Obligations

and Contracts Digests

General Provisions- Article 1156-1162

I.
Definition

II.
Elements of an Obligation

Cases

Nadela vs City of Cebu 411 SCRA 315
(September 18, 2003)

Azcuna, J.
FACTS:
-Petioner Kenneth O. Nadela sought the
review of the CA, which dismissed his
action for for recovery of ownership and
possession of a parcel of land with
damages against respondents City of Cebu
and Metro Cebu Development Project
(MCDP).
-He argued that for more than 30 yrs., he
has been in actual, adverse, peaceful and
continuous possession of a parcel of land,
in the concept of an owner, however it is
unregistered in his name.
-Furthermore, MCDP have constructed
infrastructure development in his allegedly
owned land, thereby depriving him of his
right as an owner of said land.
-He further argued that his amended
complaint is sufficient to establish a cause
of action and it was hypothetically
admitted by respondents when they filed a
motion to dismiss.
-The trial court dismissed the case and CA
affirmed the dismissal.

ISSUE: WON Nadela has a cause of action?

HELD:
-The contention is untenable.
-A cause of action exists if the following
elements are present: (1) a right in favor of
the plaintiff by whatever means and under
whatever law it arises or is created; (2) an

obligation on the part of the named

defendant to respect or not to violate such
right; and (3) an act or omission on the part
of such defendant violative of the right of
the plaintiff or constituting a breach of the
obligation of defendant to the plaintiff for
which the latter may maintain an action for
recovery of damages.
-Moreover, under PD 1073, the petitioner
has not complied with the conditions for
there was no proof that the land was under
private possession (of his predecessors)
since 1945.





Heirs of Luis Bacus, et al vs. CA et al GR No.
127695 (December 3, 2001)
Quisumbing, J.

FACTS:
-Luis Bacus leased to private respondent
Faustino Duray a parcel of agricultural land
in Bulacao, Talisay, Cebu.
-The contract contained an option to buy
clause. Under said option, the lessee had
the exclusive and irrevocable right to buy
2,000 square meters of the property within
five years from a year after the effectivity
of the contract, at P200 per square
meter. That rate shall be proportionately
adjusted depending on the peso rate
against the US dollar, which at the time of
the execution of the contract was fourteen
pesos
-Close to the expiration of the contract,
Luis Bacus died. The Duray spouses then
informed the heirs of Luis Bacus that they
are willing to buy the land but the latter
refused.
-The Duray spouses then filed a complaint
for specific performance asking that they
be allowed to purchase the lot.
-Petitioners insist that they cannot be
compelled to sell the disputed property by

virtue of the nonfulfillment of the

obligation under the option contract of the
private respondents. Also, they argued
that, private respondents conveyed to
them the formers lack of interest to
exercise their option because of
insufficiency of funds, but they were
surprised to learn of private respondents
demand. In turn, they requested private
respondents to pay the purchase price in
full but the latter refused. They further
alleged that private respondents did not
deposit the money as required by
the Lupon and instead presented a bank
certification which cannot be deemed legal
tender.

ISSUE: 1. WON when private respondents
opted to buy the property covered by the
lease contract with option to buy, were
they already required to deliver the money
or consign it in court before petitioner
executes a deed of transfer?

2. WON private respondents incur
in delay when they did not deliver the
purchase price or consign it in court on or
before the expiration of the contract?


HELD:
-No. Obligations under an option to buy are
reciprocal obligations. The performance of
one obligation is conditioned on the
simultaneous fulfillment of the other
obligation. In other words, in an option to
buy, the payment of the purchase price by
the creditor is contingent upon the
execution and delivery of a deed of sale by
the debtor. In this case, when private
respondents opted to buy the property,
their obligation was to advise petitioners
of their decision and their readiness to pay
the price. They were not yet obliged to
make actual payment. Only upon
petitioners actual execution and delivery
of the deed of sale were they required to
pay.

-Private respondents did not incur in delay

when they did not yet deliver payment nor
make a consignation before the expiration
of the contract. 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. Only from the moment one of
the parties fulfills his obligation, does delay
by the other begin.



III.
Different Kinds of Prestations
IV.
Classifications of Obligations
V.
Sources of Obligations

Cases

Leung Ben vs O'Brien 38 Phil 182 (April 6,
1918)
Street, J.
FACTS:
-
ISSUE:
HELD:



VI.
Nature and Effect of
ObligationsArticles 1163
1178

Reyes vs CA 363 SCRA 51 (August 15,
2001)
De Leon, Jr.
FACTS:
-In view of the 20th Asian Racing
Conference then scheduled to be held in
September, 1988 in Sydney, Australia, the
Philippine Racing Club, Inc. (PRCI, for
brevity) sent four (4) delegates to the said
conference.
-Petitioner Gregorio H. Reyes, as vicepresident for finance, racing manager,
treasurer, and director of PRCI, sent
Godofredo Reyes, the clubs chief cashier,

to the respondent bank to apply for a

foreign exchange demand draft in
Australian dollars.
-Due to lack of Australian funds, Mr. Yasis
informed Godofredo of another way of
effecting the remittance. The respondent
bank would draw a demand draft against
Westpac Bank in Sydney, Australia
(Westpac-Sydney for brevity) and have the
latter reimburse itself from the U.S. dollar
account of the respondent in Westpac
Bank in New York, U.S.A. They agreed.
-On July 28, 1988, the respondent bank
approved the said application of PRCI and
issued Foreign Exchange Demand Draft
(FXDD) No. 209968 in the sum applied for,
that is, One Thousand Six Hundred Ten
Australian Dollars (AU$1,610.00), payable
to the order of the 20th Asian Racing
Conference Secretariat of Sydney,
Australia, and addressed to WestpacSydney as the drawee bank.
-Upon presentment of demand draft, the
same was dishonored but 1,610 was
debited from the dollar account of
respondent bank in Westpac New York, so
they seek to be reimbursed. Upon 2nd
presentment, the same thing happened.
-When petitioners spouses Gregorio H.
Reyes and Consuelo Puyat-Reyes attended
the conference in Australia, the demand
draft were dishonored and they were
subjected to humiliation. So they just paid
in cash, but the humiliation was already
done.
-The petitioners contend that due to the
fiduciary nature of the relationship
between the respondent bank and its
clients, the respondent bank should have
exercised a higher degree of diligence than
that expected of an ordinary prudent
person in the handling of its affairs as in the
case at bar. And violation of sec 61 of
Negotiable instruments law on warranty of
the drawer, that it must be accepted.

ISSUE: WON the respondent bank are

liable/negligent?

HELD:
-No. The degree of diligence required of
banks, is more than that of a good father of
a family where the fiduciary nature of their
relationship with their depositors is
concerned. In other words banks are duty
bound to treat the deposit accounts of
their depositors with the highest degree of
care. But the said ruling applies only to
cases where banks act under their fiduciary
capacity, that is, as depositary of the
deposits of their depositors. But the same
higher degree of diligence is not expected
to be exerted by banks in commercial
transactions that do not involve their
fiduciary
relationship
with
their
depositors.
-The relationship involved was that of a
buyer and seller, that is, between the
respondent bank as the seller of the
subject foreign exchange demand draft,
and PRCI as the buyer of the same, with the
20th Asian Racing Conference Secretariat in
Sydney, Australia as the payee thereof.
-The evidence shows that the respondent
bank did everything within its power to
prevent the dishonor of the subject foreign
exchange demand draft. The erroneous
reading of its cable message to WestpacSydney by an employee of the latter could
not have been foreseen by the respondent
bank.

Gonzales vs Philippine Commercial and

Int'l Bank 644 SCRA 180 (February 23,
2011)
Velasco, Jr.
FACTS:
-Petitioner Eusebio Gonzales (Gonzales)
was a client of PCIB for a good 15 years. His
account with PCIB was handled by
respondent Edna Ocampo (Ocampo) until
she was replaced by respondent Roberto
Noceda (Noceda).
-PCIB granted a credit line to Gonzales
through the execution of a Credit-On-Hand
Loan Agreement (COHLA), in which the
aggregate amount of the accounts of
Gonzales with PCIB served as collateral for
and his availment limit under the credit
line. Gonzales drew from said credit line
through the issuance of check. At the
institution of the instant case, Gonzales
had a Foreign Currency Deposit (FCD) of
USD 8,715.72 with PCIB.
-Panlilio and Gonzales obtained a loan for
about 1.8 million covered by 3 promissory
notes and secured by a mortgage on a land.
-Starting July 1998, spouses Panlilio
defaulted in the payment of periodic
interest in their PCIB account, and was
informed by the bank. (This led to freezing
of her FCD account)
-In the meantime, Gonzales issued a check
dated September 30, 1998 in favor of Rene
Unson (Unson) for PhP 250,000 drawn
against the credit line (COHLA), that was
later dishonored due to unpaid periodic
interest. This led to a humiliating
argumentation of Gonzales and Unson in
the Phil. Columbian Assn.
-Gonzales then sought for damages and
asked for the proceeds to his FCD account
in addition to insisting that the checks be
funded.

ISSUE: WON the PCIB was at fault or
negligent in dishonoring the checks and
freezing the account of petitioner?

HELD:
-No evidence was presented tending to
show that Gonzales was periodically sent
notices or notified of the various periodic
interest dues covering the three
promissory notes. Neither do the records
show that Gonzales was aware of amounts
for the periodic interests and the payment
for them. Such were serviced by the
spouses Panlilio. Thus PCIB is negligent in
not informing Gonzales (in writing) in clear
and unambiguous figures of the amount to
be paid.
-Indeed, the business of banking is
impressed with public interest and great
reliance is made on the banks sworn
profession of diligence and meticulousness
in giving irreproachable service. Like a
common carrier whose business is imbued
with public interest, a bank should exercise
extraordinary diligence to negate its
liability to the depositors. In this instance,
PCIB is sorely remiss in the diligence
required in treating with its client,
Gonzales. It may not wantonly exercise its
rights without respecting and honoring the
rights of its clients.



Leano vs CA 369 SCRA 36 (November 15,
2001)
Pardo, J.
FACTS:
-On November 13, 1985, Hermogenes
Fernando, as vendor and Carmelita Leano,
as vendee executed a contract to sell
involving a piece of land, Lot No. 876-B,
with an area of 431 square meters, located
at Sto. Cristo, Baliuag, Bulacan.
-In the contract, Carmelita Leano bound
herself to pay Hermogenes Fernando the
sum of one hundred seven thousand and
seven hundred and fifty pesos
(P107,750.00) as the total purchase price
of the lot.

-The contract also provided for a grace

period of one month within which to make
payments, together with the one
corresponding to the month of
grace. Should the month of grace expire
without the installments for both months
having been satisfied, an interest of 18%
per annum will be charged on the unpaid
installments.
-Should a period of ninety (90) days elapse
from the expiration of the grace period
without the overdue and unpaid
installments having been paid with the
corresponding interests up to that date,
respondent Fernando, as vendor, was
authorized to declare the contract
cancelled and to dispose of the parcel of
land, as if the contract had not been
entered into. The payments made,
together with all the improvements made
on the premises, shall be considered as
rents paid for the use and occupation of
the premises and as liquidated damages.
-After the execution of the contract,
Carmelita Leano made several payments in
lump sum.
-Thereafter, she constructed a house on
the lot valued at P800,000.00. The last
payment that she made was on April 1, 1989.
-On September 16, 1991, the trial court
rendered a decision in an ejectment case
earlier filed by respondent Fernando
ordering petitioner Leano to vacate the
premises and to pay P250.00 per month by
way of compensation for the use and
occupation of the property from May 27,
1991 until she vacated the premises,
attorneys fees and costs of the suit. On
August 24, 1993, the trial court issued a
writ of execution which was duly served on
petitioner Leano.

ISSUES: 1. whether the transaction
between the parties is an absolute sale or
a conditional sale?

2. whether there was a proper
cancellation of the contract to sell?

3. whether petitioner was in
delay in the payment of the monthly
amortizations?

HELD:
-Contrary to the findings of the trial court,
the transaction between the parties was a
conditional sale not an absolute sale. The
act of registration of deed of sale was the
operative act that could transfer
ownership. The transfer of ownership and
title would occur after full payment of the
price.
-In the case at bar, petitioner Leanos nonpayment of the installments after April 1,
1989, prevented the obligation of
respondent Fernando to convey the
property from arising. In fact, it brought
into effect the provision of the contract on
cancellation.
-R. A. No. 6552 provides
That the actual cancellation of the contract
shall take place after thirty days from
receipt by the buyer of the notice of
cancellation or the demand for rescission
of the contract by a notarial act and upon
full payment of the cash surrender value to
the buyer.
-As petitioner Leano was not given the cash
surrender value of the payments that she
made, there was still no actual cancellation
of the contract
-In the case at bar, respondent Fernando
performed his part of the obligation by
allowing petitioner Leano to continue in
possession
and
use
of
the
property. Clearly, when petitioner Leano
did not pay the monthly amortizations in
accordance with the terms of the contract,
she was in delay and liable for damages.

Guanio vs Makati Shanrila and Resort, Inc.

641 SCRA 59 (February 7, 2011)
Carpio Morales, J.

FACTS:
-For their wedding reception on July 28,
2001, spouses Luigi M. Guanio and Anna
Hernandez-Guanio (petitioners) booked at
the Shangri-la Hotel Makati (the hotel).
-Prior to the event, Makati Shangri-La
Hotel & Resort, Inc. (respondent)
scheduled
an
initial
food
tasting. Petitioners claim that they
requested the hotel to prepare for seven
persons the two of them, their respective
parents, and the wedding coordinator. At
the scheduled food tasting, however,
respondent prepared for only six.
Moreover, during the final food tasting,
the price of salmon was agreed to be
1,150/person (*as it was alleged that was
was served was smaller than the initial
Food tasting)
-Also, during the reception, petitioner
allege that the sales manager and catering
director was not around, delayed services,
rude, and they were charged for the
extension 8k/hr. Also, the wine and liquor
were not served. Later a letter of apology
was sent to the petitioners.
-Respondents argue that they were around
(the manager) and that the delay was due
to the sudden increase of guests to 470.
(agreed was 350-380)
-RTC ruled in favor of petitioners but was
reversed by CA for the injury was due to
the increase in guests.

ISSUES: WON Shanrila was liable for
damages?

HELD:
-Generally No. The doctrine of proximate
cause is applicable only in actions for
quasi-delicts, not in actions
involving breach of contract.

-Art. 1170. Those who in the performance

of their obligations are guilty of fraud,
negligence or delay, and those who in any
manner contravene the tenor thereof, are
liable for damages.
-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.
-The appellate court, and even the trial
court, observed that petitioners were
remiss in their obligation to inform
respondent of the change in the expected
number of guests. The observation is
reflected in the records of the
case. Petitioners failure to discharge such
obligation thus excused, as the abovequoted paragraph 4.5 of the parties
contract provide, respondent from liability
for any damage or inconvenience
occasioned thereby.
-No less than quality service should be
delivered especially in events which
possibility of repetition is close to nil.
Petitioners are not expected to get married
twice in their lifetimes.
In the present petition, under
considerations of equity, the Court deems
it just to award the amount of P50,000.00
by way of nominal damages to petitioners,
for the discomfiture that they were
subjected to during to the event

VII.

Kinds of Civil Obligations

Articles 11791206

CULPA AQUILIANA AND CULPA
CONTRACTUAL

CASE

FGU Insurance Corp vs. G.P Sarmiento
Trucking Corp. 386 SCRA 312 (August
6, 2002)
Vitug, J.

FACTS:
-G.P. Sarmiento Trucking Corporation
(GPS) undertook to deliver on 18 June 1994
thirty (30) units of Condura S.D. white
refrigerators aboard one of its Isuzu truck,
driven by Lambert Eroles, from the plant
site of Concepcion Industries, Inc., along
South Superhighway in Alabang, Metro
Manila, to the Central Luzon Appliances in
Dagupan City. While the truck was
traversing the north diversion road along
McArthur highway in Barangay Anupol,
Bamban, Tarlac, it collided with an
unidentified truck, causing it to fall into a
deep canal, resulting in damage to the
cargoes.
-FGU Insurance Corporation (FGU), an
insurer of the shipment, paid to
Concepcion Industries, Inc., the value of
the covered cargoes in the sum of
P204,450.00. FGU, in turn, being the
subrogee of the rights and interests of
Concepcion Industries, Inc., sought
reimbursement of the amount it had paid
to the latter from GPS. Since the trucking
company failed to heed the claim, FGU
filed a complaint for damages and breach
of contract of carriage against GPS and its
driver Lambert Eroles
-Respondents asserted that GPS was the
exclusive hauler only of Concepcion
Industries, Inc., since 1988, and it was not
so engaged in business as a common
carrier. Respondents further claimed that

the cause of damage was purely

accidental.

ISSUE: WON the respondent was
negligent?

HELD:
-GPS, being an exclusive contractor and
hauler of Concepcion Industries, Inc.,
rendering or offering its services to no
other individual or entity, cannot be
considered a common carrier. Common
carriers are persons, corporations, firms or
associations engaged in the business of
carrying or transporting passengers or
goods or both, by land, water, or air, for
hire or compensation, offering their
services to the public, whether to the
public in general or to a limited clientele in
particular, but never on an exclusive basis.
-However, In culpa contractual, upon
which the action of petitioner rests as
being the subrogee of Concepcion
Industries, Inc., the mere proof of the
existence of the contract and the failure of
its compliance justify, prima facie, a
corresponding right of relief.
-The remedy serves to preserve the
interests of the promisee 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
-Respondent
trucking
corporation
recognizes the existence of a contract of
carriage between it and petitioners

assured, and admits that the cargoes it has

assumed to deliver have been lost or
damaged while in its custody. In such a
situation, a default on, or failure of
compliance with, the obligation in this
case, the delivery of the goods in its
custody to the place of destination - gives
rise to a presumption of lack of care and
corresponding liability on the part of the
contractual obligor the burden being on
him to establish otherwise. GPS has failed
to do so.1
-G.P. Sarmiento Trucking Corporation
which, instead, is hereby ordered to pay
FGU Insurance Corporation the value of
the damaged and lost cargoes in the
amount of P204,450.00




Herbosa vs CA 374 SCRA 578 (January 25,
2002)
De Leon, Jr., J

FACTS:
-Petitioner spouses (Emmanuel and
Rosemarie) sued Professional Video
Equipment (PVE for brevity), a division of
private respondent Solid Distributors, Inc.,
for breach of contract with damages with
the RTC failure of PVE to record on video
the petitioners wedding celebration
allegedly due to the gross negligence of its
crew as well as the lack of supervision on

1
Res ipsa loquitur, a doctrine being
invoked by petitioner, holds a defendant
liable where the thing which caused the
injury complained of is shown to be under
the latters management and the accident
is such that, in the ordinary course of
things, cannot be expected to happen if
those who have its management or control
use proper care. It affords reasonable
evidence, in the absence of explanation by

the part of the general manager of the PVE

and that it resulted in deep
disappointment, anxiety and an
irreparable break in the continuity of an
established family tradition of recording by
film or slide historical and momentous
family events especially wedding
celebrations, entitling them to damages.
-PVE claimed that it had diligently
supervised its VTR crew in the video
recording of petitioners wedding and
reception and that its crew acted in good
faith and with due care and proper
diligence of a good father of a family.
-The lower court ruled in favor of
petitioners and ordered to pay approx.
110K.
-Complications arose when the defendants
did not allegedly received notice of
judgment, that due to fraud and accident,
it was posted in the wrong post office box.
-The RTC however executed the judgment
through an auction of personal properties
(139,800) of PVE. A TRO was issued but was
presented late, that the properties were
already sold to Atty. Gabionza Jr. Solid
Corp. is now seeking for damages against
Sheriff Borja and petitioners alleging that
the auction was illegal. (*also a petition for
injunction and mandamus). CA ruled in
favor of defendants and petitioners was
ordered to pay 139K+.

ISSUE: WON respondent was negligent in
its obligations to the petitioners?
the defendant, that the accident arose
from want of careelements:
(a) the event is of a kind which does not
ordinarily occur in the absence of
negligence; (b) other responsible causes,
including the conduct of the plaintiff and
third persons, are sufficiently eliminated
by the evidence; and (c) the indicated
negligence is within the scope of the
defendant's duty to the plaintiff

HELD:
-Yes. At any rate, in order that fortuitous
event may exempt PVE or respondent Solid
Distributors, Inc. from liability, it is
necessary that it be free from negligence.
The record shows, however, that the
alleged malfunctioning of the video tape
recorder occurred at the beginning of the
video coverage at the residence of the
bride. The PVE crew miserably failed to
detect the defect in the video tape
recorder and that they discovered the
same rather too late after the wedding
reception at the Manila Hotel.
-The failure to record on videotape the
wedding celebration of the petitioners
constitutes malicious breach of contract as
well as gross negligence on the part of
respondent Solid Distributors, Inc.
-PVE or respondent Solid Distributors, Inc.
cannot seek refuge under Article 2180 of
the New Civil Code by claiming that it
exercised due care in the selection and
supervision of its employees and that its
employees are experienced in their
respective trade. That defense, as provided
in the last paragraph of Article 2180 of the
New Civil Code, may be availed of only
where the liability arises fromculpa
aquilana and not from culpa
contractual such as in the case at bar.
-CA did not err when it ordered the
petitioners to deliver the proceeds of the
auction to Solid Corp because it became
final after the appeal was denied.
Respondent is ordered to pay petitioners
for damages



Consolidated Bank and Trust Corp vs CA
410 SCRA 562 (September 11, 2003)
Carpio, J.
FACTS:
-Solidbank is a domestic banking
corporation organized and existing under
Philippine laws. Private respondent L.C.

Diaz and Company, CPAs (L.C. Diaz), is a

professional partnership engaged in the
practice of accounting.
-Sometime in March 1976, L.C. Diaz
opened a savings account with Solidbank,
designated as Savings Account No. S/A
200-16872-6.
-Calapre went to Solidbank and presented
to Teller No. 6 the two deposit slips and the
passbook. The teller acknowledged receipt
of the deposit by returning to Calapre the
duplicate copies of the two deposit
slips. Teller No. 6 stamped the deposit slips
with the words DUPLICATE and SAVING
TELLER 6 SOLIDBANK HEAD OFFICE. Since
the transaction took time and Calapre had
to make another deposit for L.C. Diaz with
Allied Bank, he left the passbook with
Solidbank. Calapre then went to Allied
Bank. When Calapre returned to Solidbank
to retrieve the passbook, Teller No. 6
informed him that somebody got the
passbook. Calapre went back to L.C. Diaz
and reported the incident to Macaraya
(cashier).
-The following day, 15 August 1991, L.C.
Diaz through its Chief Executive Officer,
Luis C. Diaz (Diaz), called up Solidbank to
stop any transaction using the same
passbook until L.C. Diaz could open a new
account.[5] On the same day, Diaz formally
wrote Solidbank to make the same
request. It was also on the same day that
L.C. Diaz learned of the unauthorized
withdrawal the day before, 14 August
1991, of P300,000 from its savings
account. The withdrawal slip for
the P300,000 bore the signatures of the
authorized signatories of L.C. Diaz, namely
Diaz and Rustico L. Murillo. The signatories,
however, denied signing the withdrawal
slip. A certain Noel Tamayo received
the P300,000.
-L.C. Diaz filed a Complaint for Recovery of
a Sum of Money against Solidbank with the
RTC. RTC then absolved the bank and the
CA deleted the exemplary awards for

damages of its decision. (The appellate

court ruled that the degree of diligence
required from Solidbank is more than that
of a good father of a family. The business
and functions of banks are affected with
public interest. Banks are obligated to treat
the accounts of their depositors with
meticulous care, always having in mind the
fiduciary nature of their relationship with
their clients. The Court of Appeals found
Solidbank remiss in its duty, violating its
fiduciary relationship with L.C. Diaz)

ISSUE: WON Solidbank are liable for
negligence under culpa aquiliana?

HELD:
-We hold that Solidbank is liable for breach
of contract due to negligence, or culpa
contractual.
-Article 1980 of the Civil Code expressly
provides that x x x savings x x x deposits of
money in banks and similar institutions
shall be governed by the provisions
concerning simple loan.
-The fiduciary nature of banking requires
banks to assume a degree of diligence
higher than that of a good father of a
family.
-For breach of the savings deposit
agreement due to negligence, or culpa
contractual, the bank is liable to its
depositor.
-In culpa contractual, once the plaintiff
proves a breach of contract, there is a
presumption that the defendant was at
fault or negligent. The burden is on the
defendant to prove that he was not at fault
or negligent. In contrast, in culpa
aquiliana the plaintiff has the burden of
proving that the defendant was

2
The doctrine of last clear chance states
that where both parties are negligent but
the negligent act of one is appreciably
later than that of the other, or where it is
impossible to determine whose fault or

negligent. In the present case, L.C. Diaz has

established that Solidbank breached its
contractual obligation to return the
passbook only to the authorized
representative of L.C. Diaz. There is thus a
presumption that Solidbank was at fault
and its teller was negligent in not returning
the passbook to Calapre. The burden was
on Solidbank to prove that there was no
negligence on its part or its employees.
-Solidbank is bound by the negligence of its
employees
under
the
principle
of respondeat superior or command
responsibility. The defense of exercising
the required diligence in the selection and
supervision of employees is not a complete
defense in culpa contractual, unlike
in culpa aquiliana. Last clear chance2





NEGLIGENCE

CASE

Philippine Hawk Corp. vs Lee 612 SCRA
576 (February 16, 2010)
Peralta, J.
FACTS
-On March 15, 2005, respondent Vivian
Tan Lee filed before the RTC of Quezon City
a Complaint[2] against petitioner Philippine
Hawk Corporation and defendant
Margarito Avila for damages based
on quasi-delict, arising from a vehicular
accident that occurred on March 17, 1991
in Barangay Buensoceso, Gumaca,
Quezon. The accident resulted in the death

negligence caused the loss, the one who

had the last clear opportunity to avoid the
loss but failed to do so, is chargeable with
the loss

of respondents husband, Silvino Tan, and

caused respondent physical injuries.
-The accident involved a motorcycle, a
passenger jeep, and a bus with Body No.
119. The bus was owned by petitioner
Philippine Hawk Corporation, and was then
being driven by Margarito Avila.

In its Answer,[4] petitioner denied liability
for the vehicular accident, alleging that the
immediate and proximate cause of the
accident was the recklessness or lack of
caution of Silvino Tan. Petitioner asserted
that it exercised the diligence of a good
father of the family in the selection and
supervision of its employees, including
Margarito Avila.
-For the defense, Margarito Avila, the
driver of petitioners bus, testified that on
March 17, 1999, at about 4:30 p.m., he was
driving his bus at 60 kilometers per hour on
the Maharlika Highway. When they were
at Barangay Buensoceso, Gumaca,
Quezon, a motorcycle ran from his left side
of the highway, and as the bus came near,
the motorcycle crossed the path of the bus,
and so he turned the bus to the right. He
heard a loud banging sound. From his side
mirror, he saw that the motorcycle turned
turtle (bumaliktad). He did not stop to help
out of fear for his life, but drove on and
surrendered to the police. He denied that
he bumped the motorcycle

ISSUE:
WON
Philippine
Hawk
Transportation Corp is liable for damages?

HELD:
-Yes. In this case, the bus driver, who was
driving on the right side of the road,
already saw the motorcycle on the left side
of
the
road
before
the
collision. However, he did not take the
necessary precaution to slow down, but
drove on and bumped the motorcycle, and
also the passenger jeep parked on the left
side of the road, showing that the bus was

negligent in veering to the left lane,

causing it to hit the motorcycle and the
passenger jeep.

Whenever an employees negligence
causes damage or injury to another, there
instantly arises a presumption that the
employer failed to exercise the due
diligence of a good father of the family in
the selection or supervision of its
employees. To avoid liability for a quasidelict committed by his employee, an
employer must overcome the presumption
by presenting convincing proof that he
exercised the care and diligence of a good
father of a family in the selection and
supervision of his employee.

The Court upholds the finding of the trial
court and the Court of Appeals that
petitioner is liable to respondent, since it
failed to exercise the diligence of a good
father of the family in the selection and
supervision of its bus driver, Margarito
Avila, for having failed to sufficiently
inculcate in him discipline and correct
behavior on the road. Indeed, petitioners
tests were concentrated on the ability to
drive and physical fitness to do so. It also
did not know that Avila had been
previously involved in sideswiping
incidents.




Tan Chiong Sian vs Inchausti & Co. 22 Phil
152 (March 8, 1912)
Torres, J.

FACTS:
- the plaintiff delivered to the defendant
205 bundles or cases of general
merchandise belonging to him, which
Inchausti & Co., upon receiving, bound
themselves to deliver in the pueblo of
Catarman, Province of Samar, to the

Chinaman, Ong Bieng Sip, and in

consideration of the obligations
contracted by the defendant party, the
plaintiff obligated himself to pay to the
latter the sum of P250 Philippine currency,
which payment should be made upon the
delivery of the said merchandise in the said
pueblo Catarman; but that the defendant
company neither carried nor delivered the
aforementioned merchandise to the said
Ong Bieng Sip, in Catarman, but unjustly
and negligently failed to do so, with the
result that the said merchandise was
almost totally lost; that, had the defendant
party complied well and faithfully with its
obligation, according to the agreement
made, the merchandise concerned would
have a value of P20,000 in the said pueblo
of Catarman on the date when it should
have been delivered there, wherefore the
defendant party owed the plaintiff the said
sum of P20,000, which it had not paid him,
or any part thereof, notwithstanding the
many demands of the plaintiff; therefore
the latter prayed for judgment against the
defendant for the said sum, together with
legal interest thereon from November 25,
1908, and the costs of the suit.
- the defendant company alleged that one
of the conditions of the shipping contract
executed between it and the Chinaman,
Ong Bieng Sip, relative to the
transportation of the said merchandise,
was that the said firm should not be held
liable for more than P25 for any bundle or
package, unless the value of its contents
should be stated in the bill of lading, and
that the shipper, Chinaman, Ong Bieng Sip,
did not state in the bill of lading the value
of any of the bundles or packages in which
the goods shipped by him were packed.
Counsel for the defendant company,
therefore, prayed the court to absolve his
client from the complaint, with costs
against the plaintiff. In addition to their
force majeure (storm) claim.

ISSUE: WON the defendant is liable for the

damages in merchandise?

HELD:
-No. In the contract made and entered into
by and between the owner of the goods
and the defendant, no term was fixed
within which the said merchandise should
be delivered to the former at Catarman,
nor was it proved that there was any delay
in loading the goods and transporting them
to their destination.
- So that there was no negligence,
abandonment, or delay in the shipment of
Ong Bieng Sip's merchandise, and all that
was done by the carrier, Inchausti & Co.,
was what it regularly and usually did in the
transportation by sea from Manila to
Catarman of all classes of merchandise.
- According to the aforecited article 361 of
the Code of Commerce, merchandise shall
be transported at the risk and venture of
the shipper, unless the contrary be
expressly stipulated. No such stipulation
appears of record, therefore, all damages
and impairment suffered by the goods in
transportation,
by
reason
of
accident, force majeure, or by virtue of the
nature or defect of the articles, are for the
account and risk of the shipper.
- it was impossible for the said lorcha,
loaded as it then was, to have entered the
Sabang River, even though there had been
a steamer to tow it, not only because of an
insufficient depth of water in its channel,
but also on account of the very high bar at
the entrance of the said river, it is
incontrovertible that the stranding and
wreck of the lorcha Pilar was due to a
fortuitous event or to force majeureand
not to the fault and negligence of the
defendant company and its agents or of
the patron, Mariano Gadvilao

Bignay EX-IM Philippines, Inc. v. Union

Bank of the Philippines (February 12,
2014)
Del Castillo, J.

FACTS:
- In 1984, Alfonso de Leon (Alfonso)
mortgaged in favor of Union Bank of the
Philippines (Union Bank) real property
situated at Esteban Abada, Loyola Heights,
Quezon City, which was registered in his
and his wife Rosarios name. Later it was
foreclosed.
- In 1988, Rosario filed against Alfonso and
Union Bank, Civil Case No. Q52702 for
annulment of the 1984 mortgage, claiming
that Alfonso mortgaged the property
without her consent, and for reconveyance
-Meanwhile Bignay purchased the
property for 4 m. and later on mortgaged
the same to the same bank to acquire a
loan. Then, the RTC nullified the mortgage
and sale between alfonso and the bank,
which later led to the eviction of Bignay in
the property.
- Bignay alleged in its Complaint17 that at
the time of the sale, the title to the
property was lost due to fire at the Register
of Deeds; that at the time of the sale,
Union Bank represented that there were
no liens or encumbrances over the
property other than those annotated on
the title, and that a reconstitution of the
lost title would be made; that on these
assurances, Bignay began and completed
construction of a building on the property;
that it turned out that the property was the
subject of a case by Rosario.
-Union Bank interposed a Motion to
Dismiss grounded on lack of or failure to
state a cause of action, claiming that it
made no warranties in favor of Bignay
when it sold the property to the latter on
December 20, 1989.
- The trial court thus declared that Union
Bank, through Robles, acted in bad faith in
selling the subject property to Bignay

ISSUE: WON the bank was negligent?

HELD:
- Indeed, this Court is convinced from an
examination of the evidence and by the
concurring opinions of the courts below
that Bignay purchased the property
without knowledge of the pending Civil
Case No. Q52702
- Union Bank represented to Bignay that it
had title to the property, and by assuming
the obligation to defend such title, it
promised to do so at least in good faith and
with sufficient prudence, if not to the best
of its abilities.
-The record reveals, however, that Union
Bank was grossly negligent in the handling
and prosecution of Civil Case No. Q52702.
- [N]egligence may be occasionally so
gross as to amount to malice [or bad
faith]. Indeed, in culpa contractual or
breach of contract, gross negligence of a
party amounting to bad faith is a ground
for the recovery of damages by the injured
party.
-The only issue raised by Union Bank in
these Petitions is the propriety of the
award of damages, and the amount
thereof is not in issue. The award in favor
of Bignay of P4 million, or the
consideration or cost of the property, and
P20 million the value of the building it
erected thereon is no longer in issue and
is thus in order.

EXTRAORDINARY DILIGENCE

CASE

Loadmasters Customs Services Inc. vs.
Glodel Brokerage Corp. 639 SCRA 69
(January 10, 2011)
MENDOZA, J.

FACTS:
-On August 28, 2001, R&B Insurance issued
Marine Policy No. MN-00105/2001 in favor
of Columbia to insure the shipment of 132
bundles of electric copper cathodes
against All Risks. OnAugust 28, 2001, the
cargoes were shipped on board the vessel
Richard Rey from Isabela, Leyte, to Pier
10, North Harbor, Manila. They arrived on
the same date.
- Columbia engaged the services of Glodel
for the release and withdrawal of the
cargoes from the pier and the subsequent
delivery to its warehouses/plants. Glodel,
in turn, engaged the services of
Loadmasters for the use of its delivery
trucks to transport the cargoes
to Columbias warehouses/plants in
Bulacan and Valenzuela City.
- The goods were loaded on board twelve
(12) trucks owned by Loadmasters, driven
by its employed drivers and accompanied
by its employed truck helpers. Six (6)
truckloads of copper cathodes were to be
delivered to Balagtas, Bulacan, while the
other six (6) truckloads were destined for
Lawang Bato, Valenzuela City. The cargoes
in six truckloads for Lawang Bato were duly
delivered in Columbias warehouses
there. Of the six (6) trucks en route to
Balagtas, Bulacan, however, only five (5)
reached the destination. One (1) truck,
loaded with 11 bundles or 232 pieces of
copper cathodes, failed to deliver its cargo.
- Later on, the said truck, an Isuzu with
Plate No. NSD-117, was recovered but
without the copper cathodes. Because of
this incident, Columbia filed with R&B

Insurance a claim for insurance indemnity

in the amount of P1,903,335.39. After the
requisite investigation and adjustment,
R&B Insurance paid Columbia the amount
of P1,896,789.62 as insurance indemnity.
-R&B Insurance, thereafter, filed a
complaint for damages against both
Loadmasters and Glodel before the
Regional Trial Court, Branch 14, Manila
(RTC), docketed as Civil Case No. 02103040. It sought reimbursement of the
amount it had paid to Columbia for the loss
of the subject cargo. It claimed that it had
been subrogated to the right of the
consignee to recover from the
party/parties who may be held legally
liable for the loss. RTC held Glodel liable to
R&B Insurance. In addition, CA held liable
Loadmasters to Glodel.
- Glodel argues that its relationship with
Loadmasters is that of Charter wherein the
transporter (Loadmasters) is only hired for
the specific job of delivering the
merchandise. Thus, the diligence required
in this case is merely ordinary diligence or
that of a good father of the family, not the
extraordinary diligence required of
common carriers.

ISSUES: Who, between Glodel and
Loadmasters, is liable to pay R&B
Insurance for the amount of the indemnity
it paid Columbia?

HELD:
-Loadmasters admitted to being a common
carrier, also Glodel based on its memo, a
customs broker is likewise a common
carrier.
- Loadmasters and Glodel, being both
common carriers, are mandated from the
nature of their business and for reasons of
public policy, to observe the extraordinary
diligence in the vigilance over the goods
transported by them according to all the
circumstances of such case, as required by
Article 1733 of the Civil Code

- Thus, in case of loss of the goods, the

common carrier is presumed to have been
at fault or to have acted negligently. This
presumption of fault or negligence,
however, may be rebutted by proof that
the common carrier has observed
extraordinary diligence over the goods.
- Premises considered, the Court is of the
view that both Loadmasters and Glodel are
jointly and severally liable to R & B
Insurance for the loss of the subject
cargo. Under Article 2194 of the New Civil
Code, the responsibility of two or more
persons who are liable for a quasi-delict is
solidary.
-Loadmasters claim that it was never privy
to the contract entered into by Glodel with
the consignee Columbia or R&B Insurance
as subrogee, is not a valid defense. It may
not have a direct contractual relation
with Columbia, but it is liable for tort under
the provisions of Article 2176 of the Civil
Code
-Whenever an employees negligence
causes damage or injury to another, there
instantly arises a presumption juris
tantum that the employer failed to
exercise diligentissimi patris families in the
selection (culpa in eligiendo) or
supervision (culpa in vigilando) of its
employees. Hence Loadmasters is liable.
-Glodel is also liable because of its failure
to exercise extraordinary diligence. It failed
to ensure that Loadmasters would fully
comply with the undertaking to safely
transport the subject cargo to the
designated destination. It should have
been more prudent in entrusting the goods
to Loadmasters by taking precautionary
measures, such as providing escorts to
accompany the trucks in delivering the
cargoes.
-Undoubtedly, Glodel has a definite cause
of action against Loadmasters for breach of
contract of service as the latter is primarily
liable for the loss of the subject cargo. In
this case, however, it cannot succeed in

seeking judicial sanction against

Loadmasters because the records disclose
that it did not properly interpose a crossclaim against the latter





VIII. Joint and Solidary
ObligationsArticles 1207
1230
IX.
Extinguishment of
ObligationsArticles 12311304