Barredo vs Garcia

Facts: At about 1:30am on May 3, 1936, Fontanilla’s taxi collided with a “kalesa” thereby killing the 16 year old Faustino Garcia. Faustino’s
parents filed a criminal suit against Fontanilla and reserved their right to file a separate civil suit. Fontanilla was eventually convicted. After
the criminal suit, Garcia filed a civil suit against Barredo – the owner of the taxi (employer of Fontanilla). The suit was based on Article 1903
of the civil code (negligence of employers in the selection of their employees). Barredo assailed the suit arguing that his liability is only
subsidiary and that the separate civil suit should have been filed against Fontanilla primarily and not him.
ISSUE: Whether or not Barredo is just subsidiarily liable.
HELD: No. He is primarily liable under Article 1903 which is a separate civil action against negligent employers. Garcia is well within his
rights in suing Barredo. He reserved his right to file a separate civil action and this is more expeditious because by the time of the SC judgment
Fontanilla is already serving his sentence and has no property. It was also proven that Barredo is negligent in hiring his employees because it
was shown that Fontanilla had had multiple traffic infractions already before he hired him – something he failed to overcome during hearing.
Had Garcia not reserved his right to file a separate civil action, Barredo would have only been subsidiarily liable. Further, Barredo is not being
sued for damages arising from a criminal act (his driver’s negligence) but rather for his own negligence in selecting his employee (Article
1903).

Mendoza v. Arrieta
Facts:

A three- way vehicularaccident occurred involving a car owned and driven bypetitioner Edgardo Mendoza, a private jeep owned and driven
by respondent RodolfoSalazar, and a gravel and sand truck owned by respondent Felipino Timbol and driven by Freddie Montoya. As a
consequence of said mishap, two separate Information for Reckless Imprudence Causing Damage to Property were filed against Rodolfo
Salazar and Freddie Montoya with the CFI of Bulacan. The trial Court absolved jeep-owner-driver Salazar of any liability, civil and criminal,
in view of its findings that the collision between Salazar’s jeep and petitioner’s car was the result of the former having been bumped from
behind by the truck driven by Montoya. Neither was petitioner awarded damages as he was not a complainant against truck-driver Montoya
but only against jeep-owner-driver Salazar. After the termination of the criminal cases, petitioner filed a civil case against respondents
Salazar and Timbol for the damages sustained by his car as a result of the collision involving their vehicles.

Issue:

whether or not the lower court in dismissing petitioner’s complaint for damages based on quasi-delict against private respondents

Held:

Insofar as Timbol is concerned the answer is yes. The respondent Judge wrongfully sustained Timbol’s allegations that the civil suit is barred
by the prior joint judgment in a criminal case filed against him, wherein no reservation to file a separate civil case was made
by petitioner and where the latter actively participated in the trial and tried to provedamages against Salazar only. For petitioner's cause of
action against Timbol in the civilcase is based on quasi-delict. Respondent Judge committed reversible error when hedismissed the civil suit
against the truck-owner, as said case may proceed independently of the criminal proceedings and regardless of the result of the latter. Article
31 of the Civil Code provides that, “When the civil action is based on an obligation not arising from the actor omission complained of as a
felony, such civil action may proceed independently of the criminal proceedings and regardless of the result of the latter.” Timbol’s submission
that petitioner's failure to make a reservation in the criminal action of his right to file an independent civil action, as required under section 2,
Rule 111, Rules of Court, bars the institution of such separate civil action is untenable. For inasmuch as Article 31 (in relation to Articles
2176 and 2177) of the Civil Code creates a civil liability distinct and different from the civil action arising from the offense of negligence
under the Revised Penal Code, no reservation is required to be made in the criminal case. And so, to reiterate, the civil case filed against
Timbol is not barred by the fact that petitioner failed to reserve, in the criminal action, his right to file an independent civil action based on
quasi-delict. But insofar as Salazar is concerned the answer is no. Inasmuch as civil liability co-exists with criminal responsibility in negligence
cases, the offended party has the option between an action for enforcement of civil liability based on culpa criminal under Article 100 of the
Revised Penal Code, and an action for recovery of damages based on culpa aquiliana under Article 2177 of the Civil Code. The action for
enforcement of civil liability based on culpa criminal under section 1 of Rule 111 of the Rules of Court is deemed
simultaneouslyinstituted with the criminal action, unless expressly waived or reserved for separate application by the offended party. The
circumstances attendant to the criminal case yields the conclusion that petitioner had opted to base his cause of action against Salazar on culpa
criminal and not on culpa aquiliana as evidenced by his active participation and
interventionin the prosecution of the criminal suit against said Salazar. The latter's civil liabilitycontinued to be involved in the criminal
action until its termination. Such being the case, there was no need for petitioner to have reserved his right to file a separate civil action as his
action for civil liability was deemed impliedly instituted in the criminal case. Salazar cannot be held civilly liable for damages sustained by
petitioner’s car for considering that the collision between the jeep driven by him and the car owned and driven by Mendoza was the result of
the hitting on the rear of the jeep by the truck driven by Montoya, it cannot be said that Salazar was at fault. Hence, the right of petitioner to
claim damages from Salazar did not arise. Accordingly, inasmuch as petitioner's cause of action as against jeep-owner-driver Salazar is ex-
delictu, founded on Article 100 of the Revised Penal Code, the civil action must be held to have been extinguished in consonance with
Section3(c) which provides that, “Extinction of the penal action does not carry with it extinction of the civil, unless the extinction proceeds
from a declaration in a final judgment that the fact from which the

civil right arise did not exist

…”

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION VS. COURT OF

APPEALS
FACTS: Carlitos Bautista was a third year student at the Philippine School of Business Administration. Assailants, who were not members
of the schools academic community, while in the premises of PSBA, stabbed Bautista to death. This incident prompted his parents to file a
suit against PSBA and its corporate officers for damages due to their alleged negligence, recklessness and lack of security precautions, means
and methods before, during and after the attack on the victim.

The defendants filed a motion to dismiss, claiming that the compliant states no cause of action against them based on quasi-delicts, as the said
rule does not cover academic institutions. The trial court denied the motion to dismiss. Their motion for reconsideration was likewise
dismissed, and was affirmed by the appellate court. Hence, the case was forwarded to the Supreme Court.

ISSUE: Whether or not PSBA is liable for the death of the student.

RULING: Because the circumstances of the present case evince a contractual relation between the PSBA and Carlitos Bautista, the rules on
quasi-delict do not really govern. A perusal of Article 2176 shows that obligations arising from quasi-delicts or tort, also known as extra-
contractual obligations, arise only between parties not otherwise bound by contract, whether express or implied. However, this impression
has not prevented this Court from determining the existence of a tort even when there obtains a contract.

Article 2180, in conjunction with Article 2176 of the Civil Code, establishes the rule in in loco parentis. Article 2180 provides that the damage
should have been caused or inflicted by pupils or students of the educational institution sought to be held liable for the acts of its pupils or
students while in its custody. However, this material situation does not exist in the present case for, as earlier indicated, the assailants of
Carlitos were not students of the PSBA, for whose acts the school could be made liable. But it does not necessarily follow that PSBA is
absolved form liability.

When an academic institution accepts students for enrollment, there is established a contract between them, resulting in bilateral obligations
which both parties is bound to comply with. For its part, the school undertakes to provide the student with an education that would presumably
suffice to equip him with the necessary tools and skills to pursue higher education or a profession. This includes ensuring the safety of the
students while in the school premises. On the other hand, the student covenants to abide by the school's academic requirements and observe
its rules and regulations.

Failing on its contractual and implied duty to ensure the safety of their student, PSBA is therefore held liable for his death.

Petition denied.

Amadora vs CA

Facts: In April 1972, while the high school students of Colegio de San Jose-Recoletos were in the school auditorium, a certain Pablito Daffon
fired a gun. The stray bullet hit Alfredo Amadora. Alfredo died. Daffon was convicted of reckless imprudence resulting in homicide. The
parents of Alfredo sued the school for damages under Article 2180 of the Civil Code because of the school’s negligence.
The trial court ruled in favor of Amadora. The trial court ruled that the principal, the dean of boys, as well as the teacher-in-charge are all
civilly liable. The school appealed as it averred that when the incident happened, the school year has already ended. Amadora argued that
even though the semester has already ended, his son was there in school to complete a school requirement in his Physics subject. The Court
of Appeals ruled in favor of the school. The CA ruled that under the last paragraph of Article 2180, only schools of arts and trades (vocational
schools) are liable not academic schools like Colegio de San Jose-Recoletos.
ISSUE: Whether or not Colegio de San Jose-Recoletos, an academic school, is liable under Article 2180 of the Civil Code for the tortuous
act of its students.
HELD: Yes. The Supreme Court made a re-examination of the provision on the last paragraph of Article 2180 which provides:
Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices
so long as they remain in their custody.
The Supreme Court said that it is time to update the interpretation of the above law due to the changing times where there is hardly a distinction
between schools of arts and trade and academic schools. That being said, the Supreme Court ruled that ALL schools, academic or not, may
be held liable under the said provision of Article 2180.
The Supreme Court however clarified that the school, whether academic or not, should not be held directly liable. Its liability is only
subsidiary.
For non-academic schools, it would be the principal or head of school who should be directly liable for the tortuous act of its students. This
is because historically, in non-academic schools, the head of school exercised a closer administration over their students than heads
of academic schools. In short, they are more hands on to their students.
For academic schools, it would be the teacher-in-charge who would be directly liable for the tortuous act of the students and not the dean or
the head of school.
The Supreme Court also ruled that such liability does not cease when the school year ends or when the semester ends. Liability applies
whenever the student is in the custody of the school authorities as long as he is under the control and influence of the school and within its
premises, whether the semester has not yet begun or has already ended at the time of the happening of the incident. As long as it can be shown
that the student is in the school premises in pursuance of a legitimate student objective, in the exercise of a legitimate student right, and even
in the enjoyment of a legitimate student right, and even in the enjoyment of a legitimate student privilege, the responsibility of the school
authorities over the student continues. Indeed, even if the student should be doing nothing more than relaxing in the campus in the company
of his classmates and friends and enjoying the ambience and atmosphere of the school, he is still within the custody and subject to the discipline
of the school authorities under the provisions of Article 2180.
At any rate, the REMEDY of the teacher, to avoid direct liability, and for the school, to avoid subsidiary liability, is to show proof that he,
the teacher, exercised the necessary precautions to prevent the injury complained of, and the school exercised the diligence of a bonus pater
familias.
In this case however, the Physics teacher in charge was not properly named, and there was no sufficient evidence presented to make the said
teacher-in-charge liable. Absent the direct liability of the teachers because of the foregoing reason, the school cannot be held subsidiarily
liable too.

Air France vs Carrascoso

FACTS: In March 1958, Rafael Carrascoso and several other Filipinos were tourists en route to Rome from Manila. Carrascoso was issued
a first class round trip ticket by Air France. But during a stop-over in Bangkok, he was asked by the plane manager of Air France to vacate
his seat because a white man allegedly has a “better right” than him. Carrascoso protested but when things got heated and upon advise of
other Filipinos on board, Carrascoso gave up his seat and was transferred to the plane’s tourist class.
After their tourist trip when Carrascoso was already in the Philippines, he sued Air France for damages for the embarrassment he suffered
during his trip. In court, Carrascoso testified, among others, that he when he was forced to take the tourist class, he went to the plane’s pantry
where he was approached by a plane purser who told him that he noted in the plane’s journal the following:
First-class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene
The said testimony was admitted in favor of Carrascoso. The trial court eventually awarded damages in favor of Carrascoso. This was affirmed
by the Court of Appeals.
Air France is assailing the decision of the trial court and the CA. It avers that the issuance of a first class ticket to Carrascoso was not an
assurance that he will be seated in first class because allegedly in truth and in fact, that was not the true intent between the parties.
Air France also questioned the admissibility of Carrascoso’s testimony regarding the note made by the purser because the said note was never
presented in court.
ISSUE 1: Whether or not Air France is liable for damages and on what basis.
ISSUE 2: Whether or not the testimony of Carrasoso regarding the note which was not presented in court is admissible in evidence.
HELD 1: Yes. It appears that Air France’s liability is based on culpa-contractual and on culpa aquiliana.
Culpa Contractual
There exists a contract of carriage between Air France and Carrascoso. There was a contract to furnish Carrasocoso a first class
passage; Second, That said contract was breached when Air France failed to furnish first class transportation at Bangkok; and Third, that there
was bad faith when Air France’s employee compelled Carrascoso to leave his first class accommodation berth “after he was already,
seated” and to take a seat in the tourist class, by reason of which he suffered inconvenience, embarrassments and humiliations, thereby causing
him mental anguish, serious anxiety, wounded feelings and social humiliation, resulting in moral damages.
The Supreme Court did not give credence to Air France’s claim that the issuance of a first class ticket to a passenger is not an assurance that
he will be given a first class seat. Such claim is simply incredible.
Culpa Aquiliana
Here, the SC ruled, even though there is a contract of carriage between Air France and Carrascoso, there is also a tortuous act based on culpa
aquiliana. Passengers do not contract merely for transportation. They have a right to be treated by the carrier’s employees with kindness,
respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and
abuses from such employees. So it is, that any rule or discourteous conduct on the part of employees towards a passenger gives the latter an
action for damages against the carrier. Air France’s contract with Carrascoso is one attended with public duty. The stress of Carrascoso’s
action is placed upon his wrongful expulsion. This is a violation of public duty by the Air France — a case of quasi-delict. Damages are
proper.
HELD: 2: Yes. The testimony of Carrascoso must be admitted based on res gestae. The subject of inquiry is not the entry, but the ouster
incident. Testimony on the entry does not come within the proscription of the best evidence rule. Such testimony is admissible. Besides, when
the dialogue between Carrascoso and the purser happened, the impact of the startling occurrence was still fresh and continued to be felt. The
excitement had not as yet died down. Statements then, in this environment, are admissible as part of the res gestae. The utterance of the purser
regarding his entry in the notebook was spontaneous, and related to the circumstances of the ouster incident. Its trustworthiness has been
guaranteed. It thus escapes the operation of the hearsay rule. It forms part of the res gestae

DR. HUANG v. PHILIPPINE HOTELIERS, INC.

FACTS: A Complaint for Damages was filed by Dr. Huang against Dusit Hotelalleging negligence of Hotel staff, in the untimely putting out
all the lights within the hotel’s swimming pool area as well as the locking of the main entrance door ofthe area, prompting petitioner to grope
for a way out. While doing so, a folding wooden counter top, which she lifted as she reached for a hotel phone, fell on her head causing her
serious brain injury. The trial court ruled that Huang’s own negligence was the immediate and proximate cause of her injury, she cannot
recover damages. Huang elevated the matter to the CA which affirmed the decision of trial court. Huang on Appeal contended that an implied
contract existed between them in view of the fact that the hotel guest status extends to all those who avail of its services its patrons and
invitees. It follows then that all those who patronize the hotel and its facilities, including those who are invited to partake of those facilities,
like her, are generally regarded as guests of the hotel. As such, Dusit Hotel is responsible by implied contract for the safety and welfare of
Huang while the latter was inside their premises by exercising due care, which they failed to do.

She argues that a person who goes in a hotel without a "bukol" or hematoma and comes out of it with a "bukol" or hematoma is a clear case
of res ipsa loquitur.

ISSUE:
1.

Whether or not the complaint is one for violation of an Implied Contract so thatres ipsa loquitur is applicable in this case?2.

Whether or not respondents are liable for the injury sustained by the petitioner based on the theory of quasi-delict?
Ruling:
1.

No. The allegations in Huang’s Complaint constitute a cause of action for quasi-delict, which under the New Civil Code is defined as an act,
or omission whichcauses damage to another, there being fault or negligence.

2.
Huang
utterly failed to prove the alleged negligence of Dusit Hotel
. Her own Complaint affirmed that Dusit Hotel afforded medical assistance to her after she met the unfortunate accident inside the hotel’s
swimming pool facility. It wasestablished that petitioner stayed in the hotel’s swimming pool facility beyond itsclosing hours; she lifted the
folding counter top that eventually hit her head; and Dusit Hotel extended medical assistance to her. As such, no negligence can be attributed
to the respondents or to their staff
Velarde vs. Court of Appeals
FACTS:
The private respondent executed a Deed of Sale with Assumption of Mortgage, with a balance of P1.8 million, in favor of the
petitioners. Pursuant to said agreements, plaintiffs paid the bank (BPI) for three (3) months until they were advised that the
Application for Assumption of Mortgage was denied. This prompted the plaintiffs not to make any further payment. Private
respondent wrote the petitioners informing the non-fulfillment of the obligations. Petitioners, thru counsel responded that they
are willing to pay in cash the balance subject to several conditions. Private respondents sent a notarial notice of
cancellation/rescission of the Deed of Sale. Petitioners filed a complaint which was consequently dismissed by an outgoing judge
but was reversed by the assuming judge in their Motion for Reconsideration. The Court of Appeals reinstated the decision to
dismiss.
ISSUE:
Whether or not there is a substantial breach of contract that would entitle its rescission.
RULING:
YES. Article 1191 of the New Civil Code applies. The breach committed did not merely consist of a slight delay in payment or
an irregularity; such breach would not normally defeat the intention of the parties to the contract. Here, petitioners not only failed
to pay the P1.8 million balance, but they also imposed upon private respondents new obligations as preconditions to the
performance of their own obligation. In effect, the qualified offer to pay was a repudiation of an existing obligation, which was
legally due and demandable under the contract of sale. Hence, private respondents were left with the legal option of seeking
rescission to protect their own interest.

ANGELES VS. CALASANZ

135 SCRA 323
FACTS:
On December 19, 1957, defendants-appellants Ursula Torres Calasanz and plaintiffs-appellees Buenaventura Angeles and Teofila Juani
entered into a contract to sell a piece of land located in Cainta, Rizal for the amount of P3,920.00 plus 7% interest per annum. The
plaintiffs-appellees made a downpayment of P392.00 upon the execution of the contract. They promised to pay the balance in monthly
installments of P41.20 until fully paid, the installment being due and payable on the 19th day of each month. The plaintiffs-appellees paid
the monthly installments until July 1966, when their aggregate payment already amounted to P4,533.38.
On December 7, 1966, the defendants-appellants wrote the plantiffs-appellees a letter requesting the remittance of past due accounts. On
January 28, 1967, the defendants-appellants cancelled the said contract because the plaintiffs failed to meet subsequent payments. The
plaintiffs’ letter with their plea for reconsideration of the said cancellation was denied by the defendants.

The plaintiffs-appellees filed a case before the Court of First Instance to compel the defendant to execute in their favor the final deed of sale
alleging inter alia that after computing all subsequent payments for the land in question, they found out that they have already paid the total
amount including interests, realty taxes and incidental expenses. The defendants alleged in their answer that the plaintiffs violated par. 6 of
the contract to sell when they failed and refused to pay and/or offer to pay monthly installments corresponding to the month of August,
1966 for more than 5 months, thereby constraining the defendants to cancel the said contract.

The Court of First Instance rendered judgment in favor of the plaintiffs, hence this appeal.

ISSUE:
Has the Contract to Sell been automatically and validly cancelled by the defendants-appellants?

RULING:
No. While it is true that par.2 of the contract obligated the plaintiffs-appellees to pay the defendants the sum of P3,920 plus 7% interest per
annum, it is likewise true that under par 12 the seller is obligated to transfer the title to the buyer upon payment of the said price.
The contract to sell, being a contract of adhesion, must be construed against the party causing it. The Supreme Court agree with the
observation of the plaintiffsappellees to the effect that the terms of a contract must be interpreted against the party who drafted the same,
especially where such interpretation will help effect justice to buyers who, after having invested a big amount of money, are now sought to
be deprived of the same thru the prayed application of a contract clever in its phraseology, condemnable in its lopsidedness and injurious in
its effect which, in essence, and its entirety is most unfair to the buyers.
Thus, since the principal obligation under the contract is only P3,920.00 and the plaintiffs-appellees have already paid an aggregate amount
of P4,533.38, the courts should only order the payment of the few remaining installments but not uphold the cancellation of the contract.
Upon payment of the balance of P671.67 without any interest thereon, the defendant must immediately execute the final deed of sale in
favor of the plaintiffs and execute the necessary transfer of documents, as provided in par.12 of the contract.

VERMEN REALTY DEVELOPMENT CORPORATION VS. COURT OF

APPEALS
FACTS:
Under the conditions of the so-called “Offsetting Agreement”, Vermen Realty (the first party in the contract) and Seneca Hardware (the
second party) were under a reciprocal obligation. Seneca Hardware shall deliver to Vermen Realty construction materials worth P552,000.00.
Vermen Realty's obligation under the agreement is threefold: he shall pay Seneca Hardware P276,000.00 in cash; he shall deliver possession
of units 601 and 602, Phase I, Vermen Pines Condominiums (with total value of P276,000.00) to Seneca Hardware; upon completion of
Vermen Pines Condominiums Phase II, Seneca Hardware shall be given option to transfer to similar units therein. As found by the appellate
court and admitted by both parties, Seneca Hardware had paid Vermen Realty the amount of P110,151.75, and at the same time delivered
construction materials worth P219,727.00. Pending completion of Phase II of the Vermen Pines Condominiums, Vermen Realty delivered to
Seneca Hardware units 601 and 602 at Phase I of the Vermen Pines Condominiums (Rollo, p. 28). In 1982, the Vermen
Realty repossessed unit 602. As a consequence of the repossession, the officers of the Seneca Hardware corporation had to rent another unit
for their use when they went to Baguio on April 8, 1982.
In its reply the Vermen Realty corporation averred that Room 602 was leased to another tenant because Seneca Hardware corporation had not
paid anything for purchase of the condominium unit. Vermen Realty corporation demanded payment of P27,848.25 representing the balance
of the purchase price of Room 601.

On June 21, 1985, Seneca Hardware filed a complaint with the Regional Trial Court of Quezon City (Branch 92) for rescission of the Offsetting
Agreement with damages. In said complaint, Seneca Hardware alleged that Vermen Realty Vermen Realty Corporation had stopped issuing
purchase orders of construction materials after April, 1982, without valid reason, thus resulting in the stoppage of deliveries of construction
materials on its (Seneca Hardware) part, in violation of the Offsetting Agreement. After conducting hearings, the trial court rendered a decision
dismissing the complaint and ordering the plaintiff (Seneca Hardware in this petition) to pay defendant (Vermen Realty in this petition) on its
counterclaim in the amount of P27,848.25 representing the balance due on the purchase price of condominium unit 601.
On appeal, respondent court reversed the trial court's decision as adverted to above.

ISSUE:
Do the circumstances of the case warrant rescission of the Offsetting Agreement as prayed for by Seneca Hardware?

RULING:
Yes. The Court ruled in favor of Seneca Hardware. There is no controversy that the provisions of the Offsetting Agreement are reciprocal in
nature. Reciprocal obligations are those created or established at the same time, out of the same cause, and which results in a mutual
relationship of creditor and debtor between parties. In reciprocal obligations, the performance of one is conditioned on the simultaneous
fulfillment of the other obligation Under the agreement, Seneca Hardware shall deliver to Vermen Realty construction materials. Vermen
Realty's obligation under the agreement is three-fold: he shall pay Seneca Hardware P276,000.00 in cash; he shall deliver possession of units
601 and 602, Phase I, Vermen Pines Condominiums (with total value of P276,000.00) to Seneca Hardware; upon completion of Vermen Pines
Condominiums Phase II, Seneca Hardware shall be given option to transfer to similar units therein. Article 1191 of the Civil Code provides
the remedy of rescission in (more appropriately, the term is "resolution") in case of reciprocal obligations, where one of
the obligors fails to comply with what is incumbent upon him.

In the case at bar, Vermen Realty argues that it was Seneca Hardware who failed to perform its obligation in the Offsetting Agreement. Seneca
Hardware, on the other hand, points out that the subject of the Offsetting Agreement is Phase II of the Vermen Pines Condominiums. It alleges
that since construction of Phase II of the Vermen Pines Condominiums has failed to begin it has reason to move
for rescission of the Offsetting Agreement, as it cannot forever wait for the delivery of the condominium units to it.
It is evident from the facts of the case that Seneca Hardware did not fail to fulfill its obligation in the Offsetting Agreement. The discontinuance
of delivery of construction materials to Vermen Realty stemmed from the failure of Vermen Realty to send purchase orders to Seneca
Hardware.
The impossibility of fulfillment of the obligation on the part of Vermen Realty necessitates resolution of the contract for indeed, the non-
fulfillment of the obligation aforementioned constitutes substantial breach of the Offsetting Agreement.
CHARLES F. WOODHOUSE, plaintiff-appellant, vs.
FORTUNATO F. HALILI, defendant-appellant.

FACTS
 On November 29, 1947, plaintiff Woodhouse entered into a written agreement with defendant Halili stating among others that: 1)
that they shall organize a partnership for the bottling and distribution of Missionsoft drinks, plaintiff to act as industrial partner or
manager, and the defendant as a capitalist, furnishing the capital necessary therefore; 2) that plaintiff was to secure the Mission Soft
Drinks franchise for and in behalf of the proposed partnership and 3) that the plaintiff was to receive 30 per cent of the net profits of
the business.
Prior to entering into this agreement, plaintiff had informed the Mission Dry Corporation of Los Angeles, California, that he had
interested a prominent financier (defendant herein) in the business, who was willing to invest half a milliondollars in the bottling and
distribution of the said beverages, and requested, in order that he may close the deal with him, that the right to bottle and distribute
be granted him for a limited time under the condition that it will finally be transferred to the corporation. Pursuant to this request,
plaintiff was given “a thirty days’ option on exclusive bottling and distribution rights for the Philippines”. The contract was finally
signed by plaintiff on December 3, 1947.
When the bottling plant was already in operation, plaintiff demanded of defendant that the partnership papers be executed. Defendant
Halili gave excuses and would not execute said agreement, thus the complaint by the plaintiff.
Plaintiff prays for the : 1.execution of the contract of partnership; 2) accounting of profits and 3)share thereof of 30 percent with 4)
damages in the amount of P200,000. The Defendant on the other hand claims that: 1) the defendant’s consent to the agreement, was
secured by the representation of plaintiff that he was the owner, or was about to become owner of an exclusive bottling franchise,
which representation was false, and that plaintiff did not secure the franchise but was given to defendant himself 2) that defendant
did not fail to carry out his undertakings, but that it was plaintiff who failed and 3)that plaintiff agreed to contribute to the exclusive
franchise to the partnership, but plaintiff failed to do so with a 4) counterclaim for P200,00 as damages.
The CFI ruling: 1) accounting of profits and to pay plaintiff 15 % of the profits and that the 2) execution of contract cannot be
enforced upon parties. Lastly, the 3) fraud wasn’t proved

ISSUES
1. WON plaintiff falsely represented that he had an exclusive franchise to bottle Mission beverages
2. WON false representation, if it existed, annuls the agreement to form the partnership

HELD
1. Yes. Plaintiff did make false representations and this can be seen through his letters to Mission Dry Corporation asking for the
latter to grant him temporary franchise so that he could settle the agreement with defendant. The trial court reasoned, and the plaintiff on this
appeal argues, that plaintiff only undertook in the agreement “to secure the Mission Dry franchise for and in behalf of the proposed
partnership.” The existence of this provision in the final agreement does not militate against plaintiff having represented that he had the
exclusive franchise; it rather strengthens belief that he did actually make the representation. The defendant believed, or was made to believe,
that plaintiff was the grantee of an exclusive franchise. Thus it is that it was also agreed upon that the franchise was to be transferred to the
name of the partnership, and that, upon its dissolution or termination, the same shall be reassigned to the plaintiff.
Again, the immediate reaction of defendant, when in California he learned that plaintiff did not have the exclusive franchise, was to reduce,
as he himself testified, plaintiff’s participation in the net profits to one half of that agreed upon. He could not have had such a feeling had not
plaintiff actually made him believe that he(plaintiff) was the exclusive grantee of the franchise.
2. No. In consequence, article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud, the causal fraud, which may
be ground for the annulment of a contract, and the incidental deceit, which only renders the party who employs it liable for damages only.
The Supreme Court has held that in order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo
incidente) inducement to the making of the contract.
The record abounds with circumstances indicative of the fact that the principal consideration, the main cause that induced defendant to enter
into the partnership agreement with plaintiff, was the ability of plaintiff to get the exclusive franchise to bottle and distribute for the defendant
or for the partnership. The original draft prepared by defendant’s counsel was to the effect that plaintiff obligated himself to secure a franchise
for the defendant. But if plaintiff was guilty of a false representation, this was not the causal consideration, or the principal inducement, that
led plaintiff to enter into the partnership agreement. On the other hand, this supposed ownership of an exclusive franchise was actually the
consideration or price plaintiff gave in exchange for the share of 30 per cent granted him in the net profits of the partnership business.
Defendant agreed to give plaintiff 30 per cent share in the net profits because he was transferring his exclusive franchise to the partnership.
Having arrived at the conclusion that the contract cannot be declared null and void, may the agreement be carried out or executed? The SC
finds no merit in the claim of plaintiff that the partnership was already a fait accompli from the time of the operation of the plant, as it is
evident from the very language of the agreement that the parties intended that the execution of the agreement to form a partnership was to be
carried out at a later date. , The defendant may not be compelled against his will to carry out the agreement nor execute the partnership papers.
The law recognizes the individual’s freedom or liberty to do an act he has promised to do, or not to do it, as he pleases.
LYDIA L. GERALDEZ vs. COURT OF APPEALS and KENSTAR
TRAVELCORPORATIONG.R. No. 108253February 23, 1994
FACTS:

 Petitioner Geraldez filed an action for damages by reason of contractual breach against respondent Kenstar Travel Corp. Petitioner
booked the Volare 3 tour with Kenstar. The tour covered a 22-day tour of Europe for$2,990.00 which she paid the total equivalent
amount of P190,000.00 charged by private respondent for her and her sister, Dolores. At the tour, petitioner claimed that what was
alleged in the brochure was not what they experienced. There was no European tour manager as stated in the brochure, the hotels
where they stayed in which were advertised as first class were not, the UGC leather factory which was specifically included as a
highlight of the tour was not visited and The Filipino tour guide provided by Kenstar was a first timer thus inexperienced. The
Quezon City RTC rendered a decision ordering respondent Kenstar to pay moral, nominal, and exemplary damages totalling
P1,000,000 and P50,000 attorney’s fees. On appeal, respondent Court of Appeals deleted theaward for moral and exemplary damages
and reduced the nominal damages and attorney’s fees to P30,000 andP10,000 respectively.

ISSUES:

(1) Whether or not Kenstar acted in bad faith or with gross negligence in discharging itsobligations in the contract?(2)Whether or not the
Court of Appeals erred in removing the moral and exemplarydamages

HELD:

(1) Yes, Kenstar acted in bad faith and with gross negligence in discharging its obligation. Kenstar’s choice of the tour guide is a manifest
disregard of its specific assurances to the tour group, and which deliberate omission is contrary to the rules of good faith and fair play.
Providing the Volare 3 group with an inexperienced first timer as a tour guide, Kenstar manifested indifference to the satisfaction, convenience
and peace of mind to its clients. The election of the tour guide was a deliberate and conscious choice on the part of Kenstar in order to afford
her on-the job-training making the tour group her unknowing guinea pigs, furthermore the inability to visit the UGC leather factory is reflective
of the ineptness and neglect of the tour guide. The failure of Kenstar to provide a European Tour Manager although it specifically advertised
and promised to do so is also a contractual breach. Kenstar expressly stated in its advertisement that a European Tour Manager would be
present. Kenstar’s contention that the European Tour Manager does not refer to a natural person but a juridical personality does not hold
because a corporate entity could not possibly accompany the tour group. Lastly Kenstar committed grave misrepresentation when it assured
in its tour package that the hotels provided would provide complete amenities and would be conveniently located along the way for the daily
itineraries. Testimonies by petitioner and private respondent show that the hotels were unsanitary and sometimes did not even provide towels
and soap. Further testimonies claim that the hotels were also located in locations far from the city making it difficult to go to. The fact that
Kenstar could only book them in such hotels because of budget constraints is not the fault of the tour group. Kenstar should not have promised
such accommodations if they couldn’t afford it. Kenstar should have increased the price to ensure accommodations.

(2) Yes, the Court of Appeals erred in removing the moral and exemplary damages. Moral damages may be awarded in breaches of contract
where the obligor acted fraudulently or in bad faith. Kenstar can be faulted with fraud in the inducement which is employed by a party in
securing the consent of the other. This fraud or dolo which is present or employed at the time of birth or perfection of the contract may either
be dolo causante or dolo incidente. The first, or causal fraud referred to in Article 1338 are those deceptions or misrepresentations of a serious
character employed by one party and without which the
other party would not have entered into the contract, Dolo incidente, or incidental fraud which isreferred to in Article 1344, are those which
are not serious in character and without which the other party would still have entered into the contract. In either case, whether Kenstar has
committed dolo causante or dolo incidente, it is liable for damages both moral and exemplary

Spouses Fernando Viloria and Lourdes Viloria vs Continental Airlines, Inc.

Facts:In 1997, while the spouses Viloria were in the United States, they approached Holiday Travel, a travel agency working for Continental
Airlines, to purchase tickets from Newark to San Diego. The travel agent, Margaret Mager, advised the couple that they cannot travel by train
because it was already fully booked; that they must purchase plane tickets for Continental Airlines; that if they won’t purchase plane tickets;
they’ll never reach their destination in time. The couple believed Mager’s representations and so they purchased two plane tickets worth
$800.00.
Later however, the spouses found out that the train trip wasn’t really fully booked and so they purchased train tickets and went to their
destination by train instead. Then they called up Mager to request for a refund for the plane tickets. Mager referred the couple to Continental
Airlines. As the couple were now in the Philippines, they filed their request with Continental Airline’s office in Ayala. The spouses Viloria
alleged that Mager misled them into believing that the only way to travel was by plane and so they were fooled into buying expensive plane
tickets.
Continental Airlines refused to refund the amount of the tickets and so the spouses sued the airline company. In its defense, Continental
Airlines claimed that the tickets sold to them by Mager were non-refundable; that, if any, they were not bound by the misrepresentations of
Mager because there’s no contract of agency existing between Continental Airlines and Mager.
The trial court ruled in favor of spouses Viloria but the Court of Appeals reversed the ruling of the RTC.
ISSUE: Whether or not a contract of agency exists between Continental Airlines and Mager.
HELD: Yes. All the elements of agency are present, to wit:

1. there is consent, express or implied of the parties to establish the relationship;

2. the object is the execution of a juridical act in relation to a third person;
3. the agent acts as a representative and not for himself, and
4. the agent acts within the scope of his authority.

The first and second elements are present as Continental Airlines does not deny that it concluded an agreement with Holiday Travel to which
Mager is part of, whereby Holiday Travel would enter into contracts of carriage with third persons on the airlines’ behalf. The third element
is also present as it is undisputed that Holiday Travel merely acted in a representative capacity and it is Continental Airlines and not Holiday
Travel who is bound by the contracts of carriage entered into by Holiday Travel on its behalf. The fourth element is also present considering
that Continental Airlines has not made any allegation that Holiday Travel exceeded the authority that was granted to it.
Continental Airlines also never questioned the validity of the transaction between Mager and the spouses. Continental Airlines is therefore in
estoppel. Continental Airlines cannot be allowed to take an altogether different position and deny that Holiday Travel is its agent without
condoning or giving imprimatur to whatever damage or prejudice that may result from such denial or retraction to Spouses Viloria, who relied
on good faith on Continental Airlines’ acts in recognition of Holiday Travel’s authority. Estoppel is primarily based on the doctrine of good
faith and the avoidance of harm that will befall an innocent party due to its injurious reliance, the failure to apply it in this case would result
in gross travesty of justice.

GUTIERREZ VS GUTIERREZ
FACTS:

 On February 2, 1930, a passenger truck and an automobile of private ownership collided while attempting to pass each other on a
bridge. The truck was driven by the chauffeur Abelardo Velasco, and was owned by saturnine Cortez. The automobile was being
operated by Bonifacio Gutierrez, a lad 18 years of age, and was owned by Bonifacio’s father and mother, Mr. and Mrs. Manuel
Gutierrez. At the time of the collision, the father was not in the car, but the mother, together with several other members of the
Gutierrez family were accommodated therein.
 The collision between the bus and the automobile resulted in Narciso Gutierrez suffering a fractured right leg which required
medical attendance for a considerable period of time.

ISSUE: Whether or not both the driver of the truck and automobile are liable for damages and indemnification due to their negligence. What
are the legal obligations of the defendants?

HELD:

 Bonifacio Gutierrez’s obligation arises from culpa aquiliana. On the other hand, Saturnino Cortez’s and his chauffeur Abelardo
Velasco’s obligation rise from culpa contractual.
 The youth Bonifacio was na incompetent chauffeur, that he was driving at an excessive rate of speed, and that, on approaching the
bridge and the truck, he lost his head and so contributed by his negligence to the accident. The guaranty given by the father at the
time the son was granted a license to operate motor vehicles made the father responsible for the acts of his son. Based on these
facts, pursuant to the provisions of Art. 1903 of the Civil Code, the father alone and not the minor or the mother would be liable for
the damages caused by the minor.
 The liability of Saturnino Cortez, the owner of the truck, and his chauffeur Abelardo Velasco rests on a different basis, namely,
that of contract.
Vasquez vs Borja

Facts:In January 1932, Francisco De Borja entered into a contract of sale with the NVSD (Natividad-Vasquez Sabani Development Co., Inc.).
The subject of the sale was 4,000 cavans of rice valued at Php2.10 per cavan. On behalf of the company, the contract was executed by Antonio
Vasquez as the company’s acting president. NVSD. only delivered 2,488 cavans and failed and refused despite demand to deliver the rest
hence De Borja incurred damages (apparently, NVSD was insolvent). He then sue Vasquez for payment of damages.
ISSUE: Whether or not Vasquez is liable for damages.
HELD: No. Vasquez is not party to the contract as it was NVSD which De Borja contracted with. It is well known that a corporation is an
artificial being invested by law with a personality of its own, separate and distinct from that of its stockholders and from that of its officers
who manage and run its affairs. The mere fact that its personality is owing to a legal fiction and that it necessarily has to act thru its agents,
does not make the latter personally liable on a contract duly entered into, or for an act lawfully performed, by them for an in its behalf.
The fact that the corporation, acting thru Vazquez as its manager, was guilty of negligence in the fulfillment of the contract did not make
Vazquez principally or even subsidiarily liable for such negligence. Since it was the corporation’s contract, its non fulfillment, whether due
to negligence or fault or to any other cause, made the corporation and not its agent liable.
JUSTICE PARAS Dissenting :
Vasquez as president of NVSD is liable for damages. Vasquez, as acting president and manager of NVSD, and with full knowledge of the
then insolvent status of his company, agreed to sell to De Borja 4,000 cavans of palay. Further, NVSD was soon thereafter dissolved.

Sarmiento v Sun-Cabrido

FACTS:
Petitioner, Tomasa Sarmiento, states that sometime in April 1994, a friend, Dra. Virginia Lao, requested her to find somebody to reset a pair
of diamond earrings into two gold rings. Accordingly, petitioner sent a certain Tita Payag with the pair of earrings to Dingding’s Jewelry
Shop, owned and managed by respondent spouses Luis and Rose Cabrido, which accepted the job order for P400.
Petitioner provided 12 grams of gold to be used in crafting the pair of ring settings. After 3 days, Tita Payag delivered to the jewelry shop
one of Dra. Lao’s diamond earrings which was earlier appraised as worth .33 carat and almost perfect in cut and clarity. Respondent Ma.
Lourdes (Marilou) Sun went on to dismount the diamond from its original setting. Unsuccessful, she asked their goldsmith, Zenon Santos,
to do it. Santos removed the diamond by twisting the setting with a pair of pliers, breaking the gem in the process.
Petitioner required the respondents to replace the diamond with the same size and quality. When they refused, the petitioner was forced to
buy a replacement in the amount of P30,000.
Petitioner filed a complaint for damages on June 28, 1994. private respondents vigorously denied any transaction between Dingdings’
Jewelry Shop and the petitioner, through Tita Payag.

DECISION OF LOWER COURTS:

1. MTC: declared respondents liable.
2. RTC: absolving the respondents of any responsibility arising from breach of contract. while ostensibly admitting the existence of the said
agreement, private respondents, nonetheless denied assuming any obligation to dismount the diamonds from their original settings.
3. CA: declared the private respondents not liable for damages.

ARGUMENTS OF THE PARTIES:

Respondents
- dismounting of the diamond from its original setting was part of the obligation assumed by the private respondents under the contract of
service.
Petitioners
- agreement was for crafting two gold rings mounted with diamonds only and did not include the dismounting of the said diamonds from
their original setting.

ISSUE:
Whether respondents are liable

RULING:
Yes. it is beyond doubt that Santos acted negligently in dismounting the diamond from its original setting. It appears to be the practice of
the trade to use a miniature wire saw in dismounting precious gems, such as diamonds, from their original settings. However, Santos
employed a pair of pliers in clipping the original setting, thus resulting in breakage of the diamond. The jewelry shop failed to perform its
obligation with the ordinary diligence required by the circumstances. It should be pointed out that Marilou examined the diamond before
dismounting it from the original setting and found the same to be in order. Its subsequent breakage in the hands of Santos could only have
been caused by his negligence in using the wrong equipment. Res ipsa loquitur. (the thing speaks for itself)
Obligations arising from contracts have the force of law between the contracting parties. Corollarily, those who in the performance of their
obligations are guilty of fraud, negligence or delay and those who in any manner contravene the tenor thereof, are liable for damages.23[23]
The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the place. Marilou and Zenon Santos were employed at Dingding’s
Jewelry Shop in order to perform activities which were usually necessary or desirable in its business. Private respondents Luis Cabrido and
Rose Sun-Cabrido are hereby ordered to pay, jointly and severally, the amount of P30,000 as actual damages and P10,000 as moral damages
in favor of the petitioner.

Crisostomo v. CA, 409 SCRA 528 (2003)

Problem:

Estela L. Crisostomo contracted the services of Caravan Travel and Tours International, Inc. to arrange and facilitate her booking, ticketing
and accommodation in a tour dubbed "Jewels of Europe". The package tour cost her P74, 322.70. She was given a 5% discount on the amount,
which included airfare, and the booking fee was also waived because petitioner’s niece, Meriam Menor, was former’s company’s ticketing
manager.

Menor went to her aunt’s residence on a Wednesday to deliver petitioner’s travel documents and plane tickets. Estela, in turn, gave Menor
the full payment for the package tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA) on Saturday, two hours
before her flight on board British Airways.

Without checking her travel documents, Estela went to NAIA on Saturday, to take the flight for the first leg of her journey from Manila to
Hongkong. She discovered that the flight she was supposed to take had already departed the previous day. She learned that her plane ticket
was for the flight scheduled on June 14, 1991. She thus called up Menor to complain.

Subsequently, Menor prevailed upon Estela to take another tour the "British Pageant”, which cost P20, 881.00. She gave caravan travel and
tours P7, 980.00 as partial payment and commenced the trip in July 1991.

Upon petitioner’s return from Europe, she demanded from respondent the reimbursement of P61, 421.70, representing the difference between
the sum she paid for "Jewels of Europe" and the amount she owed respondent for the "British Pageant" tour. Despite several demands,
respondent company refused to reimburse the amount, contending that the same was non-refundable.

Estela filed a complaint against Caravan travel and Tours for breach of contract of carriage and damages.

A) Will the action prosper?

B) Will she be entitled to damages?

Answer:

No, for there was no contract of carriage.

By definition, a contract of carriage or transportation is one whereby a certain person or association of persons obligate themselves to transport
persons, things, or news from one place to another for a fixed price.

From the above definition, Caravan Travel and Tours is not an entity engaged in the business of transporting either passengers or goods and
is therefore, neither a private nor a common carrier. Caravan Travel and Tours did not undertake to transport Estela from one place to another
since its covenant with its customers is simply to make travel arrangements in their behalf. Caravan travel and tour’s services as a travel
agency include procuring tickets and facilitating travel permits or visas as well as booking customers for tours.
While Estela concededly bought her plane ticket through the efforts of respondent company, this does not mean that the latter ipso facto is a
common carrier. At most, Caravan Travel and Tours acted merely as an agent of the airline, with whom the former ultimately contracted for
her carriage to Europe.

B) No.

The negligence of the obligor in the performance of the obligation renders him liable for damages for the resulting loss suffered by the obligee.
Fault or negligence of the obligor consists in his failure to exercise due care and prudence in the performance of the obligation as the nature
of the obligation so demands.

In the case at bar, Caravan Travel and Tours exercised due diligence in performing its obligations under the contract and followed standard
procedure in rendering its services to Estela. The plane ticket issued to petitioner clearly reflected the departure date and time, contrary to
Estela’s contention. The travel documents, consisting of the tour itinerary, vouchers and instructions, were likewise delivered to her two days
prior to the trip. The Caravan Travel and Tours also properly booked Estela for the tour, prepared the necessary documents and procured the
plane tickets. It arranged Estela’s hotel accommodation as well as food, land transfers and sightseeing excursions, in accordance with its
avowed undertaking.

From the foregoing, it is clear that the Caravan Travel and Tours performed its prestation under the contract as well as everything else that
was essential to book Estela for the tour.

Hence, Estela cannot recover and must bear her own damage

AEROSPACE CHEMICAL VS CA

FACTS: On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace) purchased five hundred (500) metric tons of sulfuric acid from
private respondent Philippine Phosphate Fertilizer Corporation (Philphos). Initially set beginning July 1986, the agreement provided that the
buyer shall pay its purchases in equivalent Philippine currency value, five days prior to the shipment date. Petitioner as buyer committed to
secure the means of transport to pick-up the purchases from private respondent's loadports. Per agreement, one hundred metric tons (100 MT)
of sulfuric acid should be taken from Basay, Negros Oriental storage tank, while the remaining four hundred metric tons (400 MT) should be
retrieved from Sangi, Cebu. On December 18, 1986, M/T Sultan Kayumanggi docked at Sangi, Cebu, but withdrew only 157.51 MT of
sulfuric acid. Again, the vessel tilted. Further loading was aborted. Two survey reports conducted by the Societe Generale de Surveillance
(SGS) Far East Limited, dated December 17, 1986 and January 2, 1987, attested to these occurrences. Later, on a date not specified in the
record, M/T Sultan Kayumanggi sank with a total of 227.51 MT of sulfuric acid on board. Petitioner chartered another vessel, M/T Don
Victor, with a capacity of approximately 500 MT.6 [TSN, September 1, 1989, pp. 28-29.] On January 26 and March 20, 1987, Melecio
Hernandez, acting for the petitioner, addressed letters to private respondent, concerning additional orders of sulfuric acid to replace its sunken
purchases.

ISSUE: Should expenses for the storage and preservation of the purchased fungible goods, namely sulfuric acid, be on seller's account
pursuant to Article 1504 of the Civil Code?

RULING: Petitioner tries to exempt itself from paying rental expenses and other damages by arguing that expenses for the preservation of
fungible goods must be assumed by the seller. Rental expenses of storing sulfuric acid should be at private respondent's account until
ownership is transferred, according to petitioner. However, the general rule that before delivery, the risk of loss is borne by the seller who is
still the owner, is not applicable in this case because petitioner had incurred delay in the performance of its obligation. Article 1504 of the
Civil Code clearly states: "Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer,
but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not,
except that: (2) Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party at
fault."

On this score, we quote with approval the findings of the appellate court, thus: The defendant [herein private respondent] was not remiss in
reminding the plaintiff that it would have to bear the said expenses for failure to lift the commodity for an unreasonable length of time.But
even assuming that the plaintiff did not consent to be so bound, the provisions of Civil Code come in to make it liable for the damages sought
by the defendant.
Ernesto V. Santos and Santos Ventura Hocorma Foundation, Inc vs Santos

Facts: Ernesto V. Santos and Santos Ventura Hocorma Foundation, Inc. (SVHFI) were plaintiff and defendant,respectively, in
several civil cases. On October 26, 1990, the parties executed a Compromise Agreement wherein Foundation shall pay Santos
P14.5 Million in the following manner:

a. P1.5 Million immediately upon the execution of this agreement; and

b. The balance of P13 Million shall be paid, whether in lump sum or in installments, at the discretion of the
Foundation, within a period of not more than two (2) years from the execution of this agreement.

In compliance, Santos moved for the dismissal of the cases, while SVHFI paid the initial P1.5 million. After several demands,
SVHFI failed to pay the balance of P13 million, prompting Santos to apply for the issuance of a writ of execution of the
compromise judgment of the RTC dated September 30, 1991.

Twice, SVHFI’s properties were auctioned and sold to Riverland, Inc.

On June 2, 1995, Santos and Riverland Inc. filed a Complaint for Declaratory Relief and Damages alleging delay on the part of
SVHFI in paying the balance. They further alleged that under the Compromise Agreement, the obligation became due on
October26, 1992, but payment of the remaining balance was effected only on November 22, 1994. Thus, respondents prayed
that petitioner be ordered to pay legal interest on the obligation, penalty, attorney's fees and costs of litigation. SVHFI alleged
that the legal interest on account of fault or delay was not due and payable, considering that the obligation had been
superseded by the compromise agreement. Moreover, SVHFI argued that absent a stipulation, Santos must ask for judicial
intervention for purposes of fixing the period.

Issue:

Whether or not SVHFI incurred in delay based on the compromise agreement and thereby liable for legalinterest

Ruling:

SVHFI is liable for legal interest as penalty on account of delay.The Compromise Agreement was entered into on October 26,
1990.

It was judicially approved on September30, 1991. Applying existing jurisprudence, the compromise agreement as a
consensual contract became binding between the parties upon its execution and not upon its court approval. Hence, the two-
year period should have begun on October 26, 1990.In this case, there was non-fulfillment of the obligation with respect to
time.

The requisites of mora were all met:

(1) that the obligation be demandable and already liquidated —the two-year period already lapsed andthe amount of
payment was already determined;
(2) that the debtor delays performance —SVHFI paid the balance beyond the two-year period; andfinally,
(3) that the creditor requires the performance judicially or extra-judicially —a demand letter was sent inaccordance with
the extra-judicial demand as contemplated by law.When the debtor knows the amount and period when he is to pay,
interest as damages is generally allowed asa matter of right. The legal interest for loan as forbearance of money is
12% per annum to be computed fromthe time the demand was made under the provisions of Article 1169 of the Civil
Code
Vasquez vs Ayala Corporation

FACTS: Daniel Vasquez owns Conduit Development, Inc. In 1981, Vasquez enters into a Memorandum of Agreement (MOA) with Ayala
Corporation wherein Ayala bought Conduit from Vasquez. Ayala committed to develop Conduit’s lands including 4 parcels of land adjacent
to Vasquez’ retained land. Be it noted that these parcels of land were in the 3 rd phase of Ayala’s development plan. Paragraph 5.15 of the
MOA provides:
5.15. The BUYER (AYALA) agrees to give the SELLERS (Vasquez) a first option to purchase four developed lots next to the “Retained Area”
at the prevailing market price at the time of the purchase.”
In 1990, Ayala was able to develop the said lots. (This was after some slump, and some litigation between Conduit’s former contractor (GP
construction) and GP’s subcontractor (Lancer Builders).) Ayala then offered to sell the 4 parcels of land to Vasquez at P6.5k/sq. m. which
was the market price in 1990. Vasquez refused the offer. Vasquez contended that the purchase price should be P460/sq. m. which was the
market price in 1981 (time of purchase). Ayala then lowered the purchase price to P5k/sq. m. but Vasquez refused again. Instead he made a
counter offer to buy the lots at P2k/sq. m. This time, Ayala refused.
ISSUE: Whether or not Paragraph 5.15 of the MOA is an option contract or right of first refusal.
HELD: No. The said paragraph is a mere right of first refusal. Although the paragraph has a definite object, i.e., the sale of the 4 lots, the
period within which they will be offered for sale to Vasquez and, necessarily, the price for which the subject lots will be sold are not
specified. The phrase “at the prevailing market price at the time of the purchase” connotes that there is no definite period within which Ayala
is bound to reserve the subject lots for Vasquez to exercise his privilege to purchase. Neither is there a fixed or determinable price at which
the subject lots will be offered for sale. The price is considered certain if it may be determined with reference to another thing certain or if the
determination thereof is left to the judgment of a specified person or persons.
Further, paragraph 5.15 was inserted into the MOA to give Vasquez the first crack to buy the subject lots at the price which Ayala would be
willing to accept when it offers the subject lots for sale. It is not supported by an independent consideration.

DELA CRUZ v. LEGASPI AND SAMPEROY

Doctrine:
Subsequent non-payment of the price at the time agreed upon did not convert the contract into one without cause or consideration: a nudum
pactum.

Facts:
Plaintiff sued defendant Legaspi to compel delivery of the parcel of land sold to plaintiff. The complaint alleged the defendant’s refusal to
accept payment of the purchase price of P450 undue retention of the realty. The defendants alleged that before the document of sale was
made, the plaintiff agreed to pay the defendants the price right after the document is executed that very day but after the document was signed
and ratified by the Notary Public and after the plaintiff has taken the original of the said document, the sad plaintiff refused to pay. They
asserted that for lack of consideration and for deceit, the document of said should be annulled.

Issue:
Whether or not the contract of sale is void on the ground that it lacks consideration

Held:
No. It cannot be denied that when the document was signed the cause or consideration existed: P450. The document specifically said so.
Subsequent non-payment of the price at the time agreed upon did not convert the contract into one without cause or consideration: a nudum
pactum. (Levy vs. Johnson, 4 Phil. 650; Puato vs. Mendoza, 64 Phil, 457). The situation was rather one in which there is failure to pay the
consideration, with its resultant consequences. In other words, when after the notarization of the contract, plaintiff failed to hand the money
to defendants as he previously promised, there was default on his part at most, and defendants’ right was to demand interest — legal interest
—.

CLAUDINA VDA. DE VILLARUEL, ET AL. VS. MANILA MOTOR CO., INC.

104 PHIL. 926
FACTS: On May 31, 1940, the plaintiffs Villaruel and defendant Manila Motor Co. Inc. entered into a contract whereby the defendant agreed
to lease plaintiffs building premises. On October 31, 1940, the leased premises were placed in the possession of the defendant until the
invasion of 1941. The Japanese military occupied and used the property leased as part of their quarters from June, 1942 to March, 1945, in
which no payment of rentals were made. Upon the liberation of the said city, the American forces occupied the same buildings that were
vacated by the Japanese. When the United States gave up the occupancy of the premises, defendant decided to exercise their option to renew
the contract, in which they agreed. However, before resuming the collection of rentals, Dr. Alfredo Villaruel upon advice demanded payment
of rentals corresponding to the time the Japanese military occupied the leased premises, but the defendant refused to pay. As a result plaintiff
gave notice seeking the rescission of the contract and the payment of rentals from June, 1942 to March, 1945; this was rejected by the
defendant. Despite the fact the defendant under new branch manager paid to plaintiff the sum of P350 for the rent, the plaintiff still demanded
for rents in arrears and for the rescission of the contract of lease. The plaintiff commenced an action before the CFC of Neg. Occidental
against defendant company. During the pendency of the case, the leased building was burned down. Because of the occurrence, plaintiffs
demanded reimbursement from the defendants, but having been refused, they filed a supplemental complaint to include a 3rd cause of action,
the recovery of the value of the burned building. The trial court rendered judgment in favor of the plaintiff. Hence the defendants appeal.

ISSUE: Is Manila Motor Co. Inc. liable for the loss of the leased premises?

RULING: No. Clearly, the lessor’s insistence upon collecting the occupation rentals for 1942-1945 was unwarranted in law. Hence, their
refusal to accept the current rentals without qualification placed them in default (mora creditoris or accipiendi) with the result that thereafter,
they had to bear all supervening risks of accidental injury or destruction of the leased premises. While not expressly declared by the Code of
1889, this result is clearly inferable from the nature and effects of mora. In other words, the only effect of the failure to consign the rentals in
court was that the obligation to pay them subsisted and the lessee remained liable for the amount of the unpaid contract rent, corresponding
to the period from July to November, 1946; it being undisputed that, from December 1946 up to March 2, 1948, when the commercial
buildings were burned, the defendants appellants have paid the contract rentals at the rate of P350 per month. But the failure to consign did
not eradicate the default (mora) of the lessors nor the risk of loss that lay upon them.

Chavez vs Gonzales
Facts: On July 1963, Rosendo Chavez brought his typewriter to Fructuoso Gonzales a typewriter repairman for the cleaning and servicing of
the said typewriter but the latter was not able to finish the job. During October 1963, the plaintiff gave the amount of P6.00 to the defendant
which the latter asked from the plaintiff for the purchase of spare parts, because of the delay of the repair the plaintiff decided to recover the
typewriter to the defendant which he wrapped it like a package. When the plaintiff reached their home he opened it and examined that some
parts and screws was lost. That on October 29, 1963 the plaintiff sent a letter to the defendant for the return of the missing parts, the interior
cover and the sum of P6.00 (Exhibit D). The following day, the defendant returned to the plaintiff some of the missing parts, the interior cover
and the P6.00. The plaintiff brought his typewriter to Freixas Business Machines and the repair cost the amount of P89.85. He commenced
this action on August 23, 1965 in 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 attorney’s fees. The defendant made no denials of the
facts narrated above, except the claim of the plaintiff that the cost of the repair made by Freixas Business Machines be fully chargeable against
him.

Issue: Whether or not the defendant is liable for the total cost of the repair made by Freixas Business Machines with the plaintiff typewriter?

Ruling: No, he is not liable for the total cost of the repair made by Freixas Business Machines instead he is only liable for the cost of the
missing parts and screws. The defendant contravened the tenor of his obligation in repairing the typewriter of the plaintiff that he fails to
repair it and returned it with the missing parts, he is liable under “ART. 1167. If a person obliged to do something fails to do it, the same shall
be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore it may be
decreed that what has been poorly done he undone.”

Telefast v. Castro
Facts:
The petitioner is a company engaged in transmitting telegrams. The plaintiffs are the children and spouse of Consolacion Castro who died in
the Philippines. One of the plaintiffs, Sofia sent a telegram thru Telefast to her father and other siblings in the USA to inform about the death
of their mother. Unfortunately, the deceased had already been interred but not one from the relatives abroad was able to pay their last respects.
Sofia found out upon her return in the US that the telegram was never received. Hence the suit for damages on the ground of breach of
contract. The defendant-petitioner argues that it should only pay the actual amount paid to it.
The lower court ruled in favor of the plaintiffs and awarded compensatory, moral, exemplary, damages to each of the plaintiffs with 6%
interest p.a. plus attorney’s fees. The Court of Appeals affirmed this ruling but modified and eliminated the compensatory damages to Sofia
and exemplary damages to each plaintiff, it also reduced the moral damages for each. The petitioner appealed contending that, it can only be
held liable for P 31.92, the fee or charges paid by Sofia C. Crouch for the telegram that was never sent to the addressee, and that the moral
damages should be removed since defendant's negligent act was not motivated by "fraud, malice or recklessness.

Issue: Whether or not the award of the moral, compensatory and exemplary damages is proper.

RULING: Yes, there was a contract between the petitioner and private respondent Sofia C. Crouch whereby, for a fee, petitioner undertook
to send said private respondent's message overseas by telegram. Petitioner failed to do this despite performance by said private respondent of
her obligation by paying the required charges. Petitioner was therefore guilty of contravening its and is thus liable for damages. This liability
is not limited to actual or quantified damages. To sustain petitioner's contrary position in this regard would result in an inequitous situation
where petitioner will only be held liable for the actual cost of a telegram fixed thirty (30) years ago.

Art. 1170 of the Civil Code provides that "those who in the performance of their obligations are guilty of fraud, negligence or delay, and those
who in any manner contravene the tenor thereof, are liable for damages." Art. 2176 also provides that "whoever by act or omission causes
damage to another, there being fault or negligence, is obliged to pay for the damage done."

Award of Moral, compensatory and exemplary damages is proper.

The petitioner's act or omission, which amounted to gross negligence, was precisely the cause of the suffering private respondents had to
undergo. Art. 2217 of the Civil Code states: "Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages
may be recovered if they are the proximate results of the defendant's wrongful act or omission."

Then, the award of P16,000.00 as compensatory damages to Sofia C. Crouch representing the expenses she incurred when she came to the
Philippines from the United States to testify before the trial court. Had petitioner not been remiss in performing its obligation, there would
have been no need for this suit or for Mrs. Crouch's testimony.

The award of exemplary damages by the trial court is likewise justified for each of the private respondents, as a warning to all telegram
companies to observe due diligence in transmitting the messages of their customers.

Arrieta v. National Rice and Corn Corporation

FACTS :

Mrs. Paz Arrieta participated in public bidding called by NARIC on May 19, 1952 for the supply of 20,000 metric tons of Burmese rice. Her
bid was $ 203.00 per metric ton, it was the lowest that’s why the contract was awarded to her. On July 1,1952, Arrieta and NARIC entered
into contract. Arrieta was obligated to deliver 20,000 metric ton of Burmese rice at $203.00 per metric ton to NARIC. In return, NARIC
committed itself to pay for the imported rice “ by means of an irrevocable, confirmed and assignable letter of credit in US currency in favour
of Arrieta and/or supplier in Burma (THIRI SETKYA), immediately.” NARIC took the first step to open the letter of credit on July 30, 1952
by forwarding to the PNB its application for commercial letter of credit. Arrieta with the help of a counsel, advised NARIC of the necessity
for the opening of the letter because she tender her supplier in Ragoon, Burma of 5 % of the price of 20,000 tons at $180.70 and if she didn’t
comply the 5% will be confiscated if the required letter of credit is not received by them before August 4, 1952. PNB informed NARIC that
their application of credit letter amounting to $3,614,000.00 was approved with the condition of 50% marginal cash be paid. NARIC does not
meet the condition. The allocation of Arrieta’s supplier in Ragoon was cancelled and the 5% deposit was forfeited.

ISSUE :

Does NARIC liable for damages?

HELD :

Yes, because the reason of the cancellation of the contract by Arrieta in Ragoon, Burma was the failure of NARIC to open the letter of credit
within a specific period of time. One who assumes contractual obligation and fails to perform in which he knew and was aware when he
entered in the contract, should be liable for his failure to do what is required by a law. Under the Art. 1170 of the Civil Code, not only the
debtors guilty of fraud, negligence or default but also a debtor of every, in general, who fails in the performance of his obligation is bound to
indemnify for the losses and damages caused thereby.