Case 1: JUAN F. VILLARROEL, defendant, vs.
RULING:
BERNARDINO ESTRADA, plaintiff.
TOPIC: Article 1156. An obligation is a juridical necessity to give, to do or
not to do.
Doctrine:
Natural Obligation - cannot be enforced by action, but
which is binding on the party who makes it in conscience and
according to the natural law.
FACTS:
On May 9, 1912, Alejandro F. Callao, the mother of the defendant
Juan F. Villarroel, obtained from the Mariano Estrada and Severina
spouses a loan of P1,000 payable after seven years. Alejandra, passed
away, leaving Villaroel (defendant) as sole heir. The spouses Mariano
Estrada and Severina also passed away, leaving Bernardino Estrada
(plaintiff) as sole heir. On August 9, 1930, the defendant signed a
document in which he declared in owing the amount of P1,000, with an
interest of 12 percent per year. This action is about the collection of this
amount.
A. Defendant Arguments – the action to recover the original debt
has already prescribed when the claim was filed in this case
B. Plaintiff Arguments – action is not based on the original
obligation contracted by the defendant's mother, which has
already been prescribed, but on the one contracted by the
defendant on August 9, 1930 upon assuming compliance with
that obligation, already prescribed
ISSUE: WON Villaroel should pay the amount despite the prescription of
the original debt
Findings of the lower Court:
The Court of First Instance of Laguna, in which this action was
filed, ordered the defendant to pay the plaintiff the amount claimed of
P1,000 with his legal interests of 12 percent a year from August 9, 1930
to its full payment. Appeal of this sentence. Villaroel (defendant)
appealed.
Findings of the Court of Appeals: not stated in the full case
Rule: Yes. On August 9, 1930. He assumed the fulfillment of the
obligation. Villaroel voluntarily wanted to assume this obligation. The
appealed sentence is confirmed, with costs to the defendant.
APPLICATION:
The present action is not based on the original obligation
contracted by the defendant's mother, which has already been
prescribed, but on the one contracted by the defendant on August 9,
1930 upon assuming compliance with that obligation, already
prescribed. The defendant being the sole heir of the original debtor, with
the right to succeed him in his inheritance, that debt legally brought by
his mother, although it lost its effectiveness by prescription, is now,
however, for him a moral obligation.
The rule that a new promise to pay a prescreened debt must be
made by the same obligated person or by another legally authorized by
it, is not applicable to the present case in which it is not required
compliance with the obligation of the obligor originally, but which you
voluntarily wanted to assume this obligation.
CONCLUSION:
The case was not being based on the positive law but on equity and
natural law that do not grant a right of action to enforce their
performance, but only after voluntary fulfillment by the obligor, they
authorize what has been delivered or rendered by reason thereof.
Case 2: Fisher vs. Robb (69 Phil 101)
Facts:
Defendant John C. Robb was told by the board of directors of the
Philippine Greyhound Club, Inc. to make a business trip to Shanghai to
study the operation of a dog racing course. In Shanghai, defendant met
plaintiff A.O. Fisher who was a manager of a dog racing course. Plaintiff
upon knowing defendant’s purpose of his trip, became interested in the
Philippine Greyhound Club and asked defendant if he could be one of
the stockholders. Defendant answered in affirmative which thereupon
filed a blank subscription and sent Greyhound Club Php3,000 in payment
of the first installment of his subscription. Upon receiving a call from the
said club, he paid the second installment amounting to Php2,000. Due to
manipulations of those who control the said club and during defendant’s
absence, the company was changed to “Philippine Racing Club.”
Defendant endeavored the investments of those who subscribed,
particularly of that of plaintiff. Defendant,. through sending a letter,
assured plaintiff for any loss which he might suffer in connection with
Philippine Greyhound Club in the same that he could not expect anyone
to reimburse him for his own losses which were more than that of
plaintiff.
Issue:
Whether a moral obligation will sustain an express executory promise?
Held:
No. Defendant, although morally responsible because of the failure of
the enterprise, is not a consideration under Article 1261 of the Civil Code
as an essential element for the legal existence for an onerous contract
which could bind the promisor to comply with his promise.
Article 1261 states, “there is no contract unless the following requisites
exists: consent of the contracting parties; definite object; consideration.”
In the present case, it does not appear that plaintiff consented to the
said form of reimbursement. The first requisite of 1261 is lacking.
With regards of the third requisite, it is now a well-established rule that
a mere moral obligation arising from wholly ethical motives not
connected with any legal obligation will not furnish a consideration from
an executory promise.
Case 3: BARREDO (Defendant-Petitioner) v. GARCIA AND ALMIRIO
(Plaintiff-Respondents)
Facts:
May 3, 1936 on the road between Malabon and Navotas, province of
Rizal, there was a head-on collision between a taxi of the Malate Taxicab
driven by Pedro Fontanilla and a carretela guided by Pedro Dimapalis.
The carretela was overturned, and one of its passengers, 16 years old
boy Faustino Garcia, suffered injuries from which he died two days later.
A criminal action was filed against Fontanilla and he was convicted.
Severino Garcia and Timotea Almario, parents of the deceased on March
7, 1939, brought an action in the Court of First Instance of Manila
against Fausto Barredo as the sole proprietor of the Malate Taxicab and
employer of Pedro Fontanilla.
Fausto Barredo is shown to be careless in employing Fontanilla who had
been caught for several times for violation of the automobile law and
speeding. The defense is that the liability is only subsidiary, and as there
has been no civil action against Pedro Fontanilla, the person criminally
liable, Barredo cannot be held responsible in the case.
Issue:
Whether or not they can file for a separate civil action against Fausto
Barredo making him primarily and directly responsible.
Ruling: (Note: The Barredo case was decided by the Supreme Court prior
to the present Civil Code. However, the principle enunciated in said case,
that responsibility for fault or negligence as quasi-delict
is distinct and separate from negligence penalized under
the Revised Penal Code, is now specifically embodied in Art. 2177 of the
Civil Code.)
Yes. Authorities support the proposition that a quasi-delict or “culpa
aquiliana” is a separate legal institution under the Civil Code with a
substantivity all its own, and individually that is entirely apart and
independent from delict or crime.
To decide the main issue, we must cut thru the tangle that has, in the
minds of many, confused and jumbled together delitos and cuasi delitos,
or crimes under the Penal Code and fault
or negligence under Articles 1902-1910 of the Civil Code. According to
the Supreme Tribunal of Spain:
“Authorities support the proposition that a quasi-delict or ‘culpa
aquiliana’ is a separate legal institution under the Civil Code, with a
substantivity all its own, and individuality that is entirely apart and
independent from a delict or crime. Upon this principle, and on the
wording and spirit of Article 1903 of the Civil Code, the primary and
direct responsibility of employers may be safely anchored.
“It will thus be seen that while the terms of Article 1902 of the Civil Code
seem to be broad enough to cover the driver’s negligence in the instant
case, nevertheless Article 1903 limits cuasi-delitos TO ACTS OR
OMISSIONS ‘NOT PUNISHABLE BY LAW.’ But inasmuch as Article 365 of
the Revised Penal Code punishes not only reckless but even simple
imprudence or negligence, the fault or negligence under Article 1902 of
the Civil Code has apparently been crowded out. It is this overlapping
that makes the “confusion worse confounded.’ However, a closer study
shows that such a concurrence of scope in regard to negligent acts does
not destroy the distinction between the civil liability arising from a crime
and the responsibility for cuasi-delitos or culpa extra-contractual. The
same negligent act causing damages may produce civil liability arising
from a crime under Article 100 of the Revised Penal Code; or create an
action for cuasi-delito or culpa extra-contractual under Articles 1902-
1910 of the Civil Code. “Some of the differences between crimes under
the Penal Code are:
“1. That crimes affect the public interest, while quasi-delitos are only of
private concern.
“2. That consequently, the Penal Code punishes or corrects the
criminal act, while the Civil Code, by means of indemnification, merely
repairs the damage.
“3. That delicts are not as broad as quasi-delicts, because for the former
are punished only if there is a penal law clearly covering them, while the
latter, cuasi-delitos, include all acts in which ‘ any kind of fault
or negligence intervenes.’ However, it should be noted that not all
violations of the penal law produce civil responsibility, such as begging in
contravention of ordinances, violation of the game laws, infraction of the
rules of traffic when nobody is hurt.
“The foregoing authorities clearly demonstrate the separate individuality
of cuasi-delitos or culpa aquiliana under the Civil Code. Specifically they
show that there is a distinction between civil liability arising from
criminal negligence (governed by the Penal Code) and responsibility for
fault or negligence under Articles 1902 to 1910 of the Civil Code, and
that the same negligent act may produce either a civil liability arising
from a crime under the Penal Code, or a separate responsibility for fault
or negligence under Articles 1902 to 1910 of the Civil Code. Still more
concretely the authorities above cited render it inescapable to conclude
that the employer – in this case the defendant-petitioner – is primarily
and directly liable under Article 1903 of the Civil Code.”
Case 4: Mendoza v. Arrieta
G.R. No. L-32599, June 29, 1979, 91 SCRA 113
FACTS: A three- way vehicular accident involving a Mercedes Benz
owned and driven by petitioner; a private jeep owned and driven by
respondent Rodolfo Salazar; and a gravel and sand truck owned by
respondent Felipino Timbol and driven by Freddie Montoya. As a
consequence of said mishap, two separate Informations for Reckless
Imprudence Causing Damage to Property were filed against Rodolfo
Salazar and Freddie Montoya. The trial Court absolved jeep-owner-driver
Salazar of any liability, civil and criminal, in view of its findings that the
collision between Salazar’s jeep and petitioner’s car was the result of the
former having been bumped from behind by the truck driven by
Montoya. Neither was petitioner awarded damages as he was not a
complainant against truck-driver Montoya but only against jeep- owner-
driver Salazar.
After the termination of the criminal cases, petitioner filed a civil
case against respondents jeep-owner-driver Salazar and Felino Timbol,
the latter being the owner of the gravel and sand truck driven by
Montoya, for indemnification for the damages sustained by his car as a
result of the collision involving their vehicles. Jeep-owner-driver Salazar
and truck- owner Timbol were joined as defendants, either in the
alternative or in solidum allegedly for the reason that petitioner was
uncertain as to whether he was entitled to relief against both on only
one of them. Respondent Judge dismissed the Complaint against truck-
owner Timbol and jeep- owner-driver Salazar.
ISSUE: Whether or not the lower court in dismissing petitioner’s
complaint for damages based on quasi-delict against private
respondents
RULING: Timbol was liable for damages, Salazar was not.
In Timbol’s case, the respondent judge wrongfully sustained
Timbol’s allegations that the civil suit is barred by the prior joint
judgment in a criminal case filed against him, wherein no reservation to
file a separate case was made by petitioner and where the latter actively
participated in the trial and tried to prove damages against Salazar only.
For petitioner’s cause of action against Timbol in the civil case is based
on quasi-delict. Respondent Judge committed reversible error when he
dismissed the civil suit against the truck-owner, as said case may
proceed independently of criminal proceedings and regardless of the
result of the latter. Article 31 if the Civil Code provides that, “When the
civil action is based on an obligation not arising from the act or omission
complained of as a felony, such civil action may proceed independently
of the criminal proceedings and regardless of the result of the latter.”
Timbol’s submission that petitioner’s failure to make a reservation in the
criminal action of his right to file an independent civil action, as required
under Section 2, Rule 111, Rules of Court, bars the institution of such
separate civil action is untenable. For inasmuch as Article 31 of the Civil
Code creates a civil liability distinct and different from the civil action
arising from the offense of negligence under the RPC, no reservation is
required to be made in the criminal case. And so, the civil case filed
against Timbol is not barred by the fact that petitioner failed to reserve,
in the criminal action, his right to file an independent civil action based
on quasi-delict.
Insofar as Salazar is concerned, petitioner had opted to base his
cause of action against jeep-owner-driver Salazar on culpa criminal and
not on culpa aquiliana as evidenced by his active participation and
intervention in the prosecution of the criminal suit against said Salazar.
The latter’s civil liability continued to be involved in the criminal action
until its termination. Such being the case, there was no need for
petitioner to have reserved his right to file a separate civil action as his
action for civil liability was deemed impliedly instituted in criminal case.
Jeep-owner-driver Salazar cannot be held liable for the damages
sustained by petitioner’s car. In other words, “the fact from which the
civil might arise did not exist.” And even if petitioner’s cause of action as
against jeep-owner-driver Salazar were not ex-delictu, the end result
would be the same, it being clear from the judgment in the criminal case
that Salazar’s acquittal was not based upon reasonable doubt,
consequently, a civil action for damages can no longer be instituted. This
is explicitly provided for in Article 29 of the Civil Code quoted here
under: Art. 29. When the accused in a criminal prosecution is acquitted
on the ground that his guilt has not been proved beyond reasonable
doubt, a civil action for damages for the same act or omission may be
instituted. Such action requires only a preponderance of evidence … If in
a criminal case the judgment of acquittal is based upon reasonable
doubt, the court shall so declare. In the absence of any declaration to
that effect, it may be inferred from the text of the decision whether or
not the acquittal is due to that ground.
Thus, the case filed by Mendoza against Timbol may prosper as
the liability is based on the responsibility of the employer to the quasi-
delict of his employee. The case filed against Salazar cannot prosper as
the same is barred by res judicata.
Case 5: SONG Fo. & Company, plaintiff-appellee vs.
HAWAIIAN PHILIPPINE Co., defendant-appelant
G.R # 47 Phil 821
September 16, 2019
TOPIC: Obligations
FACTS: A written contract between Song Fo & Co. and Hawaiian-
Philippine Co. was made. They have agreed to deliver 300,000 gallons of
molasses. Mr. Song Heng, the representative of Song Fo & Co.,
demanded that an additional 100,000 gallons be delivered. It was
written as follows: “Mr. Song Fo also asked if we could supply him with
another 100,000 gallons of molasses, and we stated we believe that this
is possible and will do our best to let you have these 100,000 gallons….”
The payment of these molasses shall be done at the end of the month.
a.) Plaintiff-Appellee’s arguments (SONG Fo & Company – WON)
Filed a case for damages against Defendant-Appelant for breach
of contract for failure of the latter to deliver the remaining
molasses.
b.) Defendant-Appelant ‘s Arguments (Hawaiian Philippine Co. –
LOST)
Argued that it was compelled to cancel and rescind the said
contract because Plaintiff-Appellee had defaulted in the
payment for the molasses delivered to it under the contract
between the parties.
ISSUE: Whether or not Hawaiian Philippine Co. had the right to rescind
the contract of sale made with Song Fo & Co.?
Findings of the Lower Court:
In favour of Song Fo & Company.
Ordered the Hawaiian Philippine Co. to pay 70,369.50 with legal
interests and costs.
Findings of the Court of Appeals:
In favour of Song Fo & Company
The judgement condemned Hawaiian Philippine Co. to pay 35,317.93
with legal interest from the date of the presentation of the complaint,
and with costs.
RULING:
No, Defendant-appellant cannot rescind.
RULE:
Rescission will not be permitted for a slight or casual breach of contract,
but only for such breaches as are so substantial and fundamental as to
defeat the object of properties in making the agreement. A delay in the
payment for a small quantity of molasses for some twenty days is not
such a violation of an essential condition of the contract as warrants
rescission for non performance.
Application:
Hawaiian Philippine Co. waived this condition when it arose by accepting
payment of the overdue accounts and continuing with the contract.
Thereafter, Song Fo & Company was not default in payment so that the
Hawaiian Philippine Co. had in reality no excuse for writing its letter of
April 2, 1923,
We rule that the appellant had no legal right to rescind the contract of
sale because of the failure of Song Fo & Company to pay for the
molasses within the time agreed by the parties.
Conclusion:
Thus, defendant-appellee cannot rescind. Defendant-Appellee is ordered
to pay to Plaintiff-Appellee 3,000 pesos with legal interest from October
2, 1923 until payment.
Case 6: Sps. Velarde v. Court of Appeals, G.R. No. 108346, [July 11,
2001], 413 PHIL 360-376
FACTS:
Petitioners entered into a deed of sale with assumption of mortgage
with private respondents paying a downpayment of P800,000 and
assuming the mortgage amount of P1.8M in favor of BPI. Petitioners
further agreed "to strictly and faithfully comply with all the terms and
conditions appearing in the real estate mortgage signed and executed by
the vendor in favor of BPI . . . as if the same were originally signed and
executed by the vendee." As part of the deed, petitioner Avelina with
her husband's consent executed an undertaking that during the
pendency of the application for the assumption of mortgage she agreed
to continue paying said loan in accordance with the mortgage deed and
that in the event of violation of any of the terms and conditions of the
deed of real estate mortgage, she agreed that the P800,000
downpayment shall be forfeited as liquidated damages and the deed of
sale with assumption of mortgage shall be deemed automatically
cancelled. When the bank denied the application for assumption of
mortgage, petitioners stopped making payments. Thus, notice of
cancellation/rescission was sent to petitioners for non-performance of
their obligation. Aggrieved, petitioners filed a complaint against private
respondent for specific performance, nullity of cancellation, writ of
possession and damages. Both parties admitted that their agreement
mandated that petitioners should pay the purchase price balance of
P1.8M to private respondents in case the request to assume the
mortgage would be disapproved. The trial court dismissed the
complaint, but on reconsideration, directed the parties to proceed with
the sale. On appeal, the Court of Appeals upheld the validity of the
rescission. Hence, this recourse.
a) Petitioner’s Arguments:
Petitioners aver that their nonpayment of private respondents'
mortgage obligation did not constitute a breach of contract, considering
that their request to assume the obligation had been disapproved by the
mortgagee bank. Accordingly, payment of the monthly amortizations
ceased to be their obligation and, instead, it devolved upon private
respondents again.
Petitioners likewise claim that the rescission of the contract by private
respondents was not justified, inasmuch as the former had signified their
willingness to pay the balance of the purchase price only a little over a
month from the time they were notified of the disapproval of their
application for assumption of mortgage. Petitioners also aver that the
breach of the contract was not substantial as would warrant a rescission.
b) Respondent’s Arguments:
Defendants sent plaintiffs a notarial notice of cancellation/rescission of
the intended sale of the subject property allegedly due to the latter's
failure to comply with the terms and conditions of the Deed of Sale with
Assumption of Mortgage and the Undertaking.
Issues:
1.) The Court of Appeals erred in holding that the non-payment of the
mortgage obligation resulted in a breach of the contract.
2.) The Court of Appeals erred in holding that the rescission (resolution)
of the contract by private respondents was justified.
Findings of the Lower Court: Dismissed but later granted the parties to
proceed with the sale after a motion for reconsideration from the
petitioners.
Findings of the Court of Appeals: Set aside the prior ruling and
dismissed petitioner’s complaint.
Ruling of the Supreme Court: Affirmed CA’s decision.
Rule:
1.) In a contract of sale, the seller obligates itself to transfer the
ownership of and deliver a determinate thing, and the buyer to pay
therefor a price certain in money or its equivalent. 13
Private respondents had already performed their obligation through the
execution of the Deed of Sale, which effectively transferred ownership of
the property to petitioner through constructive delivery. Prior physical
delivery or possession is not legally required, and the execution of the
Deed of Sale is deemed equivalent to delivery. 14
Petitioners, on the other hand, did not perform their correlative
obligation of paying the contract price in the manner agreed upon.
Worse, they wanted private respondents to perform obligations beyond
those stipulated in the contract before fulfilling their own obligation to
pay the full purchase price.
2.) The right of rescission of a party to an obligation under Article 1191
of the Civil Code is predicated on a breach of faith by the other party
who violates the reciprocity between them. 16 The breach contemplated
in the said provision is the obligor's failure to comply with an existing
obligation. 17 When the obligor cannot comply with what is incumbent
upon it, the obligee may seek rescission and, in the absence of any just
cause for the court to determine the period of compliance, the court
shall decree the rescission.
In the instant case, the breach committed did not merely consist of a
slight delay in payment or an irregularity; such breach would not
normally defeat the intention of the parties to the contract. Here,
petitioners not only failed to pay the P1.8 million balance, but they also
imposed upon private respondents new obligations as preconditions to
the performance of their own obligation. In effect, the qualified offer to
pay was a repudiation of an existing obligation, which was legally due
and demandable under the contract of sale. Hence, private respondents
were left with the legal option of seeking rescission to protect their own
interest.
Rescission creates the obligation to return the object of the contract. It
can be carried out only when the one who demands rescission can
return whatever he may be obliged to restore. 20 To rescind is to declare
a contract void at its inception and to put an end to it as though it never
was. It is not merely to terminate it and release the parties from further
obligations to each other, but to abrogate it. from the beginning and
restore the parties to their relative positions as if no contract has been
made.
Case 7: BUENAVENTURA ANGELES, ET AL.,  plaintiffs-appellees, 
vs. URSULA TORRES CALASANZ, ET AL.,  defendants-appellants.||| 
G.R. No. L-42283, [March 18, 1985], 220 PHIL 10-23
TOPIC: Art. 1191
FACTS:
This is an appeal from the decision of the Court of First Instance
of Rizal|||  declaring the contract to sell as not having been validly
cancelled and ordering the defendants-appellants to execute a final
deed of sale in favor of the plaintiffs-appellees
Defendants-appellants|||  and plaintiffs-appellees|||  entered
into a contract to sell a piece of land located in Cainta, Rizal for the
amount of P3,920.00 plus 7% interest per annum.|||  plaintiffs-appellees
made a downpayment of P392.00 upon the execution of the contract.
They promised to pay the balance in monthly installments of P41.20
until fully paid, the installments being due and payable on the 19th day
of each month. The plaintiffs-appellees paid the monthly installments
until July 1966, when their aggregate payment already amounted to
P4,533.38. The defendants-appellants accepted and received delayed
installment payments from the plaintiffs-appellees|||  .Defendants-
appellants wrote the plaintiffs-appellees a letter requesting the
remittance of past due accounts but the later cancelled the said contract
because the plaintiffs-appellees failed to meet subsequent payments.
The plaintiffs' letter with their plea for reconsideration of the said
cancellation was denied by the defendants-appellants.|||  Then the
plaintiffs-appellees filed a case with the Court of First Instance of Rizal to
compel the defendants-appellants to execute in their favor the final
deed of sale alleging inter alia that after computing all subsequent
payments for the land in question.

a) Petitioner’s Arguments (BUENAVENTURA ANGELES, ET AL – “WON” )
They alleged that they have already paid the total amount of
P4,533.38 including interests, realty taxes and incidental expenses for
the registration and transfer of the land.
Plaintiffs-appellees on the other hand contend that
the Jocson ruling does not apply. They state that paragraph 6 of the
contract to sell is contrary to law insofar as it provides that in case of
specified breaches of its terms, the sellers have the right to declare the
contract cancelled and of no effect, because it granted the sellers an
absolute and automatic right of rescission.|||  Whether or not the defendants-appellants have the right to rescind the
b) Respondent’s Argument’s ( URSULA TORRES CALASANZ, ET AL. -
“LOST” )
Alleged in their answer that the complaint states no cause of
action and that the plaintiffs-appellees violated paragraph six (6) of the
contract to sell when they failed and refused to pay and/or offer to pay
the monthly installments corresponding to the month of August, 1966
for more than five (5) months, thereby constraining the defendants-
appellants to cancel the said contract. LLp
A motion for reconsideration was filed by the defendants-
appellants but was denied. They stated that the lower court erred in not
holding the contract to sell as having been legally and validly cancelled
and assuming that the said contract to sell has not been validly cancelled
, the LC erred in ordering the defendants to execute aq final deed of
sale in favor of plaintiffs
Defendants-appellants argue that the plaintiffs-appellees failed
to pay the August, 1966 installment despite demands for more than four
(4) months. The defendants-appellants point to Jocson  v. Capitol
Subdivision  where this Court upheld the right of the subdivision owner
to automatically cancel a contract to sell on the strength of a provision
or stipulation similar to paragraph 6 of the contract in this case. They
also argue that even in the absence of the aforequoted provision, they
had the right to cancel the contract to sell under Article 1191 of the Civil
Code of the Philippines.|||
ISSUE:
contract when the plaintiffs-appellees violate the contract to sell.
whether or not the contract to sell has been automatically and validly
cancelled by the defendants-appellants.||| 
FINDINGS OF THE Lower Court:
Rendered judgment in favor of the plaintiffs-appellees||| 
FINDINGS OF THE Court of Appeals:
RULING:
Petition is DENIED for lack of merit.|||Decision appealed from is
AFFIRMED with the modification that the plaintiffs-appellees should
pay the balance of SIX HUNDRED SEVENTY ONE PESOS AND SIXTY-
SEVEN CENTAVOS (671.67) without any interests. Costs against the
defendants-appellants.|||
Rule:
 Article 1191 is explicit. In reciprocal obligations, either party already paid the monthly installments for a period of almost nine (9)
has the right to rescind the contract upon the failure of the other to years. In other words, in only a short time, the entire obligation
perform the obligation assumed thereunder. Moreover, there is would have been paid. Furthermore, although the principal
nothing in the law that prohibits the parties from entering into an obligation was only P3,920.00 excluding the 7 percent interests, the
agreement that violation of the terms of the contract would cause plaintiffs-appellees had already paid an aggregate amount of
its cancellation even without court intervention P4,533.38.
"Well settled is, however, the rule that a judicial action \
for the rescission of a contract is not necessary where the Application:
contract provides that it may be revoked and cancelled for In this case, if we were to allow to sanction the rescission made by
violation of any of its terms and conditions' (Lopez v. the defendants-appellants will work injustice to the plaintiffs-
Commissioner of Customs, appellees. It would unjustly enrich the defendants-appellants.
Conclusion:
The rule that it is not always necessary for the injured party
Thus, the defendants-appellants' contention is without merit.
to resort to court for rescission of the contract when the contract
When the defendants-appellants, instead of availing of their alleged
itself provides that it may be rescinded for violation of its terms and
right to rescind, have accepted and received delayed payments of
conditions, was qualified by this Court in University of the
installments, though the plaintiffs-appellees have been in arrears
Philippines  v. De los  Angeles
beyond the grace period mentioned in paragraph 6 of the contract,
The right to rescind the contract for non-performance of one the defendants-appellants have waived and are now estopped from
of its stipulations, therefore, is not absolute. In Universal Food exercising their alleged right of rescission.
Corp.  v. Court of Appeals  the Court stated that — "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 making the
agreement. (Song Fo & Co. v. Hawaiian-Philippine Co., 47 Phil. 821,
827) The question of whether a breach of a contract is substantial
depends upon the attendant circumstances.|||  (Angeles v. Calasanz
The breach of the contract adverted to by the defendants-
appellants is so slight and casual when we consider that apart from
the initial downpayment of P392.00 the plaintiffs-appellees had
Case #8: Delta Motor Corporation vs. Genuino
170 SCRA 29, Feb. 8, 1989
DOCTRINES:
 Rescission will be ordered only where the breach complained of
is substantial as to defeat the object of the parties in entering
into the agreement. It will not be granted where the breach is
slight or casual. Further, the question of whether a breach of a
contract is substantial depends upon the attendant
circumstances.
FACTS:
Private Respondents are owners of an ice plant and cold storage
who ordered black iron pipes from Delta Motors (petitioner) for which
the latter provided two letter quotations indicating the selling price and
delivery of said pipes. The terms of payment are also included in the
letter quotations which must be complied with by the respondents.
Private respondents made initial payments on both contracts but
delivery of the pipes was not made by Delta Motors so that the
Genuinos were not willing to give subsequent payments notwithstanding
the agreed terms of payment requiring them of such.
In July 1972 Delta offered to deliver the iron pipes but the Genuinos
did not accept the offer because the construction of the ice plant
building where the pipes were to be installed was not yet finished.
Three years later, on April 15, 1975, Hector Genuino, in behalf of
España Extension Ice Plant and Cold Storage, asked Delta to deliver the
iron pipes within thirty (30) days from its receipt of the request. But
petitioner Delta is unwilling to deliver said iron pipes unless the
Genuinos agree to a new quotation price set by the former.
Private Respondents rejected the new quoted prices and instead
filed a complaint for specific performance with damages seeking to
compel Delta to deliver the pipes. Meanwhile, Delta, in its answer
prayed for rescission of the contracts pursuant to Art. 1191 of the New
Civil Code
RTC: Complaint for specific performance w/ damages seeking to compel
Delta to deliver the pipes
 Delta prayed for the rescission pursuant to NCC Art. 1191 1.
 Ruled in favor of Delta, ordering Delta to return the 15,900
downpayment to the Genuinos and the Genuinos to pay 10k
attorney’s fee to Delta. RTC rescinded the contracts.
COURT OF APPEALS: Ruled in favor of the Genuinos.
 Reversed RTC ruling. Ordered the Genuinos to pay the remaining
installments to Delta and to execute the Promissory Note
required in the contract and thereafter, for Delta to immediately
deliver pipes.
 Reasoning of CA:
1. Delta was aware that the construction was ongoing and
should have included in said contracts (Delta was the one
who prepared the contracts) a deadline of delivery, but it did
not. Neither did Delta insist on delivery when the Genuinos
refused to accept its offer of delivery.
2. Delta’s refusal to make delivery in 1975 unless the Genuinos
pay a higher price would mean an amendment of the
contracts. Delta already made us of the advance payments
made by the Genuinos. That would be unjust enrichment on
the part of Delta at the expense of the Genuinos and is
considered an abominable business practice.
1
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of
a period.
  MR by Delta denied. Thus, this petition.
ISSUE: WON the contract of sale should be rescinded?
RULING: No. While there is merit in Delta's claim that the sale is subject
to suspensive conditions, the Court finds that it has, nevertheless,
waived performance of these conditions and opted to go on with the
contracts although at a much higher price. Art. 1545 of the Civil Code
provides:
Art. 1545. Where the obligation of either party to a contract of sale is
subject to any condition which is not performed, such party may refuse
to proceed with the contract or may waive performance of the condition.
It would be highly inequitable for petitioner Delta to rescind the two (2)
contracts considering the fact that not only does it have in its possession
and ownership the black iron pipes, but also the down payments private
respondents have paid. Delta cannot ask for increased prices based on
the price offer stipulation in the contracts and in the increase in the cost
of goods. Reliance by Delta on the price offer stipulation is misplaced.
The moment private respondents accepted the offer of Delta, the
contract of sale between them was perfected and neither party could
change the terms thereof. Neither could petitioner Delta rely on the
fluctuation in the market price of goods to support its claim for
rescission.
APPLICATION:
Rescission will be ordered only where the breach complained of is
substantial as to defeat the object of the parties in entering into the
agreement. It will not be granted where the breach is slight or casual.
Further, the question of whether a breach of a contract is substantial
depends upon the attendant circumstances.”
The conduct of Delta indicates that the Genuinos’ non-
performance was not a substantial breach, let alone a breach of contract
as would warrant a rescission.
 Delta did not do anything, as testified by its Technical Service
department manager Crispin Villanueva, when respondents
refused their offer to deliver.
 3 years later, when respondents demanded delivery, Delta did
not raise any argument but merely demanded higher prices.
Delta cannot ask for increased prices based on the price offer
stipulation in the contracts and in the increase in the cost of goods.
Reliance by Delta on the price offer stipulation is misplaced. Said
stipulation makes reference to Delta’s price offer as remaining firm for
thirty (30) days and thereafter will be subject to its review and
confirmation.
The offers of Delta, however, were accepted by the private
respondents within the thirty (30)-day period. And as stipulated in the
two (2) letter-quotations, acceptance of the offer gives rise to a contract
between the parties:
“In the event that this proposal is acceptable to you,
please indicate your conformity by signing the space
provided herein below which also serves as a contract
of this proposal.”
Thus, the moment private respondents accepted the offer of
Delta, the contract of sale between them was perfected and neither
party could change the terms thereof.
CONCLUSION: CA decision affirmed. The parties should comply with the
original terms of their contracts.
Case 9: VERMEN REALTY DEVELOPMENT CORPORATION, petitioner, vs.
THE COURT OF APPEALS and SENECA HARDWARE CO., INC.,
respondents.
TOPICS:
1. Reciprocal Obligations, its Nature
2. Rescission (better term is “resolution”) of reciprocal obligation
FACTS:
1. Agreement. Petitioner Vermen Realty and private respondent
Seneca Hardware entered into a contract denominated as
"Offsetting Agreement". Stipulations of the agreement include:
 Seneca Hardware desires to buy from Vermen Realty two
residential condominium units, studio type, more or less
worth P276,000.
 Vermen Realty desires to buy construction materials from
Seneca Hardware worth P552,000.
 Vermen Realty shall pay Seneca Hardware P276,000 in cash
upon delivery of the construction materials and the other
P276,000 shall be paid in the form of 2 condominium units,
studio type worth P276,000.
 Pending the completion of VERMEN PINES CONDOMINIUM
PHASE II which is the subject of this contract, shall deliver to
the Seneca Hardware the possession of residential
condominium, Phase I, Unit Nos. 601 and 602, studio type.
 Upon completion of Phase II, Seneca Hardware has first
option to transfer from Phase I to Phase II under the same
price, terms and conditions.
2. Subsequent events.
 As found by the appellate court and admitted by both parties,
Seneca Hardware had paid and delivered construction
materials to Vermen Realty. Vermen delivered Units 601 and
602.
 In 1982, the Vermen repossessed unit 602. Seneca requested
for a clarification of Vermen’s action and had to rent another
unit for their use. Petitioner replied that Room 602 was
leased to another tenant because private respondent
corporation had not paid anything for purchase of the
condominium unit.
 In 1983, loan application for the construction of the Vermen
Pines Condominium Phase II was denied, thus construction
was stopped.
3. Regional Trial Court – Seneca lost. Seneca Hardware filed a
complaint with the RTC of Quezon City for the rescission of the
Offsetting Agreement with damages.
Respondent’s (Seneca) arguments in RTC. They alleged that
Vermen Realty had stopped issuing purchase orders of
construction materials, without valid reason, thus resulting in
the stoppage of deliveries of construction materials on its
(Seneca Hardware) part, in violation of the =Agreement.
Petitioner’s (Vermen) arguments in RTC. Petitioner alleged
that they issued purchase orders, it was private respondent
who could not deliver the supplies ordered, alleging that they
were out of stock. However, when Treasurer was asked to
produce the POs, she was unable to do so.
It also alleged that respondent quoted higher prices thus they
had to resort to other suppliers. Also for the leasing of Unit 602
to another, it was because Seneca had not paid for anything.
RTC’s Decision. Dismissed Seneca’s complaint and ordered the
payment of the balance for Unit 601. Seneca appealed before
the CA.
4. Court of Appeals – Seneca won. Reversed RTC’s decision.
5. Supreme Court – Seneca won. Petitioner Vermen sought a
review of CA’s decision with the SC.
Petitioner’s (Vermen) arguments in SC. Petitioner alleged
that they issued purchase orders, it was private respondent
who could not deliver the supplies ordered, alleging that they
 were out of stock. Respondent's own witness admitted that
petitioner had the discretion to order or not to order the
construction material from the former. Hence, when no
purchase orders were issued, no provision of the agreement
was violated. Furthermore, mere stoppage of the loan for the
construction of Phase II of the Vermen Pines Condominiums
should not have had any effect on the fulfillment of the
obligations set forth in the Offsetting Agreement.
Respondent’s (Seneca) arguments in RTC. They alleged that
Vermen Realty had stopped issuing purchase orders of
construction materials, without valid reason, thus resulting in
the stoppage of deliveries of construction materials on its
(Seneca Hardware) part, in violation of the Offsetting
Agreement. Further, it points out that the subject of the
Offsetting Agreement is Phase II of the Vermen Pines
Condominiums. It alleges that since construction of Phase II
has failed to begin it has reason to move for rescission of the
agreement, as it cannot forever wait for the delivery of the
condominium units to it.
ISSUES:
1. WON the circumstances of the case warrant rescission of the
Offsetting Agreement as prayed for by Private Respondent when
he instituted the case before the trial court
2. WON the non-fulfillment of the obligation constitutes
substantial breach of the agreement to warrant rescission. Note:
rescission of a contract will not be permitted for a slight or
causal breach, but only for such substantial and fundamental
breach.
RULING:
Rule: 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 reciprocal obligations, the
performance of one is conditioned on the simultaneous fulfillment of the
other obligation.
Application: The provisions of the Offsetting Agreement are reciprocal in
nature. Under the agreement, private respondent shall deliver to
petitioner construction materials worth P552,000.00. Petitioner's
obligation is three-fold: he shall pay private respondent P276,000.00 in
cash; he shall deliver possession of units 601 and 602, Phase I, Vermen
Pines Condominiums (with total value of P276,000.00) to private
respondent; upon completion of Vermen Pines Condominiums Phase II,
private respondent shall be given option to transfer to similar units
therein.
Rule: Article 1191 of the Civil Code provides the remedy of rescission in
(more appropriately, the term is "resolution") in case of reciprocal
obligations, where one of the obligors fails 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 causal breach, but only for such
substantial and fundamental breach as would defeat the very object of
the parties in executing the agreement. The question of whether a
breach of contract is substantial depends upon the attendant
circumstances.
Application: The discontinuance of delivery of construction materials to
petitioner stemmed from the failure of petitioner to send purchase
orders to private respondent. The allegation that petitioner had been
sending purchase orders to private respondent, which the latter could
not fill, cannot be given credence. Furthermore, petitioner would never
be able to fulfill its obligation in allowing private respondent to exercise
the option to transfer from Phase I to Phase II, as the construction of
Phase II has ceased and the subject condominium units will never be
available.
The impossibility of fulfillment of the obligation on the part of
petitioner necessitates resolution of the contract for indeed, the non-
fulfillment of the obligation aforementioned constitutes substantial
breach of the Agreement. The possibility of exercising the option of
whether or not to transfer to condominium units in Phase II was one of
the factors which were considered by private respondent when it
entered into the agreement. Since the construction of the Vermen Pines
Condominium Phase II has stopped, petitioner would be in no position to
perform its obligation to give private respondent the option to transfer
to Phase II. It would be the height of injustice to make private
respondent wait for something that may never come.
Case 10: CETUS DEVELOPMENT INC., petitioner, vs. COURT OF APPEALS
This is a petition for review on certiorari of the decision dated January 30, 1987
of the Court of Appeals in CA-GR Nos. SP-079450 entitled, "Cetus Development,
Inc., Petitioner vs. Hon. Conrado T. Limcaoco, Presiding Judge, Regional Trial
Court of Manila, Branch XI, Ederlina Navalta, et. al., respondents.”
Facts: The six (6) private respondents, (1) Ederlina Navalta, (2) Ong Teng, (3)
Jose Liwanag, (4) Leandro Canlas, (5) Victoria Sudario, and (6) Flora Nagbuya
were the lessees of the premises located at No. 512 Quezon Boulevard, Quiapo,
Manila, originally owned by the Susana Realty. These individual verbal leases
were on a month-to-month basis paid by the lessees to a collector of the Susana
Realty who went to the premises monthly.
Sometime in March, 1984, the Susana Realty sold the leased premises to the
petitioner, Cetus Development, Inc. From April to June, 1984, the private
respondents continued to pay their monthly rentals to a collector sent by the
petitioner. In the succeeding months of July, August and September 1984, the
respondents failed to pay their monthly individual rentals as no collector came.
On October 9, 1984, the petitioner sent a letter to each of the private
respondents demanding that they vacate the subject premises and to pay the
back rentals for the months of July, August and September, 1984, within
􏰀fifteen (15) days from the receipt thereof. Immediately upon the receipt of the
said demand letters on October 10, 1984, the private respondents paid their
respective arrearages in rent which were accepted by the petitioner subject to
the unilateral condition that the acceptance was without prejudice to the 􏰀ling
of an ejectment suit.
For failure of the private respondents to vacate the premises as demanded in
the latter dated October 9, 1984, the petitioner with the Metropolitan Trial
Court of Manila complaints for ejectment against the former.
In their respective answers, the six (6) private respondents interposed a
common defense. They claimed that their non-payment of the rentals for the
months of July, August and September, 1984, was due to the failure of the
petitioner (as the new owner) to send its collector; that they were at a loss as to
where they should pay their rentals.
The private respondents, thru counsel, later 􏰀filed a motion for was
consolidation of the six cases, the said cases were consolidated in The
Metropolitan Trial Court of Manila, Branch XII. On June 4, 1985, the trial court
rendered its decision dismissing the six cases.
Not satis􏰀ed with the decision of the Metropolitan Trial Court, the petitioner
appealed to the Regional Trial Court of Manila and the same was assigned to
Branch IX thereof. In its decision dated November 19, 1985, the Regional Trial
Court dismissed the appeal for lack of merit.
In due time, a petition for review of the decision of the Regional Trial Court was
􏰀filed by the petitioner with the Court of Appeals. Said petition was dismissed
on January 30, 1987, for lack of merit.
Aggrieved by the decision of the Court of Appeals, petitioner now comes to Us
in this petition.
Issue/s: Whether or not there exists a cause of action when the complaints for
unlawful detainer were 􏰀filed considering the fact that upon demand by
petitioner from private respondents for payment of their back rentals, the latter
immediately tendered payment which was accepted by petitioner.
Ruling: There is no cause of action for unlawful detainer and/or action for
ejectment.
Section 2, Rule 70 of the Rules of Court, is interpreted as follows ". . . the right
to bring an action of ejectment or unlawful detainer must be counted from
the time the defendants failed to pay rent after the demand therefor. It is not
the failure per se to pay rent as agreed in the contract, but the failure to pay the
rent after a demand therefor is made, that entitles the lessor to bring an action
for unlawful detainer. In other words, the demand contemplated by the above-
quoted provision is not a demand to vacate, but a demand made by the
landlord upon his tenant for the latter to pay the rent due. If the tenant fails to
comply with the said demand within the period provided, his possession
becomes unlawful and the landlord may then bring the action for ejectment."
(p. 28, Rollo, G.R. No. 77647)
Thus, for the purpose of bringing an ejectment suit, two requisites must concur,
namely: (1) there must be failure to pay rent or comply with the conditions of
the lease and (2) there must be demand both to pay or to comply and vacate
with in the period specified in Section 2, Rule 70, namely 15 days in case of
lands and 5 days in case of buildings.
There was no failure yet on the part of private respondents to pay rents for
three consecutive months. As the terms of the individual verbal leases which
were on a month-to-month basis were not alleged and proved, the general rule
on necessity of demand applies, to wit: there is default in the fulfillment of an
obligation when the creditor demands payment at the maturity of the
obligation or at anytime thereafter.
This is explicit in Article 1169, New Civil Code which provides that "(t)hose
obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfi􏰀llment of their
obligation." Petitioner has not shown that its case falls on any of the following
exceptions where demand is not required: (a) when the obligation or the law so
declares; (b) when from the nature and circumstances of the obligation it can be
inferred that time is of the essence of the contract; and (c) when demand would
be useless, as when the obligor has rendered it beyond his power to perform.
The facts on record fail to show proof that petitioner demanded the payment of
the rentals when the obligation matured. Coupled with the fact that no
collector was sent as previously done in the past, the private respondents
cannot be held guilty of mora solvendi or delay in the payment of rentals. Thus,
when petitioner 􏰀first demanded the payment of the 3-month arrearages and
private respondents lost no time in making tender and payment, which
petitioner accepted, no cause of action for ejectment accrued. Hence, its
demand to vacate was premature as it was an exercise of a non- existing right to
rescind.
While it is true that a lessor is not obligated to send a collector, it has been duly
established that it has been customary for private respondents to pay the
rentals through a collector. Besides Article 1257, New Civil Code provides that
where no agreement has been designated for the payment of the rentals, the
place of payment is at the domicile of the defendants. Hence, it could not be
said that they were in default in the payment of their rentals as the delay in
paying the same was not imputable to them. Rather, it was attributable to
petitioner's omission or neglect to collect.
Case 12: RAFAEL REYES TRUCKING CORPORATION, petitioner vs.
PEOPLE and ROSARIO DY (for herself and on behalf of the minors),
respondents
G.R. No. 129029. April 3, 2000.
TOPIC: Obligations and Contracts – Enforcement of Civil Liability
FACTS:
The petitioner, RAFAEL REYES TRUCKING CORPORATION, employed a
certain Romeo Dunca who was charged with the crime of reckless
imprudence resulting in double homicide and damage to property for
recklessly and negligently driving the vehicle registered in the name of
the petitioner, causing it to hit and bump another vehicle driven by a
certain Feliciano Balcita and Francisco Dy, Jr., families of the aggrieved
private respondents. The said persons sustained injuries which resulted
to the death of the Francisco. Thereafter, the offended parties made a
reservation to file a separate civil action against the accused. On
November 29, 1989, the offended parties filed with the RTC a complaint
against the petitioner, as employer of the accused, based on quasi-
delict. At the same time, the offended parties pursued the criminal
action without withdrawing the civil case quasi ex delicto filed against
the employer. In December of the same year, private respondents
withdrew the reservation to file separate civil action against the accused
and manifested to prosecute the civil aspect ex delicto in the criminal
action. However, there was no withdrawal of separate civil action based
on quasi delict against the petitioner. Thereafter, Regional Trial Court
found the petitioner subsidiarily liable in its supplemental decision in the
criminal case of the accused, which was then affirmed by the Court of
Appeals, hence the petition before the Supreme Court.
ISSUE:
Whether or not petitioner as owner of the truck involved in the accident
may be held subsidiarily liable for the damages awarded to the offended
parties in the criminal case against the truck driver despite the filing of a
separate civil action by the offended parties against the employer of the
truck driver
RULING:
No, the Supreme Court ruled that RAFAEL REYES TRUCKING
CORPORATION, as the employer of the accused who had been found
guilty in the criminal case, cannot be held subsidiarily liable.
In this case, the offended parties elected to file a separate civil action for
damages against the petitioner as employer of the accused, based on
quasi delict. In view of the reservation to file and the subsequent filing of
a separate civil action, the same was not instituted with the criminal
action. As a rule, when private respondents reserved the right to file the
separate civil action, they waived other available civil actions predicated
on the same act or omission of the accused, which includes recovery of
indemnity from reckless imprudence under Revised Penal Code.
“In negligence cases, the aggrieved party has the choice between (1) an
action to enforce civil liability arising from crime under Article 100 of the
Revised Penal Code; and (2) a separate action for quasi delict under
Article 2176 of the Civil Code of the Philippines. Once the choice is made,
the injured party can not avail himself of any other remedy because he
may not recover damages twice for the same negligent act or omission
of the accused. This is the rule against double recovery. In other words,
"the same act or omission can create two kinds of liability on the part of
the offender, that is, civil liability ex delicto, and civil liability quasi
delicto" either of which "may be enforced against the culprit, subject to
the caveat under Article 2177 of the Civil Code that the offended party
can not recover damages under both types of liability." In the instant
case, the offended parties elected to file a separate civil action for
damages against petitioner as employer of the accused, based on quasi
delict, under Article 2176 of the Civil Code of the Philippines.”
Case 13: LRT Authority vs. Navidad
[G.R. No. 145804/ 397 Scra 75. February 6, 2003.]
FACTS:
On 14 October 1993, Nicanor Navidad, then drunk, entered the
EDSA LRT station after purchasing a "token" (representing payment of
the fare). Junelito Escartin, the security guard assigned to the area,
approached Navidad. A misunderstanding or an altercation between the
two apparently ensued that led to a fist fight. At the exact moment that
Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was
coming in.
Navidad was struck by the moving train, and he was killed
instantaneously. Private respondent Marjorie Navidad, the widow of
Nicanor, along with her children, filed a complaint for damages against
Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit
Organization, Inc. and Prudent Security Agency for the death of her
husband. The trial court ruled in favor of private respondent by awarding
actual, moral and compensatory damages. Prudent Security Agency
appealed to the CA. The appellate court exonerated Prudent from any
liability for the death of Nicanor and instead held LRTA and Roman
jointly and severally liable. In exempting Prudent from liability, the
appellate court stressed that there was nothing to link the security
agency to the death of Navidad.
ISSUE:
Whether or not the LRTA and Roman are liable for the death of
Navidad.
RULING:
The law requires common carriers to carry passengers safely
using the utmost diligence of very cautious persons with due regard for
all circumstances. Such duty of a common carrier to provide safety to its
passengers so obligates it not only during the course of the trip but for
so long as the passengers are within its premises and where they ought
to be in pursuance to the contract of carriage. The statutory provisions
render a common carrier liable for death of or injury to passengers (a)
through the negligence or wilful acts of its employees or b) on account
of wilful acts or negligence of other passengers or of strangers if the
common carrier's employees through the exercise of due diligence could
have prevented or stopped the act or omission. In the absence of
satisfactory explanation by the carrier on how the accident occurred,
which petitioners, according to the appellate court, have failed to show,
the presumption would be that it has been at fault, an exception from
the general rule that negligence must be proved.
There being, similarly, no showing that petitioner Rodolfo
Roman himself is guilty of any culpable act or omission, he must also be
absolved from liability. Needless to say, the contractual tie between the
LRT and Navidad is not itself a juridical relation between the latter and
Roman; thus, Roman can be made liable only for his own fault or
negligence.
APPLICATION:
Law and jurisprudence dictate that a common carrier, both from
the nature of its business and for reasons of public policy, is burdened
with the duty of exercising utmost diligence in ensuring the safety of
passengers.
The foundation of LRTA's liability is the contract of carriage and
its obligation to indemnify the victim arises from the breach of that
contract by reason of its failure to exercise the high diligence required of
the common carrier. In either case, the common carrier is not relieved of
its responsibilities under the contract of carriage.
When an act which constitutes a breach of contract would have
itself constituted the source of a quasi-delictual liability had no contract
existed between the parties, the contract can be said to have been
breached by tort, thereby allowing the rules on tort to apply.
CONCLUSION:
Regrettably for LRT, as well as perhaps the surviving spouse and
heirs of the late Nicanor Navidad, this Court is concluded by the factual
finding of the Court of Appeals that "there is nothing to link (Prudent) to
the death of Nicanor (Navidad), for the reason that the negligence of its
employee, Escartin, has not been duly proven.
This finding of the appellate court is not without substantial
justification in the review of the records of the case. There being,
similarly, no showing that petitioner Rodolfo Roman himself is guilty of
any culpable act or omission, he must also be absolved from liability.
Case 14: EDSEL LIGA, petitioner, vs.
ALLEGRO RESOURCES CORP., respondent.
[G.R. No. 175554. December 23, 2008]
TOPIC: Art. 1159 and Art. 1169 of the Civil Code
Art. 1159. Obligations arising from contracts have the force of law
between the contracting parties and should be complied with in good
faith.
Art. 1169. Those obliged to deliver or to do something incur in delay
from the time the obligee judicially or extrajudicially demands from
them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order
that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it
appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a controlling motive for
the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it
beyond his power to perform.
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. From the moment one of the parties fulfills his
obligation, delay by the other begins.
FACTS:
-On October 10 1975, Ortigas & Company Limited Partnership entered
into an agreement with La Paz Investment & Realty Corporation (La Paz)
where Ortigas leased to La Paz a parcel of land in San Juan city which
consisted of 5,514 sqm for a 25 year period from January 1, 1976 to
December 31 of 2000.
- In the agreement, La Paz undertook to construct a 3 or 2 storey
commercial building which will contain first class stores subdivided in
stalls for lease to those interested.
- In compliance with this, La Paz constructed the Greenhills Shopping
Arcade and then divided the same into several stalls which were
subleased to other people.
- Petitioner Edsel Liga, one of the lessees, with the Unit No. 26 as the
space he leased.
- Since the lease expired in December 31, 2000, the stallholders through
Greenhills Shoppesville Unit Lessees Assoc. Inc. (GSULAI) made attempts
to extend their leasehold rights, however these efforts were futile
because they were all denied by Ortigas.However, petitioner was
allowed to continue his lease.
- On August 30 of 2001, Ortigas formally informed GSULAI of the
impending lease to respondent Allegro. On Sept. 3 of that year, Ortigas
and Allegro executed a contract of lease. That same day, the parties
executed the Addendum to the agreement, with Section 1 providing that
Allegro shall take immediate possession and control of the leased
promises upon signing the contract, it also empowers respondent to
assist in the collection of back rentals due to Ortigas for a certain period
of time.
- As the new lessee, respondent offered the same unit to petitioner
which eventually led to a lease agreement titled as Rental Information
where it was stipulated that Liga would pay P40k montly rental starting
September 1st. This also covered the back rentals in January through
August due to Ortigas. A P40k payment as one month advance and
another P40k as security deposit was also given pursuant to the
agreement. However, her compliance with the agreement ended as
soon it was executed.
- Despite repeated demands from Allegro, Liga failed to pay the rentals
as well as such back rentas from January to August of 2001. This led
Allegro to file an ejectment complaint against Liga with the MeTC of San
Juan, who ruled in favor of Allegro and ordered Liga to vacate the stall
and pay the back rentals. The lower court ruled that Allegro has rightful
ownership over the stall since Liga’s continued occupation was only by
mere tolerance which ceased when the contract was executed. Liga
managed to pay the P80k (advance + deposit).
- The lower court ordered the payment of P210k as back rentals from
October of 2001 to February of 2002, and P20k per monthas
compensation for the use of the stall from the filing of the ejectment
suit.
- RTC affirmed this but modified the monthly rental rate to P20k per
month, thus modifying the back rentals to P80,000.
- Respondent filed a petition before the CA for review assailing the
modified decision, which was granted.
PETITIONER’S ARGUMENTS:
Petitioner argued that the CA erred in ordering her to pay the back
rentals to Ortigas because the latter is not a party to the case, that the
ruling runs counter to the doctrine that judgment cannot bind persons
who are not parties to the action.
RESPONDENT’S ARGUMENTS:
Respondent questions why petitioners would want to reinstate the RTC
decision when in fact they had already applied for a writ of execution of
the 8 March 1997 Decision. Respondent is of the view that since
petitioners had already moved for the execution of the decision
awarding a smaller amount of damages or fair rental value, the same is
inconsistent with a petition asking for a greater fair rental value and,
therefore, a possible case of unjust enrichment in favor of the
petitioners.
ISSUE:
Whether or not the Court of Appeals erred in ordering Liga to pay:
1. to Ortigas the back rentals from January to August, 2001.
2. to Allegro back rentals of P40k per month until such time she
vacates it
3. to Allegro the amount of P20k for attorney’s fees and cost of the
suit.
FINDINGS OF THE LOWER COURT:
-MeTC ruled in favor of Allegro and ordered Liga to vacate the stall and
pay the back rentals. The lower court ruled that Allegro has rightful
ownership over the stall since Liga’s continued occupation was only by
mere tolerance which ceased when the contract was executed. Liga
managed to pay the P80k (advance + deposit).
- The lower court ordered the payment of P210k as back rentals from
October of 2001 to February of 2002, and P20k per monthas
compensation for the use of the stall from the filing of the ejectment
suit.
- RTC affirmed this but modified the monthly rental rate to P20k per
month, thus modifying the back rentals to P80,000.
FINDINGS OF THE COURT OF APPEALS:
-CA granted Allegro's petition and set aside the RTC's decision.It held
that after the expiration of La Paz's lease with Ortigas on 31 December
2000, Liga occupied the property merely by tolerance of Ortigas and that
it was incorrect for the RTC to extend the lease contract for two years
since it would infringe on the parties right to contract and Liga herself
had never raised as an issue the extension of the lease contract before
the MeTC. It found that Liga signed the Rental Information with Allegro
and agreed to a monthly rental of P40,000.00 starting 1 September
2001. The appellate court ordered Liga to pay Ortigas back rentals of
P20,000.00 per month for the period of 1 January 2001 to 31 August
2001 and P40,000.00 per month as rentals to Allegro starting 1
September 2001 until the property is vacated.
-In a Resolution dated 22 November 2006, the Court of Appeals denied
Liga's motion for reconsideration.
RULING: (SUPREME COURT)
1. Yes. Liga is correct in stating that Ortigas is not a party to the
case so no relief can be extended to it. Allegro cannot justify the
award as a legal representative by virtue of a provision
contained in its lease agreement with Ortigas. Allegro did not
aver in the complaint that it was acting as the legal rep of ortigas
and that it sought the payment of back rentals due to Ortigas. -
There was no allegation in the complaint that Allegro was
seeking such back rentals. The remedies to be granted should be
limited to the issues presented by the parties in their pleadings.
2. No. The Court cannot countenance the refusal to pay P40k
montly to allegro since she had already accepted to pay such
rental rate when she signed the contract titled as Rental
Information. The contract is the law between the parties.
Furthermore, Article 1159 of the Civil Code states that
“Obligations arising from contracts have the force of law
between the contracting parties and should be complied with in
good faith.” Unless the contract’s stipulations are contrary to
law, public order, morals, etc., the contract is binding. It is a
general principle of law that no one may be permitted to change
his mind or disavow and go back upon his own acts, or to
proceed contrary thereto, to the other party’s prejudice.
3. No. Law and jurisprudence support the award of attorney's fees
and costs of suit in favor of Allegro. The award of damages and
attorney's fees is left to the sound discretion of the court, and if
such discretion is well exercised, as in this case, it will not be
disturbed on appeal. Attorney's fees and costs of litigation are
awarded in instances where "the defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiff's plainly valid,
just and demandable claim."Having delivered possession over
the leased property to Liga, Allegro had already performed its
obligation under the lease. However, interest in favor of Allegro
is also awarded, pursuant to the following guidelines:
 With regard particularly to an award of interest in the concept of
actual and compensatory damages, the rate of interest, as well
as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from
the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed
from default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil Code.”
The back rentals in this case being equivalent to a loan or
forbearance of money, the interest due thereon is twelve
percent (12%) per annum from the time of extrajudicial demand
on 15 December 2001.
Petition denied, with the ff. modifications:
that the award of back rentals for the period of 1 January 2001
to 31 August 2001 to Ortigas & Company, Limited Partnership is
DELETED and Edsel Liga is ORDERED to pay respondent Allegro
Resources Corporation legal interest of twelve percent (12%) per
annum on the back rentals from the date of extrajudicial
demand on 15 December 2001 until fully paid.
RULE:
Article 1159 and Article 1169
APPLICATION:
Art. 1159 application:
-Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
*Unless the stipulations in a contract are contrary to law, morals, good
customs, public order or public policy, the same are binding as between
the parties. It is a general principle of law that no one may be permitted
to change his mind or disavow and go back upon his own acts, or to
proceed contrary thereto, to the prejudice of the other party. Likewise, it
is settled that if the terms of the contract clearly express the intention of
the contracting parties, the literal meaning of the stipulations would be
controlling.
Art. 1169 application:
Those obliged to deliver or to do something incur in delay from the time
the obligee judicially or extrajudicially demands from them the
fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order
that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it
appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a controlling motive for
the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it
beyond his power to perform.
-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. From the moment one of the parties fulfills his
obligation, delay by the other begins.
*In the absence of stipulation, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil
Code. The back rentals in this case being equivalent to a loan or
forbearance of money, the interest due thereon is twelve percent (12%)
per annum from the time of extrajudicial demand on 15 December 2001.
CONCLUSION:
The petition for review is DENIED. The Decision of the Court of Appeals
in CA-G.R. SP No. 86331 is AFFIRMED with the MODIFICATIONS that the
award of back rentals for the period of 1 January 2001 to 31 August 2001
to Ortigas & Company, Limited Partnership is DELETED and that
petitioner Edsel Liga is ORDERED to pay respondent Allegro Resources
Corporation legal interest of twelve percent (12%) per annum on the
back rentals from the date of extrajudicial demand on 15 December
2001 until fully paid.
Case 15: MAKATI STOCK EXCHANGE, INC., MA. VIVIAN YUCHENGCO,
ADOLFO M. DUARTE, MYRON C. PAPA, NORBERTO C. NAZARENO,
GEORGE UY-TIOCO, ANTONIO A. LOPA, RAMON B. ARNAIZ, LUIS J.L.
VIRATA, and ANTONIO GARCIA, JR. Petitioners, vs. MIGUEL V. CAMPOS,
substituted by JULIA ORTIGAS VDA. DE CAMPOS, Respondent
TOPIC:
Art. 1157. Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-
contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts.
An obligation imposed on a person, and the corresponding right granted
to another, must be rooted in at least one of these five sources
FACTS:
Campos (respondent) filed with Securities, Investigation and Clearing
Department (SICD) of SEC a petition against MKSE and its directors for,
among others (petitioners), the nullification of MKSE Board Resolution
which allegedly deprived him of his right to participate equally in the
allocation of Initial Public Offerings (IPOs) of corporations registered with
MKSE. He further prayed for the issuance of TRO to enjoin petitioners
from implementing or enforcing the subject Board Resolution. The TRO
was granted by the SICD, and subsequently, granted the application for
the issuance of Writ of Preliminary Injunction, which order was assailed
by the petitioners via Petition for Certiorari before the SEC Enbanc.
Meanwhile, a Motion to Dismiss was filed by the petitioners before the
SICD alleging that the petition became moot due to the cancellation of
MKSE’s license; that SICD had no jurisdiction; and for failure to state
cause of action. Said MTD was denied by SICD. The said denial was also
assailed by the petitioners before the SEC Enbanc.
 C. Respondent, in said Petition, sought: (1) the nullication of the
Resolution dated 3 June 1993 of the MKSE Board of Directors,
which allegedly deprived him of his right to participate equally in
the allocation of Initial Public Offerings (IPO) of corporations
registered with MKSE; (2) the delivery of the IPO shares he was
allegedly deprived of, for which he would pay IPO prices; and (3)
the payment of P2 million as moral damages, P1 million as
exemplary damages, and P500,000.00 as attorney's fees and
litigation expenses
D. Petitioners led a Motion to Dismiss based on the following grounds:
(1) the Petition became moot due to the cancellation of the license
of MKSE; (2) the SICD had no jurisdiction over the Petition; and (3)
the Petition failed to state a cause of action
ISSUE: Whether or not the petition failed to state a cause of action
RULING:
SEC Enbanc: Nullifies the order granting the issuance of Writ of
Preliminary Injuction, and orders the dismissal of petition filed by
Campos before the SICD.
Court of Appeals: Granted Campo’s petition, rendering as null
and void SEC Enbanc orders, and subsequently denied the MR filed by
the petitioners.
Rule: The petition filled by the respondent, Miguel Campos
should be dismissed for failure to state a cause of action. The Decision of
the Court of Appeals dated 11 February 1997 and its Resolution dated 18
May 1999 in CA-G.R. SP No. 38455 are REVERSED and SET ASIDE. The
Orders dated 31 May 1995 and 14 August 1995 of the Securities and
Exchange Commission e n b a n c in SEC-EB Case No. 393 and No. 403,
respectively, are hereby reinstated.
APPLICATION:
A cause of action is the act or omission by which a party violates a right
of another.
It contains three essential elements: 1) the legal right of the plaintiff 2)
the correlative obligation of the defendant and 3) the act or omission of
the defendant in violation of said legal right. If these elements are
absent, the complaint will be dismissed on the ground of failure to state
a cause of action.
Furthermore, the petition filed by respondent failed to lay down the
source or basis of respondent’s right and/or petitioner’s obligation.
Article 1157 of the Civil Code, provides that Obligations arise from: law,
Contracts, Quasi Contracts, Acts or omissions punished by law and quasi
delicts. Therefore an obligation imposed on a person and the
corresponding right granted to another, must be rooted in at least one
of these five sources.
The Respondent merely quoted in his Petition the MKSE Board
Resolution, passed sometime in 1989, granting him the position of
Chairman Emeritus of MKSE for life. However, there is nothing in the
said Petition from which the Court can deduce that respondent, by
virtue of his position as Chairman Emeritus of MKSE, was granted by law,
contract, or any other legal source, the right to subscribe to the IPOs of
corporations listed in the stock market at their offering prices. The
allocation of IPO shares was merely alleged to have been done in accord
with a practice normally observed by the members of the stock
exchange. There is no such law in this case that converts the practice of
allocating IPO shares to MKSE members, for subscription at their offering
prices, into an enforceable or demandable right.
CONCLUSION:
The mere assertion of a right and claim of an obligation in an
initiatory pleading, whether a Complaint or Petition, without identifying
the basis or source thereof, is merely a conclusion of fact and law. A
pleading should state the ultimate facts essential to the rights of action
or defense asserted, as distinguished from mere conclusions of fact or
conclusions of law.
Case 16: Diesel Construction Co., Inc V. UPSI Property Holdings, Inc.G.R.
No. 154885, March 24, 2008
UPSI Property Holdings, Inc., V. Diesel Construction Co., Inc. and FGU
Insurance Corp.,G.R. No. 154937, March 24, 2008
Facts:
On August 26, 1995, Diesel, as contractor, and UPSI, as
Owner, entered into a Construction Agreement for the interior
architectural construction works for the 14 th to the 16th floors of the UPSI
Building 3 Meditel/Condotel Project located on Gen. Luna St., Ermita,
Manila. Under the Agreement, as amended, Diesel, for PHP 12,739,099,
agreed to undertake the Project, payable by progress billing. As
stipulated, Diesel posted, through FGU Insurance corp.(FGU), a
performance bond in favor of UPSI. The Agreement contained provisions
and contract provisions on contract works and Project completing,
extensions of contract period, change/extra work orders, delays and
damages for negative slippage. Under the Agreement, the Project
Prosecution proper was to run for a period of 90 days from August 2,
1999 to November 8, 1999. They later agreed to move the
commencement date to August 21, 1999 and the completion was moved
to November 20, 1999. Also this includes the section obliging the
contractor, in case of unjustifiable delay, to pay the owner liquidated
damages in the amount equivalent to one-fifth (1/5) of one (1) percent
of the total Project cost for each calendar day of delay. During the
course of Project implantation, change orders were effective and
extensive sought. Diesel requested for extension owing to the following
causes or delaying factors: (1) manual hauling of materials from the 14th
to 16th floors; (2) delayed supply of marble; (3) various change orders;
and (4) delayed in the installation of shower assembly. UPSI disapproved
the desired extensions on the basis of the foregoing causes, thus putting
Diesel in default for a given contract of work. Furthermore, for every
default situation, UPSI assessed Diesel for liquidated damages in the
form of deductions from Diesel’s progress payments, as stipulated in the
Agreement. On March 16, 2000, Diesel sent a letter notice to UPSI CASE # 18 Pantaleon v. American Express International, Inc.
stating that the Project has been completed as of the date. UPSI, G.R. No. 174269, May 8, 2009
however, disregarded the notice, and refused to accept delivery of the
contracted premises, claiming that Diesel abandoned the Project
FACTS: Petitioner Atty. Polo Pantaleon and his family joined a Western
unfinished Diesel then filed a complaint compelling to pay the unpaid
Europe tour. In Coster Diamond House, Amsterdam, Mrs. Pantaleon was
balance of UPSI of the contract price, plus damages and attorney’s fees.
about to bought a 2.5 karat diamond brilliant cut, a pendant and a chain,
UPSI denied liability.
all of which totaled U.S. $13,826.00.
Issue:
To pay these purchases, around 9:15am, Pantaleon presented his
Whether or not Diesel can be entitled to full payment of the contract American Express Credit Card together with his passport. Pantaleon was
amount? already worried about further inconveniencing the tour group, he asked
the store clerk to cancel the sale. The store manager though asked him
Held:
to wait a few more minutes. Around 45 minutes after Pantaleon had
As evidenced, by UPSI’s Progress Report No. 19 for the period ending presented his AmexCard, Coster Diamond House decided to release the
March 22, 2000, Diesel’s scope of work, as of that date, was already items even without American Express International, Inc.’s approval of
97.56% complete. Such level of work accomplishment would, by any the purchase.
natural norm, be considered as substantial to warrant full payment
The spouses Pantelon returned. Their offers of apology were
of the contract amount, less actual damages suffered by UPSI. Article
met by their tourmates with stony silence. The tour group’s visible
1234 of the Civil Code says as much, “If the obligation had substantially
irritation was aggravated when the tour guide announced that the city
performed in good faith, the obligor may recover as though there had
tour of Amsterdam was to be canceled due to lack of remaining time.
been and complete fulfillment, less damages suffered by the obligee.
Mrs. Pantaleon ended up weeping.

After the star-crossed tour had ended, the Pantaleon family

proceeded to the United States before returning to Manila. Before
heading home to Manila, the family stopped over in the US and the
same delay happened with several purchases that they made with the
AmEx credit card.

After the Amsterdam incident that happened involving the delay

of American Express Card, Pantaleon commenced a complaint for moral
and exemplary damages before the RTC against American Express. He
said that he and his family experienced inconvenience and humiliation
due to the delays in credit authorization. RTC rendered a decision in
favor of Pantaleon. CA reversed the award of damages in favor of
Pantaleon, holding that AmEx had not breached its obligations to
Pantaleon, as the purchase at Coster deviated from Pantaleon's
established charge purchase pattern.
ISSUE: Whether or not AmEx is liable for breach of its contractual
obligations and is liable for damages
RULING:
AmEx had committed a breach of its obligations to Pantaleon.
The popular notion that credit card purchases are approved “within
seconds,” there really is no strict, legally determinative point of
demarcation on how long must it take for a credit card company to
approve or disapprove a customer’s purchase, much less one specifically
contracted upon by the parties. One hour appears to be patently
unreasonable length of time to approve or disapprove a credit card
purchase. The culpable failure of AmEx herein is not the failure to timely
approve petitioner’s purchase, but the more elemental failure to timely
act on the same, whether favorably or unfavorably. Even assuming that
AmEx’s credit authorizers did not have sufficient basis on hand to make a
judgment, there is no reason why it could not have promptly informed
Pantaleon the reason for the delay, and duly advised him that resolving
the same could take some time.
AmEx is liable for damages. The reason why Pantaleon is entitled
to damages is not simply because AmEx incurred delay, but because the
delay, for which culpability lies under Article 1170, led to the particular
injuries under Article 2217 of the Civil Code for which moral damages are
remunerative. The somewhat unusual attending circumstances to the
purchase at Coster – that there was a deadline for the completion of
that purchase by petitioner before any delay would redound to the
injury of his several traveling companions – gave rise to the moral shock,
mental anguish, serious anxiety, wounded feelings and social humiliation
sustained by Pantaleon, as concluded by the RTC.
Case 19: Solar Harvest Inc., petitioner vs. Davao Corrugated Carton
Corp, respondent
GR No. 176868, 26 July 2010
TOPIC: Article 1169 of the Civil Code
FACTS:
In the first quarter of 1998, petitioner, Solar Harvest Inc.,
entered into an agreement with respondent, Davao Corrugated Carton
Corporation, for the purchase of corrugated carton boxes, specifically
designed for petitioner’s business of exporting fresh bananas, at US
$1.10 each. The agreement was not reduced into writing. To get the
production started, petitioner deposited full payment in respondent’s US
Dollar Savings Account. Despite such payment, petitioner did not receive
any boxes from respondent.
a. Petitioner’s Aggreement (Solar Harvest Incorporated – LOST)
- Petitioner filed a complaint for sum of money and damages
against respondent. The Complaint stated that the parties
agreed that the boxes will be delivered within 30 days from
payment but respondent failed to manufacture and deliver
the boxes with such time.
- The repeated follow-up was made by the plaintiff for the
immediate production of the ordered boxes , but everytime ,
defendant would only show samples of boxes and make
repeated promises to deliver the said ordered boxes.
- That because of the failure of the defendant to deliver the
ordered boxes, plaintiff had to cancel the same and demand
payment and/or refund from the defendant but the latter
refused to pay and/or refund the US$40,150.00 payment
made by the former for the ordered boxes.
 b. Respondent’s Aggreement (Davao Corrugated Carton Corp. –
WON)
- As early as April 3, 1998, it had already completed
production of the 36,500 boxes, contrary to petitioner’s
allegation. According to respondent, petitioner, in fact made
an additional order of 24,000 boxes, out of which, 14,000
had been completed without waiting for petitioner’s
payment. Respondent stated that that petitioner was to pick
up the boxes at the factory as agreed upon, but petitioner
failed to do so.
- Respondent claimed that the boxes were occupying
warehouse space and that petitioner should be made to pay
storage fee at 60.00 per square meter for every month from
April 1998. Respondent prayed that judgement be rendered
ordering petitioner to pay $15,400.00, plus interest, moral
and exemplary damages, attorney’s fees, and costs of the
suit.
ISSUE:
Whether or not petitioner may claim reimbursement under Article 1191
of Civil Code.
FINDINGS OF THE LOWER COURT:
Judgement is rendered in favour of defendant and accordingly, plaintiff’s
complaint is hereby dismissed without pronouncement as to cost.
Defendant’s counterclaims are similarly dismissed for lack of merit.
FINDINGS OF THE COURT OF APPEALS:
The Court of Appeals denied the appeal of Solar Harvest Inc. for lack of
merit. The appellate court held that petitioner failed to discharge its
burden of proving what it claimed to be the parties agreement with
respect to the delivery of the boxes.
RULING OF THE SUPREME COURT:
The Court of Appeals decision is affirmed.
RULE:
In reciprocal obligations, as in a contract of sale, the general rule is that
the fulfilment of the parties’ respective obligation should be
simultaneous. Hence, no demand is generally necessary because, once a
party fulfils his obligation and the other party does not fulfil his, the
latter automatically incurs in delay. But when the different dates for the
performance of obligation are fixed., the default for each obligation
must be determined by the rules given in the first paragraph of the
present article, that is, the other party would incur in delay only from
the moment the other party demands fulfilment of the formers
obligation. Thus, even in reciprocal obligations, if the period for the
fulfilment of the obligation is fixed, demand upon the obligee is still
necessary before the obligor can be considered in default and before a
cause of action for recission will accrue.
APPLICATION:
Evident from the records and even from the allegations in the complaint
was the lack of demand by petitioner upon respondent to fulfill its
obligation to manufacture and deliver the boxes. The Complaint only
alleged petitioner made a “follow-up” upon respondent, which,
however, would not qualify as a demand for the fulfilment of the
obligation. Petitioner’s witness also testified that they made a follow-up
of the boxes, but not a demand. Note is taken on the fact that, with
respect to their claim for reimbursement, the complaint alleged and
witness testified that a demand letter was sent to respondent. Without a
previous demand for the fulfilment of obligation, petitioner would not
have a cause of action for rescission against respondent as the latter
would not yet be considered in breach of its contractual obligation.
CONCLUSION:
The CA decision is affirmed, petitioner is given a period of 30 days from
notice within which to cause the removal of the 36,500 boxes from
respondent’s warehouse. After the lapse of said period and petitioner
fails to effect such removal, respondent shall have the right to dispose of
the boxes in any manner it may fit deem.