1.
) Marquez v Elisan Credit
Facts:
 Marquez took a loan with Elisan Credit for 53k payable
within 180-days.
 Marquez executed a promissory note to pay on weekly
installment on 25% annual interest, 10% penalty
interest on failure to pay in due time, and 25% on
attorney fees for judicial and extra-judicial expenses in
case of default.
 Marquez also executed a mortgage for a motor vehicle
which had a stipulation that it will be a security for the
first loan which will be also a security for all obligations
already incurred and shall be incurred in the future
 First loan was fully paid
 A second loan was applied for and was approved for
55k. A promissory note was also executed with the same
terms and conditions as the first one
 The second loan matured with an outstanding balance of
25k
 Marquez was allowed to pay daily installments until the
obligation is fully paid. 21 months after the due date,
Marquez has paid a total of 56k on the 55k loan
 Despite the payments made, Elisan Credit made action
for foreclosure on the mortgaged property asserting that
Marquez has not yet fully paid the second loan as the
55k interest accrued 10% penalty interest and 25%
attorneys fees
 Elisan Credit applied for the issuance of the writ of
replevin and the mortgaged motor vehicle was seized
and delivered to the Respondent
CONTENTIONS:
 Respondent:
 Elisan Credit argues that the payments made by
Marquez shall first be deemed as payment to the
interest first before the principal as per Article 1253 of
the Civil Code which states that if a debt produces
interest, then payments made would first be deducted
for the interest. Thus, the principal has not yet been
fully paid
 Respondent further argues that the mortgage covers the
second loan as the promissory note on the first loan had
a stipulation that says “obligations that may hereafter
be incurred”
 Petitioner:
 Petitioner argues that the principal has already been
fully paid as the payments that were received by Elisan
Credit which they issued O.R.s for did not specify to
where the payments were made. This is based on article
1235 which states that payment receipts without
reservation to the interest shall presume that the
interest has been paid.
ISSUE: Has Marquez fully paid the second loan and should
the mortgaged motor vehicle be returned?
Ruling:
 Court: Article 1176 as per petitioners argument applies
to payment receipts made without reservation to the
interest, thus it implies that the interest has been
waived
 Court: Article 1253 resolves doubt as to interest-bearing
debts and provide a hierarchy as to where the payment
would first go; it will first be applied to the interest.
 Court: Article 1176 only applies when creditor waives
interest
 There is no waiver of interest by respondent
 It was not proven that the respondent accepted the
payment for the principal and waives the interest
 Since the payment was overdue, interest has
accrued and since no waiver has been made,
Marquez payments would be applied to the
interest first
 On the issue of mortgage being carried over to the
second loan: The fulfillment and extinguishment of the
first obligation, extinguishes the stipulation on the
mortgage
 The mortgage was an accessory obligation in
nature, and when the obligation to pay the first
loan was fulfilled, it was extinguished as well
 Court Partially Grant petition to pay 25k unpaid
balance. Interest reduced to 2% Interest and 2%
penalty interest
2.) Bautista v Lindo
Facts:
 Bautista sold a free-patent land to the respondent
 3 years after the sale, due to CA 141 which gives rights
to repurchase free patent land within 5 years of
conveyance, filed an action to repurchase the land
 Respondents enetered to a compromise agreement
where they agree to cede part of the land to petitioner
that they later dismissed as there was a failure to state
the value of the property
Contentions:
Petitioner:
 Right to repurchase based on CA 141 and that it is
incapable of pecuniary estimation
Repondent:
 Cannot repurchase as land is not purely agricultural
anymore.
 That it should be capable of pecuniary estimation
 That petitioner wants to resell it for a higher profit which
is against the spirit of CA 141 to preserve land
Issue:
 Does Bautista have the right to repurchase the land?
Ruling:
 He has a right to repurchase the same as per CA 141
 While the sipulation to repurchase is not written in the DAS,
it is deemed in effect as contracts are governed by relevant
laws
 cannot dismiss as complainants have actively participated in
proceedings, estoppel
Petition Granted
3.) Boysaw v Interphil
Facts:
 Boysaw signed a contract to fight Elorde
 Fight is to be held on september 30 1961 or if extended, is within
30 days.
 Contract stipulated that Boysaw should not fiht in another contest
before the fight
 After signing, Boysaw went to Las Vegas for a boxing contest
 Manager was also changed
 Due to this change in fight date, they rescheduled the fight date to
November 4, then to October 28 to be within he 30days stipulation
 Boxing fight never materialized
 Boysaw sued Interphil for damages since the fight in the contract
didn't happen
Issue:
 Does Boysaw have the right for damages?
Contentions:
 Petitioner: Fight did not happen as per contract because of refusal
of Interphil, thus they are entitled to damages
 Respondent: Fight did not happen as it was the breach of contract
that postponed the fight, change of manager and fight in Vegas
Ruling:
 Under the law, when there is a unilateral substitution of the
obligor by another, the creditor is jot bound to deal with the
substitute
 Since there was a breach by Boysaw and Instead of rescinding the
contract, Interphil postponed the fight with justifiable reason since
Elorde got injured.
 The renegotiation of the contract for its postponement could not
be said to be unlawful or unreasonable
 They even placed the fight date within the 30 days stipulation
 Boysaws breach of contract has forfeited them of any right to its
enforcement; It gave Interphil the right to rescind the contract
 Their adjustment of the date was, given the circumstances, within
the rights of Interphil
 Lower court decision affirmed that dismissed the complaint
  Excuses of misconduct of manager and rotten logs are not
4.) U.P. v Delos Angeles sufficient excuse for non payment
Facts:  There is breach of contract, not justifiably excused,
 U.P. entered into a logging agreement with ALUMCO for 5 rescission does not necessarily need a judicial suit, Petition
years with extendable period of another 5 years for certiorari granted.
 ALUMCO started and has done its logging operation and
incurred an unpaid account of 219k
 Despite demands, ALUMCO failed to pay. UP then
threatened to rescind the contract.
 ALUMCO executed an Acknowledgement of Debt and
Proposed Manner of Payments which was approved by
president of UP
 It stipulated that ALUMCO was to pay the balance and that
failure to pay shall give UP the right to rescind contract
without any judicial suit
 ALUMCO continued ops and again incurred an unpaid
account of 61k
 Due to this, UP informed ALUMCO that their contract is
deemed rescinded
 UP already acquired another concessionaire to take over
 ALUMCO then filed seveal motions to enjoin petitioner from
conducting bidding

Issue:
 Is the rescission of the contract valid?

Contentions:
 Petitioner: argues that bc of BOC, they had the right to
rescind it without judicial decree bc their contract says so
 Respondent: argues that their non payment was due to
their former general manager not turning over to
management the payments.
 Further they assert that the logs they got were rotten and
could not be sold
 And that the rescission by UP without a court order is invalid

Ruling:
 Contract expressly stipulates the right to rescind even
without judicial suit
 Nothing in the law that prohibits it; it is not necessary to go
to courts for rescission
 The injured party may extra judicially rescind it to protect
its interest
 5.) De Mistica v Naguiat
Facts:
 Petitioner was an owner of land leased to respondent a
portion thereof was entered into CTS payable in 10 years
and 12% penalty interest in case of failure to pay
 After dp and initial payment resp failed to make any
payments
Contentions:
 Petitioner filed a complaint for rescission due to non
payment meaning obligation not fulfilled
 Resp contests it cannot be rescinded as there was a 12%
penalty interest stipulated. Further asserts he offered to pay
balance but was refused
Issue:
 Does Petitioner have the right to rescind contract?
Ruling:
 Contract was found to be contract of sale
 Rescission to be allowed should be bc of breach that is
substantial and fundamental to the fulfillment of obligation
 In his case, the failure to pay within 10 yrs is not
substantial as there was a penalty interest
 Further there were no demands made and that the offered
payment was refused, thus it was not unexcused
 Court ruled rescission not possible.
6.) Fil-Estate v Vertex
Facts:
 FEGDI is engaged in dev of golf courses, sold to RSACC then
to Vertex shares of Forest Hills for 1.1m
 Vertex enjoyed membership privileges being a recognized
shareholder but demands delivery of stock cert
 Despite demands, no stock cert issied, Vertex filed for
rescission
 During case, Stock cert was issued but Vertex refused it
Contentions:
 Petitioners: Argues stock cert non delivery was not a
substantial breach since they are a recognized shareholder
and enjoys its facilities. Thus, the non delivery is not
substantial
 Respondents:
 Vertex argues the non delivery of stock cert is substantial
and its delay of 3 years gave them the right to rescind
Issue:
 Whether the stock cert delay was a substantial breach
Ruling:
 Previous jprudence stated that physical delivery cert is one
of essential requisites for transfer of ownersip of stocks
 The law states so as well
 Thus the non delivery of stock cert was a substantial breach
 Fegdi failed to deliver it, there was substantial breach,
entitled Vertex to rescind
 Mutual restitution is required for rescission
 7.) BPI v Sanchez
Facts:
 Sanchezes owned land in Panay Ave qc, Garcia offered to
buy the property. Offer was only good for 7 days but did not
come to an agreement
 Felisa Yap, Widow of one of the Sanchezes agreed to sell
the property thereafter for 1.85m cash after occupants have
vacated property
 Garcia was to process documents for transfer as well
 Yap then turned over title and asked occupants to vacate
 After vacation, Garcia without Yaps knowlefge took
possession of the lot and demolished the house therein
 Despite demands, Garcia failed to pay the balance
 Garcia then issued 6 PDCs in favor of Yap, 4 of which was
deposited without issue, but the last two were dishonored
for insifficiency of fumds
 Yap asked for the replacement of the two cheques but was
not responded by Garcia
 Yap informed Garcia that she is rescinding the agreement.
Garcia then offered to pay 300k which was flatly refused
 Garcia refused to return documents and to vacate the
property
 Further, Garcia posted an advertisement in MB offering to
sell units
 Yap wrote to HLURB that resp illegally constructed on the
property
 HLURB issued a cease and desist order to Garcia from
further developing, Garcia stopped construction.
 Garcia managed to cancel previous TCT and acquired a new
one in the name of TSEI. This is apparently to entice buyers
to buy the units
 Records reveal that the units were sold to numerous buyers
but the TCT was covered by the title of the Sanchezes
 TSEI (Garcia) loaned with FEBTC which then merged wih
BPI.
 Upon default BPI foreclosed the lot of Garcias title
 They asserted that their negligence was demonstrated when
they issued the original title despite onlu a 50k payment by
Garcia
Ruling:
 Surrender of title despite 50k payment was not negligence
but rather simply to comply with their obligation. Further,
the Sanchezes did not relinquish possession of the said
property, it was Garcia who took it without their consent
 There was also no bad faith on the end of the Sanchezes as
can ne seen that they did take action to the construction of
Garcia with HLURB on the said lot
 Garcia are the ones that are in bad faith as they built on the
lot knowing that he lot was still in the ownership of the
Sanchezes
 Third parties were also purchasers in bad faith as the names
in the title thy boght were under the Sanchezes yet they
didnt question it.
 BPI were also mortgagee in bad faith as he property for
security was in the name of the Sanchezes
 The failure of Garcia to pay he Sanchezes entitled he latter
to rescind contract
 Decision: Restore the titles to the name of Sanchezes and
to reurn documents

Issue:
 Can the Sanchezes recover the land?

Contentions:
 Petitioner: Asserts that Sanchezes should bear all losses
due to their negligence and that there was no intent to
rescind agreement.
 8.) Wellex v United Airlines
Facts:
 Wellex owned shares of APIC, PEC, ESB, APC
 Uland airlines, a taiwanese airlines, entered to a
memorandum of agreement to expand their respective
airline ops im asia
 MoA stipulates to develop a long term business relationship
 Moa stipulates ULand to buy shares of stock from Wellex for
APIC, PEC, ESB for a certain amount.
 MoA stipulates that parties shall enter into a joint
development agreement
 Further, First MoA stipulaes that wihin 40 days, hey shall
execute a share purchase agreement for the sale of the
stocks
 Further First MoA stipulated to enter into a joint
development agreement for housing and real estate
development. Buying of stocks as well
 stipulation that if the agreements are not agreed upon
within 40 days, then the First MoA shall cease to be
effective.
 Second MoA was executed as a disclosure to Uland that
Wellex is in he process of acquiring its shares of stock of
APIC
 Does he First MoA ceased to be in effect?
Ruling:
 Petition denied
 under he first MOA, the share purchase agreement was
necessary before there be a purchade of the stocks
 There should be agreement first before Uland can be
obliged to pay for the stocks
 No agreement yet thus no final price, thus no obligation to
pay yet
 When the 40 days lapsed, they were released from their
obligations to negotiate for the share purchase agreement
 No express novation of the original obligation
 No subsequent agreement inconsistent with the provisions
of the first MoA

 40 day period lapsed without coming to an agreement

 Despite its absence Uland remitted 8m to Wellex.
 Due to this stock certs were delivered and titles in return
 Despite transactions, no agreements were signed
 Uland then demanded return of 7.5m

Contention:
 Respondent: First MoA is without effect as 40 days has
lapsed and still no agreement. Thus hey should both return
what has been delivered. tHey argue that they would only
pay demandable amount once the share purchase
agreement has been agreed upon

 Petitioner: Petitioner asserts there is already a partial

implementation of the First MoA. Further they assert that
the agreements were not finalized bc of financial problems
on Ulands side. Further the supposed payment of 17.5m for
the stocks were not fully paid.

Issue:
 9.) Swire v Yu
Facts:
 Swire entered into a CTS with resp. Yu
 Price is 7.5m on monthly installments plus parking slot for
600k
 Respondent Yu paid 7.5m fully while dp 20k on parking slot
 Swire failed to deliver the unit on time.
 Resp. Yu is filing for rescission with damages due to failure
to deliver
Contentions:
 Petitioner: Petitioner argues breach is not substantial to the
contract, thus is not a ground for rescission
 Respondent: Failure to deliver the unit on time is a
substantial breach and is a ground for rescission
Issue:
 Is rescission proper in the case?
Ruling:
 There is a right to rescind since here was a failure to deliver
said unit and he specific performance became impossible
 License to Sell has expired and yet during the inspection of
HLURB, the units were done yet and missing cabinets and
fixtures
 Further some of the installed amenities were not what was
agreed upon such as he flooring and swimming pool
 Amenities not yet installed, units not yet done during ocular
inspection that is beyond the period of dev under the license
to sell.
 The delay of the project as well as the delay in the delivery
of the unit are breaches lf statutory and contractual
obligations which are substantial which entitles for
rescission.
 Petition denied with damages.
10.) Fong v Duenas.
Facts:
 Duenas is owner of business in baking, food, and retail
business, old acquaintance of Fong
 Entered into verbal joint venture contract where they
agreed to do food business and create a holding company
with capital of 65m where they would contribute equal parts
 Fong started remitting his share of 5m
 Fong then sent a letter to Duenas that he is limiting his
share to 5m from 32.5m
 Despite letter and contribution, duenas has not given
financial docs on the valuation of his Danton and Bankcom
shares Further the company is yet to be incorporated
 Duenas decided he will cancel the joint venture but he could
not return immediately the 5m as it was used in the
expenses of his businesses
 After demands and failure to return 5m, Fong filed for
collection of sum of money and damages
Contentions:
 Petitioner: Asserts he 5m and its appropriation to Duenas
business amounted to unjust enrichment
 Respondent: Duenas said the expenses are not for his own
good as his two companies were part of the Alliance
corporation and that it was Fong who breached contract by
reducing his shares to 5m which made the incorporation
not push through
Ruling:
 Petition granted
 Though it was entitled action of money, it was actually a
complaint for rescission by the nature of its body
 Duenas failed to submit he valuation of Danton and
Bankcom shares
 Court said Fong never agreed for his share to be applied to
the two companies but to Alliance which is to be used for its
incorporation and initial capital subscription
 He money should have been used for registration
 Duenas further failed to deliver valuation, his delay in
incorporating plus this resulted in his breach
 The Court also notes that there is also breach in the end of
Fong
 He change from 32.5 to 5m is a breach on his end which
happened before he decided to rescind the joint venture
agreement
 Art 1192, first breach is offset by second breach
 However the Court deemed hat both substantially breached
that led to non-incorporation
 The Court declared each shall bear his own damages
 Petition granted, to return 5m, respective claims for
damages extinguished.
11.) Cupino v Pacific Rehouse
Facts:
 Cupino entered to a deed of conditional sale with resp.
 Resp. to buy land from petitioner for 6m
 Resp. made dp of 1.8m and the rest upon fulfillment of
conditions: 1.) Completion of all docs necessary for transfer
2.) removal of tenants
 Petitioners failed to submit necessary docs despite
demands
 Petitioner then said they wanted to rescind and refused to
take additional payment
 Respondent found out that petitioners are negotiating sale
with other buyers for higher price
Contention:
 Petitioner: They alleged that Pacific was in default as the
real purchase orice was 11.9m instead of 6m which was
stated in the DAS and its addendum.
 Respondent: Denied hat the price is 6m and that the
Addendum stating that failure to pay 4.1m within 6 months
or is in default would mean the refund of the money, is not
acknowledged since it was not signed by their authorized
rep
Issue:
 Does the petitioner have the right to rescind?
Ruling:
 Petition Denied
 The Deed of Conditional Sale clearly stipulated that the
price was to be 5.9m and the conditions of documents and
vacation of tenants
 The Addendum was not signed by their authorized
representative
 The respondents have partially fulfilled there obligation and
he petitioners have not, there was already a payment on
the end of Rehouse whilst petitioner has not delivered the
necessary documents
 Thus, it is respondent that is the injured party which entitles
them a right to either performance thereof or rescission
 Court ruled that after OB of 1.5m, a DAS should be issued
in favor of petitioner
 Petition denied
12.) Gutierrez v Gutierrez (1932)
Syllabus:
 Upon the showing of negligence, if there is an injured party
he has the right to recover damages
 Both culpa aquiliana and culpa contractual are sources of
obligation for damages.
Facts:
 Plaintiff action to recover damages against five defendants
for physical injuries due to automobile accident
 Passenger truck and automobile of private ownership
collided while passing on a narrow bridge
 The automobile was being driven by the youth Bonifacio
Gutierrez, an incompetent chauffer who was driving at an
excessive speed, and that upon approaching the bridge he
lost his head.
 As a result the plaintiff, Narcisso Gutierrez, a passenger of
the truck, was injured (fractured right leg which required
medical attention)
 Court found that the collision was due to negligence
 Plaintiff is suing both parties, (the truck and the private car)
whereas the truck and the car is suing each other.
Issue:
 Is there liability on the end of the car? The truck?
Ruling:
 Gutierrez (Car) is liable due to negligence (culpa aquiliana)
whereas Velasco (Truck) is liable due to negligence (culpa
contractual)
 Court found that the case is that neither of the drivers
wanted to give way of each other at the narrow passage,
thus resulting to the collision.
 Defendants claim that Gutierrez (passenger) has
contributory negligence consisting of him sticking his leg out
the truck, court found this to be contradictory in the
extreme and leads to speculative matters
 Court awards damages to plaintiff, both the truck and car
are jointly liable.
13.) Vasquez v. Borja (1944)
Syllabus:
 One who is party to the contract is the one liable for breaching
said contract, even if the negligence is on the party’s agent so
long as it does not constitute culpa aquiliana.
Facts:
 Action to recover by Borja (plaintiff) from Vazquez (defendant).
 Vazquez obligated to sell to plaintiff 4000 cavans of palay at
2.10 per cavan
 Plaintiff paid 8400 for the total price of the palay. However,
Vazquez was only able to deliver 2488 cavans of palay of 5.2k
value and refused to deliver the remaining palay even with
demands from plaintiff.
Contentions:
 Vazquez: Denies having entered into the contract in his
individual and personal capacity as the agreement was
between Borja and Natividad-Vazquez Corporation where he
was the acting manager.
 De Borja: Cause of action is breach of contract due to non-
performance by not delivering the remaining cavans of rice.
Issue:
 Did the negligence resulting to the non-delivery of the cavans
of palay made Vazquez personally liable for such breach of
contract?
Ruling:
 Court found that the contract is between De Borja and the
corporation, not Vazquez in his personal capacity
 No reason to hold Vazquez liable as there is no finding of bad
faith and intent to defraud the plaintiff
 Fact of the case is that there is negligence on the end of the
corporation but this negligence is culpa contractual (that
negligence which causes non-fulfillment of a pre-existing
obligation) as opposed to culpa aquiliana (that negligence
which is the very source of the obligation, “quasi-delict”).
 Since it was the corporation’s contract, and it was their
negligence, they are liable for it’s non-fulfillment and
not their mere agent (as he was not the one with the
obligation).
 Court noted, if it was culpa aquiliana only then would Vazquez
be personally liable.
 Complaint dismissed; no cause of action for counterclaim
14.) Federal Builders (FBI) v. Foundation Specialist (FSI)  Further, FBI in the construction of the diaphragm wall, was
Syllabus: obligated to do a site inspection which they failed to do
 Damages cannot be ascribed to a party if there are foreseen even after the request of FSI to do the same.
circumstances that may cause harm to one party especially  Thus, FSI non-completion of the 3% was justified (no
by the lack of showing of negligence. negligence on their part) and FBI’s non payment of the
amount due was unjustified
Facts:
 FBI entered into an agreement with FSI, where the latter  Petition denied. Lower Court decision of FBI to pay FSI the
will be a subcontractor of the former who would construct missing amount plus interest is affirmed with modification
walls and beams for the Trafalgar Plaza in Makati. that the interest be reduced from 12% to 6%
 Contract price was for 7m.
 FSI filed a complaint for sum of money seeking to collect
1.6m from the petitioner.
 This was based on the fact that the project was 97% done
and FBI has refused to pay the said despite demands
 FBI argues that the project is only 85% complete and that
FSI has failed to construct the works according to plans and
specifications and that because of this, FBI’s overall Project
has been delayed.

Issue:
 Who has the right to demand fulfillment of the other party’s
obligation?

Contentions:
 Petitioner: They assert that the wall constructed by FSI was
defective and out-of-specifications and that they had to re-
do it at their own expense.

Ruling:
 Court found that indeed FSI has done 97% of their
obligation and that the non-completion of the rest was due
to FBI’s own fault such as the failure to deliver the needed
cement for the construction
 The agreement stipulated that FBI was to supply for the
cement to be used for the capping beams yet they failed to
deliver it despite requests of FSI to deliver the same.

 There were also issues on the misaligned diaphragm wall

and erroneous location of the rebar dowels
 This issues were however anticipated by the parties, FSI
knew that there were going to be misalignments thus the
Court found that they cannot ascribe to FSI the defects as
they knew and agreed to work on a remedy together.
15.) NPC v CA
Facts:
 Respondents are filing for claim of damages versus Napocor
for the loss of lives and destruction to property to the town
of Norzagaray, Bulacan.
 Due to a typhoon, the water volume in the hydroelectric
plant of NPC was at optimum levels and they had to
suddenly release the water.
 This resulted to destruction of property and loss of lives.
Issue:
 Is Napocor liable for damages even though there was an act
of God? Or fortuitous event?
Contentions:
 Respondents: argue that despite the knowledge that a
typhoon was to come, they failed to exercise due diligence
in monitoring the water levels of the dam
 Respondents: Because of their failure to monitor the water
levels, they had to suddenly and recklessly release water
from the dam that resulted to destruction of property and
loss of lives.
 Petitioners: claim that they exercised due care and diligence
in the operation of the hydroelectric plant which is shown
from the written notices sent to different municipalities prior
to the release and that the damages incurred by the private
respondents were due to a fortuitous event.
the debtor, b.) event must either be unforeseeable or
unavoidable, c.) event must render it impossible for the
debtor of the normal fulfillment of the obligation, d.)
debtor must be free from any participation or
aggravation of the injury to the creditor
 The Court further cited that: If upon the happening of a
fortuitous event there concurs a corresponding fraud,
negligence, or delay on the end of the obligor, then the
obligor cannot escape liability.
 The court further cited that to be free from liability: The
obligor must be free from negligence or misconduct when
the act of God happened.
 In this case, there were findings that NPC didn’t maintain
safe water levels and the written notice was inadequate,
thus negligence- even though there is a fortuitous even
they are still liable as they have negligence.
 The Court noted that since there was participation of man in
the injury, then the whole event, even with a fortuitous
event, is humanized.
 Petition Dismissed.

Ruling:
 Court found negligence in the end of NPC:
 They should have given room for allowances in the Angat
Dam to expected torrential rains; findings show they
maintained a reservoir water elevation beyond its max safe
level giving no sufficient allowance.
 The written notice was not proper as well as it was only
given to a policeman and not to the proper authorities who
could have disseminated the warning properly; it is as if the
notice has not been served

 The Court citing the decision of Nakpil and Sons v. CA that

for an obligor to be exempt from liability the breach of an
obligation due to an “act of God”, the following must occur:
a.) cause of the breach must be independent of the will of
16.) Nakpil v CA  Further the Court noted that out of the numerous buildings
Facts: in Manila, only a handful including theirs were the ones
 Plaintiff Philippine Bar Association decided to construct office damaged. To follow their reasoning that the earthquake was
building; Construction was undertaken by United overwhelming may not prosper as only some including
Construction Inc; Plans and specifications designed by Juan theirs were destroyed; it cannot be said that God singled
Nakpil & Sons (petitioner). out their building in particular.
 An earthquake hit Manila, the building sustained damages  The Court further held that their negligence was tantamount
and tilted dangerously, because of this the building had to to bad faith as there was gross negligence.
be vacated  Court ruled that UCI and Nakpil are solidarily liable for the
 PBA moved for the demolition of the building as it may damages and to indemnify PBA to cover the damages.
topple down in case of another earthquake, which in fact
the building was demolished.
 A Commissioner was tasked to investigate on the technical
issues and found that: there were defects of the plans and
specifications of the architect and UCI also had fault due to
deviations from plans & specifications, and failure to
observe requisite workmanship in the construction of the
building.

Issue:
 Who is liable for the damage? Or are the parties excused
due to a fortuitous event?

Contentions:
 PBA alleges that it was UCI who was at fault due to defects
in the construction and failure to follow specifications
 UCI alleges that it was Nakpil & Sons who was at fault due
to defects in said plans and specifications
 Nakpil & Sons assert it was an act of God that caused the
failure of the building, which should exempt them from
liability.

Ruling:
 Court noted that generally, no one shall be responsible for
events which could not be foreseen or is unavoidable.
 Obligor may be exempt from liability if there is an act of
God and the obligor does not have any participation to the
injury to the creditor
 If there is participation of man in the injury, may it be fraud
or negligence, the whole occurrence is humanized and
exemptions from liability does not apply
 Negligence of UCI and Nakpil were established beyond
dispute, which has been stated earlier.
17.) Fil-Estate v Ronquillo
Facts:
 Petitioner Fil-Estate Properties Inc., is owner and developer
of Central Park Place Tower
 Respondent spouses Ronquillo purchased from petitioners
condo unit for 5.1m
 Respondents has paid 1.5m downpayment and had been
paying 63k monthly amortizations
 Upon learning that construction works of the condo had
stopped, respondents stopped paying their monthly
amortization as well
 Total payment before stoppage was at 2.2m
 Respondents demanded full refund with interest due to the
stoppage of construction
 Petitioner reason out that the delay in the construction was
due to the 1997 financial crisis
 Relevant law: PD 957 states that the buyer of a condo unit
has the right for reimbursement if the unit has not been
developed in accordance to the approved plan’s time limit.
 Court held that the asian financial crisis was not
unforeseeable and beyond the control of a business
operation.
 They note that a real estate enterprise engaged in selling
condominium units should be a master of projections on
commodities and currency movements and business risks.
 Fluctuating movement of the PH-peso happens everyday
and fluctuations therein cannot be identified as a fortuitous
event.
 Court: Petition partly granted. No fortuitous event,
rescission with damages granted. Refund with interest rate
lowered from 12% to 6%.

Issue:
 Can the 1997 asian financial crisis be considered as a
fortuitous event which would warrant the exemption of Fil-
Estate from liability?

Contentions:
 Fil-Estate asserts that they cannot be held liable for the
delay as it was caused by a fortuitous event, which is the
financial crisis

Ruling:
 Court ruled that the Asian financial crisis is not a fortuitous
event that would excuse petitioners from performing their
contractual obligation
 Cause of action of Ronquillo’s are the right granted by PD
957
 Due to non-performance, non-exemption, unjustified non-
fulfillment of obligation by Fil-Estate, The respondent
spouses have the right to rescind the contract
ART. 1233. A debt shall not be understood to have been paid
unless the thing or service in which the obligation consists has
been completely delivered or rendered, as the case may be.
 A debt may refer to an obligation to deliver money, to
deliver a thing (other than money), to do an act, or not to
do an act.
1.) Integrity of the prestation - This requisite means that the
prestation be fulfilled completely
 Partial or irregular performance will not produce the
extinguishment of an obligation as a general rule.
2.) Identity of the prestation” This second requisite means that the
very prestation due must be delivered or performed
..........Specific / Determinate Thing
ART. 1244. The debtor of a thing cannot compel the creditor to
receive a different one, although the latter may be of the same
value as, or more valuable than that which is due.
In obligations to do or not to do, an act or forbearance can￾not
be substituted by another act or forbearance against the obligees
will.
â— Substitution can be made if the obligee consents.
ART. 1177. The creditors, after having pursued the property in
possession of the debtor to satisfy their claims, may exercise all
the rights and bring all the actions of the latter for the same
purpose, save those which are inherent in his person; they may
also impugn the acts which the debtor may have done to
de￾fraud them.
â— Remedies of creditor if debtor fails to fulfill obligation:
1.) exact fulfillment (specific performance) with the right to
damages;
2.) pursue the leviable (not exempt from attachment under the
law) property of the debtor
3.) after having pursued the property in possession of the
debtor,’’ exercise all the rights (like the right to redeem)
and bring all the actions of the debtor (like the right to collect from
the debtor of his debtor) except those inherent in or personal to
the person of the latter.
4.) ask the court to rescind or impugn acts or contracts which the
debtor may have done to defraud him when he cannot in any other
manner recover his claim.
+ 1170, 1165
..........Generic Thing 0,,0,0,63
ART. 1246. When the obligation consists in the delivery of an
indeterminate or generic thing, whose quality and
circum￾stances have not been stated, the creditor cannot
demand a thing of superior quality. Neither can the debtor deliver a
thing of inferior quality. The purpose of the obligation and other
circumstances shall be taken into consideration.
â— If the obligation consists in the delivery of a specific thing, the
very thing due must be delivered. (Art. 1244.) However, if the
obligation is to deliver a generic thing, the purpose of the
obligation and other circumstances shall be taken into
consideration to determine the quality or kind of thing to be
delivered.
â— Article 1246 is a principle of equity in that it supplies justice in
cases where there is lack of precise declaration in the obligation of
the quality or kind of thing to be delivered.
..........Preserve 0,,0,0,64
Diligence of a good father of a family. — In obligations to give
(real obligations), the obligor has the incidental duty to take care
of the thing due with the diligence of a good father of a family
pending delivery. The phrase has been equated with ordinary care
or that diligence which an average (a reasonably prudent) person
exercises over his own property.
+ 1163
..........Deliver all its Accessions 0,,0,0,65
1166, 1164
..........Interest 0,,0,0,66
ART. 1177. The creditors, after having pursued the property in
possession of the debtor to satisfy their claims, may exercise all
the rights and bring all the actions of the latter for the same
purpose, save those which are inherent in his person; they may
also impugn the acts which the debtor may have done to
de￾fraud them.
...........Marquez v Elisan Credit 0,,0,0,76
..........Deliver all Accessories 0,,0,0,67
+ 1166
..........Analogous Circumstances 0,,0,0,68
â— ART. 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply with
what is incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fi xing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles
1385 and 1388 and the Mortgage Law.
â— Reciprocal obligations are those which arise from the same
cause and in which each party is a debtor and creditor of the other,
such that the performance of one is designed to be the equivalent
and the condition for the performance of the other.
â— The general rule is that they are to be performed
simultaneously or at the same time such that each party may treat
the fulfillment of what is incumbent upon the other as a suspensive
condition to his obligation.
â— Remedy is either action for specific performance or rescission,
both with damages.
â— Breach of an obligation occurs when there is a failure or
refusal, by a party without legal reason or excuse to perform, in
whole or in part the obligation or undertaking which is incumbent
upon him.
â— Under the rule of exceptio non adimpleti contractus, the party
who has not performed his part of the agreement is not entitled to
sue.
â— Generally, to rescind a contract is not merely to terminate it,
but to abrogate and undo it from the beginning.
â— To rescind is to declare a contract void and to abrogate it from
its inception.
● Rescission has likewise been defined as the “unmaking of
a contract, or its undoing from the beginning, and not merely its
termination.
ART. 1192. In case both parties have committed a breach of the
obligation, the liability of the fi rst infractor shall be equitably
tempered by the courts. If it cannot be determined which of the
parties first violated the contract, the same shall be deemed
extinguished, and each shall bear his own damages.
● First infractor known. — One party violated his obligation;
subsequently, the other also violated his part of the obligation. In
this
case, the liability of the fi rst infractor should be equitably reduced.
● First infractor cannot be determined. — One party violated
his obligation followed by the other, but it cannot be determined
which of them was the fi rst infractor. The rule is that the contract
shall be deemed extinguished and each shall bear his own
damages.
ART. 1170. Those who in the performance of their obligations are
guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.
â— Fundamental in the law on damages is that one injured by a
breach of a contract, or by a wrongful or negligent act or omission
shall have a fair and just compensation commensurate to the loss
sustained as a consequence of the defendant’s act.
Recovery of Damages
● A breach upon the contract confers upon the injured party a
valid cause for recovering that which may have been lost or
suffered. The remedy serves to preserve the interests of the
promisee:
1.) Expectation interest, which is his interest in having the benefit
of his bargain by being put in as good a position as he would have
been had the contract been performed;
2.) Reliance interest, which is his 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 had the contract not been made.
3.) Restitution interest, which is his interest in having restored to
him any benefi t that he has conferred on the other party.
● The award of the different kinds of damages cannot be
lumped together (e.g., to pay plaintiff actual, moral and exemplary
damages in the amount of P100,000). The damages as well as
attorney’s fees must each be independently identified and
justified
● Excuse from ensuing liability. — The effect of every
infraction is to create a new duty, that is, to make recompense to
the one who has been injured by the failure of another to observe
his contractual obligation.
● Duty of obligee to minimize his damages. — An obligee is
duty bound to minimize the damages for which he intends to hold
any obligor responsible. (see Art. 2203.) He cannot recover
damages for any loss which he might have avoided with ordinary
care. If his negligence was contributory to the loss, the court may
equitably mitigate the damages.
Damages recoverable when obligation is to pay money
● Penalty interest for delay or non-performance. — Damages
may be recovered under Article 1170 when the obligation is to do
something other than the payment of money but when the
obligation which the debtor failed to perform consists only in the
payment of money, the rule of damages is that laid down in Article
2209 of the Civil Code.
● If the obligation consists in the payment of a sum of money,
and the debtor incurs in delay, the indemnity for damages, there
being no stipulation to the contrary shall be the payment of the
interest agreed upon, and in the absence of stipulation, the legal
interest, which is six per cent per annum.
â— The damage dues (or penalty interest) do not include and are
not included in the computation of interest as the two are distinct
claims which may be demanded separately. While interest agreed
upon forms part of the consideration of the contract itself, damage
dues are usually made payable only in case of default or non-
performance of the contract.
● Rate of the penalty interest. — The rate of the penalty
interest payable shall be that agreed upon. In the absence of
stipulation of a particular rate of penalty interest, then the
additional interest shall be at a rate equal to the regular monetary
interest; and if no regular interest had been agreed upon, then the
legal interest shall be paid. The payment of the regular interest
constitutes the price or cost of the use of money and thus, until the
principal due is returned to the creditor, such interest continues to
accrue since the debtor continues to use such principal amount
â— By virtue of the authority granted to it under Section 1 of Act
No. 2655, as amended, otherwise known as the “Usury
Law,” the Monetary Board, in its Resolution No. 1622, dated July
29, 1974, has prescribed that the rate of interest for the loan or
forbearance of any money, goods or credits and the rate allowed in
judgments, in the absence of express contract as to such rate of
interest, shall be 12% per annum
..........Unilateral Obligations 0,,0,0,88
ART. 1171. Responsibility arising from fraud is demandable in all
obligations. Any waiver of an action for future fraud is void.
..........Reciprocal Obligations 0,,0,0,89
ART. 1192. In case both parties have committed a breach of the
obligation, the liability of the fi rst infractor shall be equitably
tempered by the courts. If it cannot be determined which of the
parties fi rst violated the contract, the same shall be deemed
extinguished, and each shall bear his own damages.
.......Negligence 0,,0,0,90
ART. 1172. Responsibility arising from negligence in the
performance of every kind of obligation is also demandable, but
such liability may be regulated by the courts, according to the
circumstances.
â— The damages or liabilities due to negligence is at the discretion
of the courts to determime or mitigate.
â— The reason for this is because in cases of negligence, the
circumstances of a particular case are given great weight
â— Also, in comparison to fraud, it may be mitigated as there is no
bad faith or deliberate intention for injury.
â— If both parties have negligence, their liabilities may cancel each
other. Courts may issue an equitable decision based on unjust
enrichment.
Validity of waiver of action for negligence
â— Stipulation for waiver of damages to future negligence may be
instituted so long as the nature of the contract does not need
extraordinary diligence
â— Negligence that is gross or shows bad faith os considered and
treated as fraud, thus waiver for future negligence damages is void
Kinds of negligence according to source of obligation
1.) Contractual negligence (culpa contractual) - Negligence in
contracts resulting to the breach of contract. Negligence that is
incurred during the performance of a pre existing obligation which
results to breach of contract or non fulfillment.
2.) Civil negligence (culpa aquiliana) - Negligence that is the
source of an obligation without any pre-existing contract. Also
know as tort or quasi delict.
> Negligence within a pre-existing contract may still be considered
as culpa aquiliana. This happens if the negligent act may be an
actionable tort independent of the contract.
3.) Criminal Negligence (culpa criminal) - Negligent act that results
in a commission of a crime.
â— A single negligent act may constitute a criminal negligence and
civil negligence at the same time.
â— They may claim negligence through criminal action or civil
action but may only choose one as the law disallows to recover
damages twice for the same negligent acts.
â— Sufficient establishment of diligence in culpa aquiliana may
extinguish liability whereas it may only mitigate in culpa
contractual
â— When there is negligence in the injured party where his
negligence is the proximate cause of his injury he cannot recover
damages.
â— But if his negligence is only contributory to the injury with the
other party having negligence as well, then the recovery for
damages may be mitigated.
ART. 1173. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons,
of the time and of the place. When negligence shows bad faith, the
provisions of Articles 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence which is
to be observed in the performance, that which is expected of a
good father of a family shall be required.
Tests for negligence
1.) Reasonable care and caution expected of an ordinary prudent
person.
2.) No hard and fast rule for measuring degree of care.; depends
on nature of obligation, the circumstances of person, time, and
place.
â— If contractual breach is in good faith, the liabilities are those
that are natural and probable consequences of the breach of
obligation and those that were foreseen or could have reasonably
foreseen
Kind of diligence required
1.) that agreed upon by the parties, orally or in writing;
2.) in the absence of stipulation, that required by law in the
particular case (like the extraordinary diligence18 requinred of
common carriers);
3.) if both the contract and law are silent, then the diligence
expected of a good father of a family (par. 2.) or ordinary diligence
........Effects Of Negligence 0,,0,0,91
ART. 1170. Those who in the performance of their obliga￾tions
are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable for damages.
â— If the negligence is gross or shows bad faith, it's effects are the
same as fraud.
â— Gross negligence is negligence characterized by want or
absence of or failure to exercise even slight care or diligence, or
the entire absence of care, acting or omitting to act on a situation
where there is a duty to act, not inadvertently but willfully and
intentionally. It evinces a thoughtless disregard of or conscious
indifferences to consequences insofar as other persons may be
affected, without exerting any effort to avoid them.
ART. 1174. Except in cases expressly specified by the law, or when
it is otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which,
though foreseen, were inevitable.
â— A fortuitous event is any extraordinary event which cannot be
foreseen, or which, though foreseen, is inevitable. In other words,
it is an event which is either impossible to foresee or impossible to
avoid.
â— The essence of a fortuitous event consists of being a happening
independent of the will of the obligor and which happening, makes
the normal fulfillment of the obligation impossible.
● Acts of man. — Strictly speaking, fortuitous event is an
event independent of the will of the obligor but not of other human
wills.
● Acts of God. — They are those events which are totally
independent of the will of every human being.
Requisites:
1.) Must be independent of human will or the obligor's will
2.) The event could not have been foreseen or even if foreseen, is
unavoidable
3.) Event makes it impossible for the obligor to normally fulfill
obligation
4.) The obligor must be free from any participation in, or the
aggravation of the injury to the obligee.

â— In order to be exempt from liability arising from a fortuitous

event, there should have been no human participation amounting
to a negligent act.
â— Generally, a person is not reponsible for damages caused by
fortuitous events except when: expressly specified by law or
declared by stipulation.