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Hongkong and Shanghai Banking Corp., Ltd.

Retirement Plan vs. Spouses Bienvenido and Editha Issue: Whether or not the interpretation of the subject
Broqueza, November 17, 2012, J. Carpio. promissory note is correctly classified by MeTC and RTC as
being a pure obligation.
Facts: Spouses Broqueza, as employees of HSBC and Held: YES. In ruling for HSBC-SRP, we apply the first
members of HSBC-SRP (purposely for the benefit of the paragraph of Article 1179 of the Civil Code:
employees), obtained loans specifically, car and appliance
loan which are to be paid through automatic salary deduction. Aright 1179. Every obligation whose performance does
The promissory note appears to have this period for which the not depend upon a future or uncertain event, or upon
employees can pay for the loan: on or before until fully a past event unknown to the parties, is demandable at
paid once.

Meanwhile, when a labor dispute arose between HSBC and its x x x. (Emphasis supplied.)
employees, majority of the employees of HSBC were We affirm the findings of the MeTC and the RTC that there is
terminated including Sps. Broqueza. Because of such no date of payment indicated in the Promissory Notes.
dismissal, Sps. Broqueza was not able to pay the monthly The RTC is correct in ruling that since the Promissory
amortizations of their loans. Thus, the HSBC-SRP considered Notes do not contain a period, HSBC-SRP has the right
the accounts for Sps. Broqueza as delinquent. Demand to to demand immediate payment. Article 1179 of the Civil
pay the obligation were made upon Sps. Broqueza but Code applies. The spouses Broquezas obligation to pay
failed to pay the same. HSBC-SRP is a pure obligation. The fact that HSBC-SRP
was content with the prior monthly check-off from Editha
In a civil suit for recovery and collection of sum of money Broquezas salary is of no moment. Once Editha Broqueza
against Sps. Broqueza, MeTC ruled that the nature of HSBC- defaulted in her monthly payment, HSBC-SRP made a demand
SRPs demands for payment is civil and has no connection to to enforce a pure obligation.
the labor dispute and that by reason of the respondents
termination from employment, it resulted in the loss of In their Answer, the spouses Broqueza admitted that prior to
continued benefits under the retirement plan. Editha Broquezas dismissal from HSBC in December 1993,
she "religiously paid the loan amortizations, which HSBC
Thus, the loans secured by their future retirement benefits to collected through payroll check-off:" A definite amount is paid
which they are no longer entitled are reduced to unsecured to HSBC-SRP on a specific date. Editha Broqueza authorized
and pure civil OBLIGATIONS. As unsecured and pure HSBC-SRP to make deductions from her payroll until her loans
OBLIGATIONS, the loans are immediately demandable. are fully paid. Editha Broqueza, however, defaulted in her
RTC affirmed the MeTC. But CA reversed the same saying that monthly loan payment due to her dismissal. Despite the
HSBC-SRPs complaints for recovery of sum of money against spouses Broquezas protestations, the payroll
respondents are premature as the loan OBLIGATIONS have deduction is merely a convenient mode of payment
not yet matured. Thus, no cause of action accrued in favor of and not the sole source of payment for the loans.
HSBC-SRP. HSBC-SRP never agreed that the loans will be paid
only through salary deductions. Neither did HSBC-SRP Issue: Whether or not Pays claim against the estate of the
agree that if Editha Broqueza ceases to be an employee of deceased through the promissory note has already
HSBC, her obligation to pay the loans will be suspended. prescribed.
HSBC-SRP can immediately demand payment of the loans at
anytime because the obligation to pay has no period. Held: YES. The obligation being due and demandable,
Moreover, the spouses Broqueza have already incurred in it would appear that the filing of the suit after fifteen
default in paying the monthly installments. years was much too late. For again, according to the Civil
Code, which is based on Section 43 of Act No. 190, the
prescriptive period for a written contract is that of ten years.
CASE: re Article 1179, par. 1 From the manner in which the promissory note was executed,
In the matter of the Intestate Estate of Justo Palanca, it would appear that petitioner was hopeful that the
deceased, George Pay vs. Segundina Chua Vda. De satisfaction of his credit could he realized either through the
Palanca, June 28, 1974, J. Fernando. debtor sued receiving cash payment from the estate of
the late Carlos Palanca presumptively as one of the
Facts: George Pay as creditor of the late Justo Palanca (who heirs, or, as expressed therein, "upon demand." There
died in Manila on July 3, 1963) claimed payment from the is nothing in the record that would indicate whether or
latter premised from a promissory note dated January 30, not the first alternative was fulfilled. What is
1952, which has the following details: For value received undeniable is that on August 26, 1967, more than
from time to time since 1947, we jointly and severally fifteen years after the execution of the promissory
promise to pay to Mr. George Pay at his office the sum of P26, note on January 30, 1952, this petition was filed. The
900 with 12% interest rate per annum upon receipt by either defense interposed was prescription. Its merit is rather
of the undersigned of cash payment from the Estate of the obvious. Article 1179 of the Civil Code provides: "Every
late Don Carlos Palanca and Justo Palanca or upon obligation whose performance does not depend upon a future
demand. Then came this paragraph: "The Court has or uncertain event, or upon a past event unknown to the
inquired whether any cash payment has been received by parties, is demandable at once." This used to be Article 1113
either of the signers of this promissory note from the Estate of of the Spanish Civil Code of 1889.
the late Carlos Palanca. Petitioner informed that he does not
insist on this provision but that petitioner is only claiming on
his right under the promissory note." After which, came the
ruling that the wording of the promissory note being
"upon demand," the obligation was immediately due.
Since it was dated January 30, 1952, it was clear that
more "than ten (10) years has already transpired from
that time until to date. The action, therefore, of the
creditor has definitely prescribed." The result, as above
noted, was the dismissal of the petition.
2 electric delivery within 90 February
motors daysThis is not 27, 1919
In all these contracts, there is a final clause as follows:

The sellers are not responsible for delays caused

by fires, riots on land or on the sea, strikes or
other causes known as "Force Majeure" entirely
beyond the control of the sellers or their

Smith Bell notified Mr. Sotelo of the arrival of these

goods but the latter refused to receive and pay the pay
Smith Bell & Co., Ltd. vs. Vicente Sotelo Matti, March 9, prices stipulated. The plaintiff brought suit against the
1922, J/ Romualdez.
defendant, based on four separate causes of action, alleging,
Facts: In August 1918, plaintiff corporation and defendant among other facts, that it immediately notified the defendant
entered into contracts whereby the former obligated itself to of the arrival of the goods, and asked instructions from him as
sell and the latter to purchase from it the following which to the delivery thereof, and that the defendant refused to
accordingly delivered with dates below: receive any of them and to pay their price. The case having
been tried, the court below absolved the defendants from the
Actual complaint insofar as the tanks and the electric motors were
Items/Prod Price Delivery date under
date of
ucts s the promissory note concerned, but rendered judgment against them,
to be shipped from ordering them to "receive the aforesaid expellers and
P21,0 New York to Manila April 27, pay the plaintiff the sum of fifty thousand pesos
2 steel tanks (P50,00), the price of the said goods, with legal interest
00 within 3 or 4 1919
months thereon from July 26, 1919, and costs." Both parties
to be shipped from appeal from this judgment.
San Francisco in the
month of October Issue: Whether or not under the contract being entered into
2 expellers 00/ea
September, 1918 or 26, 1918 by the parties, the plaintiff corporation is held in delay by
as soon as reason of the period stipulated in the contract.
Held: NO. Under these stipulations, it cannot be said that A day certain is understood to be one which must necessarily
any definite date was fixed for the delivery of the goods. As to arrive, even though its date be unknown.
the tanks, the agreement was that the delivery was to be If the uncertainty should consist in the arrival or non-
made "within 3 or 4 months," but that period was subject to arrival of the day, the obligation is conditional and
the contingencies referred to in a subsequent clause. With shall be governed by the rules of the next preceding
regard to the expellers, the contract says "within the month of section. (referring to pure and conditional
September, 1918," but to this is added "or as soon as OBLIGATIONS). (Aright 1125, Civ. Code.)
possible." And with reference to the motors, the contract And as the export of the machinery in question was, as stated
contains this expression, "Approximate delivery within ninety in the contract, contingent upon the sellers obtaining
days," but right after this, it is noted that "this is not certificate of priority and permission of the United States
guaranteed." The oral evidence falls short of fixing such Government, subject to the rules and regulations, as well as
period. to railroad embargoes, then the delivery was subject to a
From the record it appears that these contracts were condition the fulfillment of which depended not only upon the
executed at the time of the world war when there existed effort of the herein plaintiff, but upon the will of third persons
rigid restrictions on the export from the United States of who could in no way be compelled to fulfill the condition. In
articles like the machinery in question, and maritime, as well cases like this, which are not expressly provided for,
as railroad, transportation was difficult, which fact was known but impliedly covered, by the Civil Code, the obligor
to the parties; hence clauses were inserted in the contracts, will be deemed to have sufficiently performed his part
regarding "Government regulations, railroad embargoes, lack of the obligation, if he has done all that was in his
of vessel space, the exigencies of the requirements of the power, even if the condition has not been fulfilled in
United States Government," in connection with the tanks and reality.
"Priority Certificate, subject to the United State Government
requirements," with respect to the motors. At the time of the
execution of the contracts, the parties were not unmindful of
the contingency of the United States Government not
allowing the export of the goods, nor of the fact that the other
foreseen circumstances therein stated might prevent it.
Considering these contracts in the light of the civil law,
we cannot but conclude that the term which the
parties attempted to fix is so uncertain that one
cannot tell just whether, as a matter of fact, those
articles could be brought to Manila or not. If that is the
case, as we think it is, the OBLIGATIONS must be
regarded as conditional.
OBLIGATIONS for the performance of which a day certain has
been fixed shall be demandable only when the day arrives.
Facts: In the early part of July 1963, Rosendo Chavez
delivered to Fructuoso Gonzales, who is a typewriter repairer,
a portable typewriter for routine cleaning and servicing.
Gonzales was not able to finish job after some time despite
repeated reminder. Gonzales merely gave assurances but
failed to comply with the same. In October 1963, Gonzales
asked from Chavez the sum of P6.00 for the purchase of spare
parts which amount was duly given to the former. On October
26, 1963, Chavez asked for the return of the typewriter.
Gonzales just delivered it in a wrapped package. And it was
only upon reaching home that Chavez found out that the
typewriter was in shambles, with the interior cover and some
parts and screws missing. On October 29, 1963, Chavez
demanded the return of the missing parts and the P6.00
which was heeded to. Thereafter, Chavez had the typewriter
repaired for P89.85. Chavez sued for damages.

Issue: Whether or not Gonzales is liable for damages for the

subsequent repair of the typewriter of Chavez.

Held: YES. The SC found that both Chavez and Gonzales had
a perfected contract for cleaning and servicing of typewriter
intending for Gonzales to finish the work at some future time
although such time was not specified and that such time had
passed without the work having been accomplished, for
Gonzales returned the typewriter cannibalized and
unrepaired, which in itself is a breach of obligation, without
demanding that he should be given more time to finish the
job or compensation for the work he had already done. The
time for compliance having evidently expired and
there being a breach of contract by non-compliance,
Gonzales cannot invoke Article 1197 for he admitted
non-performance by returning the typewriter that he
CASE: Where obligation does not fix a period; When was obliged to repair. The fixing of a period would thus
fixing a period is mere formality be a mere formality and would serve no purpose than
Chavez vs. Gonzales, 32 SCRA 547. to delay. For such, Gonzales is liable under Article 1167 for
the cost of the execution of the obligation in a proper manner.
Facts: Vicente Singson Encarnacion, owner of the house
numbered 589 Legarda Street, Manila, some six years ago
leased said house to Jacinto Baldomar and her son, Lefrado
Fernando, upon a month-to-month basis for the monthly
rental of P35. After Manila was liberated in the last war,
specifically on March 16, 1945, and on April 7, of the same
year, plaintiff Singson Encarnacion notified defendants, the
said mother and son, to vacate the house above-mentioned
on or before April 15, 1945, because plaintiff needed it for
his offices as a result of the destruction of the building
where said plaintiff had said offices before. Despite
this demand, defendants insisted on continuing their
occupancy. When the original action was lodged with the
Municipal Court of Manila on April 20, 1945, defendants were
in arrears in the payment of the rental corresponding to said
month, the agrees rental being payable within the first five
days of each month. That rental was paid prior to the hearing
of the case in the municipal court, as a consequence of which
said court entered judgment for restitution and payment of
rentals at the rate of P35 a month from May 1, 1945, until
defendants completely vacate the premises. In the Court of
First Instance, the defendants interposed defense that the
contract which they had celebrated with plaintiff since the
beginning authorized them to continue occupying the
house indefinitely and while they should faithfully
fulfill their OBLIGATIONS as respects the payment of
the rentals. However, Vicente Singson Encarnacion, jr.,
contended that the lease had always and since the beginning
been upon a month-to-month basis. The Court of First
Instance gave more credence to the lessor.

Issue: Whether the contract can be interpreted as a month-

to-month basis thereby giving more credence to the effect
Vicente Singson Encarnacion vs. Jacinta Baldomar, Oct. that herein lessor can eject lessee at anytime possible.
4, 1946, J. Hilado.
Held: YES. We think that the Court of First Instance was right
in so declaring. Furthermore, carried to its logical conclusion,
the defense thus set up by defendant Lefrado Fernando would
leave to the sole and exclusive will of one of the contracting
parties (defendants in this case) the validity and fulfillment of
the contract of lease, within the meaning of article 1256 of
the Civil Code, since the continuance and fulfillment of the
contract would then depend solely and exclusively upon their
free and uncontrolled choice between continuing paying the Dario and Gaudencio Eleizegui vs. Manila Lawn Tennis
rentals or not, completely depriving the owner of all say in the Club, May 19, 1903, J. Arellano.
matter. If this defense were to be allowed, so long as
defendants elected to continue the lease by continuing Facts: This suit concerns the lease of a piece of land for a
the payment of the rentals, the owner would never be fixed consideration and to endure at the will of the lessee. By
able to discontinue it; conversely, although the owner the contract of lease the lessee is expressly authorized to
should desire the lease to continue, the lessees could make improvements upon the land, by erecting buildings of
efectively thwart his purpose if they should prefer to both permanent and temporary character, by making fills,
terminate the contract by the simple expedient of laying pipes, and making such other improvements as might
stopping payment of the rentals. This, of course, is be considered desirable for the comfort and amusement of
prohibited by the aforesaid article of the Civil Code. (8 the members. "The court is of the opinion that the contract of
Manresa, 3d ed., pp. 626, 627; Cuyugan vs. Santos, 34 Phil., lease was terminated by the notice given by the plaintiff on
100.) August 28 of last year . . . ." And such is the theory
maintained by the plaintiffs, which expressly rests upon
article 1581 of the Civil Code, the law which was in force at
the time the contract was entered into (January 25, 1890).
The judge, in giving to this notice the effect of terminating the
lease, undoubtedly considers that it is governed by the article
relied upon by the plaintiffs, which is of the following tenor:
"When the term has not been fixed for the lease, it is
understood to be for years when an annual rental has been
fixed, for months when the rent is monthly. . . ." The second
clause of the contract provides as follows: "The rent of the
said land is fixed at 25 pesos per month." (P. 11, Bill of
In accordance with such a theory, the plaintiffs might have
terminated the lease the month following the making of the
contract at any time after the first month, which, strictly
speaking, would be the only month with respect to which they
were expressly bound, they not being bound for each
successive month except by a tacit renewal (aright 1566)
an effect which they might prevent by giving the required contract, as laid down by the authorities, there is always a
notice. The OBLIGATIONS which, with the force of law, the creditor who is entitled to demand the performance, and a
lessors assumed by the contract entered into, so far as debtor upon whom rests the obligation to perform the
pertaining to the issues, are the following: "First. . . . They undertaking. In bilateral contracts the contracting parties are
lease the above-described land to Mr. Williamson, who takes it mutually creditors and debtors. Thus, in this contract of lease,
on lease, . . . for all the time the members of the said club the lessee is the creditor with respect to the rights
may desire to use it . . . Third. . . . the owners of the land enumerated in article 1554, and is the debtor with respect to
undertake to maintain the club as tenant as long as the latter the OBLIGATIONS imposed by articles 1555 and 1561. The
shall see fit, without altering in the slightest degree the term within which performance of the latter obligation is due
conditions of this contract, even though the estate be sold." is what has been left to the will of the debtor. This term it is
It is evident that they had no intention of stipulating that they which must be fixed by the court.
reserved the right to give such notice. Clause 3 begins as
follows: "Mr. Williamson, or whoever may succeed him as Philippine Banking Corporation representing the
secretary of said club, may terminate this lease whenever estate of Justina Santos Y Canon Faustino, deceased
desired without other formality than that of giving a month's vs. Lui She in her own behalf and as administratrix of
notice. The owners of the land undertake to maintain the club the intestate estate of Wong Heng, deceased., 21 SCRA
as tenant as long as the latter shall see fit." 53.
Although the relief asked for in the complaint, drawn in
accordance with the new form of procedure established by Facts: Justina Santos y Canon Faustino and her sister Lorenzo
the prevailing Code, is the restitution of the land to the were the owners in common of a piece of land in Manila. This
plaintiffs (a formula common to various actions), nevertheless parcel, with an area of 2,582.30 square meters, is located on
the action which is maintained can be no other than that of Rizal Avenue and opens into Florentino Torres street at the
desahucio, in accordance with the substantive law governing back and Katubusan street on one side. In it are two
the contract. The lessor says article 1569 of the Civil Code residential houses with entrance on Florentino Torres street
may judicially dispossess the lessee upon the expiration of and the Hen Wah Restaurant with entrance on Rizal Avenue.
the conventional term or of the legal term; the conventional The sisters lived in one of the houses, while Wong Heng, a
term that is, the one agreed upon by the parties; the legal Chinese, lived with his family in the restaurant. Wong had
term, in defect of the conventional, fixed for leases by articles been a long-time lessee of a portion of the property, paying a
1577 and 1581. monthly rental of P2,620.
Issue: Whether or not the duration of the term of lease can On September 22, 1957 Justina Santos became the owner of
be fixed by the couright the entire property as her sister died with no other heir. Then
Held: The Civil Code has made provision for such a case in all already well advanced in years, being at the time 90 years
kinds of OBLIGATIONS. In speaking in general of OBLIGATIONS old, blind, crippled and an invalid, she was left with no other
with a term it has supplied the deficiency of the former law relative to live with. Her only companions in the house were
with respect to the "duration of the term when it has been left her 17 dogs and 8 maids. Her otherwise dreary existence was
to the will of the debtor," and provides that in this case the brightened now and then by the visits of Wong's four children
term shall be fixed by the court. (Aright 1128, sec. 2.) In every who had become the joy of her life. Wong himself was the
trusted man to whom she delivered various amounts for On November 18, 1958 she executed two other
safekeeping, including rentals from her property at the corner contracts, one (Plff Exh. 5) extending the term of the lease to
of Ongpin and Salazar streets and the rentals which Wong 99 years, and another (Plff Exh. 6) fixing the term of the
himself paid as lessee of a part of the Rizal Avenue property. option of 50 years.
Wong also took care of the payment; in her behalf, of taxes, In two wills executed on August 24 and 29, 1959 (Def Exhs.
lawyers' fees, funeral expenses, masses, salaries of maids 285 & 279), she bade her legatees to respect the contracts
and security guard, and her household expenses. she had entered into with Wong, but in a codicil (Plff Exh. 17)
"In grateful acknowledgment of the personal services of of a later date (November 4, 1959) she appears to have a
the lessee to her," Justina Santos executed on November 15, change of hearight Claiming that the various contracts were
1957 a contract of lease (Plff Exh. 3) in favor of Wong, made by her because of machinations and inducements
covering the portion then already leased to him and another practiced by him, she now directed her executor to secure the
portion fronting Florentino Torres street. The lease was for 50 annulment of the contracts.
years, although the lessee was given the right to withdraw at On November 18 the present action was filed in the
any time from the agreement; the monthly rental was P3,120. Court of First Instance of Manila. The complaint alleged that
The contract covered an area of 1,124 square meters. Ten the contracts were obtained by Wong "through fraud,
days later (November 25), the contract was amended (Plff misrepresentation, inequitable conduct, undue influence and
Exh. 4) so as to make it cover the entire property, including abuse of confidence and trust of and (by) taking advantage of
the portion on which the house of Justina Santos stood, at an the helplessness of the plaintiff and were made to circumvent
additional monthly rental of P360. For his part Wong the constitutional provision prohibiting aliens from acquiring
undertook to pay, out of the rental due from him, an amount lands in the Philippines and also of the Philippine
not exceeding P1,000 a month for the food of her dogs and Naturalization Laws."
the salaries of her maids. From this judgment both parties appealed directly to this
On December 21 she executed another contract (Plff Couright After the case was submitted for decision, both
Exh. 7) giving Wong the option to buy the leased premises for parties died, Wong Heng on October 21, 1962 and Justina
P120,000, payable within ten years at a monthly installment Santos on December 28, 1964. Wong was substituted by his
of P1,000. The option, written in Tagalog, imposed on him the wife, Lui She, the other defendant in this case, while Justina
obligation to pay for the food of the dogs and the salaries of Santos was substituted by the Philippine Banking Corporation.
the maids in her household, the charge not to exceed P1,800 Justina Santos maintained now reiterated by the Philippine
a month. The option was conditioned on his obtaining Banking Corporation that the lease contract (Plff Exh. 3)
Philippine citizenship, a petition for which was then pending in should have been annulled along with the four other contracts
the Court of First Instance of Rizal. It appears, however, that (Plff Exhs. 4-7) because it lacks mutuality; because it included
this application for naturalization was withdrawn when it was a portion which, at the time, was in custodia legis; because
discovered that he was not a resident of Rizal. On October 28, the contract was obtained in violation of the fiduciary
1958 she filed a petition to adopt him and his children on the relations of the parties; because her consent was obtained
erroneous belief that adoption would confer on them through undue influence, fraud and misrepresentation; and
Philippine citizenship. The error was discovered and the because the lease contract, like the rest of the contracts, is
proceedings were abandoned. absolutely simulated.
Paragraph 5 of the lease contract states that "The until ultimately all the rights of which ownership is made up
lessee may at any time withdraw from this agreement." It is are consolidated in an alien. And yet this is just exactly what
claimed that this stipulation offends article 1308 of the Civil the parties in this case did within the space of one year, with
Code which provides that "the contract must bind both the result that Justina Santos' ownership of her property was
contracting parties; its validity or compliance cannot be left to reduced to a hollow concept. If this can be done, then the
the will of one of them." Constitutional ban against alien landholding in the Philippines,
as announced in Krivenko v. Register of Deeds,22 is indeed in
Issue: Whether or not the option given to Wong to buy the grave peril.
property despite him being an alien is valid.

Held: NO. Taken singly, the contracts show nothing that is

necessarily illegal, but considered collectively, they reveal an
insidious pattern to subvert by indirection what the
Constitution directly prohibits. To be sure, a lease to an alien
for a reasonable period is valid. So is an option giving an alien
the right to buy real property on condition that he is granted
Philippine citizenship. As this Court said in Krivenko v.
Register of Deeds:20
[A]liens are not completely excluded by the
Constitution from the use of lands for residential
purposes. Since their residence in the Philippines is
temporary, they may be granted temporary rights such
as a lease contract which is not forbidden by the
Constitution. Should they desire to remain here forever
and share our fortunes and misfortunes, Filipino
citizenship is not impossible to acquire.
But if an alien is given not only a lease of, but also an
option to buy, a piece of land, by virtue of which the Filipino Lim vs. People
owner cannot sell or otherwise dispose of his property, 21 this
to last for 50 years, then it becomes clear that the Facts: Lourdes Lim is a businesswoman who went to Maria
arrangement is a virtual transfer of ownership whereby the Ayroso and proposed to the latter to sell Ayrosos tobacco.
owner divests himself in stages not only of the right to enjoy Ayroso agreed to the proposition to sell her tobacco consisting
the land ( jus possidendi, jus utendi, jus fruendi and jus of 615 kilos at P1.30/kilo. The agreement reads: This is to
abutendi) but also of the right to dispose of it ( jus certify that I have received from Maria Ayroso of Nueva Ecija,
disponendi) rights the sum total of which make up 615 kilos of leaf tobacco to be sold at P1.30/kilo. The proceed
ownership. It is just as if today the possession is transferred, in the amount of P799.50 will be given to her as soon as it
tomorrow, the use, the next day, the disposition, and so on, was sold. Of the P799.50, only P240 was paid by Lim. Lim
failed to pay the balance. Ayroso filed an Estafa case against the lessor offered to extend the lease if spouses Co will agree
Lim. to increase rental from P350 to P1200 a month. The spouses
counter-offered the rental to P700 but this discussion was set
Issue: Whether Lims obligation to pay Ayroso is immediately aside. Later, a demand letter was issued by lessor to vacate
demandable as soon as the tobacco was disposed of. premises without renewal of expired contract which the lessor
disagreed and filed an ejectment case. The spouses Co filed a
Held: YES. The SC ruled that it was clear in the agreement separate case for the court to order renewal of contract and fix
that the proceeds of the sale of the tobacco should be turned rental at P700 a month. Spouses deposited monthly rental in
over to the complainant as soon as the same was sold, or, court while the plaintiff filed Motion to Dismiss for lack of
that the obligation was immediately demandable as soon as jurisdiction and no cause of action but the same was denied.
the tobacco was disposed of. Hence, Article 1197 of the NCC,
which provides that the court may fix the duration of the Issue: Whether the Spouses Co have valid cause of action in
obligation if it does not fix a period, does not apply. The claiming renewal of lease contract.
agreement cannot be understood to mean that the duration
of the period depends upon the will of the debtor which the
court can fix the duration thereof. Instead the agreement Held: YES. There was implied renewal of lease contract but
between them was one of agency with the OBLIGATION to only on a month-to-month basis, but not for another 5 years.
return the unsold tobacco and the proceeds of the sale Hence, par. 1 of Article 1197 is clearly inapplicable, since the
demandable. Contract of Lease did in fact fix an original period of 5 years,
which had expired. It is also clear from par. 13 of the contract
that the parties reserved to themselves the faculty of agreeing
upon the period of the renewal contract. The 2nd par. of
Article 1197 is equally inapplicable since the duration of the
renewal period was not left to the will of the lessee alone, but
rather to the will of both the lessor & the lessee. Most
importantly, Article 1197 applies only where a contract of lease
clearly exists. Here, the contract was not renewed at all, there
was in fact no contract at all the period of which could have
Pacifica Millare vs. Hon. Hernando, Antonio Co and Elsa been fixed. SC agreed the TRO and injunction.
Co., June 30, 1987, J. Feliciano.
Gregorio Araneta, Inc. vs. Phil. Sugar Estates Dev., May
Facts: Pacifica Millare, lessor and spouses Co lessee in a 5- 31, 1967, J.B.L. Reyes.
year contract of lease of Peoples Restaurant, a commercial
establishment located at the corner of McKinley and Pratt Facts: J. M. Tuason & Co., Inc. is the owner of a big tract land
Streets in Bangued, Abra. At the last week of the 5-year period, situated in Quezon City, otherwise known as the Sta. Mesa
Heights Subdivision, and covered by a Torrens title in its will comply with their obligation to construct the streets in
name. On July 28, 1950, through Gregorio Araneta, Inc., it question.
(Tuason & Co.) sold a portion thereof with an area of 43,034.4 Defendant Gregorio Araneta, Inc. opposed said motion,
square meters, more or less, for the sum of P430,514.00, to maintaining that plaintiff's complaint did not expressly or
Philippine Sugar Estates Development Co., Ltd. The parties impliedly allege and pray for the fixing of a period to comply
stipulated, among in the contract of purchase and sale with with its obligation and that the evidence presented at the trial
mortgage, that the buyer will was insufficient to warrant the fixing of such a period.
Build on the said parcel land the Sto. Domingo Church
and Convent Issue: Whether the period fixed by the court is proper.
while the seller for its part will
Construct streets on the NE and NW and SW sides of Held: We agree with the petitioner that the decision of the
the land herein sold so that the latter will be a block Court of Appeals, affirming that of the Court of First Instance
surrounded by streets on all four sides; and the street is legally untenable. The fixing of a period by the court under
on the NE side shall be named "Sto. Domingo Avenue;" Article 1197 of the Civil Code of the Philippines is sought to be
The buyer, Philippine Sugar Estates Development Co., Ltd., justified on the basis that petitioner (defendant below) placed
finished the construction of Sto. Domingo Church and the absence of a period in issue by pleading in its answer that
Convent, but the seller, Gregorio Araneta, Inc., which began the contract with respondent Philippine Sugar Estates
constructing the streets, is unable to finish the construction of Development Co., Ltd. gave petitioner Gregorio Araneta, Inc.
the street in the Northeast side named (Sto. Domingo Avenue) "reasonable time within which to comply with its obligation to
because a certain third-party, by the name of Manuel Abundo, construct and complete the streets." Neither of the court
who has been physically occupying a middle part thereof, below seems to have noticed that, on the hypothesis stated,
refused to vacate the same; hence, on May 7, 1958, Philippine what the answer put in issue was not whether the court
Sugar Estates Development Co., Lt. filed its complaint against should fix the time of performance, but whether or not the
J. M. Tuason & Co., Inc., and instance, seeking to compel the parties agreed that the petitioner should have reasonable
latter to comply with their obligation, as stipulated in the time to perform its part of the bargain. If the contract so
above-mentioned deed of sale, and/or to pay damages in the provided, then there was a period fixed, a "reasonable time;"
event they failed or refused to perform said obligation. and all that the court should have done was to determine if
Both defendants J. M. Tuason and Co. and Gregorio Araneta, that reasonable time had already elapsed when suit was filed
Inc. answered the complaint, the latter particularly setting up if it had passed, then the court should declare that petitioner
the principal defense that the action was premature since its had breached the contract, as averred in the complaint, and
obligation to construct the streets in question was without a fix the resulting damages. On the other hand, if the
definite period which needs to he fixed first by the court in a reasonable time had not yet elapsed, the court perforce was
proper suit for that purpose before a complaint for specific bound to dismiss the action for being premature. But in no
performance will prosper. case can it be logically held that under the plea above
Plaintiff moved to reconsider and modify the above decision, quoted, the intervention of the court to fix the period for
praying that the court fix a period within which defendants performance was warranted, for Article 1197 is precisely
predicated on the absence of any period fixed by the parties.
Even on the assumption that the court should have found that reasonable, but must set the time that the parties are
no reasonable time or no period at all had been fixed (and the shown to have intended. As the record stands, the trial
trial court's amended decision nowhere declared any such Court appears to have pulled the two-year period set in its
fact) still, the complaint not having sought that the Court decision out of thin air, since no circumstances are mentioned
should set a period, the court could not proceed to do so to support it. Plainly, this is not warranted by the Civil Code.
unless the complaint in as first amended; for the original
decision is clear that the complaint proceeded on the theory
that the period for performance had already elapsed, that the
contract had been breached and defendant was already
answerable in damages.
Granting, however, that it lay within the Court's power to fix
the period of performance, still the amended decision is
defective in that no basis is stated to support the conclusion
that the period should be set at two years after finality of the
judgment. The list paragraph of Article 1197 is clear that the
period can not be set arbitrarily. The law expressly prescribes
the Court shall determine such period as may under
the circumstances been probably contemplated by the
All that the trial court's amended decision (Rec. on Appeal, p.
124) says in this respect is that "the proven facts precisely
warrant the fixing of such a period," a statement manifestly
insufficient to explain how the two period given to petitioner
herein was arrived at.
It must be recalled that Article 1197 of the Civil Code
involves a two-step process. The Court must first
determine that "the obligation does not fix a period"
(or that the period is made to depend upon the will of
the debtor)," but from the nature and the
circumstances it can be inferred that a period was
intended" (Aright 1197, pars. 1 and 2). This
preliminary point settled, the Court must then proceed
to the second step, and decide what period was
"probably contemplated by the parties" (Do., par. 3).
So that, ultimately, the Court can not fix a period
merely because in its opinion it is or should be
The RTC ordered Calang and Philtranco, jointly and severally,
to pay P50,000.00 as death indemnity to the heirs of
Armando; P50,000.00 as death indemnity to the heirs of
Mabansag; and P90,083.93 as actual damages to the private

The petitioners appealed the RTC decision to the Court of

Case Doctrine: The owner of the bus is not jointly and
Appeals (CA), docketed as CA-G.R. CR No. 25522. The CA, in
severally liable to the bus driver who was criminally
its decision dated November 20, 2009, affirmed the RTC
charged for a criminal act but instead subsidiarily
decision in toto. The CA ruled that petitioner Calang failed to
liable thereto.
exercise due care and precaution in driving the Philtranco
Rolito Calang and Philtranco Service Enterprises, Inc. bus. According to the CA, various eyewitnesses testified that
vs. People, August 3, 2010. the bus was traveling fast and encroached into the opposite
lane when it evaded a pushcart that was on the side of the
Facts: At around 2:00 p.m. of April 22, 1989, Rolito Calang road. In addition, he failed to slacken his speed, despite
was driving Philtranco Bus No. 7001, owned by Philtranco admitting that he had already seen the jeep coming from the
along Daang Maharlika Highway in Barangay Lambao, Sta. opposite direction when it was still half a kilometer away. The
Margarita, Samar when its rear left side hit the front left CA further ruled that Calang demonstrated a reckless attitude
portion of a Sarao jeep coming from the opposite direction. As when he drove the bus, despite knowing that it was suffering
a result of the collision, Cresencio Pinohermoso, the jeeps from loose compression, hence, not roadworthy.
driver, lost control of the vehicle, and bumped and killed Jose
Mabansag, a bystander who was standing along the The CA added that the RTC correctly held Philtranco
highways shoulder. The jeep turned turtle three (3) times jointly and severally liable with petitioner Calang, for
before finally stopping at about 25 meters from the point of failing to prove that it had exercised the diligence of a
impact. Two of the jeeps passengers, Armando Nablo and an good father of the family to prevent the accident.
unidentified woman, were instantly killed, while the other
Issue: Whether or not Calang and Philtranco will be correctly
passengers sustained serious physical injuries.
held jointly and solidarily liable to the victims of the collision.
The prosecution charged Calang with multiple homicide,
Held: NO. We, however, hold that the RTC and the CA both
multiple serious physical injuries and damage to property thru
erred in holding Philtranco jointly and severally liable with
reckless imprudence before the Regional Trial Court (RTC),
Calang. We emphasize that Calang was charged criminally
Branch 31, Calbayog City.
before the RTC. Undisputedly, Philtranco was not a direct
party in this case. Since the cause of action against Calang
was based on delict, both the RTC and the CA erred in holding The foregoing subsidiary liability applies to employers,
Philtranco jointly and severally liable with Calang, based on according to Article 103 of the Revised Penal Code, which
quasi-delict under Articles 21761 and 21802 of the Civil Code. reads:
Articles 2176 and 2180 of the Civil Code pertain to the
vicarious liability of an employer for quasi-delicts that an The subsidiary liability established in the next preceding
employee has committed. Such provision of law does not article shall also apply to employers, teachers, persons, and
apply to civil liability arising from delict. corporations engaged in any kind of industry for felonies
committed by their servants, pupils, workmen, apprentices, or
If at all, Philtrancos liability may only be subsidiary. employees in the discharge of their duties.
Article 102 of the Revised Penal Code states the subsidiary
civil liabilities of innkeepers, tavernkeepers and proprietors of The provisions of the Revised Penal Code on subsidiary
establishments, as follows: liability Articles 102 and 103 are deemed written into the
judgments in cases to which they are applicable. Thus, in the
In default of the persons criminally liable, innkeepers, dispositive portion of its decision, the trial court need not
tavernkeepers, and any other persons or corporations shall be expressly pronounce the subsidiary liability of the employer.
civilly liable for crimes committed in their establishments, in Nonetheless, before the employers subsidiary liability is
all cases where a violation of municipal ordinances or some enforced, adequate evidence must exist establishing that (1)
general or special police regulations shall have been they are indeed the employers of the convicted employees;
committed by them or their employees. (2) they are engaged in some kind of industry; (3) the crime
was committed by the employees in the discharge of their
Innkeepers are also subsidiary liable for the restitution of duties; and (4) the execution against the latter has not been
goods taken by robbery or theft within their houses from satisfied due to insolvency. The determination of these
guests lodging therein, or for the payment of the value conditions may be done in the same criminal action in which
thereof, provided that such guests shall have notified in the employees liability, criminal and civil, has been
advance the innkeeper himself, or the person representing pronounced, in a hearing set for that precise purpose, with
him, of the deposit of such goods within the inn; and shall due notice to the employer, as part of the proceedings for the
furthermore have followed the directions which such execution of the judgment.
innkeeper or his representative may have given them with
respect to the care of and vigilance over such goods. No
liability shall attach in case of robbery with violence against or
intimidation of persons unless committed by the innkeepers
and jointly agree to pay within a period of 6 months from
January 30, 1980. However, defendants failed to pay the initial
sum on December 24, 1979. Ronquillo asked that his share
of P13, 750 be accepted as payment. But So nevertheless
asked for the execution of the decision in its entirety against all
defendants, jointly and severally. Ronquillo opposed it by
saying that it was not expressly declared that it was solidary.
The trial court ruled that liability was solidary.

ISSUE: Whether the nature of liability as termed jointly and

severally of the defendants means being solidary; hence the
full payment can be demanded by anyone of the defendant
and thereby correctly rejecting the tender of payment of
Ronquillo of his share only.

HELD: YES. In this regard, Article 1207 and 1208 of the Civil
Code provides

Art. 1207. The concurrence of two or more debtors in

one and the same obligation does not imply that each
Case Doctrine: An agreement to be individually liable
one of the former has a right to demand, or that each
or individually and jointly liable denotes a solidary
one of the latter is bound to render, entire compliance
obligation, not a joint liability.
with the prestation. Then is a solidary liability only
RONQUILLO V. CA [132 S 274, Sept. 28, 1983] when the obligation expressly so states, or when the
law or the nature of the obligation requires solidarity.
FACTS: In a collection case, parties entered into a compromise
agreement wherein the plaintiff Antonio So areed to reduce its Art. 1208. If from the law, or the nature or the wording
total claim of P117, 498.95 to only P110,000 and defendants of the obligation to which the preceding article refers
Ernesto Ronquillo, Offshore Catertrade Inc., Johnny Tan and the contrary does not appear, the credit or debt shall
Pilar Tan agreed to acknowledge the validity of such claim and be presumed to be divided into as many equal shares
further bind themselves to initially pay out of the total as there are creditors and debtors, the credits or debts
indebtedness, the amount of P55,000 on or before December being considered distinct from one another, subject to
24, 1979, the balance of P55,000, defendants, individually the Rules of Court governing the multiplicity of quits.
The decision of the lower court based on the parties' not mean that the insurer can be held solidarily liable
compromise agreement, provides: with the insured &/ or the other parties found at fault.

1. Plaintiff agrees to reduce its total claim of P117,498.95 to MALAYAN INSURANCE V. CA [165 SCRA 536]
only P110,000.00 and defendants agree to acknowledge the
validity of such claim and further bind themselves to initially Facts: Malayan Insurance on March 29, 1967 issued in favor
pay out of the total indebtedness of P110,000.00, the amount of Sio Choy, a Private Car Comprehensive Policy effective from
of P5,000.00 on or before December 24, 1979, the balance of April 18, 1967 to April 18, 1968 covering a Willys jeep. The
P55,000.00, defendants individually and jointly agree to pay insurance coverage for third-party liability was P20,000.
within a period of six months from January 1980 or before During the effectivity of the said policy, the insured jeep while
June 30, 1980. (Emphasis supply) being driven by one Juan Campollo, an employee of San Leon
Rice Mill, collided with a passenger bus owned by Pangasinan
Clearly then, by the express term of the compromise Transportation Co. (Pantranco) causing damage to the insured
agreement and the decision based upon it, the defendants vehicle and injuries to the driver and Martin Vallejos who was
obligated themselves to pay their obligation "individually and riding in an ill-fated jeep. Vallejos sued for damages against
jointly". Sio Choy, Malayan Insurance and Pantranco. However the trial
court only ordered Sio Choy, Malayan and San Leon to pay
The term "individually" has the same meaning as Vallejos a total of P29,103 (jointly and severally liable) but
"collectively", "separately", "distinctively", Malayan will be liable only up to P20,000, the consideration in
respectively or "severally". An agreement to be the policy. CA affirmed the judgment of the trial court that Sio
"individually liable" undoubtedly creates a several Choy, the San Leon Rice Mill, Inc. and the Malayan Insurance
obligation, and a "several obligation is one by which Co., Inc. are jointly and severally liable for the damages
one individual binds himself to perform the whole awarded to the plaintiff Martin C. Vallejos. It ruled, however,
obligation. that the San Leon Rice Mill, Inc. has no obligation to indemnify
or reimburse the petitioner insurance company for whatever
amount it has been ordered to pay on its policy, since the San
Leon Rice Mill, Inc. is not a privy to the contract of insurance
between Sio Choy and the insurance company.

Issue: Whether or not Malayan Insurance is solidarily liable

with Sio Choy and San Leon Rice Mill to Vallejos.
Case Doctrine: The direct liability of the insurer under
indemnity contracts against Third Party Liability does Held: NO. We hold instead that it is only respondents Sio
Choy and San Leon Rice Mill, Inc, (to the exclusion of the
petitioner) that are solidarily liable to respondent Vallejos for xxx xxx xxx
the damages awarded to Vallejos.
The responsibility treated in this article shall cease when the
It must be observed that respondent Sio Choy is made liable persons herein mentioned proved that they observed all the
to said plaintiff as owner of the ill-fated Willys jeep, pursuant diligence of a good father of a family to prevent damage.
to Article 2184 of the Civil Code which provides:
It thus appears that respondents Sio Choy and San Leon Rice
Art. 2184. In motor vehicle mishaps, the owner is solidarily Mill, Inc. are the principal tortfeasors who are primarily liable
liable with his driver, if the former, who was in the vehicle, to respondent Vallejos. The law states that the responsibility
could have, by the use of due diligence, prevented the of two or more persons who are liable for a quasi-delict is
misfortune it is disputably presumed that a driver was solidarily.
negligent, if he had been found guilty of reckless driving or
violating traffic regulations at least twice within the next On the other hand, the basis of petitioner's liability is its
preceding two months. insurance contract with respondent Sio Choy. If petitioner is
adjudged to pay respondent Vallejos in the amount of not
If the owner was not in the motor vehicle, the provisions of more than P20,000.00, this is on account of its being the
article 2180 are applicable. insurer of respondent Sio Choy under the third party liability
clause included in the private car comprehensive policy
On the other hand, it is noted that the basis of liability of existing between petitioner and respondent Sio Choy at the
respondent San Leon Rice Mill, Inc. to plaintiff Vallejos, the time of the complained vehicular accident.
former being the employer of the driver of the Willys jeep at
the time of the motor vehicle mishap, is Article 2180 of the While it is true that where the insurance contract provides for
Civil Code which reads: indemnity against liability to third persons, such third persons
can directly sue the insurer, however, the direct liability of the
Art. 2180. The obligation imposed by article 2176 is insurer under indemnity contracts against third party liability
demandable not only for one's own acts or omissions, but does not mean that the insurer can be held solidarily liable
also for those of persons for whom one is responsible. with the insured and/or the other parties found at fault. The
xxx xxx xxx liability of the insurer is based on contract; that of the insured
is based on tort.
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of In the case at bar, petitioner as insurer of Sio Choy, is liable to
their assigned tasks, even though the former are not engaged respondent Vallejos, but it cannot, as incorrectly held by the
ill any business or industry. trial court, be made "solidarily" liable with the two principal
tortfeasors namely respondents Sio Choy and San Leon Rice
Mill, Inc. For if petitioner-insurer were solidarily liable with said
two (2) respondents by reason of the indemnity contract
against third party liability-under which an insurer can be
directly sued by a third party this will result in a violation of
the principles underlying solidary obligation and insurance
Case Doctrine: If one of the alleged solidary debtor dies
during the pendency of the collection case, the court
In solidary obligation, the creditor may enforce the entire where said case is pending retains jurisdiction to
obligation against one of the solidary debtors. On the other continue hearing the charge as against the surviving
hand, insurance is defined as "a contract whereby one defendants. (1216)
undertakes for a consideration to indemnify another against
loss, damage, or liability arising from an unknown or
contingent event." Facts: Appeal by the Philippine National Bank (PNB) from the
Order of the defunct Court of First Instance of Manila (Branch
In the case at bar, the trial court held petitioner together with
XX) in its Civil Case No. 46741 dismissing PNB's complaint
respondents Sio Choy and San Leon Rice Mills Inc. solidarily
against several solidary debtors for the collection of a sum of
liable to respondent Vallejos for a total amount of P29,103.00,
money on the ground that one of the defendants (Ceferino
with the qualification that petitioner's liability is only up to
Valencia) died during the pendency of the case (i.e., after the
P20,000.00. In the context of a solidary obligation, petitioner
plaintiff had presented its evidence) and therefore the
may be compelled by respondent Vallejos to pay the entire
complaint, being a money claim based on contract, should be
obligation of P29,013.00, notwithstanding the qualification
prosecuted in the testate or intestate proceeding for the
made by the trial court. But, how can petitioner be
settlement of the estate of the deceased defendant pursuant
obliged to pay the entire obligation when the amount
to Section 6 of Rule 86 of the Rules of Court which reads:
stated in its insurance policy with respondent Sio Choy
for indemnity against third party liability is only SEC. 6. Solidary obligation of decedent. the obligation of
P20,000.00? Moreover, the qualification made in the the decedent is solidary with another debtor, the claim shall
decision of the trial court to the effect that petitioner is be filed against the decedent as if he were the only debtor,
sentenced to pay up to P20,000.00 only when the obligation without prejudice to the right of the estate to recover
to pay P29,103.00 is made solidary, is an evident breach of contribution from the other debtor. In a joint obligation of the
the concept of a solidary obligation. Thus, we hold that the decedent, the claim shall be confined to the portion belonging
trial court, as upheld by the Court of Appeals, erred in holding to him.
petitioner, solidarily liable with respondents Sio Choy and San
Leon Rice Mill, Inc. to respondent Vallejos.
The appellant assails the order of dismissal, invoking its right
of recourse against one, some or all of its solidary debtors
under Article 1216 of the Civil Code

ART. 1216. The creditor may proceed against any one of the
solidary debtors or some or all of them simultaneously. The
demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the
others, so long as the debt has not been fully collected. Case Doctrine: The SC considered the 4% interest as not
a penal clause because it does not strengthen the
Issue: Whether in an action for collection of a sum of money coercive force of the obligation.
based on contract against all the solidary debtors, the death
of one of the defendants deprives the court of jurisdiction to ROBES-FRANCISCO V. CFI [86 SCRA 59]
proceed with the case against the surviving defendants.
Facts: In May 1962 Robes-Francisco Realty & Development
Held: It is now settled that the quoted Article 1216 grants the Corporation, now petitioner, agreed to sell to private
creditor the substantive right to seek satisfaction of his credit respondent Lolita Millan for and in consideration of the sum of
from one, some or all of his solidary debtors, as he deems fit P3,864.00, payable in installments, a parcel of land containing
or convenient for the protection of his interests; and if, after an area of approximately 276 square meters, situated in
instituting a collection suit based on contract against some or Barrio Camarin, Caloocan City, known as Lot No. 20, Block No.
all of them and, during its pendency, one of the defendants 11 of its Franville Subdivision. 2
dies, the court retains jurisdiction to continue the proceedings
Millan complied with her obligation under the contract and
and decide the case in respect of the surviving defendants.
paid the installments stipulated therein, the final payment
having been made on December 22, 1971. The vendee made
a total payment of P5,193.63 including interests and
expenses for registration of title. 3

Thereafter, Lolita Millan made repeated demands upon the

corporation for the execution of the final deed of sale and the
issuance to her of the transfer certificate of title over the lot.
On March 2, 1973, the parties executed a deed of absolute
sale of the aforementioned parcel of land. The deed of
absolute sale contained, among others, this particular It is therefore inconceivable that the afore-cited provision in
provision: the deed of sale is a penal clause which will preclude an
award of damages to the vendee Millan. In fact the clause is
That the VENDOR further warrants that the transfer so worded as to work to the advantage of petitioner
certificate of title of the above-described parcel of land corporation.
shall be transferred in the name of the VENDEE within
the period of six (6) months from the date of full
payment and in case the VENDOR fails to issue said
transfer certificate of title, it shall bear the obligation to
refund to the VENDEE the total amount already paid
for, plus an interest at the rate of 4% per annum.
(record on appeal, p. 9)

Notwithstanding the lapse of the above-mentioned stipulated

period of six (6) months, the corporation failed to cause the Case Doctrine: The theory that penal and liquidated
issuance of the corresponding transfer certificate of title over damages are the same cannot be sustained where
the lot sold to Millan, hence, the latter filed on August 14, obligor is guilty of fraud in fulfillment of OBLIGATION;
1974 a complaint for specific performance and damages The penalty clause does not partake of the nature
against Robes-Francisco Realty & Development Corporation. of liquidated damages.
Party to a contract which was breached by the
Issue: Whether or not the petitioner is correct in invoking other, may be given the right to recover actual
Article 1226 of the Civil Code which provides that in damages instead of stipulated liquidated
obligations with a penal clause, the penalty shall substitute damages.
A creditor, in case of fraud by the obligor is
the indemnity for damages and the payment of interests in
entitled to stipulated penalty plus the difference
case of noncompliance, if there is no stipulation to the
between the proven damages & such stipulated
contrary. penalty.
Held: NO. We would agree with petitioner if the clause in PAMINTUAN V. CA [94 SCRA 556]
question were to be considered as a penal clause.
Nevertheless, for very obvious reasons, said clause does not FACTS: This is a case for Recovery of compensatory damages
convey any penalty, for even without it, pursuant to Article for breach of contract of sale in addition to liquidated
2209 of the Civil Code, the vendee would be entitled to damages.
recover the amount paid by her with legal rate of interest
which is even more than the 4% provided for in the clause.
In 1960, MARIANO C. PAMINTUAN, with his barter license, was Pamintuan was guilty of fraud because he did not make a
authorized to export to Japan 1000 metric tons of white flint complete delivery of the plastic sheeting & he overpriced the
corn valued at USD 47K, in exchange for collateral importation same. Xxx There is no justification for the Civil Code to make
of plastic sheetings of equal value. As such he entered into an apparent distinction between penalty and liquidated
contract with TOKYO MENKA KAISHA, LTD. of OSAKA, JAPAN. He damages because the settled rule is that there is no difference
also entered into a contract TO SELL the plastic sheetings to between penalty and liquidated damages insofar as legal
YU PING KUN, CO., INC. for Php 265K, thus the latter undertook results are concerned and that either may be recovered
to open an irrevocable domestic letter of credit in favor of without the necessity of proving actual damages and both may
Pamintuan. be reduced when proper (Arts. 1229, 2216 and 2227, Civil
Code. See observations of Justice J.B.L. Reyes, cited in 4
It was further agreed that Pamintuan would deliver the plastic Tolentino's Civil Code, p. 251). The penalty clause is strictly
sheetings to bodegas of Yu Ping in Manila and suburbs within penal or cumulative in character and does not partake
one month upon arrival of carrying vessels; & that upon of the nature of liquidated damages (pena sustitutiva)
breach, aggrieved party may collect liquidated damages of Php when the parties agree "que el acreedor podra pedir, en el
10K. supuesto incumplimiento o mero retardo de la obligacion
principal, ademas de la pena, los danos y perjuicios. Se habla
Pamintuan made incomplete deliveries, and then asked the en este caso de pena cumulativa, a differencia de aquellos
President of the Co. for cash payment and adjustments in otros ordinarios, en que la pena es sustitutiva de la reparacion
price, which the company agreed to. When Pamintuan refused ordinaria." (Ibid, Castan Tobenas, p. 130).
to complete his deliveries, he invoked that the contract was
novated and Co. failed to comply thereto. After a conscientious consideration of the facts of the case, as
Co. filed for damages against Pamintuan. The lower court found by Court of Appeals and the trial court, and after
awarded actual damages, liquidated damages as stipulated, reflecting on the/tenor of the stipulation for liquidated
and moral damages. damages herein, the true nature of which is not easy to
categorize, we further hold that justice would be adequately
Pamintuan appealed and assert that Yu Ping is only entitled to done in this case by allowing Yu Ping Kun Co., Inc. to recover
recover liquidated damages. CA found Pamintuan guilty of only the actual damages proven and not to award to it the
fraud, and sustained the Lower court. stipulated liquidated damages of ten thousand pesos for any
breach of the contract. The proven damages supersede the
ISSUE: Whether or not the Co. is entitled only to liquidated stipulated liquidated damages.
damages as appearing in the contract of sale.
This view finds support in the opinion of Manresa (whose
HELD: We hold that appellant's contention cannot be comments were the bases of the new matter found in article
sustained because the second sentence of Article 1226 itself 1226, not found in article 1152 of the old Civil Code) that in
provides that "nevertheless, damages shall be paid if the case of fraud the difference between the proven damages and
obligor xxx is guilty of fraud in the fulfillment of the the stipulated penalty may be recovered (Vol. 8, part. 1,
obligation." xxx The trial court & the CA found that Codigo Civil, 5th Ed., 1950, p. 483).
Hence, the damages recoverable by the firm would amount to
ninety thousand five hundred fifty-nine pesos and twenty-eight
centavos (P90,559.28), with six percent interest a year from
the filing of the complaint.

V. ESPIRITU [52 Phil. 346]

RE: Chattel Mortgage with PENAL CLAUSE

FACTS: Faustino Espiritu purchased from Bachrach Motor in

JULY 1925 a two-ton White truck on installment basis. This
truck was mortgaged, including two other white trucks owned
by defendant which are fully paid for, to secure the loan.
In FEBRUARY 1925 defendant also purchased another one-ton the Civil Code, this penalty is reduced to 10 per cent of the
white truck from same plaintiff corp. with down-payment unpaid debt.
balance on installment basis also, placing this truck on
mortgage for security and including the 2 above mortgaged With the sole modification that instead of 25 per cent upon
trucks also. Again, defendant failed to pay this debt. the sum owed, the defendants need pay only 10 per cent
thereon as penalty.
In both sales, a 12% annual interest was agreed upon the
unpaid portion of the contracts, and upon maturity, when due, There was already partial performance, to wit; down payment
non-payment of total remaining debt would give rise to 25% of 1k and the selling of the 2 trucks to be applied to the
penalty; aside from mortgage deed, there was a Promissory balance (although kulang pa)
Note, co-signed by defendant brother Rosario Espiritu solidarily.
Thus, Rosario appeared as intervenor in the collection suits Article 1229, NCC the judge shall equitably reduce the
alleging to be the sole owner of the two other trucks penalty when:
mortgaged. He alleged that he did not sign the mortgage and 1. The principal obligation has been partly or
did not consent to the inclusion of his two trucks therein. 2. Irregularly complied with by the debtor; or
3. Even if there is no performance, the penalty is iniquitous
While the cases were pending in lower court, the trucks or unconscionable.
were sold by virtue of the mortgage and brought in a
net sum not enough to settle the debts due. The Lower
court directed payments of all the sums due and in both two
cases ordered the payment of 12% interest p.a. until fully paid
and a penalty of 25% in addition as appearing in the contracts.
To these matters the defendants alleged that these amounts to

ISSUE: Whether or not the 12% interest p.a. plus additional

penalty of 25% makes the contract usurious?

HELD: NO. Article 1152 of the Civil Code permits the

agreement upon a penalty apart from the interest. Should
there be such an agreement, the penalty does not include the
interest, and which may be demanded separetely. According
to this, the penalty is not to be added to the interest for the
determination of whether the interest exceeds the rate fixed
by the law, since said rate was fixed only for the interest. But
considering that the obligation was partly performed, and
making use of the power given to the court by article 1154 of
Agcaoili could not stay in the house which was only a shell. It did not
have a ceiling, stairs, double walling, lights, water, CR, drainage. He
asked a homeless friend instead to stay and watch over the property.
After paying 1st installment & other fees, he refused to make further
payments until GSIS would make d house habitable. Instead of
heeding to Agcaolis condition, GSIS cancelled the contract and
demanded Agcaoili to vacate.

Agcaoili filed a case for specific performance and won. Thus GSIS
appeal must fail.


Since GSIS did not fulfill that obligation, & was not willing to put the
house in habitable state, it cannot invoke Agcaoili's suspension of
payment of amortization as cause to cancel the contract between
them. It is axiomatic that "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.

ISSUE: Whether or not Agcaoili breached the contract by failing to

occupy the house within 3 days as stipulated?

HELD: NO, argument of GSIS is devoid of merit. There being a

perfected contract of sale, it was the duty of GSIS as seller to deliver
the thing sold in a condition suitable for enjoyment by the buyer for
the purpose contemplated. There was then a perfected contract of
sale between the parties; there had been a meeting of the minds
AGCAOILI VS. GSIS [165 SCRA 1] upon the purchase by Agcaoili of a determinate house & lot in the
GSIS Housing Project at Nangka, Marikina, Rizal, at a definite price
in any manner contravene the tenor of contract payable in amortizations at P31.56 per mo., & from the moment the
parties acquired the right to reciprocally demand performance. It was,
FACTS: GSIS approved application of Marcelo Agcaoili for purchase of to be sure, the duty of the GSIS, as seller, to deliver the thing sold in
House and Lot in Marikina, subject to the condition that latter should a condition suitable for its enjoyment by the buyer for the purpose
forthwith occupy the house. contemplated, in other words, to deliver the house subject of the
contract in a reasonably livable state. This it failed to do.
If you fail to occupy the same within 3 days from receipt of this
notice, your application will be considered automatically disapproved ARRIETA VS. NARIC [10 SCRA 79] (PAZ ARRIETA AND
& said House & Lot will be awarded to another. VITALIADO ARRIETA VS. NATIONAL RICE & CORN CORP.)
CASE DOCTRINE: One who assumes a contractual obligation & was well aware of its own financial incapacity to undertake
fails to perform the same on account of his inability to meet the prestation.
certain bank requirements which inability he knew & was
aware of when he entered into the contract, should be held Under Article 1170, not only debtors guilty of fraud,
liable in damages for breach of contract. negligence or default but also every debtor, in general, who
fails the performance of his obligation is bound to indemnify
FACTS: On May 1952, Arrieta took part in public bidding called by for the losses & damages caused thereby.
NARIC to supply 20K metric tons of Burmese rice, being the lowest
bidder she was awarded the contract. In the contract of sale, Arrietas Meaning of phrase "in any manner contravene the tenor" of
OBLIGATION was to deliver the rice at the price of her bid, while the obligation in Article 1170 The phrase includes any illicit task
NARICs OBLIGATION was to pay her in letter of credit, irrevocable, which impairs the strict & faithful fulfillment of the obligation, or
confirmed and assignable, in USD in favor of Arrieta and/or supplier in every kind of defective performance.
Burma, immediately.
TELEFAST Communications/Phil. Wireless, Inc. VS. IGNACIO
NARIC knew that it did not have enough deposit in PNB to cover the CASTRO [158 SCRA 445]
OBLIGATION, thus it wrote a letter of request to accommodate the
application for Letter Of Credit despite such fact in lieu of this FACTS: Consolacion Bravo-Castro, the wife of herein respondent
contract with Arrieta. This application was made by PNB on July 30, Ignacio died in Lingayen, Pangasinan. Thus, that same day, her
1952, a month after it entered in the contract with Arrieta and
daughter Sofia sent a telegram to her father in the USA via TELEFAST.
promised to open the Letter Of Credit immediately. By this time
Arrieta has made a 5% tender to her supplier in Burma, which will be Her mother was interred without her father nor siblings in
confiscated if the required Letter Of Credit will not be received before attendance. When Sofia went back to the USA she learned that her
August 4, 1952. Such fact was apprised by Arrieta to NARIC in a telegram never reached her father. She sued TELEFAST for damages
letter through counsel. due to breach of contract. While TELEFASTs defense was technical
and atmospheric factor beyond its control.
PNB required NARIC to make a marginal deposit of 50% of the
amount of Letter Of Credit before such will be released in favor of ISSUE: Whether or not TELEFAST is liable only for P31.92 (fee) and
Arrietas supplier in Burma. Such condition NARIC is not in any not for damages.
financial position to meet. PNB consequently approved & released
the LOC 2-months in delay. The Burmese supplier had cancelled the HELD: YES, Article 1170, and also under Article 2176 applied.
order on Aug. 20, 1952, and forfeited the 5% tender of Arrieta
This liability is not limited to actual or quantified damages.
amounting to P200K. NARIC and PNB did not even make the 15-day
grace period given by the supplier. Arrieta endeavored to restore to To sustain petitioners contention and award actual damages
no avail. It offered to substitute with Thailand rice, but NARIC only would be iniquitous such that he would be liable only for
rejected. Thus, Arrieta demanded for payment of damages of USD the cost of that telegram paid for 30 yrs ago. Also, Article
286K representing unrealized profits. Again rejected. Thus, this case. 2217 is applicable since Petitioners act or omission amounted to
ISSUE: WON NARIC was in breach of contract? gross negligence which was precisely the cause of the suffering of
herein private respondents.
HELD: YES. NARICs culpability arises from its willful and
deliberate assumption of contractual OBLIGATIONS even as it
Petitioner & private respondent Sofia C. Crouch entered into a very well that it was safer to have opened the same gradually &
contract whereby, for a fee, petitioner undertook to send said private earlier, as it was also undeniable that NPC knew of the coming of the
respondent's message overseas by telegram. This, petitioner did not typhoon at least 4 days before it actually struck. And even though
do, despite performance by said private respondent of her obligation the typhoon was an act of God or what we may call force majeure,
by paying the required charges. Petitioner was therefore guilty of NPC cannot escape liability because its negligence was the proximate
contravening its obligation to said private respondent & is thus liable cause of the loss & damage. As we have said in Juan Nakpil & Sons
for damages. vs. CA, 144 SCRA 596,

Thus, if upon the happening of a fortuitous event or an act of God,

there concurs a corresponding fraud, negligence, delay or
National Power Corporation vs. CA and Engineering violation or contravention in any manner of the tenor of the
Construction Inc. [161 SCRA 334] obligation as provided for in Article 1170, which results in a
loss or damage, the obligor cannot escape liability. The
CASE DOCTRINE: NPC cannot escape liability because its
principle embodied in the act of God doctrine strictly requires that
negligence was the proximate cause of the loss & damage
the act must be one occasioned exclusively by the violence of
even though the typhoon was an act of God.
nature & human agencies are to be excluded from creating or
FACTS: Typhoon Welming Plaintiff ECI entered contract with entering into the cause of the mischief. When the effect, the
NAWASA on Aug.1964, to construct Ipo-Bicti Tunnel, Intake and Outlet cause of which is to be considered, is found to be in part the result of
Structures at Norzagaray, Bulacan within 800 days from receipt of the participation of man, whether it be from active intervention or
notice to proceed. It has finished 1st stage of the excavation works neglect, or failure to act, the whole occurrence is thereby humanized,
and was already on the Ipo site phase when typhoon Welming as it was, & removed from the rules applicable to the acts of God.
came in November 4, 1967 and hit Central Luzon passing through Thus, it has been held that when the negligence of a person concurs
Angat Dam. Consequent to the heavy downpour, the dam reached with an act of God in producing a loss, such person is not exempt
danger height of 212 m. above sea level causing the NPC to decide to from liability by showing that the immediate cause of the damage
open spillway gates at that point. Thus, the extraordinary large was the act of God. To be exempt from liability for loss because
volume of water rushed out of the gates and hit the installations and of an act of God, he must be free from any previous
construction work of ECI at Ipo Site with terrific impact washing away negligence or misconduct by which the loss or damage may
and/or destroying supplies and equipment of ECI. ECI then sued NPC have been occasioned.
for damages.
ISSUE: Whether or not NPC is liable for damages.
CASE DOCTRINE: City of Manila failed to exercise the diligence
HELD: It is clear from the appellate court's decision that based on its of a good father of a family which is a defense in quasi-delict.
findings of fact & that of the trial court's, petitioner NPC was
FACTS: Bernardino Jimenez went to Sta. Ana Public market to buy
undoubtedly negligent because it opened the spillway gates of the
bagoong when his left foot fell in an open hole that was hidden by
Angat Dam only at the height of typhoon "Welming" when it knew
muddy rainwater in the flooded market when the latter was flooded
with ankle-deep rainwater. His left leg was stuck by a rusty 4-inch been placed thereabouts to warn passers-by of the
nail. His leg later on swelled and he was brought for treatment to impending danger.
Veterans Memorial Hospital. He walked around with crutches for 15
days, unable to work, forced to hire a temporary driver for his school For liability under Article 2189 NCC to attach, it is not necessary that
bus he is operating. Thus, he sued the City of Manila for damages, the defective public works belong to the LGU concerned. What is
and the Asiatic Integrated Corp. (AIC) who had the managing and required is control or supervision.
operating contract to that market. Lower court dismissed his
JUAN F. NAKPIL & SONS vs. CA [144 SCRA 596]- October 3, 1986
complaint for insufficiency of evidence. The appellate court found in
his favor and placed sole liability on AIC. CASE DOCTRINE: Requisites for exemption from liability due to
an "act of God."
ISSUE: WON the City of Manila should be held solidarily liable with
Asiatic Integrated Corp. for injuries suffered by petitioner. To exempt the obligor from liability under Article 1174, for a breach of
an obligation due to an "act of God," the following must concur:
HELD: YES. As a defense against liability on the basis of quasi- 1. the cause of the breach of the obligation must be independent
delict, one must have exercised the diligence of a good father of a of the will of the debtor;
family. (Article 1173, NCC) 2. the event must be either unforeseeable or unavoidable; (c)
the event must be such as to render it impossible for the
There is no argument that it is the duty of the City of Manila to debtor to fulfill his obligation in a normal manner; &
exercise reasonable care to keep the public market reasonably safe 3. the debtor must be fee from any participation in, or
for people frequenting the place for their marketing needs. While it aggravation of the injury to the creditor.
may be conceded that the fulfillment of such duties is extremely
FACTS: Construction of the office building of Plaintiff Phil. Bar Assoc.
difficult during storms & floods, it must, however, be admitted that (PBA) in Intramuros, Manila was undertaken by United Construction
ordinary precautions could have been taken during good weather to Inc. on an administration basis on suggestion of United President
minimize the dangers to life & limb under those difficult Juan Carlos. Such was approved by PBA Board, & Pres. Roman
circumstances. For instance, the drainage hole could have Ozaeta. Plans and specifications were done by Juan Nakpil & Sons.
been placed under the stalls instead of on the passage ways. The Bldg. was completed on June 1966.
Even more important is the fact, that the City should have seen to it
On August 2, 1968 an unusually strong earthquake hit Manila. The
that the openings were covered. Sadly, the evidence indicates
PBA bldg. sustained major damage, in which tenants had to vacate.
that long before petitioner fell into the opening, it was The building was shored up by UCI at the cost of P13,661.28.
already uncovered, & 5 mos. after the incident happened, the
opening was still uncovered. Moreover, while there are Hence, PBA filed action to recover damages against UCI while the
findings that during floods the vendors remove the iron grills latter sued Nakpil for damages due to defects on the plans and
to hasten the flow of water, there is no showing that such specifications.
practice has ever been prohibited, much less penalized by
the City of Manila. Neither was it shown that any sign had
precipitate the loss." (Citing Tucker v. Milan, 49 OG 4379,
HELD: ARTICLE 1723 4380.)
To exempt obligor from liability under Article 1174, fortuitous
events; or for a breach of OBLIGATION due to an act of God, FACTS: UCI filed a Motion for Reconsideration on the decision
the following: must concur: previously disposed of the SC on Oct. 3, 1986 pointing out that it was
1. cause of the breach of OBLIGATION must be independent of PBAs legal duty to provide full-time and active supervision in the
the will of the debtor; construction of the subject building. Also, UCI points out that bad
2. the event must be either unforeseeable or unavoidable faith was not established.
3. the event must be such as to render it impossible for debtor to
fulfill OBLIGATION in normal manner; ISSUES RAISED ON THIS MR:
4. debtor must be free from any participation in, or aggravation (1) That the building did not collapse on the earthquake of 4/2/68,
of the injury to the creditor. thus the premise of the LC findings is negated, Article 1173
cannot apply
Thus, if upon the happening of a fortuitous event or an Acts Of God,
there concurs a corresponding fraud, negligence, delay or violation or HELD: It is not the fact of collapse that was the premise on applying
contravention in any manner of the tenor of the OBLIGATION as Article 1173 but on who should be responsible for the extreme
provided in Article 1170, which results in loss or damage, the damage to the bldg. which inevitably led to its collapse, or
obligor cannot escape liability. demolition. Trial court correctly found defendants liable;

To be an Act Of God, the event must be occasioned exclusively by (2) That court failed to impute liability on PBA or on Ozaeta for failure
violence of nature and all human agencies are excluded from creating to provide legal duty to supervise, as owner.
or entering into the cause of mischief. With participation of man,
whether active or neglect or failure to act, the occurrence is HELD: There is no legal nor contractual basis. PBA sought technical
humanized, and removed from the doctrines application. expertise of both United & JFN & sons for such costs on this
purpose. It was even JFN who suggested administration basis.
Findings of lower court and IAC were both beyond dispute that United
and Juan F. Nakpil & Sons were both liable. The defects in the plans & (3) That findings of bad faith had no factual anchor.
specifications were proximate cause, the deviations of United for the
specs and failure to observe required workmanship & degree of HELD: Wanton negligence of both United & JFN & sons in effecting
supervision on both makes them liable. plans, specs, & constructions designs is equivalent to Bad
Faith in performance of their respective duties;

(4) Award of 5M had no basis, Commissioners report estimated only

NAKPIL & SONS VS. CA [160 SCRA 334] - APRIL 15, 1988
HELD: Such initial report was based on the partial collapse only, after
CASE DOCTRINE: "One who negligently creates a dangerous the 4/2/68 earth quake, for repairs; but after total collapse
condition cannot escape liability for the natural & probable almost 20 yrs later, unrealized rentals and major
consequences thereof, although the act of a third person, or reconstructions makes even 5M a very conservative estimate.
an act of God for which he is not responsible, intervenes to
(5) As to award of atty.s fees & damages.
jewelry instead. But Sicam failed to return the same. Hence, Lulu
HELD: It was court discretion. and husband filed a complaint seeking indemnification for the loss
of pawned jewelry. RTC dismissed the complaint since Sicam cannot
(6) 12% interest p.a. according to CB Circular 416 (PD 116) applies
be made personally liable for an incident which is in relation to
only to (1) loans; (2) forbearance of money, goods or
credit; (3) rate allowed in JFOs involving 1 & 2. corporate transaction and so as the corporation because the loss
was occasioned by a fortuitous event. CA reversed the RTC and held
HELD: True, but, 12% is imposable only when there is delay in Sicam liable together with the corporation.
payment of judgment after its finality. (penalty not really
interest) ISSUE: Whether or not the robbery in pawnshop resulting to the
loss of pawned jewelry can be considered as fortuitous event
NPC VS. CA [222 S 415] thereby excusing liability of Sicam and Corporation.
FACTS: Petitioners cannot be heard to invoke the act of God or force
majeure to escape liability for the loss or damage sustained by the HELD: NO. Article 1174 of the Civil Code provides:
private respondents since they, the petitioners, were guilty of
negligence. The event then was not occasioned exclusively by an act Art. 1174. Except in cases expressly specified by the law, or
of God or force majeure; a human factor-- negligence or when it is otherwise declared by stipulation, or when the
imprudence-- had intervened. The effect then of the force majeure
nature of the obligation requires the assumption of risk, no
in question may be deemed to have, even if only partly, resulted from
the participation of man. Thus, the whole occurrence was thereby person shall be responsible for those events which could not
humanized, as it were, & removed from the rules applicable to acts of be foreseen or which, though foreseen, were inevitable.
Fortuitous events by definition are extraordinary events not
NPC VS. CA [223 S 649] foreseeable or avoidable. It is therefore, not enough that the event
Petitioners have raised the same issues & defenses as in the 2 other should not have been foreseen or anticipated, as is commonly
decided cases therein mentioned. Predictably therefore, this petition believed but it must be one impossible to foresee or to avoid. The
must perforce be dismissed because the losses & damages sustained mere difficulty to foresee the happening is not impossibility to
by the private respondent's had been proximately caused by the
foresee the same.
negligence of the petitioners, although the typhoon which preceded
the flooding could be considered as a force majeure.
To constitute a fortuitous event, the following elements
ROBERTO AND AGENCIA de R.C. SICAM vs. LULU AND CESAR must concur: (a) the cause of the unforeseen and
JORGE August 8, 2007. unexpected occurrence or of the failure of the debtor to
comply with obligations must be independent of human will;
FACTS: On October 19, 1987, two armed men entered the (b) it must be impossible to foresee the event that
pawnshop and took away whatever cash and jewelry were found constitutes the caso fortuito or, if it can be foreseen, it must
inside the pawnshop unit. Such incident was entered in police be impossible to avoid; (c) the occurrence must be such as
blotter in Paranaque. Sicam then sent letter to Lulu informing the to render it impossible for the debtor to fulfill obligations in
latter of the loss of her jewelry due to the robbery. However, Lulu a normal manner; and, (d) the obligor must be free from any
wrote a letter expressing her disbelief and asking the return of her participation in the aggravation of the injury or loss.
The burden of proving that the loss was due to a fortuitous It is not a defense for a repair shop of motor vehicles to
event rests on him who invokes it. And, in order for a escape liability simply because the damage or loss of a thing
fortuitous event to exempt one from liability, it is necessary lawfully placed in its possession was due to carnapping.
that one has committed no negligence or misconduct that Carnapping per se cannot be considered as a fortuitous
may have occasioned the loss. event. The fact that a thing was unlawfully and
forcefully taken from another's rightful possession, as
It has been held that an act of God cannot be invoked to protect a in cases of carnapping, does not automatically give
person who has failed to take steps to forestall the possible adverse rise to a fortuitous event. To be considered as such,
consequences of such a loss. One's negligence may have concurred carnapping entails more than the mere forceful taking
with an act of God in producing damage and injury to another; of another's property. It must be proved and
nonetheless, showing that the immediate or proximate cause of the established that the event was an act of God or was
damage or injury was a fortuitous event would not exempt one from done solely by third parties and that neither the
liability. When the effect is found to be partly the result of a person's claimant nor the person alleged to be negligent has
participation -- whether by active intervention, neglect or failure to any participation. In accordance with the Rules of
act -- the whole occurrence is humanized and removed from the Evidence, the burden of proving that the loss was due
rules applicable to acts of God. to a fortuitous event rests on him who invokes it
which in this case is the private respondent. However,
Petitioner Sicam had testified that there was a security guard in
other than the police report of the alleged carnapping
their pawnshop at the time of the robbery. He likewise testified that
incident, no other evidence was presented by private
when he started the pawnshop business in 1983, he thought of
respondent to the effect that the incident was not due to its
opening a vault with the nearby bank for the purpose of safekeeping
fault. A police report of an alleged crime, to which only
the valuables but was discouraged by the Central Bank since
private respondent is privy, does not suffice to establish the
pawned articles should only be stored in a vault inside the
carnapping. Neither does it prove that there was no fault on
pawnshop. The very measures which petitioners had allegedly
the part of private respondent notwithstanding the parties'
adopted show that to them the possibility of robbery was not only
agreement at the pre-trial that the car was carnapped.
foreseeable, but actually foreseen and anticipated. Petitioner
Carnapping does not foreclose the possibility of fault or
Sicams testimony, in effect, contradicts petitioners defense of
negligence on the part of private respondent.
fortuitous event.
Just like in Co, petitioners merely presented the police report of the
Moreover, petitioners failed to show that they were free from any
Paraaque Police Station on the robbery committed based on the
negligence by which the loss of the pawned jewelry may have been
report of petitioners' employees which is not sufficient to establish
robbery. Such report also does not prove that petitioners were not at
Robbery per se, just like carnapping, is not a fortuitous fault.
event. It does not foreclose the possibility of negligence on
the part of herein petitioners. In Co v. Court of Appeals, the
Court held:
On the contrary, by the very evidence of petitioners, the CA did not affairs, would do; or the doing of something which a prudent and
err in finding that petitioners are guilty of concurrent or contributory reasonable man would not do. It is want of care required by the
negligence as provided in Article 1170 of the Civil Code, to wit: circumstances.

Art. 1170. Those who in the performance of their obligations A review of the records clearly shows that petitioners failed to
are guilty of fraud, negligence, or delay, and those who in exercise reasonable care and caution that an ordinarily prudent
any manner contravene the tenor thereof, are liable for person would have used in the same situation.
Article 2123 of the Civil Code provides that with regard to 2008.
pawnshops and other establishments which are engaged in making
loans secured by pledges, the special laws and regulations FACTS: In 1987, NPC filed with MTC of Quezon City a case for
concerning them shall be observed, and subsidiarily, the provisions ejectment against several persons allegedly illegally occupying its
on pledge, mortgage and antichresis. properties in Baesa, QC. Among the defendants were the Ramoys.
The MTC ordered the demolition of the buildings and structures. On
The provision on pledge, particularly Article 2099 of the Civil Code, June 20, 1990, NPC wrote Meralco requesting the latter to
provides that the creditor shall take care of the thing pledged with immediately disconnect electric power supply to all residential and
the diligence of a good father of a family. This means that commercial establishments in the subject land. Hence, Meralco
petitioners must take care of the pawns the way a prudent person comply with the same. In due time, the electric service connection
would as to his own property. of the plaintiffs was disconnected. Upon the conduct of
disconnection, respondents herein were contesting that the property
In this connection, Article 1173 of the Civil Code further provides: were not under NPC properties. The same lead the respondents to
vacate the premises. However, during ocular inspection ordered by
Art. 1173. The fault or negligence of the obligor consists in
the court, it was found out that the residence of the Ramoys were
the omission of that diligence which is required by the nature
outside NPCs properties. RTC dismiss complaint for damages
of the obligation and corresponds with the circumstances of
against Meralco but instead ordered the latter to restore electric
the persons, of time and of the place. When negligence
power supply to respondents. Hence, respondents appealed to CA.
shows bad faith, the provisions of Articles 1171 and 2201,
CA held Meralco liable for damages.
paragraph 2 shall apply.
ISSUE: Whether Meralco is held liable for damages to the
If the law or contract does not state the diligence which is to
be observed in the performance, that which is expected of a
good father of a family shall be required. HELD: YES. MERALCO admits that respondents are its customers
under a Service Contract whereby it is obliged to supply
We expounded in Cruz v. Gangan that negligence is the omission to
respondents with electricity. Nevertheless, upon request of the NPC,
do something which a reasonable man, guided by those
MERALCO disconnected its power supply to respondents on the
considerations which ordinarily regulate the conduct of human
ground that they were illegally occupying the NPC's right of way.
Under the Service Contract, "[a] customer of electric service must accomplish little, either for their makers or for society, unless they
show his right or proper interest over the property in order that he are made the basis for action. The effect of every infraction is to
will be provided with and assured a continuous electric service." create a new duty, that is, to make recompense to the one who has
MERALCO argues that since there is a Decision of the Metropolitan been injured by the failure of another to observe his contractual
Trial Court (MTC) of Quezon City ruling that herein respondents were obligation unless he can show extenuating circumstances, like proof
among the illegal occupants of the NPC's right of way, MERALCO of his exercise of due diligence x x x or of the attendance of
was justified in cutting off service to respondents. fortuitous event, to excuse him from his ensuing liability. (Emphasis
Clearly, respondents' cause of action against MERALCO is anchored
on culpa contractual or breach of contract for the latter's Article 1173 also provides that the fault or negligence of the obligor
discontinuance of its service to respondents under Article 1170 of consists in the omission of that diligence which is required by the
the Civil Code which provides: nature of the obligation and corresponds with the circumstances of
the persons, of the time and of the place. The Court emphasized
Article 1170. Those who in the performance of their obligations are in Ridjo Tape & Chemical Corporation v. Court of Appeals that "as a
guilty of fraud, negligence, or delay, and those who in any manner public utility, MERALCO has the obligation to discharge its functions
contravene the tenor thereof, are liable for damages. with utmost care and diligence."

In Radio Communications of the Philippines, Inc. v. Verchez, the The Court agrees with the CA that under the factual milieu
Court expounded on the nature of culpa contractual, thus: of the present case, MERALCO failed to exercise the utmost
degree of care and diligence required of it. To repeat, it was
"In culpa contractual x x x the mere proof of the existence of
not enough for MERALCO to merely rely on the Decision of
the contract and the failure of its compliance justify, prima
the MTC without ascertaining whether it had become final
facie, a corresponding right of relief. The law, recognizing the
and executory. Verily, only upon finality of said Decision can
obligatory force of contracts, will not permit a party to be set free
it be said with conclusiveness that respondents have no
from liability for any kind of misperformance of the contractual
right or proper interest over the subject property, thus, are
undertaking or a contravention of the tenor thereof. A breach upon
not entitled to the services of MERALCO.
the contract confers upon the injured party a valid cause for
recovering that which may have been lost or suffered. The remedy
serves to preserve the interests of the promissee that may include
his "expectation interest," which is his interest in having the benefit
of his bargain by being put in as good a position as he would have
been in had the contract been performed, or his "reliance interest," SOLAR HARVEST, INC. vs. DAVAO CORRUGATED CARTON
which is his interest in being reimbursed for loss caused by reliance CORP., July 26, 2010.
on the contract by being put in as good a position as he would have
FACTS: In the first quarter of 1998, Petitioner entered into an
been in had the contract not been made; or his "restitution
agreement with Davao Corp. for the purchase of corrugated carton
interest," which is his interest in having restored to him any benefit
boxes specifically designed for petitioners business of exporting
that he has conferred on the other party. Indeed, agreements can
fresh bananas at US1.10 each. The agreement was not reduced into The right to rescind a contract arises once the other party defaults
writing. To get the production underway, the petitioner deposited to in the performance of his obligation. In determining when default
respondents dollar account with Westmont Bank, as full payment. occurs, Art. 1191 should be taken in conjunction with Art. 1169 of
the same law, which provides:
However, despite payment, petitioner did not receiver any boxes.
Art. 1169. Those obliged to deliver or to do something incur
Petitioner wrote demand letter for reimbursement from respondent. in delay from the time the obligee judicially or
On February 19, 2001, respondent replied that the boxes had been extrajudicially demands from them the fulfillment of their
completed as early as April 3, 1998 and that petitioner failed to pick obligation.
them up from the formers warehouse 30 days from completion, as However, the demand by the creditor shall not be necessary
agreed upon. Respondent mentioned that petitioner even placed an in order that delay may exist:
additional order of 24,000 boxes, out of which, 14,000 had been (1) When the obligation or the law expressly so
declares; or
manufactured without any advanced payment from petitioner.
(2) When from the nature and the circumstances of
Respondent then demanded petitioner to remove the boxes from the obligation it appears that the designation of the
the factory and to pay the balance of US$15,400.00 for the time when the thing is to be delivered or the service
additional boxes and P132,000.00 as storage fee. On August 17, is to be rendered was a controlling motive for the
2001, petitioner filed a Complaint for sum of money and damages establishment of the contract; or
against respondent. RTC ruled that respondents did not commit any (3) When demand would be useless, as when the
breach of faith that would justify rescission of the contract and the obligor has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other
consequent reimbursement. CA denied the appeal of petitioner.
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
ISSUE: Whether or not the respondent is liable for reimbursement
fulfills his obligation, delay by the other begins.
of the payment made by petitioner. In reciprocal obligations, as in a contract of sale, the general rule is
that the fulfillment of the parties respective obligations should be
HELD: NO. Petitioners claim for reimbursement is actually one for simultaneous. Hence, no demand is generally necessary because,
rescission (or resolution) of contract under Article 1191 of the Civil once a party fulfills his obligation and the other party does not fulfill
Code, which reads: his, the latter automatically incurs in delay. But when different dates
Art. 1191. The power to rescind obligations is implied in reciprocal for performance of the obligations are fixed, the default for each
ones, in case one of the obligors should not comply with what is obligation must be determined by the rules given in the first
incumbent upon him. paragraph of the present article, that is, the other party would incur
The injured party may choose between the fulfillment and the in delay only from the moment the other party demands fulfillment
rescission of the obligation, with the payment of damages in either of the formers obligation. Thus, even in reciprocal obligations, if the
case. He may also seek rescission, even after he has chosen period for the fulfillment of the obligation is fixed, demand upon the
fulfillment, if the latter should become impossible. obligee is still necessary before the obligor can be considered in
The court shall decree the rescission claimed, unless there be just default and before a cause of action for rescission will accrue.
cause authorizing the fixing of a period. Evident from the records and even from the allegations in
This is understood to be without prejudice to the rights of third the complaint was the lack of demand by petitioner upon
persons who have acquired the thing, in accordance with Articles respondent to fulfill its obligation to manufacture and
1385 and 1388 and the Mortgage Law. deliver the boxes. The Complaint only alleged that
petitioner made a "follow-up" upon respondent, which,
however, would not qualify as a demand for the fulfillment Korea in favor of consignee Taegu Industries, Inc. Del Monte Produce
of the obligation. Petitioners witness also testified that insured the shipment under an "open cargo policy" with private
they made a follow-up of the boxes, but not a demand. Note respondent Phoenix Assurance Company of New York (Phoenix), a
is taken of the fact that, with respect to their claim for non-life insurance company, and private respondent McGee & Co.
reimbursement, the Complaint alleged and the witness Inc. (McGee), the underwriting manager/agent of Phoenix. Mindanao
testified that a demand letter was sent to respondent. Terminal loaded and stowed the cargoes aboard the M/V Mistrau.
Without a previous demand for the fulfillment of the The vessel set sail from the port of Davao City and arrived at the
obligation, petitioner would not have a cause of action for port of Inchon, Korea. It was then discovered upon discharge that
rescission against respondent as the latter would not yet be some of the cargo was in bad condition. Del Monte Produce filed a
considered in breach of its contractual obligation. claim under the open cargo policy for the damages to its shipment.
Even assuming that a demand had been previously made RTC dismissed the complaint. CA reversed. The same court ordered
before filing the present case, petitioners claim for Mindanao Terminal to pay Phoenix and McGee "the total amount of
reimbursement would still fail, as the circumstances would $210,265.45 plus legal interest from the filing of the complaint until
show that respondent was not guilty of breach of contract. fully paid and attorneys fees of 20% of the claim." It sustained
The existence of a breach of contract is a factual matter not usually Phoenixs and McGees argument that the damage in the cargoes
reviewed in a petition for review under Rule 45. The Court, in was the result of improper stowage by Mindanao Terminal. It
petitions for review, limits its inquiry only to questions of law. After imposed on Mindanao Terminal, as the stevedore of the cargo, the
all, it is not a trier of facts, and findings of fact made by the trial duty to exercise extraordinary diligence in loading and stowing the
court, especially when reiterated by the CA, must be given great cargoes. It further held that even with the absence of a contractual
respect if not considered as final. In dealing with this petition, we relationship between Mindanao Terminal and Del Monte Produce, the
will not veer away from this doctrine and will thus sustain the cause of action of Phoenix and McGee could be based on quasi-
factual findings of the CA, which we find to be adequately supported delict under Article 2176 of the Civil Code.
by the evidence on record.
As correctly observed by the CA, aside from the pictures of the ISSUE: Whether or not Mindanao Terminal is liable for damages for
finished boxes and the production report thereof, there is ample its failure to exercise extraordinary diligence in loading and stowing
showing that the boxes had already been manufactured by the cargoes.
HELD: NO. We adopt the findings of the RTC, which are not
MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. vs. disputed by Phoenix and McGee. The only participation of Mindanao
PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE & Terminal was to load the cargoes on board M/V Mistrau. It was not
CO., INC, May 8, 2009. disputed by Phoenix and McGee that the materials, such as ropes,
pallets, and cardboards, used in lashing and rigging the cargoes
FACTS: Del Monte Philippines, Inc. (Del Monte) contracted were all provided by M/V Mistrau and these materials meets
petitioner Mindanao Terminal and Brokerage Service, Inc. (Mindanao
industry standard.
Terminal), a stevedoring company, to load and stow a shipment of
146,288 cartons of fresh green Philippine bananas and 15,202
The resolution of the two remaining issues is determinative
cartons of fresh pineapples belonging to Del Monte Fresh Produce
International, Inc. (Del Monte Produce) into the cargo hold of the of the ultimate result of this case.
vessel M/V Mistrau. The vessel was docked at the port of Davao City
and the goods were to be transported by it to the port of Inchon, Article 1173 of the Civil Code is very clear that if the law or
contract does not state the degree of diligence which is to
be observed in the performance of an obligation then that operator should observe the same degree of diligence as
which is expected of a good father of a family or ordinary that required of a common carrier and a warehouseman as
diligence shall be required. Mindanao Terminal, a stevedoring enunciated under Article 1733 of the Civil Code and Section 3(b) of
company which was charged with the loading and stowing the the Warehouse Receipts Law, respectively. Being the custodian of
cargoes of Del Monte Produce aboard M/V Mistrau, had acted merely the goods discharged from a vessel, an arrastre operator's
as a labor provider in the case at bar. There is no specific duty is to take good care of the goods and to turn them over
provision of law that imposes a higher degree of diligence to the party entitled to their possession. (Emphasis supplied)
than ordinary diligence for a stevedoring company or one
who is charged only with the loading and stowing of There is a distinction between an arrastre and a stevedore. Arrastre,
cargoes. It was neither alleged nor proven by Phoenix and McGee a Spanish word which refers to hauling of cargo, comprehends the
that Mindanao Terminal was bound by contractual stipulation to handling of cargo on the wharf or between the establishment of the
observe a higher degree of diligence than that required of a good consignee or shipper and the ship's tackle. The responsibility of the
father of a family. We therefore conclude that following Article 1173, arrastre operator lasts until the delivery of the cargo to the
Mindanao Terminal was required to observe ordinary diligence only consignee. The service is usually performed by longshoremen. On
in loading and stowing the cargoes of Del Monte Produce the other hand, stevedoring refers to the handling of the cargo in
aboard M/V Mistrau. The case of Summa Insurance Corporation v. the holds of the vessel or between the ship's tackle and the holds of
CA, which involved the issue of whether an arrastre operator is the vessel. The responsibility of the stevedore ends upon the
legally liable for the loss of a shipment in its custody and the extent loading and stowing of the cargo in the vessel.
of its liability, is inapplicable to the factual circumstances of the
It is not disputed that Mindanao Terminal was performing purely
case at bar. Therein, a vessel owned by the National Galleon
stevedoring function while the private respondent in
Shipping Corporation (NGSC) arrived at Pier 3, South Harbor, Manila,
the Summa case was performing arrastre function. In the present
carrying a shipment consigned to the order of Caterpillar Far East
case, Mindanao Terminal, as a stevedore, was only charged with the
Ltd. with Semirara Coal Corporation (Semirara) as "notify party." The
loading and stowing of the cargoes from the pier to the ships cargo
shipment, including a bundle of PC 8 U blades, was discharged from
hold; it was never the custodian of the shipment of Del Monte
the vessel to the custody of the private respondent, the exclusive
Produce. A stevedore is not a common carrier for it does not
arrastre operator at the South Harbor. Accordingly, three good-order
transport goods or passengers; it is not akin to a warehouseman for
cargo receipts were issued by NGSC, duly signed by the ship's
it does not store goods for profit. The loading and stowing of
checker and a representative of private respondent. When Semirara
cargoes would not have a far reaching public ramification as that of
inspected the shipment at house, it discovered that the bundle of
a common carrier and a warehouseman; the public is adequately
PC8U blades was missing. From those facts, the Court observed:
protected by our laws on contract and on quasi-delict. The public
x x x The relationship therefore between the consignee and the policy considerations in legally imposing upon a common carrier or
arrastre operator must be examined. This relationship is much a warehouseman a higher degree of diligence is not present in a
akin to that existing between the consignee or owner of shipped stevedoring outfit which mainly provides labor in loading and
goods and the common carrier, or that between a depositor and a stowing of cargoes for its clients.
warehouseman. In the performance of its obligations, an arrastre
In the third issue, Phoenix and McGee failed to prove by
preponderance of evidence that Mindanao Terminal had acted
negligently. Where the evidence on an issue of fact is in equipoise or
there is any doubt on which side the evidence preponderates the
party having the burden of proof fails upon that issue. That is to say,
if the evidence touching a disputed fact is equally balanced, or if it
does not produce a just, rational belief of its existence, or if it leaves
the mind in a state of perplexity, the party holding the affirmative as
to such fact must fail.

It was further established that Mindanao Terminal loaded and

stowed the cargoes of Del Monte Produce aboard the M/V Mistrau in
accordance with the stowage plan, a guide for the area assignments
of the goods in the vessels hold, prepared by Del Monte Produce
and the officers of M/V Mistrau.


1. Why would a party to an obligation be liable? If there was


a. ARRIETA vs. NARIC: As long as there is contravention of the

tenor even there was no fraud, negligence or delay there is waiver as to future frauds and such waiver is a void waiver and can
liability. But is it correct to say that only debtors may be held liable still recover. But if the waiver was executed after the
for damages? No, even creditors may be held liable. In Article fraudulent act was committed with knowledge of the fraudulent
1170, the law says that those who are guilty of fraud. It did act, this of course would amount to condonation. How would you
not say that debtors who are guilty of fraud. In fact, in the know if this is a waiver as to future frauds? See the dates as to the
past bar exams, there was a problem where the creditor was in date of the commission of the fraud and the date when the waiver
delay and this is known as mora accipiende. How could the was executed.
creditor be in delay? He is not the one to perform the obligation? d.
Because if he refuses to accept without just cause this can be e. NEGLIGENCE- another name fault which is really wrong. Article
considered in delay. So what would the damages be suffered by the 2176- quasi-delict is fault or negligence. So fault is different from
debtor? Plenty of reasons. In keeping the thing, in preserving the negligence. Negligence is by omission. Fault may have intention.
thing, in the transport of the thing if it needs to be delivered. i.
b. ii. CULPA ACQUILIANA or Quasi-delict = CULPA is a broad term
c. FRAUD A sold to B bottles of liquor which appears to be Fundador covering broad term including fault and negligence.
but in reality it is originally a Matador Brandy inside the bottle of iii. CULPA = is not intentional. There are four kinds of culpa. It can
Fundador. Was there fraud? YES. But is this fraud under under Article be intentional or non-intentional.
1171? NO. This is not, because the fraud here speaks of in the iv.
performance of the obligation. In the contract there is no fraud, v. How would we know if an act is a negligent act or not? Negligence
but in the performance of the obligation there is fraud. In this Article 1173. Parameters are there as to whether the act is negligent
problem, this is what you call CAUSAL FRAUD. Dolo Causante or not. The degree of diligence which should be observed in
under Article 1338. Article 1344 incidental fraud. As to the the performance of the obligation.
nature of this fraud- Article 1170, I would not use dolo here, because vi. If a person is invoking fortuitous event, for it to be a valid defense,
DOLO is fraud in on obtaining consent, that pertains to deceit. there must not be a concurrent negligence on his part.
Article 1170 bad faith/ malice. vii.
i. viii. Telefast vs. Castro Case This involves negligence because the
ii. The EFFECT OF FRAUD: heirs are claiming moral damages, but this is a contract, the
1. Article 1170 would result in liability for damages. sending of the telegram which was not received by the heirs, but for
2. Article 1338 would result in the contract being considered to be moral damages to be awarded resulting from a contract; breach of
VOIDABLE because theres vitiation of consent but the injured party contract, the law requires for one to disregard the
may be entitle to damages as well. obligations. Telefast: we are not negligent because the failure of
3. Article 1334 would not result into a voidable contract but would sending the telegram was not due to our fault but due to a
only result in the entitlement of the injured party to damages. fortuitous event, it was due to atmospheric pressure and its beyond
iii. are control. SC: Telefast failed to notify Sophia, the one who sent
iv. Another example for fraud: the telegram. The failure to do so was a gross negligence act. And in
4. If A filed an action against B for damages, claiming that B our jurisprudence, gross negligence act amounts to bad faith.
committed fraud upon him causing damaged upon him, however, if Hence, there is already a ground for the award of moral damages.
B was able to prove to the court that A executed this document ix.
where he basically would say that I will not hold B liable for x. You have to determine the degree of negligence whether it
whatever damage may be cause to me by B waiver. If there is is only a simple negligence or a grossly negligent act in
such a waiver proven. Will the action still prosper? It depends. If the relation to liabilities.
waiver was executed before the fraudulent act, thats a xi.
xii. Negligence in torts and damages is still the same in Article 1173. In carriers. Doctors, public utilities like Meralco. In one case it was held
the case of Philippine Bank of Commerce vs. CA: This plaintiff that: Public utilities should exercise or are required to
company authorize a secretary to deposit a sum of money to its exercise the highest degree of diligence. But the recent rulings
account in a branch of the PBC. Now, the secretary is not an on realty companies: are now required to exercise highest
executive secretary just an ordinary one, however, instead of degree of diligence.
depositing the money to the account of the company, the secretary xv. Degree of diligence corresponding to the circumstances of
deposited the sum of money to her husbands account in the same the persons time and of the place. MUST REMEMEBER!! The
branch in the PBC. How did she do it? She filled up the original copy best case: Cangco vs. MRR. Alighting from the moving vehicle was
but the duplicate original has no account name, but the account not a negligent act according to the SC. Majority ruled it was not a
number of the husbands was there. Original was fully filled up with negligent act. I agree with the majority considering the
her husbands account name and number. So the bank would accept circumstances as to the person, the time, and the place. Why? SC
the amount of money for the account of the husband and give back ruled that Cangco because he was at his prime, he was just around
the duplicate original copy to the secretary. Then the secretary 20s, it is okay for him to jump from the train even when the train is
allegedly would now fill up the original duplicate and fill the account still running. And not only that, he was every much familiar with the
name with the name of the company to make it appear that it was train and train station for he was riding it every day for years. Here
deposited in the account of the company. This happened several the time mattered, as to the negligence f the employees
times not only once. Until the company discovered that their because it turned out that it was the negligence of the
account was empty and so they sued the bank. Obviously it was employees of the MRR is the approximate and direct cause.
the negligence of the bank officers thats why the company Why? Because they placed sacks of melon in the platform of the
suffered damages. Negligence in not insuring that the station near the doors where the trains are stopping for the
deposit slips were not fully filled up. Whose negligence is the passengers to alight that is why Cangco slipped and one of his hand
proximate cause, whether it was the negligence if the officer of the went under the train. Cangco wasnt able to see the sacks of melon
bank in accepting slips which are not fully filled up? In this case because the station was not well lit. But there was proof here
there was a defense raised among other defenses, that the presented by Cangco that, (On its face the dissenting opinion
company had the last clear chance in preventing this injury have seems to be correct that alighting from a moving train per
they only exercised the diligence. Why? The banks would give us se is a negligent act, because the argument, had he not
monthly statement of accounts. The bank said that if they only alighted while the train was moving and waited for the train
bothered to open their statement if accounts they would have to go to a full stop then he would not have been injured,
notice that the money was not deposited to their account therefore parang tamang argument dba? But I think this argument is wrong. It
there would be no subsequent acts that followed causing them was not a scenario that the train was at a full stop, the scenario is
further injury. SC: The majority held the bank liable holding that it that the train was still moving so given the scenario, was the act a
was the banks negligence through its officers which is the direct negligent act? No. Why? Another passenger alighted the train ahead
and proximate cause except of one justice who supported the of Cangco, the train was still moving faster even when the train was
doctrine of the last clear chance. I agree with the majority only for moving fast, was this passenger injured? No. So that was not the
one reason = because the banks are required to exercise the reason, alighting form the moving vehicle per se. It was the
highest degree of diligence in the performance of their negligence of the employees of the MRR who put the sacks
obligations. of melon in the platform which resulted from injury. Cangco
xiii. was also a male, has he been a female then that would be a
xiv. Who else are required to exercise not the ordinary diligence or the negligent act because of the clothes the women wear at that time
diligence of a good father of a family? Anyone if it is so are kimonos.
stipulated. If not under the law, aside from banks, are common xvi.
xvii. Stevedoring company, is it required to exercise? Only Ordinary 11.
Diligence. 12.Demand will be useless due to the fault of the debtor. Due to
f. the fault of the debtor, in order for the demand not necessary so
g. DELAY is also called mora, default. Delay on the part of both that delay will not set in.
parties, 13. In reciprocal obligations, the last paragraph Article 1169, one of
h. the parties had already complied and the other had not complied,
i. AGCAOILI CASE even assuming in delay na si Agcaolli because and the one who had not complied will already be considered in
he refused to accept, GSIS was also in delay because it failed to delay even if there was no demand having said that, do not read it
deliver habitable house. He was asked to deliver a house, but literally. SC has held that, this is subject to the stipulation of
instead he delivered a structure with a roof. The court did not agree the parties.
even in the agreement it was said a house, it should be a a.
habitable house. Even assuming that Agcaoilli was in delay, in b. Like in a sale, obligations of the parties are reciprocal, the seller has
contemplation of the law no one was in delay, so was the GSIS already delivered and the buyer has not yet paid, does it mean that
correct in cancelling the contract? No, because Agcaoilli was not in the buyer is already in delay? Not necessarily, they may have
delay. agreed that the buyer will only pay after the period of one year. So
xviii. before that, you cannot be considered in delay. This is one of the
exceptions in the rule to demand under Article 1169.

When would there be delay? As a rule when there is already

xx. DEMAND NO DELAY. But there are Exceptions:
6. If so stipulated. E.g. credit card agreement. Without need of
demand. For a demand to be valid the demand must be made when
the obligation is already due. If you demand when the
obligation is not yet due not a proper demand because the
obligation is not yet due and demandable. No particular form
as to how to make a demand. But lawyers will never make a
demand verbally because of evidentiary purposes. Follow-up is it
a valid demand? NO. Demand is where you require the performance
not just a follow-up.
8. Request not a demand as well.
10. The law so provides. E.g. Agency. Like if the agent
misappropriated a sum of money, will he be liable already for
interest? From the time he misappropriated or from the time the
demand was made? From the time he misappropriated
because the law so provides. Even there was not yet any