oblicon case digests by amber gagajena

8/9/2019 ObliCon case digests by Amber Gagajena

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Amber Gagajena Oblicon Digests – Block 1F

OBLICON CASES: Articles 1156-1174

Case 1: Ayala Life Assurance, Inc. vs. Ray Burton Development CorporationCONTRACT TO SELL vs. CONTRACT OF SALE

Case about Specific Performance with Damages

Facts: Ayala Life and Ray Burton entered into a contract to sell of a parcel of land in Madrigal Business Park, Ayala Alabang,

Muntinlupa City worth P93M (1,691 square meters x P55,000 per square).

The contract to sell’s term includes 30% down payment and the remaining balance to be paid in quarterly installments f or5 years. The contract contains a stipulation in paragraphs 3 and 3.1 for an "Event of Default." It provides that in case the purchaser

(respondent) fails to pay any installment for any reason not attributable to the seller (petitioner), the latter has the right toassess the purchaser a late penalty interest on the unpaid installment at two (2%) percent per month, computed from thedate the amount became due until full payment thereof. And if such default continues for a period of six (6) months, theseller has the right to cancel the contract without need of court declaration by giving the purchaser a written notice ofcancellation. In case of such cancellation, the seller shall return to the purchaser the amount he received, less penalties,unpaid charges and dues on the property.

On August 12, 1998, the purchaser informed the seller in writing that it won’t be able to complete payments anymorebecause of economic crisis affecting its business, and thus asked for refund through “Event of Default” stipulations.

Instead of refunding, the seller sued for SPECIFIC PERFORMANCE in Makati RTC. Makati RTC ruled in favor of the seller but the CA ruled in favor of purchaser (reversed RTC decision). CA emphasized

that there is no breach of contract in contract to sell as opposed to contract of sale. Moreover, 12% interest per annum for

unpaid amount was included. Seller escalated the case to the Supreme Court and said that CA erred in its decision.

Issues: W/N respondent’s non-payment of the balance of the purchase price gave rise to a cause of action on the part of petitioner

to demand full payment of the purchase price; and W/N petitioner should refund respondent the amount the latter paid under the contract to sell.

Held: No. Evidently, before the remedy of specific performance may be availed of, there must be a breach of the contract. Under

a contract to sell, the title of the thing to be sold is retained by the seller until the purchaser makes full payment of theagreed purchase price. Such payment is a positive suspensive condition, the non-fulfillment of which is not a breach ofcontract but merely an event that prevents the seller from conveying title to the purchaser. The non-payment of thepurchase price renders the contract to sell ineffective and without force and effect. Thus, a cause of action for specificperformance does not arise.

Yes. In the event of respondent’s default in payment, petitioner, under the above provisions of the contract, has the right toretain an amount equivalent to 25% of the total payments. As stated by the Court of Appeals, petitioner having beeninformed in writing by respondent of its intention not to proceed with the contract on August 12, 1998, or prior to incurringdelay in payment of succeeding installments,15 the provisions in the contract relative to penalties and interest find noapplication.

Case 2: Cannu vs. Galang and National Home Mortgage Finance CorporationRESCISSION OF THE DEED OF SALE WITH ASSUMPTION OF MORTGAGE

Case about Resolution with Damages

Oblicon Concept: Settled is the rule that rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is

predicated on a breach of faith by the other party that violates the reciprocity between them. Article 1191 reads: Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply

with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in

either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. Rescission will not be permitted for a slight or casual breach of the contract. Rescission may be had only for such

breaches that are substantial and fundamental as to defeat the object of the parties in making the agreement. Thequestion of whether a breach of contract is substantial depends upon the attending circumstances and not merely on thepercentage of the amount not paid.

Facts: Respondents-spouses Gil and Fernandina Galang obtained a loan from Fortune Savings & Loan Association for P173,800

to purchase a house and lot. To secure payment, a real estate mortgage was constituted on the said house and lot infavor of Fortune Savings & Loan Association. In early 1990, NHMFC purchased the mortgage loan of respondents-

spouses from Fortune Savings & Loan Association for P173,800. Respondent Fernandina Galang authorized4 her attorney-in-fact, Adelina R. Timbang, to sell the subject house and lot.

Petitioner Leticia Cannu agreed to buy the property for P120,000 (P75,000 paid, P45,000 remaining balance unpaid) and


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to assume the balance of the mortgage obligations with the NHMFC and with CERF Realty5 (the Developer of theproperty).

A Deed of Sale with Assumption of Mortgage Obligation dated 20 August 1990 was made and entered into by andbetween spouses Fernandina and Gil Galang (vendors) and spouses Leticia and Felipe Cannu (vendees) over the houseand lot. In the Deed of Sale, the contract price is P200,000. There was confusion but since the contract does not show thereal intent of the parties (as evidenced in their testimonies and pleadings), the P120,000 price was followed.

Petitioners made payment to NHMFC amounting to P55,312 only. This payment is insufficient even to cover arrears andpenalties. Petitioners paid the "equity" or second mortgage to CERF Realty.

Despite requests from Adelina R. Timbang and Fernandina Galang to pay the balance of P45,000 or in the alternative tovacate the property in question, petitioners refused to do so.

Petitioners’ formal assumption of mortgage was not approved by the NHMFC because the Cannus failed to fully complywith their obligations, respondent Fernandina Galang, on 21 May 1993, paid P233,957 as full payment of her remainingmortgage loan with NHMFC.

Thereupon, a Complaint for Specific Performance and Damages was filed asking, among other things, that petitioners(plaintiffs therein) be declared the owners of the property involved subject to reimbursements of the amount made byrespondents-spouses (defendants therein) in preterminating the mortgage loan with NHMFC.

RTC and CA decided in favor of respondents.

Issue: W/N the petitioners’ breach of the obligation was substantial. W/N there was no substantial compliance with the obligation to pay the monthly amortization of NHMFC. W/N the CA erred when it failed to consider the other facts and circumstance that militate against rescission. W/N the action for rescission is subsidiary.

Held: Yes. In the case at bar, we find petitioners’ failure to pay the remaining balance of P45,000 to be substantial. Even

assuming arguendo that only said amount was left out of the supposed consideration of P250,000, or eighteen (18%)percent thereof, this percentage is still substantial.

Yes. The Court finds that petitioners were not religious in paying the amortization with the NHMFC. As admitted by them,in the span of three years from 1990 to 1993, their payments covered only thirty months. This, indeed, constitutes anotherbreach or violation of the Deed of Sale with Assumption of Mortgage. On top of this, there was no formal assumption ofthe mortgage obligation with NHMFC because of the lack of approval by the NHMFC on account of petitioners’ non-submission of requirements in order to be considered as assignees/successors-in-interest over the property covered bythe mortgage obligation.

No. There is sufficient evidence showing that demands were made from petitioners to comply with their obligation. AdelinaR. Timbang, attorney-in-fact of respondents-spouses, per instruction of respondent Fernandina Galang, made constantfollow-ups after the last payment made on 28 November 1991, but petitioners did not pay.

No. The Court held that petitioners’ reliance on Article 1383 is misplaced. The subsidiary character of the action for

rescission applies to contracts enumerated in Articles 1381 of the Civil Code. The contract involved in the case before usis not one of those mentioned therein. The provision that applies in the case at bar is Article 1191. The rescission on account of breach of stipulations is not predicated on injury to economic interests of the party plaintiff

but on the breach of faith by the defendant, that violates the reciprocity between the parties. It is not a subsidiary action,and Article 1191 may be scanned without disclosing anywhere that the action for rescission thereunder is subordinated toanything other than the culpable breach of his obligations by the defendant. This rescission is a principal action retaliatoryin character, it being unjust that a party be held bound to fulfill his promises when the other violates his. As expressed inthe old Latin aphorism: "Non servanti fidem, non est fides servanda." Hence, the reparation of damages for the breach ispurely secondary.

Case 3: Lalicon vs. National Housing AuthorityRIGHT OF RESCISSION

Case about Resolution with Damages

Facts: This case is about (a) the right of the National Housing Authority to seek annulment of sales made by housing

beneficiaries of lands they bought from it within the prohibited period and (b) the distinction between actions for rescissioninstituted under Article 1191 of the Civil Code and those instituted under Article 1381 of the same code.

On November 25, 1980 the National Housing Authority (NHA) executed a Deed of Sale with Mortgage over a Quezon Citylot1 in favor of the spouses Isidro and Flaviana Alfaro.

The deed of sale provided, among others, that the Alfaros could sell the land within five years from the date of itsrelease from mortgage without NHA’s prior written consent. The mortgage and the restriction on sale wereannotated on the Alfaros’ title.

The Alfaros sold the same to their son, Victor Alfaro, who had taken in a common-law wife, Cecilia, with whom he had twodaughters, petitioners Vicelet and Vicelen Lalicon (the Lalicons).

On December 14, 1995 Victor mortgaged the land to Marcela Lao Chua, Rosa Sy, Amparo Ong, and Ida See.Subsequently, on February 14, 1997 Victor sold the property to Chua.

A year later or on April 10, 1998 the NHA instituted a case before the Quezon City Regional Trial Court (RTC) for theannulment of the NHA’s 1980 sale of the land to the Alfaros, the latter’s 1990 sale of the land to their son Victor, and thesubsequent sale of the same to Chua, made in violation of NHA rules and regulations.


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RTC ruled in favor of the Alfaros while the CA reversed the RTC decision and found the NHA entitled to rescission. TheCA declared TCT in the name of the Alfaros and all subsequent titles and deeds of sale null and void. It ordered Chua toreconvey the subject land to the NHA but the latter must pay the Lalicons the full amount of their amortization, plusinterest, and the value of the improvements they constructed on the property.

Issue: W/N the CA erred in holding that the Alfaros violated their contract with the NHA; W/N the NHA’s right to rescind has prescribed; and W/N the subsequent buyers of the land acted in good faith and their rights, therefore, cannot be affected by the rescission.

Held: No. The contract between the NHA and the Alfaros forbade the latter from selling the land within five years from the date

of the release of the mortgage in their favor. But the Alfaros sold the property to Victor on November 30, 1990 even beforethe NHA could release the mortgage in their favor on March 21, 1991. Clearly, the Alfaros violated the five-year restriction,thus entitling the NHA to rescind the contract.

No. The CA correctly ruled that such violation comes under Article 1191 where the applicable prescriptive period is thatprovided in Article 1144 which is 10 years from the time the right of action accrues. The NHA’s right of action accrued onFebruary 18, 1992 when it learned of the Alfaros’ forbidden sale of the property to Victor. Since the NHA filed its action forannulment of sale on April 10, 1998, it did so well within the 10-year prescriptive period.

No. The Court also agrees with the CA that the Lalicons and Chua were not buyers in good faith. Since the five-yearprohibition against alienation without the NHA’s written consent was annotated on the property’s title.

Case 4: Cathay Pacific vs. Vazquez

BREACH OF CONTRACTUAL OBLIGATION: NOVATION

Case about Claim of Damages Only

Facts: Spouses Vazquez together with their 2 good friends and 1 maid went to Hong Kong. The spouses are members of

Cathay’s Marco Polo Club. One of the benefits is the involuntary promotion to better seats in flights. Maid will fly in Economy class while Vazquezes and 2 friends will fly in Business Class. Upon check-in, the Vazquezes were informed that they were upgraded to First Class. They refused but the airline insisted.

There was a commotion but in the end, the Vazquezes was succumbed because of the r isk that they won’t be allowed toboard the aircraft.

Upon arriving in the Philippines, they filed a demand for apology and damages from the airline but the demand was notacted upon so they filed the case with the RTC.

RTC ruled in favor of Vazquezes by allowing moral, exemplary, nominal damages and attorney’s fees. CA also ruled in

their favor but decreased the amount of damages.

Issues: W/N by upgrading the seat accommodation of the Vazquezes from Business Class to First Class Cathay breached its

contract of carriage with the Vazquezes; W/N the upgrading was tainted with fraud or bad faith; and W/N the Vazquezes are entitled to damages.

Held: Yes. However odd it might be, the Vazquezes had every right to decline the upgrade and insist on the Business Class

accommodation they had booked for and which was designated in their boarding passes. They clearly waived their priorityor preference when they asked that other passengers be given the upgrade. It should not have been imposed on themover their vehement objection. By insisting on the upgrade, Cathay breached its contract of carriage with the Vazquezes.

No. The Court finds no persuasive proof of fraud or bad faith in this case. The Vazquezes were not induced to agree to theupgrading through insidious words or deceitful machination or through willful concealment of material facts. It is clear fromthis section that an overbooking that does not exceed ten percent is not considered deliberate and therefore does notamount to bad faith.

Where in breaching the contract of carriage the airline is not shown to have acted fraudulently or in bad faith, liability fordamages is limited to the natural and probable consequences of the breach of the obligation which the parties hadforeseen or could have reasonably foreseen. In such a case the liability does not include moral and exemplary damages. And where the awards for moral and exemplary damages are eliminated, so must the award for attorney’s fees. Thereshould be bad faith for these to apply. The most that can be adjudged in favor of the Vazquezes for Cathay’s breach ofcontract is an award for nominal damages (P5,000) under Article 2221 of the Civil Code.

Case 5: Saludaga vs. FEUCONTRACT BETWEEN STUDENT AND SCHOOL

Case about Breach of Contract Based on Negligence

Facts: Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern University (FEU) when he was shot

by Alejandro Rosete (Rosete), one of the security guards on duty at the school premises on August 18, 1996.


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Petitioner thereafter filed a complaint for damages against respondents on the ground that they breached their obligationto provide students with a safe and secure environment and an atmosphere conducive to learning. Respondents, in turn,filed a Third-Party Complaint against Galaxy Development and Management Corporation (Galaxy), the agency contractedby respondent FEU to provide security services within its premises and Mariano D. Imperial (Imperial), Galaxy's President,to indemnify them for whatever would be adjudged in favor of petitioner, if any; and to pay attorney's fees and cost of thesuit. On the other hand, Galaxy and Imperial filed a Fourth-Party Complaint against AFP General Insurance.

RTC ruled in favor of Saludaga but CA reversed the decision.

Issues: W/N the shooting incident is a fortuitous event;

W/N the respondents are not liable for damages for the injury resulting from a gunshot wound suffered by the petitionerfrom the hands of no less than their own security guard in violation of their built in contractual obligation to petitioner, beingtheir law student at that time, to provide him with a safe and secure educational environment;

W/N the security guard who shot petitioner while he was walking on his way to the law library of respondent FEU is nottheir employee by virtue of the contract for security services between Galaxy and FEU notwithstanding the fact thatpetitioner, not being a party to it, is not bound by the same under the Principle of Relativity of Contracts; and

W/N the respondent exercised due diligence in selecting Galaxy as the agency which would provide security serviceswithin the premises of respondent FEU.

Held: No. Consequently, respondents' defense of force majeure must fail. In order for force majeure to be considered,

respondents must show that no negligence or misconduct was committed that may have occasioned the loss. An act ofGod cannot be invoked to protect a person who has failed to take steps to forestall the possible adverse consequences ofsuch a loss. One's negligence may have concurred with an act of God in producing damage and injury to another;

nonetheless, showing that the immediate or proximate cause of the damage or injury was a fortuitous event would notexempt one from liability. When the effect is found to be partly the result of a person's participation - whether by activeintervention, neglect or failure to act - the whole occurrence is humanized and removed from the rules applicable to acts ofGod.

Liable. Article 1170 of the Civil Code provides that those who are negligent in the performance of their obligations areliable for damages. Accordingly, for breach of contract due to negligence in providing a safe learning environment,respondent FEU is liable to petitioner for damages. It is essential in the award of damages that the claimant must havesatisfactorily proven during the trial the existence of the factual basis of the damages and its causal connection todefendant's acts. Medical expenses, temperate damages of P20,000, moral damages of P100,000 and attorney’s fees ofP50,000. Exemplary damages deleted.

Not employee. We agree with the findings of the Court of Appeals that respondents cannot be held liable for damagesunder Art. 2180 of the Civil Code because respondents are not the employers of Rosete. The latter was employed byGalaxy. The instructions issued by respondents' Security Consultant to Galaxy and its security guards are ordinarily nomore than requests commonly envisaged in the contract for services entered into by a principal and a security agency.They cannot be construed as the element of control as to treat respondents as the employers of Rosete.

No. FEU did not examine Rosete’s medical records. They just accepted whoever the agency provided. For these acts ofnegligence and for having supplied respondent FEU with an unqualified security guard, which resulted to the latter'sbreach of obligation to petitioner, it is proper to hold Galaxy liable to respondent FEU for such damages equivalent to theabove-mentioned amounts awarded to petitioner.

Case 6: Meralco vs. RamoySERVICE CONTRACT TO SUPPLY ELECTRICITY: CULPA CONTRACTUAL

Case about Breach of Contract

Oblicon Concept: Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in

any manner contravene the tenor thereof, are liable for damages. Expectation Interest - which is his interest in having the benefit of his bargain by being put in as good a position as he

would have been in had the contract been performed. Reliance Interest - which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as

good a position as he would have been in had the contract not been made. Restitution Interest - which is his interest in having restored to him any benefit that he has conferred on the other party.

Facts: This is a Petition for Review on Certiorari on CA’s decision of ordering petitioner Manila Electric Company (MERALCO) to

pay Leoncio Ramoy moral and exemplary damages and attorney's fees. The evidence on record has established that in the year 1987 the National Power Corporation (NPC) filed with the MTC

Quezon City a case for ejectment against several persons allegedly illegally occupying its properties in Baesa, QuezonCity. Among the defendants in the ejectment case was Leoncio Ramoy, one of the plaintiffs in the case at bar.

The MTC rendered judgment for the plaintif f [MERALCO] and "ordering the defendants to demolish or remove the buildingand structures they built on the land of the plaintiff and to vacate the premises.

On June 20, 1990 NPC wrote Meralco requesting for the immediate disconnection of electric power supply to allresidential and commercial establishments beneath the NPC transmission lines.

Meralco requested NPC for a joint survey to determine all the establishments which are considered under NPC property inview of the fact that "the houses in the area are very close to each other.


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In due time, the electric service connection of the plaintiffs [herein respondents] was disconnected. After the electric powerin Ramoy's apartment was cut off, the plaintiffs-lessees left the premises.

During the ocular inspection ordered by the Court and attended by the parties, it was found out that the residence ofplaintiffs-spouses Leoncio and Matilde Ramoy was indeed outside the NPC property.

The RTC decided in favor of MERALCO by dismissing herein respondents' claim for moral damages, exemplary damagesand attorney's fees. However, the RTC ordered MERALCO to restore the electric power supply of respondents.

Issues: W/N Meralco acted negligently when it disconnected the subject electric service of respondents. W/N the C A gravely erred when it awarded moral and exemplary damages and attorney’s fees against Meralco under the

circumstances that the latter acted in good faith in the disconnection of the electric services of the respondents.

Held: Yes. MERALCO admits that respondents are its customers under a Service Contract whereby it is obliged to supply

respondents with electricity. Clearly, respondents' cause of action against MERALCO is anchored on culpa contractual orbreach of contract for the latter's discontinuance of its service to respondents under Article 1170 of the Civil Code. In culpacontractual, the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, acorresponding right of relief. The law, recognizing the obligatory force of contracts, will not permit a party to be set freefrom liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof.

! The Court agrees with the CA that under the factual milieu of the present case, MERALCO failed to exercise theutmost degree of care and diligence required of it. To repeat, it was not enough for MERALCO to merely rely onthe Decision of the MTC without ascertaining whether it had become final and executory.

Yes to Moral Damages since Ramoy testified in Court about his mental anguish. In the present case, MERALCO wilfullycaused injury to Leoncio Ramoy by withholding from him and his tenants the supply of electricity to which they were

entitled under the Service Contract. Electricity is a basic necessity the generation and distribution of which is imbued withpublic interest, and its provider is a public utility subject to strict regulation by the State in the exercise of police power.Failure to comply with these regulations will give rise to the presumption of bad faith or abuse of right.

! No to Exemplary Damages since Article 2232 of the Civil Code provides that in contracts and quasi-contracts, thecourt may award exemplary damages if the defendant, in this case MERALCO, acted in a wanton, fraudulent,reckless, oppressive, or malevolent manner, while Article 2233 of the same Code provides that such damagescannot be recovered as a matter of right and the adjudication of the same is within the discretion of the court

! No to Attor ney’s Fees since the Court does not deem it proper to award exemplary damages in this case, thenthe CA's award for attorney's fees should likewise be deleted, as Article 2208 of the Civil Code states that in theabsence of stipulation, attorney's fees cannot be recovered except in cases provided for in said Article.

Case 7: Pantaleon vs. American Express International, Inc.

Case about Delay of Credit Card Company in its Obligation to Cardholders

Oblicon Concept: Article 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which

are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes acounter-offer.

Article 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudiciallydemands from them the fulfillment of their obligation.

Facts: In October 1991, Pantaleon, together with his wife (Julialinda), daughter (Regina), and son (Adrian Roberto), went on a

guided European tour. On October 25, 1991, the tour group arrived in Amsterdam. Due to their late arrival, they postponedthe tour of the city for the following day.

The next day, the group began their sightseeing at around 8:50 a.m. with a trip to the Coster Diamond House (Coster). Tohave enough time for take a guided city tour of Amsterdam before their departure scheduled on that day, the tour group

planned to leave Coster by 9:30 a.m. at the latest. While at Coster, Mrs. Pantaleon decided to purchase some diamond pieces worth a total of US$13,826. Pantaleon

presented his American Express credit card to the sales clerk to pay for this purchase. He did this at around 9:15 a.m. Thesales clerk swiped the credit card and asked Pantaleon to sign the charge slip, which was then electronically referred to AMEX’s Amsterdam office at 9:20 a.m.

At around 9:40 a.m., Coster had not received approval from AMEX for the purchase so Pantaleon asked the store clerk tocancel the sale. The store manager, however, convinced Pantaleon to wait a few more minutes. Subsequently, the storemanager informed Pantaleon that AMEX was asking for bank references; Pantaleon responded by giving the names of hisPhilippine depository banks.

At around 10 a.m., or 45 minutes after Pantaleon presented his credit card, AMEX still had not approved the purchase.Since the city tour could not begin until the Pantaleons were onboard the tour bus, Coster decided to release at around10:05 a.m. the purchased items to Pantaleon even without AMEX’s approval.

When the Pantaleons finally returned to the tour bus, they found their travel companions visibly irritated. This irritationintensified when the tour guide announced that they would have to cancel the tour because of lack of time as they all had

to be in Calais, Belgium by 3 p.m. to catch the ferry to London. In all, it took AMEX a total of 78 minutes to approve Pantaleon’s purchase and to transmit the approval to the jewelry

store.


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After the trip to Europe, the Pantaleon family proceeded to the United States. Again, Pantaleon experienced delay insecuring approval for purchases using his American Express credit card on two separate occasions. He experienced thefirst delay when he wanted to purchase golf equipment in the amount of US$1,475 at the Richard Metz Golf Studio in NewYork on October 30, 1991. Another delay occurred when he wanted to purchase children’ s shoes worth US$87 at theQuiency Market in Boston on November 3, 1991.

RTC ruled in favor of petitioner and held respondent as guilty of delay. CA ruled in favor of respondent. SC ruled in favorof petitioner and SC, upon reconsideration, ruled in favor of the respondent.

Issues: W/N AMEX has an obligation to grant petitioner’s credit transaction?

W/N AMEX is guilty of culpable delay? W/N AMEX has the obligation to act on the offer within a specific period of time? W/N AMEX acted with good faith? W/N petitioner’s actions was the proximate cause of his injury?

Held: No. This view finds support in the reservation found in the card membership agreement itself, particularly paragraph 10,

which clearly states that AMEX "reserve[s] the right to deny authorization for any requested Charge." By so providing, AMEX made its position clear that it has no obligation to approve any and all charge requests made by its card holders.

No. Since AMEX has no obligation to approve the purchase requests of its credit cardholders, Pantaleon cannot claim that AMEX defaulted in its obligation. Before the credit card issuer accepts this offer, no obligation relating to the loanagreement exists between them. A demand presupposes the existence of an obligation between the parties.

No. Every time Pantaleon charges a purchase on his credit card, the credit card company still has to determine whether itwill allow this charge, based on his past credit history. This right to review a card holder’s credit history, although not

specifically set out in the card membership agreement, is a necessary implication of AMEX’s right to deny authorization forany requested charge. There is no provision in this agreement that obligates AMEX to act on all cardholder purchaserequests within a specifically defined period of time.

Yes. Although it took AMEX some time before it approved Pantaleon’s three charge r equests, we find no evidence tosuggest that it acted with deliberate intent to cause Pantaleon any loss or injury, or acted in a manner that was contrary tomorals, good customs or public policy. We give credence to AMEX’s claim that its review procedure was done to ensurePantaleon’s own protection as a cardholder and to prevent the possibility that the credit card was being fraudulently usedby a third person.

Yes. The doctrine of volenti non fit injuria ("to which a person assents is not esteemed in law as injury") refers to self-inflicted injury or to the consent to injury which precludes the recovery of damages by one who has knowingly andvoluntarily exposed himself to danger, even if he is not negligent in doing so. When Pantaleon made up his mind to pushthrough with his purchase, he must have known that the group would become annoyed and irritated with him. This was thenatural, foreseeable consequence of his decision to make them all wait.

Case 8: Barzaga vs. CA and Alviar

Case about Non-importance of Demand in Obligations where Time is of the Essence

Oblicon Concept: 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.

Facts: The Fates ordained that Christmas 1990 be bleak for Ignacio Barzaga and his family. On the nineteenth of December

Ignacio's wife succumbed to a debilitating ailment after prolonged pain and suffering. Forewarned by her attendingphysicians of her impending death, she expressed her wish to be laid to rest before Christmas day to spare her familyfrom keeping lonely vigil over her remains while the whole of Christendom celebrate the Nativity of their Redeemer.

Drained to the bone from the tragedy that befell his family yet preoccupied with overseeing the wake for his departed wife,Ignacio Barzaga set out to arrange for her interment on the twenty-fourth of December in obedience semper fidelis to herdying wish. But her final entreaty, unfortunately, could not be carried out. Dire events conspired to block his plans thatforthwith gave him and his family their gloomiest Christmas ever.

On 21 December 1990, at about three o'clock in the afternoon, he went to the hardware store of respondent Angelito Alviar to inquire about the availability of certain materials to be used in the construction of a niche for his wife. He alsoasked if the materials could be delivered at once. Marina Boncales, Alviar's storekeeper, replied that she had yet to verifyif the store had pending deliveries that afternoon because if there were then all subsequent purchases would have to bedelivered the following day. With that reply petitioner left.

At seven o'clock the following morning, 22 December, Barzaga returned to Alviar's hardware store to follow up hispurchase of construction materials. He told the store employees that the materials he was buying would have to bedelivered at the Memorial Cemetery in Dasmarinas, Cavite, by eight o'clock that morning since his hired workers werealready at the burial site and time was of the essence.

The construction materials did not arrive at eight o'clock as promised. At nine o'clock, the delivery was still nowhere insight. Barzaga returned to the hardware store to inquire about the delay. Boncales assured him that although the delivery

truck was not yet around it had already left the garage and that as soon as it arrived the materials would be brought overto the cemetery in no time at all. That left petitioner no choice but to rejoin his workers at the memorial park and wait forthe materials.


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After hours of waiting — which seemed interminable to him — Barzaga became extremely upset. He decided to dismisshis laborers for the day. He proceeded to the police station, which was just nearby, and lodged a complaint against Alviar.

RTC ruled in favor of petitioner saying that respondent incurred legal delay. CA reversed the decision and said that therewas no contractual commitment as to the exact time of delivery since this was not indicated in the invoice receiptscovering the sale. SC ruled in favor of petitioner.

Issues: W/N respondent incurred legal delay? W/N the respondent encountered fortuitous event resulting to the delay? W/N petitioner is entitled to be indemnified?

Held: Yes. An assiduous scrutiny of the record convinces us that respondent Angelito Alviar was negligent and incurred in delay

in the performance of his contractual obligation. Contrary to the appellate court's factual determination, there was aspecific time agreed upon for the delivery of the materials to the cemetery. The argument that the invoices never indicateda specific delivery time must fall in the face of the positive verbal commitment of respondent's storekeeper. Consequentlyit was no longer necessary to indicate in the invoices the exact time the purchased items were to be brought to thecemetery.

No. Flattening of the tires can be foreseen and as such should have been reasonably guarded against. The nature ofprivate respondent's business requires that he should be ready at all times to meet contingencies of this kind.

Yes. This sufficiently entitles petitioner Ignacio Barzaga to be indemnified for the damage he suffered as a consequence ofdelay or a contractual breach. We therefore sustain the award of moral damages. It cannot be denied that petitioner andhis family suffered wounded feelings, mental anguish and serious anxiety while keeping watch on Christmas day over theremains of their loved one who could not be laid to rest on the date she herself had chosen. We also affirm the grant of

exemplary damages. The lackadaisical and feckless attitude of the employees of respondent over which he exercisedsupervisory authority indicates gross negligence in the fulfillment of his business obligations. We delete however theaward of temperate damages. Under Art. 2224 of the Civil Code, temperate damages are more than nominal but less thancompensatory, and may be recovered when the court finds that some pecuniary loss has been suffered but the amountcannot, from the nature of the case, be proved with certainty.

Case 9: Lorenzo Shipping Corp vs. BJ Marthel International, Inc.

Case about Non-requirement of Demand in Obligations which are time is of the essence but not communicated to thedebtor.

Oblicon Concept: No Demand or Notice Necessary

Facts: From 1987 up to the institution of this case, respondent supplied petitioner with spare parts for the latter's marine engines.

Sometime in 1989, petitioner asked respondent for a quotation for various machine parts. Acceding to this request,respondent furnished petitioner with a formal quotation.

Petitioner thereafter issued to respondent Purchase Order, dated 02 November 1989, for the procurement of one set ofcylinder liner, valued at P477,000, to be used for M/V Dadiangas Express.

Instead of paying the 25% down payment for the first cylinder liner, petitioner issued in favor of respondent ten postdatedchecks to be drawn against the former's account with Allied Banking Corporation. The checks were supposed to representthe full payment of the aforementioned cylinder liner. Subsequently, petitioner issued another purchase order dated 15January 1990, for yet another unit of cylinder liner. Like the purchase order of 02 November 1989, the second purchaseorder did not state the date of the cylinder liner's delivery.

On 26 January 1990, respondent deposited petitioner's check that was postdated 18 January 1990, however, the samewas dishonored by the drawee bank due to insufficiency of funds. The remaining nine postdated checks were eventuallyreturned by respondent to petitioner.

Respondent thereafter placed the order for the two cylinder liners with its principal in Japan, Daiei Sangyo Co. Ltd., byopening a letter of credit on 23 February 1990 under its own name with the First Interstate Bank of Tokyo.

On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's warehouse in North Harbor, Manila. The salesinvoices evidencing the delivery of the cylinder liners both contain the notation "subject to verification" under which thesignature of Eric Go, petitioner's warehouseman, appeared.

Respondent thereafter sent a Statement of Account dated 15 November 1990 to petitioner. While the other items listed insaid statement of account were fully paid by petitioner, the two cylinder liners delivered to petitioner on 20 April 1990remained unsettled. Consequently, Mr. Alejandro Kanaan, Jr., respondent's vice-president, sent a demand letter dated 02January 1991 to petitioner requiring the latter to pay the value of the cylinder liners subjects of this case. Instead ofheeding the demand of respondent for the full payment of the value of the cylinder liners, petitioner sent the former a letterdated 12 March 1991 offering to pay only P150,000 for the cylinder liners. In said letter, petitioner claimed that as thecylinder liners were delivered late and due to the scrapping of the M/V Dadiangas Express, it (petitioner) would have tosell the cylinder liners in Singapore and pay the balance from the proceeds of said sale.

The trial court held respondent bound to the quotation it submitted to petitioner particularly with respect to the terms of

payment and delivery of the cylinder liners.

Issues:


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W/N time is of the essence in the delivery of the cylinder liner?

Held: No. It was not included in the contract counter-offered by Lorenzo shipping after BJ sent a quotation. Moreover, even if

time is of the essence, BJ was not informed of the urgency of delivery. BJ delivered within reasonable time.

Case 10: Almocera vs. Johnny Ong

Case about Delay when Demand is Useless

Oblicon Concept: Art. 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 their obligation.

Facts: Plaintiff Johnny Ong tried to acquire from the defendants a "townhome" described as Unit No. 4 of Atrium Townhomes in

Cebu City. As reflected in a Contract to Sell, the selling price of the unit was P3,400,000 pesos, for a lot area of eighty-eight (88) square meters with a three-storey building.

Out of the purchase price, plaintiff was able to pay the amount of P1,060,000. Prior to the full payment of this amount,plaintiff claims that defendants Andre Almocera and First Builders fraudulently concealed the fact that before and at thetime of the perfection of the aforesaid contract to sell, the property was already mortgaged to and encumbered with theLand Bank of the Philippines (LBP).

In addition, the construction of the house has long been delayed and remains unfinished.

On March 13, 1999, Lot 4-a covered by TCT, covering the unit was advertised in a local tabloid for public auction forforeclosure of mortgage. It is the assertion of the plaintiff that had it not for the fraudulent concealment of the mortgageand encumbrance by defendants, he would have not entered into the contract to sell.

In trying to recover the amount he paid as down payment for the townhouse unit, respondent Johnny Ong filed a complaintfor Damages before the RTC of Cebu City against defendants Andre T. Almocera and FBMC alleging that defendantswere guilty of fraudulent concealment and breach of contract when they sold to him a townhouse unit without divulgingthat the same, at the time of the perfection of their contract, was already mortgaged with the Land Bank of the Philippines(LBP), with the latter causing the foreclosure of the mortgage and the eventual sale of the townhouse unit to a thirdperson.

RTC decided in favor of Ong. Ordering the defendants to solidarily pay to the plaintiff the sum of P1,060,000, together witha legal interest thereon at 6% per annum from April 21, 1999 until its full payment before finality of the judgment. Orderingthe defendants to solidarily pay to the plaintiff the sum of P100,000 as moral damages, the sum of P50,000 as attorney’sfee and the sum of P15,619 as expenses of litigation.

Issues: W/N Almocera has incurred in delay? W/N Ong should pay the remaining balance of purchase price? W/N Almocera is solidary liable with the cooperative for the damages to Ong?

Held: Yes. The evidence adduced shows that petitioner and FBMC failed to fulfill their obligation -- to complete and deliver the

townhouse within the six-month period. With petitioner and FBMC’s non-fulfillment of their obligation, respondent refusedto pay the balance of the contract price. Respondent does not ask that ownership of the townhouse be transferred to him,but merely asks that the amount or down payment he had made be returned to him. Demand is not necessary in theinstant case. Demand by the respondent would be useless because the impossibility of complying with their (petitioner andFBMC) obligation was due to their fault. If only they paid their loans with the LBP, the mortgage on the subject townhousewould not have been foreclosed and thereafter sold to a third person.

No. the obligation of respondent to pay the balance of the contract price was conditioned on petitioner and FBMC’sperformance of their obligation. Considering that the latter did not comply with their obligation to complete and deliver thetownhouse unit within the period agreed upon, respondent could not have incurred delay. For failure of one party toassume and perform the obligation imposed on him, the other party does not incur delay.

Yes. This issue of piercing the veil of corporate fiction was never raised before the trial court. The same was raised for thefirst time before the Court of Appeals which ruled that it was too late in the day to raise the same.

Case 11: Megaworld Globus Asia, Inc. vs. Tanseco

Case about delay without need of demand because demand is Useless (debtor can’t accomplish obligation of condo unitwith or without demand)

Oblicon Concept: Article 1169 of the Civil Code, no judicial or extrajudicial demand is needed to put the obligor in default if the contract, as in

the herein parties’ contract, states the date when the obligation should be performed. Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the

nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not beforeseen, or which, though foreseen, were inevitable.


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Facts: On July 7, 1995, petitioner Megaworld Globus Asia, Inc. (Megaworld) and respondent Mila S. Tanseco (Tanseco) entered

into a Contract to Buy and Sell a 224 square-meter (more or less) condominium unit at a pre-selling project, "The SalcedoPark," located along Senator Gil Puyat Avenue, Makati City.

The purchase price was P16,802,037, to be paid as follows: (1) 30% less the reservation fee of P100,000, or P4,940,611,by postdated check payable on July 14, 1995; (2) P9,241,120 through 30 equal monthly installments of P308,037 from August 14, 1995 to January 14, 1998; and (3) the balance of P2,520,305 on October 31, 1998, the stipulated delivery dateof the unit; provided that if the construction is completed earlier, Tanseco would pay the balance within seven days fromreceipt of a notice of turnover.

The construction of the Project and the unit/s herein purchased shall be completed and delivered not later than October

31, 1998 with additional grace period of six (6) months within which to complete the Project and the unit/s, barring delaysdue to fortuitous events. Tanseco paid all installments due up to January, 1998, leaving unpaid the balance of P2,520,305 pending delivery of the

unit. Megaworld, however, failed to deliver the unit within the stipulated period on October 31, 1998 or April 30, 1999, thelast day of the six-month grace period.

A few days shy of three years later, Megaworld, by notice dated April 23, 2002 (notice of turnover), informed Tanseco thatthe unit was ready for inspection preparatory to delivery. Tanseco replied through counsel, by letter of May 6, 2002, that inview of Megaworld’s failure to deliver the unit on time, she was demanding the ret urn of P14,281,731 representing thetotal installment payment she had made, with interest at 12% per annum from April 30, 1999, the expiration of the six-month grace period. Tanseco pointed out that none of the excepted causes of delay existed.

Her demand having been unheeded, Tanseco filed on June 5, 2002 with the Housing and Land Use Regulatory Board’s(HLURB) Expanded National Capital Region Field Office a complaint against Megaworld for rescission of contract, refundof payment, and damages.

In its Answer, Megaworld attributed the delay to the 1997 Asian financial crisis which was beyond its control; and argued

that default had not set in, Tanseco not having made any judicial or extrajudicial demand for delivery before receipt of thenotice of turnover. HLURB ruled in favor of Megaworld while CA ruled in favor of Tanseco.

Issues: W/N Megaworld has incurred legal delay? W/N Megaworld is entitled to defense of fortuitous event?

Held: Yes. That Megaworld’s sending of a notice of turnover preceded Tanseco’s demand for refund does not abate her cause.

For demand would have been useless, Megaworld admittedly having failed in its obligation to deliver the unit on theagreed date. The Contract to Buy and Sell of the parties contains reciprocal obligations, i.e., to complete and deliver thecondominium unit on October 31, 1998 or six months thereafter on the part of Megaworld, and to pay the balance of thepurchase price at or about the time of delivery on the part of Tanseco. Compliance by Megaworld with its obligation isdeterminative of compliance by Tanseco with her obligation to pay the balance of the purchase price. Megaworld havingfailed to comply with its obligation under the contract, it is liable therefor.

No. The Court cannot generalize the 1997 Asian financial crisis to be unforeseeable and beyond the control of a businesscorporation. A real estate enterprise engaged in the pre-selling of condominium units is concededly a master in projectionson commodities and currency movements, as well as business risks.

Case 12: Solar Harvest, Inc vs. Davao Corrugated

Case about Rescission despite LACK of DEMAND

Oblicon Concept: Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply

with what is incumbent upon him. Art. 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 their obligation.

Facts: In the first quarter of 1998, petitioner, Solar Harvest, Inc., entered into an agreement with respondent, Davao Corrugated

Carton Corporation, for the purchase of corrugated carton boxes, specifically designed for petitioner’s business ofexporting fresh bananas, at US$1.10 each. The agreement was not reduced into writing. To get the production underway,petitioner deposited, on March 31, 1998, US$40,150 in respondent’s US Dollar Savings Account with Westmont Bank, asfull payment for the ordered boxes.

Despite such payment, petitioner did not receive any boxes from respondent. On January 3, 2001, petitioner wrote ademand letter for reimbursement of the amount paid. On February 19, 2001, respondent replied that the boxes had beencompleted as early as April 3, 1998 and that petitioner failed to pick them up from the former’s warehouse 30 days fromcompletion, as agreed upon. Respondent mentioned that petitioner even placed an additional order of 24,000 boxes, outof which, 14,000 had been manufactured without any advanced payment from petitioner. Respondent then demandedpetitioner to remove the boxes from the factory and to pay the balance of US$15,400 for the additional boxes and

P132,000 as storage fee. In its Answer with Counterclaim, respondent insisted that, as early as April 3, 1998, it had already completed production of

the 36,500 boxes, contrary to petitioner’s allegation. According to respondent, petitioner, in fact, made an additional order of 24,000 boxes, out of which, 14,000 had been completed without waiting for petitioner’s payment. Respondent stated


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that petitioner was to pick up the boxes at the factory as agreed upon, but petitioner failed to do so. Respondent averredthat, on October 8, 1998, petitioner’s representative, Bobby Que (Que), went to the factory and saw that the boxes wereready for pick up. On February 20, 1999, Que visited the factory again and supposedly advised respondent to sell theboxes as rejects to recoup the cost of the unpaid 14,000 boxes, because petitioner’s transaction to ship bananas to Chinadid not materialize. Respondent claimed that the boxes were occupying warehouse space and that petitioner should bemade to pay storage fee at P60 per square meter for every month from April 1998. As counterclaim, respondent prayedthat judgment be rendered ordering petitioner to pay $15,400 , plus interest, moral and exemplary damages, attorney’sfees, and costs of the suit.

Issue:

W/N respondent has incurred legal delay in fulfilling its obligation. W/N petitioner has the right of rescission to reimburse the money paid.

Held: Evident from the records and even from the allegations in the complaint was the lack of demand by petitioner upon

respondent to fulfill its obligation to manufacture and deliver the boxes. The Complaint only alleged that petitioner made a"follow-up" upon respondent, which, however, would not qualify as a demand for the fulfillment of the obligation.Petitioner’s witness also testified that they made a follow-up of the boxes, but not a demand. Note is taken of the fact that,with respect to their claim for reimbursement, the Complaint alleged and the witness testified that a demand letter wassent to respondent. Without a previous demand for the fulfillment of the obligation, petitioner would not have a cause ofaction for rescission against respondent as the latter would not yet be considered in breach of its contractual obligation.

We also believe that the agreement between the parties was for petitioner to pick up the boxes from respondent’swarehouse, contrary to petitioner’s allegation. Thus, it was due to petitioner’s fault that the boxes were not delivered toTADECO. In sum, the Court finds that petitioner failed to establish a cause of action for rescission, the evidence havingshown that respondent did not commit any breach of its contractual obligation. As previously stated, the subject boxes arestill within respondent’s premises. To put a rest to this dispute, we therefore relieve respondent from the burden of havingto keep the boxes within its premises and, consequently, give it the right to dispose of them, after petitioner is given aperiod of time within which to remove them from the premises.

Case 13: Cortes vs CA and Villa Esperanza Development Corporation

This is a Case about Delay of Both Parties or Compensatio Morae

Oblicon Concept: ART. 1169. 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 theother begins.

ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply

with what is incumbent upon him.

Facts: The antecedents show that for the purchase price of P3,700,000, the Corporation as buyer, and Cortes as seller, entered

into a contract of sale over the lots covered by Transfer Certificate of Title located at Baclaran, Parañaque, Metro Manila.On various dates in 1983, the Corporation advanced to Cortes the total sum of P1,213,000. Sometime in September 1983,the parties executed a deed of absolute sale.

Said Deed was retained by Cortes for notarization. On January 14, 1985, the Corporation filed the instant case for specific performance seeking to compel Cortes to deliver

the TCTs and the original copy of the Deed of Absolute Sale. According to the Corporation, despite its readiness andability to pay the purchase price, Cortes refused delivery of the sought documents. It thus prayed for the award ofdamages, attorney's fees and litigation expenses arising from Cortes' refusal to deliver the same documents.

In his Answer with counterclaim, Cortes claimed that the owner's duplicate copy of the three TCTs were surrendered tothe Corporation and it is the latter which refused to pay in full the agreed down payment. He added that portion of the

subject property is occupied by his lessee who agreed to vacate the premises upon payment of disturbance fee. However,due to the Corporation's failure to pay in full the sum of P2,200,000, he in turn failed to fully pay the disturbance fee of thelessee who now refused to pay monthly rentals. He thus prayed that the Corporation be ordered to pay the outstandingbalance plus interest and in the alternative, to cancel the sale and forfeit the P1,213,000 partial down payment, withdamages in either case.

RTC ruled in favor of Cortes by rescinding the contract (right of rescission applicable when one party has alreadyaccomplish his obligation and the other did not). CA ruled in favor of the Corporation by specific performance of thecontract. The parties agreed that the Corporation will fully pay the balance of the down payment upon Cortes' delivery ofthe three TCTs to the Corporation. The records show that no such delivery was made, hence, the Corporation was notremiss in the performance of its obligation and therefore justified in not paying the balance.

Issues: W/N there is delay in the performance of the parties' obligation that would justify the rescission of the contract of sale?

Held: No. Since Cortes did not perform his obligation to have the Deed notarized and to surrender the same together with the

TCTs, the trial court erred in concluding that he performed his part in the contract of sale and that it is the Corporationalone that was remiss in the performance of its obligation. Actually, both parties were in delay. Considering that their


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obligation was reciprocal, performance thereof must be simultaneous. The mutual inaction of Cortes and the Corporationtherefore gave rise to a compensation morae or default on the part of both parties because neither has completed theirpart in their reciprocal obligation.

Case 14: Tanguilig and JMT Engineering and General Merchandising vs. CA and Vicente Herce, Jr.

Case about Interpretation of Contracts and Fortuitious Event

Oblicon Concept:

Art. 1174 of the Civil Code the event should be the sole and proximate cause of the loss or destruction of the object of thecontract. In Nakpil vs. Court of Appeals, four (4) requisites must concur:

! (a) the cause of the breach of the obligation must be independent of the will of the debtor;! (b) the event must be either unforeseeable or unavoidable;! (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner;

and,! (d) the debtor must be free from any participation in or aggravation of the injury to the creditor.

Article 1167 of the Civil Code is explicit on this point that if a person obliged to do something fails to do it, the same shallbe executed at his cost. IF PETITIONER DOESN’T WANT TO REPAIR IT.

Facts: Sometime in April 1987 petitioner Jacinto M. Tanguilig doing business under the name and style J.M.T. Engineering and

General Merchandising proposed to respondent Vicente Herce Jr. to construct a windmill system for him. After somenegotiations they agreed on the construction of the windmill for a consideration of P60,000 with a one-year guaranty fromthe date of completion and acceptance by respondent Herce Jr. of the project. Pursuant to the agreement respondent paidpetitioner a down payment of P30,000 and an installment payment of P15,000, leaving a balance of P15,000.

On 14 March 1988, due to the refusal and failure of respondent to pay the balance, petitioner filed a complaint to collectthe amount. In his Answer before the trial court respondent denied the claim saying that he had already paid this amountto the San Pedro General Merchandising Inc. (SPGMI) which constructed the deep well to which the windmill system wasto be connected. According to respondent, since the deep well formed part of the system the payment he tendered toSPGMI should be credited to his account by petitioner. Moreover, assuming that he owed petitioner a balance of P15,000,this should be offset by the defects in the windmill system which caused the structure to collapse after a strong wind hittheir place.

Petitioner also disowned any obligation to repair or reconstruct the system and insisted that he delivered it in good andworking condition to respondent who accepted the same without protest. Besides, its collapse was attributable to atyphoon, a force majeure, which relieved him of any liability.

Issues: W/N the agreement to construct the windmill system included the installation of a deep well? W/N the petitioner is under obligation to reconstruct the windmill after it collapsed?

Held: No. The preponderance of evidence supports the finding of the trial court that the installation of a deep well was not

included in the proposals of petitioner to construct a windmill system for respondent. While the words "deep well" and"deep well pump" are mentioned in both, these do not indicate that a deep well is part of the windmill system. They merelydescribe the type of deep well pump for which the proposed windmill would be suitable. As correctly pointed out bypetitioner, the words "deep well" preceded by the prepositions "for" and "suitable for" were meant only to convey the ideathat the proposed windmill would be appropriate for a deep well pump with a diameter of 2 to 3 inches. For if the real intentof petitioner was to include a deep well in the agreement to construct a windmill, he would have used instead theconjunctions "and" or "with." Since the terms of the instruments are clear and leave no doubt as to their meaning theyshould not be disturbed.

Yes. A strong wind in this case cannot be fortuitous — unforeseeable nor unavoidable. On the contrary, a strong wind

should be present in places where windmills are constructed, otherwise the windmills will not turn. The appellate courtcorrectly observed that "given the newly-constructed windmill system, the same would not have collapsed had there beenno inherent defect in it which could only be attributable to the appellee." When the windmill failed to function properly itbecame incumbent upon petitioner to institute the proper repairs in accordance with the guaranty stated in the contract.

Case 15: Juan F. Nakpil & Sons and United Construction Company, Inc. vs. CA

Case about Inability of Fortuitous Event Defense When The Defendants Acted with Wanton Negligence.

Oblicon Concept: if upon the happening of a fortuitous event or an act of God, there concurs a corresponding fraud, negligence, delay or

violation or contravention in any manner of the tenor of the obligation as provided for in Article 1170 of the Civil Code,which results in loss or damage, the obligor cannot escape liability.

It has been held that when the negligence of a person concurs with an act of God in producing a loss, such person is notexempt from liability by showing that the immediate cause of the damage was the act of God. To be exempt from liabilityfor loss because of an act of God, he must be free from any previous negligence or misconduct by which that loss ordamage may have been occasioned.


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Facts: The plaintiff, Philippine Bar Association, a civic-non-profi t association, incorporated under the Corporation Law, decided to

construct an office building on its 840 square meters lot located at the comer of Aduana and Arzobispo Streets,Intramuros, Manila. The construction was undertaken by the United Construction, Inc. on an "administration" basis, on thesuggestion of Juan J. Carlos, the president and general manager of said corporation. The proposal was approved byplaintiff's board of directors and signed by its president Roman Ozaeta, a third-party defendant in this case. The plans andspecifications for the building were prepared by the other third-party defendants Juan F. Nakpil & Sons. The building wascompleted in June, 1966.

In the early morning of August 2, 1968 an unusually strong earthquake hit Manila and its environs and the building in

question sustained major damage. The front columns of the building buckled, causing the building to tilt forwarddangerously. The tenants vacated the building in view of its precarious condition. As a temporary remedial measure, thebuilding was shored up by United Construction, Inc. at the cost of P13,661.

On November 29, 1968, the plaintiff commenced this action for the recovery of damages arising from the partial collapseof the building against United Construction, Inc. and its President and General Manager Juan J. Carlos as defendants.Plaintiff alleges that the collapse of the building was accused by defects in the construction, the failure of the contractors tofollow plans and specifications and violations by the defendants of the terms of the contract.

Defendants in turn filed a third-party complaint against the architects who prepared the plans and specifications, allegingin essence that the collapse of the building was due to the defects in the said plans and specifications. Roman Ozaeta, thethen president of the plaintiff Bar Association was included as a third-party defendant for damages for having includedJuan J. Carlos, President of the United Construction Co., Inc. as party defendant.

Upon the issues being joined, a pre-trial was conducted on March 7, 1969, during which among others, the parties agreedto refer the technical issues involved in the case to a Commissioner. Mr. Andres O. Hizon, who was ultimately appointedby the trial court, assumed his office as Commissioner, charged with the duty to try the technical issues.

After the protracted hearings, the Commissioner eventually submitted his report on September 25, 1970 with the findingsthat while the damage sustained by the PBA building was caused directly by the August 2, 1968 earthquake whosemagnitude was estimated at 7.3 they were also caused by the defects in the plans and specifications prepared by thethird-party defendants' architects, deviations from said plans and specifications by the defendant contractors and failure ofthe latter to observe the requisite workmanship in the construction of the building and of the contractors, architects andeven the owners to exercise the requisite degree of supervision in the construction of subject building.

On May 11, 1978, the United Architects of the Philippines, the Association of Civil Engineers, and the Philippine Institute of Architects filed with the Court a motion to intervene as amicus curiae. They proposed to present a position paper on theliability of architects when a building collapses and to submit likewise a critical analysis with computations on the divergentviews on the design and plans as submitted by the experts procured by the parties. The motion having been granted, theamicus curiae were granted a period of 60 days within which to submit their position.

Issues: W/N the petitioners can use the defense of fortuitous event (i.e., Earthquake) for the damage incurred by the building they

constructed and sold to Philippine Bar Association?

Held: No. It is reasonable to conclude, therefore, that the proven defects, deficiencies and violations of the plans and

specifications of the PBA building contributed to the damages which resulted during the earthquake of August 2, 1968 andthe vice of these defects and deficiencies is that they not only increase but also aggravate the weakness mentioned in thedesign of the structure. In other words, these defects and deficiencies not only tend to add but also to multiply the effectsof the shortcomings in the design of the building. We may say, therefore, that the defects and deficiencies in theconstruction contributed greatly to the damage which occurred.

Case 16: Ace-agro vs. CA and Cosmos Bottling Company

Case about Unilateral Extinguishment of Obligation Due to Fortuitous Event

ObliCon Concept: Extinguishment of Obligation Due to Fortuitous Event Resolutory Period Article 1231 of the New Civil Code on extinguishment of obligations does not specifically mention unilateral termination as

a mode of extinguishment of obligation but, according to Tolentino, "there are other causes of extinguishment ofobligations which are not expressly provided for.

Facts: Petitioner Ace-Agro Development Corporation and private respondent Cosmos Bottling Corporation are corporations duly

organized and existing under Philippine laws. Private respondent Cosmos Bottling Corp. is engaged in the manufacture ofsoft drinks. Since 1979 petitioner Ace-Agro Development Corp. (Ace-Agro) had been cleaning soft drink bottles andrepairing wooden shells for Cosmos, rendering its services within the company premises in San Fernando, Pampanga.The parties entered into service contracts which they renewed every year. On January 18, 1990, they signed a contractcovering the period January 1, 1990 to December 31, 1990. Private respondent had earlier contracted the services of Aren

Enterprises in view of the fact that petitioner could handle only from 2,000 to 2,500 cases a day and could not cope withprivate respondent's daily production of 8,000 cases. Unlike petitioner, Aren Enterprises rendered service outside privaterespondent's plant.


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On April 25, 1990, fire broke out in private respondent's plant, destroying, among other places, the area where petitionerdid its work. As a result, petitioner's work was stopped.

On May 15, 1990, petitioner asked private respondent to allow it to resume its service, but petitioner was advised that onaccount of the fire, which had "practically burned all old soft drink bottles and wooden shells," private respondent wasterminating their contract.

Petitioner expressed surprise at the termination of the contract and requested private respondent, on June 13, 1990, toreconsider its decision and allow petitioner to resume its work in order to "cushion the sudden impact of the unemploymentof many of [its] workers."

In response, private respondent advised petitioner on August 28, 1990 that the latter could resume the repair of woodenshells under terms similar to those contained in its contract but work had to be done outside the company premises.

Petitioner refused the offer, claiming that to do its work outside the company's premises would make it (petitioner) incuradditional costs for transportation which "will eat up the meager profits that [it] realizes from its original contract withCosmos."

On November 7, 1990, private respondent advised petitioner that the latter could then resume its work inside the plant inaccordance with its original contract with Cosmos. But the petitioner did not gave its consent because it wanted to secureextension of the contract which is subject to a RESOLUTORY PERIOD.

Issues: W/N Cosmos is justified in unilaterally terminating the contract on account of force majeure? W/N the Cosmos is guilty of breach of contract?

Held: Yes. The reason given by defendant-appellant for unilaterally terminating the agreement was because the April 25, 1990

fire practically burned all of the softdrink bottles and wooden shells which plaintiff-appellee was working on under the

agreement. What defendant-appellant was trying to say was that the prestation or the object of their agreement had beenlost and destroyed in the above-described fire. Obligations may be extinguished by the happening of unforeseen events,under whose influence the obligation would never have been contracted, because in such cases, the very basis uponwhich the existence of the obligation is founded would be wanting.

No. Petitioner may not be to blame for the failure to resume work after the fire, but neither is private respondent. Since thequestion is whether private respondent is guilty of breach of contract, the fact that private respondent is blameless canonly lead to the conclusion that the appealed decision is correct. As a matter of fact, it is the petitioner who is guilty ofbreach because it wanted an extension of its contract to compensate for the suspension of work.

Case 17: Mondragon Leisure vs. CA

Case about Foreclosure of Collaterals (Leasehold Rights); Acceleration Clause

Oblicon Concept: Forum Shopping, Res Judicata Fortouitous Event on Asian Economic Crisis that’s why the petitioner failed to pay on time

Facts: On February 28, 1994, Mondragon International Philippines, Inc. (MIPI), Mondragon Securities Corporation (MSC) and

herein petitioner entered into a lease agreement with the Clark Development Corporation (CDC) for the development ofwhat is now known as the Mimosa Leisure Estate.

To help finance the project, petitioner, on June 30, 1997, entered into an Omnibus Loan and Security Agreement(hereafter Omnibus Agreement) with respondent banks for a syndicated term loan in the aggregate principal amount ofUS$20M. Under the agreement, as amended on January 19, 1999, the proceeds of the loan were to be released throughadvances evidenced by promissory notes to be executed by petitioner in favor of each lender-bank, and to be paid within asix-year period from the date of initial advance inclusive of a one year and two quarters grace period.

To secure the repayment of the loan, petitioner pledged in favor of respondents US$20M worth of MIPI shares of stocks;assigned, transferred and delivered all rights, title to and interest in the pledged shares; and assigned by way of securityits leasehold rights over the project and all the rights, title, interests and benefits in, to and under any and all agreementsin connection with the project.

On July 3, 1997, petitioner fully availed of and received the full amount of the syndicated loan agreement. Petitioner, whichhad regularly paid the monthly interests due on the promissory notes until October 1998, thereafter failed to makepayments. Consequently, on January 6 and February 5, 1999, written notices of default, acceleration of payment anddemand letters were sent by the lenders to the petitioner. Then on August 27, 1999, respondents filed a complaint,docketed as Civil Case No. 9527, for the foreclosure of leasehold rights against petitioner.

Issues: W/N the default of interest payments is due to fortuitous event? W/N the certificate of forum shopping was defective because there was no proof as to the authority of the signatories

(Board of Directors) to file the complaint? W/N the respondent banks engage in forum shopping? W/N respondents have a cause of action against the petitioner?

Held:


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No. As pointed out by the respondents, the loan agreement was entered into on June 30, 1997, or when the Asianeconomic crisis had already started. Petitioner, as a long established corporation, should have been well aware of theeconomic environment at that time, yet it still took the risk to expand operations. Likewise, the closure of the MimosaRegency Casino was not an unforeseeable or unavoidable event, in the context of the contract of lease between petitionerand CDC. Every business venture involves risks. Risks are not unforeseeable; they are inherent in business.

No. The issue concerning the signatories’ authorization was never raised before it. Likewise, the appellate court did not err in refusing to take cognizance of the issue, since the parties did not raise it beforehand. Issues not raised in the trial courtcannot be raised for the first time on appeal.

No. Civil Case No. 9510 pertains to an Omnibus Credit and Security Agreement executed by and between the petitionerand respondent UCPB on November 23, 1995. This is separate and distinct from the Omnibus Agreement involved in Civil

Case No. 9527. Moreover, respondents Asian Bank and Far East Bank are not among the parties to Civil Case No. 9510. Yes. Respondents counter that the Omnibus Agreement defines, as an event of default, the failure of petitioner to pay

when due at stated maturity, by acceleration or otherwise, any amount payable under the loan documents. Since petitioneris also required to pay interest, respondents posit that non-payment thereof constituted a clear and unmistakable case ofdefault. Respondents add that they had properly advised the petitioner that it had been declared in default, referring to theJanuary 6 and February 5, 1999 letters as their compliance with the notice requirement. The respondent-banks have fouralternative remedies without prejudice to the application of the provisions on collaterals and any other steps or actionwhich may be adopted by the majority lender.

ARTICLES 1179 and 1181

Case 18. De Leon vs. Ong

Case about Perfected Contract of Sale (Respondent’s Argument - W) or Contract To Sell Subject to a SuspensiveCondition of Full Payment (Petitioner’s Argument)

Specific Performance with Damages for Ong in the RTC. De Leon is questioning decisions of RTC and CA - DENIED

Oblicon Concept: In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. Should

the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or have thecontract judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory condition.

On the other hand, a contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownershipof the property until he fully pays the purchase price. For this reason, if the buyer defaults in the payment thereof, theseller can only sue for damages.

Article 1498 of the Civil Code provides that, as a rule, the execution of a notarized deed of sale is equivalent to thedelivery of a thing sold.

Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Article 1544. If the same thing should have been sold to different vendees (DOUBLE SALE), the ownership shall be

transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in

the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith wasfirst in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is goodfaith.

Facts: On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land with improvements situated in Antipolo,

Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association,Incorporated (RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of mortgagestating:

! That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND PESOS (P1.1 million),Philippine currency, the receipt whereof is hereby acknowledged from [RESPONDENT] to the entire satisfactionof [PETITIONER], said [PETITIONER] does hereby sell, transfer and convey in a manner absolute and

irrevocable, unto said [RESPONDENT], his heirs and assigns that certain real estate together with the buildingsand other improvements existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following termsand conditions:

! P415,000 Full Payment to Petitioner! P684,500 Assumption of Real Estate Mortgage Payment to RSLAI.

Pursuant to this deed, respondent gave petitioner P415,500 as partial payment. Petitioner, on the other hand, handed thekeys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept payment from respondentand release the certificates of title.

Thereafter, respondent undertook repairs and made improvements on the properties. Respondent likewise informedRSLAI of her agreement with petitioner for her to assume petitioner’s outstanding loan. RSLAI required her to undergocredit investigation.

Subsequently, respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10,1993 and changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquireabout the credit investigation. However, she was informed that petitioner had already paid the amount due and had taken

back the certificates of title. Respondent persistently contacted petitioner but her efforts proved futile. Respondent argued that it is a contract of sale, thus, petitioner doesn’t have the right to sell it to someone else anymore.

Petitioner already conveyed full ownership of the subject properties upon the execution of the deed


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Petitioner argued that it is a contract to sell subject to suspensive condition of RSLAI approval. Since it was not approved,the contract was not perfected.

RTC ruled in favor of the petitioner, while CA ruled in favor of the respondent. SC decision is in favor of the respondentwith modification as to the amount to be reimbursed by the respondent to the petitioner.

Issues: W/N the contract is a perfected contract of sale or a contract to sell subject to suspensive condition?

Held: Contract of sale. The deed executed by the parties (as previously quoted) stated that petitioner sold the properties to

respondent "in a manner absolute and irrevocable" for a sum of P1.1 million. With regard to the manner of payment, itrequired respondent to pay P415,500 in cash to petitioner upon the execution of the deed, with the balance payabledirectly to RSLAI (on behalf of petitioner) within a reasonable time. Nothing in said instrument implied that petitionerreserved ownership of the properties until the full payment of the purchase price. On the contrary, the terms andconditions of the deed only affected the manner of payment, not the immediate transfer of ownership (upon the executionof the notarized contract) from petitioner as seller to respondent as buyer. Otherwise stated, the said terms and conditionspertained to the performance of the contract, not the perfection thereof nor the transfer of ownership.

Case 19. Reyes vs. Tuparan

Case about Perfected Contract of Sale (Petitioner’s Argument) or Contract To Se ll Subject to a Suspensive Condition ofFull Payment (Respondent’s Argument - W)

Order for Rescission of Contract DENIED because the agreement is Contract To Sell not subject to Breach

Oblicon Concept: Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to

deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted

unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise issupported by a consideration distinct from the price. A contract to sell may thus be defined as a bilateral contract wherebythe prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to theprospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of thecondition agreed upon, that is, full payment of the purchase price.

Facts: On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with Damages against

Victoria T. Tuparan (respondent) before the RTC. In her Complaint, petitioner alleged, among others, that she was theregistered owner of a 1,274 square meter residential and commercial lot located in Karuhatan, Valenzuela City, and

covered by TCT No. V-4130; that on that property, she put up a three-storey commercial building known as RBJ Buildingand a residential apartment building; that since 1990, she had been operating a drugstore and cosmetics store on theground floor of RBJ Building where she also had been residing while the other areas of the buildings including thesidewalks were being leased and occupied by tenants and street vendors.

In December 1989, respondent leased from petitioner a space on the ground floor of the RBJ Building for her pawnshopbusiness f or a monthly rental of ₱4,000. A close friendship developed between the two which led to the respondentinvesting thousands of pesos in petitioner’s financing/lending business from February 7, 1990 to May 27, 1990, withinterest at the rate of 6% a month.

On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings Bank and Loan Bank, Inc.(FSL Bank) to secure a loan of ₱2,000,000 payable in installments. On November 15, 1990, petitioner’s outstandingaccount on the mortgage reached ₱2,278,078. Petitioner then decided to sell her real properties for at least ₱6,500,000 soshe could liquidate her bank loan and finance her businesses. As a gesture of friendship, respondent verbally offered toconditionally buy petitioner’s real properties for ₱4,200,000 payable on installment basis without interest and to assumethe bank loan.

After petitioner’s verbal acceptance of all the conditions/concessions, both parties worked together to obtain FSL Bank’sapproval for respondent to assume her (petitioner’s) outstanding bank account. The assumption would be part ofrespondent’s purchase price for petitioner’s mortgaged real properties. FSL Bank approved their proposal on the conditionthat petitioner would sign or remain as co-maker for the mortgage obligation assumed by respondent.

On November 26, 1990, the parties and FSL Bank executed the corresponding Deed of Conditional Sale of RealProperties with Assumption of Mortgage. Due to their close personal friendship and business relationship, both partieschose not to reduce into writing the other terms of their agreement mentioned in paragraph 11 of the complaint. Besides,FSL Bank did not want to incorporate in the Deed of Conditional Sale of Real Properties with Assumption of Mortgage anyother side agreement between petitioner and respondent.

! a) ₱278,078 received in cash by the First Party but directly paid to the Third Party as partial payment of themortgage obligation of the First Party in order to reduce the amount to ₱2,000,000 only as of November 15,1990;

! b) ₱721,921 received in cash by the First Party as additional payment of th

oblicon case digests by amber gagajena

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