Fernandez vs. Court of Appeals GR No. L-80231.

October 18, 1988 case digest

Concept: 1370
The controversy here revolves around the appropriate reading of a clause in a lease contract that was
executed about fifteen years ago.
July 31, 1973. Miguel Tajangco (respondent and lessor) and Celso Fernandez (petitioner and lessee)
entered into a ten-year Contract of Lease over a piece of land situated along Kahilum Street, Pandacan,
Manila, where Fernandez would put up the then proposed New Zamora Market. The parties agreed that
the lease, which was scheduled to end on 1 July 1983, would be "renewable for another ten (10) years at
the option of both parties under such terms, conditions and rental reasonable at that time" and that, upon
expiration of the lease, whatever improvements were then existing thereon should automatically belong to
Miguel without having to pay Fernandez.
Before the term ended, asshole Miguel said to Fernandez that he is no longer willing to renew the
contract. Fernandez being a hardass, replied that he wants to renew the contract so he could recover the
expenses he had made. Miguel not giving in, replied through his lawyer, advised that Miguel could not
accept Fernandez's unilateral action to renew the lease because, under the contract, any renewal or
extension thereof was possible only "at the option of both parties.
June 12, 1983. Fernandez filed an action against Miguel. He said that he was entitled to renew the lease
contract, under paragraph 3 Section 2 thereof, for another ten (10) years, which paragraph in the contract
should be construed in a liberal manner and with justice. In his prayer, he sought to compel Miguel to
renew the lease agreement for another term, or asked the court to consider the original contract as
renewed for another ten (10) years or to fix another period for the renewal contract.
Miguel the asshole replied that judicial interpretation is not needed, the contract is so simple worded that
even Homer Simpson can understand it.
The trial court held its decision in favor of Fernandez. Miguel, being an asshole and won’t accept defeat,
appealed with the CA. The CA reversed the decision of the trial court. BOOM! HEIRARCHY YOW!
Issue: W/ON the condition of the contract is clear or not.
Held: Shit is clear. The CA said that the contract language as comprising, not technical terms or terms of
legal art, but rather just plain and ordinary words. SC affirmed the decision of the CA

Bachrach Garage and Taxicab Co. (Inc.) vs. Vicente Golingco Facts Bachrach filed a case for a
recovery of a sum of money. Cause of action: (1) the Plaintiff claims the amount of P7,583.93
with interests thereon from December 14th (the year not being mentioned therein), till the date it
is fully paid in addition to the 25 per cent of the total amount; (2) he claims the amount of
P1,059.17 with interests thereon until fully paid plus the 25 per cent of the total amount; (3) the
amount of P1,534.75 with legal interests thereon. The lower court rendered judgment sentencing
the Defendant, (1) to pay the amount of P7,583.93 with 10% interest thereon from January 19,
1917, plus 12.5% on the said amount; (2) to pay P1,059.17 with the same interest from the said
date plus 12.5% on the same amount; (3) to pay P154.75 with legal interest from January 19,
1917. From this judgment, the Defendant appealed. The defendant contends that the trial judge
committed 3 errors. Issue: Whether or not the court erred in its decision Held: No, however, there
are modifications: It should be (1st) to pay P6,828.33 with 10 % interest per annum; P755.70
with 6% interest per annum from filing of complaint; (2nd), to pay P1,000 with 10 % interest per
annum; and to pay P59.17 with 6 % interest per annum from filing of complaint. Ratio: I.
Application of Payment 1st Error according to the Defendant: The lower court erred in not
imputing the amount of P7,000 to that of P8,750, as partial payment of the price of a truck, M.
White, of 45 horse-power, the object of the promissory note Ex. A. EXHIBIT A (Defendant
wrote to plaintiff) Promissory note dated August 23, 1915. “In Manila…1916… I jointly and
severally promise to pay to E. Bachrach or to his order the sum of P8,750 with the corresponding
interests from this date at the rate of 10 per cent per annum, the right to protest and notice being
hereby completely and expressly waived...” (NOTE: it does not state that it pertains to the truck
M. White of 45 horse – power) EXHIBIT 1 (Defendant wrote to plaintiff) Date: February 16,
1916. “DEAR SIRS: Enclosed is… the amount of P7,000… in your favor, on the account of the
price of a truck M. White of 45 horsepower...” EXHIBIT C (Plaintiff answered the Defendant)
Date: February 23. 1916. “DEAR SIR AND FRIEND: …we received the sum of P7,000 in check
which we apply to the payment on account of the purchase price of the White truck, of 45 horsepower, the price of which is P9,000... The absence of an answer from you to our telegram of last
Saturday makes us believe of your conformity to the same...” Court said: The question raised
here is whether or not the P7,000 in Exhibit 1 is payment of the promissory note in Exhibit A –
P8,750. In Exhibit 1, the defendant made the payment of P7,000, dated February 16, 1916,
before the said note became due. It should be presumed that it is not a payment for this note
which the Defendant on that date was neither obliged nor able to pay. (This is an obligation with
a period. He must pay on the due date.) According to Article 1172 of the Civil Code, a person
owing several debts of the same kind in favor of a single creditor may declare at the time of
making a payment to which of them it is to be applied If, in making use of this right, the
Defendant applied the payment of P7,000 to another debt, he cannot now claim that it is
understood to be applied to his note for P8,750, Exhibit A. II. Interest Rates used 2nd Error
according to the defendant: “ The court erred in sentencing the Defendant to pay to (1) (a) the
8%, (b) the 10%, and (c) the 12.5% of the P7,583.93 - amount claimed in the 1st cause of action;
(2) (a) the 8%, (b) the 10%, and (c) the 12.5% of P1,059.17 – amount in 2nd cause of action.” (1)
Amount due is P8750 with interest of P138.05. There was a partial payment of P1921.67 on Nov.
2, 1915. So the court made P8750 – P1921.67 + the whole P138.05. The lower court has
adjudicated to the Plaintiff interest on accrued interests till November 2, 1915. This is an error.
Article 1109 of the Civil Code only permits accrued interests to earn legal interest from the time
they have been judicially claimed. In this case the lower court awarded to the Plaintiff these
interests over the accrued interests, without an agreement to that effect and before they had been

judicially claimed It also appears that the lower court sentenced the Defendant to pay an interest
of 10 % on the accrued interests from the time the complaint was presented until it should have
been fully paid. This is also an error. Section 5 of the above-cited Act No. 2655 only permits an
interest of 6 % on accrued interests from the time they are judicially claimed. (2) In the 2nd
cause of action, the P1,059.17 - P1,000 is the original debt and P59.17 are the interests accruing
thereon till the date of the filing of the complaint. The lower court ordered to pay 10% interest
this entire amount from January 19, 1917, until it should have been fully paid. Again, it is error
for the lower court to order to pay 10 % interest on P59.17 the accumulated interests on the
capital. It should be 6 %only. The Defendant contends that this 25% on the capital and accrued
interests which was reduced to 12.5% by the lower court is illegal, contrary to Act No. 2655 and
exceeds the interest allowed by this Act. We are of the opinion that the rate specified in this Act
is not applicable to the instant case. The interest is a form of indemnification for damages. It may
consist in the loss of the very thing itself or in the deprivation of the enjoyment which should
have been obtained through its use. The stipulation for payment of certain fees such as attorney’s
fees in case of noncompliance is not deemed to be an interest. It shall be considered as indirect or
simulated interest, according to the spirit of the law, and should therefore be subject to the
computation. In the case at bar, in our opinion, the amount which the Plaintiff was justly obliged
to pay for his attorney’s fees, and should not be considered as interest in the computation of the
latter. Therefore, the lower court is correct in its order. III. Third Error “The lower court erred:
(a) in sentencing the Defendant; and (b) in not sentencing the Plaintiff to pay to the Defendant
the sum of P678.50 – the difference between the amounts paid by the latter and the amount
claimed by the former, excluding interests and costs.” The first part of this error is decided in the
manner indicated herein before. With regard to the second part, we have examined the evidence
and fail to find any ground sustaining the contention of the Appellant.


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Philippine National Bank.PONCE DE LEON VS SYJUCOFACTS : The appellee. was the owne o! two pa"els o! lan# in Ne$os .

). . (')* the Bank e+e"te# a "onta"t to sell the sai# popeties to Jose Pon"e #e Leon !o the total pi"e o! P-*..O""i#ental% On &a"h '.

..% S/se0entl1.. 4n" in the a2ont o! P-. pa1a/le within one ... in Japanese &ilita1 Notes. Pon"e #e Leon o/taine# a loan ! o2 Santia$o S13"o.

an# S13"o "ol# not #e2an#.5(6 1ea !o2 &a1 7. the pa12ent o! sai# . ('89% 4t was also poi#e# that the Pon"e #e Leon "ol# not pa1.

note e+"ept within the a! oe2entione# peio#% To se"e the pa12ent o! sai# o/li$ation. Pon"e #e Leon 2ot$a$e# the .

pa"els o! lan# whi"h he a$ee# to p"hase ! o2 the Bank% Usin$ the loan. Pon"e #e Leon was a/le to pa1 the Bank an# a #ee# o! a/solte .

salewas e+e"te# in his na2e% Pon"e #e Leon ! the o/taine# an a##itional loan !o2 S13"o% On seeal o""asions in .

in Japanese 2ilita1 notes in ! ll pa12ent o! his in#e/te#ness whi"h .99.O"to/e. ('88. Pon"e #e Leon ten#ee# to S13"o the a2ont o! P78.

e then <le# a petition with the CF4 !o the .was e!se# /1 S13"o whi"h Pon"e #e Leon #eposite# with the Clek o! Cot o! the CF4% .

e"onstittion o! tans!e o! the "eti<"ates o! the lot in the na2e o! the Bank whi"h was $ante# /1 the "ot% S13"o <le# a se"on# a2en#e# .

/ 1 "asin$ the . /1 e"onstittin$ the titles in the na2e o! the Bank.answe to Pon"e #e Leon=s "o2plaint "lai2in$ that Pon"e #e Leon.

an# /1 s/se0entl1 2ot$a$in$ the sai# popeties to the Bank as a .>e$iste o! Dee#s to hae the sai# titles tans! ee# in his na2e.

ha# iolate# the "on#itions o! the 2o$a$e whi"h Pon"e #e Leon has e+e"te# in its ! ao #in$ .$aant1 !o his oe#a!t a""ont.

the Japanese o""pation% S13"o pa1e# that the 2ot$a$e e+e"te# /1 Pon"e #e Leon in ! ao o! the Bank /e #e"lae# nll an# oi# .

% On Jne -8. ('8'. the lowe "ot en#ee# a #e"ision a/solin$ S13"o !o2 Pon"e #e Leon=s "o2plaint an# "on#e2nin$ .

Pon"e #e Leon to pa1 S13"o the total a2ont o! P-). ('8'. with inteest at the le$al ate !o2 &a1 *. ntil ! ll1 pai# 4SSUE : 4s .().

the "onsi$nation 2a#e /1 the plainti? ali# in the li$ht o! the law an# the stiplations a$ee# pon in the two po2isso1 .

the #e/to 2st <st "o2pl1 with "etain .notes si$ne# /1 the plainti?@ >UL4N : No% 4n o#e that "onsi$nation 2a1 /e e?e"tie.

e0ie2ents pes"i/e# /1 law% The #e/to 2st show 5(6 that thee was a #e/t #e 5-6 that the "onsi$nation o! the o/li$ation ha# /een 2a#e /a"ase the .

o /e"ase seeal . o /e"ase he was a/sent !o in"apa"itate#."e#ito to who2 ten#e o! pa12ent was 2a#e e!se# to a""ept it.

pesons "lai2e# to /e entitle# to e"eie the a2ont #e 5At% ((*6 5)6 that peios noti"e o! the "onsi$nation hae /een $ien .

to the peson inteeste# in the pe!o2an"e o! the o/li$ation 5At% ((6 586 that the a2ont #e was pla"e# at the #isposal o! the .

"ot 5At ((96 an# 576 that a!te the "onsi$nation ha# /een 2a#e the peson inteeste# was noti<e# theeo! 5At% ((96% .

an# the <lin$ o! the . that the "onsi$nation was 2a#e /e"ase o! the e!sal o! the "e#ito to a""ept it. while it is a#2itte# a #e/t e+iste#.4n the instant "ase.

"o2plaint to "o2pel its a""eptan"e on the pat o! the "e#ito "an /e "onsi#ee# s"ient noti"e o! the "onsi$nation to the "e#ito. it . neetheless.

appeas that at least two o! the a/oe e0ie2ents hae not /een "o2plie# with% Ths. it appeas that plainti?. /e! oe 2akin$ the .

!aile# to $ie peios noti"e theeo! to the peson inteeste# in the pe!o2an"e o! the o/li$ation% 4t ."onsi$nation with the "lek o! the "ot.

as alea#1 state#. /1 the e1 . /e"ase.also appeas that the o/li$ation was not 1et #e an# #e2an#a/le when the 2one1 was "onsi$ne#.

an# the .e+pess poisions o! the #o"2ent ei#en"in$ the sa2e. ('89. the o/li$ation was to /e pai# within one 1ea a!te &a1 7.

"onsi$nation was 2a#e /e!oe this peio# 2ate# % The !aile o! these two e0ie2ents is eno$h $on# to en#e the "onsi$nation ine? .

e"tie% An# it "annot /e "onten#e# that plainti? is 3sti<e# in a""eleatin$ the pa12ent o! the o/li$ation /e"ase he was willin$ to .

in a2oneta1 o/li$ation "onta"te# with a peio#. the . /e"ase.pa1 the inteests #e p to the #ate o! its 2atit1. n#e the law.

pes2ption is that the sa2e is #ee2e# "onstitte# in ! ao o! /oth the "e#ito an# the #e/to nless ! o2 its teno o !o2 othe .

"i"2stan"es it appeas that the peio# has /een esta/lishe# !o the /ene<t o! eithe one o! the2 5At% ((6% .ee no s"h e+"eption .

o "i"2stan"e e+ists%4t 2a1 /e a$e# that the "e#ito has nothin$ to lose /t ee1thin$ to $ain /1 the a""eleation o! pa12ent o! the .

o/li$ation /e"ase the #e/to has o? ee# to pa1 all the inteests p to the #ate it wol# /e"o2e #e. /t this a$2ent loses ! o"e i! we .

"onsi#e that the pa12ent o! inteests is not the onl1 eason wh1 a "e#ito "annot /e !o"e# to a""ept pa12ent "onta1 to the stiplation% .

Thee ae othe easons wh1 this "annot /e #one% One o! the2 is that the "e#ito 2a1 want to keep his 2one1 ineste# sa!el1 instea# o! .

hain$ it in his han#s% Anothe eason is that the "e#ito /1 <+in$ a peio# pote"ts hi2sel! a$ainst s##en #e"line in the p"hasin$ .

powe o! the "en"1 loane# spe"iall1 at a ti2e when thee ae 2an1 ! a"tos that inen"e the "tation o! the "en"1% .

the #e/to has no .An# all aaila/le athoities onthe 2atte ae a$ee# that. nless the "e#ito "onsents.

i$ht to a""eleate the ti2e o! pa12ent een i! the pe2ate ten#e in"l#e# an o? e to pa1 pin"ipal an# .

inteest in !ll % .