#1 General Agency vs.

 Special Agency (1992)

A as principal appointed B as his agent granting him general and unlimited
management over A’s properties, stating that A withholds no power from B and that the
agent may execute such acts as he may consider appropriate.

Accordingly, B leased A’s parcel of land in Manila to C for four (4) years at P60,000.00
per year, payable annually in advance.

B leased another parcel of land of A in Caloocan City to D without a fixed term at

P3,000.00 per month payable monthly.

B sold to E a third parcel of land belonging to A located in Quezon City for three (3)
times the price that was listed in the inventory by A to B.

All  those  contracts  were  executed  by  B  while  A  was confined due to illness in the
Makati Medical Center. Rule on the validity and binding effect of each of the above
contracts upon A the principal. Explain your answers.

 SUGGESTED ANSWER:

The agency couched in general terms comprised only acts of administration (Art. 1877,
Civil Code). The lease contract on the Manila parcel is not valid, not enforceable and not
binding upon A. For B to lease the property to C, for more than one (1) year, A must
provide B with a special power of attorney (Art. 1878. Civil Code).

The lease of the Caloocan City property to D is valid and binding upon A. Since the lease
is without a fixed term, it is understood to be from month to month, since the rental is
payable monthly (Art. 1687, Civil Code).

The sale of the Quezon City parcel to E is not valid and not binding upon A. B needed a
special power of attorney to validly sell the land (Arts. 1877 and 1878, Civil Code). The
sale of the land at a very good price does not cure the defect of the contract arising from
lack of authority.

#2 Commodatum (2005)

Before he left for Riyadh to work as a mechanic, Pedro left his Adventure van with Tito,
with the understanding that the latter could use it for one year for his personal or family
use while Pedro works in Riyadh. He did not tell Tito that the brakes of the van were
faulty. Tito had the van tuned up and the brakes repaired. He spent a total amount of
P15,000.00. After using the vehicle for two weeks, Tito discovered that it consumed too
much fuel. To make up for the expenses, he leased it to Annabelle.
Two months later, Pedro returned to the Philippines and asked Tito to return the van.
Unfortunately, while being driven by Tito, the van was accidentally damaged by a cargo
truck without his fault.

a) Who shall bear the P15,000.00 spent for the repair of the van? Explain.

ALTERNATIVE ANSWER:

Tito must bear the P15,000.00 expenses for the van. Generally, extraordinary expenses
for the preservation of the thing loaned are paid by the bailor, he being the owner of the
thing loaned. In this case however, Tito should bear the expenses because he incurred
the expenses without first informing Pedro about it. Neither was the repair shown to be 
urgent.  Under Article  1949  of  the  Civil  Code,  bailor generally bears the extraordinary
expenses for the preservation  of  the  thing  and  should  refund  the  said expenses if
made by the bailee; Provided, The bailee brings the  same to the  attention of the  bailor
before  incurring them, except only if the repair is urgent that reply cannot be awaited.

ALTERNATIVE ANSWER:

The P15,000.00 spent for the repair of the van should be borne by Pedro. Where the
bailor delivers to the bailee a non-consummable thing so that the latter may use it for a
certain time and return the identical thing, the contract perfected is a Contract of
Commodatum. (Art. 1933, Civil Code) The bailor shall refund the extraordinary
expenses during the contract for the preservation of the thing loaned provided the bailee
brings the same to the knowledge of the bailor before incurring the same, except when
they are so urgent that the reply to the notification cannot be awaited without danger.
(Art. 1949 of the Civil Code)

In the given problem, Pedro left his Adventure van with Tito so that the latter could use
it for one year while he was in Riyadh. There was no mention of a consideration. Thus,
the contract perfected was commodatum. The amount of P15,000.00 was spent by Tito
to tune up the van and to repair its brakes. Such expenses are extra-ordinary expenses
because they are necessary for the preservation of the van Thus, the same should be
borne by the bailor, Pedro.

b)  Who shall bear the costs for the van’s fuel, oil and other materials while it was with

Tito? Explain.

SUGGESTED ANSWER:

Tito must also pay for the ordinary expenses for the use and preservation of the thing
loaned. He must pay for the gasoline, oil, greasing and spraying. He cannot ask for
reimbursement because he has the obligation to return the identical thing to the bailor.
Under Article 1941 of the Civil Code, the bailee is obliged to pay for the ordinary
expenses for the use and preservation of the thing loaned.
c)    Does Pedro have the right to retrieve the van even before the lapse of one year?
Explain.

ALTERNATIVE ANSWER:

No, Pedro does not have the right to retrieve the van before the lapse of one year. The
parties are mutually bound by the terms of the contract. Under the Civil Code, there are
only 3 instances when the bailor could validly ask for the return of the thing loaned even
before the expiration of the period. These  are  when:  (1)  a  precarium  contract  was 
entered (Article 1947); (2) if the bailor urgently needs the thing (Article 1946); and (3) if
the bailee commits acts of ingratitude  (Article  1948).  Not  one  of  the  situations  is
present in this case.

The fact that Tito had leased the thing loaned to Annabelle would not justify the demand
for the return of the thing loaned before expiration of the period. Under Article 1942 of
the Civil Code, leasing of the thing loaned to a third person not member of the
household of the bailee, will only entitle bailor to hold bailee liable for the loss of the
thing loaned.

ALTERNATIVE ANSWER:

As a rule, Pedro does not have the right to retrieve the van before the lapse of one year.
Article 1946 of the Code provides that “the bailor cannot demand the return of the thing
loaned till after the expiration of the period stipulated, or after the accomplishment of
the use for which the commodatum has been constituted. However, if in the meantime,
he should have urgent need of the thing, he may demand its return or temporary use.”

In the given problem, Pedro allowed Tito to use the van for one year. Thus, he should be

bound by the said agreement and  he  cannot  ask  for the  return  of  the car before the
expiration of the one year period. However, if Pedro has urgent need of the van, he may
demand for its return or temporary use.

d) Who shall bear the expenses for the accidental damage caused by the cargo truck,

granting that the driver and truck owner are insolvent? Explain.

SUGGESTED ANSWER:

Generally, extraordinary expenses arising on the occasion of the actual use of the thing
loaned by the bailee, even if incurred  without  fault  of the  bailee,  shall be  shouldered
equally by the bailor and the bailee. (Art. 1949 of the Civil Code).  However,  if  Pedro
had  an  urgent  need  for  the vehicle, Tito would be in delay for failure to immediately
return the same, then Tito would be held liable for the extraordinary expenses.

#3 Case of Siga-an v Villanueva

Facts: Respondent filed a complaint for sum of money against petitioner. Respondent
claimed that petitioner approached her inside the PNO and offered to loan her the
amount of P540,000.00 of which the loan agreement was not reduced in writing and
there was no stipulation as to the payment of interest for the loan. Respondent issued a
check worth P500,000.00 to petitioner as partial payment of the loan.  She then issued
another check in the amount of P200,000.00 to petitioner as payment of the remaining
balance of the loan of which the excess amount of P160,000.00 would be applied as
interest for the loan.  Not satisfied with the amount applied as interest, petitioner
pestered her to pay additional interest and threatened to block or disapprove her
transactions with the PNO if she would not comply with his demand. Thus, she paid
additional amounts in cash and checks as interests for the loan.  She asked petitioner
for receipt for the payments but was told that it was not necessary as there was mutual
trust and confidence between them. According to her computation, the total amount she
paid to petitioner for the loan and interest accumulated to P1,200,000.00.

The RTC rendered a Decision holding that respondent made an overpayment of her
loan obligation to petitioner and that the latter should refund the excess amount to the
former.  It ratiocinated that respondent’s obligation was only to pay the loaned amount
of P540,000.00, and that the alleged interests due should not be included in the
computation of respondent’s total monetary debt because there was no agreement
between them regarding payment of interest.  It concluded that since respondent made
an excess payment to petitioner in the amount of P660,000.00 through mistake,
petitioner should return the said amount to respondent pursuant to the principle
of solutio indebiti. Also, petitioner should pay moral damages for the sleepless nights
and wounded feelings experienced by respondent.  Further, petitioner should pay
exemplary damages by way of example or correction for the public good, plus attorney’s
fees and costs of suit. 

Ruling: (1) No. Compensatory interest is not chargeable in the instant case because it
was not duly proven that respondent defaulted in paying the loan and no interest was
due on the loan because there was no written agreement as regards payment of
interest. Article 1956 of the Civil Code, which refers to monetary interest, specifically
mandates that no interest shall be due unless it has been expressly stipulated in
writing.  As can be gleaned from the foregoing provision, payment of monetary interest
is allowed only if: (1) there was an express stipulation for the payment of interest; and
(2) the agreement for the payment of interest was reduced in writing.  The concurrence
of the two conditions is required for the payment of monetary interest.  Thus, we have
held that collection of interest without any stipulation therefor in writing is prohibited by
law.   

(2) Petitioner cannot be compelled to return the alleged excess amount paid by

respondent as interest. Under Article 1960 of the Civil Code, if the borrower of loan pays
interest when there has been no stipulation therefor, the provisions of the Civil Code
concerning solutio indebiti shall be applied.  Article 2154 of the Civil Code explains the
principle of solutio indebiti.  Said provision provides that if something is received when
there is no right to demand it, and it was unduly delivered through mistake, the
obligation to return it arises.  In such a case, a creditor-debtor relationship is created
under a quasi-contract whereby the payor becomes the creditor who then has the right
to demand the return of payment made by mistake, and the person who has no right to
receive such payment becomes obligated to return the same.  The quasi-contract
of solutio indebiti harks back to the ancient principle that no one shall enrich himself
unjustly at the expense of another.  The principle of solutio indebiti applies where (1) a
payment is made when there exists no binding relation between the payor, who has no
duty to pay, and the person who received the payment; and (2) the payment is made
through mistake, and not through liberality or some other cause.  We have held that the
principle of solutio indebiti applies in case of erroneous payment of undue interest.  

Article 2232 of the Civil Code states that in a quasi-contract, such as solutio indebiti,
exemplary damages may be imposed if the defendant acted in an oppressive manner.  
Petitioner acted oppressively when he pestered respondent to pay interest and
threatened to block her transactions with the PNO if she would not pay interest.  This
forced respondent to pay interest despite lack of agreement thereto.  Thus, the award of
exemplary damages is appropriate so as to deter petitioner and other lenders from
committing similar and other serious wrongdoings.

#6 Liability; owner who was in the vehicle (1998)

A Gallant driven by John and owned by Art, and a Corolla driven by its owner, Gina,

collided somewhere along Adriatico Street. As a result of the accident, Gina had a
concussion. Subsequently. Gina brought an action for damages against John and Art.
There is no doubt that the collision is due to John’s negligence. Can Art, who was in the
vehicle at the time of the accident, be held solidarily liable with his driver, John?

SUGGESTED ANSWER:

Yes. Art may be held solidary liable with John, if it was proven   that   the   former  
could   have   prevented   the misfortune with the use of due diligence. Article 2184 of
the Civil Code states: “In motor mishaps, the owner is solidary liable with his driver, if
the former, who was in the vehicle, could have, by the use of due diligence, prevented
the misfortune, x x x”

ALTERNATIVE ANSWER:

1. It depends. The Supreme Court in Chapman vs. Underwood (27 Phil 374),held:

“An owner who sits in his automobile, or other vehicle, and permits his driver to
continue in a violation of law by the performance of negligent acts, after he has had a
reasonable opportunity to observe them and to direct that the driver cease therefrom,
becomes himself responsible for such acts, x x x On the other hand, if the driver, by a
sudden act of negligence, and without the owner having a reasonable opportunity to
prevent  the  act  or  its  continuance,  injures  a  person  or violates the criminal law, the
owner of the automobile, although present therein at the time the act was committed is
not responsible, either civilly or criminally, therefor. The act complained of must be
continued in the presence of the owner for such a length of time that the owner, by his
acquiescence, makes his driver’s act his own.”

#7

Vicarious Liability (2006)

Arturo sold his Pajero to Benjamin for P1 Million. Benjamin took the vehicle but did not

register the sale with the Land Transportation Office. He allowed his son Carlos, a minor
who did not have a driver’s license, to drive the car to buy pan de sal in a bakery. On the
way, Carlos driving in a reckless manner, sideswiped Dennis, then riding a bicycle. As a
result, he suffered serious physical injuries. Dennis filed a criminal complaint against
Carlos for reckless imprudence resulting in serious physical injuries.

1. Can Dennis file an independent civil action against Carlos and his father Benjamin for
damages based on quasi-delict? Explain.

SUGGESTED ANSWER: Yes, Dennis can file an independent civil action against

Carlos and his father for damages based on quasi-delict there being an act or omission
causing damage to another without contractual obligation. Under Section 1 of Rule 111
of the 2000 Rules on Criminal Procedure,  what  is  deemed  instituted  with  the
criminal action is only the action to recover civil liability arising from the act or
omission punished by law. An action based on quasi-delict is no longer deemed
instituted and may be filed separately   [Section   3,   Rule   111,   Rules   of   Criminal
Procedure].

2. Assuming Dennis’ action is tenable, can Benjamin raise the defense that he is not
liable because the vehicle is not registered in his name? Explain.

SUGGESTED ANSWER:

No, Benjamin cannot raise the defense that the vehicle is not registered in his name. His
liability, vicarious in character, is based on Article 2180 because he is the father of a
minor who caused damage due to negligence. While the suit will prosper against the
registered owner, it is the actual owner of the private vehicle who is ultimately
liable (See Duavit v. CA, G.R. No. L-29759, May 18, 1989).The purpose of car
registration is to reduce difficulty in identifying the party liable in case of
accidents (Villanueva v. Domingo, G.R. No. 144274, September 14, 2004).

#8

Damages arising from Death of Unborn Child (2003)

If a pregnant woman passenger of a bus were to suffer an abortion following a vehicular
accident due to the gross negligence of the bus driver,   may she and her husband claim
damages from the bus company for the death of their unborn child? Explain.

SUGGESTED ANSWER:

No, the spouses cannot recover actual damages in the form of indemnity for the loss of
life of the unborn child. This is because the unborn child is not yet considered a person
and the law allows indemnity only for loss of life of person.  The mother, however may
recover damages for the bodily injury she suffered from the loss of the fetus which is
considered part of her internal organ.   The parents may also recover damages for
injuries that are inflicted directly upon them, e.g., moral damages for mental anguish
that attended the loss of the unborn child.   Since there is gross negligence, exemplary
damages can also be recovered.  (Gelus v.CA, 2 SCRA 801 [1961])

#10

Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than
judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's
plainly valid, just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8) In actions for indemnity under workmen's compensation and employer's liability laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.