Lambert v Fox

FACTS:
Early in 1911: John R. Edgar & Co., engaged in the retail book
and stationery business was taken over by its creditors
including Lambert and Fox
Lambert and Fox became the 2 largest stockholders in the new
corporation called John R. Edgar & Co., Incorporated
Lambert and Fox entered into an agreement wherein they
mutually and reciprocally agree not to sell, transfer, or
otherwise dispose of an part of the stock until after 1 year from
the agreement date unless consented in writing
violation: P1,000 pesos as liquidated damages
October 19, 1911: Fox sold his stock E. C. McCullough & Co.
of Manila, a strong competitor
sale was made by the defendant against the protest
Foz offered to sell his shares of stock to the Lambert for the
same sum that McCullough was paying them less P1,000, the
penalty specified in the contract
Trial Court: dismissed
ISSUE: W/N Fox should be penalized
HELD: YES. The judgment is reversed, the case remanded
with instructions to enter a judgment in favor of the plaintiff and
against the defendant for P1,000, with interest; without costs in
this instance.
parties expressly stipulated that the contract should last one
year regardless of the objective it should be applied
parties who are competent to contract may make such
agreements within the limitations of the law and public policy
as they desire, and that the courts will enforce them according
to their terms
The suspension of the power to sell has a beneficial purpose,
results in the protection of the corporation as well as of the
individual parties to the contract, and is reasonable as to the
length of time of the suspension.
Other source:
Early in 1911 the firm known as John R. Edgar & Co., engaged
in the retail book and stationery business, found itself in such
condition financially that its creditors, including the plaintiff and
the defendant, together with many others, agreed to take over
the business, incorporate it and accept stock therein in
payment of their respective credits. A few days after the
incorporation was completed plaintiff and defendant entered
into the following agreement: xxx the undersigned mutually and
reciprocally agree not to sell, transfer, or otherwise dispose of
any part of their present holdings of stock in said John R.
Edgar & Co. Inc., till after one year from the date hereof. Either
party violating this agreement shall pay to the other the sum of
one thousand (P1,000) pesos as liquidated damages, unless
previous consent in writing to such sale, transfer, or other
disposition be obtained.
Notwithstanding this contract the defendant Fox sold his stock
in the said corporation to E. C. McCullough of the firm of E. C.
McCullough & Co. of Manila, a strong competitor of the said
John R. Edgar & Co., Inc.
The learned trial court decided the case in favor of the
defendant upon the ground that the intention of the parties as it
appeared from the contract in question was to the effect that
the agreement should be good and continue only until the
corporation reached a sound financial basis, and that that
event having occurred some time before the expiration of the
year mentioned in the contract, the purpose for which the
contract was made and had been fulfilled and the defendant

accordingly discharged of his obligation thereunder. The

complaint was dismissed upon the merits.
ISSUE: Did the court erred in the construction of the contract?
HELD: "As for us, we do not construe or interpret this law. It
does not need it. We apply it. By applying the law, we conserve
both provisions for the benefit of litigants. The first and
fundamental duty of courts, in our judgment, is to apply the law.
Construction and interpretation come only after it has been
demonstrated that application is impossible or inadequate
without them. They are the very last functions which a court
should exercise. The majority of the law need no interpretation
or construction. They require only application, and if there were
more application and less construction, there would be more
stability in the law, and more people would know what the law
is."
In the case at bar the parties expressly stipulated that the
contract should last one year. No reason is shown for saying
that it shall last only nine months. Whatever the object was in
specifying the year, it was their agreement that the contract
should last a year and it was their judgment and conviction that
their purposes would not be subversed in any less time. What
reason can give for refusing to follow the plain words of the
men who made the contract? We see none.
In this jurisdiction penalties provided in contracts of this
character are enforced . It is the rule that parties who are
competent to contract may make such agreements within the
limitations of the law and public policy as they desire, and that
the courts will enforce them according to their terms. (Civil
Code, articles 1152, 1153, 1154, and 1155; Fornow vs.
Hoffmeister, 6 Phil. Rep., 33; Palacios vs. Municipality of
Cavite, 12 Phil. Rep., 140; Gsell vs. Koch, 16 Phil. Rep., 1.)
The only case recognized by the Civil Code in which the court
is authorized to intervene for the purpose of reducing a penalty
stipulated in the contract is when the principal obligation has
been partly or irregularly fulfilled and the court can see that the
person demanding the penalty has received the benefit of such
or irregular performance. In such case the court is authorized
to reduce the penalty to the extent of the benefits received by
the party enforcing the penalty.
In this jurisdiction, there is no difference between a penalty and
liquidated damages, so far as legal results are concerned. In
either case the party to whom payment is to be made is
entitled to recover the sum stipulated without the necessity of
proving damages. Indeed one of the primary purposes in fixing
a penalty or in liquidating damages, is to avoid such necessity.
The suspension of the power to sell has a beneficial purpose,
results in the protection of the corporation as well as of the
individual parties to the contract, and is reasonable as to the
length of time of the suspension. We do not here undertake to
discuss the limitations to the power to suspend the right of
alienation of stock, limiting ourselves to the statement that the
suspension in this particular case is legal and valid.
The judgment is reversed, the case remanded with instructions
to enter a judgment in favor of the plaintiff and against the
defendant for P1,000, with interest; without costs in this
instance.

Jison v CA
FACTS:
Private respondent, Monina Jison, instituted a complaint
against petitioner, Francisco Jison, for recognition as
illegitimate child of the latter. The case was filed 20 years after
her mothers death and when she was already 39 years of age.
Petitioner was married to Lilia Lopez Jison since 1940 and
sometime in 1945, he impregnated Esperanza Amolar,
Moninas mother. Monina alleged that since childhood, she
had enjoyed the continuous, implied recognition as the
illegitimate child of petitioner by his acts and that of his family.
It was likewise alleged that petitioner supported her and spent

for her education such that she became a CPA and eventually
a Central Bank Examiner. Monina was able to present total of
11 witnesses.

ISSUE: Did Monina successfully establish her filiation under

Article 172 par. 2 of the Family Code (open and continuous
possession of the status)?

ISSUE: WON Monina should be declared as illegitimate child

of Francisco Jison.

HELD: Yes. Under Article 175 of the Family Code, illegitimate

filiation, such as MONINA's, may be established in the same
way and on the same evidence as that of legitimate children.
The Supreme Court sustained the findings of the CA that
Monina was able to prove her illegitimate filiation.

HELD:
Under Article 175 of the Family Code, illegitimate filiation may
be established in the same way and on the same evidence as
that of legitimate children. Article 172 thereof provides the
various forms of evidence by which legitimate filiation is
established.
To prove open and continuous possession of the status of an
illegitimate child, there must be evidence of the manifestation
of the permanent intention of the supposed father to consider
the child as his, by continuous and clear manifestations of
parental affection and care, which cannot be attributed to pure
charity. Such acts must be of such a nature that they reveal not
only the conviction of paternity, but also the apparent desire to
have and treat the child as such in all relations in society and in
life, not accidentally, but continuously.
The following facts was established based on the testimonial
evidences offered by Monina:
1. That Francisco was her father and she was conceived at
the time when her mother was employed by the former;
2. That Francisco recognized Monina as his child through
his overt acts and conduct.
SC ruled that a certificate of live birth purportedly identifying
the putative father is not competence evidence as to the issue
of paternity. Franciscos lack of participation in the preparation
of baptismal certificates and school records render the
documents showed as incompetent to prove paternity. With
regard to the affidavit signed by Monina when she was 25
years of age attesting that Francisco was not her father, SC
was in the position that if Monina were truly not Franciscos
illegitimate child, it would be unnecessary for him to have gone
to such great lengths in order that Monina denounce her
filiation. Moninas evidence hurdles the high standard of proof
required for the success of an action to establish ones
illegitimate filiation in relying upon the provision on open and
continuous possession. Hence, Monina proved her filiation by
more than mere preponderance of evidence.
Since the instant case involves paternity and filiation, even if
illegitimate, Monina filed her action well within the period
granted her by a positive provision of law. A denial then of her
action on ground of laches would clearly be inequitable and
unjust. Petition was denied.
Other source:
FACTS:
This is a case filed by one Monina Jison for recognition as an
illegitimate child of Francisco Jison who is married to Lilia
Lopez Jison. MONINA alleged that she is the daughter of
FRANCISCO who impregnated her mother Esperanza F.
Amolar, who was then employed as the nanny of
FRANCISCO's daughter. She claims that she has openly and
continuously possessed the status of an illegitimate child of
Francisco and that Francisco had also openly and continuously
recognized her as such.
The trial court categorized Moninas many evidences as
hearsay evidence, incredulous evidence, or self-serving
evidence and ruled against Monina while the Court of Appeals
decided in favour of Monina and declared her to be the
illegitimate daughter of Francisco.
The Court of Appeals ruled that the testimonies of Moninas
witnesses were sufficient to establish MONINA's filiation.

For the success of an action to establish illegitimate filiation

under Article 172 par. 2, a "high standard of proof" is required.
To prove open and continuous possession of the status of an
illegitimate child, there must be evidence of the manifestation
of the permanent intention of the supposed father to consider
the child as his, by continuous and clear manifestations of
parental affection and care, which cannot be attributed to pure
charity. Such acts must be of such a nature that they reveal not
only the conviction of paternity, but also the apparent desire to
have and treat the child as such in all relations in society and in
life, not accidentally, but continuously.
By "continuous" is meant uninterrupted and consistent, but
does not require any particular length of time.
In deciding paternity suits, the issue of whether sexual
intercourse actually occurred inevitably redounds to the victim's
or mother's word, as against the accused's or putative father's
protestations. In the instant case, MONINA's mother could no
longer testify as to the fact of intercourse, as she had already
passed away. But the fact of Moninas birth and her parentage
may be established by evidence other than the testimony of
her mother.
The testimonial evidence offered by MONINA, woven by her
narration of circumstances and events that occurred through
the years, concerning her relationship with FRANCISCO,
coupled with the testimonies of her witnesses, overwhelmingly
established that the following:
1) FRANCISCO is MONINA's father and she was conceived at
the time when her mother was in the employ of the former;
2) FRANCISCO recognized MONINA as his child through his
overt acts and conduct like sending her to school, paying for
her tuition fees, school uniforms, books, board and lodging at
the Colegio del Sagrado de Jesus, defraying for her
hospitalization expenses, providing her with monthly
allowance, paying for the funeral expenses of her mother,
acknowledging her paternal greetings and calling appellant his
"Hija" or child, instructing his office personnel to give
appellant's monthly allowance, recommending her to use his
house in Bacolod and paying for her long distance telephone
calls, having her spend her long distance telephone calls,
having her spend her vacation in his apartment in Manila and
also at his Forbes residence, allowing her to use his surname
in her scholastic and other records.
3) Such recognition has been consistently shown and
manifested throughout the years publicly, spontaneously,
continuously and in an uninterrupted manner.
The totality of the evidence on record established Moninas
filiation.
Appeal filed by Francisco Jison was dismissed.

Culaba v CA
Facts: Culaba sells SMB. One day, an agent from SMB driving
an SMB van drops by to collect Culaba's balance, issuing SMB
receipts for the payment. Susbequently, Culaba receives
demand letters from SMB for not paying his balance. The
agent turns out to be a spurious agent, and the receipts lost
receipts which had been published in the papers as lost after
the payment. Culaba invokes articles 1240 and 1242 in his
defense. SMB's counsel invokes 1233, that the burden of proof
of payment is on the debtor and that Culaba failed to exercise
due diligence

when he failed to question the irregular nature of the invoices

as well as the authority of the purported agent. Was Culaba
excused by his mistaken payment?
Held: Culaba failed to observe the due diligence required in
parting with such a valuable consideration. He should have
verified the identity of the agent and his authority to receive. He
did not, thus he was guilty of negligence, the effects of which
not even his claims of good faith can shield him from. Culaba is
liable to pay SMB.
Other source:
FACTS:SMC sold beer products on credit to the Culaba
spouses in the amount of P28,650.00, as evidenced by
Temporary Credit InvoiceNo. 42943.
Thereafter, the Culaba spouses made a partial payment of
P3,740.00, leaving an unpaid balance of P24,910.00. As they
failed topay despite repeated demands, SMC filed an action for
collection of a sum of money against them before the RTC
The defendant-spouses denied any liability, claiming that they
had already paid the plaintiff in full on four separate occasions.
To substantiate this claim, the defendants presented four (4)
Temporary Charge Sales (TCS) Liquidation Receipts.
Defendant Francisco Culaba testified that he made the
foregoing payments to an SMC supervisor who came in an
SMC van. He wasthen showed a list of customers
accountabilities which included his account. The defendant, in
good faith, then paid to the saidsupervisor, and he was, in turn,
issued genuine SMC liquidation receipts.
SMC submitted a publishers affidavit9 to prove that the entire
booklet of TCSL Receipts bearing Nos. 27301-27350 were
reportedlost by it, and that it caused the publication of the
notice of loss in the July 9, 1983 issue of the Daily Express
ISSUE: WON the payment of the petitioners obligation to the
private respondent was properly made, thus, extinguishing
thesame. NO!
RULING:Payment is a mode of extinguishing an obligation.
Article 1240 of the Civil Code provides that payment shall be
made tothe person in whose favor the obligation has been
constituted, or his successor-in-interest, or any person
authorized toreceive it. In this case, the payments were
purportedly made to a "supervisor" of the private respondent,
who was clad in an SMCuniform and drove an SMC van. He
appeared to be authorized to accept payments as he showed a
list of customers accountabilitiesand even issued SMC
liquidation receipts which looked genuine.
The basis of agency is representation. A person dealing with
an agent is put upon inquiry and must discover upon his peril
theauthority of the agent. In the instant case, the petitioners
loss could have been avoided if they had simply exercised
duediligence in ascertaining the identity of the person to whom
they allegedly made the payments.
The petitioners in this case failed to discharge this burden,
considering that the private respondent vehemently denied that
thepayments were accepted by it and were made to its
authorized representative.
In the case at bar, the most prudent thing the petitioners should
have done was to ascertain the identity and authority of
theperson who collected their payments. Failing this, the
petitioners cannot claim that they acted in good faith when they
made suchpayments. Their claim therefor is negated by their
negligence, and they are bound by its consequences. Being
negligent in this regard,the petitioners cannot seek relief on the
basis of a supposed agency

Uraca v CA
Facts: The Velezes were the owners of the lot and commercial
building in question located at Progreso and M.C. Briones
Streets in Cebu City. The petitioners were its lessees.
On July 8, 1985, the Velezes through Carmen Velez Ting wrote
a letter to petitioners offering to sell the subject property for
P1,050,000.00 and to reply within three days. Petitioners,
through counsel, accepted the offer.
When Uraca went to Ting, Ting told her that there was a
mistake in the price. It should have been P1.4M, Uraca agreed
to the new price to be payable in installments with a down
payment of P1M and the balance of P400,000 to be paid in 30
days. Carmen Velez Ting did not accept the said counter-offer
of Emilia Uraca although this fact is disputed by Uraca.
No payment was made by to the Velezes on July 12 and 13,
1985. On July 13, 1985, the Velezes sold property to Avenue
Merchandising Inc. for P1,050,000.00. The certificate of title of
the said property was clean and free of any annotation of
adverse claims or lis pendens.
On July 31, 1985, petitioners filed the instant complaint against
the Velezes. On August 1, 1985, they also registered a notice
of lis pendens over the property in question with the Office of
the Register of Deeds.
On October 30, 1985, the Avenue Group filed an ejectment
case against petitioners ordering the latter to vacate the
commercial building standing on the lot in question.
Petitoners filed an amended complaint impleading the Avenue
Group as new defendants after about 4 years after the filing of
the original complaint.
RTC found two perfected contracts of sale between the
Velezes and the petitioners involving the real property in
question. The first sale was for P1,050,000.00 and the second
was for P1,400,000.00. In respect to the first sale, the trial
court held that "[d]ue to the unqualified acceptance by the
plaintiffs within the period set by the Velezes, there
consequently came about a meeting of the minds of the parties
not only as to the object certain but also as to the definite
consideration or cause of the contract. The second sale merely
constituted a mere modificatory novation which did not
extinguish the first sale. It also held that the Avenue Group
were buyers in bad faith.
The Court of Appeals held that there was a perfected contract
of sale of the property for P1,050,000.00 between the Velezes
and herein petitioners. It added, however, that such perfected
contract of sale was subsequently novated. However, it was
mutually withdrawn, cancelled and rescinded by novation, and
was therefore abandoned by the parties when Carmen Velez
Ting raised the consideration of the contract by P350,000.00,
thus making the price P1.4M instead of the original price of
P1,050,000.00. Since there was no agreement as to the
'second' price offered, there was no meeting of minds between
the parties, hence, no contract of sale was perfected.
CA added that, even if there was agreement as to the price
and a second contract was perfected, the later contract would
be unenforceable under the Statute of Frauds. It further held
that such second agreement, if there was one, constituted a
mere promise to sell which was not binding for lack of
acceptance or a separate consideration.
Issues:
1.)

Was there novation of the first contract?

2.)

Was there a double sale of the real property involved?

Held:
On Novation
Novation is never presumed; it must be sufficiently established
that a valid new agreement or obligation has extinguished or

changed an existing one. The registration of a later sale must

be done in good faith to entitle the registrant to priority in
ownership over the vendee in an earlier sale.
Article 1600 of the Civil Code provides that "(s)ales are
extinguished by the same causes as all other obligations, . . . ."
Article 1231 of the same Code states that novation is one of
the ways to wipe out an obligation. Extinctive novation
requires: (1) the existence of a previous valid obligation; (2) the
agreement of all the parties to the new contract; (3) the
extinguishment of the old obligation or contract; and (4) the
validity of the new one.
Novation is effected only when a new contract has
extinguished an earlier contract between the same parties. It
must be proven as a fact either by express stipulation of the
parties or by implication derived from an irreconcilable
incompatibility between old and new obligations or contracts.
The petitioners and the Velezes clearly did not perfect a new
contract because the essential requisite of consent was
absent, the parties having failed to agree on the terms of the
payment. Since the parties failed to enter into a new contract
that could have extinguished their previously perfected contract
of sale, there can be no novation of the latter. Consequently,
the first sale of the property in controversy, by the Velezes to
petitioners for P1,050,000.00, remained valid and existing.
On Double Sale
Prior registration of the disputed property by the second buyer
does not by itself confer ownership or a better right over the
property. Article 1544 requires that such registration must be
coupled with good faith.
Knowledge gained by the first buyer of the second sale cannot
defeat the first buyer's rights except where the second buyer
registers in good faith the second sale ahead of the first, as
provided by the Civil Code.
Knowledge gained by the second buyer of the first sale defeats
his rights even if he is first to register the second sale, since
such knowledge taints his prior registration with bad faith (Art.
1544).
The Avenue Group was a buyer and registrants in bad faith.
They had actual knowledge of the Velezes' prior sale of the
same property to the petitioners.
Hence, the third and not the second paragraph of Article 1544
should be applied to this case. Under this provision, petitioners
are entitled to the ownership of the property because they were
first in actual possession, having been the property's lessees
and possessors for decades prior to the sale.
(The petition is GRANTED. The assailed Decision of the Court
of Appeals is hereby SET ASIDE and the dispositive portion of
the trial court's decision dated October 19, 1990 is REVIVED
with the following MODIFICATION the consideration to be
paid under par. 2 of the disposition is P1,050,000.00 and not
P1,400,000.00.)

Ace Agro v CA
Private respondent Cosmos Bottling Corp. is engaged in the
manufacture of soft drinks. Since 1979 petitioner Ace-Agro
Development Corp. (Ace-Agro) had been cleaning soft drink
bottles and repairing wooden shells for Cosmos, rendering its
services within the company premises in San Fernando,
Pampanga. The parties entered into service contracts which
they renewed every year. In January 1990, they signed a
contract covering the period January 1, 1990 to December 31,
1990. Private respondent had earlier contracted the services of
Aren Enterprises in view of the fact that petitioner could handle
only from 2,000 to 2,500 cases a day and could not cope with
private respondent's daily production of 8,000 cases. Unlike
petitioner, Aren Enterprises rendered service outside private
respondent's plant.

On April 25, 1990, fire broke out in private respondent's plant,

destroying, among other places, the area where petitioner did
its work. As a result, petitioner's work was stopped. Petitioner
asked private respondent to allow it to resume its service, but
petitioner was advised that on account of the fire, which had
"practically burned all old soft drink bottles and wooden shells,"
private respondent was terminating their contract.
Petitioner expressed surprise at the termination of the contract
and requested private respondent to reconsider its decision
and allow petitioner to resume its work in order to "cushion the
sudden impact of the unemployment of many of its workers."
As it received no reply from private respondent, petitioner
informed its employees of the termination of their employment.
This led the employees to file a complaint for illegal dismissal
before the Labor Arbiter against petitioner and private
respondent.
Private respondent then advised petitioner that the latter could
resume the repair of wooden shells under terms similar to
those contained in its contract but work had to be done outside
the company premises. Petitioner refused the offer, claiming
that to do its work outside the company's premises would make
it incur additional costs for transportation. In subsequent
meetings with Cosmos representatives, Ace-Agro asked for an
extension of the term of the contract in view of the suspension
of work. But its request was apparently turned down.
Later, private respondent advised petitioner that the latter could
then resume its work inside the plant in accordance with its
original contract with Cosmos. Petitioner rejected private
respondent's offer, this time, citing the fact that there was a
pending labor case.
Subsequently, Ace-Agro brought a case against private
respondent for breach of contract and damages. It complained
that the termination of its service contract was illegal and
arbitrary and that, as a result, it stood to lose profits and to be
held liable to its employees for backwages, damages and/or
separation pay.
A decision was rendered in the labor case, finding petitioner
liable for the claims of its employees. Petitioner was ordered to
reinstate the employees and pay them backwages. However,
private respondent Cosmos was absolved from the employees'
claims on the ground that there was no privity of contract
between them and private respondent.
On the other hand, RTC found respondent guilty of breach of
contract and ordered it to pay damages to petitioner.
Petitioner's claim for reimbursement for what it had paid to its
employees in the labor case was denied.
ISSUE: WON COSMOS BOTTLING IS LIABLE FOR
BREACH?
HELD: NO. Petitioner claims that the appellate court erred "in
ruling that respondent was justified in unilaterally terminating
the contract on account of a force majeure." Quite possibly it
did not understand the appellate court's decision, or it would
not be contending that there was no valid cause for the
termination of the contract but only for its suspension. The
following is what the appellate court said: Article 1231 of the
New Civil Code on extinguishment of obligations does not
specifically mention unilateral termination as a mode of
extinguishment of obligation but, according to Tolentino, "there
are other causes of extinguishment of obligations which are not
expressly provided for in this chapter." He further said: But in
some contracts, either because of its indeterminate duration or
because of the nature of the prestation which is its object, one
of the parties may free himself from the contractual tie by his
own will (unilateral extinguishment).
And that was just what defendant-appellant did when it
unilaterally terminated the agreement it had with plaintiffappellee. As per its letter, the reason given by defendantappellant for unilaterally terminating the agreement was
because the fire practically burned all of the softdrink bottles
and wooden shells which plaintiff-appellee was working on
under the agreement. What defendant-appellant was trying to
say was that the prestation or the object of their agreement

had been lost and destroyed in the above-described fire.

Apparently, the defendant-appellant would like this situation to
fall within what according to Tolentino would be: Obligations
may be extinguished by the happening of unforeseen events,
under whose influence the obligation would never have been
contracted, because in such cases, the very basis upon which
the existence of the obligation is founded would be wanting.
Both parties admitted that the fire was a force majeure or
unforeseen event and that the same even burned practically all
the softdrink bottles and wooden shells which are the objects
of the agreement. But the story did not end there. It is true that
defendant-appellant still had other bottles that needed cleaning
and wooden shells that needed repairing; therefore, the
suspension of the work of the plaintiff- appellee brought about
by the fire is, at best, temporary as found by the trial court.
Appellant sent its November 7, 1990 letter to appellee, this
time specifically stating that plaintiff-appellee can now resume
work in accordance with their existing agreement. This time, it
could not be denied that by the tenor of the letter, appellant
was willing to honor its agreement with appellee, that it had
finally made a reconsideration of appellee's plea to resume
work under the contract. But again, plaintiff-appellee refused
this offer to resume work.
Why did the appellee refuse to resume work? Its November 17,
1990 letter stated that it had something to do with the
settlement of the NLRC case filed against it by its employees.
But that was not the real reason. In his cross-examination, the
witness for appellee stated that its real reason for refusing to
resume work with the appellant was, as in its previous refusal,
because it wanted an extension of the period or duration of the
contract beyond December 31, 1991, to cover the period within
which it was unable to work.
The agreement between the appellee and the appellant is with
a resolutory period, beginning from January 1, 1990 and
ending on December 31, 1990. When the fire broke out, there
resulted a suspension of the appellee's work as per
agreement. But this suspension of work due to force majeure
did not merit an automatic extension of the period of the
agreement between them.
According to Tolentino: The stipulation that in the event of a
fortuitous event or force majeure the contract shall be deemed
suspended during the said period does not mean that the
happening of any of those events stops the running of the
period the contract has been agreed upon to run. It only
relieves the parties from the fulfillment of their respective
obligations during that time. If during six of the thirty years fixed
as the duration of a contract, one of the parties is prevented by
force majeure to perform his obligation during those years, he
cannot after the expiration of the thirty-year period, be
compelled to perform his obligation for six more years to make
up for what he failed to perform during the said six years,
because it would in effect be an extension of the term of the
contract. The contract is stipulated to run for thirty years, and
the period expires on the thirtieth year; the period of six years
during which performance by one of the parties is prevented by
force majeure cannot be deducted from the period stipulated.
In fine, the appellant withdrew its unilateral termination of its
agreement with appellee in its letter dated November 7, 1990.
But the appellee's refusal to resume work was, in effect, a
unilateral termination of the parties' agreement, an act that was
without basis. When the appellee asked for an extension of the
period of the contract beyond December 31, 1990 it was, in
effect, asking for a new contract which needed the consent of
defendant- appellant. The appellee might be forgiven for its
first refusal, but the second refusal must be construed as a
breach of contract by plaintiff- appellee.

agreed to sell to Spouses Fabrigas a parcel of residential land.

The said lot was worth P109,200.00 and it was registered in
the name of respondent Del Monte. The agreement stipulated
that Spouses Fabrigas shall pay P30,000.00 as downpayment
and the balance within ten years in monthly successive
installments of P1,285.69.
After paying P30,000.00, Spouses Fabrigas took possession of
the property but failed to make any installment payments on
the balance of the purchase price. Despite the demand letter
made by Del Monte and the grace period given still the said
Spouses did not comply with their obligations.
On January 21, 1985, petitioner Marcelina and Del Monte
entered into another agreement denominated as Contract to
Sell No. 2941-V, covering the same property but under
restructed terms of payment. Under the second contract, the
parties agreed on a new purchase price of P131,642.58, the
amount of P26,328.52 as downpayment and the balance to be
paid in monthly installments of P2,984.60 each.
After the said deal, the petitioner made some delinquent
installments paying less than the stated amount, to which Del
Monte made a demand letter to the petitioners. And this time
they ordered the cancellation of the Contract to Sell No. 2941V
ISSUE:
Whether or not the Contract to Sell No. 2941-V was valid.
HELD:
The Court quotes with approval the following factual
observations of the trial court, which cannot be disturbed in this
case, to wit:
The Court notes that defendant, Marcelina Fabrigas, although
she had to sign contract No. 2491-V, to avoid forfeiture of her
downpayment, and her other monthly amortizations, was
entirely free to refuse to accept the new contract. There was no
clear case of intimidation or threat on the part of plaintiff in
offering the new contract to her. At most, since she was of
sufficient intelligence to discern the agreement she is entering
into, her signing of Contract No. 2491-V is taken to be valid
and binding. The fact that she has paid monthly amortizations
subsequent to the execution of Contract to Sell No. 2491-V, is
an indication that she had recognized the validity of such
contract. . . .
In sum, Contract to Sell No. 2491-V is valid and binding. There
is nothing to prevent respondent Del Monte from enforcing its
contractual stipulations and pursuing the proper court action to
hold petitioners liable for their breach thereof.

Manila International v ALA

Facts: The contract for the structural repair and waterproofing
of the IPT and ICT building of the NAIA airport was awarded,
after a public bidding, to respondent ALA. Respondent made
the necessary repair and waterproofing.
After submission of its progress billings to the petitioner,
respondent received partial payments. Progress billing
remained unpaid despite repeated demands by the
respondent. Meanwhile petitioner unilaterally rescinded the
contract on the ground that respondent failed to complete the
project within the agreed completion date.

Fabrigas v San Francisco

Respondent objected to the rescission made by the petitioner

and reiterated its claims. The trial court directed the parties to
proceed to arbitration. Both parties executed a compromise
agreement and jointly filed in court a motion for judgment
based on the compromise agreement. The Court a quo
rendered judgment approving the compromise agreement.

Spouses Fabrigas(petitioner) and respondent San francisco

Del Monte, Inc.(Del Monte) entered into an agreement,
denominated as Contract to Sell No. 2482-V, whereby the latter

For petitioners failure to pay within the period stipulated,

respondent filed a motion for execution to enforce its claim.
Petitioner filed a comment and attributed the delays to its being

a government agency. The trial court denied the respondents

motion. Reversing the trial court, the CA ordered it to issue a
writ of execution to enforce respondents claim. The appellate
court ratiocinated that a judgment rendered in accordance with
a compromise agreement was immediately executory, and that
a delay was not substantial compliance therewith.
Issues:
1) Whether or not decision based on compromise agreement is
final and executory.
2) Whether or not delay by one party on a compromise justifies
execution.
Held:
1) A compromise once approved by final orders of the court
has the force of res judicata between the parties and should
not be disturbed except for vices of consent or forgery. Hence,
a decision on a compromise agreement is final and executory.
Such agreement has the force of law and is conclusive
between the parties. It transcends its identity as a mere
contract binding only upon the parties thereto, as it becomes a
judgment that is subject to execution in accordance with the
Rules. Judges therefore have the ministerial and mandatory
duty to implement and enforce it.
2. The failure to pay on the date stipulated was clearly a
violation of the Agreement. Thus, non-fulfillment of the terms of
the compromise justified execution. It is the height of absurdity
for petitioner to attribute to a fortuitous event its delayed
payment. Petitioners explanation is clearly a gratuitous
assertion that borders callousness.

the principal, i.e., payment of the increased statutory minimum

wage is complied with,the Wage Rationalization Act is not
violated.
In the instant case, Article IV.4 of the service contract provides:
IV.4. In the event of a legislated increase in the minimum wage
of security guards and/or in the PADPAO rate, the AGENCY
may negotiate for an adjustment in the contract price. Any
adjustment shall be applicable only to the increment, based on
published and circulated rates and not on mere certification.
Par 3 of NFA Memorandum AO-98-03- states:
3. For purposes of wage adjustments, consider only the rate
based on the wage Order issued by the Regional
TripartiteWage Productivity Board (RTWPB). Unless
otherwise provided in the Wage Order issued by the RTWPB,
the wageadjustment shall be limited to the increment in the
legislated minimum wage;[32]
The parties therefore acknowledged the application to their
contract of the wage orders issued by the RTWPB pursuant to
RA6727. There being no assumption by NFA of a greater
liability than that mandated by Section 6 of the Act, its
obligation is limited to thepayment of the increased statutory
minimum wage rates which, as admitted by respondent, had
already been satisfied by NFA.
Under Article 1231 of the Civil Code, one of the modes of
extinguishing an obligation is by payment. Having
dischargedits obligation to respondent, NFA no longer have a
duty that will give rise to a correlative legal right of respondent.
Thelatters complaint for collection of remuneration and
benefits other than the increased minimum wage rate, should
thereforebe dismissed for lack of cause of action.

NFA v Masada
FACTS:Respondent MASADA Security Agency, Inc., entered
into a contract[3]to provide security services to the various
offices, warehouses and installations of NFA within the scope
of the NFA Region I
The Regional Tripartite Wages and Productivity Board issued
several wage orders mandating increases in the daily wage
rate.
Respondent requested NFA for a corresponding upward
adjustment in the monthly contract rate consisting of the
increases in thedaily minimum wage of the security guards as
well as the corresponding raise in their overtime pay, holiday
pay, 13th month pay, holidayand rest day pay. It also claimed
increases in Social Security System (SSS) and Pag-ibig
premiums as well as in the administrativecosts and margin.
NFA, however, granted the request only with respect to the
increase in the daily wage by multiplying the amount ofthe
mandated increase by 30 days and denied the same with
respect to the adjustments in the other benefits and
remunerationscomputed on the basis of the daily wage.
The trial court rendered a decision[13] in favor of respondent
holding that NFA is liable to pay the security guards wage
relatedbenefits pursuant to RA 6727, because the basis of the
computation of said benefits, like overtime pay, holiday pay,
SSS and Pag-ibigpremium, is the increased minimum wage. It
also found NFA liable for the consequential adjustments in
administrative costs andmargin.
NFA claims that its additional liability under the aforecited
provision is limited only to the payment of the increment in the
statutoryminimum wage rate, i.e., the rate for a regular eight
(8) hour work day.

Korea Exchange v Gonzales

BPI v Casa Montessori

FACTS: On November 8, 1982, CASA Montessori International
opened Current AccouNT with BPI with CASAs President
Lebron as one of its authorized signatories. In 1991, after
conducting an investigation, plaintiff discovered that nine of its
checks had been encashed by a certain Sonny D. Santos
since 1990 in the total amount of P782,000.00. It turned out
that Santos with account at BPI Greenbelt Branch was a
fictitious name used by third party defendant Leonardo T. Yabut
who worked as external auditor of CASA. Third party
defendant voluntarily admitted that he forged the signature of
Lebron and encashed the checks. In 1991, plaintiff filed
Complaint for Collection with Damages against defendant bank
praying that the latter be ordered to reinstate the amount of
P782,500.00 with interest. RTC rendered decision in favor of
the plaintiff. CA modified decision holding CASA as
contributory negligent hence ordered Yabut to reimburse BPI
half the total amount claimed and CASA, the other half. It also
disallowed attorneys fees and moral and exemplary damages.
ISSUE: W/N moral and exemplary damages and attorneys
fees should be awarded.
RULING: Moral and exemplary damages denied but atty.s fees
granted.

ISSUE: WON the satisfaction of NFAs Obligation is limited to

the payment of the increased statutory minimum wage rates.
YES!

In the absence of a wrongful act or omission, or of fraud or bad

faith, moral damages cannot be awarded. The adverse result
of an action does not per se make the action wrongful, or the
party liable for it.CASA was unable to identify the particular
instance upon which its claim for moral damages is predicated.
Neither bad faith nor negligence so gross that it amounts to
malice can be imputed to BPI.

RULING: Based on the foregoing interpretation of Section 6 of

RA 6727, the parties may enter into stipulations increasing the
liability of theprincipal. So long as the minimum obligation of

Imposed by way of correction for the public good, exemplary

damages cannot be recovered as a matter of right. There is no
bad faith on the part of BPI for paying the checks of CASA

upon forged signatures. Therefore, the former cannot be said

to have acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner. The latter, having no right to moral
damages, cannot demand exemplary damages.
When the act or omission of the defendant has compelled the
plaintiff to incur expenses to protect the latters interest, or
where the court deems it just and equitable, attorneys fees
may be recovered. In the present case, BPI persistently denied
the claim of CASA under the NIL to recredit the latters account
for the value of the forged checks. This denial constrained
CASA to incur expenses and exert effort for more than ten
years in order to protect its corporate interest in its bank
account.
Other source:
Facts: CASA Montessori International opened an account with
BPI, with CASAs President as one of its authorized
signatories. It discovered that 9 of its checks had been
encashed by a certain Sonny D. Santos whose name turned
out to be fictitious, and was used by a certain Yabut, CASAs
external auditor. He voluntarily admitted that he forged the
signature and encashed the checks.
RTC granted the Complaint for Collection with Damages
against BPI ordering to reinstate the amount in the account,
with interest. CA took account of CASAs contributory
negligence and apportioned the loss between CASA and BPI,
and ordred Yabut to reimburse both.
BPI contends that the monthly statements it issues to its clients
contain a notice worded as follows: If no error is reported in 10
days, account will be correct and as such, it should be
considered a waiver.
Issue:Whether or not waiver or estoppel results from failure to
report the error in the bank statement
Held: Such notice cannot be considered a waiver, even if
CASA failed to report the error. Neither is it estopped from
questioning the mistake after the lapse of the ten-day period.

This notice is a simple confirmation or "circularization" -- in

accounting parlance -- that requests client-depositors to affirm
the accuracy of items recorded by the banks. Its purpose is to
obtain from the depositors a direct corroboration of the
correctness of their account balances with their respective
banks.
Every right has subjects -- active and passive. While the active
subject is entitled to demand its enforcement, the passive one
is duty-bound to suffer such enforcement. On the one hand,
BPI could not have been an active subject, because it could
not have demanded from CASA a response to its notice.
CASA, on the other hand, could not have been a passive
subject, either, because it had no obligation to respond. It could
-- as it did -- choose not to respond.
Estoppel precludes individuals from denying or asserting, by
their own deed or representation, anything contrary to that
established as the truth, in legal contemplation. Our rules on
evidence even make a juris et de jure presumption that
whenever one has, by ones own act or omission, intentionally
and deliberately led another to believe a particular thing to be
true and to act upon that belief, one cannot -- in any litigation
arising from such act or omission -- be permitted to falsify that
supposed truth.
In the instant case, CASA never made any deed or
representation that misled BPI. The formers omission, if any,
may only be deemed an innocent mistake oblivious to the
procedures and consequences of periodic audits. Since its
conduct was due to such ignorance founded upon an innocent
mistake, estoppel will not arise. A person who has no
knowledge of or consent to a transaction may not be estopped
by it. "Estoppel cannot be sustained by mere argument or
doubtful inference x x x." CASA is not barred from questioning
BPIs error even after the lapse of the period given in the
notice.