Social Security System, petitioner vs.
Moonwalk The Court of First Instance dismissed the complaint on the ground that the
Development and Housing Corporation, et al,
respondents.
G.R. No. 73345. April 7, 1993
221 SCRA 119
Obligations; Requisites in order that debtor may be in default;
Necessity of demand. –
To be in default “x x x is different from mere delay in
grammatical sense, because it involves the beginning of a special condition or status
which has its own peculiar effects or results.”
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.
Default generally begins from the moment the creditor
demands the performance of the obligation.
CASE:
Petition for review on certiorari of the decision of the then
Intermediate Appellate Court affirming in toto the decision of the former Court
of First Instance of Rizal, Seventh Judicial District, Branch XXIX, Pasay City.
FACTS:
On February 20, 1980, the petitioner Social Security System filed a complaint in the
Court of First Instance of Rizal against the respondent
Moonwalk Development and Housing Corporation.
The petitioner alleged that it had committed an error in failing to compute the 12%
interest due on delayed payments on the loan of the respondent and also in not
reflecting in its statement of account an unpaid balance on the said penalties for
delayed payments.The respondent answered denying the claims and asserting that
the
petitioner had the opportunity to ascertain the truth but it failed to do so.
Decision of the Court of First Instance:
obligation was already extinguished by the payment by the respondent of its
indebtedness to the petitioner and by the latter’s cancellation of the real
estate mortgages executed in its favor by the defendant.
The Motion for Reconsideration filed by the petitioner was dismissed by the trial
court.
Decision of the Intermediate Appellate Court:
The respondent court held that the respondent’s obligation was extinguished and
affirmed the decision of the trial court.
ISSUE:
Whether or not respondent Moonwalk Development and Housing Corporation
incurred delay in the performance of its obligation.
RULING:
Under the Civil Code, delay begins from the time the obligee judicially
or extrajudicially demands from the obligor the performance of the obligation.
(Article 1169 of the Civil Code)
Article 1169 of the Civil Code provides for three (3) instances when demand in not
necessary to render the obligation in default:
(1) When the obligation or the law expressly so declares;
(2) When from the nature and the circumstances of the
obligation it appears that the designation of the time
when the thing is to be delivered or the service to be
rendered was a controlling motive for the establishment
of the contract;
(3) When demand would be useless, as when the obligor has rendered it beyond his
power to perform. The case at bar does not fall within any of the established
exceptions. Hence, petitioner is not excused from making a demand. It is true that
respondent has long been delinquent in meeting its monthly arrears and in paying
the full amount of the loan itself as the obligation matured sometime in January,
1977. But mere delinquency in payment does not necessarily mean delay in the
legal concept. Default generally begins from the moment the creditor demands the
performance of the obligation. In the present case, the petitioner never demanded
from the respondents the payment of its monthly amortizations. It was clear that
respondent was never in default because petitioner never compelled
performance.
The petition was DISMISSED and the decision of the
Intermediate Appellate Court was AFFIRMED.

FIRST DIVISION
[G.R. No. 133107. March 25, 1999]
RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs.
COURT OF APPEALS and FELIPE LUSTRE, respondents.
DECISION
KAPUNAN, J.:
A simple telephone call and an ounce-of good faith on the part of
petitioner could have prevented the present controversy.
On March 10, 1993, private respondent Atty. Felipe Lustre
purchased a Toyota Corolla from Toyota Shaw, Inc. for which he
made a down payment of P164,620.00, the balance of the purchase
price to be paid in 24 equal monthly installments. Private respondent
thus issued 24 postdated checks for the amount of P14,976.00 each.
The first was dated April 10, 1991; subsequent checks were dated
every 10th day of each succeeding month.
To secure the balance, private respondent executed a promissory
note[1] and a contract of chattel mortgage[2] over the vehicle in favor
of Toyota Shaw, Inc. The contract of chattel mortgage, in 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.
On March 14, 1991, Toyota Shaw, Inc. assigned all its rights and
interests in the chattel mortgage to petitioner Rizal Commercial
Banking Corporation (RCBC).
All the checks dated April 10, 1991 to January 10, 1993 were
thereafter encashed and debited by RCBC from private respondent's
account, except for RCBC Check No. 279805 representing the
payment for August 10, 1991, which was unsigned. Previously, the
amount represented by RCBC Check No. 279805 was debited from
private respondent's account but was later recalled and re-credited to
him. Because of the recall, the last two checks, dated February 10,
1993 and March 10, 1993, were no longer presented for payment.
This was purportedly in conformity with petitioner bank's procedure
that once a client's account was forwarded to its account
representative, all remaining checks outstanding as of the date the
account was forwarded were no longer presented for payment.
On the theory that respondent defaulted in his payments, the check
representing the payment for August 10, 1991 being unsigned,
petitioner, in a letter dated January 21, 1993, demanded from private
respondent the payment of the balance of the debt, including
liquidated damages. The latter refused, prompting petitioner to file
an action for replevin and damages before the Pasay City Regional
Trial Court (RTC). Private respondent, in his Answer, interposed a
counterclaim for damages.
After trial, the RTC[3] rendered a decision disposing of the case as
follows:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered as follows:
I. The complaint, for lack of cause of action, is hereby DISMISSED
and plaintiff RCBC is hereby ordered,
A. To accept the payment equivalent to the three checks
amounting to a total of P44,938.00, without interest
B. To release/cancel the mortgage on the car xxx upon payment
of the amount of P44,938.00 without interes
FIRST DIVISION
[G.R. No. 133107. March 25, 1999]
RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs.
COURT OF APPEALS and FELIPE LUSTRE, respondents.
DECISION
KAPUNAN, J.:
A simple telephone call and an ounce-of good faith on the part of
petitioner could have prevented the present controversy.
On March 10, 1993, private respondent Atty. Felipe Lustre
purchased a Toyota Corolla from Toyota Shaw, Inc. for which he
made a down payment of P164,620.00, the balance of the purchase
price to be paid in 24 equal monthly installments. Private respondent
thus issued 24 postdated checks for the amount of P14,976.00 each.
The first was dated April 10, 1991; subsequent checks were dated
every 10th day of each succeeding month.
To secure the balance, private respondent executed a promissory
note[1] and a contract of chattel mortgage[2] over the vehicle in favor
of Toyota Shaw, Inc. The contract of chattel mortgage, in 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.
On March 14, 1991, Toyota Shaw, Inc. assigned all its rights and
interests in the chattel mortgage to petitioner Rizal Commercial
Banking Corporation (RCBC).
All the checks dated April 10, 1991 to January 10, 1993 were
thereafter encashed and debited by RCBC from private respondent's
account, except for RCBC Check No. 279805 representing the
payment for August 10, 1991, which was unsigned. Previously, the
amount represented by RCBC Check No. 279805 was debited from
private respondent's account but was later recalled and re-credited to
him. Because of the recall, the last two checks, dated February 10,
1993 and March 10, 1993, were no longer presented for payment.
This was purportedly in conformity with petitioner bank's procedure
that once a client's account was forwarded to its account
representative, all remaining checks outstanding as of the date the
account was forwarded were no longer presented for payment.
On the theory that respondent defaulted in his payments, the check
representing the payment for August 10, 1991 being unsigned,
petitioner, in a letter dated January 21, 1993, demanded from private
respondent the payment of the balance of the debt, including
liquidated damages. The latter refused, prompting petitioner to file
an action for replevin and damages before the Pasay City Regional
Trial Court (RTC). Private respondent, in his Answer, interposed a
counterclaim for damages.
After trial, the RTC[3] rendered a decision disposing of the case as
follows:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered as follows:
I. The complaint, for lack of cause of action, is hereby DISMISSED
and plaintiff RCBC is hereby ordered,
A. To accept the payment equivalent to the three checks
amounting to a total of P44,938.00, without interest
B. To release/cancel the mortgage on the car xxx upon payment
of the amount of P44,938.00 without interes
FIRST DIVISION
[G.R. No. 133107. March 25, 1999]
RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs.
COURT OF APPEALS and FELIPE LUSTRE, respondents.
DECISION
KAPUNAN, J.:
A simple telephone call and an ounce-of good faith on the part of
petitioner could have prevented the present controversy.
On March 10, 1993, private respondent Atty. Felipe Lustre
purchased a Toyota Corolla from Toyota Shaw, Inc. for which he
made a down payment of P164,620.00, the balance of the purchase
price to be paid in 24 equal monthly installments. Private respondent
thus issued 24 postdated checks for the amount of P14,976.00 each.
The first was dated April 10, 1991; subsequent checks were dated
every 10th day of each succeeding month.
To secure the balance, private respondent executed a promissory
note[1] and a contract of chattel mortgage[2] over the vehicle in favor
of Toyota Shaw, Inc. The contract of chattel mortgage, in 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.
On March 14, 1991, Toyota Shaw, Inc. assigned all its rights and
interests in the chattel mortgage to petitioner Rizal Commercial
Banking Corporation (RCBC).
All the checks dated April 10, 1991 to January 10, 1993 were
thereafter encashed and debited by RCBC from private respondent's
account, except for RCBC Check No. 279805 representing the
payment for August 10, 1991, which was unsigned. Previously, the
amount represented by RCBC Check No. 279805 was debited from
private respondent's account but was later recalled and re-credited to
him. Because of the recall, the last two checks, dated February 10,
1993 and March 10, 1993, were no longer presented for payment.
This was purportedly in conformity with petitioner bank's procedure
that once a client's account was forwarded to its account
representative, all remaining checks outstanding as of the date the
account was forwarded were no longer presented for payment.
On the theory that respondent defaulted in his payments, the check
representing the payment for August 10, 1991 being unsigned,
petitioner, in a letter dated January 21, 1993, demanded from private
respondent the payment of the balance of the debt, including
liquidated damages. The latter refused, prompting petitioner to file
an action for replevin and damages before the Pasay City Regional
Trial Court (RTC). Private respondent, in his Answer, interposed a
counterclaim for damages.
After trial, the RTC[3] rendered a decision disposing of the case as
follows:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered as follows:
I. The complaint, for lack of cause of action, is hereby DISMISSED
and plaintiff RCBC is hereby ordered,
A. To accept the payment equivalent to the three checks
amounting to a total of P44,938.00, without interest
B. To release/cancel the mortgage on the car xxx upon payment
of the amount of P44,938.00 without intere
RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. COURT OF APPEALS
and FELIPE LUSTRE, respondents.
DECISION
KAPUNAN, J.:
A simple telephone call and an ounce-of good faith on the part of petitioner
could have prevented the present controversy.
On March 10, 1993, private respondent Atty. Felipe Lustre purchased a Toyota
Corolla from Toyota Shaw, Inc. for which he made a down payment of P164,620.00,
the balance of the purchase price to be paid in 24 equal monthly
installments. Private respondent thus issued 24 postdated checks for the amount
of P14,976.00 each. The first was dated April 10, 1991; subsequent checks were
dated every 10th day of each succeeding month.
[1]
To secure the balance, private respondent executed a promissory note and a
contract of chattel mortgage[2] over the vehicle in favor of Toyota Shaw, Inc. The
contract of chattel mortgage, in 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.
On March 14, 1991, Toyota Shaw, Inc. assigned all its rights and interests in
the chattel mortgage to petitioner Rizal Commercial Banking Corporation (RCBC).
All the checks dated April 10, 1991 to January 10, 1993 were thereafter
encashed and debited by RCBC from private respondent's account, except for RCBC
Check No. 279805 representing the payment for August 10, 1991, which was
unsigned. Previously, the amount represented by RCBC Check No. 279805 was
debited from private respondent's account but was later recalled and re-credited to
him. Because of the recall, the last two checks, dated February 10, 1993 and March
10, 1993, were no longer presented for payment. This was purportedly in
conformity with petitioner bank's procedure that once a client's account was
forwarded to its account representative, all remaining checks outstanding as of the
date the account was forwarded were no longer presented for payment.
On the theory that respondent defaulted in his payments, the check
representing the payment for August 10, 1991 being unsigned, petitioner, in a letter
dated January 21, 1993, demanded from private respondent the payment of the
balance of the debt, including liquidated damages. The latter refused, prompting
petitioner to file an action for replevin and damages before the Pasay City Regional
Trial Court (RTC). Private respondent, in his Answer, interposed a counterclaim for
damages.
After trial, the RTC[3] rendered a decision disposing of the case as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:
I. The complaint, for lack of cause of action, is hereby DISMISSED and plaintiff RCBC
is hereby ordered,
A. To accept the payment equivalent to the three checks
amounting to a total of P44,938.00, without interest
B. To release/cancel the mortgage on the car xxx upon payment of
the amount of P44,938.00 without interest.
C. To pay the cost of suit
II. On The Counterclaim
A. Plaintiff RCBC to pay Atty. Lustre the amount of P200,000.00 as
moral damages.
 B. RCBC to pay P100,000.00 as exemplary damages.
C. RCBC to pay Atty. Obispo P50,000.00 as Attorney's
fees. Atty. Lustre is not entitled to any fee for lawyering
for himself.
All awards for damages are subject to payment of fees to be assessed by the
Clerk of Court, RTC, Pasay City.
SO ORDERED.
On appeal by petitioner, the Court of Appeals affirmed the decision of the
RTC, thus:
We xxx concur with the trial court's ruling that the Chattel Mortgage contract being
a contract of adhesion that is, one wherein a party, usually a corporation, prepares
the stipulations the contract, while the other party merely affixes his signature or
his "adhesion" thereto xxx - is to be strictly construed against appellant bank which
prepared the form Contract xxx. Hence xxx paragraph 11 of the Chattel Mortgage
contract [containing the acceleration clause] should be construed to cover only
deliberate and advertent failure on the part of the mortgagor to pay an
amortization as it became due in line with the consistent holding of the Supreme
Court construing obscurities and ambiguities in the restrictive sense against the
drafter thereof xxx in the light of
Article 1377 of the Civil Code.
In the case at bench, plaintiff-appellant's imputation of default to defendant-
appellee rested solely on the fact that the 5th check issued by appellee xxx was
recalled for lack of signature. However, the check was recalled only after the
amount covered thereby had been deducted from defendant-appellee's account, as
shown by the testimony of plaintiff's own witness Francisco Bulatao who was in
charge of the preparation of the list and trial balances of bank customers xxx. The
"default" was therefore not a case of failure to pay, the check being sufficiently
funded, and which amount was in fact already debitted [sic] from appellee's
account by the appellant bank which subsequently re-credited the amount to
defendant-appellee's account for lack of signature. All these actions RCBC did on its
own without notifying defendant until sixteen (16) months later when it wrote its
demand letter dated January 21, 1993.
Clearly, appellant bank was remiss in the performance of its functions for it could
have easily called the defendant's attention to the lack of signature on the check
and sent the check to, or summoned, the latter to affix his signature. It is also to be
noted that the demand letter contains no explanation as to how defendant-
appellee incurred arrearages in the amount of P66,255.70, which is why defendant-
appellee made a protest notation thereon.
Notably, all the other checks issued by the appellee dated subsequent to August 10,
1991 and dated earlier than the demand letter, were duly encashed. This fact
should have already prompted the appellant bank to review its action relative to
the unsigned check. xxx[4]
We take exception to the application by both the trial and appellate courts of
Article 1377 of the Civil Code, which states:
The interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity.
It bears stressing that a contract of adhesion is just as binding as ordinary
contracts.[5] It is true that we have, on occasion, struck down such contracts as void
when the weaker party is imposed upon in dealing with the dominant bargaining
party and is reduced to the alternative of taking it or leaving it, completely deprived
of the opportunity to bargain on equal footing. [6] Nevertheless, contracts of
adhesion are not invalid per se; [7] they are not entirely prohibited. [8] The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he gives
his consent.[9]
While ambiguities in a contract of adhesion are to be construed against the
party that prepared the same,[10] this rule applies only if the stipulations in such
contract are obscure or ambiguous. If the terms thereof are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its
stipulations shall control.[11] In the latter case, there would be no need for
construction.[12]
 Here, the terms of paragraph 11 of the Chattel Mortgage Contract [13] are
clear. Said paragraph states:
11. In case the MORTGAGOR fails to pay any of the installments, or to pay the
interest that may be due as provided in the said promissory note, the whole
amount remaining unpaid therein shall immediately become due and payable and
the mortgage on the property (ies) herein-above described may be foreclosed by
the MORTGAGEE, or the MORTGAGEE may take any other legal action to enforce
collection of the obligation hereby secured, and in either case the MORTGAGOR
further agrees to pay the MORTGAGEE an additional sum of 25% of the principal
due and unpaid, as liquidated damages, which said sum shall become part
thereof. The MORTGAGOR hereby waives reimbursement of the amount heretofore
paid by him/it to the MORTGAGEE.
The above terms leave no room for construction. All that is required is the
application thereof.
Petitioner claims that private respondent's check representing the fifth
installment was "not encashed,[14] such that the installment for August 1991 was
not paid. By virtue of paragraph 11 above, petitioner submits that it "was justified
in treating the entire balance of the obligation as due and demandable." [15] Despite
demand by petitioner, however, private respondent refused to pay the balance of
the debt.Petitioner, in sum, imputes delay on the part of private respondent.
We do not subscribe to petitioner's theory.
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.
[16]
Thus, assuming that private respondent was guilty of delay in the payment of the
value of the unsigned check, private respondent cannot be held liable for
damages. There is no imputation, much less evidence, that private respondent
acted with malice or negligence in failing to sign the check. Indeed, we agree with
the Court of Appeals' finding that such omission was mere "inadvertence" on the
part of private respondent. Toyota salesperson Jorge Geronimo testified that he
even verified whether private respondent had signed all the checks and in fact
returned three or four unsigned checks to him for signing:
Atty. Obispo:
After these receipts were issued, what else did you do about the transaction?
A: During our transaction with Atty. Lustre, I found out when he issued to me
the 24 checks, I found out 3 to 4 checks are unsigned and I asked him to
sign these checks.
Atty. Obispo:
What did you do?
A: I asked him to sign the checks. After signing the checks, I reviewed again all
the documents, after I reviewed all the documents and found out that all
are completed and the downpayments was completed, we released to
him the car.[17]
Even when the checks, were delivered to petitioner, it did not object to the
unsigned check. In view of the lack of malice or negligence on the part of private
respondent, petitioner's blind and mechanical invocation of paragraph 11 of the
contract of chattel mortgage was unwarranted.
Petitioners conduct, in the light of the circumstances of this case, can only be
described as mercenary. Petitioner had already debited the value of the unsigned
check from private respondent's account only to re-credit it much later to
him. Thereafter, petitioner encashed checks subsequently dated, then abruptly
refused to encash the last two. More than a year after the date of the unsigned
check, petitioner, claiming delay and invoking paragraph 11, demanded from
private respondent payment of the value of said check and. that of the last two
checks, including liquidated damages. As pointed out by the trial court, this whole
controversy could have been avoided if only petitioner bothered to call up private
respondent and ask him to sign the check. Good faith not only in compliance with
its contractual obligations,[18] but also in observance of the standard in human
relations, for every person "to act with justice, give everyone his due, and observe
honesty and good faith."[19] behooved the bank to do so.
Failing thus, petitioner is liable for damages caused to private respondent.
[20]
These include moral damages for the mental anguish, serious anxiety,
besmirched reputation, wounded feelings and social humiliation suffered by the
latter.[21] The trial court found that private respondent was
[a] client who has shared transactions for over twenty years with a bank xxx. The
shabby treatment given the defendant is unpardonable since he was put to shame
and embarrassment after the case was filed in Court. He is a lawyer in his own right,
married to another member of the bar. He sired children who are all professionals
in their chosen field. He is known to the community of golfers with whom he
gravitates.Surely, the filing of the case made defendant feel so bad and bothered.
To deter others from emulating petitioners callous example, we affirm the
award of exemplary damages.[22] As exemplary damages are warranted, so are
attorney's fees.[23]
We, however, find excessive the amount of damages awarded by the trial
court in favor of private respondent with respect to his counterclaims and,
accordingly, reduce the same as follows:
(a) Moral damages - fromP200,000.00 to P100,000.00,
(b) (b)Exemplarydamages from P100,000.00 to P75,000.00,
(c) (c) Attorney's fees - from P 50,000,00 to P 30,000.00.
WHEREFORE, subject to these modifications, the decision of the Court of
Appeals is AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Melo, and Pardo, JJ., concur.
Barzaga v CA
Facts:
The Ignacio Barzaga s wife was suffering from a debilitating ailment and with forewarning of her
impending death, she expressed her wish to be laid to rest before Christmas day
to spare her family of the long vigils as it was almost Christmas. On 21 December
1990 After his wife passed away, petitioner bought materials from herein private
respondent (Angelito Alvair) for the construction of her niche in Dasmarias, Cavite,.
Private respondents however failed to deliver on agreed time and date despite
repeated follow-ups. The niche was completed in the afternoon of the 27th of
December, and Barzaga's wife was finally laid to rest. However, it was two-and-a-
half (2-1/2) days behind schedule. On 21 January 1991, tormented perhaps by
his inability to fulfill his wife's dying wish, Barzaga wrote private respondent Alviar
demanding recompense for the damage he suffered. Alviar did not respond.
Consequently, petitioner sued him before the Regional Trial Court. Resisting
petitioner's claim, private respondent contended that legal delay could not be
validly ascribed to him because no specific time of delivery was agreed upon
between them. He pointed out hat the invoices evidencing the sale did not contain
any stipulation as to the exact time of delivery and that assuming that the materials
were not delivered within the period desired by petitioner.
Issue:
Whether or not there was delay in the performance of the private respondent's
obligation
Ruling:
Yes. Article 1170 says 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. Since the respondent was negligent
and incurred delay in the performance of his contractualobligations, the petitioner
is entitled to be indemnified for the damage he suffered as a consequence ofthe
delay or contractual breach. Contrary to the appellate court's factual determination,
there was aspecific time agreed upon for the delivery of the materials to the
cemetery. Petitioner went to privater espondent's store on 21 December precisely
to inquire if the materials he intended to purchase could be delivered immediately.
But he was told by the storekeeper that if there were still deliveries to be made that
afternoon his order would be delivered the following day. With this in mind Barzaga
decided to buy the construction materials the following morning after he was
assured of immediate delivery according to his time frame. This is clearly a case of
non-performance of a reciprocal obligation, as in the contract of purchase and sale,
the petitioner had already done his part, which is the payment of the price. It was
incumbent upon respondent to immediately fulfill his obligation to deliver the
goods otherwise delay would attach. An award of moral damages is incumbent in
this case as the petitione rhas suffered so much.
PANTALEON VS AMERICAN EXPRESS
G.R. No. 174269, May 8 2009
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.
Lorenzo Shipping, Inc. vs BJ Marthel Intl, Inc.
G.R. No. 145483
November 19, 2004
Facts:
Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in
coastwise shipping. It used to own the cargo vessel M/V Dadiangas Express.
Upon the other hand, respondent BJ Marthel International, Inc. is a business entity
engaged in trading, marketing, and selling of various industrial commodities. It is
also an importer and distributor of different brands of engines and spare parts.
From 1987 onwards, respondent supplied petitioner with spare parts for the latter's
marine engines. Sometime in 1989, petitioner asked respondent for a quotation for
various machine parts. Acceding to this request, respondent furnished petitioner
with a formal quotation. It was stipulated in the contract that DELIVERY is within 2
months after receipt of firm order. The TERMS is 25% upon delivery, balance
payable in 5 bi-monthly equal and Installment[s] not to exceed 90 days.
Petitioner thereafter issued to respondent Purchase Order. For the procurement of
one set of cylinder liner, valued at P477,000, to be used for M/V Dadiangas Express.
Instead of paying the 25% down payment for the first cylinder liner, petitioner
issued in favor of respondent ten postdated checks to be drawn against the
former's account with Allied Banking Corporation. The checks were supposed to
represent the full payment of the aforementioned cylinder liner.
Subsequently, petitioner issued Purchase Order dated 15 January 1990, for yet
another unit of cylinder liner. This purchase order stated the term of payment to be
"25% upon delivery, balance payable in 5 bi-monthly equal installment[s]. On 26
January 1990, respondent deposited petitioner's check that was postdated 18
January 1990, however, the same was dishonored by the drawee bank due to
insufficiency of funds. The remaining nine postdated checks were eventually
returned by respondent to petitioner.
However, the parties presented disparate accounts of what happened to the check
which was previously dishonored. Petitioner claimed that it replaced said check
with a good one, the proceeds of which were applied to its other obligation to
respondent. For its part, respondent insisted that it returned said postdated check
to petitioner.
On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's
warehouse in North Harbor, Manila. The sales invoices evidencing the delivery of
the cylinder liners both contain the notation "subject to verification" under which
the signature of Eric Go, petitioner's warehouseman, appeared.
Due to the failure of the parties to settle the matter, respondent filed an action for
sum of money and damages before the Regional Trial Court (RTC) of Makati City. In
its complaint, respondent (plaintiff below) alleged that despite its repeated oral and
written demands, petitioner obstinately refused to settle its obligations.
Respondent prayed that petitioner be ordered to pay for the value of the cylinder
liners plus accrued interest of P111,300 as of May 1991 and additional interest of
14% per annum to be reckoned from June 1991 until the full payment of the
principal; attorney's fees; costs of suits; exemplary damages; actual damages; and
compensatory damages.
In an Order dated 25 July 1991, the court a quo granted respondent's prayer for the
issuance of a preliminary attachment. On 09 August 1991, petitioner filed an Urgent
Ex-Parte Motion to Discharge Writ of Attachment attaching thereto a counter-bond
as required by the Rules of Court. On even date, the trial court issued an Order
lifting the levy on petitioner's properties and the garnishment of its bank accounts.
Petitioner afterwards filed its Answer alleging therein that time was of the essence
in the delivery of the cylinder liners and that the delivery on 20 April 1990 of said
items was late as respondent committed to deliver said items "within two (2)
months after receipt of firm order" from petitioner. Petitioner likewise sought
counterclaims for moral damages, exemplary damages, attorney's fees plus
appearance fees, and expenses of litigation.
Subsequently, respondent filed a Second Amended Complaint with Preliminary
Attachment dated 25 October 1991. The amendment introduced dealt solely with
the number of postdated checks issued by petitioner as full payment for the first
cylinder liner it ordered from respondent. Whereas in the first amended complaint,
only nine postdated checks were involved.
Issue:
W/N significant the period of time which lapsed in the contract causing the delay in
the delivery of the cylinder liners is essential in the decision of the case at bar?
Held:
After trial, the court a quo dismissed the action, the decretal portion of the Decision
stating: WHEREFORE, the complaint is hereby dismissed, with costs against the
plaintiff, which is ordered to pay P50,000.00 to the defendant as and by way of
attorney's fees.
The trial court held respondent bound to the quotation it submitted to petitioner
particularly with respect to the terms of payment and delivery of the cylinder liners.
It also declared that respondent had agreed to the cancellation of the contract of
sale when it returned the postdated checks issued by petitioner. Respondent's
counterclaims for moral, exemplary, and compensatory damages were dismissed
for insufficiency of evidence. Respondent moved for the reconsideration of the trial
court's Decision but the motion was denied for lack of merit.
The respondent filed an appeal with the Court of Appeals which reversed and set
aside the Decision of the court. The appellate court brushed aside petitioner's claim
that time was of the essence in the contract of sale between the parties herein
considering the fact that a significant period of time had lapsed between
respondent's offer and the issuance by petitioner of its purchase orders. The
dispositive portion of the Decision of the appellate court states: WHEREFORE, the
decision of the lower court is REVERSED and SET ASIDE. The appellee is hereby
ORDERED to pay the appellant the amount of P954,000.00, and accrued interest
computed at 14% per annum reckoned from May, 1991.
The Court of Appeals also held that respondent could not have incurred delay in the
delivery of cylinder liners as no demand, judicial or extrajudicial, was made by
respondent upon petitioner in contravention of the express provision of Article
1169 of the Civil Code which provides: 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.
On 22 May 2000, petitioner filed a motion for reconsideration of the Decision of the
Court of Appeals but this was denied through the resolution of 06 October 2000.
WHEREFORE, premises considered, the instant Petition for Review on Certiorari is
DENIED. The Decision of the Court of Appeals, dated 28 April 2000, and its
Resolution, dated 06 October 2000, are hereby AFFIRMED. No costs. SO ORDERED.
Solar Harvest, Inc. v. Davao Corrugated Carton Corporation G.R. No. 176868 (July
26, 2010)
Facts:
The petitioner (Solar Harvest, Inc., Solar for brevity) entered into an agreement
with respondent, Davao Corrugated Carton Corporation (DCCC for brevity), for the
purchase of corrugated carton boxes, specifically designed for petitioners business
of exporting fresh bananas.
The agreement was not reduced into writing.
To start the production, Solar deposited in DCCC’s US Dollar Savings Account with
Westmont bank, as full payment for the ordered boxes.
Despite such payment, Solar did not receive any boxes from DCCC.
Solar wrote a demand letter for reimbursement of the amount paid.
DCCC replied that the boxes had been completed as early as April 3, 1998 and that
Solar failed to pick them up from the formers warehouse 30 days from
completion, as agreed upon. It was also mentioned that Solar placed an
additional order, out of which, half had been manufactured without any
advanced payment from Solar. (Solar alleges that the agreement was for DCCC to
deliver within 30 days from payment the said cartons to Tagum Agricultural
Development Corporation (TADECO) which the latter failed to manufacture and
deliver within such time.)
DCCC then demanded Solar to remove the boxes from the factory and to pay the
balance for the additional boxes.
Issue/s:
Whether or not the respondent (Davao Corrugated Carton Corporation) is in
default.
Ruling:
No. It was unthinkable that, over a period of more than two years, Solar did not
even demand for the delivery of the boxes. Even assuming that the agreement
was for DCCC to deliver the boxes, the latter would not be liable for breach of
contract as Solar had not yet demanded from it the delivery of the boxes.
In reciprocal obligations, as in contract of sale, the general rule is that the
fulfillment of the parties respective obligation should be simultaneous. Hence, no
demand is generally necessary because, once a party fulfills his obligation and the
other party does not fulfill his, the latter automatically incurs delay. But when
different dates for performance of the obligation are fixed, the default for each
obligation must be determined, that is, the other party would incur in delay only
from the moment the other party demands fulfillment of the formers obligation.
Thus, even in reciprocal obligations, if the period for the fulfillment of the formers
obligation is fixed, demand upon the obliged is still necessary before the obligor
can be considered in default and before a cause of action for rescission will
accrue.
Solar alleges that they made a follow-up upon respondent, which, however,
would not qualify as a demand for the fulfillment obligation. The former also
testified that they made a follow-up of the boxes, but not a demand.
Even assuming that a demand had been previously made before filling the
present case Solar’s claim for reimbursement would still fail, as the circumstances
would show that DCCC was not guilty of breach of contract.
Aside from the pictures of the finished boxes and the production report thereof,
there is ample showing that the boxes had already been manufactured by DCCC.
There is the testimony of Estanislao who accompanied Que to the factory,
attesting that, during the first visit to the company, they saw the pile of boxes and
Que took a samples thereof. Que, himself confirmed this incident. He testified
that Tan pointed the boxes to him and got a sample and saw that it was blank.
Ques absolute assertion that the boxes were not manufactured is, therefore,
implausible and suspicious.
DCCC was willing to shoulder expenses for a representative of the court to visit
the plant and see the boxes. It also prays that Solar be ordered to remove the
boxes from its factory site, which would only mean that the boxes are, up to the
present, still in DCCC’s premises.
Assuming that DCCC was obliged to deliver the boxes, it could not have complied
with such obligation. Que, admitted that he did not given DCCC the authority to
deliver the boxes to TADECO. Surely, without such authority, TADECO would not
have allowed to deposite the boxes within its premises.
CATHAY PACIFIC AIRWAYS LTD., petitioner,
vs. SPOUSES DANIEL VASQUEZ and MARIA LUISA MADRIGAL
VASQUEZ, respondents.
[G.R. No. 150843. March 14, 2003]

FACTS:
In respondents’ return flight to Manila from Hongkong, they were deprived of their
original seats in Business Class with their companions because of overbooking.
Since respondents were privileged members, their seats were upgraded to First
Class. Respondents refused but eventually persuaded to accept it. Upon return to
Manila, they demanded that they be indemnified in the amount of P1million for the
“humiliation and embarrassment” caused by its employees. Petitioner’s Country
Manager failed to respond. Respondents instituted action for damages. The RTC
ruled in favor of respondents. The Court of Appeals affirmed the RTC decision with
modification in the award of damages.
ISSUE:
Whether or not the petitioners (1) breached the contract of carriage, (2) acted with
fraud and (3) were liable for damages.
RULING:
(1) YES. Although respondents have the priority of upgrading their seats, such
priority may be waived, as what respondents did. It should have not been imposed
on them over their vehement objection.
(2) NO. There was no evident bad faith or fraud in upgrade of seat neither on
overbooking of flight as it is within 10% tolerance.
(3) YES. Nominal damages (Art. 2221, NCC) were awarded in the amount of
P5,000.00. Moral damages (Art.2220, NCC) and attorney’s fees were set aside and
deleted from the Court of Appeals’ ruling.