Civil Law Review II
OBLIGATIONS AND CONTRACTS
FIRST CASE ASSIGNMENT
1. Vda de Quirino v Palarca 29 SCRA 1 - Ubay-
Ubay
FACTS: Petitioner Consuelo Vda. de Quirino (lessor)
and respondent Jose Palarca (lessee) entered into a
lease contract on October 4, 1947 whereby the former
leased to the latter a parcel of land. In their written
contract of lease, it was stipulated that:
1. The term thereof would be ten (10) years, from
November 1, 1947 to November 1, 1957;
2. The monthly rental would be P250, payable in
advance;
3. The lessee could demolish the lessor's old
building on the leased premises and construct thereon
any building and/or improvements suitable for school
purposes, which new building and/or improvements shall
belong to the lessee;
4. Within one year after the expiration of the lease,
the lessee would have "the right and option to buy the
leased premises" for P12,000;
5. Should the lessee fail to exercise this option, the
lessor shall "have the option to buy" said building and/or
improvements within ... one year after the expiration of
the contract; and
6. Should neither of the parties exercise their
respective options, both "shall be free to look for a buyer
for his or her respective property.”
In a letter on September 15, 1958, the lessee informed
the lessor that the lessee was exercising "his right to buy
the leased property for the agreed price of P12,000,"
and inquired when the lessor would be ready to execute
the deed of sale. Soon thereafter, before the expiration
of the term of his option, the lessee wrote a follow-up
letter to the lessor and asked her again when she would
be ready to execute the corresponding deed of sale in
order that he (lessee) could pay said price. The lessor
replied that she cannot accede to the lessee's requests
because the contract of October 4, 1947 has been
novated by another agreement wherein the rent of P250
a month was reduced to P100.00.
Thereupon, the lessee instituted an action to compel the
lessor to comply with her obligation to execute the
corresponding deed of sale in his (lessee's) favor, upon
payment by him of said sum of P12,000. The lessor filed
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her answer and alleged that the lease contract had been
modified by a subsequent agreement of the parties,
which had been observed and carried out by them, and
that payment of the stipulated price had not been
properly tendered or validly consigned.
Court of First Instance - rendered judgment ordering the
lessor (Quirino) to execute a deed of conveyance in
favor of the lessee (Palarca)
Court of Appeals – affirmed the CFI.
ISSUES:
1. WON the lessee's option to purchase the leased
premises was null and void for want of consideration
2. WON the lessee should pay rentals during the
pendency of this case
RULING:
1. No. In reciprocal contracts, like the one in
question, the obligation or promise of each party is the
consideration for that of the other. Article 1350 of our
Civil Code states that "in onerous contracts, the cause is
understood to be, for each contracting party, the
prestation or promise of a thing or service by the other..."
As a consequence, the power to rescind obligations is
implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.
In the case at bar, the consideration for the lessor's
obligation to sell the leased premises to the lessee,
should he choose to exercise his option to purchase the
same, is the obligation of the lessee to sell to the lessor
the building and/or improvements constructed and/or
made by the former, if he fails to exercise his option to
buy said premises. Then, again, the amount of the
rentals agreed upon in the contract of October 4, 1947
— which amount turned out to be so burdensome upon
the lessee, that the lessor agreed, five (5) years later, to
reduce it —as well as the building and/or improvements
contemplated to be constructed and/or introduced by the
lessee, were, undoubtedly, part of the consideration for
his option to purchase the leased premises.
Indeed, not being inconsistent with the lessee's option to
purchase the leased premises, said agreement to
reduce the rental did not necessarily cancel or extinguish
the option. Although the lessor would have the Court
believe that she consented to said reduction, condition
that the option be cancelled, this claim had not been
proven.

Consignation referred to in Article 1256 of the Civil Code
is inapplicable to the present case (lease with option to
buy) because said provision refers to consignation as
one of the means for the payment or discharge of a
“debt,” whereas the lessee was not indebted to the
lessor for the price of the leased premises. The lessee
merely exercised a right of option and had no obligation
to pay said price until execution of the deed of sale in his
favor, which the lessor refused to do.
2. No. Had the lessor readily complied with her
obligation to execute the corresponding deed of
conveyance to the lessee, upon payment by him of the
agreed price of P12,000, which he tendered in October,
1958, the premises in question would have become his
property on or before November 1, 1958, and since then
he would have had no obligation to pay rentals. As a
consequence, it is neither just nor fair to impose such
obligation upon him by reason of the lessor's illegal
breach of their contract. Otherwise, she would be
rewarded therefor and we would jeopardize the sanctity
of contractual obligations.
2. Integrated Packaging Corp v CA, 333 SCRA
170 - Gales
Facts: Petitioner and private respondent executed on
May 5, 1978, an order agreement whereby private
respondent bound itself to deliver to petitioner 3,450
reams of printing paper, coated, 2 sides basis, 80 lbs.,
38" x 23", short grain, worth P1,040,060.00 under the
following schedule: May and June 1978450 reams at
P290.00/ream; August and September 1978700 reams
at P290/ream; January 1979575 reams at
P307.20/ream; March 1979575 reams at P307.20/ream;
July 1979575 reams at P307.20/ream; and October
1979575 reams at P307.20/ream. In accordance with the
standard operating practice of the parties, the materials
were to be paid within a minimum of thirty days and
maximum of ninety days from delivery.
Later, on June 7, 1978, petitioner entered into a contract
with Philacor to print three volumes of "Philacor Cultural
Books" for delivery on the following dates: Book VI, on or
before November 1978; Book VII, on or before
November 1979 and; Book VIII, on or before November
1980, with a minimum of 300,000 copies at a price of
P10.00 per copy or a total cost of P3,000,000.00.
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As of July 30, 1979, private respondent had delivered to
petitioner 1,097 reams of printing paper out of the total
3,450 reams stated in the agreement. Petitioner alleged
it wrote private respondent to immediately deliver the
balance because further delay would greatly prejudice
petitioner. From June 5, 1980 and until July 23, 1981,
private respondent delivered again to petitioner various
quantities of printing paper amounting to P766,101.70.
However, petitioner encountered difficulties paying
private respondent said amount. Accordingly, private
respondent made a formal demand upon petitioner to
settle the outstanding account. On July 23 and 31, 1981
and August 27, 1981, petitioner made partial payments
totalling P97,200.00 which was applied to its back
accounts covered by delivery invoices dated September
29-30, 1980 and October 1-2, 1980.
Meanwhile, petitioner entered into an additional printing
contract with Philacor. Unfortunately, petitioner failed to
fully comply with its contract with Philacor for the printing
of books VIII, IX, X and XI. Thus, Philacor demanded
compensation from petitioner for the delay and damage
it suffered on account of petitioners failure.
On August 14, 1981, private respondent filed with the
Regional Trial Court of Caloocan City a collection suit
against petitioner for the sum of P766,101.70,
representing the unpaid purchase price of printing paper
bought by petitioner on credit.
In its answer, petitioner denied the material allegations
of the complaint. By way of counterclaim, petitioner
alleged that private respondent was able to deliver only
1,097 reams of printing paper which was short of 2,875
reams, in total disregard of their agreement; that private
respondent failed to deliver the balance of the printing
paper despite demand therefor, hence, petitioner
suffered actual damages and failed to realize expected
profits; and that petitioners complaint was prematurely
filed.
In an admitted supplemental complaint, private
respondent alleged that subsequent to the enumerated
purchase invoices in the original complaint, petitioner
made additional purchases of printing paper on credit
amounting to P94,200.00. Private respondent also
averred that petitioner failed and refused to pay its
outstanding obligation although it made partial payments
in the amount of P97,200.00 which was applied to back
accounts, thus, reducing petitioners indebtedness to
P763,101.70.

RTC: Declared that petitioner should pay private
respondent the sum of P763,101.70 representing the
value of printing paper delivered by private respondent
from June 5, 1980 to July 23, 1981. However, the lower
court also found petitioners counterclaim meritorious. It
ruled that were it not for the failure or delay of private
respondent to deliver printing paper, petitioner could
have sold books to Philacor and realized profit of
P790,324.30 from the sale. It further ruled that petitioner
suffered a dislocation of business on account of loss of
contracts and goodwill as a result of private respondents
violation of its obligation, for which the award of moral
damages was justified.
CA: Court of Appeals reversed and set aside the
judgment of the trial court. The appellate court ordered
petitioner to pay private respondent the sum of
P763,101.70 representing the amount of unpaid printing
paper delivered by private respondent to petitioner, with
legal interest thereon from the date of the filing of the
complaint until fully paid. However, the appellate court
deleted the award of P790,324.30 as compensatory
damages as well as the award of moral damages and
attorneys fees, for lack of factual and legal basis.
Issues:
(1)....Whether or not private respondent violated the
order agreement, and;
(2)....Whether or not private respondent is liable for
petitioners breach of contract with Philacor.
Held:
1. No. The transaction between the parties is a
contract of sale whereby private respondent (seller)
obligates itself to deliver printing paper to petitioner
(buyer) which, in turn, binds itself to pay therefor a sum
of money or its equivalent (price). Both parties concede
that the order agreement gives rise to a reciprocal
obligations such that the obligation of one is dependent
upon the obligation of the other. Reciprocal obligations
are to be performed simultaneously, so that the
performance of one is conditioned upon the
simultaneous fulfillment of the other. Thus, private
respondent undertakes to deliver printing paper of
various quantities subject to petitioners corresponding
obligation to pay, on a maximum 90-day credit, for these
materials. Note that in the contract, petitioner is not even
required to make any deposit, down payment or advance
payment, hence, the undertaking of private respondent
to deliver the materials is conditional upon payment by
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petitioner within the prescribed period. Clearly, petitioner
did not fulfill its side of the contract as its last payment in
August 1981 could cover only materials covered by
delivery invoices dated September and October 1980.
There is no dispute that the agreement provides for the
delivery of printing paper on different dates and a
separate price has been agreed upon for each delivery.
It is also admitted that it is the standard practice of the
parties that the materials be paid within a minimum
period of thirty (30) days and a maximum of ninety (90)
days from each delivery. Accordingly, the private
respondents suspension of its deliveries to petitioner
whenever the latter failed to pay on time, as in this case,
is legally justified under the second paragraph of Article
1583 of the Civil Code which provides that:
"When there is a contract of sale of goods to be
delivered by stated installments, which are to be
separately paid for, and the seller makes defective
deliveries in respect of one or more installments, or the
buyer neglects or refuses without just cause to take
delivery of or pay for one or more installments, it
depends in each case on the terms of the contract and
the circumstances of the case, whether the breach of
contract is so material as to justify the injured party in
refusing to proceed further and suing for damages for
breach of the entire contract, or whether the breach is
severable, giving rise to a claim for compensation but
not to a right to treat the whole contract as broken."
(Emphasis supplied)
In this case, as found a quo petitioners evidence failed to
establish that it had paid for the printing paper covered
by the delivery invoices on time. Consequently, private
respondent has the right to cease making further
delivery, hence the private respondent did not violate the
order agreement. On the contrary, it was petitioner which
breached the agreement as it failed to pay on time the
materials delivered by private respondent. Respondent
appellate court correctly ruled that private respondent
did not violate the order agreement.
2. No.
As correctly held by the appellate court, private
respondent cannot be held liable under the contracts
entered into by petitioner with Philacor. Private
respondent is not a party to said agreements. It is also
not a contract pour autrui. Aforesaid contracts could not
affect third persons like private respondent because of
the basic civil law principle of relativity of contracts which

provides that contracts can only bind the parties who
entered into it, and it cannot favor or prejudice a third
person,even if he is aware of such contract and has
acted with knowledge thereof.
Indeed, the order agreement entered into by petitioner
and private respondent has not been shown as having a
direct bearing on the contracts of petitioner with Philacor.
Private respondent did not violate the order agreement it
had with petitioner. Likewise, private respondent could
not be held liable for petitioners breach of contract with
Philacor. It follows that there is no basis to hold private
respondent liable for damages. Accordingly, the
appellate court did not err in deleting the damages
awarded by the trial court to petitioner.
3. Tugade v CA, 85 SCRA 226 – Daba
Facts: In this case, a Holden car was badly damaged
when it was bumped from behind by a Blue Car Taxi
driven by petitioner Tugade. The latter admits that the
accident was caused by the faulty brakes of the taxicab
but he contends that the sudden malfunctioning of the
brakes at that particular moment before the accident was
something which even the due diligence of a good father
of a family could not have prevented.
Tugade was found guilty beyond beyond reasonable
doubt of Reckless Imprudence Resulting in Damage to
Property. He sought to exculpate himself with the
explanation that this fault could not and should not be
traced to him.
Issue: Is the mishap caused by defective brakes
fortuitous in character?
Held: No. An essential element of a caso fortuito is the
occurrence of some extraordinary circumstance
independent of the will of the obligor or of his employees
This element is lacking in the present case It is not
suggested that the accident in question was due to an
act of God or to adverse road conditions which could not
have been foreseen as far as the record shows the
accident was caused either by defects in the automobile
or else through the negligence of its driver This is not a
caso fortuito which would call for an acquittal of the
driver.
4. La Mallorca v De Jesus 17 SCRA 23 -
Germanes
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1. DAMAGES, ACCIDENT CAUSED BY MECHANICAL
DEFECT; LIABILITY OF OWNER OF VEHICLE. —
Where the cause of the blowout which caused the
accident was known in that the inner tube of the left front
tire was pressed between the inner circle of the left
wheel and the rim which had slipped out of the wheel, a
mechanical defect of the conveyance or a fault in
equipment which was easily discoverable if the bus had
been subjected to a more thorough or rigid check-up
before it took to the road, the owner of the vehicle is
liable accident.
2. MORAL DAMAGES; COMMON CARRIER; BREACH
OF CONTRACT. — In this jurisdiction moral damages
are recoverable by reason of the death of a passenger
caused by the breach of contract of a common carrier,
as provided in Article 1764, in relation to Article 2206, of
the Civil Code.
Facts: In October 1959, Lolita de Jesus was riding a bus
owned by La Mallorca and Pampanga Bus Company
which had a head on collision against a freight truck.
Apparently, the bus had a tire blow out which resulted to
the accident. Lolita died and so her father, Valentin de
Jesus, filed a civil case for damages against La
Mallorca. The lower court rendered judgment in favor of
De Jesus and ordered La Mallorca to pay for actual,
compensatory, and moral damages including counsel
fees. This decision was affirmed by the Court of
Appeals. La Mallorca assailed the decision as it argued
that a tire blow out is a fortuitous event and should not
be taken as negligence.
ISSUE: Whether or not a tire blow out is a fortuitous
event.
HELD: No. As found by the lower court, the tire blow out
in this case was due to the fact that the inner circle of the
wheel of the bus was pressed so closely to the rim which
caused it to eventually explode. This mechanical defect
in the installation of the wheel could have been easily
discovered had the bus been subjected to a thorough
check up before it was allowed to hit the road. La
Mallorca is therefore negligent and the tire explosion is
not a fortuitous event for it could have been avoided had
the bus been properly maintained.
The Supreme Court also emphasized in this case that
moral damages are recoverable by reason of the death
of a passenger caused by the breach of contract of a

common carrier, as provided in Article 1764, in relation
to Article 2206, of the Civil Code.
5. Son v Cebu Autobus Co 94 PHIL 892 - Del
Castillo
JOSE SON vs. CEBU AUTOBUS COMPANY
G.R. No. L-6155
April 30, 1954
FACTS: The plaintiff, Jose Son, instituted in the Court of
First Instituted of Cebu Autobus Company, damages in
the total sum of P2,660, alleged to have been suffered
by him as a result of the fact that the defendant's truck
fell into a due to a defect of its engine or to the
negligence of its driver; thus the plaintiff (then a
passenger of the vehicle) received serious injuries and
two of his hogs (loaded therein) were killed.
The defense set up by the defendant is that the accident
was caused by events which were unforeseen or, even if
foreseen or, even if foreseen, were inevitable.
RTC: sentenced the defendant to pay to the plaintiff the
sum of P2,000 as moral damages, and the sum of
P286.80 as plaintiff's actual expenses, together with his
loss and unrealized profit in connection with the seven
hogs loaded by the plaintiff in defendant's truck.
ISSUE: W/N Defendant may be held liable for the
injuries suffered by the plaintiff as well as the death of
the latter’s hogs.
RULING: The evidence adduced conclusively shows
that truck of the defendant Cebu Autobus Company left
Cebu City on September 17, 1948, at about 10:00 a.m.
bound for Maya, municipality of Daan Bantayan, Cebu
Province, arriving in the latter place at about 5:00 p.m. of
the same day. it passed the night in Maya. It left Maya,
Daan Bantayan, Cebu, on its return trip to Cebu City at
about 4:00 a.m. September 18, 1948, without having
been inspected or examined by the mechanic. The
plaintiff boarded defendant's truck in barrio Maya. Daan
Bantayan, Cebu, and loaded seven hogs for his home at
Yati Liloan, Cebu, paying the usual fare and freight. The
plaintiff did not reach his destination safely, because the
truck of the defendant fell into a canal at kilometer. No.
56, barrio of Macaas, municipality of Catmon, Cebu. He
was pinned down or pressed by the truck on September
18, 1948, and, as a consequence, he suffered complete
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fractures on his pelvic bone. Because of the shock and
pain he lost his consciousness for sometime. He was
brought to his house at Yati, municipality of Liloan,
Cebu, unconscious on board another truck. Later, on the
same day, he was brought in a special wagon to the City
of Cebu, and was confined in the Velez Clinic for
fourteen days. On October 2, 1948, the plaintiff went out
of the Velez Clinic, but according to Dr. Jacinto Velez,
physician and proprietor of the Velez Clinic, the plaintiff
needed 60 days more of treatment and rest before he
could resume his former habitual work, inasmuch as he
suffered complete fractures on his pelvic bone. The
evidence further shows that two hogs of the plaintiff
loaded on TPU truck No. 312 of the defendant on
September 18, 1948 died when the said truck fell into a
canal at Macaas, Catmon, Cebu.
The theory of the defendant is that the accident was
unforeseen, or even if foreseen, was inevitable. This
theory cannot be sustained.
Whether the accident was caused by the defect of the
engine of the truck of the defendant, or by the
negligence of the driver, or by the breakage of the drag-
link spring, the defendant is civilly liable to the plaintiff for
the damages suffered by him.
The evidence shows the drag-link spring of the truck in
question was not inspected or examined when it left
Maya, Daan Bantayan, Cebu, on September 1, 1948, for
Cebu City. If it were inspected or examined, the accident
might have been avoided. The plaintiff had no means of
avoiding the danger or escaping the injury. When he
boarded defendant's truck bound for his home at Yati
Liloan, Cebu, and loaded on said truck seven hogs, he
had every right to presume the truck perfectly in good
condition which could transport him safely and securely
to his destination. He paid the regular fare and the
freight of the seven hogs.
The plaintiff is suing the defendant upon its contract of
carriage which the latter had failed to perform by virtue
of its failure to safely carry the plaintiff to his destination
at the barrio of Yati, Liloan, Cebu, as distinguished from
an action based on culpa acquiliana under which it is
necessary, in order to recover damages, to prove fault or
negligence on the part of the carrier.
6. PPL v Paras, Oct 3, 2014, GR 192912 - Tan,
Charles

People v Democrito Paras
GR No. 192912
22 October 2014
Facts: Accused Democrito Paras was charged with one
count of rape before the RTC of Toledo, City, allegedly
committed against a minor, 17 years old at the time of
the incident. The RTC found Paras guilty and was
sentenced to reclusion perpetua and to indemnify the
offended party the sum of P50k by way of compensatory
damages, and P100k for moral damages.
On appeal, the CA upheld the judgment of the RTC as
well as the 50k civil indemnity, but modified the moral
damages to 50k and awarded exemplary damages of
25k.
Upon appeal to the SC, the Court affirmed the
conviction, with modification again as to the amount of
damages: 50k civil indemnity, 50k moral damages, 30k
exemplary damages plus legal interest.
This was promulgated on June 4, 2014. However, on
August 27, 2014, the Court received a letter from Police
Superintendent Rabo informing the Court that the
accused died at the New Bilibid Prison Hospital on
January 24, 2013, before the promulgation of his
conviction.
Article 89 of the RPC states that the death of the
accused pending appeal extinguishes both criminal and
civil liability.
Issue: Whether the SC Decision is still effective.
Ruling: NO, it is not.
People v Bayotas enunciated the following guidelines
before Article 89 is to be applied:
1. Death of accused pending appeal of his conviction
extinguishes both civil and criminal liability based solely
thereon. However, only the civil liability directly arising
from and based solely on the offense committed is
extinguished.
2. Thus, the claim for civil liability survives if they are
predicated on a source of obligation other than delict.
3. An action for recovery may therefore be pursued by
filing a separate civil action, to be enforced against the
executor/administrator or the estate of the accused, as
the case may be.
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4. Finally, the private offended party need not fear a
forfeiture of his right to file this separate civil action by
prescription, in cases where during the prosecution of
the criminal action and prior to its extinction, the private-
offended party instituted together there with the civil
action. In such case, the statute of limitations on the civil
liability is deemed interrupted during the pendency of the
criminal case, conformably with provisions of Article
1155 of the Civil Code, that should thereby avoid any
apprehension on a possible privation of right by
prescription.
In this case, when the accused-appellant died on
January 24, 2013, his appeal to this Court was still
pending. The Decision dated June 4, 2014 was
thereafter promulgated as the Court was not immediately
informed of the accused-appellant's death. The death of
the accused-appellant herein, thus, extinguished his
criminal liability, as well as his civil liability directly arising
from and based solely on the crime committed.
Accordingly, the Court's Decision dated June 4, 2014
had been rendered ineffectual and the same must
therefore be set aside. The criminal case against the
accused-appellant must also be dismissed.
7. PACIS v Morales GR 169467, Feb 25, 2010 -
CEL
FACTS: Alfred Dennis Pacis, then 17 years old and a
first year student at the Baguio Colleges Foundation
taking up BS Computer Science, died due to a gunshot
wound in the head which he sustained while he was at
the Top Gun Firearm[s] and Ammunition[s] Store which
was owned and operated by defendant Jerome Jovanne
Morales.
At the time of the shooting, Aristedes Matibag and Jason
Herbolario were sales agents of the defendant, and at
that particular time, the caretakers of the gun store.
The bullet which killed Alfred Dennis Pacis was fired
from a gun brought in by a customer of the gun, an AMT
Automag II Cal. 22 Rimfire Magnum, store for repair.
The gun was left by defendant Morales in a drawer of a
table located inside the gun store.
Defendant Morales was in Manila at the time. His
employee Armando Jarnague, who was the regular
caretaker of the gun store was also not around. He left
earlier and requested sales agents Matibag and

Herbolario to look after the gun store while he and
defendant Morales were away. Jarnague entrusted to
Matibag and Herbolario a bunch of keys used in the gun
store which included the key to the drawer where the
fatal gun was kept.
It appears that Matibag and Herbolario later brought out
the gun from the drawer and placed it on top of the table.
Attracted by the sight of the gun, the young Alfred
Dennis Pacis got hold of the same. Matibag asked Alfred
Dennis Pacis to return the gun. The latter followed and
handed the gun to Matibag. It went off, the bullet hitting
the young Alfred in the head.
A criminal case for homicide was filed against Matibag
who was acquitted of the charge because of the
exempting circumstance of accident under Art. 12, par. 4
of the Revised Penal Code.
Petitioners Alfredo P. Pacis and Cleopatra D. Pacis
(petitioners) filed with the trial court a civil case for
damages against respondent Jerome Jovanne Morales
(respondent). Petitioners are the parents of Alfred
Dennis Pacis, Jr. (Alfred), a 17-year old student who
died in a shooting incident inside the Top Gun Firearms
and Ammunitions Store (gun store) in Baguio City.
Respondent is the owner of the gun store.
The trial court held that the accidental shooting of
Alfred which caused his death was partly due to the
negligence of respondents employee Aristedes
Matibag (Matibag). Matibag and Jason Herbolario
(Herbolario) were employees of respondent even if
they were only paid on a commission basis. Under
the Civil Code, respondent is liable for the damages
caused by Matibag on the occasion of the performance
of his duties, unless respondent proved that he observed
the diligence of a good father of a family to prevent the
damage. The trial court held that respondent failed to
observe the required diligence when he left the key to
the drawer containing the loaded defective gun without
instructing his employees to be careful in handling the
loaded gun.
The Court of Appeals held that respondent cannot be
held civilly liable since there was no employer-employee
relationship between respondent and Matibag. The
Court of Appeals found that Matibag was not under the
control of respondent with respect to the means and
methods in the performance of his work. Thus, Article
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2180 of the Civil Code does not apply in this case and
respondent cannot be held liable.
Furthermore, the Court of Appeals ruled that even if
respondent is considered an employer of Matibag, still
respondent cannot be held liable since no negligence
can be attributed to him. He exercised due diligence in
keeping his loaded gun while he was on a business trip
in Manila. He placed it inside the drawer and locked it. It
was taken away without his knowledge and authority.
Whatever happened to the deceased was purely
accidental
ISSUE: W/N Respondent was negligent?
RULING: WHEREFORE, we GRANT the petition. We
SET ASIDE the 11 May 2005 Decision and the 19
August 2005 Resolution of the Court of Appeals in
CA-G.R. CV No. 60669. We REINSTATE the trial courts
Decision dated 8 April 1998.
RATIO: Petitioners opted to file an independent civil
action for damages against respondent whom they
alleged was Matibags employer. Petitioners based their
claim for damages under Articles 2176 and 2180 of the
Civil Code.
Unlike the subsidiary liability of the employer under
Article 103 of the Revised Penal Code, the liability of the
employer, or any person for that matter, under Article
2176 of the Civil Code is primary and direct, based on a
persons own negligence. Article 2176 states:
Art. 2176. Whoever by act or omission causes damage
to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the
parties, is called quasi-delict and is governed by the
provisions of this Chapter.
This case involves the accidental discharge of a
firearm inside a gun store. Under PNP Circular No. 9,
entitled the Policy on Firearms and Ammunition
Dealership/Repair, a person who is in the business of
purchasing and selling of firearms and ammunition
must maintain basic security and safety
requirements of a gun dealer. Indeed, a higher degree
of care is required of someone who has in his
possession or under his control an instrumentality
extremely dangerous in character, such as dangerous
weapons or substances. Such person has the duty to

take exceptional precautions to prevent any injury being
done thereby. Unlike the ordinary affairs of life or
business which involve little or no risk, a business
dealing with dangerous weapons requires the exercise
of a higher degree of care.
As a gun store owner, respondent is presumed to be
knowledgeable about firearms safety and should
have known never to keep a loaded weapon in his
store to avoid unreasonable risk of harm or injury to
others. Respondent has the duty to ensure that all
the guns in his store are not loaded. With more
reason, guns accepted by the store for repair should
not be loaded precisely because they are defective
and may cause an accidental discharge such as
what happened in this case. Respondent was clearly
negligent when he accepted the gun for repair and
placed it inside the drawer without ensuring first that it
was not loaded. In the first place, the defective gun
should have been stored in a vault. Before accepting the
defective gun for repair, respondent should have made
sure that it was not loaded to prevent any untoward
accident. Furthermore, it was not shown in this case
whether respondent had a License to Repair which
authorizes him to repair defective firearms to restore
its original composition or enhance or upgrade
firearms.
Clearly, respondent did not exercise the degree of care
and diligence required of a good father of a family, much
less the degree of care required of someone dealing with
dangerous weapons, as would exempt him from liability
in this case.
8. Cruzado v Bustos 34 Phil 17- Estelle
FACTS: This appeal was taken from the judgment of
June 17, 1914, in which the trial judge absolved
defendants from the complaint and plaintiff from the
cross-complaint, without express finding as to costs.
Counsel for plaintiff appealed from this judgment and
moved for a new trial. This motion was denied.
A complaint filed alleging that plaintiff was the owner of
certain rural property located in Pampanga with an area
of 65 balitas which was detained by defendants Bustos
and Escaler and that they refused to deliver the
possession to plaintiff and to recognize his ownership of
the same, notwithstanding repeated demands. He
therefore asked for judgment declaring plaintiff to be the
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owner of the said parcel of land and ordering defendants
to return it to plaintiff and to pay the latter P3,500 for
losses and damages, and the costs. Bustos denied the
allegations and alleged that the title to the land was not a
lawful one because there was a only simulated sale of
the said land made between herself and the deceased
Agapito Cruzado, plaintiff's father, and that for more than
thirty years preceding the present time she had been the
sole, exclusive, and lawful owner of the said parcel of
land in question; that she had been holding it quietly,
peaceably, publicly and in good faith; that it formed an
integral part of another larger parcel of land. Bustos
further alleged that with plaintiff’s knowledge, Bustos
sold and conveyed all the said property to Escaler who
then acquired the possession and ownership of the said
parcel of land. She therefore prayed to be absolved from
the complaint, with the costs against plaintiff.
ISSUES:
WON the deed of sale executed by Bustos in favor of
Agapito Cruzado (plaintiff’s father) is simulated. (YES)
And WON the right of ownership prescribed. (YES)
RULING: The deed of sale of a parcel of 65 balitas of
land was simulated, not to defraud any creditor or other
person interested in the land nor for the purpose of
eluding any lawful obligation on the part of its owner,
Estafania Bustos, but for the sole purpose of doing a
favor, of rendering a special service to Agapito Cruzado,
father of the plaintiff Santiago Cruzado. During his
lifetime Agapito G. Cruzado aspired to hold the office of
procurador in the Court of First Instance of Pampanga,
but notwithstanding that he possessed the required
ability for the discharge of the duties of that position, he
was unable to give the required bond, an indispensable
condition for his appointment, as he was possessed of
no means or real property wherewith to guarantee the
proper discharge of his duties in the manner prescribed
by the laws then in force.
It is unquestionable that the contract of sale of the 65
balitas of land was perfect and binding upon both
contracting parties, since they both appear in that
instrument to have agreed upon the thing sold, to wit, the
65 balitas of land, and upon the price, P2,200; but it is
also undeniable that the said contract was not
consummated, inasmuch as, notwithstanding that the
deed of sale was accomplished and this document was
kept by the pretended purchaser, it is positively certain
that the latter did not pay the purchase price of
P2,200, and never took possession of the land

apparently sold in the said deed. This action for
recovery of possession is therefore improper, not
only because the sale was simulated, but also
because it was not consummated. The price of the
land was not paid nor did the vendee take
possession of the property from the 7th of
September, 1875, when the said sale was feigned,
until the time of his death; nor did any of his
successors, nor the plaintiff himself until the date of
his claim, enter into possession of the land.
It is indeed true that it is not necessary that the thing
sold or its price should have been delivered in order that
the contract of purchase and sale be deemed perfect on
account of its being consensual, and from it reciprocal
obligations arise mutually to compel the parties to effect
its fulfillment; but there is no transmission of ownership
until the thing, as in the case at bar, the land, has been
delivered, and the moment such delivery is made the
contract of purchase and sale is regarded as
consummated. It
The latter, moreover, was unable to prove that at any
time as owner of the land he collected the fruits
harvested thereon, or that any other person cultivated
the said land in the name and representation of his
deceased father or of the plaintiff himself. The plaintiff
Santiago Cruzado could only, in a proper case,
exercise the personal right of action flowing from
the right possessed by his father to compel the
vendor to fulfill the contract made in a public
instrument to deliver the land sold or to give him
possession of it, in consequence of the said
contract, though simulated.
In addition, it was the opinion of the witnesses that the
deceased Agapito G. Cruzado was a poor man, for the
reason that his monthly salary scarcely provided for the
needs of himself and his family, and they therefore
believed that he could not have furnished the sum of
P2,200 to purchase the land in question. It is, therefore,
unquestionable that the price of the sale was not paid,
an omission which would indicate that it was in effect
simulated. So close were the relations that then existed
between the Cruzado family and that of Dizon and
Bustos, that later on the plaintiff married a daughter of
these latter; hence, plaintiff, in the beginning of his
letters Exhibits 8 and 9 addressed to Natalio Dizon, a
son of the vendor Estefania Bustos, calls his
correspondent his "dear and esteemed brother-in-law." It
is therefore not stranger that these spouses should have
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wished to help plaintiff's predecessor in interest by
assisting him to obtain the office of procurador, even to
the extent of making a feigned sale.
From that time the new owner Manuel Escaler took
possession of all the land sold by Estefania Bustos,
including the 65 balitas in litigation, and continued in its
possession as the owner thereof until October 8, 1910,
when plaintiff filed his claim. Thus, more than the ten
years required by law for ordinary prescription had
already elapsed, as Escaler purchased the land and was
holding it in good faith under a lawful title and was not
disturbed in his continuous and peaceable possession,
one that was adverse to the whole world. It is therefore
unquestionable that he has absolutely acquired by
prescription the ownership of the disputed land, and the
action brought by plaintiff, founded solely on a simulated
sale executed by the original owner of the land, not to
the prejudice, but to the benefit, of the pretended
vendee, cannot prevail against Escaler's rights.
Consequently at his death he could not have transmitted
to the plaintiff as his successor any greater right than a
personal right to exact the fulfillment of a contract, and
as plaintiff was not the owner of the land, he could not
validly register it.
9. Norkis v CA 193 SCRA 694 - Tere
FACTS: Private respondent Alberto Nepales' action for
specific performance of a contract of sale with damages
against petitioner Norkis Distributors, Inc. Petitioner
Norkis Distributors, Inc. (Norkis for brevity), is the
distributor of Yamaha motorcycles in Negros Occidental
with office in Bacolod City with Avelino Labajo as its
Branch Manager. On September 20, 1979, private
respondent Alberto Nepales bought from the Norkis-
Bacolod branch a brand new Yamaha Wonderbike
motorcycle Model YL2DX then displayed in the Norkis
showroom. The price of P7,500.00 was payable by
means of a Letter of Guaranty from the Development
Bank of the Philippines (DBP) which Norkis' Branch
Manager Labajo agreed to accept. Hence, credit was
extended to Nepales for the price of the motorcycle
payable by DBP upon release of his motorcycle loan. As
security for the loan, Nepales would execute a chattel
mortgage on the motorcycle in favor of DBP. Branch
Manager Labajo issued Norkis Sales Invoice No. 0120
showing that the contract of sale of the motorcycle had
been perfected. Nepales signed the sales invoice to

signify his conformity with the terms of the sale. In the
meantime, however, the motorcycle remained in Norkis'
possession.
On November 6, 1979, the motorcycle was registered in
the Land Transportation Commission in the name of
Alberto Nepales. A registration certificate in his name
was issued by the Land Transportation Commission on
November 6, 1979. The registration fees were paid by
him.
On January 22, 1980, the motorcycle was delivered to a
certain Julian Nepales who was allegedly the agent of
Alberto Nepales but the latter denies it. The motorcycle
met an accident on February 3, 1980. An investigation
conducted by the DBP revealed that the unit was being
driven by a certain Zacarias Payba at the time of the
accident. The unit was a total wreck was returned, and
stored inside Norkis' warehouse.
On March 20, 1980, DBP released the proceeds of
private respondent's motorcycle loan to Norkis in the
total sum of P7,500. As the price of the motorcycle later
increased to P7,828 in March, 1980, Nepales paid the
difference of P328 and demanded the delivery of the
motorcycle. When Norkis could not deliver, he filed an
action for specific performance with damages against
Norkis. He alleged that Norkis failed to deliver the
motorcycle which he purchased, thereby causing him
damages.
Norkis answered that the motorcycle had already been
delivered to private respondent before the accident,
hence, the risk of loss or damage had to be borne by
him as owner of the unit.
RTC rendered a decision in favor of private respondent
which was affirmed by the CA on appeal.
ISSUE: WON there had already been a transfer of
ownership of the motorcycle to private respondent at the
time it was destroyed.
RULING: No. Alberto denied having authorized Julian
Nepales to get the motorcycle from Norkis Distributors or
to enter into any transaction with Norkis relative to said
motorcycle. This circumstances more than amply rebut
the disputable presumption of delivery upon which
Norkis anchors its defense to Nepales' action.
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Article 1496 of the Civil Code which provides that "in the
absence of an express assumption of risk by the buyer,
the things sold remain at seller's risk until the ownership
thereof is transferred to the buyer," is applicable to this
case, for there was neither an actual nor constructive
delivery of the thing sold, hence, the risk of loss should
be borne by the seller, Norkis, which was still the owner
and possessor of the motorcycle when it was wrecked.
This is in accordance with the well-known doctrine of res
perit domino.
As pointed out by the private respondent, the issuance
of a sales invoice does not prove transfer of ownership
of the thing sold to the buyer. An invoice is nothing more
than a detailed statement of the nature, quantity and
cost of the thing sold and has been considered not a bill
of sale.
In all forms of delivery, it is necessary that the act of
delivery whether constructive or actual, be coupled with
the intention of delivering the thing. The act, without the
intention, is insufficient.
When the motorcycle was registered by Norkis in the
name of private respondent, Norkis did not intend yet to
transfer the title or ownership to Nepales, but only to
facilitate the execution of a chattel mortgage in favor of
the DBP for the release of the buyer's motorcycle loan.
The Letter of Guarantee issued by the DBP, reveals that
the execution in its favor of a chattel mortgage over the
purchased vehicle is a pre-requisite for the approval of
the buyer's loan. If Norkis would not accede to that
arrangement, DBP would not approve private
respondent's loan application and, consequently, there
would be no sale.
In the case of Addison vs. Felix and Tioco (38 Phil. 404,
408), this Court held:
The Code imposes upon the vendor the obligation to
deliver the thing sold. The thing is considered to be
delivered when it is "placed in the hands and possession
of the vendee." (Civil Code, Art. 1462). It is true that the
same article declares that the execution of a public
instrument is equivalent to the delivery of the thing which
is the object of the contract, but, in order that this
symbolic delivery may produce the effect of tradition, it is
necessary that the vendor shall have had such control
over the thing sold that, at the moment of the sale, its
material delivery could have been made. It is not enough
to confer upon the purchaser the ownership and the right

of possession. The thing sold must be placed in his
control. When there is no impediment whatever to
prevent the thing sold passing into the tenancy of the
purchaser by the sole will of the vendor, symbolic
delivery through the execution of a public instrument is
sufficient. But if notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment
and material tenancy of the thing and make use of it
himself or through another in his name, because such
tenancy and enjoyment are opposed by the interposition
of another will, then fiction yields to reality-the delivery
has riot been effects .
10. Perpetua Abuan, et. al. v. Estaquio Garcia,
GR. L-20091, JULY 30, 1965- Ate C
(Topic: Conveyance; Legal Redemption; Redemption
period)
FACTS: On August 7, 1953, petitioners Perpetua Abuan
et al. sold a parcel of rice land to defendants Eustaquio
Garcia et al. through a Deed of Absolute Sale. A TCT
was issued to defendants.
Later, petitioners filed an action to recover the land,
alleging the sale was tainted with fraud and was without
consideration. Reaching an amicable settlement, the
parties entered into an "Agreement" dated February 28,
1955, under which defendants paid P500 as partial
payment of the purchase price of the land, and promised
to pay the balance of P1,500 on or before April 30, 1955,
with a grace period of 30 days. The Agreement also
stated that it "shall supersede all previous agreements or
contracts heretofore entered into..."
Plaintiffs instituted the present action on March 4, 1960.
Defendants moved to dismiss, on the ground that
plaintiffs' right of action was already barred, because the
five-year redemption period had already expired. Section
119 of the Public Land Law provides:
Every conveyance of land acquired under the free
patient or homestead provisions, when proper, shall be
subject to re-purchase by the applicant, his widow, or
legal heirs, for a period of five years from the date of
conveyance.
Plaintiffs argue that the period should be counted from
the date of full payment (May 1955) since it was on this
date that the contract was consummated. CFI Nueva
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Vizcaya dismissed the complaint, fixing the starting date
as February 28, 1955, when the Agreement was entered
into. CA certified the case to SC.
ISSUE: WON the 5 year period began to run on:
(1) August 7, 1953, when the Deed of Absolute Sale was
executed, or
(2) February 28, 1955, when the compromise agreement
was entered into, or on
May 1955, the date of full payment of the purchase
price.
HELD: "Conveyance" means transfer of ownership; it
means the date when the title to the land is transferred
from one person to another. The 5-year period should,
therefore, be reckoned with from the date that
defendants acquired ownership, upon execution of the
Deed of Absolute Sale (August 7, 1953). Thus the
dismissal is affirmed.
Under Art. 1498, When the sale is made through a public
instrument, as in this case, the execution thereof shall be
equivalent to the delivery of the thing which is the object
of the contract, if from the deed the contrary does not
appear or cannot be clearly inferred. This manner of
delivery is common to personal as well as real property.
It is clear, therefore, that defendants acquired ownership
to the land in question upon the execution of the deed of
sale. The deed of sale was executed on August 7, 1953,
which was "superseded" by the Agreement of February
28, 1955, as to the terms and conditions of payment of
the purchase price. The latter agreement did not operate
to revest the ownership of the land in the plaintiffs.
Assuming arguendo that the Deed is null and void as
petitioners allege, we can consider the date of the
Agreement at the latest, as the time within which
ownership is vested in the defendants. While it is a
private instrument the execution of which could not be
construed as constructive delivery under Art. 1498,
Art.1496 explicitly provides that ownership of the thing
sold is acquired by the vendee from the moment it is
delivered to him "in any other manner signifying an
agreement that the possession is transferred from the
vendor to the vendee."
The intention to give possession (and ownership) is
manifest in the Agreement, especially considering the
following circumstances: (1) the payment of part of the
purchase price, there being no stipulation in the
agreement that ownership will not vest in the vendees

until full payment of the price; and (2) the fact that the
agreement was entered into in consideration of plaintiffs'
desistance, as in fact they did desist, in prosecuting their
reivindicatory action, thereby leaving the property in the
hands of the then and now defendants — as owners
thereof, necessarily. This was delivery brevi manu
permissible under Articles 1499 and 1501 of the New
Civil Code. In the absence of an express stipulation to
the contrary, the payment of the price is not a condition
precedent to the transfer of ownership, which passes by
delivery of the thing to the buyer.
The circumstance that full payment was made only, as
plaintiffs allege, in May, 1955, does not alter the fact that
ownership of the land passed to defendants upon the
execution of the agreement with the intention of letting
them hold it as owners. In the absence of an express
stipulation to the contrary, the payment of the price is not
a condition precedent to the transfer of ownership, which
passes by delivery of the thing to the buyer. 7
IN VIEW OF THE FOREGOING, the order of the court a
quo dismissing the complaint is hereby affirmed, with
costs against plaintiffs-appellants.
11. Heirs of Ramon Gaste v The Plaza inc Gr no
177685, Jan 26, 2011 – Nikko
FACTS: On July 16, 1980, The Plaza, Inc. (The Plaza),
a corporation engaged in the restaurant [4] 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. On July 18, 1980, to secure Rhogens
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. In a letter dated September 10, 1980,
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. The letter was referred to The
Plazas Project Manager, Architect Roberto L. Tayzon.
On September 15, 1980, Engr. Gonzales informed Gaite
that the building permit for the construction of the
restaurant was revoked for non-compliance with the
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provisions of the National Building Code and for the
additional temporary construction without permit.
The Memorandum Report of Building Inspector Victor
Gregory enumerated the following violations of Rhogen
in the construction of the building:
1) No permit for Temporary Structure.
2) No notice of concrete pouring.
3) Some workers have no safety devices.
4) The Secretary and Construction Foreman refused to
[receive] the Letter of Stoppage dated September 10,
1980.
5) Mr. Ramon Gaite [is] questioning the authority of the
Building Officials Inspector.
6) Construction plans use[d] on the job site is not in
accordance to the approved plan.
On September 19, 1980, the Project Manager (Tayzon)
in his Construction Memo #23 reported on his evaluation
of Progress Billing #1 submitted by Rhogen. Tayzon
stated that actual jobsite assessment showed that the
finished works fall short of Rhogens claimed percentage
of accomplishment and Rhogen was entitled to only
P32,684.16 and not P260,649.91 being demanded by
Rhogen.
On January 9, 1981, Gaite informed The Plaza that he is
terminating their contract based on the Contractors 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.
On January 13, 1981, 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
Rhogens expenses.
On March 26, 1981, The Plaza filed Civil Case No.
40755 for breach of contract, sum of money and
damages against Gaite and FGU in the Court of First
Instance (CFI) of Rizal.

On July 3, 1997, Branch 63 of the RTC Makati rendered
its decision granting the claims of The Plaza against
Rhogen, the Gaites and FGU. On June 27, 2006, the CA
affirmed the Decision of the trial court but modified the
award of damages.
ISSUE: Whether or not the CA gravely erred in nit
holding that there were valid and legal grounds for
Rhogen to terminate the contract pursuant to Article
1191 of the Civil Code. (NO)
Article 1191 of the Civil Code, which states that the
power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with
what is incumbent upon him.
RULING: NO. WHEREFORE, the petition is DENIED.
The Decision dated June 27, 2006 and the Resolution
dated April 20, 2007 of the Court of Appeals in CA-G.R.
CV No. 58790 are AFFIRMED.
RATIO: Reciprocal obligations are those which arise
from the same cause, and in which each party is a
debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the
other. They are to be performed simultaneously such
that the performance of one is conditioned upon the
simultaneous fulfillment of the other. Respondent The
Plaza predicated its action on Article 1191 of the Civil
Code, which provides for the remedy of rescission or
more properly resolution, a principal action based on
breach of faith by the other party who violates the
reciprocity between them. The breach contemplated in
the provision is the obligors failure to comply with an
existing obligation. Thus, the power to rescind is given
only to the injured party. The injured party is the party
who has faithfully fulfilled his obligation or is ready and
willing to perform his obligation.
The construction contract between Rhogen and The
Plaza provides for reciprocal obligations whereby the
latters obligation to pay the contract price or progress
billing is conditioned on the formers performance of its
undertaking to complete the works within the stipulated
period and in accordance with approved plans and other
specifications by the owner. Petitioners reiterate their
position that the stoppage order was unlawful, citing the
fact that when the new contractor (ACK Construction,
Inc.) took over the project, the local government of
Makati allowed the construction of the building using the
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old building permit; moreover, the basement depth of
only two meters was retained, with no further excavation
made. They cite the testimony of the late Ramon Gaite
before the trial court that at the time, he had incurred the
ire of then Mayor of Makati because his (Gaite) brother
was the Mayors political opponent; hence, they sought to
file whatever charge they could against him in order to
call the attention of his brother. This political harassment
defense was raised by petitioners in their Amended
Answer. Gaites testimony was intended to explain the
circumstances leading to his decision to terminate the
construction contract and not to question the revocation
of the building permit. As the available remedy was
already foreclosed, it was thus error for the CA to
suggest that Rhogen should have appealed the
stoppage and revocations orders issued by the
municipal authorities to the DPWH and then to the OP.
Petitioners may not justify Rhogens termination of the
contract upon grounds of nonpayment of progress billing
and uncooperative attitude of respondent The Plaza and
its employees in rectifying the violations which were the
basis for issuance of the stoppage order. Having
breached the contractual obligation it had expressly
assumed, i.e., to comply with all laws, rules and
regulations of the local authorities, Rhogen was already
at fault. Respondent The Plaza, on the other hand, was
justified in withholding payment on Rhogens first
progress billing, on account of the stoppage order and
additionally due to disappearance of owner-furnished
materials at the jobsite and revocation orders lifted or
recalled, Rhogen should take full responsibility in
accordance with its contractual undertaking.
Such non-observance of laws and regulations of the
local authorities affecting the construction project
constitutes a substantial violation of the Construction
Contract which entitles The Plaza to terminate the same,
without obligation to make further payment to Rhogen
until the work is finished or subject to refund of payment
exceeding the expenses of completing the works.
Upon the facts duly established, the CA therefore did not
err in holding that 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.
Petitioners assail the order for the return of down
payment, asserting that the principle of quantum meruit
demands that Rhogen as contractor be paid for the work
already accomplished.
We disagree.
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. 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.
12. Phil National Construction Corp v CA 272
SCRA 183 - Pepito
Nature: Petition for review on certiorari of decision made
by the Court of Appeals (CA)
Facts: On 18 November 1985, petitioner Philippine
National Construction Corporation (PNCC) executed a
contract of lease with private respondents, stipulating to
pay rent for the use of land, at the monthly rate of P
20,000.00 payable yearly in advance. The said land is to
be used by petitioner as site for a rock crushing plant.
The term of lease is for five years, commencing on the
date of issuance of an industrial clearance by the
Ministry of Human Settlements (Ministry).
On 7 January 1986 PNCC obtained a Temporary Use
Permit from the Ministry for the proposed rock crushing
project. Nine days later private respondents wrote to
PNCC, asking for the first annual rental, and assuring
that they have stopped considering proposals of other
aggregates plants in favor of PNCC.
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In reply, PNCC argued that the contract must commence
on the date of issuance by the Ministry of an industrial
clearance in their favor. It also expressed its desire to
terminate the contract it executed with respondents, due
to “financial, as well as technical difficulties.”
Respondents refused to accede to PNCC’s request for
pre termination and on 19 May 1986, instituted an action
against PNCC for Specific Performance with Damages.
Trial court ruled in favor of respondents and ordered
PNCC to pay rentals for two years, with legal interests
plus attorney’s fees. The Court of Appeals affirmed the
decision of the trial court upon appeal by PNCC; hence,
this case.
Issues:
(1) WON contract commences on the date of issuance of
clearance by Ministry;
(2) WON PNCC should be released from its contract
with respondents due to unforeseen events and causes
beyond its control;
(3) WON sum of money ordered to be paid by the court
is excessive and;
(4) WON PNCC was deprived of right to due process.
Held: Petition denied.
Ratio:
(1) PNCC is estopped from claiming that Lease Contract
commences on the date of issuance of clearance by
Ministry, because in its letter to respondents, PNCC
recognized its obligation to pay rentals counted from the
date the temporary permit was issued.
(2) PNCC cites Art. 1266, asserting that it should be
released from the obligatory force of the contract
because its purpose did not materialize due to
unforeseen events and causes beyond its control.
However, this article applies only to obligations “to do”
and not “to give”, while obligation arising out of said
contract is an obligation “to do”. Further, PNCC executed
the contract with open eyes on the deteriorating
conditions of the country and mere pecuniary inability to
fulfill an engagement does not discharge a contractual
obligation. The “unforeseen events and causes beyond
its control” cited by PNCC are not the legal and physical
impossibilities contemplated in Art. 1266.
(3) PNCC asserts that it was not able to use and enjoy
the land and is not entitled to pay damages cited by the
court. However, respondents suffered damages because
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of its inability to use the premises. Respondents are
entitled to indemnification under Art. 1659 of the Civil
Code.

(4) PNCC was not deprived of due process because trial

court granted several postponements to petitioner before
it waived the presentation of evidence in petitioner’s
behalf.

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