OBLIGATIONS AND CONTRACTS CASE DIGESTS (FIRST ASSIGNMENT)

MAKATI STOCK EXCHANGE, INC. VS. MIGUEL CAMPOS the order of SICD denying the petitioners motion to dismiss.
GR NO. 138814 APRIL 26, 2009
Such made respondent file a petition for certiorari with the Court of
Appeals and petitioners filed a MR but was denied.
A case was instituted by respondent Miguel Campos with Securities,
Investigation and Clearing Department (SICD) of the Securities and ISSUE: Was there a statement of a cause of action? HELD: NONE.
Exchange Commission (SEC), against petitioners Makati Stock
Exchange, Inc. (MKSE) and its directors where the petition sought A cause of action is the act or omission by which a party violates a
the: right of another. A complaint states a cause of action where it
contains three essential elements of a cause of action, namely: (1) the
!. Nullification of the resolution MKSE Board of Directors, which legal right of the plaintiff, (2) the correlative obligation of the
allegedly deprived him of his right to participate equally in the defendant, and (3) the act or omission of the defendant in violation of
allocation of Initial Public Offerings (IPO) of corporations registered said legal right. If these elements are absent, the
with MKSE;
complaint becomes vulnerable to dismissal on the ground of failure
#. The delivery of the IPO shares he was allegedly deprived of, for to state a cause of action.
which he would pay IPO prices; and
However, the terms right and obligation are not magic words that
$. The payment of P2 million as moral damages, P1 million as would automatically lead to the conclusion that such Petition
exemplary damages, and P500,000.00 as attorneys fees and sufficiently states a cause of action. Right and obligation are legal
litigation expenses. 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
SICD initially granted respondents prayer for issuance of TRO from obligation is defined in the Civil Code as a juridical necessity to
enforcing resolution and subsequently issued another order granting give, to do or not to do. Justice J.B.L. Reyes offers the definition
respondents application for a Writ of Preliminary Injunction, to given by Arias Ramos as a more complete definition:
continuously enjoin the implementation or enforcement of the
MKSE Board Resolution in question An obligation is a juridical relation whereby a person (called the
creditor) may demand from another (called the debtor) the
Petitioners then filed a motion to dismiss respondents petition for observance of a determinative conduct (the giving, doing or not
(1) the Petition became moot due to the cancellation of the license of doing), and in case of breach, may demand satisfaction from the
MKSE; (2) the SICD had no jurisdiction over the Petition; and (3) assets of the latter.
the Petition failed to state a cause of action.
Art. 1157 of the Civil Code provides that Obligations arise from
SICD denied the motion to dismiss which was once again challenged (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions
before the SEC en banc through certiorari. The en banc then nullified punished by law; and (5) Quasi-delicts.
The mere assertion of a right and claim of an obligation in an planning, design and documentation for architectural
initiatory pleading, whether a Complaint or Petition, without drawings of the project. The work is deemed ninety
identifying the basis or source thereof, is merely a conclusion of fact five percent (95%) complete upon submission of
and law. (In the case at bar, although the Petition in SEC Case No. complete working drawings and documents for
02-94-4678 does allege respondents right to subscribe to the IPOs of construction. The last five percent (5%) consist of
corporations listed in the stock market at their offering prices, and task required during the construction phase as
petitioners obligation to continue respecting and observing such
stipulated in this contract
right, the Petition utterly failed to lay down the source or basis of
o Work Suspended or abandoned: If the work of the
respondents right and/or petitioners obligation.)
Architect is abandoned or suspended, in whole or in
Respondent merely quoted in his Petition the MKSE Board part, due to causes n o t attributable to the Architect,
Resolution, passed sometime in 1989, granting him the position of the Architect is to be paid by the Owner for services
Chairman Emeritus of MKSE for life. However, there is nothing in rendered corresponding to the fees due on the stage
the said Petition from which the Court can deduce that of suspension or abandonment of work.
respondent, by virtue of his position as Chairman Emeritus of o *The agreement contained no provision within
MKSE, was granted by law, contract, or any other legal source, which respondent was to accomplish its services.
the right to subscribe to the IPOs of corporations listed in the August 16, 1995- letter signed by respondents Production
stock market at their offering prices. (allocation of IPO shares was Manager and noted by Mirafuente submitted to the
merely alleged to have been done in accord with a practice normally
petitioner, copies of the Master plans and latest plans
observed by the members of the stock exchange) A practice or
showing all the changes agreed upon from last meeting at
custom is, as a general rule, not a source of a legally demandable or
enforceable right. City Garden Restaurants and that it submitted the same plans
together with the complete package of Architectural plans on
UNIWIDE SALES INC. V. MIRAFUENTE & NG INC August 9, 1995 to cover the Change Order
GR NO. 172454, August 17, 2007 August 22- Petitioner terminated the latters services through
a notice of termination stating that a verbal instruction was
Facts: given to the respondent on August 8 that all works be put on
Uniwide Sales, Inc. (petitioner) and Mirafuente and Ng, Inc. hold and that owner has finally decided to stop all the works
(respondent), represented by Architect Robert Mirafuente, immediately and terminate the Consultancy Services.
forged an agreement whereby petitioner engaged respondent o Petitioner also requested respondent to submit final
"to plan and design the proposed UNIWIDE SALES statement of account
MALL" for a consideration of Two Million Five Hundred Respondent sent a letter following up its billing amount to
Thousand (P2,500,000) Pesos "for Architectural Design 400,000 representing full payment for the Change Order and
Service only." P437,000 representing full payment for the Construction
o Scope of work to be done by the Architect, consist Document Phase-Architectural Design Fee.
of professional services for the preparation,
 Respondent demanded payment for its services amounting to within six (6) months from the signing of the
a total of P837,000, petitioner responded that they were still agreement, 117 7 respondent complied with it only
in the process of reconciling their records and asked for after a year and a half
supporting documents for the said amount. o petitioner emphasizes that when respondent
Mirafuente went to the RTC to file a complaint for sum of transmitted the architectural design and plans on
money plus interest at the rate of 24% per annum from August 9, 1995 (to petitioner's Architect de
August 9, 1995 until petitioner pays its obligations, Guzman) and August 16, 1995 (to petitioner's
attorneys fees equivalent to 25% Chairman Jimmy Gow), its Chairman Jimmy Gow
RTC ruled in favor of Mirafuente demanding Uniwide to had in June 1995 verbally terminated respondent's
pay: services.
o PhP837,500.00 representing the total amount of
ISSUE: Whether the termination of the agreement by petitioner was
unpaid architectural fees owing to the plaintiff, plus made prior to respondents compliance with its undertakings
legal interest of 6% per annum from the date of thereunder
extra-judicial demand until the finality of the herein (Or simply put, WON RESPONDENT MIRAFUENTE FAILED TO
Decision FULFILL ITS OBLIGATIONS at kung valid baa ng 6 month-
o Peso equivalent of 25% of the amount due and ultimatum na verbal agreement daw nila)
collectible as and by way of attys fees
o Cost of suit HELD: No, hindi valid ang verbal agreement at there was
CA affirmed the decision and found that respondent compliance on the part of Mirafuente dahil nga hindi valid
submitted to petitioner the complete and final set of Both the trial and appellate courts found that the
architectural designs, plans and specifications prior to the architectural design prepared by respondent was delivered to
termination of its services, 110 0 but the termination petitioner before the termination of the agreement.
appeared to be a mere ploy of petitioner to avoid its the agreement forged by the parties does not provide for a
obligation to pay respondent's fees (TREACHEROUS period within which respondent has to accomplish its
BITCH!!!!!!!!!) and that it did not present any proof that it undertakings thereunder
was dissatisfied with the services. Ito ang arguments kung bakit hindi valid ang verbal
AT THE TIME PETITIONER TERMINATED agreement (ewan kung important to nilagay ko na rin para
RESPONDENTS SERVICES, THE CONSTRUCTION OF lang knowledgeable kayo hahahahaha wag niyo nang
THE MALL ALREADY HAD BEGUN basahin nakokonsensiya lang ako kasi baka biglang tanungin
Uniwide appealed to SC- respondent failed to fulfill tapos di ko nalagay sa digest ko tapos magalit kayo lahat
obligations under the agreement, hence, it is justified in sakin kasi babae lang ako, marupok hahaha)
refusing to heed respondents monetary claims o why did not petitioner immediately seek the
o petitioner alleges that despite its verbal agreement enforcement of such alleged verbal agreement when
with respondent that the plans should be submitted
 the period expired on June 13, 1994 or, in the which revisions were subsequently incorporated in
alternative, terminate respondent's services the architectural drawing package transmitted to
o the petitioner did not complain of the delay in petitioner on August 9, 1995
complying o Witness Jaime Rioflorido admitted that before his
o petitioner is estopped from enforcing the same, it company took over, he saw that the substructure
having continued to deal with petitioner on the works were substantially completed. Such admission
project even after the expiration of the six-month shows that the mall project had been started by
period by, in t e r alia , recommending revisions of petitioner using the plan prepared by the respondent
the design and paying respondent's services for the
first two phases of the project schedule RESPONDENT DISCHARGED ITS OBLIGATION UNDER
o As for petitioner's claim that it had, in June 1995, THE AGREEMENT PRIOR TO THE TERMINATION OF ITS
SERVICES ON AUG 22, 1995
verbally ordered respondent to stop and cease all its
Petitioner to terminate the agreement after respondent had
activities relating to the design 220 0 of the mall,
complied with its obligation under the agreement violates
albeit it sent the formal notice of termination on
Article 1159 of the New Civil Code which provides that
August 22, 1995 which was received by respondent
"[o]bligations arising from contracts have the force of
the following day, August 23, 1995, the same fails.
law between the contracting parties and should be
The notice of termination does not refer to a verbal
complied with in good faith
advice of termination in June 1995. Instead, it refers
to an August 8, 1995 advice to respondent for it to
"put on hold [respondent's] works." "[P]ut[ting] on
hold" is not equivalent to termination Liga v Allegro Resources Corp.
o Notice of termination of services did not specify GR No. 175554, December 23, 2008.
the ground behind termination
o Petitioner was to later claim that it terminated the Relevant Provision: Article 1159, Civil Code:
services of respondent due to "material deficiencies - Obligations arising from contracts have the force of law
in the architectural design proposals" submitted on between the contracting parties and should be complied with in good
August 9, 1995. But did it not earlier claim that it faith.
had priorly terminated respondent's services in June
1995 or on August 8, 1995 Facts:
- On October 10 1975 (wtf wild 2008 na yung case), Ortigas &
o if indeed petitioner verbally terminated the
Company Limited Partnership (Ortigas, for brevity awuw) entered
agreement as early as June 1995, why did it still into an agreement with La Paz Investment & Realty Corporation (La
send a representative to attend the meeting with Paz) where Ortigas leased to La Paz a parcel of land in San Juan city
respondent's representatives on July 18, 1995 at City which consisted of 5,514 sqm for a 25 year period from January 1,
Garden Restaurant to discuss revisions of the design, 1976 to December 31 of 2000.
- In the agreement, La Paz undertook to construct a 3 or 2 storey - However, her compliance with the agreement ended as soon it was
commercial building which will contain first class stores subdivided executed.
in stalls for lease to those interested.
- Despite repeated demands from Allegro, Liga failed to pay the
- In compliance with this, La Paz constructed the Greenhills rentals as well as such back rentas from January to August of 2001.
Shopping Arcade (omg) and then divided the same into several stalls
which were subleased to other people. - This led allegro to file an ejectment complaint against Liga with the
MeTC of San Juan, who ruled in favor of Allegro and ordered Liga
- Petitioner Edsel Liga, one of the lessees, with the Unit No. 26 as to vacate the stall and pay the back rentals. The lower court ruled
the space he leaed. that Allegro has rightful ownership over the stall since Ligas
continued occupation was only by mere tolerance which ceased
- Since the lease expired in December 31, 2000, the stallholders when the contract was executed. Liga managed to pay the P80k
through Greenhills Shoppesville Unit Lessees Assoc. Inc. (GSULAI) (advance + deposit).
made attempts to extend their leasehold rights, however these efforts
were futile because they were all denied by Ortigas. - The lower court ordered the payment of P210k as back rentals from
October of 2001 to February of 2002, and P20k per monthas
- However, petitioner was allowed to continue his lease (#special compensation for the use of the stall from the filing of the ejectment
#favoritism) suit.

- On August 30 of 2001, Ortigas formally informed GSULAI of the - RTC affirmed this but modified the monthly rental rate to P20k per
impending lease to respondent Allegro. On Sept. 3 of that year, month, thus modifying the back rentals to P80,000.
Ortigas and Allegro executed a contract of lease. That same day, the
parties executed the Addendum to the agreement, with Section 1 - Respondent filed a petition before the CA for review assailing the
providing that Allegro shall take immediate possession and control modified decision, which was granted.
of the leased promises upon signing the contract, it also empowers
respondent to assist in the collection of back rentals due to Ortigas Issues:
for a certain period of time. W/n the CA erred in ordering Liga to pay:
i. to Ortigas the back rentals from January to August, 2001.
- As the new lessee, respondent offered the same unit to petitioner ii. to Allegro back rentals of P40k per month until such time
which eventually led to a lease agreement titled as Rental she vacates it
Information where it was stipulated that Liga would pay P40k iii. to Allegro the amount of P20k for attorneys fees and cost
montly rental starting September 1st. This also covered the back of the suit.
rentals in January through August due to Ortigas. A P40k payment as
one month advance and another P40k as security deposit was also Held:
given pursuant to the agreement (rich kid si ate)
i. Yes. - She contends that Allegro is estopped from claiming monthly
rentals since it signified its concurrence in the montly rental fee of
Arguments: P20k because of the filing of the motion to release cash bond in favor
- Liga argues that the CA erred in ordering her to pay the back of plaintiff.
rentals to Ortigas because the latter is not a party to the case, that the
ruling runs counter to the doctrine that judgment cannot bind persons SC:
who are not parties to the action. - No. The filing by Allegro of the Motion to Release Cash Bond in
Favor of the Plaintiff did not operate to estop it from claiming a
SC: monthly rental rate of P40,000.00.
- Liga is correct. - Estoppel cannot be sustained by mere argument or doubtful
- Ortigas is not a party to the case so no relief can be extended to it. inference. Allegro did not abandon its stance nor did it represent to
- Allegro cannot justify the award as a legal representative by virtue Liga that it was doing so. Liga cannot feign ignorance of such fact
of a provision contained in its lease agreement with Ortigas. Allegro since Allegro's petition for review before the Court of Appeals puts
did not aver in the complaint that it was acting as the legal rep of as an issue the reduction by the RTC of the monthly rentals from
ortigas and that it sought the payment of back rentals due to Ortigas. P40,000.00 to P20,000.00. Allegro never made any deed or
- There was no allegation in the complaint that Allegro was seeking representation that could have misled Liga.
such back rentals. The remedies to be granted should be limited to - In order to avoid further injustice to a lawful possessor, an
the issues presented by the parties in their pleadings. immediate execution of a judgment is mandated and the court's duty
to order such execution is practically ministerial. In City of Manila,
ii. No. et al. v. CA, et al., We held that "Section 8 (now Section 19), Rule 70,
SC: RELEVANT DOCTRINE on execution pending appeal, also applies even if the plaintiff-lessor
- The Court cannot countenance the refusal to pay P40k montly to appeals where, as in that case, judgment was rendered in favor of
allegro since she had already accepted to pay such rental rate when the lessor but it was not satisfied with the increased rentals granted
she signed the contract titled as Rental Information. by the trial court, hence the appeal . . . ."
- The contract is the law between the parties.
- Furthermore, Article 1159 of the Civil Code states that iii. No.
Obligations arising from contracts have the force of law between - Law and jurisprudence support the award of attorney's fees and
the contracting parties and should be complied with in good faith.. costs of suit in favor of Allegro. The award of damages and
> Unless the contracts stipulations are contrary to law, public attorney's fees is left to the sound discretion of the court, and if
order, morals, etc., the contract is binding. (i.e., the contract should such discretion is well exercised, as in this case, it will not be
be valid for it to have legal effect awuwz). disturbed on appeal.
- It is a general principle of law that no one may be permitted to - Attorney's fees and costs of litigation are awarded in instances
change his mind or disavow and go back upon his own acts, or to where "the defendant acted in gross and evident bad faith in refusing
proceed contrary thereto, to the other partys prejudice. to satisfy the plaintiff's plainly valid, just and demandable claim."
- Having delivered possession over the leased property to Liga,
Arguments: Allegro had already performed its obligation under the lease
agreement. Liga should have exercised fairness and good back rentals from the date of extrajudicial demand on 15 December
judgment in dealing with Allegro by religiously paying the P40k 2001 until fully paid.
rate.
> Pwede rin isingit rito iyong reciprocal obligations SOLIDBANK CORPORATION (METROPOLITAN BANK
under Art. 1169: In reciprocal Obligations (opinion ko lang AND TRUST COMPANY) vs PERMANENT HOMES
ito HAHA) INCORPORATED
Facts:
However, interest in favor of Allegro is also awarded, pursuant to the PERMANENT HOMES is a real estate development company.
following guidelines: To finance its housing project, "Buena Vida Townhomes"
II. With regard particularly to an award of interest in the located within Merville Subdivision, Paraaque City, it
concept of actual and compensatory damages, the rate of interest, as applied and was subsequently granted by SOLIDBANK with
well as the accrual thereof, is imposed, as follows: an "Omnibus Line" credit facility in the total amount of
SIXTY MILLION PESOS
1. When the obligation is breached, and it consists in the FIFTY NINE MILLION as [sic] time loan for a term of up
payment of a sum of money, i.e., a loan or forbearance of money, the to three hundred sixty (360) days, with interest thereon at
interest due should be that which may have been stipulated in prevailing market rates, and subject to monthly repricing.
writing. The remaining ONE MILLION was available for domestic
bills purchase.
Furthermore, the interest due shall itself earn legal interest from the To secure the loan, PERMANENT HOMES mortgaged at
time it is judicially demanded. In the absence of stipulation, the rate first three (3) townhouse units within the Buena Vida project
of interest shall be 12% per annum to be computed from default, i.e., in Paraaque.
from judicial or extrajudicial demand under and subject to the
At the time of the complaint 36 townhouse units were
provisions of Article 1169 of the Civil Code.
mortgaged with the bank
Of the 60 million available to PERMANENT HOMES, it
> The back rentals in this case being equivalent to a loan or
availed of a total of 41.5 million pesos, covered by three (3)
forbearance of money, the interest due thereon is twelve percent
promissory notes
(12%) per annum from the time of extrajudicial demand on 15
December 2001. Promissory note authorizes Solidbank to increase or decrease
at any time the interest rate
Petition denied, with the ff. modifications: The adjustment of the interest rate shall be effective from the
- that the award of back rentals for the period of 1 January 2001 to 31 date indicated in the written notice sent to us by the bank, or
August 2001 to Ortigas & Company, Limited Partnership is if no date is indicated, from the time the notice was sent.
DELETED If they disagree with the interest rate adjustment, they shall
- Edsel Liga is ORDERED to pay respondent Allegro Resources prepay the amount due
Corporation legal interest of twelve percent (12%) per annum on the Contrary to the specific provisions as afore-quoted, there
was a standing agreement by the parties that any increase or
 decrease in interest rates shall be subject to the mutual TRIAL COURTS RULING:
agreement of the parties. sufficient proof to show that the instant case was instituted
Records show that there were numerous increase and by [Permanent] as an after-thought and as an obvious
decrease in the interest rate: subterfuge intended to completely lay on the defendant the
1st loan: March 20, 1997 - 19.6 M (14.25% per annum) to blame for the debacle of its Buena Vida project. An
30% p.a. on Jan. 16, 1998 afterthought because the records of the case show that the
2nd loan: 18M June 24, 1997 (15.75% pa) to Feb 20, 1998 complaint was filed in March 16, 1998, already after it was
(30% pa) highest was 34% having difficulty making the amortization payments, the last
of which being in February 1998. A subterfuge because
3rd loan: 3.9M July 15, 1997 (35% pa) to Feb (29%) plaintiff, instead of blaming itself and its own business
judgment that went sour, would rather put the blame on
PERMANENTS STAND: [Solidbank], taking advantage of every conceivable gray area
SOLIDBANK unilaterally and arbitrarily accelerated the of its contract with [Solidbank] to avoid its own liabilities.
interestrates without any declared basis of such increases, of
which PERMANENT HOMES had not agreed to, or at the CAS RULING:
very least, been informed of Reversed TCs ruling;
it was not able to protest such arbitrary increases at the time The appellate court not only recognized the validity of
they were imposed by SOLIDBANK, for fear that escalation clauses, but also underscored the necessity of a
SOLIDBANK might cut off the credit facility basis for the increase in interest rates and of the principle of
Witness Jacqueline Lim, VP and Chief Financial Officer: mutuality of contracts.
repricing of the interest rates was done by SOLIDBANK
without any written agreement entered into between the ISSUES:
parties. 1. WON CA was right in ordering the parties to enter into an express
Evidence of late notices, late billings, etc agreement regarding the applicable interest rate
HELD:
(di ko na inisa isa ung witnesses ha)
Usury Law has been lifted therefore no longer subject to a
SOLIDBANKS STAND: ceiling the lender still does not have an unbridled license to
PERMANENT HOMES has no cause of action against it, in impose increased interest rates. The lender and the borrower
view of the pertinent provisions of the Omnibus Credit Line should agree on the imposed rate, and such imposed rate
and the promissory notes agreed to and signed by should be in writing.
PERMANENT HOMES. The stipulations on interest rate repricing are valid because
SOLIDBANK was authorized to, upon due notice, (1) the parties mutually agreed on said stipulations; (2)
periodically adjust the interest rates on PERMANENT repricing takes effect only upon Solidbank's written notice to
HOMES' loan availments during the monthly interest Permanent of the new interest rate; and (3) Permanent has
repricing dates, depending on the changes in prevailing the option to prepay its loan if Permanent and Solidbank do
interest rates in the local and international capital markets. not agree on the new interest rate.
 In order that obligations arising from contracts may 1. Pursuant to Admin. Order No. 397, the indebtedness of PNCC
have the force of law between the parties, there must be a to various government financial institutions was transferred to
mutuality between the parties based on their essential the National Government through the Committee on
equality. Privatization-Asset Privatization Trust (APT) and the Bureau
A contract containing a condition which makes its of Treasury.
fulfillment dependent exclusively upon the uncontrolled 2. The APT moved for the privatization of PNCC in order to
will of one of the contracting parties is void. 11 There generate maximum cash recovery for the government.
was no showing that either Solidbank or Permanent 3. In July 2000, the APT announce the holding of a public
coerced each other to enter into the loan agreements. bidding on October 30, 2000 of the stocks, receivables, and
The terms of the Omnibus Line Agreement and the securities owned by the National Government in PNCC.
promissory notes were mutually and freely agreed upon 4. Dong-A Consortium, formed by respondent STRADEC and
by the parties Dong-A Pharmaceuticals, signified its intention to bid.
Solidbanks lending rates were consistent with prevailing a. As a prospective bidder, it received the
rates in the local or international capital markets accompanying bid documents given by the APT. It
History time: yung may height ng interest rate, Asian also acknowledged and signed the Asset Specific
financial crises 1997 when banks clamped down on lendings Bidding Rules (ASBR).
because of higher credit risks across industries, particularly 5. Asset Specific Bidding Rules:
the real estate industry. a. 2.2 Due Diligence. The conduct of due diligence is at
Solidbank admitted that it did not promptly send Permanent the option of the prospective bidders. Failure of the
written rates but was advice over the phone. Solidbank bidder to conduct due diligence shall be at his sole
advised Permanent on the repriced interest rate applicable for risk and no relief for error or omission will be given.
the 30-day interest period only after the period had begun. b. 3.1. Bid Price. The Indicative Price for the Shares,
Permanent presented a tabulation which showed that Receivables and the Securities shall be announced on
Solidbank either did not send a billing statement, or sent a the day of the bidding.
billing statement 6 to 33 days late. c. 4. Evaluation of the Bid. (4.1) The winning bidder
Solidbank's computation of the interest due from Permanent shall be the bidder who submits the highest total bid
offer for both the shares and receivables, who
should be adjusted to take effect only upon Permanent's
complies with all terms and conditions contained in
receipt of the written notice from Solidbank.
this ASBR. (4.3) APT reserves the right to reject
Remanded to TC for computation
any or all bids, including the highest bid, or to
PRIVATIZATION and MANAGEMENT OFFICE (PMO) v. waive any defect or required formality therein. (4.4)
STRATEGIC ALLIANCE DEVELOPMENT CORPORATION The evaluation of the bids and award of the sale shall
and/or PHILIPPINE ESTATE CORPORATION be subject to applicable laws, rules and regulations as
G.R. No. 200042, June 13, 2013 well as all existing governmental approval
requirements.
FACTS:
 d. 5.2 Bidders Responsibility. The consequences of 11. On October 2005, STRADEC filed a Complaint for
failure to examine and carefully interpret the bid Declaration of Right to a Notice of Award and/or Damages
documents shall be borne by the bidder and such on behalf of Dong-A Consortium against PMO and PNCC. It
bidder shall not be entitled to relief for its error or contested:
omission. The delivery or release by APT, NG, or 1. The high (!) indicative price that
PNCC to the bidders of any financial or operating caused it to lose the bid.
data or any information regarding the shares and 2. It also push for the reduction of the
receivables shall not give rise to warranty with indicative price.
respect to such data or information. 3. It demanded that the Notice of
6. On October 30, 2000, the APT conducted the public bidding; Award be issued in its favour.
Dong-A Consortium was one of the qualified bidders. On the 12. PMO answered by asserting the provisions of the ASBR, thus:
same date, the APT announce the indicative price of the a. The government has reserved the right to reject bid
PNCC properties amounting to P7 billion. offer, including the highest bid.
7. The bidders were shocked with the valuation. Relying on their Thus STRADEC has no legal right to demand the issuance of
own due diligence examinations, they protested that the a Notice of Award even after hacing submitted the highest
indicative price was too high, considering the financial bid.
statements and bid documents given by APT. 13. During the pretrial, the parties entered into several
Notwhitstanding their protests, APT continued with the stipulations. Significantly, they agreed that to be issued the
bidding and opened the bid envelopes. Notice of Award, the winning bidder must satisfy and
a. To detail: The Bid Price of Dong-A Consortium was comply with all of the ASBRs terms and conditions,
P1,228,888,800; lower by 82.44% in relation to the including the indicative price. They also stipulated that
P7 billion Indicative Price of the properties of PNCC. Dong-A Consortium had extensively conducted due
b. The bid Price of Pacific Infra. Devt. Int. Was diligence prior to the bid. Subsequently, its auditor informed
P536,888,888; lower by 92.33% the court that PNCC had been operating at a loss and that it
c. The bid Price of Phil. Exporters Confed. Was puzzled them why APT never gave the basis of the indicative
P420,000,000; lower by 94% price, especially in the light of the finances of PNCC. (If a
8. APT then faxed a letter to Dong-A Consortium informing the company is operating at a loss and wants to be sold to
latter that its offer had been rejected. another, its value is necessarily low than when its not; thus,
9. Dong-A Consortium responded and stressed to APT that the the STRADEC was questioning the high sale price offered to
formers offer was not only the highest, but was also them).
competitive and most advantageous to the government. 14. RTC ruling: it ruled that the PMO committed grave abuse of
10. On Dec. 31, 2000, the term of the APT expired. The PMO was discretion in refusing to explain the basis of the indicative
thereafter organized to continue the privatization of the price. It explained that the competitive public bidding is
PNCC. The PMO communicated to Dong-A Consortium that vested with public interest therefore the government has an
the decision to reject its bid stood. affirmative duty to disclose its reasons for rejecting a bid.
It concluded that the refusal to explain of the PMO
 amounted to a violation of the publics right to information assuming that Dong-A Consortium may access the records for
and the States policy of full transparency in transaction the purpose of validating the indicative price under the right
involving public interest. to information, it does not follow that respondent is entitled
a. The RTC directed the issuance of the Notice of to the award.
Award in favour of Dong-A Consortium on the basis 2. The submission of the highest bid and the conduct of due
that (1) it has offered the highest bid; (2) the offer was diligence do not justify an award to Dong-A Consortium: The
threefold higher than the next bid, hence SC explained that the offer of the highest bid and the conduct
advantageous to the government; and (3) it conducted of due diligence as the main factors to a Notice of Award are
an extensive due diligence examination based on the irrelevant matters.
bid documents furnished by APT.
15. PMO and PNCC appealed before the CA. They argued (1) that Obligations arising from agreements have the force of law
the factors mentioned by the RTC were immaterial and that between the contracting parties and should be complied with
none of them could justify the latters directive to issue a in good faith. Here, the ASBR sets forth the terms and
Notice of Award in favour of Dong-A Consortium; (2) that conditions under which an award will be given. During the
they have no legal obligation to disclose the basis of the pretrial, both parties agreed that a bidder wins only after
indicative price; and (3) that the public bidding was satisfying and complying with all the terms and conditions of
transparent, regular, and conducted in accordance with the the ASBR, including matching the indicative price. Since
ASBR. Dong-A Consortium failed to match the indicative price, it
16. CA: The Court of Appeals ruled against the PMO and the could not have been considered a winner, and, is not entitled
PNCC; it went to state that they must reveal the basis of the to a Notice of Award.
indicative price. The PMO and PNCC moved for
reconsideration. Even in the spirit of open market competition in public
17. While their motion was still pending in the CA, they biddings, there is no imposition on the government to sell at
proceeded directly to the Supreme Court via Rule 45 Petition. prices that are equal, higher, or lower compared with those
commanded by the market (thus, government may control and
ISSUE: Whether the PMO can be compelled to award Dong-A regulate the market; fucking twat capitalists!). We cannot
Consortium the PNCC assets that it values at P7 billion pesos for only fault APT for deciding to sell the PNCC assets for P7 billion,
P1,228,888,800? even if we put into the equation the fact that the acquired
HELD: No. The Supreme Court granted the Petition. The SC corporation has been operating at a loss as testified to by the
explained as follows: financial auditor of Dong-A Consortium.
1. The peoples right to information does not warrant the award
of the bid: the right to information allows the public to hold To substitute the valuation of Dong-A Consortium for that of
public officials accountable to the people and aids them in APT is to unduly interfere with the judgement of a
engaging in public discussions leading to the formulation of government agency tasked to liquidate nonperforming assets
government policies and their effective implementation. By of the government. APT and PMO are mandated to determine
itself, it does not extend to causing the award of the sale of the most advantageous prices that will improve the financial
government assets in failed public biddings. Thus,
 situation of the government. Given that discretion, they b. The balance of P13 Million shall be paid,
cannot be directed by the courts to do a particular act or be whether in one lump sum or in installments,
enjoined from doing an act within their prerogatives. at the discretion of the Foundation, within a
period of not more than two (2) years from
PETITION GRANTED. the execution of this agreement; provided,
ON THE RIGHT TO REJECT BIDS however, that in the event that the Foundation
[the] right to reject bids signifies that the participants of the bidding does not pay the whole or any part of such
process cannot compel the party who called for bids to accept the bid balance, the same shall be paid with the
or execute a deed of sale in the formers favour. corresponding portion of the land or real
ON DUE DILIGENCE OF THE BIDDER properties subject of the aforesaid cases and
Whether or not the bidder conducts due diligence is its business previously covered by the notices of lis
decision. It does not bind the government to give Dong-A Consortium pendens, under such terms and conditions as
the award. to area, valuation, and location mutually
ON FREEDOM TO CONTRACT acceptable to both parties; but in no case
The freedom of persons to enter into contracts is a policy of the law, shall the payment of such balance be later
and courts should move with all necessary caution and prudence when than two (2) years from the date of this
interfering with it. agreement; otherwise, payment of any unpaid
portion shall only be in the form of land
ART 1169 and 1170 aforesaid;
Santos Ventura Hocorma Foundation v Ernesto Santos
Facts: 2. Immediately upon the execution of this agreement, plaintiff
Ernesto V. Santos and Santos Ventura Hocorma Foundation, Santos shall cause the dismissal with prejudice of Civil Cases
Inc. (SVHFI) were the plaintiff and defendant, respectively, Nos. 88-743, 1413OR, TC-1024, 45366 and 18166 and voluntarily
in several civil cases filed in different courts in the withdraw the appeals in Civil Cases Nos. 4968 (C.A.-G.R. No.
Philippines. 26598) and 88-45366 (C.A.-G.R. No. 24304) respectively and for
On October 26, 1990, the parties executed a Compromise the immediate lifting of the aforesaid various notices of lis
Agreement which amicably ended all their pending pendens on the real properties aforementioned (by signing herein
litigations. attached corresponding documents, for such lifting); provided,
however, that in the event that defendant Foundation shall sell or
The pertinent portions of the Agreement read as follows: dispose of any of the lands previously subject of lis pendens, the
proceeds of any such sale, or any part thereof as may be required,
1. Defendant Foundation shall pay Plaintiff Santos P14.5 Million in shall be partially devoted to the payment of the Foundations
the following manner: obligations under this agreement as may still be subsisting and
payable at the time of any such sale or sales;
a. P1.5 Million immediately upon the execution
of this agreement; ...
5. Failure of compliance of any of the foregoing terms and Trial court dismissed the case filed by Santos and Riverland
conditions by either or both parties to this agreement shall ipso facto but the CA reversed the decision. Hence, this petition
and ipso jure automatically entitle the aggrieved party to a writ of Petitioner alleges that since the compromise agreement did
execution for the enforcement of this agreement. not provide for a period within which the obligation will
become due and demandable, it is incumbent upon
In compliance with the Compromise Agreement, respondent respondent Santos to ask for judicial intervention for
Santos moved for the dismissal of the aforesaid civil cases. purposes of fixing the period. It is only when a fixed period
For its part, petitioner SVHFI, paid P1.5 million to exists that the legal interests can be computed.
respondent Santos, leaving a balance of P13 million. Respondents profer that their right to damages is based on
Subsequently, petitioner SVHFI sold to Development delay in the payment of the obligation provided in the
Exchange Livelihood Corporation two real properties, which Compromise Agreement. The Compromise Agreement
were previously subjects of lis pendens. Discovering the provides that payment must be made within the two-year
disposition made by the petitioner, respondent Santos sent a period from its execution. This was approved by the trial
letter to the petitioner demanding the payment of the court and became the law governing their contract.
remaining P13 million, which was ignored by the latter. Respondents posit that petitioners failure to comply entitles
On September 30, 1991, RTC Makati approved the them to damages, by way of interest
compromise agreement.
On October 28, 1992, respondent Santos sent another letter Issue: WON respondents are entitled to legal interest
to petitioner inquiring when it would pay the balance of P13
million. There was no response from petitioner. Held: YES
Consequently, respondent Santos applied with the RTC
Makati for the issuance of a writ of execution of its A compromise is a contract whereby the parties, by making
compromise judgment dated September 30, 1991. The RTC reciprocal concessions, avoid a litigation or put an end to one
granted the writ. Thus, on March 10, 1993, the Sheriff levied already commenced|||
on the real properties of petitioner, which were formerly In the case at bar, the Compromise Agreement was entered
subjects of the lis pendens. Petitioner, however, filed into by the parties on October 26, 1990. It was judicially
numerous motions to block the enforcement of the said writ. approved on September 30, 1991. Applying existing
On November 1994 and February 1995, petitioners real jurisprudence, the compromise agreement as a consensual
properties located in Mabalacat, Pampanga and Bacolod City contract became binding between the parties upon its
were auctioned. In the said auctions, Riverland, Inc. was the execution and not upon its court approval. From the time a
highest bidder compromise is validly entered into, it becomes the source of
On June 2, 1995, Santos and Riverland Inc. filed a the rights and obligations of the parties thereto.
Complaint for Declaratory Relief and Damages alleging As to the remaining P13 million, the terms and conditions of
that there was delay on the part of petitioner in paying the the compromise agreement are clear and unambiguous. It
balance of P13 million. provides that the balance shall be paid, whether in one lump
sum or in installments, at the discretion of the Foundation,
 within a period of not more than two (2) years from the 3rd requisite: the demand letter sent to the petitioner on
execution of this agreement. October 28, 1992, was in accordance with an extra-judicial
The two-year period must be counted from October 26, demand contemplated by law
1990, the date of execution of the compromise agreement, Verily, the petitioner is liable for damages for the delay in
and not on the judicial approval of the compromise the performance of its obligation. This is provided for in
agreement on September 30, 1991. When respondents wrote Article 1170 of the New Civil Code.
a demand letter to petitioner on October 28, 1992, the Petition denied
obligation was already due and demandable. When the
petitioner failed to pay its due obligation after the demand
was made, it incurred delay. BARZAGA vs CA G.R. No. 115129
Article 1169 of the New Civil Code provides: Those obliged
to deliver or to do something incur in delay from the time the Facts:
obligee judicially or extrajudicially demands from them the
fulfillment of their obligation Ignacio Barzagas wife died 19 December 1990;
In order for the debtor to be in default, it is necessary that the
her dying wish being that she be interred before
following requisites be present: (1) that the obligation be
demandable and already liquidated; (2) that the debtor delays Christmas.
performance; and (3) that the creditor requires the
performance judicially or extrajudicially. Barzaga arranged for the interment be on 24
1st requisite: In the case at bar, the obligation was already December 1990 accordingly. On 21 December 1990,
due and demandable after the lapse of the two-year period
Barzaga went to the hardware store of Angelito Aviar to
from the execution of the contract. The two-year period
inquire about the availability of the construction materials
ended on October 26, 1992. When the respondents gave a
for his wifes niche and whether or not such could be
demand letter on October 28, 1992, to the petitioner, the
delivered at once. Marina Boncales, Alviar's storekeeper,
obligation was already due and demandable. Furthermore,
was unable to give a definite answer for she had yet to verify
the obligation is liquidated because the debtor knows
if the store had pending deliveries that afternoon. If there are
precisely how much he is to pay and when he is to pay it.
pending deliveries, the order would be delivered the
2nd requisite: Petitioner delayed in the performance. It was
able to fully settle its outstanding balance only on February following day. With that reply, Ignacio left.
8, 1995, which is more than two years after the extra-judicial
demand. Moreover, it filed several motions and elevated 7AM 22 December 1990, Barzaga returned to
adverse resolutions to the appellate court to hinder the Alviars hardware store in order to follow up on his
execution of a final and executor judgment, and further delay purchase. He told the store employees that the materials need
the fulfillment of its obligation to be delivered at 8AM. Marina Boncales agreed to deliver
the items at the designated time, date and place. With this
assurance, Barzaga purchased the materials and paid in full
the amount of P2,110.00 suffered. Alviar did not respond. Consequently, Barzaga
sued him before the RTC.
The materials did not arrive at 8AM. 9AM,
Barzaga went back to the hardware store to inquire about the The RTC ruled in favor of Barzaga. However, on
delay. Boncales assured him that the materials will arrive in appeal, the CA reversed the decision. Issue:
no time and that he should just return to the cemetery and
wait for the delivery. Barzaga went back to the cemetery.
W/N respondent Alviar was negligent with regard
10AM, still without the delivery, Barzaga went back to the
to the delay in the performance of his contractual obligation,
hardware store only to be told the same thing he was told
thus entitling Barzaga to indemnity for the damage he
earlier.
suffered as a consequence. Held:
After hours of waiting, Barzaga became
Yes. The law expressly provides that those who in
extremely upset. He dismissed the laborers for the day then
proceeded to the police station to file a complaint against the performance of their obligation are guilty of fraud,
Alviar. negligence, or delay and those who in any manner
contravene the tenor thereof, are liable for damages (Art.
Barzaga returned again to the store. The delivery 1170, Civil Code).
truck was already there but the materials he purchased
Contrary to the CAs factual determination, there
were not yet ready for loading. Distressed by the employees
was a specific time agreed upon for the delivery of the
apparent lack of concern, Barzaga decided to cancel his materials to the cemetery. Barzaga went to Alviars store on
transaction. 21 December precisely to inquire if the materials he intended
to purchase could be delivered immediately. But he was told
by the storekeeper that if there were still deliveries to be
Barzaga was able to buy from another store. But
made that afternoon his order would be delivered the
since it was already late and his workers had left, he decided
following day. With this in mind, Barzaga decided to buy the
to continue the project the following morning, 23 December
construction materials the following morning after he was
1990. Since the workers had to take a break on Christmas
assured of immediate delivery according to his time frame.
Day, the project was paused. The project resumed morning

of 26 December 1990 and was finished during the
afternoon. It was then that Barzagas wife was finally laid to
Boncales testified that the delivery truck arrived a
rest. little late than usual because it came from a delivery of
materials in Langcaan, Dasmarias, Cavite. Significantly, this
21 January 1991, Ignacio wrote private information was withheld by Boncales. Consequently, it is
respondent Alviar demanding recompense for the damage he not unreasonable to suppose that had she told petitioner of
this fact and that the delivery of the materials would when the court finds that some pecuniary loss has been
consequently be delayed, petitioner would not have bought suffered but the amount cannot, from the nature of the case,
the materials from respondent's hardware store but elsewhere be proved with certainty. In this case, the trial court found
which could meet his time requirement. The deliberate that plaintiff suffered damages in the form of wages for the
suppression of this information by itself manifests a certain hired workers for 22 December 1990 and expenses incurred
degree of bad faith on the part of respondent's storekeeper. during the extra two (2) days of the wake.

Malayan Insurance vs CA
Under the prevailing circumstances time was of
the essence in the delivery of the materials to the grave site. Parties: MALAYAN INSURANCE CO., INC., petitioner-appellant,
and
THE HONORABLE COURT OF APPEALS and AURELIO
This case is clearly one of non-performance of a LACSON, respondents-appellees.
reciprocal obligation. In their contract of purchase and sale,
petitioner had already complied fully with what was required Facts:
of him as purchaser, i.e., the payment of the purchase price Aurelio Lacson is the owner of a Toyota NP Land Cruiser,
of P2,110.00. It was incumbent upon respondent to Model 1972, bearing Plate No. NY-362 and with engine
immediately fulfill his obligation to deliver the goods Number F-374325.
Said vehicle was insured with Malayan Insurance Co. under
otherwise delay would attach.
"private car comprehensive" policy No. BIFC/PV-0767 for a
one-year period, from Dec. 3, 1974 to Dec. 3, 1975.
Moral damages awarded. Barzaga and his family On Dec. 1, 1975 Lacson caused the delivery of subject
suffered wounded feelings, mental anguish and serious vehicle to the shop of Carlos Jamelo for repair.
anxiety while keeping watch on Christmas day over the On Dec. 2, 1975 while the vehicle was in Carlos Jamelo's
remains of their loved one who could not be laid to rest on shop, a certain Rogelio Mahinay, together with his other co-
the date she herself had chosen. employees in the shop, namely Johnny Mahinay, Rogelio
Macapagong and Rogelio Francisco took and drove the
Exemplary damages granted. The lackadaisical Toyota Land Cruiser, as a result of which it met with an
and feckless attitude of the employees of respondent over accident at Bo. Taculing Bacolod City, causing damage
which he exercised supervisory authority indicates gross thereto, in an estimated amount of P21,849.62.
negligence in the fulfillment of his business obligations. Shop-owner Carlos Jamelo reported the incident to the
police and later on instituted a criminal case for Qualified
Theft against his employees who had taken plaintiff's
Award of temperate damages deleted. Under Art. vehicle.
2224 of the Civil Code, temperate damages are more than Lacson sought indemnification under his insurance policy
nominal but less than compensatory, and may be recovered from Malayan Insurance but the latter refused to pay on the
 ground that the claim is not covered by the policy nung nakawin nung mga tauhan ni Manong Carlos yung
inasmuch as the driver of the insured vehicle at the time of sasakyan. Sa kalokohan nila naaksidente yung sasakyan.
the accident was not a duly licensed driver. Nagsampa ng kaso si Manong Carlos against sa mga tauhan
Consequently, Lacson filed a civil case for damages before niya. Si Aurelio Lacson naman nagrequest sa Malayan na
the CFI of Negros Occidental. makuha niya yung insurance policy niya para sa car niya.
Malayan Insurance answered by raising among other things Pero sabi ng Malayan hindi naman daw covered yung
as affirmative and special defenses that plaintiff has no cause nangyari para makuha niya yung insurance. Nagsampa si
of action, claim is not covered by the insurance policy, Aurelio ng civil case for damages against Malayan.
and non-joinder of indispensable party. Pinaburan si Aurelio ng Trial Court at CA. Kaya takbo si
The trial court ruled in favor of Lacson, and the Court of Malayan sa SC.
appeals affirmed the said decision and denied the motion for
reconsideration filed by Malayan Insurance. Issue: Whether or not Malayan should be liable for damages
Hence, this appeal before the SC.
Malayan Insurances Contentions: Held:
1. the respondent Court of Appeals erred in holding that YES. Malayan should be liable for damages.
conviction of theft is not necessary for claim to be First point of the SC is meron talagang theft sa situation na
compensable under the "theft" coverage of the insurance ito. Citing this:
policy, which ruling establishes a bad and dangerous The fact that one of the accused persons in the criminal case
precedent to the detriment and prejudice of insurance (filed against those who took the jeep from the repair shop)
industry. (Ito yung pinakarelevant sa OBLICON) pleaded guilty to the charge of having unlawfully taken the
2. the respondent Court of Appeals erred in holding insured vehicle did away with the necessity of a final
petitioner liable for actual damage of the vehicle without disposition of the criminal case in order for plaintiff to
sufficient and come tent evidentiary basis. recover under his insurance policy. At any rate, accused
3. the respondent Court of Appeals erred in holding Rogelio Mahinay was convicted of Theft after he pleaded
petitioner liable to private respondent Aurelio Lacson in guilty to the charge.
disregard of the real party in interest BIFC in violation of the There is no question that the vehicle of private respondent
principle embodied in the Rules of Court, that every action was damaged because the unlawful taker, accused Rogelio
must be prosecuted in the name of the real party in interest. Mahinay, drove it and met with a vehicular accident. The
4. the respondent Court of Appeals erred in holding damages therefore were sustained in the course of the
petitioner liable for interest from firing of the complaint and unlawful taking.
not from the date of decision or its finality, also in disregard Therefore, the fact remains that plaintiff's claim is
of established doctrines laid down by the Honorable substantiated by competent evidence.
Supreme Court. Likewise in the very insurance policy (Exh. "A") covering
Summary of Facts: Yung car ni Lacson ininsure niya sa the damaged vehicle, petitioner's liability is fixed at P20,000
Malayan Insurance Co. One day, pinarepair niya yung less deductible franchise of P800.00. As borne out by the
sasakyan sa shop ni Manong Carlos Jamelo. Nagkaproblema evidence, private respondent before instituting the present
 action against petitioner wrote a letter of demand (Exh. "H") Geraldez was not satisfied with the tour when it turned out
to petitioner for the payment of his claim in the amount of that contrary to what was stated in the brochure, there was no
P21,849.62 as estimated by Fidelity Motor Company. This European tour manager for their group of tourists, the hotels
notwithstanding, petitioner failed and refused to pay in which she and the group were billeted were not first-class,
respondent's claim prompting the latter to file the present the UGC Leather Factory which was specifically added as a
action in court. highlight of the tour was not visited, and the Filipino lady tour
Lacson has sufficiently established his demand for the award guide (Rowena Zapanta) by private respondent was a first
of damages plus interest as sanctioned under Arts. 1169, timer.
1170 and 2209 of the Civil Code. The slogan of the package was Let your heart sing.
Thus, a debtor who is in delay (default) is liable for Geraldez moved for the issuance of a writ of preliminary
damages (Art. 1170) generally from extrajudicial or attachment against private respondent on the ground that it
judicial demand (Art. 1169) in the form of interest. committed fraud in contracting an obligation. But Kenstar
Summary ng Ruling: Sabi ng SC naprove naman na may filed a counterbond amounting to Php 990,000.
theft talaga na naganap at dahil dun nagkadamage yung RTC rendered a decision to pay petitioner P500.000.00 as
sasakyan. Under sa stipulations ng insurance policy, valid moral damages, P200,000.00 as nominal damages,
naman yung claim ni Lacson na iavail yung insurance policy P300,000.00 as exemplary damages, P50,000.00 as and for
niya sa Malayan para mapaayos yung car niya. Dahil sa attorney's fees, and the costs of the suit. But on appeal, CA
pagtanggi ng Malayan na ibigay agad yung nararapat kay deleted the award for moral and exemplary damages, and
Aurelio Lacson, nagkaroon ng delay sa pagfulfill niya ng reduced the awards for nominal damages and attorney's fees
obligation niya kay Aurelio. Therefore, nagfafall sa Art. to P30,000.00 and P10,000.00.
1170 yung situation nila. At dahil sa ginawa ng Malayan na CA also ruled that there was no malice or bad faith, hence no
pagdelay ng obligation niya magbabayad siya ngayon ng justification for moral and exemplary damages.
damages. The claims of the petitioner were substantiated by 2 other
members of the tour group who served as prosecution
ARTICLE 1159 (Obligations arising from contract) witnesses Luz Sui Haw and Ercilla Ampil.

Geraldez v. CA and Kenstar Travel Corporation

ISSUE: WON the private respondent acted with bad faith or with gross
FACTS: negligence in discharging its obligation under the contract
Petitioner Lydia Geraldez availed of a travel package from
private respondent Kenstar Travel Corp. HELD
Kenstar representative Alberto Vito Cruz gave her the Yes, Kenstar committed fraudulent misrepresentations
brochure regarding tour packages in Europe. She chose amounting to bad faith.
Volare 3 package covering 22-day tour for $2,990 Their slogan and brochure were untrue as to what they
(approximately Php 190,000) petitioner and other travellers had experienced.
 Kenstar should have selected an experienced European tour o referred to in Article 1338, are those deceptions
guide. Zapanta clearly showed manifest disregard of the or misrepresentations of a serious character
specific assurance to the tour group by failing to address their employed by one party and without which the
needs. It is contrary to elementary rules of good faith and fair other party would not have entered into the
play contract
UGC Leather Factory was said to be one of the highlights of o essential cause of the consent
the tour but when they went there, it was already closed. o effect - nullity of the contract and the
There was no European tour manager, contrary to their indemnification of damages
brochure that there will be 2 tour guides, Filipino and Dolo Incidental
European. Defense claims that the European tour manager is o referred to in Article 1344, are those which are
an organization named Kouni Travel of Switzerland. But the not serious in character and without which the
contract says he instead of it other party would still have entered into the
The hotels were not properly equipped and are far from the contract
city. Unlike in their brochure which says first class hotel. o refers only to some particular or accident of the
There should be award for moral and exemplary damages. obligations
Moral damages are for breaches of contract when the obligor o effect - obliges the person employing it to pay
acted in bad faith. Exemplary damages by way of example or damages
correction for the public good, in addition to moral, temperate, Contract of Adhesion
liquidated or compensatory damages. Petitioner has o the only participation of the party is the affixing
experienced serious anxiety and distress for all the of his signature or his "adhesion" thereto
disappointment and misrepresentations presented by the o when a party imposes upon another a ready-made
brochure compared to what they actually experienced. form of contract and the other is reduced to the
CA decision is set aside. alternative of taking it or leaving it, giving no
Kenstar Travel Corporation to pay petitioner Lydia L. room for negotiation and depriving the latter of
Geraldez the sums of P100,000.00 by way of moral damages, the opportunity to bargain on equal footing
P50,000.00 as exemplary damages, and P20,000.00 as and for o construed strictly against the one who drafted the
attorney's fees, with costs against private respondent. The same
award for nominal damages is deleted.

OTHER CONCEPTS:
Res inter alios acta - a thing done between others does
not harm or benefit others; a contract cannot adversely
affect the rights of one who is not a party to the contract.
Dolo Causante