OBLIGATIONS AND CONTRACTS DIGEST
GEORGE W. BATCHELDER vs. THE CENTRAL
BANK OF THE PHILIPPINES
G.R. No. L-25071 March 29, 1972
DOCTRINES:
Facts:
Monetary Board Resolution No. 857 requires Filipino and
American resident contractors for constructions in U.S.
military bases in the Philippines to surrender to the Central
Bank their dollar earnings under their respective contracts but
were entitled to utilize 90% of their surrendered dollars for
importation at the preferred rate of commodities for use
within or outside said U.S. military bases. Resolution 695
moreover, denies their right to reacquire at the preferred rate
ninety per cent (90%) of the foreign exchange the sold or
surrendered earnings to Central Bank for the purpose of
determining whether the imports against proceeds of
contracts entered into prior to April 25, 1960 are classified as
dollar-to-dollar transactions or not.
George Batchelder, an American Citizen permanently
residing in the Philippines who is engaged in the
Construction Business, surrendered to the Central Bank his
dollar earnings amounting to U.S. $199,966.00. He compels
Central Bank of the Philippines to resell to him $170,210.60
at the preferred rate of exchange of two Philippine pesos for
one American dollar, more specifically P2.00375 which was
denied by the court.
He then contended that said decision failed to consider that if
there was no contract obligating the bank to resell to him at
the preferred rate, the judgment of the lower court can and
should nevertheless be sustained on the basis of there being
such an obligation arising from law.
Issue:
Whether or not Central Bank has the obligation arising from
law to resell the US$154,094.56 to Batchelder at the
preferred rate.
Held:
Central Bank was intended to attain basic objectives in the
field of currency and finance. “It shall be the responsibility of
the Central Bank of the Philippines to administer the
monetary and banking system of the Republic. It shall be the
duty of the Central Bank to use the powers granted to it under
this Act to achieve the following objectives: (a) to maintain
monetary stability in the Philippines; (b) to preserve the
international value of the peso and the convertibility of the
peso into other freely convertible currencies; and (c) to
promote a rising level of production, employment and real
income in the Philippines."
It is, of course, true that obligations arise from 1) law; 2)
contracts; 3) quasi-contracts; 4) acts or omissions punished
by law and 5) quasi-delicts. One of the sources an obligation
then is a law. A legal norm could so require that a particular
party be chargeable with a prestation or undertaking to give
or to deliver or to do or to render some service. It is an
indispensable requisite though that such a provision, thus in
fact exists. There must be a showing to that effect. As early
 OBLIGATIONS AND CONTRACTS DIGEST

as 1909 in Pelayo v. Lauron, Court through Justice Torres,

categorically declared: "Obligation arising from law are not
presumed." For in the language of Justice Street in Leung
Ben v. O'Brien, a 1918 decision, such an obligation is "a
creation of the positive law." They are ordinarily traceable to
code or statute. It is true though, as noted in the motion for
reconsideration following People v. Que Po Lay, that a
Central Bank circular may have the force and effect of law,
especially when issued in pursuance of its quasi-legislative
power. That of itself, however, is no justification to conclude
that it has thereby assumed an obligation.

CMC VS CA
OBLIGATIONS AND CONTRACTS DIGEST

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,

vs.
PHILIPPINE LONG DISTANCE TELEPHONE
COMPANY, defendant-appellant
DOCTRINES:

Facts:

The plaintiff, Republic of the Philippines, is a political entity

exercising governmental powers through its branches and
instrumentalities, one of which is the Bureau of
Telecommunications.

The defendant, Philippine Long Distance Telephone

Company (PLDT for short), is a public service corporation
holding a legislative franchise, to install, operate and
maintain a telephone system throughout the Philippines.

BOT soon after its creation set up its own Government

Telephone System (GTS) utilizing its own appropriation and
equipment and by renting the trunk lines of the PLDT to
enable government offices to call private parties. The Bureau
has extended its services to the general public. Through these
trunk lines, a Government Telephone System (GTS)
 OBLIGATIONS AND CONTRACTS DIGEST
subscriber could make a call to a PLDT subscriber in the
same way that the latter could make a call to the former.
BOT entered into an agreement with RCA Communications
(an American Co. party not in interest of the case), Inc. for a
joint telephone service whereby the BOT would convey
radio-telephone overseas call received by RCA to and from
local residents.
PLDT complained that BOT violated conditions since BOT
had used the trunk lines not only for government offices but
even to serve private persons or the general public in
competition with the business of PLDT. PLDT sever the
telephone connections of BOT resulting to isolation of the
Philippines on telephone services from the rest of the world
except the US.
The BOT had proposed that both enter into an
interconnecting agreement, with the government paying (on a
call basis) for all calls passing through the interconnecting
facilities from the GTS to the PLDT. 18 The PLDT replied
that it was willing to enter into an agreement on overseas
telephone service to Europe and Asian countries provided
that the BOT would submit to the jurisdiction and regulations
of the Public Service Commission and in consideration
sharing of the gross revenues. The proposals were not
accepted by either party.
The plaintiff commenced suit against the defendant, praying
in its complaint for judgment; (1) commanding the PLDT to
execute a contract with plaintiff, through the BOT, for the use
of the facilities of defendant's telephone system throughout
the Philippines under such terms and conditions as the court
might consider reasonable, and; (2) for a writ of preliminary
injunction against the defendant company to restrain the
severance of the existing telephone connections and/or
restore those severed.
After trial, the lower court rendered judgment that it could
not compel the PLDT to enter into an agreement with the
Bureau because the parties were not in agreement;
Issue/s:
Whether or not interconnection of Government Telephone
System and PLDT can be subject for expropriation.
Ruling:
Yes.
The Republic of the Philippines through Bureau of
Telecommunications may in the exercise of the sovereign
power of eminent domain, require the Telephone Company to
permit interconnection of the Government Telephone System
and that of the PLDT, as the needs of the government service
may required, subject to the payment of just compensation to
be determined by the court.
The Republic’s cause of action is predicated upon the radio
telephonic isolation of the BOT facilities from the outside
world if the severance of interconnection were to be carried
out by the PLDT, thereby preventing the BOT from properly
discharging its functions, to the prejudice of the general
public. The case should be for the compulsory rendering of
interconnection of services by the telephone company upon
such terms and conditions as the court may determine to be
just.
Since the lower court should have proceeded to treat the
case as one of condemnation of such services independently
of contract and proceeded to determine the just and
reasonable compensation for the same, instead of dismissing
the petition.
Under Section 79 of EO 94 paragraph (b)
To investigate, consolidate, negotiate for, operate and
maintain wire-telephone or radio telephone communication
service throughout the Philippines by utilizing such existing
facilities in cities, towns, and provinces as may be found
feasible and under such terms and conditions or arrangements
with the present owners or operators thereof as may be
agreed upon to the satisfaction of all concerned.
Under Section 6 Article XIII 1935 Constitution
“Conservation and Utilization of Natural Resources.”
The State may, in the exercise of national welfare and
defense, establish and operate industries and means of
transportation and communication, and upon payment of just
compensation, transfer to public ownership, utilities and other
private enterprises to be operated by the government.
Charter of PLDT expressly provides that Section 14.
The rights therein granted shall not be exclusive, and the
rights and power to grant to any corporation, association or
person other than the grantee franchise for the telephone or
electrical transmission of message or signals shall not be
impaired or affected by the granting of this franchise.
PLDT’s right to just compensation for the services rendered
to the GTS and its users is herein recognized and preserved.
To uphold PLDT’s contention is to subordinate the needs of
the general public to the right of the PLDT to deprive profit
from the future expansion of its services under its non
exclusive franchise.
The acceptance by the defendant of the payment of rentals,
despite its knowledge that the plaintiff had extended the use
of the trunk lines to commercial purposes, continuously since
 OBLIGATIONS AND CONTRACTS DIGEST

1948, implies assent by the defendant to such extended use.

Since this relationship has been maintained for a long time
and the public has patronized both telephone systems, and
their interconnection is to the public convenience, it is too
late for the defendant to claim misuse of its facilities, and it is
not now at liberty to unilaterally sever the physical
connection of the trunk lines.

There is high authority for the position that, when such

physical connection has been voluntarily made, under a fair
and workable arrangement and guaranteed by contract and
the continuous line has come to be patronized and established
as a great public convenience, such connection shall not in
breach of the agreement be severed by one of the parties. In
that case, the public is held to have such an interest in the
arrangement that its rights must receive due consideration.

"Such physical connection cannot be required as of right,

but if such connection is voluntarily made by contract, as is
here alleged to be the case, so that the public acquires an
interest in its continuance, the act of the parties in making
such connection is equivalent to a declaration of a purpose to
waive the primary right of independence, and it imposes upon
the property such a public status that it may not be
disregarded"

"Where private property is by the consent of the

owner invested with a public interest or privilege for the
benefit of the public, the owner can no longer deal with it as
private property only, but must hold it subject to the right of
the public in the exercise of that public interest or privilege
conferred for their benefit.
Emetrio Cui v Arellano University
CITATION: GR NO. L15127, May 30, 1961 | 112 Phil 135
Doctrines:
Emetrio Cui took his preparatory law course at Arellano
University. He then enrolled in its College of Law from first
year (SY1948-1949) until first semester of his 4th year.
During these years, he was awarded scholarship grants of the
said university amounting to a total of P1,033.87. He then
transferred and took his last semester as a law student at
Abad Santos University. To secure permission to take the
bar, he needed his transcript of records from Arellano
University. The defendant refused to issue the TOR until he
had paid back the P1,033.87 scholarship grant which Emetrio
refunded as he could not take the bar without Arellano’s
issuance of his TOR.

On August 16, 1949, the Director of Private Schools issued

Memorandum No. 38 addressing all heads of private schools,
colleges and universities. Part of the memorandum states that
“the amount in tuition and other fees corresponding to these
scholarships should not be subsequently charged to the
recipient students when they decide to quit school or to
transfer to another institution. Scholarships should not be
offered merely to attract and keep students in a school”.

ISSUE: Whether or not Emetrio Cui can refund the

P1,033.97 payment for the scholarship grant provided by
Arellano University.
 OBLIGATIONS AND CONTRACTS DIGEST
HELD:
The memorandum of the Director of Private Schools is not a
law where the provision set therein was advisory and not
mandatory in nature. Moreover, the stipulation in question,
asking previous students to pay back the scholarship grant if
they transfer before graduation, is contrary to public policy,
sound policy and good morals or tends clearly to undermine
the security of individual rights and hence, null and void.
The court sentenced the defendant to pay Cui the sum of
P1,033.87 with interest thereon at the legal rate from Sept.1,
1954, date of the institution of this case as well as the costs
and dismissing defendant’s counterclaim.
SAURA VS SINDICO
DOCTRINES:
Art. 1347. All things which are not outside the commerce of
men, including future things, may be the object of a contract.
All rights which are not intransmissible may also be the
object of contracts.
No contract may be entered into upon future inheritance
except in cases expressly authorized by law.
All services which are not contrary to law, morals, good
customs, public order or public policy may likewise be the
object of a contract.
FACTS:
• Ramon Saura and Estela Sindico were competing
for nomination as the official candidate of the Nacionalista
Party in the 4th district of Pangasinan for the 1957
congressional elections.
• The parties entered into a written agreement
containing a pledge that —
“Each aspirant shall respect the result of the convention, i.e.,
no one of us shall either run as a rebel or independent
candidate after losing in said convention.”
• In the provincial convention of the Nacionalista
Party, Saura was elected the Party's official congressional
candidate for the 4th district of Pangasinan.
• Sindico, in disregard of the covenant, filed her
certificate of candidacy for the same office with COMELEC,
and she openly and actively campaigned for her election.
• Saura commenced a suit for the recovery of
damages.
RULING:
• CFI – Dismissed the complaint of Saura because
the agreement sued upon is null and void, in that (1) the
subject matter of the contract, being a public office, is not
within the commerce of man; and (2) the pledge was in
curtailment of the free exercise of elective franchise and
therefore against public policy.
• SC – Affirmed the decision of the lower court.
ISSUE: Whether the agreement between the parties has a
valid object which makes the contract binding?
 OBLIGATIONS AND CONTRACTS DIGEST

HELD/RATIO: NO!

• Among those that may not be the object of

contracts are certain rights of individuals, which the law and
public policy have deemed wise to exclude from the
commerce of man. Among them are the political rights
conferred upon citizens, including, one's right to vote, the
right to present one's candidacy to the people and to be voted
to public office, provided, however, that all the qualifications
prescribed by law obtain. Such rights may not be bargained
away for they are conferred not for individual or private
benefit or advantage but for the public good and interest.

• Constitutional and statutory provision fix the

qualifications of persons who may be eligible for certain
elective public offices. Said requirements may neither be
enlarged nor reduced by mere agreements between private
parties.

• In the case at hand, Saura complains on account of

Sindico's alleged violation of the pledge by filing her own
certificate o candidacy. In the face of the preceding
considerations, Saura's action would result in limiting the
choice of the electors to only those persons selected by a
small group.

LEAL VS IAC

G.R. No. L-65425 November 5, 1987

Doctrines:
 OBLIGATIONS AND CONTRACTS DIGEST
FACTS:
-Reversal of IAC in its Resolution dated Sept. 27, 1983 of the
earlier decision dated June 28, 1978 penned by Justice Paras
of the Court of Appeals, in the same case, affirming the trial
court’s dismissal of the private respondent’s complaint.
March 21, 1941: Vicente Santiago and Cirilio Leal entered
into a contract which was called the “Compraventa” where V.
Santiago sold to the latter three parcels of land. Cited in the
contract was: ‘En caso deventa, no podran vender a
otrosdichos tres lotes de terrenosino al aqui rendedor Vicente
Santiago, o los herederos o sucesores de estepor el niismo
precio de P5,600 siempre y cuando estos ultimos pueden
hacer la compra’.
1960-1965: Parts of the properties were mortgaged or leased
to the co-petitioners or to third party
1966-1957: V. Santiago offered re-purchase of the properties
but the petitioner refused the offer
August 2, 1967: V. Santiago instituted complaint for specific
performance. The trial court (Court of First Instance in Q.C.)
rendered its decision – dismissing the case for it was thought
to be a premature case or that there was no sale at all. The
respondent was not contented at all that he filed another
complaint in the Court of Appeals—
June 28, 1978: Justice Paras of the Court of Appeals affirmed
the trial court’s dismissal of respondent’s complaint. Included
in the decision was the order for the cancellation of the
annotations at the back of the Transfer Certificates of Title
issued which prohibits the petitioner to sell the land to the
third party. Respondentsfiled a motion for reconsideration
and an opposition to the petitioner’s(Leal) motion to amend
but the incidents were not resolved since the Court of
Appeals was abolished and was replaced by the IAC.
Sept. 27, 1983: The June 28, 1978 decision of the CA was
reversed. The petitioners were to accept P5,600 for re-
purchase of Land and they should pay rental of P3,087.50 as
rental from 1967-1968 and the same amount every year after.
The Transfer Certificate of Title No. 42535 was ordered to be
in the names of V. Santiago & Luis Santiago and to issue
another TCT to S. Santiago.
ISSUE/S:
Whether or not it is quoted in the “Compraventa” that the
private respondent has the right of re-purchase.
Whether the annotations of the prohibition to sell at the back
of the TCTs should be cancelled.
HELD:
The Resolution dated Sept. 27, 1983 was SET ASIDE and the
Decision promulgated on June 28, 1978 is Reinstated. The
annotations of the prohibition to sell at the back of TCT Nos.
138837-138842 were cancelled – cost against respondent.
For the following reasons:
-In IAC’s resolution : repurchase was given birth by the
phrase “siempre y cuando ultimos pueden hacer la compra”
(when the buyer has money to buy). Under Article 1508 (2nd
 OBLIGATIONS AND CONTRACTS DIGEST

Paragraph) there is agreement as to the time, although it is

indefinite, therefore the right should be exercised within ten
years, because the law does not favor suspended ownership.

-The right to redeem must be expressly stipulated in the

contract of sale in order that it may have legal existence.
Under Article 1606 of the Civil Code of the Philippines – the
right to redeem or repurchase, in the absence of an express
agreement as to time, shall last four years from the date of
contract.

-Prohibition to sell the lots to persons other than the vendor

(back of TCT) will be cancelled or deleted since the
prohibition to alienate should not exceed 20 years otherwise PAKISTAN INTERNATIONAL AIRLINES VS OPLE
there would be subversion of public policy.
Pakistan International Airline vs Ople (1990)
-Civil Code of the Phil. Art. 1306 includes that contracting
parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are
not contrary to law, morals, good customs, public order, or Doctrine: While parties to a contract may establish
public policy. Public order signifies the public weal — public stipulations, terms and conditions as they may deem
policy. Essentially, therefore, public order and public policy convenient, they may not contract away applicable provisions
mean one and the same thing. One such condition which is of law especially peremptory provisions dealing with matters
contrary to public policy is the present prohibition to self to heavily impressed with public interest.
third parties…(or perpetual restriction to the right of
ownership specifically the owner’s right to freely dispose of
his properties.
 OBLIGATIONS AND CONTRACTS DIGEST
Facts:
1. Pakistan International Airline (PIA) is a foreign
corporation licensed to do business in the PH. 2 separate
contracts of employment with Farrales and Mamasig were
entered into by PIA in Manila. The contracts became
effective in 1979. The contracts contained provisions—
a. Providing for the term of 3 years extendible upon
mutual consent of the parties
b. That PIA reserves the right to terminate the
employee either by giving notice 1 month before the date of
termination or one month’s salary
c. “This agreement shall be construed and governed
under and by the laws of Pakistan, and only the Courts of
Karachi, Pakistan shall have the jurisdiction to consider any
matter arising out of or under this agreement.”
2. After their training period, Farrales and Mamasig
commenced their services as flight attendants with base
station in Manila.
3. 1 year and 4 months before the lapse of the 3-year
period, counsel for the local branch of PIA sent Farrales and
Mamasig notices expressing that their services will be
terminated a month thereafter.
4. Farrales and Mamasig filed a joint complaint for
illegal termination and non-payment of company benefits
before the then Ministry of Labor and Employment (MOLE)
5. PIA submitted a position paper claiming that
Farrales and Mamasig were habitual absentees; that both
were in the habit of bringing in from abroad sizeable
quantities of "personal effects"; and that PIA personnel at the
Manila International Airport had been discreetly warned by
customs officials to advise private respondents to discontinue
that practice.
6. Regional Director ordered reinstatement and
payment of full back wages or in the alternative payment of
their salaries for the remainder of the 3-year period.
a. They have attained status of regular employees
b. The provision stipulating a three-year period of
employment is null and void for violating LAbor Code
provisions on regular employment
c. Dismissal without clearance from MOLE entitles
employees to reinstatement
7. Deputy Minister affirmed the RD’s order.
8. PIA filed a petition for certiorari before the SC.
a. PIA’s relationship with Farrles and Mamasig was
governed by the provisions of its contract rather than by the
general provisions of the Labor Code
Issue/s:
What law governs the relationship of the parties to the
contract?
Held/Ratio: PHILIPPINE LAW
1. Art 1306 of the Civil Code provides: The
contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public
order, or public policy.
2. The governing principle is that parties may not
contract away applicable provisions of law especially
peremptory provisions dealing with matters heavily
impressed with public interest. The law relating to labor and
employment is clearly such an area and parties are not at
liberty to insulate themselves and their relationships from the
impact of labor laws and regulations by simply contracting
with each other. It is thus necessary to appraise the
contractual provisions invoked by petitioner PIA in terms of
their consistency with applicable Philippine law and
regulations.
3. The employment contracts were inconsistent with
Arts. 280-281 of the Labor Code
4. In the case of Brent School vs Zamora, the Court
ruled that contracts of employment providing for a fied
period are not necessarily unlawful. The presence or absence
of a substantial indication that the period specified in an
employment agreement was designed to circumvent the
security of tenure of regular employees which is provided for
in Articles 280 and 281 of the Labor Code is crucial.
 OBLIGATIONS AND CONTRACTS DIGEST

5. The provision in the contracts with PIA allowing

for termination of services upon notice or payment of one
month’s salary was intended to prevent any security of tenure
from accruing in favor of private respondents even during the
limited period of three (3) years, and thus to escape
completely the thrust of Articles 280 and 281 of the Labor
Code by rendering their employment at the pleasure of PIA.

6. PIA cannot take refuge in paragraph 10 of its

employment agreement which specifies, firstly, the law of
Pakistan as the applicable law of the agreement and,
secondly, lays the venue for settlement of any dispute arising
out of or in connection with the agreement "only [in] courts
of Karachi Pakistan".

a. The relationship is much affected with public

interest and that the otherwise applicable Philippine laws and
regulations cannot be rendered illusory by the parties
agreeing upon some other law to govern their relationship.

b. A cursory scrutiny of the relevant circumstances of

this case will show the multiple and substantive contacts
between Philippine law and Philippine courts, on the one
hand, and the relationship between the parties, upon the
other:

i. the contract was not only executed in the

Philippines, it was also performed here, at least partially;

ii. private respondents are Philippine citizens and

respondents, while petitioner, although a foreign corporation,
is licensed to do business (and actually doing business) and
hence resident in the Philippines;

iii. private respondents were based in the Philippines

in between their assigned flights to the Middle East and
Europe.

All the above contacts point to the Philippine courts and

administrative agencies as a proper forum for the resolution
of contractual disputes between the parties. Under these
circumstances, paragraph 10 of the employment agreement
cannot be given effect so as to oust Philippine agencies and
courts of the jurisdiction vested upon them by Philippine law.

c. Finally, and in any event, the petitioner PIA did not

undertake to plead and prove the contents of Pakistan law on
the matter; it must therefore be presumed that the applicable
provisions of the law of Pakistan are the same as the
applicable provisions of Philippine law
 OBLIGATIONS AND CONTRACTS DIGEST

Facts:

• Petitioners urge the Court to reverse and set aside

the decision on Alcuaz vs. PSBA (the decision in the said
case stated that schools can refuse readmission of students
admitted in a previous semester because the contract between
Non vs. Judge Dames II the school and the student is terminated when the semester is
over)
DOCTRINES:
• Petitioners were not allowed to reenroll at Mabini
College after participating in student mass actions in the
preceding semester

• The trial court dismissed their petition.

• The court also denied their MR stating that, due to

the ruling in Alcuaz v. PSBA, the contract between the
student and the school is terminated when the preceding
semester ends. Furthermore, the students waived their right
for readmission when they continued to rally against the
school having known that the form they signed for
enrollment contains the condition that the school has the right
to deny admission to students whose conduct discredits the
institution.

• The court also said that there must be a clear legal

right. Since Mabini College enjoys academic freedom, it has
the freedom of admitting or denying admission of a student.
Hence, being readmitted is not a right but a privilege.

Issue: WON the termination of contract doctrine is applicable

to the case at bar
 OBLIGATIONS AND CONTRACTS DIGEST

Ratio: • Disciplinary sanctions should still be imposed

provided that these were proportionate to the offenses
• The case focuses on the right to speech and incurred by each student and that procedural due process was
assembly as exercised by students vis-à-vis the right of conducted before such sanctions were imposed.
school officials to discipline them

o The student does not shed his constitutionally

protected rights at the school gate – the rights of speech and Decision: Petition is Granted. The students are allowed to be
assembly which is constitutionally protected is similarly readmitted or reenrolled without prejudice to disciplinary
available to students (Malabanan v. Ramento and Tinker v. sanctions.
Des Moines Community School District). Malabanan case
involved students which were given a preventive suspension
due to illegal assembly for conducting rallies outside the
allowed school grounds and over the time period allowed.

o Permissible Limitations of Student Exercise of

Constitutional Rights within the school – (Guzman v. NU). In
Guzman , the students are allowed to be readmitted without
prejudice to the imposition of disciplinary measure. However,
disciplinary sanctions requires observance of procedural due
process: (1) the students must be informed in writing of the
nature and cause of any accusation against them; (2) they
shall have the right to answer the charges against them with
the assistance of counsel; (3) they shall be informed of the
evidence against them; (4) they shall have the right to adduce
evidence in their own behalf; (5) the evidence must be duly
considered by an investigating committee. Furthermore,
sanctions imposed must be proportional to the offense
committed.

o Circumventing established doctrine – since the

malabanan case, the students have been denied readmission
due to other cause than participating in mass actions against
the school

o The Nature of Contract between the school and the

student – despite the ruling in alcuaz, there is a presumption
that once admitted for a course and have been enrolled for a
semester, the student is expected to finish the course. The
school cannot deny the readmission of a student. Hence, the
contract of the student with the school is not an ordinary
contract.

o Academic Freedom not a ground for denying

student rights – the right of an institution of higher learning
to set academic standards cannot be utilized to discriminate
against students who exercise their constitutional rights for
speech and assembly, for otherwise there will be a violation
of their right of equal protection

• The students who were not given failing marks but DE LUNA VS ABRIGO
denied reenrollment were refused reenrollment without just
cause. the denial for readmission of students with failing DOCTRINE:
marks was also found to be a mere afterthought not relevant
to the actual cause i.e. their participation in mass actions.
 OBLIGATIONS AND CONTRACTS DIGEST
FACTS:
De Luna donated a portion of a 75 sq. m. lot to the Luzonian
University Foundation. The donation was embodied in a
Deed of Donation Intervivos and was subject to certain terms
and conditions. In case of violation or non-compliance, the
property would automatically revert to the donor. When the
Foundation failed to comply with the conditions, de Luna
“revived” the said donation by executing a Revival of
Donation Intervivos with the following terms and conditions:
1) The Donee shall construct on the land and at its expense a
Chapel, Nursery, and Kindergarten School to be named after
St. Veronica
2) Construction shall start immediately and must be at least
70% completed three years from the date of the Deed unless
the Donor grants extensions
3) Automatic reversion in case of violation
The Foundation accepted and the donation was registered and
annotated in the TCT. By a Deed of Segregation, the
foundation was issued a TCT for area the lot donated while
the remaining area was retained by the De Luna.
The children and only heirs of the late De Luna (died after
the donation) filed a complaint with the RTC for the
cancellation of the donation on the ground that the terms
were violated. The Foundation defended itself by saying that
it had partially and substantially complied with the conditions
and that the donor granted it an indefinite extension of time to
complete construction.
The RTC dismissed the petition on the ground of prescription
(for being filed after 4 years). The heirs did not file an MR
and went straight to the SC.
ISSUE:
Whether the action prescribes in 4 years (based on art. 764
NCC-judicial decree of revocation of the donation) or in 10
years (based on art. 1144 –enforcement of a written contract)
RULING: 10 years
The donation subject of this case is one with an onerous
cause.
Under the old Civil Code, it is a settled rule that donations
with an onerous cause are governed not by the law on
donations but by the rules on contract. On the matter of
prescription of actions for the revocation of onerous donation,
it was held that the general rules on prescription apply. The
same rules apply under the New Civil Code as provided in
Article 733 thereof which provides:
Donations with an onerous cause shall be governed by the
rules on contracts, and remuneratory donations by the
provisions of the present Title as regards that portion which
exceeds the value of the burden imposed.
 OBLIGATIONS AND CONTRACTS DIGEST

It is true that under Article 764 of the New Civil Code,

actions for the revocation of a donation must be brought
within four (4) years from the non-compliance of the
conditions of the donation. However, said article does not
apply to onerous donations in view of the specific provision
of Article 733 providing that onerous donations are governed
by the rules on contracts. The rules on prescription and not
the rules on donation applies in the case at bar.

LLORIN VS CA
OBLIGATIONS AND CONTRACTS DIGEST

PALANCA VS CA
 OBLIGATIONS AND CONTRACTS DIGEST

DOCTRINES:

Facts

Luis Ermitaño was a BPI Express Card Corporation (BECC)

credit cardholder while his wife, Manuelita Ermitaño, was an
extension cardholder. On August 29, 1989, Manuelita’s bag
which contained the credit card was snatched in Makati.
ERMITANO VS CA Immediately, she reported the loss and thereafter sent written
notice to BECC. BECC however, billed Luis for purchases
G.R. No. 127246, April 21, 1999
 OBLIGATIONS AND CONTRACTS DIGEST

made on August 30, 1989 through Manuelita’s lost card

totalling P3,197.70. To justify the billing, BECC cited the
following stipulation in their contract: “...the cardholder
continues to be liable for the purchases made through the use
of the lost/stolen BPI Express Card until after such notice has
been given to BECC and the latter has communicated such
loss/theft to its member establishments.”

The issue

whether or not the stipulation on notice required by BECC in

case of loss or theft of the credit card is valid.

HELD:

The Supreme Court held in the negative. Prompt notice by

the cardholder to the credit card company of the loss or theft
of his card should be enough to relieve the former of any
liability occasioned by the unauthorized use of his lost or
stolen card. The questioned stipulation in this case, which
still requires the cardholder to wait until the credit card
company has notified all its member-establishments, puts the
cardholder at the mercy of the credit card company which
may delay indefinitely the notification of its members to
minimize if not to eliminate the possibility of incurring any
loss from unauthorized purchases. Or, as in this case, the
credit card company may for some reason fail to promptly
notify its members through absolutely no fault of the
cardholder. To require the cardholder to still pay for Relevant Provisions:
unauthorized purchases after he has given prompt notice of
the loss or theft of his card to the credit card company would Sections 5 (1) of Article XIV of the 1987 Constitution. The
simply be unfair and unjust. The Court cannot give its assent State shall protect and promote the right of all citizens to
to such a stipulation which could clearly run against public quality education at all levels and shall take appropriate steps
policy. to make such declaration accessible to all.

Sections 5 (3) of Article XIV of the 1987 Constitution. Every

student has a right to select a profession or course of study,
REGINO VS PANGASINAN COLLEGES subject to fair, reasonable and equitable admission and
academic requirements.
DATE: November 18, 2004
Section 9. Rights of Students in School. In addition to other
G.R. No. 156109
rights, and subject to the limitations prescribed by law and
regulations, students and pupils in all schools shall enjoy the
DOCTRINES:
following rights:

xxxxxxxxx

(2) The right to freely choose their field of study subject to

existing curricula and to continue their course therein up to
graduation, except in cases of academic deficiency, or
violation of disciplinary regulations.
 OBLIGATIONS AND CONTRACTS DIGEST
Article 19. Every person must, in the exercise of his rights
and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.
Article 21. Any person who wilfully causes loss or injury to
another in a manner that is contrary to morals, good customs
or public policy shall compensate the latter for the damage.
Article 26. Every person shall respect the dignity, personality,
privacy and peace of mind of his neighbors and other
persons. The following and similar acts, though they may not
constitute a criminal offense, shall produce a cause of action
for damages, prevention and other relief:
(1) Prying into the privacy of anothers residence;
(2) Meddling with or disturbing the private life or family
relations of another;
(3) Intriguing to cause another to be alienated from his
friends;
(4) Vexing or humiliating another on account of his beliefs,
lowly station in life, place of birth, physical defect, or other
personal condition.
FACTS:
• Petitioner Khristine Rea M. Regino was a first year
computer science student at Respondent Pangasinan Colleges
of Science and Technology (PCST).
• She comes from a very poor family and she was
only able to go to school by means of financial support from
her relatives.
• During her second semester of school year 2001-
2002, she was enrolled in logic and statistics subjects under
Repondents Rachelle A. Gamurot and Elissa Baladad (her
teachers)
• It was in February 2002 that the college arranged a
fund raising campaign called “Rave Party and Dance
Revolution”. The proceeds of this dance will be used to
construct the school’s tennis and volleyball courts.
• Everyone was required to buy at least two tickets
priced at 100 pesos each. People who bought the tickets will
be given additional points in their test scores but those who
did not buy will not be allowed to take the final exams.
• Khristine, having no money and religious
restrictions, refused to buy the tickets.
• Thus on the examination dates, she was not
allowed by her two teachers, Gamurot and Balalad, to take
her final exam on statistics and logic.
• The next day, the teacher announced to the whole
class that khristine and another student was not permitted to
take the exam because of the failure to buy the tickets then
subsequently ejected the two from class.
• Khristine continued to plead with the teachers to
allow her but they kept their stand and defended their
position saying that they were complying with PCST’s
policy.
• Khristine filed in the RTC as a pauper litigant
against PCST and her two teachers for damages.
• The respondents filed a motion to dismiss based on
the khristine’s failure to exhaust administrative remedies as
they are contending that the case should’ve been filed in the
CHED (commission of higher education) and not in the RTC
• Khristine on the other hand says that prior
exhaustion of administrative remedies was unnecessary,
because her action was not administrative in nature, but one
purely for damages arising from respondents breach of the
laws on human relations
• RTC
o The RTC dismissed the complaint for the lack of
cause of action. It said that considering the case was between
a school, two teachers and a student, CHED has jurisdiction
over the case and not RTC. And it dismissed the case for the
lack of cause of action without explaining their ground.
ISSUE/s:
1. W/N the doctrine of exhaustion of administrative
remedies is applicable
2. W/N the Complaint stated sufficient cause(s) of
action.
HELD:
1. Yes
The Supreme Court ruled that the doctrine of exhaustion of
administrative remedies has no bearing on the present case
because the petitioner was not asking for the reversal of the
policies of the PCST neither was she demanding that the
 OBLIGATIONS AND CONTRACTS DIGEST

school allow her to take the final examinations (considering that it is protected by the constitution and by a legislative act
that she was already enrolled in a different school). The acts called the Education Act of 1982.
of the respondent can no longer be reversed and even if it was
reversed, it would not be adequate to redress her grievances b. Liability for Tort

The Supreme Court also held that the doctrine can only be
applied when there is competence on the part of the
administrative body to act upon the matter complained of.
Thus in the case at bar, the CHED does not have the power to
award damages to the petitioner.
And lastly, the doctrine cannot be applied when the issue is
purely legal and well within the jurisdiction of the trial court.
The petitioner’s action for damages calls for the application
of the Civil Code which falls within the jurisdiction of the
courts.
2. Yes
a. Breach of Action
In her complaint, Khristine wrote that she was inhumanly
punished by reason only of their poverty, religious practive or
lowly station I life which inculcated feelings of guilt,
disgrace and unworthiness and as a result she was unable to
finish her subjects for the second semester and had to lag her
studies for a full year. The acts caused her extreme
humiliation and mental agony and she asks for compensation
as the respondents violated Article 19, 21, and 26 of the Civil
Code.
The court held that generally, tort arises only between partieis
not otherwise bound by a contract. But in the case of PSBA
vs. CA an academic institution may be held liable for tort
even if it has an existing contract with its students, since the
act that violated the contract may also be a tort.

In the case of Alcuaz v. PSBA, the court characterized the
relationship between the school and the student as a contract,
where the student, once admitted by the school is considered
enrolled for one semester. And in a succeeding case (Non v.
Dames), the court ruled that it is not merely for one semester
but an entire period that the student is expected to complete
it. Thus it can be seen that when it comes to the court, the
relationship between the school and the student is contractual
in nature.
The Respondent CANNOT use the right to academic freedom
as a defense because According to present jurisprudence,
academic freedom encompasses the independence of an
academic institution to determine for itself (1) who may
teach, (2) what may be taught, (3) how it shall teach, and (4)
who may be admitted to study.

Being that the relationship is reciprocal, where the school

would be providing the education while the student will be
abiding by the rules and regulations of the school. The terms
of the contract are defined at the moment of its inception-
upon enrollment of the student. Thus it is in practice that the
student makes a down payment at the beginning of the
semester and succeeding payments paid before every
preliminary, midterm and final examination. Their failure to
pay their financial obligation is regarded as a valid ground for
the school to deny them the opportunity to take these
examinations.

In the present case, the PCST imposed a revenue raising

measure in the middle of the semester. It made the financial
contribution of the student as a condition for the students to Duncan Association v. Glaxo welcome, G.R. No. 162994,
take their final examinations which ultimately is translated to Sept. 17, 2004
the recognition of their ability to finish the course.
Considering that the fee was not part of the student-school Doctrines:
contract entered into at the start of the year, it cannot be
unilaterally imposed to the prejudice of the enrollees.

It should be noted that the student-school contract is not an

ordinary one and is imbued with public interest considering
 OBLIGATIONS AND CONTRACTS DIGEST
Facts: Petitioner, Pedro Tecson was hired by respondent
Glaxo as medical representative, after Tecson had undergone
training and orientation. He signed a contract of employment
which stipulates, among others, that he agrees to study and
abide by existing company rules. Another stipulation which
is also found of Glaxo’s Employee Code of Conduct provides
the duty to disclose to management any existing or future
relationship by consanguinity or affinity with co-employees
or employees of competing drug companies and should
management find that such relationship poses a possible
conflict of interest, to resign from the company.
Tecson was initially assigned to market Glaxo’s products in
the Camarines Sur-Camarines Norte sales area. He,
subsequently entered into a romantic relationship with Bettsy,
branch coordinator of Astra in Albay, a competitor of Glaxo.
She supervised the district managers and medical
representatives of her company and prepared marketing
strategies for Astra in that area. The two married even with
the several reminders given by the District Manager to
Tecson. In January 1999, Tecson’s superiors informed him
that his marriage to Bettsy gave rise to a conflict of interest.
Despite several reminders and time allowances, Tecson was
not able to resolve the issue on conflicting interest. This
situation eventually led to his alleged constructive dismissal.
This is a petition for review on certiorari assailing CA’s
decision and resolution.
Issue: Is Glaxo’s policy prohibiting its employees from
marrying an employee of a competitor company is valid?
Held: Yes. No reversible error can be ascribed to the Court
of Appeals when it ruled that Glaxo’s policy prohibiting an
employee from having a relationship with an employee of a
competitor company is a valid exercise of management
prerogative. Glaxo has a right to guard its trade secrets,
manufacturing formulas, marketing strategies and other
confidential programs and information from competitors,
especially so that it and Astra are rival companies in the
highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with
employees of competitor companies upon Glaxo’s employees
is reasonable under the circumstances because relationships
of that nature might compromise the interests of the
company. In laying down the assailed company policy, Glaxo
only aims to protect its interests against the possibility that a
competitor company will gain access to its secrets and
procedures. That Glaxo possesses the right to protect its
economic interests cannot be denied. No less than the
Constitution recognizes the right of enterprises to adopt and
enforce such a policy to protect its right to reasonable returns
on investments and to expansion and growth. Indeed, while
our laws endeavor to give life to the constitutional policy on
social justice and the protection of labor, it does not mean
that every labor dispute will be decided in favor of the
workers. The law also recognizes that management has rights
which are also entitled to respect and enforcement in the
interest of fair play.
OBLIGATIONS AND CONTRACTS DIGEST