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SMITH, BELL & CO., INC. V. C.A.

& JOSEPH solidarily liable for the obligations of its disclosed


BENGZONCHUAG.R. No. 110668 February 6, principal merely because there is allegedly a need
1997 for a speedy settlement of the claim of private
respondent.
FACTS:
2. The court held that the scope and extent of
1 Chua, doing business under the style of Tic the functions of an adjustment and settlement
Hin Chiong, Importer, bought and imported to the agent do not include personal liability. His functions
Philippines from the firm Chin Gact Co., Ltd. of are merely to settle and adjusts claims in behalf of
Taipei; Taiwan, 50 metric tons of Dicalcium his principal. The recourse of the insured is to press
Phosphate. Shipment was insured by the defendant his claim against the principal.
First Insurance Co. for US$19,500.00 "against all
risks" at port of departure, with the note "Claim, if 3. Under Article 1207 of the Civil Code clearly
any, payable in U.S. currency at Manila and with provides that "there is a solidary liability only when
defendant Smith, Bell, and Co. stamped at the the obligation expressly so states, or when the law
lower left side of the policy as "Claim Agent." or the nature of the obligation requires solidarity."

2. The cargo arrived at the Port of Manila. 4. The well-entrenched rule is that solidary
Thereafter, the entire cargo was discharged to the obligation cannot lightly be inferred. It must be
local arrastre contractor, Metroport Services Inc. positively and clearly expressed.
with a number of the cargo in apparent bad order
condition. 5. The contention that, in the end, it would
really be First Insurance Company, Ltd. which
3. Chua filed with Smith, Bell, and Co., Inc. a would be held liable cannot be accepted.
formal statement of claim with proof of loss and a
demand for settlement of the corresponding value 6. Because it would inflict injustice upon
of the losses. petitioner which would be made to advance the
funds to settle the claim without any assurance that
4. After purportedly conveying the claim to its it can collect from the principal which disapproved
principal, Smith, Bell, and Co., Inc. informed the such claim, in the first place.
plaintiff that its principal offered only50% of the
claim, on the alleged ground of discrepancy 6. Also the Insurance Code is quite clear as to
between the amounts contained in the shipping the Purpose and role of a resident agent. Such
agent's reply to the claimant with that of Metro agent, as a representative of the foreign insurance
ports. company, is tasked only to receive legal processes
on behalf of its principal and not to answer
5. The offer not being acceptable to the personally for any insurance claims.
plaintiff, the latter wrote Smith, Bell, & Co.
expressing his refusal to the "redress" offer,
contending that the discrepancy was a result of loss Here the agent cannot be sued nor held liable
from vessel to arrastre to consignees' warehouse, whether singly or solidarily with its principal. Every
which losses were still within the "all risk" insurance cause of action ex contractu must be founded upon
cover. No settlement of the claim having been a contract, oral or written, either express or implied.
made, the plaintiff then caused the instant case to The only "involvement" of petitioner in the subject
be filed. contract of insurance was having its name stamped
at the bottom left portion of the policy as "Claim
6. Denying any liability, defendant-appellant Agent. "Without anything else to back it up, such
averred in its answer that it is merely a claim agent stamp cannot even be deemed by the remotest
of defendant insurance company and as such interpretation to mean that petitioner participated in
agent, it is not personally liable under the policy in the preparation of said contract. Hence, there is
which it has not even taken part of. no privity of contract, and correspondingly there
can be no obligation or liability, and thus no Cause
RTC rendered a decision against smith-Bell, ruling of action against petitioner attaches.Under Article
that since it is admittedly a claim agent of the 1311 of the Civil Code, contracts are binding
foreign insurance firm doing business in the onlyupon the parties (and their assigns and heirs)
Philippines justice is better served if said agent is who execute them.
made liable without prejudice to its right of action
against its principal, the insurance firm. The subject cargo insurance was between the First
Insurance Company, Ltd. and the Chin Gact Co.,
ISSUE: WON the petitioner, in its capacity as Ltd., both of Taiwan, and was signed in Taipei,
resident agent be held solidarily liable with the Taiwan by the president of the First Insurance
foreign insurer? Company, Ltd. and the president of the Chin Gact
Co., Ltd. 18 There is absolutely nothing in the
HELD: contract which mentions the personal liability of
petitioner.
1 The Court said NO. Petitioner, undisputedly
a settling agent acting within the scope of its
authority, cannot be held personally and/or
PACIFIC BANKING CORPORATION and 9. The petitioners replied that the payment of a
CHESTER G. BABST, petitioners, note may be extended by an oral agreement, but
vs. that agreement to extend the time of payment in
THE COURT OF APPEALS, JOSEPH C. HART order to be valid must be for a definite time.
and ELEANOR HART, respondents.
ISSUE: Whether or not the indefinite extension of
FACTS: time with respect to the payment of the loan is valid

1 The Insular Farms Inc. in which the private RULING:


respondent where one of the stockholders
borrowed P 250,000.00 from Pacific Banking 1 The Supreme Court said Yes, the general
Corporation Due to financial difficulties. rule is that an agreement to extend the time of
payment, in order to be valid, must be for a definite
2. On July 31, 1956 Insular Farms Inc. time, but it is not absolute and admits of
executed a Promissory Note of P 250,000.00 to the qualifications and exceptions which is although it
bank payable in five equal annual instalments, the seems that no precise date be fixed, it being
first instalment payable on or before July 1957. sufficient that the time can be readily determined.
Said note provided that upon default in the payment
of any instalment, all other instalments shall 2. Now in case the period of extension is not
become due and payable. precise, the provisions of Article 1197 of the Civil
Code should apply. In this case, there was an
3. This loan was effected and the money agreement to extend the payment of the loan,
released without any security except for the including the first installment which was due on or
Continuing Guaranty executed on July 18, 1956, of before July 1957.
John Clarkin, who owned seven and half percent of
the capital stock of the bank, and his wife Helen. 3. The court is well convinced that Hart had
been given the assurance by the conduct of the
4. Unfortunately, the business floundered. petitioner, that payment would not as yet be
Nevertheless, petitioner and its then Executive Vice pressed, and under 1197 of the Civil Code, the
President, petitioner Chester Babst, did not meaning must be that there having been intended a
demand payment for the initial July 1957 period to pay, modifying the fixed period in original
installment nor of the entire obligation, but instead promissory note, now, the cause of action of
opted for more collateral in addition to the guaranty petitioner would have been to ask the Courts for the
of Clarkin. fixing of the term;

5. As the business further deteriorated and the 4. In this case the pledge constituted on
situation became desperate, Hart agreed to February 19, 1958 on the shares of stocks of
Clarkin's proposal that all Insular Farms shares of respondent was sufficient consideration for the
stocks be pledged to petitioner bank in lieu of extension, considering that this pledge was the
additional collateral and to insure an extension of additional collateral required by the petitioners in
the period to pay the July 1957 installment. Said addition to the continuing guarantee of Clarkin.
pledge was executed on February 19, 1958.

6. March 4, 1958, the petitioners wrote Insular


Farms Inc. giving the latter 48 hours to pay its The Court of Appeals noted that no demand for
entire obligation. payment of the P50,000.00 was made right after it
allegedly fell due. It was only on March 4, 1958 or
7. On March 7, 1958, Hart received notice that 13 days after the execution of the pledge
the pledged shares of stocks of Insular Farms Inc. instrument on February 19,1958 that PBC
would be sold at public auction to satisfy Insular presented its demand for payment to Insular
Farms' obligation. Farms.

8. The private respondents contend that the


sale by petitioners of the shares of stock of private
respondent to the Pacific Farms is void on the
ground that when said shares were pledged to the
bank it was done to cause an indefinite extension of
time to pay their obligation and also they observed
that no demand was made by the bank for its
payment. The bank merely asked for more
collateral.

.
2. It is evident from the language of paragraph
1(b) that the condition precedent (for respondents
obligation to pay the balance of the purchase price
to arise) involves an obligation to do, the
ROLANDO T. CATUNGAL, JOSE T. CATUNGAL, undertaking of respondent to negotiate and secure
JR., CAROLYN T. CATUNGAL and ERLINDA a road right of way at his own expense.
CATUNGAL-WESSEL, Petitioners,
vs. 3. Paragraph 1(c) Stated: c. That the access
ANGEL S. RODRIGUEZ, Respondent. road or Road Right of Way shall be the
responsibility of the VENDEE to secure and any or
Facts: all cost relative to the acquisition thereof shall be
borne solely by the VENDEE. He shall, however, be
1 Agapita T. Catungal (Agapita) owned a accorded with enough time necessary for the
parcel of land in her name situated in the Barrio of success of his endeavor, granting him a free hand
Talamban, Cebu City. Agapita, with the consent of in negotiating for the passage.
her husband Jose, entered into a Contract to Sell
with respondent Rodriguez. Subsequently, the 4. In the case at bar assuming that the
Contract to Sell was purportedly "upgraded" into a petitioners were correct that the respondents
Conditional Deed of Sale. obligation to negotiate a road right of way was one
2. It was agreed that P25,000,000.00 shall be with an uncertain period, their rescission of the
payable in instalments after the VENDEE have Conditional Deed of Sale would still be
successfully negotiated, secured and provided a unwarranted.
Road Right of Way. Also in the provision it was
stipulated that the Road Right of Way shall be the 5. Under Article 1197 of the Civil Code, the
responsibility of the VENDEE to secure and any or petitioners had a remedy which mandates: That If
all cost relative to the acquisition thereof shall be the obligation does not fix a period, but from its
borne solely by the VENDEE. He shall, however, be nature and the circumstances it can be inferred that
accorded with enough time necessary for the a period was intended, the courts may fix the
success of his endeavor, granting him a free hand duration thereof.
in negotiating for the passage.
6. Which means the courts shall determine
3. If however said Road Right of Way could such period, once fixed by the courts, the period
not be negotiated, the VENDEE shall give notice to cannot be changed by them.
the VENDOR for them to reassess and solve the
problem by taking other options and should the 7. What the petitioners should have done was
situation ultimately prove futile, he shall take steps to first file an action in court to fix the period within
to rescind or cancel the herein Conditional Deed of which the respondents should accomplish the
Sale. successful negotiation of the road right of way.

4. The spouses Catungal requested an 8. Thus, the petitioners demand for the
advance of P5, 000,000.00 for personal reasons. respondent to make an additional payment of
Shortly after the respondent refusal to pay the P5,000,000.00 was premature and respondents
advance, he learned that the Catungals were failure to accede to such demand did not justify the
offering the property for sale to third parties. rescission of the contract.
5. Jose cancelled the contract. Then the
respondent filed for a restraining order a writ of The provisions of the Conditional Deed of Sale
preliminary injunction. pertinent to the present dispute are quoted below:

6. The Catungals alleged that there was 1. The VENDOR for and in consideration of the
contractual breach and bad faith on the part of sum of TWENTY[-]FIVE MILLION PESOS
Rodriguez. The petitioners also said that more than (P25,000,000.00) payable as follows:
sufficient time had already been given to the
respondent to negotiate the road right of way and a. FIVE HUNDRED THOUSAND PESOS
this "enough time" to negotiate, had already lapsed (P500,000.00) downpayment upon the
by the time they demanded the payment of signing of this agreement, receipt of which
P5,000,000.00 from respondent. sum is hereby acknowledged in full from the
ISSUE: Whether or not the stipulation to negotiate VENDEE.
and secure a road right of way, had already lapsed
thus justified their act of rescinding the Conditional b. The balance of TWENTY[-]FOUR
Deed of Sale. MILLION FIVE HUNDRED THOUSAND
PESOS (P24,500,000.00) shall be payable
Held in five separate checks, made to the order
of JOSE Ch. CATUNGAL, the first check
1 The Supreme Court said No, shall be for FOUR MILLION FIVE
HUNDRED THOUSAND PESOS the late Anastasio Alano. FLORENCIO ALANO and
(P4,500,000.00) and the remaining balance JOSE ALANO, defendants-appellants.
to be paid in four checks in the amounts of
FIVE MILLION PESOS (P5,000,000.00) FACTS:
each after the VENDEE have (sic)
successfully negotiated, secured and 1 In 1897, one Anastasio Cruz incurred a
provided a Road Right of Way consisting of P2,730.50 loan from Marcela Mario, wife of Felipe
12 meters in width cutting across Lot 10884 Agoncillo. Cruz however died. Later, in February
up to the national road, either by widening 1904, the heirs of Cruz, namely: Jose Alano,
the existing Road Right of Way or by Anastasio Alano (for his children), and Florencio
securing a new Road Right of Way of 12 Alano executed a document whereby they
meters in width. If however said Road Right promised to pay Marcela the said debt. The debt is
of Way could not be negotiated, the scheduled to mature on February 27, 1905.
VENDEE shall give notice to the VENDOR
for them to reassess and solve the problem 2. In 1908, Anastasio Alano paid P200.00
by taking other options and should the pesos to Marcela. The payment was received as
situation ultimately prove futile, he shall take payment made on the account of the debt of
steps to rescind or cancel the herein Anastacio Alano. Apparently, other than the
Conditional Deed of Sale. P200.00 payment from Anastasio Alano, no other
payment was received from the Alanos.
c. That the access road or Road Right of
Way leading to Lot 10963 shall be the 3. In 1912, Anastasio Alano died. Crisanto
responsibility of the VENDEE to secure and Javier was named as the administrator of Anastasio
any or all cost relative to the acquisition Alanos estate.
thereof shall be borne solely by the
VENDEE. He shall, however, be accorded 4. In March 1916, Agoncillo and Marcela filed
with enough time necessary for the success a civil case against the Javier as administrator of
of his endeavor, granting him a free hand in Anastasio Alanos estate. Florencio and Jose were
negotiating for the passage. impleaded.

However, having made the observation that 5. Agoncillos claim is barred by the statute of
it was desirable for the Catungals to file a separate limitations; that Agoncillo has ten years from the
action to fix the period for respondent Rodriguezs date of maturity (February 1905) to collect hence
obligation to negotiate a road right of way, the Court his collection effort in 1916 is already way beyond
finds it necessary to fix said period in these the prescriptive period.
proceedings.
6. Agoncillo averred that the payment of
If still warranted, Rodriguez is given a P200.00 by Anastasio Alano in 1908 has tolled the
period of thirty (30) days from the finality of this running of the prescriptive period hence his civil
decision to negotiate a road right of way. In the action in 1916 is still within the 10 year prescriptive
event no road right of way is secured by Rodriquez period.
at the end of said period, the parties shall reassess
and discuss other options as stipulated in ISSUE: Whether or not Agoncillos claim is barred
paragraph 1(b) of the Conditional Deed of Sale by the statute of limitations.
and, for this purpose, they are given a period of
thirty (30) days to agree on a course of action. HELD:
Should the discussions of the parties prove futile
after the said thirty (30)-day period, immediately 1 Yes. One mode of extinguishing an
upon the expiration of said period for discussion, obligation is by prescription. It cannot be said that
Rodriguez may (a) exercise his option to rescind the payment made by Anastasio Alano in 1908
the contract, subject to the return of his suspended the running of the period of prescription.
downpayment, in accordance with the provisions of
paragraphs 1(b) and 5 of the Conditional Deed of 2. For one, it is doubtful that he was ever
Sale or (b) waive the road right of way and pay the personally liable to the document executed in
balance of the deducted purchase price as February 1904 because he signed the same on
determined in the RTC Decision dated May 30, behalf of his children (Leonina, Anastacio,
1992. Leocadio) who were not made parties to this
case.

3. At any rate, assuming arguendo that it did


FELIPE AGONCILLO, and his wife, MARCELA toll the running of the statute of limitations, it only
MARIO, plaintiff-appellees, suspended it as regards to him alone and it did not
vs. bind his brothers (Jose and Florencio).
CRISANTO JAVIER, administrator of the estate of
4. This is because there was no showing that 1 The Supreme Court said No, defendant
Anastasio Alano made the P200.00 payment with cannot compel the plaintiff to accept the proposal?
the authority of Florencio and Jose or for the benefit
of the two. Further, the payment was received by Article 1199 states that A person
Marcela as payment made on the account of the alternatively bound by different prestations
debt of Anastacio Alano. shall completely perform one of them.

The creditor cannot be compelled to receive


part of one and part of the other
undertaking.
ONG GUAN CAN and THE BANK OF THE
PHILIPPINE ISLANDS, plaintiffs-appellees,
vs.
THE CENTURY INSURANCE CO., LTD.,
defendant-appellant.
2 In the case at bar it is expressly stated in
FACTS: the condition that the defendant may either pay the
insured value of house, or rebuild it. Its effect
1 A building of the plaintiff was insured against therefore is to make the obligation of the insurance
fire by the defendant in the sum of P30,000, as well company an alternative one.
as the goods and merchandise contained in the
3. It must be noted that in alternative
sum of P15,000. The house and merchandise
obligations, the debtor, the defendant in this case,
insured were burnt early in the morning of February
must notify the creditor of his election, stating which
28, 1923.
of the two prestations he is disposed to fulfill.
2. The appellant contends that under clause 4. The notice will give the creditor an
14 of the conditions of the policies, that it may opportunity to express his consent, or to impugn
rebuild the house burnt. the election made by the debtor, and only after said
notice shall the election take legal effect when
The clause cites by the appellant is as consented by the creditor, or if impugned by the
follows: creditor (plaintiff), when declared proper by a
competent court.
The Company may at its option
5. In the instance case, the defendant did not
reinstate or replace the property
give a formal notice of its election to rebuild the
damaged or destroyed, or any part
house destroyed.
thereof, instead of paying the
amount of the loss of damages, or 6. Because of that the plaintiff did not give his
may join with any other Company or assent to the proposition, for the reason that the
insurers in so doing, but the new house would be smaller and of materials of
Company shall not be bound to lower kind.
reinstate exactly or completely, but
only as circumstances permit and in 7. The trial judge in his decision said that it
reasonable sufficient manner, and in would be an imposition unequitable, as well as
no case shall the Company be unjust, to compel the plaintiff to accept the
bound to expend more in rebuilding of a smaller house with a lower kind of
reinstatement that it would have cost materials than without offering him an additional
to reinstate such property as it was indemnity for the difference in size between the two
at the time of the occurrence of such houses.
loss or damage, nor more than the
sum insured by the Company
thereon. FACTS FROM THE FULLTEXT

3. However the plaintiff did not give his assent On April 19, 1924, the Court of First Instance of
to the proposition, for the reason that the new Iloilo rendered a judgment in favor of the plaintiff,
house would be smaller and of materials of lower sentencing the defendant company to pay him the
kind than those employed in the construction of the sum of P45,000, the value of certain policies of fire
house destroyed. insurance, with legal interest thereon from February
28, 1923, until payment, with the costs. The
ISSUE: Whether or not the defendant which is the defendant company appealed from this judgment,
debtor can compel the plaintiff which is the creditor and now insists that the same must be modified
to accept the proposal? and that it must be permitted to rebuild the house
burnt, subject to the alignment of the street where
RULING: the building was erected, and that the appellant be
relieved from the payment of the sum in which said prestations he is disposed to fulfill, in accordance
building was insured. with article 1133 of the Civil Code. The object of this
notice is to give the creditor, that is, the plaintiff in
A building of the plaintiff was insured against fire by the instant case, opportunity to express his
the defendant in the sum of P30,000, as well as the consent, or to impugn the election made by the
goods and merchandise therein contained in the debtor, and only after said notice shall the election
sum of P15,000. The house and merchandise take legal effect when consented by the creditor, or
insured were burnt early in the morning of February if impugned by the latter, when declared proper by
28, 1923, while the policies issued by the defendant a competent court. In the instance case, the record
in favor of the plaintiff were in force. shows that the appellant company did not give a
formal notice of its election to rebuild, and while the
The appellant contends that under clause 14 of the witnesses, Cedrun and Cacho, speak of the
conditions of the policies, it may rebuild the house proposed reconstruction of the house destroyed,
burnt, and although the house may be smaller, yet yet the plaintiff did not give his assent to the
it would be sufficient indemnity to the insured for proposition, for the reason that the new house
the actual loss suffered by him. would be smaller and of materials of lower kind
than those employed in the construction of the
The clause cites by the appellant is as house destroyed. Upon this point the trial judge
follows:lawphi1.net very aptly says in his decision: "It would be an
imposition unequitable, as well as unjust, to compel
The Company may at its option reinstate or the plaintiff to accept the rebuilding of a smaller
replace the property damaged or destroyed, house than the one burnt, with a lower kind of
or any part thereof, instead of paying the materials than those of said house, without offering
amount of the loss of damages, or may join him an additional indemnity for the difference in
with any other Company or insurers in so size between the two house, which circumstances
doing, but the Company shall not be bound were taken into account when the insurance
to reinstate exactly or completely, but only applied for by the plaintiff was accepted by the
as circumstances permit and in reasonable defendant." And we may add: Without tendering
sufficient manner, and in no case shall the either the insured value of the merchandise
Company be bound to expend more in contained in the house destroyed, which amounts
reinstatement that it would have cost to to the sum of P15,000.itc@alf
reinstate such property as it was at the time
of the occurrence of such loss or damage, We find in the record nothing to justify the reversal
nor more than the sum insured by the of the finding of the trial judge, holding that the
Company thereon. election alleged by the appellant to rebuild the
house burnt instead of paying the value of the
If this clause of the policies is valid, its effect is to insurance is improper. To our mind, the judgment
make the obligation of the insurance company an appealed from is in accordance with the merits of
alternative one, that is to say, that it may either pay the case and the law, and must be, as is hereby,
the insured value of house, or rebuild it. It must be affirmed with the cost against the appellant. So
noted that in alternative obligations, the debtor, the ordered.
insurance company in this case, must notify the
creditor of his election, stating which of the two