OCCENA VS.

JABSON, COURT OF APPEALS AND TROPICAL HOMES, On November 29, 1947, plaintiff Woodhouse entered into a written agreement with
INC  defendant Halili stating among others that: 1) that they shall organize a partnership
73 SCRA 637  for the bottling and distribution of Missionsoft drinks, plaintiff to act as industrial
NO. L-44349, OCTOBER 29, 1976  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
FACTS: Private respondent Tropical Homes, Inc had a subdivision contract with behalf of the proposed partnership and 3) that the plaintiff was to receive 30 per cent
petitioners who are the owners of the land subject of subdivision development by of the net profits of the business. Prior to entering into this agreement, plaintiff had
private respondent. The contract stipulated that the petitioners’ fixed and sole share informed the Mission Dry Corporation of Los Angeles, California, that he had
and participation is the land which is equivalent to forty percent of all cash receipts interested a prominent financier (defendant herein) in the business, who was willing
from the sale of the subdivision lots. When the development costs increased to such to invest half a milliondollars in the bottling and distribution of the said beverages,
level not anticipated during the signing of the contract and which threatened the and requested, in order that he may close the deal with him, that the right to bottle
financial viability of the project as assessed by the private respondent, respondent and distribute be granted him for a limited time under the condition that it will
filed at the lower court a complaint for the modification of the terms and conditions finally be transferred to the corporation. Pursuant to this request, plaintiff was given
of the contract by fixing the proper shares that should pertain to the parties therein “a thirty days’ option on exclusive bottling and distribution rights for the
out of the gross proceeds from the sales of the subdivision lots. Petitioners moved Philippines”. The contract was finally signed by plaintiff on December 3, 1947.
for the dismissal of the complaint for lack of cause of action. The lower court denied When the bottling plant was already in operation, plaintiff demanded of defendant
the motion for dismissal which was upheld by the CA based on the civil code that the partnership papers be executed. Defendant Halili gave excuses and would
provision that “when the service has become so difficult as to be manifestly beyond not execute said agreement, thus the complaint by the plaintiff.
the contemplation of the parties, the obligor may also be released therefrom, in
whole or in part”. Insisting that the worldwide increase in prices cited by private Plaintiff prays for the : 1.execution of the contract of partnership; 2) accounting of
respondent does not constitute a sufficient cause of action for the modification of the profits  and 3)share thereof of 30 percent with 4) damages in the amount of
terms and conditions of the contract, petitioners filed the instant petition.  P200,000. The Defendant on the other hand claims that: 1) the defendant’s consent
to the agreement, was secured by the representation of plaintiff that he was the
ISSUE: Whether or not private respondent may demand modification of the terms owner, or was about to become owner of an exclusive bottling franchise, which
of the contract on the ground that the prestation has manifestly come beyond the representation was false, and that plaintiff did not secure the franchise but was given
contemplation of the parties.  to defendant himself 2) that defendant did not fail to carry out his undertakings, but
that it was plaintiff who failed and 3)that plaintiff agreed to contribute to the
RULING: If the prayer of the private respondent is to be released from its exclusive franchise to the partnership, but plaintiff failed to do so with a 4)
contractual obligations on account of the fact that the prestation has become beyond counterclaim for P200,00 as damages.
the contemplation of the parties, then private respondent can rely on said provision The CFI ruling: 1) accounting of profits and to pay plaintiff 15 % of the profits and
of the civil code. But the prayer of the private respondent was for the modification that the 2) execution of contract cannot be enforced upon parties. Lastly, the 3) fraud
of their valid contract. The above-cited civil code provision does not grant the court wasn’t proved
the power to remake, modify, or revise the contract or to fix the division of the
shares between the parties as contractually stipulated with the force of law between ISSUES
the parties. Therefore, private respondent’s complaint for modification of its contract
with petitioner must be dismissed. The decision of respondent court is reversed. 1. WON plaintiff falsely represented that he had an exclusive franchise to bottle
Mission beverages
2. WON false representation, if it existed, annuls the agreement to form the
CHARLES F. WOODHOUSE, plaintiff-appellant,  vs. FORTUNATO F. partnership
HALILI, defendant-appellant.
G.R. No. L-4811 July 31, 1953 HELD
Doctrine: Fraud
1. Yes. Plaintiff did make false representations and this can be seen through his
FACTS: letters to Mission Dry Corporation asking for the latter to grant him temporary
franchise so that he could settle the agreement with defendant. The trial court
reasoned, and the plaintiff on this appeal argues, that plaintiff only undertook in the
agreement “to secure the Mission Dry franchise for and in behalf of the proposed
partnership.” 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
(plaintiff) was the exclusive grantee of the franchise.
2. No. In consequence, article 1270 of the Spanish Civil Code distinguishes two
kinds of (civil) fraud, the causal fraud, which may be ground for the annulment of a
contract, and the incidental deceit, which only renders the party who employs it
liable for damages only. The Supreme Court has held that in order that fraud may
vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo
incidente) inducement to the making of the contract.
The record abounds with circumstances indicative of the fact that the principal
consideration, the main cause that induced defendant to enter into the partnership
CLAUDINA VDA. DE VILLARUEL, ET AL. VS. MANILA MOTOR CO.,
INC. 104 PHIL. 926
FACTS:
On May 31, 1940, the plaintiffs Villaruel and defendant Manila Motor Co. Inc.
entered into a contract whereby the defendant agreed to lease plaintiffs building
premises. On October 31, 1940, the leased premises were placed in the possession of
the defendant until the invasion of 1941. The Japanese military occupied and used
the property leased as part of their quarters from June, 1942 to March, 1945, in
which no payment of rentals were made. Upon the liberation of the said city, the
American forces occupied the same buildings that were vacated by the Japanese.
agreement with plaintiff, was the ability of plaintiff to get the exclusive franchise to
bottle and distribute for the defendant or for the partnership. The original draft
prepared by defendant’s counsel was to the effect that plaintiff obligated himself to
secure a franchise for the defendant. But if plaintiff was guilty of a false
representation, this was not the causal consideration, or the principal inducement,
that led plaintiff to enter into the partnership agreement. On the other hand, this
supposed ownership of an exclusive franchise was actually the consideration or price
plaintiff gave in exchange for the share of 30 per cent granted him in the net profits
of the partnership business. Defendant agreed to give plaintiff 30 per cent share in
the net profits because he was transferring his exclusive franchise to the partnership.
Having arrived at the conclusion that the contract cannot be declared null and void,
may the agreement be carried out or executed? The SC finds no merit in the claim of
plaintiff that the partnership was already a fait accompli from the time of the
operation of the plant, as it is evident from the very language of the agreement that
the parties intended that the execution of the agreement to form a partnership was to
be carried out at a later date. , The defendant may not be compelled against his will
to carry out the agreement nor execute the partnership papers. The law recognizes
the individual’s freedom or liberty to do an act he has promised to do, or not to do it,
as he pleases.
Dispostive Postion: With modification above indicated, the judgment appealed
from is hereby affirmed.
When the United States gave up the occupancy of the premises, defendant decided
to exercise their option to renew the contract, in which they agreed. However, before
resuming the collection of rentals, Dr. Alfredo Villaruel upon advice demanded
payment of rentals corresponding to the time the Japanese military occupied the
leased premises, but the defendant refused to pay. As a result plaintiff gave notice
seeking the rescission of the contract and the payment of rentals from June, 1942 to
March, 1945; this was rejected by the defendant. Despite the fact the defendant
under new branch manager paid to plaintiff the sum of P350 for the rent, the plaintiff
still demanded for rents in arrears and for the rescission of the contract of lease. The
plaintiff commenced an action before the CFC of Neg. Occidental against defendant
company. During the pendency of the case, the leased building was burned down.
Because of the occurrence, plaintiffs demanded reimbursement from the defendants,
but having been refused, they filed a supplemental complaint to include a 3rd cause
of action, the recovery of the value of the burned building. The trial court rendered
judgment in favor of the plaintiff. Hence the defendants appeal.
ISSUE: Is Manila Motor Co. Inc. liable for the loss of the leased premises?
RULING: No. Clearly, the lessor’s insistence upon collecting the occupation rentals
for 1942-1945 was unwarranted in law. Hence, their refusal to accept the current
rentals without qualification placed them in default (mora creditoris or accipiendi)
with the result that thereafter, they had to bear all supervening risks of accidental  plaintiff. None of the conditions for delay to exist is extant in the case. Therefore,
injury or destruction of the leased premises. While not expressly declared by the
Code of 1889, this result is clearly inferable from the nature and effects of mora. In
other words, the only effect of the failure to consign the rentals in court was that the
obligation to pay them subsisted and the lessee remained liable for the amount of the
unpaid contract rent, corresponding to the period from July to November, 1946; it
being undisputed that, from December 1946 up to March 2, 1948, when the
commercial buildings were burned, the defendants appellants have paid the contract
rentals at the rate of P350 per month. But the failure to consign did not eradicate the
default (mora) of the lessors nor the risk of loss that lay upon them.
Dela Rosa v. bank of the Philippine Islands
FACTS:
Defendant-bank started a contests of designs and plans for the construction of
buildings, announcing that the prizes would be awarded not later than November 30,
1921. Plaintiff joined such contest but said bank refrained from awarding the prizes
in accordance with the conditions stipulated. In a claim for damages filed by him, he
alleged that the bank should indemnify him for its failure to award the prize to him
on the announced date, it being a breach of contract on the part of the bank. Such
claim was subsequently ganted by the trial court. On appeal, the defendant
contended that the trial court erred in holding that the date set for the awarding of
prizes is essential in the contract and hence, the failure to award the prizes on the
said date was a breach of contract on the part of the defendant.
ISSUE:
Whether or not the date set for the awarding of prizes is essential in the contract and
the failure to award the same on the announced date constitutes a breach of contract
on the part of the defendant (WON the bank incurred in delay in the performance of
its obligations)
RULING: No, the said date was not essential in the contract and the defendant’s
failure to award the prize does not amount to a breach of contract on its part. Article
1100 of the Civil Code (now article 1169 of the New Civil Code) provides that
persons obliged to deliver or to do something are in default (delay) from the moment
the creditor demnads from them judicially or extrajudicially the performance of their
obligations. Nevertheless, paragraph 2 of the same article provides that such demand
shall not be necessary in order that default (delay) may arise when from the nature
and circumstances of the obligation, it appears that the designation of time to which
the obligation must be done was the principal inducement to the creditor of the
obligation. Applying this to the case at bar, the plaintiff did not judicially or
extrajudicially demand from the bank the fulfillment of its obligations, thus the bank
did not incur in delay. Moreover, the fixation of the current price of concrete
buildings cannot be considered as the principal inducement of the contract, but
undoubtedly, only for the uniformity of designs, contrary to the contention of the
the date set for the awarding of prizes is not essential in the contract, and the failure
of the bank to give the prizes on the said date does not amount to a breach of
contract.
Lawyers Cooperative v. Tabora
LAWYERS COOPERATIVE PUBLISHING COMPANY v. PERFECTO A.
TABORA
1965
FACTS
Perfecto Tabora bought from the Lawyers Cooperative Publishing Company a
complete set of AmJur, plus a set of AmJur, General Index.
CONTRACT “Title to and ownership of the books shall remain with the seller until
the purchase price shall have been fully paid. Loss or damage to the books after
delivery to the buyer shall be borne by the buyer.” Tabora made a partial payment of
P300.00, leaving a balance of P1,382.40. The books were delivered and receipted for
by Tabora. On the same day, a fire broke out, burning down Tabora’s law office and
library. Tabora immediately reported it to LCBC. The company replied and as a
token of goodwill it sent to Tabora free of charge 4 Philippine Reports volumes. As
Tabora failed to pay the monthly installments agreed upon, LCBC filed an action to
recover of the balance.
TABORA’S CONTENTIONS
Contract: title to and the ownership of the books shall remain with the seller until the
purchase price shall have been fully paid, so LCBC should bear the loss. Even
assuming that the ownership was transferred to Tabora, he should not answer for the
loss: force majeure (no evidence that Tabora contributed in any way)
ISSUE:
Who bears the loss? Tabora
RATIO
GENERAL RULE The loss of the object of the contract of sale is borne by the
owner or in case of force majeure the one under obligation to deliver the object
is exempt from liability. THIS IS NOT APPLICABLE HERE. Contract provides
that loss or damage after delivery shall be borne by the buyer.
FORCE MAJEURE DEFENSE FAILS
The rule only holds true when the obligation consists in the delivery of a determinate
thing and there is no stipulation holding him liable even in case of fortuitous event.
NOT PRESENT IN THIS CASE
The obligation is pecuniaryin nature, and the obligor bound himself to assume the
loss after the delivery.
AEROSPACE CHEMICAL V CA
g.r.no. 108129 September 23, 1999
FACTS:
On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace) purchased five
hundred (500) metric tons of sulfuric acid from private respondent Philippine
Phosphate Fertilizer Corporation (Philphos). Initially set beginning July 1986, the
agreement provided that the buyer shall pay its purchases in equivalent Philippine
currency value, five days prior to the shipment date. Petitioner as buyer committed
to secure the means of transport to pick-up the purchases from private respondent's
loadports. Per agreement, one hundred metric tons (100 MT) of sulfuric acid should
be taken from Basay, Negros Oriental storage tank, while the remaining four
hundred metric tons (400 MT) should be retrieved from Sangi, Cebu. On December
18, 1986, M/T Sultan Kayumanggi docked at Sangi, Cebu, but withdrew only
157.51 MT of sulfuric acid. Again, the vessel tilted. Further loading was aborted.
Two survey reports conducted by the Societe Generale de Surveillance (SGS) Far
East Limited, dated December 17, 1986 and January 2, 1987, attested to these
occurrences. Later, on a date not specified in the record, M/T Sultan Kayumanggi
sank with a total of 227.51 MT of sulfuric acid on board. Petitioner chartered
another vessel, M/T Don Victor, with a capacity of approximately 500 MT.6 [TSN,
September 1, 1989, pp. 28-29.] On January 26 and March 20, 1987, Melecio
Hernandez, acting for the petitioner, addressed letters to private respondent,
concerning additional orders of sulfuric acid to replace its sunken purchases.
ISSUE:
Should expenses for the storage and preservation of the purchased fungible goods,
namely sulfuric acid, be on seller's account pursuant to Article 1504 of the Civil
Code?
RULING:
Petitioner tries to exempt itself from paying rental expenses and other damages by
arguing that expenses for the preservation of fungible goods must be assumed by the
seller. Rental expenses of storing sulfuric acid should be at private respondent's
account until ownership is transferred, according to petitioner. However, the general
rule that before delivery, the risk of loss is borne by the seller who is still the owner,
is not applicable in this case because petitioner had incurred delay in the
performance of its obligation. Article 1504 of the Civil Code clearly states: "Unless
otherwise agreed, the goods remain at the seller's risk until the ownership therein is
transferred to the buyer, but when the ownership therein is transferred to the buyer
the goods are at the buyer's risk whether actual delivery has been made or not,
except that: (2) Where actual delivery has been delayed through the fault of either
the buyer or seller the goods are at the risk of the party at fault."
On this score, we quote with approval the findings of the appellate court, thus: The
defendant [herein private respondent] was not remiss in reminding the plaintiff that
it would have to bear the said expenses for failure to lift the commodity for an
unreasonable length of time.But even assuming that the plaintiff did not consent to
be so bound, the provisions of Civil Code come in to make it liable for the damages
sought by the defendant.
TELEFAST v CASTRO
GR NO. 73867. FEB. 29, 1988
FACTS:
Sofia Crouch was in the Philippines for vacation when her mother died. Onthat same
day, she adddressed a telegramannouncing her mother’s death to Ignacio Castro, Sr
at 685, Wanda, Scottsburg, Indiana, USA. The defendants, after receiving the
required fees and charges, accepted the telegram for transmission.
The husband and the children of the deceased who were all residing in the US never
received the telegram. Sofia Crouch was the only one present during the internment.
Sofia and the other plaintiffs then filed an action to recover damages arising from
the breach of contract against the defendants. The only defense of the defendants
was that, the failure was due to “the technical and atmospheric factors beyond its
control”. However no evidence appeared on record that the defendant ever make any
attempt to advise Sofia as to why they could not transmit the telegram.
ISSUE:
Whether or not the petitioner are liable for damages for their failure to transmit the
telegram.
Whether or not the petitioners should only liable for actual or quantified damages.
RULING:
YES. TELEFAST COMMUNICATIONS/PHIL. WIRELESS INC ARE LIABLE
TO INDEMNIFY THE RESPONDENTS FOR DAMAGES THEY HAVE
SUFFERED FROM THE FAILURE OF  THE PLAINTIFFS ON TRANSMITTING
THE TEEGRAM.
The defendant Sofia Crouch and the plaintiffs entered into a contract whereby the
plaintiffs shall send the respondents message overseas by telegram, after paying the
required fees. The defendant has performed her part in the obligation. However, the
plaintiffs failed to do their part. Petitoner therefore was guilty of contravening its
obligation and is liable for damages pursuant to the provisions of Art 1170  and Art.
2176 of the Civil Code.
NO. THE PETITIONERS LIABILITY ARE NOT LIMITED TO ACTUAL OR
QUANTIFIED DAMAGES.
Pursuant to Art. 2217 of the Civil Code, the petitioners are liable to indmenify the
respondents for the moral damages they had suffered. The petitioners act or
omissionwas the precise cause of the sufferings that the respondents have to
undergo. Respondents Sofia Crouch shall be awarded with P16 000 as compensatory
damages. Each of the respondents shall be awarded with P10 000 as moral damages
and P1 000 as exemplary damages.
JACINTO TANGUILIG vs. COURT OF APPEALS and VICENTE HERCE
JR.
G.R. No. 117190
JANUARY 2, 1997
FACTS:
Petitioner Jacinto M. Tanguilig proposed to respondent Vicente Herce Jr. to
construct a windmill system for him. After some negotiations they agreed on the
construction of the windmill for a consideration of P60,000.00. On 14 March 1988,
due to the refusal and failure of respondent to pay the balance, petitioner filed a
complaint to collect the amount. Respondent denied the claim saying that he had
already paid this amount to the San Pedro General Merchandising Inc. (SPGMI)
which constructed the deep well to which the windmill system was to be connected.
According to respondent, since the deep well formed part of the system the payment
he tendered to SPGMI should be credited to his account by petitioner. Moreover,
assuming that he owed petitioner a balance of P15,000.00, this should be offset by
the defects in the windmill system which caused the structure to collapse after a
strong wind hit their place.
Petitioner denied that the construction of a deep well was included in the agreement
to build the windmill system, for the contract price of P60,000.00 was solely for the
windmill assembly and its installation. He also disowned any obligation to repair or
reconstruct the system since its collapse was attributable to a typhoon, a force
majeure, which relieved him of any liability.
ISSUE:
Whether or not the payment for the deep well is part of the contract price.
Whether or not Tanguilig is liable to reconstruct the damaged windmill considering
that its collapse is due to a typhoon.
RULING:
There is absolutely no mention in the two (2) documents that a deep well pump is a
component of the proposed windmill system. The contract prices fixed in both
proposals cover only the features specifically described therein and no other.
Respondent is directed to pay petitioner Tanguilig the balance of P15,000.00 plus
legal interest.
Regarding the second issue, the Supreme Court has consistently held that in order
for a party to claim exemption from liability by reason of fortuitous event under Art.
1174 of the Civil Code four (4) requisites must concur: (a) the cause of the breach of
the obligation must be independent of the will of the debtor; (b) the event must be
either unforeseeable or unavoidable; (c) the event must be such as to render it
impossible for the debtor to fulfill his obligation in a normal manner; and, (d) the
debtor must be free from any participation in or aggravation of the injury to the
creditor. Petitioner failed to show that the collapse of the windmill was due solely to
a fortuitous event. Petitioner merely stated that there was a "strong wind." But a
strong wind in this case cannot be fortuitous. On the contrary, a strong wind should
be present in places where windmills are constructed. Petitioner is ordered to
"reconstruct subject defective windmill system, in accordance with the
one-year guaranty".
BOARD OF LIQUIDATORS V KALAW G.R. No. L-18805 August 14, 1967
THE BOARD OF LIQUIDATORS representing THE GOVERNMENT OF
THE REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. HEIRS OF
MAXIMO M. KALAW, JUAN BOCAR, ESTATE OF THE DECEASED
CASIMIRO GARCIA, and LEONOR MOLL, defendants-appellees. 
FACTS:
The National Coconut Corporation (NACOCO, for short) was chartered as a non-
profit governmental organization on avowedly for the protection, preservation and
development of the coconut industry in the Philippines. On August 1, 1946,
NACOCO's charter was amended [Republic Act 5] to grant that corporation the
express power to buy and sell copra. The charter amendment was enacted to
stabilize copra prices, to serve coconut producers by securing advantageous prices deceased Kalaw from NACOCO. 
for them, to cut down to a minimum, if not altogether eliminate, the margin of
middlemen, mostly aliens. General manager and board chairman was Maximo M. ISSUE:
Kalaw; defendants Juan Bocar and Casimiro Garcia were members of the Board; 1. Whether plaintiff Board of Liquidators has lost its legal personality to continue
defendant Leonor Moll became director only on December 22, 1947. NACOCO, with this suit since the three year period has elapsed, the Board of Liquidators may
after the passage of Republic Act 5, embarked on copra trading activities.  not now continue with, and prosecute, the present case to its conclusion
2. Whether the action is unenforceable against Kalaw
An unhappy chain of events conspired to deter NACOCO from fulfilling the 3. whether the case at bar is to be taken out of the general concept of the powers of a
contracts it entered into. Nature supervened. Four devastating typhoons visited the general manager, given the cited provision of the NACOCO by-laws requiring prior
Philippines in 1947. When it became clear that the contracts would be unprofitable, directorate approval of NACOCO contracts. 
Kalaw submitted them to the board for approval. It was not until December 22, 1947 4. Whether damages should be awarded 
when the membership was completed. Defendant Moll took her oath on that date. A
meeting was then held. Kalaw made a full disclosure of the situation, apprised the RULING:
board of the impending heavy losses. No action was first taken on the contracts but 1. No, the provision should be read not as an isolated provision but in conjunction
not long thereafter, that is, on January 30, 1948, the board met again with Kalaw, with the whole. So reading, it will be readily observed that no time limit has been
Bocar, Garcia and Moll in attendance. They unanimously approved the contracts tacked to the existence of the Board of Liquidators and its function of closing the
hereinbefore enumerated.  affairs of the various government owned corporations, including NACOCO.
The President thought it best to do away with the boards of directors of the defunct
As was to be expected, NACOCO but partially performed the contracts. The buyers corporations; at the same time, however, the President had chosen to see to it that the
threatened damage suits, some of which were settled. But one buyer, Louis Dreyfus Board of Liquidators step into the vacuum. And nowhere in the executive order was
& Go. (Overseas) Ltd., did in fact sue before the Court of First Instance of Manila. there any mention of the lifespan of the Board of Liquidators.
The cases culminated in an out-of- court amicable settlement when the Kalaw 3 methods by which corporation may wind up it its affairs:
management was already out.  1. Voluntary dissolution, "such disposition of its assets as justice requires, and may
With particular reference to the Dreyfus claims, NACOCO put up the defenses that: appoint a receiver to collect such assets and pay the debts of the corporation;
2. Corporate existence is terminated - "shall nevertheless be continued as a body
(1) the contracts were void because Louis Dreyfus & Co. (Overseas) Ltd. did not corporate for three years after the time when it would have been so dissolved, for the
have license to do business here; and  purpose of prosecuting and defending suits by or against it and of enabling it
(2) failure to deliver was due to force majeure, the typhoons. All the settlements sum gradually to settle and close its affairs, to dispose of and convey its property and to
up to P1,343,274.52. divide its capital stock, but not for the purpose of continuing the business for which
In this suit started in February, 1949, NACOCO seeks to recover the above sum of it was established;"
P1,343,274.52 from general manager and board chairman Maximo M. Kalaw, and 3. corporation, within the three year period just mentioned, "is authorized and
directors Juan Bocar, Casimiro Garcia and Leonor Moll. It charges Kalaw with empowered to convey all of its property to trustees for the benefit of members,
negligence under Article 1902 of the old Civil Code (now Article 2176, new Civil stockholders, creditors, and others interested
Code); and defendant board members, including Kalaw, with bad faith and/or breach Corpus Juris Secundum likewise is authority for the statement that "[t]he dissolution
of trust for having approved the contracts. By Executive Order 372, dated November of a corporation ends its existence so that there must be statutory authority for
24, 1950, NACOCO, together with other government-owned corporations, was prolongation of its life even for purposes of pending litigation
abolished, and the Board of Liquidators was entrusted with the function of settling Board of Liquidators escapes from the operation thereof for the reason that
and closing its affairs.  "[o]bviously, the complete loss of plaintiff's corporate existence after the expiration
of the period of three (3) years for the settlement of its affairs is what impelled the
DECISION OF LOWER COURTS: President to create a Board of Liquidators, to continue the management of such
1. CFI-Manila: dismissed the complaint. Plaintiff was ordered to pay the heirs of matters as may then be pending."
Maximo Kalaw the sum of P2,601.94 for unpaid salaries and cash deposit due the The Board of Liquidators thus became the trustee on behalf of the government. It
was an express trust. The legal interest became vested in the trustee — the Board of
Liquidators. The beneficial interest remained with the sole stockholder — the
government. At no time had the government withdrawn the property, or the
authority to continue the present suit, from the Board of Liquidators. If for this
reason alone, we cannot stay the hand of the Board of Liquidators from prosecuting
this case to its final conclusion. The provisions of Section 78 of the Corporation Law
— the third method of winding up corporate affairs — find application.  and doings of its subordinates in and about the affairs of the corporation.
2. Action against the Kalaw heirs and, for the matter, against the Estate of Casimiro
Garcia survives.
Claims that are barred if not filed in the estate settlement proceedings(Rule 87, sec.
5)
> actions that are abated by death are:
(1) claims for funeral expenses and those for the last sickness of the decedent; (2)
judgments for money; and (3) "all claims for money against the decedent, arising
from contract express or implied."
it is not enough that the claim against the deceased party be for money, but it must
arise from "contract express or implied"  4. No. This is a case of damnum absque injuria. Conjunction of damage and wrong
actions that survive and may be prosecuted against the executor or administrator
(Rule 88, sec. 1)
> 1. actions for damages caused by tortious conduct of a defendant (as in the case at
bar) survive the death of the latter.
actions that survive against a decedent's executors or administrators, and they are:  being questioned in Congress and in the NACOCO board itself, President Roxas
(1) actions to recover real and personal property from the estate; (2) actions to
enforce a lien thereon; and
(3) actions to recover damages for an injury to person or property.
3. The movement of the market requires that sales agreements be entered into, even
though the goods are not yet in the hands of the seller. Known in business parlance
as forward sales, it is concededly the practice of the trade. Above all, NACOCO's
limited funds necessitated a quick turnover. Copra contracts then had to be executed
on short notice — at times within twenty-four hours. To be appreciated then is the
difficulty of calling a formal meeting of the board  FACTS:
So pleased was NACOCO's board of directors that, on December 5, 1946, in
Kalaw's absence, it voted to grant him aspecial bonus "in recognition of the signal
achievement rendered by him in putting the Corporation's business on a self-
sufficient basis within a few months after assuming office, despite numerous
handicaps and difficulties." 
These previous contract it should be stressed, were signed by Kalaw without prior
authority from the board. Existence of such authority is established, by proof of the
course of business, the usage and practices of the company and by
theknowledge which the board of directors has, or must be presumed to have, of acts
 
If the by-laws were to be literally followed, the board should give its stamp of prior
approval on all corporate contracts. But that board itself, by its acts and through
acquiescence, practically laid aside the by-law requirement of prior approval. 
Under the given circumstances, the Kalaw contracts are valid corporate acts. Bad
faith does not simply connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of wrong; it means breach of a
known duty thru some motive or interest or ill will; it partakes of the nature of fraud.
Applying this precept to the given facts herein, we find that there was no "dishonest
purpose," or "some moral obliquity," or "conscious doing of wrong," or "breach of a
known duty," or "Some motive or interest or ill will" that "partakes of the nature of
fraud." 
is here absent. There cannot be an actionable wrong if either one or the other is
wanting. Of course, Kalaw could not have been an insurer of profits. He could not
be expected to predict the coming of unpredictable typhoons. And even as typhoons
supervened Kalaw was not remissed in his duty. He exerted efforts to stave off
losses. That Kalaw cannot be tagged with crassa negligentia or as much as simple
negligence, would seem to be supported by the fact that even as the contracts were
defended the actuations of Kalaw. 
It is a well known rule of law that questions of policy of management are left solely
to the honest decision of officers and directors of a corporation, and the court is
without authority to substitute its judgment for the judgment of the board of
directors; the board is the business manager of the corporation, and so long as it acts
in good faith its orders are not reviewable by the courts." 
Southeastern College Inc. vs. Court of Appeals
G.R. No. 126389 – July 10, 1998
Private respondents are owners of a house near the petitioner’s four-story school
building along the same road. During a typhoon, the roof of the petitioner’s building
was partly ripped off and blown away by strong winds, landing on and destroying
portions of the roofing of private respondents’ house. In the aftermath, an ocular
inspection of the destroyed building was spearheaded by the city building official. In
his report, he imputed negligence to the petitioner for the structural defect of the
building and improper anchorage of trusses to the roof beams which caused the roof
be ripped off the building, thereby causing damage to the property of respondents.
Respondents filed an action before the RTC for recovery of damages based on culpa
aquiliana. Petitioner contested that it had no liability, attributing the damage to a
fortuitous event. RTC ruled in favor of respondents which was affirmed by the CA.
Hence present petition.’
ISSUE:
Whether or not the damage, in legal sense, can be attributed to a fortuitous event.
RULING:
Yes. The court ruled that petitioner is not liable, the damage being attributable to a
fortuitous event.
Art 1174 of the Civil Code states that: “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”
To be liable for a fortuitous event, the respondent must prove that petitioners were
negligent, with which they fall short, merely relying on the report of the city
building official. This is the same official that have approved the building plans of
petitioner, who made clear that there were no prior complaints regarding the
building. Since storms are common in the country, the part of the building in
question should have failed against stronger typhoons that preceded said storm,
which it had not. Furthermore, petitioner was able to present evidence that regular
maintenance was carried out. Respondents also failed to support the claim of the
actual loss they suffered, merely relying on estimates without considering that wear
and tear of respondents’ home which may have had a contributory effect to the
damage. Petition is granted and challenged decision is reversed.
Philcomsat v. Globe Telecom
429 SCRA 153, G.R. No. 147324 (May 25, 2004)
Facts:
Globe Telecom, Inc. (Globe) is engaged in the coordination of the provision of
various communication facilities for the military bases of the United States of
America (US) in the Clark Air Base and Subic Naval Base.
Saud communication facilities were installed and configured for the exclusive use of
the US Defense Communications Agency (USDCA).
Globe contracted Philippine Communications Satellite Corporation (Philcomsat) for
the provision of the communication facilities.
Philcomsat and Globe entered into an agreement whereby Philcomsat obliged itself
to establish, operate and provide an IBS Standard B earth station (earth station) for
the exclusive use of the USDCA. Globe promised to pay Philcomsat monthly rentals
for each leased circuit involved.
Philcomsat installed and established the earth station and the USDCA made use of
the same.
Senate passed and adopted its resolution, expressing its decision not to concur in the
ratification of the Treaty of Friendship, Cooperation and Security and its
Supplementary Agreements that was supposed to extend the term of the use by the
US of Subic Naval Base, among others.
PH government sent a Note Verbale to the US government through the US Embassy,
notifying it of the Philippine termination of the RP-US Military Base Agreement.
The withdrawal of all US military forces from Subic Naval Base should be
completed by December 31. 1992.
Globe notified Philcomsat of its intention to discontinue the use of the earth station.
Philcomsat demand payment of rentals for the balance of lease term, despite the
non-use of earth station.
Issue/s:
Whether the termination of the RP-US Military Base Agreement, the non-ratification
of the Treaty of Friendship, Cooperation and Security, and the consequent
withdrawal of US military forces and personnel from Cubi Point constitute force
majeure which would exempt Globe from complying with its obligation to pay
rentals under its Agreement with Philcomsat.
Whether Globe is liable to pay rentals under the Agreement for the month of
December 1992.
Whether Philcomsat is entitled to attorney’s fees and exemplary damages.
Ruling:
Yes. Philcomsat and Globe had no control over the non-renewal of the term of the
RP-US Military Base Agreement when the same expired in 1991, because the
prerogative to ratify the treaty extending the life thereof belonged to the Senate.
Neither did the parties have control over the subsequent withdrawal of the US
military forces and personnel from Cubi Point in December 1992.
As a consequence of the termination of the RP-US Military Base Agreement the
continued stay of all US Military forces and personnel from Subic Naval Base would
no longer be allowed, hence, plaintiff would no longer be in any position to render
service it was obligated under the Agreement.
Events made impossible the continuation of the Agreement until the end of its five-
year term without fault on the part of either party. Such fortuitous events rendered
Globe exempt from payment of rentals for the remainder of the term of the
Agreement.
Philcomsat would like to charge globe rentals for the balance of the lease term
without being any corresponding telecommunications service subject of the lease. It
will be grossly unfair and iniquitous to hold globe liable for lease charges for a
service that was not and could not have been rendered due to an act of the
government which was clearly beyond globes control.
Yes. The US military forces and personnel completely withdrew from Cubi Point
only on December 31, 1992. Thus, until that date, USDCA had control over the
earth station and had the option of using the same. Furthermore, Philcomsat could
not have removed or rendered ineffective said communication facility until after
December 31, 1992 because Cubi Point was accessible only to US naval personnel
up to that time.
No. The award of attorney’s fees is the exemption rather than the rule. In cases
where both parties have legitimate claims against each other and no party actually
prevailed, such as in the present case where the claims of both parties were sustained
in part, an award of attorney’s fees would not be warranted.
Exemplary damages may be awarded in cases involving contracts, if the erring party
acted in wanton, fraudulent, reckless, oppressive or malevolent manner. It was not
shown that Globe acted wantonly or oppressively in not heeding Philcomsats
demands for payment of rentals. Globe had valid grounds for refusing to comply
with its contractual obligations after 1992.
PEDRO VASQUEZ v. THE COURT OF APPEALS
G.R. No. L-42926 1985 Sep 13
FACTS:
MV 'Pioneer Cebu' was owned and operated by the defendant and used in the
transportation of goods and passengers in the interisland shipping. It had a passenger
capacity of three hundred twenty-two including the crew. It undertook the said
voyage on a special permit issued by the Collector of Customs inasmuch as, upon
inspection, it was found to be without an emergency electrical power system. The
special permit authorized the vessel to carry only two hundred sixty passengers due
to the said deficiency and for lack of safety devices for 322 passengers. A headcount
was made of the passengers on board, resulting on the tallying of 168 adults and 20
minors, although the passengers manifest only listed 106 passengers. It has been
admitted, however, that the headcount is not reliable. When the vessel left Manila,
its officers were already aware of the typhoon Klaring building up somewhere in
Mindanao. Plaintiffs seek the recovery of damages due to the loss of Alfonso
Vasquez, Filipinas Bagaipo and Mario Marlon Vasquez during said voyage.
ISSUE:
Whether or not the respondent would be exempt from responsibility due to its
defense of fortuitous event.
RULING:
To constitute a caso fortuito that would exempt a person from responsibility, it
is necessary that (1) the event must be independent of the human will; (2) the
occurrence must render it impossible for the debtor to fulfill the obligation in a
normal manner; and that (3) the obligor must be free of participation in, or
aggravation of, the injury to the creditor. The event must have been impossible to
foresee, or if it could be foreseen, must have been impossible to avoid. There must
be an entire exclusion of human agency from the cause of injury or loss.
Under the circumstances, while, indeed, the typhoon was an inevitable
occurrence, yet, having been kept posted on the course of the typhoon by weather
bulletins at intervals of six hours, the captain and crew were well aware of the risk
they were taking as they hopped from island to island from Romblon up to
Tanguingui. They held frequent conferences, and oblivious of the utmost diligence
required of very cautious persons, they decided to take a calculated risk. In so
doing, they failed to observe that extraordinary diligence required of them explicitly
by law for the safety of the passengers transported by them with due regard for all
circumstances and unnecessarily exposed the vessel and passengers to the tragic
mishap. They failed to overcome that presumption of fault or negligence that arises
in cases of death or injuries to passengers.
 With regard to the contention that the total loss of the vessel extinguished its
liability pursuant to Article 587 of the Code of Commerce, it was held that the
liability of a shipowner is limited to the value of the vessel or to the insurance
thereon. Despite the total loss of the vessel therefore, its insurance answers for the
damages that a shipowner or agent may be held liable for by reason of the death of
its passengers.
Hill vs. Veloso 31 Phil. 160
Facts:
It is believed that defendant Maxima Ch. Veloso is indebted to Damasa Ricablanca,
her sister-in-law and widow of Potenciano Ch. Veloso, with the amount of P8, 000.
It is also believed that Domingo Franco, defendant’s son-in-law and minor child of
Ricablanca, had the latter sign a blank document for the purpose of compelling her
to execute a document regarding the acknowledgment of the abovementioned debt in
his behalf. The guardian of Franco, named Levering, according to the latter, is the
one who compelled the defendant to sign the said document on Franco’s behalf.
Later on, the document that was signed by the defendant turned out to be a
document containing a different tenor which states that the defendant had executed
the said document for value of the goods that they received in La Cooperative
Filipina which they (the defendant and her husband) are bound to pay jointly and
severally to Michael and Co., for the sum of P6, 319.33. Levering, as the guardian of
the minor children of Damasa Ricablanca, commenced proceedings against the
defendant for the recovery of the sum of P8, 000. The defendant, in turn, pray for the
annulment of the contract with Michael and Co. on the grounds of deceit and error
committed by her son-in-law Franco who was then a deceased.
Issue: Whether or not the alleged deceit caused by Franco may be a ground for the
annulment of the contract.
Michael and Co., and the passive subject and the party of the second part are
Maxima Ch. Veloso and Domingo Franco; two, or they be more, who are one single
subject, one single party. Domingo Franco is not one contracting party with regard
to Maxima Ch. Veloso as the other contracting party. They both are but one single
contracting party in contractual relation with, Michael and Co. Domingo Franco,
like any other person who might have been able to induce Maxima Ch. Veloso to act
in the manner she is said to have done, under the influence of deceit, would be for
this purpose, but a third person. There would then be not deceit on the part of the
one of the contracting parties exercised upon the other contracting party, but deceit
practiced by a third person.
Estate of Hemady vs. Luzon Surety
Facts:
Luzon Surety files a claim against the estate of Hemady which the deceased
guaranteed as surety when still alive.
Issue:
Whether or not a solidary guarantor’s liability is extinguished by his death.
Held:
The solidary guarantor’s liability is not extinguished by his death, and that in such
event, the Luzon Surety Co., had the right to file against the estate a contingent
claim for reimbursement. The contracts of suretyship entered into by K. H. Hemady
in favor of Luzon Surety Co. not being rendered intransmissible due to the nature of
the undertaking, nor by the stipulations of the contracts themselves, nor by provision
of law, his eventual liability thereunder necessarily passed upon his death to his
heirs.

Ruling: The judgment is against defendant.

The deceit, in order that it may annul the consent, must be that which the law defines
as a cause. According to Article 1269 of the Civil Code (now Article 1338 of the
New Civil Code), “there is deceit, when by words or insidious machinations on the
part of one of the contracting parties, the other is induced to execute a contract
which without them he would not have made.” Domingo Franco is not one of the
contracting parties who may have deceitfully induced the other contracting party,
Michael and Co., to execute the contract. The one and the other contracting parties,
to whom the law refers, are the active and the passive subjects of the obligation, the
party of the first part and the party of the second part who execute the contract. The
active subject and the party of the first part of the promissory note in question is