woman, were instantly killed, while the other passengers
sustained serious physical injuries.
The prosecution charged Calang with multiple homicide, multiple serious
physical injuries and damage to property thru reckless imprudence before the
Regional Trial Court and found him guilty beyond reasonable doubt. The RTC ordered
Calang and Philtranco, jointly and severally, to pay P50,000.00 as death indemnity
to the heirs of Armando; P50,000.00 as death indemnity to the heirs of Mabansag;
and P90,083.93 as actual damages to the private complainants.
ISSUE:
Whether or not Philtranco should be jointly and severally liable with Calang in
the criminal case.
HELD:
The Court ruled in the negative. The Court emphasizes that Calang was
charged criminally before the RTC. Undisputedly, Philtranco was not a direct party in
this case. Since the cause of action against Calang was based on delict, both the
RTC and the CA erred in holding Philtranco jointly and severally liable with Calang,
based on quasi-delict under Articles 21761 and 21802 of the Civil Code. Articles
2176 and 2180 of the Civil Code pertain to the vicarious liability of an employer for
quasi-delicts that an employee has committed. Such provision of law does not apply

to civil liability arising from delict. If at all, Philtrancos liability may only be
subsidiary.
The provisions of the Revised Penal Code on subsidiary liability Articles 102
and 103 are deemed written into the judgments in cases to which they are
applicable. Thus, in the dispositive portion of its decision, the trial court need not
expressly pronounce the subsidiary liability of the employer.3 Nonetheless, before
the employers subsidiary liability is enforced, adequate evidence must exist
establishing that (1) they are indeed the employers of the convicted employees; (2)
they are engaged in some kind of industry; (3) the crime was committed by the
employees in the discharge of their duties; and (4) the execution against the latter
has not been satisfied due to insolvency. The determination of these conditions may
be done in the same criminal action in which the employees liability, criminal and
civil, has been pronounced, in a hearing set for that precise purpose, with due
notice to the employer, as part of the proceedings for the execution of the
judgment.

CASE NO. 25
ERNESTO V. RONQUILLO vs. HONORABLE COURT OF APPEALS AND
ANTONIO P. SO
G.R. No. L-55138
September 28,
1984
PONENTE: CUEVAS, J.
Decided by:
Second Division
FACTS:
Petitioner Ernesto V. Ronquillo was one of four (4) defendants in a civil case of
the then Court of First Instance of Rizal filed by private respondent Antonio P. So, on
July 23, 1979, for the collection of the sum of P17,498.98 plus attorney's fees and
costs. The other defendants were Offshore Catertrade Inc., Johnny Tan and Pilar Tan.
The amount of P117,498.98 sought to be collected represents the value of the
checks issued by said defendants in payment for foodstuffs delivered to and
received by them. The said checks were dishonored by the drawee bank.
On December 13, 1979, the lower court rendered its Decision based on the
compromise agreement, which stipulates, among others, that the Plaintiff agrees to
reduce its total claim of P117,498.95 to only P110,000.00 and defendants agree to
acknowledge the validity of such claim and further bind themselves to initially pay
out of the total indebtedness of P110,000.00 the amount of P55,000.00 on or before
December 24, 1979, the balance of P55,000.00, defendants individually and jointly
agree to pay within a period of six months from January 1980, or before June 30,
1980.
Upon the defendants default, herein private respondent filed a Motion for
Execution. Ronquillo and another defendant Pilar Tan offered to pay their shares of
the 55,000 already due. But on January 22, 1980, private respondent Antonio So
moved for the reconsideration and/or modification of the aforesaid Order of
execution and prayed instead for the "execution of the decision in its entirety
against all defendants, jointly and severally. Petitioner opposed the said motion
arguing that under the decision of the lower court being executed which has already
become final, the liability of the four (4) defendants was not expressly declared to
be solidary, consequently each defendant is obliged to pay only his own pro-rata or
1/4 of the amount due and payable.
ISSUE:
Whether or not the nature of the liability of petitioner is solidary.
HELD:
The Court ruled in the negative. The decision of the lower court based on the
parties' compromise agreement, provides: XXX the balance of P55,000.00,
defendants individually and jointly agree to pay within a period of six months from
January 1980 or before June 30, 1980.
Clearly then, by the express term of the compromise agreement and the
decision based upon it, the defendants obligated themselves to pay their obligation
"individually and jointly".
The term "individually" has the same meaning as "collectively", "separately",
"distinctively", respectively or "severally". An agreement to be "individually liable"
undoubtedly creates a several obligation, and a "several obligation is one by which
one individual binds himself to perform the whole obligation.

In the case of Parot vs. Gemora, "the phrase juntos or separadamente or in

the promissory note is an express statement making each of the persons who
signed it individually liable for the payment of the fun amount of the obligation
contained therein." Likewise in Un Pak Leung vs. Negorra, "in the absence of a
finding of facts that the defendants made themselves individually liable for the debt
incurred they are each liable only for one-half of said amount.
The obligation in the case at bar being described as "individually and jointly",
the same is therefore enforceable against one of the numerous obligors.

CASE NO. 26
MALAYAN INSURANCE CO., INC. vs. THE HON. COURT OF APPEALS (THIRD
DIVISION) MARTIN C. VALLEJOS, SIO CHOY, SAN LEON RICE MILL, INC. and
PANGASINAN TRANSPORTATION CO., INC.
G.R. No. L-36413
September
26, 1988
PONENTE: PADILLA
Decided by:
Second Division
FACTS:
Malayan Insurance Co. Inc. issued a Private Car Comprehensive Policy covering a
Willys jeep. The insurance coverage was for "own damage" not to exceed P600.00 and
"third-party liability" in the amount of P20,000.00. During the effectivity of the
insurance policy, , the insured jeep, while being driven by one Juan P. Campollo an
employee of the respondent San Leon Rice Mill, Inc., collided with a passenger bus
belonging to the respondent Pangasinan Transportation Co., Inc. at the national highway
in Barrio San Pedro, Rosales, Pangasinan, causing damage to the insured vehicle and
injuries to the driver, Juan P. Campollo, and the respondent Martin C. Vallejos, who was
riding in the ill-fated jeep.
Martin C. Vallejos filed an action for damages against Sio Choy, Malayan
Insurance Co., Inc. and the PANTRANCO before the Court of First Instance of Pangasinan.
The trial court rendered judgment holding Sio Choy, SAN LEON, and MALAYAN jointly
and severally liable. However, MALAYANs liability will only be up to P20,000.
ISSUE:
Whether or not petitioner Malayan and respondents Sio Choy and San Leon Rice
Mill, Inc. "solidarily liable" to respondent Vallejos.
HELD:

The Court ruled in the negative. It is only respondents Sio Choy and San Leon
Rice Mill, Inc, (to the exclusion of the petitioner) are solidarily liable to respondent
Vallejos for the damages awarded to Vallejos. It thus appears that respondents Sio Choy
and San Leon Rice Mill, Inc. are the principal tortfeasors who are primarily liable to
respondent Vallejos. The law states that the responsibility of two or more persons who
are liable for a quasi-delict is solidarily.
On the other hand, the basis of petitioner's liability is its insurance contract with
respondent Sio Choy. If petitioner is adjudged to pay respondent Vallejos in the amount
of not more than P20,000.00, this is on account of its being the insurer of respondent
Sio Choy under the third party liability clause included in the private car comprehensive
policy existing between petitioner and respondent Sio Choy at the time of the
complained vehicular accident.
While it is true that where the insurance contract provides for indemnity against
liability to third persons, such third persons can directly sue the insurer, however, the
direct liability of the insurer under indemnity contracts against third party liability does
not mean that the insurer can be held solidarily liable with the insured and/or the other
parties found at fault. The liability of the insurer is based on contract; that of the insured
is based on tort.
In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent
Vallejos, but it cannot, as incorrectly held by the trial court, be made "solidarily" liable
with the two principal tortfeasors namely respondents Sio Choy and San Leon Rice Mill,
Inc. For if petitioner-insurer were solidarily liable with said two (2) respondents by
reason of the indemnity contract against third party liability-under which an insurer can

be directly sued by a third party this will result in a violation of the principles
underlying solidary obligation and insurance contracts.
In solidary obligation, the creditor may enforce the entire obligation against one
of the solidary debtors. On the other hand, insurance is defined as "a contract whereby
one undertakes for a consideration to indemnify another against loss, damage, or
liability arising from an unknown or contingent event."

CASE NO. 27
PHILIPPINE NATIONAL BANKCvs. INDEPENDENT PLANTERS
ASSOCIATION, INC., ANTONIO DIMAYUGA, DELFIN FAJARDO, CEFERINO
VALENCIA, MOISES CARANDANG, LUCIANO CASTILLO, AURELIO VALENCIA,
LAURO LEVISTE, GAVINO GONZALES, LOPE GEVANA and BONIFACIO
LAUREANA
G.R. No. L-28046
May 16,
1983
PONENTE: PLANA, J.
Decided by:
Second Division
FACTS:
The Philippine National Bank (PNB) appealed from the Order of the defunct
Court of First Instance of Manila, dismissing PNB's complaint against several solidary
debtors for the collection of a sum of money on the ground that one of the
defendants (Ceferino Valencia) died during the pendency of the case and therefore
the complaint, being a money claim based on contract, should be prosecuted in the
testate or intestate proceeding for the settlement of the estate of the deceased
defendant.
PNB assails the order of dismissal, invoking its right of recourse against one,
some or all of its solidary debtors under Article 1216 of the Civil Code, The creditor
may proceed against any one of the solidary debtors or some or all of them
simultaneously. The demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the others, so long as the debt
has not been fully collected.
ISSUE:
Whether or not in an action for collection of a sum of money based on
contract against all the solidary debtors, the death of one defendant deprives the
court of jurisdiction to proceed with the case against the surviving defendants.
HELD:
The Court ruled in the negative. It is now settled that the quoted Article 1216
grants the creditor the substantive right to seek satisfaction of his credit from one,
some or all of his solidary debtors, as he deems fit or convenient for the protection
of his interests; and if, after instituting a collection suit based on contract against
some or all of them and, during its pendency, one of the defendants dies, the court
retains jurisdiction to continue the proceedings and decide the case in respect of
the surviving defendants.
Thus in Manila Surety & Fidelity Co., Inc. vs. Villarama et al., this Court ruled:
Construing Section 698 of the Code of Civil Procedure from whence the aforequoted
provision (Sec. 6, Rule 86) was taken, this Court held that where two persons are
bound in solidum for the same debt and one of them dies, the whole indebtedness
can be proved against the estate of the latter, the decedent's liability being
absolute and primary; and if the claim is not presented within the time provided by
the rules, the same will be barred as against the estate. It is evident from the
foregoing that Section 6 of Rule 87 (now Rule 86) provides the procedure should the
creditor desire to go against the deceased debtor, but there is certainly nothing in
the said provision making compliance with such procedure a condition precedent
before an ordinary action against the surviving solidary debtors, should the creditor

choose to demand payment from the latter, could be entertained to the extent that
failure to observe the same would deprive the court jurisdiction to take cognizance
of the action against the surviving debtors. Upon the other hand, the Civil Code
expressly allows the creditor to proceed against any one of the solidary debtors or
some or all of them simultaneously. There is, therefore, nothing improper in the
creditor's filing of an action against the surviving solidary debtors alone, instead of
instituting a proceeding for the settlement of the estate of the deceased debtor
wherein his claim could be filed.

CASE NO. 28
THE BACHRACH MOTOR CO., INC. vs. FAUSTINO ESPIRITU
G.R. No. L-28497
November 6, 1928
PONENTE: AVANCEA, C. J.
En
Banc Decision
FACTS:
These two cases, Nos. 28497 and 28948, were tried together. In connection
with case 28497, on July 28, 1925 the defendant Faustino Espiritu purchased of the
plaintiff corporation a two-ton White truck for P11,983.50, paying P1,000 down to
apply on account of this price, and obligating himself to pay the remaining
P10,983.50 within the periods agreed upon. To secure the payment of this sum, the
defendants mortgaged the said truck purchased and, besides, three others, two of
which are numbered 77197 and 92744 respectively, and all of the White make.
These two trucks had been purchased from the same plaintiff and were fully paid for
by the defendant and his brother Rosario Espiritu. The defendant failed to pay
P10,477.82 of the price secured by this mortgage.
In connection with case 28498, on February 18, 1925 the defendant bought a
one-ton White truck of the plaintiff corporation for the sum of P7,136.50, and after
having deducted the P500 cash payment and the 12 per cent annual interest on the
unpaid principal, obligated himself to make payment of this sum within the periods
agreed upon. To secure this payment the defendant mortgaged to the plaintiff
corporation the said truck purchased and two others, numbered 77197 and 92744,
respectively, the same that were mortgaged in the purchase of the other truck
referred to in the other case. The defendant failed to pay P4,208.28 of this sum.
In both sales it was agreed that 12 per cent interest would be paid upon the
unpaid portion of the price at the execution of the contracts, and in case of nonpayment of the total debt upon its maturity, 25 per cent thereon, as penalty.
While these two cases were pending in the lower court the mortgaged trucks
were sold by virtue of the mortgage, all of them together bringing in, after
deducting the sheriff's fees and transportation charges to Manila, the net sum of
P3,269.58.
ISSUE:
Whether or not the 25 percent penalty upon the debt in addition to 12
percent interest per annum usurious.
HELD:
The Court ruled in the negative. It is finally contended that the 25 per cent
penalty upon the debt, in addition to the interest of 12 per cent per annum, makes
the contract usurious. Such a contention is not well founded. Article 1152 of the
Civil Code permits the agreement upon a penalty apart from the interest. Should
there be such an agreement, the penalty, as was held in the case of Lopez vs.
Hernaez (32 Phil., 631), does not include the interest, and which may be demanded
separately. According to this, the penalty is not to be added to the interest for the
determination of whether the interest exceeds the rate fixed by the law, since said
rate was fixed only for the interest. But considering that the obligation was partly
performed, and making use of the power given to the court by article 1154 of the
Civil Code, this penalty is reduced to 10 per cent of the unpaid debt.

With the sole modification that instead of 25 per cent upon the sum owed,
the defendants need pay only 10 per cent thereon as penalty.

CASE NO. 29
ROBES-FRANCISCO REALTY & DEVELOPMENT CORPORATION vs.
COURT OF FIRST INSTANCE OF RIZAL (BRANCH XXXIV), and LOLITA MILLAN
G.R. No. L-41093
October 30, 1978
PONENTE: MUOZ PALMA, J.
Decided
by: First Division
FACTS:
In May 1962, Robes Corporation entered into a contract of sale with Millan for
a parcel of land in the amount of 3,864.00 payable in installments. Millan complied
with her obligation and made her final payment on December 22, 1971 for a total
payment of P5,193.63 including interests and expenses for registration of title. On
March 2, 1973 the deed of absolute sale was executed but the transfer certificate of
title could not be executed because the parcel of land conveyed to Millan was
included among other properties of the corporation mortgaged to GSIS to secure an
obligation of P10 million, hence, the owners duplicate certificate of title of the
subdivision was in the possession of the GSIS.
Notwithstanding the lapse of the above-mentioned stipulated period of six (6)
months, the corporation failed to cause the issuance of the corresponding transfer
certificate of title over the lot sold to Millan, hence, the latter filed on August 14,
1974 a complaint for specific performance and damages against Robes-Francisco
Realty & Development Corporation in the Court of First Instance of Rizal. The CFI
rendered a judgment against Robes-Francisco Corporation. Petitioner Corporation
questions the award of P20,000.00 nominal damages and P5,000.00 attorneys fees
alleging such to be excessive and unjustified.
ISSUE:
Whether or not the obligation is with a penal clause and penalty shall
substitute the indemnity for damages and the payment of interests in case of
noncompliance.
HELD:
The Court ruled in the negative. Petitioner contends that the deed of absolute
sale executed between the parties stipulates that should the vendor fail to issue the
transfer certificate of title within six months from the date of full payment, it shall
refund to the vendee the total amount paid for with interest at the rate of 4% per
annum, hence, the vendee is bound by the terms of the provision and cannot
recover more than what is agreed upon. Presumably, petitioner in invoking Article
1226 of the Civil Code which provides that in obligations with a penal clause, the
penalty shall substitute the indemnity for damages and the payment of interests in
case of noncompliance, if there is no stipulation to the contrary.
The foregoing argument of petitioner is totally devoid of merit. We would
agree with petitioner if the clause in question were to be considered as a penal
clause. Nevertheless, for very obvious reasons, said clause does not convey any
penalty, for even without it, pursuant to Article 2209 of the Civil Code, the vendee
would be entitled to recover the amount paid by her with legal rate of interest which
is even more than the 4% provided for in the clause.

It is therefore inconceivable that the aforecited provision in the deed of sale is a

penal clause which will preclude an award of damages to the vendee Millan. In fact
the clause is so worded as to work to the advantage of petitioner corporation.

CASE NO. 30
MARIANO C. PAMINTUAN vs. COURT OF APPEALS and YU PING KUN CO.,
INC.
G.R. No. L-26339
December
14, 1979
PONENTE: AQUINO, J.
Decided by:
Second Division
FACTS:
In 1960, Pamintuan was the holder of a barter license wherein he was
authorized to export to Japan one thousand metric tons of white flint corn valued at
forty-seven thousand United States dollars in exchange for a collateral importation
of plastic sheetings of an equivalent value. By virtue of that license, he entered into
an agreement to ship his corn to Tokyo Menka Kaisha, Ltd. of Osaka, Japan in
exchange for plastic sheetings. He contracted to sell the plastic sheetings to Yu Ping
Kun Co., Inc.
After Pamintuan had delivered 224,150 yards of sheetings of interior quality
valued at P163,047.87, he refused to deliver the remainder of the shipments. As
justification for his refusal, Pamintuan said that the company failed to comply with
the conditions of the contract and that it was novated with respect to the price.
On December 2, 1960, the company filed its amended complaint for damages
against Pamintuan.
ISSUE:
Whether or not the buyer, Yu Ping Kun Co., Inc., is entitled to recover only
liquidated damages.
HELD:
The Court ruled in the negative. Pamintuan relies on the rule that a penalty
and liquidated damages are the same (Lambert vs. Fox 26 Phil. 588); that "in
obligations with a penal clause, the penalty shall substitute the indemnity for
damages and the payment of interests in case of non-compliance, if there is no
stipulation to the contrary " (1st sentence of Art. 1226, Civil Code) and, it is argued,
there is no such stipulation to the contrary in this case and that "liquidated
damages are those agreed upon by the parties to a contract, to be paid in case of
breach thereof" (Art. 2226, Civil Code).
The Court hold that appellant's contention cannot be sustained because the
second sentence of article 1226 itself provides that, I nevertheless, damages shall
be paid if the obligor ... is guilty of fraud in the fulfillment of the obligation".
"Responsibility arising from fraud is demandable in all obligations" (Art. 1171, Civil
Code). "In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for the damages which may be reasonably attributed to the nonperformance of the obligation" (Ibid, art. 2201).
The trial court and the Court of Appeals found that Pamintuan was guilty of
fraud because he did not make a complete delivery of the plastic sheetings and he
overpriced the same. That factual finding is conclusive upon this Court.
There is no justification for the Civil Code to make an apparent distinction
between penalty and liquidated damages because the settled rule is that there is no
difference between penalty and liquidated damages insofar as legal results are

concerned and that either may be recovered without the necessity of proving actual
damages and both may be reduced when proper.
The penalty clause is strictly penal or cumulative in character and does not
partake of the nature of liquidated damages (pena sustitutiva) when the parties
agree "que el acreedor podra pedir, en el supuesto incumplimiento o mero retardo
de la obligacion principal, ademas de la pena, los danos y perjuicios. Se habla en
este caso de pena cumulativa, a differencia de aquellos otros ordinarios, en que la
pena es sustitutiva de la reparacion ordinaria."