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Agcaoili vs GSIS 1988 (Art 1169; Compensatio Morae; pg 109)

In 1964, plaintiff Agcaoili applied with the defendant GSIS to purchase a house and lot in Marikina. In
the following year in a letter, respondent approved petitioners application with the advise to occupy
the said house immediately and failure to occupy the same from the receipt of the notice, plaintiffs
application shall be considered disapproved and will be awarded to another applicant. Plaintiff lost no
time in occupying the house. However, he could not stay in it and had to leave the following day because
the house was nothing more than a shell, in such a state of incompleteness that civilized occupation
was not possible. Agcaoili did however ask a homeless friend, a certain Villanueva, to stay in the
premises as some sort of watchman, pending completion of the construction of the house. Agcaoili
thereafter complained to the GSIS, to no avail.
The GSIS asked Agcaoili to pay the monthly amortizations and other fees. Agcaoili paid the first monthly
installment and the incidental fees, 3 but refused to make further payments until and unless the GSIS
completed the housing unit. What the GSIS did was to cancel the award and require Agcaoili to vacate
the premises. 4 Agcaoili reacted by instituting suit in the Court of First Instance of Manila for specific
performance and damages.
The CFI ruled in favor of Agcaoili declaring the cancellation of the award illegal and viod and ordering
GSIS to respect and enforce the aforesaid award, and to complete the house in question to make the
same habitable and authorizing GSIS to collect the monthly amortization only after said house shall
have been completed. Hence this present appeal. GSIS argued the following:
1. Agcaoili had no right to suspend payment of amortizations on account of the incompleteness of his
housing unit, since said unit had been sold in the condition and state of completion then existing ...
(and) he is deemed to have accepted the same in the condition he found it when he accepted the
2. Perfection of the contract of sale between it and Agcaoili being conditioned upon the latters
immediate occupancy of the house subject thereof, and the latter having failed to comply with the
condition, no contract ever came into existence between them.
1. Whether or not Agcaoli may suspend payment of amortization on account of the incompleteness of
his housing unit, since said unit had been sold in the condition and state of completion then existing ...
(and) he is deemed to have accepted the same in the condition he found it when he accepted the
award? Whether or not there was a valid contract of sale between Agcaoili and GSIS?
2. Whether or not Agcaolili repudiated his contract with GSIS?
On the first issue, Yes, because Art. 1169 of the Civil Code provides that 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. Certainly, the prestation of the contract which was ratified upon
approval of GSIS (presupposing the meeting of the minds of GSIS and Agcaoli) is the house and lot,
on the condition that the house should be habitable. Thus: There was then a perfected contract of sale
between the parties; there had been a meeting of the minds upon the purchase by Agcaoili of a
determinate house and lot in the GSIS Housing Project at Nangka Marikina, Rizal at a definite price

payable in amortizations at P31.56 per month, and from that moment the parties acquired the right to
reciprocally demand performance.
There would be no sense to require the awardee to immediately occupy and live in a shell of a house,
a structure consisting only of four walls with openings, and a roof, and to theorize, as the GSIS does,
that this was what was intended by the parties, since the contract did not clearly impose upon it the
obligation to deliver a habitable house, is to advocate an absurdity, the creation of an unfair situation.
By any objective interpretation of its terms, the contract can only be understood as imposing on the
GSIS an obligation to deliver to Agcaoili a reasonably habitable dwelling in return for his undertaking to
pay the stipulated price. Since GSIS did not fulfill that obligation, and was not willing to put the house
in habitable state, it cannot invoke Agcaoilis suspension of payment of amortizations as cause to cancel
the contract between them. It is axiomatic that (i)n 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


MALCOLM; September 16, 1925
Appeal from a judgment of the Court of First Instance of Iloilo
Plaintiff presented a complaint with two causes of action for breach of contract against the defendant
in which judgment was asked for P70,369.50, with legal interest and cost. In an amended answer and
cross-complaint, the defendant set up the special defense that since the plaintiff had defaulted in the
payment for molasses delivered to it by the defendant under the contract between the parties, the latter
was compelled to cancel and rescind the contract. The case was submitted for decision on a stipulation
of facts and exhibits. The judgment of the trial court condemned the defendant to pay to the plaintiff a
total of P35,317.93 with legal interest from the date of the presentation of the complaint, and with costs.
- The written contract between the parties provided for the delivery by the Hawaiian-Philippine Co. to
Song Fo & Co. of 300,000 gallons of molasses. The language used in another exhibit with reference to
the additional 100,000 gallons was not a definite promise. Still less did it constitute an obligation.
- The terms of contract fixed by the parties are controlling. The time of payment stipulated for in the
contract should be treated as of the essence of the contract. Hawaiian-Philippine Co. had no legal right
to rescind the contract of sale because of the failure of Song Fo & Co. to pay for the molasses within
the time agreed upon by the parties. The general rule is that the rescission will not be permitted for a
slight or casual breach of the contract, but only for such breaches are as so substantial and fundamental
as to defeat the object of the parties in making the agreement. A delay in payment for a small quantity
of molasses for some 20 days is not such a violation of an essential condition of the contracts as
warrants rescission for nonperformance.
- The measure of damages for breach of contract in this case is as follows: Song Fo & Co. is allowed
P3,000 on account of the greater expense to which it was put in being compelled to secure molasses
in the open market. It is allowed nothing for lost profits on account of the breach of the contract, because
of failure of proof.


CASTRO; May 13, 1970
Petition for certiorari by the Universal Food Corporation against the decision of the
Court of Appeals
- Magdalo V Francisco discovered or invented a formula for the manufacture of a food seasoning
(sauce) derived from banana fruits popularly known as MAFRAN sauce
- The manufacture of this product was used in commercial scale in 1942, and in the same year
registered his trademark in his name as owner and inventor with the Bureau of Patents
- Due to lack or sufficient capital to finance the expansion of the business, he secured the financial
assistance of Tirso T. Reyes who, after a series of negotiations, formed with other defendant Universal
Food Corporation eventually leading to the execution of Bill of Assignment
- Magdalo V Francisco was appointed Chief Chemist with a salary of P300.00 a month, and Victoriano
V Francisco was appointed auditor and superintendent with a salary of P250.00 a month.
- Magdalo V Francisco when preparing the secret materials inside the laboratory, never allowed
anyone, not even his own son, or the President and General Manager Reyes or defendant, to enter the
laboratory in order to keep the formula secret to himself.
- He expressed a willingness to give the formula to defendant provided that the same should be placed
or kept inside a safe to be opened only when he is already incapacitated to perform his duties as Chief
Chemist, but defendant never acquired a safe for that purpose.
- Reyes wrote him to permit one or two members of his family to observe the preparation of the 'Mafran
Sauce', but said request was denied
- Due to the alleged scarcity and with prices or raw materials, Secretary-Treasurer Ciriaco L. de
Guzman that only Supervisor Ricardo Francisco should be retained in the factory and that the salary of
Magdalo V Francisco, should be stopped for the time being until the corporation should resume its
- Reyes issued a memorandum to Victoriano Francisco ordering him to report to the factory and produce
a 'Mafran Sauce' at the rate of not less than 100 cases a day so as to pope with the orders of the
corporation's various distributors and dealers, and with Instructions to take only the necessary daily
employees without employing permanent employees
- Another memorandum was issued by Reyes instructing the Assistant Chief Chemist Ricardo
Francisco to recall all daily employees connected in the production of Mafran Sauce and also some
additional daily employees for the production of Porky Pops
- Another memorandum instructing Ricardo Francisco, as Chief Chemist, and Porfirio Zarraga, as
Acting Superintendent, to produce Mafran Sauce and Porky Pops with further instructions to hire daily
laborers in order to cope with the full blast production
- Magdalo V Francisco received his salary as Chief Chemist in the amount of P300.00 a month only
until his services were terminated.
- Reyes authorized Zarraga and de Bacula to look for a buyer of the corporation
Including its trademarks, formula and assets at a price of not less than P300.000.00
- Due to these successive memoranda, without Magdalo, V Francisco being recalled back to work, the
letter riled the present action
(1.) WON by virtue of the term of the Bill of Assignment, Magdalo V Francisco ceded and transferred
to the petitioner corporation the formula for Mafran sauce (2.) WON Magdalo V Francisco was
dismissed from his position as chief chemist of the corporation without justifiable cause, and in violation
of paragraph 5-(a) of the Bill of Assignment which in part provides that his appointment is "permanent

in character" (3.) WON rescission of the Bill of Assignment is proper (4.) WON the corporation is liable
to pay the patentee his agreed monthly salary, as long as the use, as well as the right to use, the
formula for Mafran sauce remained with the corporation (5.) WON it can bbe inferred from the appellate
courts decision that what was meant to be returned to the patentee is not the formula itself, but only its
use and the right to such use
1. What was actually ceded and transferred by the patentee Magdalo V Francisco in favor of the
petitioner corporation was only the use of the formula. The Bill of Assignment vested in the petitioner
corporation no title to the formula.
- One of the principal considerations of the Bill of Assignment is the payment of "royalty of 2% of the
net annual profit" which the petitioner corporation may realize by and/or out of its production of Mafran
sauce and other food products, etc. The word "royalty," when employed in connection with a license
under a patent, means the compensation paid for the use of a patented invention.
- The intention of the patentee at the time of its execution was to part, not with the formula for Mafran
sauce, but only its use, to preserve the monopoly and to effectively prohibit anyone from availing of the
- Should dissolution or the petitioner corporation eventually take place, "the property rights and interests
over said trademark and formula shall automatically revert" to the patentee.
- Facts of the case compellingly demonstrate continued possession of the Mafran sauce formula by the
- A conveyance should be interpreted to effect "the least transmission of rights."
2. YES. The petitioner, acting through its corporate officers, schemed and maneuvered to ease out,
separate and dismiss the said from the service as permanent chief chemist, in flagrant violation of the
Bill of Assignment. The fact that a month after the institution of the action for rescission, the petitioner
corporation, thru Reyes requested the patentee to report for duty, is of no consequence.
3. YES. Appellees had no alternative but to rile the present action for rescission and damages.
- The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him. The injured party may choose between fulfillment and
rescission of the obligation, with payment of damages in either case.
- There is no controversy that the provisions of the Bill of Assignment are reciprocal in nature.
The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but
only for such substantial and fundamental breach as would defeat the very object of the parties in
making the agreement.
- The dismissal of Magdalo V Francisco as the permanent chief chemist of the corporation is a
fundamental and substantial breach of the Bill of Assignment. He was dismissed without any fault or
negligence on his part.
4. YES. The corporation could not escape liability to pay the patentee his agreed monthly salary, as
long as the use, as well as the right to use, the formula for Mafran sauce remained with the corporation.
- The contract placed the use of the formula for Mafran sauce with the petitioner, subject to defined
limitations. One of the considerations for the transfer of the use thereof was the undertaking on the part
of the petitioner corporation to employ the patentee as the Second Vice President and Chief Chemist
on a permanent status, at a monthly salary of P300, unless "death or other disabilities" supervened.
5. YES. It is a logical inference from the appellate court's decision that what was meant to be returned
to the patentee is not the formula itself, but only its use and the right to such use. Article 1385 of the
New Civil Code provides that rescission creates the obligation to return the things which were the object
of the contract.


BELLOSILLO; June 19, 2000
Action for specific performance
- Controversy started in 1992 at height of power crisis. Petitioner Pure Foods Corpbdecided to install 2
1500 KW generators in food processing plant in Marikina.
- A bidding for supply and installation of generators was held. Out of 8 prospective bidders who attended
pre-bidding conference, 3 bidders (FEMSCO, MONARK and
ADVANCE POWER) submitted bid proposals and gave bid bonds equivalent to 5% of their respective
bids, as required.
- In a letter, Purefoods confirmed the award of contract to FEMSCO. FEMSCO submitted the required
performance bond (P1,841,187.90) and contractors all-risk insurance policy (P6,137,293.00) w/c
Purefoods acknowledged in a letter. FEMSCO also made arrangements w/ its principal and started by
purchasing materials. Purefoods on the other hand returned FEMSCOs Bidders Bond (P1M) as
- However, Purefoods unilaterally cancelled the award. FEMSCO protested and sought a meeting.
Before the matter could be resolved, Purefoods awarded the project and entered into contract with
Jardine w/c was not one of the bidders.
- FEMSCO wrote to Purefoods and Jardine, but its letters unheeded, FEMSCO sued them both.
1. WON there existed a perfected contract bet Purefoods and FEMSCO
2. WON there is showing that Jardine induced/connived with Purefoods to violate Purefoods contract
1. YES
- Contract: juridical convention manifested in legal form, by virtue of w/c one or more persons bind
themselves in favor of another or others, or reciprocally, to the fulfillment of a prestation to give, to do,
or not to do. It binds the parties and has the force of law between them.
- Requisites of contract:
- consent of the parties
- object/subject matter of the contract
- cause of the obligation
- In this case, the controversy lies in the consent (whether there was acceptance).
Contracts are perfected by mere consent, acceptance by the offeree of the offer made by the offeror.
Acceptance may be express or implied. For a contract to arise, acceptance must be made known to
the offeror. Acceptance can be withdrawn or revoked before it is made known to offeror.
- Art 1326 of Civil Code applies: Advertisements for bidders are simply invitations to make proposals.
The bid proposals/quotations of the bidders are the offers. The reply of petitioner Purefoods is the
acceptance/rejection of the offers.
- Purefoods letter to FEMSCO constituted acceptance. While the letter enumerated basic terms and
conditions, these were imposed on the performance of the obligation rather than on the perfection of
the contract.

These two things are different. While failure to comply w/ CONDITION ON PERFECTION OF
CONTRACT results in failure of a contract, failure to comply w/ CONDITION ON PERFORMANCE OF
THE OBLIGATION merely gives other party options and/or remedies.
- Even granting that the letter of Purefoods is just a conditional counter-offer,
FEMSCOs submission of bond and insurance was implied acceptance, and acknowledgment by
Purefoods, not to mention its return of the Bidders Bond, manifests its knowledge that FEMSCO
consented to the offer.
2. NO
- The similarity in the design submitted to Purefoods by both Jardine and FEMCO and the tender of a
lower quotation by Jardine are insufficient to show that Jardine induced Purefoods to violate contract
with FEMSCO.

SICAM, ET AL. V. JORGE, ET AL., G.R. NO. 159617

Robbery per se is not a fortuitous event.
In Sicam, et al. v. Jorge, et al., G.R. No. 159617, August 8, 2007, Lulu Jorge pawned several pieces
of jewelry with Agencia de R.C. Sicam to secure a loan in the amount of P59,500.00. It was alleged
that two armed men entered the pawnshop and took away whatever cash and jewelry found inside
the pawnshop vault. It was reported to the police. She sued for damages but Sicam interposed the
defense of fortuitous event, alleging that there was robbery. The SC brushed aside the contention and
Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the possibility of
negligence on his part. In a case similarly situated, it was ruled that:
It is not a defense for a repaid shop of motor vehicles to escape liability simply because the damage
or loss of a thing lawfully placed in its possession was due to carnapping. Carnapping per se cannot be
considered as a fortuitous event. The fact that a thing was unlawfully and forcefully taken from
anothers rightful possession, as in cases of carnapping, does not automatically give rise to a fortuitous
event. To be considered as such, carnapping entails more than the mere forceful taking of anothers
property. It must be proved and established that the event was an act of God or was done solely by
third parties and that neither the claimant nor the person alleged to be negligent has any participation.
In accordance with the Rules ofEvidence, the burden of proving that the loss was due to a fortuitous
event rests on him who invokes it which in this case is the private respondent. However, other than
the police report of the alleged carnapping incident, no other evidence was presented by private
respondent to the effect that the incident was not due to its fault. A police report of an alleged crime,
to which only private respondent is privy, does not suffice to establish the carnapping. Neither does it
prove that there was no fault on the party of private respondent notwithstanding the partys agreement
at the pre-trial that the car was carnapped. Carnapping does not foreclose the possibility of fault or
negligence on the part of private respondent. (Co. v. CA, 353 Phil. 305(1998); Sicam, et al. v. Jorge,
et al., G.R. No. 159617, August 8, 2007).
In another case, it was held that to be relieved from civil liability of returning the pendant under Article
1174 of the Civil Code, it would only be sufficient that the unforeseen event, the robbery, took place
without any concurrent fault on the debtors part, and this can be done by preponderance of evidence;
that o be free from liability for reason of fortuitous event, the debtor must, in addition to the case itself,
be free from any concurrent or contributory fault or negligence. (Sicam, et al. v. Jorge, et al., supra.).


A contract, once perfected, has the force of law between the parties with which they are
bound to comply in good faith and from which neither one may renege without the consent
of the other. The autonomy of contracts allows the parties to establish such stipulations,
clauses, terms and conditions as they may deem appropriate provided only that they are
not contrary to law, morals, good customs, public order or public policy. The standard
norm in the performance of their respective covenants in the contract, as well as in the
exercise of their rights thereunder, is expressed in the cardinal principle that the parties
in that juridical relation must act with justice, honesty and good faith.
Southeastern College vs CA 1998 (Quantum of proof; Fortuitous Event)
Private respondents are owners of a house at 326 College Road, Pasay while petitioner
owns a four-storey school building along the same College Road. That on October 11,
1989, a powerful typhoon hit Metro Manila. Buffeted by very strong winds, the roof of the
petitioners building was partly ripped off and blown away, landing on and destroying
portions of the roofing of private respondents house. When the typhoon had passed, an
ocular inspection of the destroyed building was conducted by a team of engineers headed
by the city building official.
In their report, they imputed negligence to the petitioner for the structural defect of the
building and improper anchorage of trusses to the roof beams to cause for the roof be
ripped off the building, thereby causing damage to the property of respondent.
Respondents filed an action before the RTC for recovery of damages based on culpa
aquiliana. Petitioner interposed denial of negligence and claimed that the typhoon as an
Act of God is the sole cause of the damage. RTC ruled in their favor relying on the
testimony of the City Engineer and the report made after the ocular inspection. Petitioners
appeal before the CA which affirmed the decision of the RTC.
Hence this present appeal.
(1) Whether the damage on the roof of the building of private respondents resulting from
the impact of the falling portions of the school buildings roof ripped off by the strong
winds of typhoon Sailing, was, within legal contemplation, due to fortuitous event?
(2) Whether or not an ocular inspection is sufficient evidence to prove negligence?
On the first issue, Yes, petitioner should be exonerated from liability arising from the
damage caused by the typhoon. Under Article 1174 of the Civil Code, Except in cases
expressly specified by the law, or when it is otherwise declared by stipulation, or when
the nature of the obligation requires the assumption of risk, no person shall be responsible
for those events which could not be foreseen, or which, though foreseen, were inevitable.
In order that a fortuitous event may exempt a person from liability, it is necessary that
he be free from any previous negligence or misconduct by reason of which the loss may
have been occasioned. 12 An act of God cannot be invoked for the protection of a person
who has been guilty of gross negligence in not trying to forestall its possible adverse

consequences. When a persons negligence concurs with an act of God in producing

damage or injury to another, such person is not exempt from liability by showing that the
immediate or proximate cause of the damages or injury was a fortuitous event. When the
effect is found to be partly the result of the participation of man whether it be from
active intervention, or neglect, or failure to act the whole occurrence is hereby
humanized, and removed from the rules applicable to acts of God.
In the case under consideration, the lower court accorded full credence to the finding of
the investigating team that subject school buildings roofing had no sufficient anchorage
to hold it in position especially when battered by strong winds. Based on such finding,
the trial court imputed negligence to petitioner and adjudged it liable for damages to
private respondents.
There is no question that a typhoon or storm is a fortuitous event, a natural occurrence
which may be foreseen but is unavoidable despite any amount of foresight, diligence or
care. In order to be exempt from liability arising from any adverse consequence
engendered thereby, there should have been no human participation amounting to a
negligent act. In other words; the person seeking exoneration from liability must not be
guilty of negligence. Negligence, as commonly understood, is conduct which naturally or
reasonably creates undue risk or harm to others. It may be the failure to observe that
degree of care, precaution, and vigilance which the circumstances justify demand, or the
omission to do something which a prudent and reasonable man, guided by considerations
which ordinarily regulate the conduct of human affairs, would do.
On the second issue, it bears emphasizing that a person claiming damages for the
negligence of another has the burden of proving the existence of fault or negligence
causative of his injury or loss. The facts constitutive of negligence must be affirmatively
established by competent evidence, 19 not merely by presumptions and conclusions
without basis in fact. Private respondents, in establishing the culpability of petitioner,
merely relied on the aforementioned report submitted by a team which made an ocular
inspection of petitioners school building after the typhoon. As the term imparts, an ocular
inspection is one by means of actual sight or viewing. What is visual to the eye through,
is not always reflective of the real cause behind.
In the present case, other than the said ocular inspection, no investigation was conducted
to determine the real cause of the partial unroofing of petitioners school building.

G.R. No. L-6648 July 25, 1955
The petitioners Victorias Planters Association, Inc. and North Negros Planters Association,
Inc. and the respondent Victorias Milling Co., Inc entered into a milling contract whereby
they stipulated a 30-year period within which the sugar cane produced by the petitioner
would be milled by the respondent central. The parties also stipulated that in the event of
force majuere, the contract shall be deemed suspended during this period.
The petitioner failed to deliver the sugar cane during the four years of the Japanese
occupation and the two years after liberation when the mill was being rebuilt or a total of
six years.
Can the petitioners be compelled to deliver sugar cane for six more years after the
expiration of the 30-year period to make up for what they failed to deliver to the
RULING: No. Fortuitous event relieves the obligor from fulfilling the contractual obligation
under Article 1174 of the Civil Code. The stipulation in the contract that in the event of
force majeure the contract shall be deemed suspended during the said period does not
mean that the happening of any of those events stops the running of the period agreed
upon. It only relieves the parties from the fulfillment of their respective obligations during
that time the petitioner from delivering the sugar cane and the respondent central from
In order that the respondent central may be entitled to demand from the petitioner the
fulfillment of their part in the contracts, the latter must have been able to perform it but
failed or refused to do so and not when they were prevented by force majeure such as
war. To require the petitioners to deliver the sugar cane which they failed to deliver during
the six years is to demand from them the fulfillment of an obligation, which was impossible
of performance during the time it became due. Nemo tenetur ed impossibilia. The
respondent central not being entitled to demand from the petitioners the performance of
the latters part of the contracts under those circumstances cannot later on demand its
fulfillment. The performance of what the law has written off cannot be demanded and
The prayer that the petitioners be compelled to deliver sugar cannot for six years more to
make up for what they failed to deliver, the fulfillment of which was impossible, of granted,
would in effect be an extension of the terms of the contracts entered into by and between
the parties.