ARTICLE 1156-1162, GENERAL PROVISION1 ARTURO PELAYO, plaintiff-appellant,

vs.
MARCELO LAURON, ET AL., defendants-
DOMINGO DE LA CRUZ, plaintiff-appellant,
appellees.
vs.
G.R. No. L-4089 January 12, 1909
NORTHERN THEATRICAL ENTERPRISES INC.,
ET AL., defendants-appellees.
G.R. No. L-7089 August 31, 1954 FACTS:

On the 23rd of November, 1906, Arturo

FACTS:
Pelayo, a physician residing in Cebu, filed a
complaint against Marcelo Lauron and Juana
The facts in this case based on an agreed
Abella setting forth that on or about the 13th of
statement of facts are simple. In the year 1941 the
October of said year, at night, the plaintiff was
Northern Theatrical Enterprises Inc., a domestic
called to the house of the defendants, situated in
corporation operated a movie house in Laoag,
San Nicolas, and that upon arrival he was
Ilocos Norte, and among the persons employed by
requested by them to render medical assistance to
it was the plaintiff DOMINGO DE LA CRUZ, hired as
their daughter-in-law who was about to give birth
a special guard whose duties were to guard the
to a child; that therefore, and after consultation
main entrance of the cine, to maintain peace and
with the attending physician, Dr. Escaño, it was
order and to report the commission of disorders
found necessary, on account of the difficult birth,
within the premises. As such guard he carried a
to remove the fetus by means of forceps which
revolver. In the afternoon of July 4, 1941, one
operation was performed by the plaintiff, who also
Benjamin Martin wanted to crash the gate or
had to remove the afterbirth, in which services he
entrance of the movie house. Infuriated by the
was occupied until the following morning, and that
refusal of plaintiff De la Cruz to let him in without
afterwards, on the same day, he visited the
first providing himself with a ticket, Martin
patient several times; that the just and equitable
attacked him with a bolo. De la Cruz defendant
value of the services rendered by him was P500,
himself as best he could until he was cornered, at
which the defendants refuse to pay without
which moment to save himself he shot the gate
alleging any good reason therefor; that for said
crasher, resulting in the latter's death.
reason he prayed that the judgment be entered in
his favor as against the defendants, or any of
For the killing, De la Cruz was charged with
them, for the sum of P500 and costs, together with
homicide in Criminal Case No. 8449 of the Court of
any other relief that might be deemed proper.
First Instance of Ilocos Norte. After a re-
investigation conducted by the Provincial Fiscal the
ISSUE:
latter filed a motion to dismiss the complaint,
Whether the father and mother-in-law of the
which was granted by the court in January 1943.
patient, or the husband of the latter liable to the
On July 8, 1947, De la Cruz was again accused of
medical expenses incurred
the same crime of homicide, in Criminal Case No.
HELD:
431 of the same Court. After trial, he was finally
The husband is liable to pay for the medical
acquitted of the charge on January 31, 1948. In
expenses. According to article 1089 of the Civil
both criminal cases De la Cruz employed a lawyer
Code, obligations are created by law, by contracts,
to defend him. He demanded from his former
by quasi-contracts, and by illicit acts and
employer reimbursement of his expenses but was
omissions or by those in which any kind of fault or
refused, after which he filed the present action
negligence occurs.
against the movie corporation and the three
members of its board of directors, to recover not
only the amounts he had paid his lawyers but also Obligations arising from law are not
moral damages said to have been suffered, due to presumed. Those expressly determined in the
his worry, his neglect of his interests and his code or in special laws, etc., are the only
family as well in the supervision of the cultivation demandable ones. Obligations arising from
of his land, a total of P15,000. contracts have legal force between the contracting
parties and must be fulfilled in accordance with
ISSUE: their stipulations. (Arts. 1090 and 1091.)
Whether the employer is obliged to give legal
assistance to its employee and provide him with a
The rendering of medical assistance in case
lawyer
of illness is comprised among the mutual
obligations to which the spouses are bound
HELD:
by way of mutual support. (Arts. 142 and
No. Viewed from another angle it may be
143.)
said that the damage suffered by the plaintiff by
reason of the expenses incurred by him in
remunerating his lawyer, is not caused by his act If every obligation consists in giving, doing or
of shooting to death the gate crasher but rather by not doing something (art. 1088), and spouses are
the filing of the charge of homicide which made it mutually bound to support each other, there can
necessary for him to defend himself with the aid of be no question but that, when either of them by
counsel. reason of illness should be in need of medical
assistance, the other is under the unavoidable
obligation to furnish the necessary services of a
physician in order that health may be restored,
and he or she may be freed from the sickness by
which life is jeopardized; the party bound to
furnish such support is therefore liable for all
expenses, including the fees of the medical expert
for his professional services. This liability
originates from the above-cited mutual obligation
which the law has expressly established between
the married couple.
MODESTA BORCENA ET AL. petitioners,
vs.
INTERMEDIATE APPELLATE COURT, HON.
CLEMENTE D. PAREDES, ROMULO C. BASA,
LEOVINO LEGASPI and HON. ZOTICO
TOLETE respondents.
G.R. No. 70099 January 7, 1987
FACTS:
On July 6, 1981, Atty. Gil P. de Guzman was
employed by Borcena et. al., for the purpose of
handling the case against the Metropolitan
Waterworks Sewage System for the total or partial
destruction of petitioner’s roads and residential
lots. Both parties agreed with the following terms:
a) 20% of the total claim for Attorney’s fees and,
b) 5% of the total claim for representation and
miscellaneous expenses.
On the same date, Atty. de Guzman filed a
complaint for damages against the MWSS.
On December 7, 1982, the MWSS was
directed, by the court, to issue P852,000.00 to the
deputy sheriff with Sta. Maria Bulacan, Municipal
Treasury. The court also orders that withdrawals
must be made upon its orders.
On March 17, 1983, Rolando Gimeno, on
behalf of the other plaintiffs and on his behalf sent
a letter to Atty. de Guzman terminating his
services as their counsel on the reason of failure or
refusal to return the checks of MWSS and directing
him to return all the case records involving the
legal problems in the latter’s possession to Mr.
Gimeno with the assurance to be amplty
compensated.
On March 25 1983, Atty. de Guzman filed an
opposition to Gimeno’s ex-parte motion to transfer
deposit of garnished amount claiming that he
never received the checks. The court ruled in favor
of Atty. de Guzman granting him a full 25% claim
for his legal services.
Hence, this petition.
ISSUE:
Whether of nor Atty. de Guzman is entitled for
25% claim for his attorney’s fees
HELD:
No, being unconscionable and unreasonable.
Contracts for attorney’s services in this jurisdiction
stand upon a different entire footing for contracts
for the payment of compensation for the services.
By express provison of section 29 of the civil
procedure; an attorney is not entitled, in the
absence of express contract, to recover more than
a reasonable compensation for his services; even
when express contract is made, the court may
ignore it and limit its recovery to reasonable
compensation if the amount of the stipulated fee
is found by the courts to be unreasonable. the
Supreme Court ordered to pay Atty. de Guzman
P10,000.00 for his legal services.
NARCISO GUTIERREZ, plaintiff-appellee,
vs.
BONIFACIO GUTIERREZ, MARIA V. DE
GUTIERREZ, MANUEL GUTIERREZ, ABELARDO
VELASCO, and SATURNINO
CORTEZ, defendants-appellants.
G.R. No. 34840 September 23, 1931
FACTS:
On February 2, 1930, a passenger truck and
an automobile of private ownership collided while
attempting to pass each other on the Talon bridge
on the Manila South Road in the municipality of
Las Piñas, Province of Rizal. The truck was driven
by the chauffeur Abelardo Velasco, and was owned
by Saturnino Cortez. The automobile was being
operated by Bonifacio Gutierrez, a lad 18 years of
age, and was owned by Bonifacio's father and
mother, Mr. and Mrs. Manuel Gutierrez. At the time
of the collision, the father was not in the car, but
the mother, together will several other members
of the Gutierrez family, seven in all, were
accommodated therein. A passenger in the
autobus, by the name of Narciso Gutierrez, was en
route from San Pablo, Laguna, to Manila. The
collision between the bus and the automobile
resulted in Narciso Gutierrez suffering a fracture
right leg which required medical attendance for a
considerable period of time, and which even at the
date of the trial appears not to have healed
properly.
ISSUE:
Whether the father shall be liable to the
negligence caused by his son
HELD:
Yes, pursuant to the provisions of article 1903
of the Civil Code, the father alone and not the
minor or the mother, would be liable for the
damages caused by the minor.
In the United States, it is uniformly held that
the head of a house, the owner of an automobile,
who maintains it for the general use of his family
is liable for its negligent operation by one of his
children, whom he designates or permits to run it,
where the car is occupied and being used at the
time of the injury for the pleasure of other
members of the owner's family than the child
driving it. The theory of the law is that the running
of the machine by a child to carry other members
of the family is within the scope of the owner's
business, so that he is liable for the negligence of
the child because of the relationship of master and
servant. (Huddy On Automobiles, 6th ed., sec.
660; Missell vs. Hayes [1914], 91 Atl., 322.)
ARTICLE 1163-1178, NATURE AND EFFECT OF
OBLIGATIONS
GREGORCIA GARCIA VS. FRANCISCO
MANALAC
FACTS:
In 1943. Gregorcia Garcia rented the house of
Francisco Manalac. The stipulation between the
parties whereby Garcia were going to pay the
monthly rental of P20 payable in the first 5 days of
the 20th of each month was verbally agreed
between the parties. However, in 1945, Manalac
filed an action for eviction against Garcia alleging
that the latter violated the contract by failing to
pay the monthly rental the February of the said
year. The defendant denies the imputation and
defends herself by saying that she had always
religiously paid the agreed rents; that although the
verbally agreed was that the plaintiff or his
manager charged the rent within the five days
following the twenty of each month, sometimes
the presentation of the receipt was anticipated, or
the collection was made a little after five days, or
several receipts were accumulated not by default
of the defendant but simply because the plaintiff
or his manager let the time pass without going to
present the receipt, but when this was done, the
payment never failed; that neither the plaintiff nor
her manager came to collect during the month of
February, and when at the end of March she
offered to pay the accrued rent to the plaintiff. The
plaintiff refused to receive the payment and
demanded the defendat to vacate the premises.
The lower court rlued infavor of the plaintiff on the
assumption that the defendant incurred default or
lack of payment of the price agreed for the mere
fact of not having satisfied the rents of February
and March 1945.
ISSUE:
Whether the defendant incurred in default.
HELD:
There was no default in February, first,
because none of them showed up at the
defendant's address in that month to collect as
was the agreement or, at least, the custom
between the parties; second, because it is
historical and judicial knowledge that the frightful
and huge battle for the liberation of Manila was
unleashed during the said month, causing
tremendous confusion and chaos in the city life in
this city and in the suburbs, especially in the
question of accommodation, due to the
destruction and fires that reduced a considerable
part of the buildings and the hamlet to rubble and
ashes. In fact, the month of February was
expressly included in the decree of moratorium
issued by the Executive.
There was no default in March either because the
same Court a quo establishes in its judgment the
fact that the defendant offered to pay "in the last
part of March". In this sentence it fits perfectly the
possibility that the offer was made within the first
five days after the twenty of March,but even
granting that this period has been exceeded a
little, it can not be concluded either that there was
a delay in view of the extraordinarily abnormal
circumstances that prevailed at that time, and,
above all, in view of the fact that, according to the
record, the plaintiff or his manager had the custom
of making the collection with enough
irregularity. Having agreed that the payment of the
rent would be made in the domicile of the debtor,
he had the right to wait to be presented with the
receipt, not incurring in arrears for the time that
the creditor allowed to pass without making the
payment.
ROSE PACKING COMPANY, INC vs. CA
FACTS:
Respondent PCIB granted the loan
request of the petitioner Rose Packing Company
fully secured by a real estate mortgaged and with
the further condition that the bank appoint the
further condition that respondent PCIB appoint its
executive vice-president Roberto S. Benedicto as
its representative in petitioner's board of directors.
The National Investment & Development
Corporation (NIDC), an investment subsidiary of
the Philippine National Bank, approved a P2.6
million loan application of petitioner with certain
conditions. Pursuant thereto, the NIDC released to.
Subsequently, petitioner purchased 5 parcels of
land in Pasig, Rizal making a down payment
thereon. The NIDC totally released P200,000 and
applied to the payment of preferred stock which
NIDC subscribed in petitioner corporation to
partially implement its P1,000,000.00 investment
scheme as per agreement. Thereafter, the NIDC
refused to make further releases on the approved
loan of petitioner. Then respondent PCIB approved
additional loan consisting of a P710,000. All of
which were still secured by chattel and real estate
mortgages. However, PCIB released only P300,000
of the P710,000 approved loan for the payment of
the Pasig lands and some P300,000.00 for
operating capital.
On June 29,1967, the Development Bank of
the Philippines approved an application by
petitioner for a loan of P1,840,000.00 and a
guarantee for $652,682.00 for the purchase of can
making equipment. Immediately upon receipt of
notice of the approval of the DBP of the loan,
petitioner advised respondent PCIB of the
availability of P800,000.00 to partially pay off its
account and requested the release of the titles to
the Pasig lots for delivery to the DBP. Respondent
PCIB verbally advised petitioner of its refusal,
stating that all obligations should be liquidated
before the release of the titles to the Pasig
properties. Following the PCIB's rejection of
petitioner's counter-proposal, petitioner purchased
a parcel of land at Valenzuela, Bulacan with the
P800,000.DBP loan, with the latter's consent.
On January 5, 1968 respondent PCIB filed a
complaint against petitioner and Rene Knecht, its
president for the collection of petitioner's
indebtedness to respondent bank. The property
mortgaged was foreclosed for failure to pay to
indebtedness. The petitioner file an injunction for
the foreclosure of the mortgage property. The
lower court denied the petition. CA affirmed the
lower court’s decision.
ISSUE:
Whether the petitioner corporation incurred
in default in paying their loans.
HELD:
In the letter dated August 12,1966 to
petitioner corporation, among the conditions that
respondent bank set for the consolidation of the
outstanding obligations of petitioner was the
liquidation of the said obligations together with the
latter's other obligations in the financing scheme
already approved by the NIDC and PDCP. To quote:
These facilities shall be temporary and shall be
fully liquidated, together with other obligations
from a refinancing scheme already approved by
the NIDC and PDCP totalling Pl million in equity
and P2.6 million in long term financing. In this
connection, the firm shall present to this Bank a
certified copy of the terms and conditions of the
approval by the NIDC and PDCP.
In other words, the loans of petitioner
corporation from respondent bank were supposed
to become due only at the time that it receives
from the NIDC and PDCP the proceeds of the
approved financing scheme. As it is, the conditions
did not happen. NIDC refused to make further
releases after it had made two releases totalling
P200,000 which were all applied to the payment of
the preferred stock NIDC subscribed in petitioner
corporation to partially implement its P1,000,000
investment. The efficacy or obligatory force of a
conditional obligation is subordinated to the
happening of a future and uncertain event so that
if the suspensive condition does not take place,
the parties would stand as if the conditional
obligation had never existed. Petitioner
corporation alleges that there had been no
demand on the part of respondent bank previous
to its filing a complaint against petitioner and Rene
Knecht personally for collection on petitioner's
indebtedness. For an obligation to become due
there must generally be a demand. Default
generally begins from the moment the creditor
demands the performance of the obligation.
Without such demand, judicial or extrajudicial, the
effects of default will not arise.
The loan agreements between petitioner and
respondent Bank are reciprocal obligations. The
obligation or promise of each party is the
consideration for that of the other. A contract of
loan is not a unilateral contract as respondent
Bank thinks it is. The promise of petitioner to pay
is the consideration for the obligation of
respondent bank to furnish the loan. Furthermore,
respondent bank was in default in fulfilling its
reciprocal obligation under their loan agreement.
By its own admission it failed to release the
P710,000.00 loan it approved on October 13, 1966
in which case, petitioner corporation, under Article
1191 of the Civil Code, may choose between
specific performance or rescission with damages in
either case. The SC reversed the decision of the
CA which affirmed the decision of the lower court.
GUILLERMO FRANCISCO VS. JULIO ABELLA
FACTS:
Guillermo Francisco purchased parcels of
lands from the government in an instalment basis.
He then also sold the lots to Julio Abella. In their
contract Abella paid P500 as down payment for
the the lots and the balance would be paid on or
before the fifteenth day of December, 1928,
extendible fifteen days thereafter. Besides the
P500 which, according to the instrument quoted
above, the plaintiff paid, he made another
payment of P415.31 on November 13, 1928, upon
demand made by the defendant. The defendant
instructed Roman Mabanta, that in the event that
the plaintiff failed to pay the remainder of the
selling price, to inform him that the option would
be considered cancelled, and to return to him the
amount of P915.31 already delivered. On January
3, 1929, Mabanta notified the plaintiff that he had
received the power of attorney to sign the deed of
conveyance of the lots to him, and that he was
willing to execute the proper deed of sale upon
payment of the balance due. The plaintiff asked
for a few days' time, but Mabanta, following the
instructions he had received from the defendant,
only gave him until the 5th of that month. The
plaintiff did not pay the rest of the price on the 5th
of January, but on the 9th of the month attempted
to do so; Mabanta, however, refused to accept it,
and gave him to understand that he regarded the
contract as rescinded. On the same day, Mabanta
returned by check the sum of P915.31 which the
plaintiff had paid.
ISSUE:
Whether the defendant can rescind the
contract upon the default of the plaintiff.
HELD:
It is to be noted that in the document signed
by the defendant, the 15th of December was fixed
as the date, extendible for fifteen days, for the
payment by the plaintiff of the balance of the
selling price. It has been admitted that the plaintiff
did not offer to complete the payment until
January 9, 1929. He contends that Mabanta, as
attorney-in-fact for the defendant in this
transaction, granted him an extension of time until
the 9th of January. But Mabanta has stated that he
only extended the time until the 5th of that month.
Mabanta's testimony on this point is corroborated
by that of Paz Vicente and by the plaintiff's own
admission to Narciso Javier that his option to
purchase those lots expired on January 5, 1929.
In holding that the period was an essential
element of the transaction between plaintiff and
defendant, the trial court considered that the
contract in question was an option for the
purchase of the lots, and that in an agreement of
this nature the period is deemed essential. The
opinion of the court is divided upon the question of
whether the agreement was an option or a sale,
but even supposing it was a sale, the court holds
that time was an essential element in the
transaction. The defendant wanted to sell those
lots to the plaintiff in order to pay off certain
obligations which fell due in the month of
December, 1928. The time fixed for the payment
of the price was therefore essential for the
defendant, and this view is borne out by his letter
to his representative Mabanta instructing him to
consider the contract rescinded if the price was
not completed in time. In accordance with article
1124 of the Civil Code, the defendant is entitled to
resolve the contract for failure to pay the price
within the time specified.
CENTRAL BANK VS CA
FACTS:
Sulpicio Tolentino secured a loan in the
amount of P 80,000 from the Island Savings Bank.
As a security he executed a real estate mortgaged
over the land covering of 100 hectares. Tolentio
received the amount of P17, 000 as partial release.
An advance interest for the P80,000 loan covering
a 6-month period amounting to P4,800 was
deducted from the partial release of P17,000. But
this pre-deducted interest was refunded to Sulpicio
M. Tolentino on July 23, 1965, after being informed
by the Bank that there was no fund yet available
for the release of the P63,000 balance. The Bank,
thru its vice-president and treasurer, promised
repeatedly the release of the P63,000.00 balance.
However, on June 14, 1968, the Monetary Board,
after finding that Island Savings Bank failed to put
up the required capital to restore its solvency,
issued Resolution No. 967 which prohibited Island
Savings Bank from doing business in the
Philippines and instructed the Acting
Superintendent of Banks to take charge of the
assets of Island Savings Bank.
On August 1, 1968, Island Savings Bank, in
view of non-payment of the P17,000. covered by
the promissory note, filed an application for the
extra-judicial foreclosure of the real estate
mortgage covering the 100-hectare land of
Sulpicio M. Tolentino. On January 20, 1969, Sulpicio
M. Tolentino filed a petition for injunction, specific
performance or rescission and damages with
preliminary injunction, alleging that since Island
Savings Bank failed to deliver the P63,000.00
balance of the P80,000.00 loan, he is entitled to
specific performance by ordering Island Savings
Bank to deliver the P63,000.00 with interest of
12% per annum from April 28, 1965, and if said
balance cannot be delivered, to rescind the real
estate mortgage. The trial court, after trial on the
merits rendered its decision, finding unmeritorious
the petition of Sulpicio M. Tolentino, ordering him
to pay Island Savings Bank the amount of PI 7
000.00 plus legal interest and legal charges due
thereon, and lifting the restraining order so that
the sheriff may proceed with the foreclosure . The
Court of Appeals, affirmed with modification the
ruling of the lower court for specific performance,
but it ruled that Island Savings Bank can neither
foreclose the real estate mortgage nor collect the
P17,000 loan.
ISSUE:
Whether Island Savings Bank incurred in
delay when it failed to deliver the balance to
Sulpicio Tolentino.
HELD:
When Island Savings Bank and Sulpicio M.
Tolentino entered into an P80,000.00 loan
agreement they undertook reciprocal obligations.
In reciprocal obligations, the obligation or promise
of each party is the consideration for that of the
and when one party has performed or is ready and
willing to perform his part of the contract, the
other party who has not performed or is not ready
and willing to perform incurs in delay (Art. 1169 of
the Civil Code). The promise of Sulpicio M.
Tolentino to pay was the consideration for the
obligation of Island Savings Bank to furnish the
P80,000 loan. When Sulpicio M. Tolentino executed
a real estate mortgage he signified his willingness
to pay the P80,000 loan. From such date, the
obligation of Island Savings Bank to furnish the
P80,000.00 loan accrued. Thus, the Bank's delay
in furnishing the entire loan started on April 28,
1965, and lasted for a period of 3 years or when
the Monetary Board of the Central Bank issued
Resolution No. 967 on June 14, 1968, which
prohibited Island Savings Bank from doing further
business. Such prohibition made it legally
impossible for Island Savings Bank to furnish the
P63,000 balance of the P80,000 loan.
Since Island Savings Bank failed to furnish
the P63,000balance of the P8O,000 loan, the real
estate mortgage of Sulpicio M. Tolentino became
unenforceable to such extent. P63,000 is 78.75%
of P80,000 hence the real estate mortgage
covering 100 hectares is unenforceable to the
extent of 78.75 hectares. The mortgage covering
the remainder of 21.25 hectares subsists as a
security for the P17,000 debt. 21.25 hectares is
more than sufficient to secure a P17,000 debt
PRICE STABILIZATION, INC VS HON.EMILIO
RILLORAZA
G.R. No. L—8253
Concepcion, J.:
FACTS:
On March 20, 1951, Manual Camus, an owner
of a 1,700 square-meter land, and Price, Inc.
entered into a contract whereby the former leased
to the latter said lot for a period of ten (10) years,
from April 1, 1951.
On January 19, 1951, Price instituted Civil
Case No. 2582 of the Court of First Instance of
Rizal against Camus for specific performance,
damages, and extension of the period of said
lease, upon the ground of non-compliance with the
provisions of paragraph 5 which reads:
“ 5. That the party of the first part
Lessor, likewise covenants and agrees
to cause or make the necessary filling,
at his sole expense, within a year from
signing of this contract, the vacant
portion of the lot along the river with
an area of about 500 square meters to
increase its elevation and enable the
party of the second part Lessee, to
facilitate or make us of the whole lot;
as well as to construct, build or cause
to erect the necessary concrete stone
walls provided with barbed wire on top
thereof and all expenses incurred or to
be incurred incident the filling as well
 as to the construction, building and
erection of the stone walls, one (1)
meter high, with barbed wire to be
borne solely by the party of the first
part Lessor.”
Three days later, Camus in turn, commenced
Civil Case No. 1159 of the Justice of the Peace
Court of Malabon Rizal against Price, for forcible
entry and detainer, upon the ground of non-
payment of the rentals from February 16, 1953.
The Justice of the Peace Court rendered a decision
in favor of Camus and against Price, condemning
the latter to pay Camus the rentals with interest
unpaid by Price, damages and attorney’s fees.
Price was also condemned to vacate the premises
and turnover the possession to Camus.
Price appealed the decision and instead of
paying the amount of rentals, posted a bond for
P1,200 “to answer for the rentals for the month
inclusive, in the event the plaintiff secures a final
judgment in his favor”. Camus filed with the CFI of
Rizal a petition for the execution of the decision of
the Justice of the Peace of Court. Hon. Emilio
Rilloraza, Judge, directed the execution of the
decision of the Justice of the Peace Court. On
September 11, 1954, the Clerk of Court of Rizal
issued the writ of execution, which said officer, as
ex officio Provincio Sheriff, threatened to enforce.
Hence, Price instituted petition for certiorari.
ISSUE:
Whether or not Price violated the Contract of
Lease.
HELD:
No, Price did not violate the Contract of
Lease. The last paragraph of Article 1169 provides
that:
“in reciprocal obligation, neither party incurs in
delay if the other does not comply or is not ready
to comply in a proper manner what is incumbent
upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins”.
In this case, Camus did not comply with some
of his obligations under the contract of lease,
specifically in Section 5 of the contract, and that
this breach of contract dates back to March 20,
1952 or eleven months prior to the alleged default
of Price in payment of rentals.
PACIENTE TAMAYO VS CARLOS GSELL
35 Phil 953
FACTS:
Braulio Tamayo, minor son of Paciente
Tamayo, was employed by Carlos Gsell to do
ordinary work in the match factory. Eugenio
Murcia, one of the foremen employed in the
factory, assigned Braulio to assist machinist
Arcadio Reyes in recovering strips used in the
manufacture of match boxes, from the machine. At
the same time, Braulio had to clean out the pieces
of wood from said strips stuck in the machine
obstructing its performance. Because he was
inexperienced, Braulio’s right hand was caught by
the knife of the machine resulting to injury.
ISSUE:
Whether or not Gsell be held liable for the
injuries sustained by Braulio at the course of his
work.
HELD:
Yes, Gsell is liable for damages. There was
negligence on his part as an employer to warn the
boy of the dangers of his work and give him
instructions on how to avoid accidents in cleaning
of a machine with which he was unfamiliar.
MEDEL, ET.AL VS COURT OF APPEALS
GR No 131622, November 27, 1988
Pardo, J.:
FACTS:
Servando Franco and Letecia Medel obtained
four loans from Veronica. The first was 50,000 with
3,000 interest; second 90,000 with 6,000 interest;
third 300,000 secured by a real estate mortgage
of a property owned by Leticia Yaptinchay. Of
these three loans, Servando and Letecia executed
promissory notes. However, they failed to pay
these loans on time. The fourth loan was the
consolidated unpaid loans of Servando and Letecia
and an additional 60,000 which totaled to
P500,000.00. Another promissory note was
executed in favor of Veronic to pay the sum of
P500, 000.00 with a 5.5% interest per month plus
2% service charge per annum, with an additional
amount of 1% per month as penalty charges.
Upon maturity of the loan, the Servando and
Medel AGAIN failed to pay the indebtedness
which prompted Veronica to file with the RTC a
complaint for collection of the full amount of the
loan including interests and other charges.
Declaring that the due execution and
genuineness of the four promissory notes has
been duly proved, the RTC ruled that although the
Usury Law had been repealed, the interest
charged on the loans was unconscionable and
“revolting to the conscience” and ordered the
payment of the amount of the first 3 loans with a
12% interest per annum and 1% per month as
penalty.
On appeal, Veronica argued that the
promissory note, which consolidated all the unpaid
loans of the Servando and Medel, is the law that
governs the parties.
The Court of Appeals ruled in favor of the
Veronica on the ground that the Usury Law has
become legally inexistent with the promulgation
by the Central Bank in 1982 of Circular No. 905,
the lender and the borrower could agree on any
interest that may be charged on the loan, and
ordered the Defendants to pay the Plaintiffs the
sum of P500,000, plus 5.5% per month interest
and 2& service charge per annum , and 1% per
month as penalty charges.
ISSUE:
WHETHER OR NOT THE 5.5% INTEREST RATE
WAS USURIOUS.
HELD:
No, it is not usurious because Central Bank
Circular No. 905 has expressly removed the
interest ceilings prescribed by the Usury Law and
that the said law is already legally inexistent.
However, A stipulated rate of interest at 5.5% per
month on the P500, 000.00 loan is excessive,
iniquitous, unconscionable and exorbitant.
LIAM LAW VS OLYMPIC SAWMILL CO., AND
ELINO LEE CHI
G.R. NO. L-30771, MAY 28, 1984
MELENCIO – HERRERA, J.:
FACTS:
Liam law loaned from Olympic Sawmill and
Elino Lee Chi, P10,000 without interest. Upon due,
Liam was not able to pay and asked for an
extension of 3 months. The parties executed
another loan document extending the due date
and increasing the loan by P6,000 as payment for
attorney’s fees, legal interest and other costs.
Again, defendants failed to pay the amount,
prompting Liam to institute a collection case.
Defendants admitted the principal obligation but
claimed that the additional P6,000 was usurious.
ISSUE:
Whether or not the additional 6,000 in the
principal obligation was usurious.
HELD:
No, the addition of 6,000 was not usurious.
Defendants maintained that “usury” was deemed
to be admitted by the plaintiff as it was not denied
specifically under oath, pursuant to Section 9 of
the Usury Law, which provides:
SEC. 9. The person or corporation
sued shall file its answer in writing under
oath to any complaint brought or filed
against said person or corporation before
a competent court to recover the money
or other personal or real property, seeds
or agricultural products, charged or
received in violation of the provisions of
this Act. The lack of taking an oath to an
answer to a complaint will mean the
admission of the facts contained in the
latter.
According to the Supreme Court, the
aforementioned provision does not apply to the
case at bar because it is the defendant, not the
plaintiff, who is alleging usury. Moreover, Usury
had been inexistent. Interest can now be charged
as lender and borrower may agree upon.
ANGEL JOSE WAREHOUSING CO., INC., vs.
CHELDA ENTERPRISES
G.R. No. L-25704, April 24, 1968
FACTS:
Angel Jose Warehousing Co. (AJWC) filed a
suit against the partnership Chelda Enterprises
and David Syjueco, its capitalist partner, for
recovery of alleged unpaid loans in the total
amount of P20,880.00, with legal interest from the
filing of the complaint, plus attorney's fees of
P5,000.00. Alleging that post dated checks issued
by defendants to pay said account were
dishonored, that defendants' industrial partner,
Chellaram I. Mohinani, had left the country, and
that defendants have removed or disposed of their
property, or are about to do so, with intent to
defraud their creditors, preliminary attachment
was also sought.
Answering, defendants averred that they
obtained four loans from plaintiff in the total
amount of P26,500.00, of which P5,620.00 had
been paid, leaving a balance of P20,880.00; that
plaintiff charged and deducted from the loan
usurious interests thereon, at rates of 2% and
2.5% per month, and, consequently, plaintiff has
no cause of action against defendants and should
not be permitted to recover under the law. A
counterclaim for P2,000.00 attorney's fees was
interposed.
ISSUE:
Whether the illegal terms as to payment of
interest likewise renders a nullity the legal terms
as to payments of the principal debt.
HELD:
Chelda Enterprises fail to consider that a
contract of loan with usurious interest consists of
principal and accessory stipulations; the principal
one is to pay the debt; the accessory stipulation is
to pay interest thereon.
And said two stipulations are divisible in the
sense that the former can still stand without the
latter. Article 1273, Civil Code, attests to this: "The
renunciation of the principal debt shall extinguish
the accessory obligations; but the waiver of the
latter shall leave the former in force."
Article 1420 of the New Civil Code provides in
this regard: "In case of a divisible contract, if the
illegal terms can be separated from the legal ones,
the latter may be enforced."
In simple loan with stipulation of usurious
interest, the prestation of the debtor to pay the
principal debt, which is the cause of the contract
(Article 1350, Civil Code), is not illegal. The
illegality lies only as to the prestation to pay the
stipulated interest; hence, being separable, the
latter only should be deemed void, since it is the
only one that is illegal.
ANDAL V. PNB, 711 SCRA 15
FACTS:
On September 7, 1995, Spouses Andal
obtained a loan from PNB in the amount of
₱21,805,000.00, for which they executed twelve
(12) promissory to pay the principal loan with
varying interest rates of 17.5% to 27% per interest
period. It was agreed upon by the parties that the
rate of interest may be increased or decreased for
the subsequent interest periods, with prior notice
to Spouses Andal in the event of changes in
interest rates prescribed by law or the Monetary
Board or in the bank’s overall cost of funds.
To secure the payment of the said loan,
Spouses Andal executed in favor of PNB a real
estate mortgage using as collateral five (5) parcels
of land including all improvements therein.
Subsequently, PNB advised Spouses Andal to
pay their loan obligation, otherwise the former will
declare the latter’s loan due and demandable. On
July 17, 2001, petitioners paid ₱14,800,000.00 to
respondent to avoid foreclosure of the properties
subject of the real estate mortgage. Accordingly,
respondent executed a release of real estate
mortgage over the two (2) parcels of land.
However, despite payment PNB proceeded to
foreclose the real estate mortgage, with respect to
the three (3) parcels of land.
A public auction sale of the properties
proceeded, with the PNB emerging as the highest
and winning bidder. This prompted Spouses Andal
to file a complaint for annulment of mortgage,
sheriff’s certificate of sale, declaration of nullity of
the increased interest rates and penalty charges
plus damages. Further, petitioners alleged that the
unilateral increase of interest rates and exorbitant
penalty charges are akin to unjust enrichment at
their expense, giving PNB no right to foreclose
their mortgaged properties.
ISSUE:
Whether the contention of Spouses Andal is
tenable.
HELD:
We cannot subscribe to the contention of
petitioners-spouses that no interest should be due
on the loan they obtained from respondent bank,
or that, at the very least, interest should be
computed only from the finality of the judgment
declaring the foreclosure sale null and void, on
account of the exorbitant rate of interest imposed
on their loan.
It is clear from the contract of loan between
petitioners-spouses and respondent bank that
petitioners-spouses, as borrowers, agreed to the
payment of interest on their loan obligation. That
the rate of interest was subsequently declared
illegal and unconscionable does not entitle
petitioners-spouses to stop payment of interest. It
should be emphasized that only the rate of
interest was declared void. The stipulation
requiring petitioners-spouses to pay interest on
their loan remains valid and binding. They are,
therefore, liable to pay interest from the time they
defaulted in payment until their loan is fully paid.
It is worth mentioning that both the RTC and
the CA are one in saying that "[petitioners-
spouses] cannot be considered in default for their
inability to pay the arbitrary, illegal and
unconscionable interest rates and penalty charges
unilaterally imposed by [respondent] bank." This is
precisely the reason why the foreclosure
proceedings involving petitioners-spouses’
properties were invalidated. As pointed out by the
CA, "since the interest rates are null and void,
[respondent] bank has no right to foreclose
[petitioners-spouses’] properties and any
foreclosure thereof is illegal. Since there was no
default yet, it is premature for [respondent] bank
to foreclose the properties subject of the real
estate mortgage contract."
HILL vs. VELOSO, 31 Phil. 160
FACTS:
Defendant Maxima Ch. Veloso is indebted to
Damasa Ricablanca, her sister-in-law and widow of
Potenciano Ch. Veloso, with the amount of P8, 000.
It is also believed that Domingo Franco,
defendant’s son-in-law and minor child of
Ricablanca, had the latter sign a blank document
for the purpose of compelling her to execute a
document regarding the acknowledgment of the
abovementioned debt in his behalf. The guardian
of Franco, named Levering, according to the latter,
is the one who compelled the defendant to sign
the said document on Franco’s behalf. Later on,
the document that was signed by the defendant
turned out to be a document containing a different
tenor which states that the defendant had
executed the said document for value of the goods
that they received in La Cooperative Filipina which
they (the defendant and her husband) are bound
to pay jointly and severally to Michael and Co., for
the sum of P6, 319.33. Levering, as the guardian
of the minor children of Damasa Ricablanca,
commenced proceedings against the defendant
for the recovery of the sum of P8, 000. The
defendant, in turn, pray for the annulment of the
contract with Michael and Co. on the grounds of
deceit and error committed by her son-in-law
Franco who was then a deceased.
ISSUE:
Whether or not the alleged deceit caused by
Franco may be a ground for the annulment of the
contract.
HELD:
The judgment is against defendant. The
deceit, in order that it may annul the consent,
must be that which the law defines as a cause.
According to Article 1269 of the Civil Code (now
Article 1338 of the New Civil Code), “there is
deceit, when by words or insidious machinations
on the part of one of the contracting parties, the
other is induced to execute a contract which
without them he would not have made.” Domingo
Franco is not one of the contracting parties who
may have deceitfully induced the other
contracting party, Michael and Co., to execute the
contract. The one and the other contracting
parties, to whom the law refers, are the active and
the passive subjects of the obligation, the party of
the first part and the party of the second part who
execute the contract. The active subject and the
party of the first part of the promissory note in
question is Michael and Co., and the passive
subject and the party of the second part are
Maxima Ch. Veloso and Domingo Franco; two, or
they be more, who are one single subject, one
single party. Domingo Franco is not one
contracting party with regard to Maxima Ch.
Veloso as the other contracting party. They both
are but one single contracting party in contractual
relation with, Michael and Co. Domingo Franco, like
any other person who might have been able to
induce Maxima Ch. Veloso to act in the manner
she is said to have done, under the influence of
deceit, would be for this purpose, but a third
person. There would then be not deceit on the part
of the one of the contracting parties exercised
upon the other contracting party, but deceit
practiced by a third person.

PEREZ vs. GARCIA, 7 Phil. 162

FACTS:
On the 15th of January, 1904, the defendant,
Bosque, sold to the plaintiff the house in question
under an agreement that he should have the right
to repurchase it at any time before the 31st day of
March, 1905. It was stated in the agreement of
sale that Bosque should occupy the house as a
tenant until the 31st day of March, 1905, or until
he repurchased it before that time, and that he
should pay for such use and occupation 40 pesos a
month. On the 24th day of August, 1904, the
parties hereto made another contract, by the
terms of which they canceled the contract of the
15th of January and the defendant sold to the
plaintiff the house absolutely for 4,000 pesos. The
instrument in which this contract appeared were a
notarial document and it was duly recorded in the
Registry of Property. On the same day the plaintiff
signed a paper in which he gave to the defendant
the right, until the 31st day of May, 1905, to
repurchase the property. Nothing was said in either
of these two agreements of the 24th of August as
to the further occupation of the house. The
defendant continued his occupation thereafter
until the 31st day of May, 1905, when he
abandoned it. He never exercised his right to
repurchase. This action was brought to recover the
sum of 580 pesos as rent for the house.

ISSUE:
Whether the defendant is liable for the rent
from the 24th day of August, 1904, to the 31st day
of May, 1905, at the rate of 40 pesos a month.

RULING:
There was evidence offered to show that
between the 15th day of January, 1904, and the
31st day of May, 1905, the defendant, Bosque,
had paid three months’ rent. One of the payments
was evidenced by a receipt dated the 1st day of
June, 1904, for rent corresponding to that month.
By the provisions of article 1110 of the Civil Code
and of section 334, paragraph 9, of the Code of
Civil Procedure this receipt was evidence that the
prior rent been paid. The defendant is liable for the
rent from the 1st of July to the 24th of August by
the express terms of the contract of the 15th day
of January. The contract of lease found in that
document expired on the 24th day of August.
Nothing having been said in the two contracts of
that date in regard to the occupation of the house,
and the defendant having occupied it for fifteen
days after the termination of the original contract,
there was an implied renewal of that lease in
accordance with the provisions of article 1566 of
the Civil Code. The defendant is, therefore, liable
for the rent from the 24th day of August, 1904, to
the 31st day of May, 1905, at the rate of 40 pesos
a month.