11. G.R. No. 178610. November 17, 2010.
* MeTC ruled that the nature of HSBCL-SRP’s demands for
Hongkong and Shanghai Banking Corp., Ltd. Staff Retirement
Plan vs. Broqueza
CARPIO, J.:
FACTS:
A petition for review assailing the Decision promulgated by the
CA. The appellate court granted the petition filed by Fe Gerong
(Gerong) and Spouses Bienvenido and EdithaBroqueza (spouses
Broqueza) and dismissed the consolidated complaints filed by
Hongkong and Shanghai Banking Corporation, Ltd. - Staff
Retirement Plan (HSBCL-SRP) for recovery of sum of money.
The HSBCL-SRP is a retirement plan established by HSBC
through its Board of Trustees for the benefit of the employees.
Petitioner [Editha] Broqueza obtained a car loan in the amount
of Php175,000.00 and she again applied and was granted an
appliance loan in the amount of Php24,000.00. On the other
hand, petitioner Gerongapplied and was granted an emergency
loan in the amount of Php35,780.00.These loans are paid
through automatic salary deduction.
A labor dispute arose between HSBC and its employees.
Majority of HSBC’s employees were terminated, among whom
are petitioners Editha Broqueza and Fe Gerong. The employees
then filed an illegal dismissal case before the National Labor
Relations Commission (NLRC) against HSBC. Because of their
dismissal, petitioners were not able to pay the monthly
amortizations of their respective loans. Thus, respondent
HSBCL-SRP considered the accounts of petitioners delinquent.
Demands to pay the respective obligations were made upon
petitioners, but they failed to pay.”
The Metropolitan Trial Court’s Ruling
payment is civil and has no connection to the ongoing labor
dispute. Gerong and Editha Broqueza’s termination from
employment resulted in the loss of continued benefits under
their retirement plans. 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.
The Regional Trial Court’s Ruling
The RTC initially denied the joint appeal because of the belated
filing of Gerong and the spouses Broqueza’s memorandum. The
RTC later reconsidered the order of denial and resolved the
issues in the interest of justice.The RTC ruled that Gerong and
EdithaBroqueza’s termination from employment disqualified
them from availing of benefits under their retirement plans. As a
consequence, there is no longer any security for the loans.
HSBCL-SRP has a legal right to demand immediate settlement
of the unpaid balance because of Gerong and EdithaBroqueza’s
continued default in payment and their failure to provide new
security for their loans. Moreover, the absence of a period
within which to pay the loan allows HSBCL-SRP to demand
immediate payment. The loan obligations are considered pure
obligations, the fulfillment of which are demandable at once.
Gerong and the spouses Broqueza then filed a Petition for
Review under Rule 42 before the CA.
The Ruling of the Court of Appeals
The CA ruled that the HSBCL-SRP’s complaints for recovery of
sum of money against Gerong and the spouses Broqueza are
premature as the loan obligations have not yet matured.
HSBCL-SRP filed a motion for reconsideration which the CA
denied for lack of merit.
HSBCL-SRP filed a manifestation withdrawing the petition
against Gerong because she already settled her obligations.The
CA granted the motion, and considered the case against Gerong
closed and terminated.
ISSUE:
Whether or not the obligation is a pure obligation and is
demandable at once.
HELD:
The SC affirmed 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, HSBCL-SRP has the right to demand
immediate payment. Article 1179 of the Civil Code applies. The
spouses Broqueza’s obligation to pay HSBCL-SRP is a pure
obligation. The fact that HSBCL-SRP was content with the prior
monthly check-off from EdithaBroqueza’s salary is of no
moment. Once EdithaBroqueza defaulted in her monthly
payment, HSBCL-SRP made a demand to enforce a pure
obligation.
12. G.R. No. 48194. March 15, 1990.*
JOSE M. JAVIER and ESTRELLA F. JAVIER, petitioners, vs.
COURT OF APPEALS and LEONARDO TIRO, respondents.
REGALADO, J.:
FACTS:
Private respondent is a holder of an ordinary timber license
issued by the Bureau of Forestry covering 2,535 hectares in the
town of Medina, Misamis Oriental.
At the time the said deed of assignment was executed, private
respondent had a pending application, for an additional forest
concession covering an area of 2,000 hectares southwest of and
adjoining the area of the concession subject of the deed of
assignment.
Consequently, petitioners, now acting as timber license holders
by virtue of the deed of assignment executed by private
respondent in their favor, entered into a Forest Consolidation
Agreement with other ordinary timber license holders in Misamis
Oriental, namely, Vicente L. De Lara, Jr., Salustiano R. Oca and
Sanggaya Logging Company. Under this consolidation
agreement, they all agreed to pool together and merge their
respective forest concessions into a working unit, as envisioned
by the aforementioned directives.The working unit was
subsequently incorporated as the North Mindanao Timber
Corporation, with the petitioners and the other signatories of
the aforesaid Forest Consolidation Agreement as incorporators.
For failure of petitioners to pay the balance due under the two
deeds of assignment, private respondent filed an action against
petitioners, based on the said contracts, for the payment of the
amount of P83,138.15 with interest at 6% per annum from April
10, 1967 until full payment, plus P12,000.00 for attorney’s fees
and costs.
Petitioners filed their answer admitting the due execution of the
contracts but interposing the special defense of nullity thereof
since private respondent failed to comply with his contractual
obligations and, further, that the conditions for the
enforceability of the obligations of the parties failed to
materialize. As a counterclaim, petitioners sought the return of
P55,586.00 which private respondent had received from them
pursuant to an alleged management agreement, plus attorney’s
fees and costs.
ISSUE:
Whether or not contract is null and void.
HELD:
The SC agreed with petitioners that they cannot be held liable
thereon. The efficacy of said deed of assignment is subject to
the condition that the application of private respondent for an
additional area for forest concession be approved by the Bureau
of Forestry. Since private respondent did not obtain that
approval, said deed produces no effect. When a contract is
subject to a suspensive condition, its birth or effectivity
can take place only if and when the event which
constitutes the condition happens or is fulfilled. If the
suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed.
13. [No. 24190. July 13, 1926]
GEORGE L. PARKS, plaintiff and appellant, vs. PROVINCE OF
TARLAC, MUNICIPALITY OF TARLAC, CONCEPCION CIRER, and
JAMES HILL, her husband, defendants and appellees.
AVANCEÑA, C. J.:
FACTS: Concepcion Cirer and James Hill, the owners of parcel
of land No. 2 referred to in the complaint, donated it perpetually
to the municipality of Tarlac, Province of Tarlac, under certain
conditions specified in the public document in which they made
this donation. The donation was accepted by Mr. Santiago de
Jesus in the same document on behalf of the municipal council
of Tarlac of which he was the municipal president. The parcel
thus donated was later registered in the name of the donee, the
municipality of Tarlac.
The plaintiff, George L. Parks, alleging that the conditions of the
donation had not been complied with and invoking the sale of
this parcel of land made by Concepcion Cirer and James Hill in
his favor, brought this action against the Province of Tarlac, the
municipality of Tarlac, Concepcion Cirer and James Hill and
prayed that he be declared the absolute owner entitled to the
possession of this parcel, that the transfer of the same by the
municipality of Tarlac to the Province of Tarlac be annulled, and
the transfer certificate issued to the Province of Tarlac
cancelled.
The lower court dismissed the complaint.
ISSUE:
Whether or not the termination of the contract is valid.
HELD:
The plaintiff has no right of action. If he has any, it is only by
virtue of the sale of this parcel made by Concepcion Cirer and
James Hill in his favor, but that sale cannot have any effect,
This parcel having been donated by Concepcion Cirer and
James Hill to the municipality of Tarlac, which donation was
accepted by the latter, the title to the property was transferred
to the municipality of Tarlac. It is true that the donation might
have been revoked for the causes, if any, provided by the law,
but the fact is that it was not revoked when Concepcion Cirer
and James Hill made the sale of this parcel to the plaintiff. Even
supposing that causes existed for the revocation of this
donation, still, it was necessary, in order to consider it revoked,
either that the revocation had been consented to by the donee,
the municipality of Tarlac, or that it had been judicially decreed.
None of these circumstances existed when Concepcion Cirer and
James Hill sold this parcel to the plaintiff. Consequently, when
the sale was made Concepcion, Cirer and James Hill were no
longer the owners of this parcel and could not have sold it to
the plaintiff, nor could the latter have acquired it from them.
The appellant refers to the condition imposed that one of the
parcels donated was to be used absolutely and exclusively for
the erection of a central school and the other for a public park,
the work to commence in both cases within the period of six
months from the date of the ratification by the parties of the
document evidencing the donation. It is true that this condition
has not been complied with. The allegation, however, that it is a
condition precedent is erroneous. The characteristic of a
condition precedent is that the acquisition of the right is not
effected while said condition is not complied with or is not
deemed complied with. Meanwhile nothing is acquired and there
is only an expectancy of right. Consequently, when a condition
is imposed, the compliance of which cannot be effected except
when the right is deemed acquired, such condition cannot be a
condition precedent. In the present case the condition that a
public school be erected and a public park made of the donated
land, work on the same to commence within six monthsf rom
the date of the ratification of the donation by the parties, could
not be complied with except after giving effect to the donation.
The donee could not do any work on the donated land if the
donation had not really been effected, because it would be an
invasion of another's title, for the land would have continued to
belong to the donor so long as the condition imposed was not
complied with.
14. G.R. No. 188986. March 20, 2013.*
GALILEO A. MAGLASANG, doing business under the name GL
Enterprises, petitioner, vs. NORTHWESTERN UNIVERSITY, INC.,
respondent.
SERENO, C.J.:
FACTS:
A petition was filed seeking a review of the Court of Appeals
(CA). The CA held that petitioner substantially breached its
contracts with respondent for the installation of an integrated
bridge system (IBS).
Respondent Northwestern University (Northwestern), an
educational institution offering maritime-related courses,
engaged the services of a Quezon City-based firm, petitioner GL
Enterprises, to install a new IBS in Laoag City. The installation
of an IBS, used as the students’ training laboratory, was
required by the Commission on Higher Education (CHED) before
a school could offer maritime transportation programs.
Since its IBS was already obsolete, respondent required
petitioner to supply and install specific components in order to
form the most modern IBS that would be acceptable to CHED
and would be compliant with the standards of the International
Maritime Organization (IMO). For this purpose, the parties
executed two contracts.
Subsequently, Northwestern paid P1 million as down payment
to GL Enterprises. The former then assumed possession of
Northwestern’s old IBS as trade-in payment for its service.
Thus, the balance of the contract price remained at P1.97
million.
Two months after the execution of the contracts, GL Enterprises
technicians delivered various materials to the project site.
However, when they started installing the components,
respondent halted the operations. GL Enterprises then asked for
an explanation.
Northwestern justified the work stoppage upon its finding that
the delivered equipment were substandard.9 It explained
further that GL Enterprises violated the terms and conditions of
the contracts, since the delivered components (1) were old; (2)
did not have instruction manuals and warranty certificates; (3)
contained indications of being reconditioned machines; and (4)
did not meet the IMO and CHED standards. Thus, Northwestern
demanded compliance with the agreement and suggested that
GL Enterprises meet with the former’s representatives to iron
out the situation.
Instead of heeding this suggestion, GL Enterprises filed for
breach of contract. Petitioner alleged that Northwestern
breached the contracts by ordering the work stoppage and thus
preventing the installation of the materials for the IBS.
Northwestern denied the allegation. Hence, it prayed for the
rescission of the contracts and made a compulsory counterclaim
for actual, moral, and exemplary damages, and attorney’s fees.
The RTC held both parties at fault. It found that Northwestern
unduly halted the operations, even if the contracts called for a
completed project to be evaluated by the CHED. In turn, the
breach committed by GL Enterprises consisted of the delivery of
substandard equipment that were not compliant with IMO and
CHED standards as required by the agreement.
Invoking the equitable principle that “each party must bear its
own loss,” the trial court treated the contracts as impossible of
performance without the fault of either party or as having been
dissolved by mutual consent. Consequently, it ordered mutual
restitution, which would thereby restore the parties to their
original positions as follows:11
Aggrieved, both parties appealed to the CA, the appellate court
ultimately determined that GL Enterprises was the one guilty of
substantial breach and liable for attorney’s fees.
ISSUE:
Whether or not there is a substantial breach of contract onthe
part of the petitioner.
HELD:
This time, applying Article 1191 of the Civil Code, the CA
declared the rescission of the contracts.
The power to rescind the obligations of the injured party is
implied in reciprocal obligations, such as in this case. On this
score, the CA correctly applied Article 1191, which provides
thus:
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.
Given that petitioner, without justification, supplied substandard
components for the new IBS, it is thus clear that its violation
was not merely incidental, but directly related to the essence of
the agreement pertaining to the installation of an IBS compliant
with the CHED and IMO standards. Consequently, the CA
correctly found substantial breach on the part of petitioner.
In contrast, Northwestern’s breach, if any, was characterized by
the appellate court as slight or casual.By way of negative
definition, a breach is considered casual if it does not
fundamentally defeat the object of the parties in entering into
an agreement. Furthermore, for there to be a breach to begin
with, there must be a “failure, without legal excuse, to perform
any promise which forms the whole or part of the contract.”
Here, as discussed, the stoppage of the installation was
justified. The action of Northwestern constituted a legal excuse
to prevent the highly possible rejection of the IBS. Hence, just
as the CA concluded, we find that Northwestern exercised
ordinary prudence to avert a possible wastage of time, effort,
resources and also of the P2.9 million representing the value of
the new IBS.
15. G.R. No. 162802. October 9, 2013.*
EDS MANUFACTURING, INC., petitioner, vs. HEALTHCHECK
INTERNATIONAL, INC., respondent.
PERALTA, J.:
FACTS:
This is a Petition for Review on Certiorari seeking the reversal of
the Decisionof the Court of Appeals (CA).
The plaintiff Healthcheck Inc. is a Health Maintenance
Organization (HMO) that provides prepaid health and medical
insurance coverage to its clients, one of which is the De La Salle
University Medical Center located at Dasmariñas, Cavite. Being
within the access of this medical facility, the defendant Eds
Manufacturing Inc. with about 5,000 employees at Imus, Cavite
saw fit to obtain insurance coverage from it. They entered into
a one-year contract as host of medical services and benefits.
Only two months into the program, problems began to loom in
the horizon. On July 17, HCI notified EMI that its accreditation
with DLSUMC was suspended and advised it to avail of the
services of nearby accredited institutions.
Although HCI had yet to settle its accounts with it, DLSUMC
resumed services.In another meeting with EMI, HCI undertook
to settle all its accounts with DLSUMC in order to maintain its
accreditation. Despite this commitment, HCI failed to preserve
its credit standing with DLSUMC prompting the latter to suspend
its accreditation for a second. A third suspension was still to
follow and remained in force until the end of the contract
period.
Complaints from EMI employees and workers were pouring in
that their HMO cards were not being honored by the DLSUMC
and other hospitals and physicians, EMI formally notified HCI
that it was rescinding their Agreement on account of HCI’s
serious and repeated breach of its undertaking including but not
limited to the unjustified non-availability of services. It
demanded a return of premium for the unused period, giving a
ballpark figure of P6 million.
HCI pre-empted EMI’s threat of legal action by instituting the
present case before the Regional Trial Court of Pasig. The cause
of action it presented was the unlawful pretermination of the
contract and failure of EMI to submit to a joint reconciliation of
accounts and deliver such assets as properly belonged to HCI.
EMI responded with an answer alleging that HCI reneged on its
duty to provide adequate medical coverage after EMI paid the
premium in full. Having rescinded the contract, it claimed that it
was entitled to the unutilized portion of the premium, and that
the accounting required by HCI could not be undertaken until it
submitted the monthly utilization reports mentioned in the
Agreement.
EMI’s rescission of the Agreement was not done through court
action or by a notarial act and was based on casual or slight
breaches of the contract. Moreover, despite the announced
rescission, the employees of EMI continued to avail of HCI’s
services.
ISSUE:
Whether or not there was a valid rescission of the Agreement
between the parties.
HELD:
There was no valid rescission.The power to rescind obligations submitted by HCI shows entries as late as March 1999,
is implied in reciprocal ones, in case one of the obligors should signifying that EMI employees were availing of the services until
not comply with what is incumbent upon him. the contract period were almost over. The continued use by
them of their privileges under the contract, with the apparent
The injured party may choose between the fulfillment and the
consent of EMI, belies any intention to cancel or rescind it, even
rescission of the obligation, with the payment of damages in
as they felt that they ought to have received more than what
either case. He may also seek rescission, even after he has
they got.
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.
The general rule is that rescission (more appropriately,
resolution) of a contract will not be permitted for a slight or
casual breach, but only for such substantial and fundamental
violations as would defeat the very object of the parties in
making the agreement.
Consequently, even if the right to rescind is made available to
the injured party, the obligation is not ipso facto erased by the
failure of the other party to comply with what is incumbent
upon him. The party entitled to rescind should apply to the
court for a decree of rescission. The right cannot be exercised
solely on a party’s own judgment that the other committed a
breach of the obligation. The operative act which produces the
resolution of the contract is the decree of the court and not the
mere act of the vendor. Since a judicial or notarial act is
required by law for a valid rescission to take place, the letter
written by respondent declaring his intention to rescind did not
operate to validly rescind the contract.
What is more, it is evident that EMI had not rescinded the
contract at all. As observed by the CA, despite EMI’s
pronouncement, it failed to surrender the HMO cards of its
employees although this was required by the Agreement, and
allowed them to continue using them beyond the date of the
rescission. The in-patient and the out-patient utilization reports