Bayla v. Silang Traffic Co.

made and the reversion of the shares of stock to

G.R. 48195 & 48196 | May 1, 1942 | Oblicon | Case 1 | Delay the corporation.
Facts  The court ruled that the forfeiture was ineffective, the
 Petitioners instituted an action to the CFI of Cavite Against contract did not expressly provide that the failure of the
Respondent to recover sums of money which they paid purchaser to pay an instalment would give rise to forfeiture
severally to the corporation on account of shares of stocks and cancellation without the necessity of any demand from
which they individually agreed to take and pay for under the seller.
specific terms and conditions. o Under Art 1100 of the Civil Code, persons obliged
o According to the said terms and conditions, the to deliver or do something are not in default until
subscriber agrees that if he fails to pay any of said the moment the creditor demands them
installment when due or to perform any of the judicially or extrajudicially the fulfillment of the
conditions or if the shares shall be attached or obligation except in the following cases:
levied upon by creditors of the said subscribers,  Obligation or law expressly provides
the shares will revert to the seller and payments that demand shall not be necessary in
are forfeited in favor of seller and possess it order that default may arise
without resorting to court proceedings.
 By reason of the nature and
 However, after signing the agreement, the Board of circumstances of the obligation it shall
Directors issued a memorandum rescinding the said appear that the designation of the time
agreement. Thu7s, Petitioners filed the current action to at which the thing was to be delivered
the CFI. or service rendered was the principal
Respondent’s Defense inducement to the creation of the
obligation.
 According to Respondent, the subsequent resolution made
by the Board of Directors issuing a memorandum
rescinding the said agreement does not apply to
Petitioners as the shares of stock they had already been
forfeited and that the said agreement had already been
rescinded.
RTC Ruling
 The Trial Court absolved defendant from the complaint
and ruled that the shares of stock should be given to the
defendant. Furthermore, the court ruled that the
resolution was null and void wherein the trial court cited a
decision stating that “a corporation has no legal capacity to
release an original subscriber to its capital stock from the
obligation to pay for his shares, and any agreement to this
effect is invalid.”
Court of Appeals Ruling
 The Court of Appeals affirmed the dismissal of the
complaint of the plaintiffs. However, the declaration of the
subscription is canceled and reversed.
Issue
 Whether or not Petitioners have the right to recover the
amounts involved under the resolution.
Ruling
 Judgment of the C.A is reversed, and defendant Silang
Traffic Co. is ordered to pay plaintiffs the sums that they
had given the company with legal interest.
 In this case, the Court ruled that the contract involved
provides that if the purchaser fails to pay any of the
instalments when due, the shares of stuck which are the
object of sale are reverted to seller and the payments are
forfeited to the seller.
o The seller, through its board of directors annulled
ap previous resolution rescinding the sale and
declared the forfeiture of the payments already

Aerospace Chemical Industries v. Court of Appeals
G.R 108129 | Sept 23, 1999 | Oblicon | Case 2 | Delay
Facts
 June 27, 1986 – Petitioner purchased sulfuric acid from
Private Respondent which was made in a letter form
stating the said agreement between the two parties.
o The said agreement was set to begin in July 1986
which provides that the Petitioner shall pay its
purchases in equivalent of Philippine Currency
five days prior to the shipment date. Petitioner is
also committed to secure the means of transport
of the said items from the port of private
respondent located in Basay, Negros and Sangi,
Cebu
 Aug 6, 1986 – Private Respondent sent a letter to petitioner
withdrawing the sulfuric acid at Basay because Private
Respondent had been incurring expense of 2,000 pesos per
day for each day of delay in shipment.
 Oct 3, 1986 – Petitioner paid 553,280 for the 500 tons of
sulfuric acid which it ordered.
 Nov. 19, 1986 – Petitioner chartered a ship, the ship was
assigned to carry the volume of the sulfuric acid to the
loading-port of Private Respondent from Basay. However,
the ship withdrew only 70 metric tons of the said item
because the ship tilted while carrying the said cargo
o The ship then underwent repairs.
 Dec 12, 1986 – Private Respondent demanded petitioner
through a letter to retrieve the remaining acid in the Basay
Tanks so that it can be emptied on or before Dec 15, 1986
Respondent states that it would charge petitioner the
storage and costs for the Basay tanks including all other
expenses due to loading delay if petitioner fails to comply.
 Dec 15, 1986 – the ship chartered by petitioner docked in
Cebu but withdrew only 157 tons of the sulfuric acid. The
vessel tilted again, and loading was aborted.
o After the said incident, the chartered Ship M/T
Sultan Kayumanggi sank with 227.51 Metric tons
of sulfuric acid on board.
 Petitioner then chartered another vessel with a bigger
capacity. Then on the dates of Jan 26 and Mar 20, 1987.
Melecio Hernandez acting for the petitioner, addressed
letters to private respondent concerning additional orders
of sulfuric acid to replace its sunken purchases. With no
reply, Petitioner sent another letter on May 15, 1987.
 January 25, 1988 – Petitioner’s Counsel sent a demand
letter to private respondent for the delivery of sulfuric acid
paid by his client or the return of the purchase price of
307,530 pesos.
o Private Respondent replied on March 8, 1988 and
instructed petitioner to lift the remaining 30 MT
of sulfuric acid from Basay or pay maintenance
and storage expenses commencing August 1,
1986.
 July 6, 1988 – Petitioner wrote another letter insisting on
picking up the 272.49 MT and an additional 227.51 MT of
acid as Petitioner already paid a chartered vessel for the full
capacity.
 July 22, 1988 – Private Repsondent replied that they cannot
accommodate the request for additional acid because of
the limitation and delayed arrival of imported Sulfuric Acid
from Japan.
 July 25, 1988 – Petitioner’s counsel wrote to respondent
another demand letter for the delivery or suffer tedious
legal action that his client would commence.
 May 4, 1989 – Petitioner filed a complaint for specific
performance and or damages before the RTC. Private
Respondent answered that it was petitioner who was
remiss in the performance of its obligation in arranging the
shipping of their purchase and that they should pay
damages to them as consequence.
RTC Ruling
 The RTC rendered judgment in favor of Petitioner, ordering
Private Respondent to pay petitioner the undelivered value
of the sulfuric acid, unrealized profits, exemplary damages
and attorney’s fees.
o The Trial Court reasoned out that petitioner was
absolved in its obligation to pick up the
remaining sulfuric acid because of force majeure,
instead it was private respondent who breached
the contract when it failed to accommodate the
additional order of petitioner to replace the
sulfuric acid that sank.
C.A Appeal
 The Court of Appeals found Petitioner guilty of delay and
negligence in the performance of its obligation. It also
dismissed the complaint of petitioner and ordered it to pay
damages representing the counterclaim of private
respondent.
o A motion for reconsideration was filed by
Petitioner but was denied for lack of merit.
Issue
 Whether or not Petitioners are the ones who are actually
guilty of delay and negligence in the performance of its
obligation to ship the items they ordered.
Ruling
 The Court denies the Petition and affirms the decision of
the Court of Appeals with modifications by reducing the
amount of damages awarded in favor of private
respondent is reduced.
  The Court does not agree with the contention that the
storm or force majeure caused the delay of the removal of
the cargo from the seller.
o The reason for this is that the storm was not the
proximate cause of petitioner’s failure to
transport its purchases on time. The survey
report submitted by a third-party surveyor
revealed that the vessel was also incapable of
carrying the full load of cargo which was also
shown in the facts that the vessel had to undergo
repairs before continuing its voyage. Thus, the
ship’s sinking was not due to force majeure, but
it was unstable and not sea worthy.
 The Court ruled that where there has been a breach of
contract by the buyer, the seller has a right of action for
damages. This is because of the fact that the buyer refused
to remove the goods even if the two parties agreed to
remove the said goods from the seller.
 The court also stated the requisites that should be
complied in order for the debtor to be held in default
o The obligation be demandable and already
liquidated
o Debtor delays performance
o Creditor requires the performance judicially or
extrajudicially.
Binalbagan Tech Inc v. Court of Appeals
G.R 100594 | Mar. 10, 1993 | Oblicon | Case 3 | Kinds of Delay
Facts
 May 11, 1967 – Private Respondents through a certain
Angelina Echaus in her capacity as administrator of the
intestate of Mr. Puetevella executed a contract to sell and deed
of sale of 42 subdivision lots within the Phib-Khih Subdivision
of the Puentevella family conveying the said lots to Petitioner.
o In pursuance to this sale, Petitioner executed an
Acknowledgment of Debt with Mortgage
Agreement, mortgaging the aforementioned lots in
favor of the estate of Puentavella.
 Upon transfer to Petitioner of the titles to the 42 subdivision
lots, Petitioner took possession of the lots and started to build
and add improvements on them. Petitioner then started to
operate a school from the year 1967 when the titles and
possession of the lots were transferred.
 While the said sale happened, some of the lots were under a
pending case wherein the intestate estate of Mr. Puentevella
thru its Administratrix, Angelina L. Puentevella sold the lots to
a certain Raul Javellana with the condition that the vendee
would not transfer his rights without the consent of
Puentevella and that in case of the cancellation of their
contract by reason of the violation of any of the terms, all
payments and all improvements introduced on the property
shall pertain to the promissor and shall be considered as
rentals.
o With Javellana failing to pay the installments for a
period of five years, a civil case was filed by
Puentevella against Javellana and the Southern
Negros Colleges as the latter had actual possession
of the land, for the rescission of their contract to sell
and the recovery of possession of the lots and
buildings with damages.\
o Judgment was then rendered in favor of
Puentevella, defendants were then served a copy of
the writ of execution and a levy was made to satisfy
the monetary portion of the judgment.
 Dec 29, 1965 – Plaintiffs filed the instant case on appeal
alleging that the Deed of Sale executed by the Spouses Lopez
means that Puentevella was constrained to assert physical
possession of the premises to counteract the fictitious and
unenforceable claim of plaintiffs.
o After this, the Court of Appeals issued a writ of
preliminary injunction ordering Judge Abiera or any
other person to refrain from further enforcing the
injunction issued by him.
o Plaintiffs then filed a petition for review with the SC
which issued a restraining order against the sale of
the properties claimed by the spouses-plaintiffs.
 After dissolving the injunction by the Court of Appeals,
Possession of the building and other property was taken from
Petitioner and given to the third-party claimants, the de la
Cruz spouses.
o Petitioner also transferred its school to another
location until the Court of Appeals rendered
judgment ordering the case to be remanded to the
RTC.
 1982 – The judgment in Civil Case was executed and enforced,
petitioner was restored to the possession of the said
subdivision lots on May 31 of the same year.
After repossessing the land
 Shortly after taking possession of the subdivision lots, Private
Respondent Angelina Echaus demanded payment from
Petitioner for the subdivision lots through a letter of demand
which states a statement of account as of September 1982
showing a total due of 367,509.93.
 Petitioner failed to effect payment to Private Respondent, as
a result Private Respondent field a Case with the RTC against
petitioner for recovery of title and damages.
RTC Decision
 The RTC declared that the case had not fraud and on top of
that, the action on the written contract had already long
prescribed, judgment is rendered in favor of the defendants
and against the plaintiffs, dismissing the complaint.
o The counterclaim filed was also dismissed for lack of
proof.
Court of Appeals Ruling
 The Court of Appeals reversed the decision of the RTC. A new
one was made ordering the Petitioner through any of its
officers execute a deed of conveyance transferring and
returning the ownership of the lands to Private Respondent.
Issue
 Whether or not Respondent’s cause of action is barred by
prescription.
Ruling
 The Court denies the Petition and affirms the Decision of
the Court of Appeals.
  For the first issue, the court ruled that the prescriptive period
to institute an action upon a written contract is 10 years. IN this
case, the deed of sale whereby Private Respondent transferred
the ownership of the lots was executed on May 1967, she then
filed the case on Oct. 1982 which is 15 years.
o However, the Court ruled that the period from 1974
to 1982 should be deducted in computing the period
because Private Respondent was not in a legal
position to initiate action against petitioner.
 The Prescriptive period to institute action
upon written contract was interrupted by
the issuance of an injunctive write.
 In this case, the court ruled that the appellants could not have
prospered in any suit to compel performance or payment from
the appellees-buyers, because appellants were in no position
to perform their own corresponding obligation to deliver to
and maintain said buyers in possession of the lots.
o A party unable to comply with own obligations
under a contract cannot demand rescission thereof.
The right to rescind a contract can be demanded
only if a party thereto is ready, willing and able to
comply with his own obligations. ( Art. 1191 NCC)
 IN a contract of sale, the vendor is bound to transfer the
ownership of and deliver as well as warrant the thing which is
the object of the sale.
o Additionally, from the years 1974 to 1982, Private
Respondent’s warranty against eviction given to
buyer Petitioner was breached though it was not her
fault. Thus, on the period of 1974 to 1982, private
respondent was not in a legal position to demand
compliance of the prestation of petitioner to pay the
price of said subdivision rights. Her right to demand
payment was suspended during 1974 to 1982.
 Lastly, the Court cited the principle against unjust enrichment
where a situation of unjust enrichment would result if
petitioner is allowed to own the lots without full payment.
Agcaoili v. GSIS
G.R L-30056 |Aug. 30, 1988 | Oblicon | Case 4 | Delay
Facts
 Defendant approved the application of Plaintiff for the
purchase a house and lot in the GSIS Housing Project at
Nangka subject to the condition that the house be
occupied by Plaintiff. However, Plaintiff failed to fulfill this
condition as according to him, the house was
uninhabitable.
 After paying the first installment and other fees and also
refusing to make further payment of the other stipulated
installments until Defendant had made the house
habitable as according to him, the house was nothing more
than a shell and that civilized occupation was not possible,
due to this, Plaintiff asked a homeless friend to stay in the
premises as a watchman.
o IN reply, Defendant cancelled the award of the
purchase of the house and also demanded the
vacation of Defendant from the premises.
o Due to the cancellation, Petitioner then filed a
case for specific performance with the CFI.
Court of First Instance Ruling
 The CFI ruled in favor of Plaintiff by declaring the
cancellation of the award of a house and lot to plaintiff
illegal and void, ordering the defendant to respect and
enforce the award to plaintiff and the completion of the
house in question so as to make the same habitable.
Issue
 Whether or not the perfection of the contract between the
parties being conditioned upon the Plaintiff’s occupancy of
the house and with him failing to comply with the
condition, no contract ever came into existence between
them.
o In relation to this the act of placing his friend
without consent operated a repudiation by
Plaintiff of the award.
Ruling
 The Court invalidates the decision of the judgment of
the court insofar as it invalidates and sets aside the
cancellation by Defendant of the award in favor of
petitioner of the housing project and order the
Defendant to pay damages is affirmed. The court
removes the order of GSIS to complete the house to
make it habitable. The court instead orders that the
contract between the parties relative to the property
described adding the cost of the land as of the time of
perfection and the cost of the house in its unfinished
state to adjust the amortizations to be paid by plaintiff.
 In this case, the Court ruled that there was a perfected
contract of sale between the parties as there had been a
meeting of the minds upon the purchase by Plaintiff of a
determinate house and lot in the Housing Projects.
o There being a perfected contract of sale, it was
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.
 Furthermore, Defendant sold a house to Plaintiff and
required him to immediately occupy it under pain of
cancellation of the sale. However, under the circumstances
shown in the case, it is without doubt that the house
contemplated was one that could be occupied for purposes
of residence with reasonable convert. There would be no
sense to require Plaintiff to occupy the house if it is a shell
as the Defendants are obligated to deliver a habitable
house.
o In the interpretation of their contract, it can only
be understood that Defendant is obligated to
deliver to Plaintiff a reasonably habitable
dwelling in return for his undertaking to pay the
price.
 Since GSIS did not fulfill the aforementioned obligation
and was not willing to put the house in habitable state. It
 cannot invoke the suspension payment of Plaintiff as cause
to cancel the contract.
o It is axiomatic 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.
 Furthermore, the court rejects the argument of defendant
that Plaintiff breached their agreement by failing to occupy
the house must be rejected as devoid of merit. The facts of
the case show that Plaintiff tried to occupy the house but
found it so uninhabitable that he had to leave it the
following day, however, he left a friend to live there who is
homeless even if the house is rudimentary who only agreed
because of his homelessness.
Bricktown Development Corp. v. Amor Tierra Dev’t Corp.
G.R 112182 | Dec 12, 1994 | Oblicon | Case 5 | Delay
Facts
 Mar. 31, 1981 – Petitioner represented by its President and
co-petitioner Velarde executed two contracts to sell in
favor of Private Respondent who was represented by its
Vice-President, the said contract covers 96 residential lots
situated at a subdivision located in Manila.
o The said contract also stipulated amounts to be
paid and maturity dates in the following dates:
 Mar. 31, 1981 – 2.200,000
 June 30, 1981 – 3,209,968.75
 Balance of 11,500,000.00 to be paid by
means of an assumption by Private
Respondent of Petitioner’s mortgage
liability to the Philippine Savings Bank
or to be made in cash.
 On the same date above, the parties executed a
supplemental agreement providing that Private
Respondent would pay to petitioner amounts of 55,364.68
on the balance of down payment for the period from Mar
31 to June 30, 1981.
 While the agreement was made, Private Respondent was
only able to pay Petitioner the sum of 1,334,443.21.
Meanwhile the parties continued to negotiate for a
possible modification of their agreement although nothing
conclusive happened.
 Oct. 12, 1981 – Petitioner through its legal counsel sent
Private Respondent a notice of cancellation of contract
sent a notice of cancellation of contract on account of
Private Respondent’s failure to pay the installment due on
June 30, 1981. However, Petitioner advised Private
respondent that it still had the right to pay its arrearages
within 30 days or the actual cancellation of the contract
would take place.
 Sept 26, 1983 – Private Respondent through counsel
demanded the refund of their various payments made to
Petitioner which amounts to 2,455,497.71 with interest or
in lieu of a cash payment assigned to them an equivalent
number of unencumbered lots at the same price fixed in
the contracts. Petitioner did not heed the demand; hence,
Private Respondent started an action with the Court.
RTC Ruling
 The trial Court rescinded the supplemental agreement of
the two parties and ordering Petitioner to return the
amount of 1,334,443.21 with interest and to pay attorney’s
fees and dismissing petitioner’s counterclaim for lack of
merit.
Court of Appeals Ruling
 The Court of Appeals affirmed the trial court’s findings and
judgment.
Issue
 Whether or not the contracts to sell were rescinded or
cancelled validly by Petitioner
  Whether or not the amounts remitted by Private
Respondent were rightly forfeited by Petitioner
Corporation

Ruling

 The appealed decision is affirmed insofar as it declared

valid the cancellation of the contracts in question but
modified by ordering the refund by Petitioner of
Enriquez v. Ramos
1,334,443.21 with interest to commence from the finality of
G.R L-23616 | Sept 30, 1976 | Oblicon | Case 6 | Delay
the decision.
Facts
 While the terms of the payment agreed upon by the parties
 Nov. 24, 1958 – Plaintiffs sold to defendant 20 subdivision
of the contract were not met by Private Respondent, the
lots for a sum of 235,036 of which only 35,056 had been paid
fact that private respondent was only able to remit the sum
by defendants. The said balance of 200,000 was to be
of 1,334,443.21 which was short of the initial payment of
liquidated within two years from the date of the execution
2,200,000.00, no additional payments were made, and a
of the deed of sale with interest until fully paid.
notice of cancellation was ultimately made after the lapse
of the contracted grace period. o To secure the payment of the said balance,
defendant executed a deed of mortgage in favor
 The Court in this case defined Grace Period.
of the vendors’ seven parcels of land.
o According to the Court, a grace period is a right,
 The deed of mortgage has certain
not an obligation of the debtor. When
stipulations which states that if the
unconditionally conferred such as in this case, the
mortgagor should fail to pay the
grace period is effective without further need of
amount secured by the mortgage or
demand either calling for the payment of the
any part of the terms and conditions,
obligation or for honoring the right.
the mortgagee shall have the right to
o The grace period must not be likened to an foreclose the mortgage extrajudicially
obligation, the non-payment of which under Art. where mortgagee is appointed as the
1169 of the Civil Code would still require judicial attorney-in-fact of the mortgagor with
or extrajudicial demand before default can arise. full power of substitution to enter and
take possession of the properties
 In the case at bar, the 60-day grace without order of any court or any
period in the contract became ipso- authority other than what is granted.
facto operative from the moment the
due payments were not met at their  In this second case, the plaintiffs state that in pursuance to
stated maturities. Thus, Art. 1169 of their agreement made in the first case of L-18077 the
the Civil Code would not apply in this defendants violated the terms of their agreement in the
case. following aspects:

 Furthermore, the cancellation of the contracts to sell by o Defendant refused to pay the sum of 200,000
Petitioner accord with the contractual covenants of the within the stipulated period
parties, thus the cancellation must be respected.
o The mortgage on the property in Bulacan was not
o In a contract to sell, the non-payment of the registered
purchase price can prevent the obligation to
o The realty tax for the lots mortgaged were not
convey title from acquiring any obligatory force.
paid by defendant.
 While the court concludes that Petitioner acted within its
 While defendant admits that she has not paid the realty
legal right to declare the contracts to sell rescinded, the
taxes and has not registered the mortgage on the property,
peculiar circumstances found in this case and confirmed by
defendant argues that the said matters were only minor
the C.A, it would be unconscionable to sanction the
ones which was explained by her in the first case invoking
forfeiture by petitioner of payments made to it by private
the rule of res judicata.
respondent.
o In addition to this, defendant does not dispute
 Lastly, the relationship between parties in any contract
that she did not pay the sum of 200,000.
must always be characterized and punctuated by good
However, she contends that the roads have not
faith and fair dealing. In this case, petitioners fell from the
yet been completed in accordance with the
said standard of good faith and fair dealing. As it was not
ordinance of Quezon City which states that there
equitable for petitioners to adjudge any interest payment
should be water facilities and tree plantings in the
on the amount to be refunded.
subdivision which according to defendant are not
 yet in the roads, thus, the roads are not yet
completed.

Issue

 Whether or not Ramos should pay her balance to Enriquez

and spouses Dizon even though she is not yet fully satisfied
with her demand?

Ruling

 The court order dated December 3, 1963 is set aside and

judgment is hereby rendered ordering the defendant-
appellee to pay plaintiffs the sum of 200,000, interest, and
amount equivalent to 5% of the mortgage indebtedness of
attorney’s fees and the costs.

 The Court ruled that the deed of sale with mortgage makes
it the express duty of the defendant to pay the realty taxes
on the mortgaged lots, to register the mortgaged lots and
to contribute 50,000 for the construction of the roads. In its
express terms, the appellee failed to fulfill the conditions of
Leaño v. Court of Appeals
her entire obligation which means that the mortgagee has
G.R. 129018 | Nov. 15, 2001 | Oblicon | Case 7 | Delay
the option to foreclose the mortgage. The terms of the
Facts
contract have the force of law between the parties.
 Nov. 13, 1985 – Hermogenes Fernando, as vendor, and
 The court ruled that the opinions of the Supreme Court Petitioner Leaño, as vendee executed a contract to sell
cannot be taken as license for continued non-fulfillment of involving a piece of land in Bulacan.
defendant of her contractual obligations. The court did not
intend to allow or enable the litigants to use the first o In the said contract, Petitioner bound herself to
decision as an instrument to avoid the obligations of the pay Fernando the sum of 107,750.00 pesos as the
parties. total purchase price of the lot. According to the
contract, the sum of 10,775 shall be paid at the
 Lastly, the court states that the filing of the case is signing of the contract as down payment. The
sufficient notice to defendant f the completion of the roads remaining balance shall be paid within a period of
in question and of the appellant’s desire to be paid the 10 years at a monthly amortization of 1,747.30
purchase price of the questioned lots. starting from Dec. 7, 1985.

o The effect of the demand retroacts to the day of
the constitution of defendant’s obligation. It is
provided in Art 1187 that the effects of a
conditional obligation to give, once the condition
has been fulfilled shall retroact to the day of the
constitution of the obligation.
 In this instant case, the contracted
obligation of appellee was to pay the
balance of 200,000 within two years
from the date of the roads in question
are completed.
MTC Ruling (Ejectment Case by Respondent)
 IN addition to this, the contract provided for a grace period
of one month within which to make payments, together
with the one corresponding to the month of grace.
o Should the grace period expire without
installments for both months having been
satisfied an interest of 18% per annum shall be
charged on the unpaid installments.
o Additionally, should a period of 90 days elapse
from the expiration of the grace period without
the overdue and unpaid installments been paid.
Respondent Fernando, as vendor is authorized to
declare the contract cancelled and to dispose the
parcel of land as if the contract had not been
entered to, the payments shall be considered as
rents for the use and occupation of the premises.
 After the execution of the contract, Petitioner made
payments in lump sum. She then built a house on the lot
valued 800,000. The last payment according to the facts of
the case was on April 1, 1989.
o Due to her non-payment of the subsequent
payments, Respondent filed a case for ejectment
against Petitioner to vacate the premises.
  The trial court ordered Petitioner to vacate the premises for which the corresponding penalty shall be imposed in
and to pay 250.00 per month by way of compensation for case of default, the vendee cannot ignore the provision on
the use and occupation of the property from May 27, 1991 the payment of monthly installments by stating that the 10
until she vacates the premises of the property. A writ of year period has not elapsed.
execution was issued on August 24, 1993 which was served
 In reciprocal obligations, neither party incurs in delay if the
to Petitioner.
other does not comply or is not ready to comply in a proper
o IN response to this, Petitioner filed a specific manner with what is incumbent upon him, but from the
performance complaint against Respondent on moment one of the parties fulfills his obligation, delay by
Sept. 27, 1993 and to assail the decision of the the other begins (Art 1169)
court as the order was violative to the intentions
o In this case, Respondent performed his part of
of R.A 6552 which afford buyers of lots on
the obligation by allowing Petitioner to continue
installments protection.
in possession and use of the property. Petitioner
RTC Ruling (Specific Performance Case by Petitioner) did not pay the monthly amortizations in
accordance with their contract, thus she was in
 The preliminary injunction issued by the RTC is made
delay and liable for damages.
permanent. Furthermore, the plaintiff is ordered to pay the
defendant the sum of 103,090.70 corresponding to her  Lastly, it is a cardinal rule in the interpretation of contracts
outstanding obligations under the contract to sell with that if the terms are clear and leave no doubt upon the
defendant and to pay attorney’s fees and the costs of the intention of the contracting parties, the literal meaning of
suit. its stipulations shall control. If there is no ambiguity in the
language, there is no room for construction only
o A motion for reconsideration was filed by
compliance.
Respondent. However, the court increased the
amount to be paid by Petitioner to 183,687 and
ordered petitioner to pay attorney’s fees.
o The trial court reasoned out that the transaction
between the parties was an absolute sale,
making petitioner the owner of the lot upon
actual and constructive delivery thereof.
Respondent was divested of his ownership and
cannot recover unless the contract is rescinded in
pursuance to Art. 1592 of the Civil Code which
requires a judicial or notarial demand.
o For the issue of delay, the trial court ruled that
the contract clearly specifies that the purchase
price shall be payable in monthly installments Lee v. De Guzman
for which the corresponding penalty shall be G.R 90926 | Jul 6, 1990 | Oblicon | Case 8 | Delay
imposed in case of default. Plaintiff’s failure to
pay the amortization is a clear default on Facts
Plaintiff’s part therefore she should be liable  Nov. 8, 1983 – Freelance salesman of Respondent
for interests and penalties. Motorcars Inc named Arsemio Tumibay signed in half of
Court of Appeals ruling the branch manager of Respondent Company a price
quotation and delivered to Petitioner one Toyota Corolla,
 The Court of Appeals affirmed the decision of the RTC. 1983 with the price of 149,7000 plus miscellaneous
Issue expenses of 10,033.

 Whether the transaction between the parties is an absolute o Petitioner then signed the sales order of the
sale or a conditional sale vehicle. Delivery was then scheduled to be within
the Nov. 1983.
 Whether or not there was a proper cancellation of the
contract to sell  Nov. 10, 1983 – Petitioner made a deposit of 1,000 which
was required in the agreed price quotation. After
 Whether petitioner was in delay in the payment of the depositing the said amount, petitioner then wrote that
amortizations. Motorcars had acknowledgment receipt of the delivery
Ruling receipt for petitioner.

 The Court denies the Petition and affirms the decision of  Dec 15, 1983 – Petitioner’s counsel wrote to the Executive
the Court of Appeals Vice-president of Motorcars demanding for the delivery of
the said Toyota Car. Respondent Company replied that due
 The Court ruled that even if the contract provided that the
to the sudden change of prices by the manufacturer of the
total purchase price is payable within a ten-year period,
specifying the price shall be paid in monthly installments
 car, they decided to exercise the option in the vehicles Ruling
order which states:
 Respondent is ordered to give petitioner the sum of
o Whenever deposits are made by customers for 100,000 as damages.
vehicles, parts and services ordered, the sales for
 The Court agrees with the contention that Respondent
such vehicles, parts or services shall be at the
could not comply with the writ of execution as Delta
option of Motorcars Inc. refund o the deposits
Motors who manufactured the 19883 models of the
shall be made upon request and without undue
Liftback had already closed shop. However, there is no
delay should the option be exercised.
question that there was a perfected contract between
 Due to the said stipulation in the said order, Respondent Petitioner and Respondent.
Company offered to refund the deposit of 1,000 made by
o The relief that Petitioner left can do is provided
Petitioner. However, it was revealed that the sales order
under Art. 1170 of the Civil Code where those who
contains:
in the performance of their obligations are guilty
o Order is not valid unless signed and accepted by of fraud, negligence or delay, and those who in
the dealer principal, President, Executive Vice any manner contravene the tenor thereof, are
President or General Sales Manager of the liable for damages.
dealership.
 In this case, there was delay in the delivery of the subject
RTC Ruling vehicle which was stated in the letter of Respondent
Company addressed to Petitioner by stating the sudden
 The Trial Court rendered a judgment in favor of
change of prices by the car manufacturer as what was
Respondent by ordering Petitioner to pay 5,000 as
agreed upon by the parties is the delivery of the subject
damages and attorney’s fees.
vehicle within November 1983.
Court of Appeals Ruling
 The Court of Appeals reversed the decision of the RTC
stating that there was a perfected contract of sale, and that
there was the undisputed signature of Mr. Tapas, the
branch manager of Motorcars.
o Respondent was ordered to deliver to Petitioner
the vehicle upon payment of 149,7000 and the
amount of 8,833 for miscellaneous expenses and
other charges. Respondent then appealed to the
Supreme Court in another case.
G.R 77992 (Related Case; Case filed by Respondent)
 The Court in the said case ruled that there was indeed a
contract of sale between the parties. Thus, it denied the
petition and affirmed the decision of the Court of Appeals,
furthermore, after the case was remanded, Petitioner filed
a motion for writ of execution.
 However, Respondent company filed a motion to quash
the said writ of execution stating that the obligation has
become impossible to comply on the ground that Delta
Motors had closed shop.
o Petitioner opposed the motion of Respondent,
but Respondent continued to defy the order of
the court. Petitioner then filed a motion for
contempt of court for the stance that what
Respondent did was contempt.
o Respondent trial court then issued the assailed
order where it favored respondent company’s
contention that they cannot comply with the
obligations.
Issue
Tanguilig v. Court of Appeals
 Whether or not the decision rendered by the C.A and G.R. 117190 | Jan 2, 1997 | Oblicon | Case 9 | Delay
affirmed by the S.C is capable of performance and can be Facts
executed.
  April 1987 – Petitioner under the name of JMT Engineering
and General Merchandising proposed to Respondent
Herce to construct a windmill system for him. The parties
negotiated and agreed on the construction of the windmill
for 60,000 pesos with a one-year guaranty from the date of
completion and acceptance by Respondent Herce
o In pursuance to the agreement, respondent paid
Petitioner 30,000 as downpayment and
installment payment of 15,000 leaving a balance
of 15,000.
 March 14, 1988 – Respondent refused to pay the balance.
This prompted Petitioner to file a complaint to collect the
amount.
Private Respondent’s Arguments
 For his reply, Respondent denies the claim made by
Petitioner. According to Private Respondent, he already
paid the said balance to San Pedro General Merchandising
which made the deep well connected to the windmill
system.
o Since the said deep well is a part of th e system,
the payment he gave to SPGMI should be
credited to his account by petitioner. The balance
he owes to Petitioner should be offset by the
defects in the windmill which caused its collapse
after strong winds.
Petitioner’s Reply
 Petitioner denies that the construction of the deep well
was included in the agreement to build the windmill
system. According to Petitioner the price of 60,000 was
solely for the windmill assembly and its installation,
exclusive of other incidental materials needed for the
project.
 Furthermore, petitioner disowns any obligation to repair or
rebuild the system as he delivered the said windmill in good
and working condition to respondent. According to
Petitioner, the collapse was attributable to a typhoon, a
force majeure which relieves him from any liability.
RTC Ruling
 The Trial Court held that the deep well was not part of the
windmill. This is evidenced by the proposals submitted by
Petitioner to Respondent. Due to the absence of the
agreement regarding the construction of the deep well, the
trial court concluded that it was not part of the project of
Petitioner.
o The Court adds that Plaintiff is not liable for the
collapse of the windmill as it was not proven that
the system fell down because of defect.
Court of Appeals Ruling
 Court of Appeals reversed the trial court ruling. Stating that
the deep well was included in the agreement of the parties
because the term was mentioned in the two proposals.
Furthermore, testimony of respondent who is the
proprietor of SPGMI, the company which installed the deep
well stated that Petitioner told him that the cost of the
deep well would be deducted from the contract price of
60,000.
 Due to this, the Court of Appeals ruled that the payment of
15,000 to SPGMI should be applied to his remaining
balance.
 Furthermore, the Court of Appeals rejects the claim of
force majeure, ordering Petitioner to rebuild the windmill
in accordance with the one year guarantee.
Issue
 Whether or not the payment of 15,000 for the deep well
should be included in the 60,000 for the windmill assembly.
 Whether or not Petitioner is obligated to rebuild the said
windmill
Ruling
 The Court modifies the decision ordering Respondent to
pay Petitioner the balance of 15,000 with interest at the
legal rate. Petitioner is ordered to reconstruct the
windmill subject to the one-year guaranty and to
complete the reconstruction within 3 months.
 The Court took notice that the proposal made by Petitioner
does not mention the installation of a deep well, even
remotely.
o In addition to this, in the itemization or
description of the materials to be used. There is
no mention of the two documents
o While there is a mention of deep well and deep
well pump, they do not indicate that the said
object is part of the windmill. AS the description
only describes that the pump is suitable for the
proposed windmill.
 Furthermore, it is a rule in the interpretation of contracts
that the intention of then parties shall be accorded
primordial consideration and in case of doubt, their
contemporaneous and subsequent acts shall be
considered.
 The Court ruled that payments made by a third person does
not apply as there is no creditor – debtor relationship
between Petitioner and SPGMI has been established
regarding the deep well.
o Proprietor also states that he entered into a
contract with petitioner for the construction of
deep well.
 Art 1174
o For the second issue, the Court ruled that in order
for a party to claim exemption by reason of
fortuitous event under 1174 of the Civil Code. The
event should be the sole and proximate cause of
the loss or destruction of the object of the
contract.
 4 Requisites of Fortuitous Event
o Cause of breach must be independent of the will
of debtor
o Event must be unforeseeable or unavoidable
o Event must render the debtor to fulfill his
obligation in a normal manner
o Debtor must be free from any participation in or
aggravation to the creditor.
  Art 1167
o Petitioner’s argument that Respondent was
already in default, hence, he should bear his own
loss is untenable. This is because in reciprocal
obligations, neither party incurs in delay if the
other does not comply or is not ready to comply.
o When the windmill failed to function, Petitioner
is supposed to repair it in accordance with the
guaranty. As provided in Article 1167, that if a
person is obliged to do something and fails to do
it, the same shall be executed at his cost.
Vernen Realty v. Court of Appeals
G.R 101762 | Jul 6, 1993 | Oblicon | Case 10 |Delay
Facts
 Mar. 2, 1981 – Petitioner and Private Respondent entered
into a contract called an offsetting agreement. The said
contract stipulates the different payments and the
agreement regarding the delivery of construction
materials for the purposes of the condominium units that
are being built by Petitioner.
o Private Respondent had paid Petitioner the
amount of 110,151.75 and at the same time,
delivered construction materials worth 219,727.
Pending the completion of the Phase 2 of the
Condominiums, Petitioner delivered to Private
Respondent Units 601 and 602 of the Phase 1 of
the Condominiums.
 1982 – Petitioner repossessed unit 602, as a consequence
of the repossession, Private Respondent had to rent
another unit for their use when they went to Baguio.
 May 10, 1982 – Officers of Private Respondent requested
for clarification of the petitioner’s action of preventing
them and their families from occupying condominium unit
602.
o Petitioner replied that the room was leased to
another tenant because Private Respondent had
not paid anything for purchase of the
condominium unit.
o Petitioner then demanded payment of 27,848.25
representing the balance of the purchase price of
Room 601.
 1983 – the loan application for the construction of the
Phase 2 of the condominiums was denied which resulted
into the stoppage of the construction of the condominium
project.
 June 21, 1985 – Private Respondent field a complaint with
the RTC for rescission of the Offsetting Agreement with
damages. Private Respondent alleges that petitioner had
stopped issuing purchase orders of construction materials
after April 1982 without valid reason which violated the
offsetting agreement between the two parties.
o For its reply, Petitioner alleges that it was private
respondent who could not deliver the supplies
stated in their agreement according to
Petitioner, Respondent stated that the supplies
were out of stock. Furthermore, Respondent had
given a higher price quote for the materials which
resulted to Petitioner seeking other suppliers.
For the issue of unit 602, petitioner states that his
was done because private respondent had not
paid anything for it.
 Dec. 16, 1986 – Private Respondent had paid 110,151.75 in
cash and made deliveries of construction materials worth
219,727 leaving a balance of 27,848.25 which represents
the purchase price of unit 601.
RTC Decision
 The trial court dismissed the complaint and ordered Private
Respondent to pay Petitioner its counterclaim the balance
due on the purchase price of unit 601.
Court of Appeals Decision
 The Court of Appeals reversed the trial court’s decision.
Issue
 Whether or not the circumstance of the case warrants a
rescission of the Offsetting Agreement prayed by Private
Respondent when he instituted the case before the RTC.
Ruling
 The Court denies the petition for lack of merit, costs
against petitioner.
 In this case, the court ruled that after a perusal of the
offsetting agreement, it is not a question that the said
agreement is reciprocal in nature.
o Reciprocal obligations are those created or
established at the same time, out of the same
cause and which results in a mutual relationship
of creditor and debtor between parties.
 In this type of obligation, the
performance of one is conditioned on
the simultaneous fulfillment of the
other obligation.
 Article 1191 of the Civil Code provides the remedy of a
rescission in case of reciprocal obligations where one of the
obligors fail to comply with what is incumbent upon him.
 The general rule is that rescission of a contract will not be
permitted for a slight or casual breach, but only for such
substantial and fundamental breach as would defeat the
very object of the parties in executing the agreement.
o However, the question of whether a breach of
contract is substantial depends upon the
attendant circumstances of the case.
 In this case, while petitioner argues that it was private
respondent who failed to perform the obligation in the
agreement. It averred that contrary to the C. A’s ruling, the
stoppage of the loan for the phase 2 of the condominiums
should not have any effect on the obligations in the
Offsetting agreement.
 o On the other hand, private respondent states
that the subject of the offsetting agreement is
phase 2 of the condominiums, which means that
since the construction of the phase 2 of the
condominiums failed to start, Private
Respondent had reason to rescind the contract as
it cannot wait forever for the delivery of the
condominium units.
 The Court ruled in this case that Private Respondent did not
fail to fulfill its obligation in the offsetting agreement. The
discontinuance of the delivery of construction materials
was rooted on the failure of petitioner to send purchase
orders to private respondent.
o In this case, Petitioner failed to produce the
purchase orders of Petitioner with Private
Respondent, however, Petitioner failed to
produce the same to the Court.
 The non-fulfillment of the obligation of Petitioner
constitutes a substantial breach of the offsetting
agreement. Since the construction of the Phase 2 of the
condominiums has stopped, it is impossible to fulfill the
obligation, thus, Private Respondent was correct to rescind
the contract.
Heirs of Luis Bacus v. Court of Appeals
G.R 127695 | Dec. 3, 2001 | Oblicon | Case 11 | Delay
Facts
 Jun. 1, 1984 – Luis Bacus leased to Private Repsondent
Duray a parcel of agricultural land in Talisay Cebu. The said
lease was for 6 years which ended on May 31, 1990. In the
said contract, an option to buy clause was provided.
o Under the said option to buy, the lessee had the
exclusive and irrevocable right to buy 2,000
square miles of the property within 5 years from
a year after the effectivity of the contract at 200 /
sqm. Rate shall be also adjusted in proportion to
the exchange rate of Peso and USD.
 Oct. 10, 1989 – Luis Bacus died.
 Mar 15, 1990 – The Duray spouses informed one of the heirs
of Luis Bacus that they were willing and ready to purchase
the property under the option to buy the clause. Thus, they
requested that the heir prepare the necessary documents
such as a Special Power of Attorney authorizing him to
enter into a contract of sale on behalf of his sisters.
 Mar 30, 1990 – Petitioners refused to sell the property, due
to this, Private Respondent had an adverse claim
annotated by the Register of Deeds of Cebu.
 Apr 5, 1990 – Duray filed a complaint for specific
performance against Petitioners with the Lupon
Tagapamayapa, asking that he be allowed to purchase the
lot specifically referred to in the lease contract with option
to buy.
o Private Respondent presented a certification
from a bank stating that arrangements were
being made to allow Mr. Duray to borrow funds
of 700,000 to be able to meet his obligations
under the contract with Luis Bacus
 Apr. 27, 1990 – Parties failed to reach an agreement, thus,
Private Respondents field a complaint for specific
performance with damages against Petitioners before the
RTC.
o According to Petitioners, their father conveyed
to them that he had no interest to exercise the
option because of insufficiency of funds, they
were surprised to learn of private respondent’s
demand, thus, they requested that private
respondent pay the purchase price in full, but
they refused, and the amount deposited by
Respondent was insufficient. Furthermore, what
was presented by Private Respondent was a bank
certificate which is not legal tender
 Oct 30, 1990 – Private Repsondents manifested in court
that they caused the issuance of a cashier’s check in
650,000 payables to petitioners at any time upon demand.
RTC Ruling
 RTC Ruled in favor of Private Respondents, finding that
defendants should perform their obligation in the option to
buy and to execute a document of sale over the property in
issue.
C.A Ruling
 The Court of Appeals denied the appeal of petitioners on
the ground that private respondents exercised their option
to buy the leased the property before the expiration of the
contract of lease.
Issue
 Whether or not Private Respondents incurred delay when
they did not deliver the purchase price or consign it on or
before the expiry of contract.
Ruling
 The Court denies the petition and affirms the C.A Ruling
 The Court ruled that obligations under an option to buy are
reciprocal obligations. Performance of one obligation is
conditioned on the simultaneous fulfillment of the other
obligation; notice of the creditor’s decision to exercise his
option to buy need not be coupled with actual payment of
the price, so long as this is delivered to the owner of the
property upon performance of his part of the agreement.
 Where the obligation is not yet due, consignation in court
of the purchase price is not yet required.
o In this case, when private respondents opted to
buy the property, their obligation was to advise
petitioners of their decision and their readiness
to pay the price. They were not yet obliged to
make actual payment. Only upon petitioners’
actual execution and delivery of the deed were
they required to pay.
 Consignation
o Act of depositing the thing due with the court or
judicial authorities whenever the creditor cannot
accept or refuses to accept payment and it
generally requires a prior tender of payment.
 Furthermore, 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.
o In this case, private respondents did not incur in
delay when they did not yet deliver payment nor
make a consignation before the expiration of the
contract.
Pacmac v. IAC
G.R. L-72405 | May 29, 1987 | Oblicon | Case 1 | Contravention of
Tenor of Obligations
Facts
 The controversy of the case started in a civil case wherein
Petitioner alleged that by virtue of an existing contract and
arrangement with Respondent, since 1953 to Aug. 3, 1965
has been the exclusive distributor of the latter’s products.
o In the said arrangement, Private Respondent was
obliged to periodically deliver and sell at its own
price any number or volume of its products
exclusively to Petitioner. Petitioner, in turn
would exclusively sell and distribute the products
to the open market, whole sale or retail at a price
set by Private Respondent.
 The said agreement, however, was terminated unilaterally
by Private Respondent causing damages to Petitioner.
o Private Respondent replied by denying that the
exclusive distributorship with Petitioner. Private
Respondent alleges that Petitioner is indebted to
them as of Sept. 30, 1965 a sum of 320,220.25
plus interest representing the unpaid purchase
price of Private Respondent’s products.
 The drift of the companies started when on February 17,
1962, a majority of the members of the board of directors
of Petitioner company approved an amendment to its
articles of incorporation thereby authorizing the said
corporation to engage in the merchandizing business as
one of its secondary purposes and also increasing the
product types it could manufacture.
o The said amendment was approved, and a
written contract was made regarding the
exclusive distributorship for two years starting
Nov 16, 1962 over two products made by Private
Respondent
RTC Ruling
 The trial court ruled in favor of petitioner. The trial court
considered the amount Petitioner owed to Private
Respondent which represented the unpaid purchase price
of Private Respondent sold and delivered to petitioner and
that the damages due to Petitioner was fixed in 189,908.76,
the court ordered Petitioner to pay 14,946.74 with interest.
Court of Appeals Ruling
 The Court of Appeals ordered Petitioner to pay
Respondent 304,855 with legal interest as the said amount
was agreed between the parties during the pre-trial
proceedings which was the balance due to the defendant
from plaintiff.
Issue
 What is the actual business relationship between Petitioner
and Private Respondent on Aug 3, 1965 when the deliveries
stopped?
Ruling
 The Court grants the petition and the questioned decision
of the IAC is reversed and set aside. Trial Court’s decision is
reinstated.
 The Court ruled that the IAC erred when it failed to consider
the evidence proving that the exclusive contract of
distributorship between the parties went beyond the
expiration of the two year written contract between the
parties.
  The records establish that after the termination of the two-
year written contract, the parties agreed on another term
regarding the distributorship arrangement would remain in
full force until one year from and after notice of its
termination would have given to Petitioner.
 The parties’ contract of exclusive distributorship
arrangement was still in existence on Aug 13, 19654 when
Private Respondent decided to stop its deliveries of its
products to Petitioner, Private Respondents unilateral act
of terminating the contract without legal justification
makes it liable for damages suffered by Petitioner in
pursuance to Art 1170 of the Civil Code.
Llorente Jr. v. Sandiganbayan
G.R 122166 | Mar 11, 1998 | Oblicon | Case 2 | Contravention of
Tenor of Obligations
Facts
 The case is about Petitioner, who is the mayor of Sindangan,
Zamboanga Del Norte was charged with violating Section 3 (e)
of R.A 3019 or the Anti-Graft and Corrupt Practices Act,
wherein he refused to sign and approve payrolls and vouchers
representing the payments of the salaries and emoluments of
an employee without valid cause and due process of law
causing injury to the employee.
 The case had two versions of its antecedent facts:
Prosecution’s Version
 According to the Prosecution, the controversy started when
the Petitioner, presiding over the Sangguniang Bayan passed
a resolution which he vehemently objecting to the assignment
of the complainant or employee as the Assistant Municipal
Treasurer of Singan.
 After this, Petitioner received a letter from the SB demanding
from the private complainant return of the amount overpaid to
her as salaries.
 After the said demand, a petition was filed against the accused
mayor before the RTC for Petitioner’s unjustified refusal to
sign and or approve her payrolls and vouchers representing her
salaries and other emoluments.
 Later on, Petitioner did not file an answer but instead, he
negotiated for an amicable settlement of the case. Then on
August 27, 1991, Petitioner and Complainant executed a
compromise agreement which states that Petitioner binds
himself to sign all vouchers and payrolls and other
emoluments and that the parties renounce their claims against
each other.
o While the said compromise agreement was signed
by the parties, Private complainant states that she
was only able to receive her payments on January
1993, in checks dated Dec. 29, 1992. Her other
emoluments were also delayed.
Petitioner’s Version
 While Petitioner admits that there were delays in the payment
of the claims of complainant, Petitioner sought to prove that
the delay was in good faith because according to Petitioner,
Private Complainant failed to submit the money and property
clearance to the SB’s delayed enactment of a supplemental
budget to cover Private Complainant’s claims.
Sandiganbayan’s Ruling
 The Sandiganbayan held that the delay or withholding of
Complainant’s salaries and emoluments was unreasonable
and caused undue injury to Private Complainant as being the
sole breadwinner of the family, the withholding of her salaries
resulted in difficulties in meeting her family’s financial
obligations.
o According to the Sandiganbayan, the defense of
Petitioner that complainant failed to attach the
clearance was held to be an afterthought that was
brought about by his own failure to issue any
memorandum requiring its submission.
o Furthermore, the Sandiganbayan ruled that the
Petitioner’s bad faith was the direct and proximate
 cause of Fuertes’ undue injury. Complainant’s
salaries and allowances were withheld for no valid or
justifiable reason. The delay of Petitioner was
intended to harass complainant because Petitioner
wanted to replace Complainant with his political
protégé. Furthermore, bad faith was further
evidenced by the instruction of Petitioner to the
outgoing treasurer not to give complaining
witnesses any work assignment, not to provide her
with office table and chair and not to act on her DTR.
Issue
 Whether or not petitioner acted in bad faith in refusing to sign
the vouchers and implement the compromise agreement until
the SB had enacted the appropriation ordinance.
Ruling
 Petition is GRANTED, Petitioner is Acquitted of violating
Sec 3 (e) of R.A 3019
 In this case, the court ruled that unlike in action for torts, undue
injury in Section 3 (e) cannot be presumed even after a wrong
or a violation of a right has been established – its existence
must be proven as one of the elements of the crim, and that
the undue injury be specified, quantified and proven to the
point of moral certainty.
o The causing of undue injury or giving of any
unwarranted benefits through manifest partiality,
evident bad faith or gross inexcusable negligence
constitutes the very act punished under the section.
 Undue injury definition
o The invasion of any legally protected interest of
another. In this context. Undue injury can also be
defined as actual damage.
 The court additionally states that it is fundamental in the law
on damages that one injured by a breach of a contract or by a
wrongful or negligent act or omission shall have a fair and just
compensation commensurate to the loss sustained as a
consequence of the defendant’s act.
o actual damages are primarily intended to simply
make good or replace the loss caused by the wrong.
Furthermore, damages must not only be capable of
proof but must be actually proven with reasonable
certainty or upon speculation, conjecture or
guesswork it cannot include any speculative
damages, which are too remote in an accurate
estimate of the injury.
 In this case, the court ruled that after an employee, whose
salary was withheld fully received her monetary claims, there
is no longer any basis for compensatory damages or undue
injury, there being nothing more the compensate.
 Undue injury entails damages that are more than necessary or
are excessive or illegal.
o In this case, the prosecution failed to prove any
other loss or damage sustained by complainant,
while it is noted that complainant suffered from the
withholding of her salary and emoluments, the
inconvenience is not constitutive of undue injury.
 The Court does not agree that the imputed act does not fall
under Sec. 3 (e) as according to Petitioner it requires a positive
act. The Court clarified that causing means to be the cause or
occasion of, causing does not limit itself to positive acts, it can
be passive acts or inaction which cause undue injury. What is
essential is that the injury is quantifiable and demonstrable.
FGU Insurance v. G.P Sarmiento Trucking
G.R 141910 | Aug 6, 2002 | Oblicon | Case 3 | Contravention of Tenor
of Obligations
Facts
 June 18, 1994 – Respondent undertook to deliver 30 units of
Condura S.D. white refrigerators aboard one of its Isuzu trucks,
driven by Mr. Eroles from the plant site of Concepcion
Industries in Manila to Dagupan City.
o While the truck was traversing the highway, it
collided with an unidentified truck causing it to fall
into a deep canal resulting in damage to the
cargoes.
 Petitioner, an insurer of the shipment paid to Respondent the
value of 204,450.00 being the subrogee of the rights industries
of Concepcion Industries sought reimbursement of the
amount it paid from Respondent. Since the trucking company
failed to heed the claim, Petitioner filed a complaint for
damages and breach of contract against Respondent
Respondent’s Reply
 Respondent replied that they have been the only hauler of
Concepcion Industries since 1988 and it was not engaged in
business as a common carrier. Furthermore, respondents
assert that the cause of damage was accidental.
 Respondent also filed a leave of court with motion to dismiss
the complaint by way of demurrer on the ground that
petitioner failed to prove that Respondent was a common
carrier.
RTC Ruling
 The RTC granted the motion to dismiss stating that petitioner
did not present any single evidence that would prove that
Respondent is a common carrier.
o The RTC added that under the law on obligations
and contracts, negligence or fault is not presumed.
The law on quasi delict provides for some
presumption of negligence but only upon the
attendance of some circumstances.
o Thus, Art 2185 provides that a person driving a
motor vehicle has been negligent if at the time of
the mishap he was violating any traffic regulation.
 In this case, there was no proof that
Respondent had been violating traffic
regulation, hence, the negligence does
not apply.
Court of Appeals Ruling
  The Court of appeals rejected the appeal of Petitioner and unlike culpa contractual would require the claimant for
ruled in favor of Respondent. In its ruling, the C.A stated the damages to prove negligence or fault on his part.
following: o The court applied the latin maxim of “res inter alios
o In order for the presumption of negligence provided acta aliis neque nocet prodest” or “a thing done
for under the law governing common carriers to between others does not harm or benefit others"
arise, petitioner must prove that respondent is a which means that such contract can neither favor
common carrier. Failing to do so would mean that nor prejudice a third person.
the presumption would not arise.  While Petitioner invokes the doctrine of Res Ipsa Loquitur, the
o The Court of Appeals added that basing from the said doctrine is not a rule of substantive law and as such it does
facts presented, Respondent had been the trucking not create an independent ground of liability – instead the said
corporation of Petitioner exclusively since 1079, doctrine is a mode of proof and relieves the plaintiff of the
thus, Respondent had no choice but to comply with burden of producing specific proof of negligence.
the directive of its principal, that Respondent is a o The doctrine is allowed in the following cases only:
private carrier.
 Event is of a kind which does not
Issue ordinarily occur in the absence of
 Whether or not Respondent may be considered as a common negligence
carrier  Other responsible causes including the
 Whether or not Respondent either as a common carrier or a conduct of plaintiff and third persons are
private carrier may be presumed to have been negligent when eliminated by the evidence
the goods it undertook to transport safely were damaged  Indicated negligence is within the scope
while in its protective custody and possession. of defendant’s duty to plaintiff.
 Whether or not Res Ipsa Loquitor is applicable in the case at  While Res Ipsa Loquitur generally finds relevance whether or
bar. not a contractual relationship exists between the plaintiff and
Ruling the defendant – for the inference of negligence arises from the
circumstances and nature of the parties – the requirement that
 The Court affirms the decision of the C.A and RTC insofar as
responsible other than those due to defendant’s conduct must
Respondent Driver is concerned, but the assailed order of
first be eliminated for res ipsa loquitur to apply. As it should be
the trial court and decision of appellate court are reversed
understood as being confined only to cases of pure tort or non-
as regards to Respondent which is ordered to pay Petitioner
contractual ones because negligence in culpa contractual
204,450 for the lost and damaged cargoes.
immediately attaches a failure of the convenant or its tenor.
 On the first issue, the court finds that the conclusion of the
lower courts was justified as Respondent is an exclusive
contractor and hauler of Concepcion Industries. A trucking
company which is an exclusive contractor and hauler of
another company, rendering or offering its services to no other
individual or entity, cannot be considered a common carrier.
o Common carriers are persons, corporations, firms or
associations iin the business of carrying or
transporting passengers or goods or both by land
water or air for hire or compensation, offering their
services to the public, whether to the public in
general or to a limited clientele in particular, but
never on an exclusive basis.
o The test of a common carrier is the carriage of
passengers or goods providing space for those who
opt to avail themselves of its transportation service
for a fee.
 In culpa contractual, the mere proof of the existence of the
contract and the failure of its compliance justify prima facie, a
corresponding right of relief; 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 there is a showing of
extenuating circumstances like proof of due diligence or the
attendance of a fortuitous event which can excuse him from
liability.
 In this case, the driver, who is not a party to the contract of
carriage may not be held liable under the agreement – action
against the driver can only be based on culpa aquiline which