Article 1163-1178

n Doctrine
o
1 Contrary to petitioner’s contention, Eastern Shipping Lines, Inc. did not lay down
any new rules; all that was made was to state a comprehensive summary of
existing rules on the computation of legal interest. In fact, earlier in the case
of Nakpil and Sons v. Court of Appeals,[8] the Court allowed the imposition of
12% legal interest per annum on money judgment from the date of its finality
until fully paid. Strictly speaking, therefore, there was no retroactive application
of the rules in this case.

Nor was there modification of judgment in fixing the legal rate of interest at 12%
precisely because the subject case arose when the trial court failed to specify in
its decision the rate of the legal interest to be imposed on the money judgment.
2 Common carriers, from the nature of their business and on public policy
considerations, are bound to observe extraordinary diligence in the vigilance over
the goods transported by them. Subject to certain exceptions enumerated under
Article 1734[51] of the Civil Code, common carriers are responsible for the loss,
destruction, or deterioration of the goods. The extraordinary responsibility of
the common carrier lasts from the time the goods are unconditionally placed in
the possession of, and received by the carrier for transportation until the same
are delivered, actually or constructively, by the carrier to the consignee, or to
the person who has a right to receive them.[52]

In maritime transportation, a bill of lading is issued by a common carrier as a

contract, receipt and symbol of the goods covered by it. If it has no notation of
any defect or damage in the goods, it is considered as a “clean bill of lading.” A
clean bill of lading constitutes prima facie evidence of the receipt by the carrier of
the goods as therein described.[53]
3 The resolution of the issues in this case requires a re-examination of the
evidence presented by the contending parties during the trial. Generally, the
Court does not resolve questions of facts. However, this rule admits of several
exceptions. The instant case falls under one of the recognized exceptions, which
is, when the findings of facts of the trial court and the Court of Appeals are
conflicting. [9] Therefore, a review of the facts and the pieces of evidence is proper.
4 Clearly, the Philippines is the state with the most significant relationship to the
problem. Thus, we hold that CMI and Basso intended Philippine law to govern,
notwithstanding some references made to US laws and the fact that this intention
was not expressly stated in the contract. We explained in Philippine Export and
Foreign Loan Guarantee Corporation v. V. P. Eusebio Construction, Inc.[53] that the
law selected may be implied from such factors as substantial connection with
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the transaction, or the nationality or domicile of the parties. [54] We cautioned,

however, that while Philippine courts would do well to adopt the first and most
basic rule in most legal systems, namely, to allow the parties to select the law
applicable to their contract, the selection is subject to the limitation that it is not
against the law, morals, or public policy of the forum.[55]
5 The second surety bond clearly guaranteed the full and faithful performance of
the "obligations" of Vil-Rey under the third contract, and it was not secured just
to answer for "defects in the materials used and workmanship utilized." As a
performance bond, the second surety bond guaranteed that Vil-Rey would
perform the contract, and provided that if the latter defaults and fails to
complete the contract, Stronghold itself shall complete the contract or pay
damages up to the limit of the bond.[39]

A surety bond is an accessory contract dependent for its existence upon the
principal obligation it guarantees.[40] Being so associated with the third contract as
a necessary condition or component thereof, the second surety bond cannot be
separated or severed from its principal. Considering that the third contract
provided that the works shall be completed on or before 15 January 1997, the
second surety bond was deemed to have guaranteed the completion of the works
on the same date.
6 Likewise in this case, the contract of lease, with all its concomitant provisions,
continues even after Fausto's death and her heirs merely stepped into her shoes.
[30]
Respondent, as an heir of Fausto, is therefore bound to fulfill all its terms and
conditions.

There is no personal act required from Fausto such that respondent cannot
perform it. Fausto's obligation to deliver possession of the property to petitioner
upon the exercise by the latter of its right of first refusal may be performed by
respondent and the other heirs, if any. Similarly, nonperformance is not excused
by the death of the party when the other party has a property interest in the
subject matter of the contract.[31]
7 The petitioner’s issues are largely factual in nature and are therefore not the
proper subjects of a Rule 45 petition.[35] Specifically, the determination of the
existence of a breach of contract is a factual matter that we do not review in a
Rule 45 petition.[36] But due to the conflicts in the factual findings of the RTC and
the CA, we see the need to re-examine the facts and the parties’ evidence to fully
resolve their present dispute.[37]
8 Having held that a surety upon demand fails to pay, it can be held liable for
interest, even if in thus paying, its liability becomes more than the principal
obligation.[54] The increased liability is not because of the contract, but because of
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the default and the necessity of judicial collection.[55]

However, for delay to merit interest, it must be inexcusable in nature. In Guanio v.

Makati-Shangri-la Hotel,[56] citing RCPI v. Verchez,[57] we held thus:

In culpa contractual x x x the mere proof of the existence of the contract and the
failure of its compliance justify, prima facie, a corresponding right of relief. The
law, recognizing the obligatory force of contracts, will not permit a party to be set
free from liability for any kind of misperformance of the contractual undertaking
or a contravention of the tenor thereof. A breach upon the contract confers upon
the injured party a valid cause for recovering that which may have been lost or
suffered. The remedy serves to preserve the interests of the promissee that may
include his “expectation interest,” which is his interest in having the benefit of his
bargain by being put in as good a position as he would have been in had the
contract been performed, or his “reliance interest,” which is his interest in being
reimbursed for loss caused by reliance on the contract by being put in as good a
position as he would have been in had the contract not been made; or his
“restitution interest,” which is his interest in having restored to him any benefit that
he has conferred on the other party. Indeed, agreements can accomplish little,
either for their makers or for society, unless they are made the basis for action. The
effect of every infraction is to create a new duty, that is, to make
RECOMPENSE to the one who has been injured by the failure of another to
observe his contractual obligation unless he can show extenuating
circumstances, like proof of his exercise of due diligence x x x or of the
attendance of fortuitous event, to excuse him from his ensuing
liability. (Emphasis ours)

9 Upon the other hand, a right of first refusal is a contractual grant, not of the sale
of a property, but of the first priority to buy the property in the event the owner
sells the same. [28] As distinguished from an option contract, in a right of first
refusal, while the object might be made determinate, the exercise of the right of
first refusal would be dependent not only on the owner's eventual intention to
enter into a binding juridical relation with another but also on terms, including
the price, that are yet to be firmed up. [29]
10 Lastly, if a demurrer to evidence is granted but on appeal the order of dismissal
is reversed, the movant shall be deemed to have waived the right to present
evidence.[41] The movant who presents a demurrer to the plaintiff’s evidence
retains the right to present their own evidence, if the trial court disagrees with
them; if the trial court agrees with them, but on appeal, the appellate court
disagrees with both of them and reverses the dismissal order, the defendants lose
the right to present their own evidence. The appellate court shall, in addition,
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resolve the case and render judgment on the merits, inasmuch as a demurrer
aims to discourage prolonged litigations.[42] Thus, respondent may no longer offer
proof to establish that he has no liability under the loan documents sued upon by
petitioner.
11 At the outset, it must be noted that the questioned check issued by SBTC is not
just an ordinary check but a manager's check. A manager's check is one drawn by
a bank's manager upon the bank itself. It stands on the same footing as a certified
check,[13] which is deemed to have been accepted by the bank that certified it.
[14]
As the bank's own check, a manager's check becomes the primary obligation
of the bank and is accepted in advance by the act of its issuance. [15]
12 It must be remembered that public interest is intimately carved into the banking
industry because the primordial concern here is the trust and confidence of the
public. This fiduciary nature of every bank’s relationship with its
clients/depositors impels it to exercise the highest degree of care, definitely
more than that of a reasonable man or a good father of a family.[22] It is,
therefore, required to treat the accounts and deposits of these individuals with
meticulous care.[23] The rationale behind this is well-expressed in Sandejas v.
Ignacio,[24]
13 The Court need not belabor how respondent's evidence likewise fails to
demonstrate that it exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the squall.

Article 1764[27] vis-א-vis Article 2206[28] of the Civil Code holds the common
carrier in breach of its contract of carriage that results in the death of a
passenger liable to pay the following: (1) indemnity for death, (2) indemnity for
loss of earning capacity and (3) moral damages.

Petitioners are entitled to indemnity for the death of Ruelito which is fixed at
P50,000.[29]
14 2. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1
or paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit. [21]

15 Unjust enrichment exists when a person unjustly retains a benefit to the loss of
another, or when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience. Under Article 22 of
the Civil Code,[21] there is unjust enrichment when (1) a person is unjustly
benefited and (2) such benefit is derived at the expense of or with damages to
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another.[22]