Bambalan, Dexter John N.

ABPS3A
PS 120 MTH 3:40-5:30
CASE DIGEST 1
Chapter 1 – General Provisions of Obligations

1. ARTICLE 1156
G.R. NO. 158086 February 14, 2008
ASJ CORPORATION and ANTONIO SAN JUAN, Petitioners, vs . SPS.
EFREN & MAURA EVANGELISTA, Respondents.
FACTS:
This case is a petition for review on certiorari on the decision of the Court of Appeals
affirming the decision of the Regional Trial Court of Malolos, Bulacan Branch 9 in
Civil Case No. 745-M-93.
Respondents with the style and name of R.M.  Sy Chicks are active in large-scale
enterprises of buying, hatching and distributing eggs (chicks) in Bulacan and New
Ecija. The respondents used hatchery facilities of ASJ Corp. for the incubation and
hatching of these eggs, a business that had been properly licensed on behalf of San
Juan and his family.
The respondents delayed payments for the services of the ASJ Corp after years of
business with ASJ Corp. causing the owner San Juan to refuse to release the
hatched eggs. San Juan sent Php 15,000 for partial compensation by the
respondents, but before they released the picks and by-products, San Juan insisted
on settling the full accounts of the respondents. He also threatened them answering
to force their vehicle and arrest them at the hatchery compound if they returned to
settle their accounts entirely unprepared.
Before the police authority, the parties attempted to negotiate nice, but failed. ASJ
Corp. and San Juan were held by the RTC solidarily responsible for actual and moral
damages and attorney's fees, and for the depletion of the losses incurred by the
chicks and by-products. The Court of Appeal upheld the ruling and added exemplary
damages on appeal.
ISSUE:
Whether or not Bilateral Obligation/Reciprocal Obligation Exists between ASJ Corp
and Evangelista.
HELD:
Bilateral Obligations are those arising from the same purpose under which each party
is debtor and creditor of the other, to the degree that the success of one is
conditional to the parallel success of the other party.
To partly fulfill their accounts the bid of respondents is not adequate to fulfill their
obligations. According to Article 1248 of the Civil Code, unless a particular stipulation
applies, the borrower shall not be allowed to receive partial compensation from the
debtor. Moreover, the respondents can not replace the value of the chicks and by-
products that are supposed to be extracted, or offer as reimbursement, so all of the
debts must be of the same kind, usually of a nominal type. There was no legitimate
payment method in this case , of course.
Bambalan, Dexter John N. ABPS3A
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2. ARTICLE 1158
G.R. No. L-56170 January 31, 1984

HILARIO JARAVATA petitioner vs. THE HON. SANDIGANBAYAN and

THE PEOPLE OF THE PHILIPPINES, respondents.
FACTS:

Hilario Jaravata was accused of violating Section 3(b) of Republic Act No. 3019, as
amended, said to have been committed in the following manner: That on or about the
period from April 30, 1979 to May 25, 1979, in the Municipality of Tubao, Province of
La Union, Philippines, and within the jurisdiction of this Honourable Court, the
abovenamed accused, being then the Assistant Principal of the Leones Tubao, La
Union Barangay High School and with the use of his influence as such public official
and taking advantage of his moral and official ascendancy over his classroom
teachers, with deliberate intent did then and there wilfully, unlawfully and feloniously
made demand and actually received payments from other classroom teachers,
Romeo Dacayan et.al., various sums of money, namely: P118.00, P100.00, P50.00
and P70.00 out of their salary differentials, in consideration of accused having
officially intervened in the release of the salary differentials of the six classroom
teachers, to the prejudice and damage of the said classroom teachers, in the total
amount of P338.00.
The Sandiganbayan rendered the following judgment:

WHEREFORE, accused is hereby found guilty beyond reasonable doubt for Violation
of Section 3(b), Republic Act No. 3019 otherwise known as the Anti-Graft and
Corrupt Practices Act, as amended, and he is hereby sentenced to suffer an
indeterminate imprisonment ranging from ONE (1) YEAR, is minimum, to FOUR (4)
YEARS, as maximum, to further suffer perpetual special disqualification from public
office and to pay the costs.

Section 3b of RA 3019 states the corrupt practices as “Directly or indirectly

requesting or receiving any gift, present, share, percentage, or benefit, for himself or
for any other person in connection with any contract or transaction between the
Government and any other party, wherein the public officer in his official capacity has
to intervene under the law.”

No pronouncement as to the civil liability it appearing that the money given to the
accused was already refunded by him.

ISSUE:

Whether or not Jaravata violated the above-quoted provision of the statute.

HELD:

NO. There is no question that Jaravata at the time material to the case was a “public
officer” as defined by Section 2 of R.A. No. 3019, i.e. “elective and appointive officials
and employees, permanent or temporary, whether in the classified or unclassified or
exempt service receiving compensation, even normal from the government.” It may
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also be said that any amount which Jaravata received in excess of P36.00 from each
of the complainants was in the concept of a gift or benefit.

The key point, though, is whether Jaravata, a secondary school assistant director at
the Tubas boondocks, the Group, "must be involved under the statute in his official
capacity" in paying for 1978 the plaintiffs' wage differentials. It should be
remembered that the agreement was "to facilitate the accused's [pay differential] and
the teachers in the classroom decided that it would be the duty for the teachers in the
classroom to reimburse the accused for his expenses to follow-up the papers in
Manila.

No law grants the plaintiff the right to interfere in paying the complainants' wage
differentials or others in this respect. The petitioner did not have authority to perform
the modest position of a petitioner whose duty was to speed up the payment of wage
discrepancies. He is not allowed by statute to participate in the allocation of pay
differentials as an office assistant principal. Accordingly, while he was making
attempts to encourage payment of pay differentials, his breach of the legislation
referred to above could no longer be said.
3. ARTICLE 1160
G.R. No. 1299. November 16, 1903.
VICENTE PEREZ, Plaintiff-Appellee, v. EUGENIO POMAR, Agent of the
Compania-General de Tabacos, Defendant-Appellant
FACTS:
Vicente Filed in the Court of First Instance of Laguna a complaint against the
defendant herein to determine the amount due to the plaintiff, at the customary rate
of compensation for interpreting in these island, for rendering services in the
Tabacalera company. In the complaint it was alleged that the defendant rendered the
services of the plaintiff to act as interpreter between former and the military
authorities; not just for the latter but also between the defendant and the colonel
commanding the local garrison and with various officer residing in the area, to the
end that such services might be punctually rendered, the agent, Pomar, assured him
that the Tabacalera Company always generously repaid services rendered it, and
that he therefore did not trouble himself about his inability to devote the necessary
amount of time to his business, the defendant going so far as to make him flattering
promises of employment with the company, which he did not accept; that these
statements were made in the absence of witnesses and that therefore his only proof
as to the same was Mr. Pomar’s word as a gentleman.

The defendant, on 25 September 1902, demanded that the case be dismissed at the
detriment of the plaintiff; the claimant refuted the claim and claimed that the
accusation is completely untrue. The defendant further claimed that the complainant
serves as the translator, without requiring the defendant to do so and without any
service bid or reimbursement bid.
ISSUE:
Whether or not a Contract is formed between Perez and Pomar.
HELD:
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Yes. Article 1254 of the Civil Code provides that a contract exists the moment that
one or more persons consent to be bound, with respect to another or others, to
deliver some thing or to render some service. Article 1255 provides that the
contracting parties may establish such covenants, terms, and conditions as they
deem convenient, provided they are not contrary to law, morals, or public policy.
Whether the service was solicited or offered, the fact remains that Perez rendered to
Pomar services as interpreter. As it does not appear that he did this gratuitously, the
duty is imposed upon the defendant, having accepted the benefit of the service, to
pay a just compensation therefor, by virtue of the innominate contract of facio ut des
implicitly established.

It must be also considered that there is a tacit and mutual consent as to the rendition
of the services This gives rise to the obligation upon the person benefited by the
services to make compensation therefor, since the bilateral obligation to render
services as interpreter, on the one hand, and on the other to pay for the services
rendered, is thereby incurred. (Arts. 1088, 1089, and 1262 of the Civil Code). The
supreme court of Spain in its decision of February 12, 1889, holds, among other
things, “that not only is there an express and tacit consent which produces real
contract but there is also a presumptive consent which is the basis of quasi contracts,
this giving rise to the multiple juridical relations which result in obligations for the
delivery of a thing or the rendition of a service. The judgment is rendered against Don
Eugenio Pomar the payment to the plaintiff of the sum of 200 Mexican pesos, from
which will be deducted the sum of 50 pesos is made as to the costs of this instance.

4. ARTICLE 1162
G.R. No. 34840 September 23, 1931

NARCISO GUTIERREZ, plaintiff-appellee, vs. BONIFACIO GUTIERREZ,

MARIA V. DE GUTIERREZ, MANUEL GUTIERREZ, ABELARDO
VELASCO, and SATURNINO CORTEZ, defendants-appellants.
FACTS:

On 2 February 1930, while trying to travel on a bridge a freight truck and an

automobile of private ownership collided. The truck was run by Abelardo Velasco
a chauffeur and was owned by Cortez Saturnine. The car was owned by 18-year-old
Bonifacio Gutierrez, who was owned by Mr and Mrs Manuel Gutierrez, Bonifacio 's
father, mum. The father was not in the car when the crash took place, but the mother
was in it, along with some other members of the Gutierrez family.The collision
between the bus and the automobile resulted in Narciso Gutierrez suffering a
fractured right leg which required medical attendance for a considerable period of
time.

ISSUE:

Whether or not both the driver of the truck and automobile are liable for damages and
indemnification due to their negligence. What are the legal obligations of the
defendants.

HELD:
The responsibility of Bonifacio Gutierrez derives from guilt aquiliana. In the other
hand, the duty of Abelardo Velasco and his chauffeur, Saturnino Cortez, grows out of
contractual culpa. The young Bonifacio was a chauffeur novice, driving at an
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excessive speed, and lost his head when he reached the bridge and the truck, and
therefore led to the crash by his incompetence. The parent's promise after his son
was given the motor vehicle license made the parent liable for his son's actions. In
the light of these facts, the father and not the minor or the mother alone will be
responsible for harm incurred to the minor in compliance with Art. 1903 of the Civil
Code. iSaturnino Cortez and his chauffeur Abelardo Velasco share a certain
responsibility, namely that of the contract. Their responsibility lies on different basis.

In consonance with the foregoing rulings, the judgment appealed from will be
modified, and the plaintiff will have judgment in his favor against the
defendants Manuel Gutierrez, Abelardo Velasco, and Saturnino Cortez, jointly
and severally, for the sum of P5,000, and the costs of both instances.

Chapter 2 – Nature and Effect of Obligations

5. ARTICLE 1163
G.R. No. L-6913 November 21, 1913
THE ROMAN CATHOLIC BISHOP OF JARO, Plaintiff-Appellee, vs.
GREGORIO DE LA PEÑA, administrator of the estate of Father Agustin
de la Peña, Defendant-Appellant.
FACTS:

In 1898, Father  De la Peña was appointed a trustee of P6,641 for charitable

reasons, he deposited in the Hong Kong Bank and in the Shanghai Bank of
Iloilo P19,000 wherein his personal account.

Father De la Peña was imprisoned as a political prisoner by the colonial

government during the civil war. From his military authorities' intention to be
an insurrection and to the gathering of his money for political purposes, the
capture of Fr De La peña and the confiscation of the funds in the bank was the
outcome.The money was taken from the bank by the military authorities by virtue of
such order, was confiscated and turned over to the Government.

ISSUE:

Whether or not Father De la Peña is liable for the loss of the funds.

HELD:

NO. He is not liable because there is no negligent act on the part of Fr. De la Peña. It
has so happened that during that time the money was taken from him by the U.S.
military forces which is an unforeseen event.
Although 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”, it also
provides, following the principle of the Roman law that “no one shall be liable for
events which could not be foreseen, or which having been foreseen were inevitable,
with the exception of the cases expressly mentioned in the law or those in which the
obligation so declares.”

6. Article 1164
G.R. No. L-12342 August 3, 1918
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A. A. ADDISON, plaintiff-appellant, vs.MARCIANA FELIX and BALBINO
TIOCO, defendants-appellees.
FACTS:

Pemorandum Addison sold four parcels of land, located in Lucena City, to defendant
wife Felix and Tioco. P3,000.00 for the selling price was paid by the responding
respondents and the remaining payment was performed. The contract specifies that
after one year after title has been issued the purchasers can withdraw from the
contract on their behalf. The complainant went to Lucena to nominate and submit the
land for inspection, but only 2 parcels and 2/3 of them was owned by Juan
Villafuerte.

The other parcels were not surveyed and designated by Addison. Addison demanded
from petitioner the payment of the first installment, but the latter contends that there
was no delivery and as such, they are entitled to get back the 3K purchase price they
gave upon the execution of the contract.

ISSUE:

Whether or not there was a valid delivery.

HELD:

The record shows that the plaintiff did not deliver the thing sold. With respect
to two of the parcels of land, he was not even able to show them to the
purchaser; and as regards the other two, more than two-thirds of their area
was in the hostile and adverse possession of a third person.
It is true that the same article declares that the execution of a public
instruments is equivalent to the delivery of the thing which is the object of the
contract, but, in order that this symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have had such control over the
thing sold that, at the moment of the sale, its material delivery could have
been made. It is not enough to confer upon the purchaser the ownership and
the right of possession. The thing sold must be placed in his control. When
there is no impediment whatever to prevent the thing sold passing into the
tenancy of the purchaser by the sole will of the vendor, symbolic delivery
through the execution of a public instrument is sufficient. But if there is an
impediment, delivery cannot be deemed effected.

Inasmuch as the rescission is made by virtue of the provisions of law

and not by contractual agreement, it is not the conventional but the
legal interest that is demandable.

It is therefore held that the contract of purchase and sale entered into
by and between the plaintiff and the defendant on June 11, 1914, is
rescinded, and the plaintiff is ordered to make restitution of the sum of
P3,000 received by him on account of the price of the sale, together with
interest thereon at the legal rate of 6 per annum from the date of the
filing of the complaint until payment, with the costs of both instances
against the appellant. So ordered.
Bambalan, Dexter John N. ABPS3A
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7. ARTICLE 1168

G.R. No. 107737 October 1, 1999

JUAN L. PEREZ, LUIS KEH, CHARLIE LEE and ROSENDO G.
TANSINSIN, JR., petitioners, vs. COURT OF APPEALS, LUIS
CRISOSTOMO and VICENTE ASUNCION, respondents.
FACTS:

Juan Perez et al. are usufructuaries of a parcel of land called Papaya Fishpond. They
entered into contract leasing the property to Luis Keh with the prohibition that he
cannot sublease nor assign his rights to anyone.
Ming Cosim and Luis Crisostomo two persuaded private respondent to take over the
operation of Papaya Fishpond as petitioner Lee and his partner, petitioner Luis Keh,
were allegedly losing money in its operation. Private respondent having acceded to
the proposal, he and petitioners Lee and Keh executed a written agreement
denominated as pakiao-buwis whereby private respondent would take possession of
the Papaya Fishpond.
ISSUE:

Whether or not, Luis Keh is liable for breach of contract under Article 1168.

HELD:

YES. Article 1168 of the Civil Code provides that when an obligation consists in not
doing and the obligor does what has been forbidden him, it shall also be undone at
his expense. The lease contract prohibited petitioner Luis Keh, as lessee, from
subleasing the fishpond. In entering into the agreement for pakiao-buwis with private
respondent, not to mention the apparent artifice that was his written agreement with
petitioner Lee on January 9, 1978, petitioner Keh did exactly what was prohibited of
him under the contract to sublease the fishpond to a third party.
That the agreement for pakiao-buwis was actually a sublease is borne out by the fact
that private respondent paid petitioners Luis Keh and Juan Perez, through petitioner
Tansinsin the amount of annual rental agreed upon in the lease contract between the
usufructuaries and petitioner Keh.
Petitioner Keh led private respondent to unwittingly incur expenses to improve the
operation of the fishpond. By operation of law, therefore, petitioner Keh shall be liable
to private respondent for the value of the improvements he had made in the fishpond
or for P486,562.65 with interest of six percent (6%) per annum from the rendition of
the decision of the trial court on September 6, 1989.
8. ARTICLE 1170

G.R. No. 141968 February 12, 2001

THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE

PHILIPPINES), petitioner, vs. SPS. FRANCIS S. GUECO and MA. LUZ E.
GUECO, respondents.
FACTS:
Bambalan, Dexter John N. ABPS3A
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Gueco Partners, the respondent, got a loan from the complainant for purchasing a
car (Union bank). Therefore, the Partners took out promissory notes payable in
annual installments and chattel mortgages in their car for the purpose of securing the
notes. In interest, the partners have defaulted. The Bank then lodged legal charges
before the MTC for the "Amount of money with a Prayer for a Writ of Replevin." The
coach was stored in the compound of the Bank. Dr Gueco submitted a P150,000.00
check to the boss but was not discharged on the grounds that he declined to sign a
joint petition to evict the car because it had not yet obtained its reaction.

It stressed that in order to induce a settlement to avoid further filing of charges,

counter- charges or lawsuits for damages, the joint motion for dismissal is an
ordinary operational process in its bank. The spouses launched legal proceedings
seeking damages following many letters of inquiry and discussions with bank
officials. The RTC claimed that there was a majority among the parties about the
reduction of the level of debt and the release of the vehicle, but that the deal did not
include the signature of the joint motion to oppose the solution, as a criterion for
effectiveness.

ISSUE:

1. Whether or not there was an agreement with respect to the execution of the joint
motion to dismiss as a condition for the compromise agreement

2. Whether or not the spouses are entitled for damages arising from fraud.

HELD:

1. No. Being an affirmative allegation, the petitioner has the burden of evidence to
prove his claim that the oral compromise entered into by the parties included the
stipulation that the parties would jointly file a motion to dismiss. This petitioner failed
to do. Notably, even the Metropolitan Trial Court, while ruling in favour of the
petitioner and thereby dismissing the complaint, did not make a factual finding that
the compromise agreement included the condition of the signing of a joint motion to
dismiss.

2. No. The Court failed to see how the act of the petitioner bank in requiring the
respondent to sign the joint motion to dismiss could constitute as fraud. Fraud has
been defined as the deliberate intention to cause damage or prejudice. Petitioner
may have been remiss in informing Dr. Gueco that the signing of a joint motion to
dismiss is a standard operating procedure of petitioner bank. However, this cannot in
any way have prejudiced Dr. Gueco. The whole point of the parties entering into the
compromise agreement was in order that Dr. Gueco would pay his outstanding
account and in return petitioner would return the car and drop the case for money
and replevin before the Metropolitan Trial Court. The joint motion to dismiss was but
a natural consequence of the compromise agreement and simply stated that Dr.
Gueco had fully settled his obligation, hence, the dismissal of the case.

WHEREFORE, premises considered, the petition for review is given due

course. The decision of the Court of Appeals affirming the decision of the
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Regional Trial Court is SET ASIDE. Respondents are further ordered to pay the
original obligation amounting to P150,000.00 to the petitioner upon surrender
or cancellation of the manager's check in the latter's possession, afterwhich,
petitioner is to return the subject motor vehicle in good working condition.

9. ARTICLE 1172
G.R. No. L-12191 October 14, 1918

JOSE CANGCO, plaintiff-appellant, vs. MANILA RAILROAD CO.,

defendant-Appellee.

FACTS:

Jose Cangco was a Manila railroad company executive as clerk. His home was in
San Mateo, on the railway company's line. From the office in Manila, he traveled free
by company.

He got up from his seat on January 21, 1915, while traveling back by train to San
Mateo station to get out of the house. When he boarded the line, one or both his feet
tangled up with a watermelon sack causing him to fall off and crash on the platform
violently. He stepped beneath the moving vehicle. He's been heavily smashed and
lacerated. He was taken to the hospital and his arm was amputated.

He filed a civil action in the CFI of Manila for damages against the defendant based
on the defendant's neglect to place the springboard and to put it on the platform as a
threat to passenger safety on board.
The Court ruled that the claimant refused to use sufficient care in lighting the coach
and thus was not allowed to restore, thus this appeal, when it was found to have
refused on the part of the accused.

ISSUE:

Whether or not the negligence of the employees attributable to their employer

whether the negligence is based on contractual obligation or on torts.
HELD:

YES. It cannot be doubted that the employees of defendant were guilty of negligence
in piling these sacks on the platform in the manner stated. It necessarily follows that
the defendant company is liable for the damage thereby occasioned unless recovery
is barred by the plaintiff’s own contributory negligence. It is to note that the
foundation of the legal liability is the contract of carriage.
However Art. 1903 relates only to culpa aquiliana and not to culpa contractual, as the
Court cleared on the case of Rakes v. Atlantic Gulf. It is not accurate to say that proof
of diligence and care in the selection and control of the servant relieves the master
from liability fro the latter’s act. The fundamental distinction between obligation of this
character and those which arise from contract, rest upon the fact that in cases of
non-contractual obligations it is the wrongful or negligent act or omission itself which
creates the vinculum juris, whereas in contractual relations the vinculum exists
independently of the breach of the voluntary duty assumed by the parties when
entering into the contractual relation. When the source of obligation upon which
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plaintiff’s cause of action depends is a negligent act or omission, the burden of proof
rest upon the plaintiff to prove negligence.

10. ARTICLE 1181

G.R. No. L-24190 July 13, 1926

GEORGE L. PARKS, plaintiff-appellant, vs. PROVINCE OF TARLAC,

MUNICIPALITY OF TARLAC, CONCEPCION CIRER, and JAMES HILL,
her husband, defendants-Appellee.

FACTS:

The municipality of Tarlac acquired plots of land in 1910 from Concepción Cirer and
James Hill, so that this property had been used solely and entirely for the building of
a central school as well as public parks. Work was begun in six months. The
President of the Tarlac municipality acknowledged the gift and registered it. The
same property was sold to George L. Parks in 1921 by Cirer and Hill. Later on, the
Tarlac municipality passed its land rights to the Tarlac province. In order to withdraw
the grant, Parks lodged a lawsuit and called for the acknowledgement of its absolute
possession.Parks say that the conditions of the donation were not complied with.

ISSUE:

Whether or not the donation was coupled with a condition precedent? W/N the action
to revoke has prescribed.

HELD:

No. There is no requirement for constructing a school within six months. The value of
a precedent condition is that the right to purchase is not compromised because the
said obligation has not been met or found not to have been satisfied. In the end, little
is achieved and the hope of a right is just there. Therefore, when conformity with a
condition is enforced and can not be changed, it can not be a law precedent except
where the right is considered gained. If a public school and a public park of the
donated land is to be created, the requirements in this situation can not be met even
after the donation is effected.

It has recommended the move to cancel the donation. The terms of restriction are 5
years for the removal by the intervening birth of children, 1 year if due to ingratitude.
10 years, with a large donation under Contract Law and general prescriptive laws,
when no particular duration is required. The donation took place in 1910, the cause
of the lawsuit in 1911, and the case for the revocation was lodged in 1924.

By virtue of the foregoing, the judgment appealed from is affirmed, with the
costs against the appellant. So ordered

11. ARTICLE 1175

G.R. No. 131622. November 27, 1998
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LETICIA Y. MEDEL DR. RAFAEL MEDEL and SERVANDO FRANCO,
Petitioners, v. COURT OF APPEALS, SPOUSES VERONICA R.
GONZALES and DANILO G. GONZALES, JR., doing lending business
under the trade name and style "GONZALES CREDIT ENTERPRISES",
Respondents.
FACTS:

Defendants obtained a loan from Plaintiff in the amount P50, 000.00, payable in 2
months and executed a promissory note. Plaintiff gave only the amount of P47,
000.00 to the borrowers and retained P3, 000.00 as advance interest for 1 month at
6% per month. Defendants obtained another loan from Plaintiff in the amount of P90,
000.00, payable in 2 months, at 6% interest per month. They executed a promissory
note to evidence the loan and received only P84, 000.00 out of the proceeds of the
loan.
For the third time, Defendants secured from Plaintiff another loan in the amount of
P300, 000.00, maturing in 1 month, and secured by a real estate mortgage. They
executed a promissory note in favor of the Plaintiff. However, only the sum of P275,
000.00, was given to them out of the proceeds of the loan. Upon maturity of the three
promissory notes, Defendants failed to pay the indebtedness.
Defendants consolidated all their previous unpaid loans totalling P440, 000.00, and
sought from Plaintiff another loan in the amount of P60, 000.00, bringing their
indebtedness to a total of P50,000.00. They executed another promissory note in
favor of Plaintiff to pay the sum of P500, 000.00 with a 5.5% interest per month plus
2% service charge per annum, with an additional amount of 1% per month as penalty
charges.
On maturity of the loan, the Defendants failed to pay the indebtedness which prompt
the Plaintiffs to file with the RTC a complaint for collection of the full amount of the
loan including interests and other charges.
Declaring that the due execution and genuineness of the four promissory notes has
been duly proved, the RTC ruled that although the Usury Law had been repealed, the
interest charged on the loans was unconscionable and “revolting to the conscience”
and ordered the payment of the amount of the first 3 loans with a 12% interest per
annum and 1% per month as penalty. On appeal, Plaintiff-appellants argued that the
promissory note, which consolidated all the unpaid loans of the defendants, is the law
that governs the parties.
The Court of Appeals ruled in favor of the Plaintiff-appellants on the ground that the
Usury Law has become legally inexistent with the promulgation by the Central Bank
in 1982 of Circular No. 905, the lender and the borrower could agree on any interest
that may be charged on the loan, and ordered the Defendants to pay the Plaintiffs the
sum of P500,000, plus 5.5% per month interest and 2& service charge per annum ,
and 1% per month as penalty charges.
ISSUE:

Whether or not the stipulated 5.5% interest rate per month on the loan in the sum of
P500, 000.00 is usurious.
Bambalan, Dexter John N. ABPS3A
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HELD:

NO. A stipulated rate of interest at 5.5% per month on the P500, 000.00 loan is
excessive, iniquitous, unconscionable and exorbitant, but it cannot be considered
“usurious” because Central Bank Circular No. 905 has expressly removed the
interest ceilings prescribed by the Usury Law and that the Usury Law is now “legally
inexistent.”
Jurisprudence provides that CB Circular did not repeal nor in a way amend the Usury
Law but simply suspended the latter’s effectivity (Security Bank and Trust Co vs
RTC). Usury has been legally non-existent in our jurisdiction. Interest can now be
charged as lender and borrower may agree upon. The courts shall reduce equitably
liquidated damages, whether intended as an indemnity or a penalty if they are
iniquitous or unconscionable. While the Usury Law ceiling on interest rates was lifted
by the CB Circular 905, nothing in the said circular could possibly be read as granting
carte blanche authority to lenders to raise interest rates to levels which would either
enslave their borrowers or lead to a haemorrhaging of their assets (Almeda vs. CA,
256 SCRA 292 [1996]).

12. ARTICLE 1178

G.R. No. 80645 August 3, 1993

MARCELINO GALANG, GUADALUPE GALANG, Petitioners, vs. COURT

OF APPEALS, RAMON R. BUENAVENTURA, ANGELES
BUENAVENTURA, CORAZON BUENAVENTURA, and MA. LUISA
BUENAVENTURA, Respondents.
FACTS:

On July 16, 1976, Ramon Buenaventura on his own behalf and as attorney-in-fact of
Angeles, Corazon, Amparo, and Maria Luisa, all surnamed Buenaventura, sold to
Guadalupe Galang and Marcelino Galang two (2) parcels of land situated in
Tagaytay City. The agreement was embodied in a Deed of Sale which stated the
following terms: (a) 25% of the purchase price upon signing of this instrument; (b)
25% within three months, or upon removal of the "encargado" from the premises,
with the delivery of the owner's duplicate certificate of title; and (c) 50% balance
within one (1) year from date hereof upon which the title will be transferred to the
buyers but 12% interest per annum will be charged after said one year in the event
full payment is not made.
Marcelino and Guadalupe Galang, herein petitioners paid to the sellers the first 25%
of the purchase price as stated in the deed. Thereafter, they allegedly demanded
from private respondents the removal of the "encargado" from the premises and the
delivery of the owners' duplicate certificate of title. Private respondents failed to do so
despite the willingness of petitioners to pay the second 25% of the purchase price.
Consequently, Marcelino and Guadalupe Galang filed on March 18, 1977 a complaint
for specific performance with damages. They filed on July 21, 1978, a third-party
complaint against the "encargado" for subrogation and reimbursement in case of an
adverse judgment against third-party plaintiff. Upon the "encargado's" motion, the
Bambalan, Dexter John N. ABPS3A
PS 120 MTH 3:40-5:30
complaint... was dismissed on the ground that it did not state a cause of action for the
ejectment of the tenant - the "encargado."

Agreeing that the "encargado" was an agricultural tenant who could not be ejected
without cause, the Court of Appeals affirmed the decision. In their petition, Marcelino
and Guadalupe Galang argued that respondent Court erred in ordering the rescission
instead of specific performance of the contract of sale on the ground that the
ejectment of the "encargado"-tenant was a legally... impossible condition that
prevented the fulfilment of the contract. Contrary to the reason advanced by the
Court of Appeals and the trial court, petitioners averred that the removal of the
"encargado" was not a condition precedent to the fulfilment of the... contract as
paragraph two (2) thereof provides for an alternative period within which petitioners
would have to pay the second 25% of the purchase price and concomitantly, private
respondents would deliver the owner's duplicate certificate of... title. Thus, whether or
not the "encargado" was removed, the amount would still be due and private
respondents would still have to deliver the duplicate title.

ISSUES: Was the removal of the "encargado" a condition precedent to the fulfilment
of the contract of sale such that the finding that it was a legally impossible condition
would entitle the buyers to the rescission of the contract?

HELD:

To summarize, we hold that there was no basis for rescinding the contract because t
he removal of the "encargado" was not a condition precedent to the contract of sale.
Rather, it was one of the alternative periods for the payment of the second instalment
given by the seller himself to the buyers. Secondly, even granting that it was indeed a
condition precedent rendering necessary the determination of the legal status of the
"encargado," the lower courts were rash in holding that the "encargado" was a tenan
t of the land in question. In view of the foregoing circumstances, we are convinced th
at specific performance by the parties of their respective obligations is proper. Accord
ingly, petitioners Marcelino and Guadalupe Galang are ordered to pay private respon
dents the second 25% of the purchase price. Considering, however, the time that has
lapsed since the parties entered into the contract, payment of the full balance, that is,
75% of the purchase price, P192,795.00 is in order.

However, the 12% interest per annum that was stipulated in paragraph 3 of the contr
act of sale should not be assessed against petitioners. On the other hand, private res
pondents Ramon Buenaventura, Angeles Buenaventura, Corazon Buenaventura, an
d Maria Luisa Buenaventura are obliged to deliver the owner's duplicate certificate of
title and to transfer the title to the land in question upon payment of the purchase pric
e by petitioners.

Under the Civil Code, private respondents are liable for damages to the injured
party, the petitioners in this case. However, in lieu of actual payment of damag
es, and considering the fact that private respondents were in possession of the
land during the entire period that this case was pending, private respondents a
re no longer entitled to the interest payments which would have been due from
petitioners. Wherefore, in view of the foregoing, the petition is hereby granted,
and the decision of the Court of Appeals is reversed and set aside.