Development Bank of the Philippines v.

Guariña Agricultural and Realty

Development Corporation
GR No. 160758, January 15, 2014
BERSAMIN, J.
Xylex Dave P. Andres

Facts
In July 1976, Guariña Corporation applied for a loan in the amount of P3,387,000.00
from DBP. Guariña Corporation executed a real estate mortgage over several real properties
and chattel mortgage over the personal properties existing at the resort complex and those
yet to be acquired out of the proceeds of the loan in favor of DBP as security for the
repayment of the loan. DBP required Guariña Corporation to put up a cash equity of P
1,470,951.00 for the construction of the buildings and other improvements on the resort
complex. The loan was released in several installments, and was used to defray the cost of
additional improvements in the resort complex. The total amount released was 3,003,617.49,
from which DBP withheld P148,102.98 as interest. Guariña Corporation demanded the release
of the balance of the loan, but DBP refused. Instead, DBP directly paid some suppliers of
Guariña Corporation over the latter’s objection. DBP found upon inspection of the resort
project, its developments and improvements that Guariña Corporation had not completed the
construction works. In a letter and a telegram, DBP thus demanded that Guariña Corporation
expedite the completion of the project, and warned that it would initiate foreclosure
proceedings should Guariña Corporation not do so. Unsatisfied with the non-action and
objection of Guariña Corporation, DBP initiated extrajudicial foreclosure proceedings

Issue
Whether or not Guarina was in delay in performing its obligation making DBP’s action
to foreclose the mortgage proper.

Ruling
No. The loan agreement between the parties is a reciprocal obligation. Appellant in
the instant case bound itself to grant appellee the loan amount of P3,387,000.00 condition on
appellee’s payment of the amount when it falls due. The appellant did not release the total
amount of the approved loan. Appellant therefore could not have made a demand for
payment of the loan since it had yet to fulfil its own obligation. Moreover, the fact that
appellee was not yet in default rendered the foreclosure proceedings premature and
improper. By its failure to release the proceeds of the loan in their entirety, DBP had no right
yet to exact on Guariña Corporation the latter’s compliance with its own obligation under the
loan. Indeed, if a party in a reciprocal contract like a loan does not perform its obligation, the
other party cannot be obliged to perform what is expected of it while the other’s obligation
remains unfulfilled. In other words, the latter party does not incur delay.
 Maybank Philippines, Inc. v. Tarrosa
GR No. 213014, October 14, 2015
PERLAS-BERNABE, J.
Xylex Dave P. Andres

Facts
On December 15, 1980, respondent Spouses Tarrosa obtained a loan from PNB-
Republic Bank, now Maybank Philippines, in the amount of P91,000.00 secured by a real
estate mortgage over a 500-square meter parcel of land. After payment of said loan, the
respondents again obtained another loan from Maybank in the amount of P60,000.00
payable on March 11, 1984. Respondents failed to pay upon maturity. Sometime in April 1998,
a Final Demand Letter was sent by petitioner bank to respondents requiring the latter to settle
their loan obligation which already amounted to P564,679.91 inclusive of principal, interest,
and penalty charges. The spouses offered to settle it in a lesser amount to which the bank
refused. On June 25, 1998, Maybank instituted an extrajudicial foreclosure proceeding and the
subject property was eventually sold in a public auction to Philmay Property Inc. (PPI). The
spouses then filed a complaint for declaration of nullity and invalidity of the foreclosure sale
averring among others that the second loan is an unsecured loan and that, Maybank’s right
to foreclose had already prescribed.

Issue
Whether or not or not the respondent spouses are in default.

Ruling
No. It is not sufficient that the law or obligation fixes a date for performance; it must
further state expressly that after the period lapses, default will commence. Thus, it is only
when demand to pay is unnecessary in case of the aforementioned circumstances, or when
required, such demand is made and subsequently refused that the mortgagor can be
considered in default and the mortgagee obtains the right to file an action to collect the debt
or foreclose the mortgage. In this case, the provision in the Real Estate Mortgage between
the parties merely articulated Maybank's right to elect foreclosure upon Sps. Tarrosa's failure
or refusal to comply with the obligation secured, which is one of the rights duly accorded to
mortgagees in a similar situation. In no way did it affect the general parameters of default,
particularly the need of prior demand under Article 1169 of the Civil Code, considering that it
did not expressly declare: (a) that demand shall not be necessary in order that the mortgagor
may be in default; or (b) that default shall commence upon mere failure to pay on the maturity
date of the loan. Therefore, Maybank's right to foreclose the real estate mortgage accrued
only after the lapse of the period indicated in its final demand letter for Sps. Tarrosa to pay,
i.e., after the lapse of five (5) days from receipt of the final demand letter dated March 4, 1998.
 Federal Builders, Inc. v. Foundation Specialists, Inc.
GR No. 194507, September 8, 2014
PERALTA, J.
Xylex Dave P. Andres

Facts
On August 20, 1990, Federal Builders, Inc. (FBI) entered into an agreement with
Foundation Specialists, Inc. (FSI) whereby the latter, as subcontractor, undertook the
construction of the diaphragm wall, capping beam, and guide walls of the Trafalgar Plaza
located at Makati City (the Project), for a total contract price of P7,400,000.00. Under the
agreement, FBI was to pay a down payment equivalent to 20% of the contract price and the
balance, through a progress billing every 15 days, payable not later than 1 week from
presentation of the billing. FSI then filed a complaint for Sum of Money against FBI before
the RTC of Makati City seeking to collect the amount representing Billings No. 3 and 4, with
accrued interest from August 1, 1991 plus moral and exemplary damages with attorney’s fees.
In its complaint, FSI alleged that FBI refused to pay said amount despite demand and its
completion of 97% of the contracted works. RTC ruled in favor of FSI ordering FBI the payment
of billings 3 & 4 plus 12% legal interest from August 30, 1991. The CA affirmed the Decision of
the lower court, but with modifications.

Issue
Whether or not the FBI is obliged to pay the 12 % interest of the billings 3 & 4
considering the nature of the obligation.

Ruling
This case, however, does not involve an acquiescence to the temporary use of a party’s
money but a performance of a particular service. For transactions involving payment of
indemnities in the concept of damages arising from default in the performance of obligations
in general and/or for money judgment not involving a loan or forbearance of money, goods,
or credit, the governing provision is Art. 2209 of the Civil Code prescribing a yearly 6% interest.
Thus, SC ordered FBI to pay FSI the billings 3 and 4 plus interest reduced to only 6% per annum
considering the fact that the obligation involved herein does not partake of a loan or
forbearance of money.
 Barzaga v. Court of Appeals
GR No. 115129, February 12, 1997
BELLOSILLO, J.
Xylex Dave P. Andres

Facts
Barzaga went to the hardware store of respondent Alviar to inquire about the
availability of certain materials to be used in the construction of a niche for his wife. The
following morning, Barzaga went back to the store and told the employees that the materials
he was buying would have to be delivered at the Memorial Cemetery by eight o'clock that
morning since his hired workers were already at the burial site and time was of the essence.
A store employee agreed to deliver the items at the designated time, date and place. With
this assurance, Barzaga purchased the materials and paid in full. The construction materials
did not arrive at eight o'clock as promised. After follow-ups and several hours later, when
there was yet no delivery made, Barzaga went back to the store. He saw the delivery truck
but the things he purchased were not yet ready for loading. Distressed by the seeming lack of
concern on the store’s part, Barzaga decided to cancel his transaction with the store and buy
from another store. Not being able to fulfill the scheduled burial of his wife, Barzaga
demanded damages from Alviar but the latter refused claiming that he is not liable for
damages considering that he did not incur legal delay since there was no specific time of
delivery agreed upon.

Issue
Whether or not the respondent incurred delay in the performance of his obligation.

Ruling
Respondent Angelito Alviar was negligent and incurred in delay in the performance of
his contractual obligation. The niche had to be constructed at the very least on the twenty-
second of December considering that it would take about two (2) days to finish the job if the
interment was to take place on the twenty-fourth of the month. Respondent's delay in the
delivery of the construction materials wasted so much time that construction of the tomb
could start only on the twenty-third. It could not be ready for the scheduled burial of
petitioner's wife. This case is clearly one of non-performance of a reciprocal obligation. In their
contract of purchase and sale, petitioner had already complied fully with what was required
of him as purchaser, i.e., the payment of the purchase price of P2,110.00. It was incumbent
upon respondent to immediately fulfill his obligation to deliver the goods otherwise delay
would attach.
 Tanguilig v. Court of Appeals
GR No. 117190, January 2, 1997
BELLOSILLO, J.
Xylex Dave P. Andres

Facts
In April 1987, Tanguilig of JMT Engineering and General Merchandising proposed to
construct a windmill system for Herce, Jr. for P60,000.00 with a one-year guaranty from the
date of completion and acceptance by Herce of the project. Herce paid Php 30,000.00 as
down payment and Php 15,000.00 as installment, leaving a balance of Php 15,000.00. Tanguilig
filed a complaint to collect PHP 15k due to Herce’s refusal and failure to pay the balance. Herce
contends: it was already paid to San Pedro General Merchandising Inc. (SPGMI) which
constructed a deep well to which the windmill system was to be connected; the deep well
formed part of the; even assuming that Herce owed Tanguilig, this should be offset by defects
in the windmill system which caused the structure to collapse after it was hit by strong wind.
Tanguilig, in reply: the deep well was not included in the agreement, for the amount was solely
for the windmill assembly and its installation; disowned any obligation to repair or reconstruct
the system, claiming that the windmill system was delivered in good and working condition,
and that Herce accepted it without protest; since the collapse was attributable to a typhoon,
a force majeure, he believed he is relieved from liability. The trial court ruled in favor of
Tanguilig. The CA reversed and ordered Tanguilig to reconstruct the windmill in accordance
with the stipulated one-year guaranty.

Issue
Whether or not Tanguilig is under obligation to reconstruct the collapsed windmill.

Ruling
Yes. In order for a party to claim exemption from liability by reason of fortuitous event,
the event should be the sole and proximate cause of the loss or destruction of the object of
the contract. Four requisites must concur: 1) the cause of the breach must be independent of
the will of the debtor; 2) the event must be unforeseeable or unavoidable; 3) the event must
such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and
4) the debtor must be free from any participation in or aggravation of the injury to the
creditor. Tanguilig failed to show that the collapse of the windmill was due solely to a
fortuitous event and that there was actually a typhoon on that day. Tanguilig merely stated
that there was a "strong wind." But a strong wind in this case cannot be fortuitous –
unforeseeable nor unavoidable. Tanguilig’s argument that Herce was already in default and
liable for his the loss is untenable. When the windmill failed to function properly it became
incumbent upon Tanguilig to institute the proper repairs in accordance with the guaranty
stated in the contract. Thus, Herce cannot be said to have incurred delay. Instead, it is
Tanguilig who should bear the expenses for the reconstruction of the windmill. A1167 of the
Civil Code is explicit that if a person obliged to do something fails to do it, the same shall be
executed at his cost.
 Tayag v. Court of Appeals
GR No. 96053, March 3, 1993
MELO, J.
Xylex Dave P. Andres

Facts
Juan Galicia, Sr. executed a deed of conveyance, prior to his demise in 1979 in favor of
Albrigido Leyva involving the undivided one-half portion of a piece of land situated at
Poblacion, Guimba, Nueva Ecija for the sum of P50,000.00. There is no dispute that the first
installment was received by Juan Galicia, Sr. And according to petitioners, of the P10,000.00
to be paid within ten days from execution of the instrument, only P9,707.00 was tendered to,
and received by, them on numerous occasions from May 29, 1975, up to November 3, 1979. It
was also agreed upon that private respondent will assume the vendors' obligation to the
Philippine Veterans Bank, however, he paid only the sum of P6,926.41 while the difference of
the indebtedness was paid by Juan Galicia, Sr.’s sister. Moreover, petitioners claimed that not
a single centavo of the P27,000.00 representing the remaining balance was paid to them.
Petitioners averred that private respondent’s failure to pay full consideration of the
agreement to sell gave them the right to have the contract rescinded.

Issue
Whether or not the petitioners have the right to rescind the contract in the present
case.

Ruling
Considering that the heirs of Juan Galicia, Sr. accommodated private respondent by
accepting the latter's delayed payments not only beyond the grace periods but also during
the pendency of the case for specific performance, petitioners' actuation is susceptible of but
one construction that they are now estopped from reneging from their commitment on
account of acceptance of benefits arising from overdue accounts of private respondent.
Indeed, the right to rescind is not absolute and will not be granted where there has been
substantial compliance by partial payments. Private respondent is ordered to pay the balance
of the purchase price and to reimburse the sum paid by Juan Galicia Sr.’s sister to the
Philippine Veteran’s bank, minus the attorney's fees and damages awarded in favor of private
respondent.
 Periquet, Jr. v. Court of Appeals
GR No. L-69996, December 5, 1994
KAPUNAN, J.
Xylex Dave P. Andres

Facts
Spouses Fernando Periquet and Petra Francisco were left childless after the death of
their only child, Elvira, so they took in a son out of wedlock of Marta Francisco-Reyes, sister of
Petra. Though he was not legally adopted, the boy was given the name Fernando Periquet, Jr.
and was reared to manhood by the spouses Periquet. On March 20, 1966, Fernando Periquet
died. When Petra died, she was survived by her siblings, nieces and nephews and by the
petitioner. But a few days before her death, Petra asked her lawyer to prepare her last will
and testament. However, she died before she could sign it. In the said will, Petra left her estate
to petitioner, Fernando Periquet, Jr. and provided for certain legacies to her other heirs. Felix
Franciso, brother of Petra, assigned his hereditary rights to the petitioner. However, later on,
he filed an action for annulment of the Assignment of Hereditary Rights claiming "gross
misrepresentation and fraud," "grave abuse of confidence," "mistake and undue influence,"
and "lack of cause and/or consideration" in the execution of the challenged deed of
assignment.

Issue
Whether or not the Assignment of Hereditary Rights is tainted with fraud.

Ruling
The kind of fraud that will vitiate a contract refers to those insidious words or
machinations resorted to by one of the contracting parties to induce the other to enter into a
contract which without them he would not have agreed to. In the case at bench, no such fraud
was employed by herein petitioner. Resultantly, the assignment of hereditary rights executed
by Felix Francisco in favor of herein petitioner is valid and effective. Felix Francisco could not
be considered to have been deceived into signing the subject deed of assignment for the
following reasons: The assignment was executed and signed freely and voluntarily by Felix
Francisco in order to honor, respect and give full effect to the last wishes of his deceased
sister, Petra. The same was read by him and was further explained by Atty. Diosdado
Guytingco. Furthermore, witnesses for petitioner, who also served as witnesses in the
execution and signing of the deed of assignment, declared that Felix Francisco was neither
forced nor intimidated to sign the assignment of hereditary rights.
 Cabanting v. BPI Family Savings Bank, Inc
GR No. 201927, February 17, 2016
PERALTA, J.
Xylex Dave P. Andres

Facts
Cabanting bought a Mitsubishi Adventure from Diamond Motors on installment basis.
He also executed a Promissory note with Chattel Mortgage on the vehicle in favor of Diamond
Motors wherein the parties stipulated that in case of failure to pay “the entire sum
outstanding under this note shall immediately become due and payable without the necessity
of notice or demand which I/We hereby waive." On the same day, Diamond motors assigned
to BPI Bank all its right, title and interest to the Promissory note. When Cabanting failed to
pay his monthly amortizations, BPI filed a case for Replevin and damages against Cabanting.
RTC rendered a decision in favor of BPI and ordered Cabanting to pay his unpaid balance. The
decision was affirmed by the CA on appeal. Cabanting now raised as error that there was no
proof of prior demand and that the stipulation on its waiver must be deemed invalid for being
a contract of adhesion.

Issue
Whether or not prior demand by the respondent bank is necessary before the
obligation of Cabating becomes due and demandable.

Ruling
No. The Supreme Court held that no prior demand was necessary. Petitioners are
bound by the aforementioned stipulation in the Promissory Note with Chattel Mortgage
waiving the necessity of notice and demand to make the obligation due and payable. The Civil
Code in Article 1169 provides that one incurs in delay or is in default from the time the obligor
demands the fulfillment of the obligation from the obligee. However, the law expressly
provides that demand is not necessary under certain circumstances, and one of these
circumstances is when the parties expressly waive demand. Hence, since the co-signors
expressly waived demand in the promissory notes, demand was unnecessary for them to be
in default. Prior demand is not a condition precedent to an action for a writ of replevin, since
there is nothing in Section 2, Rule 60 of the Rules of Court that requires the applicant to make
a demand on the possessor of the property before an action for a writ of replevin could be
filed.Clearly, as stated, Article 1169 (1) of the Civil Code allows a party to waive the need for
notice and demand. Petitioners' argument that their liability cannot be deemed due and
payable for lack of proof of demand must be struck down.
 Rivera v. Chua
GR No. 184458, January 14, 2015
PEREZ, J.
Xylex Dave P. Andres

Facts
The parties were friends and compadres for a long time already. Rivera obtained a loan
from the Spouses Chua evidenced by a Promissory Note. Three years from the date of
payment stipulated in the promissory note, Rivera, issued and delivered to Spouses Chua two
(2) checks drawn against his account at Philippine Commercial International Bank (PCIB) but
upon presentment for payment, the two checks were dishonored for the reason “account
closed.” As of 31 May 1999, the amount due the Spouses Chua was pegged at P366,000.00
covering the principal of P120,000.00 plus five percent (5%) interest per month from 1 January
1996 to 31 May 1999. The Spouses Chua alleged that they have repeatedly demanded payment
from Rivera to no avail. Because of Rivera’s unjustified refusal to pay, the Spouses Chua were
constrained to file a suit. The MeTC ruled against Rivera requiring him to pay the spouses Chua
P120,000.00 plus stipulated interest at the rate of 5% per month from 1 January 1996, and legal
interest at the rate of 12% percent per annum from 11 June 1999 and was affirmed by the RTC
of Manila. The Court of Appeals further affirmed the decision upon appeal of the two inferior
courts but with modification of lowering the stipulated interest to 12% per annum. Hence, a
petition at the Supreme Court.

Issue
Whether Rivera is still liable under the terms of the Promissory Note.

Ruling
Yes, even if Rivera’s Promissory Note is not a negotiable instrument and therefore
outside the coverage of Section 70 of the NIL which provides that presentment for payment
is not necessary to charge the person liable on the instrument, Rivera is still liable under the
terms of the Promissory Note that he issued. Article 1169 of the Civil Code explicitly provides:
Those obliged to deliver or to do something incur in delay from the time the obligee judicially
or extrajudicially demands from them the fulfillment of their obligation. However, the
demand by the creditor shall not be necessary in order that delay may exist: (1) When the
obligation or the law expressly so declare; or (2) When from the nature and the circumstances
of the obligation it appears that the designation of the time when the thing is to be delivered
or the service is to be rendered was a controlling motive for the establishment of the contract;
or (3) When demand would be useless, as when the obligor has rendered it beyond his power
to perform. The date of default under the Promissory Note is 1 January 1996, the day following
31 December 1995, the due date of the obligation. On that date, Rivera became liable for the
stipulated interest which the Promissory Note says is equivalent to 5% a month. In sum, until
31 December 1995, demand was not necessary before Rivera could be held liable for the
principal amount of -120,000.00. Thereafter, on 1 January 1996, upon default, Rivera became
liable to pay the Spouses Chua damages, in the form of stipulated interest.
 Raquel-Santos v. Court of Appeals
GR No. 174986, July 7, 2009
NACHURA, J.
Xylex Dave P. Andres

Facts
Armand O. Raquel-Santos was Finvest’s President and nominee to the PSE from
February 20, 1990 to July 16, 1998. Annalissa Mallari was Finvest’s Administrative Officer until
December 31, 1998. In the course of its trading operations, Finvest incurred liabilities to PSE
representing fines and penalties for non-payment of its clearing house obligations. PSE also
received reports that Finvest was not meeting its obligations to its clients. Consequently, PSE
indefinitely suspended Finvest from trading. The Securities and Exchange Commission (SEC)
also suspended its license as broker. PSE demanded from Finvest the payment of its
obligations to the PSE in the amount ofP4,267,339.99 and to its clients within 15 days. Finvest
promised to settle all obligations to its clients and to PSE subject to verification of the amount
due, but Finvest requested a deadline of July 31, 1999. PSE granted Finvest’s request, with the
warning that, should Finvest fail to meet the deadline, PSE might exercise its right to sell
Finvest’s membership seat and use the proceeds thereof to settle its obligations. PSE points
out that it has made several demands on Finvest for the payment of its obligations and the
amount due has been computed after consultation with Finvest’s representative, Mr. Ernesto
Lee. Considering, therefore, that Finvest already acknowledged and ascertained its
obligations with PSE and yet it defaulted in the payment thereof, PSE had the right to sell at
public auction Finvest’s pledged seat pursuant to the Pledge Agreement and in accordance
with Article 2112 of the Civil Code.

Issue
Whether or not Finvest incurred delay in its obligations.

Ruling
NO. A debt is liquidated when the amount is known or is determinable by inspection
of the terms and conditions of relevant documents. In the case, PSE insists that Finvest’s
liability for fines, penalties and charges has been established, determined and substantiated,
hence, liquidated. However, both trial court and CA have ruled otherwise. The findings of fact
of both the trial court and the CA are fully supported by the records and that they plainly show
that the parties were negotiating to determine the exact amount of Finvest’s obligations to
PSE, during which period PSE repeatedly moved the deadlines it imposed for Finvest to pay
the fines, penalties and charges, apparently to allow for more time to thresh out the details
of the computation of said penalties. Under the attendant circumstances, it cannot be said
that Finvest’s debt is liquidated. At the time PSE left the negotiating table, the exact amount
of Finvest’s fines, penalties and charges was still in dispute and as yet undetermined.
Consequently, Finvest cannot be deemed to have incurred in delay in the payment of its
bligations to PSE. It cannot be made to pay an obligation the amount of which was not fully
explained to it. The public sale of the pledged seat would, thus, be premature.
 RCBC vs. Court of Appeals
GR No. 128834, April 20, 1998
MELO, J.
Xylex Dave P. Andres

Facts
RCBC initially granted a credit facility of P30M to Goyu & Sons, Inc. GOYU’s applied
again, RCBC’s executive committee increased its credit facility to P50M to P90M and finally to
P117M. As security, GOYU executed 2 real estate mortgages and 2 chattel mortgages in favor
of 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. 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
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, creditor and GOYU, debtor, where the
subject insurance policies were attached in favor of Sebastian. RTC and CA also ruled that the
endorsements do not bear the signature of any officer of GOYU concluded that the
endorsements favoring RCBC as defective.

Issue
Whether or not RCBC as mortgagee, has any right over the insurance policies taken by
GOYU, the mortgagor, in case of the occurrence of loss.

Ruling
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. 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, thus, estopped from assailing their operative effects. 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.
 Santos Ventura Hocorma Foundation, Inc. v. Santos
GR No. 153004, November 5, 2004
QUISUMBING, J.
Xylex Dave P. Andres

Facts
There are several civil cases between herein respondent (then petitioner, Ernesto
Santos) and petitioner (then respondent, Santos Ventura Hocorma Foundation, Inc., SVHFI
for brevity). On October 26, 1990, Santos and SVHFI executed a Compromise Agreement
which amicable ended all their pending litigations. Santos move for the dismissal of the
aforesaid cases and caused the lifting of the notices of lis pendens on the real properties
involved. SVHFI, paid P1.5 million to Santos, leaving a balance of P13 million. On September 30,
1991, the RTC of Makati approved the compromise agreement. SVHFI sold two real properties,
which were previously subjects of lis pendens. Santos then sent a letter to the SVHFI
demanding the payment of the remaining P13 million, which the latter ignored. On October
28, 1992, Santos send another letter to SVHFI inquiring when it would pay the balance. There
was no response from SVHFI. Santos applied for the issuance of the writ of execution of its
compromise agreement. Granted by the RTC. Sheriff levied on the real properties petitioner,
which were formerly subjects of the lis pendens. On November 22, 1994, the real properties
were auctioned. Riverland, Inc. was the highest bidder and issued a Certificate of Sale
covering the real properties subject of the auction sale, provided for the right of redemption
within one year from the date of registration of properties. Santos and Riverland, Inc. filed a
Complaint for Declaratory Relief and Damages alleging that there was delay on the part of the
petitioner in paying the balance of P13 million. They prayed that petitioner be ordered to pay
legal interest and for the sales be declared final and not subject to legal redemption. SVHFI
was able to fully settle its outstanding balance on February 8, 1995.

Issue
Whether or not the petitioner is in default (mora).

Ruling
Yes. A compromise has upon the parties the effect and authority of res judicata, with
respect to the matter definitely stated therein, or which by implication from its terms should
be deemed to have been included therein. In the present case, Compromise Agreement was
entered into by the parties on October 26, 1990. It was judicially approved on September 30,
1991. The compromise agreement as a consensual contract became binding between the
parties upon its execution and not upon its court approval. From the time a compromise is
validly entered into, it becomes the source of the rights and obligation of the parties thereto.
The two-year period must be counted from October 26, 1990, the date of execution of the
compromise agreement, and not on the judicial approval of the compromise agreement on
September 30, 1991. When the respondents wrote a demand letter to petitioner, the
obligation was already due and demandable. When the petitioner failed to pay its due
obligation after the demand was made, it incurred delay.
 State Investment House, Inc. v. Court of Appeals,
GR No. 90676, June 19, 1991
FELICIANO, J.
Xylex Dave P. Andres

Facts
Respondent spouses Rafael and Refugio Aquino pledged certain shares of stock to
petitioner State Investment House Inc. in order to secure a loan of P120, 000.00. Prior to the
execution of the pledge, respondent spouses Jose and Marcelina Aquino signed an
agreement with Petitioner for the latter’s purchase of receivables amounting to P375,000.00.
When the 1st Account fell due, respondent spouses paid the same partly with their own funds
and partly from the proceeds of another loan which they obtained also from Petitioner
designated as the 2nd Account. This new loan was secured by the same pledge agreement
executed in relation to the 1st Account. When the new loan matured, State demanded
payment. Respondents expressed willingness to pay, requesting that upon payment, the
shares of stock pledged be released. State denied the request on the ground that the loan
which it had extended to the spouses Jose and Marcelina Aquino has remained unpaid. Atty.
Rolando Salonga sent to respondent spouses a Notice of Notarial Sale, he would sell at public
auction the shares of stock pledged to State. This prompted respondents to file a case before
the Regional Trial Court. The trial court rendered a decision in favor of the plaintiff ordering
State to immediately release the pledge and to deliver to respondents the share of stock upon
payment of the loan. The Court of Appeals affirmed in toto the decision of the trial court.

Issue
Whether or not the conditions to be complied with by the debtor desirous of being
released from his obligation in cases where the creditor unjustly refuses to accept payment
have been met by the spouses Aquino.

Ruling
The conditions had not been complied with. Article 1256 of the civil code states that:
“If the creditor to whom tender of payment has been made refuses without just cause to
accept it, the debtor shall be released from responsibility by consignation of the thing or sum
due.” Where the creditor unjustly refuses to accept payment, the debtor desirous of being
released from his obligation must comply with two (2) conditions: (a) tender of payment; and
(b) consignation of the sum due. Tender of payment must be accompanied or followed by
consignation in order that the effects of payment may be produced. In the instant case,
respondent spouses Aquino, while they are properly regarded as having made a written
tender of payment to petitioner state, failed to consign in court the amount due at the time
of the maturity of the 2nd Account No. It follows that their obligation to pay principal-cum-
regular or monetary interest under the terms and conditions of the said Account was not
extinguished by such tender of payment alone.
 Heirs of Bacus v. Court of Appeals
GR No. 127695, December 3, 2001
QUISUMBING, J.
Xylex Dave P. Andres

Facts
Luis Bacus leased to private respondent Faustino Duray a parcel of agricultural land.
The contract contained an option to buy clause. Under said option, the lessee had the
exclusive and irrevocable right to buy 2,000 square meters of the property within five years
from a year after the effectivity of the contract. Close to the expiration of the contract, Luis
Bacus died. Thereafter, the Duray spouses informed one of the heirs of Luis Bacus, that they
were willing and ready to purchase the property under the option to buy clause. Due to the
refusal of petitioners to sell the property, Duray filed a complaint for specific performance
against the heirs of Luis Bacus asking that he be allowed to purchase the lot specifically
referred to in the lease contract with option to buy. On the other hand, petitioners alleged
that before Luis Bacus’ death, private respondents conveyed to them the former’s lack of
interest to exercise their option because of insufficiency of funds. They further alleged that
private respondents did not deposit the money as required by the Lupon and instead
presented a bank certification which cannot be deemed legal tender.

Issue
Whether or not private respondents incur in delay when they did not deliver the
purchase price or consign it in court on or before the expiration of the contract.

Ruling
Obligations under an option to buy are reciprocal obligations. The performance of one
obligation is conditioned on the simultaneous fulfillment of the other obligation. In other
words, in an option to buy, the payment of the purchase price by the creditor is contingent
upon the execution and delivery of a deed of sale by the debtor. In this case, when private
respondents opted to buy the property, their obligation was to advise petitioners of their
decision and their readiness to pay the price. They were not yet obliged to make actual
payment. Only upon petitioners’ actual execution and delivery of the deed of sale were they
required to pay. Notice of the creditor’s decision to exercise his option to buy need not be
coupled with actual payment of the price, so long as this is delivered to the owner of the
property upon performance of his part of the agreement. Consequently, since the obligation
was not yet due, consignation in court of the purchase price was not yet required. Private
respondents did not incur in delay when they did not yet deliver payment nor make a
consignation before the expiration of the contract. In reciprocal obligations, neither party
incurs in delay if the other does not comply or is not ready to comply in a proper manner with
what is incumbent upon him. Only from the moment one of the parties fulfills his obligation,
does delay by the other begin. In this case, as there was no compliance yet with what was
incumbent upon petitioners under the option to buy, private had not incurred in delay when
the cashier’s check was issued even after the contract expired.
 BPI Investment Corporation v. Court of Appeals
GR No. 133632, February 15, 2002
QUISUMBING, J.
Xylex Dave P. Andres

Facts
Frank Roa obtained a loan with interest rate of 16 1/4%/annum from Ayala Investment
and Development Corporation (AIDC), the predecessor of BPI Investment Corp. (BPIIC), for
the construction of a house on his lot. He mortgaged the house and lot to AIDC as security for
the loan. Roa sold the house and lot to ALS Management & Development Corp. and Antonio
Litonjua for P850K who paid P350K in cash and assumed the P500K indebtness of ROA with
AIDC. AIDC proposed to grant ALS and Litonjua a new loan for P500K with interested rate of
20%/annum and service fee of 1%/annum on the outstanding balance payable within 10 years
through equal monthly amortization and penalty interest of 21%/annum/day from the date the
amortization becomes due and payable. After sometime, BPIIC instituted foreclosure
proceedings against ALS and Litonjua on the ground that they failed to pay the mortgage
indebtedness. Notice of sheriff's sale was published. ALS and Litonjua filed Civil Case against
BPIIC alleging that they are not in arrears and instead they made an overpayment as of June
30, 1984 since the P500K loan was only released September 13, 1982 which marked the start
of the amortization and since only P464,351.77 was released applying legal compensation the
balance of P35,648.23 should be applied to the monthly amortizations. RTC ruled in favor of
ALS and Litonjua and against BPIIC that the loan granted by BPI to ALS and Litonjua was only
in the principal sum of P464,351.77 and awarding moral damages, exemplary damages and
attorney’s fees for the publication. CA affirmed reasoning that a simple loan is perfected upon
delivery of the object of the contract which is on September 13, 1982.

Issue
Whether or not the contract of loan was perfected only on September 13, 1982 or the
second release of the loan.

Ruling
Yes. Contract of loan involves a reciprocal obligation, wherein the obligation or
promise of each party is the consideration for that of the other. It is a basic principle in
reciprocal obligations that neither party incurs in delay, if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. Consequently,
petitioner could only demand for the payment of the monthly amortization after September
13, 1982 for it was only then when it complied with its obligation under the loan contract. BPIIC
was negligent in relying merely on the entries found in the deed of mortgage, without
checking and correspondingly adjusting its records on the amount actually released and the
date when it was released. Such negligence resulted in damage for which an award of nominal
damages should be given.
 Leaño v. Court of Appeals
GR No. 129018, November 15, 2001
PARDO, J.
Xylex Dave P. Andres

Facts
On November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leaño, as
vendee executed a contract to sell involving a piece of land. In the contract, Carmelita Leaño
bound herself to pay Hermogenes Fernando the sum of PhP107,750.00 as the total purchase
price of the lot. The contract also provided for a grace period of one month within which to
make payments, together with the one corresponding to the month of grace. Should the
month of grace expire without the installments for both months having been satisfied, an
interest of 18% per annum will be charged on the unpaid installments. Should a period of ninety
days elapse from the expiration of the grace period without the overdue and unpaid
installment paid with proper interests, Fernando, as vendor, was authorized to declare the
contract cancelled. The defendant later filed an ejectment case for failure of petitioner to pay
within the terms of contract.

Issue
Whether or not petitioner is entitled to rights over the lot.

Ruling
The transaction between the parties was a conditional sale not an absolute sale. The
intention of the parties was to reserve the ownership of the land in the seller until the buyer
has paid the total purchase price. The ownership of the lot was not transferred to Carmelita
Leaño. In a contract to sell real property on installments, the full payment of the purchase
price is a positive suspensive condition, the failure of which is not considered a breach, casual
or serious, but simply an event that prevented the obligation of the vendor to convey title
from acquiring any obligatory force. In the case at bar, petitioner’s non-payment of the
installments after April 1, 1989, prevented the obligation of respondent to convey the
property from arising. In fact, it brought into effect the provision on cancellation. However,
in view of RA No. 6552, that the default committed by petitioner in respect of the obligation
could be compensated by the interest and surcharges imposed upon her under the contract
in question.
 Integrated Packaging Corp. v. Court of Appeals
GR No. 115117, June 8, 2000
QUISUMBING, J.
Xylex Dave P. Andres

Facts
Petitioner and private respondent executed an order agreement whereby private
respondent bound itself to deliver to petitioner 3,450 reams of printing papers under
specified schedule of delivery. As of July 30, 1979, private respondent had delivered to
petitioner 1,097 reams of printing paper out of the total 3,450 reams stated in the agreement.
Petitioner alleged it wrote private respondent to immediately deliver the balance because
further delay would greatly prejudice petitioner. From June 5, 1980 and until July 23, 1981,
private respondent delivered again to petitioner various quantities of printing paper
amounting to P766,101.70. However, petitioner encountered difficulties paying private
respondent said amount. Accordingly, private respondent made a formal demand upon
petitioner to settle the outstanding account. Private respondent filed a collection suit against
petitioner for the sum of P766,101.70, representing the unpaid purchase price of printing
paper bought by petitioner on credit. In its answer, petitioner denied the material allegations
of the complaint. It alleged that private respondent was able to deliver only 1,097 reams of
printing paper which was short of 2,875 reams, in total disregard of their agreement; that
private respondent failed to deliver the balance of the printing paper despite demand
therefor, hence, petitioner suffered actual damages and failed to realize expected profits.

Issue
Whether or not private respondent violated the order agreement.

Ruling
The transaction between the parties is a contract of sale whereby private respondent
(seller) obligates itself to deliver printing paper to petitioner (buyer) which, in turn, binds itself
to pay its equivalent (price). Both parties concede that the order agreement gives rise to a
reciprocal obligation such that the obligation of one is dependent upon the obligation of the
other. Reciprocal obligations are to be performed simultaneously, so that the performance of
one is conditioned upon the simultaneous fulfillment of the other. Thus, private respondent
undertakes to deliver printing paper of various quantities subject to petitioner’s
corresponding obligation to pay, on a maximum 90-day credit, for these materials. Clearly,
petitioner did not fulfill its side of the contract as its last payment in August 1981 could cover
only materials covered by delivery invoices dated September and October 1980. Thus, private
respondent did not violate the order agreement.
 Laforteza v. Machuca
GR No. 137552, June 16, 2000
GONZAGA-REYES, J.
Xylex Dave P. Andres

Facts
In the exercise of the Special Power of Attorney executed by their co-heirs, by Roberto
Z. Laforteza and Gonzalo Z. Laforteza, Jr. entered into a Memorandum of Agreement,
Contract to Sell, with the plaintiff over the subject house and lot for the sum of P630,000.00.
On September 18, 1998, defendant heirs, through their counsel wrote a letter to the plaintiff
furnishing the latter a copy of the reconstituted title to the subject property, advising him that
he had thirty (3) days to produce the balance of P600,000.00 under the Memorandum of
Agreement which plaintiff received on the same date. The plaintiff requested a 30-day
extension within which he would pay the balance of the purchase price. This was granted by
Roberto Laforteza but not by Gonzalo Laforteza, the second attorney-in-fact. On November
15, 1989, plaintiff informed the defendant heirs, through defendant Roberto Z. Laforteza, that
he already has the money. However, the defendants, refused to accept the told him that the
subject property was no longer for sale. Thereafter, plaintiff reiterated his request to tender
payment of the balance but the defendants insisted on the rescission of the Memorandum of
Agreement. Thereafter, plaintiff filed the instant action for specific performance.

Issue
Whether or not defendants may rescind the contract of sale entered with Machuca.

Ruling
No. The failure of the respondent to pay the balance of the purchase price was a
breach of the contract and was a ground for rescission thereof. The extension of thirty (30)
days allegedly granted to the respondent by Roberto was correctly found to be ineffective
inasmuch as the signature of Gonzalo did not appear thereon as required by the Special
Powers of Attorney. However, the evidence reveals that after the expiration of the six-month
period provided for in the contract, the petitioners were not ready to comply with what was
incumbent upon them, the delivery of the reconstituted title of the house and lot. It was only
nearly eight months after the execution of the Memorandum of Agreement when the
petitioners informed the respondent that they already had a copy of the reconstituted title
and demanded the payment of the balance of the purchase price. The respondent could not
therefore be considered in delay for in reciprocal obligations, neither party incurs in delay if
the other party does not comply or is not ready to comply in a proper manner with what was
incumbent upon him. Delay in payment was only thirty days which was caused by the
respondent’s justified but mistaken belief that an extension to pay was granted to him. We
agree with the Court of Appeals that the delay of one month in payment was a mere casual
breach that would not entitle the respondents to rescind the contract. Rescission of a
contract will not be permitted for a slight or casual breach, but only such substantial and
fundamental breach as would defeat the very object of the parties in making the agreement.
 Cortes v. Court of Appeals
GR No. 126083, July 12, 2006
YNARES-SANTIAGO, J.
Xylex Dave P. Andres

Facts
This is a petition for reversal of decision made by the Court of Appeals setting aside
the decision of Trial Court to rescind the contract between Antonio Cortes and Villa Ezperenza
Development Corporation for the contract of sale of land amounting to 3.7 million pesos
located at Baclaran, Metro Manila with the following terms: The Corporation shall advance 2.2
M as downpayment, and Cortes shall likewise deliver the TCT for the 3 lots; the balance of
1.5M shall be payable within a year from the date of the execution. The Corporation paid the
partial the amount of P1,213,000.00 as downpayment but Cortes failed to deliver the CTC and
the original copy of the Deed of Sale arising resulting to the filing of this instant case by the
Corporation praying for specific performance to deliver the CTC and the Deed of sale from the
petitioner. Cortes claimed that the owner’s duplicate copy of the three TCTs were
surrendered to the Corporation and it is the latter which refused to pay in full the agreed down
payment. RTC ruled rescinding the contract of sale and return the downpayment with interest
for the Corporation having failed to pay in full the amount of P2,200,000.00 despite Cortes’
delivery of the Deed of Absolute Sale and the TCTs, rescission of the contract is proper. On
appeal by the respondents, CA reversed the decision of the RTC. However, Cortes file a
petition praying for the reinstatement of rescinding the contract by RTC since the Corporation
failed in the performance of their obligation.

Issue
Whether or not there is delay in the performance of the parties’ obligation that would
justify the rescission of the contract of sale.

Ruling
No. The contract of sale in question gave rise to a reciprocal obligation of the parties.
Considering that their obligation was reciprocal, performance thereof must be simultaneous.
The mutual inaction of Cortes and the Corporation therefore gave rise to a compensation
morae or default on the part of both parties because neither has completed their part in their
reciprocal obligation. Cortes is yet to deliver the original copy of the notarized Deed and the
TCTs, while the Corporation is yet to pay in full the agreed down payment of P2,200,000.00.
This mutual delay of the parties cancels out the effects of default, such that it is as if no one is
guilty of delay. Under Article 1169 of the Civil Code, from the moment one of the parties fulfills
his obligation, delay by the other begins. The Court of Appeals therefore correctly ordered the
parties to perform their respective obligation in the contract of sale, i.e., for Cortes to, among
others, deliver the necessary documents to the Corporation and for the latter to pay in full,
not only the down payment, but the entire purchase price.
 Legaspi Oil Co., Inc. v. Court of Appeals
GR No. 96505, July 1, 1993
MELO, J.
Xylex Dave P. Andres

Facts
Bernard Oseraos had several transactions with Legaspi Oil Co. for the sale of copra to
the latter. The price at which appellant sells the copra varies from time to time, depending on
the prevailing market price when the contract is entered into. On February 16, 1976,
appellant's agent Jose Llover signed contract No. 3804 for the sale of 100 tons of copra at
P82.00 per 100 kilos with delivery terms of 20 days effective March 8, 1976. After the period
to deliver had lapsed, appellant sold only 46,334 kilos of copra thus leaving a balance of 53,666
kilos. Accordingly, demands were made upon appellant to deliver the balance with a final
warning that failure to deliver will mean cancellation of the contract, the balance to be
purchased at open market and the price differential to be charged against appellant. On
October 22, 1976, since there was still no compliance, appellee exercised its option under the
contract and purchased the undelivered balance from the open market at the prevailing price
of P168.00 per 100 kilos, or a price differential of P86.00 per 100 kilos, a net loss of P46,152.76
chargeable against appellant.

Issue
Whether or not private respondent is guilty of breach of contact.

Ruling
Private respondent is guilty of fraud in the performance of his obligation under the
sales contract whereunder he bound himself to deliver to petitioner 100 metric tons of copra.
However within the delivery period, Oseraos delivered only 46,334 kilograms of copra to
petitioner. Petitioner made repeated demands upon private respondent to deliver the
balance of 53,666 kilograms but private respondent ignored the same. Petitioner made a final
demand with a warning that, should private respondent fail to complete delivery of the
balance of 53,666 kilograms of copra, petitioner would purchase the balance at the open
market and charge the price differential to private respondent. Still private respondent failed
to fulfill his contractual obligation to deliver the remaining 53,666 kilograms of copra and
since there was still no compliance by private respondent, petitioner exercised its right under
the contract and purchased 53,666 kilograms of copra, the undelivered balance, at the open
market at the then prevailing price of P168.00 per 100 kilograms, a price differential of
P46,152.76. The conduct of private respondent clearly manifests his deliberate fraudulent
intent to evade his contractual obligation for the price of copra had in the meantime more
than doubled from P82.00 to P168 per 100 kilograms. Under Article 1170 of the Civil Code of
the Philippines, those who in the performance of their obligation are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are liable
for damages. Pursuant to said article, private respondent is liable for damages.
 Solidbank Corporation v. Mindanao Ferroalloy Corporation
GR No. 153535, July 28, 2005
PANGANIBAN, J.
Xylex Dave P. Andres

Facts
Mindanao Ferroalloy corporation is the fruit of a joint venture agreement between
a Filipino corporation and Korean Corporation. In its operations, its liabilities ballooned over
its assets that it had to secure loans from petitioner Solidbank. The loans were later
consolidated and restructured, evidenced by a promissory note. The promissory note was
signed by Cu and Hong, both officers of the corporation. The corporation, through the same
officers also executed a deed of assignment. Thereafter, the corporation stopped its
operations and the loan was left unpaid. The bank was prompted to file a complaint
against the corporation, and with it, impleading the officers who signed the agreement
and promissory notes. The trial court held in favor of the bank but didn't adjudge liability of
the officers. Both the trial court and CA held that there was no solidary liability on the part of
the officers impleaded by the bank.

Issue
Whether or not principal officers can be held personally liable upon signing the
contract of loan under the name of the corporation.

Ruling
Basic is the principle that a corporation is vested by law with a personality separate
and distinct from that of each person composing or representing it. Equally fundamental is
the general rule that corporate officers cannot be held personally liable for the consequences
of their acts, for as long as these are for and on behalf of the corporation, within the scope of
their authority and in good faith. The separate corporate personality is a shield against the
personal liability of corporate officers, whose acts are properly attributed to the corporation.
Moreover, it is axiomatic that solidary liability cannot be lightly inferred. Since solidary liability
is not clearly expressed in the Promissory Note and is not required by law or the nature of the
obligation in this case, no conclusion of solidary liability can be made. Furthermore, nothing
supports the alleged joint liability of the individual petitioners because, as correctly pointed
out by the two lower courts, the evidence shows that there is only one debtor: the
corporation.
 The International Corporate v. Gueco
GR No. 141968, February 12, 2001
KAPUNAN, J.
Xylex Dave P. Andres

Facts
The Gueco Spouses obtained a loan from petitioner International Corporate Bank (now
Union Bank of the Philippines) to purchase a car. In consideration thereof, the Spouses
executed promissory notes which were payable in monthly installments and chattel mortgage
over the car to serve as security for the notes. The Spouses defaulted in payment of
installments. After some negotiations and computation, the amount of car loan was lowered.
Finally, Dr. Gueco delivered a manager’s check in the amount of reduced car loan but the car
was not released because of his refusal to sign the Joint Motion to Dismiss. Petitioner,
however, insisted that the joint motion to dismiss is standard operating procedure in their
bank to effect a compromise and to preclude future filing of claims, counterclaims or suits for
damages.

Issue
Whether or not there was fraud in the part of herein petitioner.

Ruling
Fraud has been defined as the deliberate intention to cause damage or prejudice. It is
the voluntary execution of a wrongful act, or a willful omission, knowing and intending the
effects which naturally and necessarily arise from such act or omission. We fail to see how the
act of the petitioner bank in requiring the respondent to sign the joint motion to dismiss could
constitute as fraud. True, petitioner may have been remiss in informing Dr. Gueco that the
signing of a joint motion to dismiss is a standard operating procedure of petitioner bank.
However, this cannot in anyway have prejudiced Dr. Gueco. The motion to dismiss was in fact
also for the benefit of Dr. Gueco, as the case filed by petitioner against it before the lower
court would be dismissed with prejudice. The whole point of the parties entering into the
compromise agreement was in order that Dr. Gueco would pay his outstanding account and
in return petitioner would return the car and drop the case for money and replevin before the
Metropolitan Trial Court. Petitioner's act of requiring Dr. Gueco to sign the joint motion to
dismiss cannot be said to be a deliberate attempt on the part of petitioner to renege on the
compromise agreement of the parties. It should, likewise, be noted that in cases of breach of
contract, moral damages may only be awarded when the breach was attended by fraud or
bad faith. The law presumes good faith. Dr. Gueco failed to present an iota of evidence to
overcome this presumption. Necessarily, the claim for exemplary damages must fail. In no
way, may the conduct of petitioner be characterized as “wanton, fraudulent, reckless,
oppressive or malevolent.”
 Woodhouse v. Halili,
GR No. L-4811, July 31, 1953
LABRADOR, J.
Xylex Dave P. Andres

Facts
On November 29, 1947, plaintiff Woodhouse entered into a written agreement with
defendant Halili stating among others that: 1) that they shall organize a partnership for the
bottling and distribution of Missionsoft drinks, plaintiff to act as industrial partner or manager,
and the defendant as a capitalist, furnishing the capital necessary therefore; 2) that plaintiff
was to secure the Mission Soft Drinks franchise for and in behalf of the proposed partnership
and 3) that the plaintiff was to receive 30 per cent of the net profits of the business. Prior to
entering into this agreement, plaintiff had informed the Mission Dry Corporation of Los
Angeles, California, that he had interested a prominent financier in the business, who was
willing to invest half a million dollars and requested, in order that he may close the deal with
him, that the right to bottle and distribute be granted him for a limited time under the
condition that it will finally be transferred to the corporation. Pursuant to this request,
plaintiff was given “a thirty days’ option on exclusive bottling and distribution rights for the
Philippines”. The contract was finally signed by plaintiff. When the bottling plant was already
in operation, plaintiff demanded of defendant that the partnership papers be executed.
Defendant Halili gave excuses and would not execute said agreement, thus the complaint by
the plaintiff. The CFI ruled: 1) accounting of profits and to pay plaintiff 15 % of the profits and
that the 2) execution of contract cannot be enforced upon parties. Lastly, the 3) fraud wasn’t
proved

Issue
Whether or not plaintiff falsely represented that he had an exclusive franchise to bottle
Mission beverages.

Ruling
Yes. Plaintiff did make false representations and this can be seen through his letters to
Mission Dry Corporation asking for the latter to grant him temporary franchise so that he
could settle the agreement with defendant. The existence of this provision in the final
agreement does not militate against plaintiff having represented that he had the exclusive
franchise; it rather strengthens belief that he did actually make the representation. The
defendant believed, or was made to believe, that plaintiff was the grantee of an exclusive
franchise. Thus it is that it was also agreed upon that the franchise was to be transferred to
the name of the partnership, and that, upon its dissolution or termination, the same shall be
reassigned to the plaintiff. Again, the immediate reaction of defendant, when in California he
learned that plaintiff did not have the exclusive franchise, was to reduce, as he himself
testified, plaintiff’s participation in the net profits to one half of that agreed upon. He could
not have had such a feeling had not plaintiff actually made him believe that he was the
exclusive grantee of the franchise.
 Regala v. Carin
GR No. 188715, April 6, 2011
CARPIO MORALES, J.
Xylex Dave P. Andres

Facts
Regala and Carin are adjacent neighbors. Regala decided add a second storey to his
house, under the guise of merely building an extension to it, and asked Carin for permission
to bore a hole through a perimeter wall shared by both their respective properties, to which
Carin verbally consented. Regala suffered from the dust and debris, hence, he filed a
complaint before the City Engineers Office for lack of building permit and before the Office of
Barangay for encroachment, invasion of privacy, damages arising from construction and
illegal construction of scaffoldings in his (Regala) property. However, Regala still continued
the work despite several notices from the City Engineers Office. Carin filed a complaint for
damages before the RTC alleging that instead of boring just one hole as agreed upon,
petitioner demolished the whole length of the wall and that debris and dust piled up on his
property. Regala answered that he was the sole and exclusive owner of the wall referred to
as a perimeter wall and that securing the consent was a mere formality to facilitate the
issuance of a building permit. Engineer Haduca found an encroachment by petitioner of six
centimeters. Hence, RTC rendered judgment in favor of respondent.

Issue
Whether or not Carin is entitled to damages.

Ruling
No. It bears noting that petitioner was engaged in the lawful exercise of his property
rights to introduce renovations to his abode. While he initially did not have a building permit
and may have misrepresented his real intent when he initially sought respondents consent,
the lack of the permit was inconsequential since it only rendered petitioner liable to
administrative sanctions or penalties. However, Regala cannot steer clear from any liability
whatsoever. Carin and his family’s rights to the peaceful enjoyment of their property have, at
the very least, been inconvenienced from the incident borne of petitioners construction work.
Any pecuniary loss or damage suffered by respondent cannot be established as the records
are bereft of any factual evidence to establish the same. Nominal damages may thus be
adjudicated in order that a right of the plaintiff, respondent herein, which has been violated
or invaded by the defendant, petitioner herein, may be vindicated or recognized, and not for
the purpose of indemnifying the plaintiff for any loss suffered by him.
 Republic of the Philippines v. The Court of Tax Appeals
GR No. 139050, October 2, 2001
VITUG, J.
Xylex Dave P. Andres

Facts
On 12 December 1992, a shipment of bales of textile gray cloth arrived at the Manila
International Container Port (MICP). There has been a mistake in the name of the consignee
provided in the shipment's Inward Foreign Manifest. Forthwith, the shipping agent, FIL-
JAPAN, requested for an amendment of the Inward Foreign Manifest so as to correct the
name of the consignee from that of GQ GARMENTS, Inc., to that of AGFHA, Inc. Subsequently,
FIL-JAPAN forwarded to AGFHA, Inc., the amended Inward Foreign Manifest which the latter,
in turn, submitted to the MICP Law Division. The MICP indorsed the document to the Customs
Intelligence Investigation Services (CIIS). The CIIS placed the subject shipment under Hold
Order on the ground that GQ GARMENTS, Inc., could not be located in its given address and
was thus suspected to be a fictitious firm. Forfeiture proceedings under Section 2530(f) and
(l) (3-5) of the Tariff and Customs Code were initiated.

Issue
Whether or not the private respondent is guilty of fraud in relation to the shipment
subject of the case at bench.

Ruling
Petitioner asserts that all of the requisites for forfeiture proceedings under the Tariff
and Customs Code are present in this case. Private respondent AGFHA, Inc., on the other
hand, maintains that there has only been an inadvertent error and not an intentional wrongful
declaration by the shipper to evade payment of any tax due. Fraud must be proved to justify
forfeiture. It must be actual, amounting to intentional wrong-doing with the clear purpose of
avoiding the tax. Forfeiture is not favored in law nor in equity. Mere negligence is not
equivalent to the fraud contemplated by law. What is here involved is an honest mistake, not
even directly attributable to private respondent, which will not deprive the government of its
right to collect the proper tax. The conclusion of the appellate court, being consistent with
the evidence on record and not contrary to law and jurisprudence, hardly can be overturned
by this Court.
 Philippine Banking Corporation v. Dy
GR No. 183774, November 14, 2012
PERLAS-BERNABE, J.
Xylex Dave P. Andres

Facts
The spouses Delgado entered into an agreement with a certain Cecilia Tan for the
purchase of the former’s property by the latter to be paid in installment, or from time to time,
until the Sps. Delgado are ready to execute a deed of sale and transfer the title to Tan upon
full payment. Tan however later on found out that the property had already been transferred
to the name of the Dys and had been mortgaged to Philbank. Tan filed an action for specific
performance and annulment of the title of the Dys. The Delgados contend that there was no
perfected sale between them and Tan as she did not agree on the selling price and that the
sale and transfer of the property of the Dys was fictitious and was only made in order for the
Dys to enable the Delgados to mortgage the property and obtain a loan from PhilBank. The
Delgados contend that PhilBank is not a mortgagee in good faith as it was aware of the
fictitious nature of the sale of the porerty. While PHilBank avers that they are a mortgagee in
good faith and should not be held liable to any of the parties for damages. Tan subsequently
abandoned her claim on the property and the sale between the Dys and Delgados have been
rules as void which has become final and executory.

Issue
Whether or not PhilBank is a mortgagee in good faith.

Ruling
Yes. A finding of negligence must always be contextualized in line with the attendant
circumstances of a particular case. As aptly held in Philippine National Bank v. Heirs of
Estanislao Militar, "the diligence with which the law requires the individual or a corporation at
all times to govern a particular conduct varies with the nature of the situation in which one is
placed, and the importance of the act which is to be performed." Thus, without diminishing
the time-honored principle that nothing short of extraordinary diligence is required of banks
whose business is impressed with public interest, Philbank's inconsequential oversight should
not and cannot serve as a bastion for fraud and deceit. To be sure, fraud comprises "anything
calculated to deceive, including all acts, omissions, and concealment involving a breach of
legal duty or equitable duty, trust, or confidence justly reposed, resulting in damage to
another, or by which an undue and unconscientious advantage is taken of another." In this
light, the Dys' and Sps. Delgado's deliberate simulation of the sale intended to obtain loan
proceeds from and to prejudice Philbank clearly constitutes fraudulent conduct. As such, Sps.
Delgado cannot now be allowed to deny the validity of the mortgage executed by the Dys in
favor of Philbank as to hold otherwise would effectively sanction their blatant bad faith to
Philbank's detriment. As the Dys and Delgados conspired together to induce PhilBank in
mortgaging the property through fraud, PHilBank cannot be considered as negligent or a
mortgagee in bad faith.
 Diaz v. Davao Light and Power Co., Inc.
GR No. 160959, April 3, 2007
CALLEJO, SR., J.
Xylex Dave P. Andres

Facts
Plaintiff asks for damages for defendant’s alleged malicious prosecution of a criminal
case of theft of electricity against him, for plaintiff’s filing of a charge of violation of P.D. 401
as amended after dismissal of the theft case, the filing of a damage suit against him before
the RTC of Cebu City which was dismissed and the filing of another damage suit before the
same Cebu RTC which is still pending. Damages are also being sought for defendant’s removal
of Electric Meter, but this is a subject matter of a case pending before this Court and therefore
said court retains jurisdiction over the said cause of action. The RTC held that while the City
Prosecutor, and later the Secretary of Justice, concluded that there was no probable cause
for the crime of theft, this did not change the fact that plaintiff made an illegal connection for
electricity. A person’s right to litigate should not be penalized by holding him liable for
damages. The CA affirmed the decision of the RTC. As to the effect of the compromise
agreement, the CA ruled that it did not bar the filing of the criminal action. Hence, this petition.

Issue
Whether or not DLPC acted in bad faith in instituting the criminal cases against Diaz.

Ruling
Article 2028 of the Civil Code defines a compromise as a contract whereby the parties,
by making reciprocal concessions, avoid litigation or put an end to one already commenced.
The purpose of compromise is to settle the claims of the parties and bar all future disputes
and controversies. However, criminal liability is not affected by compromise for it is a public
offense which must be prosecuted and punished by the Government on its own motion,
though complete reparation should have been made of the damages suffered by the
offended party. A criminal case is committed against the People, and the offended party may
not waive or extinguish the criminal liability that the law imposes for the commission of the
offense. Moreover, a compromise is not one of the grounds prescribed by the Revised Penal
Code for the extinction of criminal liability. On the other hand, malicious prosecution has been
defined as an action for damages brought by or against whom a criminal prosecution, civil suit
or other legal proceeding has been instituted maliciously and without probable cause, after
the termination of such prosecution, suit, or other proceeding in favor of the defendant
therein. DLPC was not motivated by malicious intent or by a sinister design to unduly harass
petitioner, but only by a well-founded anxiety to protect its rights. Respondent DLPC cannot
therefore be faulted in availing of the remedies provided for by law.
 Yasoña v. De Ramos
G.R. No. 156339 October 6, 2004
CORONA, J.
Jerico Cariño Lopez

Facts
Aurea Yasoña and her son Saturnino went to the house of Jovencio de Ramos to ask
for financial assistance in paying their loans to PNB, otherwise their residential house and lot
would be foreclosed. Inasmuch as Aurea was his aunt, Jovencio acceded to the request. They
agreed that, upon payment by Jovencio of the loan to PNB, half of Yasoñas' subject property
would be sold to him. Jovencio paid Aurea‘s bank loan. As agreed upon, Aurea executed a
deed of absolute sale in favor of Jovencio over half of the lot consisting of 123 sq. m.
Thereafter, the lot was surveyed, and separate titles were issued by the Register of Deeds in
the names of Aurea and Jovencio. Twenty-two years later, Aurea filed an estafa complaint
against brothers Jovencio and Rodencio de Ramos on the ground that she was deceived by
them when she asked for their assistance in 1971 concerning her mortgaged property. In her
complaint, Aurea alleged that Rodencio asked her to sign a blank paper on the pretext that it
would be used in the redemption of the mortgaged property. In February 1994, the assistant
provincial prosecutor dismissed the criminal complaint for lack of evidence. On account of this
dismissal, Jovencio and Rodencio filed a complaint for damages on the ground of malicious
prosecution. They alleged that the filing of the estafa complaint against them was done with
malice and caused irreparable injury to their reputation, as Aurea knew full well that she had
already sold half of the property to Jovencio.

Issue
Whether or not the filing of the criminal complaint for estafa against brothers de
Ramos constituted malicious prosecution.

Ruling
To constitute malicious prosecution, there must be proof that the prosecution was
prompted by a sinister design to vex or humiliate a person, and that it was initiated
deliberately by the defendant knowing that his charges were false and groundless. The mere
act of submitting a case to the authorities for prosecution does not make one liable for
malicious prosecution. In this case, the sale of the property was evidenced by a deed of sale
duly notarized and registered with the local Register of Deeds. Separate titles issued in the
names of Yasoña and Jovencio. Since 1973, Jovencio had been paying the realty taxes of the
portion registered in his name. In 1974, Aurea even requested Jovencio to use his portion as
bond for the temporary release of her son who was charged with malicious mischief. Also,
when Aurea borrowed money from banks, only her portion was mortgaged. Evidence indicate
that Aurea had long acknowledged Jovencio‘s ownership. Malicious prosecution, both in
criminal and civil cases, requires the elements of (1) malice and (2) absence of probable cause.
These 2 elements were present in the present controversy. The decision declaring the Yasoñas
liable for malicious prosecution was affirmed in toto.
 FGU Insurance Corporation v. Sarmiento Trucking Corporation
G.R. No. 141910 August 6, 2002
VITUG, J.
Jerico Cariño Lopez

Facts
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on June 18, 1994, 30
units of Condura S.D. white refrigerators aboard its Isuzu truck driven by Lambert Eroles, to
the Central Luzon Appliances in Dagupan City. While traversing the North Diversion Road
along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified
truck, causing it to fall into a deep canal, resulting in damage to the cargoes. FGU, an insurer
of the shipment, paid the value of the covered cargoes (P204,450.00) to Concepcion
Industries, Inc.,. Being subrogee of CII’s rights & interests, FGU, in turn, sought
reimbursement from GPS. Since GPS failed to heed the claim, FGU filed a complaint for
damages & breach of contract of carriage against GPS and Eroles with the RTC. In its answer,
respondents asserted that GPS was only the exclusive hauler of CII since 1988, and it was not
so engaged in business as a common carrier. Respondents further claimed that the cause of
damage was purely accidental. GPS filed a motion to dismiss the complaint by way of
demurrer to evidence on the ground that petitioner had failed to prove that it was a common
carrier. The RTC granted the motion to dismiss on April 30, 1996. It subsequently dismissed
the complaint holding that GPS was not a common carrier defined under the law & existing
jurisprudence. The subsequent motion for reconsideration having been denied, FGU
interposed an appeal to the CA. The CA rejected the FGU’s appeal & ruled in favor of GPS. It
also denied petitioner’s motion for reconsideration.

Issue
Whether or not GPS may be considered a common carrier as defined under the law &
existing jurisprudence. 2. Whether or not GPS, either as a common carrier or a private carrier,
may be presumed to have been negligent when the goods it undertook to transport safely
were subsequently damaged while in its protective custody & possession.

Ruling
The SC finds the conclusion of the RTC and the CA to be amply justified. GPS, being an
exclusive contractor & hauler of Concepcion Industries, Inc., rendering/offering its services to
no other individual or entity, cannot be considered a common carrier. Common carriers are
persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for hire or compensation,
offering their services to the public, whether to the public in general or to a limited clientele
in particular, but never on an exclusive basis. The true test of a common carrier is the carriage
of passengers/goods, providing space for those who opt to avail themselves of its
transportation service for a fee. Given accepted standards, GPS scarcely falls within the term
“common carrier.” 2. GPS cannot escape from liability. In culpa contractual, the mere proof
of the existence of the contract & the failure of its compliance justify, prima facie, a
corresponding right of relief. The law will not permit a party to be set free from liability for
any kind of misperformance of the contractual undertaking or a contravention of the tenor
thereof. A breach upon the contract confers upon the injured party a valid cause for
recovering that which may have been lost/suffered. The remedy serves to preserve the
interests of the promisee that may include his: a. Expectation interest – interest in having the
benefit of his bargain by being put in as good a position as he would have been in had the
contract been performed; b. Reliance interest – interest in being reimbursed for loss caused
by reliance on the contract by being put in as good a position as he would have been in had
the contract not been made; c. Restitution interest – interest in having restored to him any
benefit that he has conferred on the other party. Agreements can accomplish little unless they
are made the basis for action. The effect of every infraction is to create a new duty, or to make
recompense to the one who has been injured by the failure of another to observe his
contractual obligation unless he can show extenuating circumstances, like proof of his
exercise of due diligence (normally that of the diligence of a good father of a family or,
exceptionally by stipulation or by law such as in the case of common carriers, that of
extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his
ensuing liability. A default on, or failure of compliance with, the obligation gives rise to a
presumption of lack of care & corresponding liability on the part of the contractual obligor
the burden being on him to establish otherwise. GPS has failed to do so. Eroles, on the other
hand, may not be ordered to pay petitioner without concrete proof of his negligence/fault.
The driver, not being a party to the contract of carriage between petitioner’s principal and
defendant, may not be held liable under the agreement. A contract can only bind the parties
who have entered into it or their successors who have assumed their personality/juridical
position. Consonantly with the axiom res inter alios acta aliis neque nocet prodest, such
contract can neither favor nor prejudice a third person. Petitioner’s civil action against the
driver can only be based on culpa aquiliana, which would require the claimant for damages to
prove the defendant’s negligence/fault.
 Picart v. Smith
37 Phil 809, March 15, 1918
STREET, J.
Jerico Cariño Lopez

Facts
In December 1912, Picart was riding on his horse over a bridge while Smith approached
from the opposite direction in an automobile. As Smith continued on, he blew his horn as it
appeared to him that Picart was not observing the rule of the road. Picart saw the automobile
and heard the warning signals. However, he pulled the horse closely up against the railing on
the right side of the bridge instead of going to the left. As the automobile approached, Smith
guided it toward his left, that being the proper side of the road for the machine. Instead of
veering to the right while yet some distance away or slowing down, Smith continued to
approach directly toward the horse without diminution of speed. The automobile passed in
such close proximity to the animal that it became frightened and turned its body across the
bridge with its head toward the railing. It was struck on its left hind leg and the limb was
broken. The horse fell and its rider was thrown off with some violence. As a result of its
injuries, the horse died. Picart received contusions which caused temporary unconsciousness
and required medical attention for several days.

Issue
Whether or not Smith was guilty of negligence giving rise to a civil obligation to repair
the damage done.

Ruling
The SC ruled that Smith was liable. The existence of negligence in a given case is not
determined by reference to the personal judgment of the actor in the situation before him.
The law considers what would be reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that. Applying this to the conduct of
Smith, negligence is clearly established. A prudent man, placed in his position would have
recognized that the course which he was pursuing was fraught with risk and would therefore
have foreseen harm to the horse and the rider as reasonable consequence of that course.
Picart himself was not free from fault for he was guilty of antecedent negligence in planting
himself on the wrong side of the road. But the negligence of Smith succeeded the negligence
of Picart by an appreciable interval. Under these circumstances, the law is that the person
who has the last fair chance to avoid the impending harm and fails to do so is chargeable with
the consequences without reference to the prior negligence of the other party. While
contributory negligence on the part of the person injured does not constitute a bar to
recovery, it could be received in evidence to reduce the damages which would otherwise have
been assessed wholly against the other party. The SC ordered Smith to pay Picart P200 with
costs of other instances. The award was estimated to include the value of the horse, medical
expenses of Picart, the loss or damage occasioned to articles of his apparel, and lawful
interest on the whole to the date of this recovery.
 Necesito v. Paras
G.R. No. L-10605-06, June 30, 1958
REYES, J. B. L., J.
Jerico Cariño Lopez

Facts
A mother and her son boarded a passenger auto-truck of the Philippine Rabbit Bus
Lines. While entering a wooden bridge, its front wheels swerved to the right, the driver lost
control and the truck fell into a breast-deep creek. The mother drowned and the son sustained
injuries. These cases involve actions ex contractu against the owners of PRBL filed by the son
and the heirs of the mother. Lower Court dismissed the actions, holding that the accident was
a fortuitous event.

Issue
Whether or not the carrier is liable for the manufacturing defect of the steering
knuckle, and whether the evidence discloses that in regard thereto the carrier exercised the
diligence required by law (Art. 1755, new Civil Code)

Ruling
Yes. While the carrier is not an insurer of the safety of the passengers, the
manufacturer of the defective appliance is considered in law the agent of the carrier, and the
good repute of the manufacturer will not relieve the carrier from liability. The rationale of the
carrier’s liability is the fact that the passengers has no privity with the manufacturer of the
defective equipment; hence, he has no remedy against him, while the carrier has. We find that
the defect could be detected. The periodical, usual inspection of the steering knuckle did not
measure up to the “utmost diligence of a very cautious person” as “far as human care and
foresight can provide” and therefore the knuckle’s failure cannot be considered a fortuitous
event that exempts the carrier from responsibility.
 Añonuevo v. CA
G.R. No. 130003, October 20, 2004
TINGA, J.
Jerico Cariño Lopez

Facts
The accident in question occurred on 8 February 1989, at around nine in the evening,
at the intersection of Boni Avenue and Barangka Drive in Mandaluyong (now a city). Villagracia
was traveling along Boni Avenue on his... bicycle, while Añonuevo, traversing the opposite
lane was driving his Lancer car with plate number PJJ 359. The car was owned by Procter and
Gamble Inc., the employer of Añonuevo's brother, Jonathan. Añonuevo was in the course of
making a left turn towards Libertad Street when... the collision occurred. Villagracia sustained
serious injuries as a result, which necessitated his hospitalization several times in 1989, and
forced him to undergo four (4) operations. Villagracia instituted an action for damages against
Procter and Gamble Phils., Inc. and Añonuevo before the RTC. Trial on the civil action ensued,
and in a Decision dated 9 March 1990, the RTC rendered judgment against Procter and Gamble
and Añonuevo, ordering them to pay Villagracia the amounts... of One Hundred Fifty
Thousand Pesos (P150, 000.00). for actual damages, Ten Thousand Pesos (P10,000.00) for
moral damages, and Twenty Thousand Pesos (P20,000.00) for attorney's fees, as well as legal
costs. The Court of Appeals Fourth Division affirmed the RTC Decision in toto.

Issue
Whether Article 2185 of the New Civil Code, which presumes the driver of a motor
vehicle negligent if he was violating a traffic regulation at the time of the mishap, should apply
by analogy to non-motorized vehicles.

Ruling
The more pertinent basis for the segregate classification is the difference in type of
these vehicles. A motorized vehicle, unimpeded by the limitations in physical exertion. is
capable of greater speeds and acceleration than non-motorized vehicles. At the same time,
motorized vehicles are more capable in inflicting greater injury or damage in the event of an
accident or collision. Art. 2185 was not formulated to compel or ensure obeisance by all to
traffic rules and regulations. While the legal argument as formulated by Añonuevo is
erroneous, his core contention that Villagracia was negligent for failure to comply with traffic
regulations warrants serious consideration, especially since the imputed negligent acts were
admitted by Villagracia himself. The generally accepted view is that the violation of a statutory
duty constitutes negligence, negligence as a matter of law, or negligence per se. At face value,
Villagracia's mishap was precisely the danger sought to be guarded against by the ordinance
he violated. Añonuevo argues that Villagracia's violation should bar the latter's recovery of
damages, and a simplistic interpretation of negligence per se might vindicate such an
argument. There is the fact which we consider as proven, that Añonuevo was speeding as he
made the left turn, and such negligent act was the proximate cause of the accident. This
reckless behavior would have imperiled anyone unlucky enough within the path of
Añonuevo's car as it turned into the intersection, whether they are fellow motorists,
pedestrians, or cyclists. Even assuming that Añonuevo had failed to see Villagracia because
the bicycle was not equipped with headlights, such lapse on the cyclist's part would not have
acquitted the driver of his duty to slow down as he proceeded to make the left turn. The rule
on negligence per se must admit qualifications that may arise from the logical consequences
of the facts leading to the mishap. The doctrine (and Article 2185, for that matter) is
undeniably useful as a judicial guide in adjudging liability, for it seeks to impute culpability
arising from the failure of the actor to perform up to a standard established by a legal fiat. But
the doctrine should not be rendered inflexible so as to deny relief when in fact there is no
causal relation between the statutory violation and the injury... sustained. Presumptions in
law, while convenient, are not intractable so as to forbid rebuttal rooted in fact. After all, tort
law is remunerative in spirit, aiming to provide compensation for the harm suffered by those
whose interests have been invaded owing to the conduct of others.
 Saludaga v. FEU
G.R. No. 179337, April 30, 2008
YNARES-SANTIAGO, J.
Jerico Cariño Lopez

Facts
Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern
University (FEU) when he was shot by Alejandro Rosete, one of the security guards on duty
at the school premises on August 18, 1996. Petitioner was rushed to FEU-Dr. Nicanor Reyes
Medical Foundation (FEU-NRMF) due to the wound he sustained. Meanwhile, Rosete was
brought to the police station where he explained that the shooting was accidental. He was
eventually released considering that no formal complaint was filed against him. Petitioner
thereafter filed a complaint for damages against respondents on the ground that they
breached their obligation to provide students with a safe and secure environment and an
atmosphere conducive to learning. Petitioner is suing respondents for damages based on the
alleged breach of student-school contract for a safe learning environment.

Issue
Is Galaxy liable for Saludaga’s actions?

Ruling
No. It is undisputed that petitioner was enrolled as a sophomore law student in
respondent FEU. As such, there was created a contractual obligation between the two parties.
On petitioner's part, he was obliged to comply with the rules and regulations of the school.
On the other hand, respondent FEU, as a learning institution is mandated to impart knowledge
and equip its students with the necessary skills to pursue higher education or a profession. At
the same time, it is obliged to ensure and take adequate steps to maintain peace and order
within the campus. It is settled that in culpa contractual, the mere proof of the existence of
the contract and the failure of its compliance justify, prima facie, a corresponding right of
relief. Consequently, respondents' defense of force majeure must fail. In order for force
majeure to be considered, respondents must show that no negligence or misconduct was
committed that may have occasioned the loss. An act of God cannot be invoked to protect a
person who has failed to take steps to forestall the possible adverse consequences of such a
loss. Incidentally, although the main cause of action in the instant case is the breach of the
school-student contract, petitioner, in the alternative, also holds respondents vicariously
liable under Article 2180 of the Civil Code. The respondents cannot be held liable for damages
under Art. 2180 of the Civil Code because respondents are not the employers of Rosete. The
latter was employed by Galaxy. The instructions issued by respondents' Security Consultant
to Galaxy and its security guards are ordinarily no more than requests commonly envisaged in
the contract for services entered into by a principal and a security agency. They cannot be
construed as the element of control as to treat respondents as the employers of Rosete. The
fact that a client company may give instructions or directions to the security guards assigned
to it, does not, by itself, render the client responsible as an employer of the security guards
concerned and liable for their wrongful acts or omissions.