Brigette Florenda L.

Domingo
Student Number: 2020010196

Javier vs. Court of Appeals (suspensive condition)

Facts: Private respondent (Leonardo Tiro) is a holder of an ordinary timber license issued by the
Bureau of Forestry covering 2,535 hectares in the town of Medina, Misamis Oriental. On February
15, 1966 he executed a "Deed of Assignment" in favor of petitioners Javiers (Timberwealth Corp
Directors) obliging himself to the payment of money and delivery of stock certificates upon
availability to petitioners Javier. During this time, Tiro has a pending application with Bureau of
Forestry for an additional forest concession covering an area of 2,000 hectares southwest of and
adjoining the area of the concession subject of the deed of assignment. Hence, on February 28,
1966, private respondent and petitioners entered into another "Agreement" where Tiro promises
to give to petitioners whatever he may acquire from a forest concession still pending approval
from BoF.

The BoF informed Tiro that his license is renewed up to May 12, 1967 provided that on or before
said date, Tiro should have formed an cooperative, partnership or corporation with other adjoining
licensees so as to have a total holding area of not less than 20,000 hectares. Javiers entered into
a Forest Consolidation Agreement with other timber license holders pursuant to their previous
Deed of Assignment as a result of which North Mindanao Timber Corp was incorporated.

Later, Tiro brought an action for collection against Javiers for the payment of the balance of the
preceding 2 Deeds of Assignment. Javiers filed an answer admitting the due execution of the
Deeds but interposing a special defense of nullity thereof since Tirot failed to comply with his
contractual obligations and, further, that the conditions for the enforceability of the obligations of
the parties failed to materialize. Tiro argued that what the previous Deeds give to Javiers was
actually his inchoate rights subject to the concession approval by the BoF and Javiers actually
benefited from the same.

Lower Court: dismissed Tiro’s complaint ; CA: overturned RTC decision. Hence this petition.

Javier: Deed of Assignment is void for total absence of consideration; Agreement is void for non-
fulfillment of condition.

Issue: Is the DoA and Agreement void?

Ruling: Only the DoA is void. Agreement is valid. DoA is void because there is actually a
cause or consideration that is hidden which is the transfer of forest concession of Tiro to Javiers
(simulated contract not prejudicial to 3rd person binds the parties to the real agreement).

As to the alleged nullity of the agreement dated February 28, 1966, we agree with petitioners that
they cannot be held liable thereon. The efficacy of said deed of assignment is subject to the
condition that the application of private respondent for an additional area for forest concession be
approved by the Bureau of Forestry.

Since private respondent did not obtain that approval, said deed produces no effect. When a
contract is subject to a suspensive condition, its birth or effectivity can take place only if and when
the event which constitutes the condition happens or is fulfilled. If the suspensive condition does
not take place, the parties would stand as if the conditional obligation had never existed.
Brigette Florenda L. Domingo
Student Number: 2020010196

The said agreement is a bilateral contract which gave rise to reciprocal obligations, that is, the
obligation of the private respondent to transfer his rights in the forest concession over the
additional area and, on the other hand, the obligation of petitioners to pay P30,000.00. The
demandability of the obligation of one party depends upon the fulfillment of the obligation of the
other. In this case, the failure of the private respondent to comply with his obligation negates his
right to demand performance from petitioners. Delivery and payment in a contract of sale, are so
interrelated and intertwined with each other that without delivery of the goods there is no
corresponding obligation to pay. The two complement each other.

Moreover, under the second paragraph of Article 1461 of the Civil Code, the efficacy of the sale
of a mere hope or expectancy is deemed subject to the condition that the thing will come into
existence. In this case, since the private respondent never acquired any right over the additional
area for failure to secure the approval of the Bureau of Forestry, the agreement executed
therefore, which had for its object the transfer of said right to petitioners, never became effective
or enforceable.

Hermosa v. Longara (potestative/suspensive condition)

Facts: Case involves three claims made to the intestate, Hermosa, Sr and his son Hermosa Jr.
Upon evidence presented by claimant, CA discovered that the claims to the estate were
dependent "on condition that their payment should be made by Fernando Hermosa, Sr. as soon
as he receives funds derived from the sale of his property in Spain." Claimant had testified without
opposition that the credit advances were to be "payable as soon as Fernando Hermosa, Sr.'s
property in Spain was sold and he received money derived from the sale." The Court of Appeals
held that payment of the advances did not become due until the administratrix received the sum
of P20,000 from the buyer of the property.

Issue: Do the foregoing stipulations made dependent upon Hermosa Sr.’s ability to pay make the
condition potestative as to the debtor thereby making the obligation and the condition void?

Ruling: YES. The Court held that the matter of the sale of the house rested on the sole will of the
debtor, un- affected by any outside consideration or influence. The majority admit that if the
condition were "if he decides to sell his house" or "if he likes to pay the sums advanced," the same
would be potestative. I think a mere play of words is invoked, as I cannot see any substantial
difference, Under the condition imposed by Fernando Hermosa, Sr., it is immaterial whether or
not he had already decided to sell his house, since there is no pretence that acceptable conditions
of the sale had been made the subject of an agreement, such that if such conditions presented
themselves the debtor would be bound to proceed with the sale. In the case at bar, the terms are
still subject to the sole judgment not whims and caprice of Fernando Her- mosa, Sr. In fact no
sale was effected during his life- time. As the condition above referred to is null and void, the debt
resulting from the advances made to Fernando Hermosa, Sr. became either immediately
demandable or payable within a term to be fixed by the court. In both cases the action has
prescribed after the lapse of ten years.

As to the fact that the suspensive condition took place after the death of the debtor, and that
advances were made more than ten years before the sale, we are supported in our conclusion
that the same is immaterial. As the obligation retroacts to the date when the contract was entered
into, all amounts advanced from the time of the agreement became due upon the happening of
the suspensive condition. As the obligation to pay became due and demandable only when the
house was sold and the proceeds received in the islands, the action to recover the same only
Brigette Florenda L. Domingo
Student Number: 2020010196

accrued, within the meaning of the statute of limitations, on the date the money became available
here, hence the action to recover the advances has not yet prescribed.

The majority also contend that the condition in question depended on other factors than the sole
will of the debtor, and cite the presence of a buyer, ready, able and willing to purchase the
property. This is of no moment, because, as already stated, in the absence of any contract setting
forth the minimum or maximum terms which would be acceptable to the debtor, nobody could
legally compel Fernando Hermosa, Sr. to make any sale.

Catungal v. Rodriguez (rescission)

Facts: Petitioners are the heirs of Sps. Catungal the latter being the ones who entered into a
Contract to Sell a parcel of land with Rodriguez. Said contract was allegedly “upgraded” into a
Conditional Deed of Sale in favor of Rodriguez. While the latter was busy making the necessary
processes in order to facilitate the sale to him, the Sps Catungal allegedly offered the land for
sale to third parties. In Sps Catungal’s defense, they did what they had to do because Rodriguez
refused to pay 5M as demanded which is in breach of contract. Rodriguez filed an action for
issuance of TRO against Sps. Catungal and for the rescission of the contract because the Sps
breached its terms when it offered the sale to third parties instead of to Rodriguez.

It should be noted that the Conditional Deed of Sale is onditioned on the payment of a certain
price but the payment of the purchase price was additionally made contingent on the successful
negotiation of a road right of way.

RTC ruled in favor of Rodriguez and this was affirmed by the CA. The petitioners contention is
that the right to rescind essentially belongs to both parties to a reciprocal obligation and that
eitherway, Rodriguez was guilty of bad faith which warrants the nullification of the contract.
Furthermore, they contended that the provisions of the Conditional Deed of Sale violated the
principle of mutuality of contracts and should therefore be considered void.

Issue: Is there a violation of mutuality of contracts?

Ruling: NONE. In the past, this Court has distinguished between a condition imposed on the
perfection of a contract and a condition imposed merely on the performance of an obligation.
While failure to comply with the first condition results in the failure of a contract, failure to comply
with the second merely gives the other party the option to either refuse to proceed with the sale
or to waive the condition. Paragraph 1(b) of the Conditional Deed of Sale, stating that respondent
shall pay the balance of the purchase price when he has successfully negotiated and secured a
road right of way, is not a condition on the perfection of the contract nor on the validity of the entire
contract or its compliance as contemplated in Article 1308. It is a condition imposed only on
respondent’s obligation to pay the remainder of the purchase price. In our view and applying
Article 1182, such a condition is not purely potestative as petitioners contend. It is not dependent
on the sole will of the debtor but also on the will of third persons who own the adjacent land and
from whom the road right of way shall be negotiated. In a manner of speaking, such a condition
is likewise dependent on chance as there is no guarantee that respondent and the third party-
landowners would come to an agreement regarding the road right of way. This type of mixed
condition is expressly allowed under Article 1182 of the Civil Code.

What the Catungals should have done was to first file an action in court to fix the period within
which Rodriguez should accomplish the successful negotiation of the road right of way pursuant
Brigette Florenda L. Domingo
Student Number: 2020010196

to the above quoted provision. Thus, the Catungals’ demand for Rodriguez to make an additional
payment of P5,000,000.00 was premature and Rodriguez’s failure to accede to such demand did
not justify the rescission of the contract. With respect to petitioners’ argument that paragraph 5 of
the Conditional Deed of Sale likewise rendered the said tract void, we find no merit to this theory.

Rodriguez’s option to rescind the contract is not purely potestative but rather also subject to the
same mixed condition as his obligation to pay the balance of the purchase price—i.e., the
negotiation of a road right of way. In the event the condition is fulfilled (or the negotiation is
successful), Rodriguez must pay the balance of the purchase price. In the event the condition is
not fulfilled (or the negotiation fails), Rodriguez has the choice either (a) to not proceed with the
sale and demand return of his downpayment or (b) considering that the condition was imposed
for his benefit, to waive the condition and still pay the purchase price despite the lack of road
access. This is the most just interpretation of the parties’ contract that gives effect to all its
provisions. In any event, even if we assume for the sake of argument that the grant to Rodriguez
of an option to rescind, in the manner provided for in the contract, is tantamount to a potestative
condition, not being a condition affecting the perfection of the contract, only the said condition
would be considered void and the rest of the contract will remain valid.

Schenker v. Gemperle (pure obligation)

Facts: Parties agreed to organize a PH corporation, “The Philippine Swiss Trading, Co.” Under
this agreement, they are also bound to divide the stocks equally between them and their
associates. However, the defendant only remitted 26% of subscriptions to Petitioner and the
remaining percentage to the defendant himself. In the latter’s defense, he did so because the PH
Government requires that at least 75% must be owned by Filipinos. Despite repeated demands
by the Petitioner, the defendant failed to remit what was due to the petitioner. Petitioner filed an
action for specific performance against the defendant for the remittance of what is due to the
petitioner. The defendant answered that Schenker’s complaint states no cause of action and that
he is not still entitled to what he is claiming because the obligation is not yet due.

In petitioner’s defense, he alleged that the obligation was pure and thus immediately demandable.
Thus, his demand already made the obligation on the part of defendant due and demandable.
Despite this, RTC ruled in favor of defendant by stating that no period is fixed in the AOI for
compliance by the defendant and so it is not yet due and demandable; and, that the action to fix
a period is not deemed integrated in an action for specific performance.

Issue: Is the obligation a pure one?

Ruling: YES. The ultimate facts to be alleged in a complaint to properly and adequately plead
the right of action granted by the above quoted provision of law are (1) Facts showing that a
contract was entered into, imposing on one of the parties an obligation or obligations in favor of
the other; (2) Facts showing that the performance of the obligation was left to the will of the obligor
or clearly showing or from which an inference may reasonably be drawn, that a period was
intended by the parties. The first cause of action, under consideration, sets out facts describing
an obligation with an indefinite period, thereby bringing the case within the pale of the article
above quoted, albeit it fails to specifically and categorically demand that the court fix the duration
of the period. Under the circumstances, the court could render judgment granting the remedy
indicated in said article 1197, notwithstanding the fact that the complaint does not positively and
by explicit expression ask for such relief.
Brigette Florenda L. Domingo
Student Number: 2020010196

Even discarding the above considerations, still there is no gainsaying the fact that the obligation
in question, is pure, because "its performance does not depend upon a future or uncertain event
or upon a past event unknown to the parties" and as such, "is demandable at once" (Art. 1179,
New York Code). It was so understood and treated by the defendant-appellee himself. The
immediate payment by the plaintiff-appellant of his subscriptions, after the organization of the
corporation, can only mean that the obligation should be immediately fulfilled, giving the defendant
only such time as might reasonably be necessary for its actual fulfillment. The contract was to
organize the corporation and to divide equally, after its organization, its capital stock.

Delta Motor Corp. vs. Genuino (rescission)

Facts: Delta entered into an agreement with Genuino’s business as a result of which two letter-
quotations were sent by Delta indicating how the delivery and payment of pipes were to be made.
These conditions are: payment of 20% of the net contract price or P13,200.00 and execution of a
promissory note called for by the first contract; and payment of 50% of the net contract price or
P2,700.00 under the second contract. Genuino accepted the offer and paid the corresponding
payments due. However, Delta failed to deliver the iron pipes, Genuino failed to pay the
installments agreed upon in full and Genuino failed to execute a promissory note as required by
the first letter-quotation.

There was a also an instance when Delta offered to deliver the pipes but Genuino rejected the
offer saying that their facility is still under construction. Delta then issued a new quotation for
Genuino wherein the prices increased. Genuino rejected the offer and filed an action for specific
performance against Delta. The latter then filed for rescission invoking Art 1191 of the NCC.

Petitioner argues that its obligation to deliver the goods under both contracts is subject to
conditions required of private respondents as vendees. These are suspensive conditions and only
upon their performance or compliance would its obligation to deliver the pipes arise. Thus, when
private respondents did not perform their obligations; when they refused to accept petitioner's
offer to deliver the goods; and, when it took them three (3) long years before they demanded
delivery of the iron pipes that in the meantime, great and sudden fluctuation in market prices have
occurred; Delta is entitled to rescind the two (2) contracts.

Issue: Is Delta entitled to rescind the contract?

Ruling: NO. In construing Art. 1191, the Supreme Court has stated that, "rescission will be
ordered only where the breach complained of is substantial as to defeat the object of the parties
in entering into the agreement. It will not be granted where the breach is slight or casual." Further,
"the question of whether a breach of a contract is substantial depends upon the attendant
circumstances."

In the case at bar, the conduct of Delta indicates that the Genuinos' non-performance of its
obligations was not a substantial breach, let alone a breach of contract, as would warrant
rescission. Firstly, it is undisputed that a month after the execution of the two (2) contracts, Delta's
offer to deliver the black iron pipes was rejected by the Genuinos who were "not ready to accept
delivery because the cold storage rooms have not been constructed yet. Plaintiffs (private
respondents herein) were short-funded, and did not have the space to accommodate the pipes
they ordered". Given this answer to its offer, Delta did not do anything.
Brigette Florenda L. Domingo
Student Number: 2020010196

And secondly, three (3) years later when the Genuinos offered to make payment Delta did not
raise any argument but merely demanded that the quoted prices be increased. Moreover, the
power to rescind under Art. 1191 is not absolute. "The act of a party in treating a contract as
cancelled or resolved on account of infractions by the other contracting party must be made known
to the other and is always provisional, being ever subject to scrutiny and review by the proper
court."

In the instant case, Delta made no manifestation whatsoever that it had opted to rescind its
contracts with f-he Genuinos. It only raised rescission as a defense when it was sued for specific
performance by private respondents. Further, it would be highly inequitable for petitioner Delta to
rescind the two (2) contracts considering the fact that not only does it have in its possession and
ownership the black iron pipes, but also the P15,900.00 down payments private respondents have
paid. And if petitioner Delta claims the right to rescission, at the very least, it should have offered
to return the P15,900.00 down payments.

Finally, Delta cannot ask for increased prices based on the price offer stipulation in the contracts
and in the increase in the cost of goods. Reliance by Delta on the price offer stipulation is
misplaced. Said stipulation makes reference to Delta's price offer as remaining firm for thirty (30)
days and thereafter, will be subject to its review and confirmation. The offers of Delta, however,
were accepted by the private respondents within the thirty (30)-day period. And as stipulated in
the two (2) letter-quotations, acceptance of the offer gives rise to a contract between the parties.

SSS vs. Moonwalk Devt. and Housing Corp. (delay/penalty clause)

Facts: SSS filed a complaint against Moonwalk for the enforcement of the compliance with the
penalty clause under its contract with Moonwalk. One of the provisions of such contract is that “all
amortization payments shall be made every first five (5) days of the calendar month until the
principal and interest on the loan or any portion thereof actually released has been fully paid.”
The trial court discovered that Moonwalk already paid its principal obligation with SSS as also
characterized by the latter’s foreclosure of Moonwalk’s mortgage in favor of SSS. Still, SSS
argued that it cannot amount to a waiver of SSS of the enforcement of the penalty clause under
its contract with Moonwalk.

Issue: Is Moonwalk still liable under the penalty clause?

Ruling: NO. A penal clause is an accessory undertaking to assume greater liability in case of
breach.6 It has a double function: (1) to provide for liquidated damages, and (2) to strengthen the
coercive force of the obligation by the threat of greater responsibility in the event of breach.7 From
the foregoing, it is clear that a penal clause is intended to prevent the obligor from defaulting in
the performance of his obligation. Thus, if there should be default, the penalty may be enforced.

The Court then discussed the concept of delay and enumerated the instances when there is delay.
It then stated that This case does not fall within any of the established exceptions. Hence, despite
the provision in the promissory note that “(a)ll amortization payments shall be made every first
five (5) days of the calendar month until the principal and interest on the loan or any portion thereof
actually released has been fully paid,”10 petitioner is not excused from making a demand. It has
been established that at the time of payment of the full obligation, private respondent Moonwalk
has long been delinquent in meeting its monthly arrears and in paying the full amount of the loan
itself as the obligation matured sometime in January, 1977. But mere delinquency in payment
does not necessarily mean delay in the legal concept. To be in default “x x x is different from mere
Brigette Florenda L. Domingo
Student Number: 2020010196

delay in the grammatical sense, because it involves the beginning of a special condition or status
which has its own peculiar effects or results.”11 In order that the debtor may be in default it is
necessary that the following requisites be present: (1) that the obligation be demandable and
already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the
performance judicially and extrajudicially.12 Default generally begins from the moment the
creditor demands the performance of the obligation.13 Nowhere in this case did it appear that
SSS demanded from Moonwalk the payment of its monthly amortizations. Neither did it show that
petitioner demanded the payment of the stipulated penalty upon the failure of Moonwalk to meet
its monthly amortization.

Universal Food Corp. vs. CA (rescission)

Facts: Private Respondents filed a complaint against UFC for rescission of the Bill of Assignment
they entered with each other. The answer further alleged that the defendant had complied with all
the terms and conditions of the Bill of Assignment and, consequently, the plaintiffs are not entitled
to rescission thereof. Let it be noted that under the Bill of Assignment, UFC should retain Private
Respondents in his employment therein. However, UFC violated this by dismissing the Private
Respondents for refusing to cede the formula to UFC.

Issue: Is rescission proper?

Ruling: YES. 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 fulfillment and rescission of the obligation, with payment of damages in either case. In
this case before us, there is no controversy that the provisions of the Bill of Assignment are
reciprocal in nature. The petitioner corporation violated the Bill of Assignment, specifically
paragraph 5-(a) and (b), by terminating the services of the respondent patentee Magdalo V.
Francisco, Sr., without lawful and justifiable cause.

The general rule is that rescission of a contract will not be permitted for a slight or casual breach,
but only for such substantial and fundamental breach as would defeat the very object of the parties
in making the agreement. The question of whether a breach of a contract is substantial depends
upon the attendant circumstances.

However, in this case the dismissal of the respondent patentee Magdalo V. Francisco, Sr. as the
permanent chief chemist of the corporation is a fundamental and substantial breach of the Bill of
Assignment. He was dismissed without any fault or negligence on his part. Thus, apart from the
legal principle that the option—to demand performance or ask for rescission of a contract—
belongs to the injured party,14 the fact remains that the respondents-appellees had no alternative
but to file the present action for rescission and damages.

Gaisano Cagayan Inc v Insurance Company of North America (loss due

to fortuitous event)
Facts: IMC and LSPI are manufacturers of jeans. They contracted a fire insurance policy with
respondent. Petitioner is the local seller of said products by IMC and LSPI. Soon, the mall wherein
petitioner sells said products caught fire and the products were damaged and burnt. Respondent
then filed a collection suit against petitioner for payment of the unpaid accounts of IMC and LSPI
as provided under the insurance contract. Petitioner denies liability stating that it should not be
held liable under 1174 because the loss was due to a fortuitous event.
Brigette Florenda L. Domingo
Student Number: 2020010196

Issue: Is Petitioner excused from liability due to fortuitous event?

Ruling: NO. Petitioner bears the risk of loss under Art 1504(1). Moreover, it must be stressed
that the insurance in this case is not for loss of goods by fire but for petitioner’s accounts with IMC
and LSPI that remained unpaid 45 days after the fire. Accordingly, petitioner’s obligation is for the
payment of money. As correctly stated by the CA, where the obligation consists in the payment
of money, the failure of the debtor to make the payment even by reason of a fortuitous event shall
not relieve him of his liability.33 The rationale for this is that the rule that an obligor should be held
exempt from liability when the loss occurs thru a fortuitous event 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. It does not apply when the obligation is pecuniary in
nature.34 Under Article 1263 of the Civil Code, “[i]n an obligation to deliver a generic thing, the
loss or destruction of anything of the same kind does not extinguish the obligation.” If the
obligation is generic in the sense that the object thereof is designated merely by its class or genus
without any particular designation or physical segregation from all others of the same class, the
loss or destruction of anything of the same kind even without the debtor’s fault and before he has
incurred in delay will not have the effect of extinguishing the obligation.35 This rule is based on
the principle that the genus of a thing can never perish. Genus nunquan perit.36 An obligation to
pay money is generic; therefore, it is not excused by fortuitous loss of any specific property of the
debtor.37 Thus, whether fire is a fortuitous event or petitioner was negligent are matters
immaterial to this case.

Tanguilig v CA (reciprocal obligations and fortuitous event)

Facts: Petitioner offered his services to Herce in the construction of windmill for 60k. Herce
accepted and initially paid 30k, then 15k. The remaining 15k was left unpaid. Despite alleged
demands, Herce refused to pay the balance and so Petitioner instituted a collection suit against
Herce. In Petitioner’s Answer, he alleged 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 disowned any obligation to repair or reconstruct the system and insisted that he
delivered it in good and working condition to the respondent who accepted the same without
protest. Besides, its collapse was attributable to a typhoon, a force majeure, which relieved him
of any liability.

Issue: Is the windmill damaged due to a fortuitous event?

Ruling: NO. In a long line of cases, this 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 the
event should be the sole and proximate cause of the loss or destruction of the object of the
contract. In Nakpil vs. Court of Appeals, 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
Brigette Florenda L. Domingo
Student Number: 2020010196

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. Interestingly, the evidence does not disclose that
there was actually a typhoon on the day the windmill collapsed. Petitioner merely stated that there
was a “strong wind.” But a strong wind in this case cannot be fortuitous—unforeseeable or
unavoidable. On the contrary, a strong wind should be present in places where windmills are
constructed, otherwise the windmills will not turn.

The appellate court correctly observed that “given the newly-constructed windmill system, the
same would not have collapsed had there been no inherent defect in it which could only be
attributable to the appellee.”13 It emphasized that respondent had in his favor the presumption
that “things have happened according to the ordinary course of nature and the ordinary habits of
life.”14 This presumption has not been rebutted by petitioner. Finally, petitioner’s argument that
private respondent was already in default in the payment of his outstanding balance of P15,000.00
and hence should bear his own loss, is untenable. In reciprocal obligations, neither party incurs
in delay if the other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him.15 When the windmill failed to function properly it became incumbent upon
petitioner to institute the proper repairs in accordance with the guaranty stated in the contract.
Thus, respondent cannot be said to have incurred in delay; instead, it is petitioner who should
bear the expenses for the reconstruction of the windmill. Article 1167 of the Civil Code is explicit
on this point that if a person obliged to do something fails to do it, the same shall be executed at
his cost.

Jimmy Co v CA (fortuitous event)

Facts: Co entrusted his Nissan vehicle to Private Respondent for repairs and upgrades. Upon
completion of the job, Co paid and a gate pass was issued to him for claiming of the vehicle.
However, upon the time of claiming, Private Respondent failed to surrender the vehicle because
the battery was weak and has to be replaced. Co undertook to replace the batteries at the Private
Respondent’s expense. The latter did so but it still failed to release the vehicle to Co allegedly
because the same was carnapped as evidenced by police reports. Co then filed an action for
damages against Private Respondent’s for allegedly being negligent in losing the vehicle. Private
Respondent argued that the carnapping incident was a fortuitous event and so it should not be
liable.

Issue: Can a repair shop be held liable for the loss of a customer’s vehicle while the same is in
its custody for repair or other job services?

Ruling: YES. It must likewise be emphasized that pursuant to Articles 1174 and 1262 of the New
Civil Code, liability attaches even if the loss was due to a fortuitous event if “the nature of the
obligation requires the assumption of risk.” Carnapping is a normal business risk for those
engaged in the repair of motor vehicles. For just as the owner is exposed to that risk so is the
repair shop since the car was entrusted to it. That is why, repair shops are required to first register
with the DTI and to secure an insurance policy for the “shop covering the property entrusted by
its customer for repair, service or maintenance” as a prerequisite for such
registration/accreditation.

Violation of this statutory duty constitutes negligence per se. Having taken custody of the vehicle,
private respondent is obliged not only to repair the vehicle but must also provide the customer
with some form of security for his property over which he loses immediate control. An owner who
cannot exercise the seven (7) juses or attributes of ownership—the right to possess, to use and
enjoy, to abuse or consume, to accessories, to dispose or alienate, to recover or vindicate and to
Brigette Florenda L. Domingo
Student Number: 2020010196

the fruits—is a crippled owner. Failure of the repair shop to provide security to a motor vehicle
owner would leave the latter at the mercy of the former. Moreover, on the assumption that private
respondent’s repair business is duly registered, it presupposes that its shop is covered by
insurance from which it may recover the loss. If private respondent can recover from its insurer
then it would be unjustly enriched if it will not compensate petitioner to whom no fault can be
attributed. Otherwise, if the shop is not registered, then the presumption of negligence applies.