FAR EAST BANK v.
CA
FACTS: Luna applied for, and was accorded, a FAREASTCARD issued by petitioner Far East Bank and Trust
Company ("FEBTC") at its Pasig Branch. Upon his request, the bank also issued a supplemental card to private
respondent Clarita S. Luna. Clarita lost her card. The banks internal security procedures and policy would
appear to be to meanwhile so record the lost card, along with the principal card, as a "Hot Card" or
"Cancelled Card" in its master file.
Luis tendered a despedida lunch for a close friend, a Filipino-American, and another guest at the Bahia
Rooftop Restaurant of the Hotel Intercontinental Manila. The card was not honored, Luis was forced to pay in
cash the bill amounting to P588.13. Naturally, Luis felt embarrassed by this incident.
Luis Luna, through counsel, demanded from FEBTC the payment of damages. Adrian V. Festejo, a vice-
president of the bank, expressed the bank's apologies to Luis. Festejo also sent a letter to the Manager of the
Bahia Rooftop Restaurant to assure the latter that private respondents were "very valued clients" of FEBTC.
William Anthony King, Food and Beverage Manager of the Intercontinental Hotel, wrote back to say that the
credibility of private respondent had never been "in question."
RTC - Ordered FEBTC to pay private respondents (a) P300,000.00 moral damages; (b) P50,000.00 exemplary
damages; and (c) P20,000.00 attorney's fees.
CA - affirmed the decision of the trial court.
ISSUE: WON moral and exemplary damages will be awarded to Luna?
HELD: No. SC finds, therefore, the award of moral damages made by the court a quo, affirmed by the
appellate court, to be inordinate and substantially devoid of legal basis. The bank was remiss in indeed
neglecting to personally inform Luis of his own cards cancellation. Nothing in the findings of the trial court
and the appellate court, however, can sufficiently indicate any deliberate intent on the part of FEBTC to cause
harm to private respondents. Neither could FEBTC's negligence in failing to give personal notice to Luis be
considered so gross as to amount to malice or bad faith.
"'Art. 2176.Whoever by act or omission causes damage to another, there being fault or negligence, is obliged
to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between
the parties, is called a quasi-delict and is governed by the provisions of this Chapter.'
"The distinction between fraud, bad faith or malice in the sense of deliberate or wanton wrong doing and
negligence (as mere carelessness) is too fundamental in our law to be ignored (Arts. 1170-1172); their
consequences being clearly differentiated by the Code.
Exemplary or corrective damages, in turn, are intended to serve as an example or as correction for the public
good in addition to moral, temperate, liquidated or compensatory damages. In contracts and quasi-contracts,
the court may award exemplary damages if the defendant is found to have acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner.
WHEREFORE, the petition for review is given due course. The appealed decision is MODIFIED by deleting the
award of moral and exemplary damages to private respondents; in its stead, petitioner is ordered to pay
private respondent Luis A. Luna an amount of P5,000.00 by way of nominal damages. In all other respects,
the appealed decision is AFFIRMED. No costs.
Topic 11: Responsibility from negligence
CASE 31
PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS and LILY S. PUJOL, respondents.
[G.R. No. 126152. September 28, 1999]
FACTS:
Sometime prior to 23 October 1990 private respondent Lily S. Pujol opened with petitioner PNB Mandaluyong
an account denominated as "Combo Account," a combination of Savings Account and Current Account in
private respondent's business name "Pujol Trading," under which checks drawn against private respondents
checking account could be charged against her Savings Account should the funds in her Current Account be
insufficient to cover the value of her checks. Hence, private respondent was issued by petitioner a passbook
on the front cover of which was typewritten the words "Combo Deposit Plan."
On 23 and 24 October 1990, private respondent issued a check in the amount of P30,000.00 each in favor of
her daughter-in-law, Dr. Charisse M. Pujol and daughter Venus De Ocampo, respectively.
When issued and presented for payment, private respondent had sufficient funds in her Savings Account.
However, petitioner dishonored her check allegedly for insufficiency of funds and debited her account with
P500.00 as penalty charge (P250 each per check transaction).
On 4 November 1990, after realizing its mistake, petitioner accepted and honored the second check for
P30,000.00 and re-credited to private respondents account the P250.00 previously debited as penalty.
Private respondent Lily S. Pujol filed with Pasig RTC a complaint for moral and exemplary damages against
petitioner for dishonoring her checks despite sufficiency of her funds in the bank. Petitioner bank admitted in
its answer that private respondent Pujol opened a "Combo Account," a combination of Savings Account and
Current Account, with its Mandaluyong branch. It however justified the dishonor of the two (2) checks by
claiming that at the time of their issuance private respondent Pujols account was not yet operational due to
lack of documentary requirements.
On 27 September 1994 the trial court (RTC) rendered a decision ordering petitioner to pay private respondent
Pujol moral damages of P100,000.00 and attorneys fees of P20,000.00.
CA affirmed RTC decision in toto.
ISSUE:
W/N the appellate court (C/A) erred
in holding that petitioner was estopped from denying the existence of a "Combo Account" and the fact that it
was operational at the time of the issuance of the checks
in not holding that the award by the trial court of moral damages of P100,000.00 and attorneys fees of
P20,000.00 was inordinately disproportionate and unconscionable.
RULING:
We cannot sustain petitioner.
Although petitioner presented evidence before the trial court to prove that the arrangement was not yet
operational at the time respondent issued the two checks, it failed to prove that she had actual knowledge
that it was not yet operational at the time she issued the checks considering that the passbook in her Savings
Account already indicated the words "Combo Deposit Plan."
Hence, respondent Pujol had justifiable reason to believe that her accounts were effectively covered by the
arrangement during the issuance of the checks. Either by its own deliberate act, or its negligence in causing
the "Combo Deposit Plan" to be placed in the passbook, petitioner is considered estopped to deny the
existence of and perfection of the combination deposit agreement with respondent Pujol.
A bank is under obligation to treat the accounts of its depositors with meticulous care whether such account
consists only of a few hundred pesos or of millions of pesos. Responsibility arising from negligence in the
performance of every kind of obligation is demandable. While petitioners negligence in this case may not
have been attended with malice and bad faith, nevertheless, it caused serious anxiety, embarrassment and
humiliation to private respondent Lily S. Pujol for which she is entitled to recover reasonable moral damages.
RTC and CA decision affirmed.
Topic 11: Responsibility from negligence
CASE 31
PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS and LILY S. PUJOL, respondents.
[G.R. No. 126152. September 28, 1999]
FACTS:
Sometime prior to 23 October 1990 private respondent Lily S. Pujol opened with petitioner PNB Mandaluyong
an account denominated as "Combo Account," a combination of Savings Account and Current Account in
private respondent's business name "Pujol Trading," under which checks drawn against private respondents
checking account could be charged against her Savings Account should the funds in her Current Account be
insufficient to cover the value of her checks. Hence, private respondent was issued by petitioner a passbook
on the front cover of which was typewritten the words "Combo Deposit Plan."
On 23 and 24 October 1990, private respondent issued a check in the amount of P30,000.00 each in favor of
her daughter-in-law, Dr. Charisse M. Pujol and daughter Venus De Ocampo, respectively.
When issued and presented for payment, private respondent had sufficient funds in her Savings Account.
However, petitioner dishonored her check allegedly for insufficiency of funds and debited her account with
P500.00 as penalty charge (P250 each per check transaction).
On 4 November 1990, after realizing its mistake, petitioner accepted and honored the second check for
P30,000.00 and re-credited to private respondents account the P250.00 previously debited as penalty.
Private respondent Lily S. Pujol filed with Pasig RTC a complaint for moral and exemplary damages against
petitioner for dishonoring her checks despite sufficiency of her funds in the bank. Petitioner bank admitted in
its answer that private respondent Pujol opened a "Combo Account," a combination of Savings Account and
Current Account, with its Mandaluyong branch. It however justified the dishonor of the two (2) checks by
claiming that at the time of their issuance private respondent Pujols account was not yet operational due to
lack of documentary requirements.
On 27 September 1994 the trial court (RTC) rendered a decision ordering petitioner to pay private respondent
Pujol moral damages of P100,000.00 and attorneys fees of P20,000.00.
CA affirmed RTC decision in toto.
ISSUE:
W/N the appellate court (C/A) erred
in holding that petitioner was estopped from denying the existence of a "Combo Account" and the fact that it
was operational at the time of the issuance of the checks
in not holding that the award by the trial court of moral damages of P100,000.00 and attorneys fees of
P20,000.00 was inordinately disproportionate and unconscionable.
RULING:
We cannot sustain petitioner.
Although petitioner presented evidence before the trial court to prove that the arrangement was not yet
operational at the time respondent issued the two checks, it failed to prove that she had actual knowledge
that it was not yet operational at the time she issued the checks considering that the passbook in her Savings
Account already indicated the words "Combo Deposit Plan."
Hence, respondent Pujol had justifiable reason to believe that her accounts were effectively covered by the
arrangement during the issuance of the checks. Either by its own deliberate act, or its negligence in causing
the "Combo Deposit Plan" to be placed in the passbook, petitioner is considered estopped to deny the
existence of and perfection of the combination deposit agreement with respondent Pujol.
A bank is under obligation to treat the accounts of its depositors with meticulous care whether such account
consists only of a few hundred pesos or of millions of pesos. Responsibility arising from negligence in the
performance of every kind of obligation is demandable. While petitioners negligence in this case may not
have been attended with malice and bad faith, nevertheless, it caused serious anxiety, embarrassment and
humiliation to private respondent Lily S. Pujol for which she is entitled to recover reasonable moral damages.
RTC and CA decision affirmed.
Samson vs CA. GR No. 108245
Facts:
Private respondent Angel Santos is the lessee of a commercial unit in Madrigal Building owned by lessor,
SusanaRealty Corporation. Lessees store occupied the said building for 20 years with the contract of lease
renewed every year. After the expiration of the lease contract, lessor informed lessee that they wont be
renewing said contract but was extended from July 1984 to December 1984. Lessee continued to occupy said
unit even after the extension given and was informed on February 1985 that there would be an increase in
the said rentals pending the renewal of said contract until one of the owners of the building arrives. Herein
petitioner, Samson, enters into a contract with Santos to buy said store and the right to lease the commercial
unit. Santos made a counter proposal with one of the conditions being that the lease contract between
Santos and Susana Realty Corporation be impliedly renewed since she is still waiting for one of the owners to
arrive on the same month. Petitioner agreed and sign the contract in which he made a downpayment of
P150k for the value of the existing improvements of the store and the remaining P150k as balance will be
paid upon the formal renewal of the lease of conract between Santos and Susana Realty Corp. However, after
a few months, petitioner received a notice to vacate the premises of the unit since private respondent failed
to renew said contract of lease. Petitioner filed an action for damages in which RTC ruled in favor of the
petitioner. Upon appeal, CA modified decision of RTC, wherein it favored private respondent as CA saw no bad
faith or fraud in her dealings with petitioner and affirmed with respect to RTCs decision to return to appellee
said store materials.
Issue: WON private respondent exercised bad faith or fraud in its dealings with the petitioner specifically on
the contract of lease over the subject premises that has been impliedly renewed by Susana Realty?
Ruling: Court ruled in favor of private respondent, dismissing the petition.
Grounds:
Private respondent not guilty of fraud or bad faith by claiming that the contract of lease has been impliedly
renewed because petitioner was also aware that said contract already expired but pending renewal until one
of the owners arrives. Petitioner knows that as far as the leasehold right is concerned, it is a future right
which has yet to materialize until such time that a formal renewal of the said contract between Santos and
Susana Realty has been accomplished.
Petitioner failed to exercise due diligence in verifying first the status of the respondents lease when he had
every opportunity to do so. He could have verified it with Susana Realty but was not able to do so. He cannot
claim he has been deceived.
PEDRO D. DIOQUINO VS. LAUREANO
G.R. No. L-25906 May 28, 1970
FACTS:
Attorney Pedro Dioquino is the owner of a car.
On March 31, 1964, he went to the office of the MVO, Masbate, to register the same.
He met the defendant Federico Laureano, a patrol officer, who was waiting for a jeepney to take him
to the office of the Provincial Commander, PC, Masbate.
Attorney Dioquino requested the defendant Federico Laureano to introduce him to one of the clerks
in the MVO Office, who could facilitate the registration of his car.
Defendant Laureano rode on the car of Atty. Dioquino on his way to the P.C. Barracks at Masbate.
While about to reach their destination, the car was stoned by some 'mischievous boys,' and
its windshield was broken.
Defendant Federico Laureano chased the boys and he was able to catch one of them. The boy was
taken to Atty. Dioquino [and] admitted having thrown the stone that broke the car's windshield.
The plaintiff and the defendant Federico Laureano with the boy returned to the P.C. barracks and the
father of the boy was called, but no satisfactory arrangements [were] made about the damage to the
windshield."
The decision now on appeal, the defendant Federico Laureano refused to file any charges against
the boy and his parents because he thought that the stone-throwing was merely accidental and
that it was due to force majeure.
Federico Laureano refused to pay the windshield himself and challenged that the case be brought to
court for judicial adjudication.
There is no question that the plaintiff tried to convince the defendant Federico Laureano just to pay
the value of the windshield and he even came to the extent of asking the wife to convince her
husband to settle the matter amicably but the defendant Federico Laureano refused to make any
settlement, clinging [to] the belief that he could not be held liable because a minor child threw a
stone accidentally on the windshield and therefore, the same was due to force majeure.
ISSUE:
Is Federico Laureano liable for the payment of the windshield of Atty Dioquino?
RULING:
No. The law being what it is, such a belief on the part of defendant Federico Laureano was justified.
The express language of Art. 1174 of the present Civil Code which is a restatement of Art. 1105
of the Old Civil Code, except for the addition of the nature of an obligation requiring the assumption
of risk, compels such a conclusion.
It reads thus: "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."
Even under the old Civil Code then, as stressed by us in the first decision dating back to 1908, in an
opinion by Justice Mapa, the rule was well-settled that in the absence of a legal provision or an
express covenant, "no one should be held to account for fortuitous cases."
"That some extraordinary circumstance independent of the will of the obligor, or of his employees,
is an essential element of a caso fortuito."
If it could be shown that such indeed was the case, liability is ruled out. There is no requirement of
"diligence beyond what human care and foresight can provide."
The error committed by the lower court in holding defendant Federico Laureano liable appears to be
thus obvious. Its own findings of fact repel the motion that he should be made to respond in
damages to the plaintiff for the broken windshield. What happened was clearly unforeseen. It was a
fortuitous event resulting in a loss which must be borne by the owner of the car.
The very wording of the law dispels any doubt that what is therein contemplated is the resulting
liability even if caused by a fortuitous event where the party charged may be considered as having
assumed the risk incident in the nature of the obligation to be performed. It would be an affront, not
only to the logic but to the realities of the situation, if in the light of what transpired, as found by the
lower court, defendant Federico Laureano could be held as bound to assume a risk of this nature.
There was no such obligation on his part.
The decision of the lower court of November 2, 1965insofar as it orders defendant Federico
Laureano to pay plaintiff the amount of P30,000.00 as damages plus the payment of costs, is hereby
reversed. It is affirmed insofar as it dismissed the case against the other two defendants, Juanita
Laureano and Aida de Laureano, and declared that no moral damages should be awarded the
parties.
People vs PO3 Fallorina
G.R. No. 137347
March 4, 2004
Facts:
At about 2:30 p.m. of September 26, 1998, Vincent Jorojoro, an eleven-year old minor and the third child of
Vicente and Felicisima Jorojoro, residing at Sitio Militar, Brgy. Bahay Toro, Project 8, Quezon City, asked
permission from his mother Felicisima if he could play outside. She agreed. Together with his playmate
Whilcon Buddha Rodriguez, Vincent played with his kite on top of the roof of an abandoned carinderia
beside the road.
Beside the carinderia was a basketball court, where a fourteen-year old witness Ricardo Salvo and his three
friends, were playing basketball. Ricardo heard the familiar sound of a motorcycle coming from the main road
across the basketball court. Cognizant to Ricardo of the appellant, PO3 Ferdinand Fallorina, a Philippine
National Police (PNP) officer, detailed in the Traffic Management Group (TMG), knew that he abhorred kids
playing on the roof, since one of his friends was previously been scolded by the appellant before.
Ricardo called on Vincent and Whilcon to come down from the roof. When PO3 Fallorina saw them, the
former stopped his motorcycle, he shouted and badmouthed at them. After hearing the shouts of the
appellant, Whilcon rushed to jump off from the roof while Vincent was lying on his stomach on the roof flying
his kite. When he heard the appellants shouts, Vincent stood up and looked at the latter. As soon as Vincent
turned his back, ready to get down from the roof, suddenly, the appellant pointed the .45 caliber pistol
towards the direction of Vincent and fired a shot. Vincent fell from the roof, lying prostrate near the canal
beside the abandoned carinderia and the basketball court.
The appellant approached Vincent and carried the latters hapless body in a waiting tricycle and brought him
to the Quezon City General Hospital. Vincent was pronounced dead on arrival caused by a single gunshot
wound in the head.
Issues:
(a) Whether or not the appellant is exempt from criminal liability?
(b) Whether or not the appellant can offset the aggravating circumstance of taking advantage of public
position from a mitigating circumstance of his voluntary surrender?
Held:
The Office of the Solicitor General (OSG) cites that the basis for exemption from a criminal liability under
Article 12, paragraph 4 of the Revised Penal Code (RPC), is the complete absence of intent and negligence on
the part of the accused. For the accused to be guilty for a felony, it must be committed either with criminal
intent or with fault or negligence.
Thusly, the elements of exempting circumstances are (1) a person is performing a lawful act; (2) with due
care; (3) he causes an injury to another by mere accident; and (4) without any fault or intention of causing it.
In the case at bar, the Court a quo erred in inequitably appreciating exculpatory and inculpatory facts and
circumstances which should have been considered in favor of the accused. The court also failed to appreciate
the mitigating circumstance of voluntary surrender in favor of the accused since it was only after three days
that the appellant gave himself up and surrendered his service firearm. And lastly, the court considered the
aggravating circumstance of taking advantage of his position by the accused.
On January 19, 1999, the trial court rendered judgment convicting the appellant-accused of murder, qualified
by treachery and aggravated by abuse of public position. The trial court did not appreciate in favor of the
appellant the mitigating circumstances of voluntary surrender.
The Regional Trial Court of Quezon City, Branch 95, found the accused PO3 Ferdinand Fallorina y Fernando
GUILTY beyond reasonable doubt of the crime of murder defined and penalized by Article 248 of the RPC, as
amended by the Republic Act No. 7659, and in view of the presence of the aggravating circumstance of taking
advantage by the accused of his public position (par. 1, Art. 14, RPC). Hence, the accused is hereby ordered to
indemnify the heirs of late Vincent Jorojoro, Jr. the amounts of actual damages of P49,174.00 (paid for funeral
services); P50,000.00 for moral damages; P25,000.00 as exemplary damages; and P50,000.00 as death
indemnity. The court a quo sentenced the appellant to suffer the Death Penalty.
LA MALLORCA VS CA (17 SCRA 739)
Facts:
Plaintiffs husband and wife, together with their three minor children, namely, Milagros (13), Raquel (4) and
Fe (2) boarded the Pambusco Bus No. 352 bearing plate TPU No. 757 owned and operated by La Mallorca at
San Fernando, Pampanga, bound for Anao, Mexico, Pampanga. At the time, they were carrying with them
four pieces of baggages containing their personal belonging. The conductor (half-brother of Beltran) of the
bus issued three tickets (Exhs. A, B, & C) covering the full fares of the plaintiff and their eldest child, Milagros.
No fare was charged on Raquel and Fe, since both were below the height at which fare is charged in
accordance with the appellant's rules and regulations.
After about an hour's trip and after Beltrans family got off, Mariano Beltran went back to the bus to get the
baggage he had left under one of the seats near the door while the rest was waiting on a shaded area, he did
not notice that Raquel was following him. While said Mariano Beltran was on the running board of the bus
waiting for the conductor to hand him his bayong, the bus, whose motor was not shut off while unloading,
suddenly started moving forward, evidently to resume its trip, notwithstanding the fact that the conductor
has not given the driver the customary signal to start, since said conductor was still attending to the baggage
left behind by Mariano Beltran. Incidentally, when the bus was again placed into a complete stop, it had
travelled about ten meters from the point where the plaintiffs had gotten off.
Sensing that the bus was again in motion, Mariano Beltran immediately jumped from the running board
without getting his bayong from the conductor. He landed on the side of the road almost in front of the
shaded place where he left his wife and children. At that precise time, he saw people beginning to gather
around the body of a child lying prostrate on the ground, her skull crushed, and without life. The child was
none other than his daughter Raquel, who was run over by the bus in which she rode earlier together with
her parents.
Issue:
Whether or not La Mallorca is liable for the negligence of its driver and for the death of Beltrans daughter.
Held:
La Mallorca is liable for damages. It was pointed out that even though, M. Beltrans family already alighted
from the bus, the fact that Beltran went back to the bus to retrieve his bayong, the relation of
carrierpassenger relation between La Mallorca and Beltran still subsist. It has been recognized as a rule that
the relation of carrier and passenger does not cease at the moment the passenger alights from the carrier's
vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had
a reasonable time or a reasonable opportunity to leave the carrier's premises. And, what is a
reasonable time or a reasonable delay within this rule is to be determined from all the circumstances.
In the circumstances, it cannot be claimed that the carrier's agent had exercised the "utmost diligence" of a
"very cautions person" required by Article 1755 of the Civil Code to be observed by a common carrier in the
discharge of its obligation to transport safely its passengers. In the first place, the driver, although stopping
the bus, nevertheless did not put off the engine. Secondly, he started to run the bus even before the bus
conductor gave him the signal to go and while the latter was still unloading part of the baggages of the
passengers Mariano Beltran and family. The presence of said passengers near the bus was not unreasonable
and they are, therefore, to be considered still as passengers of the carrier, entitled to the protection under
their contract of carriage.
But even assuming arguendo that the contract of carriage has already terminated, herein petitioner can be
held liable for the negligence of its driver, as ruled by the Court of Appeals, pursuant to Article 2180 of the
Civil Code. Paragraph 7 of the complaint, which reads
That aside from the aforesaid breach of contract, the death of Raquel Beltran, plaintiffs' daughter, was caused
by the negligence and want of exercise of the utmost diligence of a very cautious person on the part of the
defendants and their agent, necessary to transport plaintiffs and their daughter safely as far as human care
and foresight can provide in the operation of their vehicle.
The driver did not exercise utmost diligence required of him; hence, petitioner must be adjudged peculiarly
liable for the death of the child Raquel Beltran.
to return it to its owner.
HELD: NO
The defendant must show that he has a bona fide defense to the action, one
which he may be able to establish. It must be a plausible ground of defense,
something fairly arguable and of a substantial character. This he must show by
affidavits or other proof. In the present case, ASIAKONSTRUKT clearly has no
evidence to prove his claim.
The [petitioner] cannot even find solace in Articles 1266 and 1267 of the New
Civil Code for, as declared by our Supreme Court since it is applicable only to
obligations to do, and not obligations to give. An obligation to do includes all
kinds of work or service; while an obligation to give is a prestation which
consists in the delivery of a movable or an immovable thing in order to create a
real right, or for the use of the recipient, or for its simple possession, or in order

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, vs. PHILIPPINE COMMERCIAL FIL-ESTATE VS GO (GR 165164, August 17, 2007)
INTERNATIONAL BANK
Facts:
G.R. No. 153827 April 25, 2006

FACTS:
On February 24, 1999, PCIBANK filed a complaint for a sum of money against
petitioner ASIAKONSTRUKT. On various occasions, ASIAKONSTRUKT obtained
U.S. dollar denominated credit accommodations from PCIBANK in the amount of
Four Million Four Hundred Eighty Seven Thousand U.S. dollars (US$4,487,000.00).
The promissory notes signed by ASIAKONSTRUKT however have remained not
fully paid despite having become due and demandable. PCIBANK made repeated
verbal and written demands were made upon ASIAKONSTRUKT, but to no avail.
On December 29, 1995, petitioner Fil-Estate Properties, Inc. entered into a contract to sell
a condominium unit to respondent spouses Gonzalo and Consuelo Go. The spouses paid a
total ofP3.4M of the full contract price set at P3.6M.
Petitioner failed to develop the condominium project. The spouses demanded the refund of
the amount they paid, plus interest. When petitioner did not refund the spouses, the latter
filed a complaint against petitioner for reimbursement of P3.6M plus interest, attorneys
fees, and expenses of litigation.

Secondly, PCIBANK filed in the same complain that ASIAKONSTRUKT is guilty of Petitioner claimed that respondents had no cause of action since the delay in the
fraud in contracting the debt and/or in the performance of it. PCIBANK was construction of the condominium was caused by the financial crisis that hit the Asian
surprised to learn that ASIAKONSTRUKT had long ago collected the contract
region, a fortuitous event over which petitioner had no control.
proceeds for payment to PCIBANK. However, to date, it has yet to turn over these
proceeds to PCIBANK. Worse, PCIBANK learned that the contract proceeds were
Issue:
used by ASIAKONSTRUKT for its own purposes. This act was subsequently
confirmed by Mr. Napoleon Garcia, Vice President for Finance of
WON Fil-Estate can exculpate itself from liability in its claim of caso fortuito based on the
ASIAKONSTRUKT.
1997 Asian
The trial court ruled in favor of PCIBANK ordering ASIAKONSTRUKT to pay the
amount it owed plus damages and interest. Meanwhile, on August 27, 1999, Financial Crisis? NO
defendant ASIAKONSTRUKT filed its Answer that they failed to pay due to the
alleged severe financial and currency crisis, which hit the Philippines in July Compiled by: FCSB MYCK
1997, which adversely affected and ultimately put it out of business.
Held:
On January 24, 2000, plaintiff PCIBANK filed a verified Motion for Summary
Judgment, therein contending that the defenses interposed by the defendant are
In Mondragon Leisure vs. Court of Appeals, the Asian financial crisis in 1997 is not among
sham and contrived, that the alleged financial crisis pleaded in the Answer is not
the fortuitous events contemplated under Article 1174 of the Civil Code.
a fortuitous event that would excuse debtors from their loan obligations, nor is it
an exempting circumstance under Article 1262 of the New Civil Code where, as
here, the same is attended by bad faith. The Asian financial crisis in 1997 was not unforeseeable and beyond the control of a
business corporation.
Issue: Is ASIAKONSTRUKTs defense tenable?
However, a real estate enterprise engaged in the pre-selling of condominium units is
concededly a master in projections on commodities and currency movements and business
risks. The fluctuating movement of the Philippine peso in the foreign exchange market is
an everyday occurrence, and fluctuations in currency exchange rates happen every day,
thus, not an instance of caso fortuito.
The delay in the construction of the building was not attributable to the Asian financial
crisis which happened in 1997 because petitioner did not even start the project in 1995
when it should have done, so that it could have finished it in 1997, as stipulated in the
contract.
Under Section 23 of P.D. No. 957, the respondents are entitled to reimbursement but only
to the P3.4Mthat they have paid.
VICTORIAS PLANTERS ASS., INC., ET AL. VS. VICTORIAS MILLING CO., INC. (G.R. No. L-6648
July 25,
1955)
FACTS:
The petitioners Victorias Planters Association, Inc. and North Negros Planters Association,
Inc. and the respondent Victorias Milling Co., Inc entered into a milling contract whereby
they stipulated a 30-year period within which the sugar cane produced by the petitioner
would be milled by the respondent central.
The parties also stipulated that in the event of force majuere, the contract shall be deemed
suspended during this period. The petitioner failed to deliver the sugar cane during the
four years of the Japanese occupation and the two years after liberation when the mill was
being rebuilt or a total of six years.
ISSUE:
Can the petitioners be compelled to deliver sugar cane for six more years after the
expiration of the 30- year period to make up for what they failed to deliver to the
respondent?
RULING:
No. Fortuitous event relieves the obligor from fulfilling the contractual obligation under
Article 1174 of the
Civil Code. The stipulation in the contract that in the event of force majeure the contract
shall be deemed suspended during the said period does not mean that the happening of
any of those events stops the running of the period agreed upon. It only relieves the
parties from the fulfillment of their respective obligations during that time- the petitioner
from delivering the sugar cane and the respondent central from milling. In order that the
respondent central may be entitled to demand from the petitioner the fulfillment of their
part in the contracts, the latter must have been able to perform it but failed or refused to
do so and not when they were prevented by force majeure such as war. To require the
petitioners to deliver the sugar cane which they failed to deliver during the six years is to
demand from them the fulfillment of an obligation, which was impossible of performance
during the time it became due. Nemotenetur ed impossibilia. The respondent central not
being entitled to demand from the petitioners the performance of the latters part of the
contracts under those circumstances cannot later on demand its fulfillment. The
performance of what the law has written off cannot be demanded and required. The prayer
that the petitioners be compelled to deliver sugar cannot for six years more to make up for
what they failed to deliver, the fulfillment of which was impossible, of granted, would in
effect be an extension of the terms of the contracts entered into by and between the
parties.
Ace-Agro dev v Ca
FACTS:
Petitioner Ace-Agro Development Corp. (Ace-Agro) had been cleaning soft drink bottles and repairing wooden
shells for Cosmos, rendering its services within the company premises in San Fernando, Pampanga. The
parties entered into service contracts which they renewed every year. On January 18, 1990, they signed a
contract covering the period January 1, 1990 to December 31, 1990. On April 25, 1990, fire broke out in
private respondent's plant, destroying, among other places, the area where petitioner did its work. As a
result, petitioner's work was stopped.Private respondent was terminating their contract with Ace-Agro.
Petitioner expressed surprise at the termination of the contract and requested private respondent to
reconsider its decision and allow petitioner to resume its work. As it received no reply from private
respondent and informed its employees of the termination of their employment. Petitioner brought this case
against private respondent for breach of contract and damages in the Regional Trial Court of Malabon. It
complained that the termination of its service contract was illegal and arbitrary and that, as a result, it stood
to lose profits and to be held liable to its employees for backwages, damages and/or separation pay.
Regional Trial Court, finding private respondent guilty of breach of contract and ordering it to pay damages,
private respondent appealed to the Court of Appeals which reversed the trial court's decision and dismissed
the complaint for lack of merit.
ISSUE:
WON this suspension of work due to force majeure did not merit an automatic extension of the period of the
agreement?
RULING:
The stipulation that in the event of a fortuitous event or force majeure the contract shall be deemed
suspended during the said period does not mean that the happening of any of those went stops the running
of the period the contract has been agreed upon to run. It only relieves the parties from the fulfillment of
their respective obligations during that time.
The suspension of work under the contract was brought about by force majeure. Therefore, the period during
which work was suspended did not justify an extension of the term of the contract. For the fact is that the
contract was subject to a resolutory period which relieved the parties of their respective obligations but did
not stop the running of the period of their contract.
As already stated, because the suspension of work was due to force majeure, there was no justification for
petitioner's demand for an extension of the terms of the contract. Private respondent was justified in insisting
that after the expiration of the contract, the parties must negotiate a new one as they had done every year
since the start of their business relations in 1979.
CUATON v. CA
FACTS: Rebecca Salud, joined by her husband Rolando Salud, instituted a suit for foreclosure of real estate
mortgage with damages against petitioner Mansueto Cuaton and his mother, Conchita Cuaton, with the
Regional Trial Court of General Santos City, Branch 35, docketed as SPL. Civil Case No. 359.
Mansueto Cuaton executed mortgage in favor of Rebecca Salud without expressly stating that he was merely
acting as a representative of Conchita Cuaton, in whose name the mortgaged lot was titled.
RTC- Declared the mortgaged constituted void, ordered petitioner to pay Rebecca Salud, inter alia, the loan
secured by the mortgage in the amount of One Million Pesos plus a total P610,000.00 representing interests
of 10% and 8% per month for the period February 1992 to August 1992 and Ordering defendant, Mansueto
Cuaton, to pay Attorney's fees of P25,000.00 in favor of the plaintiff, Rebecca Salud and to pay the cost of this
suit.
CA- Affirmed the judgment of the trial court.
ISSUE: Whether the 8% and 10% monthly interest rates imposed on the one-million-peso loan obligation of
petitioner to respondent Rebecca Salud are valid.
HELD: No. The 10% and 8% interest rates per month on the one-million-peso loan of petitioner are even
higher than those previously invalidated cases by the Court. Accordingly, the reduction of said rates to 12%
per annum is fair and reasonable. They cannot be ratified nor the right to set up their illegality as a defense
be waived.
Stipulations authorizing iniquitous or unconscionable interests are contrary to morals ('contra bonos mores'),
if not against the law. Under Article 1409 of the Civil Code, these contracts are inexistent and void from the
beginning.
The interest of 12% per annum imposed by the Court (in lieu of the invalidated 10% and 8% per month
interest rates) on the one-million-peso loan should be computed from the date of the execution of the loan
on October 31, 1991 until finality of this decision. After the judgment becomes final and executory until the
obligation is satisfied, the amount due shall further earn interest at 12% per year.
WHEREFORE, in view of all the foregoing, the instant petition is GRANTED. The August 31, 2001 Decision of
the Court of Appeals in CA-G.R. CV No. 54715, which affirmed the Decision of the Regional Trial Court of
General Santos City, Branch 35, in SPL. Civil Case No. 359, is MODIFIED. The interest rates of 10% and 8% per
month imposed by the trial court is reduced to 12% per annum, computed from the date of the execution of
the loan on October 31, 1991 until finality of this decision. After the judgment becomes final and executory
until the obligation is satisfied, the amount due shall further earn interest at 12% per year.
LIAM LAW VS OLYMPIC SAWMILL CO (GR L-30771, 28 May 1984)
Facts:
On 7 September 1957, Liam Law (plaintiff) loaned P10,000.00, without interest, to Olympic
Sawmill Co. and Elino Lee Chi, as the latters managing partner (defendants). The loan
became ultimately due on 31 January 1960, but was not paid on that date, with the debtors
asking for an extension of 3 months, or up to 30 April 1960. On 17 March 1960, the
parties executed another loan document. Payment of the P10,000.00 was extended to 30
April 1960,but the obligation was increased by P6,000 which formed part of the principal
obligation to answer for attorneys fees, legal interest, and other cost incident thereto to
be paid unto the creditor and his successors in interest upon the termination of this
agreement. The defendants again failed to pay their obligation. On 23 September 1960,
the plaintiff instituted the collection case before the Court of First Instance of Bulacan. The
defendants admitted the P10,000.00 principal obligation, but claimed that the additional
P6,000.00 constituted usurious interest.
Upon the plaintiffs application, the Trial Court issued a writ of Attachment on real and
personal properties of defendants. After the Writ of Attachment was implemented,
proceedings before the Trial Court versed principally in regards to the attachment. On 18
January 1961, an Order was issued by the Trial Court allowing both parties to
simultaneously submit a Motion for Summary Judgment. On 26 June 1961, the
Trial Court rendered decision ordering defendants to pay the plaintiff the amount of
P10,000.00 plus the further sum of P6,000.00. The defendants appealed before the then
court of Appeals, which endorsed it to the Supreme Court stating that the issue involved
was one of law.
Issue [1]:
Whether the allegation of usury should be made in writing and under oath, pursuant to
Section 9 of the Usury Law.
Held [1]:
Section 9 of the Usury Law provides that the person or corporation sued shall file its
answer in writing under oath to any complaint brought or filed against said person or
corporation before a competent court to recover the money or other personal or real
property, seeds or agricultural products, charged or received in violation of the provisions
of this Act. The lack of taking an oath to an answer to a complaint will mean the admission
of the facts contained in the latter. It envisages a complaint filed against an entity which
has committed usury, for the recovery of the usurious interest paid. In that case, if the
entity sued shall not file its answer under oath denying the allegation of usury, the
defendant shall be deemed to have admitted the usury. The provision does not apply to a
case where it is the defendant, not the plaintiff, who is alleging usury.
Issue [2]:
Whether the repeal of Rules of Court or any procedural law is with retroactive effect.
Held [2]:
The Court opined that the Rules of Court in regards to allegations of usury, procedural in
nature, should be considered repealed with retroactive effect. It has been previously
held(People vs. Sumilang, and DeLopez, et al. vs. Vda. de Fajardo, et al.) that statutes
regulating the procedure of the courts will be construed as applicable to actions pending
and undetermined at the time of their passage. Procedural laws are retrospective in that
sense and to that extent. Comments (required in assignment) The last sentence of Section
11, Rule 9, of the 1997 Rules n of usury in a complaint to recover usurious interest similar
in context to Section 9 of Usury Law, which was raised in this 1984 case (although
improperly applied). The reiteration of matters pertaining to usury in the 1997 rules is
perplexing as the 1984 decision itself admits -existent; as interest can now be charged as
lender and Court in regards to allegations of usury, procedural in nature, should be
considered repealed with incongruent realities, however, are secondary only to the fact that
a mere Central Bank circular or memorandum effectively suspended the application of the
Usury Law to a degree tantamount to its repeal.
MANILA TRADING SUPPLY CO. VS. MEDINA (2 SCRA 549, 1961)
FACTS:
Mariano Medina had an account prior to May 7, 1956 with Manila Trading and Supply Co.
with an amount of P60,000 for which Medina executed a promissory note. The note
provided that upon failure to pay the installments, the remaining amount will immediately
become due and payable at the option of the holder of the note with 33.33% amount due
for attorneys fees and expenses of collection.
On January 8, 1957, Manila Trading & Co. filed a complaint against Medina for failure to
pay installments from September 1956 to January 7, 1957. Medina filed an answer
admitting allegations but said the 33.33% for attorneys fees were exorbitant and
unconscionable. He pleaded that on January 24, 1957, an additional P4,000 was paid so
that he will not be sued and allowed to pay the balance. Upon petition of
plaintiff, a writ of attachment was issued and levied upon eleven of defendant's buses. His
counterclaim was damages for the loss of his earnings. Plaintiff denied the defense and
counterclaim. Plaintiff provided evidence of 21 payments made by defendant from June 6,
1956 to Jan. 21, 1957. The defendant testified that he has 10 other payments with receipts
but the dates and serial numbers are unclear for it was eaten by anay. Defendant claims
that his payment on Jan. 1957 gives rise to the presumption that prior installments have
been paid.
ISSUE:
Are the presented receipts genuine to raise the presumption that prior installments were
paid?
RULING:
No. Appellant avers that the genuine receipts dated January, 1957 raise the presumption
that prior installments were paid. This might be true if such receipts recited that they were
issued for the installments corresponding to the month of January, 1957; but nowhere
does that fact appear. And even if such recital had been made, the resultingpresumption
would only be prima facie, and the evidence before us is clear that the payments made do
not correspond to the installments falling due on the dates of the genuine receipts. As
pointed out by the trial court, it is highly suspicious that these receipts should be mutilated
precisely at the places where the serial numbers and the year of issue must appear, while
the receipts for intervening payments recognized by the plaintiff remained intact. In
addition, the numbers that Medina attributed to them are not in sequence. It is difficult to
believe that a trading company should issue receipts numbered at random, since it would
make auditing control impossible.
ADORABLE vs. COURT OF APPEALS
G.R. No. 119466, November 25, 1999
Facts:
Private respondent Saturnino Bareng was the registered owner of 2 parcels of land.
Petitioners were lessees of a 200 sq.m. portion of one of the said 2 lands.
On April 29, 1985, Saturnino Bareng and his son, Francisco Bareng, obtained a loan
from petitioner amounting to P26,000 in consideration of which they promised to transfer
the possession and enjoyment of the fruits of Lot No. 661-E.
On Aug 3, 1986, Saturnino sold to his son Francisco 18,500 sq.m. of lot No. 661-D-5-A.
o In turn, Francisco sold on Aug. 27, 1986 to private respondent Jose Ramos
3,000 sq. m. of the lot.
Petitioner filed a complaint for the annulment of the sale on the ground that the sale
was fraudulently prepared.
Issue: Does petitioner have a cause of action?
Whether petitioner is the real party in interest?
Held:
No. Petitioners do not have such material interest as to allow them to sue for rescission of
the contract of sale.
At the outset, petitioners right against private respondents is only a personal right to
receive payment of the loan; it is not a real right over the lot subject of the deed of sale.
Nor can we sustain petitioners claim that the sale was made in fraud of creditors under
Art. 1177 of the Civil Code.
The following successive measures must be taken by a creditor before he may bring an
action for rescission of an allegedly fraudulent sale:
1. exhaust the property of the debtor through levying by attachment and execution upon
all the property of the debtor, except such as are exempt by law from execution;
2. exercise all the rights and actions of the debtor, save those personal to him;
3. seek rescission of the contracts executed by the debtor in fraud of their rights.
Without availing of the first and second remedies, i.e., exhausting the properties of the
debtor or subrogating themselves in Francisco Barengs transmissible rights and action,
petitioners simply undertook the third measure and filed an action for annulment of sale.