MANUEL CRAME SY PANCO v. RICARDO GONZAGA et. al.
INSULAR GOVERNMENT v. W.O. BINGHAM, C.D. Squire, and Albert Bryan
Topic: Loss of the thing due; condona on or remission of debt, confusion or merger of rights
June 15, 1909 | Johnson, J.
RECIT-READY/SUMMARY:  Bingham bought from the Philippine a certain revolver along with
100 ammuni on rounds. Such contract s pulated that when the government demands the
revolver and the ammuni on to be returned, Bingham should do without delay. However, while
Bingham was pearl fishing, his boat sunk and that the revolver and the ammuni ons sunk along
with it. The government filed a case against Bingham for breach of contract. Fortunately, the
Supreme Court held that the government didn’t demand the revolver and that such defense of
fortuitous event is valid since it was independent of the will of the perpetrator. Hence, Bingham is
not liable for such breach of contract since the contract s pulated a determinate thing and that
there were no demands made prior to the fortuitous event.   FACTS:  An ac on was ins tuted by the plain ff against a certain Alejo Lanzon for the recovery of
 
DOCTRINE:   In  cases  of  delivery  of  a  determinate  thing,  the  obligor  is  not  liable  when  such  thing  is  lost  defendant Lanzon, which was levied on three carabaos owned by the la er. Said attachment was
through fortuitous events  released under a bond given by the defendants. The terms of the said bond are as follows:
FACTS:  Bingham and 2 other defendants (acted as sure es) obtained a permission from the
government to buy and use a revolver accompanied with 100 rounds of ammuni on. Such
contract s pulated that Bingham will deliver it when the government orders him to do so
(Revolver is now a determinate thing)
Unfortunately, Bingham was pearl fishing and that a storm occurred which sank the boat that
Bingham owned along with the revolver and ammuni ons. Such instance prompted the Philippine
government to file a case against Bingham for breach of contract.
The lower court upheld the defense of Bingham since the determinate objects were lost because
of fortuitous events thereby exculpa ng him from any liabili es. Furthermore, it was also
impossible for Bingham to recover such determinate items since it was already 80 fathoms below.
Hence, this pe on to the Supreme Court
  
ISSUE: Whether Bingham is liable for such loss of a determinate thing
HELD:  The Supreme Court held that when an obliga on consists of a delivery of a determinate
thing, it shall be ex nguished upon the lost of such thing provided that it is not the fault of the
obligor and that no demands were made before such lost. Furthermore, there were no
s pula ons made in the contract between Bingham and the Philippine government, which will
make Bingham liable even though no demands were made by the Philippine government in case
the thing was lost. Hence, impossibility of performance without negligence on the part of
Bingham ex nguishes the contract.
Topic: Fortuitous destruc on of subject ma er of an obliga on
March 27, 1908 | Mapa, J.
DOCTRINE/S: 
● Art.  1265.  Whenever  the  thing  is  lost in the possession of the debtor, it shall be presumed that 
the  loss  was  due  to  his  fault,  unless  there is proof to the contrary, and without prejudice to the 
provisions  of article 1165. This presumption does not apply in case of earthquake, flood, storm, 
or other natural calamity. 
● In  the  absence  of  express  stipulations  to  the  contrary,  an  obligation imposed upon one person 
to  return  certain  property  to  another  is  extinguished  by  the  fortuitous  destruction  of  the 
subject-matter of the agreement. 
 
the sum  of P300.42. The plain ff obtained a preliminary a achment of the property of the
 
Undersigned  ...  do  hereby  bind  ourselves,  jointly  and  severally,  in  favor  of  
the  plaintiff,  in  the 
aforesaid  sum  of  five  hundred  pesos,  on  the  condition  that,  should  judgment  be  rendered  in 
favor  of  the  plaintiff,  the  defendant,  on request, shall again deliver the attached carabaos to 
the officer of the court failure to do so, shall pay the value of the carabaos  

Court ruled that Lanzon was sentenced to pay to the plain ff the amount claimed by him.
However, the writ of execu on could not be enforced because no property of any kind subject to
execu on was found in the possession of the la er. Neither were the carabaos produced, in the
preliminary a achment of which had been raised. 
The defendants offered evidence to show that
the three carabaos above men oned had died of a disease prevailing in the province.  

 
ISSUE/S: 
1. Whether or not the death of the carabaos in this case is a fortuitous event?
2. Whether or not there was no fault a ributable to the respondent in the loss of the
carabaos? 
HELD: YES TO BOTH ISSUES   
The  testimony  of  the  aforesaid  witnesses  has not been contradicted or overcome in any manner 
at  the  trial, and is sufficiently proves that the three carabaos in ques on really died of the
"prevailing disease," and, therefore, without fault on the part of the defendants. 

The death of the carabaos being fortuitous,  it  results  upon  the  one  hand  that  the  obligation 
contracted  by  the  defendants  to  return  or  deliver  up  the  said  carabaos  was  extinguished  as  a 
matter of fact and of law (art. 1182, Civil Code)
They were exempted  from  the  other  subsidiary  obligation  contracted  by them, to pay the value
of the said carabaos in default of the carabaos themselves. n accordance with ar cle 1105 of the
above cited Civil Code, unless there is a legal provision or an express covenant, which in this case
does not exist, no one should be held to account for fortuitous cases. 

Lanzon  wins in so far as the defense on the death of the Carabaos. However, he is s ll
obliged to
pay the sum of money. The judgment appealed from is hereby reversed in so far as it sentences
the defendants to  pay  the  sum  of  P300.42  and  legal  interest  thereon, and the complaint is
dismissed in so far as it relates to said amount.
Obligations and Contracts | Week 5 Cases | Page 1 

ROMAN CATHOLIC BISHOP OF JARO v. GREGORIO DELA PEÑA
Topic: Loss of the thing due; condona on or remission of debt, confusion or merger of rights
November 21, 1913 | Moreland, J.
DOCTRINE:   No  one  shall  be  liable  for events which could not be foreseen, or which having been foreseen  REYNALDO LABAYEN et. al. v. TALISAY-SILAY MILLING CO. Inc.
were  inevitable,  with  the  exception  of  the  cases  expressly  mentioned  in  the  law  or  those  in  which  the  Topic: Loss of the thing due; condona on or remission of debt, confusion or merger of rights
obligation so declares  December 15, 1928 | Malcolm, J.
FACTS:  In 1898, the books Father De La Peña, as trustee, showed that he had on hand such
trustee the sum of P6,441, collected by him for charitable purposes. In the same year, he
deposited P19,000 in his personal accounts in the Hong Kong and Shanghai Bank.
During the war, he was arrested and the funds were confiscated (in favor of the government) on
ground that the funds were for revolu onary purposes. There was a ques on on whether the
P19,000 included the P6,441 and a careful examina on claimed it was included
ISSUE: Whether or not De La Peña is liable for the loss
HELD: NO.  FACTS:  Plain ffs possess Hacienda Dos Hermanos of Talisay in Occidental Negros, while
The Art. 1094 of the Civil Code states that “a person obliged to give something is also bound to
preserve it with the diligence pertaining to a good father of a family.
Art. 1105 provides that “no one shall be liable for events which could not be foreseen, or which
having been foreseen were inevitable, with the excep on of the cases expressly men oned in the
law or those in which the obliga on so declares.
By playing the money in the bank with his personal funds, he did not thereby assume an
obliga on different. If it were forcibly taken from his pocket or house by military forces, it is clear
that under the provisions of the civil code he would have been exempt. The fact that he placed
the trust fund with his personal account does not add to his responsibility.
DISSENTING OPINION OF JUSTICE TRENT:   HELD
Father De La Peña was a trustee of the funds. This money was then clothed with all immuni es
and protec on which the law seeks to invest trust funds, but when he mixed it with his personal
account, he stamped on the fund his own private marks and removed all kinds of protec on it
had. If the money had been deposited in the name of De La Peña as trustee or agent of plain ff,
Jus ce Trent argues it may be presumed military would not have confiscated the funds.
SC men ons US jurisprudence which men ons “Trustees are only bound to exercise the same
care and solicitude with regard to the trust property which they would exercise with regard to
their own. Equity will not exact more of them. They are not liable for a loss by the without their
fault. But this exemp on ceases when they mix the trust-money with their own, whereby it loses
its iden ty, and they become mere debtors." If he deposited the funds in his personal account and
used them for buying and selling sugar for example, there would be no doubt to his liability.
No evidence showed that he used funds for a purpose like such, but it will be noted that a
considerable length of me intervened from me of deposit un l me of confisca on. De La Peña
deposited on:
● June 27, 1898 P5,259;
● June 28 - P3,280; and
● August 5 - P6,000
These funds were withdrawn and again deposited all together on May 29, 1900, last deposit
amoun ng to P18,970. These facts show he had been using the funds in viola on of the trust
imposed in him.
RECIT-READY/SUMMARY:  So plain ffs own a hacienda and they entered into a contract with
defendant for the construc on of a railroad. Some engineer said na it would be very dangerous to
construct such. (Also hassle pa 'cause it would have to pass by OTHER haciendas, and other
owners did not permit the use of their lands for the said construc on) Thus, although the
construc on is possible, defendant is excused from performing its obliga on since it would be
dangerous. So basically, not required to perform something which is dangerous.
DOCTRINE:    A  party  cannot  be  compelled  to  perform  an  obligation  which,  although  possible,  would  be 
dangerous. 
defendant is a corpora on dedicated to the milling of sugar cane. The contract entered by the
par es required the construc on of a railroad through the hacienda. The said construc on,
though possible, would be dangerous as tes fied by civil engineer H.W. Corp. For the railroad to
extend to the hacienda, a distance of 4km. would require a gradual eleva on of 4.84% to 7%, thus
requiring 26 curves which would cost about P80,000.
  
ISSUES: 
1. Whether or not defendant can excuse itself from the obliga on since the construc on
would be dangerous
2. Whether or not plain ff can recover damages for breach of contract from the
defendant
 
1. YES.  
Allowing its construc on would counter to public policy and law by forcing the performance of a
contract undesirable and harmful.
2. NO. 
There is no breach of contract. It was shown that the owner of the haciendas through which the
railroad would have to pass would not grant permission to use his land for this purpose. On these
facts, it is held that the ac on for damages for the alleged breach of contract to grind sugar cane
cannot prosper.
NOTES:  The contract entered with the defendant is similar to contracts entered into by the
defendant and other planters. So basically, it was a general contract use by the defendant.
Contract states:
  
COVENANTS OF 'LA CENTRAL' (defendant)
"Third: That it shall build and a er building it shall do or cause to be done all that is
necessary for its preserva on in good condi on, and shall, during the period of this
agreement, without charge to the Producer or Producers, operate a permanent railroad
run by steam or motor, or both, for the use of the planta on or planta ons in the
transporta on of sugar cane, sugar, fer lizer, and all such ar cles as the producer may
need for his estate, his use and that of his family and employees, and shall cause the
main line or a branch thereof, as the case may be, to reach the point of the planta on
Obligations and Contracts | Week 5 Cases | Page 2 
 to be herea er described not farther than one mile from any of the boundaries of said
planta on, whenever the contour of the land, the curves, and eleva ons permit the
same; it shall provide said railroad with locomo ves or motors and wagons in a number
sufficient to make efficient the transporta on of sugar cane, sugar, fer lizer, and the
above men oned ar cles, and shall likewise build a branch of said railroad in such a
way that from the main line, mill, and warehouses, it shall reach the wharf above
men oned, and it shall also cause the yard of the factory near the sugar mill to be
available for use with switches or otherwise. All the steam locomo ves shall be
provided with safety spark devices. The railroad shall consist of a road or path
conveniently and duly designated so that, so far as possible, all the producers may
derive equal benefit from said railroad. The right-of-way for the main line of the railroad
shall be three and a half (3-1/2) meters wide measured from the center of the road to
each side, and the branches, switches, or curved shall have more if necessary."
  
OBLIGATION OF THE PRODUCER  employees must do the work given to them. However, those presta ons became impossible when
"Fi h: That he shall accept the provisions of clauses 7, 8, and 19 of the covenants of 'La
Central' and shall deliver the cane as therein provided; hereby binding himself to plant
each year according to the usage and custom of a good agriculturist not less than
one-half of his own lands devoted to sugar cane subject to the approval of the
Commi ee of Producers leaving the remainder uncul vated."
MUTUAL OBLIGATIONS  fault of the employees, ABF will s ll be liable to pay them wages; but the fact that the law does
"10. In case of . . . inability to secure, under reasonable condi ons such rights-of-way as
'La Central' may require, . . . 'La Central' shall no fy the Commi ee of Producers and
without incurring any liability for the non-fulfillment of the terms of this contract, its
effect shall be suspended in part or in whole during such period of incapacity."
ASIA BED FACTORY v. NATIONAL BED & KAPOK INDUSTRIES WORKERS’ UNION et. al.
Topic: Loss of the thing due; condona on or remission of debt, confusion or merger of rights
January 31, 1957 | Reyes, A, J.
RECIT-READY/SUMMARY:  ABF and Union entered into a CBA, which allowed ABF to give its
employees work on Sundays and pay them for that amount of work. The agreement also states
that ABF must pay its employees for no Sunday work if the fault is not due to the employees.
However, Blue Sunday Law was passed which prohibits work on Sundays. But due to the CBA,
the employees s ll demanded Sunday payment. Court ruled in favor of ABF.
DOCTRINE:    If  the  intention  of  the  law  is  lawful  and  valid,  it  would  not  infringe  the  constitutional  October 29, 1976 | Teehankee, J.
prohibition against the impairment of the obligations of the contract between parties. 
FACTS:  ABF and Union entered into a collec ve bargaining agreement (CBA) which contained the
following:
● Employees paid on a monthly basis at a daily rate based on their current compensa on
plus the addi onal increase of P0.30 cents a day;
● Employees shall be provided with work every Sunday and they will work for half a day.
● If there is no work to be done on Sunday and employees are not available for work
through no fault of theirs, they shall be en tled to payment of the equivalent of their
wages as if they had performed referred to that day.
● In the event that an employee shall absent for no excusable reasons, the Company shall
be en tled to reduce the wages.
ABF complied with the terms un l it was forced to suspend its business on Sundays due to RA
946 (Blue Sunday Law), which prohibits the opera on of certain enterprises on Sundays. Some of
the employees then demanded that they are en tled to Sunday wages even if they do not work
due to their CBA. Hence, pe oner filed in the CFI for a declaratory judgment that it ceased to be
bound by the CBA when the Blue Sunday Law took effect.
Union filed for a mo on for a summary judgment declaring that the employees were en tled to
the Sunday wages notwithstanding the passages of the Blue Sunday Law. RTC ruled that in view
of the Blue Sunday Law, pe oner was relieved from its compliance with its agreement to provide
work on Sundays and to pay them such wage. CA held that Appeal of Union is denied.
 
ISSUE:  Whether or not the passage of Blue Sunday Law relieved ABF from complying with its
agreement to pay its laborers Sunday wages?
HELD: YES. 
The clause in ques on provided for the mutual presta ons between the contrac ng par es, ABF
and Union. ABF has to provide its employees Sunday work and pay them for such work; and the
the Blue Sunday Law prohibited opera ons of business establishments during Sundays.
The CBA puts the employees on a daily basis at rates of compensa on. Payment for Sundays is
only due because of the work done.
While it is true that the CBA states that if no work is made available on those days without the
not give the employer the right to provide work on Sunday makes it seem that the Court will
deprive the employer of his right without relieving him of the obliga on to pay employees who
did no work.
Addi onally, there is no a empt by ABF to reduce the compensa on of the employees as alleged
by Union because it is the law itself that deprives the employees of work on Sundays, thus,
preven ng them to earn.
There is no merit to the conten on that to apply the Blue Sunday Law to their agreement would
infringe the cons tu onal prohibi on against the impairment of the obliga ons of contract. The
Blue Sunday Law is intended for the health, well-being, and happiness of the working class and is
a legi mate exercise of police power. Judgment of the lower court is affirmed
JESUS & EFIGENIA OCCEÑA v. Hon. RAMON JABSON, CA, and Tropical Homes Inc.
Topic: Ex nguishment of obliga on; loss of the thing due; NCC 1267
RECIT-READY:  Tropical Homes, Inc. agreed to develop a subdivision on the land own by the
pe oners. Respondents herein were going to be paid 40% of all cash receipts from the sale of
the lots. On Feb. 25, 1976, priv. respondent, filed a complaint for modifica on of the terms and
condi ons of its subdivision contract with pe oners. It was alleged that due to the increase of
price of oil, commodi es including raw materials required for development of work, the cost of
development has risen to levels which are unan cipated, unimagined and not within the
contempla on of the par es. CFI, rendered judgment modifying the contract. Pe oner appealed
and moved to dismiss the complaint for lack of cause of ac on. However, CA, also dismissed the
case on the ground under Art. 1267 of the CC. Pe oner now argue that worldwide increase in
prices cited by the priv. respondent does not cons tute sufficient cause of ac on for modifica on
of contract. The SC ruled in favor of the pe oner, on the basis of misapplica on of Art. 1267 CC,
and therefore, there is no cause of ac on.
DOCTRINE:   The  Civil  Code  authorizes  the  release  of  an  obligor  when the service has become so difficult 
as  to  be manifestly beyond the contemplation of the parties but does not authorize the courts to modify or 
Obligations and Contracts | Week 5 Cases | Page 3 
revise  the  subdivision  contract  between  the  parties  or  fix a different sharing ratio from that contractually  a. the lease shall be for a period of five (5) years which begins upon the issuance of permit
stipulated with the force of law bet. The parties.  by the Ministry of Human Se lement and renewable at the op on of the lessee under
   the terms and condi ons;
FACTS:  Priv. Respondent, Tropical Homes, Inc. filed a complaint for modifica on of the terms and b. the monthly rent is  P20,  000.00  which shall be increased yearly by 5% based on the
condi ons of its subdivision contract with pe oner. It was alleged that due to the increase in monthly rate;
price of oil and worldwide spiraling of prices, the cost of such development has risen which the c. the rent shall be paid yearly in advance, and the first  annual  rent  in  the  amount  of 
performance by the plain ff will result in situa on where defendants would be unjustly enriched P240,000 which is payable upon execution of the agreement; 
at the expense of plain ff. d. the property shall be used as premises of a rock crushing plan 
 
Under the said subdivision contract, priv. respondent “guaranteed (pe oners as landowners) as Pe oner then obtained a permit from the Ministry to build. Later, private respondent requested
the la er’s fixed and sole share and par cipa on an amount equivalent to 40% of all cash receipts the payment of the first annual rental, but pe oner alleged that the payment of rental should
from the sale of the subdivision lots. commence on the date of the issuance of the industrial clearance not on the date of signing of the
contract. Pe oner then expressed its inten on to terminate the contract because of financial
CFI rendered judgment modifying the terms and condi ons of the contract by fixing the proper and technical difficul es.
shares that should pertain to the par es out of the gross proceeds from the sales of subdivided
lots of subject subdivision. Pe oner moved to dismiss the complaint for lack of cause of ac on Private respondent didn’t want and instead, reiterated their demand of payment; but pe oner
and insist that the worldwide increase in prices does not cons tute a sufficient cause of ac on for argued that it was only obligated to pay P20, 000.00 as rental for one month. Private respondent
modifica on of the subdivision contract. CA affirmed the decision of the CFI and dismissed the then filed a case for specific performance in the RTC of Pasig. RTC ruled in favor of private
case on the ground under art. 1267 of the CC. respondents and ordering the pe oner to pay P492,000 which was the rentals for 2 years.
  
ISSUE:  Whether or not respondents may demand modifica on of the contract on the basis that Pe oner appealed to the CA. But CA affirmed. Pe oner contends that he should be released
the presta on has become so difficult. from the obliga on since by virtue of Art. 1266 and 1267, or the principle of Rebus sic Stantibus, 
pe oner asserts that it should be released from the obligatory force of the contract of lease
HELD: NO.  because the purpose of the contract did not materialize due to unforeseen events and causes
THE  SC  RULED  IN  FAVOR  OF  THE  PETITIONER AND GRANTED THE PETITION ON THE BASIS  beyond its control,  i.e.,  due  to  the  abrupt  change  in  political  climate  after  the  EDSA  Revolution 
THAT THERE IS NO CAUSE OF ACTION AND MISAPPLICATION OF ART. 1626 CC.  and financial difficulties. 
  
While the respondent court correctly cited in its decision the ra onale for Art. 1267 of the CC, it ISSUE: Whether or not pe oner could be released from his obliga on.
misapplied the same. The cited ar cle does not grant the courts this authority to remake, modify
or revise the contract or to fix the division of shares bet. Par es as contractually s pulated with HELD: NO. 
the force of law bet. the par es. It is a fundamental rule that contracts, once perfected, bind both contrac ng par es, and
obliga ons arising therefrom have the force of law between the par es and should be complied
In the case at hand, priv. respondent’s complaint seeks not release from the subdivision contract with in good faith. But there are excep ons: 1. One excep on is laid down in Ar cle 1266, which
but that the court “render judgment modifying the terms and condi ons of the contract by fixing reads: "The debtor in obliga ons to do shall also be released when the presta on becomes legally
the proper shares that should pertain to the par es out of the gross proceeds from the sales of or physically impossible without the fault of the obligor."
subdivided. Therefore, Respondent’s complaints for modifica on of contract has no basis in law
and therefore states no cause of ac on. Pe oner cannot, however, successfully take refuge in the said ar cle, since it is applicable only 
to obligations "to do," and not to obligations "to give." 
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION v. COURT OF APPEALS The  obligation  to  pay  rentals  or deliver the thing in a contract of lease falls within the prestation 
Topic: Rebus sic stan bus, NCC 1266-1267 "to  give";  hence,  it  is  not  covered  within  the  scope  of  Article  1266. At any rate, the unforeseen 
May 5, 1997 | Davide Jr., J. event  and  causes  mentioned  by  petitioner  are  not  the  legal  or  physical  impossibilities 
RECIT-READY:  Pe oner and Respondent entered in to a contract of lease. Respondent, yung contemplated  in  the said article. Besides, petitioner failed to state specifically the circumstances 
nag pa rent ng land, nag singil. Ayaw mag bayad ni pe oner and gusto niya na iterminate yung brought  about  by  "the  abrupt  change  in  the  political  climate  in  the  country"  except the alleged 
contract kasi invoking the principle of rebus sic stan bus na pag umiba na daw yung panahon prevailing uncertainties in government policies on infrastructure projects. 
since nung pag gawa ng contract compared sa present condi ons, hindi na valid yung contract.
Sabi ng SC hindi raw impressive yung argument ni pe oner kasi yung changes raw hindi naman The principle of rebus  sic  stantibus neither fits in with the facts of the case. Under this theory, the
daw siya “absolutely excep onal changes of circumstance” par es  stipulate  in  the  light  of  certain  prevailing  conditions,  and  once these conditions cease to 
   exist,  the  contract  also  ceases  to  exist.  This theory is said to be the basis of Ar cle 1267 of the
DOCTRINE:  “Only  absolutely  exceptional  changes  of  circumstances  that  equity  demands  the  release  of  Civil Code, which provides:
obligation on the part of the debtor” 
Art. 1267.  When  the  service  has  become  so  difficult  as  to  be  manifestly  beyond  the 
FACTS:  Private respondent and pe oner entered into a contract of lease of a parcel of land of contemplation of the parties, the obligor may also be released therefrom, in whole or in part. 
private repsondent. The terms and condi ons of the contract are:  
Obligations and Contracts | Week 5 Cases | Page 4 
This ar cle, which enunciates the doctrine of unforeseen events, is not, however, an absolute FACTS:  NATELCO is a telephone company rendering local and long distance telephone service in
applica on of the principle of rebus sic stan bus, which would endanger the security of Naga; while CASURECO II operates an electric power service in the same city. In 1977, they
contractual rela ons. The par es to the contract must be presumed to have assumed the risks of entered into a contract – Natelco will use the electric light posts of Casureco, free of charge, 10
unfavorable developments. It is therefore  only  in  absolutely  exceptional  changes  of  telephone connec ons in different places.
circumstances that equity demands assistance for the debtor. 
It is stated in the contract that the term of the contract shall be terminated for any reason that
In this case, pe oner wants this Court to believe that the abrupt change in the poli cal climate Casureco is forced to stop, abandoned its opera on as public service and becomes necessary to
of the country a er the EDSA Revolu on and its poor financial condi on  "rendered  the  remove the electric lightpost. A er 11 years, Casureco filed for reforma on of the contract on the
performance  of  the  lease  contract  impractical  and  inimical  to  the  corporate  survival  of  the  grounds:
petitioner." 
(FIRST CAUSE OF ACTION)
This Court cannot subscribe to this argument. As pointed out by private respondents: ● That it is too one-sided, most favorable only for the Natelco
It  is  a  matter  of  record  that  petitioner  PNCC  entered into a contract with private respondents  ● That it is not in conformity with guidelines of Na onal Electrifica on Administra on
on  November  18,  1985.  Prior  thereto,  it  is  of  judicial  notice  that  after  the  assassination  of  (NEA) [compensa on for use of posts P10/post/month]
Senator  Aquino  on  August  21,  1983,  the  country  has  experienced  political  upheavals,  ● That the wires installed by Natelco through the years became too heavy due to volume
turmoils,  almost  daily  mass  demonstrations,  unprecedented,  inflation,  peace  and  order  of its subscribers
deterioration,  the  Aquino  trial  and  many  other  things that brought about the hatred of people 
even  against  crony  corporations.  On  November  3,  1985,  Pres.  Marcos,  being  interviewed live  (SECOND)
on  U.S.  television  announced  that  there  would  be  a  snap  election  scheduled  for  February  7,  ● that since 1981, Natelco used 319 post without any contract with Casureco so it must
1986.  be paid of P10/post from 1981 up to me of filing of complaint [total of P267k] and
Natelco refused to pay
On  November  18,  1985,  notwithstanding  the  above,  petitioner  PNCC  entered into the contract 
of lease with private respondents with open eyes of the deteriorating conditions of the country.  (THIRD)
-Anent pe oner's alleged poor financial condi on, the same will neither release pe oner from ● that Natelco has poor servicing that caused great inconvenience and damages to the
the binding effect of the contract of lease. As held in Central Bank v. Court of Appeals, 22 cited tune of Casureco [not less than P100k]
by private respondents, mere  pecuniary  inability  to  fulfill  an  engagement  does  not  discharge  a 
contractual  obligation,  nor  does  it  constitute  a  defense  to  an  action  for  specific  performance.  In Natelco’s defense:
Private Respondents won. Yehey. ● that it must be dismissed because reasons are insufficient for ac on of reforma on of
contract
NOTES:  ● That it is barred by prescrip on since it was filed more than 10 years a er the contract
● Rebus  sic  stantibus – a treaty or agreement remains valid only if the same condi ons ● Barred by estoppel since Casureco seeks to enforce contract in same ac on
prevailing at the me of contrac ng con nue to exist at the me of performance ● Natelco claimed that Casureco had asked telephone lines in areas outside Naga which
Casureco’s posts were used and they refused to pay since what is due is more than its
REQUISITES OF ARTICLE 1267: claims against them
1. Service must become so difficult that it was manifestly beyond the contempla on of ● that they were categorized as “very high” and “superior quality” by NTC
both par es
2. One of the par es must ask for relief CASURECO presented numerous witnesses (5 to be exact) to support claims on those 3 cause of
3. The object must be a future service with future unusual change in condi ons ac on. For Natelco, A y. Maggay tes fied (one of the pe oners herein). He is a member of
Board of Direc ons of Casureco and at the same me the lawyer of Natelco. He claimed that
when the contract was executed. A y. Tena (member of BoD of Casureco) said that contract was
NAGA TELEPHONE CO. Inc. and Luciano Maggay v. COURT OF APPEALS and CASURECO II fair to both par es, and that the Inten on of the par es upon entering the contract was that
February 24, 1994 | Nocon, J. coverage would include whole area serviced by Natelco and that when Casureco asked for
SUMMARY:  Natelco and Casureco entered into a contract that Natelco will be using posts of telephone connec ons outside Naga and they did not charge Casureco for the installa on and
Casureco for its telephone lines for free. But a er 11 years, Casureco wanted a reforma on of reconnec ons so it’s naturally in return by use of Casureco’s posts.
the contract since it was too one-sided favoring only Natelco and that Natelco has been growing
and wire lines are excessive already. Casureco wants Natelco to pay but Natelco refused. RTC RTC ruling: reforma on of the contract to abolish inequi es, that pe oner pay P10/post/month
ordered Natelco to pay the monthly compensa on for use of posts and Casureco to pay monthly from the date of complaint, that respondent pay monthly billings of pe oner from date of
billings of telephone to Natelco. CA affirmed in pursuant with Art. 1267 which is the issue in this complaint. Pe oners appealed with CA. CA affirmed in pursuant to Art. 1267 of NCC. Natelco
case. SC also affirmed, contract be reformed due to peculiar circumstances which may affect asserts that said ar cle is not applicable because the contract does not involve the rendi on of
public service and Casureco’s business as well. service or personal presta on and it is not for future service with future unusual change and insist
   that in a previous case (Occeña case) be followed
DOCTRINE:  Although  Article  1267  does  not  grant  the  courts  to  remake,  revise  or  modify  contracts,   
peculiar circumstances necessitates exercise of the Court’s equity jurisdiction.  ISSUE: Whether or not the CA erred in using Art. 1267 to affirm the lower court’s decision
    
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HELD: NO.  not one strictly of deposit but one according to local custom for the pasturing of ca le, the
Art. 1267 speaks of  “service” but may be understood as referring to “performance” as well which
in this case is allowing the pe oners to use respondent’s posts. In this ar cle, it is not a
requirement that the contract be for future service with future unusual change.
Sen. Tolen no states that this ar cle observes doctrine of unforeseen events in where the par es
s pulate in the light of certain prevailing condi ons, and once these condi ons cease to exist, the
contract also ceases to exist BUT excep on to this case. In Occeña case, the par es were
released in pursuant with Ar cle 1267 but in this case, SC took into account possible
consequences if both par es would be released from the contract – that Natelco will be disrupted
of their service in public while Casureco will return all telephone units to Natelco causing
prejudice to its own business. This necessitates exercise of equity jurisdic on.
Although Ar cle 1267 does not grant the court the authority to remake, modify or revise a
contract, SC held that in reforma on of contracts, what is reformed is not the contract itself, but
the instrument embodying the contract. CA decision AFFIRMED.
ANCIETA PALACIO v. DIONISIO SUDARIO
Topic: Loss of the thing due
January 2, 1907 | Tracey, J.
SUMMARY:  Si Pe oner Palacio owner ng 81 ca les tapos pinatago or pina alaga (pasturing)
muna kay respondent/defendant Dionisio. In return bibigay niya daw yung 1/2 nung mga
magiging babies/calves pag may nanganak. Later on, upon her (Palacio) demand, 48 lang yung
nabalik sa kanya. Hence, nag ins tute siya ng ac on to recover yung 33 na nawawala. In defense,
sabi ni Dionisio due to fortuitous event daw kasi nagka flood daw, pero yung mga witnessed niya
failed to establish na may fortuitous event nga. Hence, the issue of WON DIONISIO SHOULD BE
HELD LIABLE. Sabi ng SC YES kasi pursuant to 1253 of CC, if itr-treat daw yung case as a
“deposit” which is just the same with pasturing of ca les as in the instant case, it is on the part of
the depositary to explain the loss. In the case, nag fail iprove ni Dionisio na may fortuitous event.
DOCTRINE:   Article  1265.  Whenever  the  thing  is  lost in the possession of the debtor, it shallbe presumed  of P700, without express finding as to costs. The defendant, a er entering a mo on for a new
that  the  loss  was  due  to  his  fault,  unless  there  is  proof  to  the  contrary,  and  withoutprejudice  to  the  trial, which was denied, appealed from said judgment and forwarded to this court the proper bill
provisions  of  article  1165.  This  presumption  does  not  apply  in  case  ofearthquake,  flood,  storm,  or other  of excep ons.
natural calamity. 
FACTS:  Plain ff Ancieta Palacio made an arrangement for the pasturing of 81 ca le with the
Defendant Dionisio Sudario. In return she would give ⁄ of the calves that might be born and
would pay defendant one-half peso for each calf branded.
Upon demand of the whole, only 48 heads of ca le were returned. The present ac on is for the
recovery of the remaining 33 heads. The Defendant, through a le er replying to the demand of
the 33 heads, put up the defense that ca le died of disease or were drowned in a flood, thus
excusing himself from the obliga on. The Defendant's witnesses, however, swore that of the
cows that perished, 6 died from overfeeding, and they failed to make clear the happening of any
flood sufficient to destroy the others.
ISSUE: Whether or not the defendant is liable for the 33 heads of ca le
  
HELD: YES.  that the voluntary surrender by a creditor to his debtor, of a private instrument proving a credit,
If we consider the contract as one of deposit, then under ar cle 1183 (Art. 1265, NCC) of 'the
Civil Code, the burden of explana on of the loss rested upon the depositary and under ar cle
1769 the fault is presumed to be his. The defendant has not succeeded in showing that the loss
occurred either without fault on his part or by reason of caso fortuito. If, however, the contract be
obliga ons of the par es remain the same. Lower Court decision affirmed. Plain ff Palacio won.
LEONIDES LOPEZ LISO v. MANUEL TAMBUNTING
Topic: Loss of the thing due; condona on or remission of debt, confusion or merger of rights
January 19, 1916 | Araullo, J.
RECIT-READY:  Tambun ng owed money to Lopez Liso for his professional medical services which
he rendered to one of the daughters of Tambun ng. He refused to pay despite repeated
demands. Tambun ng alleged that his obliga on is already ex nguished because he is in
possession of the receipt as a proof. The ques on is whether the obliga on is already
ex nguished. The SC held that it was not ex nguished. As a presump on, if the debtor holds the
receipt, it is freely given by the creditor. However, this presump on may be proven in the
contrary. In this case, despite Tambun ng having the receipt in possession, it was clear from the
tes mony and statements in court that the obliga on was not yet paid.
DOCTRINE:   Whenever the private instrument which evidences the debt is in the possession of the debtor, 
it will be presumed that the creditor delivered it of his own free will, unless the contrary is proven.   
  
FACTS:  These proceedings were brought to recover from Tambun ng the sum of P2,000, amount
of the fees, which, according to the complaint, are owing for professional medical services
rendered by the Lopez Liso to a daughter of Tambun ng from March 10 to July 15, 1913, which
fees the defendant refused to pay, notwithstanding the demands therefor made upon him by
Lopez Liso.
Tambun ng denied the allega ons of the complaint, and furthermore alleged that the obliga on
which the plain ff endeavored to compel him to fulfill was already ex nguished. Since he has
receipt as a proof, which he later on presented as evidence in court.
The Court of First Instance of Manila, a er hearing the evidence introduce by both par es,
rendered judgment on December 17, 1913, ordering the defendant to pay to the plain ff the sum
  
ISSUE: Whether or not the obliga on alleged in the complaint has already been ex nguished
HELD: NO. 
The Supreme Court ruled that the obliga on has not been ex nguished. The receipt signed by the
plain ff, for P700, the amount of his fees he endeavored to collect from the defendant a er he
had finished rendering the services in ques on was in the la er's possession, and this fact was
alleged by him as proof that he had already paid said fees to the plain ff. The court, a er hearing
the tes mony, reached the conclusion that, notwithstanding that the defendant was in possession
of the receipt, the said P700 had not been paid to the plain ff. (It is presumed that the obligation 
was  already  paid  because  there  was  a  receipt,  but  because  of  the  testimony  and  statements  in 
court, it was proven that the obligation is not yet extinguished.) 
Number 8 of sec on 334 of the Code of Civil Procedure provides as a legal presump on "that an
obliga on delivered up to the debtor has been paid." Ar cle 1188 of the Civil Code also provides
implies the renuncia on of the right of ac on against the debtor; and ar cle 1189 prescribes that
whenever the private instrument which evidences the debt is in the possession of the debtor, it
will be presumed that the creditor delivered it of his own free will, unless the contrary is proven.
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But the legal presump on established by the foregoing provisions of law cannot stand if sufficient
proof is adduced against it. In the case at bar the trial court correctly held that there was
sufficient evidence to the contrary, in view of the preponderance thereof in favor of the plain ff
and of the circumstances connected with the defendant's possession of said receipt. Furthermore,
in order that such a presump on may be taken into account, it is necessary, as stated in the laws
cited, that the evidence of the obliga on be delivered up to the debtor and that the delivery of
the instrument proving the credit be made voluntarily by the creditor to the debtor. In the present
case, it cannot be said that these circumstances concurred, inasmuch as when the plain ff sent
the receipt to the defendant for the purpose of collec ng his fee, it was not his inten on that that
document should remain in the possession of the defendant if the la er did not forthwith pay the
amount specified therein.

By  reason  of  the  foregoing,  we  affirm  the  judgment  appealed  from,  with  costs  of  this  instance 
against the appellant. So ordered.

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