2. ELCANO VS.
HILL doubt is required, while in a civil case, preponderance of evidence is sufficient to make the
PEDRO ELCANO and PATRICIA ELCANO, in their capacity as Ascendants of
AgapitoElcano, deceased,plaintiffs-appellants,
vs.
REGINALD HILL, minor, and MARVIN HILL, as father and Natural Guardian of said
minor, defendants-appellees.
G.R. No. L-24803 [May 26, 1977]
Facts of the Case:
Respondent Reginald Hill killed the son of the plaintiffs named Agapito Elcano. A criminal
complaint was instituted against him but he was acquitted on the ground that his act was not
criminal, because of lack of intent to kill, couple with mistake. Subsequently, plaintiffs filed a
complaint for recovery of damages against defendant Reginald Hill, a minor, married at the
time of the occurrence, and his father, the defendant Marvin Hill, with who he was living and
getting subsistence, for the same killing. A motion to dismiss was filed by the defendants. The
Court of First Instance of Quezon City denied the motion. Nevertheless, the civil case was
finally dismissed upon motion for reconsideration.
Issues:
1. WON the present civil action for damages is barred by the acquittal of Reginald in the
criminal case.
2. WON Article 2180 (2nd and last paragraphs) of the Civil Code may be applied against
Atty. Hill, notwithstanding the undisputed fact that at the time of the occurrence complained
of. Reginald, though a minor, living with and getting subsistence from his father, was already
legally married.
Ruling of the Court:
1. No, the present civil action for damages is not barred by the acquittal of Reginald in the
criminal case. Firstly, there is a distinction as regards the proof required in a criminal case and
a civil case. To find the accused guilty in a criminal case, proof of guilt beyond reasonable
defendant pay in damages. Furthermore, a civil case for damages on the basis of quasi-delict
does is independently instituted from a criminal act. As such the acquittal of Reginald Hill in
the criminal case has not extinguished his liability for quasi-delict, hence that acquittal is not a
bar to the instant action against him.
2. Yes, the above mentioned provision may still be applied against Atty Marvin Hill.
Although parental authority is terminated upon emancipation of the child, emancipation by
marriage is not absolute, i.e. he can sue and be sued in court only with the assistance of his
father, mother or guardian. As in the present case, killing someone else contemplated judicial
litigation, thus, making Article 2180 apply to Atty. Hill.However, inasmuch as it is evident
that Reginald is now of age, as a matter of equity, the liability of Atty. Hill has become
milling, subsidiary to that of his son.
Elcano and Elcano v. Hill and Hill
G.R. No. L-24803, May 26, 1977, 77 SCRA
Facts:
Respondent Reginald Hill killed the son of the plaintiffs named Agapito Elcano. A criminal
complaint was instituted against him but he was acquitted on the ground that his act was not
criminal, because of lack of intent to kill, couple with mistake. Subsequently, plaintiffs filed a
complaint for recovery of damages against defendant Reginald Hill, a minor, married at the
time of the occurrence, and his father, the defendant Marvin Hill, with who he was living and
getting subsistence, for the same killing. A motion to dismiss was filed by the defendants. The
Court of First Instance of Quezon City denied the motion. Nevertheless, the civil case was
finally dismissed upon motion for reconsideration.
Issues:
WoN the present civil action for damages is barred by the acquittal of Reginald in the criminal
case.
Ruling:
No, the present civil action for damages is not barred by the acquittal of Reginald in the
criminal case. Firstly, there is a distinction as regards the proof required in a criminal case and
a civil case. To find the accused guilty in a criminal case, proof of guilt beyond reasonable
doubt is required, while in a civil case, preponderance of evidence is sufficient to make the
defendant pay in damages. Furthermore, a civil case for damages on the basis of quasi-delict
does is independently instituted from a criminal act. As such the acquittal of Reginald Hill in
the criminal case has not extinguished his liability for quasi-delict, hence that acquittal is not a
bar to the instant action against him.
Doctrine:
ART. 2177. Responsibility for fault or negligence under the preceding article is entirely getting subsistence, for the same killing. A motion to dismiss was filed by the defendants. The
separate and distinct from the civil liability arising from negligence under the Penal Code. But Court of First Instance of Quezon City denied the motion. Nevertheless, the civil case was
the plaintiff cannot recover damages twice for the same act or omission of the defendant. finally dismissed upon motion for reconsideration.
Elcano and Elcano v. Hill and Hill Issues:
G.R. No. L-24803, May 26, 1977, 77 SCRA WoN the present civil action for damages is barred by the acquittal of Reginald in the criminal
Facts: case.
Respondent Reginald Hill killed the son of the plaintiffs named Agapito Elcano. A criminal Ruling:
complaint was instituted against him but he was acquitted on the ground that his act was not No, the present civil action for damages is not barred by the acquittal of Reginald in the
criminal, because of lack of intent to kill, couple with mistake. Subsequently, plaintiffs filed a criminal case. Firstly, there is a distinction as regards the proof required in a criminal case and
complaint for recovery of damages against defendant Reginald Hill, a minor, married at the a civil case. To find the accused guilty in a criminal case, proof of guilt beyond reasonable
time of the occurrence, and his father, the defendant Marvin Hill, with who he was living and doubt is required, while in a civil case, preponderance of evidence is sufficient to make the
getting subsistence, for the same killing. A motion to dismiss was filed by the defendants. The defendant pay in damages. Furthermore, a civil case for damages on the basis of quasi-delict
Court of First Instance of Quezon City denied the motion. Nevertheless, the civil case was does is independently instituted from a criminal act. As such the acquittal of Reginald Hill in
finally dismissed upon motion for reconsideration. the criminal case has not extinguished his liability for quasi-delict, hence that acquittal is not a
Issues: bar to the instant action against him.
WoN the present civil action for damages is barred by the acquittal of Reginald in the criminal Doctrine:
case. ART. 2177. Responsibility for fault or negligence under the preceding article is entirely
Ruling: separate and distinct from the civil liability arising from negligence under the Penal Code. But
No, the present civil action for damages is not barred by the acquittal of Reginald in the the plaintiff cannot recover damages twice for the same act or omission of the defendant.
criminal case. Firstly, there is a distinction as regards the proof required in a criminal case and
a civil case. To find the accused guilty in a criminal case, proof of guilt beyond reasonable
doubt is required, while in a civil case, preponderance of evidence is sufficient to make the
defendant pay in damages. Furthermore, a civil case for damages on the basis of quasi-delict
does is independently instituted from a criminal act. As such the acquittal of Reginald Hill in
the criminal case has not extinguished his liability for quasi-delict, hence that acquittal is not a
bar to the instant action against him.
Doctrine:
ART. 2177. Responsibility for fault or negligence under the preceding article is entirely
separate and distinct from the civil liability arising from negligence under the Penal Code. But
the plaintiff cannot recover damages twice for the same act or omission of the defendant.
Elcano and Elcano v. Hill and Hill
G.R. No. L-24803, May 26, 1977, 77 SCRA
Facts:
Respondent Reginald Hill killed the son of the plaintiffs named Agapito Elcano. A criminal
complaint was instituted against him but he was acquitted on the ground that his act was not
criminal, because of lack of intent to kill, couple with mistake. Subsequently, plaintiffs filed a
complaint for recovery of damages against defendant Reginald Hill, a minor, married at the
time of the occurrence, and his father, the defendant Marvin Hill, with who he was living and
Barredo vs. garcia
FAUSTO BARREDO, petitioner, vs. SEVERINO GARCIA and TIMOTEO
ALMARIO, respondents
No. 48006. July 8, 1942
Facts:
A head-on collision between a taxicab owned by Barredo and a carretela occurred.
The carretela was overturned and one of its passengers, a 16-year old boy, the son of Garcia
and Almario, died as a result of the injuries which he received. The driver of the taxicab, an
employee of Barredo, was prosecuted for the crime and was convicted. When the criminal
case was instituted, Garcia and Almario reserved their right to institute a separate civil action
for damages. Subsequently, Garcia and Almario instituted a civil action for damages against
Barredo, the employer of the taxicab driver.
Issue:
Whether or not they can file a separate civil action against Fausto Barredo making him
primarily and directly responsible
Held:
(Foreword: The Barredo case was decided by the Supreme Court prior to the present Civil
Code. However, the principle enunciated in said case, that responsibility for fault or
negligence as quasi-delict is distinct and separate from negligence penalized under the
Revised Penal Code, is now specifically embodied in Art. 2177 of the Civil Code.)
The defendant maintains that Fontanilla’s negligence being punishable by the Penal Code,
his (defendant’s) liability as an employer is only subsidiary, according to said Penal Code, but
Fontanilla has not been sued in a civil action and his property has not been exhausted. To
decide the main issue, we must cut thru the tangle that has, in the minds of many, confused
and jumbled together delitos and cuasi delitos, or crimes under the Penal Code and fault or
negligence under Articles 1902-1910 of the Civil Code. According to the Supreme Tribunal of
Spain:
“Authorities support the proposition that a quasi-delict or ‘culpa aquiliana’ is a separate legal
institution under the Civil Code, with a substantivity all its own, and individuality that is
entirely apart and independent from a delict or crime. Upon this principle, and on the wording
and spirit of Article 1903 of the Civil Code, the primary and direct responsibility of employers
may be safely anchored.
“It will thus be seen that while the terms of Article 1902 of the Civil Code seem to be broad
enough to cover the driver’s negligence in the instant case, nevertheless Article 1903 limits
cuasi-delitos TO ACTS OR OMISSIONS ‘NOT PUNISHABLE BY LAW.’ But inasmuch as
Article 365 of the Revised Penal Code punishes not only reckless but even simple imprudence
or negligence, the fault or negligence under Article 1902 of the Civil Code has apparently
been crowded out. It is this overlapping that makes the “confusion worse confounded.’
However, a closer study shows that such a concurrence of scope in regard to negligent acts
does not destroy the distinction between the civil liability arising from a crime and the
responsibility for cuasi-delitos or culpa extra-contractual. The same negligent act causing
damages may produce civil liability arising from a crime under Article 100 of the Revised
Penal Code; or create an action for cuasi-delito or culpa extra-contractual under Articles
1902-1910 of the Civil Code. “Some of the differences between crimes under the Penal Code
are:
“1. That crimes affect the public interest, while quasi-delitos are only of private concern.
“2. That consequently, the Penal Code punishes or corrects the criminal act, while the Civil
Code, by means of indemnification, merely repairs the damage.
“3. That delicts are not as broad as quasi-delicts, because for the former are punished only if
there is a penal law clearly covering them, while the latter, cuasi-delitos, include all acts in
which ‘ any kind of fault or negligence intervenes.’ However, it should be noted that not all
violations of the penal law produce civil responsibility, such as begging in contravention of
ordinances, violation of the game laws, infraction of the rules of traffic when nobody is hurt.
“The foregoing authorities clearly demonstrate the separate individuality of cuasi-delitos or
culpa aquiliana under the Civil Code. Specifically they show that there is a distinction
between civil liability arising from criminal negligence (governed by the Penal Code) and
responsibility for fault or negligence under Articles 1902 to 1910 of the Civil Code, and that
the same negligent act may produce either a civil liability arising from a crime under the Penal
Code, or a separate responsibility for fault or negligence under Articles 1902 to 1910 of the
Civil Code. Still more concretely the authorities above cited render it inescapable to conclude
that the employer – in this case the defendant-petitioner – is primarily and directly liable
under Article 1903 of the Civil Code.”
Barredo vs. Garcia, G.R. No. L-48006, July 8, 1942
DOCTRINE:
Plaintiffs may choose bring cause of action under the Civil Code (as quasi-delict or culpa
aquiliana) rather than the Penal Code for practical purposes. Employer is primarily (instead of
subsidiarily) liable, as it was shown that he had not exercised the standard of diligence
required by the Civil Code over his employee.
FACTS:
On May 3, 1936, a Malate Taxicab driven by Pedro Fontanilla collided with a carriage that
had Faustino Garcia as passenger. The latter died two days later due to the injuries he
sustained.
Garcia’s parents brought a criminal action against Fontanilla before the Court of First Instance
of Rizal, which found him guilty of the charge. The court likewise granted the petition to
reserve the right to bring a separate civil action.
The Court of Appeals (CA) affirmed ruling in the criminal case. Meanwhile, the civil action
was instituted in the Court of First Instance (CFI) of Manila against Fontanilla and his
employer Fausto Barredo. CFI of Manila awarded damages to the parents worth 2,000 plus
legal interest. CA reduced the amount to 1k.
Barredo’s responsibility hinged on his failure to abide by the standard set by the Civil Code
which is that of exercising care as a good father of a family. Under this, Barredo is primarily
liable.
Defendants assert that Barredo is only subsidiarily liable under Art. 100 of the RPC since
Fontanilla was found guilty under that said law.
ISSUES:
1. May the petitioners institute a separate civil action against the respondents? – YES.
2. May Barredo be held primarily liable as the employer for Fontanilla’s negligence?
YES – YES.
RATIO:
Petitioners may institute separate civil action to recover damages.
Petitioners are seeking to recover damages not as a result of the felony (delito), but as a result
of a quasi-delict (culpa aquiliana). The latter is recognized by the civil code as a separate legal
concept.
The court has recognizes how delicts and quasi-delicts overlap, and people resort to bringing
actions as quasi-delict because of the speedier disposition of proceedings. The court sees the
advantage of bringing a case under quasi-delict rather that criminal negligence as a way to
protect private rights and efficaciously bring redress to the injured party.
Barredo is primarily/directly/principally liable.
Since the present action is a separate civil suit and not an action to recover damages arising
from criminal liability, Barredo’s negligence under the Civil Code provision invoked makes
him directly liable.
Preponderance of evidence is sufficient to prove his negligence (instead of beyond reasonable
doubt) because the case at bar is a civil action.
The case of Barredo v. Garcia (73 Phil. 607 (1942)) involves a 16-year old boy, one of the
passengers of a caretela, who died as a result of a collision with a recklessly driven taxi. In the
criminal action, the parents of the victim reserved their right to file a separate civil action.
After conviction of the driver with the charge of homicide thru reckless imprudence, they
proceeded to file a separate civil action against the taxi-owner based on Article 2180 of the
New Civil Code. The taxi-driver met this with the argument that the driver having been
convicted of criminal negligence, Article 100 in relation to Articles 102-o3 of the Revised
Penal Code should govern his liability, which, pursuant to said provisions is only subsidiary,
but since the driver has not been sued in a civil action and his property not yet exhausted, the
plaintiffs have no recourse against him.
The Court, in said case, ruled in favor of the plaintiff, holding that a quasi-delict is “a separate
legal institution under the Civil Code, with a substantivity all its own, and individuality that is
entirely apart and independent from a delict or crime.”
The Comment thus analyzes related decisions on the matter of interpreting and
applying Barredoand Article 2177 of the New Civil Code, which include: Diana v.
Batangas (93 Phil. 391 (1953)), Jocson v. Glorioso (22 SCRA 316 (1968)), Mendoza v. La
Mallorca (82 SCRA 243 (1978)), and Padua v. Robles (66 SCRA 485 (1975)) on the one
hand, and Tactaquin v. Palileo (21 SCRA 346 (1967)) on the other.
The Author concludes by stating that the doctrine in Barredo is meritorious but is susceptible
to improvement, in effect, posing a challenge to legislators.
4 CO VS. CA
Co v. CA
G.R. No. 124922, June 22, 1998, 291 SCRA 111
FACTS:
Private respondent undertook to return the vehicle on July 21, 1990 fully serviced and
supplied in accordance with the job contract. After petitioner paid in full the repair bill in the
amount of P1,397.00, private respondent issued to him a gate pass for the release of the
vehicle on said date. But came July 21, 1990, the latter could not release the vehicle as its
battery was weak and was not yet replaced. Left with no option, petitioner himself bought a
new battery nearby and delivered it to private respondent for installation on the same day.
However, the battery was not installed and the delivery of the car was rescheduled to July 24,
1990 or three (3) days later. When petitioner sought to reclaim his car in the afternoon of July
24, 1990, he was told that it was carnapped earlier that morning while being road-tested by
private respondents employee along Pedro Gil and Perez Streets in Paco, Manila. Private
respondent said that the incident was reported to the police.
ISSUE:
Whether or not a repair shop can be held liable for the loss of a customers’ vehicle due to
carnapping while the same is in its custody for repair or other job services?
RULING:
It is a not a defense for a repair shop of motor vehicles to escape liability simply because the
damage or loss of a thing lawfully placed in its possession was due to carnapping. Carnapping
per se cannot be considered as a fortuitous event. The fact that a thing was unlawfully and
forcefully taken from another’s rightful possession, as in cases of carnapping, does not
automatically give rise to a fortuitous event. Assuming further that there was no delay, still
working against private respondent is the legal presumption under Article 1265 that its
possession of the thing at the time it was lost was due to its fault. This presumption is
reasonable since he who has the custody and care of the thing can easily explain the
circumstances of the loss. The vehicle owner has no duty to show that the repair shop was at
fault. All that petitioner needs to prove, as claimant, is the simple fact that private respondent
was in possession of the vehicle at the time it was lost. In this case, private respondents
possession at the time of the loss is undisputed. Consequently, the burden shifts to the
possessor who needs to present controverting evidence sufficient enough to overcome that
presumption. Moreover, the exempting circumstances – earthquake, flood, storm or other
natural calamity – when the presumption of fault is not applicable do not concur in this case.
Accordingly, having failed to rebut the presumption and since the case does not fall under the
exceptions, private respondent is answerable for the loss.
124 Phil. 611
BENGZON, J.P., J.:
This is an appeal from two orders of the Court of First Instance of Rizal in Special
Proceedings No. 2524 regarding the testacy of the deceased Maxima Santos Vda. de Blas.
On October 22, 1956, Rosalina Santos filed a petition with the Court of First Instance of Rizal
for the probate of the last will allegedly executed on September 22, 1956 by the deceased
Maxima Santos Vda. de Blas.[1] The nearest of kin of the deceased were her brothers and a
sister, nephews and nieces. Rosalina Santos, petitioner-appellee herein, is one of said nieces.
Among the legatees - or more accurately, devisees - mentioned in the will is Flora Blas de
Buenaventura. She is not related by blood to the deceased.
Flora Blas de Buenaventura and Justo Garcia filed on November 28, 1956 an opposition to the
probate of said will.
Among the grounds for the opposition of Flora Blas and Justo Garcia were that the will was
not executed in accordance with law; that undue and improper pressure was exerted upon the
testatrix Maxima Santos in the execution thereof; that the signature of Maxima was secured
through fraud; and that at the time of the execution of the will Maxima was mentally
incapable of making a will.[2]
After the probate court had received the evidence for both the petitioner and oppositors, but
before the latter could close their evidence, Flora Blas on November 6, 1957 filed a
manifestation that she is withdrawing her opposition to the probate of the will, quoted as
follows:
"Oppositor FLORA BLAS DE BUENAVENTURA, assisted by her counsel, unto this
Honorable Court respectfully manifests:
"1. That she is hereby withdrawing her opposition to the petition for the probate of the will of
the deceased Maxima Santos Vda. de Blas;
"2. That being a legatee named in the will, to protect and preserve her rights and interests, she
hereby makes of record that she is joining the proponent of said will for the legalization of the
same."
Some circumstances leading to said withdrawal may be noted. Flora had to sell her house for
P5,000 to pay for stenographic notes of this case. Rosalina Santos thereafter gave a party at
the Manila Hotel, aimed at settling the case amicably. And there Atty. Jose T. de los Santos -
appellee's lawyer - took Flora aside and told her that he learned she had sold her house, that it
was a foolish thing to have done, and that for her sake and her children's, she should withdraw
her opposition and receive her legacy, so that from its rent she could start a business.
The proceedings continued however as to the opposition of Justo Garcia.
On December 24, 1957, the court below issued an order allowing the probate of the will. After
the order had become final and executory, Flora Blas on February 27, 1958, filed a petition
praying for the delivery to her of a fishpond as a specific devise in her favor under Item No. 3,
Clause No. 6, of the will. To this petition, inspite of apparent understanding, Rosalina Santos
filed an opposition predicated on the ground that said specific devise in favor of Flora was
forfeited in favor of the other residuary heirs, pursuant to a provision of the will that should
any of the heirs, devisees or legatees contest or oppose its probate, the latter shall lose his or
her right to receive any inheritance or benefit under it, which shall be forfeited in favor of the
other heirs, devisees and legatees.
The pertinent provisions of the will, translated into English from Tagalog, reads as follows:
"Fourteenth. - I request all my heirs, devisees and legatees to look after each other, love and
help one another and accept with thanks what I have bequeathed to them, and treasure, love
and cherish the same. Anyone of them who contests or opposes the probate of my will or the
carrying out of its provisions shall lose any right to receive any inheritance or benefit under
my will, and their inheritance or share shall pertain to the other heirs who have not
opposed."[3]
This is known in Anglo-American jurisdiction as the "no-contest and forfeiture" clause of a
will.
In its order of April 30, 1958, the court a quo sustained the theory that the "no-contest and
forfeiture" clause of the will was valid and had the effect of depriving Flora of her devise in
view of her previous opposition to its probate, which it held not justified under the
circumstances. Accordingly, it denied the motion for delivery of the specific devise, declaring
the same forfeited in favor of the other residuary heirs. Flora's motion for reconsideration,
superseded by a subsequent amended motion to the same effect, was denied by the probate
court in its order dated March 7, 1959.
From the foregoing two orders of the trial court, Flora Blas interposed an appeal to the Court
of Appeals. Said Court, in its resolution of March 25, 1964, certified the appeal to Us as
calling for determination of questions purely of law.
This appeal raises two issues: (1) Did Flora's actuations, under the facts and circumstances
herein, amount to a violation of the "no-contest and forfeiture" clause of the will; and (2) Is
the "no-contest and forfeiture" provision of the will valid?
Anent the second issue, the parties herein, relying mostly upon Spanish and Anglo-American
authorities, advance conflicting theories. Petitioner-appellee argues that the "no-contest and
forfeiture" clause is a valid, legal and efficacious testamentary condition. Against this
position, however, the devisee-appellant maintains that such provision in a will is null and
void because it is contrary to public policy.
It is, however, the first issue that We will now discuss. For this purpose, the point to
determine initially is whether or not appellant's filing of her opposition was justified under the
particular circumstances of the case; and then, whether or not a timely withdrawal of said
opposition had precluded violation of the "no-contest and forfeiture clause".
The court a quo's conclusion is that "there was no justification for her to oppose or contest the
probate of said will" because "from the evidence given by her and by her witnesses during the
pendency of the probate of the will x x x, it appears that Flora Blas was aware of the true facts
surrounding the execution of the will and of the mental state of mind of the said testatrix at the
time of the execution of the will in question, and yet she has charged her benefactor, the late
Maxima Santos, as not enjoying sound mind when the latter executed her will on September
22, 1956", and that "there is no proof to show that the said Flora Blas was in any manner
related by blood to Maxima Santos Vda. de Blas so that her contest of the said will cannot
benefit her."[4]
We disagree with the above conclusion of the lower court, which is not the inference borne
out by the facts and the evidence - both testimonial and documentary - adduced in the case.
Appellant knew about the existence of another will executed earlier in 1953 in which she
stood to receive more - much more - than what is devised to her in the 1956 will.[5] Since 1953
up to the death of the testatrix, appellant did not fall out of the good graces of the deceased.
Their relationship stayed as close as ever. She did not give any cause to alienate the
deceased's affections. Why, then, the supposed change of heart?
She was addressed as Flora Buendia in the will,[6] yet she has been using the name Flora Blas
as far as she could remember, apparently with the knowledge and consent of the deceased.
This is supported by her school records from grade school up to first year pharmacy.
Admittedly, it was the deceased who reared and spent for the education of the appellant, and
therefore she must have known that the latter was using the family name Blas. If, indeed, the
testatrix was not agreeable to such an arrangement, why did she not take steps to correct the
same? We can only conclude that appellant's use of the family name Blas was with the
acquiescence of the testatrix. Why should she change her mind after all the years and speak of
appellant in her will as Flora Buendia instead of Flora Blas?
There was also the coincidence that the three attesting witnesses to the will, all brothers, are
likewise the lawyers of the executrix (who will receive the biggest single share under the will)
and compadres of the assistant executrix, while the notary public is also a compadre of one of
the attesting brothers-lawyers.
Furthermore, the nurse who attended to the deceased on September 22, 1956 - the date when
the will was supposedly typed and signed by the testatrix in her room at the Manila Doctors
Hospital - told the appellant that there was no one inside the testatrix's room when she went to
administer medications to the old woman at the precise time when the attesting witnesses and
the notary public testified they were inside said room. The nurse admitted this likewise under
oath (Tsn., June 10, 1957, p. 23).
But the most important single factor that should engender reasonable doubt as to the physical
and mental capacity of a person to execute a will, was the condition of Maxima Blas as
gleaned from the records of the case. She was an old woman more than 86 years old who The most that can be said, if at all, is that Flora Blas' actuations were also impelled by some
suffered from various ailments like rheumatoid arthritis, catarrh of the eyes, jaundice, desire to gain. But who among the heirs can assume a posture of innocence and cast the first
cirrhosis of the liver, anemia, edema of lower legs and fracture in the vertebrae. From August stone? None of them can safely claim that he is not thus similarly motivated.
1, 1956 to September 23, 1956 she received seven blood transfusions, as follows: one on From the foregoing premises it cannot be said that Flora's actuations impaired the true
August 1; two on September 22 (the alleged date of the execution of the will), with barely intention of the testatrix in regard to the "no-contest and forfeiture" clause of the will. Flora's
three hours intervening; one each on September 24, 25, 26 and 29, 1956. She was also given act of withdrawing her opposition before she had rested her case contributed to the speedy
dextrose vinoclysis on September 22, because she could not take food through the mouth; and probate of the will. Since the withdrawal came before Flora had rested her case, it precluded
on September 23, 1956 she started to bleed by mouth, compelling her doctor to cancel her trip the defeat of the probate upon the strength of Flora's evidence. Through said withdrawal,
to the United States scheduled for September 25, 1956. Several documents executed by Flora conformed to the testatrix's wish that her dispositions of her properties under the will be
her before the alleged date of execution of the will, were no longer signed but merely carried out. It follows that, taken as a whole, Flora's actuations subserved rather than violated
thumbmarked by her,[7] whereas the will appeared to have been signed. the testatrix's intention.
It is difficult for Us to imagine that one situated and equally faced with the above enumerated There is, therefore, no further need to discuss the second issue on the validity of a "no-contest
facts and circumstances as the appellant was, should keep her peace. She had her doubts, and and forfeiture" clause in this jurisdiction, since, at any rate, said clause was not violated in this
to resolve them she had to conduct inquiries and investigations. Her findings all the more case.
strengthened her belief that there was something untoward about the execution of the will. WHEREFORE, the appealed orders dated April 30, 1958 and March 7, 1959 are hereby
Thus, in her desire to know the truth and to protect her rights, she opposed the probate of the reversed, and this case is remanded to the court a quo with the instruction that appellant's
will. devise under the will be forthwith delivered to her. No costs.
After all, had the contest been continued and the will held invalid on any of the grounds SO ORDERED.
provided by law for the disallowance of a will,[8] she would have contributed in no small
measure to the cause of the truth which the courts are duty-bound to ascertain. The probate
court would have been in a position to apply the proper legal provisions which are for the
greater interests of the testatrix - since all of them are ordained to the idea that the truth of her
last thoughts may be duly assured and guaranteed.
Above all, the factor that preponderates in favor of appellant is that, after realizing her
mistake in contesting the will - a mistake committed in good faith because grounded on strong
doubts - she withdrew her opposition and joined the appellee in the latter's petition for the
probate of the will. She must not now be penalized for rectifying her error. After all, the
intentions of the testatrix had been fulfilled, her will had been admitted and allowed probate
within a reasonably short period, and the disposition of her property can now be effected.
It should be pointed out that, contrary to the translation accorded to Paragraph Fourteen of the
will, the testatrix enjoins not a mere contest or opposition to its probate, but a contest or
opposition to the probate of the will and the carrying out of its provisions. This is so because
the questioned clause speaks of "pagpapatibay atpag-bibigay-bisa" instead of
"pagpapatibay o pag-bibigay-bisa."[9] This furnishes a significant index into the intention of
the testatrix, namely, that she was more concerned in insuring the carrying out of her
testamentary provisions than in precluding any contest or opposition to it. By the withdrawal
of the contest which appellant brought in good faith, no prejudice has been done to the
intention of the testatrix. The dispositions of her will can now be safely carried out.
Chavez vs. Gonzales
Rosendo O. Chavez, plaintiff-appellant
vs.
Fructuoso Gonzales, defendant-appellee
REYES, J.B.L., J.:

Facts: On July 1963, Rosendo Chavez brought his typewriter to Fructuoso Gonzales a
typewriter repairman for the cleaning and servicing of the said typewriter but the latter was
not able to finish the job. During October 1963, the plaintiff gave the amount of P6.00 to the
defendant which the latter asked from the plaintiff for the purchase of spare parts, because of
the delay of the repair the plaintiff decided to recover the typewriter to the defendant which he
wrapped it like a package. When the plaintiff reached their home he opened it and examined
that some parts and screws was lost. That on October 29, 1963 the plaintiff sent a letter to the
defendant for the return of the missing parts, the interior cover and the sum of P6.00 (Exhibit
D). The following day, the defendant returned to the plaintiff some of the missing parts, the
interior cover and the P6.00. The plaintiff brought his typewriter to Freixas Business
Machines and the repair cost the amount of P89.85. He commenced this action on August 23,
1965 in the City Court of Manila, demanding from the defendant the payment of P90.00 as
actual and compensatory damages, P100.00 for temperate damages, P500.00 for moral
damages, and P500.00 as attorney’s fees. The defendant made no denials of the facts narrated
above, except the claim of the plaintiff that the cost of the repair made by Freixas Business
Machines be fully chargeable against him.

Issue: Whether or not the defendant is liable for the total cost of the repair made by Freixas
Business Machines with the plaintiff typewriter?

Ruling: No, he is not liable for the total cost of the repair made by Freixas Business Machines
instead he is only liable for the cost of the missing parts and screws. The defendant
contravened the tenor of his obligation in repairing the typewriter of the plaintiff that he fails
to repair it and returned it with the missing parts, he is liable under “ART. 1167. 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 he undone.”
Facts:
July 1963, Rosendo Chavez, plaintiff, brought his typewriter to Fructuoso Gonzales,
defendant, a typewriter repairman for the cleaning and servicing of the said typewriter. Three
months later, the plaintiff paid P6.00 to the defendant for the purchase of spare parts. Because
of the delay of the repair the plaintiff decided to recover the typewriter from the defendant
which was wrapped like a package. When he opened and examined it, the interior cover and
some parts and screws were missing. October 29, 1963 the plaintiff sent a letter to the
defendant for the return of the missing parts, the interior cover and the sum of P6.00. The
following day, the defendant returned to the plaintiff only some of the missing parts, the
interior cover and the P6.00.
August 29, 1964, the plaintiff had his typewriter repaired by Freixas Business Machines, that
cost him a total of P89.85. A year later, the plaintiff filed an action before the City Court of
Manila, demanding from the defendant the payment for total of P1,190.00 for
damages including attorney’s fees. The defendant made no denials.
The repair invoice shows that the missing parts had a total value of P31.10 only.
Wherefore, judgment is hereby rendered ordering the defendant to pay the plaintiff the sum of
P31.10, and the costs of suit.
Chaves appealed, because it only awarded the value of the missing parts of the typewriter,
instead of the whole cost of labor and materials that went into the repair of the machine. It is
clear that the defendant-appellee contravened the tenor of his obligation because not only did
he not repair the typewriter but returned it “in shambles”.
IN VIEW OF THE FOREGOING REASONS, the appealed judgment is hereby modified, by
ordering the defendant-appellee to pay, as he is hereby ordered to pay, the plaintiff-appellant
the sum of P89.85, with interest at the legal rate from the filing of the complaint. Costs in all
instances against appellee Fructuoso Gonzales.
Issue:
Whether or not the defendant is liable for the total cost of repair.
Held:
Yes. For such contravention, he is liable under Article 1167 of the Civil Code. For the cost of
executing the obligation in a proper manner. The cost of the execution of the obligation in this
case should be the cost of the labor or service expended in the repair of the typewriter.
Chavez v. Gonzales
G.R. No. 27454, April 30, 1970, 32 SCRA 547
FACTS:
On July 1963, Rosendo Chavez brought his typewriter to Fructuoso Gonzales a typewriter
repairman for the cleaning and servicing of the said typewriter but the latter was not able to
finish the job. During October 1963, the plaintiff gave the amount of P6.00 to the defendant
which the latter asked from the plaintiff for the purchase of spare parts, because of the delay
of the repair the plaintiff decided to recover the typewriter to the defendant which he wrapped
it like a package. When the plaintiff reached their home he opened it and examined that some
parts and screws was lost. That on October 29, 1963 the plaintiff sent a letter to the defendant
for the return of the missing parts, the interior cover and the sum of P6.00 (Exhibit D). The
following day, the defendant returned to the plaintiff some of the missing parts, the interior
cover and the P6.00. The plaintiff brought his typewriter to Freixas Business Machines and
the repair cost the amount of P89.85. He commenced this action on August 23, 1965 in the
City Court of Manila, demanding from the defendant the payment of P90.00 as actual and
compensatory damages, P100.00 for temperate damages, P500.00 for moral damages, and
P500.00 as attorney’s fees. The defendant made no denials of the facts narrated above, except
the claim of the plaintiff that the cost of the repair made by Freixas Business Machines be
fully chargeable against him.
ISSUE:
Whether or not the defendant is liable for the total cost of the repair made by Freixas Business
Machines with the plaintiff typewriter?
RULING:
No, he is not liable for the total cost of the repair made by Freixas Business Machines instead
he is only liable for the cost of the missing parts and screws. The defendant contravened the
tenor of his obligation in repairing the typewriter of the plaintiff that he fails to repair it and
returned it with the missing parts.
Under Article 1167 of the Civil Code, a person who is obliged to do something and fails to do
it shall be liable for the cost of executing the obligation in a proper manner. The cost of
execution of the obligation to repair a typewriter is the cost of the labor or service expended in
the repair of the typewriter. In addition, the obligor, under Article 1170 of the Code, is liable
for the cost of the missing parts because in his obligation to repair the typewriter he is bound
to return the typewriter in the same condition it was when he received it.
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 he undone.”
Eliseo Fajardo Jr., vs Freedom to Build Inc. the immediately preceding 5 years based on the weighted average of wholesale price and
G. R. No. 134692 August 1, 2000 wage indices of the National Census and Statistics Office and the Bureau of Labor Statistics is
Facts: Freedom to Build Inc., an owner-developer and seller of low-cost housing sold to explicitly provided for in the Deed of Restrictions entered into by the parties. This unique and
petitioner-spouses a house and lot in the De La Costa Homes, in Barangka, Marikina, Metro peculiar circumstance, among other strong justifications therein mentioned, is not extant in the
Manila. The Contract to sell executed between the parties, contained a Restrictive Covenant case at bar.
providing certain prohibitions, to wit: In sum, the Court holds that since the extension constructed exceeds the floor area limits of
“Easements. For the good of the entire community, the homeowner must observe a two-meter the Restrictive Covenant, petitioner spouses can be required to demolish the structure to the
easement in front. No structure of any kind (store, garage, bodega, etc.) may be built on the extent that it exceeds the prescribed floor area limits.
front easement. Wherefore, the assailed decision of the Court of Appeals is AFFIRMED. No costs.
“Upward expansion. A second storey is not prohibited. But the second storey expansion must SO ORDERED.
be placed above the back portion of the house and should not extend forward beyond the apex
of the original building.
“Front expansion: 2nd Storey: No unit may be extended in the front beyond the line as
designed and implemented by the developer in the 60 sq. m. unit. In other words, the 2nd
floor expansion, in front, is 6 meters back from the front property line and 4 meters back from
the front wall of the house, just as provided in the 60 sq. m. units.”
The above restrictions were also contained in Transfer Certificate of Title No. N-115384
covering the lot issued in the name of petitioner-spouses.
The controversy arose when the petitioners despite repeated demand from the respondent,
extended the roof of their house to the property line and expanded the second floor of their
house to a point directly above the original front wall. Respondent filed before the RTC an
action to demolish the unauthorized structures.
The RTC rendered a judgment against the petitioner ordering them to immediately demolish
and remove the extension of their expanded housing unit that exceeds the limitations imposed
by the Restrictive Covenant, otherwise the Branch Sheriff of this Court will execute the this
decision at the expense of the defendants.
On appeal, the CA affirmed the decision of the RTC. Hence, this petition for review.
Issue: Whether or not the for the lack of a specific provision, prescribing the penalty of the
demolition in the “Restrictive Covenant” in the event of the breach thereof, the prayer of the
respondent to demolish the structure should fail.
Ruling:
The Court held that the argument of the petitioner-spouses has no merit; Article 1168 of the
New Civil Code states that: “When the obligation consists in not doing and the obligor does
what has been forbidden him, it shall be undone at his expense.”
This Court is not unaware of its ruling in Ayala Corporation vs. Ray Burton Development
Corporation, which has merely adjudged the payment of damages in lieu of demolition. In the
aforementioned case, however, the elaborate mathematical formula for the determination of
compensatory damages which takes into account the current construction cost index during
Crisostomo v. CA travel agency include procuring tickets and facilitating travel permits or visas as well as
G.R. No. 138334, August 25, 2003, 409 SCRA 528 booking customers for tours.
FACTS: The object of petitioner’s contractual relation with respondent is the service of arranging and
Petitioner contracted the services of respondent Caravan Travel and Tours International, Inc. facilitating petitioners booking, ticketing and accommodation in the package tour. In contrast,
to arrange and facilitate her booking, ticketing and accommodation in a tour dubbed Jewels of the object of a contract of carriage is the transportation of passengers or goods. It is in this
Europe. Pursuant to said contract, the travel documents and plane tickets were delivered to the sense that the contract between the parties in this case was an ordinary one for services and
petitioner who in turn gave the full payment for the package tour on June 12, 1991. Without not one of carriage. Since the contract between the parties is an ordinary one for services, the
checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take standard of care required of respondent is that of a good father of a family under Article 1173
the flight for the first leg of her journey from Manila to Hongkong. To petitioner’s dismay, of the Civil Code. The evidence on record shows that respondent exercised due diligence in
she discovered that the flight she was supposed to take had already departed the previous day. performing its obligations under the contract and followed standard procedure in rendering its
She learned that her plane ticket was for the flight scheduled on June 14, 1991. She thus services to petitioner. As correctly observed by the lower court, the plane ticket issued to
called up Menor to complain. Subsequently, Menor prevailed upon petitioner to take another petitioner clearly reflected the departure date and time, contrary to petitioner’s contention.
tour- the British Pageant. Upon petitioner’s return from Europe, she demanded from The travel documents, consisting of the tour itinerary, vouchers and instructions, were
respondent the reimbursement of the difference between the sum she paid for Jewels of likewise delivered to petitioner two days prior to the trip. Respondent also properly booked
Europe and the amount she owed respondent for the British Pageant tour. petitioner for the tour, prepared the necessary documents and procured the plane tickets. It
arranged petitioner’s hotel accommodation as well as food, land transfers and sightseeing
Petitioner filed a complaint against respondent for breach of contract of carriage and damages
excursions, in accordance with its avowed undertaking. The evidence on record shows that
alleging that her failure to join Jewels of Europe was due to respondent’s fault since it did not
respondent company performed its duty diligently and did not commit any contractual breach.
clearly indicate the departure date on the plane, failing to observe the standard of care
Hence, petitioner cannot recover and must bear her own damage.
required of a common carrier when it informed her wrongly of the flight schedule. For its part,
respondent company, denied responsibility for petitioner’s failure to join the first tour,
insisting that petitioner was informed of the correct departure date, which was clearly and
legibly printed on the plane ticket. The travel documents were given to petitioner two days
ahead of the scheduled trip. Respondent further contend that petitioner had only herself to
blame for missing the flight, as she did not bother to read or confirm her flight schedule as
printed on the ticket.
ISSUE:
Whether or not Caravan Travel & Tours International Inc. is negligent in the fulfilment of its
obligation to petitioner Crisostomo thus granting to the petitioner the consequential damages
due her as a result of breach of contract of carriage.
RULING:
Contention of petitioner has no merit. A contract of carriage or transportation is one whereby
a certain person or association of persons obligate themselves to transport persons, things, or
news from one place to another for a fixed price. Such person or association of persons are
regarded as carriers and are classified as private or special carriers and common or public
carriers. Respondent is not an entity engaged in the business of transporting either passengers
or goods and is therefore, neither a private nor a common carrier. Respondent did not
undertake to transport petitioner from one place to another since its covenant with its
customers is simply to make travel arrangements in their behalf. Respondent’s services as a
Crisostomo v. CA, 409 SCRA 528 (2003)
Problem:

Estela L. Crisostomo contracted the services of Caravan Travel and Tours International, Inc.
to arrange and facilitate her booking, ticketing and accommodation in a tour dubbed "Jewels
of Europe". The package tour cost her P74, 322.70. She was given a 5% discount on the
amount, which included airfare, and the booking fee was also waived because petitioner’s
niece, Meriam Menor, was former’s company’s ticketing manager.

Menor went to her aunt’s residence on a Wednesday to deliver petitioner’s travel documents
and plane tickets. Estela, in turn, gave Menor the full payment for the package tour. Menor
then told her to be at the Ninoy Aquino International Airport (NAIA) on Saturday, two hours
before her flight on board British Airways.

Without checking her travel documents, Estela went to NAIA on Saturday, to take the flight
for the first leg of her journey from Manila to Hongkong. She discovered that the flight she
was supposed to take had already departed the previous day. She learned that her plane ticket
was for the flight scheduled on June 14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon Estela to take another tour the "British Pageant”, which
cost P20, 881.00. She gave caravan travel and tours P7, 980.00 as partial payment and
commenced the trip in July 1991.
Upon petitioner’s return from Europe, she demanded from respondent the reimbursement of
P61, 421.70, representing the difference between the sum she paid for "Jewels of Europe" and
the amount she owed respondent for the "British Pageant" tour. Despite several demands,
respondent company refused to reimburse the amount, contending that the same was non-
refundable.
Estela filed a complaint against Caravan travel and Tours for breach of contract of carriage
and damages.
A) Will the action prosper?
B) Will she be entitled to damages?
The negligence of the obligor in the performance of the obligation renders him liable for
damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the performance of the obligation
as the nature of the obligation so demands.
In the case at bar, Caravan Travel and Tours exercised due diligence in performing its
obligations under the contract and followed standard procedure in rendering its services to
Estela. The plane ticket issued to petitioner clearly reflected the departure date and time,
contrary to Estela’s contention. The travel documents, consisting of the tour itinerary,
vouchers and instructions, were likewise delivered to her two days prior to the trip. The
Caravan Travel and Tours also properly booked Estela for the tour, prepared the necessary
documents and procured the plane tickets. It arranged Estela’s hotel accommodation as well
as food, land transfers and sightseeing excursions, in accordance with its avowed undertaking.

Answer: From the foregoing, it is clear that the Caravan Travel and Tours performed its prestation
under the contract as well as everything else that was essential to book Estela for the tour.
No, for there was no contract of carriage. Hence, Estela cannot recover and must bear her own damage.

By definition, a contract of carriage or transportation is one whereby a certain person or

association of persons obligate themselves to transport persons, things, or news from one
place to another for a fixed price.

From the above definition, Caravan Travel and Tours is not an entity engaged in the business
of transporting either passengers or goods and is therefore, neither a private nor a common
carrier. Caravan Travel and Tours did not undertake to transport Estela from one place to
another since its covenant with its customers is simply to make travel arrangements in their
behalf. Caravan travel and tour’s services as a travel agency include procuring tickets and
facilitating travel permits or visas as well as booking customers for tours.

While Estela concededly bought her plane ticket through the efforts of respondent company,
this does not mean that the latter ipso facto is a common carrier. At most, Caravan Travel and
Tours acted merely as an agent of the airline, with whom the former ultimately contracted for
her carriage to Europe.

B) No.
CAGUIOA, J:
Before the Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court
filed by petitioners Jose Sanico (Sanico) and Vicente Castro (Castro), assailing the
Decision[2] dated September 30, 2013 of the Court of Appeals (CA) in CA-G.R. CEB-CV No.
01889. The CA affirmed with modification the Decision[3]dated October 27, 2006 of the
Regional Trial Court, Branch 25, Danao City (RTC) which found Sanico and Castro liable for
breach of' contract of carriage and awarded actual and compensatory damages for loss of
income in favor of respondent Werherlina P. Colipano (Colipano). The CA reduced the
compensatory damages that the RTC awarded.
Antecedents
WHEREFORE, premises considered, this Court finds the defendants LIABLEfor breach of
contract of carriage and are solidarily liable to pay plaintiff:
1. Actual damages in the amount of P2,098.80; and
2. Compensatory damages for loss of income in the amount of P360,000.00.
No costs.
SO ORDERED.[16]
Only Sanico and Castro appealed to the CA, which affirmed with modification the RTC
Decision. The dispositive portion of the CA Decision states:

Colipano filed a complaint on January 7, 1997 for breach of contract of carriage and damages IN LIGHT OF ALL THE FOREGOING, the instant appeal is PARTIALLY GRANTED. The
against Sanico and Castro.[4] In her complaint, Colipano claimed that at 4:00 P.M. more or Decision dated October 27, 2006 of the Regional Trial Court, Branch 25, Danao City, in Civil
less of December 25, 1993, Christmas Day, she and her daughter were; paying passengers in Case No. DNA-418, is AFFIRMED with MODIFICATION in that the award for
the jeepney operated by Sanico, which was driven by Castro. [5] Colipano claimed she was compensatory damages for loss of income in paragraph 2 of the dispositive portion of the
made to sit on an empty beer case at the edge of the rear entrance/exit of the jeepney with her RTC's decision, is reduced to P200,000.00.
sleeping child on her lap.[6] And, at an uphill incline in the road to Natimao-an, Carmen, Cebu,
the jeepney slid backwards because it did not have the power to reach the top. [7] Colipano SO ORDERED.[17]
pushed both her feet against the step board to prevent herself and her child from being thrown
out of the exit, but because the step board was wet, her left foot slipped and got crushed Without moving for the reconsideration of the CA Decision, Sanico and Castro filed this
between the step board and a coconut tree which the jeepney bumped, causing the jeepney to petition before the Court assailing the CA Decision.
stop its backward movement.[8] Colipano's leg was badly injured and was eventually
amputated.[9] Colipano prayed for actual damages, loss of income, moral damages, exemplary Issues
damages, and attorney's fees.[10]
a. Whether the CA erred in finding that Sanico and Castro breached the contract of
In their answer, Sanico and Castro admitted that Colipano's leg was crushed and amputated carriage with Colipano;
but claimed that it! was Colipano's fault that her leg was crushed. [11]They admitted that the
jeepney slid backwards because the jeepney lost power. [12]The conductor then instructed b. Whether the Affidavit of Desistance and Release of Claim is binding on Colipano;
everyone not to panic but Colipano tried to disembark and her foot got caught in between the and
step board and the coconut tree.[13] Sanico claimed that he paid for all the hospital and medical
expenses of Colipano,[14] and that Colipano eventually freely and voluntarily executed an c. Whether the CA erred in the amount of damages awarded.
Affidavit of Desistance and Release of Claim.[15]
The Court's Ruling
After trial, the RTC found that Sanico and Castro breached the contract of carriage between
them and Colipano but only awarded actual and compensatory damages in favor of Colipano. The Court partly grants the petition.
The dispositive portion of the RTC Decision states:
Only Sanico breached the contract of carriage.
Here, it is beyond dispute that Colipano was injured while she was a passenger in the jeepney
owned and operated by Sanico that was being driven by Castro. Both the CA and RTC found
Sanico and Castro jointly and severally liable. This, however, is erroneous because only
Sanico was the party to the contract of carriage with Colipano.
Since the cause of action is based on a breach of a contract of carriage, the liability of Sanico
is direct as the contract is between him and Colipano. Castro, being merely the driver of
Sanico's jeepney, cannot be made liable as he is not a party to the contract of carriage.
In Soberano v. Manila Railroad Co.,[18] the Court ruled that a complaint for breach of a
contract of carriage is dismissible as against the employee who was driving the bus because
the parties to the contract of carriage are only the passenger, the bus owner, and the
operator, viz.:
The complaint against Caccam was therefore properly dismissed. He was not a party to the
contract; he was a mere employee of the BAL. The parties to that contract are Juana
Soberano, the passenger, and the MRR and its subsidiary, the BAL, the bus owner and
operator, respectively; and consequent to the inability of the defendant companies to carry
Juana Soberano and her baggage arid personal effects securely and safely to her destination as
imposed by law (art. 1733, in relation to arts. 1736 and 1755, N.C.C.), their liability to her
becomes direct and immediate.[19]
Since Castro was not a party to the contract of carriage, Colipano had no cause of action
against him and the pomplaint against him should be dismissed. Although he was driving the
jeepney, he was a mere employee of Sanico, who was the operator and owner of the jeepney.
The obligation to carry Colipano safely to her destination was with Sanico. In fact, the
elements of a contract of carriage existeid between Colipano and Sanico: consent, as shown
when Castro, as employee of Sanico, accepted Colipano as a passenger when he allowed
Colipano to board the jeepney, and as to Colipano, when she boarded the jeepney; cause or
consideration, when Colipano, for her part, paid her fare; and, object, the transportation of
Colipano from the place of departure to the place of destination. [20]
Having established that the contract of carriage was only between Sanico and Colipano and
that therefore Colipano had no cause of action against Castro, the Court next determines
whether Sanico breached his obligations to Colipano under the contract.
Sanico is liable as operator and owner of a common carrier.
Specific to a contract of carriage, ithe Civil Code requires common carriers to observe
extraordinary diligence in safely transporting their passengers. Article 1733 of the Civil Code
states:
ART. 1733. Common carriers, fijpm the nature of their business and for reasons of public
policy, are bbund to observe extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to all the circumstances of each
case.
Such extraordinary diligence in the vigilance over the goods is further expressed in Articles
1734, 1735 and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the
passengers is further set forth in Articles 1755 and 1756.
This extraordinary diligence, following Article 1755 of the Civil Code, means that common
carriers have the obligation to carry passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances.
In case of death of or injury to their passengers, Article 1756 of the Civil Code provides that
common carriers are presumed to have been at fault or negligent, and this presumption can be
overcome only by proof of the extraordinary diligence exercised to ensure the safety of the
passengers.[21]
Being an operator and owner of a common carrier, Sanico was required to observe
extraordinary diligence in safely transporting Colipano. When Colipano's leg was injured
while she was a passenger in Sanico's jeepney, the presumption of fault or negligence on
Sanico's part arose and he had the burden to prove that he exercised the extraordinary
diligence required of him. He failed to do this.
In Calalas v. Court of Appeals,[22] the Court found that allowing the respondent in that case to
be seated in an extension seat, which was a wooden stool at the rear of the jeepney, "placed
[the respondent] in a peril greater than that to which the other passengers were
exposed."[23] The Court further ruled that the petitioner in Calalaswas not only "unable to
overcome the presumption of negligence imposed on him for the injury sustained by [the
respondent], but also, the evidence shows he was actually negligent in transporting
passengers."[24]
Calalas squarely applies here. Sanico failed to rebut the presumption of fault or negligence
under the Civil Code. More than this, the evidence indubitably established Sanico's
negligence when Castro made Colipano sit on an empty beer case at the edge of the rear
entrance/exit of the jeepney with her sleeping child on her lap, which put her and her child in
greater peril than the other passengers. As the CA correctly held:
For the driver, Vicente Castro, to allow a seat extension made of an empty case of beer clearly
indicates lack of prudence. Permitting Werherlina to occupy an improvised seat in the rear
portion of the jeepney, with a child on her lap to boot, exposed her and her child in a peril
greater than that to which the other passengers were exposed. The use of an improvised seat
extension is undeniable, in view of the testimony of plaintiffs witness, which is consistent
with Werherlina's testimonial assertion. Werherlina and her witness's testimony were
accorded belief by the RTC. Factual findings of the trial court are entitled to great weight on
appeal and should not be disturbed except for strong and valid reasons, because the trial court
ip in a better position to examine the demeanor of the witnesses while testifying. [25]
The CA also correctly held that the!defense of engine failure, instead of exonerating Sanico,
only aggravated his already precarious position.[26] The engine failure "hinted lack of regular
check and maintenance to ensure that the engine is at its best, considering that the jeepney
regularly passes through a mountainous area." [27] This failure to ensure that the jeepney can
safely transport passengers through its route which required navigation through a
mountainous area is proof of fault on Sanico's part. In the face of such evidence, there is no
question as to Sanico's fault or negligence.
Further, common carriers may also be liable for damages when they contravene the tenor of
their obligations. Article 1170 of the Civil Code states:
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.
In Magat v. Medialdea,[28] the Court ruled: "The phrase 'in any manner contravene the tenor'
of the obligation includes any illicit act or omission which impairs the strict and faithful
fulfillment of the obligation and every kind of defective performance." [29] There is no question
here that making Colipano sit on the empty beer case was a clear showing of how Sanico
contravened the tenor of his obligation to safely transport Colipano from the place of
departure to the place of destination as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, and with due regard for all the circumstances.
Sanico's attempt to evade liability by arguing that he exercised extraordinary diligence when
he hired; Castro, who was allegedly an experienced and time-tested driver, whom he had even
accompanied on a test-drive and in whom he was personally convinced of the driving
skills,[30] are not enough to exonerate him from liability - because the liability of common
carriers does not cease upon p!roof that they exercised all the diligence of a good father of a
family irii the selection. and supervision of their employees. This is the express mandate of
Article 1759 of the Civil Code:
ART. 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former's employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
The only defenses available to common carriers are (1) proof that they observed extraordinary
diligence as prescribed in Article 1756,[31] and (2) following Article 1174 of the Civil Code,
proof that the injury or death was brought about by an event which "could not be foreseen, or
which, though foreseen, were inevitable," or a fortuitous event.
The Court finds that neither of these defenses obtain. Thus, Sanico is liable for damages to
Colipano because of the injury that Colipano suffered as a passenger of Sanico's jeepney.
The Affidavit of Desistance and Release of Claim is void.
Sanico cannot be exonerated from liability under the Affidavit of Desistance and Release of
Claim[32]and his payment of the hospital and medical bills of Colipano amounting to
P44,900.00.[33]
The RTC ruled that "the Affidavit of Desistance and Release of Claim is not binding on
plaintiff [Colipano] in the absence of proof that the contents thereof were sufficiently
translated and explained to her."[34] The CA affirmed the findings of the RTC and ruled that
the document was not binding on Colipano, as follows:
Finally, We sustain the RTC's finding that the affidavit of desistance and release of claim,
offered by defendants-appellants, are not binding on Werherlina, quoting with approval its
reflection on the matter, saying:
xxx this Court finds that the Affidavit of Desistance and Release of Claim is not binding on
plaintiff in the absence of proof that the contents thereof were sufficiently explained to her. It
is clear from the plaintiffs circumstances that she is not able to understand English, more so
stipulations stated in the said Affidavit and Release. It is understandable that in her pressing
need, the plaintiff may have been easily convinced to sign the document with the promise that
she will be compensated for her injuries.[35]
The Court finds no reason to depart from these findings of the CA and the RTC.
For there to be a valid waiver, the following requisites are essential:
(1) that the person making the waiver possesses the right, (2) that he has the capacity and
power to dispose of the right, (3) that the waiver must be clear and unequivocal although it
may be made expressly or impliedly, and (4) that the waiver is not contrary to law, public
policy, public order, morals, good customs or prejudicial to a third person with a right
recognized by law.[36]
While the first two requirements can be said to exist in this case, the third and fourth
requirements are, however, lacking.
For the waiver to be clear and unequivocal, the person waiving the right should understand
what she is waiving and the effect of such waiver. Both the CA and RTC made the factual
deitermination that Colipano was not able to understand English and that there was no proof
that the documents and their contents and effects were explained to her. These findings of the
RTC, affirmed by the CA, are entitled to great weight and respect. [37] As this Court held
in Philippine National Railways Corp. v. Vizcara [38]:
It is a well-established rule that factual fill dings by the CA are conclusive on the parties and
are not reviewable byj this Court. They are entitled to great weight and respect, even finality,
especially when, as in this case, the CA affirmed the factual findings arrived at by the trial
court.[39]
Although there are exceptions to this rule,[40] the exceptions are absent here.
Colipano could not have clearly and unequivocally waived her right to claim damages when
she had no understanding of the right she was waiving and the extent of that right. Worse, she
was made to sign a document written in a language she did not understand.
The fourth requirement for a valid waiver is also lacking as the waiver, based on the attendant
facts, can only be construed as contrary to public policy. The doctrine in Gatchalian v.
Delim,[41] which the CA correctly cited,[42] is applicable here:
Finally, because what is involved here is the liability of a common carrier for injuries
sustained by passengers in respect of whose safety a common carrier must
exercise extraordinary diligence, we must construe any such purported waiver most strictly
against the common carrier. For a waiver to be valid and effective, it must not be contrary to
law, morals, public policy or good customs. To uphold a supposed waiver of any right to
claim damages by an injured passenger, under circumstances like those exhibited in this case,
would be to dilute and weaken the standard of extraordinary diligence exacted by the law
from common carriers and hence to render that standard unenforceable. We believe such a
purported waiver is offensive to public policy.[43]
"[P]ublic policy refers to the aims of the state to promote the social and general well-being of
the inhabitants."[44] The Civil Code requires extraordinary diligence from common carriers
because the nature of their business requires the public to put their safety and lives in the
hands of these common carriers. The State imposes this extraordinary diligence to promote
the well-being of the public who avail themselves of the services of common carriers. Thus, in
instances of injury or death, a waiver of the right to claim damages is strictly construed
against the common carrier so as not to dilute or weaken the public policy behind the required
standard of extraordinary diligence.
It was for this reason that in Gatchalian, the waiver was considered offensive to public policy
because it was shown that the passenger was still in the hospital and was dizzy when she
signed the document. It was also shown that when she saw the other passengers signing the
document, she signed it without reading it. .
Similar to Gatchalian, Colipano testified that she did not understand the document she
signed.[45] She also did not understand the nature and extent of her waiver as the content of the
document was not explained to her.[46] The waiver is therefore void because it is contrary to
public policy.[47]
The Court reiterates that waivers executed under similar circumstances are indeed contrary to
public policy and are void.[48] To uphold waivers taken from injured passengers who have no
knowledge of their entitlement under the law and the extent of liability of common carriers
would indeed dilute the extraordinary diligence required from common carriers, and
contravene a public policy reflected in the Civil Code.
Amount of compensatory damages granted is incorrect.
On the amount of damages, the RiTC awarded P2,098.80 as actual damages and P360,000.00
as compensatoiy damages for loss of income, as follows:
[T]his Court can only award actual damages in the amount that is duly supported by receipts,
that is, P2,098.80 mid not P7,277.80 as prayed for by plaintiff as there is no basis for the
amount prayed for. However, considering that plaintiff has suffered the loss of one leg which
has caused her to be limited in her movement thus resulting in loss of livelihood, she is
entitled to compensatory damages for lost income at the rate of P12,000.00/year for thirty
years in the amount of P360,000.00.[49]
The CA, on the other hand, modified the award of the RTC by reducing the compensatory
damages from P360,000.00 to P200,000.00, thus:
By virtue of their negligence, defendants-appellants are liable to pay Werheiiina
compensatory damages for loss of earning capacity. In arriving at the proper amount, the
Supremip Court has consistently used the following formula:
Net Earning Life Expectancy x [Gross Annual Income - Living Expenses (50% of
=
Capacity gross annual income)]
where life
= 2/3 (80 - the age of the deceased).
expectancy
Based on the stated formula, the damages due to Werherlina for loss of earning capacity is:
Net Earning
= [2/3 x (80-30)] x (P12,000.00 x (50%)
Capacity
= (2/3 x 50) x P6,000.00
= 33.33 x P6,000.00
= P200,000.00
The award of the sum of P200,000.00 as compensatory damages for loss of earning capacity
is in order, notwithstanding the objections of defendants-appellants with respect to lack of
evidence on Werherlina's age and annual income.[50]
Sanico argues that Colipano failed to present documentary evidence to support her age and
her income, so that her testimony is self-serving and that there was no basis for the award of
compensatory damages in her favor.[51] Sanico is gravely mistaken.
[52]
The Court has held in Heirs of Pedro Clemeña y Zurbano v. Heirs of Irene B. Bien that
testimonial evidence cannot be objected to on the ground of being self-serving, thus:
"Self-serving evidence" is not to be taken literally to mean any evidence that serves its
proponent's interest. The term, if used with any legal sense, refers only to acts or declarations
made by a party in his own interest at some place and time out of court, and it does not
include testimony that he gives as a witness in court. Evidence of this sort is excluded on the
same ground as any hearsay evidence, that is, lack of opportunity for cross-examination by the
adverse party and on the consideration that its admission would open the door to fraud and
fabrication. In contrast, a party's testimony in court is sworn and subject to cross-
examination by the other party, and therefore, not susceptible to an objection on the
ground that it is self-serving.[53]
Colipano was subjected to cross-examination and both the RTC and CA believed her
testimony on her age and annual income. In fact, as these are questions of facts, these findings
of the RTC and CA are likewise binding on the Court.[54]
Further, although as a general rule, documentary evidence is required to prove loss of earning
capacity, Colipano's testimony on her annual earnings of P12,000.00 is an allowed exception.
There are two exceptions to the general rule and Colipano's testimonial evidence falls under
the second exception, viz.:
By way of exception, damages for loss of earning capacity may be awarded despite the
absence of documentary evidence when (1) the deceased is self-employed earning less than
the minimum wage under current labor laws, and judicial notice may be taken of the fact that
in the deceased's line of work no documentary evidence is available; or (2) the deceased is
employed as a daily wage worker earning less than the minimum wage under current labor
laws.[55]
The CA applied the correct formula for computing the loss of Colipano's earning capacity:
Net earning capacity = Life expectancy x [Gross Annual Income - Living Expenses (50% of
gross annual income)], where life expectancy = 2/3 (80-the age of the deceased).[56]
However, the CA erred when it used Colipano's age at the time she testified as basis for
computing the loss of earning capacity.[57] The loss of earning capacity commenced when
Colipano's leg was crushed on December 25, 1993. Given that Colipano was 30 years old
when she testified on October 14, 1997, she was roughly 27 years old on December 25, 1993
when the injury was sustained. Following the foregoing formula, the net earning capacity of
Colipano is P212,000.00.[58]
Sanico is liable to pay interest.
Interest is a form of actual or compensatory damages as it belongs to Chapter 2 [59]of Title
XVIII on Damages of the Civil Code. Under Article 2210 of the Civil Code, "[i]nterest may,
in the discretion of the court, be allowed upon damages awarded for breach of contract." Here,
given the gravity of the breach of the contract of carriage causing the serious injury to the leg
of Colipano that resulted in its amputation, the Court deems it just and equitable to award
interest from the date of the RTC decision. Since the award of damages was given by the RTC
in its Decision dated October 27, 2006, the interest on the amount awarded shall be deemed to
run beginning October 27, 2006.
As to the rate of interest, in Eastern Shipping Lines, Inc. v. Court of Appeals, [60] the Court
ruled that "[w]hen an obligation, not constituting a loan or forbearance of money, is breached,
an interest on the amount of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum."[61] Further, upon finality of the judgment awarding a sum
of money, the rate of interest shall be 12% per annum from such finality until satisfaction
because the interim period is considered a forbearance of credit.[62] Subsequently, in Nacar v.
Gallery Frames,[63] the rate of legal interest for loans or forbearance of any money, goods or
credits and the rate allowed in judgments was lowered from 12% to 6%. Thus, the applicable
rate of interest to the award of damages to Colipano is 6%.

WHEREFORE, premises considered, the petition for review is hereby PARTLY GRANTED.
As to petitioner Vicente Castro, the Decision of the Court of Appeals dated September 30,
2013 is REVERSED and SET ASIDE and the complaint against him is dismissed for lack of
cause of action. As to petitioner Jose Sanico, the Decision of the Court of Appeals is
hereby AFFIRMED with MODIFICATIONS, Petitioner Jose Sanico is liable and ordered to
pay respondent Werherlina Colipano the following amounts:

1. Actual damages in the amount of P2,098.80;

2. Compensatory damages for loss of income in the amount of P212,000.00;

3. Interest on the total amount of the damages awarded in 1 and 2 at the rate of 6% per
annum reckoned from October 27, 2006 until finality of this Decision.
The total amount of the foregoing shall, in turn, earn interest at the rate of 6% per annum from
finality of this Decision until full payment thereof.

SO ORDERED.
 [ G.R. No. 194642, April 06, 2015 ]

NUNELON R. MARQUEZ, PETITIONER, VS. ELISAN CREDIT CORPORATION,

RESPONDENTS.

DECISION
BRION, J.:
We resolve the present petition for review on certiorari[1] assailing the May 17, 2010
decision[2] and the November 25, 2010 resolution[3] of the Court of Appeals (CA) in CA-G.R.
SP No. 102144.[4]

The Factual Antecedents
On December 16, 1991, Nunelon R. Marquez (petitioner) obtained a (first loan) from Elisan
Credit Corporation (respondent) for fifty-three thousand pesos (Php 53,000.00) payable in
one-hundred eighty (180) days.[5]
The petitioner signed a promissory note which provided that it is payable in weekly
installments and subject to twenty-six percent (26%) annual interest. In case of non-payment,
the petitioner agreed to pay ten percent (10%) monthly penalty based on the total amount
unpaid and another twenty-five percent (25%) of such amount for attorney's fees exclusive of
costs, and judicial and extrajudicial expenses.[6]
[7]
To further secure payment of the loan, the petitioner executed a chattel mortgage over a
motor vehicle. The contract of chattel mortgage provided among others, that the motor vehicle
shall stand as a security for the first loan and "all other obligations of every kind already
incurred or which may hereafter be incurred."[8]
Both the petitioner and respondent acknowledged the full payment of the first loan.[9]
Subsequently, the petitioner obtained another loan (second loan) from the respondent for
fifty-five thousand pesos (P55,000.00) evidenced by a promissory note [10] and a cash
voucher[11] both dated June 15, 1992.
The promissory note covering the second loan contained exactly the same terms and
conditions as the first promissory note.
When the second loan matured on December 15, 1992, the petitioner had only paid twenty-
nine thousand nine hundred sixty pesos (P29,960.00), leaving an unpaid balance of twenty
five thousand forty pesos (P25,040.00).[12]
Due to liquidity problems, the petitioner asked the respondent if he could pay in daily
installments (daily payments) until the second loan is paid. The respondent granted the
petitioner's request. Thus, as of September 1994 or twenty-one (21) months after the second
loan's maturity, the petitioner had already paid a total of fifty-six thousand four-hundred forty
pesos (P56,440.00), an amount greater than the principal.[13]
Despite the receipt of more than the amount of the principal, the respondent filed a complaint
for judicial foreclosure of the chattel mortgage because the petitioner allegedly failed to settle
the balance of the second loan despite demand.[14]
The respondent further alleged that pursuant to the terms of the promissory note, the
petitioner's failure to fully pay upon maturity triggered the imposition of the ten percent
(10%) monthly penalty and twenty-five percent (25%) attorney's fees.
The respondent prayed that the petitioner be ordered to pay the balance of the second loan
plus accrued penalties and interest.[15]
Before the petitioner could file an answer, the respondent applied for the issuance of a writ of
replevin. The MTC issued the writ and by virtue of which, the motor vehicle covered by the
chattel mortgage was seized from the petitioner and delivered to the respondent. [16]
Trial on the merits thereafter ensued.
The MTC Ruling[17]
The MTC found for the petitioner and held that the second loan was fully extinguished as of
September 1994.
It held that when an obligee accepts the performance or payment of an obligation, knowing its
incompleteness or irregularity and without expressing any protest or objection, the obligation
is deemed fully complied with.[18] The MTC noted that the respondent accepted the daily
payments made by the petitioner without protest. The second loan having been fully
extinguished, the MTC ruled that respondent's claim for interests and penalties plus the
alleged unpaid portion of the principal is without legal basis.
The MTC ordered:
1. "the plaintiff Elisan Credit Corporation to return/deliver the seized motor vehicle
with Plate No. UV-TDF-193 to the possession of the defendant and in the event its
delivery is no longer possible, to pay the defendant the amount of P30,000.00
corresponding to the value of the said vehicle;"
2. "the bonding company People's Trans-East Asia Insurance Corporation to pay the
defendant the amounts of P20,000.00 and P5,000.00 representing the damages and
 attorney's fees under P.T.E.A.LC Bond No. JCL (13)-00984;"
3."the plaintiff is likewise directed to surrender to the defendant the originals of the
documents evidencing indebtedness in this case so as to prevent further use of the
same in another proceeding."
The RTC Ruling[19]
Except for the MTC's order directed to the bonding company, the RTC initially affirmed the
ruling of the MTC.
Acting on the respondent's motion for reconsideration, the RTC reversed itself. Citing Article
1253 of the Civil Code, it held that "if the debt produces interest, payment of the principal
shall not be deemed to have been made until the interests have been covered." It also
sustained the contention of the respondent that the chattel mortgage was revived when the
petitioner executed the promissory note covering the second loan.
The RTC ordered:
1. "the defendant to pay the plaintiff the following: a) P25,040.00, plus interest thereon
at the rate of 26% per annum and penalties of 10% per month thereon from due date
of the second promissory note until fully paid, b) 25% of the defendant's outstanding
obligation as and for attorney's fees, c) costs of this suit;"
2. "the foreclosure of the chattel mortgage dated December 16, 1991 and the sale of the
mortgaged property at a public auction, with the proceeds thereof to be applied as
and in payment of the amounts awarded in a and b above."
The CA Ruling[20]
The CA affirmed the RTC's ruling with modification.
The CA observed that the disparity in the amount loaned and the amount paid by the
petitioner supports the respondent's view that the daily payments were properly applied first
for the payment of interests and not for the principal.
According to the CA, if the respondent truly condoned the payment of interests as claimed by
the petitioner, the latter did not have to pay an amount in excess of the principal. The CA
believed the petitioner knew his payments were first applied to the interests due.
The CA held that Article 1253 of the Civil Code is clear that if debt produces interest,
payment of the principal shall not be deemed made until the interests have been covered. It
ruled that even if the official receipts issued by the respondent did not mention that the
payments were for the interests, the omission is irrelevant as it is deemed by law to be for the
payment of interests first, if any, and then for the payment of the principal amount.
The CA, however, reduced the monthly penalty from ten percent (10%) to two percent (2%)
pursuant to Article 1229 of the Civil Code which gives the courts the power to decrease the
penalty when the principal obligation has been partly or irregularly complied with by the
debtor.
The dispositive portion of the CA decision provides:
"WHEREFORE, premises considered, the Petition is hereby DENIED for lack of merit. The
Order dated 07 May 2007 of the Regional Trial Court, Branch 222, Quezon City is
hereby AFFIRMED with MODIFICATION that the penalty charge should only be two
(2%) per month until fully paid."
The CA denied the petitioner's Motion for Reconsideration dated May 17, 2010 on November
25, 2010 for failing to raise new matters. Hence, this present petition.
The Petition
The petitioner seeks the reversal of the CA's decision and resolution. He argues that he has
fully paid his obligation. Thus, the respondent has no right to foreclose the chattel mortgage.
The petitioner insists that his daily payments should be deemed to have been credited against
the principal, as the official receipts issued by the respondent were silent with respect to the
payment of interest and penalties. He cites Article 1176 of the Civil Code which ordains that
[t]he receipt of the principal by the creditor without reservation with respect to the interest,
shall give rise to the presumption that the interest has been paid. The petitioner invokes
Article 1235 of the Civil Code which states that "[w]hen the obligee accepts the performance
of an obligation, knowing its incompleteness or irregularity, and without expressing any
protest or objection, the obligation is deemed fully complied with."
The petitioner denies having stipulated upon and consented to the twenty-six per cent (26%)
per annum interest charge, ten percent (10%) monthly penalty and twenty-five percent (25%)
attorney's fees. According to the petitioner, he signed the promissory note in blank.
The petitioner likewise disclaims receiving any demand letter from the respondent for the
alleged balance of the second loan after he had paid fifty-six thousand four-hundred forty
pesos (Php56,440.00) as of September 1994, and further argues that the chattel mortgage
could not cover the second loan as it was annulled and voided upon full payment of the first
loan.
The Respondent's Case[21]
The respondent claims that the daily payments were properly credited against the interest and
not against the principal because the petitioner incurred delay in the full payment of the
second loan.
It argues that pursuant to the terms and conditions of the promissory note, the interest and
penalties became due and demandable when the petitioner failed to pay in full upon maturity.
The respondent relies on Article 1253 of the Civil Code which provides that if the debt
produces interest, payment of the principal shall not be deemed to have been made until the
interests have been covered.
The respondent likewise maintains that the chattel mortgage could validly secure the second
loan invoking its provision which provided that it covers "obligations...which may hereafter
be incurred."
Issues
The petitioner raises the following issues for our resolution:
I. "WHETHER THE HONORABLE COURT OF APPEALS ERRED IN
AFFIRMING THE DECISION OF THE REGIONAL TRIAL COURT ORDERING
THE PETITIONER TO PAY THE RESPONDENT THE AMOUNT OF
PHP24,040.00 PLUS INTEREST AND PENALTY FROM DUE DATE UNTIL
FULLY PAID; AND
II. "WHETHER THE HONORABLE COURT OF APPEALS ERRED IN
AFFIRMING THE DECISION OF THE REGIONAL TRIAL COURT ORDERING
THE FORECLOSURE AND SALE OF THE MORTGAGED PROPERTY." [22]
In simpler terms, did the respondent act lawfully when it credited the daily payments against
the interest instead of the principal? Could the chattel mortgage cover the second loan?
The Court's Ruling
We find the petition partly meritorious.
We rule that: (1) the respondent acted pursuant to law and jurisprudence when it credited the
daily payments against the interest instead of the principal; and (2) the chattel mortgage could
not cover the second loan.
Rebuttable presumptions; Article 1176 vis-a-vis Article 1253
There is a need to analyze and harmonize Article 1176 and Article 1253 of the Civil Code to
determine whether the daily payments made after the second loan's maturity should be
credited against the interest or against the principal.
Article 1176 provides that:
"The receipt of the principal by the creditor, without reservation with respect to the
interest, shall give rise to the presumption that said interest has been paid.
xxx."
On the other hand, Article 1253 states:
"If the debt produces interest, payment of the principal shall not be deemed to have been
made until the interests have been covered."
The above provisions appear to be contradictory but they in fact support, and are in
conformity with, each other. Both provisions are also presumptions and, as such, lose their
legal efficacy in the face of proof or evidence to the contrary.
Thus, the settlement of the first issue depends on which of these presumptions prevails under
the given facts of the case.
There are two undisputed facts crucial in resolving the first issue: (1) the petitioner failed to
pay the full amount of the second loan upon maturity; and (2) the second loan was subject to
interest, and in case of default, to penalty and attorney's fees.
But before proceeding any further, we first tackle the petitioner's denial of the genuineness
and due execution of the second promissory note. He denies that he stipulated upon and
consented to the interest, penalty and attorney's fees because he purportedly signed the
promissory note in blank.[23]
This allegation deserves scant consideration. It is self-serving and unsupported by evidence.
As aptly observed by the RTC and the CA, the promissory notes securing the first and second
loan contained exactly the same terms and conditions. They were mirror-image of each other
except for the date and amount of principal Thus, we see sufficient basis to believe that the
petitioner knew or was aware of such terms and conditions even assuming that the entries on
the interest and penalty charges were in blank when he signed the promissory note.
Moreover, we find it significant that the petitioner does not deny the genuineness and due
execution of the first promissory note. Only when he failed to pay the second loan did he
impugn the validity of the interest, penalty and attorney's fees. The CA and the RTC also
noted that the petitioner is a schooled individual, an engineer by profession, who, because of
these credentials, will not just sign a document in blank without appreciating the import of his
action.[24]
These considerations strongly militate against the petitioner's claim that he did not consent to
and stipulated on the interest and penalty charges of the second loan. Thus, he did not only
fail to fully pay the second loan upon maturity; the loan was also subject to interest, penalty
and attorney's fees.
Article 1176 in relation to Article 1253
Article 1176 falls under Chapter I (Nature and Effect of Obligations) while Article 1253
falls under Subsection I (Application of Payments), Chapter IV (Extinguishment of
Obligations) of Book IV (Obligations and Contracts) of the Civil Code.
The structuring of these provisions, properly taken into account, means that Article 1176
should be treated as a general presumption subject to the more specific presumption under
Article 1253. Article 1176 is relevant on questions pertaining to the effects and nature of
obligations in general, while Article 1253 is specifically pertinent on questions involving
application of payments and extinguishment of obligations.
A textual analysis of the above provisions yields the results we discuss at length below:
The presumption under Article 1176 does not resolve the question of whether the amount
received by the creditor is a payment for the principal or interest. Under this article the
amount received by the creditor is the payment for the principal, but a doubt arises on whether
or not the interest is waived because the creditor accepts the payment for the principal without
reservation with respect to the interest. Article 1176 resolves this doubt by presuming that the
creditor waives the payment of interest because he accepts payment for the principal without
any reservation.
On the other hand, the presumption under Article 1253 resolves doubts involving payment of
interest-bearing debts. It is a given under this Article that the debt produces interest. The
doubt pertains to the application of payment; the uncertainty is on whether the amount
received by the creditor is payment for the principal or the interest. Article 1253 resolves this
doubt by providing a hierarchy: payments shall first be applied to the interest; payment shall
then be applied to the principal only after the interest has been fully-paid.
Correlating the two provisions, the rule under Article 1253 that payments shall first be applied
to the interest and not to the principal shall govern if two facts exist: (1) the debt produces
interest (e.g., the payment of interest is expressly stipulated) and (2) the principal remains
unpaid.
The exception is a situation covered under Article 1176, i.e., when the creditor waives
payment of the interest despite the presence of (1) and (2) above. In such case, the payments
shall obviously be credited to the principal.
Since the doubt in the present case pertains to the application of the daily payments, Article
1253 shall apply. Only when there is a waiver of interest shall Article 1176 become relevant.
Under this analysis, we rule that the respondent properly credited the daily payments to the
interest and not to the principal because: (1) the debt produces interest, i.e., the promissory
note securing the second loan provided for payment of interest; (2) a portion of the second
loan remained unpaid upon maturity; and (3) the respondent did not waive the payment of
interest.
There was no waiver of interest
The fact that the official receipts did not indicate whether the payments were made for the
principal or the interest does not prove that the respondent waived the interest.
We reiterate that the petitioner made the daily payments after the second loan had already
matured and a portion of the principal remained unpaid. As stipulated, the principal is subject
to 26% annual interest.
All these show that the petitioner was already in default of the principal when he started
making the daily payments. The stipulations providing for the 10% monthly penalty and the
additional 25% attorney's fees on the unpaid amount also became effective as a result of the
petitioner's failure to pay in full upon maturity.
In other words, the so-called interest for default[25] (as distinguished from the stipulated
monetary interest of 26% per annum) in the form of the 10% monthly penalty accrued and
became due and demandable. Thus, when the petitioner started making the daily payments,
two types of interest were at the same time accruing, the 26% stipulated monetary interest and
the interest for default in the form of the 10% monthly penalty.
Article 1253 covers both types of interest. As noted by learned civilist, Arturo M. Tolentino,
no distinction should be made because the law makes no such distinction. He explained:
"Furthermore, the interest for default arises because of non-performance by the debtor, and to
allow him to apply payment to the capital without first satisfying such interest, would be
to place him in a better position than a debtor who has not incurred in delay. The delay
should worsen, not improve, the position of a debtor." [26] [Emphasis supplied.]
The petitioner failed to specify which of the two types of interest the respondent allegedly
waived. The respondent waived neither.
[27]
In Swagman Hotels and Travel Inc. v. Court of Appeals, we applied Article 1253 of the
Civil Code in resolving whether the debtor has waived the payments of interest when he
issued receipts describing the payments as "capital repayment." We held that,
"Under Article 1253 of the Civil Code, if the debt produces interest, payment of the principal
shall not be deemed to have been made until the interest has been covered. In this case, the
private respondent would not have signed the receipts describing the payments made by
the petitioner as "capital repayment" if the obligation to pay the interest was still
subsisting.
"There was therefore a novation of the terms of the three promissory notes in that the interest
was waived..."[28] [Emphasis supplied.]
The same ruling was made in an older case[29] where the creditor issued a receipt which
specifically identified the payment as referring to the principal. We held that the interest
allegedly due cannot be recovered, in conformity with Article 1110 of the Old Civil Code, a
receipt from the creditor for the principal, that contains no stipulation regarding interest,
extinguishes the obligation of the debtor with regard thereto when the receipt issued by the
creditor showed that no reservation whatever was made with respect to the interest.
In both of these cases, it was clearly established that the creditors accepted the payment of the
principal. The creditors were deemed to have waived the payment of interest because they
issued receipts expressly referring to the payment of the principal without any reservation
with respect to the interest. As a result, the interests due were deemed waived. It was
immaterial whether the creditors intended to waive the interest or not. The law presumed such
waiver because the creditors accepted the payment of the principal without reservation with
respect to the interest.
In the present case, it was not proven that the respondent accepted the payment of the
principal. The silence of the receipts on whether the daily payments were credited against the
unpaid balance of the principal or the accrued interest does not mean that the respondent
waived the payment of interest. There is no presumption of waiver of interest without any
evidence showing that the respondent accepted the daily installments as payments for the
principal.
Ideally, the respondent could have been more specific by indicating on the receipts that the
daily payments were being credited against the interest. Its failure to do so, however, should
not be taken against it. The respondent had the right to credit the daily payments against the
interest applying Article 1253.
It bears stressing that the petitioner was already in default. Under the promissory note, the
petitioner waived demand in case of non-payment upon due date.[30] The stipulated interest
and interest for default have both accrued. The only logical result, following Article 1253 of
the Civil Code, is that the daily payments were first applied against either or both the
stipulated interest and interest for default.
Moreover, Article 1253 is viewed as having an obligatory character and not merely
suppletory. It cannot be dispensed with except by mutual agreement. The creditor may oppose
an application of payment made by the debtor contrary to this rule.[31]
In any case, the promissory note provided that "interest not paid when due shall be added to,
and become part of the principal and shall likewise bear interest at the same rate, compounded
monthly."[32]
Hence, even if we assume that the daily payments were applied against the principal, the
principal had also increased by the amount of unpaid interest and the interest on such unpaid
interest. Even under this assumption, it is doubtful whether the petitioner had indeed fully
paid the second loan.
Excessive interest, penalty and attorney's fees
Notwithstanding the foregoing, we find the stipulated rates of interest, penalty and attorney's
fees to be exorbitant, iniquitous, unconscionable and excessive. The courts can and should
reduce such astronomical rates as reason and equity demand.
Article 1229 of the Civil Code provides:
"The judge shall equitably reduce the penalty when the principal obligation has been partly or
irregularly complied with by the debtor. Even if there has been no performance, the penalty
may also be reduced by the courts if it is iniquitous or unconscionable."
Article 2227 of the Civil Code ordains:
"Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably
reduced if they are iniquitous or unconscionable.
More importantly, Article 1306 of the Civil Code is emphatic:
"The contracting parties may establish such stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not contrary to law, morals, good customs, public
order, or public policy."
Thus, stipulations imposing excessive rates of interest and penalty are void for being contrary
to morals, if not against the law.[33]
Further, we have repeatedly held that while Central Bank Circular No. 905-82, which took
effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured
and unsecured loans, regardless of maturity, nothing in the said circular could possibly be read
as granting carte blanche authority to lenders to raise interest rates to levels that would be
unduly burdensome, to the point of oppression on their borrowers. [34]
In exercising this power to determine what is iniquitous and unconscionable, courts must
consider the circumstances of each case since what may be iniquitous and unconscionable in
one may be totally just and equitable in another.[35]
In the recent case of MCMP Construction Corp. v. Monark Equipment Corp.,[36]we reduced
the interest rate of twenty-four percent (24%) per annum to twelve percent (12%) per annum;
the penalty and collection charge of three percent (3%) per month, or thirty-six percent (36%)
per annum, to six percent (6%) per annum; and the amount of attorney's fees from twenty-five
percent (25%) of the total amount due to five percent (5%).
Applying the foregoing principles, we hereby reduce the stipulated rates as follows: the
interest of twenty-six percent (26%) per annum is reduced to two percent (2%) per annum; the
penalty charge of ten percent (10%) per month, or one-hundred twenty percent (120%) per
annum is reduced to two percent (2%) per annum; and the amount of attorney's fees from
twenty-five percent (25%) of the total amount due to two percent (2%) of the total amount
due.
We believe the markedly reduced rates are reasonable, equitable and just under the
circumstances.
It is not entirely the petitioner's fault that he honestly, albeit wrongly, believed that the second
loan had been fully paid. The respondent is partly to blame for issuing receipts not indicating
that the daily payments were being applied against the interest.
Moreover, the reduction of the rates is justified in the context of its computation period.
In Trade & Investment Dev't Corp. of the Phil. v. Roblett Industrial Construction Corp.,[37] we
equitably reduced the interest rate because the case was decided with finality sixteen years
after the filing of the complaint. We noted that the amount of the loan swelled to a
considerably disproportionate sum, far exceeding the principal debt.
It is the same in the present case where the complaint was filed almost twenty-years ago.[38]
The Chattel Mortgage could not cover the second loan.
The chattel mortgage could not validly cover the second loan. The order for foreclosure was
without legal and factual basis.
In Acme Shoe, Rubber and Plastic Corp. v. Court of Appeals,[39] the debtor executed a chattel
mortgage, which had a provision to this effect:
"In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal
of the former note, as an extension thereof, or as a new loan, or is given any other kind of
accommodations such as overdrafts, letters of credit, acceptances and bills of exchange,
releases of import shipments on Trust Receipts, etc., this mortgage shall also stand as security
for the payment of the said promissory note or notes and/or accommodations without the
necessity of executing a new contract and this mortgage shall have the same force and
effect as if the said promissory note or notes and/or accommodations were existing on
the date thereof."[40] [Emphasis supplied.]
In due time, the debtor settled the loan covered by the chattel mortgage. Subsequently, the
debtor again borrowed from the creditor. Due to financial constraints, the subsequent loan was
not settled at maturity.
On the issue whether the chattel mortgage could be foreclosed due to the debtor's failure to
settle the subsequent loan, we held that,
"[c]ontracts of security are either personal or real, x x x In contracts of real security, such as a
pledge, a mortgage or an antichresis, that fulfillment is secured by an encumbrance of
property — in pledge, the placing of movable property in the possession of the creditor; in
chattel mortgage, by the execution of the corresponding deed substantially in the form
prescribed by law; x x x — upon the essential condition that if the principal obligation
becomes due and the debtor defaults, then the property encumbered can be alienated for the
payment of the obligation, but that should the obligation be duly paid, then the contract is
automatically extinguished proceeding from the accessory character of the agreement.
As the law so puts it, once the obligation is complied with, then the contract of security
becomes, ipso facto, null and void."[41]
While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred
obligations so long as these future debts are accurately described, a chattel mortgage,
however, can only cover obligations existing at the time the mortgage is
constituted. Although a promise expressed in a chattel mortgage to include debts that are
yet to be contracted can be a binding commitment that can be compelled upon, the
security itself, however, does not come into existence or arise until after a chattel
mortgage agreement covering the newly contracted debt is executed either by
concluding a fresh chattel mortgage or by amending the old contract conformably with
the form prescribed by the Chattel Mortgage Law. Refusal on the part of the borrower to
execute the agreement so as to cover the after-incurred obligation can constitute an act of
default on the part of the borrower of the financing agreement whereon the promise is written
but, of course, the remedy of foreclosure can only cover the debts extant at the time of
constitution and during the life of the chattel mortgage sought to be foreclosed." [42] [Emphasis
supplied.]
We noted that the Chattel Mortgage Law[43] requires the parties to the contract to attach an
affidavit of good faith and execute an oath that -
" x x x (the) mortgage is made for the purpose of securing the obligation specified in the
conditions thereof, and for no other purposes, and that the same is a just and valid
obligation, and one not entered into for the purposes of fraud." [44]
It is obvious therefore that the debt referred in the law is a current, not an obligation that is
yet merely contemplated.[45]
"x x x in consideration of the credit accommodation granted by the MORTGAGEE to the
MORTGAGOR(S) in the amount of FIFTY-THREE THOUSAND ONLY PESOS
(P53,000.00) xxx and all other obligations of every kind already incurred or which may
hereafter be incurred, for or accommodation of the MORTGAGOR(S), as well as the
faithful performance of the terms and conditions of this mortgage x x x." [46][Emphasis
supplied.]
The only obligation specified in the chattel mortgage contract was the first loan which the
petitioner later fully paid. By virtue of Section 3 of the Chattel Mortgage Law, [47] the payment
of the obligation automatically rendered the chattel mortgage terminated; the chattel mortgage
had ceased to exist upon full payment of the first loan. Being merely an accessory in nature, it
cannot exist independently of the principal obligation.
The parties did not execute a fresh chattel mortgage nor did they amend the chattel mortgage
to comply with the Chattel Mortgage Law which requires that the obligation must
be specified in the affidavit of good faith. Simply put, there no longer was any chattel
mortgage that could cover the second loan upon full payment of the first loan. The order to
foreclose the motor vehicle therefore had no legal basis.
WHEREFORE, in view of the foregoing findings and legal premises, we PARTIALLY
GRANT the petition. We MODIFY the May 17, 2010 Decision and the November 25, 2010
Resolution of the Court of Appeals in CA G.R. SP No. 102144.
ACCORDINGLY, petitioner Nunelon R. Marquez is ORDERED to pay:
Twenty-five thousand forty pesos (P25,040.00) representing the amount of the unpaid balance
of the second loan;
1. Interest of two percent (2%) per annum on the unpaid balance to be computed from December
15, 1992[48] until full payment;
2.
3. Penalty of two percent (2%) per annum on the unpaid balance to be computed from December
15, 1992;
4. Attorney's Fees of two percent (2%) of the total amount to be recovered.
The total amount to be recovered shall further be subject to the legal interest rate of six percent (6 %) per
annum from the finality of this Decision until fully paid. [49]
Respondent Elisan Credit Corporation, on the other hand, is ORDERED to return/deliver the seized
motor vehicle with Plate No. UV-TDF-193, subject of the chattel mortgage, to the possession of the
petitioner; in the event its delivery is no longer possible, to pay the petitioner the amount of P30,000.00
corresponding to the value of the said vehicle.
No pronouncement as to costs.
SO ORDERED.
PERLAS-BERNABE, J.: paid periodically. An additional sum of P125,000.00 for the retaining wall (P70,000.00) and
Assailed in this petition for review on certiorari[1] are the Decision[2] dated November 29, air-conditioning system (P55,000.00) was likewise paid for by Buenviaje.[14]
2013 and the Resolution[3] dated December 15, 2014 of the Court of Appeals (CA) in CA-
G.R. SP No. 93422, essentially upholding the Decision[4] dated September 16, 2004 and the However, despite full payment of the contract price, Jebson was unable to complete Unit 5 in
Resolution[5] dated January 25, 2005 of the Housing and Land Use Regulatory Board violation of its contractual stipulation to finish the same within twelve (12) months from the
(HLURB) Board of Commissioners (HLURB-BOC) which, inter alia: (a) ordered respondent date of issuance of the building permit. Thus, in April 1999, Buenviaje formally demanded
Jebson Holdings Corporation (Jebson) to comply with its obligations under the Contract to the immediate completion and delivery of Unit 5, to which Jebson cited the 1997 financial
Sell it entered into with petitioner Dr. Restituto C. Buenviaje (Buenviaje); (b) declared crisis as the reason for the delay. Accordingly, Jebson asked to be given until the early part of
respondents Spouses Jovito R. Salonga and Lydia B. Salonga (Sps. Salonga) not solidarily the year 2000 to complete the same but still failed to do so.[15]
liable with Jebson and respondent Ferdinand Juat Banez (Banez) with regard to such Contract
to Sell; (c) rescinded the "swapping arrangement" entered into by Buenviaje, Jebson, and On May 27, 2002, Buenviaje filed before the HLURB Regional Field Office IV (HLURB-
Bañez with regard to the Contract to Sell; and (d) ordered Buenviaje to pay Sps. Salonga RIV) a Complaint for Specific Performance with Damages and Attorney's Fees, against
moral damages and attorney's fees in the amounts of P50,000.00 and P25,000.00, Jebson, Bañez, and Sps. Salonga (respondents), praying for the (a) completion of Unit 5, (b)
respectively. partition and subdivision of the property, (c) delivery of the title to Unit 5, and (d) payment of
damages and attorney's fees. In the alternative, he prayed for the rescission of the subject
The Facts CTS, and the return of all payments made thereunder, with interest at 24% per annum (p.a.),
as well as the house and lot, and golf share pursuant to the "swapping arrangement." [16]
On May 29, 1997, Jebson, an entity engaged in the real estate business, through its Executive
The complaint was consolidated with those filed by other parties, i.e., Beliz Realty and
Vice President, Bañez, entered into a Joint Venture Agreement[6] (JVA) with Sps. Salonga.
Development Corporation (Beliz Realty) and Spouses George and Valentina Co (Sps. Co;
Under the JVA, Sps. Salonga, who owned three (3) parcels of land with an area of 2,935
collectively, complainants), who similarly entered into contracts to sell with Jebson, and
square meters situated in Tagaytay City, and covered by Transfer Certificate of Title (TCT)
sought the completion of the units they purchased.[17]
No. T-9000, agreed for Jebson to construct thereon ten (10) high-end single detached
residential units, to be known as Brentwoods Tagaytay Villas (Brentwoods). [7] They likewise
In their defense, Jebson and Bañez claimed that they were ready to comply with all their
assumed to subdivide the property into individual titles upon which Jebson shall assume the
contractual obligations but were not able to secure the necessary government permits because
liability to pay their mortgage loan with the Metropolitan Bank and Trust Company. [8] On the
Sps. Salonga stubbornly refused to cause the consolidation of the parcels of land covered by
other hand, Jebson undertook to construct the units at its own expense, secure the building and
TCT No. T-9000, and their partition into ten (10) individuallots. [18]
development permits, and the license to sell from the HLURB, as well as the other permits
required. Out of the ten (10) units, seven (7) units, i.e., Units 3, 4, 5, 6, 8, 9, and 10, will
For their part, Sps. Salonga averred that they were not liable to the complainants since there
belong to Jebson while the remaining three (3) units, i.e., Units 1, 2, and 7, will correspond to
was no privity of contract between them, adding that the contracts to sell were unenforceable
Sps. Salonga's share.[9] The units allocated to Sps. Salonga were to be delivered within six (6)
against them as they were entered into by Jebson without their conformity, in violation of the
months after Jebson's receipt of the down payment for the units allocated to it. [10] Jebson was
JVA. They maintained that they were ready to cause the subdivision and individual titling of
also allowed to sell its allocated units under such terms as it may deem fit, subject to the
the subject property. They also filed a cross-claim against Jebson for the latter's failure to
condition that the price agreed upon was with the conformity of Sps. Salonga. [11]
complete and deliver to them the three (3) units corresponding to their share in Brentwoods,
and for representing to the buyers that it owned the land where Brentwoods was located. [19]
On June 9, 1997, Jebson entered into a Contract to Sell[12] (subject CTS) with Buenviaje over
Unit 5 for a total consideration of P10,500,000.00, without the conformity of Sps.
Salonga.[13] Out of the purchase price, P7,800,000.00 was paid through a "swapping
arrangement," whereby Buenviaje conveyed to Jebson a house and lot located in Garden The HLURB-RIV Ruling
Villas, Tagaytay valued at P5,800,000.00 (house and lot) and Tagaytay Highlands Golf share
No. 0722 (golf share) worth P2,000,000.00 on July 1, 1997, while the remaining balance was In a Decision[20] dated December 5, 2002, the HLURB-RIV: (a) rescinded the respective
contracts to sell entered into by Jebson with the complainants; (b) found respondents
solidarily liable for (i) the return of the payments made by the complainants, with interest of
12% per annum (p.a.), and (ii) the payment of moral and exemplary damages, attorney's fees,
and litigation expenses; and (c) ordered respondents to (i) return to Buenviaje and Beliz
Realty the properties conveyed to Jebson through their respective "swapping arrangements,"
and (ii) pay an administrative fine of P30,000.00 for violation of Sections 4, 5, 20, and 25 of
Presidential Decree No. (PD) 957.[21]
The HLURB-RIV found that respondents were not legally authorized to sell Brentwoods as
they have not secured the necessary Registration Certificate and License to Sell. Furthermore,
they failed to complete the construction of the units as well as to deliver the units to the
complainants on time, entitling the latter to the refund of their payments, including interests. It
further found Sps. Salonga solidarily liable with Jebson and Bañez as joint venture partners
liable to the general buying public.[22]
Aggrieved, Sps. Salonga appealed to the HLURB-BOC.[23]
The HLURB-BOC Ruling
In a Decision[24] dated September 16, 2004, the HLURB-BOC reversed and set aside the
HLURB-RIV's ruling, and (a) upheld the validity of the respective contracts to sell of Jebson
with Buenviaje[25] and Beliz Realty; (b) rescinded the "swapping arrangements" under the said
CTS, and ordered Jebson and Bañez, jointly and severally, to return the properties received
thereunder to Buenviaje and Beliz Realty, who shall, in turn, pay the cash values thereof; (c)
fixing a period of six (6) months for the completion of the construction of Units 3, 5, 6 and 7;
and (d) ordered the complainants to pay respondents Sps. Salonga moral damages and
attorney's fees.[26]
The HLURB-BOC held that there was no substantial breach but only a slight or casual one,
which did not justify a rescission of the contracts to sell, especially in view of the fact that the
residential units covered by the said contracts were already at their finishing stages.
Considering the accomplishment level of the work done on the said units, and further noting
that the primary relief sought in the complaints of Buenviaje and Beliz Realty was specific
performance, the HLURB-BOC ruled that the proper remedy, instead, was to fix the period
for completion of the concerned units.[27]
Nonetheless, it invalidated the "swapping arrangements" in the respective contracts to sell of
Jebson with Buenviaje and Beliz Realty, which allowed the use of non-cash assets as
substantial downpayment, leaving Jebson with insufficient funds to complete their units, and
to construct and deliver the units allocated to Sps. Salonga who were prejudiced thereby.[28]
It also found no basis to hold Sps. Salonga solidarily liable with Jebson and Bañez under the
subject CTS, considering that: (a) the JVA does not provide for solidarity for any act or
omission of either party and, in fact, expressly provides that Sps. Salonga shall be free of any
liability from any third party as regards non-compliance with HLURB Rules and
Regulations;[29] (b) the legal obligation to procure the required development, permit, license to
sell, and certificate of registration from the HLURB devolved entirely and exclusively on
Jebson and Bañez;[30] (c) Sps. Salonga were not the ones in control of the project, but
Bañez;[31] and (d) even assuming Sps. Salonga directly or indirectly controlled Jebson, Section
40 of PD 957 exempts from its rule of solidary liability one who has acted in good faith and
did not directly or indirectly induce the act or acts constituting the violation or cause of
action.[32]
Buenviaje and complainants moved for reconsideration but the same were denied in a
Resolution[33] dated January 25, 2005. Dissatisfied, Buenviaje elevated the matter to the
Office of the President (OP).[34]
The OP's Ruling
In a Decision[35] dated November 30, 2005, the OP affirmed the ruling of the HLURB-BOC,
finding: (a) no factual basis to hold Sps. Salonga solidarily liable with Jebson, pointing out
that under the JVA, Jebson, as the developer, holds Sps. Salonga free from liability to third
parties for non compliance with HLURB rules and regulations;[36] (b) the contracts to sell
between Jebson and the complainants to be unenforceable against Sps. Salonga whose
conformity thereto was not secured in violation of the JVA; [37] (c) the rescission of the
contracts to sell was not the most economical solution to the problem confronting the parties
considering that the units have already reached the finishing stage;[38] and (d) the rescission of
the "swapping arrangements" entered into by Jebson and the buyers to be proper. [39]
Complainants separately moved for reconsideration, all of which were denied in an
Order[40] dated January 31, 2006. Unperturbed, Buenviaje and Beliz Realty filed a petition for
review before the CA.[41] However, in the course of the proceedings, Beliz Realty withdrew
all its claims against Sps. Salonga.[42]
The CA Ruling
In a Decision[43] dated November 29, 2013, the CA affirmed the OP ruling. It found that
Jebson violated the terms of the JVA when it failed to secure the pertinent government
permits for the development of Brentwoods, and sold its allocated units without the
conformity of Sps. Salonga.[44]
Considering that the primary prayer of Buenviaje and Beliz Realty was for specific
performance, i.e., the completion of the construction of their units, which are almost finished,
it ruled that the OP correctly (a) sustained the HLURB Decision holding the rescission of the
contracts to sell to be impractical; and (b) ordered that the said units be finished and delivered
to Buenviaje and Beliz Realty, rescinding only the "swapping arrangement" in their respective
contracts to sell with Jebson.[45] Anent Buenviaje's liability for moral damages and attorney's
fees to Sps. Salonga, the CA opined that the OP's in toto affirmation of the HLURB-BOC
ruling is equivalent to an affirmation of the ratio of said finding of liability, i.e., that
Buenviaje connived with Jebson in diluting the cash portion of its payments to the prejudice
of the spouses.[46]
Buenviaje, Jebson, and Bañez, respectively filed their motions for reconsideration, but the
same were denied by theCA in a Resolution[47] dated December 15, 2014; hence, the present
petition filed by Buenviaje.[48]
The Issues Before the Court
The essential issues for the Court's resolution are whether or not the CA correctly ruled that:
(a) the grant of the remedy of specific performance in Buenviaje's favor was proper under the
prevailing circumstances of the case; (b) Sps. Salonga are not solidarily liable with Jebson and
Banez to Buenviaje for the completion of the construction and delivery of the unit; (c) the
"swapping arrangement" was invalid; and (d) Buenviaje is liable to Sps. Salonga for moral
damages and attorney's fees.
The Court's Ruling
The petition is partly meritorious.
I.
Specific performance and "rescission" (more accurately referred to as resolution)
are alternative remedies available to a party who is aggrieved by a counter-party's breach of a
reciprocal obligation. This is provided for in Article 1191 of the Civil Code, which partly
reads:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission, even
after he has chosen fulfillment, if the latter should become impossible.
x x x x (Emphasis supplied)
Specific performance is defined as "[t]he remedy of requiring exact performance of a contract
in the specific form in which it was made, or according to the precise terms agreed
upon."[49] It pertains to "[t]he actual accomplishment of a contract by a party bound to fulfill
it."[50]
On the other hand, resolution is defined as the "unmaking of a contract for a legally sufficient
reason x x x."[51] "[Resolution] does not merely terminate the contract and release the parties
from further obligations to each other, but abrogates the contract from its inception and
restores the parties to their original positions as if no contract has been made. Consequently,
mutual restitution, which entails the return of the benefits that each party may have received
as a result of the contract, is thus required." [52] Notably, resolution under Article 1191 of the
Civil Code "will not be permitted for a slight or casual breach, but only for such substantial
and fundamental violations as would defeat the very object of the parties in making the
agreement. Ultimately, the question of whether a breach of contract is substantial depends
upon the attending circumstances."[53]
In this case, the HLURB-BOC, the OP, and the CA all pointed out that Buenviaje primarily
prayed for the remedy of specific performance - i.e., the completion of Unit 5, the subdivision
of Sps. Salonga's property into individual lots per unit, and the tum-over of Unit 5 as well as
the subdivided lot portion allocated to such unit to him and only prayed for the remedy of
rescission as an alternative remedy.[54]Thus, it remains apparent that as between the two
remedies made available to him, Buenviaje, had, in fact, chosen the remedy of specific
performance and therefore, ought to be bound by the choice he had made. To add, "[t]he
fundamental rule is that reliefs granted a litigant are limited to those specifically prayed for in
the complaint; other reliefs prayed for may be granted only when related to the specific
prayer(s) in the pleadings and supported by the evidence on record." [55] Hence, based on this
postulate, the lower tribunals could hardly be faulted for granting the proper relief in
accordance with what Buenviaje himself had claimed.

Relatedly, it is observed that Buenviaje's alternative prayer for resolution is textually
consistent with that portion of Article 1191 of the Civil Code which states that an injured
party "may also seek rescission, even after he has chosen fulfillment, if the latter should
become impossible." Nevertheless, the impossibility of fulfillment was not sufficiently
demonstrated in the proceedings conducted in this case. As the HLURB BOC pointed out,
"[t]here is no finding that specific performance has become impossible or that there are
insuperable legal obstacles to the completion of the constructed units so as to justify
[resolution]."[56] In fact, as the CA contrarily remarked, Buenviaje's "main prayer [for specific
performance] x x x appears to be the more plausible course of action" [57] "[s]ince the units
covered by the disputed Contracts To Sell are almost finished, and [have] most likely [been]
complete[d]."[58]
With these in mind, the CA therefore correctly upheld the directive for Jebson to comply with
its obligations under the subject CTS with Buenviaje as prayed for by the latter. Failing to
show any cogent reason to hold otherwise, Buenviaje can no longer recant his primary choice
of relief. His prayer for resolution in the instant petition must perforce fail.
II.
With the propriety of specific performance having been decreed, Buenviaje's claim to be
restituted the alleged purchase price of P10,625,000.00 - for which Sps. Salonga were claimed
to be solidarily liable - thus, holds no basis. As above-intimated, mutual restitution is the
proper consequence of the remedy of resolution. It cannot arise - as it is, in fact, theoretically
incompatible - with the remedy of specific performance, which is the relief prayed for and
consequently, granted to the injured party herein.
In this relation, it is fitting to clarify that the obligations to be fulfilled, i.e., the completion of
Unit 5, the subdivision of Sps. Salonga's property into individual lots per unit, and the tum-
over of Unit 5, as well as the subdivided lot portion allocated to such unit, are obligations of
Jebson to Buenviaje under the subject CTS dated June 1997. These obligations are subsumed
in the general provisions of Articles 3 and 4, which respectively read:
ARTICLE 3. POSSESSION
3.1. Upon execution of this contract and the payment of the amounts stated in Article 1.2 are
in good standing and the housing unit is completed hereof, the BUYER may take possession
of the subject house and lot of this contract, in the concept of a lessee or tenant until such time
as the housing unit have been fully paid. BUYER's right of possession shall continue so long
as he complies with all the terms and conditions hereof.
ARTICLE 4. TRANSFER OF OWNERSHIP
4.1 It is hereby agreed and understood that title to the above-described lot subject of this
contract shall remain with the SELLER and shall pass to and be transferred to the BUYER
only upon complete payment by the BUYER of all his obligations herein stipulated, at which
time the SELLER agrees to execute a final Deed of Absolute Sale in favor of the BUYER. [59]
In this case, it is undisputed that Sps. Salonga were not parties to the above-mentioned
contract. Under Article 1311[60] of the Civil Code, it is a basic principle in civil law on
relativity of contracts, that contracts can only bind the parties who had entered into it and it
cannot favor or prejudice third persons. Contracts take effect only between the parties, their
successors in interest, heirs and assigns. Thus, absent any privity of contract as to them, there
is no basis to hold Sps. Salonga liable for any of the obligations stated under the said contract
to sell.
At this juncture, it should be further made clear that the imputation of joint or solidary
liability against a particular person- such as that insistently claimed against Sps. Salonga by
Buenviaje first presupposes the existence of that person's obligation. On the active side, the
joint or solidary nature of an obligation is an aspect of demandability; it pertains to the extent
of a creditor's entitlement to demand fulfillment against any or all of his debtors under one
particular obligation. Based on case law, a solidary obligation is one in which each of the
debtors is liable for the entire obligation, and each of the creditors is entitled to demand the
satisfaction of the whole obligation from any or all of the debtors. On the other hand, a joint
obligation is one in which each debtors is liable only for a proportionate part of the debt, and
the creditor is entitled to demand only a proportionate part of the credit from each debtor. [61]
As already mentioned, no source of obligation under the subject CTS can be traced to Sps.
Salonga as they were clearly non-parties thereto. Therefore, without such extant obligation,
the possibility of holding them liable in solidum with Jebson under the said contract is out of
the question.
Neither has Buenviaje persuasively argued that Sps. Salonga may be held solidarily liable
pursuant to law, which is a distinct source of obligation. [62] More particularly, Buenviaje
attempts to establish that Section 40 of PD 957 as well as Articles 1822 and 1824 of the Civil
Code, are legal provisions which render Sps. Salonga solidarity liable together with Jebson:
Section 40 of PD 957 reads:
Section 40. Liability of controlling persons. Every person who directly or indirectly controls
any person liable under any provision of this Decree or of any rule or regulation issued
thereunder shall be liable jointly and severally with and to the same extent as such controlled
person unless the controlling person acted in good faith and did not directly or indirectly
induce the act or acts constituting the violation or cause of action.
In this case, records are bereft of any showing that Sps. Salonga had direct or indirect control
over Jebson throughout the course of the entire Brentwoods Project. In fact, even if it is
assumed that they had some sort of control over Jebson, it was not shown that they acted in
bad faith and had a hand in inducing Jebson's acts from which Buenviaje's cause of action
arose. As such, the foregoing provision cannot be invoked to hold Sps. Salonga solidarily
liable with Jebson.
Similarly, there is no perceptible legal basis to hold them solidarily liable under Articles 1822
and 1824 of the Civil Code. These provisions, which are found under Section 3, Chapter 2,
Title IX, Book IV of the Civil Code on Partnership, respectively state:
Article 1822. Where, by any wrongful act or omission of any partner acting in the ordinary
course of the business of the partnership or with the authority of his co-partners, loss or injury
is caused to any person, not being a partner in the partnership, or any penalty is incurred, the
partnership is liable therefor to the same extent as the partner so acting or omitting to act.
xxxx
Article 1824. All partners are liable solidarily with the partnership for everything chargeable
to the partnership under Articles 1822 and 1823.
Evidently, the foregoing legal provisions pertain to the obligations of a co-partner in the event
that the partnership to which he belongs is held liable. In this case, Buenviaje never dealt with
any partnership constituted by and between Jebson and Sps. Salonga. As previously
mentioned, the subject CTS, which was the source of the obligations relative to the
completion and delivery of Unit 5, solely devolved upon the person of Jebson. As there was
no partnership privy to any obligation to which Buenviaje is a creditor, Articles 1822 and
1824 of the Civil Code do not apply.
While Jebson, as developer, and Sps. Salonga, as land owner, entered into a joint venture,
which - based on case law may be considered as a form of partnership, [63]the fact remains that
their joint venture was never privy to any obligation with Buenviaje; hence, liability cannot be
imputed against the joint venture based on the same principle of relativity as above
mentioned. Besides, it should be pointed out that the JVA[64] between Jebson and Sps. Salonga
was limited to the construction of the residential units under the Brentwoods Project and that
Jebson had the sole hand in marketing the units allocated to it to third persons, such as
Buenviaje. In fact, under the express terms of the JVA, Jebson, as the developer, had even
stipulated to hold Sps. Salonga free from any liability to third parties for non-compliance with
HLURB rules and regulations. As things stand, only Jebson should be held liable for its
obligations to Buenviaje under the subject CTS.
III.
Pursuant to Articles 1177[65] and 1313[66] of the Civil Code, creditors are given remedies
whenever their debtors perform acts or omissions or enter into contracts that tend to defraud
the former of what is due them. Such remedy comes in the form of rescission under Articles
1381(3)[67] in relation to Articles 1383[68] and 1384[69] of the Civil Code. Rescission (as
contemplated in Articles 1380 to 1389 of the Civil Code) is a remedy granted by law to the
contracting parties and even to third persons, to secure the reparation of damages caused to
them by a contract, even if this should be valid, by restoration of things to their condition at
the moment prior to the celebration of the contract. It implies a contract, which even if
initially valid, produces a lesion or a pecuniary damage to someone.[70] In the rescission by
reason of lesion or economic prejudice, the cause of action is subordinated to the existence of
that prejudice, because it is the raison d 'etre as well as the measure of the right to rescind.
Hence, where the defendant makes good the damages caused, the action cannot be maintained
or continued, as expressly provided in Articles 1383 and 1384. [71]
In this case, it must be recapitulated that under the JVA, Sps. Salonga are supposed to receive
a total of three (3) Brentwoods residential units from Jebson, who in turn, is obligated to
construct these units at its own expense. Jebson bound itself to deliver the same within six (6)
months after receipt of the downpayment for the units allocated to it. Meanwhile, Jebson
through Bañez - entered into "swapping arrangements" with its buyers (among others,
Buenviaje), whereby it accepted various non-cash assets as suitable payments for the said
units. Sps. Salonga assailed the property swaps as they purportedly deprived the funding for
the Brentwoods project to the tune of P13,000,000.00. Specifically, they asked that the
swapped properties be ordered returned to the buyers concerned and that their values be paid
in cash by the latter to be utilized for the completion of the corresponding units. [72] The
HLURB-BOC, which was later affirmed by the OP and then by the CA, found Sps. Salonga's
supplication to be meritorious, holding that the latter were prejudiced by the property swaps
inasmuch as these arrangements ate up more than 80% of the down payments which would
have been utilized to complete the units. Moreover, it was observed that the said arrangements
were done without the conformity of Sps. Salonga as required in their JVA with Jebson, and
thus, were entered into to defraud them.[73] As a result, the HLURB-BOC ordered the
rescission of the "swapping arrangement" entered into by Jebson with Buenviaje and instead,
ordered him to pay in cash the sum of P7,200,000.00 as part of his down payment under the
subject CTS.
After a careful study of this case, the Court, however, finds no basis to rescind the aforesaid
"swapping arrangement." Although the same was admittedly entered into by Jebson with
Buenviaje without the conformity of Sps. Salonga, the records do not support the HLURB-
BOC's finding that this separate arrangement was entered into in order to defraud Jebson's
creditor under the JVA, i.e., Sps. Salonga, and hence, should not be rescinded. As aptly
observed by Justice Alfredo Benjamin S. Caguioa during the deliberations on this case, the act
of Jebson in accepting non-cash assets as suitable payments was a business decision made by
it. While such may have been the cause of Jebson's inability to timely complete the
Brentwoods project (possibly due to the lack of immediate access to liquid capital at that
time), the soundness or unsoundness of that business decision is not enough for the Court to
conclude that the said swaps were entered into to defraud Sps. Salonga, notwithstanding the
resulting "economic prejudice" to them. As the records show, Jebson was, in fact, able to
receive both cash and non cash asset payments made by Buenviaje,[74] and hence, could have
properly
managed the same to meet its obligations in light of its financial position. In Union Bank
Philippines v. Sps. Ong,[75] the Court explained the requirement of fraud relative to rescissible
contracts under Article 1381 of the Civil Code:
Essentially, petitioner anchors its case on Article 1381 of the Civil Code which lists as among
the rescissible contracts "[T]hose undertaken in fraud of creditors when the latter cannot in
any other manner collect the claim due them."
Contracts in fraud of creditors are those executed with the intention to prejudice the
rights of creditors. They should not be confused with those entered into without such mal-
intent, even if, as a direct consequence thereof, the creditor may suffer some damage. In
determining whether or not a certain conveying contract is fraudulent, what comes to
mind first is the question of whether the conveyance was a bona fide transaction or a
trick and contrivance to defeat creditors. To creditors seeking contract rescission on the
ground of fraudulent conveyance rest the onus of proving by competent evidence the
existence of such fraudulent intent on the part of the debtor, albeit they may fall back on
the disputable presumptions, if proper, established under Article 1387 of the
Code.[76] (Emphases supplied)
Here, the onus of proving that the "swapping arrangement" was a fraudulent conveyance, or a
trick and contrivance to defeat creditor rights, was not sufficiently discharged by Sps.
Salonga. Thus, absent such proof of fraud, the Court concludes that the "swapping
arrangement" was a bona fide transaction freely entered into between Jebson and Buenviaje,
and therefore, valid and binding. As such, the HLURB-BOC's directive to rescind the
"swapping arrangement" entered into by Jebson with Buenviaje and the consequent order for
the latter to pay Jebson the sum of P7,200,000.00 in cash as part of his down payment under
the subject CTS, is hereby reversed. If at all, Sps. Salonga's remedy is to compel Jebson to
honor its obligations under its contract with them, and not the rescission of the afore-
discussed property swap, which is part and parcel of the consideration underlying the subject
CTS between Jebson and Buenviaje, a distinct and independent contract from the JVA
altogether.
IV.
In order that moral damages under Article 2219 [77] of the Civil Code may be awarded, there
must be pleading and proof of moral suffering, mental anguish, fright and the
like.[78] In Mahinay v. Velasquez,[79] the Court explained:
While no proof of pecuniary loss is necessary in order that moral damages may be awarded,
the amount of indemnity being left to the discretion of the court, it is nevertheless essential
that the claimant should satisfactorily show the existence of the factual basis of damages
and its causal connection to defendant's acts. This is so because moral damages, though
incapable of pecuniary estimation, are in the category of an award designed to compensate the
claimant for actual injury suffered and not to impose a penalty on the wrongdoer.
In Francisco vs. GSIS, the Court held that there must be clear testimony on the anguish
and other forms of mental suffering. Thus, if the plaintiff fails to take the witness stand
and testify as to his/her social humiliation, wounded feelings and anxiety, moral
damages cannot be awarded. In Cocoland Development Corporation vs. National labor
Relations Commission, the Court held that "additional facts must be pleaded and proven to
warrant the grant of moral damages under the Civil Code, these being, x x x social
humiliation, wounded feelings, grave anxiety, etc. that resulted therefrom."[80] (Emphases
and underscoring supplied)
As to attorney's fees, the general rule is that the same cannot be recovered as part of damages
because of the policy that no premium should be placed on the right to litigate. They are not to
be awarded every time a party wins a suit. The power of the court to award attorney's fees
under Article 2208[81] of the Civil Code demands factual, legal, and equitable justification.
Even when a claimant is compelled to litigate with third persons or to incur expenses to
protect his rights, still attorney's fees may not be awarded where no sufficient showing of bad
faith could be reflected in a party's persistence in a case other than an erroneous conviction of
the righteousness ofhis cause.[82]

In this case, the tribunals a quo grounded Buenviaje's liability for moral damages and
attorney's fees to Sps. Salonga on his alleged connivance with Jebson and Bañez in diluting
the cash portion of his down payments to the prejudice of Sps. Salonga. However, a judicious
perusal of the record reveals that aside from Buenviaje's actual payment of non-cash assets as
part of the purchase price of Unit 5, no other evidence shows that such connivance exists. In
the absence of such proof, it cannot be concluded that Buenviaje had some ulterior purpose in
paying non-cash assets as part of the consideration. As the Court views it, Buenviaje honestly
thought that he could partially pay the purchase price of Unit 5 with the said non-cash assets
amounting to P7,200,000.00 as anyway Jebson and Bañez accepted the offer. "Good faith is
always presumed, and upon him who alleges bad faith rests the burden of proof," [83] which
was not overcome in this case.

Thus, there was no factual basis to declare Buenviaje liable to Sps. Salonga for moral
damages and attorney's fees; consequently, such awards must be deleted. While factual
findings of quasi-judicial agencies, especially when affirmed by the CA, are binding on the
Court, such findings may be overturned when, inter alia, they are grounded on mere
speculation,[84] as in this instance.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated November 29,
2013 and the Resolution dated December 15, 2014 of the Court of Appeals (CA) in CA-G.R.
SP No. 93422 are hereby AFFIRMED with MODIFICATION, DELETING the following
directives: (a) the rescission of the "swapping arrangement" entered into by respondent Jebson
Holdings Corporation (Jebson) with petitioner Dr. Restituto C. Buenviaje (Buenviaje) and the
consequent order for the latter to pay Jebson the sum of P7,200,000.00 in cash as part of his
down payment under their Contract to Sell; and (b) the order for Buenviaje to pay respondents
Spouses Jovito R. Salonga and Lydia B. Salonga moral damages and attorney's fees in the
amounts of P50,000.00 and P25,000.00, respectively. The rest of theCA Decision STANDS.

SO ORDERED.
HSBC v. Spouses Broqueza
G.R. No. 178610, November 17, 2010

FACTS:
Petitioners Gerong and Broqueza are employees of Hongkong and Shanghai Banking
Corporation (HSBC). They are also members of respondent Hongkong Shanghai Banking
Corporation, Ltd. Staff Retirement Plan.
In October 1990, petitioner Broqueza obtained a car loan in the amount of Php 175,000.00. In
December 1991, she again applied and was granted an appliance loan in the amount of Php
24,000.00.
In 1993, a labor dispute arose between HSBC and its employees. Majority of HSBCs
employees were terminated, among whom are petitioners Editha Broqueza and Fe Gerong.

ISSUE:
Whether or not the claim was premature as the loan obligations have not yet matured

RULING:
No. The Court affirms the findings of the lower courts that there is no date of payment
indicated in the Promissory Notes. The RTC is correct in ruling that since the Promissory
Notes do not contain a period, HSBCL-SRP has the right to demand immediate payment.
Article 1179 of the Civil Code applies: Every obligation whose performance does not depend
upon a future or uncertain event, or upon a past event unknown to the parties, is demandable
at once. The spouses Broquezas obligation to pay HSBCL-SRP is a pure obligation. The fact
that HSBCL-SRP was content with the prior monthly check-off from Editha Broquezas salary
is of no moment. Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP
made a demand to enforce e a pure obligation.
RADIOWEALTH FINANCE COMPANY vs. DEL ROSARIO 335 SCRA 288 which showed the intention of the parties that the installment should be paid at a definite date.
RADIOWEALTH FINANCE COMPANY vs. DEL ROSARIO Had they intended that the debtors could pay as & when they could, there would have been no
335 SCRA 288 need for these 2 clauses.

FACTS:
Spouses Vicente & Maria Del Rosario jointly & severally executed, signed and delivered in
favor of Radiowealth Finance Company a promissory note for P138,948.
Thereafter, respondents defaulted on the monthly installments. Despite repeated demands,
they failed to pay their obligation.
The installments had already became due & demandable is bolstered by the fact that
respondents started paying installments on the promissory note. The obligation of the
respondents had matured & they clearly defaulted when their checks bounced. Per the
acceleration clause, the whole debt became due one month after the date of the note because
the check representing their first installment bounced.

Petitioner filed a complaint for the collection of sum of money before the RTC.

Trial court dismissed the complaint for the evidence presented were merely hearsay.

CA reversed & remanded the case for further proceedings.

Petitioner claims that respondents are liable for the whole amount of their debt and the interest
thereon, after they defaulted on the monthly installments. Respondents counter that the
installments were not yet due and demandable. They theorize that the action for immediate
enforcement of their obligation is premature because its fulfillment is dependent on the sole
will of the debtor. Hence, they consider that the proper court should first fix a period for
payment, pursuant to Articles 1180 and 1197 of the Civil Code.

ISSUE:

WON the installments had already became due and demandable? YES

HELD:

The act of leaving blank space the due date of the first installment did not necessary mean that
the debtors were allowed to pay as & when they could. If this was the intention of the parties,
they should have so indicated in the promissory note. However, it did not reflect any such
intention.

While the specific date on which each installment would be due was left blank, the note
clearly provided that each installment should be payable each month.

Furthermore, it also provided for an acceleration clause and a late payment penalty, both of

Lessons Applicable: Demurrer to Evidence, Promissory Note, When Demandable, Penalty,
Interest (Credit Transactions)
Laws Applicable: Rule 33 of the 1997 Rules of Court (Civil Procedure)
FACTS:
• March 2, 1991: Spouses Vicente and Maria Sumilang del Rosario jointly and severally
executed, signed and delivered in favor of Radiowealth Finance Company a Promissory Note
for P138,948 without need of notice or demand, in instalments of P11,579.00 payable for 12
consecutive months leaving the period for the instalments blank. Upon default, the late
payment, 2.5% penalty charge per month shall be added to each unpaid installment from due
date thereof until fully paid.
• June 7, 1993: Radiowealth filed a complaint for the collection of a sum of money before
the Regional Trial Court of Manila. During the trial, Jasmer Famatico, the credit and
collection officer of Radiowealth, presented in evidence the Spouses’ check payments, the
demand letter dated July 12, 1991, Spouses’ customer’s ledger card, another demand letter
and Metropolitan Bank dishonor slips. Famatico admitted that he did not have personal
knowledge of the transaction or the execution of any of these pieces of documentary evidence,
which had merely been endorsed to him.
• July 29, 1994: Spouses filed a Demurrer to Evidence for alleged lack of cause of action
• RTC: Dismissed for Radiowealth’s failure to substantiate the claims, the evidence it had
presented being merely hearsay
• CA: reversed and remanded the case for further proceedings
o During the pretrial, through judicial admissions or the spouses admitted the genuineness
of the Promissory Note and demand letter dated July 12, 1991. Their only defense was the
absence of an agreement on when the installment payments were to begin
ISSUES:
1. W/N the spouses can still present evidence after the appellate court’s reversal of the
dismissal on demurer of evidence (Civil Procedure)
2. W/N the obligation is due and demandable (Credit Transaction)
HELD: Petition is GRANTED. Appealed Decision is MODIFIED. Ordered to PAY
P138,948, plus 2.5 percent penalty charge per month beginning April 2, 1991 until fully paid,
and 10 percent of the amount due as attorney’s fees.
1. NO.
• Rule 33 of the 1997 Rules
o SECTION 1. Demurrer to evidence.—After the plaintiff has completed the presentation
of his evidence, the defendant may move for dismissal on the ground that upon the facts and
the law the plaintiff has shown no right to relief. If his motion is denied, he shall have the
right to present evidence. If the motion is granted but on appeal the order of dismissal is
reversed he shall be deemed to have waived the right to present evidence.
• Defendants who present a demurrer to the plaintiff’s evidence retain the right to present
their own evidence, if the trial court disagrees with them; if the trial court agrees with them,
but on appeal, the appellate court disagrees with both of them and reverses the dismissal
order, the defendants lose the right to present their own evidence
• The appellate court shall resolve the case and render judgment on the merits, inasmuch as
a demurrer aims to discourage prolonged litigations

2. Yes.
• The act of leaving blank the due date of the first installment did NOT necessarily mean
that the debtors were allowed to pay as and when they could. While the specific date on
which each installment would be due was left blank, the Note clearly provided that each
installment should be payable each month. It also provided for an acceleration clause and a
late payment penalty, both of which showed the intention of the parties that the installments
should be paid at a definite date. Per the acceleration clause, the whole debt became due one
month (April 2, 1991) after the date of the Note because the check representing their first
installment bounced.
• Respondents started paying installments on the Promissory Note, even if the checks were
dishonored by their drawee bank.
• The Note already stipulated a late payment penalty of 2.5 percent monthly to be added to
each unpaid installment until fully paid. Payment of interest was not expressly stipulated in
the Note. Thus, it should be deemed included in such penalty. Liquidated damages, however,
should no longer be imposed for being unconscionable. Such damages should also be deemed
included in the 2.5 percent monthly penalty. Furthermore, we hold that petitioner is entitled
to attorney’s fees, but only in a sum equal to 10 percent of the amount due which we deem
reasonable under the proven facts