Eastern Shipping vs. CA Art.

1175 & 1176, Legal Interest Issues Whether the payment of legal interest on an award for loss or damage is to be computed from the time of complaint is filed or from the date the decision appealed from is rendered? Whether the applicable rate of interest is 12% or 6%? Facts Petitioner Eastern Shipping made a shipment which was insured under Insurance Policy with Defendant Mercantile Insurance One drum of riboflavin was said to be in bad order upon receipt of the consignee (person to whom the shipment is to be delivered) Mercantile was compelled to pay the consignee There is sufficient evidence that the shipment sustained damage while in the possession of petitioner. Eastern was held liable for payment of damages

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Held: Established rule on interest in the concept of actual/compensatory damages 1. Payment of sum of money in the form of loan/forbearance a. if stipulated in writing – interest shall earn from the time it is judicially demanded b. in the absence of stipulation – 12% per annum to be computed fron time of default (from time of judicial/extra-judicial demand was made under Art. 1169) 2. NOT in the form of loan/forbearance - may be imposed at the discretion of the court at 6% per annum NO INTEREST SHALL BE ADJUDGED ULESS THE DEMAND CAN BE ESTABLISHED WITH REASONABLE CERTAINTY a. When demand is established with reasonable certainty – interest begin to run from the time claim is made judicially/extra-judicially b. When demand is not certain – interest shall begin to run only from date of judgment of court is made Base for Computation – amount finally adjudged 3. When judgment awarding sum of money becomes final and executory – legal interest both 1 & 2 shall be 12% until its satisfaction (Reason: Interim period being deemed to be by then an equivalent to a forbearance of credit) *Eastern was ordered to pay 6% on the amount due computed from the decision dated February 3, 1988, and 12% interest, in lieu of 6%, was imposed on such amount upon finality of the SC decision until the payment thereof. Tiglao vs. Manila Railroad Art. 1180, Setting of Period Issue W/N a company may be excused for payment of salary diff of its retired employees when the agreement is subject to condition that “salary differentials from date of exhaustion will be paid when funds for the purpose are available”, if the company is losing its business? Facts Petitioners are 35 retired employees of defendant company who sought to recover salary diff

due to them under MOA with defendant Under the MOA, employed affected by the standardized plan will receive standardized salaries provided that any salary diff from date of exhaustion will be paid when funds for the purpose are available Held Art. 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of Article 1197. MOA does not stipulate that salary diff shall be paid only from surplus profits It is not appearing that defendant was bankcrupt – the obligation to pay said salary diff may be considered as one with term whose duration has been left to the will of the debtor, so that pursuant to art. 1197, the duration of the term may be fixed by courts

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Javier vs. CA and Leonardo Tiro Art. 1181, Suspensive Condition Issue W/N an agreement may be nullified for non-performance of the conditions stipulated therein Facts Petitioner and private respondent entered into an agreement into which Petitioner bound himself to transfer his rights(shares of stocks) on Timberlwealth Corp to private respondent That for and in consideration of the transfer of rights, Petitioner undertake to pay Private Respondent subject to the condition that the application of Private Respondent for an additional area for forest concession be approved by Bureau of Forestry Private Respondent did not obtain the approval Ruling When a contract is subject to a suspensive condition, its birth and 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. Art. 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

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Parks vs. Province of Tarlac Art. 1181, Suspensive vs. Resolutory Condition Facts Plaintiff bought the land from Concepcon Ciper and James Hill Prior to the sale, Ciper and Hill donated the land to province of Tarlac subject to the condition that it will be absolutely used for erection of a central school and a public park and the work shall commence within six months from the ratification for the donation Issue W/N Parks has the right of action to recover the land from municipality of Tarlac on the condition that the condition is suspensive and therefore the said municipality had never

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acquired a right thereto since the condition was never performed Ruling
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The Condition is not suspensive it is resolutory In the present case, the condition that a public school be erected and a public park made on the donated land, work on the same to commence within 6months from date of ratification of the donation by parties, could not be complied with except after giving effect to the donation The done could not do any work on the donated land if the donation had not really been effected, because it would be an invasion if another’s title for the land would have continued to belong to the donor so long as the condition was imposed was not complied with. The condition was a condition subsequent (resolutory)

Central Phil. University vs. CA, et.al. Art. 1181, Resolutory Condition Issue/Scope Effects of Resolutory Condition Rule when condition has no fixed amount Facts Don Ramon Lopez donated a parcel of land in favor of CPU, subject to several conditions Private respondents, heirs of Don Ramon, filed an action for annulment of donation alleging that for more than 50 years the condition of donation had not complied with, particularly the establishment of medical college in the university Ruling Under Art. 1181 of the Civil Code, in conditional obligations, the acquisition of rights, as well as extinguishment or loss of those already acquired shall depend upon happening of the event which constitutes the condition. Thus, when a person donated a land to another on the condition that the other would build on the land a school, the condition imposed was not a condition precedent or suspensive condition but a resolutory condition When obligation does not fix a period from its nature and circumstances it can be inferred that the period was intended, the general rule provided in Art. 1197 of the Civil Code applies, which provides that the court may fix the duration thereof because the fulfillment of the obligation itself cannot be demanded until the court has fixed the period for compliance therewith and such period has arrived However, this general rule cannot be applied in this case. More than a reasonable period of 50years has been allowed for petitioner to avail of the opportunity to comply with the obligation Art. 1191 of Civil Code, when one of the obligors cannot comply with what is incumbent upon him, the obligee may seek rescission and the court shall decree the same unless there is just cause authorizing the fixing of the period

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Trillana vs. Quezon College, Inc Art. 1182, Potestative Condition Issue/Scope

Example of Potestative/Facultative which depend solely in the will of debtor Facts Deceased Damasa Crisostomo sent a letter to defendant regarding to her subscription to shares of capital stock in QC, Inc. When Damasa died, QC, Inc. presented a claim in her testate proceeding for collection of sum, representing the value of subscription to capital stock Damasa, in her letter: 1. did not enclose initial payment, 2. stated “babayaran kong lahat pagkatapos manghuli ng isda” Ruling In view of proposal of Damasa to pay value of subscription after he has harvested fish is a condition obviously dependent upon her sole will and therefore void Art. 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void.

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Sps. Conrado and Ma. Corona Romero v. CA and Saturnino Orden Art. 1182 Perfection of Contract Effect of annotation of notice of lis pendens in perfection of contract Facts
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Petitioner and Private respondent executed a letter contract to sell PR proposed to purchase a property of land of P Stipulations in the contract: 1. PR shall pay amount of 7M upon execution of deed 2. Payment of balance not later than 12/9/1996 3. R should shoulder expenses in evicting squatters Petitioner Romero told him that she was rescinding the contract PR filed for specific performance and damages alleging that he complied with evicting the squatters PR filed a complaint and caused annotation of lis pendens on the property Ruling To put property under coverage of lis pendens, all a party has to do is to assert a claim of possession or title over the subject property. It is not necessary that ownership or interest over the property is proved A simple reading on the complaint of PR would show that it was his intent to run after the ownership of the property No ruling on the complaint for specific performance No ruling whether they had perfected the letter-contract

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Vda. De Mistica vs. Naguiat Art. 1182. Potestative Condition Issue/Scope Potestative Condition under Art. 1182 in relation to Art. 1191 of Civil Code

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Facts Predecessor-in-interest of Petitioner and herein Defendants entered into a contract to sell in which the latter prayed the initial payment and undertake to pay the remaining by installment within 10 years subject to 12% interest per annum Petitioner filed a complaint for rescission alleging failure and refusal of Defendants to pay the balance constitutes a violation of the contract which entitles her to rescind the same Petitioner argues that period for performance of obligation cannot be extended to 10 years because to do so would convert the obligation to purely potestative Ruling Under Art. 1191 of Civil Code, the right to rescind an obligation is predicated on violation between parties brought about by breach of faith by one of them. Rescission, however, is allowed only when the breach is substantial and fundamental to the fulfillment of the obligation In this case, no substantial breach – in the Kasulatan, it was stipulated that payment could be made even after 10 years from execution of contract, provided they will pay the 12% interest Civil Code prohibits purely potestative, suspensive, conditional obligation that depend on the whims of the debtor. Nowhere in the deed that payment of purchase price is dependent whether respondents want to pay it or not, the fact that they already made partial payment shows that parties intended to be bound by the Kasulatan

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Araneta vs. Phi. Sugar Estate Dev., Inc Art. 1197 Issue/Scope Proper application of Art. 1197 Facts Petitioner and Respondent entered into a contract of purchase and sale with mortgage whereas P sold a big tract of land to R subject to following conditions: 1) that buyer will build on said land the Sto. Domingo Church and Convent and 2) that seller will construct streets surrounding the land which shall be named “Sto. Domingo Avenue” R finished the construction of the church will P was unable to finish the construction of the streets because a third party, occupying the middle part thereof, refuse to vacate the same R filed a complaint seeking P to comply with the obligation and/or pay damages in case of failure/refusal RTC and CA decided in favor of R and gave P 2 years to comply with its obligation

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Ruling 1. Art. 1197 involves two step processes: 1) the Court must first determine that the obligation does not fix period (or that the period is made to depend upon the will of the debtor), but from the nature and the circumstances it can be inferred that a period was intended (Art 1197 1 &2) and 2) the Court must proceed to second step and decide what period was probably contemplated by parties. ➢ Even on the assumption that the court should have found out that no reasonable time or peiod at all had been fixed, the COMPLAINT NOT HAVING SOUGHT THE COURT SHOULD SET A PERIOD, the court could not proceed to do so unless the complaint is amended

No basis to support the conclusion that period should be set at two years after finality of judgment, considering that the land was occupied by squatters. Parties must comply with legal processes in evicting the squatters. Reasonable time: at the date all the squatters on affected areas are finally evicted

Areola vs. CA Reciprocal Obligations on Contract of Insurance Issues 1. W/N erroneous cancellation of insurance policy entitle petitioner-insured to payment of damages? 2. W/N reinstatement of insurance policy in order to rectify the error, obliterate the liability for damages? Facts A Personal Accident Insurance Policy was issued to the petitioner by respondent company Private respondent cancelled the same since company records revealed that P failed to pay his premiums t was submitted that the fraudulent act of Malapit, manager of PR's branch office in Baguio in misappropriating funds is the proximate cause of cancellation of the policy PR ordered for reinstatement of insurance policy However, complaint for breach of contract with damages had already been filed by P

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Ruling Contract of insurance creates reciprocal obligations for both insurer and insured Under Art. 1191 (2), the injured party is given a choice between fulfillment or rescission of obligation in case one of the obligors fails to comply with what is incumbent upon him. Said article entitles injured party to payment of damages whether he demands fulfillment or rescission. Untenable then is PR's argument, namely reinstatement being equivalent to fulfillment of its obligation, divests petitioner's rightful claim over damages ➢ P should be awarded with damages- nominal damages since no substantial injury or actual damages have been shown

Tayag vs. CA Art. 1191 on Reciprocal Obligations 1. Reciprocal Obligations on Contract of Purchase 2. Right to rescind, when partial payments have been accepted by creditors Facts Petitioners are heirs of Juan Galicia, Sr., who executed a deed of conveyance in favor of private respondent including a piece of land Suit for specific performance was filed by PR for failure of P to execute final deed of sale P argued that remaining balance was not paid by PR Ruling In a perfected contract of sale of land under an agreed schedule of payments, while the parties may mutually oblige each other to compel the specific performance of the monthly amortization

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plan and upon failure of buyer to make the payment, the seller has the right to ask for rescission of contract under Art. 1191, this shall be deemed waived by acceptance of posterior payments (DBP vs. Sarandi) When the obligee accepts the performance, knowing its completeness or irregularity and without expressing any protest or objection, the obligation is deemed fully complied with (Art. 1235, Civil Code) n reciprocal obligation like contract of purchase, both parties are mutually obligors and also obligees and any of the contracting parties, upon non-fulfillment by other privy of his part of the prestation, rescind the contract or seek fulfillment

Osmena III vs. SSS Extinguishment of Determinate Thing Facts

Osmena III and 4 other members of the Senate and SSS members seek for nullification of the following issuances of Social Security Commission 1. Res. No. 428, July 124, 2004- Swiss Challenge Method – approved the sale of the entire equity share of SSS to Equitable PCI bank 2. Res. 485, August 11, 2004 – pertains to the timetable and instruction to bidders

SSS in order to liquefy its long term investments and diversify them into higher yielding and less volatile investments which includes its shareholdings in EPCIB (Reason: shares in question substantially declined in value and SSS could no longer afford to continue holding on them)In a purchase agreement it was agreed in that SSS will sell all its EPCIB shares to BDO COA and DOJ (in its opinion) approved the agreement Bidding was made “subject to the right of BDO Capital to match the highest bid” BDO turned out t be the highest bidder Petitioner alleged that BDO to buy EPCIB shares is inconsistent with the idea of public bidding BDO and EPCIB had a merger, all EPCIB shares were transferred to BDO

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Issue W/N in questioning the alleged resolution can still recover the shares and subject it to a “proper” bidding process Ruling
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No, petitioners can no longer recover the shares The obligation to give a determinate thing is extinguished if the object is lost without the fault of the debtor Under the Civil Code, a thing is considered lost when it perishes or disappears on such a way that it cannot be recovered.

In the very real sense, the interplay of the ensuing factor: a) the BDO-EPCIB merger and b) the cancellation of subject shares and their replacement by totally new common shares of BDO had rendered the erstwhile 187.84 M EPCIB shares of SSS unrecoverable in the contemplation of Civil Cod provision

IMIDC vs. NLRC Joint/ Solidary Obligation Facts

Private respondents were employees of petitioner who seek for separation pay and unpaid wages Labor Arbiter decided the case in their favorIn the decision, IMIDC and Filipinas Carbon were ordered to pay private respondent their claims, no word “solidary" was used in the dispositive portion of the decisio Labor Arbiter issued an alias writ execution in which it was stated that the sheriff was vested the power to proceed the premises of IMIDC “and/or” Filipinas Carbon, thus holding them solidarily liable Issue:

W/N petitioner IMIDC can be held solidarily liable with Filipinas Carbon when it was not provided in the judgment that the defendants are liable to pay jointly and severally liable a certain sum of money Ruling

No. It is already a well settled doctrine that when it is not provided in a judgment that the defendants are liable to p[ay jointly and severally a certain sum of money, none of them may be compelled to satisfy in full said judgment Well entrench is the rule that solidary obligation cannot lightly inferred. There is solidary liability only when the obligation EXPRESSLY so states, when the law so provide or when the nature of the obligation so requires Petitioner’s liability is only joint not solidary

Ronquillo vs. CA Joint/ Solidary Obligation Facts

Ronquillo was one of the four defendants of the Civil case filed by Antonio So (private respondent) for collection of money amounting to 117M The amount sought to be collected represented the value of the checks issued by defendants in payment for foodstuffs delivered to and received by them They entered into a compromise agreement. In said agreement both parties agree that failure of either party to comply with the terms and conditions stipulated, the innocent party will be

entitled to an execution of the decision based on the compromise agreement and the defaulting party agrees and hold themselves to reimburse the innocent party for attys fees and other feesBecause of failure of the other two defendants to pay their obligation, private respondent filed for the issuance of writ of execution

A writ of execution was issued for the satisfaction for the claim against the properties of the defendants including petitioner, single and jointly liable The decision of RTC based on the compromise agreement provides that “defendants individually and agree to pay” within a periods of six months from January 1980 or before June 30, 1980 Issue W/N Ronquillo is solidarily liable with the other defendants in the civil case Ruling

Yes. The term individually has the same meaning as collectively, separately, distinctively, respectively or severally. An agreement to be individually liable undoubtedly creates a several obligation and a several obligation is one which binds himself to perform the whole obligation

Republic Glass v. Qua Solidary Obligation, Novation Facts
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Republic Glass, Gervel and Qua were shareholders of Ladtek Ladtek obtained loans from Metrobank and Private Dev’t Corp of the Phils (PDCP) They entered into agreement that in case of default in payment of Ladtek loans, the parties will reimburse each other the proportionate shares of any sum that any might pay to creditors Ladtek defaulted on its obligation to Metrobank and PDCP Republic Glass Corp and Gervel Corp payed Metrobank 7M (not full payment of the amount due) Republic Glass and Gervel demanded to Qua reimbursement of the total amount that RGC and GC paid to Metrobank Qua refused to pay Qua filed a complaint for injunction with damages with application for TRO Issues

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W/N payment of the entire obligation is an essential condition for reimbursement? W/N there was novation of agreements as held by CA (that there was implied novation)

Ruling On the first issue:

Contrary to RGC and GC’s claim, payment of any amount will not automatically result in reimbursement. If a solidary debtor pays the obligation in part, he can recover reimbursement from the co-debtors only in so far his payment exceeded his share in the obligation. This is precisely because if solidary debtor pays an amount equal to his proportionate share in the obligation, then he in effects pay only what is due to him. If the debtor pays less than his share in the obligation, he cannot demand reimbursement because his payment is less than his actual debt. Since they only made partial payments, RGC and GC should clearly and convincingly show that their payments to Metro bank and PDCP exceeded their proportionate shares in the obligations before they can seek reimbursement from Qua. RGC and GC failed to do this, thus they cannot seek reimbursement from Qua On the second issue:

There was no novation of the agreements. The parties did not constitute new obligations to substitute the agreements. The terms and conditions of the agreement remains the same. Novation extinguishes obligation by 1) changing the object or principal conditions; 2) substituting the person of the debtor and 3) subrogating a third person in the rights of the creditor

Diamond Builders vs. Country Bankers Joint/Solidary Obilgation on Surety Contract Facts

Rogelio Acidre (sole proprietor of Diamond Builders) was sued by Marceliano Borja for breach of his obligation to construct a residential and commercial building Rogelio entered into a compromise agreement with Borja Rogelio in order to secure himself, entered into surety bond with Country Bankers Under the Surety Bond, Rogelio and his spouse and other petitioners in this case signed an indemnity agreement consenting to their joint and several liability to Country Bankers should the surety bond be executed upon Rogelio violated the compromise agreement A writ of execution was issued against Country Bankers for violation of Rogelio to the compromise agreement Country bankers payed the surety bond and ask for reimbursement from petitioners Petitioners refused to pay Country bankers filed a complaint for sum of money against petitioners\

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Issue W/N Country Bankers is entitled for reimbursement? Ruling

Yes. Art. 1217 of the Civil Code recognizes the right of reimbursement from a co-debtor (principal co-debtor in case of suretyship) in favor of one who paid the surety Only payments made after the obligation has prescribed or became illegal shall not entitle a solidary debtor for reimbursement (in accordance with Art. 1218)

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