(120) Ejercito v.

Oriental Assurance
FACTS:

On 10 May 1999, respondent Oriental Assurance Corporation, through its Executive Vice President Luz N.
Cotoco issued a Surety Bond in favor of FFV Travel & Tours, Inc. (Company). The bond was intended to
guarantee the Company's payment of airline tickets purchased on credit from participating members of
International Air Transport Association (IATA) to the extent of P3 million.

On the same day, petitioners and Merissa C. Somes (Somes) executed a Deed of Indemnity in favor of
respondent. The Surety Bond was effective for one year from its issuance until 10 May 2000. It was renewed
for another year, from 10 May 2000 to 10 May 2001, as shown in Bond Endorsement No. OAC-2000/0145
dated 17 April 2000. The corresponding renewal premium amounting to P15,024.54 was paid by the insured
corporation under Official Receipt No. 100262.

FFV Travel & Tours, Inc. has been declared in default for failure to pay its obligations amounting to
P5,484,086.97 and USD 18,760.98 as of 31 July 2000. Consequently, IATA demanded payment of the bond,
and respondent heeded the demand on 28 November 2000 as evidenced by China Bank Check No. 104949.
IATA executed a Release of Claim on 29 November 2000 acknowledging payment of the surety bond.

Respondent sent demand letters to petitioners and Somes for reimbursement of the P3 million pursuant to the
indemnity agreement. For their failure to reimburse respondent, the latter filed a collection suit.

ISSUE:

Whether or the petitioners are liable to indemnify the respondent under the deed of indemnity considering that
petitioners did not give their consent to be bound thereby beyond the one (1) year effectivity period of the
original surety bond
RULING:
Yes. The contract of indemnity is the law between the parties. It is a cardinal rule in the interpretation of a
contract that if its terms are clear and leave no doubt on the intention of the contracting parties, the literal
meaning of its stipulation shall control. The CA aptly found provisions in the contract that could not exonerate
petitioners from their liability.

WAIVER: — The undersigned hereby waive all the rights, privileges, and benefits that they have or may have
under Articles 2077, 2078, 2079, 2080 and 2081 of the Civil Code.

RENEWALS, ALTERATIONS AND SUBSTITUTIONS: - The undersigned hereby empower and authorize
the Company to grant or consent to the granting of, any extension, continuation, increase, modifications,
change, alteration and/or renewal of the original bond herein referred to, and to execute or consent to the
execution of any substitution for said bond with the same or different conditions and parties, and the
undersigned hereby hold themselves jointly and severally liable to the Company for the original bond
hereinabove mentioned or for any extension, continuation, increase, modification, change, alteration, renewal or
substitution thereof until the full amount including principal
Clearly, as far as respondent is concerned, petitioners have expressly bound themselves to the contract, which
provides for the terms granting authority to the Company to renew the original bond. The terms of the contract
are clear, explicit and unequivocal. Therefore, the subsequent acts of the Company, through Somes, that led to
the renewal of the surety bond are binding on petitioners as well.

(141) So Ping Bun v. CA

FACTS:
In this case, Tek Hua Trading entered into a contract of lease agreement with Dee C. Chua & Sons Inc
(DCCSI). This was done thru Tek Hua Trading’s manager So Pek Giok. The subject of the leas were premises
located in Binondo which will be used Tek Hua as stores in its textile business. Note that each contract has a 1
year term. More so, it is provided that should the leesee continue to occupy the premises after the term, the lease
shall be on a month to month basis. When the contract expired, parties did not renew the contract but Tek hua
continued to occupy the premises.

On 1976, Tek Hua trading was dissolved. Later, the original members of Tek Hua, including Manuel C.
Tiong formed Tek Hua Enterprising Corp. In 1986, So pek Giok died in 1986 and was replaced by So Ping Bun
who occupied the warehouse for his own textile business named “Trendsetter Marketing”. Later on, Tek Hua
Enterprising Corp, through Manuel Tiong, requested petitioner So Ping Bun to vacate his business and request
for the company will use it. However, petitioner refuse to vacate the premise for his textile business and
requested formal contracts of lease with DCCSI. He claimed that after his grandfather died, he had been
occupying the premises for his textile business and religiously paid the rent. Hence, the lease contract was in
favor of Trendsetter was executed.

Tek Hua Enterpires Corp filed injunction and for nullification of the lease contract between DCCSI and
petitioner. Also, they filed a damage suit. RTC annulled the contract of lease without awarding damages. This
ruling was upheld by the CA.

ISSUE:
Whether injunction be upheld and damages be granted.

RULING:
No. SC affirmed the decision. However, award of attorney’s fee was modified from 200k to 100k.

Damage is the loss, hurt, or harm which results from injury, and damages are the compensation awarded for the
damage suffered. The elements of Tort of interference are:
(1) Existence of a valid contract;
(2) Knowledge on the part of the third person of the existence of contract;
(3) Interference of third person is without legal justification or excuse.

The above elements are present in this case.

This situation pertains to a third person who induce a party to violate his undertaking under a contract. In this
case, petitioner asked DCCSI to execute contract of lease in its favor. As a result, petitioner deprived respondent
corporation of the latter’s property right. Petitioner, however, argues that damage is an essential element of Tort
of interference. Because the lower courts ruled that private respondents were not entitled to actual, moral, and
exemplary damages, it follows that he be absolve of any liability including attorney’s fees. There was a
situation in Gilchrist v. Cuddy where it was difficult or impossible to determine the extent of damage and there
was nothing on the record to serve as basis thereof. It is true that lower courts did not award damages but this
was only because the extent of damages was not quantifiable. In such situations, court will refrain from
awarding damages. Same conclusion applies in this case.

However, the recovery of attorney's fees in the concept of actual or compensatory damages, is allowed under
the circumstances provided for in Article 2208 of the Civil Code.  One such occasion is when the defendant's
act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his
interest. But we have consistently held that the award of considerable damages should have clear factual and
legal bases.
(162) HSBC v. Pauli
FACTS:

On June 14, 1957, HSBC filed an action for collection of sum of money against Ralph Pauli wherein a
judgment was rendered in favor of HSBC. However, said judgment was not satisfied because no leviable assets
of Pauli were found. Unknown to HSBC, Pauli purchased from the PNB a sugar cane plantation known as
Hacienda Riveside, but he did not register the deed of sale to avoid discovery by his creditors. Six years later,
on March 1, 1963, he fraudulently sold the hacienda to his daughter Sally Garganera and her husband Mateo
Gargenera. In another civil case filed by Warner Barnes & Co., another creditor of Pauli, the sale to spouses
Garganera was declared fictitious for being in fraud of creditors. Having discovered that the hacienda belonged
to Pauli, HSBC filed a complaint for revival of the previous judgment on January 13, 1969 wherein the court
ordered Pauli to pay HSBC. HSBC filed another civil case to annul the conditional sale as well as the deed of
sale of the disputed hacienda. Pauli argues that the case is barred by prescription. HSBC counters that the four-
year period commenced to run from the date when they had actual knowledge of the fraudulent sale (sometime
in 1969), hence, the action has not yet prescribed.

ISSUE:

Whether or not the action for annulment of the sale of the hacienda prescribed?

RULING:

Yes. The action has prescribed. HSBC’s theory would diminish public faith in the integrity of torrens titles and
impair commercial transactions involving registered lands for it would render uncertain the computation of the
period for the prescription of such actions. When a transaction involves registered land, the four-year period
fixed in Article 1391 of the Civil Code within which to bring an action for annulment of the deed, shall be
computed from the registration of the conveyance (March 5, 1963) on the familiar theory that the registration of
the document is constructive notice of the conveyance to the whole world.