You are on page 1of 17

1.

MAKATI STOCK EXCHANGE

FACTS:
SEC Case No. 02-94-4678 was instituted on 10 February 1994 by respondent Miguel V. Campos with the Securities, Investigation
and Clearing Department (SICD) of the Securities and Exchange Commission (SEC), a Petition against herein petitioners Makati
Stock Exchange, Inc. (MKSE). The Petition, sought: (1) the nullification of the Resolution dated 3 June 1993 of the MKSE Board of
Directors, which allegedly deprived him of his right to participate equally in the allocation of Initial Public Offerings (IPO) of
corporationsregistered with MKSE; (2) the delivery of the IPO shares he was allegedlydeprived of, for which he would pay IPO
prices; and (3) the payment of P2 million as moral damages, P1 million as exemplary damages, and P500,000.00 as attorneys
fees and litigation expenses.
The SICD issued an Order granting respondents prayer for the issuance of a Temporary Restraining Order to enjoin petitioners
from implementing or enforcing the Resolution of the MKSE Board of Directors. Subsequently issued another Order on 10 March
1994 granting respondents application for a Writ of Preliminary Injunction, to continuously enjoin, during the pendency of SEC
Case No. 02-94-4678, the implementation or enforcement of the MKSE BoardResolution in question.
On 11 March 1994, petitioners filed a Motion to Dismiss respondents Petition based on the following grounds: (1) the Petition
became moot due to the cancellation of the license of MKSE; (2) the SICD had no jurisdiction over the Petition; and (3) the
Petition failed to state a cause of action.
The SICD denied petitioners Motion to Dismiss. Petitioners again challenged Order of SICD before the SEC en banc through
another Petition for Certiorari. The SEC en banc nullified the Order of SICD granting a Writ of Preliminary Injunction in favour of
respondent. SEC en banc annulled the Order of SICD in SEC Case No. 02-94-4678 denying petitioners Motion to Dismiss, and
accordingly ordered the dismissal of respondents Petition before the SICD.
Respondent filed a Petition for Certiorari with the Court of Appeals.
Petitioners filed a Motion for Reconsideration but was denied by the Court of Appeals.

ISSUE: whether or not the petition failed to state a Cause of action.

RULING: The petition filled by the respondent, Miguel Campos should be dismissed for failure to state a cause of action. A cause
of action is the act or omission by which a party violates a right of another. A complaint states a cause of action where it
contains three essential elements of a cause of action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of
the defendant, and (3) the act or omission of the defendant in violation of said legal right. If these elements are absent, the
complaint becomes vulnerable to dismissal on the ground of failure to state a cause of action.
However, the terms right and obligation are not magic words that would automatically lead to the conclusion that such Petition
sufficiently states a cause of action. Right and obligation are legal terms with specific legal meaning. A right is a claim or title to
an interest in anything whatsoever that is enforceable by law while an obligation is defined in the Civil Code as a juridical
necessity to give, to do or not to do. Justice J.B.L. Reyes offers the definition given by Arias Ramos as a more complete definition:
An obligation is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the
observance of a determinative conduct (the giving, doing or not doing), and in case of breach, may demand satisfaction from the
assets of the latter.
Art. 1157 of the Civil Code provides that Obligations arise from (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions
punished by law; and (5) Quasi-delicts.
The mere assertion of a right and claim of an obligation in an initiatory pleading, whether a Complaint or Petition, without
identifying the basis or source thereof, is merely a conclusion of fact and law. (In the case at bar, although the Petition in SEC
Case No. 02-94-4678 does allege respondents right to subscribe to the IPOs of corporations listed in the stock market at their
offering prices, and petitioners obligation to continue respecting and observing such right, the Petition utterly failed to lay down
the source or basis of respondents right and/or petitioners obligation.)
Respondent merely quoted in his Petition the MKSE Board Resolution, passed sometime in 1989, granting him the position of
Chairman Emeritus of MKSE for life. However, there is nothing in the said Petition from which the Court can deduce that
respondent, by virtue of his position as Chairman Emeritus of MKSE, was granted by law, contract, or any other legal source, the
right to subscribe to the IPOs of corporations listed in the stock market at their offering prices. (allocation of IPO shares was
merely alleged to have been done in accord with a practice normally observed by the members of the stock exchange)
A practice or custom is, as a general rule, not a source of a legally demandable or enforceable right.

2. ANG YU ASUNCION VS CA Ang Yu Asuncion, Arthur Go and Keh Tiong vs. CA and Buen Realty Development Corp.

FACTS: On July 29, 1987, a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong, et
al., against Bobby Cu Unjieng and Jose Tan before the Regional Trial Court of Manila. The plaintiffs were tenants or lessees of
residential and commercial spaces owned by defendants in Binondo, Manila. On several conditions defendants informed the
plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same. During negotiations, Bobby
Cu Unjieng offered a price of P6 million while plaintiffs made a counter of offer of P5 million. Plaintiff thereafter asked the
1
defendants to put their offer in writing to which the defendants acceded. In reply to defendants letter, plaintiffs wrote, asking
that they specify the terms and conditions of the offer to sell. When the plaintiffs did not receive any reply, they sent another
letter with the same request. Since defendants failed to specify the terms and conditions of the offer to sell, and because of
information received that the defendants were about to sell the property, plaintiffs were compelled to file the complaint to
compel defendants to sell the property to them. The court dismissed the complaint on the ground that the parties did not agree
upon the terms and conditions of the proposed sale, hence, there was no contract of sale at all. On November 15, 1990, the Cu
Unjieng spouses executed a Deed of Sale transferring the property in question to Buen Realty and Development Corporation.
Buen Realty, as the new owner of the subject property, wrote to the lessees demanding the latter to vacate the premises. In its
reply, it stated that Buen Realty and Development Corporation brought the property subject to the notice of lis pendens.

ISSUE: Can Buen Realty be bound by the writ of execution by virtue of the notice of lis pendens?

HELD: No. An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is upon the
concurrence of the essential elements thereof, namely: (a) the vinculum juris or juridical tie which is the efficient cause
established by the various sources of obligations; (b) the object which is the prestation or conduct, required to be observed; and
(c) the subject-persons who, viewed from demandability of the obligation are the active (obligee) and the passive (obligor)
subjects. Among the sources of an obligation is a contract (Art. 1157), which is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something or to render some service. A contract undergoes
various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Until the contract is
perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales, particularly, to which
the case at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to
deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees. The registration
of lis pendens must be independently addressed in appropriate proceedings. Therefore, Buen Realty cannot be held subject to
the writ of execution issued by the respondent Judge, let alone ousted from the ownership and possession of the property,
without first being duly afforded its day in court.

3. SSS vs. Moonwalk Development and Housing Corporation

FACTS: - Plaintiff SSS approved the application of Defendant Moonwalk for a loan of P30,000,000 for the purpose of developing
and constructing a housing project. - Out of P30,000,000 approved loan, the sum of P9,595,000 was released to defendant
Moonwalk. - A third Amendment Deed of Mortgage was executed for the payment of the amount of P9,595,000. - Moonwalk
made a total payment of P23,657,901.84 to SSS for the loan principal of P12,254,700. - After settlement of the account, SSS
issued to Moonwalk the release of Mortgage for Moonwalks Mortgaged properties. - In letter to Moonwalk, SSS alleged that it
committed an honest mistake in releasing defendant. - That Moonwalk has still 12% penalty for failure to pay on time the
amortization which is in the penal clause of the contract. - Moonwalks counsel told SSS that it had completely paid its obligation
to SSS and therefore there is no recovery of any penalty.

ISSUE: Is the penalty demandable even after the extinguishment of the principal obligation?

HELD: No. There has been a waiver of the penal clause as it was not demanded before the full obligation was fully paid and
extinguished. Default begins from the moment the creditor demands the performance of the obligation. In this case, although
there were late amortizations there was no demand made by SSS for the payment of the penalty hence Moonwalk is not in
delay in the payment of the penalty. No delay occurred and there was no occasion when the penalty became demandable and
enforceable. Since there was no default in the performance of the main obligation-payment of the loan- SSS was never entitled
to recover any penalty. If the demand for the payment of the penalty was made prior to the extinguishment of the obligation
which are: 1. The principal obligation 2. The interest of 12% on the principal obligation 3. The penalty of 12% for late payment
for after demand, Moonwalk would be in delay and therefore liable for the penalty.

//FACTS: On February 20, 1980, the petitioner Social Security System filed a complaint in the Court of First Instance of Rizal
against the respondent Moonwalk Development and Housing Corporation. The petitioner alleged that it had committed an error
in failing to compute the 12% interest due on delayed payments on the loan of the respondent and also in not reflecting in its
statement of account an unpaid balance on the said penalties for delayed payments. The respondent answered denying the
claims and asserting that the petitioner had the opportunity to ascertain the truth but it failed to do so. Decision of the Court of
First Instance: The Court of First Instance dismissed the complaint on the ground that the obligation was already extinguished by
the payment by the respondent of its indebtedness to the petitioner and by the latters cancellation of the real estate mortgages
2
executed in its favor by the defendant. The Motion for Reconsideration filed by the petitioner was dismissed by the trial court.
Decision of the Intermediate Appellate Court: The respondent court held that the respondents obligation was extinguished and
affirmed the decision of the trial court.

ISSUE: Whether or not respondent Moonwalk Development and Housing Corporation incurred delay in the performance of its
obligation.

RULING: Under the Civil Code, delay begins from the time the obligee judicially or extrajudicially demands from the obligor the
performance of the obligation. (Article 1169 of the Civil Code) Article 1169 of the Civil Code provides for three (3) instances
when demand in not necessary to render the obligation in default: (1) When the obligation or the law expressly so declares; (2)
When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to
be delivered or the service to be rendered was a controlling motive for the establishment of the contract; (3) When demand
would be useless, as when the obligor has rendered it beyond his power to perform. The case at bar does not fall within any of
the established exceptions. Hence, petitioner is not excused from making a demand. It is true that respondent has long been
delinquent in meeting its monthly arrears and in paying the full amount of the loan itself as the obligation matured sometime in
January, 1977. But mere delinquency in payment does not necessarily mean delay in the legal concept. Default generally begins
from the moment the creditor demands the performance of the obligation. In the present case, the petitioner never demanded
from the respondents the payment of its monthly amortizations. It was clear that respondent was never in default because
petitioner never compelled performance. The petition was DISMISSED and the decision of the Intermediate Appellate Court was
AFFIRMED.

//Issue: Is the penalty demandable even after the extinguishment of the principal obligation? No.

Ruling: Petition is dismissed. Ratio: A penalty clause is an accessory obligation attached to a principal obligation for the purpose
of ensuring the performance of the obligation or takes its place in case of breach. Note therefore that an accessory obligation is
dependent for its existence on the existence of a principal obligation. A principal obligation may exist without an accessory
obligation but an accessory obligation cannot exist without a principal obligation A penalty is also only demandable where the
debtor incurs mora or delay, or when the creditor demands for the performance of the obligation. In the case at bar, although
there were late amortizations, no demand was made by SSS for Moonwalk to pay the penalty. Thus, SSS is not entitled to
recover any damages. If the demand for the payment of the penalty was made prior to the extinguishment of the obligation
because then the obligation of Moonwalk would consist of: 1) the principal obligation 2) the interest of 12% on the principal
obligation and 3) the penalty of 12% for late payment for after demand, Moonwalk would be in mora and therefore liable for
the penalty.

5. ANSAY VS. BOARD OF DIRECTORS OF NDC

FACTS: On July 25, 1956, appellants filed against appellees in the Court of First Instance of Manila a complaint praying for a 20%
Christmas bonus for the years 1954 and 1955. The lower court citing article 142 of the Civil Code granted appellees motion to
dismiss holding that the grant of a bonus is not a legal duty but a moral obligation and that the court has no power to compel a
party to comply with a moral obligation.
A motion for reconsideration was denied. Hence this appeal.
Appellants contend that there exists a cause of action in their complaint because their claim rests on moral grounds or what in
brief is defined by law as a natural obligation.
ISSUE: Whether or not courts may compel performance of natural obligations?
HELD: No. Article 1423 of the New Civil Code classifies obligations into civil or natural. Civil obligations are a right of action to
compel their performance. Natural obligations, not being based on positive law but on equity and natural law, do not grant a
right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what
has been delivered or rendered by reason thereof.
It is thus readily seen that an element of natural obligation before it can be cognizable by the court is voluntary fulfillment by the
obligor. Certainly retention can be ordered but only after there has been voluntary performance. But here there has been no
voluntary performance. In fact, the court cannot order the performance.
From the legal point of view a bonus is not a demandable and enforceable obligation. It is so when it is made a part of the wage
or salary compensation. (Philippine Education Co. vs. CIR and the Union of Philippine Education Co., Employees (NUL) (92 Phil.,
381; 48 Off. Gaz., 5278)
// ISSUE: W/N the grant of a Christmas bonus arises as moral obligation or the natural obligation. HELD: The Court held that an
element of natural obligation before it can be cognizable by the court is voluntary fulfillment by the obligor. Retention can be
ordered but only after there has been voluntary performance. But here there has been no voluntary performance. In fact, the
3
court cannot order the performance. A bonus is not a demandable and enforceable obligation. It is so when it is made a part of
the wage or salary compensation. Even if a bonus is not demandable for not forming part of the wage, salary or compensation
of an employee, the same may nevertheless, be granted on equitable consideration as when it was given in the past, though
withheld in succeeding two years from low salaried employees due to salary increases. RATIO: Article 1423 of the New Civil
Code classifies obligations into civil or natural. "Civil obligations are a right of action to compel their performance. Natural
obligations, not being based on positive law but on equity and natural law, do not grant a right of action to enforce their
performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or rendered
by reason thereof".

6. DBP VS CONFESSOR
FACTS: On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an agricultural loan from DBP, in the sum
of P2,000, as evidenced by a promissory note, whereby they bound themselves jointly and severally to pay the account in ten
(10) equal yearly amortizations.
After ten years, the debt remained unpaid. Confessor, now a Congressman, executed a second promissory note acknowledging
the loan and promising to pay the same before June 15, 1961. Still not having paid the obligation on the specified date, the DBP
filed a complaint against the spouses for the payment of the loan.
ISSUE: W /N prescription had barred the complaint.
HELD:No. Prescription was renounced when Confessor signed the second promissory note.
The right to prescription may be waived or renounced. Prescription is deemed to have been tacitly renounced when the
renunciation results from acts which imply the abandonment of the right acquired.
The Court ruled that when a debt is already barred by prescription, it cannot be enforced by the creditor. But a new contract
recognizing and assuming the prescribed debt would be valid and enforceable.
The statutory limitation bars the remedy but does not discharge the debt. A new express promise to pay a debt barred ... will
take the case from the operation of the statute of limitations as this proceeds upon the ground that as a statutory limitation
merely bars the remedy and does not discharge the debt, there is something more than a mere moral obligation to support
a promise, to wit a pre-existing debt which is a sufficient consideration for the new the new promise; upon this sufficient
consideration constitutes, in fact, a new cause of action.

7. ABS CBN VS OMBUDSMAN

Facts: Senator Fernandez, representing Benedicto, met with Senator Taada to discuss on how to arrive at a reasonable rental
for the use of ABS-CBN stations and facilities. Thereafter, they entered into a letter-agreement with ABS-CBN. Barely two weeks
from their entry into the ABS Broadcast Center, KBS personnel started making unauthorized withdrawals from the ABS Stock
Room. All these withdrawals of supplies and equipment were made under the orders of Benedicto, et. al. No payment was ever
made by either Benedicto for all the supplies and equipment withdrawn from the ABS Broadcast Center.

Issue: Whether or not a criminal prosecution will proceed to prosecute civil liability notwithstanding the death of an accused
during the pendency of the case as decided in People vs Bayotas.

Ruling: Motion for Reconsideration denied. The motion contained in petitioners motion does not involve a question of law as
would merit the attention of this Court sitting en banc (Petitioner filed a Motion to Refer the case to the Court en banc).
Nowhere in People v. Bayotas does it state that a criminal complaint may continue and be prosecuted as an independent civil
action. 1. Death of an accused pending appeal of his conviction extinguishes his criminal liability as well as the civil liability based
solely thereon. As opined by Justice Regalado, in this regard, the death of the accused prior to final judgment terminates his
criminal liability and only the civil liability directly arising from and based solely on the offense committed, i.e., civil liability ex
delicto in senso strictiore. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if the same may
also be predicated on a source of obligation other than delict. Article 1157 of the Civil Code enumerates these other sources of
obligation from which the civil liability may arise as a result of the same act or omission: a) Law b) Contracts c) Quasi-contracts d)
xxx xxx xxx e) Quasi-delicts 3. Where the civil liability survives, as explained in Number 2 above, an action for recovery thereof
may be pursued but only by filing a separate civil action and subject to Section 1, Rule 111 of the 1985 Rules on Criminal
Procedure as amended. This separate civil action may be enforced either against the executor/administrator or the estate of the
accused, depending on the source of obligation upon which the same is based as explained above. As regards the offenses,
complained of, the Court does not find any grave abuse of discretion on the part of the Ombudsman. Petitioner has not
established the element of intent to defraud and petitioners inconsistent claims defeated their complaint.

9. METROBANK VS ROSALES

4
FACTS: Petitioner Metrobank is a domestic banking corporation duly organized and existing under the laws of the Philippines.
Respondent Rosales is the owner of a travel agency while Yo Yuk To is her mother. In 2000, respondents opened a Joint Peso
Account10 with petitioners Pritil-Tondo Branch. In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a
Taiwanese National applying for a retirees visa from the Philippine Leisure and Retirement Authority (PLRA), to petitioners
branch in Escolta to open a savings account. Since Liu Chiu Fang could speak only in Mandarin, respondent Rosales acted as
an interpreter for her.
On March 3, 2003, respondents opened with petitioners Pritil-Tondo Branch a Joint Dollar Account with an initial deposit of
US$14,000.00. On July 31, 2003, petitioner issued a Hold Out order against respondents accounts. On September 3, 2003,
petitioner, through its Special AuditDepartment Head Antonio Ivan Aguirre, filed before the Office of the Prosecutor of Manila a
criminal case for Estafa through False Pretences, Misrepresentation, Deceit, and Use of Falsified Documents. Respondent
Rosales, however, denied taking part in the fraudulent and unauthorized withdrawal from the dollar account of Liu Chiu Fang.
On December 15, 2003, the Office of the City Prosecutor of Manila issued a Resolution dismissing the criminal case for lack of
probable cause. On September 10, 2004, respondents filed before the RTC of Manila a complaint for Breach of Obligation and
Contract with Damages.

ISSUE: Whether Metrobank breached its contract with respondents.


HELD: YES. The Court held that Metrobanks reliance on the Hold Out clause in the Application and Agreement for Deposit
Account is misplaced.
Bank deposits, which are in the nature of a simple loan or mutuum, must be paid upon demand by the depositor.
The Hold Out clause applies only if there is a valid and existing obligation arising from any of the sources of obligation
enumerated in Article 1157 of the Civil Code, to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case,
petitioner failed to show that respondents have an obligation to it under any law, contract, quasi-contract, delict, or quasi-delict.
And although a criminal case was filed by petitioner against respondent Rosales, this is not enough reason for petitioner to issue
a Hold Out order as the case is still pending and no final judgment of conviction has been rendered against respondent
Rosales.
In fact, it is significant to note that at the time petitioner issued the Hold Out order, the criminal complaint had not yet been
filed. Thus, considering that respondent Rosales is not liable under any of the five sources of obligation, there was no legal basis
for petitioner to issue the Hold Out order. Accordingly, we agree with the findings of the RTC and the CA that the Hold
Out clause does not apply in the instant case.
In view of the foregoing, the Court found that petitioner is guilty of breach of contract when it unjustifiably refused to release
respondents deposit despite demand. Having breached its contract with respondents, petitioner is liable for damages.

10. SALADUGA VS FEU


FACTS:
Petitioner Joseph Saludaga was a sophomore law student of (FEU) when he was shot by Alejandro Rosete, one of the security
guards on duty at the school premises on August 18, 1996. Petitioner was rushed to FEU Hospital due to the wound he
sustained. Meanwhile, Rosete was brought to the police station where he explained that the shooting was accidental. He was
eventually released considering that no formal complaint was filed against him.

Saludaga thereafter filed with RTC Manila a complaint for damages against respondents on the ground that they breached their
obligation to provide students with a safe and secure environment and an atmosphere conducive to learning.

Respondents, in turn, filed a Third-Party Complaint against Galaxy Dvpt and Mgt Corp. (Galaxy), the agency contracted by FEU to
provide security services within its premises and Mariano D. Imperial (Imperial), Galaxy's President, to indemnify them for
whatever would be adjudged in favor of petitioner, if any; and to pay attorney's fees and cost of the suit. On the other hand,
Galaxy and Imperial filed a Fourth-Party Complaint against AFP General Insurance.

On Nov.10, 2004, the trial court ruled in favor of Saludaga, the dispositive portion of which reads:
WHEREFORE, from the foregoing, judgment is hereby rendered ordering:
1. FEU and Edilberto de Jesus, in his capacity as president of FEU to pay jointly and severally Joseph Saludaga the amount of
P35,298.25 for actual damages with 12% interest per annum from the filing of the complaint until fully paid; moral damages xxx,
exemplary damages xx, attorney's fees xx and cost of the suit;
2. Galaxy Corp. and its president, Col. Mariano Imperial to indemnify jointly and severally 3rd party plaintiffs (FEU and Edilberto
de Jesus in his capacity as President of FEU) for the above-mentioned amounts;
3. And the 4th party complaint is dismissed for lack of cause of action. No pronouncement as to costs.
Respondents appealed to the CA which ruled in its favor, reversing the RTC decision, dismissing the complaint, and also denying
Saludagas subsequent MR. Hence, the instant petition based on the following grounds:

THE CA SERIOUSLY ERRED....IN RULING THAT:


5.1. THE SHOOTING INCIDENT IS A FORTUITOUS EVENT;

5
5.2. RESPONDENTS ARE NOT LIABLE FOR DAMAGES FOR THE INJURY RESULTING FROM A GUNSHOT WOUND SUFFERED BY THE
PETITIONER.....IN VIOLATION OF THEIR....CONTRACTUAL OBLIGATION TO PETITIONER.......TO PROVIDE HIM WITH A SAFE AND
SECURE EDUCATIONAL ENVIRONMENT;
5.3. ALEJANDRO ROSETE....IS NOT FEUS EMPLOYEE.....; and
5.4. RESPONDENT EXERCISED DUE DILIGENCE IN SELECTING GALAXY AS THE AGENCY WHICH WOULD PROVIDE SECURITY
SERVICES WITHIN THE PREMISES OF RESPONDENT FEU.

ISSUES:
WON Saludaga may claim damages from FEU for breach of student-school contract for a safe learning environment
Whether FEUs liability is based on quasi-delict or on contract
From what source of obligation did the other claims arose?

HELD:
1) Yes.
2) FEUs liability is based on contract, not quasi-delict.
3) Quasi-delict vicarious liability between Galaxy Agency and security guard Rosete
Quasi-delict but SC held that there is no vicarious liability between FEU and Rosete
Quasi-delict damage to FEU due to the negligence of Galaxy Agency in supplying FEU with an unqualified guard (Imperial, the
president of Galaxy is solidarily liable with the agency)

It is undisputed that Saludaga was enrolled as a sophomore law student in FEU. As such, there was created a contractual
obligation between the two parties. On Saludaga's part, he was obliged to comply with the rules and regulations of the school.
On the other hand, FEU, as a learning institution is mandated to impart knowledge and equip its students with the necessary
skills to pursue higher education or a profession. At the same time, it is obliged to ensure and take adequate steps to maintain
peace and order within the campus.

It is settled that in culpa contractual, the mere proof of the existence of the contract and the failure of its compliance justify,
prima facie, a corresponding right of relief. In the instant case when Saludaga was shot inside the campus by no less the security
guard who was hired to maintain peace and secure the premises, there is a prima facie showing that FEU failed to comply with
its obligation to provide a safe and secure environment to its students.

In order to avoid liability, however, FEU alleged that the shooting incident was a fortuitous event because they could not have
reasonably foreseen nor avoided the accident caused by Rosete as he was not their employee; and that they complied with their
obligation to ensure a safe learning environment for their students by having exercised due diligence in selecting the security
services of Galaxy.

After a thorough review of the records, the SC found that FEU failed to discharge the burden of proving that they exercised due
diligence in providing a safe learning environment for their students. They failed to prove that they ensured that the guards
assigned in the campus met the requirements stipulated in the Security Service Agreement. Certain documents about Galaxy
were presented during trial; however, no evidence as to the qualifications of Rosete as a security guard for the university was
offered. FEU also failed to show that they undertook steps to ascertain and confirm that the security guards assigned to them
actually possess the qualifications required in the Security Service Agreement.

Consequently, FEU's defense of force majeure must fail. In order for force majeure to be considered, FEU must show that no
negligence or misconduct was committed that may have occasioned the loss. An act of God cannot be invoked to protect a
person who has failed to take steps to forestall the possible adverse consequences of such a loss. When the effect is found to be
partly the result of a person's participation - whether by active intervention, neglect or failure to act - the whole occurrence is
humanized and removed from the rules applicable to acts of God.

Article 1170 of the Civil Code provides that those who are negligent in the performance of their obligations are liable for
damages. Accordingly, for breach of contract due to negligence in providing a safe learning environment, respondent FEU is
liable to petitioner for damages.

We note that the trial court held respondent De Jesus solidarily liable with respondent FEU. In Powton Conglomerate, Inc. v.
Agcolicol, we held that:
... Personal liability of a corporate director, trustee or officer along (although not necessarily) with the corporation may so validly
attach, as a rule, only when - (1) he assents to a patently unlawful act of the corporation, or when he is guilty of bad faith or
gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its
stockholders or other persons; (2) he consents to the issuance of watered down stocks or who, having knowledge thereof, does
not forthwith file with the corporate secretary his written objection thereto; (3) he agrees to hold himself personally and

6
solidarily liable with the corporation; or (4) he is made by a specific provision of law personally answerable for his corporate
action.
None of the foregoing exceptions was established in the instant case; hence, respondent De Jesus should not be held solidarily
liable with respondent FEU.

Incidentally, although the main cause of action in the instant case is the breach of the school-student contract, petitioner, in the
alternative, also holds respondents vicariously liable under Article 2180 of the Civil Code. However, respondents cannot be held
liable for damages under Art. 2180 of the Civil Code because respondents are not the employers of Rosete. The latter was
employed by Galaxy. The instructions issued by respondents' Security Consultant to Galaxy and its security guards are ordinarily
no more than requests commonly envisaged in the contract for services entered into by a principal and a security agency.

As to the Third Party Claim against Galaxy, evidence duly supports that Galaxy is negligent not only in the selection of its
employees but also in their supervision. Indeed, no administrative sanction was imposed against Rosete despite the shooting
incident; moreover, he was even allowed to go on leave of absence which led eventually to his disappearance. Galaxy also failed
to monitor petitioner's condition or extend the necessary assistance. For these acts of negligence and for having supplied
respondent FEU with an unqualified security guard, which resulted to the latter's breach of obligation to petitioner, it is proper
to hold Galaxy liable to respondent FEU for such damages equivalent to the above-mentioned amounts awarded to petitioner.

Unlike respondent De Jesus, we deem Imperial to be solidarily liable with Galaxy for being grossly negligent in directing the
affairs of the security agency. It was Imperial who assured petitioner that his medical expenses will be shouldered by Galaxy but
said representations were not fulfilled.

4. ASIAN CONSTRUCTION & DEVT CORP VS PCIB


FACTS: Respondent PCIBANK filed complain for a sum of money with prayer for preliminary attachment against petitioner
ASIACON.
The first cause of action was that ASIACON had not paid its credit account with PCIBANK amounting to $4,487,000. The second
cause of action was that PCIBANK suffered damages and prayed that ASIACON pay Exemplary damages, attorneys fees, and the
cost of suit, and that ASIACON is guilty of fraud in contracting the debt and in the performance thereof or both.
By way of defenses, ASIACON pleads in its answer the alleged Severe Financial Crisis which hit the Philippines in July 1997
which affected and put it out of business.
PCIBANK filed a verified Motion for Summary Judgment therein contending that ASIACONs defenses are a sham and that the
financial crisis alleged in the answer is not a fortuitous event that would excuse debtors from their
loan obligations, nor is it an exempting circumstance under ART. 1262, CC. RTC in favor of PCIBANK granted the motion for
Summary Judgment. Upon Appeal, the CA affirmed with modification the Summary Judgment, reducing the amount of
attorneys fees from (P1,260,000) to (P1M). With its motion for reconsideration denied by the CA, ASIACON now appeals to the
SC.
ISSUES: (I) Whether or not there is a genuine issue as to the material fact which rules out the propriety of the summary
judgment;
(II) Whether or not the award of Attorneys fees is exorbitant or unconscionable.
RULING: (I) CA did not commit any reversible error in affirming the summary judgment rendered by the trial court as, at bottom,
there existed no genuine issue as to any material fact.
(II) CAs reduction in the award of attorneys fees to only P1,000,000.00, given the fact that there was no full-blown trial.
Petitioner failed to append, to its "Opposition" to the "Motion for Summary Judgment", "Affidavits" showing the factual basis
for its defenses of "extraordinary deflation," including facts, figures and data showing its financial condition before and after the
economic crisis and that the crisis was the proximate cause of its financial distress. It bears stressing that the [petitioner] was
burdened to demonstrate, by its "Affidavits" and documentary evidence, that, indeed, the Philippines was engulfed in an
extraordinary deflation of the Philippine Peso and that the same was the proximate cause of the financial distress, it claimed, it
suffered.
A "genuine issue" is an issue of fact which requires the presentation of evidence as distinguished from a sham, fictitious,
contrived or false claim. When the facts as pleaded appear uncontested or undisputed, then there is no real or genuine issue or
question as to the facts, and summary judgment is called for.
The party who moves for summary judgment has the burden of demonstrating clearly the absence of any genuine issue of fact,
or that the issue posed in the complaint is patently unsubstantial so as not to constitute a genuine issue for trial.
The [petitioner] may have experienced financial difficulties because of the "1997 economic crisis" that ensued in Asia. However,
the same does not constitute a valid justification for the [petitioner] to renege on its obligations to the [respondent].
It is a fundamental rule that contracts, once perfected, bind both contracting parties, and obligations arising therefrom have the
force of law between the parties and should be complied with in good faith. But the law recognizes exceptions to the principle of
the obligatory force of contracts. One exception is laid down in Article 1266 of the Civil Code, which reads: The debtor in

7
obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the
obligor.
Petitioner cannot, however, successfully take refuge in the said article, since it is applicable only to obligations "to do," and not
obligations "to give." An obligation "to do" includes all kinds of work or service; while an obligation "to give" is a prestation
which consists in the delivery of a movable or an immovable thing in order to create a real right, or for the use of the recipient,
or for its simple possession, or in order to return it to its owner.

12 CRUZ vs TUASON & CO. G.R. No. L-23749 April 29, 1977
Facts: 1. As requested by the Deudors, the family of Telesforo Deudor who laid claim in question on the strength of
an informacion posesoria, Cruz made permanent improvements on the said land having an area of more or less 20
quinones. 2. The improvements were valued at P30,400 and for which he incurred expenses amounting to P7,781.74
3. In 1952, Tuason & Co. availed of Cruz services as an intermediary with the Deudors, to work for the amicable
settlement in a civil case. The said case involved 50 quiones of land, of which the 20 quiones of land mentioned
formed part. 4. A compromise agreement between the Deudors and Tuason & Co. was entered into on 1963 which
was approved by court. 5. Cruz alleged that Tuason & Co. promised to convey him the 3,000 sq. meters of land
occupied by him which was part of the 20 quiones of land within 10 years from the date of signing of the
compromise agreement between the Deudors and the latter as consideration of his services. The said land was not
conveyed to him by Tuason & Co. 6. Cruz further alleged that Tuason & Co. was unjustly enriched at his expense
since they enjoyed the benefits of the improvements he made on the land acquired by the latter. 7. The trial court
dismissed the case on the ground that there was no cause of action. Hence, this appeal.
Issue: Whether or not a presumed quasi-contract be emerged as against one part when the subject matter thereof is
already covered by a contract with another party.
Held: From the very language of this provision, it is obvious that a presumed qauasi-contract cannot emerge as
against one party when the subject mater thereof is already covered by an existing contract with another party.
Predicated on the principle that no one should be allowed to unjustly enrich himself at the expense of another,
Article 2124 creates the legal fiction of a quasi-contract precisely because of the absence of any actual agreement
between the parties concerned. Corollarily, if the one who claims having enriched somebody has done so pursuant
to a contract with a third party, his cause of action should be against the latter, who in turn may, if there is any
ground therefor, seek relief against the party benefited. It is essential that the act by which the defendant is
benefited must have been voluntary and unilateral on the part of the plaintiff. As one distinguished civilian puts it,
"The act is voluntary. because the actor in quasicontracts is not bound by any pre-existing obligation to act. It is
unilateral, because it arises from the sole will of the actor who is not previously bound by any reciprocal or bilateral
agreement. The reason why the law creates a juridical relations and imposes certain obligation is to prevent a
situation where a person is able to benefit or take advantage of such lawful, voluntary and unilateral acts at the
expense of said actor." In the case at bar, since appellant has a clearer and more direct recourse against the Deudors
with whom he had entered into an agreement regarding the improvements and expenditures made by him on the
land of appellees. It Cannot be said, in the sense contemplated in Article 2142, that appellees have been enriched at
the expense of appellant.

13 ADILLE VS CA
Facts:
Felisa Alzul owned a certain property in Albay. She was married twice in her life time. First with Bernabe Adille, with
whom she begot a son, Rustico Adille. Second with Procopio Asejo, with whom she begot Emeteria, Teodorica,
Domingo, Josefa, and Santiago. She sold said property in pacto de retro to 3rd persons but she died before the
redemption period expired. Rustico, representing himself as the only heir and child of Felisa, repurchased the said
property and secured a title in his own name. His siblings then filed a case for partition on the basis that Rustico was
only a trustee on an implied trust when he redeemed the property.
Issue: W/N there was an implied trust
Held: Yes. ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property comes.
We agree with the respondent Court of Appeals that fraud attended the registration of the property. The petitioners
pretension that he was the sole heir to the land in the affidavit of extrajudicial settlement he executed preliminary to
the registration thereof betrays a clear effort on his part to defraud his brothers and sisters and to exercise sole
dominion over the property. The aforequoted provision therefore applies.

8
//Facts: 1. The property in dispute was originally owned by Felisa Alzul who got married twice. Her child in the first
marriage was petitioner Rustico Adile and her children in the second marriage were respondents Emetria Asejo etal.
2. During her lifetime, Felisa Alzul sodl the property in pacto de retro with a three-year repurchase period. 3. Felisa
died before she could repurchase the property. 4. During the redemption period, Rustico Adille repurchased the
property by himself alone at his own expense, and after that, he executed a deed of extra-judicial partition
representing himself to be the only heir and child of his mother Felisa. Consequently, he was able to secure title in
his name alone. 5. His half-siblings, herein respondents, filed a case for partition and accounting claiming that
Rustico was only a trustee on an implied trust when he redeemed the property, and thus, he cannot claim exclusive
ownership of the entire property.
Issue: 1. Whether or not a co-owner may acquire exclusive ownership over the property held in common. 2.
Whether or nor Rustico had constituted himself a negotiorum gestor
Held: 1. No. The right to repurchase may be exercised by a co-owner with respect to his share alone. Although
Rustico Adille redeemed the property in its entirety, shouldering the expenses did not make him the owner of all of
it. 2. Yes. The petitioner, in taking over the property, did so on behalf of his co-heirs, in which event, he had
constituted himself a negotiorum gestor under Art 2144 of the Civil Code, or for his exclusive benefit, in which case,
he is guilty of fraud, and must act as trustee, the respondents being the beneficiaries, pursuant to Art 1456.

14. ANDRES VS MANTRUST


FACTS: Andres, using the business name Irenes Wearing Apparel was engaged in the manufacture of ladies
garments, childrens wear, mens apparel and linens for local and foreign buyers. Among its foreign buyers was Facts
of the United States. Sometime in August 1980, Facts instructed the First National State Bank (FNSB) of New Jersey
to transfer $10,000 to Irenes Wearing Apparel via Philippine National Bank (PNB) Sta. Cruz, Manila branch. FNSB
instructed Manufacturers Hanover and Trust Corporation (Mantrust) to effect the transfer by charging the amount
to the account of FNSB with private respondent. After Mantrust effected the transfer, the payment was not effected
immediately because the payee designated in the telex was only Wearing Apparel. Private respondent sent PNB
another telex stating that the payment was to be made to Irenes Wearing Apparel. On August 28, 1980, petitioner
received the remittance of $10,000. After learning about the delay, Facets informed FNSB about the situation. Facts,
unaware that petitioner had already received the remittance, informed private respondent and amended its
instruction y asking it to effect the payment to Philippine Commercial and Industrial Bank (PCIB) instead of PNB.
Private respondent, also unaware that petitioner had already received the remittance, instructed PCIB to pay
$10,000 to petitioner. Hence, petitioner received another $10,000 which was charged again to the account of Facets
with FNSB. FNSB discovered that private respondent had made a duplication of remittance. Private respondent
asked petitioner to return the second remittance of $10,000 but the latter refused to do so contending that the
doctrine of solution indebiti does not apply because there was negligence on the part of the respondents and that
they were not unjustly enriched since Facets still has a balance of $49,324.
ISSUE: Whether or not the private respondent has the right to recover the second $10,000 remittance it had
delivered to petitioner
HELD: Yes. Art 2154 of the New Civil Code is applicable. For this article to apply, the following requisites must concur:
1) that he who paid was not under obligation to do so; and 2) that payment was made by reason of an essential
mistake of fact. There was a mistake, not negligence, in the second remittance. It was evident by the fact that both
remittances have the same reference invoice number.

15. PUYAT AND SONS


FACTS: Plaintiff Gonzalo Puyat & Sons Inc is engaged in the business of manufacturing and selling all kinds of
furniture. Acting pursuant to an ordinance, the defendant City Treasurer of Manila assessed from plaintiff retail
dealers tax the sales of furniture manufactured and sold by it and its factory site. All assessments were paid by
plaintiff without protest in the erroneous belief that it was liable thereof not knowing that pursuant to an ordinance,
it is exempt from the payment of taxes being a manufacturer of various kinds of furniture. After learning about the
ordinance, plaintiff filed with defendant City Treasurer of Manila a formal request for refund of the retail dealers
taxes unduly paid. The City Treasurer, however, denied the said request for refund.
ISSUE: Whether or not the defendant is obliged to refund the amount which the plaintiff paid

9
HELD: Yes. The plaintiff was actually exempted from paying the tax assessed, hence, it was clearly an error or
mistake which makes it fall under Art 2154 of solution indebiti. Art 2154 provides that if something is received when
there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.
Alongside with this, Art 2156 is also applicable which states that if the payer was in doubt whether the debt was due,
he may recover if he proves that it was not due. Plaintiff had duly proved that taxes were not lawfully due.
Therefore, there is no doubt that the provisions of solution indebiti apply in this case.

16. CINCO VS CANONOY


FACTS:
Petitioner filed a complaint in the City Court for recovery of damages on account of a vehicular accident involving his
car and a jeepney driven by respondent Romeo Hilot and operated by respondents Valeriana Pepito and Carlos
Pepito.
Subsequently, a criminal case was filed against the driver. At the pre-trial of the civil case counsel for the
respondents moved for the suspension of the civil action pending determination of the criminal case invoking
Section 3(b), Rule 111 of the Rules of Court. The City Court granted the motion and ordered the suspension of the
civil case. Petitioner elevated the matter on certiorari to the Court of First Instance, alleging that the City Judge acted
with grave abuse of discretion in suspending the civil action for being contrary to law and jurisprudence. The Court
of First Instance dismissed the petition; hence, this petition to review on certiorari.

ISSUE: Whether or not there can be an independent civil action for damages to property during the pendency of the
criminal action.

HELD: The Supreme Court held that an action for damages based on Articles 2176 and 2180 of the New Civil Code is
quasi-delictual in character which can be prosecuted independently of the criminal action.Where the plaintiff made
essential averments in the complaint that it was the driver's fault or negligence in the operation of the jeepney
which caused the collision between his automobile and said jeepney; that plaintiff sustained damages because of the
collision; that a direct causal connection exists between the damage he suffered and the fault or negligence of the
defendant-driver and where the defendant-operator in their answer, contended, among others, that they observed
due diligence in the selection and supervision of their employees, a defense peculiar to actions based on quasi-delict,
such action is principally predicated on Articles 32176 and 2180 of the New Civil Code which is quasi-delictual in
nature and character. Liability being predicated on quasi-delict , the civil case may proceed as a separate and
independent court action as specifically provided for in Article 2177. Section 3 (b), Rule 111 of the Rules of Court
refers to "other civil actions arising from cases not included in Section 2 of the same rule" in which,
"once the criminal action has been commenced, no civil action arising from the same offense can be prosecuted and
the same shall be suspended in whatever stage it may be found, until final judgment in the criminal proceeding has
been rendered".
The civil action referred to in Section 2(a) and 3(b), Rule 11 of the Rules of Court
which should be suspended after the criminal action has been instituted is that arising from the criminal offense and
not the civil action based on quasi delict.
The concept of quasi-delict enunciated in Article 2176 of the New Civil Code is so broad that it includes not only
injuries to persons but also damage to property. It makes no distinction between "damage to persons" on the one
hand and "damage to property" on the other. The word "damage" is used in two concepts: the "harm"
done and "reparation" for the harm done. And with respect to "harm" it is plain that it includes both injuries to
person and property since "harm" is not limited to personal but also to property injuries. An example of quasi-delict
in the law itself which includes damage to property in Article 2191(2) of the Civil Code which holds
proprietors responsible for damages caused by excessive smoke which may be harmful "to person or property".
Respondent Judge gravely abused his discretion in upholding the decision of the city court suspending the civil action
based on quasi-delict until after the criminal action is finally terminated.

18. JIMENEZ VS CITY OF MANILA


FACTS: Jimenez bought bagoong at the Santa Ana public market at the time that it was flooded with ankle-deep
water. As he turned around to go home, he stepped on an uncovered opening w/c could not be seen because of
dirty rainwater. A dirty and rusty 4-inch nail, stuck inside the uncovered opening, pierced his left leg to a depth of1
inches. His left leg swelled and he developed fever. He was confined for 20 days, walked w/ crutches for 15 days and
10
could not operate his school buses. He sued City of Manila and Asiatic Integrated Corp under whose administration
the Sta. Ana had been placed by virtue of Management and Operating Contract. TC found for respondent. CA
reversed and held Asiatec liable and absolved City of Manila.
ISSUE: WON City of Manila should be jointly and solidarily liable with Asiatec
HELD: YES RATIO: In the City of Manila v Teotico case, it was held that Art 1, Sec 4 of RA 409, which City of Manila is
invoking in this case, establishes a general rule regulating the liability of City Of Manila while Art 2189 NCC governs
the liability due to defective streets, public buildings and other public works in particular and is therefore decisive
in this case. It was also held that for liability under 2189 to attach, control and supervision by the province, city or
municipality over the defective public building in question is enough. It is not necessary that such belongs to such
province, city or municipality. In the case at bar, there is no question that Sta. Ana public market remained under the
control of the City as evidenced by: 1.the contract bet Asiatec and City which explicitly states that prior approval of
the City is still needed in the operations. 2.Mayor Bagatsing of Manila admitted such control and supervision in his
letter to Finance Sec. Virata (The City retains the power of supervision and control over its public markets) 3.City
employed a market master for the Sta. Ana public Market whose primary duty is to take direct supervision and
control of that particular public market 4.Sec. 30 of Tax Code The treasurer shall exercise direct and immediate
supervision, administration and control over public markets It is thus the duty of the City to exercise reasonable
care to keep the public market reasonably safe for people frequenting the place for their marketing needs. Ordinary
precautions could have been taken during good weather to minimize danger to life and limb. The drainage hole
could have been placed under the stalls rather than the passageways. The City should have seen to it that the
openings were covered. It was evident that the certain opening was already uncovered, and 5 months after this
incident it was still uncovered. There were also findings that during floods, vendors would remove the iron grills to
hasten the flow of water. Such acts were not prohibited nor penalized by the City. No warning sign of impending
danger was evident. Petitioner had the right to assume there were no openings in the middle of the passageways
and if any, that they were adequately covered. Had it been covered, petitioner would not have fallen into it. Thus the
negligence of the City is the proximate cause of the injury suffered. Asiatec and City are joint tortfeasors and are
solidarily liable

19. MINDANAO VS PHOENIX


FACTS: - Del Monte Philippines contracted petitioner Mindanao Terminal and Broker age Service, Inc, a stevedoring
company, to load and stow a shipment of 146,288 cartons of fresh green Bananas and 15,202 cartons of fresh
pineapples belonging to Del Monte Produce into the cargo hold of the vessel M/v Mistrau - The vessel was docked at
the port of Davao and goods were to be transpor ted to Incheon, Korea in favour of consignee Taegu Industries. - Del
Monte Produce insured the shipment under an open cargo policy with pri vate respondent Phoenix Assurance
Company of New York, a non-life insurance comp any, and private respondent McGee & Co, the underwriting
manager/agent of Phoeni x - Upon arrival of M/V Mistrau in Incheon, it was discovered upon discharge that some of
the cargo was in bad condition - The damage surveyor of Korea, Byeong, surveyed that 16,069 cartons of th e banana
shipment and 2,185 cartons of the pineapple shipment were so damaged th at they no longer had commercial value.
- Del Monte Produce filed a claim under the open cargo policy. McGee s Marin e Claims evaluated the claim and
recommended that payment in the amount of $210, 266.43 be made. Del Monte issued a subrogation receipt to
Phoenix and McGee. - Phoenix and McGee instituted an action for damages against Mindanao Term inal - RTC ruled
that the only participation of Mindanao Terminal was to load t he cargoes on board the vessel and signed the
foreman s report unless they were pr operly arranged and tightly secured to withstand voyage across the open seas.
o It was found that the cargoes were damages on account of a typhoon which M/V Mistrau had encountered during
the voyage. o It was held that Phoenix and McGee had no cause of action against Mindan ao Terminal because the
latter, whose services were contracted by Del Monte, a d istinct corporation from Del Monte Produce, had no
contract with the assured Del Monte Produce. - CA reversed the RTC s decision which sustained Phoenix s and
McGee s argument that the damage in the cargoes was the result of the improper stowage by Mindana o Terminal. It
imposed on Mindanao Terminal, as the stevedore of the cargo, the duty to exercise extraordinary diligence in
loading and stowing the cargoes. - It further held that even with the absence of a contractual relationship between
Mindanao Terminal and Del Monte Produce, the cause of action of Phoenix and McGee could be based on quasi-
delict under Article 2176 of the Civil Code.
ISSUE: - Whether or not Mindanao Terminal was careless and negligent in the loadi ng and stowage of the cargoes
onboard M/V Mistrau making it liable for damages? - Whether Phoenix and McGee has a cause of action against
Mindanao Termina l under CC 2176 on quasi-delict? - Whether Mindanao Terminal observed the degree of diligence
required by l aw of a stevedoring company?
11
RULING: - The company filed by Phoenix and McGee against Mindanao Terminal states a cause of action. - The
present action is based on quasi-delict, arising from the negligent and careless loading and stowing of the cargoes
belonging to Del Monte Produce. Even assuming that both Phoenix and McGee have only been subrogated in the
right s of Del Monte Produce, who is not a party to the contract of service between Mi ndanao Terminal and Del
Monte, still the insurance carriers may have a cause of action in light of the Court s consistent ruling that the act that
breaks the cont ract may be also a tort. - In fine, a liability for tort may arise even under a contract, where tor t is
that which breaches the contract - In the present case, Phoenix and McGee are not suing for damages for in juries
arising from the breach of the contract of service but from the alleged n egligent manner by which Mindanao
Terminal handled the cargoes belonging to Del Monte Produce. Despite the absence of contractual relationship
between Del Monte Produce and Mindanao Terminal, the allegation of negligence on the part of the defendant
should be sufficient to establish a cause of action arising from quasi -delict. - 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 performan ce of
an obligation then that which is expected of a good father of a family or ordinary diligence shall be required. -
Mindanao Terminal, a stevedoring company which was charged with the load ing and stowing the cargoes of Del
Monte Produce aboard M/V Mistrau, had acted m erely as a labor provider in the case at bar. There is no specific
provision of law that imposes a higher degree of diligence than ordinary diligence for a stev edoring company or one
who is charged only with the loading and stowing of cargo es. - It was neither alleged nor proven by Phoenix and
McGee that Mindanao Te rminal was bound by contractual stipulation to observe a higher degree of dilige nce than
that required of a good father of a family. We therefore conclude that following Article 1173, Mindanao Terminal
was required to observe ordinary dilig ence only in loading and stowing the cargoes of Del Monte Produce aboard
M/V Mis trau. - Mindanao Terminal, as a stevedore, was only charged with the loading and stowing of the cargoes
from the pier to the ship s cargo hold; it was never the c ustodian of the shipment of Del Monte Produce. - The
loading and stowing of cargoes would not have a far reaching public ramification as that of a common carrier and a
warehouseman; the public is adequ ately protected by our laws on contract and on quasi-delict. - The public policy
considerations in legally imposing upon a common carri er or a warehouseman a higher degree of diligence is not
present in a stevedorin g outfit which mainly provides labor in loading and stowing of cargoes for its c lients. -
Phoenix and McGee failed to prove by preponderance of evidence that Mind anao Terminal had acted negligently.
1avvphi1 - Phoenix and McGee relied heavily on the deposition of Byeong Yong Ahn an d on the survey report of the
damage to the cargoes. Byeong, whose testimony was refreshed by the survey report, found that the cause of the
damage was imprope r stowage due to the manner the cargoes were arranged - As admitted by Phoenix and McGee
in their Comment before us, the latter is merely a stevedoring company which was tasked by Del Monte to load and
stow t he shipments of fresh banana and pineapple of Del Monte Produce aboard the M/V M istrau. - How and
where it should load and stow a shipment in a vessel is wholly d ependent on the shipper and the officers of the
vessel. - we are of the opinion that damage occurred aboard the carrying vessel du ring sea transit, being caused by
ship s heavy rolling and pitching under boistero us weather while proceeding from 1600 hrs on 7th October to 0700
hrs on 12th Oct ober, 1994 as described in the sea protest. - As it is clear that Mindanao Terminal had duly exercised
the required de gree of diligence in loading and stowing the cargoes, which is the ordinary dili gence of a good father
of a family, the grant of the petition is in order.

20. SANCHEZ VS RIGOS


FACTS: In an instrument entitled "Option to Purchase," executed on April 3, 1961, defendant-appellant Severina Rigos "agreed,
promised and committed ... to sell" to plaintiff-appellee Nicolas Sanchez for the sum of P1,510.00 within two (2) years from said
date, a parcel of land situated in the barrios of Abar and Sibot, San Jose, Nueva Ecija. It was agreed that said option shall be
deemed "terminated and elapsed," if Sanchez shall fail to exercise his right to buy the property" within the stipulated period.
On March 12, 1963, Sanchez deposited the sum of Pl,510.00 with the CFI of Nueva Ecija and filed an action for specific
performance and damages against Rigos for the latters refusal to accept several tenders of payment that Sanchez made to
purchase the subject land.
Defendant Rigos contended that the contract between them was only a unilateral promise to sell, and the same being
unsupported by any valuable consideration, by force of the New Civil Code, is null and void." Plaintiff Sanchez, on the other
hand, alleged in his compliant that, by virtue of the option under consideration, "defendant agreed and committed to sell" and
"the plaintiff agreed and committed to buy" the land described in the option. The lower court rendered judgment in favor of
Sanchez and ordered Rigos to accept the sum Sanchez judicially consigned, and to execute in his favor the requisite deed of
conveyance. The Court of Appeals certified the case at bar to the Supreme Court for it involves a question purely of law.

ISSUE: Was there a contract to buy and sell between the parties or only a unilateral promise to sell?

12
COURT RULING: The Supreme Court affirmed the lower courts decision. The instrument executed in 1961 is not a "contract to
buy and sell," but merely granted plaintiff an "option" to buy, as indicated by its own title "Option to Purchase." The option did
not impose upon plaintiff Sanchez the obligation to purchase defendant Rigos' property. Rigos "agreed, promised and
committed" herself to sell the land to Sanchez for P1,510.00, but there is nothing in the contract to indicate that her
aforementioned agreement, promise and undertaking is supported by a consideration "distinct from the price" stipulated for the
sale of the land. The lower court relied upon Article 1354 of the Civil Code when it presumed the existence of said consideration,
but the said Article only applies to contracts in general.
However, it is not Article 1354 but the Article 1479 of the same Code which is controlling in the case at bar because the latters
2nd paragraph refers to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." Since
there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly,
withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if
accepted, results in a perfected contract of sale. Upon mature deliberation, the Court reiterates the doctrine laid down in the
Atkins case and deemed abandoned or modified the view adhered to in the Southwestern Company case.

RIVERA VS SPS CHUA


FACTS: The parties were friends and kumpadres for a long time already. Rivera obtained a loan from the Spouses
Chua evidenced by a Promissory Note. The relevant parts of the note are the following: (a) FOR VALUE RECEIVED, I,
RODRIGO RIVERA promise to pay spouses SALVADOR C. CHUA and VIOLETA SY CHUA, the sum of One Hundred
Twenty Thousand Philippine Currency (_120,000.00) on December 31, 1995. (b) It is agreed and understood that
failure on my part to pay the amount of (_120,000.00) One Hundred Twenty Thousand Pesos on December 31, 1995.
I agree to pay the sum equivalent to FIVEPERCENT (5%) interest monthly from the date of default until the entire
obligation is fully paid for. Three years from the date of payment stipulated in the promissory note, Rivera, issued
and delivered to Spouses Chua two (2) checks drawn against his account at Philippine Commercial International Bank
(PCIB) but upon presentment for payment, the two checks were dishonored forthe reason account closed. As of 31
May 1999, the amount due the Spouses Chua was pegged at P366,000.00 covering the principal of P120,000.00 plus
five percent (5%) interest per month from 1 January 1996 to 31 May 1999. The Spouses Chua alleged that they have
repeatedly demanded payment from Rivera to no avail. Because of Riveras unjustified refusal to pay, the Spouses
Chua were constrained to file a suit before the MeTC, Branch 30, Manila. The MeTC ruled against Rivera requiring
him to pay the spouses Chua P120,000.00 plus stipulated interest at the rate of 5% per month from 1 January 1996,
and legal interest at the rate of 12% percent per annum fromn11 June 1999 and was affirmed by the RTC of Manila.
The Court of Appeals further affirmed the decision upon appeal of the two inferior courts but with modification of
lowering the stipulated interest to 12% per annum. Hence, a petition at the Supreme Court.
ISSUES: 1. Whether or not the Promissory Note executed as evidence of loan falls under Negiotiable Instruments
Law. 2. Whether or not a demand from spouses Chua is needed to make Rivera liable. 3. Whether or not the
stipulated interest is unconscionable and should really be lowered.
RULINGS: 1. NO, the Promissory Note executed as evidence of loan does not fall under Negotiable Instruments Law.
The instrument is still governed by the Civil Code as to interpretation of their obligations. The Supreme Court held
that the Instrument was not able to meet the requisites laid down by Section 1 of the Negotiable Instruments Law as
the instrument was made out to specific persons, herein respondents, the Spouses Chua, and not to order or to
bearer, or to the order of the Spouses Chua as payees. 2. NO, a demand from spouses Chua is not needed to make
Rivera liable. Even if Riveras Promissory Note is not a negotiable instrument and therefore outside the coverage of
Section 70 of the NIL which provides that presentment for payment is not necessary to charge the person liable on
the instrument, Rivera is still liable under the terms of the Promissory Note that he issued. Article 1169 of the Civil
Code explicitly provides that the demand by the creditor shall not be necessary in order that delay may exist when
the obligation or the law expressly so declare. The clause in the Promissory Note containing the stipulation of
interest (letter B in the above facts) which expressly requires the debtor (Rivera) to pay a 5% monthly interest from
the date of default until the entire obligation is fully paid for. Theparties evidently agreed that the maturity of the
obligation at a date certain, 31 December 1995, will give rise to the obligation to pay interest. 3. YES, the stipulated
interest is unconscionable and should really be lowered. The Supreme Court held that as observed by Rivera, the
stipulated interest of 5% per month or 60% per annum in addition to legal interests and attorneys fees is, indeed,
highly iniquitous and unreasonable and stipulated interest rates if illegal and are unconscionable the Court is allowed
to temper interest rates when necessary. Since the interest rate agreed upon is void, the parties are considered to
have no stipulation regarding the interest rate, thus, the rate of interest should be 12% per annum computed from
the date of judicial or extrajudicial demand. However, the 12% per annum rate of legal interest is only applicable
until 30 June 2013, before the advent and effectivity of Bangko Sentral ng Pilipinas (BSP) Circular No. 799, Series of

13
2013 reducing the rate of legal interest to 6% per annum. Pursuant to our ruling in Nacar v. Gallery Frames,30 BSP
Circular No. 799 is prospectively applied from 1 July 2013.

MERALCO vs. RAMOY, G.R. NO. 158911, March 4, 2008


FACTS: The National Power Corporation (NPC) won an ejectment case against several persons allegedly illegally occupying its
properties in Baesa, Quezon City. To execute such, NPC requested from MERALCO that the electrical service connection of those
residential and commercial establishments beneath the NPC lines be immediately disconnected and MERALCO agreed upon
determination of the affected establishments by NPC. One of which includes the residence of the plaintiffs- the Ramoys.
ISSUE: WON MERALCO is liable for damages to the Ramoys for the sudden disconnection of their electric power supply.
HELD: Yes. MERALCO is liable for damages to the Ramoys for the sudden disconnection of their electric power supply which
turned out to be without any valid ground, pursuant to Articles 1170 and 1173 of the Civil Code. Therefore, MERALCO failed to
exercise the required utmost diligence as a public utility service provider, hence, liable for culpa-contractual being negligent in
its performance of its obligation derived from the Service Contract between MERALCO and its consumers, one of which is the
Ramoys.

UNLAD RESOURCES DEVELOPMENT CORPORATION vs. DRAGON, G.R. NO. 149338, July 28, 2008
FACTS: The parties in this case entered in a Memorandum of Agreement (MoA) that UNLAD will invest in additional stocks worth
4.8M and pay up immediately 1.2M for said subscription while the respondents, Dragon and company, shall transfer control
and management over the Rural Bank to UNLAD Resources. The respondents complied with their obligation but the petitioners
did not, thus respondents filed a complaint for rescission of the agreement and the return of control and management of the
Rural Bank from petitioners to respondents, plus damages.
ISSUE: WON the rescission of the MoA between the parties is proper.
HELD: Yes, the MoA between the parties can be rescinded pursuant to Article 1191 of the Civil Code which states that the
power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent
upon him. Since UNLAD failed to comply with what is incumbent upon him, the other party-the respondents can ask for
rescission of the MoA on such ground. Clearly, the petitioners failed to fulfill their end of the agreement, and thus, there was
just cause for rescission. With the contract, thus rescinded, the parties must be restored to the original state, that is, before they
entered into the Memorandum of Agreement.

SPOUSES CACAYORIN vs. ARMED FORCES AND POLICE MUTUAL BENEFIT ASSOCIATION , INC. (AFPMBAI
FACTS: Rural Bank approved a loan in favor of Oscar Cacayorin to buy one of the properties of AFPMBAI. Subsequently, the Rural
Bank was closed and placed under receivership by Philippine Deposit Insurance Corporation (PDIC). Since PDIC cannot locate the
loan records and title, the petitioners-the spouses, then, filed a complaint for consignation of loan payment, while the
respondent filed a motion to dismiss on the ground that the case falls within the jurisdiction of the Housing and Land Use
Regulatory Board (HLURB).
ISSUES: 1. WON the case falls within the exclusive jurisdiction of the HLURB. 2. WON the case makes out a case of consignation.
HELD: 1. No. Consignation of payment is necessarily judicial (Article 1258), thus, jurisdiction lies with the Trial Court and not
HLURB. 2. Yes, in the case, the creditor is unknown as there are two (2) entities which claim the same right to collect 1) Rural
Bank, through PDIC and 2) AFPMBAI, who was currently in the possession of the loan records and title and make demands. Thus,
for the debtor to be released in such case, he must deposit it to the proper judicial court even without prior tender of payment
pursuant to Article 1256 (2).

AJAX MARKETING vs. HON. COURT OF APPEALS, G.R. NO. 118585 September 14, 1995
FACTS: There are three (3) Real Estate Mortgages (REMs) over a single property between AJAX Marketing & Development
Corporation and Metropolitan Bank & Trust Co. First loan was under the name Ylang-Ylang Merchandising Company, a
partnership, for the amount of 250,000.00. The second was when it changed its name to AJAX Marketing Co. for the amount
of 150,000.00. And third was during its incorporation as AJAX Marketing & Development Corporation for the amount of
600,000.00. Later on, the AJAX Marketing executed a Promissory Note to restructure and consolidate the 3 loans.
Subsequently, the bank foreclosed the mortgaged property.
ISSUE: WON there is novation by virtue of the consolidation of the three (3) loans into a single Promissory Note.
HELD: No, novation is never presumed. To effect either objective/subjective novation, it must be imperative that the new
obligation expressly declare that the old obligation is thereby extinguished or that the original debtor/s is/are released. In the
case, there is nothing mentioned about the intention of the parties to novate the three (3) loans nor their extinguishment. In
addition, the annotations in the mortgaged property remained uncancelled. The conversion from partnership to corporation,
likewise, did not expressly release the old debtor/s. Clearly, neither objective nor subjective novation took place.

LEONARDO BOGNOT vs. RRI LENDING CORPORATION, REPRESENTED BY ITS GENERAL MANAGER, DARIO J. BERNARDEZ
FACTS: Leonardo Bognot executed a promissory note in favor of RRI Lending Corporation, with Rolando Bognot, his brother, as a
co-maker, for a loan they obtained in the amount of 500,000.00, secured by a post-dated check. Eventually, the loan was
renewed several times on a monthly basis by the siblings until Rolandos wife, Julieta Bognot, renewed the said loan and got the

14
loan documents for the Bognot siblings signatures but she never returned them. Despite repeated demands, the loan was left
unpaid. The petitioner, then, pleaded that he had paid the loan but failed to prove it.
ISSUE: WON the Bognot siblings obligation was extinguished by novation through substitution of debtors?
HELD: No, there is no novation to talk about since to legally effect a novation, the original debtor must be expressly released
from the obligation and the new debtor assumes his place. The renewal of the loan made by Mrs. Bognot is not, in effect, a
substitution since she merely renewed the original loan by executing a new promissory note and check. Nevertheless, the
respondent never agreed to the substitution which is essential to validly substitute the old debtor.

GAISANO CAGAYAN, INC. vs INSURANCE COMPANY OF NORTH AMERICA, G.R. NO. 147839, June 8, 2006
FACTS: Intercapitol Marketing Corporation (IMC) and Levi Strauss Phils. Inc. (LSPI) separately obtained their insurance policies
from Insurance Company of North America (ICNA) for their book debt endorsements for products sold to customers which are
unpaid 45 days after the time of the loss. Gaisanao Cagayan, Inc. bought ready-made clothing products from IMC and LSPI which
were, subsequently, included in the stocks lost when its store was consumed by fire.
ISSUE: WON Gaisano Cagayan Inc. can be held liable despite the occurrence of fortuitous event.
HELD: Yes, Gaisano Cagayan Inc. is liable even if the goods were lost through fortuitous event, thus, its liability to pay the price
of the goods purchased was not extinguished. Article 1263 of the Civil Code states that in an obligation to deliver a generic thing,
the loss or destruction of anything of the same kind does not extinguish the obligation (genus nunquam perit). The obligation of
Gaisano is pecuniary in nature and money is generally considered as a generic thing.
FRANCIA vs. IAC, G.R. NO. L-67649 June 28, 1988
FACTS: Engracio Francia owned a house and lot located in Pasay City, a portion of which was expropriated by the government for
4,116.00 deposited in Philippine National Bank (PNB) but was never withdrawn. Francia failed to pay his real estate taxes
amounting to 2,400.00, hence, his remaining property was auctioned.
ISSUE: WON the expropriation payment may compensate for the real estate taxes due.
HELD: No, the expropriation payment cannot be compensated with the real estate taxes due because the Government and the
taxpayer are not mutually creditors and debtors of each other pursuant to Article 1278 of the Civil Code. There can never be an
offsetting of taxes against the claims that the taxpayer may have against the government. He would have withdrawn the
expropriation payment to pay the real estate taxes due to avoid the auction. Moreover, the taxes assessed were derived from
law while the money judgment against the government is an obligation arising from a contract, whether express or implied.
//Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. While Levi Strauss (Phils.) Inc. (LSPI)
is the local distributor of products bearing trademarks owned by Levi Strauss & Co. IMC and LSPI separately obtained
from respondent Insurance Company of North America (ICNA) fire insurance policies for their book debt
endorsements related to their ready-made clothing materials which have been sold or delivered to various
customers and dealers of the Insured anywhere in the Philippines which are unpaid45 days after the time of the loss.
Petitioner Gaisano Cagayan, Inc. is a customer and dealer of IMC and LSPI products. It owns the Gaisano Superstore
Complex which was consumed by fire in 1991. Included in the items destroyed in the fire were stocks of ready-made
clothing materials sold and delivered by IMC and LSPI. Respondent filed a complaint for damages against Gaisano
Cagayan, Inc. alleging that IMC and LSPI filed their claims under their respective fire insurance policies which it paid,
thus it was subrogated to their rights. Petitioner averred it not be held liable because the items were destroyed due
to fortuitous event or force majeure. The RTC ruled that IMC and LSPI retained ownership of the delivered goods
until fully paid, it must bear the loss (res perit domino). The CA ruled otherwise and ordered petitioner to pay
respondent Php 2,119,205.60 and Php 535,613.00 the amount paid by the latter to IMC and LSPI, respectively.

SOLAR HARVEST VS DAVAO CORRUGATED


Facts:
1. The petitioner (Solar Harvest, Inc., Solar for brevity) entered into an agreement with respondent, Davao Corrugated
Carton Corporation (DCCC for brevity), for the purchase of corrugated carton boxes, specifically designed for petitioners
business of exporting fresh bananas.
2. The agreement was not reduced into writing.
3. To start the production, Solar deposited in DCCCs US Dollar Savings Account with Westmont bank, as full payment for
the ordered boxes.
4. Despite such payment, Solar did not receive any boxes from DCCC.
5. Solar wrote a demand letter for reimbursement of the amount paid.
6. DCCC replied that the boxes had been completed as early as April 3, 1998 and that Solar failed to pick them up from the
formers warehouse 30 days from completion, as agreed upon. It was also mentioned that Solar placed an additional
order, out of which, half had been manufactured without any advanced payment from Solar. (Solar alleges that the
agreement was for DCCC to deliver within 30 days from payment the said cartons to Tagum Agricultural Development
Corporation (TADECO) which the latter failed to manufacture and deliver within such time.)
7. DCCC then demanded Solar to remove the boxes from the factory and to pay the balance for the additional boxes.
Issue/s:

15
Whether or not the respondent (Davao Corrugated Carton Corporation) is in default.
Ruling:
No. It was unthinkable that, over a period of more than two years, Solar did not even demand for the delivery of the boxes. Even
assuming that the agreement was for DCCC to deliver the boxes, the latter would not be liable for breach of contract as Solar
had not yet demanded from it the delivery of the boxes.
In reciprocal obligations, as in contract of sale, the general rule is that the fulfillment of the parties respective obligation should
be simultaneous. Hence, no demand is generally necessary because, once a party fulfills his obligation and the other party does
not fulfill his, the latter automatically incurs delay. But when different dates for performance of the obligation are fixed, the
default for each obligation must be determined, that is, the other party would incur in delay only from the moment the other
party demands fulfillment of the formers obligation. Thus, even in reciprocal obligations, if the period for the fulfillment of the
formers obligation is fixed, demand upon the obliged is still necessary before the obligor can be considered in default and before
a cause of action for rescission will accrue.
Solar alleges that they made a follow-up upon respondent, which, however, would not qualify as a demand for the fulfillment
obligation. The former also testified that they made a follow-up of the boxes, but not a demand.
Even assuming that a demand had been previously made before filling the present case Solars claim for reimbursement would
still fail, as the circumstances would show that DCCC was not guilty of breach of contract.
Aside from the pictures of the finished boxes and the production report thereof, there is ample showing that the boxes had
already been manufactured by DCCC. There is the testimony of Estanislao who accompanied Que to the factory, attesting that,
during the first visit to the company, they saw the pile of boxes and Que took a samples thereof. Que, himself confirmed this
incident. He testified that Tan pointed the boxes to him and got a sample and saw that it was blank. Ques absolute assertion
that the boxes were not manufactured is, therefore, implausible and suspicious.
DCCC was willing to shoulder expenses for a representative of the court to visit the plant and see the boxes. It also prays that
Solar be ordered to remove the boxes from its factory site, which would only mean that the boxes are, up to the present, still in
DCCCs premises.
Assuming that DCCC was obliged to deliver the boxes, it could not have complied with such obligation. Que, admitted that he did
not given DCCC the authority to deliver the boxes to TADECO. Surely, without such authority, TADECO would not have allowed
to deposite the boxes within its premises.
//ISSUE:
WON there was default on the part of Davao Corrugated Carton to deliver the boxes and thus make it liable for breach of
contract to Solar Harvest
May Solar Harvest be allowed to rescind the contract?

HELD: None, thus, Solar Harvest cannot demand for the refund of its payment, which in essence is actually a claim for rescission.
Based on Art. 1191, in reciprocal obligations, the right to rescind a contract arises once the other party defaults in the
performance of his obligation. In determining when default occurs, Art. 1191 should be taken in conjunction with Art.
1169 which provides as to when delay is incurred.
In reciprocal obligations, as in a contract of sale, thegeneral rule is that the fulfillment of the parties' respective obligations
should be simultaneous. Hence, no demand is generally necessary because, once a party fulfills his obligation and the other
party does not fulfill his, the latter automatically incurs in delay. But when different dates for performance of the obligations are
fixed, the default for each obligation must be determined by the rules given in the first paragraph of Art. 1169, that is, the other
party would incur in delay only from the moment the other party demands fulfillment of the former's obligation. Thus, even in
reciprocal obligations, if the period for the fulfillment of the obligation is fixed, demand upon the obligee is still necessary before
the obligor can be considered in default and before a cause of action for rescission will accrue.
Evident from the records and even from the allegations in the complaint was the lack of demand by petitioner upon respondent
to fulfill its obligation to manufacture and 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 of the obligation. Note is taken of the fact that,
with respect to their claim for reimbursement, the Complaint alleged and the witness testified that a demand letter was sent to
respondent. Without a previous demand for the fulfillment of the obligation, petitioner would not have a cause of action for
rescission against respondent as the latter would not yet be considered in breach of its contractual obligation.
Even assuming that a demand had been previously made before filing the present case, petitioner's claim for reimbursement
would still fail, as the circumstances would show thatrespondent was not guilty of breach of contract.
The existence of a breach of contract is a factual matter. As correctly observed by the CA, there is ample showing that the boxes
had already been manufactured by respondent. Que's absolute assertion that the boxes were not manufactured is implausible
and suspicious. We note that respondent's counsel manifested during trial, that his client was willing to shoulder expenses for a
representative of the court to visit the plant and see the boxes. Even in its Comment to this petition, respondent prays that
petitioner be ordered to remove the boxes from its factory site, which could only mean that the boxes are, up to the present,
still in respondent's premises.
We also believe that the agreement between the parties was for petitioner to pick up the boxes from respondent's warehouse,
contrary to petitioner's allegation. Thus, it was due to petitioner's fault that the boxes were not delivered to TADECO. Petitioner
had the burden to prove that the agreement was, in fact, for respondent to deliver the boxes within 30 days from payment, as

16
alleged in the Complaint. It failed to do so. Its sole witness, Que, was not even competent to testify on the terms of the
agreement because he did not personally place the order with Tan. Moreover, assuming that respondent was obliged to deliver
the boxes, it could not have complied with such obligation because as admitted by Que, he did not give respondent the
authority to deliver the boxes to TADECO
Surely, without such authority, TADECO would not have allowed respondent to deposit the boxes within its premises.
In sum, the Court finds that petitioner failed to establish a cause of action for rescission, the evidence having shown that
respondent did not commit any breach of its contractual obligation. As previously stated, the subject boxes are still within
respondent's premises. To put a rest to this dispute, we therefore relieve respondent from the burden of having to keep the
boxes within its premises and, consequently, give it the right to dispose of them, after petitioner is given 30 days within which to
remove them from the premises.

GENERAL MILLING CORP VS RAMOS


Facts: General Milling Corporation (GMC) entered into a Growers Contract with spouses Librado and Remedios
Ramos (Spouses Ramos). Under the contract, GMC was to supply broiler chickens for the spouses to raise on their
land. To guarantee full compliance, the Growers Contract was accompanied by a Deed of Real Estate Mortgage over
a piece of real property and a surety bond. Spouses Ramos eventually were unable to settle their account with GMC.
The property was extrajudicially foreclosed and GMC was the highest bidder. Spouses Ramos questioned the validity
of the foreclosure proceedings. The CA found that GMC made no demand to spouses Ramos for the full payment of
their obligation. A perusal of the letters presented and offered as evidence by defendant-appellant GMC did not
demand but only request spouses Ramos to go to the office of GMC to discuss the settlement of their account.
Issue: WON GMC made sufficient demand to the spouses Ramos to fulfill their obligation NO
Held: No. There are three requisites necessary for a finding of default. First, the obligation is demandable and
liquidated; second, the debtor delays performance; and third, the creditor judicially or extrajudicially requires the
debtor's performance. According to the CA, GMC did not make a demand on Spouses Ramos but merely requested
them to go to GMCs office to discuss the settlement of their account. In spite of the lack of demand made on the
spouses, however, GMC proceeded with the foreclosure proceedings. Neither was there any provision in the Deed of
Real Estate Mortgage allowing GMC to extrajudicially foreclose the mortgage without need of demand. Article 1169
of the Civil Code states that: those obligated to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation. However, the demand by the
creditor shall not be necessary in order that delay may exist, when the obligation or the law expressly so declares.
The Deed of Real Estate Mortgage (contract) in the instant case has no such provision stating that demand is not
necessary for delay to exist. GMC should have first made a demand on the spouses before proceeding to foreclose
the real estate mortgage. Facts: General Milling Corporation (GMC) entered into a Growers Contract with spouses
Librado and Remedios Ramos (Spouses Ramos). Under the contract, GMC was to supply broiler chickens for the
spouses to raise on their land. To guarantee full compliance, the Growers Contract was accompanied by a Deed of
Real Estate Mortgage over a piece of real property and a surety bond. Spouses Ramos eventually were unable to
settle their account with GMC. The property was extrajudicially foreclosed and GMC was the highest bidder. Spouses
Ramos questioned the validity of the foreclosure proceedings. The CA found that GMC made no demand to spouses
Ramos for the full payment of their obligation. A perusal of the letters presented and offered as evidence by
defendant-appellant GMC did not demand but only request spouses Ramos to go to the office of GMC to discuss
the settlement of their account. Issue: WON GMC made sufficient demand to the spouses Ramos to fulfill their
obligation - NO Held: No. There are three requisites necessary for a finding of default. First, the obligation is
demandable and liquidated; second, the debtor delays performance; and third, the creditor judicially or
extrajudicially requires the debtor's performance. According to the CA, GMC did not make a demand on Spouses
Ramos but merely requested them to go to GMCs office to discuss the settlement of their account. In spite of the
lack of demand made on the spouses, however, GMC proceeded with the foreclosure proceedings. Neither was
there any provision in the Deed of Real Estate Mortgage allowing GMC to extrajudicially foreclose the mortgage
without need of demand. Article 1169 of the Civil Code states that: those obligated to deliver or to do something
incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their
obligation. However, the demand by the creditor shall not be necessary in order that delay may exist, when the
obligation or the law expressly so declares. The Deed of Real Estate Mortgage (contract) in the instant case has no
such provision stating that demand is not necessary for delay to exist. GMC should have first made a demand on the
spouses before proceeding to foreclose the real estate mortgage.

17