Joennel M. Semilla Ms.

Kristine Carmina Manaog

BSA 203 Law on Obligations and Contract

Case Analysis. Analyze the cases and answer the given questions. (10 points)

1. LEGASPI OIL CO., INC. vs. THE COURT OF APPEALS and BERNARD OSERAOS
[G.R. No. 96505; July 1, 1993]
FACTS:
Private Respondent Bernard Oseraos acting through his authorized agents, had several
transactions with Legaspi Oil Co. for the sale of copra to the latter. In 1976, Oseraos’ agent
signed a contract for the sale of copra at P82.00/100 kg with delivery terms of 20 days.
However, the period to deliver had lapsed and respondent delivered only 46,334 kg of copra,
leaving an undelivered balance of 53,666 kg. Petitioner made repeated demands but Oseraos
elected to ignore the same. A final demand with a warning was issued that should Oseraos fail
to complete the delivery, petitioner would purchase the balance at the open market and charge
the price differential to the latter, still Oseraos failed to deliver the remaining balance. Hence,
petitioner exercised its right under the contract and purchased the undelivered balance at the
open market at the then prevailing price of P168.00/100 kg.

ISSUE:
Is Oseraos liable for damages arising from fraud or bad faith in deliberately breaching the
contract of sale entered into by the parties? Explain the grounds for his liability, if any.

ANSWER:
Yes, Oseroas is liable for the damages arising from fraud or bad faith in deliberately breaching
the contract of the sale entered into by the parties due to the following reasons: first, ignoring
the demand of the client, when Legaspi Oil Co. repeatedly requested the remainder of the
supply, Oseroas decided to disregard them, which is a total violation of the contract since a
client might have suffered significant losses as a result of the delayed delivery of the copra.
Second, failing to deliver the remaining balance, Legaspi Oil Co. eventually filed an appeal with
a demand that Oseroas should refund the money in the open market, but the firm refused to do
so as well, resulting in a double breach of contract. And lastly, delivery not met on time: The first
harm that Oseroas caused was by failing to produce all of the copra units on time, as required
by the contract signed with the consent of both parties, which Oseroas failed to do. Hence,
Oseroas is liable for the damages caused to Legaspi Oil Co.
2. SSS vs. MOONWALK DEVELOPMENT AND HOUSING CORPORATION [G.R. No.
73345. April 7, 1993]
FACTS:
Plaintiff SSS approved the application of Defendant Moonwalk for a loan of P30,000,000 for the
purpose of developing and constructing a housing project. Out of P30,000,000 approved loan,
the sum of P9,595,000 was released to defendant Moonwalk. A third Amendment Deed of
Mortgage was executed for the payment of the amount of P9,595,000. Moonwalk made a total
payment of P23,657,901.84 to SSS for the loan principal of P12,254,700.
After settlement of the account, SSS issued to Moonwalk the release of Mortgage for
Moonwalk’s Mortgaged properties. In a letter to Moonwalk, SSS alleged that it committed an
honest mistake in releasing defendant; that Moonwalk has still 12% penalty for failure to pay on
time the amortization which is in the penal clause of the contract.
Moonwalk’s counsel told SSS that it had completely paid its obligation to SSS and therefore
there is no recovery of any penalty.

ISSUE:
Is the penalty demandable even after the extinguishment of the principal obligation? Explain
your answer.

ANSWER:
No, besides the Real Estate Mortgages, the penal clause which is also an accessory obligation,
must also be believed extinguished considering that the principal obligation was considered
extinguished, and the penal clause being an accessory obligation cannot exist, without a
principal obligation. That being the case, the demand for payment of the penal clause made by
plaintiff-appellant in its demand letter are therefore ineffective as there was nothing to demand.
It would be otherwise, if the demand for the payment of the penalty was made prior to the
extinguishment of the obligation because then the obligation of Moonwalk would consist of the
principal obligation, the interest of 12% on the principal obligation and the penalty of 12% for
late payment for after demand, Moonwalk would be in mora and therefore liable for the penalty.

3. PICART vs. SMITH, JR. [G.R. No. L-12219; March 15, 1918]

FACTS:
On the Carlatan Bridge in La Union, Picart was riding on his pony over said bridge. Before he
had gotten half way across, Smith approached from the opposite direction in an automobile. As
the defendant neared the bridge, he saw a horseman on it and blew his horn to give warning of
his approach. He continued his course and after he had taken the bridge, he gave two (2) more
successive blasts, as it appeared to him that the man on horseback before him was not
observing the rule of the road.
Picart saw the automobile coming and heard the warning signals. However, being perturbed by
the novelty of the apparition or the rapidity of the approach, he pulled the pony closely up
against the railing on the right side of the bridge instead of going to the left. He says that the
reason he did this was that he thought he did not have sufficient time to get over to the other
side. As the automobile approached, Smith guided it toward his left, that being the proper side
of the road for the machine. In so doing, the defendant assumed that the horseman would move
to the other side. Seeing that the pony was apparently quiet, the defendant, instead of veering
to the right while yet some distance away or slowing down, continued to approach directly
toward the horse without diminution of speed. When he had gotten quite near, there being then
no possibility of the horse getting across to the other side, the defendant quickly turned his car
sufficiently to the right to escape hitting the horse; but in so doing the automobile passed in such
close proximity to the animal that it became frightened and turned its body across the bridge,
got hit by the car and the limb was broken. The horse fell and its rider was thrown off with some
violence. As a result of its injuries, the horse died. The plaintiff received contusions which
caused temporary unconsciousness and required medical attention for several days.
From a judgment of the lower court of La Union absolving Smith from liability, Picart has
appealed.

ISSUE:
Is Smith guilty of negligence? Is the lower court right in absolving Smith from liability? Explain
your answer.

ANSWER:
Yes. Smith, in maneuvering his car in the manner described, was guilty of negligence such as
gives rise to a civil obligation to repair the damage done. And the lower court was wrong in
absolving smith from the liability because in the nature of things, the control of the situation had
passed entirely to Smith, and it was his duty either to bring his car to an immediate stop or,
seeing that there were no other persons on the bridge, to take the other side and pass
sufficiently far away from the horse to avoid the danger of collision. Instead of doing this, Smith
ran straight on until he was almost upon the horse. When Smith exposed the horse and rider to
this danger, he was negligent in the eye of the law. The test by which to determine the existence
of negligence in a particular case may be stated as follows: Did the defendant in doing the
alleged negligent act use that person would have used in the same situation? If not, then he is
guilty of negligence.