Julio Abella V Guillermo Francisco

Avancena, J.; December 20,1930

G.R. No. 32336

FACTS:
 Guillermo Francisco purchased from the govt. on installments, lots 937 to 945 of
the Tala Estate in Novaliches, Caloocan, Rizal. He was in arrears for some of
these installments.
 On October 31, 1928, he signed a document that stated he received from Juloi
Abella Php 500 as payment for the said lots (221 hectares) at the rate of 100 per
hectare, with the balance due on Dec. 15, 1928, extendible 15 days after.
 Abella then proposed sale of these lots at a higher price to George C. Sellner
and collecte Php 10,000 on Dec. 29, 1928.
 On Nov. 13,1928, Abella paid another Php 415.31 upon demand.
 On Dec. 27, 1928, Francisco wrote to Roman Mabanta attaching a power of
attorney authorizing the latter to sign in his behalf documents required by the
Bureau of Lands for the transfer of lands to the plaintiff. He also instructed
Mabanta that in the event Abella failed to pay the remaining balance, the option
will be considered cancelled, and the Php 915.81 already given shall be returned.
 On Jan. 3, 1929, Mabanta notified Abella of the situation and gave him until Jan.
5 to pay.
 Abella tried to pay the remaining balance on Jan. 9 but Mabanta refused to
accept it, since he regarded the contract rescinded for the failure to pay on Jan.
5. The Php 915.81 was returned to Abella.
 Abella filed a complaint. CFI-Rizal absolved Francisco.
Issues:
 Whether or not Francisco can be compelled to execute the deed of sale of the
lots in question upon receipt of the balance and to deliver them to Abella.
 Whether or not Abella can be judicially declared the owner of said lots.

Held:
 No.
 NO!
 Petition DENIED. CFI-Rizal decision AFFIRMED.
Ratio:
 Abella failed to pay the price of the lots within the stipulated time. Since
the contract was an option for the purchase of the lots, time was an essential
element in an agreement of this nature.
 Abella’s claim that Mabanta extended the deadline to Jan 9 cannot hold.
Mabanta’s statement that it was only until Jan. 5 is corroborated by Paz Vicente
and Narciso Javier (Abella admitted the fact to him)
 AND even supposing it was a sale time was still an essential element
since Francisco wanted to sell those lots to pay off obligations due on
December, 1928. Under Civil Code 1124, he is entitled to resolve the contract
for failure to pay the price within the time specified.

PANTALEON VS AMERICAN EXPRESS

Posted by kaye lee on 11:30 PM
G.R. No. 174269, May 8 2009 [Credit Transaction]

FACTS:

After the Amsterdam incident that happened involving the delay of American Express
Card to approve his credit card purchases worth US$13,826.00 at the Coster store,
Pantaleon commenced a complaint for moral and exemplary damages before the RTC
against American Express. He said that he and his family experienced inconvenience
and humiliation due to the delays in credit authorization. RTC rendered a decision in
favor of Pantaleon. CA reversed the award of damages in favor of Pantaleon, holding
that AmEx had not breached its obligations to Pantaleon, as the purchase at Coster
deviated from Pantaleon's established charge purchase pattern.

ISSUE:
1. Whether or not AmEx had committed a breach of its obligations to Pantaleon.
2. Whether or not AmEx is liable for damages.

RULING:
1. Yes. The popular notion that credit card purchases are approved “within seconds,”
there really is no strict, legally determinative point of demarcation on how long must it
take for a credit card company to approve or disapprove a customer’s purchase, much
less one specifically contracted upon by the parties. One hour appears to be patently
unreasonable length of time to approve or disapprove a credit card purchase.

The culpable failure of AmEx herein is not the failure to timely approve petitioner’s
purchase, but the more elemental failure to timely act on the same, whether favorably
or unfavorably. Even assuming that AmEx’s credit authorizers did not have sufficient
basis on hand to make a judgment, we see no reason why it could not have promptly
informed Pantaleon the reason for the delay, and duly advised him that resolving the
same could take some time.

2. Yes. The reason why Pantaleon is entitled to damages is not simply because AmEx
incurred delay, but because the delay, for which culpability lies under Article 1170, led
to the particular injuries under Article 2217 of the Civil Code for which moral damages
are remunerative. The somewhat unusual attending circumstances to the purchase at
Coster – that there was a deadline for the completion of that purchase by petitioner
before any delay would redound to the injury of his several traveling companions –
gave rise to the moral shock, mental anguish, serious anxiety, wounded feelings and
social humiliation sustained by Pantaleon, as concluded by the RTC.
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 defendantsappellants
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.

TENGCO V CA
PADILLA; October 19, 1989

NATURE
Review on certiorari of the decision of CA.

FACTS
- Lutgarda Cifra, the owner of the premises at No. 164 Int., Gov. Pascual St.,
Navotas, Metro Manila leased the said property to Emilia Tengco. The contract was
not in writing, hence, not recorded.
- While the contract of lease was still subsisting, Lutgarda Cifra transferred the
ownership of the property to Benjamin Cifra.
- Tengco, despite her knowledge of this transfer, attempted to pay her rentals to the
person whom she used to pay her dues. But that person refused to accept the
payment as she is no longer had the authority to accept payments. Tengco, on the
other hand, did not give the payment to Benjamin Cifra or consigned the amount to
the court.
- The record of the case shows that on 16 September 1976, Benjamin Cifra, Jr. filed
an action for umlawful detainer with the MTC of Navotas to evict the peititioner,
Emilia Tengco, from the said premises for her alleged failure to comply with the
terms and conditions of the lease contract by failing and refusing to pay the
stipulated rentals despite repeated demands. After trial, judgment was rendered
against Tengco and ordered the defendant and any and all persons claiming rights
under her to vacate the premises occupied by her and to surrender possession
thereof to the plaintiff.

ISSUES
1. WON Benjamin Cifra, Jr. is the owner of the leased premises
2. WON the lessor was guilty of mora accipiendi
3. WON laches had deprived the lessor of the right to eject her considering that the
Complaint was filed only in September 1976 whereas his cause of action arose
sometime in February, 1974 when she defaulted in the payment of rentals

HELD

1. YES. The question of whether or not private respondent is the owner of the
leased premises is one of fact which is within the cognizance of the trial court
whose findings thereon will not be disturbed on appeal unless there is a showing
that the trial court had overlooked, misunderstood, or misapplied some fact or
circumstance of weight and substance that would have affected the result of the
case.
2. NO. Under the circumstances, the refusal to accept that proffered rentals is not
without justification. The ownership of the property had been transferred by
Lutgarda Cifra, the original lessor, to Benjamin Cifra and the person to whom
payment was offered had no authority to accept payment. It should be noted that
the contract of lease between the petitoner and Lutgarda Cifra, the former owner of
the land, was not in writing and, hence, unrecorded. The Court has held that a
contract of lease executed by the vendor, unless recorded, ceases to have effect
when the property is sold, in the absence of a contrary agreement.
3. NO. The tenant's mere failure to pay rent does not ipso facto make unlawful his
possession of the leased premises. It is failure to pay rents after a demand
therefore is made that entitles the lessor to bring an action of Unlawful Detainer,
Moreover, the lessor has the privilege to waive his right to bring an action against
his tenant and give the latter credit for the payment of the rents and allow him to
continue indefinitely in the possession of the premises. During such period, the
tenant would not be in illegal possession of the premises and the landlord can not
maintain an action until after he has taken steps to convert the legal possession
into an illegal possession. Consequently, petitioner's non-payment of the rentals on
the premises, notwithstanding demand made by Cifra, and her failure to avail of the
remedy provided for in Article 1256 of the Civil Code, entitles private respondent to
eject her from the premises.

Disposition: The petition is denied.

CENTRAL BANK OF THE PHILIPPINES V COURT OF
APPEALS
MAKASIAR; October 3, 1985
NATURE
Petition for certiorari to review the decision of the Court of Appeals.

FACTS

- Island Savings Bank approved the loan application for P80K of Sulpicio Tolentino
who executed a real estate mortgage over his 100 hectare land.
- The loan called for a lump sum of P80K, repayable in semi-annual installments for
3 yrs, w/ 12% annual interest. It was required that Tolentino shall use the loan
solely as additional capital to develop his other property into a subdivision.
- A mere P17K partial release of the loan was made by the bank and Tolentino and
his wife signed a promissory note for the P17K at 12% annual interest payable w/in
3 yrs. An advance interest was deducted fr the partial release but this prededucted
interest was refunded to Tolentino after being informed that there was no
fund yet for the release of the P63K balance. The bank VP and Treasurer promised
release of the balance.
- Monetary Board of Central Bank, after finding that bank was suffering liquidity
problems, prohibited the bank fr making new loans and investments. And after the
bank failed to restore its solvency, the Central Bank prohibited Island Savings Bank
fr doing business in the Philippines.
- Island Savings Bank in view of the non-payment of the P17K filed an application
for foreclosure of the real estate mortgage.
- Tolentino filed petition for specific performance or rescission and damages w/
preliminary injunction, alleging that since the bank failed to deliver P63K, he is
entitled to specific performance and if not, to rescind the real estate mortgage.
- Trial court found Tolentino’s petition unmeritorious. CA affirmed dismissal of
Tolentino’s petition for specific performance, but it ruled that the bank can neither
foreclose the real estate mortgage nor collect the P17K loan.

ISSUES

1. WON Tolentino’s action for specific performance can prosper

2. WON Tolentino is liable to pay the P17K covered by the promissory note
3. If liable to pay P17K, WON Tolentino’s real estate mortgage can be foreclosed

HELD

1. NO
- The loan agreement implied reciprocal obligations. When one party is willing and
ready to perform, the other party not ready nor willing incurs in delay. When
Tolentino executed real estate mortgage, he signified willingness to pay. That time,
the bank’s obligation to furnish the P80K loan accrued. Now, the Central Bank
resolution made it impossible for the bank to furnish the P63K balance.
- The prohibition on the bank to make new loans is irrelevant bec it did not prohibit
the bank fr releasing the balance of loans previously contracted.
- Insolvency of debtor is not an excuse for non-fulfillment of obligation but is a
breach of contract.
- The bank’s asking for advance interest for the loan is improper considering that
the total loan hasn’t been released. A person can’t be charged interest for nonexisting
debt.
- The alleged discovery by the bank of overvaluation of the loan collateral is not an
issue. The bank officials should have been more responsible and the bank bears
risk in case the collateral turned out to be overvalued. Furthermore, this was not
raised in the pleadings so this issue can’t be raised.
- The bank was in default and Tolentino may choose bet specific performance or
rescission w/ damages in either case. But considering that the bank is now
prohibited fr doing business, specific performance cannot be granted. Rescission is
the only remedy left, but the rescission shld only be for the P63K balance.
2. YES
- The promissory note gave rise to this liability. His failure to pay made him party
in default, hence, not entitled to rescission. This time, it is the bank which has right
to rescind the promissory note.
- Since both Tolentino and the bank are in default, both are liable for damages.
Liability may be offset.
3. NO
- Since the bank failed to furnish the balance, the real estate mortgage became
unenforceable to such extent.

ANTONIO R. CORTES VS HON. COURT OF APPEALS AND VILLA ESPERANZA

DEVELOPMENT CORPORATION G.R. NO. 126083, 12 July 2006, FIRST
DIVISION (Ynares-Santiago, J.)

FACTS:
Cortes entered into a contract of sale with the Corporation for the sale of several lots
worth p3,700,000 and executed a Deed of Absolute Sale. The Corporation advanced
payment of p1,213,000 but Cortes retained the Deed for notarization. Upon the
Corporation’s demand for specific performance, Cortes refused to deliver the Deed
alleging that the balance was yet to be paid resulting in his failure to pay his lessees the
disturbance fees causing the latter’s refusal to pay their rent. He thus prayed that the
Corporation to pay the outstanding balance plus interest otherwise to cancel the sale.
The trial court rendered a decision rescinding the sale but the Court of Appeals reversed
its decision.

ISSUE:
Whether or not there is delay in the performance of the parties’ obligation that would
justify the rescission of the contract.

HELD:
Yes. Both parties were in delay. Considering that their obligation was reciprocal,
performance thereof must be simultaneous. The mutual inaction of the parties gave rise
to compensatio morae because neither completed their part in their reciprocal
obligation. This mutual delay of the parties cancels out the effects of default, such that
it is as if no one is guilty of delay.
Wherefore the petition is DENIED. The decision of the Court of Appeals is AFFIRMED.

Chavez vs. Gonzales

March 25, 2016
Case Digest
G.R. No. L-27454 April 30, 1970
Rosendo O. Chavez, plaintiff-appellant
vs.
Fructuoso Gonzales, defendant-appellee
REYES, J.B.L., J.:

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 Digest G.R. No. 73867

Telefast v. Castro

G.R. No. 73867 February 29, 1988

Facts:

1. 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.
2. 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 CORP

REGALA; January 31, 1964

NATURE
Appeal of the defendant-appellant NARIC from the decision of the trial court dated
February 20, 1958, awarding to the plaintiffs-appellees the amount of $286,000.00
as damages for breach of contract and dismissing the counterclaim and third party
complaint of the defendant-appellant NARIC.

FACTS
- On May 19, 1952, plaintiff-appellee participated and won in the public bidding
called by the NARIC for the supply of 20,000 metric tons of Burmese rice.
Accordingly, on July 1, 1952, plaintiff-appellee Paz P. Arrieta and the appellant
corporation entered into a Contract of Sale of Rice, under the terms of which the
former obligated herself to deliver to the latter 20,000 metric tons of Burmese Rice
at $203.00 per metric ton, CIF Manila. In turn, the defendant Corporation committed
itself to pay for the imported rice "by means of an irrevocable, confirmed and
assignable letter of credit in U.S. currency in favor of the plaintiff-appellee and/or
supplier in Burma, immediately."
- Despite the commitment to pay immediately "by means of an irrevocable,
confirmed and assignable Letter of Credit," however, it was only on July 30, 1952, or
a full month from the execution of the contract, that the defendant corporation, thru
its general manager, took the first step to open a letter of credit by forwarding to
the Philippine National Bank its Application for Commercial Letter of Credit. On the
same day, July 30, 1952, Mrs. Paz P. Arrieta, thru counsel, advised the appellant
corporation of the extreme necessity for the immediate opening of the letter of
credit since she had by then made a tender to her supplier in Rangoon, Burma
"equivalent to 5% of the F.O.B. price of 20,000 tons at $180.70 and in compliance
with the regulations in Rangoon this 5% will be confiscated if the required letter of
credit is not received by them before August 4, 1952."
- It turned out however, the appellant corporation was not in any financial position
to meet the condition, which it candidly admitted in a communication with PNB.
Consequently, the credit instrument applied for was opened only on September 8,
1952 "in favor of Thiri Setkya, Rangoon, Burma, and/or assignee for $3,614,000.00,"
(which is more than two months from the execution of the contract) the party
named by the appellee as beneficiary of the letter of credit. As a result of the delay,
the allocation of appellee's supplier in Rangoon was cancelled and the 5% deposit,
amounting to 524,000 kyats or approximately P200,000.00 was forfeited. In this
connection, it must be made of record that although the Burmese authorities had
set August 4, 1952 as the deadline for the remittance of the required letter of
credit, the cancellation of the allocation and the confiscation of the 5% deposit were
not effected until August 20. 1952, or, a full half month after the expiration of the
deadline. And yet, even with that 15-day grace, appellant corporation was unable to
make good its commitment to open the disputed letter of credit.
- The appellee endeavored, but failed, to restore the cancelled Burmese rice
allocation. When the futility of reinstating the same became apparent, she offered
to substitute Thailand rice instead to the defendant NARIC, communicating at the
same time that the offer was "a solution which should be beneficial to the NARIC
and to us at the same time." This offer for substitution, however, was rejected by
the appellant in a resolution dated November 15, 1952. Appellee sent a letter to the
appellant, demanding compensation for the damages caused her in the sum of
$286,000.00, U.S. currency, representing unrealized profit. The demand having
been rejected, she instituted this case now on appeal.

ISSUE
WON the lower court erred in holding NARIC liable for damages for breach of
Contract

HELD
- YES. We do not think the appellant corporation can refute the fact that had it
been able to put up the 50 c/o marginal cash deposit demanded by the bank, then
the letter of credit would have been approved, opened and released as early as
August 4, 1952. The letter of the Philippine National Bank to the NARIC was plain
and explicit that as of the said date, appellant's it "application for a letter of
credit . . . has been approved by the Board of Directors with the condition that 50%
marginal cash deposit be paid and that drafts are to be paid upon presentment."
The liability of the appellant, however, stems not alone from this failure or inability
to satisfy the requirements of the bank. Its culpability arises from its willful and
deliberate assumption of contractual obligations even as it was well aware of its
financial incapacity to undertake the presentation.
- A number of logical inferences may be drawn from NARIC’s admission. First, that
the appellant knew the bank requirements for opening letters of credit; second, that
appellant also knew it could not meet those requirements. When, therefore, despite
this awareness that it was financially incompetent to open a letter of credit
immediately, appellant agreed in paragraph 8 of the contract to pay immediately
"by means of an irrevocable, confirmed and assignable letter of credit," it must be
similarly be held to have bound itself too answer for all and every consequences
that would result from the representation.
- In relation to the aforequoted observation of the trial court, We would like to make
reference also to Article 1170 of the Civil Code which provides:
"Those who in the performance of their obligation are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor
thereof, are liable in damages.
- Under this provision, not only debtors guilty of fraud, negligence or default in the
performance of obligations are decreed liable: in general, every debtor who fails in
the performance of his obligations is bound to indemnify for the losses and
damages caused thereby. The phrase "in any manner contravene the tenor" of the
obligation includes any illicit act which impairs the strict and faithful fulfillment of
the obligation, or every kind of defective performance. (IV Tolentino, Civil Code of
the Philippines, citing authorities, p. 103.)
- The NARIC would also have this Court hold that the subsequent offer to substitute
Thailand rice for the originally contracted Burmese rice amounted to a waiver by
the appellee of whatever rights she might have derived from the breach of the
contract. We disagree. Waivers are not presumed, but must be clearly and
convincingly shown, either by express stipulation or acts admitting no other
reasonable explanation. (Ramirez vs. Court of Appeals, 98 Phil., 225; 52 Off. Gaz.
779). In the case at bar, no such intent to waive has been established.
- In the premises, however, a minor modification must be effected in the disposition
portion of the decision appealed from insofar as it expresses the amount of
damages in U.S. currency and not in Philippine Peso. Republic Act 529 specifically
requires the discharge of obligations only "in any coin or currency which at the time
of payment is legal tender for public and private debts." In view of that law,
therefore, the award should be converted into and expressed in Philippine Peso.
Disposition UPON ALL THE FOREGOING, the decision appealed from is hereby
affirmed, with the sole modification that the award should be converted into the
Philippine peso at the rate of exchange prevailing at the time the obligation was
incurred or on July 1, 1952 when the contract was executed. The appellee insurance
company, in the light of this judgment, is relieved of any liability under this suit.
No pronouncement as to costs.

MAGAT V MEDIALDEA
ESCOLIN; April 20, 1983

NATURE
Petition for review on certiorari to determine the sufficiency of the averments
contained in the complaint for alleged breach of contract filed by petitioner
Victorino D. Magat against respondent Santiago A. Guerrero of the CFI of Rizal,
presided by respondent Judge Leo D. Medialdea, now Deputy Judicial Administrator,
which complaint was dismissed for failure to state a cause of action.

FACTS
- Defendant entered into a contract with the U.S. Navy Exchange, Subic Bay,
Philippines, for the operation of a fleet of taxicabs, each taxicab to be provided with
the necessary taximeter and a radio transceiver for receiving and sending of
massage from mobile taxicab to fixed base stations within the Naval Base
- Because of the experience of the plaintiff in connection with his various contracts
with the U.S. Navy and his goodwill already established with the Naval personnel,
Isidro Q. Aligada, acting as agent of the defendant approached the plaintiff and
proposed to import from Japan thru the plaintiff or thru plaintiff's Japanese business
associates, all taximeters and radio transceivers needed by the defendant
- Defendant and his agent were able to import from Japan with the assistance of the
plaintiff and his Japanese business associates the necessary taximeters for
defendant's taxicabs in partial fulfillment of defendant's commitments with the U.S.
Navy Exchange, the plaintiff's assistance in this matter having been given to the
defendant gratis et amore
- Isidro Q. Aligada, acting as agent of the defendant, made representations with the
plaintiff that defendant desired to procure from Japan thru the plaintiff the needed
radio transceivers and to this end, Isidro Q. Aligada secured a firm offer in writing
dated September 25, 1972, wherein the plaintiff quoted in his offer a total price of
$77,620.59 FOB Yokohama, the goods or articles offered for sale by the plaintiff to
the defendant to be delivered sixty to ninety days after receipt of advice from the
defendant of the radio frequency assigned to the defendant by the proper
authorities
- Plaintiff received notice of the fact that the defendant accepted plaintiff's offer to
sell to the defendant the items as well as the terms and conditions of said offer, as
shown by the signed conformity of the defendant which was duly delivered by the
defendant's agent to the plaintiff, whereupon all that the plaintiff had to do was to
await advice from the defendant as, to the radio frequency to be assigned by the
proper authorities to the defendant
- In his letter dated October 6, 1972, the defendant advised his agent that the U.S.
Navy provided him with the radio frequency of 34.2 MHZ [Megaherzt] and
requested his said agent to proceed with his order placed with the plaintiff, which
fact was duly communicated to the plaintiff
- By his letter dated October 7, 1972 addressed to the plaintiff by the defendant's
agent, defendant's agent qualified defendant's instructions that plaintiff should
proceed to fulfill defendant's order only upon receipt by the plaintiff of the
defendant's letter of credit
- Plaintiff awaited the opening of such a letter of credit by the defendant
- Defendant and his agent have repeatedly assured plaintiff of the defendant's
financial capabilities to pay for the goods and in fact he accomplished the necessary
application for a letter of credit with his banker, but he subsequently instructed his
banker not to give due course to his application for a letter of credit and that for
reasons only known to the defendant, he fails and refuses to open the necessary
letter of credit to cover payment of the goods
- It came to the knowledge of the plaintiff that the defendant has been operating his
taxicabs without the required radio transceivers and when the U.S. Navy Authorities
of Subic Bay, Philippines, were pressing defendant for compliance with his
commitments with respect to the installations of radio transceivers on his taxicabs
he impliedly laid the blame for the delay upon the plaintiff thus destroying the
reputation of the plaintiff with the mid Naval Authorities with whom plaintiff
transacts business
- On March 27, 1973, plaintiff wrote a letter thru his counsel to ascertain from the
defendant as to whether it is his intention to fulfill his pan of the agreement with the
plaintiff or whether he desired to have the contract between them definitely
cancelled, but defendant did not even have the courtesy to answer plaintiff's
demand

Petitioner’s Claims The defendant entered into a contract with the plaintiff
without the least intention of faithfully complying with his obligations, but he did so
only in order to obtain the concession from the U.S. Navy Exchange. of operating a
fleet of taxicabs inside the U.S. Naval Base to his financial benefit and at the
expense and prejudice of third parties such as the plaintiff. That in view of the
defendant's failure to fulfill his contractual obligations with the plaintiff, the plaintiff
will suffer several damages

Respondent’s Arguments Respondent Guerrero filed a motion to dismiss

complaint for lack of cause of action. He alleged that plaintiff was merely
anticipating his loss or damage, which might result from the alleged failure of
defendant to comply with the terms of the alleged contract. Plaintiff's right of
recovery under his cause of action is premised not on any loss or damage actually
suffered by him but on a non-existing loss or damage which he is expecting to incur
in the near future. Plaintiff's right therefore under his cause of action is not yet fixed or
vested. - The respondent judge, over petitioner's opposition, issued a minute order
dismissing the complaint

ISSUE
WON there is sufficient cause of action

HELD
YES.
Ratio The essential elements of a cause of action are: [1] the existence of a legal
right of the plaintiff; [2] a correlative duty of the defendant and [3] an act or
omission of the defendant in violation of the plaintiff's right, with consequent injury
or damage to the latter for which he may maintain an action for recovery of
damages or other appropriate relief.
- Article 1170 Of the Civil Code provides:
"Those who in the performance of their obligation are guilty of fraud. negligence, or
delay, and those who in any manner contravene the tenor thereof are liable for
damages."
The phrase "in any manner contravene the tenor" of the obligation includes any
illicit act or omission which impairs the strict and faithful fulfillment of the obligation
and every kind of defective performance.
- The damages which the obligor is liable for includes not only the value of the loss
suffered by the obligee [daño emergense] but also the profits which the latter failed
to obtain [lucro cesante]. If the obligor acted in good faith, he shall be liable for
those damages that are the natural and probable consequences of the breach of
the obligation and which the parties have foreseen or could have reasonably
foreseen at the time the obligation was constituted; and in case of fraud, bad faith,
malice or wanton attitude, he shall be liable for all damages which may be
reasonably attributed to the nonperformance of the obligation. The same is true
with respect to moral and exemplary damages. The applicable legal provisions on
the matter, Articles 2220 and 2232 of the Civil Code, allow the award of such
damages in breaches of contract where the defendant acted in bad faith.
Reasoning The complaint recites the circumstances that led to the perfection of
the contract entered into by the parties. It further avers that while petitioner had
fulfilled his part of the bargain, private respondent failed to comply with his
correlative obligation by refusing to open a letter of credit to cover payment of the
goods ordered by him, and that consequently, petitioner suffered not only loss of
his expected profits, but moral and exemplary damages as well. From these
allegations, the essential elements of a cause of action are present.
- Indisputably, the parties, both businessmen, entered into the aforesaid contract
with the evident intention of deriving some profits therefrom. Upon breach of the
contract by either of them, the other would necessarily suffer loss of his expected
profits. Since the loss comes into being at the very moment of breach, such loss is
real, "fixed and vested" and, therefore, recoverable under the law. The complaint
sufficiently alleges bad faith on the part of the defendant.
Disposition The questioned order of dismissal was set aside and the case was
ordered remanded to the court of origin for further proceedings. No costs.

Ong v. Bognalbal

FACTS:

Ernesto Bogñalbal, an architect-contractor doing business under the

name and style of E.B. Bogñalbal Construction, entered into an
“Owner-Contractor Agreement” with Victoria Ong, a
businesswoman, for the construction of a proposed boutique owned
by the latter to be known as Les Galeries de Paris located at the 3rd
Floor of the Shangri-La Plaza, Epifanio Delos Santos Avenue corner
Shaw Boulevard, Mandaluyong City.
The agreement provides that in consideration of the sum of two
hundred thousand pesos (P200,000.00), the contractor agrees to
furnish labor, tools and equipment to complete the work on the
boutique as per specification within forty-five (45) days excluding
Sundays from the date of delivery of the construction materials.
Payment by the owner shall be made by progress billing to be
collected every two (2) weeks based on the accomplishment of work
value submitted by the contractor to the owner as certified for
payment by the architect assigned on site.
It is with respect to progress billing no. 4 that the present
controversy arose. When [respondent Bogñalbal] submitted the
fourth progress billing on March 31, 1995 for the period covering
March 4 to 18, 1995, in the sum of P30,950.00 equivalent to 15.47%
of the total job refused to pay the same.
Petitioner Ong claims, as a defense against payment of the fourth
progress billing, that “the only reason why the fourth billing was not
paid was because [respondent Bogñalbal] himself agreed and
committed to collect the fourth progress billing after he completed
the Kenzo flooring.” Petitioner Ong claims that, because of this
promise, her obligation to pay respondent Bogñalbal has not yet
become due and demandable.
The Court of Appeals rejected this argument, ruling that respondent
Bogñalbal’s stoppage of work on the project prior to its completion
cannot justify petitioner Ong’s refusal to pay the fourth progress
billing and the value of respondent Bogñalbal’s accomplished work
on the Kenzo flooring. On the contrary, according to the Court of
Appeals, respondent Bogñalbal was justified to refuse to continue
the project due to petitioner Ong’s failure to pay the fourth progress
billing.
ISSUE:

Whether or not there was a novation?

RULING:

The Court of Appeals is in error. If the parties indeed had a verbal

agreement that collection of said billing will be held on abeyance
until after respondent Bogñalbal finished the work on the Kenzo
flooring, there would have been a novation of petitioner Ong’s
obligation to pay the price covered by the fourth billing by changing
the principal conditions therefor. This falls under the first type of
novation under Article 1291 of the Civil Code which provides:
Article 1291. Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.
While the subject of novation is, in the Civil Code, included in Book
IV, Title I, Chapter 4, which refers to extinguishment of obligations,
the effect of novation may be partial or total. There is partial
novation when there is only a modification or change in some
principal conditions of the obligation. It is total, when the obligation
is completely extinguished. Also, the term principal conditions in
Article 1291 should be construed to include a change in the period to
comply with the obligation. Such a change in the period would only
be a partial novation, since the period merely affects the
performance, not the creation of the obligation.
Novation is never presumed. Unless it is clearly shown either by
express agreement of the parties or by acts of equivalent import, this
defense will never be allowed.
The evidence preponderates in favor of respondent Bogñalbal that
there had been no novation of the contract. At best, what was
proven was a grudging accommodation on the part of respondent
Bogñalbal to continue working on the project despite petitioner
Ong’s failure to pay the fourth progress billing. Respondent
Bogñalbal’s fourth partial billing demand letters dated 21 April 1995
and 15 May 1995, both of which were served upon petitioner Ong
after the alleged 20 April 1995 meeting, is inconsistent with the
theory that the meeting had produced a novation of the petitioner
Ong’s obligation to pay the subject billing.
More importantly, assuming that there was indeed a novation of the
obligation of petitioner Ong to pay the fourth billing so as to include
as additional condition the completion of the Kenzo flooring, such
new condition would, nevertheless, be deemed fulfilled. This is
pursuant to Article 1186 of the Civil Code, which provides that the
condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.

Heirs of Ramon Gaite, et al vs. the Plaza, Inc. and FGU Insurance Corporation
G.R. No. 177685
January 26, 2011

Facts:
The Plaza, Inc. (The Plaza), a corporation engaged in the restaurant business,
through its President, Jose C. Reyes, entered into a contract with Rhogen Builders
(Rhogen), represented by Ramon C. Gaite, for the construction of a restaurant building
in Greenbelt, Makati, Metro Manila for the price of P7,600,000.00.
To secure Rhogen’s compliance with its obligation under the contract, Gaite and FGU
Insurance Corporation (FGU) executed a surety bond in the amount of P1,155,000.00 in
favor of The Plaza. The Plaza paid P1,155,000.00 less withholding taxes as down
payment to Gaite. Thereafter, Rhogen commenced construction of the restaurant
building.
Engineer Angelito Z. Gonzales, the Acting Building Official of the Municipality of
Makati, ordered Gaite to cease and desist from continuing with the construction of the
building for violation of Sections 301 and 302 of the National Building Code (P.D. 1096)
and its implementing rules and regulations.
Engr. Gonzales informed Gaite that the building permit for the construction of the
restaurant was revoked for non-compliance with the provisions of the National Building
Code and for the additional temporary construction without permit.
Gaite notified Reyes that he is suspending all construction works until Reyes and the
Project Manager cooperate to resolve the issue he had raised to address the problem.
This was followed by another letter in which Gaite expressed his sentiments on their
aborted project and reiterated that they can still resolve the matter with cooperation
from the side of The Plaza.
However, Gaite informed The Plaza that he is terminating their contract based on the
Contractor’s Right to Stop Work or Terminate Contracts as provided for in the General
Conditions of the Contract. In his letter, Gaite accused Reyes of not cooperating with
Rhogen in solving the problem concerning the revocation of the building permits, which
he described as a minor problem. Additionally, Gaite demanded the payment of
P63,058.50 from The Plaza representing the work that has already been completed by
Rhogen.
The Plaza, through Reyes, countered that it will hold Gaite and Rhogen fully
responsible for failure to comply with the terms of the contract and to deliver the
finished structure
on the stipulated date. Reyes argued that the down payment made by The Plaza was
more than enough to cover Rhogen’s expenses.
The Plaza notified Gaite that it could no longer credit any payment to Rhogen for the
work it had completed because the evaluation of the extent, condition, and cost of work
done revealed that in addition to the violations committed during the construction of
the building, the structure was not in accordance with plans approved by the
government and accepted by Ayala. Hence, The Plaza demanded the reimbursement of
the down payment, the cost of uprooting or removal of the defective structures, the
value of owner-furnished materials, and payment of liquidated damages.
Branch 63 of the RTC Makati rendered its decision granting the claims of The Plaza
against Rhogen, the Gaites and FGU, and the cross-claim of FGU against Rhogen and
the Gaites.
The CA affirmed the Decision of the trial court but modified the award of damages.
The motion for reconsideration of the decision was denied. Hence, this appeal.

Issue:
Whether or not petitioners are liable for breach of contract.

Held:
Rhogen committed a serious breach of its contract with The Plaza, which justified the
latter in terminating the contract. Petitioners are thus liable for damages for having
breached their contract with respondent The Plaza. Article 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.
Under the principle of quantum meruit, a contractor is allowed to recover the
reasonable value of the thing or services rendered despite the lack of a written
contract, in order to avoid unjust enrichment. Quantum meruit means that in an action
for work and labor, payment shall be made in such amount as the plaintiff reasonably
deserves. To deny payment for a building almost completed and already occupied
would be to permit unjust enrichment at the expense of the contractor.
Rhogen failed to finish even a substantial portion of the works due to the stoppage
order issued just two months from the start of construction. Despite the down payment
received from The Plaza, Rhogen, upon evaluation of the Project Manager, was able to
complete a meager percentage much lower than that claimed by it under the first
progress billing. Moreover, after it relinquished the project, the site inspection appraisal
jointly conducted by the Project Manager, Building Inspector Engr. Gregory and
representatives from FGU and Rhogen, Rhogen was found to have executed the works
not in accordance with the approved plans or failed to
seek prior approval of the Municipal Engineer. Article 1167 of the Civil Code is explicit
on this point that if a person obliged to do something fails to do it, the same shall be
executed at his cost.
G.R. No. 171660 October 17, 2011

CONTINENTAL CEMENT CORPORATION Petitioner,

vs.
ASEA BROWN BOVERI, INC., BBC BROWN BOVERI, CORP., AND TORD B.
ERIKSON,** Respondents.

DECISION

DEL CASTILLO, J.:

FACTS:

Sometime in July 1990, petitioner Continental Cement Corporation (CCC), a corporation

engaged in the business of producing cement, obtained the services of
respondents Asea Brown Boveri, Inc. (ABB) and BBC Brown Boveri, Corp. to repair its
160 KW Kiln DC Drive Motor (Kiln Drive Motor).

On October 23, 1991, due to the repeated failure of respondents to repair the Kiln
Drive Motor, petitioner filed with Branch 101 of the Regional Trial Court (RTC) of
Quezon City a Complaint for sum of money and damages, docketed as Civil Case No. Q-
91-10419, against respondent corporations and respondent Tord B. Eriksson (Eriksson),
Vice-President of the Service Division of the respondent ABB. Petitioner alleged that:

On July 11, 1990, the plaintiff delivered the 160 KW Kiln DC Drive Motor to the
defendants to be repaired under PO No. 17136-17137,

The defendant, Tord B. Eriksson, was personally directing the repair of the said
Kiln Drive Motor. He has direction and control of the business of the defendant
corporations. Apparently, the defendant Asea Brown Boveri, Inc. has no separate
personality because of the 4,000 shares of stock, 3996 shares were subscribed
by Honorio Poblador, Jr. The four other stockholders subscribed for one share of
stock each only.

After the first repair by the defendants, the 160 KW Kiln Drive Motor was
installed for testing on October 3, 1990. On October 4, 1990 the test failed. The
plaintiff removed the DC Drive Motor and replaced it with its old motor. It was
only on October 9, 1990 that the plaintiff resumed operation. The plaintiff lost
1,040 MTD per day from October 5 to October 9, 1990.
 On November 14, 1990, after the defendants had undertaken the second repair
of the motor in question, it was installed in the kiln. The test failed again. The
plaintiff resumed operation with its old motor on November 19, 1990. The
plaintiff suffered production losses for five days at the rate of 1,040 MTD daily.

The defendants were given a third chance to repair the 160 KW Kiln DC Drive
Motor.1avvphi1 On March 13, 1991, the motor was installed and tested. Again,
the test failed. The plaintiff resumed operation on March 15, 1991. The plaintiff
sustained production losses at the rate of 1,040 MTD for two days.

As a consequence of the failure of the defendants to comply with their

contractual obligation to repair the 160 KW Kiln DC Drive Motor, the plaintiff
sustained the following losses:

(a) Production and opportunity losses - P10,600,000.00

This amount represents only about 25% of the production losses at

the rate of P72.00 per bag of cement.

(b) Labor Cost and Rental of Crane - 26,965.78

(c) Penalties (at P987.25 a day) for failure to deliver the motor from
Aug. 29, 1990 to July 31, 1991. - 331,716.00

(d) Cost of money interest of the P987.25 a day from July 18, 1990 to
April 5, 1991 at 34% for 261 days - 24,335.59

Total Damages 10,983,017.42

The plaintiff has made several demands on the defendants for the payment of
the above-enumerated damages, but the latter refused to do so without valid
justification.

10. The plaintiff was constrained to file this action and has undertaken to pay its
counsel Twenty Percentum (20%) of the amount sought to be recovered as
attorney’s fees.

ISSUES:

Hence, the present recourse where petitioner interposes the following issues:
 1. Whether the [CA] gravely erred in applying the terms of the "General
Conditions" of Purchase Orders Nos. 17136 and 17137 to exculpate the
respondents from liability in this case.

2. Whether the [CA] seriously erred in applying the concepts of ‘implied

warranty’ and ‘warranty against hidden defects’ of the New Civil Code in order to
exculpate the respondents from its contractual obligation.

Ruling of the Regional Trial Court

On August 30, 1995, the RTC rendered a Decision in favor of petitioner. The RTC
rejected the defense of limited liability interposed by respondents since they failed to
prove that petitioner received a copy of the General Conditions.16 Consequently, the
RTC granted petitioner’s claims for production loss, labor cost and rental of crane, and
attorney’s fees.17 Thus:

WHEREFORE, premises above considered, finding the complaint substantiated by

plaintiff, judgment is hereby rendered in favor of plaintiff and against defendants,
hereby ordering the latter to pay jointly and severally the former, the following sums:

P10,600,00.00 for loss of production;

P 26,965.78 labor cost and rental of crane;
P 100,000.00 attorney’s fees and cost.

SO ORDERED.

Ruling of the Court of Appeals

On appeal, the CA reversed the ruling of the RTC. The CA applied the exculpatory
clause in the General Conditions and ruled that there is no implied warranty on repair
work; thus, the repairman cannot be made to pay for loss of production as a result of
the unsuccessful repair. The fallo of the CA Decision reads:

WHEREFORE, premises considered, the assailed August 30, 1995 Decision of the
Regional Trial Court of Quezon City, Branch 101 is hereby REVERSED and SET
ASIDE. The October 23, 1991 Complaint is hereby DISMISSED.

SO ORDERED.

Our Ruling (Supreme Court)

The petition has merit.

Petitioner and respondent ABB entered into a contract for the repair of petitioner’s Kiln
Drive Motor, evidenced by Purchase Order Nos. 17136-37,33 with the following terms
and conditions:
 a) Total Price: P197,450.00
b) Delivery Date: August 29, 1990 or six (6) weeks from receipt of order and
down payment34
c) Penalty: One half of one percent of the total cost or Nine Hundred Eighty
Seven Pesos and Twenty five centavos (P987.25) per day of delay.

WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated August 25,
2005 and the Resolution dated February 16, 2006 of the Court of Appeals in CA-G.R. CV
No. 58551 are hereby REVERSED and SET ASIDE. Respondent ABB is ORDERED to pay
petitioner the amount of P129,329.75, with interest at 6% per annum to be computed
from the date of the filing of the complaint until finality of this Decision and 12% per
annum thereafter until full payment.

SO ORDERED.