cacayorin
TRANSCRIPT
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CACAYORIN v. AFP MUTUAL BENEFITFacts:Petitioner Oscar Cacayorin (Oscar) is a member of respondent Armed Forces and Police Mutual
Benet Association, Inc. (AFPMBAI), a mutual benet association duly orani!ed and e"istin under
P#ilippine la$s and enaed in t#e business of de%elopin lo$&cost #ousin pro'ects for personnel of
t#e Armed Forces of t#e P#ilippines, P#ilippine ational Police, Bureau of Fire Protection, Bureau of ail
Manaement and Penoloy, and P#ilippine Coast *uard. +e led an application $it# AFPMBAI to
purc#ase a piece of property $#ic# t#e latter o$ned, specically ot -, Bloc /, P#ase I, 0aliasan
Mutual +omes, 1an Pedro, Puerto Princesa City (t#e property), t#rou# a loan facility.
On uly 2, 3442, Oscar and #is $ife and co&petitioner #erein, 5#elma, on one #and, and t#e 6ural Ban
of 1an 5eodoro (t#e 6ural Ban) on t#e ot#er, e"ecuted a oan and Mortae Areement - $it# t#e
former as borro$ers and t#e 6ural Ban as lender, under t#e auspices of Pa&IBI* or +ome
7e%elopment Mutual Fund8s +ome Financin Proram.
5#e 6ural Ban issued an Auust 99, 3442 letter of uaranty: informin AFPMBAI t#at t#e proceeds of
petitioners8 appro%ed loan in t#e amount of P;;,23/.<< s#all be released to AFPMBAI after title to t#e
property is transferred in petitioners8 name and after t#e reistration and annotation of t#e parties8
mortae areement.
On t#e basis of t#e 6ural Ban8s letter of uaranty, AFPMBAI e"ecuted in petitioners8 fa%or a 7eed of
Absolute 1ale,; and a ne$ title = 5ransfer Certicate of 5itle o. >;<3;/ (5C5 o. >;<3;) = $as issued in
t#eir name, $it# t#e correspondin annotation of t#eir mortae areement $it# t#e 6ural Ban,
under ?ntry o. >>:2.4
@nfortunately, t#e Pa&IBI* loan facility did not pus# t#rou# and t#e 6ural Ban closed and $as
placed under recei%ers#ip by t#e P#ilippine 7eposit Insurance Corporation (P7IC). Mean$#ile, AFPMBAI
some#o$ $as able to tae possession of petitioners8 loan documents and 5C5 o. >;<3;, $#ile
petitioners $ere unable to pay t#e loanconsideration for t#e property.
AFPMBAI made oral and $ritten demands for petitioners to pay t#e loan consideration for t#e
property.3<
In uly 9<<>, petitioners led a Complaint33
for consination of loan payment, reco%ery of title andcancellation of mortae annotation aainst AFPMBAI, P7IC and t#e 6eister of 7eeds of Puerto
Princesa City. 5#e case $as doceted as Ci%il Case o. >/39 and raed to Branc# 2; of t#e 6eional
5rial Court (65C) of Puerto Princesa City (Puerto Princesa 65C). Petitioners alleed in t#eir Complaint
t#at as a result of t#e 6ural Ban8s closure and P7IC8s claim t#at t#eir loan papers could not be
located, t#ey $ere left in a uandary as to $#ere t#ey s#ould tender full payment of t#e loan and #o$
to secure cancellation of t#e mortae annotation on 5C5 o. >;<3;. Petitioners prayed, t#usD
a. 5#at after t#e lin of t#is complaint an order be made allo$in t#e consination " "" of
P#p;;,23/.<<.
b. For t#e court to compute and declare t#e amount of interest to be paid by t#e plaintiEs and
t#ereafter to allo$ t#e consination of t#e interest payments in order to i%e $ay for t#e full
disc#are of t#e loan.
c. 5o order t#e AFPMBAI to turn o%er to t#e custody of t#e court t#e loan records and title
(5.C.5. o. >;<3;) of t#e plaintiEs if t#e same are in t#eir possession.
d. 5o declare t#e full payment of t#e principal loan and interest and orderin t#e full disc#are
from mortae of t#e property co%ered by 5.C.5. o. >;<3;.
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e. 5o order t#e 6eister of 7eeds of Puerto Princesa City to cancel t#e annotation of real estate
mortae under ?ntry o. >>:2 at t#e bac of 5.C.5. o. >;<3;.
f. 5#ereafter, to turn o%er to t#e plaintiEs t#eir title free from t#e aforesaid mortae loan.
Petitioners assert t#at t#e elements $#ic# mae up a %alid case for consination are present in t#eir
Complaint. 5#ey add t#at since a deed of absolute sale #as been issued in t#eir fa%or, and possessionof t#e property #as been surrendered to t#em, not to mention t#at title #as been placed in t#eir name,
t#e +@6B lost 'urisdiction o%er t#eir case. And for t#is same reason, petitioners arue t#at t#eir case
may not be said to be one for specic performance of contractual and leal obliations under P7 4-;
as not#in more $as left to be done in order to perfect or consolidate t#eir title.
Petitioners t#us pray t#at t#e #erein assailed 7ecision and 6esolution of t#e CA be set aside, and t#at
t#e trial court be ordered to continue $it# t#e proceedins in Ci%il Case o. >/39.
6espondent, on t#e ot#er #and, insists in its Comment 9< t#at 'urisdiction o%er petitioners8 case lies $it#
t#e +@6B, as it sprins from t#eir contractual relation as seller and buyer, respecti%ely, of a
subdi%ision lot. 5#e prayer in petitioners8 Complaint in%ol%es t#e surrender or deli%ery of t#e title after
full payment of t#e purc#ase price, $#ic# respondent claims are reciprocal obliations in a sale
transaction co%ered by P7 4-;. 6espondent adds t#at in eEect, petitioners are e"actin specicperformance from it, $#ic# places t#eir case $it#in t#e 'urisdiction of t#e +@6B.
Issue: t#e complaint maes out a case for consination.
Held: 5#e Court rants t#e Petition.
5#e Complaint maes out a case for consination.
5#e settled principle is t#at Gt#e alleations of t#e Complaint determine t#e nature of t#e action and
conseuently t#e 'urisdiction of t#e courts. 5#is rule applies $#et#er or not t#e plaintiE is entitled to
reco%er upon all or some of t#e claims asserted t#erein as t#is is a matter t#at can be resol%ed only
after and as a result of t#e trial.G93
7oes t#e Complaint in Ci%il Case o. >/39 mae out a case for consinationH It allees t#atD
:.< = ot lon after #o$e%er, 6B1599 closed s#op and defendant P#ilippine 7eposit Insurance
Corporation (P7IC) $as appointed as its recei%er. 5#e plaintiEs, t#rou# a representati%e, made
a %erbal inuiry to t#e P7IC reardin t#e payment of t#eir loan but $ere told t#at it #as no
information or record of t#e said loan. 5#is made sicJ t#e plaintiEs in uandary as to $#ere or
$#om t#ey $ill pay t#eir loan, $#ic# t#ey intend to pay in full, so as to cancel t#e annotation
of mortae in t#eir title.
;.< = It $as disco%ered t#at t#e loan papers of t#e plaintiEs, includin t#e duplicate oriinal of
t#eir title, $ere in t#e possession of defendant AFPMBAI. It $as unclear t#ou# $#y t#e said
documents includin t#e title $ere in t#e possession of AFPMBAI. 5#ese papers s#ould #a%e
been in 6B158s possession and i%en to P7IC after its closure in t#e latter8s capacity asrecei%er.
/.< = PlaintiEs are no$ intendin to pay in full t#eir real estate loan but could not decide $#ere
to pay t#e same because of 6B15 sicJ closure and P7IC8s failure to locate t#e loan records and
title. 5#is court8s inter%ention is no$ needed in order to determine to sicJ $#ere or $#om t#e
loan s#ould be paid.
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4.< = PlaintiEs #ereby respectfully prays sicJ for t#is court to allo$ t#e deposit of t#e amount
of P#p;;,23/.<< as full payment of t#eir principal loan, e"cludin interest, pursuant to t#e
oan and Mortae Areement on 2 uly 3442.9>
From t#e abo%e alleations, it appears that the petiti!e"s# de$t is utsta!di!%& that the Ru"al
Ba!'#s "eceive"( P)IC( i!*"+ed petiti!e"s that it has ! "ec"d * thei" la! eve! as it
t' ve" the a,ai"s * the Ru"al Ba!'( -hich ! "ec"d is the petiti!e"s# c"edit" as pe"
the ul/ 0( 1220 La! a!d M"t%a%e A%"ee+e!t& that !e -a/ " a!the"( AFPMBAI ca+e
i!t pssessi! * the la! dcu+e!ts as -ell as TCT N. 34514& that petiti!e"s a"e "ead/
t pa/ the la! i! *ull& h-eve"( u!de" the ci"cu+sta!ces( the/ d !t '!- -hich * the
t- 6 the Ru"al Ba!' " AFPMBAI 6 shuld "eceive *ull pa/+e!t * the pu"chase p"ice( " t
-h+ te!de" * pa/+e!t +ust validl/ $e +ade.
@nder Article 39-: of t#e Ci%il Code,92 t#e debtor s#all be released from responsibility by t#e
consination of t#e t#in or sum due, $it#out need of prior tender of payment, $#en t#e creditor is
absent or unno$n, or $#en #e is incapacitated to recei%e t#e payment at t#e time it is due, or $#en
t$o or more persons claim t#e same ri#t to collect, or $#en t#e title to t#e obliation #as been lost.
Applyin Article 39-: to t#e petitioners8 case as s#aped by t#e alleations in t#eir Complaint, t#e
Court nds t#at a case for consination #as been made out, as it no$ appears t#at t#ere are t$o
entities $#ic# petitioners must deal $it# in order to fully secure t#eir title to t#e propertyD 3) t#e 6ural
Ban (t#rou# P7IC), $#ic# is t#e apparent creditor under t#e uly 2, 3442 oan and MortaeAreementK and 9) AFPMBAI, $#ic# is currently in possession of t#e loan documents and t#e certicate
of title, and t#e one main demands upon petitioners to pay. Clea"l/( the alle%ati!s i! the
C+plai!t p"ese!t a situati! -he"e the c"edit" is u!'!-!( " that t- " +"e e!tities
appea" t pssess the sa+e "i%ht t cllect *"+ petiti!e"s. 7hateve" t"a!spi"ed $et-ee!
the Ru"al Ba!' " P)IC a!d AFPMBAI i! "espect * petiti!e"s# la! accu!t( i* a!/( such
that AFPMBAI ca+e i!t pssessi! * the la! dcu+e!ts a!d TCT N. 34514( it appea"s
that petiti!e"s -e"e !t i!*"+ed the"e*( !" +ade p"iv/ the"et.
Indeed, t#e instant case presents a uniue situation $#ere t#e buyer, t#rou# no fault of #is o$n, $as
able to obtain title to real property in #is name e%en before #e could pay t#e purc#ase price in full.
5#ere appears to be no %itiated consent, nor is t#ere any ot#er impediment to t#e consummation of
t#eir areement, 'ust as it appears t#at it $ould be to t#e best interests of all parties to t#e sale t#at it
be once and for all completed and terminated. For t#is reason, Ci%il Case o. >/39 s#ould at t#is 'uncture be allo$ed to proceed.
Moreo%er, petitioners8 position is buttressed by AFPMBAI8s o$n admission in its Comment 9- t#at it
made oral and $ritten demands upon t#e former, $#ic# naturally ara%ated t#eir confusion as to $#o
$as t#eir ri#tful creditor to $#om payment s#ould be made = t#e 6ural Ban or AFPMBAI. Its
subseuent lin of t#e Motion to 7ismiss runs counter to its demands to pay. If it $anted to be paid
$it# alacrity, t#en it s#ould not #a%e mo%ed to dismiss Ci%il Case o. >/39, $#ic# $as brou#t
precisely by t#e petitioners in order to be able to nally settle t#eir obliation in full.
Fi!all/( the lac' * p"i" te!de" * pa/+e!t $/ the petiti!e"s is !t *atal t thei"
c!si%!ati! case. The/ 8led the case *" the e9act "eas! that the/ -e"e at a lss as t
-hich $et-ee! the t- 6 the Ru"al Ba!' " AFPMBAI 6 -as e!titled t such a te!de" *
pa/+e!t. Besides( as ea"lie" stated( A"ticle 1;< auth"i=es c!si%!ati! al!e( -ithut!eed * p"i" te!de" * pa/+e!t( -he"e the %"u!d *" c!si%!ati! is that the c"edit" is
u!'!-!( " des !t appea" at the place * pa/+e!t& " is i!capacitated t "eceive the
pa/+e!t at the ti+e it is due& " -he!( -ithut >ust cause( he "e*uses t %ive a "eceipt& "
-he! t- " +"e pe"s!s clai+ the sa+e "i%ht t cllect& " -he! the title * the
$li%ati! has $ee! lst.
C!si%!ati! is !ecessa"il/ >udicial& he!ce( >u"isdicti! lies -ith the RTC( !t -ith the
HLURB.
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On t#e uestion of 'urisdiction, petitioners8 case s#ould be tried in t#e Pue"t P"i!cesa RTC( a!d !t
the HLURB. C!si%!ati! is !ecessa"il/ >udicial(< as the Civil Cde itsel* p"vides that
c!si%!ati! shall $e +ade $/ depsiti!% the thi!% " thi!%s due at the dispsal * >udicial
auth"it/( thus:
A"t. 1;?. C!si%!ati! shall $e +ade $/ depsiti!% the thi!%s due at the dispsal *
>udicial auth"it/( $e*"e -h+ the te!de" * pa/+e!t shall $e p"ved( i! a p"pe" case(
a!d the a!!u!ce+e!t * the c!si%!ati! i! the" cases.
The c!si%!ati! havi!% $ee! +ade( the i!te"ested pa"ties shall als $e !ti8ed the"e*.
The a$ve p"visi! clea"l/ p"ecludes c!si%!ati! i! ve!ues the" tha! the
cu"ts.1âwphi1 Else-he"e( -hat +a/ $e +ade is a valid te!de" * pa/+e!t( $ut !t
c!si%!ati!. The t-( h-eve"( a"e t $e disti!%uished.
5ender of payment must be distinuis#ed from consination. Te!de" is the a!tecede!t *
c!si%!ati!( that is( a! act p"epa"at"/ t the c!si%!ati!( -hich is the p"i!cipal( a!d
*"+ -hich a"e de"ived the i++ediate c!se@ue!ces -hich the de$t" desi"es " see's t
$tai!. Te!de" * pa/+e!t +a/ $e e9t"a>udicial( -hile c!si%!ati! is !ecessa"il/ >udicial(
a!d the p"i"it/ * the 8"st is the atte+pt t +a'e a p"ivate settle+e!t $e*"e p"ceedi!%t the sle+!ities * c!si%!ati!. ? Ma!"esa 3;.4
#ile it may be true t#at petitioners8 claim relates to t#e terms and conditions of t#e sale of AFPMBAI8s
subdi%ision lot, t#is is o%ers#ado$ed by t#e fact t#at since t#e Complaint in Ci%il Case o. >/39 pleads
a case for consination, t#e HLURB is -ithut >u"isdicti! t t"/ it( as such case +a/ !l/ $e
t"ied $/ the "e%ula" cu"ts.
PHILIPPINE NATIONAL CONTRUCTION
v. CAFacts:On 3/ o%ember 34/-, petitioner P#il ippine ational Construction Corporation(PCC) e"ecuted a contract of lease $it# pri%ate respondents, stipulatin to pay rent fort#e use of land, at t#e mont#ly rate of P 9<,<<<.<< payable yearly in ad%ance. 5#e said landis to be used by petitioner as site for a roc crus#in plant. 5#e term of lease is for %e years,commencin on t#e date of issuance of an industrial clearance by t#e Ministry of +uman 1ettlements(Ministry).
On ; anuary 34/: PCC obtained a 5emporary @se Permit from t#e Ministry for t#eproposed roc crus#in pro'ect. ine days later pri%ate respondents $rote to PCC, asin for t#erst annual rental, and assurin t#at t#ey #a%e stopped considerin proposals of ot#er areatesplants in fa%or of PCC.
In reply, PCC arued t#at t#e contract must commence on t#e date of issuance by t#e Ministry of anindustrial clearance in t#eir fa%or. It also e"pressed its desire to terminate t#e contract it e"ecuted $it#respondents, due to Lnancial, as $ell as tec#nical diculties.N 6esponden ts refused to accedeto PCC8s reuest for pre termination and on 34 May 34/:,instituted an action aainst PCCfor 1pecic Performance $it# 7amaes. 5rial court ruled in fa%or of respondents and ordered PCC topay rentals for t$o years, $it# leal interests plus attorney8s fees. 5#e Court of Appeals armed t#edecision of t#e trial court upon appeal by PCCK #ence, t#is case
In%oin Article 39:: and t#e principle of rebus sic stantibus, petitioner asserts t#at it s#ould be
released from t#e obliatory force of t#e contract of lease because t#e purpose of t#e contract did not
materiali!e due to unforeseen e%ents and causes beyond its control, i.e., due to abrupt c#ane in
political climate after t#e ?71A 6e%olution and nancial diculties.
Issue: PCC s#ould be released from its contract $it# respondents due to unforeseen e%ents and
causes beyond itscontrol.
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Held: It is a fundamental rule t#at contracts, once perfected, bind bot# contractin parties, and
obliations arisin t#erefrom #a%e t#e force of la$ bet$een t#e parties and s#ould be complied $it# in
ood fait#.3>J But t#e la$ reconi!es e"ceptions to t#e principle of t#e obliatory force of
contracts. One e"ception is laid do$n in Article 39:: of t#e Ci%il Code, $#ic# readsD G5#e debtor in
obliations to do s#all also be released $#en t#e prestation becomes leally or p#ysically impossible
$it#out t#e fault of t#e oblior.G
Petitioner cannot, #o$e%er, successfully tae refue in t#e said article, since it is applicable only to
obliations Gto doG, and not to obliations Gto i%eG.32J An obliation Gto doG includes all inds of $or
or ser%iceK $#ile an obliation Gto i%eG is a prestation $#ic# consists in t#e deli%ery of a mo%able or
an immo%able t#in in order to create a real ri#t, or for t#e use of t#e recipient, or for its simple
possession, or in order to return it to its o$ner.3-J
5#e obliation to pay rentals3:J or deli%er t#e t#in in a contract of lease 3;J falls $it#in t#e prestation
Lto i%eNK #ence, it is not co%ered $it#in t#e scope of Article 39::. At any rate, t#e unforeseen e%ent
and causes mentioned by petitioner are not t#e leal or p#ysical impossibilities contemplated in said
article. Besides, petitioner failed to state specically t#e circumstances brou#t about by Lt#e abrupt
c#ane in t#e political climate in t#e countryN e"cept t#e alleed pre%ailin uncertainties in
o%ernment policies on infrastructure pro'ects.
5#e principle of rebus sic stantibus3/J neit#er ts in $it# t#e facts of t#e case. @nder t#is t#eory, t#e
parties stipulate in t#e li#t of certain pre%ailin conditions, and once t#ese conditions cease to e"ist
t#e contract also ceases to e"ist.34J 5#is t#eory is said to be t#e basis of Article 39:; of t#e Ci%il Code,
$#ic# pro%idesD
A65. 39:;. #en t#e ser%ice #as become so dicult as to be manifestly beyond t#e
contemplation of t#e parties, t#e oblior may also be released t#erefrom, in $#ole or in part.
5#is article, $#ic# enunciates t#e doctrine of unforeseen e%ents, is not, #o$e%er, an absolute
application of t#e principle of rebus sic stantibus, $#ic# $ould endaner t#e security of contractual
relations. 5#e parties to t#e contract must be presumed to #a%e assumed t#e riss of unfa%orable
de%elopments. It is t#erefore only in absolutely e"ceptional c#anes of circumstances t#at euity
demands assistance for t#e debtor. 9<J
In t#is case, petitioner $ants t#is Court to belie%e t#at t#e abrupt c#ane in t#e political climate of t#e
country after t#e ?71A 6e%olution and its poor nancial condition Lrendered t#e performance of t#e
lease contract impractical and inimical to t#e corporate sur%i%al of t#e petitioner.
5#is Court cannot subscribe to t#is arument. As pointed out by pri%ate respondentsD93J
It is a matter of record t#at petitioner PCC entered into a contract $it# pri%ate respondents
on o%ember 3/, 34/-. Prior t#ereto, it is of 'udicial notice t#at after t#e assassination of
1enator Auino on Auust 93, 34/>, t#e country #as e"perienced political up#ea%als, turmoils,
almost daily mass demonstrations, unprecedented, ination, peace and order deterioration,
t#e Auino trial and many ot#er t#ins t#at brou#t about t#e #atred of people e%en aainst
crony corporations. On o%ember >, 34/-, Pres. Marcos, bein inter%ie$ed li%e on @.1.tele%ision announced t#at t#ere $ould be a snap election sc#eduled for February ;, 34/:.
On o%ember 3/, 34/-, not$it#standin t#e abo%e, petitioner PCC entered into t#e contract
of lease $it# pri%ate respondents $it# open eyes of t#e deterioratin conditions of t#e country.
Anent petitioner8s alleed poor nancial condition, t#e same $ill neit#er release petitioner from t#e
bindin eEect of t#e contract of lease. As #eld in Central Ban %. Court of Appeals,99J cited by t#e
pri%ate respondents, mere pecuniary inability to fulll an enaement does not disc#are a contractual
obliation, nor does it constitute a defense to an action for specic performance.
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it# reard to t#e non&materiali!ation of petitioner8s particular purpose in enterin into t#e contract
of lease, i.e., to use t#e leased premises as a site of a roc crus#in plant, t#e same $ill not in%alidate
t#e contract. 5#e cause or essential purpose in a contract of lease is t#e use or en'oyment of a t#in.9>J As a eneral principle, t#e moti%e or particular purpose of a party in enterin into a contract does
not aEect t#e %alidity or e"istence of t#e contractK an e"ception is $#en t#e reali!ation of suc# moti%e
or particular purpose #as been made a condition upon $#ic# t#e contract is made to depend. 92J 5#e
e"ception is not apply #ere.
Accordin to petitioner, t#e a$ard of P249,<<< representin t#e rent for t$o years is e"cessi%e,
considerin t#at it did not benet from t#e property. Besides, t#e temporary permit, conformably $it#
t#e e"press pro%ision t#erein, $as deemed automatically re%oed for failure of petitioner to use t#e
same $it#in one year from t#e issuance t#ereof. +ence, t#e rent payable s#ould only be for one year.
Petitioner cannot be #eard to complain t#at t#e a$ard is e"cessi%e. 5#e temporary permit $as %alid
for t$o years but $as automatically re%oed because of its non&use $it#in one year from its
issuance. 5#e non&use of t#e permit and t#e non&entry into t#e property sub'ect of t#e lease contract
$ere bot# imputable to petitioner and cannot, t#erefore, be taen ad%antae of in order to e%ade or
lessen petitioner8s monetary obliation. 5#e damae or pre'udice to pri%ate respondents is beyond
dispute. 5#ey unuestionably suEered pecuniary losses because of t#eir inability to use t#e leased
premises. 5#us, in accordance $it# Article 3:-4 of t#e Ci%il Code,9-J t#ey are entitled to
indemnication for damaesK and t#e a$ard of P249,<<< is fair and 'ust under t#e circumstances of t#e case.
MADAT( R. v. CAFacts:
Issue:
Held: 5#e contract $as %alidK t#e radio transcei%ers $ere not contraband.
GContrabandG enerally refers to Gany property $#ic# is unla$ful to produce or possess.G It refers
to oods $#ic# are e"ported and imported into a country aainst its la$s. >/J
In declarin t#e contract %oid ab initio, t#e Court of Appeals ruled t#at t#e importation of t#e
transcei%ers meant t#e ine%itable passin of suc# oods t#rou# P#ilippine Ports, $#ere t#e OI and
t#e Administrati%e Circular #a%e to be obser%ed and applied $it# full force and eEect. >4J 5#e Court of
Appeals declared t#at t#e proposed importation of suc# oods $as contrary to la$, #ence, t#e nullity
of t#e contract.2<J
e do not aree. 5#e contract $as not void ab initio. o$#ere in t#e OI and Admin. Circular is
t#ere an e"press ban on t#e importation of transcei%ers.
5#e OI and Administrati%e Circular did not render Gradios and transcei%ersG illeal per se. 5#e
Administrati%e Circular merely ordered t#e 6adio Control Oce to suspend t#e Gacceptance and
processin .... of applications... for permits to possess, o$n, transfer, purc#ase and sell radio
transmitters and transcei%ers...G23J
5#erefore, possession and importation of t#e radio transmitters andtranscei%ers $as leal pro%ided one #ad t#e necessary license for it.29J 5ranscei%ers $ere not
pro#ibited but merely reulated oods. 5#e OI and Administrati%e Circular did not render t#e
transcei%ers outside t#e commerce of man. 5#ey $ere %alid ob'ects of t#e contract. 2>J
Armin t#e %alidity of t#e contract, $e ne"t discuss $#et#er t#e contract $as breac#ed.
*uerrero testied t#at a permit to import t#e transcei%ers from apan $as denied by t#e 6adio
Control Board. +e stated t#at #e, toet#er $it# Aliada, ictorino and a certain o#n 7auden
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personally $ent to t#e 6adio Control Oce, and $ere denied a permit to import. 5#ey also $ent to t#e
Oce of t#e President, $#ere 1ecretary 6onaldo B. Qamora e"plained t#at radios $ere Gbanned lie
uns because of martial la$.G22J *uerrero testied t#at t#is pre%ented #im from securin a letter of
credit from t#e Central Ban.2-J 5#is testimony $as not rebutted.
5#e la$ pro%ides t#at G$J#en t#e ser%ice (reuired by t#e contract) #as become so manifestly
beyond t#e contemplation of t#e parties, t#e oblior may also be released t#erefrom, in $#ole or in
part.G2:J +ere, *uerreroRs inability to secure a letter of credit and to comply $it# #is obliation $as a
direct conseuence of t#e denial of t#e permit to import. For t#is, #e cannot be faulted.
?%en if $e assume t#at t#ere $as a breac# of contract, damaes cannot be a$arded. Damnum
absque injuria.
5#ere $as no bad fait#.2;J Bad fait# does not simply connote bad 'udment or nelience. It
imports a dis#onest purpose or some moral obliuity and conscious doin of $ron. It means a breac#
of a no$n duty t#rou# some moti%e or interest or ill $ill t#at partaes of t#e nature of fraud.2/J *uerrero #onestly relied on t#e representations of t#e 6adio Control Oce and t#e Oce of t#e
President.
5rue, *uerrero borro$ed euipment from t#e 1ubic a%al Base aut#orities at !ero cost.24J
5#isdoes not automatically translate to bad fait#. *uerrero $as faced $it# t#e daner of t#e cancellation of
#is contract $it# 1ubic a%al Base. +e borro$ed euipment as a prudent and s$ift alternati%e. 5#ere
$as no proof t#at #e resorted to t#is option $it# a deliberate and malicious intent to dis#onor #is
contract $it# ictorino. An a$ard of damaes surely cannot be based on mere #ypot#eses,
con'ectures and surmises. *ood fait# is presumed, t#e burden of pro%in bad fait# rests on t#e one
allein it.-<J Petitioners did not eEecti%ely disc#are t#e burden in t#is case.