MANLUCOB, Lyra Kaye B.

/ Obligations and Contracts March 29, 2023

Agapito Gutierez v. Capital Insurance and Surety Co.

(G.R. No. L-26827. Jun. 29, 1984.)

FACTS:
Capital Insurance & Surety Co., Inc. insured on December 7, 1961 for one year the
jeepney of Agapito Gutierrez against passenger and third-party liability. The policy
provides in item 13 that the authorized driver must be the holder of a valid and
subsisting professional driver’s license. “A driver with an expired Traffic Violation
Receipt or expired Temporary Operator’s Permit is not considered an authorized
driver”.

Item 13 is part of the “declarations” which formed part of the policy and had a
promissorynature and effect and constituted “the basis of the policy”.

On May 29, 1962, the insured jeepney figured in an accident. As a result, a

passenger named Agatonico Ballega fell off the vehicle and died. At the time of the
accident, TeofiloVentura, the jeepney driver, did not have his license though he was
duly licensed for theyears 1962 and 1963. He had with him instead a carbon copy of
a traffic violation report issued by a policeman on February 22, 1962. However, the
said TVR was already expired because it only served as a temporary operator’s
permit for 15 days from receipt.

Gutierrez paid P4,000 to the passenger’s widow. Capital Insurance refused to make
any reimbursement, hence, Gutierrez filed in the city court of Manila an action for
specific performance and damages.

ISSUE:
Whether or not an insurance covers a jeepney whose driver’straffic violation report
or temporary operator’s permit had already expired.

RULING:
No. The insurance policy doesn't cover an expired Traffic Violation Receipt or
Temporary Operator's permit of a jeepney driver. The policy states that an expired
permit means the driver is not considered authorized, and therefore, not covered by
the policy. The policy's terms govern the insured's right to recover under liability
insurance. The policy definitively defines the meaning of an "authorized driver,"
regardless of the Motor Vehicle Law's interpretation of a Traffic Violation Receipt.
MANLUCOB, Lyra Kaye B. / Obligations and Contracts March 29, 2023

Integrated Construction v. Relova

(G.R. No. 41117. Dec. 29, 1986.)

FACTS:
The petitioners sued the respondent Metropolitan Waterworks and Sewerage
System(MWSS) for breach of contract which the Arbitration Board, through the
respondent judge, awarded to the petitioners. The decision ordered MWSS to pay
the petitioners P15,518,383.61 -less P2,329,433.41, to be set aside as a trust fund in
favor of the creditors of the joint venture in connection with the project. Subsequently,
the petitioners agreed to give MWSS some discounts provided that MWSS pay them
within fifteen days of this agreement or up to October 17, 1972.They later agreed to
extend theperiod of payment of the discounted price to October 31.MWSS, however,
paid the discounted price only on December 22. Three years thereafter, after the
release of the trust fund to the satisfy their creditor’s claims, the petitioners filed a
motion for executionfor the balance due. Respondent judge denied the motion on the
ground that the parties had novated the award by their subsequent agreement to
the discounted price.

ISSUE:
Whether or not the respondent judge erred in holding that the original award was
novatedby the subsequent agreement granting the discounted rate if paid on or before
October31,and barred the collection of the balance of the original judgment-award

RULING: :
No. Although the tenor of the subsequent agreement in a sense novated the
judgment award there being a shortening of the period of payment, the suspensive
and conditional nature of the agreement is expressly acknowledged and stipulated.
The failure of MWSSto pay within the stipulated period removed the very cause and
reason for the agreement, therefore remitting to the petitioners their original rights
under the judgment award. The petitioners also never acknowledged full payment
and refused MWSS’ request for a conformed or quitclaim; thus, they cannot be held
in estoppel for now collecting the balance of the original judgment-award.
MANLUCOB, Lyra Kaye B. / Obligations and Contracts March 29, 2023

Luzon Stevedoring Corporation v. CIR

(G.R. No. L-17411, 18681 and18683. Dec. 31, 1965.)

FACTS:
Luzon Stevedoring Corporation (LSC) is a domestic corporation engaged in the
business of providing stevedoring and cargo handling services to various shipping
companies. LSC engages the services of stevedores or cargo handlers to perform
loading and unloading of cargoes from the vessels. The stevedores or cargo
handlers are paid on a "per ton" basis.

The Bureau of Internal Revenue (BIR) conducted an investigation of LSC and

assessed deficiency taxes on the ground that the stevedores or cargo handlers are
employees of LSC and not independent contractors. LSC appealed the assessment
to the Court of TaxAppeals (CTA).

ISSUE:
Whether the stevedores or cargo handlers engaged by LSC are employees or
independent contractors.

RULING:
Yes. The Supreme Court ruled that the stevedores or cargo handlers are employees
of LSC and not independent contractors. The Court applied the control test, which is
the most important test in determining the existence of an employer-employee
relationship. The Court found that LSC exercised control over the stevedores or
cargo handlers in the performance of their work, such as assigning them to specific
tasks, providing them withtools and equipment, and supervising their work. The fact
that the stevedores or cargo handlers were paid on a "per ton" basis did not
necessarily make them independent contractors, as the method of compensation is
not determinative of the existence of an employer-employee relationship.

The Court also found that LSC failed to prove that the stevedores or cargo handlers
had substantial investment in tools and equipment or that they had control over the
means and methods of their work. Thus, the Court held that the stevedores or cargo
handlers were employees of LSC and not independent contractors.

The Court affirmed the decision of the CTA, which upheld the assessment of
deficiency taxes against LSC. The Court ordered LSC to pay the assessed taxes,
penalties, and interest.
MANLUCOB, Lyra Kaye B. / Obligations and Contracts March 29, 2023

Smith, Bell and Co. v. Sotelo Matti, 44 Phil. 874

(G.R. No. L-16570. March 9, 1922.)

FACTS:
On August 1918, plaintiff corporation and defendant Mr. Vicente Soleto, entered into
a contract whereby the former obligated himself to sell and the latter to purchase it,
two (2)steel tanks for Php 21,000.00 which is to be shipped from New York and be
delivered to Manila “within 34 months”; two(2) expellers and two (2) electric motors,
as to its deliveryis within 90 days “that is not guaranteed.”

The equipment arrived in Manila on 1919. Plaintiff informed defendant of the arrival of
thegoods but Mr. Sotelo refused to receive them and pay the goods stipulated. Mr.
Sotelo rather, sued them for damages because of the delay suffered.

ISSUE:
Whether Smith Bell incurred delay in the delivery of the goods.

RULING:
No. The Court emphasized that it appears from the record that the contracts were
executed during World War with the United States and not unmindful with the
contingency with thelatter not the allowing the export of the goods.

When the delivery was subjected to a condition, the fulfillment of which depended
not only upon plaintiff but also upon the will of the third persons who may not be
compelled to perform therefore.
In the case at hand, obligor has deemed to have sufficiently performed his part of
obligation.

Likewise, the Court held that when the contract provides for delivery “as soon as
possible”, the seller is entitled to a reasonable time and does not immediately mean
thatit must be delivered immediately.
MANLUCOB, Lyra Kaye B. / Obligations and Contracts March 29, 2023

Santos v. Sec. of Agriculture and Natural Resources and Director of Lands, 91

Phil. 832
(G.R. No. L-27595. Oct. 26, 1976.)

FACTS:
The Municipality of Hagonoy, Bulacan, filed a case to recover a parcel of land,
claiming that it was a public land that should be reverted to its jurisdiction. The land
was originally registered under the Land Registration Act, but the registration was
canceled by the Director of Lands due to fraud. The cancellation order was appealed,
and while the appeal was pending, the land was sold to Jose B. Santos. Santos then
applied for the registration of the land under the Cadastral Act, and the registration
was granted.

ISSUE:
Whether or not the land is a public land that should be reverted to the jurisdiction of
the Municipality of Hagonoy.

RULING:
No, the Supreme Court upheld the decision of the lower court, stating that the land in
question was classified as public land and had not yet been reclassified as alienable
and disposable land. The fact that Jose B. Santos had been issued a homestead
patent did not give him ownership over the land, as the patent was subject to
cancellation if the land was later found to be part of the public domain. The
Municipality of Hagonoy had failed to prove that the land had been reclassified, and
therefore the defendants' right to possess the land remained valid.
MANLUCOB, Lyra Kaye B. / Obligations and Contracts March 29, 2023

Taylor v. Uy Tieng Piao, 43 Phil. 873

(G.R. No. L-16109. October 2, 1922.)

FACTS:
Uy Tieng, defendant, employed Taylor, plaintiff, for two years as the oil mill
superintendent.Written in the contract that the machinery to be installed in the factory
fail and to not arrive in manila within 6 months, this contract can be cancelled by the
defendant. The machinery failed to arrive in manila within 6 months. Because the
defendant saw that the oil businessno longer promised large returns. After 6 months
the defendant decided to revoke the contract and notified the plaintiff of his
discharge. Plaintiff sued the defendant for the commission he would have received
under the contract. The plaintiff also stated that thedefendants voluntarily prevented
the arrival of the said agreement, and under article 1186 of the Civil Code, the
condition should be considered fulfilled.

ISSUE:
Whether or not the defendant is liable for the salary the plaintiff lost under the
contract.

RULING:
No. Because according to the terms agreed upon the defendant has the right to
cancel the contract. Article 1186 is not applicable because it only supposes a case
where the obligor is the one who prevented the fulfillment of the obligation, not the
obligee.
MANLUCOB, Lyra Kaye B. / Obligations and Contracts March 29, 2023

Pio Barreto Sons, Inc. v. Compania Maritima

(G.R. No. L-22358. Jan. 29, 1975.)

FACTS :
The petitioner (plaintiff) filed a complaint against the respondent (defendant) for the
collection of a sum of money, alleging that the respondent purchased lumber on
credit and received it from the petitioner, thereby incurring a total indebtedness of
P6,054.36 with stipulated interest of 12% per annum, plus attorney's fees. The
respondent denied all material allegations of the complaint and counter-claimed for
expenses of litigation and attorney's fees.

The trial court rendered judgment in favor of the petitioner. Both parties appealed to
the Court of Appeals.

The petitioner argued that the trial court erred in not awarding the stipulated interest
of 12% per annum, while the respondent made several assignments of errors. The
Court of Appeals reversed the judgment of the trial court and ordered the dismissal
of the case on the ground that delivery of the lumber was not duly proved. The
petitioner's motion for reconsideration was denied for lack of sufficient showing of
valid delivery of the lumber.

ISSUE:
Whether or not the Court of Appeals decided the case on a new issue not raised in
the pleadings before the lower courts.

RULING:
No. The issue of delivery on which the Court of Appeals based its decision reversing
that of the trial court is no new issue at all. For delivery and payment in a contract of
sale, or for that matter in quasi-contracts, 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. Thus, "by the contract of sale one of the
contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its
equivalent." (Art. 1458, 1st par., new Civil Code). It is clear that the two elements
cannot be dissociated, for "the contract of purchase and sale is, essentially, a
bilateral contract, as it gives rise to reciprocal obligations; to wit, on the part of the
seller, "to deliver a determinate thing, andon the part of the buyer, "to pay a certain
price therefor in money or in something representing it.

WHEREFORE, the judgment appealed from is hereby affirmed without

pronouncement as to costs.
MANLUCOB, Lyra Kaye B. / Obligations and Contracts March 29, 2023

Ramirez v. Court of Appeals, et al., 98 Phi. 225

(G.R. No. 93833. September 28, 1995.)

FACTS:
A civil case damages was filed by petitioner Socorro Ramirez in the Quezon City
RTC alleging that the private respondent, Ester Garcia, in a confrontation in the
latter’s office, allegedly vexed, insulted and humiliated her in a “hostile and furious
mood” and in a manner offensive to petitioner’s dignity and personality,” contrary to
morals, good customs and public policy.”

In support of her claim, petitioner produced a verbatim transcript of the event and
soughtdamages. The transcript on which the civil case was based was culled from a
tape recording of the confrontation made by petitioner.

As a result of petitioner’s recording of the event and alleging that the said act of
secretlytaping the confrontation was illegal, private respondent filed a criminal case
before the Pasay RTC for violation of Republic Act 4200, entitled “An Act to prohibit
and penalize wiretapping and other related violations of private communication, and
other purposes.”

Petitioner filed a Motion to Quash the Information, which the RTC later on granted, on
the ground that the facts charged do not constitute an offense, particularly a violation
of R.A. 4200. The CA declared the RTC’s decision null and void and denied the
petitioner’s MR, hence the instant petition.

ISSUE:
Whether or not the petitioner committed an offense under Republic Act 4200, also
known as the Anti-Wiretapping Law.

RULING:
Yes. The petitioner violated Republic Act 4200, also known as the Anti-Wiretapping
Law, when she secretly recorded the confrontation between herself and the private
respondent. The evidence obtained from the recording is therefore inadmissible in
court. The decision of the Court of Appeals is affirmed, and the case is remanded to
the trial court for further proceedings.
MANLUCOB, Lyra Kaye B. / Obligations and Contracts March 29, 2023

Abella v. Francisco, 55 Phil 447

(G.R. No. 32336. December 20, 1930.)

FACTS:
Guillermo bought lots 937 to 945 of the Tala Estate in Novaliches on installment, and
became in arrears for some of them. He then executed a document with Julio on 31
October 1928 where the 221-hectare total lots would be paid for by Julio at a rate of
P100per hectare, and P500 being paid right then. The rest of the balance would be
due on or before 15 December 1928 with the option of a 15-day extension. Besides
the P500 initial payment, Guillermo demanded another payment of P415.31 on 13
November 1928 whichwas paid by Julio.

On December 27, Guillermo wrote to Roman, authorizing him to act on his behalf
regarding the agreement. He also instructed Roman that if Julio could not pay the
remainder of the selling price, he should inform Julio that the option would be
considered cancelled and the previously-paid P915.31 would be returned to Julio.

On 3 January 1929, Roman informed Julio that he had power of attorney and that
the documents for conveyance of ownership are ready to be executed upon payment
of the balance. Julio asked for a few days’ extension on the payment but Roman only
gave him up to 5 January. Julio was unable to pay the balance at that date, but
approached Roman on 9 January to attempt to pay. Roman refused to accept the
payment as he believed that the contract had already been rescinded by then. On the
same day, Roman returnedthe P915.31 to Julio via check. Julio brought an action to
compel Guillermo to execute the deed of sale of the lots upon receipt of the balance,
to have him judicially declared the owner of the lots, and to compel Guillermo to
deliver the lots to him. The trial court found in favor of Guillermo. Hence, this appeal.

ISSUE:
Whether or not the time of payment was essential to the contract, thus allowing
Guillermo to cancel it due to Julio’s non-payment on time.

RULING:
Yes. The trial court considered the contract as one of an option for Julio to buy the
lots from Guillermo. The Court was divided if it was an option or a sale, but
nonetheless held that the period of time for the completion of the contract was an
essential element to the transaction. Guillermo wanted to sell the lots to Julio to cover
some of his obligations that were due on December, and this is evident in his
instruction to Roman to consider the contract rescinded if the price was not
completed in time. Therefore, the time fixed for payment was essential to Guillermo.
Thus, in accordance with Article 1124 of the Civil Code, he is entitled to resolve the
contract due to failure to pay the price in time. The judgement appealed from is
affirmed, with costs against the appellant.
MANLUCOB, Lyra Kaye B. / Obligations and Contracts March 29, 2023

Ace-Agro Development Corp. v. CA

(G.R. No. 119729, Jan. 21, 1997)

FACTS:
Ace-Agro had been cleaning soft drink bottles and repairing wooden shells for
Cosmos within its company premises in San Fernando, Pampanga. On April 25, 1990,
a fire brokeout in the Cosmos plant. As a result, Ace-Agro’s work stopped. On May
15, 1990, Ace- Agro requested Cosmos to resume its services but they were advised
that on account of the fire destroying nearly all the bottles and shells, Cosmos was
terminating their contract.Ace-Agro requested Cosmos to reconsider its decision but
upon receiving no reply, they informed the employees of the termination of their
employment, which led the employees to file a complaint for illegal dismissal before
the Labor Arbiter against both Ace-Agro andCosmos. Ace-Agro sent another letter for
reconsideration to Cosmos to which they replied that they could resume work but
outside company premises. Ace-Agro refused the offer,claiming that to work outside
would incur additional transportation costs.Cosmos then advised Ace-Agro that they
could resume work inside the company premises but then Ace-Agro unjustifiably
refused because it wanted and extension of the contract to make up for the period of
inactivity.

ISSUE:
Whether or not the period during which work has been suspended justify an
extension of the term of the contract.

RULING:
No. The suspension of work due to fire does not merit an automatic extension. The
stipulation that in the event of a fortuitous event or force majeure the contract shall
be deemed suspended during the said period does not mean that it stops the
running of the period the contract has been agreed upon to run. The fact that the
contract is subject to a resolutory period, which relieves the parties of their
respective obligations, does not stop the running of the period of their contract.
MANLUCOB, Lyra Kaye B. / Obligations and Contracts March 29, 2023

Millare v. Hernando
(G.R. No. 55480. Jun. 30, 1987)

FACTS:
Petitioner Millare leased a commercial building from respondent Hernando for a
period offive years, with a monthly rental of P1,200.00. During the second year of the
lease, petitioner abandoned the premises and stopped paying rent. Respondent filed
an action for ejectment and damages against petitioner.

The City Court of Caloocan City rendered judgment in favor of respondent, ordering
petitioner to vacate the premises and pay damages. Petitioner appealed to the
Regional Trial Court (RTC), which affirmed the City Court's decision. Petitioner then
appealed to the Court of Appeals (CA), which set aside the RTC's decision and
ordered the dismissal of the case. Respondent then filed a petition for review before
the Supreme Court (SC).

ISSUE:
Whether or not the CA erred in setting aside the RTC's decision and dismissing the
case.

RULING:
Yes. The SC ruled in favor of respondent Hernando and reinstated the RTC's
decision. The SC held that the CA erred in setting aside the RTC's decision and
dismissing the case. The CA's decision was based on the ground that the contract of
lease had already expired by the time respondent filed the action for ejectment and
damages.

However, the SC found that the lease contract contained an automatic renewal
clause, which provided that the lease would continue for another five years unless
either party gave notice of termination. The SC held that since petitioner failed to
give notice of termination, the lease was deemed renewed for another five years, and
therefore, respondent was entitled to collectrent for the entire period.

The SC also noted that petitioner had abandoned the premises and failed to pay rent
forseveral months, which constituted a breach of the lease contract. As such, the SC
held that the action for ejectment and damages was properly decided in favor of
respondent.
MANLUCOB, Lyra Kaye B. / Obligations and Contracts March 29, 2023

Quizana v. Redugerio and Postrado, 94 Phil. 218

(G.R. No. L-6220. May 7, 1954.)

FACTS:
The defendants –appellants executed a document containing an acknowledgement
of loan from plaintiff-appellee, stated therein circumstances as follows: “Na alang-
alang sa aming mahigpit na pangangailangan ay kaming magasawa ay lumapit kay
Ginang Martina Quizana, balo, at naninirahan sa Hupi, Sta. Cruz, Marinduque, at
kami ay umutang sa kanya ng halagang Limang Daan at Limang Pung Piso
(P550.00), Salapingumiiral dito sa Filipinas na aming tinanggap na husto at walang
kulang sa kanya sa condicion na ang halagang aming inutang ay ibabalik o
babayaran namin sa kanya sa katapusan ng buwan ng Enero, taong 1949.”
“Pinagkasunduan din naming magasawa nasakaling hindi kami makabayad sa taning
na panahon ay aming ipifrenda o isasangla sa kanya ang isa naming palagay na
niogan sa lugar nang Cororocho, barrio ng Balogo, Municipio ng Santa Cruz,
Lalawigang Marinduque.”

ISSUE:
Whether or not the second part of the written obligation, in which the obligors agreed
andpromised to deliver a mortgage over the parcel of land, upon their failure to pay
the debton a date specified, is valid.

RULING:
Yes, it is valid, According to Article 1206 of Obligation and Contract, when only one
prestation has been agreed upon, but the obligor may render another in substitution,
the obligation is called Facultative obligation. Article 1206 When only one prestation
has been agreed upon, but the obligor may render another in substitution, the
obligation is called facultative. The loss or deterioration of the thing intended as a
substitute, through the negligence of the obligor, does not render him liable. But
once the substitution has beenmade, the obligor is liable for the loss of the substitute
on the account of his delay, negligence or fraud.