OBLIGATIONS AND CONTRACTS

87

CASE DIGESTS:

OBLIGATIONS AND CONTRACTS

By: LEONI FRANCIS GEONZON LAGRAMA

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Article 1150. The time for prescription for all kinds of

actions, when there is no special provision which ordains
otherwise, shall be counted from the day they may be
brought.

CASES 87

KHE HONG CHENG VS COURT OF APPEALS

GR NO. 144169
Ponente: Justice Santiago Kapunan

Facts:
On October 4, 1985, The Philippine Agricultural Trading
Corporation shipped on board MV Prince Eric, which was owned
by petitioner Khe Hong Chong, 3400 bag of copra. The said
bags were insured by American Home Insurance Company.

M/V Prince Eric sank, resulting into the total loss of

the copra shipment. Because of the loss, American Home paid
the amount of the shipment to the consignee. American Home,
having subrogated the rights of the consignee, instituted a
civil case against petitioner to recover the money paid.

While the case was pending, Khe transferred the ownership

of all of his properties to his children. As a result, no
property was levied when a writ of execution was issued after
the judgment of RTC became final.

In 1997, respondents discovered Khe’s alienation and

immediately sought to nullify the transactions for being
executed in fraud of creditors. Petitioners moved to dismiss
the complaint on the ground of prescription.

Issue:

Whether or not the action to nullify the donation has

already prescribed?

Decision:

No. An accion pauliana accrues only when the creditor

discovers that he has no other legal remedy for the
satisfaction of his claim against the debtor other than an
accion pauliana. The accion pauliana is an action of a last
resort. For as long as the creditor still has a remedy at law
for the enforcement of his claim against the debtor, the

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creditor will not have any cause of action against the

creditor for rescission of the contracts entered into by and
between the debtor and another person or persons. Indeed, an
accion pauliana presupposes a judgment and the issuance by
the trial court of a writ of execution for the satisfaction
of the judgment and the failure of the Sheriff to enforce and
87
satisfy the judgment of the court. It presupposes that the
creditor has exhausted the property of the debtor. The date
of the decision of the trial court against the debtor is
immaterial. What is important is that the credit of the
plaintiff antedates that of the fraudulent alienation by the
debtor of his property. After all, the decision of the trial
court against the debtor will retroact to the time when the
debtor became indebted to the creditor.

- - - x x x - - -

To count the four year prescriptive period to rescind an

allegedly fraudulent contract from the date of registration
of the conveyance with the Register of Deeds, as alleged by
the petitioners, would run counter to Article 1383 of the
Civil Code as well as settled jurisprudence. It would
likewise violate the third requisite to file an action for
rescission of an allegedly fraudulent conveyance of property,
i.e., the creditor has no other legal remedy to satisfy his
claim.

- - - x x x - - -

An accion pauliana thus presupposes the following: 1) A

judgment; 2) the issuance by the trial court of a writ of
execution for the satisfaction of the judgment, and 3) the
failure of the sheriff to enforce and satisfy the judgment of
the court. It requires that the creditor has exhausted the
property of the debtor. The date of the decision of the
trial court is immaterial. What is important is that the
credit of the plaintiff antedates that of the fraudulent
alienation by the debtor of his property. After all, the
decision of the trial court against the debtor will retroact
to the time when the debtor became indebted to the creditor.

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Article 1158. Obligations derived from law are not

presumed. Only those expressly determined in this Code or
in special laws are demandable, and shall be regulated by
the precepts of the law which establishes them; and as to
what has not been foreseen, by the provisions of this
Book. 87

CASES

YASOA VS DE RAMOS
GR No. 156339
Ponente: Justice Renato Corona

Facts:
Aurea Yasoa asked for financial assistance from
Jovencio De Ramos to pay her indebtedness to PNB. Jovencio
agreed on the premise that Aurea would sell half of her
properties to him.

After paying Aurea’s bank loan, Aurea executed a deed

of sale in favor of Jovencio over half of the lot she owned.
Twenty-two years later, Aurea filed an estaffa complaint
against Jovencio on the ground of fraud.

The provincial prosecutor dismissed the complaint for

lack of evidence. On the account such dismissal, Jovencio
filed a complaint for damages on the ground of malicious
prosecution.

Issue:
Whether or not the damage award for malicious
prosecution was proper?

Decision:
Yes. In this jurisdiction, the term malicious
prosecution has been defined as an action for damages brought
by one against whom a criminal prosecution, civil suit, or
other legal proceeding has been instituted maliciously and
without probable cause, after the termination of such
prosecution, suit, or other proceeding in favor of the
defendant therein. To constitute malicious prosecution,
there must be proof that the prosecution was prompted by a
sinister design to vex or humiliate a person, and that it
was initiated deliberately by the defendant knowing that his
charges were false and groundless. Concededly, the mere act

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of submitting a case to the authorities for prosecution does

not make one liable for malicious prosecution.

In this case, however, there is reason to believe

that a malicious intent was behind the filing of the
complaint for estafa against respondents. The records show
that the sale of the property was evidenced by a deed of sale 87
duly notarized and registered with the local Register of
Deeds. After the execution of the deed of sale, the property
was surveyed and divided into two portions. Separate titles
were then issued in the names of Aurea Yasoa (TCT No. 73252)
and Jovencio de Ramos (TCT No. 73251). Since 1973, Jovencio
had been paying the realty taxes of the portion registered in
his name. In 1974, Aurea even requested Jovencio to use his
portion as bond for the temporary release of her son who was
charged with malicious mischief. Also, when Aurea borrowed
money from the Rural Bank of Lumban in 1973 and the PNB in
1979, only her portion covered by TCT No. 73252 was
mortgaged.

All these pieces of evidence indicate that Aurea had

long acknowledged Jovencios ownership of half of the
property. Furthermore, it was only in 1993 when petitioners
decided to file the estafa complaint against respondents. If
petitioners had honestly believed that they still owned the
entire property, it would not have taken them 22 years to
question Jovencios ownership of half of the property. The
only conclusion that can be drawn from the circumstances is
that Aurea knew all along that she was no longer the owner of
Jovencios portion after having sold it to him way back in
1971. Likewise, other than petitioners bare allegations, no
other evidence was presented by them to substantiate their
claim.

Malicious prosecution, both in criminal and civil

cases, requires the elements of (1) malice and (2) absence of
probable cause.These two elements are present in the present
controversy. Petitioners were completely aware that Jovencio
was the rightful owner of the lot covered by TCT No. 73251,
clearly signifying that they were impelled by malice and
avarice in bringing the unfounded action.

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UYPITCHING VS QUIAMCO
GR No. 146322
Ponente: Justice Renato Corona

Respondent Ernesto Quiamco was approached by Juan

Davalan, Josefino Gabutero and Raul Generoso to settle the
civil aspect of the robbery case filed by Quiamco against 87
them. They surrendered to him a Honda motorcycle and
photography of its certificate of registration. Quiamco never
saw the three again.

Later on, it was found out that the motorcycle had

been sold in installment basis to Gabutero by Ramas
Uyptiching Sons, Inc, owned by herein petitioner and to
secure its payment, it was mortgaged to the said corporation.
When Gabutero could no longer pay the installments,
Davalan assumed the obligation but stopped paying and told
petitioner that the motorcycle had allegedly been taken away
by Quiamco’s men.

Nine years later, petitioner, together with some

policemen, went to Quiamco’s establishment to recover the
motorcycle. While inside, he uttered “Quiamco is a thief of a
motorcycle”. Petitioner then filed a complaint for Qualified
theft against Quiamco.

Respondent moved for the dismissal of the complaint

because he had neither stolen nor bought the motorcycle. The
complaint was dismissed by the RTC.

Quiamco then filed a complaint against Ramas for

damages for unlawfully taking the motorcycle, utterance of
defamatory remarks and baseless filling of complaint.
The RTC rendered a decision, holding petitioners
liable for article 19 of the civil code. Petitioner appealed
to the CA but the latter affirmed the RTC’s decision. Hence
this appeal.

Issue:
Whether or not the petitioner is liable for damages?

Decision:
Yes. Petitioner corporation failed to bring the
proper civil action necessary to acquire legal possession of
the motorcycle. Instead, petitioner Uypitching descended on
respondent’s establishment with his policemen and ordered
the seizure of the motorcycle without a search warrant or

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court order. Worse, in the course of the illegal seizure of

the motorcycle, petitioner Uypitching even mouthed a
slanderous statement.

No doubt, petitioner corporation, acting through its

co-petitioner Uypitching, blatantly disregarded the lawful
procedure for the enforcement of its right, to the prejudice 87
of respondent. Petitioners’ acts violated the law as well as
public morals, and transgressed the proper norms of human
relations.

The basic principle of human relations, embodied in

Article 19 of the Civil Code, provides:

Art. 19. Every person must in the exercise of his rights and
in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.

Article 19, also known as the "principle of abuse of

right," prescribes that a person should not use his right
unjustly or contrary to honesty and good faith, otherwise he
opens himself to liability.19 It seeks to preclude the use
of, or the tendency to use, a legal right (or duty) as a
means to unjust ends.

There is an abuse of right when it is exercised

solely to prejudice or injure another. The exercise of a
right must be in accordance with the purpose for which it was
established and must not be excessive or unduly harsh; there
must be no intention to harm another. Otherwise, liability
for damages to the injured party will attach.

In this case, the manner by which the motorcycle was

taken at petitioners’ instance was not only attended by bad
faith but also contrary to the procedure laid down by law.
Considered in conjunction with the defamatory statement,
petitioners’ exercise of the right to recover the mortgaged
vehicle was utterly prejudicial and injurious to respondent.
On the other hand, the precipitate act of filing an unfounded
complaint could not in any way be considered to be in
accordance with the purpose for which the right to prosecute
a crime was established. Thus, the totality of petitioners’
actions showed a calculated design to embarrass, humiliate
and publicly ridicule respondent. Petitioners acted in an
excessively harsh fashion to the prejudice of respondent.
Contrary to law, petitioners willfully caused damage to
respondent. Hence, they should indemnify him.

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Article 1159. Obligations arising from contracts have the

force of law between the contracting parties and should
be complied with in good faith.

CASES
87
PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION VS COURT OF
APPEALS
GR No. 84698
Ponente: Justice Teodoro Padilla

Facts:
A stabbing incident inside the PSBA campus caused the
death of Carlito Bautista, a 3rd year commerce student of
PSBA. The assailants though were elements from outside the
premises of PSBA.

Carlito’s parents filed a suit for damages against

the school authorities for alleged negligence, reckless, and
Lack of security precautions on the school’s part.

The school sought to dismiss the case on the ground

of lack of course of action. According to them, since they
are presumably sued under Article 2180 of the civil code,
they are beyond the ambit of the provision since they are an
academic institution.

Issue:
Whether or not the school is liable for Bautista’s
death?

Decision:
It depends. When an academic institution accepts
students for enrollment, there is established a contract
between them, resulting in bilateral obligations which both
parties are bound to comply with. For its part, the school
undertakes to provide the student with an education that
would presumably suffice to equip him with the necessary
tools and skills to pursue higher education or a profession.
On the other hand, the student covenants to abide by the
school's academic requirements and observe its rules and
regulations.

- - - x x x - - -

Certainly, no student can absorb the intricacies of

physics or higher mathematics or explore the realm of the

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arts and other sciences when bullets are flying or

grenades exploding in the air or where there looms around
the school premises a constant threat to life and limb.
Necessarily, the school must ensure that adequate steps
are taken to maintain peace and order within the campus
premises and to prevent the breakdown thereof.
87
Because the circumstances of the present case evince
a contractual relation between the PSBA and Carlitos
Bautista, the rules on quasi-delict do not really govern.
8 A perusal of Article 2176 shows that obligations
arising from quasi-delicts or tort, also known as extra-
contractual obligations, arise only between parties not
otherwise bound by contract, whether express or implied.
However, this impression has not prevented this Court
from determining the existence of a tort even when there
obtains a contract.

- - - x x x - - -

Immediately what comes to mind is the chapter of the

Civil Code on Human Relations, particularly Article 21, which
provides:
Any person who wilfully causes loss or injury to
another in a manner that is contrary to morals, good
custom or public policy shall compensate the latter
for the damage.

- - - x x x - - -

In the circumstances obtaining in the case at bar,

however, there is, as yet, no finding that the contract
between the school and Bautista had been breached thru the
former's negligence in providing proper security measures.
This would be for the trial court to determine. And, even if
there be a finding of negligence, the same could give rise
generally to a breach of contractual obligation only. Using
the test of Cangco, supra, the negligence of the school
would not be relevant absent a contract. In fact, that
negligence becomes material only because of the contractual
relation between PSBA and Bautista. In other words, a
contractual relation is a condition sine qua non to the
school's liability. The negligence of the school cannot
exist independently of the contract, unless the negligence
occurs under the circumstances set out in Article 21 of the
Civil Code.

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FISHER VS. ROBB

GR No. 46274
Ponente: Justice Antonio Villa – Real

Facts:
John Robb made a business trip to Shanghai, China to
study the operation of a dog-racing course. There, he met A.O 87
Fisher who was a manager of a dog-racing course. The latter
become interested in investing at the Philippine Greyhound
Club where Robb was connected. Fisher then subscribed and
sent P3,000 as installment of his subscription.

After several months, Fisher then sent P2,000 as

payment for the second installment. Sometime later, those in
control of the Philippine Greyhound Club made manipulations
an established the Philippine Racing Club, thereby impairing
Fisher’s subscription.

Upon learning of the condition of the Philippine

Greyhound Club, Fisher ask Robb to return to him the entire
amount he had paid to the Philippine Greyhound Club.

In response, Robb wrote a letter to Fisher stating

among others that he felt it was his moral obligation and
personal responsibility to repay the second installment and
promised to return what Fisher has paid as second installment
out of his personal funds.

Fisher then sued Robb for the payment of the P2,000

and judgment was rendered ordering Robb to pay the amount.

Issue:
Whether or not Fisher may recover from Robb what he
has paid to the Greyhound Club?

Decision:
No. Article 1261 provides that here is no contract
unless the following requisites exists:

1. The consent of the contracting parties;

2. A definite object which is the subject-matter of the
contract;
3. A consideration for the obligation established.

In the present case, while the defendant-appellant

told the plaintiff-appellee that he felt morally responsible
for the second payments which had been made to carry out his

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plan, and that Mr. Hilscher and he would do everything

possible so that the stockholders who had made second
payments may receive the amount paid by them from their
personal funds because they voluntarily assumed the
responsibility to make such payment as soon as they receive
from the Philippine racing Club certain shares for their
services as promoters of said organization, it does not 87
appear that the plaintiff-appellee had consented to said form
of reimbursement of the P2,000 which he had directly paid to
the Philippine Greyhound Club, Inc., in satisfaction of the
second installment.

The first essential requisite, therefore, required by

the cited article 1261 of the Civil Code for the existence of
a contract, does not exists.

As to the third essential requisite, namely, "A

consideration for the obligation established," article 1274
of the same Code provides:

In onerous contracts the consideration as to each of the

parties is the delivery or performance or the promise of
delivery or performance of a thing or service by the other
party; in remuneratory contracts the consideration is the
service or benefit for which the remuneration is given, and
in contracts of pure beneficence the consideration is the
liberality of the benefactors.

And article 1275 of the same Code provides:

ART. 1275. Contracts without consideration or with an illicit

consideration produce no effect whatsoever. A consideration
is illicit when it is contrary to law or morality.

- - - x x x - - -

The contract sought to be judicially enforced by the

plaintiff-appellee against the defendant-appellant is onerous
in character, because it supposes the deprivation of the
latter of an amount of money which impairs his property,
which is a burden, and for it to be legally valid it is
necessary that it should have a consideration consisting in
the lending or or promise of a thing or service by such
party. The defendant-appellant is required to give a thing,
namely, the payment of the sum of P2,000, but the plaintiff-
appellee has not given or promised anything or service to the
former which may compel him to make such payment. The promise

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which said defendant-appellant has made to the plaintiff-

appellee to return to him P2,000 which he had paid to the
Philippine Greyhound Club, Inc., as second installment of the
payment of the amount of the shares for which he has
subscribed, was prompted by a feeling of pity which said
defendant-appellant had for the plaintiff-appellee as a
result of the loss which the latter had suffered because of 87
the failure of the enterprise. The obligation which the said
defendant-appellant had contracted with the plaintiff-
appellee is, therefore, purely moral and, as such, is not
demandable in law but only in conscience, over which human
judges have no jurisdiction.

- - - x x x - - -

The promise made by an organizer of a dog racing

course to a stockholder to return to him certain amounts
paid by the latter in satisfaction of his subscription upon
the belief of said organizer that he was morally responsible
because of the failure of the enterprise, is not the
consideration required by article 1261 of the Civil Code as
an essential element for the legal existence of an onerous
contract which would bind the promisor to comply with his
promise.

DE GUIA VS. MANILA ELECTRIC RAILROAD AND LIGHT COMPANY

GR No. L-14335
Ponente: Justice Thomas Street

Facts:
Manuel De Guia boarded a street car owned and
operated by the defendant company. The car was detailed,
causing him to sustain internal injuries. De Gula filed a
complaint against the company for breach of contract of
carriage.

The trial court found the motorman negligent but the

company insisted that the accident was due to the presence of
a stone lodged between the rails and therefore was fatuitous
event and not chargeable to the negligence of the motorman.
The company further added that they exercised due care in the
selection of the motorman and is therefore not liable for any
damages.

Issue:
Whether or not the company is liable for the acts of
the motorman?

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Decision:
Yes. Even supposing that the derailment of the car
was due to the accidental presence of such a stone as
suggested, we do not think that the existence of negligence
is disproved. The motorman says that upon approaching the
switch he reduced the electrical energy to the point that 87
the car barely entered the switch under its own momentum,
and this operation was repeated as he passed out. Upon
getting again on the straight tract he put the control
successively at points one, two, three and lastly at point
four. At the moment when the control was placed at point four
he perceived that the rear wheels were derailed and applied
the brake; but at the same instant the car struck the post,
some 40 meters distant from the exit of the switch. One of
the defendant's witnesses stated in court that the rate of a
car propelled by electricity with the control at point "four"
should be about five or 6 miles per hour. There was some
other evidence to the effect that the car was behind schedule
time and that it was being driven after leaving the switch,
at a higher rate than would ordinarily be indicated by the
control at point four. This inference is rendered more
tenable by the circumstance that the car was practically
empty. On the whole, we are of the opinion that the finding
of negligence in the operation of the car must be sustained,
as not being clearly contrary to the evidence; not so much
because of excessive speed as because of the distance which
the car was allowed to run with the front wheels of the rear
truck derailed. It seems to us than an experienced and
attentive motorman should have discovered that something was
wrong and would have stopped before he had driven the car
over the entire distance from the point where the wheels
left the track to the place where the post was struck.

The conclusion being accepted that there was

negligence on the part of the motorman in driving the car,
it results that the company is liable for the damage
resulting to the plaintiff as a consequence of that
negligence. The plaintiff had boarded the car as a passenger
for the city of Manila and the company undertook to convey
him for hire. The relation between the parties was,
therefore, of a contractual nature, and the duty of the
carrier is to be determined with reference to the principles
of contract law, that is, the company was bound to convey
and deliver the plaintiff safely and securely with reference
to the degree of care which, under the circumstances, is
required by law and custom applicable to the case. Upon

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failure to comply with that obligation the company incurred

the liability defined in articles 1103-1107 of the Civil
Code.

From the nature of the liability thus incurred, it is

clear that the defendant company can not avail itself of the
last paragraph of article 1903 of the Civil Code, since that 87
provision has reference to liability incurred by negligence
in the absence of contractual relation, that is, to the
culpa aquiliana of the civil law. It was therefore irrelevant
for the defendant company to prove, as it did, that the
company had exercised due care in the selection and
instruction of the motorman who was in charge of its car and
that he was in fact an experienced and reliable servant.

At this point, however, it should be observed that

although in case like this the defendant must answer for the
consequences of the negligence of its employee, the court has
the power to moderate liability according to the
circumstances of the case. Furthermore, we think it obvious
that an employer who has in fact displayed due diligence in
choosing and instructing his servants is entitled to be
considered a debtor in good faith, within the meaning of
article 1107 of the same Code. Construing these two
provisions together, applying them to the facts of this case,
it results that the defendant's liability is limited to such
damages as might, at the time of the accident, have been
reasonably foreseen as a probable consequence of the physical
injuries inflicted upon the plaintiff and which were in fact
a necessary result of those injuries.

PADCOM VS. ORTIGAS CENTER ASSOCIATION

GR No. 146807
Ponente: Chief Justice Hilario Davide, Jr.

Facts:
PADCOM acquired a lot owned by Tierra Development
Corporation. Under the deed of sale, the transferee and its
successor-in-interested must become members of an association
for reality owners in the area.

In 1982, the Ortigas Center Association was

organized. It sought the collection of membership dues from
PADCOM but the latter refused. In view of this, the
association filed a complaint for collection of sum of money.

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The RTC dismissed the complaint. The CA however

reverses the RTC and ordered PADCOM to pay. Hence, this
appeal.

PADCOM contends that it cannot be compelled to be a

member of the association because when it bought the land,
the association was still inexistent and that the association 87
by-laws requires an application for member which PADCOM never
sought.

Issue:
Whether or not PADCOM can be ordered to pay
membership dues to Ortigas Center Association?

Decision:
Yes. It is undisputed that when the land in question
was bought by PADCOM's predecessor-in-interest, TDC, from
OCLP, the sale bound TDC to comply with automatic membership
with the association.

- - - x x x - - -

Evidently, it was agreed by the parties that dues

shall be collected from an automatic member and such fees or
assessments shall be a lien on the property. This
stipulation was likewise annotated at the back of Transfer
Certificate of Title No. 457308 issued to TDC.

- - - x x x - - -

Any lien annotated on previous certificates of title

should be incorporated in or carried over to the new
transfer certificates of title. Such lien is inseparable
from the property as it is a right in rem, a burden on the
property whoever its owner may be.

- - - x x x - - -

Moreover, Article 1311 of the Civil Code provides

that contracts take effect between the parties, their assigns
and heirs. Since PADCOM is the successor-in-interest of TDC,
it follows that the stipulation on automatic membership with
the Association is also binding on the former.

- - - x x x - - -

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As lot owner, PADCOM is a regular member of the

Association. No application for membership is necessary.

- - - x x x - - -

Assuming in gratis argumenti that PADCOM is not a

member of the Association, it cannot evade payment without 87
violating the equitable principles underlying quasi-
contracts.

- - - x x x - - -

As resident and lot owner in the Ortigas area, PADCOM

was definitely benefited by the Association's acts and
activities to promote the interests and welfare of those who
acquire property therein or benefit from the acts or
activities of the Association.

GUANIO VS. MAKATI SHANGRI-LA HOTEL AND RESORT, INC.

GR No. 190601
Ponente: Justice Conchita Carpio-Morales

Facts:
Spouses Luigi and Anna Hernandez-Guanio booked their
wedding reception at the Makati Shangri-La Hotel. During the
reception, the hotel’s representatives did not show up
despite their assurance that they would there was a delay in
the service of the dinner certain items listed in the menu
were unavailable, the waiters were rude and unapologetic when
confirmed about the delay and that the open bar agreement did
not materialize, forcing the guests to pay for their drinks.

The spouses sent a letter to the hotel and received

and apologetic reply. Nevertheless the spouses filed a
complaint for breach of contract. The RTC ruled in favor of
petitioners is opined that the tenor of the letter is an
admission of liability by stating therein that their services
were not up to their standards.

On appeal, the CA reversed the RTC’s ruling, holding

that the proximate cause of petitioner’s injury was an
unexpected increase in their guests.

Issue:
Whether or not the hotel is liable for damages for
breach of contract?

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Decision:
Yes. The respondent could have managed the
"situation" better, it being held in high esteem in the
hotel and service industry. Given respondent's vast
experience, it is safe to presume that this is not its first
encounter with booked events exceeding the guaranteed cover.
It is not audacious to expect that certain measures have 87
been placed in case this predicament crops up. That
regardless of these measures, respondent still received
complaints as in the present case, does not amuse.

Respondent admitted that three hotel functions

coincided with petitioners' reception. To the Court, the
delay in service might have been avoided or minimized if
respondent exercised prescience in scheduling events. No
less than quality service should be delivered especially in
events which possibility of repetition is close to nil.

TSPIC CORPORATION VS TSPIC EMPLOYEES UNION

GR No. 163419
Ponente: Justice Presbitero Velasco, Jr.

Facts:
TSPIC Corporation and the TSPIC Empoloyees Union
entered into a collective bargaining agreement which includes
provisions on salary adjustments. Among the pertinent
provisions of the agreement were as follows:

a.) Effective January 1, 2000 all employees on regular

status and within the bargaining unit on or before said date
shall be granted a salary increase equivalent to ten percent
(10%) of their basic monthly salary as of December 31, 1999.

b.) Effective January 1, 2001 all employees on regular

status and within the bargaining unit on or before said date
shall be granted a salary increase equivalent to twelve (12%)
of their basic monthly salary as of December 31, 2000.

c.) Effective January 1, 2002 all employees on regular

status and within the bargaining unit on or before said date
shall be granted a salary increase equivalent to eleven
percent (11%) of their basic monthly salary as of December
31, 2001.

The wage salary increase of the first year of this

Agreement shall be over and above the wage/salary increase,

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including the wage distortion adjustment, granted by the

COMPANY on November 1, 1999 as per Wage Order No. NCR-07.

The wage/salary increases for the years 2001 and 2002

shall be deemed inclusive of the mandated minimum wage
increases under future Wage Orders, that may be issued after
Wage Order No. NCR-07, and shall be considered as correction 87
of any wage distortion that may have been brought about by
the said future Wage Orders. Thus the wage/salary increases
in 2001 and 2002 shall be deemed as compliance to future wage
orders after Wage Order No. NCR-07.

Consequently, on January 1, 2000 all the regular

ranked-and-file employees of TSPIC received a 10% increase in
their salary.

On October 6,2000 the RTWRB issued wage order No.

NCR-08 raising the daily minimum wage from P223 to P250
effective Nov. 1, 2000.

On various dates during the last quarter of 2000,

several employees attained regular employment and received
increases granted under the CBA. On January 2001, TSPIC
implemented the new wage rates mandated by the CBA.

A few weeks after the implementation of the CBA

provisions, TSPIC’s HR department notified 24 of their
employees that they were overpaid due to an error in the
automated payroll system and the overpaid amount will be
deducted from their salary in staggered basis.

The Union asserted that there was no overpayment and

such deduction constitutes diminution of pay. Arbitration
failed, leading to this instant petition.

Issue:
Whether or not the act of TSPIC in deducting the
overpaid salary constitutes diminution of benefits?

Decision:
No. There is diminution of benefits when it is shown
that: (1) the grant or benefit is founded on a policy or has
ripened into a practice over a long period; (2) the practice
is consistent and deliberate; (3) the practice is not due to
error in the construction or application of a doubtful or
difficult question of law; and (4) the diminution or
discontinuance is done unilaterally by the employer.

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 OBLIGATIONS AND CONTRACTS

- - - x x x - - -

Considering that the parties have unequivocally

agreed to substitute the benefits granted under the CBA with
those granted under wage orders, the agreement must prevail
and be given full effect. 87

- - - x x x - - -

Paragraph (b) of Sec. 1 of Art. X of the CBA provides

for the general agreement that, effective January 1, 2001,
all employees on regular status and within the bargaining
unit on or before said date shall be granted a salary
increase equivalent to twelve (12%) of their basic monthly
salary as of December 31, 2000. The 12% salary increase is
granted to all employees who (1) are regular employees and
(2) are within the bargaining unit.

Second paragraph of (c) provides that the salary

increase for the year 2000 shall not include the increase in
salary granted under WO No. 7 and the correction of the wage
distortion for November 1999.

The last paragraph, on the other hand, states the

specific condition that the wage/salary increases for the
years 2001 and 2002 shall be deemed inclusive of the mandated
minimum wage increases under future wage orders, that may be
issued after WO No. 7, and shall be considered as correction
of the wage distortions that may be brought about by the said
future wage orders. Thus, the wage/salary increases in 2001
and 2002 shall be deemed as compliance to future wage orders
after WO No. 7.

Paragraph (b) is a general provision which allows a

salary increase to all those who are qualified. It, however,
clashes with the last paragraph which specifically states
that the salary increases for the years 2001 and 2002 shall
be deemed inclusive of wage increases subsequent to those
granted under WO No. 7. It is a familiar rule in
interpretation of contracts that conflicting provisions
should be harmonized to give effect to all.21 Likewise, when
general and specific provisions are inconsistent, the
specific provision shall be paramount to and govern the
general provision.22 Thus, it may be reasonably concluded
that TSPIC granted the salary increases under the condition
that any wage order that may be subsequently issued shall be

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 OBLIGATIONS AND CONTRACTS

credited against the previously granted increase. The

intention of the parties is clear: As long as an employee is
qualified to receive the 12% increase in salary, the employee
shall be granted the increase; and as long as an employee is
granted the 12% increase, the amount shall be credited
against any wage order issued after WO No. 7.
87
Respondents should not be allowed to receive benefits
from the CBA while avoiding the counterpart crediting
provision. They have received their regularization increases
under Art. X, Sec. 2 of the CBA and the yearly increase for
the year 2001. They should not then be allowed to avoid the
crediting provision which is an accompanying condition.

REGINO VS PANGASINAN COLLEGES

GR No. 156109
Ponente: Justice Artemio Panganiban

Facts:
Petitioner Khristine Rea M. Regino was a first year
computer science student at Respondent Pangasinan Colleges of
Science and Technology (PCST). Reared in a poor family,
Regino went to college mainly through the financial support
of her relatives. During the second semester of school year
2001-2002, she enrolled in logic and statistics subjects
under Respondents Rachelle A. Gamurot and Elissa Baladad,
respectively, as teachers.

In February 2002, PCST held a fund raising campaign

dubbed the "Rave Party and Dance Revolution," the proceeds of
which were to go to the construction of the school's tennis
and volleyball courts. Each student was required to pay for
two tickets at the price of P100 each. The project was
allegedly implemented by recompensing students who purchased
tickets with additional points in their test scores; those
who refused to pay were denied the opportunity to take the
final examinations.

Financially strapped and prohibited by her religion

from attending dance parties and celebrations, Regino refused
to pay for the tickets. On March 14 and March 15, 2002, the
scheduled dates of the final examinations in logic and
statistics, her teachers - - Respondents Rachelle A. Gamurot
and Elissa Baladad - - allegedly disallowed her from taking
the tests. According to petitioner, Gamurot made her sit out
her logic class while her classmates were taking their
examinations. The next day, Baladad, after announcing to the

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 OBLIGATIONS AND CONTRACTS

entire class that she was not permitting petitioner and

another student to take their statistics examinations for
failing to pay for their tickets, allegedly ejected them from
the classroom.

Regino filed a complaint for damages against the

school but was dismissed. Hence, this petition. 87

Issue:
Whether or not Pangasinan College is liable for
breach of contract?

Decision:
No. The school-student relationship is also
reciprocal. Thus, it has consequences appurtenant to and
inherent in all contracts of such kind - - it gives rise to
bilateral or reciprocal rights and obligations. The school
undertakes to provide students with education sufficient to
enable them to pursue higher education or a profession. On
the other hand, the students agree to abide by the academic
requirements of the school and to observe its rules and
regulations.

The terms of the school-student contract are defined

at the moment of its inception - - upon enrolment of the
student. Standards of academic performance and the code of
behavior and discipline are usually set forth in manuals
distributed to new students at the start of every school
year. Further, schools inform prospective enrollees the
amount of fees and the terms of payment.

In practice, students are normally required to make a

down payment upon enrollment, with the balance to be paid
before every preliminary, midterm and final examination.
Their failure to pay their financial obligation is regarded
as a valid ground for the school to deny them the
opportunity to take these examinations.

Thus, students expect that upon their payment of

tuition fees, satisfaction of the set academic standards,
completion of academic requirements and observance of school
rules and regulations, the school would reward them by
recognizing their "completion" of the course enrolled in.

In the present case, PCST imposed the assailed

revenue-raising measure belatedly, in the middle of the
semester. It exacted the dance party fee as a condition for

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 OBLIGATIONS AND CONTRACTS

the students' taking the final examinations, and ultimately

for its recognition of their ability to finish a course. The
fee, however, was not part of the school-student contract
entered into at the start of the school year. Hence, it
could not be unilaterally imposed to the prejudice of the
enrollees.
87
PILIPINAS HINO VS. COURT OF APPEALS
GR No. 126570
Ponente: Justice Santiago Kapunan

Facts:
On August 10, 1990, plaintiff and defendants entered
into a contract to sell denominated as a Memorandum of
Agreement to sell whereby the latter agreed to sell to the
former the leased property subject of this suit in the amount
of P45,611,000.00.

The aforesaid Memorandum of Agreement to sell granted

the owner (defendants) the option to rescind the same upon
failure of the buyer (plaintiff) to pay any of the first six
(6) installments with the corresponding obligation to return
to the buyer any amount paid by the buyer in excess of the
downpayment as stated in paragraphs 7 and 9 of the Memorandum
of Agreement.

Pursuant to said Memorandum of Agreement, plaintiff

remitted on August 10, 1990 to the defendants the amount of
P1,811,000.00 as downpayment. Subsequently, plaintiff paid
the first and second installments in the amount of
P1,800,000.00 and P5,250,000.00, respectively, thereby making
the total amount paid by the plaintiff to the defendants, on
top of the downpayment, P7,050,000.00.

Unfortunately, plaintiff failed to pay the 3rd

installment and subsequent installments: and thereupon,
defendants decided to, and in fact did, in a letter dated 20
November 1990, rescinded and terminated the contract and
promised to return to the plaintiff all the amounts paid in
excess of the downpayment after deducting the interest due
from 3rd to 6th installments, inclusive.

Issue:
Whether or not the respondent is obliged to return
the P924,000 representing the accrued interest?

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 OBLIGATIONS AND CONTRACTS

Decision:
Yes. In justifying the withholding of the amount of
P924,000.00 representing interest due of the unpaid
installments, both the trial and the appellate court relied
on paragraph 6 of the memorandum of agreement entered into by
the parties. Surprisingly, both courts failed to consider
paragraph 9 contained in the same memorandum of agreement. 87
Said paragraph provides in very clear terms that when the
owners exercise their option to forfeit the downpayment, they
shall return to the buyer any amount paid by the buyer in
excess of the downpayment with no obligation to pay interest
thereon. This should include all amounts paid, including
interest. Had it been the intention of the parties to exclude
interest from the amount to be returned to the buyer in the
event that the owner exercises its option to terminate or
rescind the agreement, then such should have been stated in
categorical terms.

We find no basis in the conclusion reached by the

lower courts that interest paid should not be returned to the
buyer. It may be conceded, as the trial court endeavored to
rationalize, that for failure of the buyer to pay the
installments, private respondents were consequently deprived
of the productive use of the supposed money they should have
received as per contract. However, the private respondents
withholding of the amount corresponding to the interest
violated the specific and clear stipulation in paragraph 9 of
the memorandum of agreement that except for the downpayment,
all amounts paid shall be returned to the buyer with no
obligation to pay interest thereon. The parties are bound by
their agreement.

Thus, Article 1159 of the Civil Code expressly

provides:

Obligation arising from contracts have the force of law

between the contracting parties and should be complied with
in good faith.

Paragraph 9 of the memorandum of agreement between

the parties, not being contrary to law, morals, good
customs, public policy, or public order has therefore the
force of law between the parties. Aside from equity
considerations, the lower courts failed to provide a basis
for the retention by the respondent of the interest. Equity
is applied only in the absence of, and never against,
statutory law or judicial rules of procedure. The memorandum

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 OBLIGATIONS AND CONTRACTS

of agreement, being the law between the parties, must

therefore, govern.

Article 1160. Obligations derived from quasi-contracts

shall be subject to the provisions of Chapter 1, Title
XVII, of this Book. 87

CASES

LEUNG BEN VS. O’BRIEN

GR NO. L-13602
Ponente: Justice Thomas Street

Facts:
Leung Ben lost in a series of gambling games to
O’Brien. The latter filed a case for collection of money
representing his earnings. When Leung Ben was about to depart
from the Philippines, O’Brien sought for the issuance of writ
of attachment which the sheriff granted.

Leung Ben moved to quash the motion but his petition

was denied. Hence, this appeal.

Leung Ben contends that a statutory action to recover

money lost at gaming is not an action at all and that
therefore, the remedy of attachment is not applicable.

Issue:
Whether or not money claims arising from winnings in
a gambling game can be actionable?

Decision:
No. Money lost in gaming and voluntarily paid by the
loser to the winner cannot in the absence of statue, be
recovered in a civil action.

In the case now under consideration the duty of the

defendant to refund the money which he won from the plaintiff

Article 1161. Civil obligations arising from criminal

offenses shall be governed by the penal laws, subject to
the provisions of Article 2177, and of the pertinent
provisions of Chapter 2, Preliminary Title, on Human
Relations, and of Title XVIII of this Book, regulating
damages.

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 OBLIGATIONS AND CONTRACTS

at gaming is a duty imposed by statute. It therefore arises

ex lege. Furthermore, it is a duty to return a certain sum
which had passed from the plaintiff to the defendant. By all
the criteria which the common law supplies, this a duty in
the nature of debt and is properly classified as an implied
contract. It is well- settled by the English authorities
that money lost in gambling or by lottery, if recoverable at 87
all, can be recovered by the loser in an action of
indebitatus assumpsit for money had and received.This means
that in the common law the duty to return money won in this
way is an implied contract, or quasi-contract.
CASES

PEOPLE VS. BAYOTAS

GR No. 102007
Ponente: Justice Flerida Ruth Romero

Facts:
Rogelio Bayotas was convicted of the crime of rape.
Pending appeal of his conviction, he died. Consequently, the
Supreme Court dismissed the criminal aspect of the appeal but
is required the Solicitor General to comment with regards to
Bayotas’ civil liability.

In his comment, the Solicitor-General is of the view

that Bayotas’ death did not extinguish his civil liability.
He likewise insist that the appeal should still be resolved
for the purpose of reviewing his conviction on which the
civil liability is based.

Counsel for the accused opposed this view, contending

that Bayotas’ death pending appeal extinguishes both
penalties.

Issue:
Whether or not a convict’s death pending the appeal
of his case extinguishes his civil liability?

Decision:
Yes. 1. Death of the accused pending appeal of his
conviction extinguishes his criminal liability as well as the
civil liability based solely thereon. As opined by Justice
Regalado, in this regard, "the death of the accused prior to
final judgment terminates his criminal liability and only the
civil liability directly arising from and based solely on the
offense committed, i.e., civil liability ex delicto in senso
strictiore."

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 OBLIGATIONS AND CONTRACTS

2. Corollarily, the claim for civil liability survives

notwithstanding the death of accused, if the same may also be
predicated on a source of obligation other than delict. 19
Article 1157 of the Civil Code enumerates these other sources
of obligation from which the civil liability may arise as a
result of the same act or omission: 87

a) Law 20
b) Contracts
c) Quasi-contracts
d) . . .
e) Quasi-delicts

3. Where the civil liability survives, as explained in Number

2 above, an action for recovery therefor may be pursued but
only by way of filing a separate civil action and subject to
Section 1, Rule 111 of the 1985 Rules on Criminal Procedure
as amended. This separate civil action may be enforced either
against the executor/administrator or the estate of the
accused, depending on the source of obligation upon which the
same is based as explained above.

4. Finally, the private offended party need not fear a

forfeiture of his right to file this separate civil action by
prescription, in cases where during the prosecution of the
criminal action and prior to its extinction, the private-
offended party instituted together therewith the civil
action. In such case, the statute of limitations on the civil
liability is deemed interrupted during the pendency of the
criminal case, conformably with provisions of Article 1155 21
of the Civil Code, that should thereby avoid any apprehension
on a possible privation of right by prescription. 22
Applying this set of rules to the case at bench, we hold that
the death of appellant Bayotas extinguished his criminal
liability and the civil liability based solely on the act
complained of, i.e., rape.

Article 1162. Obligations derived from quasi-delicts

shall be governed by the provisions of Chapter 2, Title
XVII of this Book, and by special laws.

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 OBLIGATIONS AND CONTRACTS

CASES
BARREDO VS GARCIA
GR No. L-48006
Ponente: Justice Jorge Bocobo

Facts: 87
A head-on collision between a carretella and a Taxi
of Malate Taxicab occurred, causing the death of Faustino
Garcia. A criminal action was filed against Pedro Fontanilla,
the taxicab driver. Fontanilla was convinced of reckless
imprudence but the civil aspect of the case was reserved for
a separate trial.

The parents of Faustino Garcia then filed a case of

damages against the taxicab operator, Fausto Barredo. The
Trial court awarded damages in favor of Garcia, finding
Barredo liable under Article 1903 of the old civil code. The
finding were upheld by court of Appeals. It stated that
Barredo, knowing the several traffic violations committed by
Fontanilla, was negligent in hiring him.

Barredo filed his appeal before the Supreme Court,

contending mainly that his liability is governed by the
Revised Penal Code and therefore his liability is only
subsidiary. In addition, he appears that since there has been
no civil action against Fontanilla, the person criminality
liable, Berredo cannot be held responsible.

Issue:
Whether or not Barredo is liable for damages?

Decision:
Yes. The same negligent act may produce civil
liability arising from a crime or create an action for quasi-
delict.

- - - x x x - - -

In the present case, the taxi driver was found guilty

of criminal negligence, so that if he had even sued for his
civil responsibility arising from the crime, he would have
been held primarily liable for civil damages, and Barredo
would have been held subsidiarily liable for the same. But
the plaintiffs are directly suing Barredo, on his primary
responsibility because of his own presumed negligence — which
he did not overcome — under article 1903. Thus, there were

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 OBLIGATIONS AND CONTRACTS

two liabilities of Barredo: first, the subsidiary one because

of the civil liability of the taxi driver arising from the
latter's criminal negligence; and, second, Barredo's primary
liability as an employer under article 1903. The plaintiffs
were free to choose which course to take, and they preferred
the second remedy. In so doing, they were acting within their
rights. 87

MENDOZA VS. ARRIETA

GR No. L-32599
Ponente: Justice Amuerfina Melencio-Herrera

Facts:
A three way collision happened between a truck owned
by Felino Timbol, and driven by Freddie Montoya, a jeep owned
and driven by Rodolfo Salazar and a Mercedes Benz owned and
driven by petitioner Edgardo Mendoza.

Subsequent criminal cases were filed, one between

Timbol and Salazar and the other between Mendoza and Salazar.
Montoya was found guilty in the criminal case while Salazar
was acquitted after the trail court found out that the reason
Salazar bumped into Mendoza’s car was because Montoya hit
Salazar from the rear. No damages was awardea to Mendoza as
he was not a complainant in the case against Montoya.

After termination for the criminal case, Mendoza

filed a civil case against both Timbol and Salazar. The
respondent judge dismissed the case on the ground that no
reservation to file a separate civil case was made during the
trial of the criminal case and that Mendoza’s cause of action
in the criminal case was only against Salazar.

Issue:
Whether or not the complaints for damages will
prosper?

Decision:
Yes in the case of Timbol. Mendoza’s complaint was
based on quasi – delict and as such Mendoza is not bared
from instituting a separate civil action even if the same
was not reserved in the previous criminal action.

No as against Salazar since he was acquitted and

therefore cannot be held liable for damages because the fact
from which a civil action might arise does not exist.

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 OBLIGATIONS AND CONTRACTS

BERMUDEZ VS. MELENCIO-HERRERA

GR No. L-32055
Ponente: Justice Pedro Yap

Facts: 87
A cargo truck driven by Domingo Pontino and owned by
Cordova Ng Sun Kwan bumped a jeep which Rogelio, a six-year
old son of petitioners was riding. As a result, the boy died.
Subsequently, a criminal case was filed against the driver
Domingo Pontino. The institution finding that the plaintiff…
is finally terminated.

Issue:
Whether or not reservation of the civil action in a
criminal case precludes the petitioner from filing a civil
action for quasi-delict?

Decision:
No. In cases of negligence, the injured party or his
heirs has the choice between an action to enforce the civil
liability arising from crime under Article 100 of the
Revised Penal Code and an action for quasi- delict under
Article 2176-2194 of the Civil Code. If a party chooses the
latter, he may hold the employer solidarity liable for the
negligent act of his employee, subject to the employer's
defense of exercise of the diligence of a good father of the
family.
In the case at bar, the action filed by appellant was an
action for damages based on quasi-delict. The fact that
appellants reserved their right in the criminal case to file
an independent civil action did not preclude them from
choosing to file a civil action for quasi-delict.

Article 1167. If a person obliged to do something fails

to do it, the same shall be executed at his cost.

CASES

CHAVES VS. GONZALES

GR No. L-27454
Ponente: Justice Jose B.L Reyes

Facts:
Sometime in July 1963, plaintiff Rosendo Chaves
delivered to defendant Fructoso Gonzales a typewriter for

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 OBLIGATIONS AND CONTRACTS

some routine cleaning and servicing. However, after being

exasperated of the delay, plaintiff went to defendant’s house
to personally ask for the return of the typewriter. It was
returned wrapped in a package. Upon reaching home, the
petitioner opened to have the typewriter repaired by another
serviceman.
87
Chaves filed a complaint for the reimbursement of the
amount he paid for the repair of the typewriter. Gonzales
refused, contending that his obligation do not constitute a
period.

Issue:
Whether or not Gonzales is liable for the
reimbursement of the cost of the repair of the typewriter?

Decision:
Yes. Defendant cannot invoke Article 1197 of the
Civil Code for he virtually admitted non-performance by
returning the typewriter that he was obliged to repair in a
non-working condition, with essential parts missing. The
fixing of a period would thus be a mere formality and would
serve no purpose than to delay.It is clear that the
defendant-appellee contravened the tenor of his obligation
because he not only did not repair the typewriter but
returned it "in shambles", according to the appealed
decision. For such contravention, as appellant contends, he
is liable under Article 1167 of the Civil Code. jam quot, for
the cost of executing the obligation in a proper manner.

Civil Code Of The Philippines

Article 1169. Those obliged to deliver or to do something
incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of
OBLIGATIONS AND CONTRACTS
their obligation.

However, the demand by the creditor shall not be

necessary in order that delay may exist:
CASES
(1) When the obligation or the law expressly so declare;
BARZAGA VS. COURT OF APPEALS
or
GR No. 115129
Ponente:
(2) When Justice
from theJosue Bellosillo
nature and the circumstances of the
obligation it appears that the designation of the time 87
Facts:
when the thing is to be delivered or the service is to be
On December 19, 1990, Ignacio’s Wife died. In order
rendered
to fulfillwas
hisa wife’s
controlling motive
last wish to for the establishment
be interned before
of the contract;
Christmas or
Day, Ignacio inquired about the availability of
construction materials for his wife’s tomb at respondent’s
(3) When demand would be useless, as when the obligor has
store. He was informed by the storekeeper that she still had
rendered
to it beyond
be effected his power day.
the following to perform.

In reciprocal obligations, neither party incurs in delay

The following morning, Ignacio came back to follow up
if the other does not comply or is not ready to comply in
his purchase. He instructed the employees to deliver the
a proper manner
materials at the with what at
cemetery is 8incumbent upon him.
o’clock since From the
his employees
moment
are one of
already at the
the parties fulfills
burial site his obligation,
and time delay
was of the essence.
by theseveral
After other begins.
hours the materials were not yet delivered,
prompting him to dismiss employees for the day and cancel his
transaction with the store.
The construction began on December 23 but because of
the holidays, it could not be completed in time for the
scheduled burial the next day. As a result. Ignacio’s wife
way buried 2½ days behind schedule.

Tormented perhaps by his inability to perform his

wife’s dying wish, Ignacio wrote respondent to recompense him
for the damage he suffered. Respondent refuses, arguing that
there was no specific time of delivery agreed upon.

The Trial court ruled in favor of Ignacio but on

appeal, the decision was reversed

Issue:
Whether or not respondent is liable for damages?

Decision:
Yes.Respondent Angelito Alviar was negligent and
incurred in delay in the performance of his contractual
obligation. This sufficiently entitles petitioner Ignacio
Barzaga to be indemnified for the damage he suffered as a
consequence of delay or a contractual breach. The law
expressly provides that those who in the performance of their
obligation are guilty of fraud, negligence, or delay and
those who in any manner contravene the tenor thereof, are
liable for damages.

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 OBLIGATIONS AND CONTRACTS

- - - x x x - - -

Petitioner went to private respondent's store on 21

December precisely to inquire if the materials he intended to
purchase could be delivered immediately. But he was told by
the storekeeper that if there were still deliveries to be 87
made that afternoon his order would be delivered the
following day. With this in mind Barzaga decided to buy the
construction materials the following morning after he was
assured of immediate delivery according to his time frame.

- - - x x x - - -

Respondent's witness testified that the delivery truck

arrived a little late than usual because it came from a
delivery of materials in Langcaan, Dasmarinas, Cavite.
Significantly, this information was withheld by Boncales
from petitioner when the latter was negotiating with her for
the purchase of construction materials. Consequently, it is
not unreasonable to suppose that had she told petitioner of
this fact and that the delivery of the materials would
consequently be delayed, petitioner would not have bought the
materials from respondent's hardware store but elsewhere
which could meet his time requirement. The deliberate
suppression of this information by itself manifests a
certain degree of bad faith on the part of respondent's
storekeeper.

PNB MADECOR VS. UY

GR No. 129598
Ponente: Justice Leonardo Quisumbing

Facts:
Guillermo Uy assigned his receivables from PNEI to
respondent Gerardo Uy. The latter then filed a collection
suit against PNEI to respondent with a prayer for a writ of
preliminary attachment. The sheriff issued a notice of
garnishment to PNB Madecor for all the properties of PNEI
that are in possession of the said bank.

In its answer, PNB asserted that it owns a parcel of

land leased by PNEI and PNEI has not been paying its rentals
until it vacated the property the other hand it also asserted
that it owned PNEI an amount of P7,884,000 considering that
the PNB Madecor and PNEI are debtors and debtors and
creditors of each other for the amount of P8,784,227.48 and

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 OBLIGATIONS AND CONTRACTS

P7,884,000, respectively, by law f compensation, both

obligation of PNB and PNEI are considered extinguished to the
concurrent amount of P7,884,000 so that PNEI are still
obligated to pay PNB Madecor the amount of P997,227.48.

Gerardo filed a motion controverting PNB Madecor’s

claim of compensation. He explained that the allegation of 87
PNB Madecor… largely sufficient enough to cover complaint’s
claim.

The RTC rendered judgment against PNEI. The CA

affirmed the RTC’s decision.

According to the CA, there could not be any

compensation between PNEIs receivables from PNB MADECOR and
the latters obligation to the former because PNB MADECORs
supposed debt to PNEI is the subject of attachment
proceedings initiated by a third party, herein respondent
Gerardo Uy. This is a controversy that would prevent legal
compensation from taking place, per the requirements set
forth in Article 1279 of the Civil Code.
Petitioner, however, maintains that there is nothing
now that could be subject of attachment or execution in
favor of respondent since compensation had already taken
place as between its debt to PNEI and the latter’s
obligation to it, consistent with Articles 1278, 1279, and
1290 of the Civil Code. Petitioner assails the CAs
ratiocination that compensation could not have taken place
because the receivables in question were the subject of
attachment proceedings commenced by a third party
respondent. This reasoning is contrary to law, according to
petitioner.

Issue:
Whether or not legal compensation is proper?

Decision:
No. Legal compensation requires the concurrence of
the following conditions:

(1) that each one of the obligors be bound principally, and

that he be at the same time a principal creditor of the
other;
(2) that both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind, and also
of the same quality if the latter has been stated;
(3) that the two debts be due;

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(4) that they be liquidated and demandable;

(5) that over neither of them there be any retention or
controversy, commenced by third persons and communicated in
due time to the debtor.

- - - x x x - - -
87
Legal compensation could not have occurred because of
the absence of one requisite in this case: that both debts
must be due and demandable.

- - - x x x - - -

Petitioners obligation to PNEI appears to be payable

on demand, following the above observation made by the CA
and the assertion made by petitioner. Petitioner is obligated
to pay the amount stated in the promissory note upon receipt
of a notice to pay from PNEI.

- - - x x x - - -

Since petitioners obligation to PNEI is payable on

demand, and there being no demand made, it follows that the
obligation is not yet due. Therefore, this obligation may
not be subject to compensation for lack of a requisite under
the law. Without compensation having taken place, petitioner
remains obligated to PNEI to the extent stated in the
promissory note. This obligation may undoubtedly be garnished
in favor of respondent to satisfy PNEIs judgment debt.

LEAÑO VS COURT OF APPEALS

GR No.129018
Ponente: Justice Bernardo Pardo

Facts:
Hermogenes Fernado and respondent Carmelita Leaño
executed a contract to sell with Fernando as vendor and Leaño
as vendee of a piece of land.

The contract stipulates that the balance is to be

paid within a period of 10 years by way of monthly
amortization beginning 1985. After payment of initial
installment, Fernando allowed Leaño to take possession of the
lot and after several installments; Leaño constructed a house
and lot.

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Leaño later defaulted in her payments and as a

result, an ejectment case was filed by Fernando against her.
Later, after a writ of execution was issued and served on
Leaño, she filed a complaint for specific performance with
preliminary injunction alleging that the judgment of ejection
was vocative of RA 6552 which protects buyers of lots
oninstallments. She also denied having been in default of 87
payments as the 10-year period both the trial court and the
CA ruled against Leaño, Hence, this petition.

Issue:
Whether or not Leaño was in default despite the fact
that the 10-year period within which to pay was not yet
elapsed?

Decision:
Yes. While the contract provided that the total
purchase price was payable within a ten-year period, the
same contract specified that the purchase price shall be
paid in monthly installments for which the corresponding
penalty shall be imposed in case of default. Petitioner
Leaño cannot ignore the provision on the payment of monthly
installments by claiming that the ten-year period within
which to pay has not elapsed.

Article 1169 of the Civil Code provides that in reciprocal

obligations, neither party incurs in delay if the other does
not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one of the
parties fulfills his obligation, delay by the other begins.

In the case at bar, respondent Fernando performed his

part of the obligation by allowing petitioner Leaño to
continue in possession and use of the property. Clearly,
when petitioner Leaño did not pay the monthly amortizations
in accordance with the terms of the contract, she was in
delay and liable for damages.

ASI CORPORATION VS. EVANGELISTA

GR No. 158086
Ponente: Justice Leonardo Quisumbing

Facts:
Respondents, under the name and style of R.M chicks,
entered into a contract with petitioner ASJ corporation for
the incubation of broiler eggs.

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 OBLIGATIONS AND CONTRACTS

Every delivery to ASJ’s hatchery is evidenced bu a

setting report. On Febuary 3, 1993, when Enfren Evangelista
went to the hatchery to pick up the chicks and by products
covered by setting report number 108, San Juan refused to
release them on the ground that Evangelista failed to settle
their obligation covered starting from setting report no. 90.
Nevertheless, San Juan accepted eggs for hatching under 87
selling report no. 113.

On Febuary 10, 10993, Efren returned to the hatchery

to pick up the chicks under setting report no. 109 but San
Juan again refused to release the same unless the
Evangelistas can fully settle their accounts. In the
afternoon of the same day, Maura Evangelista can fully settle
their accounts. In the afternoon of the same day, Maura
Evangelista tendered P15,000 to San Juan which the latter
accepted. However, San Juan insisted on a full payment before
releasing the chicks.

Amicable settlement between the parties failed,

prompting the Evangelistas to file a action for damages
against San Juan for the retention of the chicks and the
products.

The RTC ruled in favor of the Evangelistas. The CA

affirmed the trial court’s decision. Hence, this appeal.

Issue:
Whether or not the retention of the chicks and by-
products by San Juan was justified?

Decision:
To begin with, petitioners’ obligation to deliver the
chicks and by-products corresponds to three dates: the date
of hatching, the delivery/pick-up date and the date of
respondents’ payment. On several setting reports, respondents
made delays on their payments, but petitioners tolerated such
delay. When respondents’ accounts accumulated because of
their successive failure to pay on several setting reports,
petitioners opted to demand the full settlement of
respondents’ accounts as a condition precedent to the
delivery. However, respondents were unable to fully settle
their accounts.

Respondents’ offer to partially satisfy their

accounts is not enough to extinguish their obligation. Under
Article 1248 of the Civil Code, the creditor cannot be

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 OBLIGATIONS AND CONTRACTS

compelled to accept partial payments from the debtor, unless

there is an express stipulation to that effect. More so,
respondents cannot substitute or apply as their payment the
value of the chicks and by-products they expect to derive
because it is necessary that all the debts be for the same
kind, generally of a monetary character. Needless to say,
there was no valid application of payment in this case. 87

Furthermore, it was respondents who violated the very

essence of reciprocity in contracts, consequently giving rise
to petitioners’ right of retention. This case is clearly one
among the species of non-performance of a reciprocal
obligation. Reciprocal obligations are those which arise
from the same cause, wherein each party is a debtor and a
creditor of the other, such that the performance of one is
conditioned upon the simultaneous fulfillment of the other.
From the moment one of the parties fulfills his obligation,
delay by the other party begins.

COSMO ENTERAINMENT VS. LA VILLE COMMERICAL

GR No. 152801
Ponente: Justice Romeo Callejo Sr.

Facts:
La Ville commercial entered into a contract of lease
with herein petitioner Cosmo Entertainment involving a parcel
of land owned by the farmer.

Petitioner suffered business setbacks and as a

result, it defaulted in it’s rental payments. Prompting
respondent to file a ejectment and unlawful detainer case.

Petitioner objected on the ground that in the

contract, it had the right to sublease the premises upon
prior written consent from the respondent. However,
respondent refuses to allow them without any justifiable
reason.

Issue:
Whether or not the ejectment and unlawful detainer
case was proper?

Decision:
Yes. In any case, the Court is convinced that the
findings and conclusions of the court a quo and the RTC are

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 OBLIGATIONS AND CONTRACTS

in order. These courts uniformly found that, under the terms

of the contract of lease, the respondent, as the owner-lessor
of the premises, had reserved its right to approve the
sublease of the same. The petitioner, having voluntarily
given its consent thereto, was bound by this stipulation.
And, having failed to pay the monthly rentals, the
petitioner is deemed to have violated the terms of the 87
contract, warranting its ejectment from the leased premises.

BRICKTOWN DEVELOPMENT VS. AMOR TIERRA

GR No. 112182
Ponente: Justice Jose Vitug

Facts:
Petitioner Bricktown Development and respondent Amor
Tierra entered a contract to sell involving 96 residential
lot owned by farmer. Respondent Amor Tierra was reneless in
paying the installment but it tried to negotiate for a
possible modification of that agreement. A proposal was made
by Bricktown but was turned down by Amor Tierra. The latter
made two counter proposals. The negotiations went for
something but nothing definite was accomplished. Petitioners
did not give the respondent a categorical answer that their
counter-proposals will not materials.

On October 2,1981, Petitioner sent a notice of

cancellation of contract to respondent demanded a refund of
the payments it made or in lieu of cash, assign to them a
equivalent number of unencumbered.

Both the RTC and the CA ordered Bricktown to refund

to Amor Tierra whatever has been paid. Hence, this petition.

Issue:
Whether or not Bricktown can be ordered to refund to
Amor Tierra what the latter has paid as installments?

Decision:
Yes. The forfeiture of the payments thus far remitted
under the cancelled contracts in question, given the factual
findings of both the trial court and the appellate court,
must be viewed differently. While clearly insufficient to
justify a foreclosure of the right of petitioner corporation
to rescind or cancel its contracts with private respondent,
the series of events and circumstances described by said

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courts to have prevailed in the interim between the parties,

however, warrant some favorable consideration by this Court.

Petitioners do not deny the fact that there has

indeed been a constant dialogue between the parties during
the period of their juridical relation. Concededly, the
negotiations that they have pursued strictly did not result 87
in the novation, either extinctive or modificatory, of the
contracts to sell.

SONG FO AND COMPANY VS. HAWAIIAN PHILIPPINE COMPANY

GR No.23769
Ponente: Justice George Malcolm

Facts:
Song Fo and Company contracted Hawaiian Philippine
Company to provide the former with some molasses.

Song Fo paid some of its obligation on time, while

some payments are around 20 days late. Despite some of these
delays, Hawaiian continued to supply molasses to Song Fo.
Sometime in 1923, Hawaiian sent a letter to Song Fo,
rescinding the contract of the delivery of molasses. This
prompted Song Fo to file a case for breach of contract
against Hawaiian. In its defense, Hawaiian contended that due
to the default of the payment by Song Fo, they were forced to
cancel the contract.

Issue:
Whether or not the recession of the contract is
justified.

Decision:
No. The general rule is that rescission will not be
permitted for a slight or casual breach of the contract, but
only for such breaches as are so substantial and fundamental
as to defeat the object of the parties in making the
agreement. A delay in payment for a small quantity of
molasses for some twenty days is not such a violation of an
essential condition of the contract was warrants rescission
for non-performance. Not only this, but the Hawaiian-
Philippine Co. waived this condition when it arose by
accepting payment of the overdue accounts and continuing with
the contract. Thereafter, Song Fo & Company was not in
default in payment so that the Hawaiian-Philippine co. had in
reality no excuse for cancelling the contract.

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CETUS DEVELOPMENT VS. COURT OF APPEALS

GR No. 77648
Ponente: Justice Leo Medialdea

Facts:
Private respondents are lessors of the premises owned
by Susana Realty. The lease agreement was done verbally and 87
rentals are collected monthly by a collector.

In March 1984, Susana Realty sold the property to

Cetus Development. The respondents continued to pay their
rentals to Cetus through its collector. However, from July –
September 1984, no collector came. As they don’t know where
to pay, one of the respondents called the petitioner and was
told that someone will come to get the rent but no one came
to collect them. As a result, respondents failed to pay the
rent for those three months.

Not long after, respondents received a uniform demand

letter which demanded payments of the unpaid rentals and
ordering them to vacate the premises within 15 days. Despite
payment of unpaid rentals, Cetus still proceeded with the
ejectment case for respondent’s failure to vacate the
premises.

Issue:
Whether or not there was a cause of action for the
ejectment case.

Decision:
No. For the purpose of bringing an ejectment suit,
two requisites must concur, namely: (1) there must be
failure to pay rent or comply with the conditions of the
lease and (2) there must be demand both to pay or to comply
and vacate within the periods specified in Section 2, Rule
70, namely 15 days in case of lands and 5 days in case of
buildings. The first requisite refers to the existence of the
cause of action for unlawful detainer while the second refers
to the jurisdictional requirement of demand in order that
said cause of action may be pursued.

- - - x x x - - -

It is very clear that in the case at bar, no cause of

action for ejectment has accrued. There was no failure yet
on the part of private respondents to pay rents for three
consecutive months. As the terms of the individual verbal

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 OBLIGATIONS AND CONTRACTS

leases which were on a month-to-month basis were not alleged

and proved, the general rule on necessity of demand applies,
to wit: there is default in the fulfillment of an obligation
when the creditor demands payment at the maturity of the
obligation or at anytime thereafter. This is explicit in
Article 1169, New Civil Code which provides that "(t)hose
obliged to deliver or to do something incur in delay from the 87
time the obligee judicially or extrajudicially demands from
them the fulfillment of their obligation." Petitioner has not
shown that its case falls on any of the following exceptions
where demand is not required: (a) when the obligation or the
law so declares; (b) when from the nature and circumstances
of the obligation it can be inferred that time is of the
essence of the contract; and (c) when demand would be
useless, as when the obligor has rendered it beyond his power
to perform.

The demand required in Article 1169 of the Civil Code

may be in any form, provided that it can be proved. The
proof of this demand lies upon the creditor. Without such
demand, oral or written, the effects of default do not
arise.
- - - x x x - - -

While it is true that a lessor is not obligated to

send a collector, it has been duly established that it has
been customary for private respondents to pay the rentals
through a collector. Besides Article 1257, New Civil Code
provides that where no agreement has been designated for the
payment of the rentals, the place of payment is at the
domicile of the defendants. Hence, it could not be said that
they were in default in the payment of their rentals as the
delay in paying the same was not imputable to them. Rather,
it was attributable to petitioner's omission or neglect to
collect.

AEROSPACE CHEMICAL INDUSTRIES VS. COURT OF APPEALS

GR No. 108129
Ponente: Justice Leonardo Quisumbing

Facts:
Petitioner Aerospace bought 500MT of sulfuric acid
from respondent Philphos. It was agreed that 100MT will be
picked up from respondent’s land ports at Basay and the 400MT
will be picked up from Sangl, Toledo City. It was also agreed
that the petitioner shall secure the means to transport the
orders.

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 OBLIGATIONS AND CONTRACTS

On august 6 1986, respondents sent an advisory letter

reminding the petitioners to withdraw its sulfuric acid at
Basay as they have incurred incremental expenses of P2,000
each day of delay.

On November 19 1986 petitioner chartered MT sultan 87

Kayumanggi to withdraw the sulfuric acid to the designated
load ports. Due to some defects, it was only able to withdraw
70MT of sulfuric acid at Basay and only 158Mt at Sangi,
Toledo. It eventually sank carrying with 228 MT of sulfuric
acid.

Subsequently, petitioner hired/ chartered another

vessel, MT Don Victor which can carry at most 500MT to
withdraw the remaining sulfuric acid left unloaded due to
sultan Kayumanggi’s sinking.

In its desire to utilize the ship to its full

capacity, petitioner ordered another 228MT of sulfuric acid,
the same amount carried by MT Kayumanggi when it sank. The
petitioner paid the said order.

Respondent wrote a letter stating that it could not

accommodate the said order as there was lack of supply as of
the moment. Petitioner likewise failed to lift the remaining
sulfuric acid and instead demanded delivery of the additional
order from respondent.

Later petitioner filed an action for damages against

respondent. Respondents countered by stating that because of
petitioner’s delay loading the sulfuric acid, they suffered
incremental expenses and asked for damages as well.

The trial court dissolved the petitioner, stating

that the sinking was due to force majeure and it was
defendant’s obligation to replace those quantities lost by
the sinking.

The CA reversed the trial court’s decision. Hence

this petition.

In this petition, Aerospace posed the following

arguments:
1. The sinking was due to force majeure;

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 OBLIGATIONS AND CONTRACTS

2. By paying the purchase price ahead of time, they

already complied with the initial condition under the sales
contract;

3. By the time the ship is ready to made the orders, it

was respondents who failed to comply with their obligations.
87
Issue:
Whether or not petitioners are liable to pay damages.

Decision:
Yes. On record, the storm was not the proximate cause
of petitioners failure to transport its purchases on time.
The survey report submitted by a third party surveyor, SGS
Far East Limited, revealed that the vessel, which was
unstable, was incapable of carrying the full load of
sulfuric acid. Note that there was a premature termination of
loading in Basay, Negros Oriental. The vessel had to undergo
several repairs before continuing its voyage to pick-up the
balance of cargo at Sangi, Cebu. Despite repairs, the vessel
still failed to carry the whole lot of 500 MT of sulfuric
acid due to ship defects like listing to one side. Its
unfortunate sinking was not due to force majeure. It sunk
because it was, based on SGS survey report, unstable and
unseaworthy.
- - - x x x - - -

It was petitioner which chartered M/T Sultan

Kayumanggi. The vessel was petitioners agent. When it failed
to comply with the necessary loading conditions of sulfuric
acid, it was incumbent upon petitioner to immediately
replace M/T Sultan Kayumanggi with another seaworthy vessel.
However, despite repeated demands, petitioner did not comply
seasonably.

- - - x x x - - -

Indeed the above demand, which was unheeded,

justifies the finding of delay.

SANTOS VENTURA HOCORMA VS. SANTOS

GR No. 153004
Ponente: Justice Lenardo Quisumbing

Facts:

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 OBLIGATIONS AND CONTRACTS

Petitioner foundation and respondent Santos entered

into a compromise agreement to put to an end all their
pending litigation of several civil cases.

In their compromise agreement, the following

pertinent items were entered into:
a. The foundation will pay 1.5 million to respondent 87
immediately after the execution of the agreement.
b. The balance of 13M shall be paid within a period of
not more than 2 years from the execution of the agreement.
c. Upon the execution of the greement and the receipt of
the 1.5M, Santos will cause the dismissal of all cases filed
against the foundation and lift all the notice of lis pendens
to all properties belonging to the foundation.

The first and third clause mentioned above were

compiled by the parties. The petitioners failed to pay the
remaining balance after 2 years. On October 28,1998, Santos
sent a demand letter to the foundation regarding the payment
of the remaining balance. As there was no response coming
from the petitioner, Santos filed for the issuance of a writ
of execution of the comprise agreement. The sheriff then
levied some properties of the petitioner to satisfy its
obligations. Subsequently, the levied properties were sold.

On June 2,1995, Santos filed a complaint for

declaratory relief and damages, for the petitioner’s delay of
fulfilling its obligation.

The trial court dismissed the complaint but the CA

reversed it on appeal. Hence, this petition.

The petitioner argue that the compromise agreement

did not provide for interest and that since the agreement did
not fix a period, it becomes incumbent upon Santos to fix
some.

Issue:
Whether or not petitioner had incurred delay in
fulfilling their obligation.

Decision:
Yes. The two-year period must be counted from October
26, 1990, the date of execution of the compromise agreement,
and not on the judicial approval of the compromise agreement
on September 30, 1991. When respondents wrote a demand letter
to petitioner on October 28, 1992, the obligation was already

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 OBLIGATIONS AND CONTRACTS

due and demandable. When the petitioner failed to pay its due
obligation after the demand was made, it incurred delay.

Article 1169 of the New Civil Code provides:

Those obliged to deliver or to do something incur in delay
from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation. 87

Delay as used in this article is synonymous to

default or mora which means delay in the fulfillment of
obligations. It is the non-fulfillment of the obligation with
respect to time.

In order for the debtor to be in default, it is

necessary that the following requisites be present: (1) that
the obligation be demandable and already liquidated; (2) that
the debtor delays performance; and (3) that the creditor
requires the performance judicially or extrajudicially.

In the case at bar, the obligation was already due

and demandable after the lapse of the two-year period from
the execution of the contract. The two-year period ended on
October 26, 1992. When the respondents gave a demand letter
on October 28, 1992, to the petitioner, the obligation was
already due and demandable. Furthermore, the obligation is
liquidated because the debtor knows precisely how much he is
to pay and when he is to pay it.

The second requisite is also present. Petitioner

delayed in the performance. It was able to fully settle its
outstanding balance only on February 8, 1995, which is more
than two years after the extra-judicial demand. Moreover, it
filed several motions and elevated adverse resolutions to the
appellate court to hinder the execution of a final and
executory judgment, and further delay the fulfillment of its
obligation.

Third, the demand letter sent to the petitioner on

October 28, 1992, was in accordance with an extra-judicial
demand contemplated by law.

Article 1171. Responsibility arising from fraud is

demandable in all obligations. Any waiver of an action
for future fraud is void.

CASES

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LAGON VS. HOOVEN COMALCO

GR No. 135697
Ponente: Justice Josue Bellosillo

Facts:
Petitioner Jose Lagon, a businessman who owns a 87
commercial building, engaged the services of respondent to
install aluminum materials into his building.

Sometime in February 1987 respondent filed a

collection suit against petitioner. It alleged that after the
completion of the project, the remaining balance remain
unpaid. Lagon on his part denied liability. He asserted that
it was respondent who was guilty of breach by failing to
deliver and install the materials specified in the proposals.
During the trial, respondent presented invoices and delivery
receipts as documentary evidence to support their claim.

The trial court rendered a decision ordering Lagon to

pay the remaining balance while at the same time, ordering
Hooven to pay damages for the breach it committed.

Issue:
Whether or not respondent is liable for breach of
contract.

Decision:
Yes. The mass of documentary evidence adduced by
respondent suffers from patent irregularities and material
inconsistencies on their faces, raising serious questions
requiring cogent explanations.

Firstly, the quantity of materials and the amounts

stated in the delivery receipts do not tally with those in
the invoices covering them.

Secondly, the total value of the materials as

reflected in all the invoices is P117,329.00 while under the
delivery receipts it is only P112,870.50, or a difference of
P4,458.00.

Thirdly, under the Proposals HOOVEN bound itself to

invoice the materials "when complete and ready for shipment."
Oddly, the records show that the invoices were prepared
several years after the materials were allegedly delivered
and installed completely on petitioner's building.

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Even more strange is the fact that HOOVEN instituted

the present action for collection of sum of money against
Lagon only on 24 February 1987, or more than five (5) years
after the supposed completion of the project. Indeed, it is
contrary to common experience that a creditor would take its
own sweet time in collecting its credit, more so in this case 87
when the amount involved is not miniscule but substantial.

Fourthly, the demand letter of 25 August 198310 sent

to petitioner by respondent further betrays the falsity of
its claims.

If, as claimed by HOOVEN, all the materials were

completely delivered and installed in petitioner's building
as early as August 1981, why then would it demand partial
payment only two (2) years later? This circumstance is very
significant especially considering that under the Proposals
the terms of payment should be 50% down "and the balance to
be paid in full" upon completion. Moreover, it is surprising
that the partial payment demanded was only "to cover
operation costs." As correctly observed by petitioner, demand
for payment of operation costs is typical of a still on-going
project where the contractor needs funds to defray his
expenses.

Fifthly, all the delivery receipts did not appear to

have been signed by petitioner or his duly authorized
representative acknowledging receipt of the materials listed
therein. A closer examination of the receipts clearly showed
that the deliveries were made to a certain Jose Rubin,
claimed to be petitioner's driver, Armando Lagon, and a
certain bookkeeper. Unfortunately for HOOVEN, the identities
of these persons were never been established, and there is no
way of determining now whether they were indeed authorized
representatives of petitioner.

Sixthly, it is also obvious from the contested

delivery receipts that some important details were not
supplied or were left in blank, i.e., truck numbers, persons
who delivered the materials, invoice and s. o. numbers. The
persons who delivered the materials were potential witnesses
who could shed light on the circumstances surrounding the
alleged deliveries of the materials to petitioner. Moreover,
it could have been easier for HOOVEN to pinpoint
responsibility to any of its employees for the non-delivery
of the materials.

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PERIQUET VS INTERMEDIATE APPELLATE COURT

GR No. L-69996
Ponente: Justice Santiago Kapunan

Facts:
The spouses Fernando Periquet and Petra Francisco 87
were childless. They took in a son out of wedlock of Maria
Francisco. Reyes sister of Petra. The boy was name Francisco
Periqueto,Jr. Through he was not legally adopted, he was
reared to manhood by the Pertquets.

Fernando Periquet Sr. died and was folled months

later by Petra. In her last will and testament. Petra left
her entire estate to Gernando Jr and provided certain
legacies to Felix Periquet, Dolores Periquet, Carmen
Periquet, Belen Periquet de Jesus and Lydia and Jose
Periquet.

On Aug. 8,1966, Felix Francisco executed a dead of

assignment of his rights of the inheritance to Francisco
Periquet, Jr. The other heirs did the same, except for
Florentino Zaragosa and Alberta Zaragosa Morgan.
On May 1970, Felix filed on action for annulment of
hereditary rights. He alleged that Francisco committed fraud
when he asked him to sign the deed of assignment.

The trial court sustained the validity of the

assignment. However, upon appeal to the CA, the assignment
was nullified. Hence, this petition. Petitioner contends that
there was no fraud in the execution of the deed of assignment
as Felix signed it freely and voluntarily. He further added
that there was true and valid consideration in the execution
of the instrument.

Issue:
Whether or not there was found in executing the
instrument of assignment.

Decision:
No. The kind of fraud that will vitiate a contract
refers to those insidious words or machinations resorted to
by one of the contracting parties to induce the other to
enter into a contract which without them he would not have
agreed to. It must have a determining influence on the
consent of the victim. The will of the victim, in effect, is

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 OBLIGATIONS AND CONTRACTS

maliciously vitiated by means of a false appearance of

reality.

In the case at bench, no such fraud was employed by

herein petitioner. Resultantly, the assignment of hereditary
rights executed by Felix Francisco in favor of herein
petitioner is valid and effective. 87

Felix Francisco could not be considered to have been

deceived into signing the subject deed of assignment for the
following reasons, viz:

First, the assignment was executed and signed freely

and voluntarily by Felix Francisco in order to honor, respect
and give full effect to the last wishes of his deceased
sister, Petra. The same was read by him and was further
explained by Atty. Diosdado Guytingco. Furthermore, witnesses
for petitioner, Antonio Eugenio and Elias Fermin, who also
served as witnesses in the execution and signing of the deed
of assignment testified to the foregoing. They declared that
Felix Francisco was neither forced nor intimidated to sign
the assignment of hereditary rights. He did so out of his own
free will and volition.
Second, there was valid cause or consideration in the
execution of the assignment of hereditary rights. Contrary to
the trial court's finding that the amount of P10,000.00 as
promised by Dr. Fernando Periquet, Jr. to Felix Francisco is
the cause or considereation of the assignment, we find and so
rule that it was the generosity or liberality of Felix
Francisco that impelled him to execute the questioned
instrument. Pure beneficence, not monetary consideration, was
the moving force because Felix wanted to respect the wishes
of a deceased sibling. Consequently, the award of P10,000.00
to private respondent Felix Francisco as consideration of the
assignment of hereditary rights is eliminated, the deed thus
executed being merely gratuitous in nature.

Third, the allegation of fraud is an afterthought on

the part of the assignor, Felix Francisco who filed the
instant case to annul the deed of assignment on the ground of
fraud only in 1970, almost four (4) years after he executed
the instrument. He initiated the proceedings immediately upon
learning from his niece, Gloria Zaragoza that a compromise
agreement was reached by the parties in Special Proceedings
Nos. Q-10004 and Q-11074 and that they were to receive
certain amounts from the settlement.18 In fact, Felix even

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 OBLIGATIONS AND CONTRACTS

admitted in his testimony that he was waiting for the outcome

of the cases before filing his own independent action.

LEGASPI OIL COMPANY VS. COURT OF APPEALS

GR NO. 96505
Ponente: Justice Jose Melo
87
Facts:
Respondent Bernard Oseraos had several transactions
with Legaspi Oil for the sale of copra. The price at which
the copra were sold varies from time to time depending upon
the prevailing market value of the copra.

On February 16, 1975, Oseraos, through his agents,

signed a contract for the sale of 100 tons of copra at P82.00
per 100 kilo with delivery terms of 20 days effective March
3, 1976.

Oseraos failed to make complete delivery and demands

were sent to him accordingly by Legaspi Oil. The demands were
accompanied by warnings that failure to deliver will mean
cancellation of the contract. The balance to be purchased at
open market and the price differential to be changed against
him.
For failure to comply with the demands the company
cancelled the contract and purchased the undelivered balance
from the open market at a prevailing price of P168 per 100
kilos.

On November 8, 1976 petitioner filed a complaint

against respondent for breach of contract and damages. The
trail court held that respondent is guilty of fraud and
ordered him pay damages. The CA reversed the trail court upon
appeal. Hence, this petition.

Issue:
Whether or not respondent is guilty of fraud.

Decision:
Yes. Private respondent is guilty of fraud in the
performance of his obligation under the sales contract
whereunder he bound himself to deliver to petitioner 100
metric tons of copra within twenty (20) days from March 8,
1976. However within the delivery period, Oseraos delivered
only 46,334 kilograms of copra to petitioner, leaving an
undelivered balance of 53,666 kilograms. Petitioner made
repeated demands upon private respondent to comply with his

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 OBLIGATIONS AND CONTRACTS

contractual undertaking to deliver the balance of 53,666

kilograms but private respondent elected to ignore the same.
In a letter dated October 6, 1976, petitioner made a final
demand with a warning that, should private respondent fail to
complete delivery of the balance of 53,666 kilograms of
copra, petitioner would purchase the balance at the open
market and charge the price differential to private 87
respondent. Still private respondent failed to fulfill his
contractual obligation to deliver the remaining 53,666
kilograms of copra. On October 22, 1976, since there was
still no compliance by private respondent, petitioner
exercised its right under the contract and purchased 53,666
kilograms of copra, the undelivered balance, at the open
market at the then prevailing price of P168.00 per 100
kilograms, a price differential of P86.00 per 100 kilograms
or a total price differential of P46,152.76.

Under the foregoing undisputed circumstances, the

actuality of private respondent's fraud cannot be gainsaid.
In general, fraud may be defined as the voluntary execution
of a wrongful act, or a wilfull omission, knowing and
intending the effects which naturally and necessarily arise
from such act or omission; the fraud referred to in Article
1170 of the Civil Code of the Philippines is the deliberate
and intentional evasion of the normal fulfillment of
obligation; it is distinguished from negligence by the
presence of deliberate intent, which is lacking in the
latter. The conduct of private respondent clearly manifests
his deliberate fraudulent intent to evade his contractual
obligation for the price of copra had in the meantime more
than doubled from P82.00 to P168 per 100 kilograms. Under
Article 1170 of the Civil Code of the Philippines, those who
in the performance of their obligation are guilty of fraud,
negligence, or delay, and those who in any manner contravene
the tenor thereof, are liable for damages. Pursuant to said
article, private respondent is liable for damages.

MC ENGINEERING VS. COURT OF APPEALS

Gr No. 104047
Ponente: Justice Antonio Carpio

Facts:
MC Engineering and SucoDeco signed a contract for the
restoration of the latter’s building. Land improvement,
electrical and mechanical equipment’s that were damaged by
typhoon Nitang.

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 OBLIGATIONS AND CONTRACTS

The following day, MC Engineering and Gerent Builders

entered into a contract wherein MC Engineering subcontracted
to Gerent the restoration of the buildings and land
improvement phase of the contract. Mc Engineering retained
the electrical and mechanical works.
Two months later, SUCODECO and MC Engineering entered
into a agreement increasing the price of the civil works from 87
P 2,250,000 to P3,104,851. All other provision of the
contract remains the same.

The building restoration and land improvement aspect

of the contract was completed and a certificate of acceptance
was executed. But the electrical works were cancelled.
Nevertheless, Gerent received from MC Engineering the full
payment of the contract price. Gerent was made to sign and
acknowledgment of the complete payment.

Gerent later on claimed a share in the adjusted

contract price. Petitioner refused to pay, prompting Gerent
to file a complaint for damages against petitioner. The trail
court denied Gerent’s motion. However, the court of Appeals
ruled that Gerent’s claim was meritorious Petition. The CA
found that the quitclaim executed by Gerent was vitiated with
fraud since MC Engineering intentionally withheld from Gerent
the agreed price increase.

Issue:
Whether or not Gerent Builders was defrauded in
signing the quit claim.

Decision:
No. Fraud is never presumed but must be established
by clear and convincing evidence. There is no evidence that
petitioner misled, deceived or coerced respondent Gerents
president into signing the Affidavit. A mere preponderance
of evidence is not even adequate to prove fraud.

The deceit employed must be serious. It must be

sufficient to impress or lead an ordinarily prudent person
into error, taking into account the circumstances of each
case. Silence or concealment, by itself, does not constitute
fraud, unless there is a special duty to disclose certain
facts.

There was no proof of fraud presented by respondent

Gerent other than its bare and unsubstantiated allegations.
On the contrary, respondent Gerents president, Roque,

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 OBLIGATIONS AND CONTRACTS

admitted that he was fully aware and certain of the impending

price increase.

- - - x x x - - -

Since respondent Gerent was fully aware of the

impending price increase, it cannot claim that it was misled 87
or deceived into signing the Affidavit. The non-disclosure by
petitioner of the price increase did not mislead or deceive
respondent Gerent because Roque fully knew that the price
increase would in any event happen.

- - - x x x - - -

Petitioner was under no obligation to disclose to

respondent Gerent, a subcontractor, any price increase in
petitioners main contract with Sucodeco. Respondent Gerent is
not a party to the main contract. The subcontract between
petitioner and respondent Gerent does not require petitioner
to disclose to Gerent any price increase in the main
contract. The non-disclosure by petitioner of the price
increase cannot constitute fraud or breach of any obligation

on the part of petitioner.

CASES
Article 1173. The fault or negligence of the obligor
consists in the omission of that diligence which is
SARMIENTO VS. SUN-CABRIDO
required by the nature of the obligation and corresponds
GR No. 141258
with the circumstances of the persons, of the time and of
Ponente: Justice Renato Corona
the place. When negligence shows bad faith, the
provisions
Facts: of Articles 1171 and 2201, paragraph 2, shall
apply. A certain Dr. Virginia Lao asked petitioner Tomasa
Sarmiento to find somebody to reset her pair of earing to
If therings.
gold law orSarmiento
contract then
does asked
not state the diligence
a certain Tita Payagwhich
to do
is to be observed in the performance, that which is
the same on her behalf. Payag to do the same on her behalf.
expected of a good father of a family shall be required.

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 OBLIGATIONS AND CONTRACTS

Payag went to Dingding’s Jewerly shop. Brining with her the

diamond earrings. The jewelry shop accepted the job for P400.
The respondents, Ma. Lourdes Sun, tried to dismount the
diamond from its original setting. Unsuccessuful. She asked
her goldsmith, Zernon Santos, to do it. Santos instead of
using a miniature wiresaur, used a pair of pliers to remove
the diamond, thus breaking the gem in the procees. 87

Petitioner required respondents to replace the

diamond with the same size the quality but the latter
refused, forcing the petitioner to buy a replacement in the
amount of P30,000.

Petitioner later filed a complaint for damages

against the resondents. The MTCC ruled in favor of Sarmiento
but the RTC reversed the decision which was upheld by the CA.
Hence, this petition.

Issue:
Whether or not the respondents are liable to pay
damages.

Decision:
Yes. In the case at bar, it is beyond doubt that
Santos acted negligently in dismounting the diamond from its
original setting. It appears to be the practice of the trade
to use a miniature wire saw in dismounting precious gems,
such as diamonds, from their original settings. However,
Santos employed a pair of pliers in clipping the original
setting, thus resulting in breakage of the diamond. The
jewelry shop failed to perform its obligation with the
ordinary diligence required by the circumstances. It should
be pointed out that Marilou examined the diamond before
dismounting it from the original setting and found the same
to be in order. Its subsequent breakage in the hands of
Santos could only have been caused by his negligence in
using the wrong equipment. Res ipsa loquitur.

CRISOSTOMO VS COURT OF APPEALS

GR No. 138334
Ponente: Justice Consuelo Ynares – Santiago

Facts:
Estela Crisostomo contracted the services of the
respondent Caravan Travel and Tours International to arrange
her booking and travel accommodation for a tour dubbed as
jewels of Europe.

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 OBLIGATIONS AND CONTRACTS

On June 12,1991 her niece, Meriam Menor who was an

employee of the respondent company, gave her all the flight
documents needed for the trip. Menor told her to go to NAIA
on Saturday, June 15,1991.

When petitioner arrived at NAIA on June 15 she 87

discovered that the flight she was supposed to take had
already left the day before. Menor however was able to
convince her to purchase another package tour dubbed as
British Pageant. Upon her return from the said trip,
petitioner asked for the reimbursement of the amount she paid
for the Jewels of Europe trip. The company refused, prompting
petitioner to file a complaint before the RTC.

In her complaint, petitioner alleged that her failure

to join Jewels of Europe was due to respondent’s fault since
it did not clearly indicate the departure date on the plane
ticket. Respondent’s was also negligent in informing her of
the wrong fight schedule. She insisted that the British
Pageant was merely a substitute for the Jewels of Europe.

For its part, respondent company… as printed on the

ticket.
The trial court held that… petitioner’s testimony. On
appeal, the appellate court held… what was told to her.

Issue:
Whether or not respondent company was negligent.

Decision:
No. Contrary to petitioners claim, the evidence on
record shows that respondent exercised due diligence in
performing its obligations under the contract and followed
standard procedure in rendering its services to petitioner.
As correctly observed by the lower court, the plane ticket
issued to petitioner clearly reflected the departure date and
time, contrary to petitioners contention. The travel
documents, consisting of the tour itinerary, vouchers and
instructions, were likewise delivered to petitioner two days
prior to the trip. Respondent also properly booked petitioner
for the tour, prepared the necessary documents and procured
the plane tickets. It arranged petitioners hotel
accommodation as well as food, land transfers and sightseeing
excursions, in accordance with its avowed undertaking.

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 OBLIGATIONS AND CONTRACTS

Therefore, it is clear that respondent performed its

prestation under the contract as well as everything else that
was essential to book petitioner for the tour. Had petitioner
exercised due diligence in the conduct of her affairs, there
would have been no reason for her to miss the flight.
Needless to say, after the travel papers were delivered to
petitioner, it became incumbent upon her to take ordinary 87
care of her concerns. This undoubtedly would require that she
at least read the documents in order to assure herself of the
important details regarding the trip.

PHILIPPINE HAWK CORPORATION VS. LEE

Gr No.166869
Ponente: Justice Diosdado Peralta

Facts:
On March 17, 1991, she was riding on their motorcycle
in tandem with her husband, who was on the wheel, at a place
after a Caltex gasoline station in Barangay Buensoceso,
Gumaca, Quezon on the way to Lopez, Quezon. They came from
the Pasumbal Machine Shop, where they inquired about the
repair of their tanker. They were on a stop position at the
side of the highway; and when they were about to make a turn,
she saw a bus running at fast speed coming toward them, and
then the bus hit a jeep parked on the roadside, and their
motorcycle as well. She lost consciousness and was brought to
the hospital in Gumaca, Quezon, where she was confined for a
week. She was later transferred to St. Lukes Hospital in
Quezon City, Manila. She suffered a fracture on her left
chest, her left arm became swollen, she felt pain in her
bones, and had high blood pressure.

Respondents husband died due to the vehicular

accident.

Respondent Vivian Tan Lee filed before the RTC of

Quezon City a Complaint against petitioner for damages based
on quasi-delict.

Petitioner denied liability for the vehicular

accident, alleging that the immediate and proximate cause of
the accident was the recklessness or lack of caution of
Silvino Tan. Petitioner asserted that it exercised the
diligence of a good father of the family in the selection and
supervision of its employees.

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 OBLIGATIONS AND CONTRACTS

Ernest Ovial, the driver of the passenger jeep

involved in the accident, testified that in the afternoon of
March 17, 1991, his jeep was parked on the left side of the
highway near the Pasumbal Machine Shop. He did not notice the
motorcycle before the accident. But he saw the bus dragging
the motorcycle along the highway, and then the bus bumped his
jeep and sped away. 87

For the defense, Margarito Avila, the driver of

petitioners bus, testified that on March 17, 1999, at about
4:30 p.m., he was driving his bus at 60 kilometers per hour
on the Maharlika Highway. When they were at Barangay
Buensoceso, Gumaca, Quezon, a motorcycle ran from his left
side of the highway, and as the bus came near, the motorcycle
crossed the path of the bus, and so he turned the bus to the
right. He heard a loud banging sound.

Avila further testified that he had previously been

involved in sideswiping incidents, but he forgot how many
times.

The trial court held petitioner bus company liable

for failing to exercise the diligence of a good father of the
family in the selection and supervision of Avila, having
failed to sufficiently inculcate in him discipline and
correct behavior on the road.
On appeal, the Court of Appeals affirmed the decision
of the trial court.

Issue:
Whether or not petitioner is liable for damages.

Decision:
Yes. Foreseeability is the fundamental test of
negligence. To be negligent, a defendant must have acted or
failed to act in such a way that an ordinary reasonable man
would have realized that certain interests of certain
persons were unreasonably subjected to a general but
definite class of risks.

In this case, the bus driver, who was driving on the

right side of the road, already saw the motorcycle on the
left side of the road before the collision. However, he did
not take the necessary precaution to slow down, but drove on
and bumped the motorcycle, and also the passenger jeep parked
on the left side of the road, showing that the bus was

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 OBLIGATIONS AND CONTRACTS

negligent in veering to the left lane, causing it to hit the

motorcycle and the passenger jeep.

DY TEBAN TRADING VS. CHING

GR No. 161803
Ponente: Justice Ruben Reyes
87
Facts:
On July 4, 1995, at around 4:45 a.m., Rogelio Ortiz,
with helper Romeo Catamora, was driving a Nissan van owned by
petitioner Dy Teban Trading, Inc. along the National Highway
in Barangay Sumilihon, Butuan City, going to Surigao City.
They were delivering commercial ice to nearby barangays and
municipalities. A Joana Paula passenger bus was cruising on
the opposite lane towards the van. In between the two
vehicles was a parked prime mover with a trailer, owned by
private respondent Liberty Forest, Inc.

The night before, at around 10:00 p.m., the prime

mover with trailer suffered a tire blowout. The driver,
private respondent Cresilito Limbaga, parked the prime mover
askew occupying a substantial portion of the national
highway, on the lane of the passenger bus. He parked the
prime mover with trailer at the shoulder of the road with the
left wheels still on the cemented highway and the right
wheels on the sand and gravel shoulder of the highway. The
prime mover was not equipped with triangular, collapsible
reflectorized plates, the early warning device required under
Letter of Instruction No. 229. As substitute, Limbaga placed
a banana trunk with leaves on the front and the rear portion
of the prime mover to warn incoming motorists. It is alleged
that Limbaga likewise placed kerosene lighted tin cans on the
front and rear of the trailer.

To avoid hitting the parked prime mover occupying its

lane, the incoming passenger bus swerved to the right, onto
the lane of the approaching Nissan van. Ortiz saw two bright
and glaring headlights and the approaching passenger bus. He
pumped his break slowly, swerved to the left to avoid the
oncoming bus but the van hit the front of the stationary
prime mover.

On October 31, 1995, petitioner Nissan van owner

filed a complaint for damages against private respondents
prime mover owner and driver.

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 OBLIGATIONS AND CONTRACTS

The RTC held that the proximate cause of the three-

way vehicular collision was improper parking of the prime
mover on the national highway and the absence of an early
warning device on the vehicle.

In its decision, the RTC held defendant Liberty

Forest, Inc. did not exercise the diligence of a good father 87
of a family in managing and running its business. The
evidence on record shows that it failed to provide its prime
mover and trailer with the required early warning devices
with reflectors and it did not keep proper maintenance and
condition of the prime mover and the trailer.

On August 28, 2003, the CA reversed the RTC decision.

In partly reversing or partly modifying the RTC

decision, the CA held that the proximate cause of the
vehicular collision was the failure of the Nissan van to give
way or yield to the right of way of the passenger bus.

Issue:
Whether or not the defendant Liberty Forest was
negligent.

Decision:
Yes. Negligence is defined as the failure to observe
for the protection of the interests of another person that
degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person
suffers injury.

The Supreme Court stated the test of negligence in

the landmark case Picart v. Smith as follows:

“The test by which to determine the existence or negligence

in a particular case may be stated as follows: Did the
defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinary person would
have used in the same situation? If not, then he is guilty of
negligence.”

Limbaga also failed to take proper steps to minimize

the risk posed by the improperly parked prime mover. He did
not immediately inform his employer, private respondent
Liberty Forest, Inc., that the prime mover suffered two tire
blowouts and that he could not have them fixed because he had
only one spare tire. Instead of calling for help, Limbaga

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 OBLIGATIONS AND CONTRACTS

took it upon himself to simply place banana leaves on the

front and rear of the prime mover to serve as warning to
oncoming motorists. Worse, Limbaga slept on the prime mover
instead of standing guard beside the vehicle. By his own
account, Limbaga was sleeping on the prime mover at the time
of the collision and that he was only awakened by the impact
of the Nissan van and the passenger bus on the prime mover. 87

Limbaga also admitted on cross-examination that it

was his first time to drive the prime mover with trailer
loaded with a D-8 caterpillar bulldozer. We find that private
respondent Liberty Forest, Inc. was utterly negligent in
allowing a novice driver, like Limbaga, to operate a vehicle,
such as a truck loaded with a bulldozer, which required
highly specialized driving skills. Respondent employer
clearly failed to properly supervise Limbaga in driving the
prime mover.

SAFEGUARD SECURTIY AGENCY VS. TANGCO

GR No. 165732
Ponente: Justice Ma. Alicia Austria – Martinez

Facts:
On November 3, 1997, at about 2:50 p.m., Evangeline
Tangco (Evangeline) went to Ecology Bank, Katipunan Branch,
Quezon City, to renew her time deposit per advise of the
banks cashier as she would sign a specimen card. Evangeline,
a duly licensed firearm holder with corresponding permit to
carry the same outside her residence, approached security
guard Pajarillo, who was stationed outside the bank, and
pulled out her firearm from her bag to deposit the same for
safekeeping. Suddenly, Pajarillo shot Evangeline with his
service shotgun hitting her in the abdomen instantly causing
her death.

Lauro Tangco, Evangelines husband, together with his

six minor children filed a criminal case of Homicide against
Pajarillo.

Meanwhile, on January 14, 1998, respondents filed

with RTC, Branch 273, Marikina City, a complaint for damages
against Pajarillo for negligently shooting Evangeline and
against Safeguard for failing to observe the diligence of a
good father of a family to prevent the damage committed by
its security guard.

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 OBLIGATIONS AND CONTRACTS

In their Answer,petitioners denied the material

allegations in the complaint and alleged that Safeguard
exercised the diligence of a good father of a family in the
selection and supervision of Pajarillo; that Evangelines
death was not due to Pajarillos negligence as the latter
acted only in self-defense.
87
The RTC found respondents to be entitled to damages.
It rejected Pajarillos claim that he merely acted in self-
defense. It gave no credence to Pajarillos bare claim that
Evangeline was seen roaming around the area prior to the
shooting incident since Pajarillo had not made such report to
the head office and the police authorities.

Safeguard insists that the claim for damages by

respondents is based on culpa aquiliana under Article 2176 of
the Civil Code, in which case, its liability is jointly and
severally with Pajarillo. However, since it has established
that it had exercised due diligence in the selection and
supervision of Pajarillo, it should be exonerated from civil
liability.

Issue:
Whether or not Safeguard Security is liable for the
death of Evangeline.

Decision:
Yes. An act or omission causing damage to another may
give rise to two separate civil liabilities on the part of
the offender, i.e., (1) civil liability ex delicto, under
Article 100 of the Revised Penal Code; and (2) independent
civil liabilities, such as those (a) not arising from an act
or omission complained of as a felony, e.g., culpa
contractual or obligations arising from law under Article 31
of the Civil Code, intentional torts under Articles 32 and
34, and culpa aquiliana under Article 2176 of the Civil
Code; or (b) where the injured party is granted a right to
file an action independent and distinct from the criminal
action under Article 33 of the Civil Code. Either of these
liabilities may be enforced against the offender subject to
the caveat under Article 2177 of the Civil Code that the
offended party cannot recover damages twice for the same act
or omission or under both causes.

It is important to determine the nature of

respondents cause of action. The nature of a cause of action

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 OBLIGATIONS AND CONTRACTS

is determined by the facts alleged in the complaint as

constituting the cause of action.

- - - x x x - - -

A thorough review of the records of the case fails to

show any cogent reason for us to deviate from the factual 87
finding of the trial court and affirmed by the CA that
petitioner Pajarillo was guilty of negligence in shooting
Evangeline.

Respondents evidence established that Evangelines

purpose in going to the bank was to renew her time deposit.
On the other hand, Pajarillo claims that Evangeline drew a
gun from her bag and aimed the same at him, thus, acting
instinctively, he shot her in self-defense.

Pajarillo testified that when Evangeline aimed the

gun at him at a distance of about one meter or one arms
length he stepped backward, loaded the chamber of his gun and
shot her. It is however unimaginable that petitioner
Pajarillo could still make such movements if indeed the gun
was already pointed at him. Any movement could have prompted
Evangeline to pull the trigger to shoot him.

- - - x x x - - -

The RTC did not err in ruling that Safeguard fell

short of the diligence required in the supervision of its
employee, particularly Pajarillo. In this case, while
Safeguard presented Capt. James Camero, its Director for
Operations, who testified on the issuance of company rules
and regulations, such as the Guidelines of Guards Who Will Be
Assigned To Banks, Weapons Training, Safeguard Training
Center Marksmanship Training Lesson Plan,
Disciplinary/Corrective Sanctions, it had also been
established during Cameros cross-examination that Pajarillo
was not aware of such rules and regulations. Notwithstanding
Cameros clarification on his re-direct examination that these
company rules and regulations are lesson plans as a basis of
guidelines of the instructors during classroom instructions
and not necessary to give students copy of the same, the
records do not show that Pajarillo had attended such
classroom instructions.

The records also failed to show that there was

adequate training and continuous evaluation of the security

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 OBLIGATIONS AND CONTRACTS

guards performance. Pajarillo had only attended an in-

service training on March 1, 1997 conducted by Toyota Sta.
Rosa, his first assignment as security guard of Safeguard,
which was in collaboration with Safeguard. It was established
that the concept of such training was purely on security of
equipments to be guarded and protection of the life of the
employees. 87

VILLANUEVA VS. DOMINGO

GR No. 144274
Ponente: Justice Renato Corona

Facts:
Priscilla R. Domingo is the registered owner of a
silver Mitsubishi Lancer Car model 1980 bearing plate No.NDW
781 91 with co-respondent Leandro Luis R. Domingo as
authorized driver. [Petitioner] Nostradamus Villanueva was
then the registered owner of a green Mitsubishi Lancer
bearing Plate No.PHK 201.

On 22 October 1991 at about 9:45 in the evening,

following a green traffic light, [respondent] Priscilla
Domingos silver Lancer car with Plate No. NDW 781 then driven
by co-respondent Leandro Luis R. Domingo was cruising along
the middle lane of South Superhighway at moderate speed from
north to south. Suddenly, a green Mitsubishi Lancer with
plate No.PHK 201 driven by Renato Dela Cruz Ocfemia darted
from Vito Cruz Street towards the South Superhighway directly
into the path of NDW 781 91 thereby hitting and bumping its
left front portion. As a result of the impact, NDW 781 hit
two (2) parked vehicles at the roadside, the second hitting
another parked car in front of it.

Per Traffic Accident Report prepared by Traffic

Investigator Pfc. Patrocinio N. Acido, Renato dela Cruz
Ocfemia was driving with expired license and positive for
alcoholic breath.

Nostradamus Villanueva claimed that he was no longer

the owner of the car at the time of the mishap because it was
swapped with a Pajero owned by Albert Jaucian/Auto Palace Car
Exchange.

On the other hand, Auto Palace Car Exchange

represented by Albert Jaucian claimed that he was not the
registered owner of the car. Moreover, it could not be held
subsidiary liable as employer of Ocfemia because the latter

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 OBLIGATIONS AND CONTRACTS

was off-duty as utility employee at the time of the incident.

Neither was Ocfemia performing a duty related to his
employment.

After trial, the trial court found petitioner liable

and ordered him to pay respondent actual, moral and exemplary
damages plus appearance and attorneys fees. 87

Issue:
Whether or not Villanueva is liable for the mishap.

Decision:
Yes. The registered owner of any vehicle is directly
and primarily responsible to the public and third persons
while it is being operated.

The rationale behind such doctrine was explained way

back in 1957 in Erezo vs. Jepte:

“The principle upon which this doctrine is based is

that in dealing with vehicles registered under the Public
Service Law, the public has the right to assume or presume
that the registered owner is the actual owner thereof, for it
would be difficult for the public to enforce the actions that
they may have for injuries caused to them by the vehicles
being negligently operated if the public should be required
to prove who the actual owner is.”

- - - x x x - -

Registration is required not to make said

registration the operative act by which ownership in vehicles
is transferred, as in land registration cases, because the
administrative proceeding of registration does not bear any
essential relation to the contract of sale between the
parties, but to permit the use and operation of the vehicle
upon any public highway. The main aim of motor vehicle
registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the
vehicle on the public highways, responsibility therefore can
be fixed on a definite individual, the registered owner.

- - - x x x - - -

A registered owner who has already sold or

transferred a vehicle has the recourse to a third-party
complaint, in the same action brought against him to recover

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 OBLIGATIONS AND CONTRACTS

for the damage or injury done, against the vendee or

transferee of the vehicle. The inconvenience of the suit is
no justification for relieving him of liability; said
inconvenience is the price he pays for failure to comply with
the registration that the law demands and requires.

CALALAS VS. COURT OF APPEALS 87

GR No. 122039
Ponente: Justice Vicente Mendoza

Facts:
At 10 o'clock in the morning of August 23, 1989,
private respondent Eliza Jujeurche G. Sunga, then a college
freshman majoring in Physical Education at the Siliman
University, took a passenger jeepney owned and operated by
petitioner Vicente Calalas. As the jeepney was filled to
capacity of about 24 passengers, Sunga was given by the
conductor an "extension seat," a wooden stool at the back of
the door at the rear end of the vehicle.

On the way to Poblacion Sibulan, Negros Occidental,

the jeepney stopped to let a passenger off. As she was seated
at the rear of the vehicle, Sunga gave way to the outgoing
passenger. Just as she was doing so, an Isuzu truck driven by
Iglecerio Verena and owned by Francisco Salva bumped the left
rear portion of the jeepney. As a result, Sunga was injured.

On October 9, 1989, Sunga filed a complaint for

damages against Calalas, alleging violation of the contract
of carriage by the former in failing to exercise the
diligence required of him as a common carrier. Calalas, on
the other hand, filed a third-party complaint against
Francisco Salva, the owner of the Isuzu truck.

The lower court rendered judgment against Salva as

third-party defendant and absolved Calalas of liability,
holding that it was the driver of the Isuzu truck who was
responsible for the accident. It took cognizance of another
case (Civil Case No. 3490), filed by Calalas against Salva
and Verena, for quasi-delict, in which Branch 37 of the same
court held Salva and his driver Verena jointly liable to
Calalas for the damage to his jeepney.

On appeal to the Court of Appeals, the ruling of the

lower court was reversed on the ground that Sunga's cause of
action was based on a contract of carriage, not quasi-delict,
and that the common carrier failed to exercise the diligence

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 OBLIGATIONS AND CONTRACTS

required under the Civil Code. The appellate court dismissed

the third-party complaint against Salva and adjudged Calalas
liable for damages to Sunga.

Petitioner contends that the ruling in Civil Case No.

3490 that the negligence of Verena was the proximate cause of
the accident negates his liability and that to rule otherwise 87
would be to make the common carrier an insurer of the safety
of its passengers.

Issue:
Whether or not petitioner can be held liable.

Decision:
Yes. The issue in Civil Case No. 3490 was whether
Salva and his driver Verena were liable for quasi-delict for
the damage caused to petitioner's jeepney. On the other hand,
the issue in this case is whether petitioner is liable on his
contract of carriage. The first, quasi-delict, also known as
culpa aquiliana or culpa extra contractual, has as its source
the negligence of the tortfeasor. The second, breach of
contract or culpa contractual, is premised upon the
negligence in the performance of a contractual obligation.

Consequently, in quasi-delict, the negligence or

fault should be clearly established because it is the basis
of the action, whereas in breach of contract, the action can
be prosecuted merely by proving the existence of the contract
and the fact that the obligor, in this case the common
carrier, failed to transport his passenger safely to his
destination. In case of death or injuries to passengers,
Art. 1756 of the Civil Code provides that common carriers
are presumed to have been at fault or to have acted
negligently unless they prove that they observed
extraordinary diligence as defined in Arts. 1733 and 1755 of
the Code.

There is, thus, no basis for the contention that the

ruling in Civil Case No. 3490, finding Salva and his driver
Verena liable for the damage to petitioner's jeepney, should
be binding on Sunga. It is immaterial that the proximate
cause of the collision between the jeepney and the truck was
the negligence of the truck driver. The doctrine of proximate
cause is applicable only in actions for quasi-delict, not in
actions involving breach of contract. The doctrine is a
device for imputing liability to a person where there is no
relation between him and another party.

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- - - x x x - - -

In the case at bar, upon the happening of the

accident, the presumption of negligence at once arose, and it
became the duty of petitioner to prove that he had to observe
extraordinary diligence in the care of his passengers. 87

First, as found by the Court of Appeals, the jeepney

was not properly parked, its rear portion being exposed about
two meters from the broad shoulders of the highway, and
facing the middle of the highway in a diagonal angle.

Second, it is undisputed that petitioner's driver

took in more passengers than the allowed seating capacity of
the jeepney, a violation of §32(a) of the same law.

LUDO AND LUYM VS. COURT OF APPEALS

GR No. 125483
Ponente: Justice Leonardo Quisumbing

Facts:
Petitioner Ludo & Luym Corporation is a domestic
corporation engaged in copra processing with plant and
business offices in Cebu City. Private Respondent Gabisan
Shipping Lines was the registered owner and operator of the
motor vessel MV Miguela, while the other private respondent,
Anselmo Olasiman, was its captain.

Petitioner owns and operates a private wharf used by

vessels for loading and unloading of copra and other
processed products. Among its wharfs facilities are fender
pile clusters for docking and mooring.

On May 21, 1990, at around 1:30 P.M., while MV

Miguela was docking at petitioners wharf, it rammed and
destroyed a fender pile cluster. Petitioner demanded damages
from private respondents. The latter refused. Hence,
petitioner filed a complaint for damages before the Regional
Trial Court of Cebu.

Petitioners evidence during trial showed that on May

21, 1990, at 1:30 P.M., MV Miguela came to dock at
petitioners wharf. Ireneo Naval, petitioners employee, guided
the vessel to its docking place. After the guide (small rope)
was thrown from the vessel and while the petitioners security
guard was pulling the big rope to be tied to the bolar, MV

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 OBLIGATIONS AND CONTRACTS

Miguela did not slow down. The crew did not release the
vessels anchor. Naval shouted Reverse to the vessels crew,
but it was too late when the latter responded, for the vessel
already rammed the pile cluster. The impact disinclined the
pile cluster and deformed the cable wires wound around it.

Private respondents denied the incident and the 87

damage. Their witnesses claimed that the damage, if any, must
have occurred prior to their arrival and caused by another
vessel or by ordinary wear and tear. They averred that MV
Miguela started to slow down at 100 meters and the crew
stopped the engine at 50 meters from the pier; that Capt.
Anselmo Olasiman did not order the anchors release and chief
mate Manuel Gabisan did not hear Naval shout Reverse.

There were scattered pieces of copra at the place

where MV Miguela docked, which indicated the prior docking by
other vessels. After MV Miguela left, another vessel docked
in the same area. Petitioner did not prevent MV Miguela from
departing. When chiefmate Gabisan went to Atty. Du, the
latter told him not to mind the incident.

On May 14, 1993, the trial court disposed the case in

favor of petitioner.

The CA found that petitioners eyewitness Naval was

incompetent to testify on the negligence of the crew and
officers of MV Miguela; that there were other vessels that
used the wharf for berthing and petitioners evidence did not
positively prove that it was MV Miguela that rammed the pile
cluster; that the photographs of the pile cluster taken after
the incident showed no visible damages; that, as shown by
private respondents witness, there were seashells and
seaweeds directly under the uprooted post, which indicated
that the breaking happened a long time ago.

Issue:
Whether or not petitioner’s liability based on res
ipsa loquitor is well-taken.

Decision:
Yes. Where the thing which causes injury is shown to
be under the management of the defendant, and the accident is
such as in the ordinary course of things does not happen if
those who have the management use proper care, it affords
reasonable evidence, in the absence of an explanation by the
defendant, that the accident arose from want of care.

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 OBLIGATIONS AND CONTRACTS

The doctrine recognizes that parties may establish prima

facie negligence without direct proof and allows the
principle to substitute for specific proof of negligence.
This is invoked when under the circumstances, direct evidence
is absent and not readily available.

- - - x x x - - - 87

All the requisites for recourse to this doctrine

exist. First, MV Miguela was under the exclusive control of
its officers and crew. Petitioner did not have direct
evidence on what transpired within as the officers and crew
maneuvered the vessel to its berthing place.

Second, aside from the testimony that MV Miguela

rammed the cluster pile, private respondent did not show
persuasively other possible causes of the damage.

- - - x x x - - -

Additionally, petitioner presented tangible proof

that demonstrated private respondents negligence. As
testified by Capt. Olasiman, from command of slow ahead to
stop engine, the vessel will still travel 100 meters before
it finally stops. However, he ordered stop engine when the
vessel was only 50 meters from the pier. Further, he
testified that before the vessel is put to slow astern, the
engine has to be restarted. However, Olasiman can not
estimate how long it takes before the engine goes to slow
astern after the engine is restarted. From these
declarations, the conclusion is that it was already too late
when the captain ordered reverse.

- - - x x x - - -

Respondent companys negligence consists in allowing

incompetent crew to man its vessel. As shown also by
petitioner, both Captain Olasiman and Chief Mate Gabisan did
not have a formal training in marine navigation. The former
was a mere elementary graduate while the latter is a high
school graduate.

TUAZON VS. WENPHIL CORPORATION

GR No. 162447
Ponente: Justice Leonardo Quisumbing

Facts:

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 OBLIGATIONS AND CONTRACTS

Petitioners Annabelle Tuazon and Almer Albing were

branch managers of two different branch of Wendy’s. They were
dismissed because of the management’s loss of trust and
confidence in them after allegation of their involvement in
the cheating that happened during the time when the company
was running a contest for all branches.
87
A complaint for illegal dismissal was filed by the
petitioners. Later, the labor arbiter ruled in favor of
petitioner. Respondents appealed to decision to the NLRC
which affirmed the labor arbiter’s decision.

The court of appeals reversed the decision of the

NLRC. Hence, this petition.

For their part, petitioners contend that respondents

did not sufficiently prove the existence of a cause of their
dismissal.

Issue:
Whether or not loss of trust and confidence is
sufficient ground for petitioner’s dismissal.

Decision:
Yes. There is no denying that petitioners were
managerial employees. They executed management policies, they
had the power to hire personnel and assign them tasks; and
discipline the employees in their branch. They recommended
actions on employees to the head office. Pertinent is Article
212 (m) of the Labor Code defining a managerial employee as
one who is vested with powers or prerogatives to lay down and
execute management policies and/or hire, transfer, suspend,
lay-off, recall, discharge, assign or discipline employees.
Consequently, as managerial employees, in the case of
petitioners, the mere existence of grounds for the loss of
trust and confidence justify their dismissal. Pursuant to our
ruling in Caoile v. National Labor Relations Commission,as
long as the employer has a reasonable ground to believe that
the managerial employee concerned is responsible for the
purported misconduct, or the nature of his participation
renders him unworthy of the trust and confidence demanded by
his position, the managerial employee can be dismissed.

In the present case, the tape receipts presented by

respondents showed that there were anomalies committed in the
branches managed by the petitioners. On the principle of
respondeat superior or command responsibility alone,

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 OBLIGATIONS AND CONTRACTS

petitioners may be held liable for negligence in the

performance of their managerial duties, unless petitioners
can positively show that they were not involved. Their
position requires a high degree of responsibility that
necessarily includes unearthing of fraudulent and irregular
activities.Their bare, unsubstantiated and uncorroborated
denial of any participation in the cheating does not prove 87
their innocence nor disprove their alleged guilt.

RODZSSEN SUPPLY VS. FAR EAST BANK

GR. No. 109087
Ponente: Justice Artemio Panganiban

Facts:
Petitioner Rodzssen applied for a letter of credit
with respondent Far East to purchase five hydraulic loaders
from EKMAN, Inc. After the expiry date of the letters of
credit, the remaining two out of five gydraulic loaders was
delivered by Ekman to petitioner who readily received it. Far
East Bank likewise paid Ekman after the presentment of the
letters of credit.

Later, Far East sues Rodzssen for collection of what

it has paid to Ekman. Petitioners interposed the defense that
Far East paid Ekman in bad faith since payment was done after
the expiration of the letters of credit.

When the case reached the CA, it held that there was
no bad faith in the part of the bank as petitioner received
the units even after the expiration of the letters of credit.
To absolve petitioner from liability tantamount to unjust
enrichment.

Issue:
Whether or not petitioner is liable to pay
respondent.

Decision:
Yes. Equitable considerations behoove us to allow
recovery by respondent. True, it erred in paying Ekman, but
petitioner itself was not without fault in the transaction.
It must be noted that the latter had voluntarily received and
kept the loaders since October 1979.

Petitioner claims that it accepted the late delivery

of the equipment, only because it was bound to accept it

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 OBLIGATIONS AND CONTRACTS

under the companys trust receipt arrangement with respondent

bank.

Granting that petitioner was bound under such

arrangement to accept the late delivery of the equipment, we
note its unexplained inaction for almost four years with
regard to the status of the ownership or possession of the 87
loaders. Bewildering was its lack of action to validate the
ownership and possession of the loaders, as well as its
stolidity over the purported failed sales transaction.
Significant too is the fact that it formalized its offer to
return the two pieces of equipment only after respondents
demand for payment, which came more than three years after it
accepted delivery.

When both parties to a transaction are mutually

negligent in the performance of their obligations, the fault
of one cancels the negligence of the other and, as in this
case, their rights and obligations may be determined
equitably under the law proscribing unjust enrichment.

BAYNE ADJUSTERS VS. COURT OF APPEALS

GR No. 116332
Ponente: Justice Minerva Gonzaga – Reyes

Facts:
Colgate Palmolive Philippines imported Alkyl Benzene
from Japan and was insured with insurance company of North
America. Petitioner Bayne Adjusters were contracted by the
consigns to supervise the proper handling and discharge of
the cargo.

When the cargo arrived in Manila, pumping operation

began in the presence of the petitioner’s surveyor. When the
pumping operations were interrupted, petitioner’s surveryor
left without any instruction and without sealing the valves.
The pumping operations resumed without the surveyor and in
the absence of any instruction. As a result, undetermined
volume of alkyl benzene was lost due to overflow.

As a subrogee, private respondent instituted a

collection suit after failing to extrajudicially settle the
matter with Bayne Adjusters. The trial court and CA found
that petitioners failed to comply with the standard operating
procedure.

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 OBLIGATIONS AND CONTRACTS

In this petitioner denies the finding of negligence.

The petitioner argues that it is not bound to guard the cargo
at all times and its duty is to supervise the transfer of the
liquid cargo from the chemical tanker to the barge and fro
the barge to the shore tank of the consignee.

Issue: 87
Whether or not petitioner is negligent.

Decision:
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.The factual findings and
conclusions of the trial and appellate court when supported
by substantial evidence are entitled to great respect and
will not be disturbed on appeal except on very strong and
cogent grounds.

Both parties agree that the petitioner is bound to

supervise the proper discharge of the liquid cargo from the
chemical tanker to the receiving barge and from the latter
to the consignees shore tank. Petitioner does not deny that
when pumping operations were suspended due to mechanical
problems with the barge pump, that the assigned surveyor left
the premises without closing the valves and the manifold, and
worse failed to instruct the barge foreman to resume
discharge of the cargo only at a specified time when the
petitioners surveyor will again be present. Thus, when the
pump became operational again and the tank was left open by
the petitioners surveyors the barge pump operators, without
instruction to the contrary, assumed that they may resume
discharge of the cargo. It was during the unsupervised
discharge of the cargo that the spillage occurred.

- - - x x x - - -

Paragraph 2.2 of the Surveyors Standard Operating

Procedure when pumping operation is suspended states:
2.2.1 If consignee desires to temporarily suspend the
pumping operation, take final reading of the shore tanks.
2.2.2 Seal all cargo compartment manhole covers and
sounding pipe covers of the barge.
2.2.3 Seal the barge manifold and shore manifold.

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 OBLIGATIONS AND CONTRACTS

2.2.4 The surveyor should take sounding of the

remaining quantity left on barge prior to closing/sealing of
its covers to counter check the quantity partially received
by the shore tanks.

It is clear that under the standard procedure the

surveyor is required to seal all cargo compartment manhole 87
covers and the barge and manifold covers to avoid
unsupervised discharge of the liquid cargo and to avert loss
or contamination thereof. Although the cessation of the
pumping operations in this case was not voluntarily requested
by the consignee, but was due to mechanical problems with the
pump, there is greater reason to comply with the above quoted
standard procedure.

DELSAN TRANSPORT VS C AND A CONTRACTION

GR No. 1560340
Ponente: Justice Consuelo Ynares – Santiago

Facts:
On October 9, 1994, M/V Delsan Express, a ship owned
and operated by petitioner Delsan Transport Lines, Inc.,
anchored at the Navotas Fish Port for the purpose of
installing a cargo pump and clearing the cargo oil tank. At
around 12:00 midnight of October 20, 1994, Captain Demetrio
T. Jusep of M/V Delsan Express received a report from his
radio head operator in Japan that a typhoon was going to hit
Manila in about eight (8) hours. At approximately 8:35 in the
morning of October 21, 1994, Capt. Jusep tried to seek
shelter at the North Harbor but could not enter the area
because it was already congested. At 10:00 a.m., Capt. Jusep
decided to drop anchor at the vicinity of Vitas mouth, 4
miles away from a Napocor power barge. At that time, the
waves were already reaching 8 to 10 feet high. Capt. Jusep
ordered his crew to go full ahead to counter the wind which
was dragging the ship towards the Napocor power barge. To
avoid collision, Capt. Jusep ordered a full stop of the
vessel. He succeeded in avoiding the power barge, but when
the engine was re-started and the ship was maneuvered full
astern, it hit the deflector wall constructed by respondent.
The damage caused by the incident amounted to P456,198.24.
Respondent demanded payment of the damage from petitioner but
the latter refused to pay. Consequently, respondent filed a
complaint for damages with the Regional Trial Court of
Manila, Branch 46, which was docketed as Civil Case No. 95-
75565. In its answer, petitioner claimed that the damage was
caused by a fortuitous event.

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 OBLIGATIONS AND CONTRACTS

On February 13, 1998, the complaint filed by

respondent was dismissed. The trial court ruled that
petitioner was not guilty of negligence because it had taken
all the necessary precautions to avoid the accident. Applying
the emergency rule, it absolved petitioner of liability
because the latter had no opportunity to adequately weigh the 87
best solution to a threatening situation. It further held
that even if the maneuver chosen by petitioner was a wrong
move, it cannot be held liable as the cause of the damage
sustained by respondent was typhoon Katring, which is an act
of God.

On appeal to the Court of Appeals, the decision of

the trial court was reversed and set aside. It found Capt.
Jusep guilty of negligence in deciding to transfer the vessel
to the North Harbor only at 8:35 a.m. of October 21, 1994 and
thus held petitioner liable for damages.

Issue:
Whether or not Capt. Jusep was negligent.

Decision:
Yes. In the case at bar, the Court of Appeals was
correct in holding that Capt. Jusep was negligent in deciding
to transfer the vessel only at 8:35 in the morning of October
21, 1994. As early as 12:00 midnight of October 20, 1994, he
received a report from his radio head operator in Japan that
a typhoon was going to hit Manila after 8 hours. This,
notwithstanding, he did nothing, until 8:35 in the morning of
October 21, 1994, when he decided to seek shelter at the
North Harbor, which unfortunately was already congested. The
finding of negligence cannot be rebutted upon proof that the
ship could not have sought refuge at the North Harbor even if
the transfer was done earlier. It is not the speculative
success or failure of a decision that determines the
existence of negligence in the present case, but the failure
to take immediate and appropriate action under the
circumstances. Capt. Jusep, despite knowledge that the
typhoon was to hit Manila in 8 hours, complacently waited for
the lapse of more than 8 hours thinking that the typhoon
might change direction. He cannot claim that he waited for
the sun to rise instead of moving the vessel at midnight
immediately after receiving the report because of the
difficulty of traveling at night. The hour of 8:35 a.m. is
way past sunrise. Furthermore, he did not transfer as soon as

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 OBLIGATIONS AND CONTRACTS

the sun rose because, according to him, it was not very

cloudy and there was no weather disturbance yet.

When he ignored the weather report notwithstanding

reasonable foresight of harm, Capt. Jusep showed an
inexcusable lack of care and caution which an ordinary
prudent person would have observed in the same situation. Had 87
he moved the vessel earlier, he could have had greater
chances of finding a space at the North Harbor considering
that the Navotas Port where they docked was very near North
Harbor. Even if the latter was already congested, he would
still have time to seek refuge in other ports.

The trial court erred in applying the emergency rule.

Under this rule, one who suddenly finds himself in a place of
danger, and is required to act without time to consider the
best means that may be adopted to avoid the impending danger,
is not guilty of negligence, if he fails to adopt what
subsequently and upon reflection may appear to have been a
better method, unless the danger in which he finds himself is
brought about by his own negligence.

San Miguel Corporation vs. Heirs of Inguito

GR No. 141716
Ponente: Justice Consuelo Ynares – Santiago

Facts:
San Miguel Corporation entered into a Time Charter
Party Agreement with Julius Ouano, doing business under the
name and style J. Ouano Marine Services. Under the terms of
the agreement, SMC chartered the M/V Doña Roberta owned by
Julius Ouano for a period of two years, from June 1, 1989 to
May 31, 1991, for the purpose of transporting SMCs beverage
products from its Mandaue City plant to various points in
Visayas and Mindanao.

On November 11, 1990, during the term of the charter,

SMC issued sailing orders to the Master of the MN Doña
Roberta, Captain Sabiniano Inguito, instructing him to sail
for Opol, Cagayan on Nov. 12, 1990, or as soon as loading of
FGS is completed.

In accordance with the sailing orders, Captain

Inguito obtained the necessary sailing clearance from the
Philippine Coast Guard.Loading of the cargo on the M/V Doa
Roberta was completed at 8:30 p.m. of November 11, 1990.

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 OBLIGATIONS AND CONTRACTS

However, the vessel did not leave Mandaue City until 6:00
a.m. of the following day, November 12, 1990.

Meanwhile, at 4:00 a.m. of November 12, 1990, typhoon

Ruping was spotted 570 kilometers east-southeast of Borongan,
Samar, moving west-northwest at 22 kilometers per hour in the
general direction of Eastern Visayas. The typhoon had maximum 87
sustained winds of 240 kilometers per hour near the center
with gustiness of up to 280 kilometers per hour.

At 7:00 a.m., November 12, 1990, one hour after the

M/V Doña Roberta departed from Mandaue City and while it was
abeam Cawit Island off Cebu, SMC Radio Operator Rogelio P.
Moreno contacted Captain Inguito through the radio and
advised him to take shelter. Captain Inguito replied that
they will proceed since the typhoon was far away from them,
and that the winds were in their favor.

At 2:00 p.m., while the vessel was two kilometers

abeam Boljoon Point, Moreno again communicated with Captain
Inguito and advised him to take shelter. The captain
responded that they can manage. Hearing this, Moreno
immediately tried to get in touch with Rico Ouano to tell him
that Captain Inguito did not heed their advice. However, Rico
Ouano was out of his office, so Moreno left the message with
the secretary.

Moreno again contacted Captain Inguito at 4:00 p.m.

of November 12, 1990. By then the vessel was already 9.5
miles southeast of Balicasag Island heading towards Sulauan
Point. The sky was cloudy with southwesterly winds and the
sea was choppy. Moreno reiterated the advice and pointed out
that it will be difficult to take shelter after passing
Balicasag Island because they were approaching an open sea.
Still, the captain refused to heed his advice.

At 8:00 p.m., the vessel was 38 miles southeast of

Balicasag Island. West-southwest winds were prevailing. At
10:00 p.m., the M/V Doña Roberta was 25 miles approaching
Sulauan Point.Moments later, power went out in Morenos office
and resumed at 11:40 p.m. He immediately made a series of
calls to the M/V Doña Roberta but he failed to get in touch
with anyone in the vessel.

At 1:15 a.m., November 13, 1990, Captain Inguito

called Moreno over the radio and requested him to contact
Rico Ouano, son of Julius Ouano, because they needed a

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 OBLIGATIONS AND CONTRACTS

helicopter to rescue them. The vessel was about 20 miles west

of Sulauan Point.

Upon being told by SMCs radio operator, Rico Ouano

turned on his radio and read the distress signal from Captain
Ingiuto. When he talked to the captain, the latter requested
for a helicopter to rescue them.Rico Ouano talked to the 87
Chief Engineer who informed him that they can no longer stop
the water from coming into the vessel because the crew
members were feeling dizzy from the petroleum fumes.

At 2:30 a.m. of November 13, 1990, the M/V Doña

Roberta sank.

The heirs of the deceased captain and crew, as well

as the survivors,[16] of the ill-fated M/V Doña Roberta filed
a complaint for tort against San Miguel Corporation and
Julius Ouano, docketed as Civil Case No. 2472-L of the
Regional Trial Court of Lapu-Lapu City, Branch 27.

Julius Ouano filed an answer with cross-claim,

alleging that the proximate cause of the loss of the vessel
and its officers and crew was the fault and negligence of
SMC, which had complete control and disposal of the vessel as
charterer and which issued the sailing order for its
departure despite being forewarned of the impending typhoon.
Thus, he prayed that SMC indemnify him for the cost of the
vessel and the unrealized rentals and earnings thereof.

In its answer to the complaint and answer to the

cross-claim,SMC countered that it was Ouano who had the
control, supervision and responsibilities over the navigation
of the vessel. This notwithstanding, and despite his
knowledge of the incoming typhoon, Ouano never bothered to
initiate contact with his vessel. Contrary to his allegation,
SMC argued that the proximate cause of the sinking was Ouanos
breach of his obligation to provide SMC with a seaworthy
vessel duly manned by competent crew members. SMC interposed
counterclaims against Ouano for the value of the cargo lost
in the sea tragedy.

After trial, the court a quo rendered judgment

finding that the proximate cause of the loss of the M/V Doña
Roberta was attributable to SMC.

Issue:

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 OBLIGATIONS AND CONTRACTS

Whether or not SMC can be held liable for the deaths

of the crew members due to the sinking.

Decision:
No. A charter party may either be a (1) bareboat or
demise charter or (2) contract of affreightment. Under a
demise or bareboat charter, the charterer mans the vessel 87
with his own people and becomes, in effect, the owner of the
ship for the voyage or service stipulated, subject to
liability for damages caused by negligence.

In a contract of affreightment, on the other hand,

the owner of the vessel leases part or all of its space to
haul goods for others. It is a contract for special service
to be rendered by the owner of the vessel. Under such
contract the ship owner retains the possession, command and
navigation of the ship, the charterer or freighter merely
having use of the space in the vessel in return for his
payment of the charter hire.

- - - x x x - - -

A contract of affreightment may be either time

charter, wherein the leased vessel is leased to the charterer
for a fixed period of time, or voyage charter, wherein the
ship is leased for a single voyage. In both cases, the
charterer provides for the hire of the vessel only, either
for a determinate period of time or for a single or
consecutive voyage, the ship owner to supply the ships store,
pay for the wages of the master of the crew, and defray the
expenses for the maintenance of the ship.

If the charter is a contract of affreightment, which

leaves the general owner in possession of the ship as owner
for the voyage, the rights and the responsibilities of
ownership rest on the owner. The charterer is free from
liability to third persons in respect of the ship.

- - - x x x - - -

It appearing that Ouano was the employer of the

captain and crew of the M/V Doa Roberta during the term of
the charter, he therefore had command and control over the
vessel. His son, Rico Ouano, even testified that during the
period that the vessel was under charter to SMC, the Captain
thereof had control of the navigation of all voyages.

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Under the foregoing definitions, as well as the clear

terms of the Charter Party Agreement between the parties, the
charterer, SMC, should be free from liability for any loss or
damage sustained during the voyage, unless it be shown that
the same was due to its fault or negligence.

The evidence does not show that SMC or its employees 87

were amiss in their duties. The facts indubitably establish
that SMCs Radio Operator, Rogelio P. Moreno, who was tasked
to monitor every shipment of its cargo, contacted Captain
Inguito as early as 7:00 a.m., one hour after the M/V Doa
Roberta departed from Mandaue, and advised him to take
shelter from typhoon Ruping. This advice was reiterated at
2:00 p.m.

Pacis Vs. Morales

GR No. 169467
Ponente: Justice Antonio Carpio

Facts:
On January 19, 1991, Alfred Dennis Pacis, then 17
years old and a first year student at the Baguio Colleges
Foundation taking up BS Computer Science, died due to a
gunshot wound in the head which he sustained while he was at
the Top Gun Firearm and Ammunition Store. The gun store was
owned and operated by defendant Jerome Jovanne Morales.

Defendant Morales was in Manila at the time. His

employee Armando Jarnague, who was the regular caretaker of
the gun store was also not around. He left earlier and
requested sales agents Matibag and Herbolario to look after
the gun store while he and defendant Morales were away.
Jarnague entrusted to Matibag and Herbolario a bunch of keys
used in the gun store which included the key to the drawer
where the fatal gun was kept.

It appears that Matibag and Herbolario later brought

out the gun from the drawer and placed it on top of the
table. Attracted by the sight of the gun, the young Alfred
Dennis Pacis got hold of the same. Matibag asked Alfred
Dennis Pacis to return the gun. The latter followed and
handed the gun to Matibag. It went off, the bullet hitting
the young Alfred in the head.

Issue:
Whether or not Morales can be held liable for
damages.

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Decision:
Yes. This case involves the accidental discharge of a
firearm inside a gun store.1avvphi1 Under PNP Circular No. 9,
entitled the "Policy on Firearms and Ammunition
Dealership/Repair," a person who is in the business of
purchasing and selling of firearms and ammunition must 87
maintain basic security and safety requirements of a gun
dealer, otherwise his License to Operate Dealership will be
suspended or canceled.

Indeed, a higher degree of care is required of

someone who has in his possession or under his control an
instrumentality extremely dangerous in character, such as
dangerous weapons or substances. Such person in possession or
control of dangerous instrumentalities has the duty to take
exceptional precautions to prevent any injury being done
thereby.Unlike the ordinary affairs of life or business which
involve little or no risk, a business dealing with dangerous
weapons requires the exercise of a higher degree of care.

As a gun store owner, respondent is presumed to be

knowledgeable about firearms safety and should have known
never to keep a loaded weapon in his store to avoid
unreasonable risk of harm or injury to others. Respondent has
the duty to ensure that all the guns in his store are not
loaded. Firearms should be stored unloaded and separate from
ammunition when the firearms are not needed for ready-access
defensive use. With more reason, guns accepted by the store
for repair should not be loaded precisely because they are
defective and may cause an accidental discharge such as what
happened in this case. Respondent was clearly negligent when
he accepted the gun for repair and placed it inside the
drawer without ensuring first that it was not loaded. In the
first place, the defective gun should have been stored in a
vault. Before accepting the defective gun for repair,
respondent should have made sure that it was not loaded to
prevent any untoward accident. Indeed, respondent should
never accept a firearm from another person, until the
cylinder or action is open and he has personally checked that
the weapon is completely unloaded. For failing to insure that
the gun was not loaded, respondent himself was negligent.
Furthermore, it was not shown in this case whether respondent
had a License to Repair which authorizes him to repair
defective firearms to restore its original composition or
enhance or upgrade firearms.

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Mendoza vs. Soriano

GR No. 164012
Ponente: Justice Leonardo Quisumbing

Facts:
Sonny Soriano, while crossing Commonwealth Avenue
near Luzon Avenue in Quezon City, was hit by a speeding 87
Tamaraw FX driven by Lomer Macasasa. Soriano was thrown five
meters away, while the vehicle only stopped some 25 meters
from the point of impact. Gerard Villaspin, one of Sorianos
companions, asked Macasasa to bring Soriano to the hospital,
but after checking out the scene of the incident, Macasasa
returned to the FX, only to flee.

On August 20, 1997, respondents Mutya Soriano and

Julie Ann Soriano, Sorianos wife and daughter, respectively,
filed a complaint for damages against Macasasa and petitioner
Flordeliza Mendoza, the registered owner of the vehicle.

Petitioner Mendoza maintained that she was not liable

since as owner of the vehicle, she had exercised the
diligence of a good father of a family over her employee,
Macasasa.

After trial, the trial court also dismissed the

complaint against petitioner.It found Soriano negligent for
crossing Commonwealth Avenue by using a small gap in the
islands fencing rather than the pedestrian overpass. The
lower court also ruled that petitioner was not negligent in
the selection and supervision of Macasasa since complainants
presented no evidence to support their allegation of
petitioner’s negligence.

Issue:
Whether or not Mendoza is liable for damages.

Decision:
Yes. The records show that Macasasa violated two
traffic rules under the Land Transportation and Traffic Code.
First, he failed to maintain a safe speed to avoid
endangering lives. Both the trial and the appellate courts
found Macasasa overspeeding. The records show also that
Soriano was thrown five meters away after he was hit.
Moreover, the vehicle stopped only some 25 meters from the
point of impact.

- - - x x x - - -

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Second, Macasasa, the vehicle driver, did not aid

Soriano, the accident victim, in violation of Section 55,
Article V of the Land Transportation and Traffic Code. While
Macasasa at first agreed to bring Soriano to the hospital, he
fled the scene in a hurry. Contrary to petitioners claim,
there is no showing of any factual basis that Macasasa fled 87
for fear of the people’s wrath. What remains undisputed is
that he did not report the accident to a police officer, nor
did he summon a doctor.
- - - x x x - - -

While respondents could recover damages from Macasasa

in a criminal case and petitioner could become subsidiarily
liable, still petitioner, as owner and employer, is directly
and separately civilly liable for her failure to exercise due
diligence in supervising Macasasa. We must emphasize that
this damage suit is for the quasi-delict of petitioner, as
owner and employer, and not for the delict of Macasasa, as
driver and employee.
- - - x x x - - -

Lastly, we agree that the Court of Appeals did not

err in ruling that Soriano was guilty of contributory
negligence for not using the pedestrian overpass while
crossing Commonwealth Avenue.

Thermochem Inc. vs. Naval

Gr No. 131541
Ponente: Justice Consuelo Ynares – Santiago

Facts:
On May 10, 1992, at around 12:00 o'clock midnight,
Eduardo Edem was driving a "Luring Taxi" along Ortigas
Avenue, near Rosario, Pasig, going towards Cainta. Prior to
the collision, the taxicab was parked along the right side of
Ortigas Avenue, not far from the Rosario Bridge, to unload a
passenger. Thereafter, the driver executed a U-turn to
traverse the same road, going to the direction of EDSA. At
this point, the Nissan Pathfinder traveling along the same
road going to the direction of Cainta collided with the
taxicab. The point of impact was so great that the taxicab
was hit in the middle portion and was pushed sideward,
causing the driver to lose control of the vehicle. The
taxicab was then dragged into the nearby Question Tailoring
Shop, thus, causing damage to the said tailoring shop, and

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its driver, Eduardo Eden, sustained injuries as a result of

the incident.

Private respondent, as owner of the taxi, filed a

damage suit against petitioner, Thermochem Incorporated, as
the owner of the Nissan Pathfinder, and its driver,
petitioner Jerome Castro. After trial, the lower court 87
adjudged petitioner Castro negligent and ordered petitioners,
jointly and severally, to pay private respondent actual,
compensatory and exemplary damages plus attorney's fees and
costs of suit.

Issue:
Whether or not petitioner is solely liable.

Decision:
No. The driver of the oncoming Nissan Pathfinder
vehicle was liable and the driver of the U-turning taxicab
was contributorily liable. Contrary to petitioners'
contention, the fact that a party had no opportunity to avoid
the collision is of his own making and this should not
relieve him of liability.From petitioner Castro's testimonial
admissions, it is established that he was driving at a speed
faster than 50 kilometers per hour because it was a downhill
slope coming from the Rosario bridge. But as he allegedly
stepped on the brake, it locked causing his Nissan Pathfinder
to skid to the left and consequently hit the taxicab. The
sudden malfunction of the vehicle's brake system is the usual
excuse of drivers involved in collisions which are the result
of speedy driving, particularly when the road is downhill.

Malfunction or loss of brake is not a fortuitous

event. Between the owner and his driver, on the one hand, and
third parties such as commuters, drivers and pedestrians, on
the other, the former is presumed to know about the
conditions of his vehicle and is duty bound to take care
thereof with the diligence of a good father of the family. A
mechanically defective vehicle should avoid the streets. As
petitioner's vehicle was moving downhill, the driver should
have slowed down since a downhill drive would naturally cause
the vehicle to accelerate. Moreover, the record shows that
the Nissan Pathfinder was on the wrong lane when the
collision occurred. This was a disregard of traffic safety
rules.

- - - x x x - - -

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As mentioned earlier, the driver of the taxi is

contributorily liable. U-turns are not generally advisable
particularly on major streets. The taxi was hit on its side
which means that it had not yet fully made a turn to the
other lane. The driver of the taxi ought to have known that
vehicles coming from the Rosario bridge are on a downhill
slope. Obviously, there was lack of foresight on his part, 87
making him contributorily liable.

Syki vs. Begasa

GR No. 149149
Ponente: Justice Renato Corona

Facts:
Respondent Salvado Begasa and his three companions
flagged down a jeepney driven by Joaquin Espina and owned by
Aurora Pisuena. While boarding the jeepney. A truck by
Ernesto Syki bumped the rear and of the jeepney, causing
respondent to suffer some Injury.

After the hearing, the trial court dismissed the

complaint against Plsuena but ordered Syki and Sablyan to pay
respondent.

Petitioner contends that the CA erred in not finding

Begasa guilty of contributing negligence and for ruling of
contributing negligence and for ruling that he failed to
observe the diligence of a good father of a family.

Issue:
1. Whether or not respondent was guilty of
contributing negligence?
2. Whether or not petitioner was guilty of
negligence?

Decision:
1. No. There was no evidence that respondent Begasa
and his three companions flagged down the passenger jeepney
at in a prohibited area.

2. Yes. In this case, petitioners evidence consisted

entirely of testimonial evidence. He testified that before he
hired Elizalde Sablayan, he required him to submit a police
clearance in order to determine if he was ever involved in
any vehicular accident. He also required Sablayan to undergo
a driving test with conducted by his mechanic, Esteban Jaca.

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Ramos vs. Court of Appeals

GR No. 124354
Ponente: Justice Santiago Kapunan

Facts:
Erlinda Ramos went to Delos Santos Medical Center to
undergo an operation for the removal of a gall bladder stones 87
which was to be performed by Dr. Hosaka.

During the day of the operation, Dr. Mosaka was late

and Dr. Gutierrez the anesthesiologist, performed on
erroneous intubation. As a result, Erlinda was on comatose
condition for several months.

The petitioners filed a civil case for damages

against Dr. Hosaka, Dr. Gutierrez and Delos Santos Medical
Center.

The trial court rendered Dr. Gutierrez liable for

negligence for omitting the necessary reasonable care; Dr.
Hosaka was held liable for the acts of Dr. Gutierrez for
failing in his obligation to provide a good anesthesiologist.
The hospital was made liable for not cancelling the operation
after Dr. Hosaka inexcusably failed to arrive on time.

The CA reversed the RTC. Hence, this appeal.

On this appeal, petitioner contents that the doctrine

of res ipsa loquitor is applicable in order to hold the
respondents liable.

Issue:
Whether or not Res Ipsa Loquitor applies.

Decision:
Yes. Res ipsa loquitur is a Latin phrase which
literally means "the thing or the transaction speaks for
itself." The phrase "res ipsa loquitur'' is a maxim for the
rule that the fact of the occurrence of an injury, taken with
the surrounding circumstances, may permit an inference or
raise a presumption of negligence, or make out a plaintiff's
prima facie case, and present a question of fact for
defendant to meet with an explanation. Where the thing which
caused the injury complained of is shown to be under the
management of the defendant or his servants and the accident

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is such as in ordinary course of things does not happen if

those who have its management or control use proper care, it
affords reasonable evidence, in the absence of explanation by
the defendant, that the accident arose from or was caused by
the defendant's want of care.

The doctrine of res ipsa loquitur is simply a 87

recognition of the postulate that, as a matter of common
knowledge and experience, the very nature of certain types of
occurrences may justify an inference of negligence on the
part of the person who controls the instrumentality causing
the injury in the absence of some explanation by the
defendant who is charged with negligence.It is grounded in
the superior logic of ordinary human experience and on the
basis of such experience or common knowledge, negligence may
be deduced from the mere occurrence of the accident itself.
16 Hence, res ipsa loquitur is applied in conjunction with
the doctrine of common knowledge.

However, much has been said that res ipsa loquitur is

not a rule of substantive law and, as such, does not create
or constitute an independent or separate ground of liability.
Instead, it is considered as merely evidentiary or in the
nature of a procedural rule. It is regarded as a mode of
proof, or a mere procedural of convenience since it furnishes
a substitute for, and relieves a plaintiff of, the burden of
producing specific proof of negligence. In other words, mere
invocation and application of the doctrine does not dispense
with the requirement of proof of negligence. It is simply a
step in the process of such proof, permitting the plaintiff
to present along with the proof of the accident, enough of
the attending circumstances to invoke the doctrine, creating
an inference or presumption of negligence, and to thereby
place on the defendant the burden of going forward with the
proof. Still, before resort to the doctrine may be allowed,
the following requisites must be satisfactorily shown:
1. The accident is of a kind which ordinarily does not occur
in the absence of someone's negligence;
2. It is caused by an instrumentality within the exclusive
control of the defendant or defendants; and
3. The possibility of contributing conduct which would make
the plaintiff responsible is eliminated.

In the above requisites, the fundamental element is

the "control of instrumentality" which caused the damage.Such
element of control must be shown to be within the dominion of
the defendant. In order to have the benefit of the rule, a

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plaintiff, in addition to proving injury or damage, must show

a situation where it is applicable, and must establish that
the essential elements of the doctrine were present in a
particular incident.

Medical malpractice cases do not escape the

application of this doctrine. Thus, res ipsa loquitur has 87
been applied when the circumstances attendant upon the harm
are themselves of such a character as to justify an inference
of negligence as the cause of that harm. The application of
res ipsa loquitur in medical negligence cases presents a
question of law since it is a judicial function to determine
whether a certain set of circumstances does, as a matter of
law, permit a given inference.

Although generally, expert medical testimony is

relied upon in malpractice suits to prove that a physician
has done a negligent act or that he has deviated from the
standard medical procedure, when the doctrine of res ipsa
loquitur is availed by the plaintiff, the need for expert
medical testimony is dispensed with because the injury itself
provides the proof of negligence. The reason is that the
general rule on the necessity of expert testimony applies
only to such matters clearly within the domain of medical
science, and not to matters that are within the common
knowledge of mankind which may be testified to by anyone
familiar with the facts. Ordinarily, only physicians and
surgeons of skill and experience are competent to testify as
to whether a patient has been treated or operated upon with a
reasonable degree of skill and care. However, testimony as to
the statements and acts of physicians and surgeons, external
appearances, and manifest conditions which are observable by
any one may be given by non-expert witnesses. Hence, in cases
where the res ipsa loquitur is applicable, the court is
permitted to find a physician negligent upon proper proof of
injury to the patient, without the aid of expert testimony,
where the court from its fund of common knowledge can
determine the proper standard of care Where common knowledge
and experience teach that a resulting injury would not have
occurred to the patient if due care had been exercised, an
inference of negligence may be drawn giving rise to an
application of the doctrine of res ipsa loquitur without
medical evidence, which is ordinarily required to show not
only what occurred but how and why it occurred. When the
doctrine is appropriate, all that the patient must do is
prove a nexus between the particular act or omission
complained of and the injury sustained while under the

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custody and management of the defendant without need to

produce expert medical testimony to establish the standard of
care. Resort to res ipsa loquitur is allowed because there is
no other way, under usual and ordinary conditions, by which
the patient can obtain redress for injury suffered by him.

- - - x x x - - - 87

In the present case, Erlinda submitted herself for

cholecystectomy and expected a routine general surgery to be
performed on her gall bladder. On that fateful day she
delivered her person over to the care, custody and control of
private respondents who exercised complete and exclusive
control over her. At the time of submission, Erlinda was
neurologically sound and, except for a few minor discomforts,
was likewise physically fit in mind and body. However, during
the administration of anesthesia and prior to the performance
of cholecystectomy she suffered irreparable damage to her
brain. Thus, without undergoing surgery, she went out of the
operating room already decerebrate and totally incapacitated.
Obviously, brain damage, which Erlinda sustained, is an
injury which does not normally occur in the process of a gall
bladder operation. In fact, this kind of situation does not
in the absence of negligence of someone in the administration
of anesthesia and in the use of endotracheal tube. Normally,
a person being put under anesthesia is not rendered
decerebrate as a consequence of administering such anesthesia
if the proper procedure was followed. Furthermore, the
instruments used in the administration of anesthesia,
including the endotracheal tube, were all under the exclusive
control of private respondents, who are the physicians-in-
charge. Likewise, petitioner Erlinda could not have been
guilty of contributory negligence because she was under the
influence of anesthetics which rendered her unconscious.
Considering that a sound and unaffected member of the body
(the brain) is injured or destroyed while the patient is
unconscious and under the immediate and exclusive control of
the physicians, we hold that a practical administration of
justice dictates the application of res ipsa loquitur. Upon
these facts and under these circumstances the Court would be
able to say, as a matter of common knowledge and observation,
if negligence attended the management and care of the
patient. Moreover, the liability of the physicians and the
hospital in this case is not predicated upon an alleged
failure to secure the desired results of an operation nor on
an alleged lack of skill in the diagnosis or treatment as in
fact no operation or treatment was ever performed on Erlinda.

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Thus, upon all these initial determination a case is made out

for the application of the doctrine of res ipsa loquitur.

Victory Liner vs Gammad

GR No. 159636
Ponente: Justice Consuelo Ynares – Santiago
87
Facts:
Rosalito’s wife Marie Grace was on board and air
conditioned victory Liner Bus that fell on a ravine which
caused for death.

Rosalito then filed a complaint for damages cursing

from culpa contractual. In its answer, petitioner denied
liability. It asserted that the incident was purely
accidental and that it has always exercised extraordinary
diligence in its 50 years of operation.

Issue:
Whether or not petitioner is liable for damages.

Decision:
Yes. A common carrier is bound to carry its
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons,
with due regard to all the circumstances. In a contract of
carriage, it is presumed that the common carrier was at fault
or was negligent when a passenger dies or is injured. Unless
the presumption is rebutted, the court need not even make an
express finding of fault or negligence on the part of the
common carrier. This statutory presumption may only be
overcome by evidence that the carrier exercised extraordinary
diligence.

In the instant case, there is no evidence to rebut

the statutory presumption that the proximate cause of Marie
Grace’s death was the negligence of petitioner. Hence, the
courts below correctly ruled that petitioner was guilty of
breach of contract of carriage.

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