Hongkong and Shanghai Banking Corp., Ltd.
Staf
Retirement Plan vs. Spouses Bienvenido and Editha
Broqueza, November 17, 2012, J. Carpio.
Facts: Spouses Broqueza, as employees of HSBC and
members of HSBC-SRP (purposely for the benefit of the
employees), obtained loans specifically, car and appliance
loan which are to be paid through automatic salary deduction.
The promissory note appears to have this period for which the
employees can pay for the loan: on or before until fully
paid
Meanwhile, when a labor dispute arose between HSBC and its
employees, majority of the employees of HSBC were
terminated including Sps. Broqueza. Because of such
dismissal, Sps. Broqueza was not able to pay the monthly
amortizations of their loans. Thus, the HSBC-SRP considered
the accounts for Sps. Broqueza as delinquent. Demand to
pay the obligation were made upon Sps. Broqueza but
failed to pay the same.
In a civil suit for recovery and collection of sum of money
against Sps. Broqueza, MeTC ruled that the nature of HSBC-
SRPs demands for payment is civil and has no connection to
the labor dispute and that by reason of the respondents
termination from employment, it resulted in the loss of
continued benefits under the retirement plan.
Thus, the loans secured by their future retirement benefits to
which they are no longer entitled are reduced to unsecured
and pure civil OBLIGATIONS. As unsecured and pure
OBLIGATIONS, the loans are immediately demandable.
RTC affirmed the MeTC. But CA reversed the same saying that
HSBC-SRPs complaints for recovery of sum of money against
respondents are premature as the loan OBLIGATIONS have
not yet matured. Thus, no cause of action accrued in favor of
HSBC-SRP.
Issue: Whether or not the interpretation of the subject
promissory note is correctly classified by MeTC and RTC as
being a pure obligation.
Held: YES. In ruling for HSBC-SRP, we apply the first
paragraph of Article 1179 of the Civil Code:
Aright 1179. Every obligation whose performance does
not depend upon a future or uncertain event, or upon
a past event unknown to the parties, is demandable at
once.
x x x. (Emphasis supplied.)
We affirm the findings of the MeTC and the RTC that there is
no date of payment indicated in the Promissory Notes.
The RTC is correct in ruling that since the Promissory
Notes do not contain a period, HSBC-SRP has the right
to demand immediate payment. Article 1179 of the Civil
Code applies. The spouses Broquezas obligation to pay
HSBC-SRP is a pure obligation. The fact that HSBC-SRP
was content with the prior monthly check-off from Editha
Broquezas salary is of no moment. Once Editha Broqueza
defaulted in her monthly payment, HSBC-SRP made a demand
to enforce a pure obligation.
In their Answer, the spouses Broqueza admitted that prior to
Editha Broquezas dismissal from HSBC in December 1993,
she "religiously paid the loan amortizations, which HSBC
collected through payroll check-off:" A definite amount is paid
to HSBC-SRP on a specific date. Editha Broqueza authorized
HSBC-SRP to make deductions from her payroll until her loans
are fully paid. Editha Broqueza, however, defaulted in her
monthly loan payment due to her dismissal. Despite the
spouses Broquezas protestations, the payroll
deduction is merely a convenient mode of payment
and not the sole source of payment for the loans.
HSBC-SRP never agreed that the loans will be paid
only through salary deductions. Neither did HSBC-SRP
agree that if Editha Broqueza ceases to be an employee of
HSBC, her obligation to pay the loans will be suspended.
HSBC-SRP can immediately demand payment of the loans at
anytime because the obligation to pay has no period.
Moreover, the spouses Broqueza have already incurred in
default in paying the monthly installments.
CASE: re Article 1179, par. 1
In the matter of the Intestate Estate of Justo Palanca,
deceased, George Pay vs. Segundina Chua Vda. De
Palanca, June 28, 1974, J. Fernando.
Facts: George Pay as creditor of the late Justo Palanca (who
died in Manila on July 3, 1963) claimed payment from the
latter premised from a promissory note dated January 30,
1952, which has the following details: For value received
from time to time since 1947, we jointly and severally
promise to pay to Mr. George Pay at his office the sum of P26,
900 with 12% interest rate per annum upon receipt by either
of the undersigned of cash payment from the Estate of the
late Don Carlos Palanca and Justo Palanca or upon
demand. Then came this paragraph: "The Court has
inquired whether any cash payment has been received by
either of the signers of this promissory note from the Estate of
the late Carlos Palanca. Petitioner informed that he does not
insist on this provision but that petitioner is only claiming on
his right under the promissory note." After which, came the
ruling that the wording of the promissory note being
"upon demand," the obligation was immediately due.
Since it was dated January 30, 1952, it was clear that
more "than ten (10) years has already transpired from
that time until to date. The action, therefore, of the
creditor has definitely prescribed." The result, as above
noted, was the dismissal of the petition.
Issue: Whether or not Pays claim against the estate of the
deceased through the promissory note has already
prescribed.
Held: YES. The obligation being due and demandable,
it would appear that the filing of the suit after fifteen
years was much too late. For again, according to the Civil
Code, which is based on Section 43 of Act No. 190, the
prescriptive period for a written contract is that of ten years.
From the manner in which the promissory note was executed,
it would appear that petitioner was hopeful that the
satisfaction of his credit could he realized either through the
debtor sued receiving cash payment from the estate of
the late Carlos Palanca presumptively as one of the
heirs, or, as expressed therein, "upon demand." There
is nothing in the record that would indicate whether or
not the first alternative was fulfilled. What is
undeniable is that on August 26, 1967, more than
fifteen years after the execution of the promissory
note on January 30, 1952, this petition was filed. The
defense interposed was prescription. Its merit is rather
obvious. Article 1179 of the Civil Code provides: "Every
obligation whose performance does not depend upon a future
or uncertain event, or upon a past event unknown to the
parties, is demandable at once." This used to be Article 1113
of the Spanish Civil Code of 1889.
 Approximate
P2,00
2 electric delivery within 90 February
0/eac
motors daysThis is not 27, 1919
h
guaranteed
In all these contracts, there is a final clause as follows:

The sellers are not responsible for delays caused

by fires, riots on land or on the sea, strikes or
other causes known as "Force Majeure" entirely
beyond the control of the sellers or their
representatives.

Smith Bell notified Mr. Sotelo of the arrival of these

goods but the latter refused to receive and pay the pay
Smith Bell & Co., Ltd. vs. Vicente Sotelo Matti, March 9, prices stipulated. The plaintiff brought suit against the
1922, J/ Romualdez.
defendant, based on four separate causes of action, alleging,
Facts: In August 1918, plaintiff corporation and defendant among other facts, that it immediately notified the defendant
entered into contracts whereby the former obligated itself to of the arrival of the goods, and asked instructions from him as
sell and the latter to purchase from it the following which to the delivery thereof, and that the defendant refused to
accordingly delivered with dates below: receive any of them and to pay their price. The case having
been tried, the court below absolved the defendants from the
Actual complaint insofar as the tanks and the electric motors were
Items/Prod Price Delivery date under
date of
ucts s the promissory note concerned, but rendered judgment against them,
delivery
to be shipped from ordering them to "receive the aforesaid expellers and
P21,0 New York to Manila April 27, pay the plaintiff the sum of fifty thousand pesos
2 steel tanks (P50,00), the price of the said goods, with legal interest
00 within 3 or 4 1919
months thereon from July 26, 1919, and costs." Both parties
to be shipped from appeal from this judgment.
San Francisco in the
P25,0
month of October Issue: Whether or not under the contract being entered into
2 expellers 00/ea
September, 1918 or 26, 1918 by the parties, the plaintiff corporation is held in delay by
ch
as soon as reason of the period stipulated in the contract.
possible
Held: NO. Under these stipulations, it cannot be said that A day certain is understood to be one which must necessarily
any definite date was fixed for the delivery of the goods. As to arrive, even though its date be unknown.
the tanks, the agreement was that the delivery was to be If the uncertainty should consist in the arrival or non-
made "within 3 or 4 months," but that period was subject to arrival of the day, the obligation is conditional and
the contingencies referred to in a subsequent clause. With shall be governed by the rules of the next preceding
regard to the expellers, the contract says "within the month of section. (referring to pure and conditional
September, 1918," but to this is added "or as soon as OBLIGATIONS). (Aright 1125, Civ. Code.)
possible." And with reference to the motors, the contract And as the export of the machinery in question was, as stated
contains this expression, "Approximate delivery within ninety in the contract, contingent upon the sellers obtaining
days," but right after this, it is noted that "this is not certificate of priority and permission of the United States
guaranteed." The oral evidence falls short of fixing such Government, subject to the rules and regulations, as well as
period. to railroad embargoes, then the delivery was subject to a
From the record it appears that these contracts were condition the fulfillment of which depended not only upon the
executed at the time of the world war when there existed effort of the herein plaintiff, but upon the will of third persons
rigid restrictions on the export from the United States of who could in no way be compelled to fulfill the condition. In
articles like the machinery in question, and maritime, as well cases like this, which are not expressly provided for,
as railroad, transportation was difficult, which fact was known but impliedly covered, by the Civil Code, the obligor
to the parties; hence clauses were inserted in the contracts, will be deemed to have sufficiently performed his part
regarding "Government regulations, railroad embargoes, lack of the obligation, if he has done all that was in his
of vessel space, the exigencies of the requirements of the power, even if the condition has not been fulfilled in
United States Government," in connection with the tanks and reality.
"Priority Certificate, subject to the United State Government
requirements," with respect to the motors. At the time of the
execution of the contracts, the parties were not unmindful of
the contingency of the United States Government not
allowing the export of the goods, nor of the fact that the other
foreseen circumstances therein stated might prevent it.
Considering these contracts in the light of the civil law,
we cannot but conclude that the term which the
parties attempted to fix is so uncertain that one
cannot tell just whether, as a matter of fact, those
articles could be brought to Manila or not. If that is the
case, as we think it is, the OBLIGATIONS must be
regarded as conditional.
OBLIGATIONS for the performance of which a day certain has
been fixed shall be demandable only when the day arrives.

CASE: Where obligation does not fix a period; When
fixing a period is mere formality
Chavez vs. Gonzales, 32 SCRA 547.
Facts: In the early part of July 1963, Rosendo Chavez
delivered to Fructuoso Gonzales, who is a typewriter repairer,
a portable typewriter for routine cleaning and servicing.
Gonzales was not able to finish job after some time despite
repeated reminder. Gonzales merely gave assurances but
failed to comply with the same. In October 1963, Gonzales
asked from Chavez the sum of P6.00 for the purchase of spare
parts which amount was duly given to the former. On October
26, 1963, Chavez asked for the return of the typewriter.
Gonzales just delivered it in a wrapped package. And it was
only upon reaching home that Chavez found out that the
typewriter was in shambles, with the interior cover and some
parts and screws missing. On October 29, 1963, Chavez
demanded the return of the missing parts and the P6.00
which was heeded to. Thereafter, Chavez had the typewriter
repaired for P89.85. Chavez sued for damages.
Issue: Whether or not Gonzales is liable for damages for the
subsequent repair of the typewriter of Chavez.
Held: YES. The SC found that both Chavez and Gonzales had
a perfected contract for cleaning and servicing of typewriter
intending for Gonzales to finish the work at some future time
although such time was not specified and that such time had
passed without the work having been accomplished, for
Gonzales returned the typewriter cannibalized and
unrepaired, which in itself is a breach of obligation, without
demanding that he should be given more time to finish the
job or compensation for the work he had already done. The
time for compliance having evidently expired and
there being a breach of contract by non-compliance,
Gonzales cannot invoke Article 1197 for he admitted
non-performance by returning the typewriter that he
was obliged to repair. The fixing of a period would thus
be a mere formality and would serve no purpose than
to delay. For such, Gonzales is liable under Article 1167 for
the cost of the execution of the obligation in a proper manner.

Vicente Singson Encarnacion vs. Jacinta Baldomar, Oct.
4, 1946, J. Hilado.
Facts: Vicente Singson Encarnacion, owner of the house
numbered 589 Legarda Street, Manila, some six years ago
leased said house to Jacinto Baldomar and her son, Lefrado
Fernando, upon a month-to-month basis for the monthly
rental of P35. After Manila was liberated in the last war,
specifically on March 16, 1945, and on April 7, of the same
year, plaintiff Singson Encarnacion notified defendants, the
said mother and son, to vacate the house above-mentioned
on or before April 15, 1945, because plaintiff needed it for
his offices as a result of the destruction of the building
where said plaintiff had said offices before. Despite
this demand, defendants insisted on continuing their
occupancy. When the original action was lodged with the
Municipal Court of Manila on April 20, 1945, defendants were
in arrears in the payment of the rental corresponding to said
month, the agrees rental being payable within the first five
days of each month. That rental was paid prior to the hearing
of the case in the municipal court, as a consequence of which
said court entered judgment for restitution and payment of
rentals at the rate of P35 a month from May 1, 1945, until
defendants completely vacate the premises. In the Court of
First Instance, the defendants interposed defense that the
contract which they had celebrated with plaintiff since the
beginning authorized them to continue occupying the
house indefinitely and while they should faithfully
fulfill their OBLIGATIONS as respects the payment of
the rentals. However, Vicente Singson Encarnacion, jr.,
contended that the lease had always and since the beginning
been upon a month-to-month basis. The Court of First
Instance gave more credence to the lessor.
Issue: Whether the contract can be interpreted as a month-
to-month basis thereby giving more credence to the effect
that herein lessor can eject lessee at anytime possible.
Held: YES. We think that the Court of First Instance was right
in so declaring. Furthermore, carried to its logical conclusion,
the defense thus set up by defendant Lefrado Fernando would
leave to the sole and exclusive will of one of the contracting
parties (defendants in this case) the validity and fulfillment of
the contract of lease, within the meaning of article 1256 of
the Civil Code, since the continuance and fulfillment of the
contract would then depend solely and exclusively upon their
free and uncontrolled choice between continuing paying the
rentals or not, completely depriving the owner of all say in the
matter. If this defense were to be allowed, so long as
defendants elected to continue the lease by continuing
the payment of the rentals, the owner would never be
able to discontinue it; conversely, although the owner
should desire the lease to continue, the lessees could
efectively thwart his purpose if they should prefer to
terminate the contract by the simple expedient of
stopping payment of the rentals. This, of course, is
prohibited by the aforesaid article of the Civil Code. (8
Manresa, 3d ed., pp. 626, 627; Cuyugan vs. Santos, 34 Phil.,
100.)
Dario and Gaudencio Eleizegui vs. Manila Lawn Tennis
Club, May 19, 1903, J. Arellano.
Facts: This suit concerns the lease of a piece of land for a
fixed consideration and to endure at the will of the lessee. By
the contract of lease the lessee is expressly authorized to
make improvements upon the land, by erecting buildings of
both permanent and temporary character, by making fills,
laying pipes, and making such other improvements as might
be considered desirable for the comfort and amusement of
the members. "The court is of the opinion that the contract of
lease was terminated by the notice given by the plaintiff on
August 28 of last year . . . ." And such is the theory
maintained by the plaintiffs, which expressly rests upon
article 1581 of the Civil Code, the law which was in force at
the time the contract was entered into (January 25, 1890).
The judge, in giving to this notice the effect of terminating the
lease, undoubtedly considers that it is governed by the article
relied upon by the plaintiffs, which is of the following tenor:
"When the term has not been fixed for the lease, it is
understood to be for years when an annual rental has been
fixed, for months when the rent is monthly. . . ." The second
clause of the contract provides as follows: "The rent of the
said land is fixed at 25 pesos per month." (P. 11, Bill of
Exceptions.)
In accordance with such a theory, the plaintiffs might have
terminated the lease the month following the making of the
contract at any time after the first month, which, strictly
speaking, would be the only month with respect to which they
were expressly bound, they not being bound for each
successive month except by a tacit renewal (aright 1566)
an effect which they might prevent by giving the required
notice. The OBLIGATIONS which, with the force of law, the
lessors assumed by the contract entered into, so far as
pertaining to the issues, are the following: "First. . . . They
lease the above-described land to Mr. Williamson, who takes it
on lease, . . . for all the time the members of the said club
may desire to use it . . . Third. . . . the owners of the land
undertake to maintain the club as tenant as long as the latter
shall see fit, without altering in the slightest degree the
conditions of this contract, even though the estate be sold."
It is evident that they had no intention of stipulating that they
reserved the right to give such notice. Clause 3 begins as
follows: "Mr. Williamson, or whoever may succeed him as
secretary of said club, may terminate this lease whenever
desired without other formality than that of giving a month's
notice. The owners of the land undertake to maintain the club
as tenant as long as the latter shall see fit."
Although the relief asked for in the complaint, drawn in
accordance with the new form of procedure established by
the prevailing Code, is the restitution of the land to the
plaintiffs (a formula common to various actions), nevertheless
the action which is maintained can be no other than that of
desahucio, in accordance with the substantive law governing
the contract. The lessor says article 1569 of the Civil Code
may judicially dispossess the lessee upon the expiration of
the conventional term or of the legal term; the conventional
term that is, the one agreed upon by the parties; the legal
term, in defect of the conventional, fixed for leases by articles
1577 and 1581.
Issue: Whether or not the duration of the term of lease can
be fixed by the couright
Held: The Civil Code has made provision for such a case in all
kinds of OBLIGATIONS. In speaking in general of OBLIGATIONS
with a term it has supplied the deficiency of the former law
with respect to the "duration of the term when it has been left
to the will of the debtor," and provides that in this case the
term shall be fixed by the court. (Aright 1128, sec. 2.) In every
contract, as laid down by the authorities, there is always a
creditor who is entitled to demand the performance, and a
debtor upon whom rests the obligation to perform the
undertaking. In bilateral contracts the contracting parties are
mutually creditors and debtors. Thus, in this contract of lease,
the lessee is the creditor with respect to the rights
enumerated in article 1554, and is the debtor with respect to
the OBLIGATIONS imposed by articles 1555 and 1561. The
term within which performance of the latter obligation is due
is what has been left to the will of the debtor. This term it is
which must be fixed by the court.
Philippine Banking Corporation representing the
estate of Justina Santos Y Canon Faustino, deceased
vs. Lui She in her own behalf and as administratrix of
the intestate estate of Wong Heng, deceased., 21 SCRA
53.
Facts: Justina Santos y Canon Faustino and her sister Lorenzo
were the owners in common of a piece of land in Manila. This
parcel, with an area of 2,582.30 square meters, is located on
Rizal Avenue and opens into Florentino Torres street at the
back and Katubusan street on one side. In it are two
residential houses with entrance on Florentino Torres street
and the Hen Wah Restaurant with entrance on Rizal Avenue.
The sisters lived in one of the houses, while Wong Heng, a
Chinese, lived with his family in the restaurant. Wong had
been a long-time lessee of a portion of the property, paying a
monthly rental of P2,620.
On September 22, 1957 Justina Santos became the owner of
the entire property as her sister died with no other heir. Then
already well advanced in years, being at the time 90 years
old, blind, crippled and an invalid, she was left with no other
relative to live with. Her only companions in the house were
her 17 dogs and 8 maids. Her otherwise dreary existence was
brightened now and then by the visits of Wong's four children
who had become the joy of her life. Wong himself was the
trusted man to whom she delivered various amounts for
safekeeping, including rentals from her property at the corner
of Ongpin and Salazar streets and the rentals which Wong
himself paid as lessee of a part of the Rizal Avenue property.
Wong also took care of the payment; in her behalf, of taxes,
lawyers' fees, funeral expenses, masses, salaries of maids
and security guard, and her household expenses.
"In grateful acknowledgment of the personal services of
the lessee to her," Justina Santos executed on November 15,
1957 a contract of lease (Plff Exh. 3) in favor of Wong,
covering the portion then already leased to him and another
portion fronting Florentino Torres street. The lease was for 50
years, although the lessee was given the right to withdraw at
any time from the agreement; the monthly rental was P3,120.
The contract covered an area of 1,124 square meters. Ten
days later (November 25), the contract was amended (Plff
Exh. 4) so as to make it cover the entire property, including
the portion on which the house of Justina Santos stood, at an
additional monthly rental of P360. For his part Wong
undertook to pay, out of the rental due from him, an amount
not exceeding P1,000 a month for the food of her dogs and
the salaries of her maids.
On December 21 she executed another contract (Plff
Exh. 7) giving Wong the option to buy the leased premises for
P120,000, payable within ten years at a monthly installment
of P1,000. The option, written in Tagalog, imposed on him the
obligation to pay for the food of the dogs and the salaries of
the maids in her household, the charge not to exceed P1,800
a month. The option was conditioned on his obtaining
Philippine citizenship, a petition for which was then pending in
the Court of First Instance of Rizal. It appears, however, that
this application for naturalization was withdrawn when it was
discovered that he was not a resident of Rizal. On October 28,
1958 she filed a petition to adopt him and his children on the
erroneous belief that adoption would confer on them
Philippine citizenship. The error was discovered and the
proceedings were abandoned.
On November 18, 1958 she executed two other
contracts, one (Plff Exh. 5) extending the term of the lease to
99 years, and another (Plff Exh. 6) fixing the term of the
option of 50 years.
In two wills executed on August 24 and 29, 1959 (Def Exhs.
285 & 279), she bade her legatees to respect the contracts
she had entered into with Wong, but in a codicil (Plff Exh. 17)
of a later date (November 4, 1959) she appears to have a
change of hearight Claiming that the various contracts were
made by her because of machinations and inducements
practiced by him, she now directed her executor to secure the
annulment of the contracts.
On November 18 the present action was filed in the
Court of First Instance of Manila. The complaint alleged that
the contracts were obtained by Wong "through fraud,
misrepresentation, inequitable conduct, undue influence and
abuse of confidence and trust of and (by) taking advantage of
the helplessness of the plaintiff and were made to circumvent
the constitutional provision prohibiting aliens from acquiring
lands in the Philippines and also of the Philippine
Naturalization Laws."
From this judgment both parties appealed directly to this
Couright After the case was submitted for decision, both
parties died, Wong Heng on October 21, 1962 and Justina
Santos on December 28, 1964. Wong was substituted by his
wife, Lui She, the other defendant in this case, while Justina
Santos was substituted by the Philippine Banking Corporation.
Justina Santos maintained now reiterated by the Philippine
Banking Corporation that the lease contract (Plff Exh. 3)
should have been annulled along with the four other contracts
(Plff Exhs. 4-7) because it lacks mutuality; because it included
a portion which, at the time, was in custodia legis; because
the contract was obtained in violation of the fiduciary
relations of the parties; because her consent was obtained
through undue influence, fraud and misrepresentation; and
because the lease contract, like the rest of the contracts, is
absolutely simulated.
 Paragraph 5 of the lease contract states that "The
lessee may at any time withdraw from this agreement." It is
claimed that this stipulation offends article 1308 of the Civil
Code which provides that "the contract must bind both
contracting parties; its validity or compliance cannot be left to
the will of one of them."
Issue: Whether or not the option given to Wong to buy the
property despite him being an alien is valid.
until ultimately all the rights of which ownership is made up
are consolidated in an alien. And yet this is just exactly what
the parties in this case did within the space of one year, with
the result that Justina Santos' ownership of her property was
reduced to a hollow concept. If this can be done, then the
Constitutional ban against alien landholding in the Philippines,
as announced in Krivenko v. Register of Deeds,22 is indeed in
grave peril.

Held: NO. Taken singly, the contracts show nothing that is

necessarily illegal, but considered collectively, they reveal an
insidious pattern to subvert by indirection what the
Constitution directly prohibits. To be sure, a lease to an alien
for a reasonable period is valid. So is an option giving an alien
the right to buy real property on condition that he is granted
Philippine citizenship. As this Court said in Krivenko v.
Register of Deeds:20
[A]liens are not completely excluded by the
Constitution from the use of lands for residential
purposes. Since their residence in the Philippines is
temporary, they may be granted temporary rights such
as a lease contract which is not forbidden by the
Constitution. Should they desire to remain here forever
and share our fortunes and misfortunes, Filipino
citizenship is not impossible to acquire.
But if an alien is given not only a lease of, but also an
option to buy, a piece of land, by virtue of which the Filipino Lim vs. People
owner cannot sell or otherwise dispose of his property, 21 this
to last for 50 years, then it becomes clear that the Facts: Lourdes Lim is a businesswoman who went to Maria
arrangement is a virtual transfer of ownership whereby the Ayroso and proposed to the latter to sell Ayrosos tobacco.
owner divests himself in stages not only of the right to enjoy Ayroso agreed to the proposition to sell her tobacco consisting
the land ( jus possidendi, jus utendi, jus fruendi and jus of 615 kilos at P1.30/kilo. The agreement reads: This is to
abutendi) but also of the right to dispose of it ( jus certify that I have received from Maria Ayroso of Nueva Ecija,
disponendi) rights the sum total of which make up 615 kilos of leaf tobacco to be sold at P1.30/kilo. The proceed
ownership. It is just as if today the possession is transferred, in the amount of P799.50 will be given to her as soon as it
tomorrow, the use, the next day, the disposition, and so on, was sold. Of the P799.50, only P240 was paid by Lim. Lim
failed to pay the balance. Ayroso filed an Estafa case against
Lim.
Issue: Whether Lims obligation to pay Ayroso is immediately
demandable as soon as the tobacco was disposed of.
Held: YES. The SC ruled that it was clear in the agreement
that the proceeds of the sale of the tobacco should be turned
over to the complainant as soon as the same was sold, or,
that the obligation was immediately demandable as soon as
the tobacco was disposed of. Hence, Article 1197 of the NCC,
which provides that the court may fix the duration of the
obligation if it does not fix a period, does not apply. The
agreement cannot be understood to mean that the duration
of the period depends upon the will of the debtor which the
court can fix the duration thereof. Instead the agreement
between them was one of agency with the OBLIGATION to
return the unsold tobacco and the proceeds of the sale
demandable.
Pacifica Millare vs. Hon. Hernando, Antonio Co and Elsa
Co., June 30, 1987, J. Feliciano.
Facts: Pacifica Millare, lessor and spouses Co lessee in a 5-
year contract of lease of Peoples Restaurant, a commercial
establishment located at the corner of McKinley and Pratt
Streets in Bangued, Abra. At the last week of the 5-year period,
the lessor offered to extend the lease if spouses Co will agree
to increase rental from P350 to P1200 a month. The spouses
counter-offered the rental to P700 but this discussion was set
aside. Later, a demand letter was issued by lessor to vacate
premises without renewal of expired contract which the lessor
disagreed and filed an ejectment case. The spouses Co filed a
separate case for the court to order renewal of contract and fix
rental at P700 a month. Spouses deposited monthly rental in
court while the plaintiff filed Motion to Dismiss for lack of
jurisdiction and no cause of action but the same was denied.
Issue: Whether the Spouses Co have valid cause of action in
claiming renewal of lease contract.
Held: YES. There was implied renewal of lease contract but
only on a month-to-month basis, but not for another 5 years.
Hence, par. 1 of Article 1197 is clearly inapplicable, since the
Contract of Lease did in fact fix an original period of 5 years,
which had expired. It is also clear from par. 13 of the contract
that the parties reserved to themselves the faculty of agreeing
upon the period of the renewal contract. The 2nd par. of
Article 1197 is equally inapplicable since the duration of the
renewal period was not left to the will of the lessee alone, but
rather to the will of both the lessor & the lessee. Most
importantly, Article 1197 applies only where a contract of lease
clearly exists. Here, the contract was not renewed at all, there
was in fact no contract at all the period of which could have
been fixed. SC agreed the TRO and injunction.
Gregorio Araneta, Inc. vs. Phil. Sugar Estates Dev., May
31, 1967, J.B.L. Reyes.
Facts: J. M. Tuason & Co., Inc. is the owner of a big tract land
situated in Quezon City, otherwise known as the Sta. Mesa
Heights Subdivision, and covered by a Torrens title in its
name. On July 28, 1950, through Gregorio Araneta, Inc., it
(Tuason & Co.) sold a portion thereof with an area of 43,034.4
square meters, more or less, for the sum of P430,514.00, to
Philippine Sugar Estates Development Co., Ltd. The parties
stipulated, among in the contract of purchase and sale with
mortgage, that the buyer will
Build on the said parcel land the Sto. Domingo Church
and Convent
while the seller for its part will
Construct streets on the NE and NW and SW sides of
the land herein sold so that the latter will be a block
surrounded by streets on all four sides; and the street
on the NE side shall be named "Sto. Domingo Avenue;"
The buyer, Philippine Sugar Estates Development Co., Ltd.,
finished the construction of Sto. Domingo Church and
Convent, but the seller, Gregorio Araneta, Inc., which began
constructing the streets, is unable to finish the construction of
the street in the Northeast side named (Sto. Domingo Avenue)
because a certain third-party, by the name of Manuel Abundo,
who has been physically occupying a middle part thereof,
refused to vacate the same; hence, on May 7, 1958, Philippine
Sugar Estates Development Co., Lt. filed its complaint against
J. M. Tuason & Co., Inc., and instance, seeking to compel the
latter to comply with their obligation, as stipulated in the
above-mentioned deed of sale, and/or to pay damages in the
event they failed or refused to perform said obligation.
Both defendants J. M. Tuason and Co. and Gregorio Araneta,
Inc. answered the complaint, the latter particularly setting up
the principal defense that the action was premature since its
obligation to construct the streets in question was without a
definite period which needs to he fixed first by the court in a
proper suit for that purpose before a complaint for specific
performance will prosper.
Plaintiff moved to reconsider and modify the above decision,
praying that the court fix a period within which defendants
will comply with their obligation to construct the streets in
question.
Defendant Gregorio Araneta, Inc. opposed said motion,
maintaining that plaintiff's complaint did not expressly or
impliedly allege and pray for the fixing of a period to comply
with its obligation and that the evidence presented at the trial
was insufficient to warrant the fixing of such a period.
Issue: Whether the period fixed by the court is proper.
Held: We agree with the petitioner that the decision of the
Court of Appeals, affirming that of the Court of First Instance
is legally untenable. The fixing of a period by the court under
Article 1197 of the Civil Code of the Philippines is sought to be
justified on the basis that petitioner (defendant below) placed
the absence of a period in issue by pleading in its answer that
the contract with respondent Philippine Sugar Estates
Development Co., Ltd. gave petitioner Gregorio Araneta, Inc.
"reasonable time within which to comply with its obligation to
construct and complete the streets." Neither of the court
below seems to have noticed that, on the hypothesis stated,
what the answer put in issue was not whether the court
should fix the time of performance, but whether or not the
parties agreed that the petitioner should have reasonable
time to perform its part of the bargain. If the contract so
provided, then there was a period fixed, a "reasonable time;"
and all that the court should have done was to determine if
that reasonable time had already elapsed when suit was filed
if it had passed, then the court should declare that petitioner
had breached the contract, as averred in the complaint, and
fix the resulting damages. On the other hand, if the
reasonable time had not yet elapsed, the court perforce was
bound to dismiss the action for being premature. But in no
case can it be logically held that under the plea above
quoted, the intervention of the court to fix the period for
performance was warranted, for Article 1197 is precisely
predicated on the absence of any period fixed by the parties.
Even on the assumption that the court should have found that reasonable, but must set the time that the parties are
no reasonable time or no period at all had been fixed (and the shown to have intended. As the record stands, the trial
trial court's amended decision nowhere declared any such Court appears to have pulled the two-year period set in its
fact) still, the complaint not having sought that the Court decision out of thin air, since no circumstances are mentioned
should set a period, the court could not proceed to do so to support it. Plainly, this is not warranted by the Civil Code.
unless the complaint in as first amended; for the original
decision is clear that the complaint proceeded on the theory
that the period for performance had already elapsed, that the
contract had been breached and defendant was already
answerable in damages.
Granting, however, that it lay within the Court's power to fix
the period of performance, still the amended decision is
defective in that no basis is stated to support the conclusion
that the period should be set at two years after finality of the
judgment. The list paragraph of Article 1197 is clear that the
period can not be set arbitrarily. The law expressly prescribes
that
the Court shall determine such period as may under
the circumstances been probably contemplated by the
parties.
All that the trial court's amended decision (Rec. on Appeal, p.
124) says in this respect is that "the proven facts precisely
warrant the fixing of such a period," a statement manifestly
insufficient to explain how the two period given to petitioner
herein was arrived at.
It must be recalled that Article 1197 of the Civil Code
involves a two-step process. The Court must first
determine that "the obligation does not fix a period"
(or that the period is made to depend upon the will of
the debtor)," but from the nature and the
circumstances it can be inferred that a period was
intended" (Aright 1197, pars. 1 and 2). This
preliminary point settled, the Court must then proceed
to the second step, and decide what period was
"probably contemplated by the parties" (Do., par. 3).
So that, ultimately, the Court can not fix a period
merely because in its opinion it is or should be

Case Doctrine: The owner of the bus is not jointly and
severally liable to the bus driver who was criminally
charged for a criminal act but instead subsidiarily
liable thereto.
Rolito Calang and Philtranco Service Enterprises, Inc.
vs. People, August 3, 2010.
Facts: At around 2:00 p.m. of April 22, 1989, Rolito Calang
was driving Philtranco Bus No. 7001, owned by Philtranco
along Daang Maharlika Highway in Barangay Lambao, Sta.
Margarita, Samar when its rear left side hit the front left
portion of a Sarao jeep coming from the opposite direction. As
a result of the collision, Cresencio Pinohermoso, the jeeps
driver, lost control of the vehicle, and bumped and killed Jose
Mabansag, a bystander who was standing along the
highways shoulder. The jeep turned turtle three (3) times
before finally stopping at about 25 meters from the point of
impact. Two of the jeeps passengers, Armando Nablo and an
unidentified woman, were instantly killed, while the other
passengers sustained serious physical injuries.
The prosecution charged Calang with multiple homicide,
multiple serious physical injuries and damage to property thru
reckless imprudence before the Regional Trial Court (RTC),
Branch 31, Calbayog City.
The RTC ordered Calang and Philtranco, jointly and severally,
to pay P50,000.00 as death indemnity to the heirs of
Armando; P50,000.00 as death indemnity to the heirs of
Mabansag; and P90,083.93 as actual damages to the private
complainants.
The petitioners appealed the RTC decision to the Court of
Appeals (CA), docketed as CA-G.R. CR No. 25522. The CA, in
its decision dated November 20, 2009, affirmed the RTC
decision in toto. The CA ruled that petitioner Calang failed to
exercise due care and precaution in driving the Philtranco
bus. According to the CA, various eyewitnesses testified that
the bus was traveling fast and encroached into the opposite
lane when it evaded a pushcart that was on the side of the
road. In addition, he failed to slacken his speed, despite
admitting that he had already seen the jeep coming from the
opposite direction when it was still half a kilometer away. The
CA further ruled that Calang demonstrated a reckless attitude
when he drove the bus, despite knowing that it was suffering
from loose compression, hence, not roadworthy.
The CA added that the RTC correctly held Philtranco
jointly and severally liable with petitioner Calang, for
failing to prove that it had exercised the diligence of a
good father of the family to prevent the accident.
Issue: Whether or not Calang and Philtranco will be correctly
held jointly and solidarily liable to the victims of the collision.
Held: NO. We, however, hold that the RTC and the CA both
erred in holding Philtranco jointly and severally liable with
Calang. We emphasize that Calang was charged criminally
before the RTC. Undisputedly, Philtranco was not a direct
party in this case. Since the cause of action against Calang
was based on delict, both the RTC and the CA erred in holding
Philtranco jointly and severally liable with Calang, based on
quasi-delict under Articles 21761 and 21802 of the Civil Code.
Articles 2176 and 2180 of the Civil Code pertain to the
vicarious liability of an employer for quasi-delicts that an
employee has committed. Such provision of law does not
apply to civil liability arising from delict.
If at all, Philtrancos liability may only be subsidiary.
Article 102 of the Revised Penal Code states the subsidiary
civil liabilities of innkeepers, tavernkeepers and proprietors of
establishments, as follows:
In default of the persons criminally liable, innkeepers,
tavernkeepers, and any other persons or corporations shall be
civilly liable for crimes committed in their establishments, in
all cases where a violation of municipal ordinances or some
general or special police regulations shall have been
committed by them or their employees.
Innkeepers are also subsidiary liable for the restitution of
goods taken by robbery or theft within their houses from
guests lodging therein, or for the payment of the value
thereof, provided that such guests shall have notified in
advance the innkeeper himself, or the person representing
him, of the deposit of such goods within the inn; and shall
furthermore have followed the directions which such
innkeeper or his representative may have given them with
respect to the care of and vigilance over such goods. No
liability shall attach in case of robbery with violence against or
intimidation of persons unless committed by the innkeepers
employees.
The foregoing subsidiary liability applies to employers,
according to Article 103 of the Revised Penal Code, which
reads:
The subsidiary liability established in the next preceding
article shall also apply to employers, teachers, persons, and
corporations engaged in any kind of industry for felonies
committed by their servants, pupils, workmen, apprentices, or
employees in the discharge of their duties.
The provisions of the Revised Penal Code on subsidiary
liability Articles 102 and 103 are deemed written into the
judgments in cases to which they are applicable. Thus, in the
dispositive portion of its decision, the trial court need not
expressly pronounce the subsidiary liability of the employer.
Nonetheless, before the employers subsidiary liability is
enforced, adequate evidence must exist establishing that (1)
they are indeed the employers of the convicted employees;
(2) they are engaged in some kind of industry; (3) the crime
was committed by the employees in the discharge of their
duties; and (4) the execution against the latter has not been
satisfied due to insolvency. The determination of these
conditions may be done in the same criminal action in which
the employees liability, criminal and civil, has been
pronounced, in a hearing set for that precise purpose, with
due notice to the employer, as part of the proceedings for the
execution of the judgment.

Case Doctrine: An agreement to be individually liable
or individually and jointly liable denotes a solidary
obligation, not a joint liability.
RONQUILLO V. CA [132 S 274, Sept. 28, 1983]
FACTS: In a collection case, parties entered into a compromise
agreement wherein the plaintiff Antonio So areed to reduce its
total claim of P117, 498.95 to only P110,000 and defendants
Ernesto Ronquillo, Offshore Catertrade Inc., Johnny Tan and
Pilar Tan agreed to acknowledge the validity of such claim and
further bind themselves to initially pay out of the total
indebtedness, the amount of P55,000 on or before December
24, 1979, the balance of P55,000, defendants, individually
and jointly agree to pay within a period of 6 months from
January 30, 1980. However, defendants failed to pay the initial
sum on December 24, 1979. Ronquillo asked that his share
of P13, 750 be accepted as payment. But So nevertheless
asked for the execution of the decision in its entirety against all
defendants, jointly and severally. Ronquillo opposed it by
saying that it was not expressly declared that it was solidary.
The trial court ruled that liability was solidary.
ISSUE: Whether the nature of liability as termed jointly and
severally of the defendants means being solidary; hence the
full payment can be demanded by anyone of the defendant
and thereby correctly rejecting the tender of payment of
Ronquillo of his share only.
HELD: YES. In this regard, Article 1207 and 1208 of the Civil
Code provides
Art. 1207. The concurrence of two or more debtors in
one and the same obligation does not imply that each
one of the former has a right to demand, or that each
one of the latter is bound to render, entire compliance
with the prestation. Then is a solidary liability only
when the obligation expressly so states, or when the
law or the nature of the obligation requires solidarity.
Art. 1208. If from the law, or the nature or the wording
of the obligation to which the preceding article refers
the contrary does not appear, the credit or debt shall
be presumed to be divided into as many equal shares
as there are creditors and debtors, the credits or debts
being considered distinct from one another, subject to
the Rules of Court governing the multiplicity of quits.
The decision of the lower court based on the parties'
compromise agreement, provides:
1. Plaintiff agrees to reduce its total claim of P117,498.95 to
only P110,000.00 and defendants agree to acknowledge the
validity of such claim and further bind themselves to initially
pay out of the total indebtedness of P110,000.00, the amount
of P5,000.00 on or before December 24, 1979, the balance of
P55,000.00, defendants individually and jointly agree to pay
within a period of six months from January 1980 or before
June 30, 1980. (Emphasis supply)
Clearly then, by the express term of the compromise
agreement and the decision based upon it, the defendants
obligated themselves to pay their obligation "individually and
jointly".
The term "individually" has the same meaning as
"collectively", "separately", "distinctively",
respectively or "severally". An agreement to be
"individually liable" undoubtedly creates a several
obligation, and a "several obligation is one by which
one individual binds himself to perform the whole
obligation.
Case Doctrine: The direct liability of the insurer under
indemnity contracts against Third Party Liability does
not mean that the insurer can be held solidarily liable
with the insured &/ or the other parties found at fault.
MALAYAN INSURANCE V. CA [165 SCRA 536]
Facts: Malayan Insurance on March 29, 1967 issued in favor
of Sio Choy, a Private Car Comprehensive Policy effective from
April 18, 1967 to April 18, 1968 covering a Willys jeep. The
insurance coverage for third-party liability was P20,000.
During the effectivity of the said policy, the insured jeep while
being driven by one Juan Campollo, an employee of San Leon
Rice Mill, collided with a passenger bus owned by Pangasinan
Transportation Co. (Pantranco) causing damage to the insured
vehicle and injuries to the driver and Martin Vallejos who was
riding in an ill-fated jeep. Vallejos sued for damages against
Sio Choy, Malayan Insurance and Pantranco. However the trial
court only ordered Sio Choy, Malayan and San Leon to pay
Vallejos a total of P29,103 (jointly and severally liable) but
Malayan will be liable only up to P20,000, the consideration in
the policy. CA affirmed the judgment of the trial court that Sio
Choy, the San Leon Rice Mill, Inc. and the Malayan Insurance
Co., Inc. are jointly and severally liable for the damages
awarded to the plaintiff Martin C. Vallejos. It ruled, however,
that the San Leon Rice Mill, Inc. has no obligation to indemnify
or reimburse the petitioner insurance company for whatever
amount it has been ordered to pay on its policy, since the San
Leon Rice Mill, Inc. is not a privy to the contract of insurance
between Sio Choy and the insurance company.
Issue: Whether or not Malayan Insurance is solidarily liable
with Sio Choy and San Leon Rice Mill to Vallejos.
Held: NO. We hold instead that it is only respondents Sio
Choy and San Leon Rice Mill, Inc, (to the exclusion of the
petitioner) that are solidarily liable to respondent Vallejos for
the damages awarded to Vallejos.
It must be observed that respondent Sio Choy is made liable
to said plaintiff as owner of the ill-fated Willys jeep, pursuant
to Article 2184 of the Civil Code which provides:
Art. 2184. In motor vehicle mishaps, the owner is solidarily
liable with his driver, if the former, who was in the vehicle,
could have, by the use of due diligence, prevented the
misfortune it is disputably presumed that a driver was
negligent, if he had been found guilty of reckless driving or
violating traffic regulations at least twice within the next
preceding two months.
If the owner was not in the motor vehicle, the provisions of
article 2180 are applicable.
On the other hand, it is noted that the basis of liability of
respondent San Leon Rice Mill, Inc. to plaintiff Vallejos, the
former being the employer of the driver of the Willys jeep at
the time of the motor vehicle mishap, is Article 2180 of the
Civil Code which reads:
Art. 2180. The obligation imposed by article 2176 is
demandable not only for one's own acts or omissions, but
also for those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged
ill any business or industry.
xxx xxx xxx
The responsibility treated in this article shall cease when the
persons herein mentioned proved that they observed all the
diligence of a good father of a family to prevent damage.
It thus appears that respondents Sio Choy and San Leon Rice
Mill, Inc. are the principal tortfeasors who are primarily liable
to respondent Vallejos. The law states that the responsibility
of two or more persons who are liable for a quasi-delict is
solidarily.
On the other hand, the basis of petitioner's liability is its
insurance contract with respondent Sio Choy. If petitioner is
adjudged to pay respondent Vallejos in the amount of not
more than P20,000.00, this is on account of its being the
insurer of respondent Sio Choy under the third party liability
clause included in the private car comprehensive policy
existing between petitioner and respondent Sio Choy at the
time of the complained vehicular accident.
While it is true that where the insurance contract provides for
indemnity against liability to third persons, such third persons
can directly sue the insurer, however, the direct liability of the
insurer under indemnity contracts against third party liability
does not mean that the insurer can be held solidarily liable
with the insured and/or the other parties found at fault. The
liability of the insurer is based on contract; that of the insured
is based on tort.
In the case at bar, petitioner as insurer of Sio Choy, is liable to
respondent Vallejos, but it cannot, as incorrectly held by the
trial court, be made "solidarily" liable with the two principal
tortfeasors namely respondents Sio Choy and San Leon Rice
Mill, Inc. For if petitioner-insurer were solidarily liable with said
two (2) respondents by reason of the indemnity contract
against third party liability-under which an insurer can be
directly sued by a third party this will result in a violation of
the principles underlying solidary obligation and insurance
Case Doctrine: If one of the alleged solidary debtor dies
contracts.
during the pendency of the collection case, the court
In solidary obligation, the creditor may enforce the entire where said case is pending retains jurisdiction to
obligation against one of the solidary debtors. On the other continue hearing the charge as against the surviving
hand, insurance is defined as "a contract whereby one defendants. (1216)
undertakes for a consideration to indemnify another against
PNB V. INDEPENDENT PLANTERS [122 SCRA 113]
loss, damage, or liability arising from an unknown or
contingent event." Facts: Appeal by the Philippine National Bank (PNB) from the
Order of the defunct Court of First Instance of Manila (Branch
In the case at bar, the trial court held petitioner together with
XX) in its Civil Case No. 46741 dismissing PNB's complaint
respondents Sio Choy and San Leon Rice Mills Inc. solidarily
against several solidary debtors for the collection of a sum of
liable to respondent Vallejos for a total amount of P29,103.00,
money on the ground that one of the defendants (Ceferino
with the qualification that petitioner's liability is only up to
Valencia) died during the pendency of the case (i.e., after the
P20,000.00. In the context of a solidary obligation, petitioner
plaintiff had presented its evidence) and therefore the
may be compelled by respondent Vallejos to pay the entire
complaint, being a money claim based on contract, should be
obligation of P29,013.00, notwithstanding the qualification
prosecuted in the testate or intestate proceeding for the
made by the trial court. But, how can petitioner be
settlement of the estate of the deceased defendant pursuant
obliged to pay the entire obligation when the amount
to Section 6 of Rule 86 of the Rules of Court which reads:
stated in its insurance policy with respondent Sio Choy
for indemnity against third party liability is only SEC. 6. Solidary obligation of decedent. the obligation of
P20,000.00? Moreover, the qualification made in the the decedent is solidary with another debtor, the claim shall
decision of the trial court to the effect that petitioner is be filed against the decedent as if he were the only debtor,
sentenced to pay up to P20,000.00 only when the obligation without prejudice to the right of the estate to recover
to pay P29,103.00 is made solidary, is an evident breach of contribution from the other debtor. In a joint obligation of the
the concept of a solidary obligation. Thus, we hold that the decedent, the claim shall be confined to the portion belonging
trial court, as upheld by the Court of Appeals, erred in holding to him.
petitioner, solidarily liable with respondents Sio Choy and San
Leon Rice Mill, Inc. to respondent Vallejos.
The appellant assails the order of dismissal, invoking its right
of recourse against one, some or all of its solidary debtors
under Article 1216 of the Civil Code
ART. 1216. The creditor may proceed against any one of the
solidary debtors or some or all of them simultaneously. The
demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the
others, so long as the debt has not been fully collected.
Issue: Whether in an action for collection of a sum of money
based on contract against all the solidary debtors, the death
of one of the defendants deprives the court of jurisdiction to
proceed with the case against the surviving defendants.
Held: It is now settled that the quoted Article 1216 grants the
creditor the substantive right to seek satisfaction of his credit
from one, some or all of his solidary debtors, as he deems fit
or convenient for the protection of his interests; and if, after
instituting a collection suit based on contract against some or
all of them and, during its pendency, one of the defendants
dies, the court retains jurisdiction to continue the proceedings
and decide the case in respect of the surviving defendants.
Case Doctrine: The SC considered the 4% interest as not
a penal clause because it does not strengthen the
coercive force of the obligation.
ROBES-FRANCISCO V. CFI [86 SCRA 59]
Facts: In May 1962 Robes-Francisco Realty & Development
Corporation, now petitioner, agreed to sell to private
respondent Lolita Millan for and in consideration of the sum of
P3,864.00, payable in installments, a parcel of land containing
an area of approximately 276 square meters, situated in
Barrio Camarin, Caloocan City, known as Lot No. 20, Block No.
11 of its Franville Subdivision. 2
Millan complied with her obligation under the contract and
paid the installments stipulated therein, the final payment
having been made on December 22, 1971. The vendee made
a total payment of P5,193.63 including interests and
expenses for registration of title. 3
Thereafter, Lolita Millan made repeated demands upon the
corporation for the execution of the final deed of sale and the
issuance to her of the transfer certificate of title over the lot.
On March 2, 1973, the parties executed a deed of absolute
sale of the aforementioned parcel of land. The deed of
absolute sale contained, among others, this particular
provision:
That the VENDOR further warrants that the transfer
certificate of title of the above-described parcel of land
shall be transferred in the name of the VENDEE within
the period of six (6) months from the date of full
payment and in case the VENDOR fails to issue said
transfer certificate of title, it shall bear the obligation to
refund to the VENDEE the total amount already paid
for, plus an interest at the rate of 4% per annum.
(record on appeal, p. 9)
Notwithstanding the lapse of the above-mentioned stipulated
period of six (6) months, the corporation failed to cause the
issuance of the corresponding transfer certificate of title over
the lot sold to Millan, hence, the latter filed on August 14,
1974 a complaint for specific performance and damages
against Robes-Francisco Realty & Development Corporation.
Issue: Whether or not the petitioner is correct in invoking
Article 1226 of the Civil Code which provides that in
obligations with a penal clause, the penalty shall substitute
the indemnity for damages and the payment of interests in
case of noncompliance, if there is no stipulation to the
contrary.
Held: NO. We would agree with petitioner if the clause in
question were to be considered as a penal clause.
Nevertheless, for very obvious reasons, said clause does not
convey any penalty, for even without it, pursuant to Article
2209 of the Civil Code, the vendee would be entitled to
recover the amount paid by her with legal rate of interest
which is even more than the 4% provided for in the clause.
It is therefore inconceivable that the afore-cited provision in
the deed of sale is a penal clause which will preclude an
award of damages to the vendee Millan. In fact the clause is
so worded as to work to the advantage of petitioner
corporation.
Case Doctrine: The theory that penal and liquidated
damages are the same cannot be sustained where
obligor is guilty of fraud in fulfillment of OBLIGATION;
The penalty clause does not partake of the nature
of liquidated damages.
Party to a contract which was breached by the
other, may be given the right to recover actual
damages instead of stipulated liquidated
damages.
A creditor, in case of fraud by the obligor is
entitled to stipulated penalty plus the difference
between the proven damages & such stipulated
penalty.
PAMINTUAN V. CA [94 SCRA 556]
FACTS: This is a case for Recovery of compensatory damages
for breach of contract of sale in addition to liquidated
damages.
In 1960, MARIANO C. PAMINTUAN, with his barter license, was
authorized to export to Japan 1000 metric tons of white flint
corn valued at USD 47K, in exchange for collateral importation
of plastic sheetings of equal value. As such he entered into
contract with TOKYO MENKA KAISHA, LTD. of OSAKA, JAPAN. He
also entered into a contract TO SELL the plastic sheetings to
YU PING KUN, CO., INC. for Php 265K, thus the latter undertook
to open an irrevocable domestic letter of credit in favor of
Pamintuan.
It was further agreed that Pamintuan would deliver the plastic
sheetings to bodegas of Yu Ping in Manila and suburbs within
one month upon arrival of carrying vessels; & that upon
breach, aggrieved party may collect liquidated damages of Php
10K.
Pamintuan made incomplete deliveries, and then asked the
President of the Co. for cash payment and adjustments in
price, which the company agreed to. When Pamintuan refused
to complete his deliveries, he invoked that the contract was
novated and Co. failed to comply thereto.
Co. filed for damages against Pamintuan. The lower court
awarded actual damages, liquidated damages as stipulated,
and moral damages.
Pamintuan appealed and assert that Yu Ping is only entitled to
recover liquidated damages. CA found Pamintuan guilty of
fraud, and sustained the Lower court.
ISSUE: Whether or not the Co. is entitled only to liquidated
damages as appearing in the contract of sale.
HELD: We hold that appellant's contention cannot be
sustained because the second sentence of Article 1226 itself
provides that "nevertheless, damages shall be paid if the
obligor xxx is guilty of fraud in the fulfillment of the
obligation." xxx The trial court & the CA found that
Pamintuan was guilty of fraud because he did not make a
complete delivery of the plastic sheeting & he overpriced the
same. Xxx There is no justification for the Civil Code to make
an apparent distinction between penalty and liquidated
damages because the settled rule is that there is no difference
between penalty and liquidated damages insofar as legal
results are concerned and that either may be recovered
without the necessity of proving actual damages and both may
be reduced when proper (Arts. 1229, 2216 and 2227, Civil
Code. See observations of Justice J.B.L. Reyes, cited in 4
Tolentino's Civil Code, p. 251). The penalty clause is strictly
penal or cumulative in character and does not partake
of the nature of liquidated damages (pena sustitutiva)
when the parties agree "que el acreedor podra pedir, en el
supuesto incumplimiento o mero retardo de la obligacion
principal, ademas de la pena, los danos y perjuicios. Se habla
en este caso de pena cumulativa, a differencia de aquellos
otros ordinarios, en que la pena es sustitutiva de la reparacion
ordinaria." (Ibid, Castan Tobenas, p. 130).
After a conscientious consideration of the facts of the case, as
found by Court of Appeals and the trial court, and after
reflecting on the/tenor of the stipulation for liquidated
damages herein, the true nature of which is not easy to
categorize, we further hold that justice would be adequately
done in this case by allowing Yu Ping Kun Co., Inc. to recover
only the actual damages proven and not to award to it the
stipulated liquidated damages of ten thousand pesos for any
breach of the contract. The proven damages supersede the
stipulated liquidated damages.
This view finds support in the opinion of Manresa (whose
comments were the bases of the new matter found in article
1226, not found in article 1152 of the old Civil Code) that in
case of fraud the difference between the proven damages and
the stipulated penalty may be recovered (Vol. 8, part. 1,
Codigo Civil, 5th Ed., 1950, p. 483).
Hence, the damages recoverable by the firm would amount to
ninety thousand five hundred fifty-nine pesos and twenty-eight
centavos (P90,559.28), with six percent interest a year from
the filing of the complaint.

V. ESPIRITU [52 Phil. 346]

RE: Chattel Mortgage with PENAL CLAUSE

FACTS: Faustino Espiritu purchased from Bachrach Motor in

JULY 1925 a two-ton White truck on installment basis. This
truck was mortgaged, including two other white trucks owned
by defendant which are fully paid for, to secure the loan.
In FEBRUARY 1925 defendant also purchased another one-ton the Civil Code, this penalty is reduced to 10 per cent of the
white truck from same plaintiff corp. with down-payment unpaid debt.
balance on installment basis also, placing this truck on
mortgage for security and including the 2 above mortgaged With the sole modification that instead of 25 per cent upon
trucks also. Again, defendant failed to pay this debt. the sum owed, the defendants need pay only 10 per cent
thereon as penalty.
In both sales, a 12% annual interest was agreed upon the
unpaid portion of the contracts, and upon maturity, when due, There was already partial performance, to wit; down payment
non-payment of total remaining debt would give rise to 25% of 1k and the selling of the 2 trucks to be applied to the
penalty; aside from mortgage deed, there was a Promissory balance (although kulang pa)
Note, co-signed by defendant brother Rosario Espiritu solidarily.
Thus, Rosario appeared as intervenor in the collection suits Article 1229, NCC the judge shall equitably reduce the
alleging to be the sole owner of the two other trucks penalty when:
mortgaged. He alleged that he did not sign the mortgage and 1. The principal obligation has been partly or
did not consent to the inclusion of his two trucks therein. 2. Irregularly complied with by the debtor; or
3. Even if there is no performance, the penalty is iniquitous
While the cases were pending in lower court, the trucks or unconscionable.
were sold by virtue of the mortgage and brought in a
net sum not enough to settle the debts due. The Lower
court directed payments of all the sums due and in both two
cases ordered the payment of 12% interest p.a. until fully paid
and a penalty of 25% in addition as appearing in the contracts.
To these matters the defendants alleged that these amounts to
usury.

ISSUE: Whether or not the 12% interest p.a. plus additional

penalty of 25% makes the contract usurious?

HELD: NO. Article 1152 of the Civil Code permits the

agreement upon a penalty apart from the interest. Should
there be such an agreement, the penalty does not include the
interest, and which may be demanded separetely. According
to this, the penalty is not to be added to the interest for the
determination of whether the interest exceeds the rate fixed
by the law, since said rate was fixed only for the interest. But
considering that the obligation was partly performed, and
making use of the power given to the court by article 1154 of

AGCAOILI VS. GSIS [165 SCRA 1]
in any manner contravene the tenor of contract
FACTS: GSIS approved application of Marcelo Agcaoili for purchase of
House and Lot in Marikina, subject to the condition that latter should
forthwith occupy the house.
If you fail to occupy the same within 3 days from receipt of this
notice, your application will be considered automatically disapproved
& said House & Lot will be awarded to another.
Agcaoili could not stay in the house which was only a shell. It did not
have a ceiling, stairs, double walling, lights, water, CR, drainage. He
asked a homeless friend instead to stay and watch over the property.
After paying 1st installment & other fees, he refused to make further
payments until GSIS would make d house habitable. Instead of
heeding to Agcaolis condition, GSIS cancelled the contract and
demanded Agcaoili to vacate.
Agcaoili filed a case for specific performance and won. Thus GSIS
appeal must fail.
xxx
Since GSIS did not fulfill that obligation, & was not willing to put the
house in habitable state, it cannot invoke Agcaoili's suspension of
payment of amortization as cause to cancel the contract between
them. It is axiomatic that "In reciprocal OBLIGATIONS, neither party
incurs in delay if the other does not comply or is not ready to comply
in a proper manner with what is incumbent upon him.
ISSUE: Whether or not Agcaoili breached the contract by failing to
occupy the house within 3 days as stipulated?
HELD: NO, argument of GSIS is devoid of merit. There being a
perfected contract of sale, it was the duty of GSIS as seller to deliver
the thing sold in a condition suitable for enjoyment by the buyer for
the purpose contemplated. There was then a perfected contract of
sale between the parties; there had been a meeting of the minds
upon the purchase by Agcaoili of a determinate house & lot in the
GSIS Housing Project at Nangka, Marikina, Rizal, at a definite price
payable in amortizations at P31.56 per mo., & from the moment the
parties acquired the right to reciprocally demand performance. It was,
to be sure, the duty of the GSIS, as seller, to deliver the thing sold in
a condition suitable for its enjoyment by the buyer for the purpose
contemplated, in other words, to deliver the house subject of the
contract in a reasonably livable state. This it failed to do.
ARRIETA VS. NARIC [10 SCRA 79] (PAZ ARRIETA AND
VITALIADO ARRIETA VS. NATIONAL RICE & CORN CORP.)
CASE DOCTRINE: One who assumes a contractual obligation &
fails to perform the same on account of his inability to meet
certain bank requirements which inability he knew & was
aware of when he entered into the contract, should be held
liable in damages for breach of contract.
FACTS: On May 1952, Arrieta took part in public bidding called by
NARIC to supply 20K metric tons of Burmese rice, being the lowest
bidder she was awarded the contract. In the contract of sale, Arrietas
OBLIGATION was to deliver the rice at the price of her bid, while
NARICs OBLIGATION was to pay her in letter of credit, irrevocable,
confirmed and assignable, in USD in favor of Arrieta and/or supplier in
Burma, immediately.
NARIC knew that it did not have enough deposit in PNB to cover the
OBLIGATION, thus it wrote a letter of request to accommodate the
application for Letter Of Credit despite such fact in lieu of this
contract with Arrieta. This application was made by PNB on July 30,
1952, a month after it entered in the contract with Arrieta and
promised to open the Letter Of Credit immediately. By this time
Arrieta has made a 5% tender to her supplier in Burma, which will be
confiscated if the required Letter Of Credit will not be received before
August 4, 1952. Such fact was apprised by Arrieta to NARIC in a
letter through counsel.
PNB required NARIC to make a marginal deposit of 50% of the
amount of Letter Of Credit before such will be released in favor of
Arrietas supplier in Burma. Such condition NARIC is not in any
financial position to meet. PNB consequently approved & released
the LOC 2-months in delay. The Burmese supplier had cancelled the
order on Aug. 20, 1952, and forfeited the 5% tender of Arrieta
amounting to P200K. NARIC and PNB did not even make the 15-day
grace period given by the supplier. Arrieta endeavored to restore to
no avail. It offered to substitute with Thailand rice, but NARIC
rejected. Thus, Arrieta demanded for payment of damages of USD
286K representing unrealized profits. Again rejected. Thus, this case.
ISSUE: WON NARIC was in breach of contract?
HELD: YES. NARICs culpability arises from its willful and
deliberate assumption of contractual OBLIGATIONS even as it
was well aware of its own financial incapacity to undertake
the prestation.
Under Article 1170, not only debtors guilty of fraud,
negligence or default but also every debtor, in general, who
fails the performance of his obligation is bound to indemnify
for the losses & damages caused thereby.
Meaning of phrase "in any manner contravene the tenor" of
the obligation in Article 1170 The phrase includes any illicit task
which impairs the strict & faithful fulfillment of the obligation, or
every kind of defective performance.
TELEFAST Communications/Phil. Wireless, Inc. VS. IGNACIO
CASTRO [158 SCRA 445]
FACTS: Consolacion Bravo-Castro, the wife of herein respondent
Ignacio died in Lingayen, Pangasinan. Thus, that same day, her
daughter Sofia sent a telegram to her father in the USA via TELEFAST.
Her mother was interred without her father nor siblings in
attendance. When Sofia went back to the USA she learned that her
telegram never reached her father. She sued TELEFAST for damages
due to breach of contract. While TELEFASTs defense was technical
and atmospheric factor beyond its control.
ISSUE: Whether or not TELEFAST is liable only for P31.92 (fee) and
not for damages.
HELD: YES, Article 1170, and also under Article 2176 applied.
This liability is not limited to actual or quantified damages.
To sustain petitioners contention and award actual damages
only would be iniquitous such that he would be liable only for
the cost of that telegram paid for 30 yrs ago. Also, Article
2217 is applicable since Petitioners act or omission amounted to
gross negligence which was precisely the cause of the suffering of
herein private respondents.
Petitioner & private respondent Sofia C. Crouch entered into a
contract whereby, for a fee, petitioner undertook to send said private
respondent's message overseas by telegram. This, petitioner did not
do, despite performance by said private respondent of her obligation
by paying the required charges. Petitioner was therefore guilty of
contravening its obligation to said private respondent & is thus liable
for damages.
National Power Corporation vs. CA and Engineering
Construction Inc. [161 SCRA 334]
CASE DOCTRINE: NPC cannot escape liability because its
negligence was the proximate cause of the loss & damage
even though the typhoon was an act of God.
FACTS: Typhoon Welming Plaintiff ECI entered contract with
NAWASA on Aug.1964, to construct Ipo-Bicti Tunnel, Intake and Outlet
Structures at Norzagaray, Bulacan within 800 days from receipt of
notice to proceed. It has finished 1st stage of the excavation works
and was already on the Ipo site phase when typhoon Welming
came in November 4, 1967 and hit Central Luzon passing through
Angat Dam. Consequent to the heavy downpour, the dam reached
danger height of 212 m. above sea level causing the NPC to decide to
open spillway gates at that point. Thus, the extraordinary large
volume of water rushed out of the gates and hit the installations and
construction work of ECI at Ipo Site with terrific impact washing away
and/or destroying supplies and equipment of ECI. ECI then sued NPC
for damages.
ISSUE: Whether or not NPC is liable for damages.
HELD: It is clear from the appellate court's decision that based on its
findings of fact & that of the trial court's, petitioner NPC was
undoubtedly negligent because it opened the spillway gates of the
Angat Dam only at the height of typhoon "Welming" when it knew
very well that it was safer to have opened the same gradually &
earlier, as it was also undeniable that NPC knew of the coming of the
typhoon at least 4 days before it actually struck. And even though
the typhoon was an act of God or what we may call force majeure,
NPC cannot escape liability because its negligence was the proximate
cause of the loss & damage. As we have said in Juan Nakpil & Sons
vs. CA, 144 SCRA 596,
Thus, if upon the happening of a fortuitous event or an act of God,
there concurs a corresponding fraud, negligence, delay or
violation or contravention in any manner of the tenor of the
obligation as provided for in Article 1170, which results in a
loss or damage, the obligor cannot escape liability. The
principle embodied in the act of God doctrine strictly requires that
the act must be one occasioned exclusively by the violence of
nature & human agencies are to be excluded from creating or
entering into the cause of the mischief. When the effect, the
cause of which is to be considered, is found to be in part the result of
the participation of man, whether it be from active intervention or
neglect, or failure to act, the whole occurrence is thereby humanized,
as it was, & removed from the rules applicable to the acts of God.
Thus, it has been held that when the negligence of a person concurs
with an act of God in producing a loss, such person is not exempt
from liability by showing that the immediate cause of the damage
was the act of God. To be exempt from liability for loss because
of an act of God, he must be free from any previous
negligence or misconduct by which the loss or damage may
have been occasioned.
BERNARDINO JIMENEZ vs. CITY OF MANILA [150 SCRA 510]
CASE DOCTRINE: City of Manila failed to exercise the diligence
of a good father of a family which is a defense in quasi-delict.
FACTS: Bernardino Jimenez went to Sta. Ana Public market to buy
bagoong when his left foot fell in an open hole that was hidden by
muddy rainwater in the flooded market when the latter was flooded
with ankle-deep rainwater. His left leg was stuck by a rusty 4-inch
nail. His leg later on swelled and he was brought for treatment to
Veterans Memorial Hospital. He walked around with crutches for 15
days, unable to work, forced to hire a temporary driver for his school
bus he is operating. Thus, he sued the City of Manila for damages,
and the Asiatic Integrated Corp. (AIC) who had the managing and
operating contract to that market. Lower court dismissed his
complaint for insufficiency of evidence. The appellate court found in
his favor and placed sole liability on AIC.
ISSUE: WON the City of Manila should be held solidarily liable with
Asiatic Integrated Corp. for injuries suffered by petitioner.
HELD: YES. As a defense against liability on the basis of quasi-
delict, one must have exercised the diligence of a good father of a
family. (Article 1173, NCC)
There is no argument that it is the duty of the City of Manila to
exercise reasonable care to keep the public market reasonably safe
for people frequenting the place for their marketing needs. While it
may be conceded that the fulfillment of such duties is extremely
difficult during storms & floods, it must, however, be admitted that
ordinary precautions could have been taken during good weather to
minimize the dangers to life & limb under those difficult
circumstances. For instance, the drainage hole could have
been placed under the stalls instead of on the passage ways.
Even more important is the fact, that the City should have seen to it
that the openings were covered. Sadly, the evidence indicates
that long before petitioner fell into the opening, it was
already uncovered, & 5 mos. after the incident happened, the
opening was still uncovered. Moreover, while there are
findings that during floods the vendors remove the iron grills
to hasten the flow of water, there is no showing that such
practice has ever been prohibited, much less penalized by
the City of Manila. Neither was it shown that any sign had
been placed thereabouts to warn passers-by of the
impending danger.
For liability under Article 2189 NCC to attach, it is not necessary that
the defective public works belong to the LGU concerned. What is
required is control or supervision.
JUAN F. NAKPIL & SONS vs. CA [144 SCRA 596]- October 3, 1986
CASE DOCTRINE: Requisites for exemption from liability due to
an "act of God."
To exempt the obligor from liability under Article 1174, for a breach of
an obligation due to an "act of God," the following must concur:
1. the cause of the breach of the obligation must be independent
of the will of the debtor;
2. the event must be either unforeseeable or unavoidable; (c)
the event must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner; &
3. the debtor must be fee from any participation in, or
aggravation of the injury to the creditor.
FACTS: Construction of the office building of Plaintiff Phil. Bar Assoc.
(PBA) in Intramuros, Manila was undertaken by United Construction
Inc. on an administration basis on suggestion of United President
Juan Carlos. Such was approved by PBA Board, & Pres. Roman
Ozaeta. Plans and specifications were done by Juan Nakpil & Sons.
The Bldg. was completed on June 1966.
On August 2, 1968 an unusually strong earthquake hit Manila. The
PBA bldg. sustained major damage, in which tenants had to vacate.
The building was shored up by UCI at the cost of P13,661.28.
Hence, PBA filed action to recover damages against UCI while the
latter sued Nakpil for damages due to defects on the plans and
specifications.
ISSUE: WON AN ACT OF GOD WHICH CAUSED DAMAGE TO THIS
BLDG, EXEMPTS FROM LIABILITY, PARTIES WHO ARE OTHERWISE
LIABLE BECAUSE OF NEGLIGENCE?

HELD: ARTICLE 1723
To exempt obligor from liability under Article 1174, fortuitous
events; or for a breach of OBLIGATION due to an act of God,
the following: must concur:
1. cause of the breach of OBLIGATION must be independent of
the will of the debtor;
2. the event must be either unforeseeable or unavoidable
3. the event must be such as to render it impossible for debtor to
fulfill OBLIGATION in normal manner;
4. debtor must be free from any participation in, or aggravation
of the injury to the creditor.
Thus, if upon the happening of a fortuitous event or an Acts Of God,
there concurs a corresponding fraud, negligence, delay or violation or
contravention in any manner of the tenor of the OBLIGATION as
provided in Article 1170, which results in loss or damage, the
obligor cannot escape liability.
To be an Act Of God, the event must be occasioned exclusively by
violence of nature and all human agencies are excluded from creating
or entering into the cause of mischief. With participation of man,
whether active or neglect or failure to act, the occurrence is
humanized, and removed from the doctrines application.
Findings of lower court and IAC were both beyond dispute that United
and Juan F. Nakpil & Sons were both liable. The defects in the plans &
specifications were proximate cause, the deviations of United for the
specs and failure to observe required workmanship & degree of
supervision on both makes them liable.
NAKPIL & SONS VS. CA [160 SCRA 334] - APRIL 15, 1988
CASE DOCTRINE: "One who negligently creates a dangerous
condition cannot escape liability for the natural & probable
consequences thereof, although the act of a third person, or
an act of God for which he is not responsible, intervenes to
precipitate the loss." (Citing Tucker v. Milan, 49 OG 4379,
4380.)
FACTS: UCI filed a Motion for Reconsideration on the decision
previously disposed of the SC on Oct. 3, 1986 pointing out that it was
PBAs legal duty to provide full-time and active supervision in the
construction of the subject building. Also, UCI points out that bad
faith was not established.
ISSUES RAISED ON THIS MR:
(1) That the building did not collapse on the earthquake of 4/2/68,
thus the premise of the LC findings is negated, Article 1173
cannot apply
HELD: It is not the fact of collapse that was the premise on applying
Article 1173 but on who should be responsible for the extreme
damage to the bldg. which inevitably led to its collapse, or
demolition. Trial court correctly found defendants liable;
(2) That court failed to impute liability on PBA or on Ozaeta for failure
to provide legal duty to supervise, as owner.
HELD: There is no legal nor contractual basis. PBA sought technical
expertise of both United & JFN & sons for such costs on this
purpose. It was even JFN who suggested administration basis.
(3) That findings of bad faith had no factual anchor.
HELD: Wanton negligence of both United & JFN & sons in effecting
plans, specs, & constructions designs is equivalent to Bad
Faith in performance of their respective duties;
(4) Award of 5M had no basis, Commissioners report estimated only
1.1M.
HELD: Such initial report was based on the partial collapse only, after
the 4/2/68 earth quake, for repairs; but after total collapse
almost 20 yrs later, unrealized rentals and major
reconstructions makes even 5M a very conservative estimate.
(5) As to award of atty.s fees & damages.

HELD: It was court discretion.
(6) 12% interest p.a. according to CB Circular 416 (PD 116) applies
only to (1) loans; (2) forbearance of money, goods or
credit; (3) rate allowed in JFOs involving 1 & 2.
HELD: True, but, 12% is imposable only when there is delay in
payment of judgment after its finality. (penalty not really
interest)
NPC VS. CA [222 S 415]
FACTS: Petitioners cannot be heard to invoke the act of God or force
majeure to escape liability for the loss or damage sustained by the
private respondents since they, the petitioners, were guilty of
negligence. The event then was not occasioned exclusively by an act
of God or force majeure; a human factor-- negligence or
imprudence-- had intervened. The effect then of the force majeure
in question may be deemed to have, even if only partly, resulted from
the participation of man. Thus, the whole occurrence was thereby
humanized, as it were, & removed from the rules applicable to acts of
God.
NPC VS. CA [223 S 649]
Petitioners have raised the same issues & defenses as in the 2 other
decided cases therein mentioned. Predictably therefore, this petition
must perforce be dismissed because the losses & damages sustained
by the private respondent's had been proximately caused by the
negligence of the petitioners, although the typhoon which preceded
the flooding could be considered as a force majeure.
ROBERTO AND AGENCIA de R.C. SICAM vs. LULU AND CESAR
JORGE August 8, 2007.
FACTS: On October 19, 1987, two armed men entered the
pawnshop and took away whatever cash and jewelry were found
inside the pawnshop unit. Such incident was entered in police
blotter in Paranaque. Sicam then sent letter to Lulu informing the
latter of the loss of her jewelry due to the robbery. However, Lulu
wrote a letter expressing her disbelief and asking the return of her
jewelry instead. But Sicam failed to return the same. Hence, Lulu
and husband filed a complaint seeking indemnification for the loss
of pawned jewelry. RTC dismissed the complaint since Sicam cannot
be made personally liable for an incident which is in relation to
corporate transaction and so as the corporation because the loss
was occasioned by a fortuitous event. CA reversed the RTC and held
Sicam liable together with the corporation.
ISSUE: Whether or not the robbery in pawnshop resulting to the
loss of pawned jewelry can be considered as fortuitous event
thereby excusing liability of Sicam and Corporation.
HELD: NO. Article 1174 of the Civil Code provides:
Art. 1174. Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not
be foreseen or which, though foreseen, were inevitable.
Fortuitous events by definition are extraordinary events not
foreseeable or avoidable. It is therefore, not enough that the event
should not have been foreseen or anticipated, as is commonly
believed but it must be one impossible to foresee or to avoid. The
mere difficulty to foresee the happening is not impossibility to
foresee the same.
To constitute a fortuitous event, the following elements
must concur: (a) the cause of the unforeseen and
unexpected occurrence or of the failure of the debtor to
comply with obligations must be independent of human will;
(b) it must be impossible to foresee the event that
constitutes the caso fortuito or, if it can be foreseen, it must
be impossible to avoid; (c) the occurrence must be such as
to render it impossible for the debtor to fulfill obligations in
a normal manner; and, (d) the obligor must be free from any
participation in the aggravation of the injury or loss.
The burden of proving that the loss was due to a fortuitous
event rests on him who invokes it. And, in order for a
fortuitous event to exempt one from liability, it is necessary
that one has committed no negligence or misconduct that
may have occasioned the loss.
It has been held that an act of God cannot be invoked to protect a
person who has failed to take steps to forestall the possible adverse
consequences of such a loss. One's negligence may have concurred
with an act of God in producing damage and injury to another;
nonetheless, showing that the immediate or proximate cause of the
damage or injury was a fortuitous event would not exempt one from
liability. When the effect is found to be partly the result of a person's
participation -- whether by active intervention, neglect or failure to
act -- the whole occurrence is humanized and removed from the
rules applicable to acts of God.
Petitioner Sicam had testified that there was a security guard in
their pawnshop at the time of the robbery. He likewise testified that
when he started the pawnshop business in 1983, he thought of
opening a vault with the nearby bank for the purpose of safekeeping
the valuables but was discouraged by the Central Bank since
pawned articles should only be stored in a vault inside the
pawnshop. The very measures which petitioners had allegedly
adopted show that to them the possibility of robbery was not only
foreseeable, but actually foreseen and anticipated. Petitioner
Sicams testimony, in effect, contradicts petitioners defense of
fortuitous event.
Moreover, petitioners failed to show that they were free from any
negligence by which the loss of the pawned jewelry may have been
occasioned.
Robbery per se, just like carnapping, is not a fortuitous
event. It does not foreclose the possibility of negligence on
the part of herein petitioners. In Co v. Court of Appeals, the
Court held:
It is not a defense for a repair shop of motor vehicles to
escape liability simply because the damage or loss of a thing
lawfully placed in its possession was due to carnapping.
Carnapping per se cannot be considered as a fortuitous
event. The fact that a thing was unlawfully and
forcefully taken from another's rightful possession, as
in cases of carnapping, does not automatically give
rise to a fortuitous event. To be considered as such,
carnapping entails more than the mere forceful taking
of another's property. It must be proved and
established that the event was an act of God or was
done solely by third parties and that neither the
claimant nor the person alleged to be negligent has
any participation. In accordance with the Rules of
Evidence, the burden of proving that the loss was due
to a fortuitous event rests on him who invokes it
which in this case is the private respondent. However,
other than the police report of the alleged carnapping
incident, no other evidence was presented by private
respondent to the effect that the incident was not due to its
fault. A police report of an alleged crime, to which only
private respondent is privy, does not suffice to establish the
carnapping. Neither does it prove that there was no fault on
the part of private respondent notwithstanding the parties'
agreement at the pre-trial that the car was carnapped.
Carnapping does not foreclose the possibility of fault or
negligence on the part of private respondent.
Just like in Co, petitioners merely presented the police report of the
Paraaque Police Station on the robbery committed based on the
report of petitioners' employees which is not sufficient to establish
robbery. Such report also does not prove that petitioners were not at
fault.
On the contrary, by the very evidence of petitioners, the CA did not
err in finding that petitioners are guilty of concurrent or contributory
negligence as provided in Article 1170 of the Civil Code, to wit:
Art. 1170. 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.
Article 2123 of the Civil Code provides that with regard to
pawnshops and other establishments which are engaged in making
loans secured by pledges, the special laws and regulations
concerning them shall be observed, and subsidiarily, the provisions
on pledge, mortgage and antichresis.
The provision on pledge, particularly Article 2099 of the Civil Code,
provides that the creditor shall take care of the thing pledged with
the diligence of a good father of a family. This means that
petitioners must take care of the pawns the way a prudent person
would as to his own property.
In this connection, Article 1173 of the Civil Code further provides:
Art. 1173. The fault or negligence of the obligor consists in
the omission of that diligence which is required by the nature
of the obligation and corresponds with the circumstances of
the persons, of time and of the place. When negligence
shows bad faith, the provisions of Articles 1171 and 2201,
paragraph 2 shall apply.
If the law or contract does not state the diligence which is to
be observed in the performance, that which is expected of a
good father of a family shall be required.
We expounded in Cruz v. Gangan that negligence is the omission to
do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human
affairs, would do; or the doing of something which a prudent and
reasonable man would not do. It is want of care required by the
circumstances.
A review of the records clearly shows that petitioners failed to
exercise reasonable care and caution that an ordinarily prudent
person would have used in the same situation.
MANILA ELECTRIC COMPANY vs. MATILDE RAMOY March 4,
2008.
FACTS: In 1987, NPC filed with MTC of Quezon City a case for
ejectment against several persons allegedly illegally occupying its
properties in Baesa, QC. Among the defendants were the Ramoys.
The MTC ordered the demolition of the buildings and structures. On
June 20, 1990, NPC wrote Meralco requesting the latter to
immediately disconnect electric power supply to all residential and
commercial establishments in the subject land. Hence, Meralco
comply with the same. In due time, the electric service connection
of the plaintiffs was disconnected. Upon the conduct of
disconnection, respondents herein were contesting that the property
were not under NPC properties. The same lead the respondents to
vacate the premises. However, during ocular inspection ordered by
the court, it was found out that the residence of the Ramoys were
outside NPCs properties. RTC dismiss complaint for damages
against Meralco but instead ordered the latter to restore electric
power supply to respondents. Hence, respondents appealed to CA.
CA held Meralco liable for damages.
ISSUE: Whether Meralco is held liable for damages to the
Respondents.
HELD: YES. MERALCO admits that respondents are its customers
under a Service Contract whereby it is obliged to supply
respondents with electricity. Nevertheless, upon request of the NPC,
MERALCO disconnected its power supply to respondents on the
ground that they were illegally occupying the NPC's right of way.
Under the Service Contract, "[a] customer of electric service must
show his right or proper interest over the property in order that he
will be provided with and assured a continuous electric service."
MERALCO argues that since there is a Decision of the Metropolitan
Trial Court (MTC) of Quezon City ruling that herein respondents were
among the illegal occupants of the NPC's right of way, MERALCO
was justified in cutting off service to respondents.
Clearly, respondents' cause of action against MERALCO is anchored
on culpa contractual or breach of contract for the latter's
discontinuance of its service to respondents under Article 1170 of
the Civil Code which provides:
Article 1170. 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.
In Radio Communications of the Philippines, Inc. v. Verchez, the
Court expounded on the nature of culpa contractual, thus:
"In culpa contractual x x x the mere proof of the existence of
the contract and the failure of its compliance justify, prima
facie, a corresponding right of relief. The law, recognizing the
obligatory force of contracts, will not permit a party to be set free
from liability for any kind of misperformance of the contractual
undertaking or a contravention of the tenor thereof. A breach upon
the contract confers upon the injured party a valid cause for
recovering that which may have been lost or suffered. The remedy
serves to preserve the interests of the promissee that may include
his "expectation interest," which is his interest in having the benefit
of his bargain by being put in as good a position as he would have
been in had the contract been performed, or his "reliance interest,"
which is his interest in being reimbursed for loss caused by reliance
on the contract by being put in as good a position as he would have
been in had the contract not been made; or his "restitution
interest," which is his interest in having restored to him any benefit
that he has conferred on the other party. Indeed, agreements can
accomplish little, either for their makers or for society, unless they
are made the basis for action. The effect of every infraction is to
create a new duty, that is, to make recompense to the one who has
been injured by the failure of another to observe his contractual
obligation unless he can show extenuating circumstances, like proof
of his exercise of due diligence x x x or of the attendance of
fortuitous event, to excuse him from his ensuing liability. (Emphasis
supplied)
Article 1173 also provides that the fault or negligence of the obligor
consists in the omission of that diligence which is required by the
nature of the obligation and corresponds with the circumstances of
the persons, of the time and of the place. The Court emphasized
in Ridjo Tape & Chemical Corporation v. Court of Appeals that "as a
public utility, MERALCO has the obligation to discharge its functions
with utmost care and diligence."
The Court agrees with the CA that under the factual milieu
of the present case, MERALCO failed to exercise the utmost
degree of care and diligence required of it. To repeat, it was
not enough for MERALCO to merely rely on the Decision of
the MTC without ascertaining whether it had become final
and executory. Verily, only upon finality of said Decision can
it be said with conclusiveness that respondents have no
right or proper interest over the subject property, thus, are
not entitled to the services of MERALCO.
SOLAR HARVEST, INC. vs. DAVAO CORRUGATED CARTON
CORP., July 26, 2010.
FACTS: In the first quarter of 1998, Petitioner entered into an
agreement with Davao Corp. for the purchase of corrugated carton
boxes specifically designed for petitioners business of exporting
fresh bananas at US1.10 each. The agreement was not reduced into
writing. To get the production underway, the petitioner deposited to
respondents dollar account with Westmont Bank, as full payment.
However, despite payment, petitioner did not receiver any boxes.
Petitioner wrote demand letter for reimbursement from respondent.
On February 19, 2001, respondent replied that the boxes had been
completed as early as April 3, 1998 and that petitioner failed to pick
them up from the formers warehouse 30 days from completion, as
agreed upon. Respondent mentioned that petitioner even placed an
additional order of 24,000 boxes, out of which, 14,000 had been
manufactured without any advanced payment from petitioner.
Respondent then demanded petitioner to remove the boxes from
the factory and to pay the balance of US$15,400.00 for the
additional boxes and P132,000.00 as storage fee. On August 17,
2001, petitioner filed a Complaint for sum of money and damages
against respondent. RTC ruled that respondents did not commit any
breach of faith that would justify rescission of the contract and the
consequent reimbursement. CA denied the appeal of petitioner.
ISSUE: Whether or not the respondent is liable for reimbursement
of the payment made by petitioner.
HELD: NO. Petitioners claim for reimbursement is actually one for
rescission (or resolution) of contract under Article 1191 of the Civil
Code, which reads:
Art. 1191. 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.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles
1385 and 1388 and the Mortgage Law.
The right to rescind a contract arises once the other party defaults
in the performance of his obligation. In determining when default
occurs, Art. 1191 should be taken in conjunction with Art. 1169 of
the same law, which provides:
Art. 1169. Those obliged to deliver or to do something incur
in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their
obligation.
However, the demand by the creditor shall not be necessary
in order that delay may exist:
(1) When the obligation or the law expressly so
declares; or
(2) When from the nature and the circumstances of
the obligation it appears that the designation of the
time when the thing is to be delivered or the service
is to be rendered was a controlling motive for the
establishment of the contract; or
(3) When demand would be useless, as when the
obligor has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other
does not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins.
In reciprocal obligations, as in a contract of sale, the general rule is
that the fulfillment of the parties respective obligations should be
simultaneous. Hence, no demand is generally necessary because,
once a party fulfills his obligation and the other party does not fulfill
his, the latter automatically incurs in delay. But when different dates
for performance of the obligations are fixed, the default for each
obligation must be determined by the rules given in the first
paragraph of the present article, that is, the other party would incur
in delay only from the moment the other party demands fulfillment
of the formers obligation. Thus, even in reciprocal obligations, if the
period for the fulfillment of the obligation is fixed, demand upon the
obligee is still necessary before the obligor can be considered in
default and before a cause of action for rescission will accrue.
Evident from the records and even from the allegations in
the complaint was the lack of demand by petitioner upon
respondent to fulfill its obligation to manufacture and
deliver the boxes. The Complaint only alleged that
petitioner made a "follow-up" upon respondent, which,
however, would not qualify as a demand for the fulfillment
of the obligation. Petitioners witness also testified that
they made a follow-up of the boxes, but not a demand. Note
is taken of the fact that, with respect to their claim for
reimbursement, the Complaint alleged and the witness
testified that a demand letter was sent to respondent.
Without a previous demand for the fulfillment of the
obligation, petitioner would not have a cause of action for
rescission against respondent as the latter would not yet be
considered in breach of its contractual obligation.
Even assuming that a demand had been previously made
before filing the present case, petitioners claim for
reimbursement would still fail, as the circumstances would
show that respondent was not guilty of breach of contract.
The existence of a breach of contract is a factual matter not usually
reviewed in a petition for review under Rule 45. The Court, in
petitions for review, limits its inquiry only to questions of law. After
all, it is not a trier of facts, and findings of fact made by the trial
court, especially when reiterated by the CA, must be given great
respect if not considered as final. In dealing with this petition, we
will not veer away from this doctrine and will thus sustain the
factual findings of the CA, which we find to be adequately supported
by the evidence on record.
As correctly observed by the CA, aside from the pictures of the
finished boxes and the production report thereof, there is ample
showing that the boxes had already been manufactured by
respondent.
MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. vs.
PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE &
CO., INC, May 8, 2009.
FACTS: Del Monte Philippines, Inc. (Del Monte) contracted
petitioner Mindanao Terminal and Brokerage Service, Inc. (Mindanao
Terminal), a stevedoring company, to load and stow a shipment of
146,288 cartons of fresh green Philippine bananas and 15,202
cartons of fresh pineapples belonging to Del Monte Fresh Produce
International, Inc. (Del Monte Produce) into the cargo hold of the
vessel M/V Mistrau. The vessel was docked at the port of Davao City
and the goods were to be transported by it to the port of Inchon,
Korea in favor of consignee Taegu Industries, Inc. Del Monte Produce
insured the shipment under an "open cargo policy" with private
respondent Phoenix Assurance Company of New York (Phoenix), a
non-life insurance company, and private respondent McGee & Co.
Inc. (McGee), the underwriting manager/agent of Phoenix. Mindanao
Terminal loaded and stowed the cargoes aboard the M/V Mistrau.
The vessel set sail from the port of Davao City and arrived at the
port of Inchon, Korea. It was then discovered upon discharge that
some of the cargo was in bad condition. Del Monte Produce filed a
claim under the open cargo policy for the damages to its shipment.
RTC dismissed the complaint. CA reversed. The same court ordered
Mindanao Terminal to pay Phoenix and McGee "the total amount of
$210,265.45 plus legal interest from the filing of the complaint until
fully paid and attorneys fees of 20% of the claim." It sustained
Phoenixs and McGees argument that the damage in the cargoes
was the result of improper stowage by Mindanao Terminal. It
imposed on Mindanao Terminal, as the stevedore of the cargo, the
duty to exercise extraordinary diligence in loading and stowing the
cargoes. It further held that even with the absence of a contractual
relationship between Mindanao Terminal and Del Monte Produce, the
cause of action of Phoenix and McGee could be based on quasi-
delict under Article 2176 of the Civil Code.
ISSUE: Whether or not Mindanao Terminal is liable for damages for
its failure to exercise extraordinary diligence in loading and stowing
the cargoes.
HELD: NO. We adopt the findings of the RTC, which are not
disputed by Phoenix and McGee. The only participation of Mindanao
Terminal was to load the cargoes on board M/V Mistrau. It was not
disputed by Phoenix and McGee that the materials, such as ropes,
pallets, and cardboards, used in lashing and rigging the cargoes
were all provided by M/V Mistrau and these materials meets
industry standard.
The resolution of the two remaining issues is determinative
of the ultimate result of this case.
Article 1173 of the Civil Code is very clear that if the law or
contract does not state the degree of diligence which is to
be observed in the performance of an obligation then that
which is expected of a good father of a family or ordinary
diligence shall be required. Mindanao Terminal, a stevedoring
company which was charged with the loading and stowing the
cargoes of Del Monte Produce aboard M/V Mistrau, had acted merely
as a labor provider in the case at bar. There is no specific
provision of law that imposes a higher degree of diligence
than ordinary diligence for a stevedoring company or one
who is charged only with the loading and stowing of
cargoes. It was neither alleged nor proven by Phoenix and McGee
that Mindanao Terminal was bound by contractual stipulation to
observe a higher degree of diligence than that required of a good
father of a family. We therefore conclude that following Article 1173,
Mindanao Terminal was required to observe ordinary diligence only
in loading and stowing the cargoes of Del Monte Produce
aboard M/V Mistrau. The case of Summa Insurance Corporation v.
CA, which involved the issue of whether an arrastre operator is
legally liable for the loss of a shipment in its custody and the extent
of its liability, is inapplicable to the factual circumstances of the
case at bar. Therein, a vessel owned by the National Galleon
Shipping Corporation (NGSC) arrived at Pier 3, South Harbor, Manila,
carrying a shipment consigned to the order of Caterpillar Far East
Ltd. with Semirara Coal Corporation (Semirara) as "notify party." The
shipment, including a bundle of PC 8 U blades, was discharged from
the vessel to the custody of the private respondent, the exclusive
arrastre operator at the South Harbor. Accordingly, three good-order
cargo receipts were issued by NGSC, duly signed by the ship's
checker and a representative of private respondent. When Semirara
inspected the shipment at house, it discovered that the bundle of
PC8U blades was missing. From those facts, the Court observed:
x x x The relationship therefore between the consignee and the
arrastre operator must be examined. This relationship is much
akin to that existing between the consignee or owner of shipped
goods and the common carrier, or that between a depositor and a
warehouseman. In the performance of its obligations, an arrastre
operator should observe the same degree of diligence as
that required of a common carrier and a warehouseman as
enunciated under Article 1733 of the Civil Code and Section 3(b) of
the Warehouse Receipts Law, respectively. Being the custodian of
the goods discharged from a vessel, an arrastre operator's
duty is to take good care of the goods and to turn them over
to the party entitled to their possession. (Emphasis supplied)
There is a distinction between an arrastre and a stevedore. Arrastre,
a Spanish word which refers to hauling of cargo, comprehends the
handling of cargo on the wharf or between the establishment of the
consignee or shipper and the ship's tackle. The responsibility of the
arrastre operator lasts until the delivery of the cargo to the
consignee. The service is usually performed by longshoremen. On
the other hand, stevedoring refers to the handling of the cargo in
the holds of the vessel or between the ship's tackle and the holds of
the vessel. The responsibility of the stevedore ends upon the
loading and stowing of the cargo in the vessel.
It is not disputed that Mindanao Terminal was performing purely
stevedoring function while the private respondent in
the Summa case was performing arrastre function. In the present
case, Mindanao Terminal, as a stevedore, was only charged with the
loading and stowing of the cargoes from the pier to the ships cargo
hold; it was never the custodian of the shipment of Del Monte
Produce. A stevedore is not a common carrier for it does not
transport goods or passengers; it is not akin to a warehouseman for
it does not store goods for profit. The loading and stowing of
cargoes would not have a far reaching public ramification as that of
a common carrier and a warehouseman; the public is adequately
protected by our laws on contract and on quasi-delict. The public
policy considerations in legally imposing upon a common carrier or
a warehouseman a higher degree of diligence is not present in a
stevedoring outfit which mainly provides labor in loading and
stowing of cargoes for its clients.
In the third issue, Phoenix and McGee failed to prove by
preponderance of evidence that Mindanao Terminal had acted
negligently. Where the evidence on an issue of fact is in equipoise or
there is any doubt on which side the evidence preponderates the
party having the burden of proof fails upon that issue. That is to say,
if the evidence touching a disputed fact is equally balanced, or if it
does not produce a just, rational belief of its existence, or if it leaves
the mind in a state of perplexity, the party holding the affirmative as
to such fact must fail.

It was further established that Mindanao Terminal loaded and

stowed the cargoes of Del Monte Produce aboard the M/V Mistrau in
accordance with the stowage plan, a guide for the area assignments
of the goods in the vessels hold, prepared by Del Monte Produce
and the officers of M/V Mistrau.

Illustrations:

1. Why would a party to an obligation be liable? If there was

FRAUD, NEGLIGENCE, DELAY or ANY OTHER MATTER OF
CONTRAVENTION.

a. ARRIETA vs. NARIC: As long as there is contravention of the

 tenor even there was no fraud, negligence or delay there is
liability. But is it correct to say that only debtors may be held liable
for damages? No, even creditors may be held liable. In Article
1170, the law says that those who are guilty of fraud. It did
not say that debtors who are guilty of fraud. In fact, in the
past bar exams, there was a problem where the creditor was in
delay and this is known as mora accipiende. How could the
creditor be in delay? He is not the one to perform the obligation?
Because if he refuses to accept without just cause this can be
considered in delay. So what would the damages be suffered by the
debtor? Plenty of reasons. In keeping the thing, in preserving the
thing, in the transport of the thing if it needs to be delivered.
b.
c. FRAUD A sold to B bottles of liquor which appears to be Fundador
but in reality it is originally a Matador Brandy inside the bottle of
Fundador. Was there fraud? YES. But is this fraud under under Article
1171? NO. This is not, because the fraud here speaks of in the
performance of the obligation. In the contract there is no fraud,
but in the performance of the obligation there is fraud. In this
problem, this is what you call CAUSAL FRAUD. Dolo Causante
under Article 1338. Article 1344 incidental fraud. As to the
nature of this fraud- Article 1170, I would not use dolo here, because
DOLO is fraud in on obtaining consent, that pertains to deceit.
Article 1170 bad faith/ malice.
i.
ii. The EFFECT OF FRAUD:
1. Article 1170 would result in liability for damages.
2. Article 1338 would result in the contract being considered to be
VOIDABLE because theres vitiation of consent but the injured party
may be entitle to damages as well.
3. Article 1334 would not result into a voidable contract but would
only result in the entitlement of the injured party to damages.
iii.
iv. Another example for fraud:
4. If A filed an action against B for damages, claiming that B
committed fraud upon him causing damaged upon him, however, if
B was able to prove to the court that A executed this document
where he basically would say that I will not hold B liable for
whatever damage may be cause to me by B waiver. If there is
such a waiver proven. Will the action still prosper? It depends. If the
waiver was executed before the fraudulent act, thats a
waiver as to future frauds and such waiver is a void waiver and can
still recover. But if the waiver was executed after the
fraudulent act was committed with knowledge of the fraudulent
act, this of course would amount to condonation. How would you
know if this is a waiver as to future frauds? See the dates as to the
date of the commission of the fraud and the date when the waiver
was executed.
d.
e. NEGLIGENCE- another name fault which is really wrong. Article
2176- quasi-delict is fault or negligence. So fault is different from
negligence. Negligence is by omission. Fault may have intention.
i.
ii. CULPA ACQUILIANA or Quasi-delict = CULPA is a broad term
covering broad term including fault and negligence.
iii. CULPA = is not intentional. There are four kinds of culpa. It can
be intentional or non-intentional.
iv.
v. How would we know if an act is a negligent act or not? Negligence
Article 1173. Parameters are there as to whether the act is negligent
or not. The degree of diligence which should be observed in
the performance of the obligation.
vi. If a person is invoking fortuitous event, for it to be a valid defense,
there must not be a concurrent negligence on his part.
vii.
viii. Telefast vs. Castro Case This involves negligence because the
heirs are claiming moral damages, but this is a contract, the
sending of the telegram which was not received by the heirs, but for
moral damages to be awarded resulting from a contract; breach of
contract, the law requires for one to disregard the
obligations. Telefast: we are not negligent because the failure of
sending the telegram was not due to our fault but due to a
fortuitous event, it was due to atmospheric pressure and its beyond
are control. SC: Telefast failed to notify Sophia, the one who sent
the telegram. The failure to do so was a gross negligence act. And in
our jurisprudence, gross negligence act amounts to bad faith.
Hence, there is already a ground for the award of moral damages.
ix.
x. You have to determine the degree of negligence whether it
is only a simple negligence or a grossly negligent act in
relation to liabilities.
xi.
 xii. Negligence in torts and damages is still the same in Article 1173. In
the case of Philippine Bank of Commerce vs. CA: This plaintiff
company authorize a secretary to deposit a sum of money to its
account in a branch of the PBC. Now, the secretary is not an
executive secretary just an ordinary one, however, instead of
depositing the money to the account of the company, the secretary xv.
deposited the sum of money to her husbands account in the same
branch in the PBC. How did she do it? She filled up the original copy
but the duplicate original has no account name, but the account
number of the husbands was there. Original was fully filled up with
her husbands account name and number. So the bank would accept
the amount of money for the account of the husband and give back
the duplicate original copy to the secretary. Then the secretary
allegedly would now fill up the original duplicate and fill the account
name with the name of the company to make it appear that it was
deposited in the account of the company. This happened several
times not only once. Until the company discovered that their
account was empty and so they sued the bank. Obviously it was
the negligence of the bank officers thats why the company
suffered damages. Negligence in not insuring that the
deposit slips were not fully filled up. Whose negligence is the
proximate cause, whether it was the negligence if the officer of the
bank in accepting slips which are not fully filled up? In this case
there was a defense raised among other defenses, that the
company had the last clear chance in preventing this injury have
they only exercised the diligence. Why? The banks would give us
monthly statement of accounts. The bank said that if they only
bothered to open their statement if accounts they would have
notice that the money was not deposited to their account therefore
there would be no subsequent acts that followed causing them
further injury. SC: The majority held the bank liable holding that it
was the banks negligence through its officers which is the direct
and proximate cause except of one justice who supported the
doctrine of the last clear chance. I agree with the majority only for
one reason = because the banks are required to exercise the
highest degree of diligence in the performance of their
obligations.
xiii.
xiv. Who else are required to exercise not the ordinary diligence or the
diligence of a good father of a family? Anyone if it is so
stipulated. If not under the law, aside from banks, are common xvi.
carriers. Doctors, public utilities like Meralco. In one case it was held
that: Public utilities should exercise or are required to
exercise the highest degree of diligence. But the recent rulings
on realty companies: are now required to exercise highest
degree of diligence.
Degree of diligence corresponding to the circumstances of
the persons time and of the place. MUST REMEMEBER!! The
best case: Cangco vs. MRR. Alighting from the moving vehicle was
not a negligent act according to the SC. Majority ruled it was not a
negligent act. I agree with the majority considering the
circumstances as to the person, the time, and the place. Why? SC
ruled that Cangco because he was at his prime, he was just around
20s, it is okay for him to jump from the train even when the train is
still running. And not only that, he was every much familiar with the
train and train station for he was riding it every day for years. Here
the time mattered, as to the negligence f the employees
because it turned out that it was the negligence of the
employees of the MRR is the approximate and direct cause.
Why? Because they placed sacks of melon in the platform of the
station near the doors where the trains are stopping for the
passengers to alight that is why Cangco slipped and one of his hand
went under the train. Cangco wasnt able to see the sacks of melon
because the station was not well lit. But there was proof here
presented by Cangco that, (On its face the dissenting opinion
seems to be correct that alighting from a moving train per
se is a negligent act, because the argument, had he not
alighted while the train was moving and waited for the train
to go to a full stop then he would not have been injured,
parang tamang argument dba? But I think this argument is wrong. It
was not a scenario that the train was at a full stop, the scenario is
that the train was still moving so given the scenario, was the act a
negligent act? No. Why? Another passenger alighted the train ahead
of Cangco, the train was still moving faster even when the train was
moving fast, was this passenger injured? No. So that was not the
reason, alighting form the moving vehicle per se. It was the
negligence of the employees of the MRR who put the sacks
of melon in the platform which resulted from injury. Cangco
was also a male, has he been a female then that would be a
negligent act because of the clothes the women wear at that time
are kimonos.
 xvii. Stevedoring company, is it required to exercise? Only Ordinary
Diligence.
f.
g. DELAY is also called mora, default. Delay on the part of both
parties,
h.
i. AGCAOILI CASE even assuming in delay na si Agcaolli because
he refused to accept, GSIS was also in delay because it failed to
deliver habitable house. He was asked to deliver a house, but
instead he delivered a structure with a roof. The court did not agree
even in the agreement it was said a house, it should be a
habitable house. Even assuming that Agcaoilli was in delay, in
contemplation of the law no one was in delay, so was the GSIS
correct in cancelling the contract? No, because Agcaoilli was not in
delay.
xviii.
11.
12.Demand will be useless due to the fault of the debtor. Due to
the fault of the debtor, in order for the demand not necessary so
that delay will not set in.
13. In reciprocal obligations, the last paragraph Article 1169, one of
the parties had already complied and the other had not complied,
and the one who had not complied will already be considered in
delay even if there was no demand having said that, do not read it
literally. SC has held that, this is subject to the stipulation of
the parties.
a.
b. Like in a sale, obligations of the parties are reciprocal, the seller has
already delivered and the buyer has not yet paid, does it mean that
the buyer is already in delay? Not necessarily, they may have
agreed that the buyer will only pay after the period of one year. So
before that, you cannot be considered in delay. This is one of the
exceptions in the rule to demand under Article 1169.

When would there be delay? As a rule when there is already

DEMAND. NO
xix.
xx. DEMAND NO DELAY. But there are Exceptions:
5.
6. If so stipulated. E.g. credit card agreement. Without need of
demand. For a demand to be valid the demand must be made when
the obligation is already due. If you demand when the
obligation is not yet due not a proper demand because the
obligation is not yet due and demandable. No particular form
as to how to make a demand. But lawyers will never make a
demand verbally because of evidentiary purposes. Follow-up is it
a valid demand? NO. Demand is where you require the performance
not just a follow-up.
7.
8. Request not a demand as well.
9.
10. The law so provides. E.g. Agency. Like if the agent
misappropriated a sum of money, will he be liable already for
interest? From the time he misappropriated or from the time the
demand was made? From the time he misappropriated
because the law so provides. Even there was not yet any
demand.