ARTICLE 1157 – HOW OBLIGATIONS ARISE

1. PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

Respondent: ROGELIO BAYOTAS y CORDOVA, accused-appellant.
G.R. No. 102007, September 2, 1994
FACTS
Rogelio Bayotas y Cordova was charged with Rape and eventually convicted thereof. Pending appeal of his conviction, Bayotas
died. Consequently, the Supreme Court dismissed the criminal aspect of the appeal. However, it required the Solicitor General to file its
comment with regard to the civil liability of Bayotas arising from his commission of the offense charged.
ISSUE: Whether or not the death of the accused pending appeal of his conviction extinguish his civil liability.
HELD:
Article 89 of the Revised Penal Code provides that by death of the convict personal liabilities are extinguished, as to pecuniary
penalties liability therefore is extinguished only when the death of the offender occurs before final judgment.
Thus the court made a ruling as follows:
1… Death of the accused pending appeal of his conviction extinguishes his criminal liability as well as the civil liability based solely
thereon;
2 Corollarily, the claim for civil liability survives notwithstanding the death of the accused, if the same may also be predicated on
a source of obligation other than delict. Aricle 1157 of the Civil Code enumerates these other sources of obligation from which the civil
liability may arise as a result of the same act or omission: Law, Contracts, Quasi-contracts, Acts or omissions punished by law, Quasi-
delicts;
3. Where the civil liability survives, an action for recovery therefore may be pursued but only by way of separate civil action and
may be enforced either against the executor/administrator of the estate of the accused, depending on the source of obligation aside from
delicts;
4. Finally, the private offended party need not fear a forfeiture of his right to file this separate civil action by prescription, in cases
where during the prosecution of the criminal action and prior to its extinction, the private offended party instituted together therewith the
civil action. In such case, the statute of limitations on the civil liability is deemed interrupted during the pendency of the criminal case,
conformably with provisions of Article 1155 of the Civil Code that should thereby avoid any apprehension on a possible privation of right
by prescription.
In the case at bar, the death of Bayotas extinguished his criminal and civil liability based solely on the act of rape. Hence, his civil
liability also extinguished together with his criminal liability upon his death.

G.R. No. 82562 April 11, 1997 2

LYDIA VILLEGAS, MA TERESITA VILLEGAS, ANTONIO VILLEGAS, JR., and ANTONIETTE VILLEGAS vs. THE COURT OF
APPEALS, PEOPLE OF THE PHILIPPINES and ANTONIO V. RAQUIZA

G.R. No. 82592 April 11, 1997

ANTONIO V. RAQUIZA vs. COURT OF APPEALS, LYDIA A. VILLEGAS, ANTONIO VILLEGAS, JR., MA. ANTONETTE
VILLEGAS, MA. LYDIA VILLEGAS and ESTATE OF ANTONIO J. VILLEGAS

FACTS:
This case originated from a libel suit filed by then Assemblyman Antonio V. Raquiza against then Manila Mayor Antonio J. Villegas,
who allegedly publicly imputed to him acts constituting violations of the Anti-Graft and Corrupt Practices Act. He did this on several
occasions in August 1968
After losing in the 1971 elections, Villegas left for the United States where he stayed until his death.
Nevertheless, trial for libel case proceeded on absentia. Two months after the prosecution rested its case, the court issued an order
dismissing the criminal aspect of the case but reserving the right to resolve its civil aspect.
Subsequently the Court awarded Raquiza actual, moral, exemplary damages and cost of suit.
2. Ordering the estate of Antonio J. Villegas, represented herein by his legal heirs to pay plaintiff Antonio V. Raquiza Two Hundred
Million Pesos (P200,000,000.00), itemized as follows:
On appeal, the CA affirmed but reduced the amount of damages to 2 million. Hence, this petition.

ISSUE: WON the death of the accused before final judgment extinguish his civil liability?

HELD:
 1… NO, because the source of Villegas’ civil liability in the present case is the felonious act of libel he allegedly committed. and, this
act could also be deemed a quasi-delict within the purview of Article 33 in relation to Article 1157 of the Civil Code.

2.. Article 33 of the Civil Code provides Raquiza’s right to recover demages arose from this article not from delict.
3.. Also, Article 1157 of the Civil Code enumerates these other sources of obligation from which the civil liability may arise as a
result of the same act or omission:
a) Law
b) Contracts
c) Quasi-contracts
d) Act or omissions punished by law
e) Quasi-delicts

4.. Now, If the court ruled in People v. Bayotas that the death of an accused during the pendency of his appeal extinguishes not
only his criminal as well as the civil liability unless the latter can be predicated on a source of obligation other than the act or omission
complained, with more reason should it apply to the case at bar where the accused died shortly after the prosecution rested its case and
before he was able to submit his memorandum and all this before any decision could even be reached by the trial court.

5.. The Bayotas ruling, however, makes the enforcement of a deceased accused’s civil liability dependent on two factors, namely,
that it be pursued by filing a separate civil action and that it be made subject to the Rules on Criminal Procedure.

6.. Obviously, in the case at bar, the civil action was deemed instituted with the criminal. There was no waiver of the civil action and
no reservation of the right to institute the same, nor was it instituted prior to the criminal action.

7.. What then is the recourse of the private offended party in a criminal case such as this which must be dismissed in accordance
with the Bayotas doctrine, where the civil action was impliedly instituted with it?

8.. The answer is likewise provided in Bayotas, thus:

Assuming that for lack of express reservation, Belamala’s civil action for damages was to be considered instituted together with the
criminal action still, since both proceedings were terminated without finals adjudication, the civil action of the offended party under Article
33 may yet be enforced separately.

9.. Hence, logically, the court should have dismissed both actions against Villegas which dismissal will not however, bar Raquiza
as the private offended party from pursuing his claim for damages against the executor or administrator of Villegas estate. Notwithstanding
the fact that he did not reserve the right to institute a civil action based on Article 33 of the Civil Code.

ARTICLE 1158 - OBLIGATIONS FROM LAW

2. ARTURO PELAYO VS MARCELO LAURON, ET ALG.R. NO. L-4089 JANUARY 12, 1909
FACTS:
Petitioner Pelayo, a physician, rendered a medical assistance during the child delivery of the daughter-in-law of the defendants.
The just and equitable value of services rendered by him was P500.00 which the defendants refused to pay without alleging any good
reason. With this, the plaintiff prayed that the judgment be entered in his favor as against the defendants for the sum of P500.00 and
costs.
The defendants denied all of the allegation of the plaintiff, contending that their daughter-in-law had died in consequence of the
child-birth, and that when she was alive, she lived with her husband independently and in a separate house, that on the day she gave
birth she was in the house of the defendants and her stay there was accidental and due to fortuitous circumstances.
ISSUE:
Whether or not the defendants are obliged to pay the petitioner for the medical assistance rendered to their daughter-in-law.
HELD:
According to Article 1089 of the Old Civil Code (now 1157), obligations are created by law, by contracts, by quasi-contracts, by
illicit acts and omissions or by those which any kind of fault or negligence occurs. Obligations arising from law are not presumed. Those
expressly determined in the Code or in special law, etc., are the only demandable ones.
The rendering of medical assistance in case of illness is comprised among the mutual obligations to which the spouses are
bound by way of mutual support as provided by the law or the Code. Consequently, the obligation to pay the plaintiff for the medical
assistance rendered to the defendant’s daughter-in-law must be couched on the husband.
In the case at bar, the obligation of the husband to furnish his wife in the indispensable services of a physician at such critical
moments is especially established by the law and the compliance therewith is unavoidable.
 3. LEUNG BEN VS. P. J. O'BRIEN
G.R. No. L-13602 April 6, 1918
FACTS:
Upon December 12, 1917, an action was instituted in the Court of First Instance of the city of Manila by P. J. O'Brien to recover
of Leung Ben the sum of P15,000 alleged to have been lost by the plaintiff to the defendant in a series of gambling, banking and
percentage games conducted ruing the two or three months prior to the institution of the suit. In his verified complaint the plaintiff asked
for an attachment, under section 424, and 412 (1) of the Code of Civil Procedure, against the property of the defendant, on the ground
that the latter was about to depart from the Philippine islands with intent to defraud his creditors. This attachment was issued; and acting
under the authority thereof, the sheriff attached the sum of P15,000 which had been deposited by the defendant with the International
Banking Corporation.
ISSUE:
Whether or not Leung Ben has the legal basis to recover the money he lost to O’brien in a series of gambling, banking and
percentage games.
HELD:
YES. As a general rule, money lost in gaming and voluntarily paid by the loser to the winner cannot in the absence of statue, be
recovered in a civil action. But Act No. 1757 of the Philippine Commission, which defines and penalizes several forms of gambling,
contains numerous provisions recognizing the right to recover money lost in gambling or in the playing of certain games (secs. 6, 7, 8, 9,
11). The original complaint in the action in the Court of First Instance is not clear as to the particular section of Act No. 1757 under which
the action is brought, but it is alleged that the money was lost at gambling, banking, and percentage game in which the defendant was
banker. It must therefore be assumed that the action is based upon the right of recovery given in Section 7 of said Act, which declares
that an action may be brought against the banker by any person losing money at a banking or percentage game.
Is this a cause arising upon contract, express or implied, as this term is used in section 412 of the Code of Civil Procedure?
In the case now under consideration the duty of the defendant to refund the money which he won from the plaintiff at gaming is
a duty imposed by statute. It therefore arises ex lege (as a matter of law). Furthermore, it is a duty to return a certain sum which had
passed from the plaintiff to the defendant. By all the criteria which the common law supplies, this a duty in the nature of debt and is
properly classified as an implied contract. It is well- settled by the English authorities that money lost in gambling or by lottery, if
recoverable at all, can be recovered by the loser in an action of indebitatus assumpsit for money had and received. This means that in
the common law the duty to return money won in this way is an implied contract, or quasi-contract.

ARTICLE 1159 – OBLIGATIONS ARISING FROM CONTRACTS

4. ROMAN CATHOLIC OF MALOLOS V IAC

FACTS:
The property subject matter of the contract consists of a parcel of land in the Province of Bulacan, issued and registered in the
name of the petitioner which it sold to the private respondent.
On July 7, 1971, the subject contract over the land in question was executed between the petitioner as vendor and the private
respondent through its then president, Mr. Carlos F. Robes, as vendee, stipulating for a downpayment of P23,930.00 and the balance
of P100,000.00 plus 12% interest per annum to be paid within four (4) years from execution of the contract. The contract likewise
provides for cancellation, forfeiture of previous payments, and reconveyance of the land in question in case the private respondent
would fail to complete payment within the said period.
After the expiration of the stipulated period for payment, Atty. Adalia Francisco (president of the company who bought land)
wrote the petitioner a formal request that her company be allowed to pay the principal amount of P100,000.00 in three (3) equal
installments of six (6) months each with the first installment and the accrued interest of P24,000.00 to be paid immediately upon
approval of the said request.
The petitioner formally denied the said request of the private respondent, but granted the latter a grace period of five (5) days
from the receipt of the denial to pay the total balance of P124,000.00. The private respondent wrote the petitioner requesting an
extension of 30 days from said date to fully settle its account but this was still denied.
Consequently, Atty. Francisco wrote a letter directly addressed to the petitioner, protesting the alleged refusal of the latter to
accept tender of payment made by the former on the last day of the grace period. But the private respondent demanded the execution
of a deed of absolute sale over the land in question
Atty. Fernandez, wrote a reply to the private respondent stating the refusal of his client to execute the deed of absolute sale so
the petitioner cancelled the contract and considered all previous payments forfeited and the land as ipso facto reconveyed.
From a perusal of the foregoing facts, we find that both the contending parties have conflicting versions on the main question
of tender of payment.
According to the trial court:
 . . . What made Atty. Francisco suddenly decide to pay plaintiff’s obligation on tender her payment, when her request to
extend the grace period has not yet been acted upon? Atty. Francisco’s claim that she made a tender of payment is not worthy of
credence.
The trial court considered as fatal the failure of Atty. Francisco to present in court the certified personal check allegedly
tendered as payment or, at least, its xerox copy, or even bank records thereof.
Not satisfied with the said decision, the private respondent appealed to the IAC. The IAC reversed the decision of the trial
court. The IAC, in finding that the private respondent had sufficient available funds, ipso facto concluded that the latter had tendered
payment.
ISSUE:
Whether or not the finding of the IAC that Atty. Francisco had sufficient available funds did tender payment for the said obligation.
Whether or not an offer of a check is a valid tender of payment of an obligation under a contract which stipulates that the consideration
of the sale is in Philippine Currency.
HELD:
1. No. Tender of payment involves a positive and unconditional act by the obligor of offering legal tender currency as payment to the
obligee for the former’s obligation and demanding that the latter accept the same. Thus, tender of payment cannot be presumed by a
mere inference from surrounding circumstances. At most, sufficiency of available funds is only affirmative of the capacity or ability of
the obligor to fulfill his part of the bargain. The respondent court was therefore in error.
2. No. In the case of Philippine Airlines v. Court of Appeals:
Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself,
operate as payment. A check, whether a manager’s check or ordinary check, is not legal tender, and an offer of a check in payment of
a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. The tender of payment by the private
respondent was not valid for failure to comply with the requisite payment in legal tender or currency stipulated within the grace period.
The DECISION of the IAC is hereby SET ASIDE and ANNULLED and the DECISION of the trial court is REINSTATED.

6. OLLENDORF VS ABRAHAMSON CASE DIGEST

38 Phil. 585
Facts: The record discloses that Ollendorf is and for a long time past has been engaged in the city of Manila and elsewhere in the
Philippines in the business of manufacturing ladies' embroidered underwear for export. Ollendorf imports the material from which this
underwear is made and adopts decorative designs which are embroidered upon it by Filipino needle workers from patterns selected and
supplied by him. Most of the embroidery work is done in the homes of the workers. The embroiderers employed by plaintiff are under
contract to work for plaintiff exclusively.
On September 1915, plaintiff and defendant entered into a contract. Under the terms of this, agreement defendant entered the
employ of plaintiff and worked for him until April 1916, when defendant, on account of ill health, left plaintiff's employ and went to the
United States. While in plaintiff's employ defendant had access to all parts of plaintiff's establishment, and had full opportunity to acquaint
himself with plaintiff's business methods and business connections. The duties performed by him were such as to make it necessary that
he should have this knowledge of plaintiff s business. Defendant had a general knowledge of the Philippine embroidery business before
his employment by plaintiff, having been engaged in similar work for several years.
Some months after his departure, defendant returned to Manila as the manager of the Philippine Underwear Company, a
corporation. This corporation does not maintain a factory in the Philippine Islands, but sends material and embroidery designs from New
York to its local representative here who employs Filipino needle workers to embroider the designs and make up the garments in their
homes. The only difference between plaintiff's business and that of the firm by which the defendant is employed, is the method of doing
the finishing work — the manufacture of the embroidered material into finished garments.
Shortly after defendant's return to Manila and the commencement by him of the discharge of the duties of his position as local
manager of the Philippine Embroidery Company, plaintiff commenced this action, the principal purpose of which is to prevent, by
injunction, any further breach of that part of defendant's contract of employment by plaintiff, by which he agreed that he would not "enter
into or engage himself directly or indirectly . . . in a similar or competitive business to that of (plaintiff) anywhere within the Philippine
Islands for a period of five years . . ." from the date of the agreement.
Issue: Whether or not the said contract is valid.
Ruling: The contract is a valid one. The only limitation upon the freedom of contractual agreement is that the pacts established shall not
be contrary to "law, morals or public order." (Civil Code, art. 1255.)
Public welfare is first considered, and if it be not involved, and the restraint upon one party is not greater than protection to the
other party requires, the contract may be sustained. The question is whether, under the particular circumstances of the case and the
nature of the particular contract involved in it the contract is, or is not, unreasonable.
The Courts adopt the modern rule that the validity of restraints upon trade or employment is to be determined by the intrinsic
reasonableness of the restriction in each case, rather than by any fixed rule, and that such restrictions may be upheld when not contrary
to the public welfare and not greater than is necessary to afford a fair and reasonable protection to the party in whose favor it is imposed.
 A business enterprise may and often does depend for its success upon the owner's relations with other dealers, his skill in
establishing favorable connections, his methods of buying and selling — a multitude of details, none vital if considered alone, but which
in the aggregate constitute the sum total of the advantages which are the result of the experience or individual aptitude and ability of the
man or men by whom the business has been built up. Failure or success may depend upon the possession of these intangible but all-
important assets, and it is natural that their possessor should seek to keep them from falling into the hands of his competitors.
It is with this object in view that such restrictions as that now under consideration are written into contracts of employment. Their
purpose is the protection of the employer, and if they do not go beyond what is reasonably necessary to effectuate this purpose they
should be upheld. We are of the opinion, and so hold, that in the light of the established facts the restraint imposed upon defendant by
his contract is not unreasonable.

7. THE CITY OF CEBU VS SPOUSES APOLONIO and BLASA DEDAMO, respondents.

G.R. No. 142971 May 7, 2002
FACTS:
1. On 17 September 1993, Petitioner City of Cebu filed a complaint for eminent domain against respondent spouses Apolonio and
Blasa Dedamo.
2. The petitioner alleged therein that it needed the land for a public purpose, i.e., for the construction of a public road which shall
serve as an access/relief road of Gorordo Avenue to extend to the General Maxilum Avenue and the back of Magellan
International Hotel Roads in Cebu City.
3. The lower court fixed the amount of just compensation at P20,826,339.50.
4. Petitioner alleged that the lower court erred in fixing the amount of just compensation at P20, 826,339.50.
5. The just compensation should be based on the prevailing market price of the property at the commencement of the expropriation
proceedings.
6. The petitioner did not convince the Court of Appeals, which affirmed the lower court’s decision in toto.
7. Hence, this petition for review on certiorari,
ISSUE: Whether or not just compensation should be determined as of the date of the filing of the complaint.
HELD:
1. No. In t he c as e at ba r , t he a ppl i c a ble l aw f or th e determination of just compensation is Section 19 of R.A. No.
7160, which expressly provides that just compensation shall be determined as of the time of actual taking.
2. The petitioner has misread the ruling in The National Power Corp. vs. Court of Appeals that just compensation should be
determined as of the date of the filing of the complaint.
3. The Court of Appeals did not err in affirming the decision of the trial court because the trial court decided the case on the basis
of the agreement of the parties that just compensation shall be fixed by commissioners appointed by the court.
4. Also, the parties, by a solemn document freely and voluntarily agreed upon by them, agreed to be bound by the report of the
commission and approved by the trial court.
5. The agreement is a contract between the parties. It has the force of law between them and should be complied with in good
faith.
6. Article 1159 and 1315 of the Civil Code explicitly provides:
7. Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with
in good faith.
8. and, Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfilment
of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good
faith, usage and law.
9. Furthermore, during the hearing petitioner did not interpose a serious objection and Records show that petitioner consented to
conform with the valuation recommended by the commissioners.
10 It is therefore too late for petitioner to question the valuation now without violating the principle of equitable estoppel. Estoppel
in pais arises when one, by his acts, representations or admissions, or by his own silence when he ought to speak out, intentionally or
through culpable negligence, induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, so
that he will be prejudiced if the former is permitted to deny the existence of such facts.
11. Finally, while Section 4, Rule 67 of the Rules of Court provides that just compensation shall be determined at the time of the
filing of the complaint for expropriation,13 such law cannot prevail over R.A. 7160, which is a substantive law.14
WHEREFORE, finding no reversible error in the assailed judgment on the Court of Appeals in CA-G.R. CV No. 59204, the petition in this
case is hereby DENIED.No pronouncement as to costs.

ARTICLE 1163 – DILIGENCE OF A GOOD FATHER OF A FAMILY

8. THE ROMAN CATHOLIC BISHOP OF JARO vs. GREGORIO DE LA PEÑA

G.R. No. L-6913 November 21, 1913
FACTS :
1. The plaintiff is the trustee of a charitable bequest made for the construction of a leper hospital and that father Agustin de la Peña
was the duly authorized representative of the plaintiff to receive the legacy.
2. The defendant is the administrator of the estate of Father Agustin dela Peña.
In the year 1898 Father De la Peña, as trustee, showed that he had on hand as such trustee the sum of P6, 641, collected by
him for the charitable purposes.
3. In the same year he deposited in his personal account P19, 000 in the Hong Kong and Shanghai Bank at Iloilo.
4. Shortly thereafter and during the war of the revolution, Father De la Peña was arrested by the military authorities as a political
prisoner and money was taken from the bank by the military authorities by virtue of such order, was confiscated and turned over to the
Government.
5. The said trust funds were a part of the funds deposited and which were removed and confiscated by the military authorities of
the United States.
ISSUE : Whether or not Father de la Peña is liable for the loss of the money under his trust?
RULINGS :
1.. No, the court, finds and declares that the money which is the subject matter of this action was deposited by Father De la Peña
in the bank and that said money was forcibly taken from the bank by the armed forces of the United States during the war of the
insurrection;
2. And that said Father De la Peña was not responsible for its loss.
3. Father De la Peña's liability is determined by those portions of the Civil Code which relate to obligations. Although Article 1163
of the Civil Code states that "a person obliged to give something is also bound to preserve it with the diligence pertaining to a good father
of a family" (art.1094),
4. Now, by placing the money in the bank and mixing it with his personal funds Father De la Peña did not thereby assume an
obligation, nor make himself liable to repay the money at all hazards.
5. If he had been forcibly taken from his pocket or from his house by the military forces of one of the combatants during a state of
war, it is clear that under the provisions of the Civil Code he would have been exempt from responsibility.
6. The fact that he placed the trust fund in the bank in his personal account does not add to his responsibility.
7. The judgment is therefore reversed, and it is decreed that the plaintiff shall take nothing by his complaint.
Refer also to additional Idea papers

9 ENGRACIO OBEJERA and MERCEDES INTAK, plaintiffs-appellees, VS

Respondent: IGA SY, defendant-appellant.
C.A. No. 34 April 29, 1946
FACTS:
1.. This case is an appeal filed against the decision of the Court of First Instance of Batangas annulling, on the ground of force and
intimidation, the deed of transfer, whereby the plaintiffs agreed to transfer to the defendant their property in case they failed to return to
the defendant the balance and pieces of jewelry allegedly deposited with the plaintiffs during the Japanese invasion.
2. During the Japanese invasion plaintiffs and defendant sought refuge in the house of Leon Villena, barrio lieutenant of Batangas
and after consultation with their host Leon Villena, they decided to hide their things and valuables in a dug-out belonging to Leon Villena.
3. After a month the defendant who desired to move to another house, they went back to the dug-out to take out the defendant's
container and discovered, that their money and things, except for a few papers, had been lost.
4. In this case the defendant (Iga Sy) contends that she deposited her money and jewelry with the plaintiffs and that the plaintiffs,
acknowledging liability for the loss of her money and jewelry, offered to transfer their property.
5. On the other hand, the plaintiffs deny the alleged deposit, deny knowledge of the loss of the defendant's money and jewelry,
and claim that their consent to the deed of transfer was obtained through violence and intimidation.
ISSUE: WON the plaintiffs (OBEJERA and INTAK) are liable for the loss of the defendant's money and jewelry?
HELD:
1.. No, under Article 1163 of the Civil Code states that "a person obliged to give something is also bound to preserve it with the
diligence pertaining to a good father of a family"
2. After a careful consideration of the evidences of this case, the contention of the defendant (Iga Sy) cannot be sustained. The
alleged deposit cannot be believed and is contrary to the ordinary course of nature and the ordinary habits of life.
3. It should also be considered, that the dug-out into which the plaintiffs and the defendant hid their money and valuables belongs
to Leon Villena;
4. that the plaintiffs and the defendant only sought refuge in his house; that neither the plaintiffs nor the defendant had, therefore,
control over, or absolute and exclusive access, to the dug-out
5. it is hard to believe that plaintiff Engracio Obejera would assume responsibility over the defendant's things hidden in a place not
belonging to him but to Leon Villena, in whose house they only sought refuge.
6. and especially at a time when the confusion and fear resulting from the Japanese invasion that nobody could be sure of his own
things and even of his life.
7. The more natural conclusion is that plaintiffs and defendant decided to hide their things in the dug-out of their host Leon Villena,
thinking it to be the safest place, and that they might recover them after the confusion and uncertainty.
8. Even Leon Villena did not offer to his guests to take care of their things by hiding them in his dug-out.
9. Even if the defendant's theory of deposit were sustained, any obligation arising was extinguished upon the loss, without the fault
of the depositee and under circumstances which at the time were inevitable.
10. The evidence of record, shows that the plaintiffs were not in any way responsible for the loss of the defendant's money and
jewelry.
11. It necessarily follows that the deed of transfer, is null and void for lack of cause or consideration. Also the two documents are
also null and void upon the other ground that the consent of the plaintiffs therein was obtained through duress and intimidation.
Wherefore, the decision of the court a quo is hereby affirmed in toto with costs against the defendant and appellant. So ordered.

ARTICLE 1667 – IF A PERSON OBLIGED TO DO SOMETHING FAILS TO FOR IT, THE SAME SHALL BE EXECUTED
AT HIS COST

10. Petitioner: PERLA PALMA GIL, VICENTE HIZON, JR., and ANGEL PALMA GIL VS
Respondent: HON. COURT OF APPEALS, HEIRS OF EMILIO MATULAC, CONSTANCIO MAGLANA, AGAPITO PACETES & The
REGISTER OF DEEDS OF DAVAO CITY,
[G.R. No. 127206. September 12, 2003]
FACTS:
1.. This case is review on appeal by certiorari.
2. This was originated from a disputed portion of property between Concepcion Palma Gil, and her sister, Nieves Palma Gil,
married to Angel Villarica, who were co-owners of a parcel of commercial land in Davao City.
3. After due proceedings, the court rendered judgment in favor of Concepcion, ordering the defendant to deliver to the plaintiff an
undivided portion of the said property.
4. Concepcion executed a deed of absolute sale in favour of Iluminada Pacetes. Pacetes paid the agreed down payment and shall
pay the full obligation upon fulfilment agreed in the contract
5. The spouses Angel and Nieves Villarica filed a suit with regard to the parcel of land sold by Concepcion until the latter died
intestate.
6. The heirs of Concepcion wanted to claim the lot sold.
ISSUE: WON the expenses incurred by the vendee to obtain the owner’s duplicate title should be charged against the amount due to the
heirs of the vendor?
HELD:
1.. Yes, According to Article 1167 of the New Civil Code provides that if a person obliged to do something fails to do it, the same
shall be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore,
it may be decreed that what has been poorly done be undone. (1098)
2. The vendee (Iluminada) paid the down payment of P7,500.00. By the terms of the contract, the obligation of the vendee to pay
the balance of the purchase price happened only upon the issuance of the certificate of title under the name of the vendee, and the
delivery thereof by the vendor Concepcion Gil to the vendee.
3. Concepcion failed to secure a certificate of title over the property. When she died intestate her obligation to deliver the said title
to the vendee transferred upon her heirs, including the petitioners but they failed to do so, despite the lapse of eighteen years since
Concepcion’s death.
4. The vendee was not yet obliged on August 8, 1977 to pay the balance of the purchase price of the property, but as a sign of
good faith, she nevertheless consigned the amount of P11,983.00, part of the balance of the purchase price of P14,000.00.
5. The court accepted the payment and she was issued receipts therefor. Still, the heirs of Concepcion Gil, including the petitioners,
failed to deliver the said title to the vendee.
6. Although the vendee consigned with the Court only the amount less than that of the contract agreed it cannot be claimed that
Concepcion was an unpaid seller because under the deed of sale, she was still obligated to transfer the property in the name of the
vendee, which she failed to do so.
7. The vendee (Iluminada) had to obtain the owner’s duplicate title and thereafter secure its transfer in her name. Pursuant to
Article 1167, the expenses incurred by the vendee should be charged against the amount due to the heirs of Concepcion Gil as the
vendor’s successors-in-interest.
In sum, the decision of the CA affirming the decision of the RTC dismissing the complaint of the petitioners is affirmed.
IN LIGHT OF ALL THE FOREGOING, the petition for review is DENIED for lack of merit.
ARTICLE 1168 – WHEN OBLIGATION CONSISTS IN NOT DOING

11. Petitioner: JUAN L. PEREZ, LUIS KEH, CHARLIE LEE and ROSENDO G. TANSINSIN, JR., VS
Respondent: COURT OF APPEALS, LUIS CRISOSTOMO and VICENTE ASUNCION,
FACTS:
1.. the usufructuaries entered into a contract leasing the fishpond to Luis Keh for a period of five (5) years and renewable for another
five (5) years by agreement of the parties, In the lease contract states that the lessee "cannot sublease" the fishpond "nor assign his
rights to anyone." 3
2. Private respondent Luis Crisostomo, who engaged in the operation of fishponds was persuaded by the petitioners to take over
the operation of "Papaya Fishpond".
3. December 1977, Private respondent agreed to the proposal and they executed a written agreement
4. In the agreement the petitioner Keh ceded, conveyed and transferred all his "rights and interests" over the fishpond to petitioner
Lee, "up to June 1985." From private respondent's point of view, that document assured him of continuous possession of the property
for as long as he paid the agreed rentals.
5. However, sometime in June 1979, petitioners Atty. Tansinsin and Juan Perez, in the company of men bearing armalites, went
to the fishpond and presented private respondent with a letter dated June 7, 1979 showing that petitioner Luis Keh had surrendered
possession of the fishpond to the usufructuaries.
6. On September 6, 1989, the lower court rendered the aforesaid decision. It arrived at the conclusion that the defendants therein
"conspired with one another to exploit the plaintiff's naivete and educational inadequacies and, in the process, to defraud him by inducing
him into taking possession of the "Papaya Fishpond".
ISSUE: WON petitioner LUIS KEH shall be liable to private respondent for the value of the improvements made in the fishpond
HELD
1… YES, Art. 1168 of the Civil Code provides that when an obligation "consists in not doing and the obligor does what has been
forbidden him, it shall also be undone at his expense."
2. The contract between the usufructuaries and petitioner Keh has a provision barring the sublease of the fishpond. However, it
was petitioner Keh himself who violated that provision in offering the operation of the fishpond to private respondent.
3. The lease contract prohibited petitioner Luis Keh, as lessee, from subleasing the fishpond. In entering into the agreement with
private respondent, petitioner Keh did exactly what was prohibited of him under the contract — to sublease the fishpond to a third party.
4. That the agreement for pakiao-buwis was actually a sublease is borne out by the fact that private respondent paid petitioners
Luis Keh and Juan Perez, through petitioner Tansinsin the amount of annual rental agreed upon in the lease contract between the
usufructuaries and petitioner Keh.
5. Petitioner Keh led private respondent to unwittingly incur expenses to improve the operation of the fishpond. By operation of
law,
6. Therefore, petitioner Keh shall be liable to private respondent for the value of the improvements he had made in the fishpond.

ARTICLE 1169 – DELAY

12. Petitioner: CETUS DEVELOPMENT, INC., petitioner, VS

Respondent: COURT OF APPEALS and ONG TENG, respondents.
G.R. No. 77648 August 7, 1989
FACTS:
1.. The private respondents were the lessees of the premises owned by the petitioner Cetus Development Corporation .
2. In the succeeding months after the acquisition of the property by the petitioner, the respondents failed to pay their monthly
individual rentals as no collector came.
3. The petitioner sent a letter to each of the private respondents demanding that they vacate the subject premises and to pay the
back rentals within fifteen (15) days.
4. Immediately upon the receipt of the said demand letters, the private respondents paid their respective arrearages in rent which
were accepted by the petitioner subject to the unilateral condition that the acceptance was without prejudice to the filing of an ejectment
suit.
5. the petitioner filed a complaints for ejectment against the private respondents.
6. judgment is rendered in favor to the private respondents.
7. Hence, this petition for certiorari.
ISSUE: WON the private respondents be held guilty of delay in the payment of rentals.
HELD:
1.. No, It is very clear that in the case at bar, no cause of action for ejectment has accrued. There was no failure yet on the part of
private respondents to pay rents for three consecutive months.
2. The general rule on necessity of demand applies, when there is default in the fulfilment of an obligation when the creditor
demands payment at the maturity of the obligation.
3. Article 1169 of the Civil Code which provides that "those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extra judicially demands from them the fulfilment of their obligation."
4. Petitioner has not shown that its case falls on any of the following exceptions where demand is not required:
(a) when the obligation or the law so declares;
(b) when from the nature and circumstances of the obligation it can be inferred that time is of the essence of the contract; and
(c) when demand would be useless, as when the obligor has rendered it beyond his power to perform.
5. the private respondents cannot be held guilty of delay in the payment of rentals. Thus, when petitioner first demanded the
payment the private respondents lost no time in making tender and payment, in which the petitioner accepted the said rentals.
6. Hence, its demand to vacate was premature as it was an exercise of a non-existing right to rescind.
7. Petitioner likewise claims that its failure to send a collector to collect the rentals cannot be considered a valid defense for the
reason that sending a collector is not one of the obligations of the lessor under Article 1654.
8. While it is true that a lessor is not obligated to send a collector, it has been duly established that it has been a customary for
private respondents to pay the rentals through a collector.
9. Besides Article 1257of the Civil Code provides that where no agreement has been designated for the payment of the rentals,
the place of payment is at the domicile of the defendants.
In sum, We hold that respondent Court of Appeals did not commit grave abuse of discretion amounting to lack of jurisdiction in
its conclusion affirming the trial court's decision dismissing petitioner's complaint for lack of cause of action. ACCORDINGLY, the petition
for review on certiorari is hereby DENIED for lack of merit

13. CORONEL V. CA
FACTS:
The case arose from a complaint for specific performance filed by private respondent Alcaraz against petitioners to consummate
the sale of a parcel of land in Quezon City.
On January 19, 1985, petitioners executed a “Receipt of Down Payment” of P50,000 in favor of plaintiff Ramona Alcaraz, binding
themselves to transfer the ownership of the land in their name from their deceased father, afterwhich the balance of P1,190,000 shall be
paid in full by Alcaraz. On February 6, 1985, the property was transferred to petitioners. On February 18, 1985, petitioners sold the
property to Mabanag. For this reason, Concepcion, Ramona’s mother, filed an action for specific performance.
ISSUE:
Whether the contract between petitioners and private respondent was that of a conditional sale or a mere contract to sell
HELD:
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract
of sale are the following: a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b)
Determinate subject matter; and c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicity reserves the transfer of title to the prospective buyer, meaning, the prospective
seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event,
which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to
fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words the full
payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising
and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. A contract to sell may thus
be defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite
delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the purchase price.
A contract to sell may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the
property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of
consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is completely abated. However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer,
ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. In
a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not
automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to
convey title to the prospective buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject
property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to
sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition
such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot
seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after
registration because there is no defect in the owner-seller's title per se, but the latter, of course, may be used for damages by the intending
buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this
will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the subject property, the seller's ownership or
title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person.
Such second buyer of the property who may have had actual or constructive knowledge of such defect in the seller's title, or at least was
charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's
title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.
The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or
title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an absolute contract of
sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price.
Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate of title been in the
names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not have been executed
and consummated right there and then.
What is clearly established by the plain language of the subject document is that when the said "Receipt of Down Payment" was
prepared and signed by petitioners Romeo A. Coronel, et al., the parties had agreed to a conditional contract of sale, consummation of
which is subject only to the successful transfer of the certificate of title from the name of petitioners' father, Constancio P. Coronel, to
their names.
The provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a) when the second
buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the two buyers, when
the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to him to the prejudice of the first buyer. In a case of double sale, what finds relevance
and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers such
second sale in good faith, that is, without knowledge of any defect in the title of the property sold. If a vendee in a double sale registers
that sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person
claims said property in a pervious sale, the registration will constitute a registration in bad faith and will not confer upon him any right.

14. Petitioner: AEROSPACE CHEMICAL INDUSTRIES, INC., petitioner

Respondent: COURT OF APPEALS, PHILIPPINE PHOSPHATE FERTILIZER, CORP., respondents.
G.R. No. 108129 September 23, 1999
FACTS:
1.. This is a petition for review assailing the Decision of the Court of Appeals. The petitioner prevailed in the trial court, in the
appellate court reversed and instead found petitioner guilty of delay and therefore liable for damages.
2. The petitioner (Aerospace) purchased a sulfuric acid from private respondent (Philphos). They entered an agreement that the
buyer (Aerospace) shall pay its purchases five days prior to the shipment date. Petitioner as buyer committed to secure the means of
transport to pick-up the purchases from private respondent's load ports. One from Basay, Negros Oriental storage tank, while the other
one should be retrieved from Sangi, Cebu.
3. The hired vessel withdrew only 70.009 MT of sulfuric acid from Basay. In a demand letter dated December 12, 1986, private
respondent asked petitioner to retrieve the remaining sulfuric acid in Basay tanks so that said tanks could be emptied on or before
December 15, 1986. Private respondent said that it would charge petitioner the storage and consequential costs for the Basay tanks,
including all other incremental expenses due to loading delay, if petitioner failed to comply.
4. Later, on a date not specified in the record, the hired vessel (M/T Sultan Kayumanggi) sank with a total of 227.51 MT of sulfuric
acid on board. The petitioner, addressed letters to private respondent, concerning additional orders of sulfuric acid to replace its sunken
purchases.
5. The petitioner filed a complaint for specific performance and damages. Private respondent filed its answer stating that it was the
petitioner who was remiss in the performance of its obligation.
6. (In finding for the petitioner, the trial court held that the petitioner was absolved in its obligation because its failure was due to
force majeure. According to the trial court, it was private respondent who committed a breach of contract when it failed to accommodate
the additional order of the petitioner, to replace those that sank in the sea)
7. On appeal by private respondent, the Court of Appeals reversed the decision of the trial court.
8. The CA said that the plaintiff had the obligation to withdraw the full amount of 500 MT of sulfuric acid from the defendant's
loadport at Basay and Sangi on or before August 15, 1986. The plaintiff sent its vessel, only on November 19, 1987. The vessel, however;
sank.
9. The CA did not absolve the plaintiff from its obligation to lift the rest of the sulfuric acid at the agreed time. Respondent Court of
Appeals found the petitioner guilty of delay and negligence in the performance of its obligation.
10. Hence, this petition.
ISSUE: WON the damages have been properly awarded against petitioner for its unjustified delay in the performance of its obligation
under the contract?
HELD:
1.. YES, it held that where there has been breach of contract by the buyer, the seller has a right of action for damages. Following
this rule, a cause of action of the seller for damages may arise where the buyer refuses to remove the goods, such that buyer has to
remove them. Article 1170 of the Civil Code provides that “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”.
2. Delay begins from the time the obligee judicially or extrajudicially demands from the obligor the performance of the obligation.
Art. 1169 states that those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.
3. In order that the debtor may be in default, it is necessary that the following requisites be present:
(1) that the obligation be demandable and already liquidated;
(2) that the debtor delays performance; and
(3) that the creditor requires the performance judicially or extrajudicially. 27
4. In the present case, private respondent required petitioner to ship out or lift the sulfuric acid as agreed, otherwise petitioner
would be charged for the consequential damages owing to any delay.
5. When did such delay begin?
6. The computation of damages arising from the shipping delay would then have to be from December 15, 1986, given said
reasonable period after the December 12th letter.
7. The letter of December 12 1986 constitutes private respondent's extrajudicial demand for the petitioner to fulfill its obligation,
and its dateline is significant and is the basis of computing the commencement of delay.
Note:
8. Here, petitioner tries to exempt itself from paying rental expenses and other damages by arguing that expenses for the
preservation of fungible goods must be assumed by the seller. Rental expenses of storing sulfuric acid should be at private respondent's
account until ownership is transferred, according to petitioner. However, the general rule that before delivery, the risk of loss is borne by
the seller who is still the owner, is not applicable in this case because petitioner had incurred delay in the performance of its obligation.
Article 1504 of the Civil Code clearly states:
9. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when
the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not, except
that:
10. (2) Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party
at fault.
11. Thus, the plaintiff [herein petitioner] was guilty of negligence and delay in the performance of its obligation to lift the sulfuric acid
and had contravened the tenor of its letter-contract with the defendant.
12. The petitioner is guilty of delay, after private respondent made the necessary extrajudicial demand by requiring petitioner to lift
the cargo at its designated loadports. When petitioner failed to comply with its obligations under the contract it became liable for its
shortcomings. Petitioner is indubitably liable for proven damages.
13. It was the unstable vessel and the storm the cause of petitioner's failure to transport its purchases on time. Its unfortunate
sinking was not due to force majeure. It sunk because it was, based on SGS survey report, unstable and unseaworthy.
14. Petitioner, as the buyer, was obligated under the contract to undertake the shipping requirements of the cargo from the private
respondent's loadports to the petitioner's designated warehouse.
15. The Supreme Court declared that the respondent court did not err when it absolved private respondent from any breach of
contract.
16. It is clear from the plaintiff's letters to the defendant that it wanted to send another vessel (M/T Don Victor) only if the defendant
would confirm that it was ready to deliver 500 MT. Because the defendant could not sell another 227.51 MT to the plaintiff, the latter did
not send a new vessel to pick up the balance of the 500 MT originally contracted for by the parties. This, inspite the representations made
by the defendant for the hauling thereof as scheduled and its reminders that any expenses for the delay would be for the account of the
plaintiff.
Helpful idea
(Settled is the principle in law that proof of verbal agreements offered to vary the terms of written agreements is inadmissible, under the
parol evidence rule.)

15. Petitioner: DESAMPARADOS M. SOLIVA

Respondent: The INTESTATE ESTATE of MARCELO M. VILLALBA and VALENTA BALICUA VILLALBA
G.R. No. 154017 December 8, 2003
FACTS:
1…. On May 5, 1982, Petitioner Soliva filed a complaint for recovery of ownership, possession and damages against Respondent
Valenta Villalba alleging that she is the owner of a parcel of agricultural land occupied by the respondent.
2. On January 4, 1966, the late Capt. Marcelo Villalba asked her permission to occupy her house on said land, promised to buy
the house and lot upon receipt of his money from Manila and gave her P600.00 for the occupation of the house;
3. that Capt. Villalba died in 1978 without having paid the consideration for the house and lot; and that after the death of Capt.
Villalba, his widow, Respondent Valenta refused to vacate the house and lot despite demands, destroyed the house thereon and
constructed a new one.
4. The court rendered judgment restoring to petitioner her right of ownership and possession of the property
5. The CA rendered judgment dismissing the complaint had barred her action to recover the disputed property from the Villalbas.
6. Hence this petition.
ISSUE: WON the plaintiff by reason of long inaction or inexcusable neglect should be barred entirely from asserting the claim?
HELD:
1… Yes, because to allow such action would be inequitable and unjust to the defendant.
2. One of the essential elements of laches is that the Delay by the complainant in asserting his right after he has had knowledge
of the defendant’s conduct and after he has had an opportunity to sue;
3. The Petitioner complied with her obligation to deliver the property in 1966. However, respondent’s husband failed to comply with
his reciprocal obligation to pay, when the money he had been expecting from Manila never materialized.25 He also failed to make further
instalments after May 13, 1966.26
4. As early as 1966, therefore, petitioner already had the right to compel payment or to ask for rescission, pursuant to Article 1169
of the Civil Code, which reads:
5. That those obliged to deliver or to do something incur in delay from the time the obligee judicially or extra judicially demands
from them the fulfilment of their obligation.
6. 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. From the moment one of the parties fulfils his obligation, delay by the other begins."
7. Nonetheless, petitioner failed to sue for collection or rescission. Due to insufficiency of evidence, the lower courts brushed aside
her assertions that she had availed herself of extrajudicial remedies to collect the balance or to serve an extrajudicial demand on Villalba,
prior to her legal action in 1982.
8. Meanwhile, respondent had spent a considerable sum in renovating the house and introducing improvements on the premises.27
9. In view thereof, the appellate court aptly ruled that petitioner’s claim was already barred by laches.
10. it must be stressed that unlike prescription, laches is not concerned merely with the fact of delay, but even more with the effect
of unreasonable delay
11. WHEREFORE, the Petition is partly GRANTED. The Decision of the Court of Appeals is AFFIRMED, with the MODIFICATION
that respondent is ordered to pay the balance of the purchase price of P1,250 plus 6 percent interest per annum, from May 5, 1982 until
the finality of this judgment. Thereafter, interest of 12 percent per year shall then be imposed on that amount upon the finality of this
Decision until the payment thereof. No costs.

16. PANTALEON VS AMERICAN EXPRESS

G.R. No. 174269, May 8 2009 [Credit Transaction]
FACTS:
After the Amsterdam incident that happened involving the delay of American Express Card to approve his credit card
purchases worth US$13,826.00 at the Coster store, Pantaleon commenced a complaint for moral and exemplary damages before the
RTC against American Express. He said that he and his family experienced inconvenience and humiliation due to the delays in credit
authorization. RTC rendered a decision in favor of Pantaleon. CA reversed the award of damages in favor of Pantaleon, holding that
AmEx had not breached its obligations to Pantaleon, as the purchase at Coster deviated from Pantaleon's established charge purchase
pattern.
ISSUE:
1. Whether or not AmEx had committed a breach of its obligations to Pantaleon.
2. Whether or not AmEx is liable for damages.
RULING:
1. Yes. The popular notion that credit card purchases are approved “within seconds,” there really is no strict, legally determinative point
of demarcation on how long must it take for a credit card company to approve or disapprove a customer’s purchase, much less one
specifically contracted upon by the parties. One hour appears to be patently unreasonable length of time to approve or disapprove a
credit card purchase.
The culpable failure of AmEx herein is not the failure to timely approve petitioner’s purchase, but the more elemental failure to
timely act on the same, whether favorably or unfavorably. Even assuming that AmEx’s credit authorizers did not have sufficient basis
on hand to make a judgment, we see no reason why it could not have promptly informed Pantaleon the reason for the delay, and duly
advised him that resolving the same could take some time.
2. Yes. The reason why Pantaleon is entitled to damages is not simply because AmEx incurred delay, but because the delay, for which
culpability lies under Article 1170, led to the particular injuries under Article 2217 of the Civil Code for which moral damages are
remunerative. The somewhat unusual attending circumstances to the purchase at Coster – that there was a deadline for the completion
of that purchase by petitioner before any delay would redound to the injury of his several traveling companions – gave rise to the moral
shock, mental anguish, serious anxiety, wounded feelings and social humiliation sustained by Pantaleon, as concluded by the RTC.

17. TWIN TOWERS CONDOMINIUM CORP. V. CA

G.R. No. 123552 February 27, 2003
FACTS:
Twin Towers Condominium Corp. (P) is a non-stock corporation organized for the sole purpose of holding title to and managing
the common areas of Twin Towers Condominium. ALS Management & Development Corp. (R) is a registered owner of Unit 4-A wherein
its pres. Litonjua occupies therein. P collects from all its members quarterly assessments and dues as authorized by its Master Deed and
its By-Laws. R failed to pay assessments and dues starting 1986 up to the 1st quarter of 1988. P claimed against both ALS and Litonjua
P118,923.20 as unpaid assessments and dues. R claims that it is the corp. & not Litonuja who is liable and claims damages against P’s
act of preventing usage of facilities. The SEC Hearing Officer ordered P to pay Litonjua moral and exemplary damages for maliciously
including Litonjua’s name in the list of delinquent unit owners and for impleading him as R but ordered the latter to pay the assessments
and dues to P. The SEC en banc nullified the award of damages and attorney’s fees to Litonjua on the ground that the SEC had no
jurisdiction over Litonjua.
The SEC en banc held that there is no intracorporate relationship between P and Litonjua who is not the registered owner of
the Unit & not a member of P and P can’t raise corp. veil doctrine. Specifically, Rule 26.3 of P’s house rules expressly authorize denial
of the use of condominium facilities to delinquent members. P justifies such by invoking Section 36, paragraph 11 of the Corporation
Code which grants every corporation the power "to exercise such powers as may be essential or necessary to carry out its purpose or
purposes as stated in its Articles of Incorporation." P claims that there is here implied the power to enact such measures as may be
necessary to carry out the provisions of the Articles of Incorporation, By-Laws and Master Deed to deal with delinquent members. R
assail the validity of House Rule 26.3 alleging that it is ultra vires so it claims it can validly deduct the value of the services withheld from
the assessments and dues since it was barred from using the Condominium facilities for which the assessments and dues were being
collected.
ISSUE:
Whether P House Rule 26.3 is Ultra Vires.
RULING: No. The Master Deed empowers P to enforce the provisions of the Master Deed in accordance with P’s By-Laws and expressly
authorizes P to exercise all powers granted to the management body by the Condominium Act, Articles of Incorp. & By-Laws, the Master
Deed, and the Corporation Code under the Sec. 9 (a) (1) & (3) of the Condomium Act. P’s By-Laws expressly authorize P’s Board of
Directors to promulgate rules and regulations on the use and enjoyment of the common areas. P would be unable to carry out its main
purpose of maintaining the Condominium common areas and facilities if members refuse to pay their dues and yet continue to use these
areas and facilities. To impose a temporary ban on the use of the common areas and facilities until the assessments and dues in arrears
are paid is a reasonable measure that P may undertake to compel the prompt payment of assessments and dues.

ARTICLE 1170 – LIABILITY FOR DAMAGES

18. PNCC VS. NLRC [G.R. NO 78603 JANUARY 28, 1991]
FACTS:
On 22 May 1979, private respondent, Romeo Buan, was hired by petitioner, Philippine National Construction Corporation
("PNCC") to work as Civil Engineer III in Saudi Arabia for a period of two (2) years with a monthly salary of US$1,024.00. While in Saudi
Arabia, respondent was assigned to work in the Saudi Government's Mecca Stormwater Drainage Project where petitioner was a sub-
contractor of Saudi Research and Development Corporation ("REDEC"), the main contractor. After private respondent had served the
full term of his two-year contract, he entered into another two-year contract of employment with petitioner under which he was hired as
Senior Engineer at a higher monthly salary of US$1,350. This new contract of employment provided, among other things, that:
All expenses for entry visas to Saudi Arabia or residence permits thereof of the EMPLOYEE shall be borne by the COMPANY. The
COMPANY shall assist the employee in the renewal of his Residence permit during the term of this contract. Should the renewal of the
said permit be denied by the concerned authorities for any reason, this contract shall be cancelled as of the end of the residence period
without prejudice to the rights of the employee, benefits or privileges accrued at the time of the cancellation of this Agreement.
On 21 August 1981, private respondent arrived in Saudi Arabia on a re-entry visa sponsored by REDEC. On 1 September 1981,
however, private respondent's Residence and Work Permit ("Iqama") expired. Petitioner transmitted to the project manager of REDEC a
letter requesting extension of private respondent's Residence and Work permit. However, this request was returned by one Mr. Ziad
Yamut with the notation "returned without renewal" together with a handwritten note stating — "having been dissatisfied with the
performance —BUAN — we suggest that you send him back on the reason that REDEC has refused to renew the IQAMA." As a result,
private respondent was repatriated on 26 November 1981.
Respondent then filed a complaint against petitioner PNCC before public respondent Philippine Overseas Employment
Administration ("POEA") for breach of contract or illegal dismissal. In a decision dated 15 April 1986, POEA ordered petitioner to pay
private respondent his salary corresponding to the unexpired term of the second contract of employment in the total amount of
US$28,080.00, or its equivalent in Philippine currency at the time of actual payment, plus attorney's fees. Petitioner appealed, the decision
of the POEA was affirmed by the National Labor Relations Commission ("NLRC") with some modifications in respect of the award granted.
Thus this Petition for Certiorari with prayer for temporary restraining order.
ISSUE:
Whether NLRC abused its discretion in holding petitioner liable for breach of contract despite the fact that termination of the overseas
contract was due to force majuere and events not foreseen by the parties.
DECISION: Yes. We are unable to agree with public respondent NLRC. While it may be true that under our labor laws petitioner is the
employer of private respondent, it must be noted that the employment contract entered into by private respondent is an overseas
employment contract to be implemented in Saudi Arabia and which implementation must comply with Saudi Arabian law. It is not disputed
that petitioner had no official standing in Saudi Arabia being only a sub-contractor of REDEC, the principal contractor. Indeed, the NLRC
conceded that "under the Saudi Arabian law it is only REDEC which can sponsor the renewal of private respondent's work permit." Under
Saudi Arabian law, REDEC was to be, in effect, the employer of private respondent.
Appraising the second employment contract between petitioner and private respondent in terms of Philippine law, there are
three (3) reasons why petitioner cannot be held liable under that contract for breach thereof under the circumstances of this case. The
first reason relates to paragraph 13 of the second contract, quoted earlier. It will be seen that the renewal of private respondent's
Residence and Work permit constituted a condition to his continued employment in Saudi Arabia. That condition was resolutory in nature,
that is, the non-renewal of private respondent's permit had the effect of resolving, or rendering cancellable, that contract.
The second reason is found in the rule that an obligor shall be released from his obligation when the prestation has become
legally or physically impossible without fault on his part. The supervening impossibility of performance, based upon some factor
independent of the will of the obligor, releases the obligor from his obligation after restitution of what he may have received, if any, in
advance from the other contracting party; 8 the obligor incurs no liability for damages for his inability to perform. In the case at bar, the
failure of refusal of REDEC to sponsor the renewal of private respondent's Residence and Work permit had rendered it legally impossible
for petitioner to continue to implement its contract of employment in Saudi Arabia of private respondent. There is no dispute that REDEC
was not subject to the control of petitioner; indeed, it was petitioner which was wholly subject to the control and even the whims of
REDEC. To insist that petitioner should pay for private respondent's wages under the second contract of employment under the
circumstances of this case, is to impose an unfair burden upon the latter and to sanction the unjust enrichment of private respondent at
the expense of petitioner. To require petitioner to retain the services of private respondent in Saudi Arabia would be to require petitioner
to violate the labor laws of its host country. So to require, would be to impose an intolerable burden upon petitioner.
There is a third and final reason why private respondent cannot hold petitioner liable for breach of the second contract of
employment. Paragraph 13 of the second contract expressly envisaged the possibility that renewal of the Residence and Work permit of
private respondent could "be denied by the concerned authorities for any reason," in which case, the contract would be "cancelled."
Private respondent was, of course, aware that his original permit was about to expire when he left for Saudi Arabia the second time. He
must or should have been also alerted by the second contract of employment to the possibility of non-renewal of his Residence and Work
permit and the ensuing cancellability of the contract. Petitioner did not, in other words, conceal the legal and practical situation from
private respondent. We find no bad faith on the part of petitioner.
ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Certiorari and to REVERSE and SET ASIDE the
Decision dated 21 April 1987 of the NLRC in POEA. The Temporary Restraining Order earlier issued by this Court is hereby made
PERMANENT.

19. Syquia v CA G.R. No. 98695 January 27, 1993 JUAN J. SYQUIA, CORAZON C. SYQUIA, CARLOTA C. SYQUIA, CARLOS C.
SYQUIA and ANTHONY C. SYQUIA, petitioners, vs. THE HONORABLE COURT OF APPEALS, and THE MANILA MEMORIAL
PARK CEMETERY, INC., respondents.
FACTS:
1. Petitioners were the parents and siblings, respectively, of the deceased Vicente Juan Syquia. On March 5, 1979, they filed a
complaint in the then Court of First Instance against herein private respondent, Manila Memorial Park Cemetery, Inc. for recovery of
damages arising from breach of contract and/or quasi-delict.
2. According to the complaint, the petitioners and respondent to inter the remains of deceased in the Manila Memorial Park Cemetery in
the morning of July 25, 1978. They also alleged that the concrete vault encasing the coffin of the deceased had a hole approximately
three (3) inches in diameter. Upon opening the vault, it became apparent that there was evidence of total flooding, the coffin was
entirely damaged and the exposed parts of the deceased’s remains were damaged.
3. The complaint prayed that judgment be rendered ordering defendant-appellee to pay plaintiffs-appellants P30,000.00 for actual
damages, P500,000.00 for moral damages, etc.
DECISION OF LOWER COURTS:
1. Trial Court: dismissed the complaint. the contract between the parties did not guarantee that the cement vault would be waterproof;
that there could be no quasi-delict because the defendant was not guilty of any fault or negligence, and because there was a pre-
existing contractual relation.
Contention of the defense: "The hole had to be bored through the concrete vault because if it has no hole the vault will (sic) float and
the grave would be filled with water and the digging would caved (sic) in the earth, the earth would caved (sic) in the (sic) fill up the
grave."
2. Court of Appeals: affirmed dismissal.
ISSUE: whether the Manila Memorial Park Cemetery, Inc., breached its contract with petitioners; or, alternatively, whether private
respondent was guilty of a tort.
RULING:
NO, there was no negligent act on the part of the cemetery.
Although a pre-existing contractual relation between the parties does not preclude the existence of aculpa aquiliana,
We find no reason to disregard the respondent's Court finding that there was no negligence.
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a
quasi- delict.
Syquias and the Manila Memorial Park Cemetery, Inc., entered into a contract entitled "Deed of Sale and Certificate of
Perpetual Care" on August 27, 1969. That agreement governed the relations of the parties and defined their respective rights and
obligations. Hence, had there been actual negligence on the part of the Manila Memorial Park Cemetery, Inc., it would be held liable
not for a quasi-delict or culpa aquiliana, but for culpa contractual as provided by Article 1170 of the Civil Code, to wit:
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.
There was no stipulation in the Deed of Sale and Certificate of Perpetual Care and in the Rules and Regulations of the Manila Memorial
Park Cemetery, Inc. that the vault would be waterproof.
The law defines negligence as the "omission of that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the place." In the absence of stipulation or legal
provision providing the contrary, the diligence to be observed in the performance of the obligation is that which is expected
of a good father of a family.
Private respondent has exercised the diligence of a good father of a family in preventing the accumulation of water inside the
vault which would have resulted in the caving in of earth around the grave filling the same with earth.

20. LEGASPI OIL CO., INC. V COURT OF APPEALS, GR NO. 96505, 01 JULY 1993
FACTS: Petitioner Legaspi Oil Company had several transactions with Oseraos through the agents of the latter. The transactions involve
the sale of copras (coconut husk) by private respondent to the petitioner. The selling price of Oseraos for every 100 kilos of copras
depends on the prevailing market price at the time the contract was entered into.
In one transaction, Oseraos committed to sell 100 tons of copra to Legaspi Oil for the price of P82 per 100 kilos with delivery
terms of 20 days effective 8 March 1975. After the period to deliver had lapsed, Oseraos was only able to sell 46,334 kilos of copra thus
leaving a balance of 53,666 kilos as per running account. Accordingly, demands were made upon Oseraos to deliver the balance with a
final warning embodied in a letter dated 6 October 1976 that failure to deliver will mean cancellation of the contract, the balance to be
purchased at open market and the price deferential to be charged against Oseraos. Since there was still no compliance, Legaspi Oil
purchased the undelivered balance from the open market at the prevailing price of P168.00 per 100 kilos, or a price differential of P86.00
per 100 kilos, a net loss of P46,152.76 chargeable against private respondent.
ISSUE: WoN Oseraos is liable for damages arising from fraud or bad faith in deliberately breaching the contract of sale entered into by
the parties.
HELD: Despite repeated demands by petitioner, private respondent failed to fulfill his contractual obligation to deliver the remaining
53,666 kilograms of copra. Based on the foregoing facts, the actuality of private respondent’s fraud cannot be gainsaid. In general fraud
may be defined as the voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which naturally and
necessarily arise from such act or omission. The conduct of the private respondent clearly manifests his deliberate faudulent intent to
evade his contractual obligation for the price of copra had in the meantime more than doubled from P82.00 to P168.00 per 100 kilograms.
Under Art. 1170 of the Civil Code, those who in the performance of their obligation are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof, are liable for damages. Pursuant to said article, private respondent is liable for damages.

21. RCBC v. CA and FELIPE LUSTRE (1999)

FACTS: Atty. Felipe Lustre purchased a Toyota Corolla from Toyota Shaw, Inc. He made a down payment, and the balance of the
purchase price to be paid in 24 equal monthly installments. Lustre thus issued 24 postdated checks. The 1 st was dated 10 April 1991,
subsequent checks were dated every 10th of each succeeding month.
 As security, Lustre executed a contract of chattel mortgage over the vehicle. Paragraph 11 thereof provided for an acceleration
clause stating that should the mortgagor default in the payment of any installment, the whole amount remaining unpaid shall become
due. In addition, the mortgagor shall be liable for 25% of the principal due as liquidated damages.
Toyota Shaw assigned all its rights and interests in the chattel mortgage to RCBC.
The first 22 PDCs were encashed and debited by RCBC from Lustre’s account, except the PDC dated 10 August 1991 (5th PDC
out of 24 PDCs), which was unsigned. Previously, the amount of the 5th PDC was debited from Lustre’s account but was later recalled
and re-credited to Lustre’s account. Because of the recall, RCBC refused to encash the last 2 PDCs (pursuant to RCBC policy). Lustre
was not informed of RCBC’s actions.
On 21 January 1993, RCBC sent a demand letter to Lustre, demanding payment of balance of the debt (3 installment payments),
including liquidated damages. Lustre refused. RCBC filed an action for replevin and damages against Lustre. Lustre interposed a
counterclaim for damages.
Procedure:
RTC: Dismissed RCBC’s complaint. Ordered RCBC to accept the payment equivalent to the 3 checks and to release/cancel the mortgage
on the car.
On the counterclaim, RCBC ordered to pay Lustre moral damages, exemplary damages and attorney’s fees.
CA: Affirmed RTC.
ISSUE/S: WON Lustre is liable for damages on the ground of delay in the performance of his obligation. NO.
HELD/RATIO: Assuming that Lustre was guilty of delay in payment of the value of the unsigned check, he cannot be held liable for
damages. Article 1170 of the Civil Code states that those who in the performance of their obligations are guilty of delay are liable for
damages. The delay in the performance of the obligation, however, must be either malicious or negligent. ICAB, there is no
imputation, much less evidence, that Lustre acted with malice or negligence in failing to sign the check. Such omission was mere
inadvertence on the part of Lustre.
Toyota salesperson testified that he verified whether Lustre had signed all checks and in fact returned 3 or 4 unsigned checks
to him for signing. Lustre signed these returned checks, and only then did the Toyota salesperon release the car to Lustre.
SC noted that RCBC did not object to the unsigned check when all the PDCs were delivered to it by Toyota Shaw.
In view of the lack of malice or negligence on the part of Lustre, RCBC’s blind and mechanical invocation of paragraph 11 of the
contract of chattel mortgage was unwarranted.
SC also said that this whole controversy could have been avoided if only RCBC bothered to call up Lustre and ask him to sign
the check! RCBC failed to act with good faith and is therefore liable for moral damages suffered by Lustre, who has been a client of
RCBC for 20 years. Lustre also suffered shame and embarrassment after the case was filed as he was a lawyer, married to another
lawyer, and known to the community of golfers. SC also allowed exemplary damages and attorney’s fees.

22. SPS. GUANIO VS. MAKATI SHANGRI-LA HOTEL

G.R. No. 190601 February 7, 2011
FACTS: Petitioner spouses, Luigi M. Guanio and Anna Hernandez-Guanio, booked respondent Makati Shangre-La Hotel for their
wedding reception.
A week before their wedding reception, the hotel scheduled a food tasting. Eventually, the parties agreed to a package where
the final price was P1,150.00 per person.
According to the complainants, when the actual reception took place, ” the respondent’s representatives did not show up despite
their assurance that they would; their guests complained of the delay in the service of the dinner; certain items listed in the published
menu were unavailable; the hotel’s waiters were rude and unapologetic when confronted about the delay; and despite Alvarez’s promise
that there would be no charge for the extension of the reception beyond 12:00 midnight, they were billed and paid P8,000 per hour for
the three-hour extension of the event up to 4:00 A.M. the next day. They further claim that they brought wine and liquor in accordance
with their open bar arrangement, but these were not served to the guests who were forced to pay for their drinks. They sent a letter-
complaint to hotel and received an apologetic reply from the hotel’s Executive Assistant Manager in charge of Food and Beverage.
They nevertheless filed a complaint for breach of contract and damages before the Regional Trial Court (RTC) of Makati City.
Answering, the hotel said that complainants requested a combination of king prawns and salmon, hence, the price was increased
to P1,200.00 per person, but discounted at P1,150.00; that contrary to their claim, the hotel representatives were present during the
event, albeit they were not permanently stationed thereat as there were three other hotel functions; that while there was a delay in the
service of the meals, the same was occasioned by the sudden increase of guests to 470 from the guaranteed expected minimum number
of guests of 350 to a maximum of 380, as stated in the Banquet Event Order (BEO);2 and the Banquet Service Director in fact relayed
the delay in the service of the meals to complainant’s father.
The RTC, relying heavily on the letter of the hotel’s Executive Assistant ruled in favour of the complainants and awarded
damages in their favour.
The Court of Appeals reversed the decision, noting that the proximate cause of the complainant’s injury was the unexpected
increase in the number of their guests.
ISSUE: WON Makati Shangri-La Hotel may be held liable for damages.
HELD: The Supreme Court reversed the Court of Appeals decision, noting that in this case, the obligation was based on a contract,
hence, the concept of proximate cause has no application.
In absolving the hotel from damages, the Supreme Court noted that: “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 above-quoted paragraph 4.5 of
the parties’ contract provide, respondent from liability for “any damage or inconvenience” occasioned thereby”
Nevertheless, on grounds of equity, the High Court awarded P50,000.00 in favour of the complainants and justified it by saying:
“The exculpatory clause notwithstanding, the Court notes that respondent could have managed the “situation” better, it being
held in high esteem in the hotel and service industry. Given respondent’s vast experience, it is safe to presume that this is not its first
encounter with booked events exceeding the guaranteed cover. It is not audacious to expect that certain measures have been placed in
case this predicament crops up. That regardless of these measures, respondent still received complaints as in the present case, does
not amuse.
Respondent admitted that three hotel functions coincided with petitioners’ reception. To the Court, the delay in service might
have been avoided or minimized if respondent exercised prescience in scheduling events. 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.”
What applies in the present case is Article 1170 of the Civil Code which reads:
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.
RCPI v. Verchez, et al. enlightens: In culpa contractual x x x the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts, will not permit a
party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. A
breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered.
The remedy serves to preserve the interests of the promissee that may include his “expectation interest ,” which is his interest
in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, or his
“reliance interest ,”which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position
as he would have been in had the contract not been made; or his”restitution interest,” which is his interest in having restored to him any
benefit that he has conferred on the other party. Indeed, agreements can accomplish little, either for their makers or for society, unless
they are made the basis for action.
The effect of every infraction is to create a new duty, that is, to make RECOMPENSE to the one who has been injured by the
failure of another to observe his contractual obligation unless he can show extenuating circumstances, like proof of his exercise of due
diligence or of the attendance of fortuitous event to excuse him from his ensuing liability.

ARTICLE 1172 - RESPONSIBILITY ARISING FROM NEGLIGENCE ALSO DEMANDABLE

23. GUTIERREZ VS GUTIERREZ 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 a bridge. The truck was driven by the chauffeur Abelardo Velasco, and was owned by saturnine 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 with several other members of the Gutierrez family were
accommodated therein.
The collision between the bus and the automobile resulted in Narciso Gutierrez suffering a fractured right leg which required
medical attendance for a considerable period of time.
ISSUE: Whether or not both the driver of the truck and automobile are liable for damages and indemnification due to their negligence.
What are the legal obligations of the defendants?
HELD: Bonifacio Gutierrez’s obligation arises from culpa aquiliana. On the other hand, Saturnino Cortez’s and his chauffeur Abelardo
Velasco’s obligation rise from culpa contractual.
The youth Bonifacio was na incompetent chauffeur, that he was driving at an excessive rate of speed, and that, on approaching
the bridge and the truck, he lost his head and so contributed by his negligence to the accident. The guaranty given by the father at the
time the son was granted a license to operate motor vehicles made the father responsible for the acts of his son. Based on these facts,
pursuant to the provisions of Art. 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.
The liability of Saturnino Cortez, the owner of the truck, and his chauffeur Abelardo Velasco rests on a different basis, namely,
that of contract.

24. DE GUIA V. MANILA ELECTRIC, RAILROAD & LIGHT CO

STREET; Jan. 28, 1920
FACTS:
-The plaintiff is a physician residing in Caloocan City.
-Sept 4, 1915, at about 8pm, the defendant boarded a car at the end of the line with the intention of coming to Caloocan.
-At about 30 meters from the starting point the car entered a switch, the plaintiff remaining on the back platform holding the handle of the
right-hand door. Upon coming out of the switch, the small wheels of the rear truck left the track ran for a short distance and hit a concrete
post.
-the post was shattered: at the time the car struck against the concrete post, the plaintiff was allegedly standing on the rear platform,
grasping the handle of the right-hand door. The shock of the impact threw him forward, and the left part of his chest struck against the
door causing him to fall. In the falling, the plaintiff alleged that his head struck one of the seats and he became unconscious.
-the plaintiff was taken to his home which was a short distance away from the site of the incident. A physician of the defendant company
visited the plaintiff and noted that the plaintiff was walking about and apparently suffering somewhat from bruises on his chest. The
plaintiff said nothing about his head being injured and refused to go to a hospital.
-The plaintiff consulted other physicians about his condition, and all these physicians testified for the plaintiff in the trial court.
-the plaintiff was awarded with P6,100, with interest and costs, as damages incurred by him in consequence of physical injuries sustained.
The plaintiff and the defendant company appealed.
ISSUES
1. WON the defendant has disproved the existence of negligence
2. What is the nature of the relation between the parties?
3. WON the defendant is liable for the damages
4. If liable for damages, WON the defendant could avail of the last paragraph of Art 1903 on culpa aquiliana (Art 2180)
5. What is the extent of the defendant’s liability?
HELD
1. NO, the existence of negligence in the operation of the car must be sustained, as not being clearly contrary to the evidence.
Ratio: An experienced and attentive motorman should have discovered that something was wrong and would have stopped before he
had driven the car over the entire distance from the point where the wheels left the track to the place where the post was struck.
Reasoning: The motorman alleged that he reduced his speed to the point that the car barely entered the switch under its own momentum,
and this operation was repeated as he passed out. Upon getting again on the straight track he put the control successively at points one,
two, three and lastly at point four. At the moment when the control was placed at point four he perceived that the rear wheels were
derailed and applied the brake; but at the same instant the car struck the post, some 40 meters distant from the exit of the switch.
However, testimonial evidence alleged that the rate of a car propelled by electricity with the control at point "four" should be about five or
6 miles per hour (around 8 kph) and other evidence showed that the car was behind schedule time and that it was being driven, after
leaving the switch, at a higher rate than would ordinarily be indicated by the control at point four. The car was practically empty (so it’s
possible that it could run faster???). The court granted that there is negligence as shown by the distance which the car was allowed to
run with the front wheels of the rear truck derailed, aside from the fact that the car was running in an excessive speed.
2. The relation between the parties was of a contractual nature.
Ratio: The company was bound to convey and deliver the plaintiff safely and securely with reference to the degree of care which, under
the circumstances, is required by law and custom applicable to the case.
Reasoning: The plaintiff had boarded the car as a passenger for the city of Manila and the company undertook to convey him for hire.
3. YES, the defendant is liable for the damages
Ratio/ Reasoning: Upon failure to comply with that obligation arising from the contract, the company incurred the liability defined in articles
1103-1107 of the Civil Code.
4. No, the defendant could not avail of the last paragraph of Art 1903
Ratio/ Reasoning: The last paragraph of article 1903 of the civil code refers to liability incurred by negligence in the absence of contractual
relation, that is, to the culpa aquiliana of the civil law and not to liability incurred by breach of contract; therefore, it is irrelevant to prove
that the defendant company had exercised due care in the selection and instruction of the motorman who was in charge of its car and
that he was in experienced and reliable servant.
5. The defendant is liable for the damages ordinary recoverable for the breach of contractual obligation, against a person who has acted
in good faith, which could be reasonably foreseen at the time the obligation is contracted.
Ratio: The extent of the liability for the breach of a contract must be determined in the light of the situation in existence at the time the
contract is made; and the damages ordinarily recoverable are in all events limited to such as might be reasonably foreseen in the light of
the facts then known to the contracting parties.
Reasoning: The court has the power to moderate liability according to the circumstances of the case, i.e. when the defendant must
answer for the consequences of the negligence of its employees. Also, an employer who has displayed due diligence in choosing and
instructing his servants is entitled to be considered a debtor in good faith (w/n meaning of article 1107, old CC)

25. DEL PRADO V. MERALCO

FACTS:
Teodorico Florenciano, Meralco’s motorman, was driving the company’s street car along Hidalgo Street. Plaintiff Ignacio Del Prado ran
across the street to catch the car. The motorman eased up but did not put the car into complete stop. Plaintiff was able to get hold of the
rail and step his left foot when the car accelerated. As a result, plaintiff slipped off and fell to the ground. His foot was crushed by the
wheel of the car. He filed a complaint for culpa contractual.
ISSUES:
(1) Whether the motorman was negligent
(2) Whether Meralco is liable for breach of contract of carriage
(3) Whether there was contributory negligence on the part of the plaintiff
HELD:
(1) We may observe at the outset that there is no obligation on the part of a street railway company to stop its cars to let on intending
passengers at other points than those appointed for stoppage. Nevertheless, although the motorman of this car was not bound to stop
to let the plaintiff on, it was his duty to do no act that would have the effect of increasing the plaintiff's peril while he was attempting to
board the car. The premature acceleration of the car was, in our opinion, a breach of this duty.
(2) The relation between a carrier of passengers for hire and its patrons is of a contractual nature; and a failure on the part of the carrier
to use due care in carrying its passengers safely is a breach of duty (culpa contractual). Furthermore, the duty that the carrier of
passengers owes to its patrons extends to persons boarding the cars as well as to those alighting therefrom.
Where liability arises from a mere tort (culpa aquiliana), not involving a breach of positive obligation, an employer, or master,
may exculpate himself by proving that he had exercised due diligence to prevent the damage; whereas this defense is not available if the
liability of the master arises from a breach of contractual duty (culpa contractual). In the case before us the company pleaded as a special
defense that it had used all the diligence of a good father of a family to prevent the damage suffered by the plaintiff; and to establish this
contention the company introduced testimony showing that due care had been used in training and instructing the motorman in charge
of this car in his art. But this proof is irrelevant in view of the fact that the liability involved was derived from a breach of obligation.
(3) It is obvious that the plaintiff's negligence in attempting to board the moving car was not the proximate cause of the injury. The direct
and proximate cause of the injury was the act of appellant's motorman in putting on the power prematurely. Again, the situation before
us is one where the negligent act of the company's servant succeeded the negligent act of the plaintiff, and the negligence of the company
must be considered the proximate cause of the injury. The rule here applicable seems to be analogous to, if not identical with that which
is sometimes referred to as the doctrine of "the last clear chance." In accordance with this doctrine, the contributory negligence of the
party injured will not defeat the action if it be shown that the defendant might, by the exercise of reasonable care and prudence, have
avoided the consequences of the negligence of the injured party. The negligence of the plaintiff was, however, contributory to the accident
and must be considered as a mitigating circumstance.

26. THE SAN PEDRO BUS LINE, PAULINO DE LA CRUZ, and TEODOLO LACDAN, doing business under the name of "THE
SAN PEDRO BUS LINE," petitioners, vs. NICOLAS NAVARRO, and the HON. ASSOCIATE JUSTICES OF THE FIRST DIVISION,
COURT OF APPEALS, respondents.
G.R. No. L-6291 April 29, 1954
PARAS, C.J.:
Nicolas Navarro filed a complaint in the court of First Instance of Rizal against the San Pedro Bus Line, Paulino de la Cruz and
Teodulo Lacdan, doing business in the name of the San Pedro Bus Line, alleging that the plaintiff, on April 21, 1943, rode as a passenger
in Manila bound bus No. TPU-7654 owned and operated by the defendants; that while on its way the bus collided with another vehicle,
causing serious physical injuries to the plaintiff, with subsequent post-traumatic psychosis which might incapacitate him for life; that as a
result thereof the plaintiff suffered damages, for actual medical and hospital expenses and loss of earning power, in the total sum of
P4,500 which the plaintiff sought to recover from the defendants. In their answer the defendants admitted the occurrence of the accident
and the injuries received the plaintiff, but disclaimed responsibility for the accident. After trial, the court dismissed the complaint on the
ground that there was "no proof whatsoever of the relation of the defendants San Pedro Bus Line and Paulino de la Cruz with the
damages claimed by the plaintiff." The plaintiff appealed to the Court of Appeals which, on part of which reads as follows: "WHEREFORE,
it appearing that the trial court erred as charged, and that the facts and the lawfully warrant a recovery by the appellant, the judgment
appealed in the total sum of P9,500, with interests thereon from the date this action was commenced. Costs are charged against the
appellees." The defendants have elevated the case by way of a petition for certiorari.
It is contended for the herein petitioners that they cannot be held civilly liable to respondents Nicolas Navarro, for the reason
that the Court of First Instance of Rizal had dismissed the criminal charge against petitioner Paulino de la Cruz, driver of the bus involved
in the accident, citing the case of Martinez vs. Barredo,* Off. Gaz., 4922. In answer to this contention, it is enough to advert to the
conclusion of the Court of Appeals — which is correct — that the action was not based on tort or quasi delict, but was one for breach of
a carrier's contract, there being a clear distinction between culpa as a source and creator of obligations (aquiliana) and culpa in the
performance of an already existing obligation (contractual). As already held in the case of Castro vs. Acro Taxicab Co.** 46 Off. Gaz.,
2023, "para que prosperase la accion del demandante pidiendo indemnizacion de daños y perjuicios bastaba que probase la existencia
del contrato de pasaje esto es, que causo lesiones y daños en el pasajero. De acuerdo con la doctrina enunciada, para el exito de la
accion de daños no era necesario que se probase la culpa, desuido a negligencia del chofer que guiaba el taximetro No. 962." The case
of Martinez vs. Barredo is not controlling, since it referred to an action based on criminal negligence.
The other contention of the petitioners is that it was erroneous for the Court of Appeals to award in favor of respondent Navarro
damages in the amount of P9,500, his claim in the complaint being only for P4,500. It appears, however, that the complaint prayed for
"such further relief as may be deemed just and equitable," and this of course warranted the granting in the complaint. Indeed, under
section 9, Rule 35, of the Rules of Court, "the judgment shall grant the relief to which the party in whose favor it is rendered is entitled,
even if the party has not demanded such relief in his pleadings."
It is also urged by counsel for the petitioners that the finding of the Court of Appeals that respondent Navarro is insane, is not
supported by any evidence, and that on the other hand, in the motion for new trial filed by the petitioners, accompanied by the affidavits
of Marcelo Legaspi and Ceferino Terello, respondent Navarro is shown not to be insane, with the result that there is no basis for awarding
the additional amount of P5,000. However, apart from the fact that the finding of the Court of Appeals is factual and therefore conclusive,
the said sum was granted by the Court of Appeals, not only for the resulting insanity of respondent Navarro but for his pain and suffering
in general; and we are not prepared to hold that the award is excessive as compensation for moral damages.
Wherefore, the decision complained of is affirmed, and it is so ordered with costs against petitioners.

28. CONSOLIDATED BANK AND TRUST CORPORATION VS. COURT OF APPEALS G.R. NO. 138569, SEPTEMBER 11, 2003
Solidbank’s tellers must exercise a high degree of diligence in insuring that they return the passbook only to the depositor or his authorized
representative. The tellers know, or should know, that the rules on savings account provide that any person in possession of the passbook
is presumptively its owner.
FACTS: Solidbank is a domestic banking corporation while private respondent L.C. Diaz and Company, CPA’s (“L.C. Diaz”), is a
professional partnership engaged in the practice of accounting and which opened a savings account with Solidbank. Diaz through its
cashier, Mercedes Macaraya , filled up a savings cash deposit slip and a savings checks deposit slip. Macaraya instructed the messenger
of L.C. Diaz, Ismael Calapre, to deposit the money with Solidbank and give him the Solidbank passbook. 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. 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. 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. The following day,, L.C.
Diaz through its Chief Executive Officer, Luis C. Diaz, called up Solidbank to stop any transaction using the same passbook until L.C.
Diaz could open a new account followed by a formal written request later that day. It was also on the same day that L.C. Diaz learned of
the unauthorized withdrawal the day before of P300,000 from its savings account. The withdrawal slip 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 demanded from Solidbank the return of its money but to no avail. Hence, L.C. Diaz filed a Complaint for Recovery of
a Sum of Money against Solidbank with the Regional Trial Court. After trial, the trial court rendered a decision absolving Solidbank and
dismissing the complaint. Court of Appeals reversed the decision of the trial court.
ISSUE: Whether or not Solidbank must be held liable for the fraudulent withdrawal on private respondent’s account.
HELD: Solidbank’s tellers must exercise a high degree of diligence in insuring that they return the passbook only to the depositor or his
authorized representative. The tellers know, or should know, that the rules on savings account provide that any person in possession of
the passbook is presumptively its owner. If the tellers give the passbook to the wrong person, they would be clothing that person
presumptive ownership of the passbook, facilitating unauthorized withdrawals by that person. For failing to return the passbook to
Calapre, the authorized representative of L.C. Diaz, Solidbank and Teller No. 6 presumptively failed to observe such high degree of
diligence in safeguarding the passbook, and in insuring its return to the party authorized to receive the same. However, L.C. Diaz was
guilty of contributory negligence in allowing a withdrawal slip signed by its authorized signatories to fall into the hands of an
impostor. Thus, the liability of Solidbank should be reduced. Hence, the liability of Solidbank for actual damages was reduced to only
60%, the remaining 40% was borne by private respondent.
The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan. There is a
debtor-creditor relationship between the bank and its depositor. The bank is the debtor and the depositor is the creditor. The law imposes
on banks high standards in view of the fiduciary nature of banking. RA 8791 declares that the State recognizes the “fiduciary nature of
banking that requires high standards of integrity and performance.” This new provision in the general banking law, introduced in 2000, is
a statutory affirmation of Supreme Court decisions holding that “the bank is under obligation to treat the accounts of its depositors
with meticulous care, always having in mind the fiduciary nature of their relationship.”

ARTICLE 1173 - DILIGENCE OF A GOOD FATHER OF A FAMILY

29. JIMENEZ v CITY OF MANILA
FACTS: Jimenez bought bagoong at the Santa Ana public market at the time that it was flooded with ankle-deep water. As he turned
around to go home, he stepped on an uncovered opening w/c could not be seen because of dirty rainwater. A dirty and rusty 4-inch nail,
stuck inside the uncovered opening, pierced his left leg to a depth of1½ inches. His left leg swelled and he developed fever. He was
confined for 20 days, walked w/ crutches for 15 days and could not operate his school buses. He sued City of Manila and Asiatic Integrated
Corp under whose administration the Sta. Ana had been placed by virtue of Management and Operating Contract. TC found for
respondent. CA reversed and held Asiatec liable and absolved City of Manila.
ISSUE: WON City of Manila should be jointly and solidarily liable with Asiatec
HELD: YES
RATIO: In the City of Manila v Teotico case, it was held that Art 1, Sec 4 of RA 409, which City of Manila is invoking in this case,
establishes a general rule regulating the liability of City Of Manila while Art 2189 NCC governs the liability due to “defective streets, public
buildings and other public works” in particular and is therefore decisive in this case. It was also held that for liability under 2189 to attach,
control and supervision by the province, city or municipality over the defective public building in question is enough. It is not necessary
that such belongs to such province, city or municipality.
In the case at bar, there is no question that Sta. Ana public market remained under the control of the City as evidenced by:
1.the contract bet Asiatec and City which explicitly states that “prior approval” of the City is still needed in the operations.
2.Mayor Bagatsing of Manila admitted such control and supervision in his letter to Finance Sec. Virata (“The City retains the
power of supervision and control over its public markets…)
3.City employed a market master for the Sta. Ana public Market whose primary duty is to take direct supervision and control of
that particular public market
4.Sec. 30 of Tax Code “The treasurer shall exercise direct and immediate supervision, administration and control over public
markets…
It is thus the duty of the City to exercise reasonable care to keep the public market reasonably safe for people frequenting the
place for their marketing needs. Ordinary precautions could have been taken during good weather to minimize danger to life and limb.
The drainage hole could have been placed under the stalls rather than the passageways. The City should have seen to it that the openings
were covered. It was evident that the certain opening was already uncovered, and 5 months after this incident it was still uncovered.
There were also findings that during floods, vendors would remove the iron grills to hasten the flow of water. Such acts were not prohibited
nor penalized by the City. No warning sign of impending danger was evident.
Petitioner had the right to assume there were no openings in the middle of the passageways and if any, that they were
adequately covered. Had it been covered, petitioner would not have fallen into it. Thus the negligence of the City is the proximate
cause of the injury suffered. Asiatec and City are joint tortfeasors and are solidarily liable

30. CANLAS V. CA (2000)

FACTS:
August, 1982: Osmundo S. Canlas executed a Special Power of Attorney authorizing Vicente Mañosca to mortgage 2 parcels
of land situated in BF Homes Paranaque in the name of his wife Angelina Canlas.
Subsequently, Osmundo Canlas agreed to sell the lands to Mañosca for P850K, P500K payable within 1 week, and the balance serves
as his investment in the business. Mañosca issued 2 checks P40K and P460K. The P460K lacked sufficient funds.
September 3, 1982: Mañosca mortgage to Atty. Manuel Magno the parcels of lands for P100K with the help of impostors who
misrepresented themselves as the Spouses Canlas.
September 29, 1982: Mañosca was granted a loan by the respondent Asian Savings Bank (ASB) for P500K with the parcels of
land as security and with the help of the same impostors. The loan was left unpaid resulting in a extrajudicially foreclosure on the lots.
January 15, 1983: Canlas wrote a letter informing ASB that the mortgage was without their authority. He also requested the
sheriff Contreras to hold or cancel the auction. Both parties refused.
The spouses Canlas filed a case for annulment of deed of real estate mortgage with prayer for the issuance of a writ of
preliminary injunction
RTC: restrained the sheriff from issuing a Certificate of Sheriff’s Sale and annulled the mortgage
CA: reversed holding Canlas estopped for coming to the bank with Mañosca and letting himself be introduced as Leonardo Rey
ISSUE: W/N the ASB had was negligent due to the doctrine of last clear chance
HELD: YES. Petition is GRANTED
Article 1173. The fault or negligence of the obligor consist in the omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the
provisions of articles 1171 and 2201, paragraph 2, shall apply the degree of diligence required of banks is more than that of a good father
of a family not even a single identification card was exhibited by the said impostors to show their true identity acted simply on the basis
of the residence certificates bearing signatures which tended to match the signatures affixed on a previous deed of mortgage to Atty.
Magno previous deed of mortgage did not bear the tax account number of the spouses as well as the Community Tax Certificate of
Angelina Canlas.
Doctrine of last clear chance where both parties are negligent but the negligent act of one is appreciably later in point of time
than that of the other, or where it is impossible to determine whose fault or negligence brought about the occurrence of the incident, the
one who had the last clear opportunity to avoid the impending harm but failed to do so, is chargeable with the consequences arising
therefrom
the antecedent negligence of a person does not preclude recovery of damages caused by the supervening negligence of the
latter, who had the last fair chance to prevent the impending harm by the exercise of due diligence
Antecedent Negligence: Osmundo Canlas was negligent in giving Vicente Mañosca the opportunity to perpetrate the fraud, by entrusting
him the owner's copy of the transfer certificates of title of subject parcels of land
Supervening Negligence: Failing to perform the simple expedient of faithfully complying with the requirements for banks to
ascertain the identity of the persons transacting with them - ASB bears the loss
Canlas went to ASB with Mañosca and he was introduced as Leonardo Rey. He didn't correct Mañosca. However, he did not know that
the lots were being used as a security for he was there to make sure that Mañosca pays his debt so he cannot be estopped from assailing
the validity of the mortgage
But being negligent in believing the misrepresentation by Mañosca that he had other lots and that the lot were not to be used
as a security, Canlas was negligent and undeserving of Attorney's fees.
The contract of mortgage sued upon was entered into and signed by impostors who misrepresented themselves as the spouses
Osmundo Canlas and Angelina Canlas = complete nullity

31. MERCURY DRUG CORPORATION and AURMELA GANZON vs. RAUL DE LEON
G.R. No. 165622 [ October 17, 2008]
FACTS:
Respondent Raul T. De Leon, a judge, noticed that his left eye was reddish. He also had difficulty reading. On the same evening,
he met a friend who happened to be a doctor, Dr. Charles Milla. The latter prescribed the drugs “CortisporinOpthalmic” and “Ceftin” to
relieve his eye problems. Before heading to work the following morning, De Leon went to the Betterliving, Parañaque, branch of
Mercury Drug Store Corporation to buy the prescribed medicines. He showed his prescription to petitioner AurmelaGanzon, a pharmacist
assistant. At his chambers, De Leon requested his sheriff to assist him in using the eye drops. As instructed, the sheriff applied 2-3
drops on respondent’s left eye. Instead of relieving his irritation, respondent felt searing pain. He immediately rinsed the affected eye
with water, but the pain did not subside. Only then did he discover that he was given the wrong medicine, “CortisporinOtic Solution.” De
Leon returned to the same Mercury Drug branch, with his left eye still red and teary. When he confronted Ganzon why he was given ear
drops, instead of the prescribed eye drops, she did not apologize and instead brazenly replied that she was unable to fully read the
prescription and it was her supervisor who apologized and informed De Leon that they do not have stock of the needed
CortisporinOpthalmic. De Leon wrote Mercury Drug, through its president, Ms. Vivian K. Askuna, about the day’s incident. Instead, two
sales persons went to his office and informed him that their supervisor was busy with other matters. Having been denied his simple desire
for a written apology and explanation, De Leon filed a complaint for damages against Mercury Drug.
ISSUE: Whether or not the Mercury Drug and Ganzon are liable.
RULING: Yes. Mercury Drug and Ganzoncannot exculpate themselves from any liability. As active players in the field of dispensing
medicines to the public, the highest degree of care and diligence is expected of them. Likewise, numerous decisions, both here and
abroad, have laid salutary rules for the protection of human life and humanhealth. In the United States case of Tombari v. Conners, it
was ruled that the profession of pharmacy demands care and skill, and druggists must exercise care of a specially high degree, the
highest degree of care known to practical men. In other words, druggists must exercise the highest practicable degree of prudence and
vigilance, and the most exact and reliable safeguards consistent with the reasonable conduct of the business, so that human life may not
constantly be exposed to the danger flowing from the substitution of deadly poisons for harmless medicines.
In cases where an injury is caused by the negligence of an employee, there instantly arises a presumption of law that there has been
negligence on the part of the employer, either in the selection or supervision of one’s employees. This presumption may be rebutted by
a clear showing that the employer has exercised the care and diligence of a good father of the family. Mercury Drug failed to overcome
such presumption.
Petitioners Mercury Drug and Ganzon have similarly failed to live up to high standard of diligence expected of them as pharmacy
professionals. They were grossly negligent in dispensing ear drops instead of the prescribed eye drops to De Leon.
As a buyer, De Leon relied on the expertise and experience of Mercury Drug and its employees in dispensing to him the right
medicine. This Court has ruled that in the purchase and sale of drugs, the buyer and seller do not stand at arms length. There exists an
imperative duty on the seller or the druggist to take precaution to prevent death or injury to any person who relies on one’s absolute
honesty and peculiar learning.

32. FAR EAST BANK AND TRUST COMPANY V. QUERIMIT

G.R. NO. 148582 JANUARY 16, 2002
CHAPTER I: REQUISITES OF NEGOTIABILITY
FACTS: Respondent Estrella Querimit worked as an internal auditor of thePhilippine Savings Bank (PSB) for 19 years. She opened a
dollar savings account in petitioner Far East Bank and Trust Company (FEBTC)—issued to her was four (4) Certificates of Deposit, each
representing a total amount of 60,000 USD. Said certificates were to mature on January 23, 1987 and were payable to bearer at 4.5%
interest per annum. Respondent kept her money in the bank to ear more interest and use her funds after she retired. After accompanying
his husband, who eventually died, to the United States, she returned to the Philippines and went to petitioner to withdraw her deposit.
Petitioner told respondent that her husband had withdrawn the money deposit. Despite several demands made by the respondent,
petitioner refused to pay prompting Querimit to file a complaint against FEBTC. Petitioner insisted that they allowed respondent’s husband
to withdraw the deposit by presenting certified true copies of documents showing the payment. The trial court and the Court of Appeals
rendered judgment for respondent stating the fact that FEBTC failed to prove that the certificates of deposit had been paid out of its
funds. Respondent’s subject certificates of deposit until now remain unendorsed, undelivered and unwithdrawn.
ISSUE/S: Whether or not the subject certificates of deposit have already been paid by petitioner.
HELD: No, petitioner bank failed to prove their payment to respondent Estrella Querimit, as the bearer and lawful holder of the subject
certificates of deposit. A certificate of deposit is a written acknowledgement by a bank of the receipt of a sum of money on deposit which
the bank promises to pay to the depositor, on demand of the same, to some other person whereby a debtor-creditor relationship between
the bank and depositor is created. The principle that payment must be made to someone authorize to receive in order to release a debt
is necessary to the payment of certificates of deposit. In general, one who pleads payment has the burden to prove it such that the burden
rests on the defendant to prove payment than on the plaintiff. The certificates of deposit were clearly marked payable to “bearer” which
means “the person in possession of an instrument”. FEBTC should not have paid respondent’s husband or any third party without the
surrender of the said certificates. The business of banks is impressed with public interest since there exists a fiduciary nature of
relationship with their depositors to treat their accounts with the highest degree of care. Responsibility arising from negligence in the
performance of every kinds of obligation is demandable. The principle of laches is not sufficient to defeat the rights of respondent over
the subject certificates of deposit. FEBTC is liable for exemplary damages, moral damages and attorney’s fees.

33. CRUZ VS GANGAN

On Friday afternoon of January 15, 1999, petitioner went to the Regional Office of the Technological Education and Skills
Development Authority (TESDA) in Taguig, Metro Manila for consultation with the regional director.[3] After the meeting, petitioner went
back to her official station in Caloocan City, where she was the then Camanava district director of the TESDA, by boarding the Light
Railway Transit (LRT) from Sen. Gil Puyat Avenue to Monumento. On board the LRT, her handbag was slashed and its contents stolen
by an unidentified person. Among the items taken from her were her wallet and the government-issued cellular phone, which is the
subject of the instant case. That same day, she reported the incident to police authorities who immediately conducted an investigation.
However, all efforts to locate the thief and to recover the phone proved futile.
Three days after, on January 18, 1999, petitioner reported the theft to the regional director of TESDA-NCR. She did so through
a Memorandum, in which she requested relief from accountability of the subject property. In a 1st Indorsement dated January 19, 1999,
the regional director, in turn, indorsed the request to the resident auditor.
Under a 2nd Indorsement dated February 26, 1999, the resident auditor[4] denied the request of petitioner on the ground that
the latter lacked the diligence required in the custody of government properties. Thus, petitioner was ordered to pay the purchase value
of the cell phone (P3,988) and that of its case (P250), a total of P4,238. The auditors action was sustained by the director of the National
Government Audit Office II (NGAO II). The matter was then elevated to the Commission on Audit.
ISSUES: In the main, the issues in this case are: (1) whether petitioner was negligent in the care of the government-issued cellular phone,
and (2) whether she should be held accountable for its loss.
HELD:
(1) Negligence is the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something which a prudent man and reasonable man would not do.
Negligence is want of care required by the circumstances.
The diligence with which the law requires the individual at all times to govern his conduct varies with the nature of the situation
in which he is placed, and the importance of the act which he is to perform. (Emphasis supplied)
The Rules provide that property for official use and purpose shall be utilized with the diligence of a good father of a family. Extra-
ordinary measures are not called for in taking care of a cellular phone while in transit. Placing it in a bag away from covetous eyes and
holding on to that bag, as done by petitioner, is ordinarily sufficient care of a cellular phone while travelling on board the LRT. The records
do not show any specific act of negligence on her part. It is a settled rule that negligence cannot be presumed; it has to be proven. In the
absence of any shred of evidence thereof, respondents gravely abused their discretion in finding petitioner negligent.
Granting that the presence or the absence of negligence is a factual matter, the consistent ruling of this Court is that findings of
fact of an administrative agency must be respected, so long as they are supported by substantial evidence. But lacking support, the
factual finding of the COA on the existence of negligence cannot stand on its own and is therefore not binding on the Court.
While we commend the Commission on Audit for its diligence in safeguarding State properties, we nonetheless hold that a
government employee who has not been proven to be culpable or negligent should not be held accountable for the loss of a cellular
phone, which was stolen from her while she was riding on the LRT.
(2) The assailed COA Decision directly attributed the loss of the cellular phone to a robbery (bag slashing). However, it denies the request
of petitioner for relief from accountability, because it found her to be negligent. Earlier, we have already ruled that the finding of negligence
had no factual or legal basis and was therefore invalid. What now remains to be resolved is whether petitioner observed the proper
procedure for notifying the government of the loss.
Within thirty days of the loss,[14] petitioner applied for relief from accountability. We hold that such application be deemed as
the notification of the loss of the subject cellular phone. She has also done her part in proving that the loss was due to theft or robbery.
The resident auditor[15] concerned and the COA itself have accepted that the robbery or theft had actually taken place. Necessarily, in
the absence of evidence showing negligence on her part, credit for the loss of the cellular phone is proper under the law.[16] It also
stands to reason that P4,238 should now be refunded to her. That was the amount she had to pay on June 3, 1999, upon her retirement
from government service at age 65.

ARTICLE 1174 - RESPONSIBILITY FOR EVENTS WHICH CANNOT BE FORESEEN (CASO FORTUITO)

34. LA MALLORCA AND PAMPANGA BUS COMPANY VS VALENTIN DE JESUS

In October 1959, Lolita de Jesus was riding a bus owned by La Mallorca and Pampanga Bus Company which had a head on
collision against a freight truck. Apparently, the bus had a tire blow out which resulted to the accident. Lolita died and so her father,
Valentin de Jesus, filed a civil case for damages against La Mallorca. The lower court rendered judgment in favor of De Jesus and
ordered La Mallorca to pay for actual, compensatory, and moral damages including counsel fees. This decision was affirmed by the Court
of Appeals. La Mallorca assailed the decision as it argued that a tire blow out is a fortuitous event and should not be taken as negligence.
ISSUE: Whether or not a tire blow out is a fortuitous event.
HELD: No. As found by the lower court, the tire blow out in this case was due to the fact that the inner circle of the wheel of the bus was
pressed so closely to the rim which caused it to eventually explode. This mechanical defect in the installation of the wheel could have
been easily discovered had the bus been subjected to a thorough check up before it was allowed to hit the road. La Mallorca is therefore
negligent and the tire explosion is not a fortuitous event for it could have been avoided had the bus been properly maintained.
The Supreme Court also emphasized in this case that moral damages are recoverable by reason of the death of a passenger
caused by the breach of contract of a common carrier, as provided in Article 1764, in relation to Article 2206, of the Civil Code.

35. JUAN NAKPIL AND SONS V. CA

G.R. NO. L-47851 OCTOBER 3, 1986
FACTS OF THE CASE:
The private respondent (Philippine Bar Association) hired the services of the petitioner to make the plans and specifications for the
construction of their office building. The building was completed by the contractor but subsequently, an earthquake struck causing its
partial collapse and damage.
ISSUE: Is the petitioner liable for damages in this case?
HELD: Yes. The petitioner made substantial deviations from the plans and specifications and failed to observe requisite workmanship
standards in the construction of the building while their architect drew plans that contain defects and other inadequacies. Both the
contractor and the architect cannot escape liability for damages when the building collapsed due to an earthquake. Other buildings in the
area withstood the tremor. The lower court also found that the spirals in one of the columns in the ground floor has been cut. One who
creates a dangerous condition cannot escape liability even if an act of God may have intervened as in this case. As such, the liability of
the contractor (herein petitioner) and the architect for the collapse of the building is solidary.

36. COKALIONG SHIPPING VS. UCPB

FACTS: December 11, 1991: Nestor Angelia (shipper and consignee) delivered to the petitioner Edgar Cokaliong Shipping Lines, Inc.
(now Cokaliong Shipping Lines), a cargo consisting of one (1) carton of Christmas decor and two (2) sacks of plastic toys, to be
transported on board the M/V Tandag from Cebu City for Tandag, Surigao del Sur. This cargo is under Bill of Lading No. 58, in the
amount of P6,500.00.
Zosimo Mercado (another shipper and consignee) likewise delivered cargo to petitioner consisting of two (2) cartons of plastic
toys and Christmas decor, one (1) roll of floor mat and one (1) bundle of various or assorted goods. This is under Bill of Lading No. 59,
valued in the amount of P14,000.00
Feliciana Legaspi (owner of the goods) insured the cargo, covered by BOL Nos. 59 and No. 58, with the UCPB General
Insurance Co., Inc., [respondent]. No. 59 was insured for P100,000 while No. 58 for P50,000. [*Note that both amounts are far from the
actual and declared value in the BOLs issued by Cokaliong]
After the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts of the
officers and crew of the vessel, the fire engulfed and destroyed the entire vessel resulting in the loss of the vessel and the cargoes
therein.
Feliciana Legaspi filed a claim, with [respondent], for the value of the cargos insured. The latter approved the claim. For Bill of
Lading No. 59, Legaspi received from UCPB P99,000.00 while for No. 58, P60,338.00.
 UCPB as subrogee of Legaspi, filed a complaint anchored on torts against petitioner, with the RTC of Makati City, for the
collection of the total principal amount of P148,500.00. Respondent alleged that the loss of the cargo was due to the negligence of the
petitioner
Petitioner alleged that: (a) It was cleared by the Board of Marine Inquiry of any negligence in the burning of the vessel; and (b)
it cannot be held liable for the loss of the cargo beyond the value thereof declared in the Bill of Lading.
ISSUES:
(1) Is petitioner liable for the loss of the goods? YES
HELD:
(1) Petitioner’s argument: the cause of the loss of the goods, subject of this case, was force majeure. It adds that its exercise of due
diligence was adequately proven by the findings of the Philippine Coast Guard.
SC: We are not convinced. The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag sank due to a fire,
which resulted from a crack in the auxiliary engine fuel oil service tank. The crack was located on the side of the fuel oil tank, which
had a mere two-inch gap from the engine room walling, thus precluding constant inspection and care by the crew
Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force
majeure. Broadly speaking, force majeure generally applies to a natural accident, such as that caused by a lightning, an earthquake,
a tempest or a public enemy.
Hence, fire is not considered a natural disaster or calamity. It does not fall within the category of an act of God unless caused
by lighting or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier.
Peril of fire is not comprehended within the exceptions in Article 1734; Article 1735 applies (please see provision)
Where loss of cargo results from the failure of the officers of a vessel to inspect their ship frequently so as to discover the
existence of cracked parts, that loss cannot be attributed to force majeure, but to the negligence of those officials.
Ensuring the seaworthiness of the vessel is the first step in exercising the required vigilance. Petitioner did not present sufficient
evidence showing what measures or acts it had undertaken to ensure the seaworthiness of the vessel.
It failed to show when the last inspection and care of the auxiliary engine fuel oil service tank was made, or some other evidence
to establish that it had exercised extraordinary diligence.
It merely stated that constant inspection and care were not possible, and that the last time the vessel was dry-docked was in
November 1990.

37. BACOLOD-MURCIA MILLING V. COURT OF APPEALS 182 SCRA 24, G.R. NO. 81100-01 (FEBRUARY 7, 1990)
FACTS:
-Bacolod-Murcia Milling Co., Inc.(BMMC) is the owner and operator of the sugar central in Bacolod.
-Alonso Gatuslao (Gatuslao) is a registered plantor of the Bacolod-Muria Mill District.
-BMMC and Gatuslao executed an “Extension and Modification of Milling Contract.
-From crop year 1957-1958 up to crop year 1967-1968, Gatuslao has been milling all the sugarcane grown and produced with the Mill of
BMMC.
-From crop year 1920-21 to crop year 1967-68, the canes of planters adhered to the mill of BMMC were transported from the plantation
to the mill by means of cane cars and through railway system operated by BMMC.
BMMC has been hauling planter Gatuslao’s sugar cane to its mill or factory continuously until crop year 1967 – 1968.
-The milling contract between BMMC and owners of the hacienda Helvetica expired at the end of the 1964-1965 crop year.
-The portion of the railway traversing the hacienda Helvetica was closed as per decision of the court.
-The use of the railroad tracks(traversing hacienda Helvetica) was temporarily allowed due to the intervention of the President of the
Philippines, which is until 1967-1978 milling season only.
-Gatuslao loaded their cut cranes on trucks provided by the Bacolod-Murcia Agricultural Cooperative Marketing Association, Inc. (B-
MACMA) during 1968-1969 crop year.
-BMMC had not been able to use its cane cars and railway system for the cargo crop year 1968-1989.
ISSUE/S:
-Whether or not the termination of petitioner’s right of way over the hacienda Helvetica caused by the expiration of its amended milling
contracts with the landowners of the land in question is fortuitous event or force majeure which will exempt petitioner BMMC from
fulfillment of its contractual obligation.
-Whether or not BMMC was able to provide adequate and efficient transportation facilities of the canes of Gatuslao and the other planters
milling with BMMC during the crop year 1968-69.
RULING:
No. The terms of the milling contracts were clear and undoubtedly there was no reason for BMMC to expect otherwise. The
closure of any portion of the railroad track, not necessarily in the hacienda Helvetica but in any of the properties whose owners decided
not to renew their milling contracts with the Central upon their expiration, was foreseeable and inevitable.
 Despite its awareness that the conventional contract of lease would expire in crop year 1964-1965 and that refusal on the part
of any one of the landowners to renew their milling contracts and the corresponding use of the right of way on their lands would render
impossible compliance of its commitments, BMMC took a calculated risk that all the landowners would renew their contracts.
The closure of the railway lines was not an act of God nor it constitute force majeure. It was due to the termination of the
contractual relationships of the parties, for which BMMC is charged with knowledge. Owners of the hacienda Helvetica notified BMMC
as far back as August 1965 of its intention not to allow the passage of the railway system thru its land after the aforesaid crop year.
Adequate measures should have been adopted by BMMC to forestall such paralyzations but the records show none.
No, BMMC failed to provide adequate transportation facilities to Gatuslao and other adherent parties.
The inadequacies of the reparto or trailer allotment as well as the state of unpreparedness on the part of BMMC to meet the problem
posed by the closure of the railway lines.
It was established that after Gatuslao had cut his sugarcanes for hauling, no trailers arrived and when two trailers finally arrived
on October 1968 after several unheeded requests, they were left on the national highway about one kilometer away from the loading
station, the means of transportation provided by BMMC is very inadequate to answer the needs of Gatuslao.

38. BACHELOR EXPRESS, INCORPORATED, and CRESENCIO RIVERA vs. THE HONORABLE COURT OF APPEALS (Sixth
Division), RICARDO BETER, SERGIA BETER, TEOFILO RAUTRAUT and ZOETERA RAUTRAUT
G.R. No. 85691 July 31, 1990
FACTS: A bus owned by Bachelor Express, Inc. and driven by Cresencio Rivera was the situs of a stampede which resulted in the death
of passengers Ornominio Beter and Narcisa Rautraut.
The bus came from Davao City on its way to Cagayan de Oro City; that while in Butuan City, the bus picked up a passenger;
that about 15 minutes later, a passenger at the rear portion suddenly stabbed a PC soldier which caused commotion and panic
among the passengers; that when the bus stopped, passengers Ornominio Beter and Narcisa Rautraut were found lying down the road,
the former already dead as a result of head injuries and the latter also suffering from severe injuries which caused her death later. The
passenger assailant alighted from the bus and ran toward the bushes but was killed by the police. Thereafter, the heirs of Ornominio
Beter and Narcisa Rautraut, private respondents filed a complaint for "sum of money" against Bachelor Express, Inc. its alleged owner
Samson Yasay and the driver Rivera.
Petitioner alleged that the driver was able to transport his passengers safely to their respective places of destination except
Ornominio Beter and Narcisa Rautraut who jumped off the bus without the knowledge and consent.
The trial court dismissed the complaint which was reversed and set aside by the Court of Appeals.
Petitioners asseverate that they were not negligent in the performance of their duties and that the incident was completely and absolutely
attributable to a third person, the passenger who ran amuck, for without his criminal act, Beter and Rautraut could not have been subjected
to fear and shock which compelled them to jump off the running bus. They argue that they should not be made liable for damages arising
from acts of third persons over whom they have no control or supervision. . In effect, the petitioner, in order to overcome the presumption
of fault or negligence under the law, states that the vehicular incident resulting in the death of passengers Beter and Rautraut was caused
by force majeure or caso fortuito over which the common carrier did not have any control.
ISSUE: Whether petitioner is liable.
HELD: YES. The liability of the petitioners is anchored on culpa contractual or breach of contract of carriage.
Ornominio Beter and Narcisa Rautraut were passengers of a bus belonging to petitioner Bachelor Express, Inc. and, while
passengers of the bus, suffered injuries which caused their death. Consequently, pursuant to Article 1756 of the Civil Code, petitioner
Bachelor Express, Inc. is presumed to have acted negligently unless it can prove that it had observed extraordinary diligence in
accordance with Articles 1733 and 1755 of the New Civil Code.
The running amuck of the passenger was the proximate cause of the incident as it triggered off a commotion and panic among
the passengers such that the passengers started running to the sole exit shoving each other resulting in the falling off the bus by
passengers Beter and Rautraut causing them fatal injuries. The sudden act of the passenger who stabbed another passenger in the
bus is within the context of force majeure.
A caso fortuito presents the following essential characteristics: (1) The cause of the unforeseen and unexpected occurrence, or
of the failure of the debtor to comply with his obligation, must be independent of the human will. (2) It must be impossible to foresee
the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid. (3) The occurrence must be such as
to render it impossible for the debtor to fulfill his obligation in a normal manner. And (4) the obligor (debtor) must be free from any
participation in the aggravation of the injury resulting to the creditor.
As will be seen, these authorities agree that some extraordinary circumstance independent of the will of the obligor or of his
employees, is an essential element of a caso fortuito.
However, in order that a common carrier may be absolved from liability in case of force majeure, it is not enough that the
accident was caused by force majeure. The common carrier must still prove that it was not negligent in causing the injuries
resulting from such accident.
The bus driver did not immediately stop the bus at the height of the commotion; the bus was speeding from a full stop; the
victims fell from the bus door when it was opened or gave way while the bus was still running; the conductor panicked and blew his
whistle after people had already fallen off the bus; and the bus was not properly equipped with doors in accordance with law-it is clear
that the petitioners have failed to overcome the presumption of fault and negligence found in the law governing common carriers.
The petitioners' argument that the petitioners "are not insurers of their passengers" deserves no merit in view of the failure of
the petitioners to prove that the deaths of the two passengers were exclusively due to force majeure and not to the failure of the petitioners
to observe extraordinary diligence in transporting safely the passengers to their destinations as warranted by law.

39. NAPOCOR vs CA
GR 103442-45 May 21, 1993
FACTS:
This is a consolidated case comprising of four separate complaints., filed against NPC and a particular Chavez.
Plaintiffs filed a complaint against respondent for the lost of lives and destruction of properties due to the negligence of the latter
in releasing water from Angat dam during the typhoon “Kading”
Benjamin Chavez, being the supervisor at that time of a multi-purpose hydroelectric plant in the Angat River at Hilltop,
Norzagaray, Bulacan, failed to exercise due diligence in monitoring the water level at the dam.
NPC’s allegations were as follows:
1) the NPC exercised due care, diligence and prudence in the operation and maintenance of the hydroelectric plant;
2) the NPC exercised the diligence of a good father in the selection of its employees; 3) written notices were sent to the different
municipalities of Bulacan warning the residents therein about the impending release of a large volume of water with the onset of typhoon
"Kading" and advise them to take the necessary precautions;
4) the water released during the typhoon was needed to prevent the collapse of the dam and avoid greater damage to people and
property;
5) in spite of the precautions undertaken and the diligence exercised, they could still not contain or control the flood that resulted and;
6) the damages incurred by the private respondents were caused by a fortuitous event or force majeure and are in the nature and
character of damnum absque injuria. By way of special affirmative defense, the defendants averred that the NPC cannot be sued because
it performs a purely governmental function.
The trial court dismissed the complaints as against the NPC on the ground that the provision of its charter allowing it to sue and
be sued does not contemplate actions based on tort. Its decision on 30 April 1990 dismissing the complaints "for lack of sufficient and
credible evidence."
Court of Appeals reversed the appealed decision and awarded damages in favor of the private respondents. Based on the
findings that From the mass of evidence extant in the record, We are convinced, and so hold that the flash flood on October 27, 1978,
was caused not by rain waters (sic), but by stored waters (sic) suddenly and simultaneously released from the Angat Dam by defendants-
appellees, particularly from midnight of October 26, 1978 up to the morning hours of October 27, 1978.
ISSUE:
Whether or not respondent is negligent?
Whether or not the notices of warning were insufficient?
Whether or not The damages suffered was not DAMNUM ABSQUE INJURIA?
HELD:
We declared therein that the proximate cause of the loss and damage sustained by the plaintiffs therein — who were similarly
situated as the private respondents herein — was the negligence of the petitioners, and that the 24 October 1978 "early warning notice"
supposedly sent to the affected municipalities, the same notice involved in the case at bar, was insufficient.
The petitioners were guilty of "patent gross and evident lack of foresight, imprudence and negligence in the management and
operation of Angat Dam," and that "the extent of the opening of the spillways, and the magnitude of the water released, are all but
products of defendants-appellees' headlessness, slovenliness, and carelessness."
To exempt the obligor from liability under Article 1174 of the Civil Code, for a breach of an obligation due to an "act of God," the
following must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be
either unforseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a moral
manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor. (Vasquez v. Court of Appeals,
138 SCRA 553; Estrada v. Consolacion, 71 SCRA 423; Austria v. Court of Appeals, 39 SCRA 527; Republic of the Phil. v. Luzon
Stevedoring Corp., 21 SCRA 279; Lasam v. Smith, 45 Phil. 657).
Accordingly, petitioners cannot be heard to invoke the act of God or force majeure to escape liability for the loss or damage
sustained by private respondents since they, the petitioners, were guilty of negligence. The event then was not occasioned exclusively
by an act of God or force majeure; a human factor — negligence or imprudence — had intervened. The effect then of the force majeure
in question may be deemed to have, even if only partly, resulted from the participation of man. Thus, the whole occurrence was thereby
humanized, as it were, and removed from the laws applicable to acts of God.

40. JACINTO TANGUILIG doing business under the name and style J.M.T. ENGINEERING AND GENERAL MERCHANDISING vs
COURT OF APPEALS and VICENTE HERCE JR.
G.R.No. 125994 29June2001
FACTS OF THE CASE:
Herce contracted Tanguilig to construct a windmill system for him, for consideration of 60,000.00. Pursuant to the agreement
Herce paid the downpayment of 30,000.00 and installment of 15,000.00 leaving a 15,000.00 balance.
Herce refused to pay the balance because he had already paid this amount to SPGMI which constructed a deep well to which
the windmill system was to be connected since the deepwell, and assuming that he owed the 15,000.00 this should be offset by the
defects in the windmill system which caused the structure to collapse after strong winds hit their place. According to Tanguilig, the
60,000.00 consideration is only for the construction of the windmill and the construction of the deepwell was not part of it. The collapse
of the windmill cannot be attributed to him as well, since he delivered it in good and working condition and Herce accepted it without
protest. Herce contested that the collapse is attributable to a typhoon, a force majeure that relieved him of liability.
The RTC ruled in favor of Tanguilig, but this decision was overturned by the Court of Appeals which ruled in favor of Herce.
ISSUES OF THE CASE:
Can the collapse of the windmill be attributed to force majeure? Thus, extinguishing the liability of Tanguilig?
- Yes, in order for a party to claim exemption from liability by reason of fortuitous event under Art 1174 of the Civil Code the event should
be the sole and proximate cause of the loss or destruction of the object of the contract.
- In Nakpil vs. Court of Appeals, the S.C. held that 4 requisites must concur that there must be a (a) the cause of the breach of the
obligation must be independent of the will of debtor (b) the event must be either unforeseeable or unavoidable; (c) the event be such to
render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in or
aggravation of the injury to the creditor.
- Tanguilig merely stated that there was a strong wind, and a strong wind in this case is not fortuitous, it was not unforeseeable nor
unavoidable, places with strong winds are the perfect locations to put up a windmill, since it needs strong winds for it to work.
HELD:
WHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE HERCE JR. is directed to pay petitioner JACINTO M.
TANGUILIG the balance of P15,000.00 with interest at the legal rate from the date of the filing of the complaint. In return, petitioner is
ordered to "reconstruct subject defective windmill system, in accordance with the one-year guaranty" and to complete the same within
three (3) months from the finality of this decision.
Obligations and Contracts Terms:
Fortuitous Events- Refers to an occurrence or happening which could not be foreseen, or even if foreseen, is inevitable. It is necessary
that the obligor is free from negligence. Fortuitous events may be produced by two (2) general causes: (1) by Nature, such as but not
limited to, earthquakes, storms, floods, epidemics, fires, and (2) by the act of man, such as but not limited to, armed invasion, attack by
bandits, governmental prohibitions, robbery, provided that they have the force of an imposition which the contractor or supplier could not
have resisted.

41. SOUTHEASTERN COLLEGE INC VS CA (TORTS)

FACTS:
After a typhoon a complaint of culpa aquiliana was filed against the School for the reason that one of their buildings was
considered a structural hazard and the reason of inhabitability of the nearby houses .The complaint is rooted to the claim that the school
has a defective roofing structure and that they have been remiss on the maintenance of such building. The school (petitioner) averred
that subject school building had withstood several devastating typhoons and other calamities in the past, without its roofing or any portion
thereof giving way; that it has not been remiss in its responsibility to see to it that said school building, which houses school children,
faculty members, and employees, is "in tip-top condition"; and furthermore, typhoon "Saling" was "an act of God and therefore beyond
human control" such that petitioner cannot be answerable for the damages wrought thereby, absent any negligence on its part.
ISSUE:
Whether or not the destruction of the nearby houses was caused by a fortuitous event.
HELD:
It was held that petitioner has not been shown negligent or at fault regarding the construction and maintenance of its school building in
question and that typhoon "Saling" was the proximate cause of the damage suffered by private respondents' house.

42. FORTUNE EXPRESS vs. COURT OF APPEALS and PAULIE CAORONG and HER MINOR CHILDREN, 305 SCRA 14 (1999)
FACTS:
 Pauli Caurong filed a complaint for damages against petitioner, a bus company operating in Northern Mindanao, for the death
of her husband, Atty. Talib Caorong. Atty. Caurong was shot by Maranaos in an ambush involving said bus.
 BACKGROUND OF THE STORY:
o In November 1989, a bus of Fortune was involved in an accident with a passenger jeepney resulting in the deaths of several
passengers.
 o Crisanto Generalao, a local field agent of the Philippine Constabulary, conducted an investigation on the accident and found
that the owner of the jeepney was a Maranao and that several Maranaos were planning to burn some of Fortune’s buses
for revenge.
o Generalao informed Diosdado Bravo, operations manager of Fortune, about the plot, and Bravo assured him that they
would take the necessary precautions for safety.
o Several days later, Atty. Caorong was on board a bus to Iligan when three Maranaos went on board the vehicle. The leader
of the group ordered the passengers to leave the bus. Atty. Caorong later went back to get something when he saw that
the Maranaos were already pouring gasoline on the bus and on the driver. Atty. Caorong pleaded for the life of the driver,
after which the driver jumped out of the vehicle. Caorong was shot to death as a result.
 RTC dismissed the complaint:
o Fortune was not negligent. Disregarding the suggestion of providing its buses with security guards is not an omission of
petitioner’s duty. The evidence showed that the assailants did not intend to harm the passengers. The death of Atty.
Caorong was an unexpected and unforeseen occurrence beyond petitioner’s control.
 CA REVERSED RTC’s ruling:
o Fortune is negligent. Despite the tip to Manager Bravo of the devious plan by several Maranaos, management did not do
not take any safety precautions at all.
o One available safeguard that could have absolved Fortune from liability was frisking of incoming passengers en route
to dangerous areas and bag inspection at the terminals, which Fortune failed to do. The frisking system is not novel in
sensitive and dangerous places. Many companies adopt this measure. Fortune did “absolutely nothing”.
ISSUE:
1. W/N Petitioner is liable for the death of Atty. Caorong by failing to take necessary precautions to ensure the safety of its
passengers;
2. W/N the attack by the Maranaos constituted causo fortuito?
HELD: Petitioner is liable. Attack was not a fortuitous event.
 Article 1763 holds common carriers liable for the injuries to passengers caused by the wilful act of other passengers, if its
employees failed to exercise the diligence of a good father in preventing the act.
 Despite the warning by the constabulary officer, petitioner did nothing to protect the safety of its passengers.
 If petitioner took the necessary precautions, they would have discovered the weapons and the large quantity of gasoline the
malefactors carried with them.
 A common carrier is liable for failing to prevent hijacking by frisking passengers and inspecting baggages.
 The seizure of the bus was not force majeure. Of the four elements to constitute an event as caso fotuito, the element of
“unforeseeable or unavoidable circumstances” was lacking. The seizure of the bus was foreseeable, given the fact that
petitioner was well-informed of the possibility, days before the incident. This situation was likened to a case1 where the common
carrier failed to take safety precautions despite warnings of an approaching typhoon.
 Petitioner is solely liable for Atty. Caorong’s death. There was no contributory negligence on the part of the victim, since all he
did was pleading for the life of the driver. His heroic effort was neither an act of negligence or recklessness.

43. THERMOCHEM INCORPORATED and JEROME O. CASTRO, Petitioners,

vs. LEONORA NAVAL and THE COURT OF APPEALS, Respondents.
G.R. No. 131541 : October 20, 2000
FACTS: On May 10, 1992, at around 12:00 o’clock midnight, Eduardo Edm was driving a “Luring Taxi” along Ortigas Avenue, near
Rosario, Pasig going towards Cainta. Prior to the collision, the taxicab was parked along the right side of Ortigas Avenue, not far from
the Rosario Bridge, to unload a passenger. Thereafter, the driver exectued a U-turn to traverse the same road, going to the direction of
EDSA. At this point, the Nissan Pathfinder traveling along the same road going to the direction of Cainta collided with the taxicab. The
point of impact was so great that the taxicab was hit in the middle portion and was pushed sideward, causing the driver to lose control of
the vehicle. The taxicab was then dragged into the nearby Question Tailoring Shop, thus, causing damage to the said tailoring shop, and
its driver, Eduardo Edem, sustained injuries as a result of the incident. Private respondent, as owner of the taxi, filed a damage suit
against petitioner, Thermochem Incorporated, as the owner of the Nissan Pathfinder, and its driver, petitioner Jerome Castro.
ISSUE: WON the Honorable Court of Appeals erred in holding petitioner liable to respondent for actual, compensatory and .exemplary
damages as well as attorneys fees and cost of suit.
RULING:
Yes. The Court finds that the driver of the oncoming Nissan Pathfinder vehicle was liable and the driver of the U-turning taxicab
was contributorily liable. The fact that a party had no opportunity to avoid the collision is his own making and this should not relieve him
of liability. From petitioner Castro’s testimonial admissions, it is established that he was driving at a speed faster than 50km/hr because

1 Vasquez vs. Court of Appeals

it was a downhill slope coming from the Rosario Bridge. But as he allegedly stepped on the brake, it locked causing his Nissan Pathfinder
to skid to the left and consequently hit the taxicab. It is said that malfunction or loss of brake is not a fortuitous event. Even assuming
arguendo that loss of brakes is an act of God, by reason of their negligence, the fortuitous event became humanized, rendering the
Nissan driver liable for the ensuing damages.
As mentioned earlier, the driver of the taxi is contributorily liable. U turns are not generally advisable particularly on major
streets. Obviously, there was a lack of foresight on his part, making him contributorily liable. Considering the contributory negligence of
the driver of private respondent’s taxi, the award of ₱47,850.00, for the repair of the taxi, should be reduced in half. All other awards for
damages are deleted for lack of merit.

44. PHILCOMSAT V. GLOBE TELECOM 429 SCRA 153, G.R. NO. 147324 (MAY 25, 2004)
429 SCRA 153, G.R. NO. 147324 (MAY 25, 2004)
FACTS:
Globe Telecom, Inc. (Globe) is engaged in the coordination of the provision of various communication facilities for the military
bases of the United States of America (US) in the Clark Air Base and Subic Naval Base.
Saud communication facilities were installed and configured for the exclusive use of the US Defense Communications Agency
(USDCA).
Globe contracted Philippine Communications Satellite Corporation (Philcomsat) for the provision of the communication facilities.
Philcomsat and Globe entered into an agreement whereby Philcomsat obliged itself to establish, operate and provide an IBS
Standard B earth station (earth station) for the exclusive use of the USDCA. Globe promised to pay Philcomsat monthly rentals
for each leased circuit involved.
Philcomsat installed and established the earth station and the USDCA made use of the same.
Senate passed and adopted its resolution, expressing its decision not to concur in the ratification of the Treaty of Friendship,
Cooperation and Security and its Supplementary Agreements that was supposed to extend the term of the use by the US of Subic Naval
Base, among others.
PH government sent a Note Verbale to the US government through the US Embassy, notifying it of the Philippine termination of
the RP-US Military Base Agreement. The withdrawal of all US military forces from Subic Naval Base should be completed by December
31. 1992.
Globe notified Philcomsat of its intention to discontinue the use of the earth station.
Philcomsat demand payment of rentals for the balance of lease term, despite the non-use of earth station.
ISSUE/S:
Whether the termination of the RP-US Military Base Agreement, the non-ratification of the Treaty of Friendship, Cooperation and Security,
and the consequent withdrawal of US military forces and personnel from Cubi Point constitute force majeure which would exempt Globe
from complying with its obligation to pay rentals under its Agreement with Philcomsat.
Whether Globe is liable to pay rentals under the Agreement for the month of December 1992.
Whether Philcomsat is entitled to attorney’s fees and exemplary damages.
RULING:
Yes. Philcomsat and Globe had no control over the non-renewal of the term of the RP-US Military Base Agreement when the
same expired in 1991, because the prerogative to ratify the treaty extending the life thereof belonged to the Senate. Neither did the
parties have control over the subsequent withdrawal of the US military forces and personnel from Cubi Point in December 1992.
As a consequence of the termination of the RP-US Military Base Agreement the continued stay of all US Military forces and
personnel from Subic Naval Base would no longer be allowed, hence, plaintiff would no longer be in any position to render service it was
obligated under the Agreement.
Events made impossible the continuation of the Agreement until the end of its five-year term without fault on the part of either
party. Such fortuitous events rendered Globe exempt from payment of rentals for the remainder of the term of the Agreement.
Philcomsat would like to charge globe rentals for the balance of the lease term without being any corresponding
telecommunications service subject of the lease. It will be grossly unfair and iniquitous to hold globe liable for lease charges for a service
that was not and could not have been rendered due to an act of the government which was clearly beyond globes control.
Yes. The US military forces and personnel completely withdrew from Cubi Point only on December 31, 1992. Thus, until that
date, USDCA had control over the earth station and had the option of using the same. Furthermore, Philcomsat could not have removed
or rendered ineffective said communication facility until after December 31, 1992 because Cubi Point was accessible only to US naval
personnel up to that time.
No. The award of attorney’s fees is the exemption rather than the rule. In cases where both parties have legitimate claims
against each other and no party actually prevailed, such as in the present case where the claims of both parties were sustained in part,
an award of attorney’s fees would not be warranted.
Exemplary damages may be awarded in cases involving contracts, if the erring party acted in wanton, fraudulent, reckless,
oppressive or malevolent manner. It was not shown that Globe acted wantonly or oppressively in not heeding Philcomsats demands for
payment of rentals. Globe had valid grounds for refusing to comply with its contractual obligations after 1992.
45. SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners, vs. SUN HOLIDAYS, INC., Respondent.
G.R. No. 186312 June 29, 2010
FACTS: Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25,2001 against Sun Holidays, Inc. (respondent)
with the Regional Trial Court (RTC) of Pasig City for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished
with his wife on September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera,
Oriental Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned and operated by respondent.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners’ son and his wife trekked
to the other side of the Coco Beach mountain that was sheltered from the wind where they boarded M/B Coco Beach III, which was to
ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open seas, the rain and
wind got stronger, causing the boat to tilt from side to side and the captain to step forward to the front, leaving the wheel to one of the
crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B Coco Beach III capsized
putting all passengers underwater. The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the
captain, Matute and the other passengers who reached the surface asked him what they could do to save the people who were still
trapped under the boat. The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by the capsized M/B
Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers and four crew members, who were brought
to Pisa Island. Eight passengers, including petitioners’ son and his wife, died during the incident.
ISSUE: Whether or not respondent is a common carrier.
HELD: The Civil Code defines "common carriers" in the following terms:
Article 1732. 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 compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment
of the general population. We think that Article 1733 deliberately refrained from making such distinctions.
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be properly considered
ancillary thereto. The constancy of respondent’s ferry services in its resort operations is underscored by its having its own Coco Beach
boats. And the tour packages it offers, which include the ferry services, may be availed of by anyone who can afford to pay the same.
These services are thus available to the public. That respondent does not charge a separate fee or fare for its ferry services is of no
moment. It would be imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of beach resort
operators offering tour packages to factor the transportation fee in arriving at the tour package price. That guests who opt not to avail of
respondent’s ferry services pay the same amount is likewise inconsequential. These guests may only be deemed to have overpaid.

46. RESTITUTA IMPERIAL V. ALEX A. JAUCIAN (April 14, 2004)

FACTS:
Petitioner obtained six (6) separate loans amounting to P 320,000.00 from the respondent. In the written agreement, they agreed
upon the 16% interest per month plus penalty charge of 5% per month and the 25% attorney’s fee, failure to pay the said loans on the
stipulated date.
Petitioner executed six (6) separate promissory notes and issued several checks as guarantee for payment. When the said
loans become overdue and unpaid, especially when the petitioner’s checks issued were dishonored, respondent made repeated oral and
written demands for payment.
The petitioner was able to pay only P 116,540.00 as found by the RTC. Although she alleged that she had already paid the
amount of P 441,780.00 and the excess of P 121,780.00 is more than the interest that could be legally charged, the Court affirms the
findings of RTC that petitioner is still indebted to the respondent.
ISSUE:
Whether or not the stipulated interest of 16% per month, 5% per month for penalty charge and 25% attorney’s fee are usurious.
HELD:
YES. The rate must be equitably reduced for being iniquitous, unconscionable and exorbitant. While the Usury Law ceiling on
interest rates was lifted by C.B. Circular No. 905, nothing in the said circular grants lenders carte blanche authority to raise interests rates
to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets.
 When the agreed rate is iniquitous or unconscionable, it considered contrary to morals, if not against the law. Such stipulation
is void. Since the stipulation is void, it is as if there was no express contract thereon. Hence, courts may reduce the interest rate as
reason and equity demand.
The interest rate of 16% per month was reduced to 1.167% per month or 14% per annum and the penalty charge of 5% per
month was also reduced to 1.167% per month or 14% per annum.
The attorney’s fees here are in the nature of liquidated damages and the stipulation therefor is aptly called a penal clause. So
long as the stipulation does not contravene the law, morals, public order or public policy, it is binding upon the obligor. Nevertheless, in
the case at bar, petitioner’s failure to comply fully with her obligation was not motivated by ill will or malice. The partial payments she
made were manifestations of her good faith. Hence the attorney’s fees were reduced to 10% of the total due and payable.

47. TOLEDO VS. HYDEN DIGEST

G.R. NO. 17213 : DECEMBER 8, 2010
FACTS:
Petitioner Jocelyn M. Toledo, who was then the Vice-President of the College Assurance Plan (CAP) Phils., Inc., obtained
several loans from respondent Marilou M. Hyden.
Jocelyn had been religiously paying Marilou the stipulated monthly interest. However, the total principal amount ofP290,000.00
remained unpaid. A document entitled "Acknowledgment of Debt" for the amount ofP290,000.00 was signed by Jocelyn with two of her
subordinates as witnesses. Also on said occasion, Jocelyn issued checks to Marilou representing renewal payment of her five previous
loans.
Jocelyn ordered the stop payment on the remaining checks and filed with the RTC of Cebu City a complaintagainst Marilou for
Declaration of Nullity and Payment, Annulment, Sum of Money, Injunction and Damages.
Jocelyn averred that Marilou forced, threatened and intimidated her into signing the "Acknowledgment of Debt" and at the same
time forced her to issue the postdated checks.She further claimed that the application of her total payment ofP528,550.00 to interest
alone is illegal, unfounded, unjust, oppressive and contrary to law because there was no written agreement to pay interest. Marilou filed
an Answer alleging that Jocelyn voluntarily obtained the said loans knowing fully well that the interest rate was at 6% to 7% per month.
In fact, a 6% to 7% advance interest was already deducted from the loan amount given to Jocelyn.
The trial court ruled in favor of Marilou which was affirmed by the CA.
ISSUES:
I. Whether or not the imposition of interest at the rate of six percent (6%) to seven percent (7%) is contrary to law, morals, good customs,
public order or public policy.
II. Whether or not the "Acknowledgment of Debt" is an inexistent contract that is void from the very beginning pursuant to Article 1409 of
the New Civil Code.
HELD: The petition is without merit.
First Issue: The 6% to 7% interest per month paid by Jocelyn is not excessive under the circumstances of this case. It was
clearly shown that before Jocelyn availed of said loans, she knew fully well that the same carried with it an interest rate of 6% to 7% per
month, yet she did not complain. In fact, when she availed of said loans, an advance interest of 6% to 7% was already deducted from
the loan amount, yet she never uttered a word of protest.
After years of benefiting from the proceeds of the loans bearing an interest rate of 6% to 7% per month and paying for the same,
Jocelyn cannot now go to court to have the said interest rate annulled on the ground that it is excessive, iniquitous, unconscionable,
exorbitant, and absolutely revolting to the conscience of man."This is so because among the maxims of equity are (1) he who seeks
equity must do equity, and (2) he who comes into equity must come with clean hands.The latter is a frequently stated maxim which is
also expressed in the principle that he who has done inequity shall not have equity.It signifies that a litigant may be denied relief by a
court of equity on the ground that his conduct has been inequitable, unfair and dishonest, or fraudulent, or deceitful as to the controversy
in issue."
Second Issue: The document "Acknowledgment of Debt" is valid and binding. It is provided, as one of the conclusive
presumptions under Rule 131, Section 2(a), of the Rules of Court that, "Whenever a party has, by his own declaration, act or omission,
intentionally and deliberately led another to believe a particular thing to be true, and to act upon such belief, he cannot, in any litigation
arising out of such declaration, act or omission, be permitted to falsify it."This is known as the principle ofestoppel.
Here, it is uncontested that Jocelyn had in fact signed the "Acknowledgment of Debt" in April 1998 and two of her subordinates
served as witnesses to its execution, knowing fully well the nature of the contract she was entering into.Next, Jocelyn issued five checks
in favor of Marilou. More significantly, Jocelyn already availed herself of the benefits of the "Acknowledgment of Debt," the validity of
which she now impugns.
Clearly, by her own acts, Jocelyn isestoppedfrom impugning the validity of the "Acknowledgment of Debt." Courts have no power
to relieve parties from obligations voluntarily assumed, simply because their contracts turned out to be disastrous or unwise investments."
The Petition is DENIED.

48. SOLIDBANK CORPORATION, (now Metroplolitan Bank and Trust Company), Petitioner,
vs. PERMANENT HOMES, INCORPORATED, Respondent. G.R. No. 171925 : July 23, 2010
FACTS: The records disclose that PERMANENT HOMES is a real estate development company, and to finance its housing project
known as the “Buena Vida Townhome” located within Merville Subdivision, Parañaque City, it applied and was subsequently granted by
SOLIDBANK with an “Omnibus Line” credit facility in the total amount of SIXTY MILLION PESOS. Of the entire loan, FIFTY NINE
MILLION as time loan for a term of up to three hundred sixty (360) days, with interest thereon at prevailing market rates, and subject to
monthly repricing. The remaining ONE MILLION was available for domestic bills purchase.
To secure the aforesaid loan, PERMANENT HOMES initially mortgaged three(3) townhouse units within the Buena Vida project
in Parañaque. At the time, however, the instant complaint was filed against SOLIDBANK, a total of thirty six (36) townhouse units were
mortgaged with said bank. Of the 60 million available to PERMANENT HOMES, it availed of a total of 41.5 million pesos covered by
three(3) promissory notes. There was a standing agreement by the parties that any increase or decrease in interest rates shall be subject
to the mutual agreement of the parties.
For the three loan availments that PERMANENT HOMES obtained, the herein respondent argued that SOLIDBANK unilaterally
and arbitrarily accelerated the interest rates without any declared basis of such increases, of which PERMANENT HOMES had not
agreed to, or at the very least, been informed of.
On July 5, 2002, the trial court promulgated its Decision in favor of Solidbank. Permanent then filed an appeal before the
appellate court which was granted, in which reversed and set aside the assailed decision dated July 5, 2002. Hence, the
present petition.
ISSUES: (1) WON the Honorable Court of Appeals was correct in ruling that the increases in the interest rates on Permanent’s loans
are void for having been unilaterally imposed without basis.
(2) WON the Honorable Court of Appeals was correct in ordering the parties to enter into an express agreement regarding the
applicable interest rates on Permanent’s loan availments subsequent to the initial thirty-day (30) period.
RULING: (1) Yes. Although interest rates are no longer subject to a ceiling, the lender still does not have an unbridled license to impose
increased interest rates. The lender and the borrower should agree on the imposed rate, and such imposed rate should be in writing of
which was not provided by petitioner.
(2) Yes. In order that obligations arising from contracts may have the force of law between the parties, there must be mutuality
between the parties based on their essential quality. A contract containing a condition which makes its fulfillment dependent exclusively
upon the uncontrolled will of one of the contracting parties is void. There was no showing that either Solidbank or Permanent coerced
each other to enter into the loan agreements. The terms of the Omnibus Line Agreement and the promissory notes were mutually and
freely agreed upon by the parties.

49. DARIO NACAR VS GALLERY FRAMES

Dario Nacar filed a labor case against Gallery Frames and its owner Felipe Bordey, Jr. Nacar alleged that he was dismissed
without cause by Gallery Frames on January 24, 1997. On October 15, 1998, the Labor Arbiter (LA) found Gallery Frames guilty of illegal
dismissal hence the Arbiter awarded Nacar P158,919.92 in damages consisting of backwages and separation pay.
Gallery Frames appealed all the way to the Supreme Court (SC). The Supreme Court affirmed the decision of the Labor Arbiter
and the decision became final on May 27, 2002.
After the finality of the SC decision, Nacar filed a motion before the LA for recomputation as he alleged that his backwages
should be computed from the time of his illegal dismissal (January 24, 1997) until the finality of the SC decision (May 27, 2002) with
interest. The LA denied the motion as he ruled that the reckoning point of the computation should only be from the time Nacar was
illegally dismissed (January 24, 1997) until the decision of the LA (October 15, 1998). The LA reasoned that the said date should be the
reckoning point because Nacar did not appeal hence as to him, that decision became final and executory.
ISSUE: Whether or not the Labor Arbiter is correct.
HELD: No. There are two parts of a decision when it comes to illegal dismissal cases (referring to cases where the dismissed employee
wins, or loses but wins on appeal). The first part is the ruling that the employee was illegally dismissed. This is immediately final even if
the employer appeals – but will be reversed if employer wins on appeal. The second part is the ruling on the award of backwages and/or
separation pay. For backwages, it will be computed from the date of illegal dismissal until the date of the decision of the Labor Arbiter.
But if the employer appeals, then the end date shall be extended until the day when the appellate court’s decision shall become final.
Hence, as a consequence, the liability of the employer, if he loses on appeal, will increase – this is just but a risk that the employer cannot
avoid when it continued to seek recourses against the Labor Arbiter’s decision. This is also in accordance with Article 279 of the Labor
Code.
Anent the issue of award of interest in the form of actual or compensatory damages, the Supreme Court ruled that the old case
of Eastern Shipping Lines vs CA is already modified by the promulgation of the Bangko Sentral ng Pilipinas Monetary Board Resolution
No. 796 which lowered the legal rate of interest from 12% to 6%. Specifically, the rules on interest are now as follows:
1. Monetary Obligations ex. Loans:
a. If stipulated in writing:
a.1. shall run from date of judicial demand (filing of the case)
a.2. rate of interest shall be that amount stipulated
 b. If not stipulated in writing
b.1. shall run from date of default (either failure to pay upon extra-judicial demand or upon judicial
demand whichever is appropriate and subject to the provisions of Article 1169 of the Civil Code)
b.2. rate of interest shall be 6% per annum
2. Non-Monetary Obligations (such as the case at bar)
a. If already liquidated, rate of interest shall be 6% per annum, demandable from date of judicial or extra-
judicial demand (Art. 1169, Civil Code)
b. If unliquidated, no interest
Except: When later on established with certainty. Interest shall still be 6% per annum demandable from the date of judgment because
such on such date, it is already deemed that the amount of damages is already ascertained.
3. Compounded Interest
– This is applicable to both monetary and non-monetary obligations
– 6% per annum computed against award of damages (interest) granted by the court. To be computed from the date when the court’s
decision becomes final and executory until the award is fully satisfied by the losing party.
4. The 6% per annum rate of legal interest shall be applied prospectively:
– Final and executory judgments awarding damages prior to July 1, 2013 shall apply the 12% rate;
– Final and executory judgments awarding damages on or after July 1, 2013 shall apply the 12% rate for unpaid obligations until June
30, 2013; unpaid obligations with respect to said judgments on or after July 1, 2013 shall still incur the 6% rate.