CHARLES F. WOODHOUSE, plaintiff-appellant, vs.
2) Because of defendants' refusal to deliver to the plaintiff the
FORTUNATO F. HALILI, defendant-appellant.
Facts: On November 29, 1947, the plaintiff Woodhouse
entered into a written agreement with defendant Halili for a
partnership for the bottling and distribution of Mission soft
drinks franchise for and in behalf of the proposed partnership
and that the plaintiff was to receive 30% of the net profits of
the business.
Prior to entering into this agreement, plaintiff had informed the
Mission Dry Corporation that he had interested a prominent
financier who was willing to invest in the bottling and
distribution of the said beverages, and requested, in order
that he may close the deal with him, that the right to bottle
and distribute be granted him for a limited time under the
condition that it will finally be transferred to the corporation.
Pursuant to this request, plaintiff was given 30 days option on
exclusive bottling and distribution rights
Plaintiff prayed for the execution of the contract of
partnership, an accounting of the profits, and a share thereof
of 30% with damages. The defendant on the other hand
claims that the defendant’s consent to the agreement was
secured by false representation of plaintiff that he was the
owner or was about to become the owner of an exclusive
bottling franchise. Further, he contended that plaintiff did not
secure the franchise but was given to defendant himself. He
also filed counterclaim for damages.
Issue: W/n fraud or false representation, if it existed,
annuls the agreement to form the partnership
Held: No. Article 1270 of the Spanish Civil Code distinguishes
two kinds of (civil) fraud, the causal fraud, which may be a
ground for the annulment of a contract, and the incidental
fraud, which only renders the party who employs it liable for
damages. This Court has held that in order that fraud may
vitiate consent, it must be the causal (dolo causante), not
merely the incidental (dolo incidente), inducement to the
making of the contract.
If ever the plaintiff was guily of a false representation, this was
not the causal consideration, or the principal inducement, that
led plaintiff to enter into the partnership agreement. The main
cause that induced defendant to enter into the partnership
agreement with plaintiff, was the ability of plaintiff to get the
exclusive franchise to bottle and distribute for the defendant
or for the partnership.
***Jeff’s note – “MEMORIZE THE DEFINITION OF DOLO
CAUSANTE AND DOLO INCIDENTE. PLUS
DIFFERENCES”***
ANTONIO VAZQUEZ, petitioner, vs. FRANCISCO DE
BORJA, respondent.
Facts: Francisco de Borja against Antonio Vazquez and
Fernando Busuego to recover from them jointly and severally
the total sum of P4,702.70 upon three alleged causes of
action, to wit:
1) On January, 1932, the defendants jointly and severally
obligated themselves to sell to the plaintiff 4,000 cavans of
palay at P2.10 per cavan, to be delivered during the month of
February, 1932, the said defendants having subsequently
received from the plaintiff in virtue of said agreement the sum
of P8,400; that the defendants delivered to the plaintiff during
the months of February, March, and April, 1932, only 2,488
cavans of palay of the value of P5,224.80 and refused to
deliver the balance of 1,512 cavans of the value of P3,175.20
notwithstanding repeated demands.
said 1,512 cavans of palay within the period above
mentioned, the plaintiff suffered damages in the sum of
P1,000.
3) On account of the agreement above mentioned the plaintiff
delivered to the defendants 4,000 empty sacks, of which they
returned to the plaintiff only 2,490 and refused to deliver to
the plaintiff the balance of 1,510 sacks or to pay their value
amounting to P377.50; and that on account of such refusal
the plaintiff suffered damages in the sum of P150.
In his defense, Antonio Vasquez denied having entered into
the contract mentioned in the first cause of action in his own
individual and personal capacity and the said agreement was
made by the plaintiff with and to the Natividad-Vazquez
Sabani Development Co., Inc., of which the defendant was
the acting manager at the time the transaction took place.
Issue: W/n Vasquez is guilty of negligence in the
performance of the contract (culpa contractual)
Held: No. Counsel for the plaintiff, in his brief as respondent,
argues that altho by the preponderance of the evidence the
trial court and the Court of Appeals found that Vazquez
celebrated the contract in his capacity as acting president of
the corporation and although the corporation, thru Vasquez,
had received the sum of P8,400 from Borja, it’s still Vasquez
who shall be liable on the contract he entered into by him on
behalf of the corporation.
The Court ruled that such argument is invalid and insufficient
to show that Vasquez is personally liable on the contract. It is
well known that a corporation is an artificial being invested by
law with a personality of its own, separate and distinct from
that of its stockholders and from that of its officers who
manage and run its affairs. The mere fact that its personality
is owing to a legal fiction and that it necessarily has to act thru
its agents, does not make the latter personally liable on a
contract duly entered into, or for an act lawfully performed, by
them for and in its behalf. Such legal fiction may be
disregarded only when an attempt is made to use it as a cloak
to hide an unlawful or fraudulent purpose. No such thing has
been alleged or proven in this case neither is it contended
that he entered into said contract for the corporation in bad
faith and with intent to defraud the plaintiff.
The trial court and CA erred in finding Vasquez guilty of
contractual negligence and held him personally liable on that
account. They have manifestly failed to distinguish a
contractual from an extracontractual obligation. The fault and
negligence referred to in articles 1101-1104 of the Civil Code
are those incidental to the fulfillment or nonfulfillment of a
contractual obligation while the fault or negligence referred to
in article 1902 is the culpa aquiliana of the civil law, which
gives rise to obligations independently of any contract. The
fact that the corporation, acting thru Vazquez as its manager,
was guilty of negligence in the fulfillment of the contract, did
not make Vazquez principally or even subsidiarily liable for
such negligence. Since it was the corporation's contract, its
nonfulfillment, whether due to negligence or fault or to any
other cause, made the corporation and not its agent liable.
PAZ P. ARRIETA and VITALIADO ARRIETA, plaintiffs-
appellees, vs. NATIONAL RICE AND CORN
CORPORATION, defendant-appellant, MANILA
UNDERWRITERS INSURANCE CO., INC., defendant-
appellee.
Facts: Plaintiff and the appellant corporation entered into a
Contract of Sale of Rice, under the terms of which the former
obligated herself to deliver to the latter 20,000 metric tons of
Burmese Rice at $203.00 per metric ton. In turn, the
defendant Corporation committed itself to pay for the imported
rice "by means of an irrevocable, confirmed and assignable
letter of credit in U.S. currency in favor of the plaintiff-appellee
and/or supplier in Burma, immediately."
Despite the commitment to pay immediately "by means of an
irrevocable, confirmed and assignable Letter of Credit,"
however, it was only after a full month from the execution of
the contract, that the defendant corporation took the first step
to open a letter of credit by forwarding to the Philippine
National Bank its Application for Commercial Letter of Credit
of which read:
"We understand that our supplier, Mrs. Paz P. Arrieta, has a
deadline to meet which is August 4, 1952, and in order to
comply therewith, it is imperative that the L/C be opened prior
to that date. We would therefore request your full cooperation
on this matter."
On the same day, Arrieta, thru counsel, advised the appellant
corporation of the extreme necessity for the immediate
opening of the letter of credit since she had by then made a
tender to her supplier in Rangoon, Burma "equivalent to 5% of
the F.O.B. price of 20,000 tons at $180.70 and in compliance
with the regulations in Rangoon this 5% will be confiscated if
the required letter of credit is not received by them before
August 4, 1952."
On August 4, 1952, PNB informed the appellant corporation
that its application, "for a letter of credit for $3,614,000.00 has
been approved with the condition that 50% marginal cash
deposit be paid." Furthermore, the Bank represented that it
"will hold your application in abeyance pending compliance
with the above stated requirement." However, the appellant
corporation was not in any financial position to meet the
condition.
Consequently, the credit instrument applied for was opened
only more than two months from the execution of the contract.
As a result of the delay, the allocation of appellee's supplier in
Rangoon was cancelled and the 5% deposit, amounting to
524,000 kyats or approximately P200,000.00 was forfeited.
Appellee sent a letter to the appellant, demanding
compensation for the damages caused her in the sum of
$286,000.00, U.S. currency, representing unrealized profit.
Issue: W/n appellant is liable for damages
Held: Yes. Despite the defendant's awareness that it was
financially incompetent to open a letter of credit immediately,
appellant agreed in paragraph 8 of the contract to pay
immediately "by means of an irrevocable, confirmed and
assignable letter of credit," it must be similarly be held to have
bound itself too answer far all and every consequences that
would result from the representation.
Article 1170 of the Civil Code provides:
"Those who in the performance of their obligation are guilty of
fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable in damages."
Under this provision, not only debtors guilty of fraud,
negligence or default in the performance of obligations are
decreed liable: in general, every debtor who fails in the
performance of his obligations is bound to indemnify for the
losses and damages caused thereby. The phrase "in any
manner contravene the tenor" of the obligation includes any
illicit act which impairs the strict and faithful fulfillment of the
obligation, or every kind of defective performance.
VICTORINO D. MAGAT, petitioner, vs. HON. LEO D.
MEDIALDEA and SANTIAGO A. GUERRERO, respondents.
Facts: Defendant entered into a contract with the U.S. Navy
Exchange, Subic Bay, Philippines, for the operation of a fleet
of taxicabs, each taxicab to be provided with the necessary
taximeter and a radio transceiver. Isidro Q. Aligada, acting as
agent of the defendant, approached the plaintiff herein in
behalf of the defendant and proposed to import from Japan
thru the plaintiff herein or thru plaintiff's Japanese business
associates, all taximeters and radio transceivers needed by
the defendant in connection with his contract with the U.S.
Navy Exchange.
Aligada secured a firm offer in writing wherein the plaintiff
quoted in his offer a total price of $77,620.59 [U.S. dollars]
FOB Yokohama, the goods or articles therein offered for sale
by the plaintiff to the defendant to be delivered sixty to ninety
[60-90] days after receipt of advice from the defendant of the
radio frequency assigned to the defendant by the proper
authorities. Plaintiff received notice of the fact that the
defendant the offer.
By his letter dated October 7, 1972, addressed to the plaintiff
by the defendant's agent, defendant's agent qualified
defendant's instructions in the sense that plaintiff herein
should proceed to fulfill defendant's order only upon receipt by
the plaintiff of the defendant's letter of credit. However,
defendant fails and refuses to open the necessary letter of
credit to cover payment of the goods ordered by him. Plaintiff
filed a complaint to recover his losses and for damages.
Issue: W/n plaintiff has a right to recover the losses
Held: Yes. Indisputably, the parties, both businessmen,
entered into the aforesaid contract with the evident intention
of deriving some profits therefrom. Upon breach of the
contract by either of them, the other would necessarily suffer
loss of his expected profits. Since the loss comes into being
at the very moment of breach, such loss is real, "fixed and
vested" and, therefore, recoverable under the law.
Article 1170 of the Civil Code provides:
"Those who in the performance of their obligation are guilty of
fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof are liable for damages."
The phrase "in any manner contravene the tenor" of the
obligation includes any illicit act or omission which impairs the
strict and faithful fulfillment of the obligation and every kind of
defective performance.
The damages which the obligor is liable for includes not only
the value of the loss suffered by the obligee [daño emergente]
but also the profits which the latter failed to obtain [lucro
cesante]. If the obligor acted in good faith, he shall be liable
for those damages that are the natural and probable
consequences of the breach of the obligation and which the
parties have foreseen or could have reasonably foreseen at
the time the obligation was constituted; and in case of fraud,
bad faith, malice or wanton attitude, he shall be liable for all
damages which may be reasonably attributed to the
nonperformance of the obligation