SSS VS.
MOONWALK DEVELOPMENT AND HOUSING CORPORATION executed 2 real estate mortgages and 2 chattel mortgages in favor of
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 Moonwalk’s 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. Moonwalk’s
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. e 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.
RCBC VS. CA
FACTS:
RCBC Binondo Branch initially granted a credit facility of P30M to Goyu &
Sons, Inc. GOYU’s applied again and through Binondo Branch key officer's
Uy’s and Lao’s recommendation, RCBC’s executive committee increased its
credit facility to P50M to P90M and finally to P117M. As security, GOYU
RCBC. GOYU obtained in its name 10 insurance policy on the mortgaged
properties from Malayan Insurance Company, Inc. (MICO). In February
1992, he was issued 8 insurance policies in favor of RCBC. April 27, 1992:
One of GOYU’s factory buildings was burned so he claimed against MICO
for the loss who denied contending that the insurance policies were
either attached pursuant to writs of attachments/garnishments or that
creditors are claiming to have a better right. GOYU filed a complaint for
specific performance and damages at the RTC RCBC, one of GOYU’s
creditors, also filed with MICO its formal claim over the proceeds of the
insurance policies, but said claims were also denied for the same reasons
that MICO denied GOYU’s claims. RTC: Confirmed GOYU’s other creditors
(Urban Bank, Alfredo Sebastian, and Philippine Trust Company) obtained
their writs of attachment covering an aggregate amount of P14,938,080.23
and ordered that 10 insurance policies be deposited with the court minus the
said amount so MICO deposited P50,505,594.60. Another Garnishment
of P8,696,838.75 was handed down RTC: favored GOYU against MICO for
the claim, RCBC for damages and to pay RCBC its loan CA: Modified by
increasing the damages in favor of GOYU In G.R. No. 128834, RCBC seeks
right to intervene in the action between Alfredo C. Sebastian (the creditor)
and GOYU (the debtor), where the subject insurance policies were attached
in favor of Sebastian RTC and CA: endorsements do not bear the signature
of any officer of GOYU concluded that the endorsements favoring RCBC as
defective.
ISSUE:
W/N RCBC as mortgagee, has any right over the insurance policies taken by
GOYU, the mortgagor, in case of the occurrence of loss
HELD:
YES. mortgagor and a mortgagee have separate and distinct insurable
interests in the same mortgaged property, such that each one of them may
insure the same property for his own sole benefit although it appears that
GOYU obtained the subject insurance policies naming itself as the sole
payee, the intentions of the parties as shown by their contemporaneous
acts, must be given due consideration in order to better serve the interest of
justice and equity 8 endorsement documents were prepared by Alchester in
favor of RCBC MICO, a sister company of RCBC GOYU continued to enjoy
the benefits of the credit facilities extended to it by RCBC. GOYU is at the
very least estopped from assailing their operative effects. The two courts
below erred in failing to see that the promissory notes which they ruled
should be excluded for bearing dates which are after that of the fire, are
mere renewals of previous ones RCBC has the right to claim the insurance
proceeds, in substitution of the property lost in the fire. Having assigned its
rights, GOYU lost its standing as the beneficiary of the said insurance
policies insurance company to be held liable for unreasonably delaying and
withholding payment of insurance proceeds, the delay must be wanton,
oppressive, or malevolent - not shown Sebastian’s right as attaching creditor
must yield to the preferential rights of RCBC over the Malayan insurance
policies as first mortgagee.
BARZAGA VS. CA
Facts:
The petitioner’s wife was suffering from a debilitating ailment and with
forewarning of her impending death, she expressed her wish to be laid to
rest before Christmas day to spare her family of the long vigils as it was
almost Christmas. After his wife passed away, petitioner bought materials
from herein private respondents for the construction of her niche. Private
respondents however failed to deliver on agreed time and date despite
repeated follow-ups. The niche was completed in the afternoon of the 27th of
December, and Barzaga's wife was finally laid to rest. However, it was two-
and-a-half (2-1/2) days behind schedule.
Issue: Was there delay in the performance of the private respondent's
obligation?
Ruling: Yes. Since the respondent was negligent and incurred delay in the
performance of his contractual obligations, the petitioner is entitled to be
indemnified for the damage he suffered as a consequence of the delay or
contractual breach. There was a specific time agreed upon for the delivery of
the materials to the cemetery.
This is clearly a case of non-performance of a reciprocal obligation, as in the
contract of purchase and sale, the petitioner had already done his part,
which is the payment of the price. It was incumbent upon respondent to
immediately fulfill his obligation to deliver the goods otherwise delay would
attach. An award of moral damages is incumbent in this case as the
petitioner has suffered so much.
PANTALEON VS. AMERICAN EXPRESS
FACTS:
After the Amsterdam incident that happened involving the delay of American
Express Card to approve his credit card purchases worth US$13,826.00 at
the Coster store, Pantaleon commenced a complaint for moral and
exemplary damages before the RTC against American Express. He said that
he and his family experienced inconvenience and humiliation due to the
delays in credit authorization. RTC rendered a decision in favor of
Pantaleon. CA reversed the award of damages in favor of Pantaleon,
holding that AmEx had not breached its obligations to Pantaleon, as the
purchase at Coster deviated from Pantaleon's established charge purchase
pattern.
ISSUE:
1. Whether or not AmEx had committed a breach of its obligations to
Pantaleon.
2. Whether or not AmEx is liable for damages.
RULING:
1. Yes. The popular notion that credit card purchases are approved “within
seconds,” there really is no strict, legally determinative point of demarcation
on how long must it take for a credit card company to approve or disapprove
a customer’s purchase, much less one specifically contracted upon by the
parties. One hour appears to be patently unreasonable length of time to
approve or disapprove a credit card purchase.
The culpable failure of AmEx herein is not the failure to timely approve
petitioner’s purchase, but the more elemental failure to timely act on the
same, whether favorably or unfavorably. Even assuming that AmEx’s credit
authorizers did not have sufficient basis on hand to make a judgment, we
see no reason why it could not have promptly informed Pantaleon the
reason for the delay, and duly advised him that resolving the same could
take some time.
2. Yes. The reason why Pantaleon is entitled to damages is not simply
because AmEx incurred delay, but because the delay, for which culpability
lies under Article 1170, led to the particular injuries under Article 2217 of the
Civil Code for which moral damages are remunerative. The somewhat
unusual attending circumstances to the purchase at Coster – that there was
a deadline for the completion of that purchase by petitioner before any delay
would redound to the injury of his several traveling companions – gave rise
to the moral shock, mental anguish, serious anxiety, wounded feelings and
social humiliation sustained by Pantaleon, as concluded by the RTC.
LORENZO SHIPPING VS. BJ MARTHEL
FACTS: Petitioner Lorenzo Shipping is engaged in coastwise shipping and
owns the cargo M/V Dadiangas Express. BJ Marthel is engaged in trading,
marketing an dselling various industrial commodities. Lorenzo Shipping
ordered for the second time cylinder lines from the respondent stating the
term of payment to be 25% upon delivery, the balance payable in 5 bi-
monthly equal installments, no again stating the date of the cylinder’s
delivery. It was allegedly paid through post dated checks but the same was
dishonored due to insufficiency of funds. Despite due demands by the
respondent, petitioner falied contending that time was of the essence in the
delivery of the cylinders and that there was a delay since the respondent
committed said items “ within two months after receipt of fir order”. RTC held
respondents bound to the quotation with respect to the term of payment,
which was reversed by the Court of appeals ordering appellee to pay
appellant P954,000 plus interest. There was no delay since there was no
demand.
ISSUE: Whether or not respondent incurred delay in performing its
obligation under the contract of sale
RULING: By accepting the cylinders when they were delivered to the
warehouse, petitioner waived the claimed delay in the delivery of said items.
Supreme Court geld that time was not of the essence. There having been no
failure on the part of the respondent to perform its obligations, the power to
rescind the contract is unavailing to the petitioner.
Petition is denied. Court of appeals decision is affirmed.
Solar Harvest, Inc. Vs. Davao Corrugated Carton Corporation GR No.
176858, July 26, 2010
FACTS: In the 1st Quarter of 1998, Solar Harvest and Davao Corrugated
entered into an unwritten agreement. Solar Harvest placed orders for
customized boxes for its business of exporting bananas at USD 1.10 each.
Petitioner made a full payment of USD 40,150.00. By Jan. 3, 2001 petitioner
had not received any of the ordered boxes. On Feb. 19, 2001 Davao
Corrugated replied that as early as April 3, 1998, order/boxes are completed
and Solar Harvest failed to pick them up from their warehouse within 30
days from completion as agreed upon. Respondent mentioned that petitioner
even placed additional order of 24,000.00 boxes, out of which, 14,000 had
already been manufactured without any advance payment from Solar
Harvest. Davao Corrugated then demanded that Solar Harvest remove
boxes from their warehouse, pay balance of USD 15,400.00 for the
additional boxes and P132,000 as storage fee. On August 17, 2001 Solar
harvest filed complaint against Davao Corrugated for sum of money and
damages claiming that the agreement was for the delivery of the boxes,
which Davao Corrugated did not do. They further alleged that whenever
repeated follow-up was made to Davao Corrugated, they would only see
sample boxes and get promise of delivery. Due to Davao Corrugated􏰀s
failure to deliver, Solar Harvest had to cancel the order and demanded
payment and/or refund which Davao Corrugated refused to pay. Davao
Corrugated counterclaimed that they had already completed production of
the 36,500 boxes plus an additional 14,000 boxes (which was part of the
additional 24,000 order that is unpaid). The agreement was for Solar Harvest
to pick up the boxes, which they did not do. They even averred that on Oct.
8, 1998 Solar Harvest􏰀s representative Bobby Que even went to the
warehouse to inspect and saw that indeed boxes were ready for pick up. On
Feb. 20, 1999, Que visited the factory again and said that they ought to sell
the boxes to recoup some of the costs of the 14,000 additional orders
because their transaction to ship the bananas did not materialize. Solar
Harvest denies that they made the additional order. On March 20, 2004 the
RTC ruled in favor of Davao Corrugated.
ISSUE: Whether or not Davao Corrugated was responsible for breach of
contract as Solar Harvest had not yet demanded from it the delivery of the
boxes?
HELD: NO. The CA held that it was unthinkable that for around 2 years
petitioner merely followed up and did not demand the delivery of the boxes.
Even assuming that the agreement is for delivery by Davao Corrugated,
respondent would not be liable for breach of contract as petitioner had not
yet demanded from it the delivery of the boxes. There is no error in the
decision of the RTC. Furthermore, the claim for reimbursement is actually
one for rescission or resolution of contract under Article 1191 of the Civ.
Code. The right to rescind contracts arises once the party defaults in the
performance of his obligation. Article 1191 should be taken in conjunction
with Article 1169: Those obliged to deliver or to do something in delay from
the time the obligee judicially or extrajudicially demands form them the
fulfilment of their obligation. However the demand from creditor shall not be
necessary in order that delay may exist.:
1. When the obligation or the law expressly so declares, or 

2. When from the nature and the circumstance of the obligation it
appears that the designation of the time 
 when the thing is to be
 delivered or the service is to be rendered was a controlling motive
for the 
 establishment of the contract; OR 
 overbooking of flight as it is within 10% tolerance.
3. When the demand would be useless, as when the obligor has
rendered it beyond his power to perform. 
 P5,000.00. Moral damages (Art.2220, NCC) and attorney’s fees were set
In reciprocal obligations, the general rule is that the fulfilment of the
parties􏰀s respective obligations should be simultaneous. No demand is
necessary because once a party fulfills his obligation and the other party
fails to do his, the latter automatically incurs delay. When dates are set, the
default for each obligation is determined by the rules given in the 1st
paragraph of the article. Thus even in reciprocal obligations, if the period for
the fulfilment of the obligation is fixed, demand from the obligee is still
necessary before the obligor can be considered in default and before a
cause of action for rescission will accrue. In the case of Solar Harvest,
merely following up the order was not the same as demanding for the boxes.
The SC held that Solar Harvests petition is denied and that Davao
Corrugated did not commit breach of contract and may remove the
boxes from their premises after petitioner is given a period of time to remove
them from their warehouse as they deem proper (Court gave 30day period
to comply with this)
CATHAY PACIFIC AIRWAYS VS. VASQUEZ
FACTS:
In respondents’ return flight to Manila from Hongkong, they were deprived of
their original seats in Business Class with their companions because of
overbooking. Since respondents were privileged members, their seats were
upgraded to First Class. Respondents refused but eventually persuaded to
accept it. Upon return to Manila, they demanded that they be indemnified in
the amount of P1million for the “humiliation and embarrassment” caused by
its employees. Petitioner’s Country Manager failed to respond. Respondents
instituted action for damages. The RTC ruled in favor of respondents. The
Court of Appeals affirmed the RTC decision with modification in the award of
damages.
ISSUE:
Whether or not the petitioners (1) breached the contract of carriage, (2)
acted with fraud and (3) were liable for damages.
RULING:
(1) YES. Although respondents have the priority of upgrading their seats,
such priority may be waived, as what respondents did. It should have not
been imposed on them over their vehement objection.
(2) NO. There was no evident bad faith or fraud in upgrade of seat neither on
(3) YES. Nominal damages (Art. 2221, NCC) were awarded in the amount of
aside and deleted from the Court of Appeals’ ruling.
MERALCO VS. RAMOY
FACTS: In the year 1987, the National Power Corporation (NPC) filed with
the MTC Quezon City a case for ejectment against several persons allegedly
illegally occupying its properties in Baesa, Quezon City. among the
defendants in the ejectment case was Leoncio Ramoy, one of the plaintiffs in
the case at bar. On April 28, 1989 the MTC rendered judgment for
MERALCO to demolish or remove the building and structure they built on the
land of the plaintiff and to vacate the premises. On June 20, 1999 NPC
wrote to MERALCO requesting the immediate disconnection of electric
power supply to all residential and commercial establishments beneath the
NPC transmission lines along Baesa, Quezon City.
In a letter dated August 17, 1990 MERALCO requested NPC for a joint
survey to determine all the establishments which are considered under NPC
property. In due time, the electric service connection of the plaintiffs was
disconnected. During the ocular inspection ordered by the Court, it was
found out that the residence of the plaintiffs-spouses was indeed outside the
NPC property.
ISSUES: (1) WON the Court of Appeals gravely erred when it found
MERALCO negligent when it disconnected the subject electric service of
respondents.
(2) WON the Court of Appeals gravely erred when it awarded moral
and exemplary damages and attorney’s fees against MERALCO under the
circumstances that the latter acted in good faith in the disconnection of the
electric services of the respondents.
RULING:
(1) No. The Court agrees with the CA that under the factual milieu of the
present case, MERALCO failed to exercise the utmost degree of care and
diligence required of it, pursuant to Articles 1170 & 1173 of the Civil Code. It
was not enough for MERALCO to merely rely on the Decision of the MTC
without ascertaining whether it had become final and executory. Verily, only
upon finality of the said Decision can it be said with conclusiveness that
respondents have no right or proper interest over the subject property, thus,
are not entitled to the services of MERALCO.
(2) No. MERALCO willfully caused injury to Leoncio Ramoy by withholding
from him and his tenants the supply of electricity to which they were entitled
under the Service Contract. This is contrary to public policy because,
MERALCO, being a vital public utility, is expected to exercise utmost care
and diligence i the performance of its obligation. Thus, MERALCO’s failure
to exercise utmost care and diligence in the performance of its obligation to
Leoncio Ramoy is tantamount to bad faith. Leoncio Ramoy testified that he
suffered wounded feelings because of MERALCO’s actions. Furthermore,
due to the lack of power supply, the lessees of his four apartments on
subject lot left the premises. Clearly, therefore Leoncio Ramoy is entitled to
moral damages in the amount awarded by the CA. Nevertheless, Leoncio is
the sole person entitled to moral damages as he is the only who testified on
the witness stand of his wounded feelings. Pursuant to Article 2232 of the
Civil Code, exemplary damages cannot be awarded as MERALCO’s acts
cannot be considered wanton, fraudulent, reckless, oppressive or
malevolent. Since the Court does not deem it proper to award exemplary
damages in this case then the CA’s award of attorney’s fees should likewise
be deleted, as pursuant to Article 2208 of the Civil Code of which the
grounds were not present.