Arturo Pelayo vs Marcelo Lauron, et alG.r. no. L-4089 January 12, 1909

Facts: On the 23rd of November, 1906, Arturo Pelayo, a physician residing in

Cebu, filed a complaint against Marcelo Lauron and Juana Abella on the ground that sometime in October 13, 1906, the plaintiff was called to the house of the defendants, situated in San Nicolas, Pelayo was requested to render assistance to their daughter-in-law who was about to give birth to a child. He then rendered medical services to the defendants. He even visited the patient several times and wanted to be paid for the medical services he rendered but the defendants refused to pay 500 php to do so without alleging any good reason.

In an answer to the complaint, the defendants denied all the allegations made by the plaintiff. The defendants even told that their daughter-in-law had died in consequence of the childbirth and while she was alive she lived with her husband independently and in a separate house.

The defendants were absolved from the complaint on account of lack of sufficient evidence to establish a right of action against the defendants.

Issue:Whether or not the defendants Marcelo Lauron and Juana Abella liable

to pay 500 Php for the medical services rendered by Pelayo.

Held:Obligations are created by law, by contracts, by quasi-contracts, and

by illicit acts and omissions or by those in which any kind of fault or negligence occurs. Obligations arising from law are not presumed. Those expressly determined in the code or in special laws, etc., are the only demandable ones. Obligations arising from contracts have legal force between the contracting parties and must be fulfilled in accordance with their stipulations. (Arts. 1090 and 1091.)

The rendering of medical assistance in case of illness is comprised among the mutual obligations to which the spouses are bound by way of mutual support. (Arts. 142 and 143.) If every obligation consists in giving, doing or not doing something (art. 1088), and spouses are mutually bound to support each other, there can be no question but that, when either of them by reason of illness should be in need of medical assistance, the other is under the unavoidable obligation to furnish the necessary services of a physician in order that health may be restored, and he or she may be freed from the sickness by which life is jeopardized; the party bound to furnish such support is therefore liable for all expenses, including the fees of the medical expert for his professional services. This liability originates from the above-cited mutual obligation which the law has expressly established between the married couple.

In case at bar, the person bound to pay the fees due to the plaintiff for the professional services that he rendered to the daughter-in-law of the defendants during her childbirth, is the husband of the patient and not her father and mother- in-law, the defendants herein. The fact that it was not the husband who called the plaintiff and requested his assistance for his wife is no bar to the fulfillment of the said obligation, as the defendants, in view of the imminent danger, to which the life of the patient was at that moment exposed, considered that medical assistance was urgently needed, and the obligation of the husband to furnish his wife in the indispensable services of a physician at such critical moments is specially established by the law, as has been seen, and compliance therewith is unavoidable; therefore, the plaintiff, who believes that he is entitled to recover his fees, must direct his action against the husband who is under obligation to furnish medical assistance to his lawful wife in such an emergency.

Within the meaning of the law, the father and mother-in-law are strangers with respect to the obligation that devolves upon the husband to provide support, among which is the furnishing of medical assistance to his wife at the time of her confinement; and, on the other hand, it does not appear that a contract existed between the defendants and the plaintiff physician, for which reason it is obvious that the former can not be compelled to pay fees which they are under no liability to pay because it does not appear that they consented to bind themselves.

Urbano Floriano v Esteban Delgado and et al

GR No. 44140 August 27, 1908

Facts:

The counsels for Urbano Floriano filed a complaint against spouses Esteban Delgado and Regina Bertumen alleging that they were indebted to the plaintiff in the sum, of P1,352.80, duly admitted by the debtors, who engaged to pay it together with interest thereon at the rate of 10 per cent per annum, as appears by a promissory note made out on the 20th of January, 1907.

The promissory note contains that the spouses will pay the sum of one thousand three hundred and fifty-two pesos and eighty centavos (P1, 352.80) with the obligation to pay the interest of ten percent per annum until the said amount is paid to Urbano Floriano , as agreed upon.

Notwithstanding the demand given by Floriano, the aforesaid amount has not been paid either in whole part, for which reason the court enter judgment that the spouses should pay the said sum in the Philippine currency including the interes thereon until the date of payment.

The defendants appeared within the time prescribed by the law, but they did not answer the complaint, notwithstanding the fact that the time for answering had elapsed, nor did they present any answer. On March 22, 1907, held that the spouses to be in default and ordered the plaintiff to proceed with his evidence. Esteban Delgado appealed from said judgment and it was admitted by the court.

The subject in litigation is the fulfillment of an obligation contracted by the defendant spouses to pay a certain sum stated in a document of indebtedness which is set out in the complaint, with the particularly that no date was fixed therein for the payment of the debt. The defendant appellants did not ask for the annulment of the judgment appealed from, nor for the holding of a new trial, but limited themselves simply to excepting to said judgment, appealing to this court. Hence, this petition.

Issue:

Whether or not the spouses Esteban Delgado and Regina Bertumen should be held liable to pay Urbano Floriano on the day he demanded for their payment.

Held:

In accordance with the old laws enforce in this country prior to the enactment of the present Civil Code, when an obligation is pure, simple, and unconditional, and no particular day had been fixed for its fulfillment of the same may be demanded ten days after it is contracted.

From the liquidation of accounts that took place between the plaintiff and the defendants, there resulted a balance of P1,352.80 which the debtors bound themselves to pay, without fixing a day therefor, with interest at the rate of 10 per cent per annum until paid, just as if they had received said sum on loan at the time of the liquidation whereby they became indebted. Not having paid it at the time, they executed a document by which they bound themselves to pay the creditor without fixing a date for payment, or any other condition. Although in accordance with the old laws and the doctrine or precept of article 62 of the Code of Commerce, the parties bound should have met their obligation at the expiration of ten days after the 20th of January, 1907, nevertheless, under the provisions of Civil Code, the payment of the obligation may be demanded at once, unless from nature and circumstances of the creditor to grant the debtors some extension of time, in which case the duration thereof should be fixed by the courts. (Art. 128, Civil Code.)

It cannot be inferred from the language of the said document that it was the intention of Urbano Floriano to grant the defendants any extension of time in the payment, the duration of should be fixed by judicial authority; and inasmuch as a complaint was filed in court twenty-seven days after the obligation was executed, after payment had been demanded from the debtors, the latter have no right at all to claim an extension for the fulfillment of the obligation, the existence and legality of which they have expressly recognized.

Article 113 of the Civil Code provides:

Every obligation, the fulfillment of which should not depend upon a future or uncertain event or upon a past event, unknown to the parties in interest, shall be immediately demandable.

The document of indebtedness contains no term or condition whatever upon which depends the fulfillment of obligation contracted by the debtors; therefore, there exists no motive or reason that would exempt them from compliance therewith.The court then rendered judgment in accordance with the provisions of Artcile 1137 and 1138 of the Civil Code , and it can not be contended that each of them has been severally sentenced to pay the whole amount stated in the document of indebtedness. Thus, the defendants should be held liable to pay the said amount on the demand made by Floriano.

Ong Guan Can and the Bank of the Philppine Islands v Century Insurance Co.

G.R. No. L-22738        December 2, 1924

Facts:

On April 19, 1924, the Court of First Instance of Iloilo rendered a judgment in favor of the plaintiff, sentencing the defendant company to pay him the sum of P45,000, the value of certain policies of fire insurance, with legal interest thereon from February 28, 1923, until payment, with the costs. The defendant company appealed from this judgment, and insisted that the same must be modified and that it must be permitted to rebuild the house burnt, subject to the alignment of the street where the building was erected, and that the defendant be relieved from the payment of the sum in which said building was insured.

The building owned by Ong Guan Can was insured against fire by the Century Insurance Co., Ltd in the sum of P30,000, as well as the goods and merchandise therein contained in the sum of P15,000. The building and the merchandise, which were insured, were burnt early in the morning of February 28, 1923, while the policies issued by the defendant in favor of the plaintiff were in force.

The insurance company contends that under clause 14 of the conditions of the policies, it may rebuild the house burnt, and although the house may be smaller, yet it would be sufficient indemnity to the insured for the actual loss suffered by him. Furthermore, the Company has its option to reinstate or replace the property damaged or destroyed, or any part thereof, instead of paying the amount of the loss of damages, or may join with any other Company or insurers in so doing, but the Company shall not be bound to reinstate exactly or completely, but only as circumstances permit and in reasonable sufficient manner.

Issue:

Whether or not the act of the Century Insurance Company Co. Ltd in making the obligation an alternative one is valid.

Held:

The clause of the policies made by the Insurance Company, in its effect, is to make its obligation to the plaintiff as an alternative one, that it may either pay the insured value of house, or rebuild it. It must be noted that in alternative obligations, the debtor, the insurance company in this case, must notify the creditor of his election, stating which of the two prestations he is disposed to fulfill, in accordance with article 1133 of the Civil Code. The object of this notice is to give the creditor, that is, the plaintiff in the instant case, opportunity to express his consent, or to impugn the election made by the debtor, and only after said notice shall the election take legal effect when consented by the creditor, or if impugned by the latter, when declared proper by a competent court.

In the case at bar, the record shows that the company did not give a formal notice of its election to rebuild. Thus, the company did not comply with the requirements under the law and the trial judge rendered a decision telling that it would be an imposition unequitable, as well as unjust, to compel the plaintiff to accept the rebuilding of a smaller house than the one burnt, with a lower kind of materials than those of said house, without offering him an additional indemnity for the difference in size between the two house, which circumstances were taken into account when the insurance applied for by the plaintiff was accepted by the defendant without tendering either the insured value of the merchandise contained in the house destroyed, which amounts to the sum of P15,000.

Spouses Ramon M. Nisce and A. Natividad Paras- Nisce V. Equitable PCI Bank, Inc.

G.R. No. 167434, February 19, 2007

Facts:On November 26, 2007, Equitable PCI Bank as creditor- mortgage filed

a petition for extra-judicial foreclosure of the real estate mortgage contract executed by the Ramon and Natividad Nisce over two parcels of land. These mortgage contracts were executed by the spouses to secure their obligation under Promissory Note including a Suretyship Agreement executed by Natividad. The Ex- Officio Sheriff set the sale at public auction. The Nisce spouses filed before the RTC for “Nullity of Suretyship Agreement, damages and legal compensation.”

These Nisce spouses alleged the following: that they had requested the bank to set off the peso equivalent of their obligation against their US Dollar Account with PCI Capital Asia Limited, a subsidiary of the Bank; that that Bank accepted their offer and requested for an estimate of the balance of their account; that they complied with the Bank’s request; and that they were surprised when they received a letter from the Bank demanding payment of their account, and later a petition for extrajudicial foreclosure. They even insisted that the suretyship agreement is null and void on the ground that: it was executed without the knowledge and consent of Ramon Nisce, who is by law the administrator of the conjugal partnership; the surety agreement did not rebound to the benefit of the conjugal partnership and therefore did not bind the same; and assuming that the suretyship contract was valid and binding, any obligation arising therefrom is not covered by plaintiff’s real estate mortgage which were constituted to secure the payment of certain specific obligations only. Furthermore, they even alleged that since they and the Bank are creditors and debtors with respect to each other, their obligations should have been offset by legal compensation to the extent of their account with the Bank.

The Bank filed an “Amended Petition” with the office of the Executive Judge for extrajudicial foreclosure. In its answers, the Bank alleged that the spouses had no cause of action for legal compensation sine PCI Capital was a different corporation with a separate and distinct personality.

Issue:Whether or not the parties in the case at bar can claim legal

compensation.

HELD:Compensation takes place when two persons in their own right, are

creditors and debtors of each other as expressedly mentioned under Article 1278 of the New Civil Code.

Compensation, be it legal or conventional, requires confluence in the parties of the characters of a mutual debtors and creditors although their rights as such creditors on their obligations as such debtors need not spring from one and the same contract or transaction.

Article 1980 of the New Civil Code provide fixed, savings and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loans. Under Article 1953, a person who secures a wan of money or any other fungible thing acquires the ownership thereof, and is bound to pay the creditor an equal amount of the same kind and quality. The relationship of the depositors and the Bank or similar institutions that of creditor- debtor. Such deposit may or set-off against the obligation of the depositor with the bank or similar institution. The issuance of a certificate of deposit in exchange for currency creates a debtor-creditor relationship.

Diesel Construction Co., Inc V. UPSI Property Holdings, Inc.G.R. No. 154885, March 24, 2008

UPSI Property Holdings, Inc., V. Diesel Construction Co., Inc. and FGU Insurance Corp.,

G.R. No. 154937, March 24, 2008

Facts:On August 26, 1995, Diesel, as contractor, and UPSI, as Owner, entered

into a Construction Agreement for the interior architectural construction works for the 14th to the 16th floors of the UPSI Building 3 Meditel/Condotel Project located on Gen. Luna St., Ermita, Manila. Under the Agreement, as amended, Diesel, for PHP 12,739,099, agreed to undertake the Project, payable by progress billing. As stipulated, Diesel posted, through FGU Insurance corp. (FGU), a performance bond in favor of UPSI.

The Agreement contained provisions and contract provisions on contract works and Project completing, extensions of contract period, change/extra work orders, delays and damages for negative slippage. Under the Agreement, the Project Prosecution proper was to run for a period of 90 days from August 2, 1999 to November 8, 1999. They later agreed to move the commencement date to August 21, 1999 and the completion was moved to November 20, 1999. Also this includes the section obliging the contractor, in case of unjustifiable delay, to pay the owner liquidated damages in the amount equivalent to one-fifth (1/5) of one (1) percent of the total Project cost for each calendar day of delay.

During the course of Project implantation, change orders were effective and extensive sought. Diesel requested for extension owing to the following causes or delaying factors: (1) manual hauling of materials from the 14th to 16th floors; (2) delayed supply of marble; (3) various change orders; and (4) delayed in the installation of shower assembly. UPSI disapproved the desired extensions on the basis of the foregoing causes, thus putting Diesel in default for a given contract of work. Furthermore, for every default situation, UPSI assessed Diesel for liquidated damages in the form of deductions from Diesel’s progress payments, as stipulated in the Agreement. On March 16, 2000, Diesel sent a letter notice to UPSI stating that the Project has been completed as of the date. UPSI, however, disregarded the notice, and refused to accept delivery of the contracted premises, claiming that Diesel abandoned the Project unfinished Diesel then filed a complaint compelling to pay the unpaid balance of UPSI of the contract price, plus damages and attorney’s fees. UPSI denied liability.

ISSUE:Whether or not Diesel can be entitled to full payment of the contract

amount.

HELD:

As evidenced, by UPSI’s Progress Report No. 19 for the period ending March 22, 2000, Diesel’s scope of work , as of that date, was already 97.56% complete. Such level of work accomplishment would, by any natural norm, be considered as substantial to warrant full payment of the contract amount, less actual damages suffered by UPSI. Article 1234 of the Civil Code says as much, “If the obligation had substantially performed in good faith, the obligor may recover as though there had been and complete fulfillment, less damages suffered by the obligee.

Pan Pacific Industrial Sales Co., Inc. vs. Court of Appeals and Nicolas Capistrano

G.R. No. 125283             February 10, 2006

Facts:

On September 10, 1982, Capistrano executed a Special Power of Attorney authorizing Cruz to mortgage the subject lot in favor of Associated Bank (the Bank) as security for the latter’s loan accommodation. Cruz obtained a loan in the amount of P500,000.00 from the Bank. Thus, he executed a Real Estate Mortgage over the subject lot in favor of the Bank.

Capistrano and Cruz then executed a letter-agreement dated September 23, 1982 whereby Cruz agreed to buy the subject lot for the price of P350,000.00, of which P200,000.00 would be paid out of the loan secured by Cruz, and the balance of P150,000.00 in eight (8) quarterly payments of P18,750.00 within two (2) years from October 30, 1982, without need of demand and with interest at 18% in case of default. Capistrano the executed the Deed of Absolute Sale over the subject lot in favor of Cruz which was notarized by Notary Public Vicente J. Benedicto. Capistrano’s wife, Josefa Borromeo Capistrano, signed in advance the Marital Consent evidencing her conformity in advance to the sale. The Marital Consent was also sworn to before Benedicto.

Cruz continued payments to Capistrano for the subject lot. Sometime in October 1985, Capistrano delivered to Cruz a Statement of Account signed by Capistrano, showing that as of October 30, 1985, Cruz’s balance stood at P19,561.00 as principal, and P3,520.98 as interest, or a total of P23,081.98. Cruz filed a case with the RTC of Manila to enjoin the foreclosure due to the danger of foreclosure by the bank of the mortgage on the subject lot. Cruz also impleaded Capistrano and his spouse Josefa Borromeo Capistrano as defendants, the title to the subject lot not having been transferred yet to his name.

Cruz also devised a way to save the subject lot from foreclosure by seeking a buyer for it and eventually arranging for the buyer to pay the mortgage debt to which Pan Pacific was the buyer. Pan Pacific paid off Cruz’s debt in the amount of P1,180,000.00. Consequently, the Bank executed a Cancellation of Real Estate Mortgage. Cruz then executed a Deed of Absolute Sale over the subject lot in favor of Pan Pacific, attaching thereto the previous Deed of Absolute Sale executed by Capistrano in favor of Cruz.

Unknowingly to Cruz, Capistrano filed a Revocation of Special Power of Attorney with the Register of Deeds of Manila and even requested that the

transaction between Cruz and Pan Pacific shall be withheld. Capistrano filed the precursory complaint. Pan Pacific was allowed to intervene in the proceedings and joined Cruz in resisting the complaint insofar as the first cause of action on the subject lot is concerned. The trial court rendered a decision in favor of Capistrano declaring: (1) the letter-ageement as resolved and/or rescinded; (2) both the Deed of Absolute Sale and the document entitled, "Marital Consent", null and void; and (3) the Deed of Absolute Sale executed by the spouses Severo C. Cruz, III and Lourdes Miranda Cruz in favor of the intervenor, Pan Pacific Industrial Sales, Co., Inc., null and void.

Pan Pacific and the Cruz spouses contended that Capistrano failed to present clear and convincing evidence to overturn the presumption of regularity of public documents like the documents in question. Pan Pacific, however, filed the instant Petition solely concerning the first cause of action in the Amended Complaint. Pan Pacific contends that the genuineness and due execution of the Deed of Absolute Sale and Marital Consent cannot be overridden by the self-serving testimony of Capistrano. It points out that Capistrano cannot contest the sale of the subject lot to Cruz, as the sale had already been consummated. Capistrano posits in his Memorandum that Pan Pacific is not an innocent purchaser for value and in good faith as Cruz was never the registered owner of the subject lot. Pan Pacific was bound at its peril to investigate the right of Cruz to transfer the property to it.

Issue:

Whether or not Pan Pacific is entitled fully on the subject lot despite the balance remaining due by Cruz to Capistrano.

Held:

Since Cruz had a balance of P132,061.00 owing to Capistrano as of the date of the deed of sale, the latter could not have possibly executed the deed. This From the existence of Cruz’s outstanding balance, the non-existence of the deed of sale does not necessarily follow.

Indeed, a vendor may agree to a deed of absolute sale even before full payment of the purchase price. Article 1478 of the Civil Code states that "the parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price." A sensu contrario, the parties may likewise stipulate that the ownership of the property may pass even if the purchaser has not fully paid the price.

The courts below also assigned an adverse connotation to Cruz’s impleading of the Capistrano spouses as party-defendants in the action against the Bank to enjoin the foreclosure of the mortgage on the subject lot. Cruz’s move is congruent with both his strong desire to protect his interest in

the subject lot and the reality that there was an existing deed of sale in his favor. Precisely, his interest in the lot is borne out and had arisen from the deed of sale. As purchaser of the lot, he had to avert the foreclosure of the mortgage thereon. And to ensure against the dismissal of the action for failure to join a real party-in-interest, he had to implead Capistrano in whose name the title to the subject lot was registered still.

With respect to whatever balance Cruz may still owe to Capistrano, the Court believes that this is not a concern of Pan Pacific as the latter is not a party to the Deed of Absolute Sale between Capistrano and Cruz. But of course, Pan Pacific should enjoy full entitlement to the subject lot as it was sold to him by Cruz who earlier had acquired title thereto absolutely and unconditionally by virtue of the Deed of Absolute Sale. Cruz had the right to sell the subject lot to Pan Pacific in 1988, as he in fact did.

Makati Tuscany Condominium Corporation v. Court of AppealsAmerican Home Assurance Co., represented by American

International Underwriters (Phits.), Inc.G.R. No. 95546, November 6, 1992

FACTS:Sometimes in early 1982, private respondent American Home

Assurance Co. (AHAC), represented by American International Underwriters (Phits), Inc., issued in favor of Makati Tuscany Condominium Corporation (TUSCANY) an insurance policy on the latter’s building and premises, for a period of one year beginning March 1, 1982 to March 1, 1983, with a total premium of P466, 103.05. The premium was paid on installments which were accepted by private respondent. The private respondent issued TUSCANY another insurance policy which replaced and renewed the previous policy. The same routine was done just like in the first insurance policy.

On the third renewal of the policy, AHAC issued it again to the TUSCANY and TUSCANY made two installment payments which were accepted by AHAC, but TUSCANY refused to pay the balance of the premium.

On the ground that TUSCANY refused to pay the said balance, AHAC filed a complaint and an action to recover the unpaid balance. TUSCANY then filed an answer with counter claim. It admitted the issuance of the said insurance policy and explained why it discontinued the premium payments. TUSCANY even claimed that the policy was never binding and valid and no risk attached to the policy. Thus, it pleaded a counterclaim for P 152,000.00 for the premiums already paid for 1984-85 and in its answer with amended counterclaim sought the refund of P924, 206.10 representing the premium payments for 1982-85.

Both parties moved the summary judgment and the trial court dismissed the complaint. They appealed the judgment of the trial court to the court of Appeals. The court of Appeals then ordered to pay the balances plus legal interest until fully paid, thus, affirming the denial of the counterclaim by TUSCANY.

ISSUE:Whether or not the payment of the premiums due on an insurance

policy invalidates the contract of insurance.

HELD:The obligation to pay premiums when due is ordinarily as indivisible

obligation to pay the entire premium. The parties herein agreed to make the premiums payable in installments, and there is no pretense that the parties never envisioned to make the insurance contract binding between them. It was renewed for two succeeding years, the second and third policies being renewed and replaced the previous one. And the insured never informed the insured that it was terminating the policy because the terms were unacceptable.

Under Section 77 of the Insurance Code, the parties may not agree to make the insurance contract valid and binding without payment of premiums, there is nothing in said section which suggest the parties may not agree to allow payment of the premiums in installment, or to consider the contract are valid and binding upon payment of the first premium. Otherwise, we would allow the insurer t renege on its liability under the contract, had a loss incurred before completion of payment of the entire premium, despite its voluntary acceptance of partial payments, a result eschewed by basic considerations of fairness and equity.

The insurance contract become valid and binding upon payment of the that payment was not made in full, for the reason that it agreed to accept installment payments.

United Coconut Planters Bank v. Spouses Samuel and Odette Beluso

G.R. No. 159912 August 17, 2007

FACTS:

On April 16, 1996, UCPB granted the spouses Beluso a Promissory Notes Line under a Credit Agreement whereby the spouses Beluso could avail from the former credit of up to a maximum amount of P1.2 million for a term ending on April 30, 1997. The spouses constituted a real estate mortgage over parcels of land in Roxas City, covered by Transfer Certificates of Title No. T-31539 and T-27828, as additional security for the obligation. The Credit Agreement was amended subsequently to increase the amount of the Promissory Notes Line to a maximum of P2.35 million and to extend the term to February 28, 1998.

The three promissory notes were renewed several times. To completely avail themselves of P2.35 million credit line extended to them by UCPB, the spouses Beluso executed two more promissory notes for a total of P350, 000.00. However, the spouses Beluso alleged that the amounts covered by the said last two promissory notes were never released or credited to their account and claimed that the principal indebtedness was only P2 million.

In any case, UCPB applied interest rate on the different promissory notes ranging from 18% to 34%. From 1996 to February 1998 the spouses were able to pay the total amount of P763, 692.03. After which, on February 28, 1998 to June 1998, the interest and penalty on the obligations of the spouses Beluso were continuously charged by UCPB. However, the spouses failed to make any payment. UCPB demanded that the spouses should pay their total obligation of P2, 932, 543.00 plus 25% attorney’s fees, but the spouses failed to comply therewith. UCPB foreclosed the properties mortgaged by the spouses to secure their credit line.

The spouses then filed a petition for annulment, accounting and damaged against UCPB which the court ruled in favor of them. The UCPB filed a motion for reconsideration but it was denied for lack of merit by the RTC.

ISSUE:

Whether or not there exists a principle of mutuality between the contracting parties which is valid and enforceable.

HELD:

In order that obligations arising from contracts may have the force of law between the parties, there must be mutuality between the parties based on their essential equality.

The provision stating that the interest shall be at the “rate indicative of DBD retail rate or as determined by the Branch Head” is indeed dependent solely on the will of petitioner UCPB. Under such provision, petitioner UCPB has two choices on what the interest rate shall be: (1) a rate indicative of the DBD retail rate; or (2) a rate as determined by the Branch Head. As UCPB is given this choice, the rate should be categorically determinable in both choices. If either of these two choices presents an opportunity for UCPB to fix the rate at will, the bank can easily choose an option, thus making the entire interest rate provision violative of the principle of mutuality of contracts. Not just one, but rather both, of these choices is dependent solely on the will of UCPB. Clearly, a rate “as determined by the Branch Head” gives the latter unfettered discretion on what the rate may be. The Branch Head may choose any rate he or she desires. As regards the rate, “indicative of the DBD retail rate,” the same cannot be considered as valid for being akin to a “prevailing rate” or “prime rate” allowed by this court in Polotan.

Mercury Drug Corporation and Aurmela Ganzon v. Raul de Leon

G.R. No. 165622 October 17, 2008

FACTS:

Raul De Leon consulted Dr. Milla about his irritated left eye. Dr. Milla prescribed the drugs “Cortisporin Opthalmic” and “Ceftin” to relieve his eye problems. De Leon went to the Betterliving, Parañaque, branch of Mercury Drug Store Corporation to buy the prescribed medicines. He showed his prescription to Aurmela Ganzon, a pharmacist assistant. He then paid for and took the medicine handed over by Ganzon.

De Leon requested his sheriff to assist him in using the eyedrops. The sheriff applied 2-3 drops on De Leon’s eyes. Instead of relieving his irritation, De Leon felt severe pain. He immediately rinsed the affected eye with water, but the pain did not subside. Only then did he discover that he was given the wrong medicine, “Cortisporin Otic Solution”, which is used for ears. He then returned the medicine to the same Mercury Drug branch. He confronted Ganzon, why he was given ear drops instead of eye drops, she did not apologize and instead she replied that she was unable to read the prescription fully. It was her supervisor who apologized and informed De Leon that they do not have stock of the needed eye drops. De Leon wrote a complaint against Mercury Drug, through its president, Ms. Vivian K. Askuna but she did not merit any response. De Leon filed a coplaint for damage against Mercury Drug. Mercury Drug denied that it was negligent and therefore liable for damages. Thus, it pointed out that the proximate cause of De Leon’s unfortunate experience was his own negligence.

ISSUES:

Whether or not the pharmacist exercised the highest practicable degree of prudence and vigilance while attending to the needs of De Leon.

Whether or not Mercury Drug is liable for the damages suffered by De Leon.

HELD:

The profession of pharmacy demands great skill and care. The court reminded pharmacists to exercise the highest degree of care known to practical men. In cases where an injury is caused by the negligence of an employee, there instantly arises a presumption of law that there has been

negligence on the part of the employees, either in the selection or supervision of one’s employees. This presumption may be rebutted by a clear showing that the employer has exercised the care and diligence of a good father of the family. Mercury Drug failed to overcome such presumption.

The court also ruled that in th purchase and sale of drugs, the buyer and seller do not stand at arms length. There exists as imperative duty on the seller or the druggist to take precaution to prevent death or injury to any person who relies on one’s absolute honesty and peculiar learning. It would be idle mockery for the customer to make an examination of a compound of which he can know nothing. Consequently, it must be that the druggist warrants that he will deliver the drug called for.

Pryce Corporation (formerly Pryce Properties Corporation) v. Philippine

Amusement and Gaming Corporation

G.R. No. 157480 May 6, 2005

FACTS:

Sometime in the first half of 1992, representative from Pryce Properties Corporation made representatives with the Philippine Amusement and Gaming Corporation (PAGCOR) on the possibility of setting up casino in Pryce Plaza Hotel in Cagayan de Oro City. A series of negotiation followed. On November 11, 1992, the parties executed a contract of Lease involving the ballroom of the Hotel for a period of three years. They executed an addendum to the contract which included a lease of an individual additional 1000 square meters of the hotel grounds as living granters and playground of the casino personnel. PAGCOR advertised the start of their casino operations on December 18, 1992.

Hours before the actual formal opening of casino operations, a public rally in front of the hotel was staged by some local officials, residents and religious leaders. PAGCOR was constrained to suspend casino operations because of the rally. The rally was eventually ended due to an agreement between PPC and PAGCOR and representative of the rallyists.

Ordinance No. 3375-93 was passed by the Sangguniang Panglungsod of Cagayan de Oro City, prohibiting the operation of casinos and providing for penalty for violation thereof. Subsequently, PPC filed a Petition for Prohibition with Preliminary Injunction against then public respondent Cagayan de Oro City before the court of appeals praying for the declaration of unconstitutionality of the Ordinance. Even PAGCOR intervened in said petition as being the ordinance violative of non-impairement of contracts and equal protection clauses. The Court of Appeals declared the ordinances null and void. Aggrieved by the decision, the public respondents elevated the case to the Supreme Court but the same affirmed the decision of the Court of Appeals.

PAGCOR resumed its casino operations but eventually decided to stop its operations in Cagayan de Oro City due to incessant demonstrations. PPC sent PAGCOR collecting the full rentals in case of pre-termination of the lease. PAGCOR was not amenable to the payment of the full rentals citing as reasons unforeseen legal and other circumstances which prevented it from complying with its obligations. PPC filed a case for a sum of money in the

RTC. PAGCOR also filed a case for sum of money. PPC claimed that PAGCOR was continuously breaching their contract so PPC terminated the contract of lease.

ISSUE:

Whether or not PPC’s act of terminating the contract of lease with PAGCOR refers to a valid rescission or simply termination of contracts.

HELD:

Rescission has been defined as the “unmaking of a contract, or its undoing from the beginning, and not merely its termination.” Rescission may be effected by both parties by mutual agreement; or unilaterally by one of them declaring a rescission of contract without the consent of the other, if a legally sufficient ground exists or if a decree of rescission is applied for before the courts. On the other hand, termination refers to an “end in time of existence; a close, cessation or conclusion.” With respect to a lease or contract, it means an ending, usually before the end of the anticipated term of such lease or contract that may be affected by mutual agreement or by one party exercising one of its remedies as a consequence of the default of the other. Thus, mutual restitution is required in a rescission, in order to bring back the parties to their original situation prior to the inception of the contract. Applying this principle to this case, it means that PPC would re-acquire possession of the leased premises, and PAGCOR would get back the rentals it paid the former for the use of the hotel space. In contrast, the parties in a case of termination are not restored to their original situation; neither is the contract treated as if it never existed. Prior to its termination, the parties are obliged to comply with their contractual obligations. Only after the contract has been cancelled will they be released from their obligations.