Professional Documents
Culture Documents
Contracts Case Digests
Contracts Case Digests
ISSUE:
2.) Ace Foods Inc. v. Micro Pacific Technologies Co., Ltd., GR No. 200602
Whether or not ACE Foods should pay MTCL the purchase price for the
subject products.
HELD:
Yes. The Supreme Court explained that a contract is what the law defines it
to be, taking into consideration its essential elements, and not what the contracting
parties call it. The real nature of a contract may be determined from the express
terms of the written agreement and from the contemporaneous and subsequent
acts of the contracting parties. However, in the construction or interpretation of an
instrument, the intention of the parties is primordial and is to be pursued. The
denomination or title given by the parties in their contract is not conclusive of the
nature of its contents. The very essence of a contract of sale is the transfer of
ownership in exchange for a price paid or promised. This may be gleaned from
Article 1458 of the Civil Code which defines a contract of sale as follows: Art. 1458.
By the contract of sale one of the contracting parties obligates himself to transfer
the ownership and to deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
A contract of sale may be absolute or conditional. A contract of sale is
classified as a consensual contract, which means that the sale is perfected by mere
consent. No particular form is required for its validity. Upon perfection of the
contract, the parties may reciprocally demand performance, i.e., the vendee may
compel transfer of ownership of the object of the sale, and the vendor may require
the vendee to pay the thing sold.
In contrast, a contract to sell is defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the property despite
delivery thereof to the prospective buyer, binds himself to sell the property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon,
i.e., the full payment of the purchase price. A contract to sell may not even be
considered as a conditional contract of sale where the seller may likewise reserve
title to the property subject of the sale until the fulfillment of a suspensive
condition, because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent event which
may or may not occur.
In this case, the Court concurs with the CA that the parties have agreed to a
contract of sale and not to a contract to sell as adjudged by the RTC. Bearing in
mind its consensual nature, a contract of sale had been perfected at the precise
moment ACE Foods, as evinced by its act of sending MTCL the Purchase Order,
accepted the latter’s proposal to sell the subject products in consideration of the
purchase price of ₱646,464.00. From that point in time, the reciprocal obligations of
the parties – i.e., on the one hand, of MTCL to deliver the said products to ACE
Foods, and, on the other hand, of ACE Foods to pay the purchase price therefor
within thirty (30) days from delivery – already arose and consequently may be
demanded. Article 1475 of the Civil Code makes this clear: Art. 1475. The contract
of sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price. From that moment, the
parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts.
ISSUE:
Whether or not petitioner is liable for Estafa under Art. 315, par. 1(b) of the
RPC in relation to PD 115, even if it was sufficiently proved that the entruster
(Metrobank) knew beforehand that the goods (construction materials) subject of
the trust receipts were never intended to be sold but only for use in the entrustee’s
construction business.
HELD:
No. Petitioner is not liable for Estafa. The transactions in the case are not
trust receipts transactions but contracts of simple loan.
The Supreme Court ruled that in determining the nature of a contract, courts
are not bound by the title or name given by the parties. The decisive factor in
evaluating such agreement is the intention of the parties, as shown not necessarily
by the terminology used in the contract but by their conduct, words, actions and
deeds prior to, during and immediately after executing the agreement. As such,
therefore, documentary and parol evidence may be submitted and admitted to
prove such intention.
In the instant case, the factual findings of the trial and appellate courts
reveal that the dealing between petitioner and Metrobank was not a trust receipt
transaction but one of simple loan. Petitioner’s admission–that he signed the trust
receipts on behalf of Supermax, which failed to pay the loan or turn over the
proceeds of the sale or the goods to Metrobank upon demand–does not conclusively
prove that the transaction was, indeed, a trust receipts transaction. In contrast to
the nomenclature of the transaction, the parties really intended a contract of loan.
The Trust Receipts Law was created "to aid in financing importers and retail
dealers who do not have sufficient funds or resources to finance the importation or
purchase of merchandise, and who may not be able to acquire credit except
through utilization, as collateral, of the merchandise imported or purchased."
When both parties enter into an agreement knowing that the return of the
goods subject of the trust receipt is not possible even without any fault on the part
of the trustee, it is not a trust receipt transaction penalized under Section 13 of
P.D. 115; the only obligation actually agreed upon by the parties would be the
return of the proceeds of the sale transaction. This transaction becomes a mere
loan, where the borrower is obligated to pay the bank the amount spent for the
purchase of the goods.
The fact that the entruster bank, Metrobank in this case, knew even before
the execution of the alleged trust receipt agreements that the covered construction
materials were never intended by the entrustee (petitioner) for resale or for the
manufacture of items to be sold would take the transaction between petitioner and
Metrobank outside the ambit of the Trust Receipts Law. The subject transactions in
the instant case are not trust receipts transactions. Thus, the consolidated
complaints for Estafa in relation to PD 115 have really no leg to stand on. The
practice of banks of making borrowers sign trust receipts to facilitate collection of
loans and place them under the threats of criminal prosecution should they be
unable to pay it may be unjust and inequitable. if not reprehensible.
Such agreements are contracts of adhesion which borrowers have no option
but to sign lest their loan be disapproved. The resort to this scheme leaves poor
and hapless borrowers at the mercy of banks and is prone to misinterpretation. This
reprehensible bank practice should be stopped and discouraged. For this Court to
give life to the constitutional provision of non-imprisonment for nonpayment of
debts, it is imperative that petitioner be acquitted of the crime of Estafa under Art.
315, par. 1 (b) of the RPC, in relation to PD 115.
4.) Rodolfo Cruz and Esperanza Ibias v. Atty. Delfin Gruspe, GR No. 191431
The claim arose from an accident that occurred on October 24, 1999, when
the mini bus owned and operated by Cruz and driven by one Arturo Davin collided
with the Toyota Corolla car of Gruspe; Gruspe's car was a total wreck. The next
day, on October 25, 1999, Cruz, along with Leonardo Q. Ibias went to Gruspe's
office, apologized for the incident, and executed a Joint Affidavit of Undertaking
promising jointly and severally to replace the Gruspe's damaged car in 20 days, or
until November 15, 1999, of the same model and of at least the same quality; or,
alternatively, they would pay the cost of Gruspe's car amounting to P350,000.00,
with interest at 12% per month for any delayed payment after November 15, 1999,
until fully paid. When Cruz and Leonardo failed to comply with their undertaking,
Gruspe filed a complaint for collection of sum of money against them on November
19, 1999 before the RTC.
Cruz and Leonardo denied Gruspe's allegation, claiming that Gruspe, a
lawyer, prepared the Joint Affidavit of Undertaking and forced them to affix their
signatures thereon, without explaining and informing them of its contents; Cruz
affixed his signature so that his mini bus could be released as it was his only means
of income; Leonardo, a barangay official, accompanied Cruz to Gruspe's office for
the release of the mini bus, but was also deceived into signing the Joint Affidavit of
Undertaking.
Leonardo died during the pendency of the case and was substituted by his
widow, Esperanza. Meanwhile, Gruspe sold the wrecked car for P130,000.00.
In a decision dated September 27, 2004, the RTC ruled in favor of Gruspe
and ordered Cruz and Leonardo to pay P220,000.00, plus 15% per annum from
November 15, 1999 until fully paid, and the cost of suit.
On appeal, the CA affirmed the RTC decision, but reduced the interest rate to
12% per annum pursuant to the Joint Affidavit of Undertaking. It declared that
despite its title, the Joint Affidavit of Undertaking is a contract, as it has all the
essential elements of consent, object certain, and consideration required under
Article 1318 of the Civil Code. The CA further said that Cruz and Leonardo failed to
present evidence to support their contention of vitiated consent. By signing the
Joint Affidavit of Undertaking, they voluntarily assumed the obligation for the
damage they caused to Gruspe's car; Leonardo, who was not a party to the
incident, could have refused to sign the affidavit, but he did not.
ISSUE:
Whether or not the Joint Affidavit of Undertaking signed by the petitioners is
a valid contract and enforceable.
HELD:
Yes. The Joint Affidavit of Undertaking is a contract, as it has all the essential
elements of consent, object certain, and consideration required under Article 1318
of the Civil Code.
As ruled by the Supreme Court, contracts are obligatory no matter what their
forms may be, whenever the essential requisites for their validity are present. In
determining whether a document is an affidavit or a contract, the Court looks
beyond the title of the document, since the denomination or title given by the
parties in their document is not conclusive of the nature of its contents. In the
construction or interpretation of an instrument, the intention of the parties is
primordial and is to be pursued. If the terms of the document are clear and leave
no doubt on the intention of the contracting parties, the literal meaning of its
stipulations shall control. If the words appear to be contrary to the parties' evident
intention, the latter shall prevail over the former.
A simple reading of the terms of the Joint Affidavit of Undertaking readily
discloses that it contains stipulations characteristic of a contract. As quoted in the
CA decision, the Joint Affidavit of Undertaking contained a stipulation where Cruz
and Leonardo promised to replace the damaged car of Gruspe, 20 days from
October 25, 1999 or up to November 15, 1999, of the same model and of at least
the same quality. In the event that they cannot replace the car within the same
period, they would pay the cost of Gruspe's car in the total amount of P350,000.00,
with interest at 12% per month for any delayed payment after November 15, 1999,
until fully paid. These, as read by the CA, are very simple terms that both Cruz and
Leonardo could easily understand.
There is also no merit to the argument of vitiated consent. An allegation of
vitiated consent must be proven by preponderance of evidence; Cruz and Leonardo
failed to support their allegation.
Although the undertaking in the affidavit appears to be onerous and lopsided,
this does not necessarily prove the alleged vitiation of consent. They, in fact,
admitted the genuineness and due execution of the Joint Affidavit and Undertaking
when they said that they signed the same to secure possession of their vehicle. If
they truly believed that the vehicle had been illegally impounded, they could have
refused to sign the Joint Affidavit of Undertaking and filed a complaint, but they did
not. That the release of their mini bus was conditioned on their signing the Joint
Affidavit of Undertaking does not, by itself, indicate that their consent was forced
they may have given it grudgingly, but it is not indicative of a vitiated consent that
is a ground for the annulment of a contract.
For reconsideration is the Decision of the Supreme Court dated August 13,
2014, which granted the petition for certiorari filed by SM Land, Inc. (SMLI) and
directed respondent Bases Conversion Development Authority (BCDA) and its
president to, among other things, subject SMLI's duly accepted unsolicited proposal
for the development of the Bonifacio South Property to a competitive challenge.
The gravamen of respondents' motion is that BCDA and SMLI do not have a
contract that would bestow upon the latter the right to demand that its unsolicited
proposal be subjected to a competitive challenge.
ISSUE:
Whether or not a valid contract exists between SM Land, Inc. and Bases
Conversion and Development Authority.
HELD:
Yes. There exists a valid agreement between SMLI and BCDA. The Supreme
Court said, “Article 1305 of the New Civil Code defines a contract as “a meeting of
minds between two persons whereby one binds himself, with respect to the other,
to give something or to render some service.” It is a “juridical convention
manifested in legal form, by virtue of which one or more persons bind themselves
in favor of another or others, or reciprocally, to the fulfilment of a prestation to
give, to do, or not to do.”
In the case at bar, there is, between BCDA and SMLI, a perfected contract–a
source of rights and reciprocal obligations on the part of both parties.
Consequently, a breach thereof may give rise to a cause of action against the erring
party.
The first requisite, consent, is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. In
the case at bar, when SMLI submitted the first Unsolicited Proposal to BCDA on
December 14, 2009, the submission constituted an offer to undertake the
development of the subject property. BCDA then entered into negotiations with
SMLI until the BCDA finally accepted the terms of the final unsolicited proposal.
Cause, on the other hand, is the essential reason which moves the parties to
enter into the contract. It is the immediate, direct and proximate reason which
justifies the creation of an obligation through the will of the contracting parties.
Complementing this is Article 1350 of the New Civil Code which provides that “in
onerous contracts the cause is understood to be, for each contracting party, the
prestation or promise of a thing or service by the other.” As such, the cause of the
agreement in the case at hand is their interest in the sale or acquisition and
development of the property and their undertaking to perform their respective
obligations, among others, as reflected in the Certificate of Successful Negotiations
and in the Terms of Reference (TOR) issued by BCDA.
Lastly, object certain refers to the subject matter of the contract. It is the
thing to be delivered or the service to be performed. Here, when the BCDA Board
issued, on August 6, 2010, the Certification of Successful Negotiations, it not only
accepted SMLI’s Unsolicited Proposal and declared SMLI eligible to enter into the
proposed JV activity. It also “agreed to subject SMLI’s Original Proposal to
Competitive Challenge pursuant to Annex C [of the NEDA JV Guidelines], which
competitive challenge process shall be immediately implemented following the
[TOR] Volumes 1 and 2.” Moreover, said Certification provides that “the BCDA shall,
thus, commence the activities for the solicitation for comparative proposals xxx
starting on August 10, 2010, on which date [SMLI] shall post the required Proposal
Security xxx.”
The elements of a valid contract being present, there thus exists between
SMLI and BCDA a perfected contract, embodied in the Certification of Successful
Negotiations, upon which certain rights and obligations spring forth, including the
commencement of activities for the solicitation for comparative proposals. This
agreement is the law between the contracting parties with which they are required
to comply in good faith. Verily, it is BCDA’s subsequent unilateral cancellation of
this perfected contract which this Court deemed to have been tainted with grave
abuse of discretion. BCDA could not validly renege on its obligation to subject the
unsolicited proposal to a competitive challenge in view of this perfected contract,
and especially so after BCDA gave its assurance that it would respect the rights that
accrued in SMLI’s favor arising from the same.
6.) Consolidated Industrial Gases, Inc. v. Alabang Medical Center, GR No.
181983, November 13, 2013
ISSUE:
Whether or not CIGI’s demand for payment upon AMC is proper.
HELD:
No. CIGI has to comply first with its obligation. CIGI is obliged to comply
with its undertakings to conduct a test run and hold a seminar/orientation of
concerned AMC employees, after which, turn over the system fully functional and
operational to AMC. Simultaneously with the turnover, AMC shall pay the remaining
balance of P1,267,344.42 to CIGI.
The subject installation contracts bear the features of reciprocal obligations.
“Reciprocal obligations are those which arise from the same cause, and in which
each party is a debtor and a creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. They are to be performed
simultaneously, so that the performance of one is conditioned upon the
simultaneous fulfillment of the other.” 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 fulfils his
obligation, delay by the other begins.
Under the subject contracts, CIGI as contractor bound itself to install a
centralized medical oxygen and vacuum pipeline system for the first to fifth floors
of AMC, which in turn, undertook to pay the contract price therefor in the manner
prescribed in the contract. Being reciprocal in nature, the respective obligations of
AMC and CIGI are dependent upon the performance of the other of its end of the
deal such that any claim of delay or non-performance can only prosper if the
complaining party has faithfully complied with its own obligation.
The Court finds that CIGI did not faithfully complete its prestations and
hence, its demand for payment cannot prosper based on the following grounds: (a)
under the two installation contracts, CIGI was bound to perform more prestations
than merely supplying labor and materials; and (b) CIGI failed to prove by
substantial evidence that it requested AMC for electrical facilities as such, its failure
to conduct a test run and orientation/seminar is unjustified.
ISSUE:
Whether respondent is authorized under the MOA to withhold a specific
amount from the proceeds of the sale of the Genicon laparoscopic instrument as tax
due from petitioner.
HELD:
Yes, but subject to computation of the correct amount of VAT because
respondent allegedly issued an official receipt only in the amount of P520,000.00,
instead of P2,600,000.00.
There is no dispute that the P70,000.00 respondent withheld from petitioner
formed part of the proceeds of the sale of the Genicon laparoscopic instrument.
Respondent, however, claims that the P70,000.00 represents a portion of the total
VAT due from the Genicon transaction which is allegedly petitioner’s obligation
under paragraph V of the MOA which states: “All taxes/expenses and expenses
related to Genicon transactions shall be the responsibility of petitioner.”
Basic is the principle that a contract is the law between the parties, and its
stipulations are binding on them, unless the contract is contrary to law, morals,
good customs, public order or public policy. Indeed, paragraph V of the
MO=01589obligates petitioner to pay the taxes due from the sale of the Genicon
laparoscopic instrument. Petitioner admits that he is the one “responsible in the
payment of the EVAT and not the respondent, who merely acted as the
marketer” of the Genicon laparoscopic instrument. Hence, as between petitioner
and respondent, petitioner bears the burden for the payment of VAT. Since
respondent, as the seller on record, will be liable for the payment of the VAT based
on the official receipt it issued, we shall allow respondent to retain the P70,000.00
only for the purpose of paying forthwith, if it has not done so yet this amount to the
BIR as the estimated tax due on the subject sale. There remains a dispute on the
computation of the correct amount of VAT because respondent allegedly issued an
official receipt only in the amount of P520,000.00, instead of the P2,600,000.00
purchase price. Considering this, and the foregoing findings, the BIR must be
informed of this Decision for its appropriate action.
8.) Metropolitan Bank v. Ana Grace Rosales, GR No. 183204, January 13,
2014
ISSUE:
(1) Whether petitioner breached its contract with respondents, and (2) if so,
whether it is liable for damages.
HELD:
Yes. The petitioner breached its contract with respondents. The "Hold Out"
clause does not apply to the instant case. Bank deposits, which are in the nature of
a simple loan or mutuum, must be paid upon demand by the depositor.
The "Hold Out" clause applies only if there is a valid and existing obligation
arising from any of the sources of obligation enumerated in Article 1157 of the Civil
Code, to wit: law, contracts, quasi-contracts, delict, and quasi-delict.
In this case, petitioner failed to show that respondents have an obligation to
it under any law, contract, quasi-contract, delict, or quasi-delict. And although a
criminal case was filed by petitioner against respondent Rosales, this is not enough
reason for petitioner to issue a "Hold Out" order as the case is still pending and no
final judgment of conviction has been rendered against respondent Rosales. In fact,
it is significant to note that at the time petitioner issued the "Hold Out" order, the
criminal complaint had not yet been filed. Thus, considering that respondent
Rosales is not liable under any of the five sources of obligation, there was no legal
basis for petitioner to issue the "Hold Out" order.
In fact, it is significant to note that at the time petitioner issued the “Hold
Out” order, the criminal complaint had not yet been filed. Thus, considering that
respondent Rosales is not liable under any of the five sources of obligation, there
was no legal basis for petitioner to issue the “Hold Out” order. Accordingly, we
agree with the findings of the RTC and the CA that the “Hold Out” clause does not
apply in the instant case.
In view of the foregoing, the Court found that petitioner is guilty of breach of
contract when it unjustifiably refused to release respondents’ deposit despite
demand. Having breached its contract with respondents, petitioner is liable for
damages.
On December 18, 1963, the petitioner GSIS conducted a lottery draw for the
allocation of lots and housing units in Project 8-C of GSIS Village. Private
respondent Esperanza Leuterio won and was issued a Certificate of
Acknowledgment to purchase the subject house and lot on December 27, 1963. In
1965, the parties entered into a Deed of Conditional Sale evidencing the
conveyance of the subject property and all improvements thereon to the Leuterio
spouses for the purchase price of P19,740.00, payable over a fifteen-year period, in
180 equal monthly installments of P168.53 each.
Three years elapsed before the Deed was notarized, and a copy of the same
was given to the private respondents.
After the land development and housing construction of Project 8-C were
completed in 1966, petitioner’s Board of Trustees increased the purchase price
indicated in the Deeds of Conditional Sale covering houses and lots therein. The
new price was based on the alleged final cost of construction of the GSIS Village. It
is noted that, on the face of the Leuterio’s Conditional Deed of Sale is the marginal
notation "subject to adjustment pending approval of the Board of Trustees." The
Leuterio spouses alleged that this notation was not in the Deed when they signed
the same in 1965. Resolving this factual issue, the trial court found that the
appended words were inserted into the document without the knowledge or consent
of the Leuterio spouses. This finding of fact went undisturbed on appeal to the
respondent court.
After years of diligently paying the monthly amortizations and real estate
taxes on the subject property, the private respondents spouses informed petitioner
that the payments for the property had been completed, and hence, the execution
of an absolute deed of sale in their favor was in order. No action on the matter was
taken by petitioner.
The instant case was initiated on May 20, 1984 in the RTC of Manila, Br. 11,
with the filing of a Complaint for Specific Performance with Damages to compel
petitioner to execute in private respondent’s favor, the final Deed of Sale over the
subject property. The trial court found for the Leuterios.
On January 24, 1992, the Court of Appeals, in its impugned Decision, upheld
the trial court solely on the basis of estoppel. It held that petitioner cannot increase
the price of the subject house and lot after it failed, through the years, to protest
against private respondents’ P200.00-amortization or to require the payment by
them of bigger monthly installments.
ISSUE:
HELD:
No. If there was no agreement, the Leuterio spouses are only obligated to
pay the purchase price of P19,740.00 as stipulated in the main body of the
Conditional Deed of Sale.
The purchase price mutually agreed upon by the parties was P19,740.00. The
spouses Leuterio did not give their consent for petitioner to make a unilateral
upward adjustment of this purchase price depending on the final cost of
construction of the subject house and lot. It is illegal for petitioner to claim this
prerogative, for Article 1473 of the Civil Code provides that "xxx the fixing of the
price can never be left to the discretion of one of the contracting parties xxx".
The Supreme Court also rejected petitioner’s contention that the spouses
Leuterio are bound by the recommendation of the ad hoc committee as this was set
aside by then President Ferdinand E. Marcos. The rejection was communicated by
then Presidential Assistant Jacobo Clave to petitioner in a Memorandum dated May
30, 1973. Petitioner moved for its reconsideration but the motion was denied by the
former President thru Presidential Assistant Joaquin Venus, in a letter dated
December 18, 1990.
If petitioner failed to factor the increase in the cost of construction in the
purchase price of the subject house and lot, it has nobody to blame but itself and it
alone should suffer the loss. To be sure, given the expertise of its technical people,
it has no reason to be shortsighted. In any event, our law on contract does not
excuse a party from specifically performing his obligation on the ground that he
made a bad business judgment.
Respondent Dinnah L. Crisostomo was the PAPI District Manager for Metro
Manila. As such officer, she did not receive any salary but was entitled to a
franchise commission equivalent to 10% of the payments on remittances of clients
whose contracts or agreements had been negotiated by her, for and in behalf of
PAPI. She was later promoted as Regional Manager.
On May 17, 1988, petitioner PAPI wrote Col. Noe S. Andaya, the President of
the Armed Forces of the Philippines Savings and Loan Association, Inc. (AFPSLAI)
offering an Academic Assistance Program for its members, their children and
dependents. Noel Rueda, a sales consultant of petitioner PAPI, initiated negotiations
for the sale of pre-need educational plans under the said program with the
AFPSLAI. However, before an agreement was reached, Rueda's services were
terminated. Respondent Crisostomo, as the district manager and the immediate
supervisor of Rueda, continued the negotiation of the account together with
Guillermo R. Macariola, the Assistant Vice-President for Sales. The AFPSLAI agreed
to the proposal.
On November 9, 1988, the AFPSLAI and PAPI executed a Memorandum of
Agreement (MOA) in connection with scholarship funding agreements to be entered
into by PAPI and the AFPSLAI members. These agreements shall then embody the
provisions of the Professional Academic Program Agreement. The parties agreed
that all support services would be provided by PAPI and that any amendments
and/or modifications to the MOA would be effective only upon approval of the
parties thereto.
By then, Rueda was no longer connected with the petitioner corporation,
hence, was disqualified to receive the franchise commission. Thus, the said
commission was offered to Macariola who, however, declined and waived his right
thereto in favor of respondent Crisostomo, Rueda's immediate supervisor. The
Executive Committee of petitioner PAPI agreed to give the franchise commission to
respondent Crisostomo.
Initially, respondent Crisostomo received the 10% franchise commission from
December 1988 until April 1989. Later, upon the instance of petitioner Benjamin
Dino, then Assistant Vice-President for Marketing, respondent Crisostomo's
franchise commission was reduced to 5% to support the operational expenses of
PAPI. After a few months, the said commission was again reduced to 4%. Two
months later, petitioner PAPI asked for another .25% reduction; hence, respondent
Crisostomo's franchise commission was further reduced to 3.75%. Finally, in
January 1991, petitioner PAPI again asked for a final reduction of the commission to
2% to which respondent Crisostomo agreed, on the condition that it be reduced into
writing.
Thus, on February 7, 1991, petitioner Dino, and Angelito B. Cruz, Vice-
President for Finance and Administration, signed a Memorandum.
Crisostomo received her 2% commission until October 1991. In the
meantime, Col. Victor M. Punzalan succeeded Col. Noe S. Andaya as President of
the AFPSLAI. In a Letter dated December 16, 1991, Col. Punzalan informed PAPI of
the AFPSLAI's decision to review the 1988 MOA. As an aftermath of the negotiation,
petitioner PAPI and the AFPSLAI executed a MOA in April 1992, amending their
prior MOA.
The AFPSLAI resumed its remittances of the installment payments of its
members to petitioner PAPI in June 1992. This time, however, Crisostomo was not
paid her commission. In an Inter-Office Memorandum dated June 1, 1992,
respondent Crisostomo's franchise commission on sales transacted with the
AFPSLAI was terminated, for the following reasons: (1) the new AFPSLAI
management cancelled the old MOA in October 1991 due to various anomalies and
the misrepresentation committed by PAPI's sales force; (2) the new MOA is largely
due to management's effort; hence, no franchise would be granted to any sales
associates; and (3) the franchise guidelines as per the Memorandum dated
November 1988 prescribed that in order to maintain her franchise, 100 new paid
plans should be completed on a month to month basis and respondent Crisostomo
was not able to meet these parameters for the period of November 1991 to May
1992.
Nonetheless, respondent Crisostomo insisted on the release of her 2%
franchise commission; however, she was denied. She then made a formal proposal
as per advise of Colayco. However, petitioner Colayco informed the respondent that
her settlement proposal was totally unacceptable and that she was being placed
under preventive suspension in order to abort any untoward reaction resulting from
the denial of her request, which may be detrimental to the company's interest.
Worse, she was advised not to come back after the suspension. Thus, her services
in the company were terminated.
On January 21, 1993, respondent Crisostomo filed a complaint for sum of
money and damages against petitioners PAPI, Colayco and Dino. She alleged
therein that as of October 2, 1992, petitioner PAPI's sales of pre-need plans to the
AFPSLAI amounted to P9,193,367.20; that she was entitled to 2% of such amount
or the sum of P183,867.34 as franchise commission; and that notwithstanding the
said franchise, petitioner PAPI refused to give her the said commissions. She,
likewise, prayed for the grant of moral and exemplary damages, plus attorney's
fees.
The RTC ruled in favor of Crisostomo, and ordered the defendants to release
the commission of Crisostomo and to pay damages. This was affirmed in toto by the
Court of Appeals.
ISSUE/S:
1) Whether or not the old memorandum of agreement had been cancelled
and rescinded by AFPSLAI;
2) Whether or not respondent is entitled to the franchise fee or commission
under the new memorandum of agreement under which she had no participation
whatsoever in the negotiation and execution;
HELD:
1. No. The first MOA had not been cancelled, but was merely modified by the
second MOA.
A reading of the letter of Col. Punzalan to the petitioner corporation indicates
that it merely signified the suspension of the acceptance of new applications under
the first MOA, until such time that a thorough study was undertaken, and a new
agreement mutually beneficial to both parties was entered into. By his letter, Col.
Punzalan did not unilaterally cancel or rescind the first MOA. Indeed, the petitioners
failed to adduce a morsel of evidence to prove that AFPSLAI had agreed to such
cancellation or rescission of the first MOA. It bears stressing that abandonment of
contract rights requires proof of actual intent to abandon.
Once a contract is entered into, no party can renounce it unilaterally or
without the consent of the other. This is the essence of the principle of mutuality of
contracts entombed in Article 1308 of the Civil Code. To effectuate abandonment of
a contract, mutual assent is always required. The mere fact that one has made a
poor bargain may not be a ground for setting aside the agreement. As can be
gleaned from the second MOA, the parties merely made substantial modifications to
the first MOA, and agreed that only those provisions inconsistent with those of the
second were considered rescinded, modified and/or superseded.
2. Yes. The fact that the respondent did not participate in the negotiations of
the new MOA is of no moment. As culled from the petitioners' testimonial evidence,
the franchise commission was awarded as an incentive to the one who initiated and
successfully negotiated the AFPSLAI account within a certain period. The franchise
commission was granted subject to two conditions only: (1) that the respondent
must remain connected with the company, and (2) that it is not transferable. At the
time the new MOA was executed, the respondent was still connected with the
petitioner corporation; hence, she was still entitled to her commission. Even with
the modification of the first MOA by the second one, the respondent had the right to
continue receiving her franchise commission from the petitioner corporation.
The Court agrees with the respondent that the petitioners are now in
estoppel to question her entitlement to the franchise commission under the old
MOA. It must be noted that from December 1988 until October 1991 the
respondent was continuously receiving her franchise commission from the petitioner
corporation. It was only when the remittances for AFPSLAI were suspended that the
respondent stopped receiving her commission.
11) Spouse Juico v. China Banking Corp, GR No. 187678, April 10, 2013
ISSUE:
Whether the interest rates imposed upon by respondent to the petitioners
are valid.
HELD:
No. the interest rates imposed upon by respondent are invalid. The principle
of mutuality of contracts is expressed in Article 1308 of the Civil Code, which
provides: “The contract must bind both contracting parties; its validity or
compliance cannot be left to the will of one of them. Article 1956 of the Civil Code
likewise ordains that "no interest shall be due unless it has been expressly
stipulated in writing."
The binding effect of any agreement between parties to a contract is
premised on two settled principles: (1) that any obligation arising from contract has
the force of law between the parties; and (2) that there must be mutuality between
the parties based on their essential equality. Any contract which appears to be
heavily weighed in favor of one of the parties so as to lead to an unconscionable
result is void. Any stipulation regarding the validity or compliance of the contract
which is left solely to the will of one of the parties, is likewise, invalid.
The Usury Law had been rendered legally ineffective by Resolution No. 224
dated 3 December 1982 of the Monetary Board of the Central Bank, and later by
Central Bank Circular No. 905 which took effect on 1 January 1983. These circulars
removed the ceiling on interest rates for secured and unsecured loans regardless of
maturity. The effect of these circulars is to allow the parties to agree on any
interest that may be charged on a loan. The virtual repeal of the Usury Law is
within the range of judicial notice which courts are bound to take into account.
Although interest rates are no longer subject to a ceiling, the lender still does not
have an unbridled license to impose increased interest rates. The lender and the
borrower should agree on the imposed rate, and such imposed rate should be in
writing.
Escalation clauses are not basically wrong or legally objectionable as long as
they are not solely potestative but based on reasonable and valid grounds.
Obviously, the fluctuation in the market rates is beyond the control of private
respondent. Modifications in the rate of interest for loans pursuant to an escalation
clause must be the result of an agreement between the parties. Unless such
important change in the contract terms is mutually agreed upon, it has no binding
effect. In the absence of consent on the part of the petitioners to the modifications
in the interest rates, the adjusted rates cannot bind them. Hence, the interest rates
in excess of 15%, the rate charged for the first year is invalid.