obligations cases 1

7/29/2019 Obligations Cases 1

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COURTESY OF SU LAW 2011

ANG YU ASUNCION VS. COURT OF APPEALS

238 SCRA 602

FACTS:

On July 29, 1987, a Second Amended Complaint for Specific Performance was filed by Ang Yu

Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng and Jose Tan before the Regional Trial Court of

Manila.

The plaintiffs were tenants or lessees of residential and commercial spaces owned by defendants in

Binondo, Manila. On several conditions defendants informed the plaintiffs that they are offering to sell

the premises and are giving them priority to acquire the same. During negotiations, Bobby Cu Unjiengoffered a price of P6-million while plaintiffs made a counter of offer of P5-million. Plaintiff thereafter

asked the defendants to put their offer in writing to which the defendants acceded. In reply to

defendants letter, plaintiffs wrote, asking that they specify the terms and conditions of the offer to sell.

When the plaintiffs did not receive any reply, they sent another letter with the same request.Since

defendants failed to specify the terms and conditions of the offer to sell and because of information

received that the defendants were about to sell the property, plaintiffs were compelled to file the

complaint to compel defendants to sell the property to them.

The court dismissed the complaint on the ground that the parties did not agree upon the terms and

conditions of the proposed sale, hence, there was no contact of sale at all.

On November 15, 1990, the Cu Unjieng spouses executed a Deed of Sale transferring the property in

question to Buen Realty and Development Corporation. Buen Realty, as the new owner of the subject

property, wrote to the lessees demanding the latter to vacate the premises. In its reply, it stated that

Buen Realty and Development Corporation brought the property subject to the notice of lis pendens.

ISSUE:

Can Buen Realty be bound by the writ of execution by virtue of the notice of lis pendens?

RULING:

No.An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation

is upon the concurrence of the essential elements thereof, viz:


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(a) the vinculum juris or juridical tie which is the efficient cause established by the various sources of

obligations; (b) the object which is the prestation or conduct, required to observed; and (c) the subject-

persons who, viewed demandability of the obligation are the active (oblige) and the passive (obligor)

subjects.

Among the sources of an obligation is a contract (Art. 1157), which is a meeting of minds between two

persons whereby one binds himself, with respect to the other, to give something or to render some

service. A contract undergoes various stages that include its negotiation or preparation, its perfection

and, finally, its consummation.

Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding

juridical relation. In sales, particularly, to which the case at bench belongs, the contract is perfected

when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer

ownership of a thing or right to another, called the buyer, over which the latter agrees.

The registration of lis pendens must be independently addressed in appropriate proceedings.Therefore,

Buen Realty cannot be held subject to the writ of execution issued by the respondent Judge, let alone

ousted from the ownership and possession of the property, without first being duly afforded its day in

court.

SAGRADA ORDEN vs. NATIONAL COCONUT CORPORATION

91 PHIL. 503

FACTS:

Plaintiff Sagrada Orden owned a piece of real property in Pandacan, Manila. During the Japanese

occupation, the land was acquired by a Japanese corporation Taiwan Tekkoshho. After the liberation, the

Alien Property Custodian of the United States took possession, control, and custody of the real property.

During the year 1946, the property was occupied by the Copra Export Management Company under the

custodianship agreement with United States Alien Property Custodian, and when it vacated, the propertywas occupied by defendant National Coconut Corporation. Sagrada Orden made claim to the property

before the Alien Property Custodian of the United States but was denied. So plaintiff brought an action

in court to annul the sale of property of Taiwan Tekkosho, and recover its possession. The case did not

come for trial because the parties presented a joint petition in which it is claimed by Sagrada Orden that

the sale in favor of Taiwan Tekkosho was null and void because it was executed under threats, duress,

and intimidation, and that the title be re-issued to Sagrada Orden. The court rendered judgment


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releasing the defendant from liability, but reversing to the plaintiff the right to recover from the

defendant reasonable rentals for the use and occupation of the premises.

The present action to recover the reasonable rentals from August 1946, the date when defendant began

to occupy, to the date it vacated it. The defendant did not contest its liability for the rentals at the rate of

P3, 000 per month from February 28, 1949, but resisted the claim therefore prior to that date.Defendant contends that it occupied the property in good faith, under no obligation to pay rentals for

the use and occupation. Judgment rendered for the plaintiff to recover from the defendant the sum of

P3, 000 a month, from August, 1946, to the date the defendant vacates the premises. Thus this appeal

made by defendant.

ISSUE:

Can the defendant company be held liable to pay rentals from August 1946 to the date it vacated?

RULING:

No. If defendant-appellant is liable at all, its obligations, must arise from any of the four sources of

obligations, namely, law, contract or quasi-contract, crime, or negligence. Defendant-appellant is not

guilty of any offense at all, because it entered the premises and occupied it with the permission of the

entity which had the legal control and administration thereof, the Alien Property Administration. Neither

was there any negligence on its part. There was also no privity between the Alien Property Custodian

and the Taiwan Tekkosho, which had secured the possession of the property from the plaintiff-appelleeby the use of duress, such that the Alien Property Custodian or its permittee (defendant-appellant) may

be held responsible for the supposed illegality of the occupation of the property by the said Taiwan

Tekkosho. The Alien Property Administration had the control and administration of the property not as

successor to the interests of the enemy holder of the title, the Taiwan Tekkosho. Neither is it a trustee of

the former owner, the plaintiff-appellee herein, but a trustee of then Government of the United States,

in its own right, to the exclusion of, and against the claim or title of, the enemy owner. From August,

1946, when defendant-appellant took possession, to the late of judgment on February 28, 1948, Alien

Property Administration had the absolute control of the property as trustee of the Government of the

United States, with power to dispose of it by sale or otherwise, as though it were the absolute owner.

Therefore, even if defendant-appellant were liable to the Alien Property Administration for rentals, these

would not accrue to the benefit of the plaintiff-appellee, the owner, but to the United StatesGovernment.

PE VS INTERMEDIATE APPELLATE COURT


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195 SCRA 137

FACTS:

Plaintiff spouses Francisco and Anita Pe entered into a contract to sell their 5 parcels of

land. These parcels of land were mortgaged with different banking institutions. Lots Nos. 40 and 41

were mortgaged to the Philippine Veterans Bank (PVB) for P351,162.59; Lots Nos. 42 and 45 were

mortgaged to the Development Bank of the Philippines (DBP) for P189,322.49; and Lot No. 47 to

Philippine Commercial and Industrial Bank (PCIB) for P57,000.

On September 20, 1976, the plaintiffs executed a contract to sell. The plaintiffs were paid the

total amount of 351,162.59 to PVB for lots 40 and 41. On the same date, they executed in favor of

Domingo Sy a deed of sale over Lots Nos. 42 and 45 after payment by the latter of the former's account

with the DBP in the amount of P189,322.49. Consequently, a contract to sell and a corresponding deed

of sale covering Lot No. 47 were prepared but the deed did not materialize as the buyers offer of

P49,454.92, as payment for Lot No. 47, was rejected by the Pe spouses, the latter insisted on the full

payment of their obligation with the (PCIB) in the amount of P383,615.97 and P620,000 as the alleged

consideration stipulated in the Contract to Sell. Pe allege that the consideration of the Contract to Sell

was P1,544,161.05 and not P620,000.

ISSUE:

Was the contention of the plaintiffs valid?

RULING:

No. The words of the Contract to Sell were clear and left no doubt upon the true intention of the

contracting parties. The condition laid down in paragraph (2) of the contract did not provide for an

additional consideration, but only for the manner in which the consideration was to be applied. It clearly

provided that payment shall be applied to petitioners' obligations with the bank where the respective

properties were mortgaged, and upon their release, petitioners shall execute the final deed of sale. The

subsequent acts of the parties conformed with this condition. Thus, the parties should be bound by suchwritten contract. It should also be noted that at the time of the execution of the Contract to Sell, the

total obligation due to the PCIB as regards Lot No. 47 was only P 99,374.89. The rise of the same

obligation to P383,615.96 was brought about by subsequent loans the petitioners obtained with the

same bank for which the tractor and an "Offset Discharrow" were given as additional security.

Contracts are respected as the law between the contracting parties. The parties may establish


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such stipulations, clauses, terms and conditions as they may want to include. As long as such agreements

are not contrary to law, morals, good customs, public policy or public order, they shall have the force of

law between.

LEUNG BEN VS. P. J. O'BRIEN

G.R. No. L-13602 April 6, 1918

FACTS:

An action was instituted in the Court of First Instance of the city of Manila by P. J. O'Brien to recover the

sum of P15,000 alleged to have been lost by Leung Ben to P.J. OBrien in a series of gambling, banking

and percentage games conducted during the two or three months prior to the institution of the suit. In

Leung Bens verified complaint,OBrien asked for an attachment against the property of Leung Ben on

the ground that the latter was about to depart from the Philippine Islands with intent to defraud his

creditors. This attachment was issued, and acting under that authority, the sheriff attached the sum of

P15,000 which had been deposited by the OBrien with the International Banking Corporation.

Leung Bien filed a motion to quash the attachment, which was dismissed by the court. Hence this

application for a writ of certiorari, the purpose of which was to quash an attachment issued from the

Court of First Instance of the City of Manila.

ISSUE:

Was the statutory obligation to restore money won at gaming an obligation arising from "contract,

express or implied?"

RULING:

Yes.Upon general principles, recognized both in the civil and common law, money lost in gaming and

voluntarily paid by the loser to the winner cannot, in the absence of statute, be recovered in a civil

action. But Act No. 1757 of the Philippine Commission, which defines and penalizes several forms ofgambling, contains numerous provisions recognizing the right to recover money lost in gambling or in

playing certain games. The original complaint filed in the Court of First Instance was not clear as to the

particular section of Act No. 1757 under which the action was brought, but was alleged that the money

was lost at gambling, banking, and percentage game in which the defendant was a banker. It must

therefore be assumed that the action was based upon the right of recovery given in section 7 of said Act,

which declared that an action may be brought against the banker by any person losing money at a


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banking or percentage game.

It was observed that according to the Civil Code obligations are supposed to be derived either from (1)

the law, (2) contracts and quasi-contracts, (3) illicit acts and omission, or (4) acts in which some sort ob

lame or negligence is present. This enumeration of sources of obligations and the obligation imposed by

law are different types. The obligations which in the Code are indicated as quasi-contracts, as well asthose arising ex lege, are in the common la system, merged into the category of obligations imposed by

law, and all are denominated implied contracts.

In the case under consideration, the duty of O Brien to refund the money which he won from the Leung

Ben at gaming was a duty imposed by statute. It therefore arose ex lege. Furthermore, it was a duty to

return a certain sum which had passed from OBrien to Leung Ben. By all the criteria which the common

law supplies, this a duty in the nature of debt and is properly classified as an implied contract. It was

well- settled by the English authorities that money lost in gambling or by lottery, if recoverable at all, can

be recovered by the loser in an action of indebitatus assumpsit for money had and received. This meant

that in the common law the duty to return money won in this way was an implied contract, or quasi-

contract. The phase in question should be interpreted in such a way as to include all obligations, whether

arising from consent or ex lege, because that was equivalent to eliminating all distinction between the

first and the fifth paragraphs by practically striking out the first two lines of paragraph one. The

Legislature had deliberately established this distinction, and while we may be unable to see any reason

why it should have been made, it was our duty to apply and interpret the law, and we were not

authorized under the guise of interpretation to virtually repeal part of the statute.

Nor can it be said that the relations between the parties litigant constitute a quasi-contract. In the first

place, quasi- contracts are "lawful and purely voluntary acts by which the authors thereof become

obligated in favor of a third person. . . ." The act which gave rise to the obligation ex lege relied upon by

Leung Ben in the court below is illicit an unlawful gambling game. In the second place, the firstparagraph of section 412 of the Code of Civil Procedure does not authorize an attachment in actions

arising out of quasi contracts, but only in actions arising out of contract, express or implied.

SAGRADA ORDEN VS. NATIONAL COCONUT CORPORATION

91 SCRA 503

FACTS:

Petitioner, Sagrada Orden owned a land which was acquired by a Japanese corporation during the

Japanese military occupation. After the liberation, the Alien Property Custodian took possession, control

and custody of the land. The Copra Export Management Company occupied the property and when it

vacated, the respondent, National Coconut Corporation occupied it through the representation made by

the Philippine Government to the Alien Property Custodian.


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The property was returned to Sagrada Orden upon judgment that the contract of sale of the

property in favor of the Japanese corporation was null and void and upon payment of the consideration

it received for the property to the Philippine Alien Property Administration. Sagrada Orden was also

given the right to recover from National Coconut Corporation reasonable rentals for the use and

occupation of the premises.

Sagrada Orden filed an action to recover rentals from National Coconut Corporation from the time

it used and occupied the premises. National Coconut Corporation claimed that it was willing to pay only

from the time the property was returned to Sagrada Orden and not before, for it occupied the property

in good faith, under no obligation to pay the rentals.

ISSUE:

Was National Coconut Corporation liable for rentals prior to the date the property was returned

to Sagrada Orden?

RULING:

No. National Coconut Corporation was not liable for the rentals prior to the date the property was

returned to Sagrada Orden. For National Coconut Corporation to be liable, its obligation must arise from

the law, contract or quasi- contract, crime or negligence as provided by Article 1157 of the Civil Code

which was taken from Article 1089 of the old Civil Code. As none of these sources were present, National

Coconut Corporation cannot be held liable.

There was also no express agreement between the entity which had legal control and

administration of the property and the National Coconut Corporation for the latter to pay rentals on the

property so there was no obligation.

PELAYO VS. LAURON

12 Phil. 453

FACTS:

On November 23, 1906, a physician named Arturo Pelayo filed a complaint against Marelo Lauron

and Juana Abellana. On the night of October 13th of the same year, the plaintiff was called to render

medical assistance to the defendants daughter-in-law, who was about to gie birth. After the consultation

of Dr. Escao, it was deemed that the operation was going to be difficult for child birth, but regardless,


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Dr. Pelayo proceeded with the job of operating on the subject and also removed the afterbirth. The

operation went on until morning, and on the same day, visited several times and billed the defendants

the just amount of P500 for the services rendered to which defendants refused to pay.

In answer to the complaint, counsel for the defendants denied all of the allegation and alleged as

a special defense, that their daughter-in-law had died in consequence of the said childbirth, that whenshe was alive she lived with her husband independently and in a separate house without any relation

whatever with them, and that, if on the day when she gave birth she was in the house of the defendants,

her stay their was accidental and due to fortuitous circumstances. Therefore, he prayed that the

defendants be absolved of the complaint with costs against the plaintiff.

ISSUE:

Can the defendants be held liable to pay for the obligation?

RULING:

No. According to article 1089 of the Civil Code, 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 betweenthe contracting parties and must be fulfilled in accordance with their stipulations. (Arts. 1090 and 1091.)

The rendering of medical assistance in case of illness was comprised among the mutual obligations to

which the spouses were 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 were

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 was 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 was therefore liable for all expenses, including the fees of the medical expert for his professionalservices.

In the face of the above legal precepts, it was unquestionable that 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, was the husband of the patient and not her father and mother- in-law of the

defendants herein.


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DIANA VS. BATANGAS TRANSPORTATION, CO.

93 Phil 391

FACTS:

On June 21, 1945, Truck No. 14 belonging to the defendant Batangas Transportation, Co. driven by

Vivencio Bristol ran into a ditch at Bay, Laguna resulting in the death of Florenio Diana and other

passengers. Plaintiffs were the heirs of Diana. Bristol was charged and convicted of multiple homicide

through reckless imprudence where he was ordered to indemnify the heirs of the deceased in the

amount of Php 2,000. When the decision became final, a writ of execution was issued in order that the

indemnity may be , but the sheriff filed a return stating that the accused had no visible leviable property.

The present case (civil case No. 9221) was started when defendant failed to pay the indemnity under its

subsidiary liability under article 103 of the Revised Penal Code.

Defendant filed a motion to dismiss on the ground that there was another action pending

between the same parties for the same cause (civil case No. 8023) in which the same plaintiffs sought to

recover from the same defendant the amount of P4,500 as damages resulting from the death of Florenio

Diana, who died while on board a truck of defendant due to the negligent act (culpa aquiliana) of the

driver Vivencio Bristol.

Plaintiffs filed a written opposition to the motion to dismiss. The lower court, having found the motion

well founded, dismissed the complaint, without special pronouncement as to costs, and their motion forreconsideration having been denied, plaintiffs took the present appeal.

ISSUE:

Did the lower court correctly dismiss the complaint on the sole ground that there was another

action pending between the same parties for the same cause?

RULING:

No. The present case (civil case No. 9221) stemmed from a criminal case in which the driver of the

defendant was found guilty of multiple homicide through reckless imprudence and was ordered to pay

an indemnity of P2,000 for which the defendant was made subsidiarily liable under article 103 of the

Revised Penal Code. While the other case (civil case No. 8023) was an action for damages based on culpa


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aquiliana which underlies the civil liability predicated on articles 1902 to 1910 of the old Civil Code.

These two cases involved two different remedies. As this court aptly said: "A quasi-delict or culpa

aquiliana is a separate legal institution under the Civil Code, with a substantivity all its own, and

individuality that is entirely apart and independent from a delict or crime. * * *. A distinction exists

between the civil liability arising from a crime and the responsibility for cuasi-delictos or culpa extra-

contractual. The same negligent act causing damages may produce civil liability arising from a crimeunder article 100 of the Revised Penal Code, or create an action for cuasi-delito or culpa extra-

contractual under articles 1902-1910 of the Civil Code.

It was a mistake to say that the present action should be dismissed, because of the pendency of

another action between the same parties involving the same cause. Evidently, both cases involved

different causes of action.

FAUSTO BARREDO VS. SEVERINO GARCIA AND TIMOTEA ALAMARIO

73 PHIL. 607

FACTS:

On the road between Malabon and Navotas, Province of Rizal, there was a head-on collision between a

taxi of the Malate Taxicab driven by Pedro Fontanilla and a carretela guided by Pedro Dimapalis. The

carretela was overturned, and one of its passengers, 16-year-old boy Faustino Garcia, suffered injuries

from which he died two days later. A criminal action was filed against Fontanilla in the Court of First

Instance of Rizal, where he was convicted and sentenced acoordingly. The court in the criminal case

granted the petition that the right to bring a separate civil action be reserved.

The respondents, Severino Garcia and Timotea Almario, parents of the deceased on March 7, 1939,

brought an action in the Court of First Instance of Manila against the petitioner Fausto Barredo as the

sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla. The Court of First Instance of

Manila awarded damages in favor of the respondents for P2,000 plus legal interest from the date of the

complaint, which was modified by the Court of Appeals by reducing the damages to P1,000 with legal

interest from the time the action was instituted. It was undisputed that Fontanillas negligence was the

cause of the mishap, as he was driving on the wrong side of the road, and at high speed. As to Barredo's

responsibility, the Court of Appeals found that there was proof that Barredo as employer exercised the

diligence of a good father of a family to prevent damage. In fact, it was shown he was careless in

employing Fontanilla, who had been caught several times for violation of the Automobile Law andspeeding. Defendant contended that his liability was governed by the Revised Penal Code, according to

which his responsibility was only secondary, but no civil action had been brought against the taxi driver.

ISSUE:


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May the plaintiffs bring a separate civil action against Fausto Barredo, thus making him primarily and

directly responsible under article 1903 of the Civil Code as an employer of Pedro Fontanilla?

RULING:

Yes. Authorities support the proposition that a quasi-delict or "culpa aquiliana " is a separate legal

institution under the Civil Code with a substantivity all its own, and individuality that is entirely apart and

independent from delict or crime. Upon this principle and on the wording and spirit of article 1903 of

the Civil Code, the primary and direct responsibility of employers may be safely anchored.

It will thus be seen that while the terms of articles 1902 of the Civil Code seem to be broad enough to

cover the driver's negligence in the instant case, nevertheless article 1093 limits cuasi-delitos to acts or

omissions "not punishable by law." But inasmuch as article 365 of the Revised Penal Code punishes not

only reckless but even simple imprudence or negligence, the fault or negligence under article 1902 of

the Civil Code has apparently been crowded out. It is this overlapping that makes the "confusion worse

confounded." However, a closer study shows that such a concurrence of scope in regard to negligent acts

does not destroy the distinction between the civil liability arising from a crime and the responsibility for

cuasi-delitos or culpa extra-contractual. The same negligent act causing damages may produce civil

liability arising from a crime under article 100 of the Revised Penal Code, or create an action for cuasi-

delito or culpa extra-contractual under articles 1902-1910( 2176, 2180- NCC) of the Civil Code.

GASHEM SHOOKAT BAKSH VS CA AND MARILOU T. GONZALES

GR 97336 February 19, 1993

FACTS:

Gashem Shookat Baksh, an Iranian citizen, was an exchange student taking medical course at the Lyceum

Northwestern College in Dagupan City. Private respondent, Marilou Gonzales on the other hand, was an

employee at Mabuhay Luncheonette, a high school graduate and of good moral character and

reputation duly respected in her community.

The two met at a party on August 3, 1986 and later on became inseparable lovers. Not long after, Baksh


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proposed to marry Marilou which she willingly accepted.

Even before their engagement, Baksh and private respondent were already living together. In the course

of their cohabitation, Baksh attitude towards her changed. She was maltreated. As a result, private

respondent decided to leave. Thereafter, she filed a complaint against Baksh who renounced their

marriage agreement and asked her not to live with him anymore, because he was already married tosomeone living in Bacolod.

ISSUE:

Was private respondent entitled to damages?

RULING:

Yes. Article 2176 of the Civil Code, which defines a quasi-delict thus:

"Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to

pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation

between the parties, is called aquasi-delict and is governed by the provisions of this Chapter."

limited to negligent acts or omissions and excludes the notion of willfulness or intent. Quasi-delict,

known in Spanish legal treatises as culpa aquiliana, is a civil law concept while torts is an Anglo-American

or common law concept. Tortsis much broader than culpa aquiliana because it includes not onlynegligence, but international criminal acts as well such as assault and battery, false imprisonment and

deceit. In the general scheme of the Philippine legal system envisioned by the Commission responsible

for drafting the New Civil Code, intentional and malicious acts, with certain exceptions, are to be

governed by the Revised Penal Code, while negligent acts or omissions are to be covered by Article 2176

of the Civil Code.

DIANA VS. BATANGAS TRANSPORTATION, CO.

93 PHIL 391

FACTS:

On June 21, 1945, Truck No. 14 belonging to the defendant Batangas Transportation, Co. driven by

Vivencio Bristol ran into a ditch at Bay, Laguna resulting in the death of Florenio Diana and other

passengers. Plaintiffs are the heirs of Diana. Bristol was charged and convicted of multiple homicide


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through reckless imprudence where he was ordered to indemnify the heirs of the deceased in the

amount of Php 2,000. When the decision became final, a writ of execution was issued in order that the

indemnity may be satisfied but the sheriff filed a return stating that the accused had no visible leviable

property. The present case (civil case No. 9221) was started when defendant failed to pay the indemnity

under its subsidiary liability under article 103 of the Revised Penal Code.

Defendant filed a motion to dismiss on the ground that there was another action pending

between the same parties for the same cause (civil case No. 8023) in which the same plaintiffs sought to

recover from the same defendant the amount of P4,500 as damages resulting from the death of Florenio

Diana, who died while on board a truck of defendant due to the negligent act (culpa aquiliana) of the

driver Vivencio Bristol.

Plaintiffs filed a written opposition to the motion to dismiss. The lower court, having found the motion

well founded, dismissed the complaint, without special pronouncement as to costs; and their motion for

reconsideration having been denied, plaintiffs took the present appeal.

ISSUE:

Was the lower court correct in dismissing the complaint on the sole ground that there was

another action pending between the same parties for same cause under Rule 8, section 1(d) of the Rules

of Court?

RULING:

No. Rule 8, section 1 (d) allows the dismissal of a case on the ground that "there is another action

pending between the same parties for the same cause." But where the present case stems from a

criminal case in which the river of the defendant was found guilty of multiple homicide through reckless

imprudence and was ordered to pay an indemnity of P2,000 for which the defendant was made

subsidiarily liable under article 103 of the Revised Penal Code, while the other case (civil case No. 8023)

was an action for damages based on culpa aquiliana which underlies the civil liability predicated on

articles 1902 to 1910 of the old Civil Code, the two cases involved two different remedies and the

present case should not be dismissed.

"A quasi-delict or culpa aquiliana is a separate legal institution under the Civil Code, with asubstantivity all its own, and individuality that is entirely apart and independent from a delict or crime. *

* *. A distinction exists between the civil liability arising from a crime and the responsibility for cuasi-

delictos or culpa extra-contractual. The same negligent act causing damages may produce civil liability

arising from a crime under article 100 of the Revised Penal Code, or create an action for cuasi-

delito or culpa extra-contractual under articles 1902-1910 of the Civil Code.


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VALENZUELA VS. CA

253 SCRA 303

FACTS:

A case was filed by Ma. Lourdes Valenzuela, which was an action to recover damages based on

quasi-delict, for serious physical injuries sustained in a vehicular accident on June 24, 1990. During the

accident, Valenzuelas left leg was severed up to the middle of her thigh, with only some skin and muscle

connected to the rest of the body so she had to be amputated. She was confined in the hospital for

twenty days and was eventually fitted with an artificial leg.

The lower court found Richard Li, the person driving the Mitsubishi Lancer, guilty of gross

negligence and liable for damages under 2176 of the Civil Code. Alexander Commercial Inc., Lis

employer, was also found jointly and severally liable.

Upon appeal, CA agreed with the decision of the lower court regarding the liability of Li. However,

CA absolved the liability of Alexander Commercial Inc. CA also reduced the claim for moral damages.

Hence, both parties assailed the respondent courts decision by filing two separate petitions.

ISSUE:

Should Alexander Commercial Inc. be held jointly and severally liable?

RULING:

Yes. The Court agreed with the CA that the relationship of the employer and employee was not

based on the principle of respondent superior, which held the master liable for acts of the servant, but

that of pater familias, in which the liability ultimately fell upon the employer for his failure to exercisethe diligence of a good father of the family in the selection and supervision of his employees. Under the

concept of pater familias embodied by Article 2180, the employer may be relieved from any liability

upon showing that he exercised the diligence of a good father of the family. Once the evidence is

introduced showing that the employer exercised the required amount of care, half of the employers

burden is overcome. However, the question of diligent supervision depends on the circumstances of

employment.


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In the instant case, Li, as an Assistant Manager of the company, admitted that his functions did

not require him to scrupulously keep normal office hours as he performs social and work-related

functions. The service car assigned to Li, therefore, enabled both to put up the front of a highly

successful entity, increasing the latters goodwill before its clientele. It also facilitated meeting between

Li and its clients by providing the former with a convenient mode of travel. Assuming that he really camefrom his officemates place as Li claimed, the same could give rise to speculation that he and his

officemate had just been from a work-related function, or they were together to discuss sales and other

work related strategies.

Moreover, Alexander Commercial Inc. had not demonstrated to the satisfaction of the court that it

exercised the care and diligence of a good father of the family in entrusting its company car to Li. No

allegations were made as to whether or not the company took the steps necessary to determine or

ascertain the driving proficiency and history of Li to whom it gave full and unlimited use of a company

car. Not having been able to overcome the burden of demonstrating that should be absolved of liability

for entrusting its company car to Li, said company based on the principle of bonus pater familias, ought

to be jointly and severally liable with Li for the injuries sustained by Valenzuela during the accident.

Thus, the decision of the CA was modified with the effect of reinstating the decision of the RTC.

MANILA RAILROAD CO. VS. COMPANIA TRANSATLANTICA

38 Phil 875

FACTS:

SS/Alicante, belonging to Compania Transatlantica de Barcelona was transporting two locomotive

boilers for the Manila Railroad Company. The equipment of the ship for discharging the heavy cargo was

not strong enough to handle the boilers. Compania Transatlantica contracted the services of Atlantic

gulf and Pacific Co., which had the best equipment to lift the boilers out of the ships hold. When

Alicante arrived in Manila, Atlantic company sent out its floating crane under the charge of one Leyden.

When the first boiler was being hoisted out of the ships hold, the boiler could not be brought out

because the sling was not properly placed and the head of the boiler was caught under the edge of the

hatch. The weight on the crane was increased by a strain estimated at 15 tons with the result that the

cable of the sling broke and the boiler fell to the bottom of the ships hold. The sling was again adjusted

and the boiler was again lifted but as it was being brought up the bolt at the end of the derrick broke and

the boiler fell again. The boiler was so badly damaged that it had to be shipped back to England to be

rebuilt. The damages suffered by Manila Railroad amounted to P23,343.29. Manila Railroad then filed


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an action against the Streamship Company to recover said damages. The Steamship Company caused

Atlantic Company to be brought as co-defendant arguing that Atlantic Company as an independent

contractor, who had undertaken to discharge the boilers had become responsible for the damage.

The Court of First Instance decided in favor of Manila Railroad, the plaintiff, against Atlantic Company

and absolved the Steamship Company. Manila Railroad appealed from the decision because theSteamship Company was not held liable also. Atlantic Company also appealed from the judgment

against it.

ISSUES:

1. Was the Steamship Company liable to Manila Railroad for delivering the boiler in a damaged

condition?

2. Was Atlantic Company liable to the Steamship Company for the amount it may be required to pay

the plaintiff?

Was Atlantic Company directly liable to plaintiff as held by the trial court?

RULING:

There was a contractual relation between the Steamship Company and Manila Railroad. There wasalso a contractual relation between the Steamship Company and Atlantic. But there was no contractual

relation between the Railroad Company and Atlantic Company.

There was no question that the Steamship Company was liable to Manila Railroad as it had the

obligation to transport the boiler in a proper manner safe and securely under the circumstances required

by law and customs. The Steamship Company cannot escape liability simply because it employed a

competent independent contractor to discharge the boiler.

Atlantic Company claimed that it was not liable, because it had employed all the diligence of a good

father of a family and proper care in the selection of Leyden. Said argument was not tenable, because

said defense was not applicable to negligence arising in the course of the performance of a contractual

obligation. The same can be said with respect to the liability of Atlantic Company upon its contract with

the Steamship Company. There was a distinction between negligence in the performance of a

contractual obligation (culpa contractual) and negligence considered as an independent source of

obligation (culpa aquiliana). Atlantic Company wasis liable to the Steamship Company for the damage

brought upon the latter by the failure of Atlantic Company to use due care in discharging the boiler,

regardless of the fact that the damage was caused by the negligence of an employee who was qualified


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for the work, duly chose with due care.

Since there was no contract between the Railroad Company and Atlantic Company, Railroad Company

can had no right of action to recover damages from Atlantic Company for the wrongful act which

constituted the violation of the contract. The rights of Manila Railroad can only be made effective

through the Steamship Company with whom the contract of affreightment was made.

MARANAN VS PEREZ

20 SCRA 412

FACTS:

Rogelio Corachea, a passenger in a taxicab owned and operated by Pascual Perez, was stabbed

and killed by the driver, Simeon Valenzuela. Valenzuela was found guilty for homicide by the Court of

First Instance and was sentenced to suffer Imprisonment and to indemnify the heirs of the deceased in

the sum of P6000. While pending appeal, mother of deceased filed an action in the Court of First

Instance of Batangas to recover damages from Perez and Valenzuela. Defendant Perez claimed that the

death was a caso fortuito for which the carrier was not liable. The court a quo, after trial, found for the

plaintiff and awarded her P3,000 as damages against defendant Perez. The claim against defendant

Valenzuela was dismissed. From this ruling, both plaintiff and defendant Perez appealed to this Court,

the former asking for more damages and the latter insisting on non-liability.

Defendant-appellant relied solely on the ruling enunciated in Gillaco vs. Manila Railroad Co. that

the carrier is under no absolute liability for assaults of its employees upon the passengers.

ISSUE:

Was the contention of the defendant valid?

RULING:

No. The attendant facts and controlling law of that case and the one at bar were very different. In the

Gillaco case, the passenger was killed outside the scope and the course of duty of the guilty employee.

The Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present

Civil Code, did not impose upon common carriers absolute liability for the safety of passengers against

willful assaults or negligent acts committed by their employees. The death of the passenger in the

Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art. 1105


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of the old Civil Code on fortuitous events has been substantially reproduced in Art. 1174 of the Civil Code

of the Philippines but both articles clearly remove from their exempting effect the case where the law

expressly provides for liability in spite of the occurrence of force majeure. The Civil Code provisions on

the subject of Common Carriers are new and were taken from Anglo-American Law. The basis of the

carrier's liability for assaults on passengers committed by its drivers rested either on the doctrine of

respondent superior or the principle that it was the carrier's implied duty to transport the passengersafely. Under the second view, upheld by the majority and also by the later cases, it was enough that the

assault happens within the course of the employee's duty. It was no defense for the carrier that the act

was done in excess of authority or in disobedience of the carrier's orders. The carrier's liability here was

absolute in the sense that it practically secured the passengers from assaults committed by its own

employees.

REPUBLIC VS. LUZON STEVEDORING CORPORATION

21 SCRA 279

FACTS:

In the early afternoon of August 17, 1960, barge L-1892, owned by the Luzon Stevedoring

Corporation was being towed down the Pasig River by two tugboats when the barge rammed against

one of the wooden piles of the Nagtahan bailey bridge, smashing the posts and causing the bridge to list.

The river, at the time, was swollen and the current swift, on account of the heavy downpour in Manila

and the surrounding provinces on August 15 and 16, 1960.

The Republic of the Philippines sued Luzon Stevedoring for actual and consequential damage

caused by its employees, amounting to P200,000. Defendant Corporation disclaimed liability on the

grounds that it had exercised due diligence in the selection and supervision of its employees that the

damages to the bridge were caused by force majeure, that plaintiff has no capacity to sue, and that the

Nagtahan bailey bridge is an obstruction to navigation.

After due trial, the court rendered judgment on June 11, 1963, holding the defendant liable for the

damage caused by its employees and ordering it to pay plaintiff the actual cost of the repair of the

Nagtahan bailey bridge which amounted to P192,561.72, with legal interest from the date of the filing of

the complaint.

ISSUE:

Was the collision of appellant's barge with the supports or piers of the Nagtahan bridge caused by


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fortuitous event or force majeure?

RULING:

Yes. Considering that the Nagtahan bridge was an immovable and stationary object and

uncontrovertedly provided with adequate openings for the passage of water craft, including barges like

of appellant's, it was undeniable that the unusual event that the barge, exclusively controlled by

appellant, rammed the bridge supports raises a presumption of negligence on the part of appellant or its

employees manning the barge or the tugs that towed it. For in the ordinary course of events, such a

thing will not happen if proper care is used. In Anglo American Jurisprudence, the inference arises by

what is known as the "res ipsa loquitur" rule

The appellant strongly stressed the precautions taken by it on the day in question: that it assigned

two of its most powerful tugboats to tow down river its barge L-1892; that it assigned to the task the

more competent and experienced among its patrons, had the towlines, engines and equipment double-

checked and inspected' that it instructed its patrons to take extra precautions; and concludes that it had

done all it was called to do, and that the accident, therefore, should be held due to force majeure or

fortuitous event.

These very precautions, however, completely destroyed the appellant's defense. For caso fortuito or

force majeure (which in law are identical in so far as they exempt an obligor from liability) by definition,

are extraordinary events not foreseeable or avoidable, "events that could not be foreseen, or which,

though foreseen, were inevitable" (Art. 1174, Civ. Code of the Philippines). It was, therefore, not enough

that the event should not have been foreseen or anticipated, as was commonly believed but it must be

one impossible to foresee or to avoid. The mere difficulty to foresee the happening was not impossibilityto foresee the same. The very measures adopted by appellant prove that the possibility of danger was

not only foreseeable, but actually foreseen, and was not caso fortuito.

TRILLANA VS QUEZON COLLEGE, INC.

93 Phil. 383

FACTS:

Damasa Crisostomo wrote a letter to the Quezon College, Inc. for the subscription of shares of

stock of the said college wherein payment was to be made through money she was going to generate

from fishing. However, she died and as no payment appears to have been made on the subscription

mentioned in the foregoing letter, the Quezon College, Inc. presented a claim before the Court of First

Instance in her testate proceeding, for the collection of the said sum of money. The claim was dismissed


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by the trial court on the ground that the subscription in question was neither registered in nor

authorized by the Securities and Exchange Commission. From this order the Quezon College, Inc.

appealed.

ISSUE:

Was Damasa Crisostomo liable for the claim made by Quezon Colleges, Inc?

RULING:

No. The application sent by Damasa Crisostomo to the Quezon College, Inc. was written on a

general form indicating that an applicant will enclose an amount as initial payment and will pay the

balance in accordance with law and the rules or regulations of the College. In the letter actually sent by

Damasa Crisostomo, she not only did not enclose any initial payment, but stated that "babayaran kong

lahat pagkatapos na ako ay makapagpahuli ng isda." The acceptance of Quezon College, Inc. was

essential, because it would be unfair to immediately obligate the Quezon College, Inc. under Damasa's

promise to pay the price of the subscription after she had caused fish to be caught. In other words, the

relation between Damasa Crisostomo and the Quezon College, Inc. had only thus reached the

preliminary stage whereby the latter offered its stock for subscription on the terms stated in the form

letter, and Damasa applied for subscription fixing her own plan of payment, a relation in the absence, as

in the present case of acceptance by the Quezon College, Inc. of the counter offer of Damasa

Crisostomo, that had not ripened into an enforceable contract.

The need for express acceptance on the part of the Quezon College, Inc. imperative, in view of the

proposal of Damasa Crisostomo to pay the value of the subscription after she had harvested fish, a

condition obviously dependent upon her sole will and, therefore, facultative in nature, rendering the

obligation void, under article 1115 of the old Civil Code (1182 of NCC).

PNB VS PINEDA

197 SCRA 1

FACTS:

In 1963, the Arroyo Spouses, obtained a loan of P580,000.00 from petitioner bank to purchase

60% of the subscribed capital stock and thereby acquire the controlling interest of private respondent

Tayabas Cement Company, Inc. (TCC). As security for said loan, the spouses Arroyo executed a real estate

mortgage over a parcel of land known as the La Vista property.


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TCC filed with petitioner bank an application and agreement for the establishment of an eight (8)

year deferred letter of credit (L/C) for $7,000,000.00 in favor of Toyo Menka Kaisha, Ltd. of Tokyo, Japan,

to cover the importation of a cement plant machinery and equipment. Upon approval of said

application, the Arroyo spouses executed a Surety Agreement dated August 5, 1964 3 and Covenant

dated August 6, 1964 to secure the loan.

The imported cement plant machinery and equipment arrived from Japan and were released to

TCC under a trust receipt agreement. Subsequently, Toyo Menka Kaisha, Ltd. made the corresponding

drawings against the L/C as scheduled, but TCC failed to remit and/or pay the corresponding amount

covered by the drawings. Thus, pursuant to the agreement, PNB repossessed the imported machinery

and equipment for failure of TCC to settle its obligations under the L/C.

On July 18, 1975, PNB filed a petition for extra-judicial foreclosure of the real estate mortgage

over the La Vista property as well as the mortgaged properties located at Isabela, Negros Occidental and

covered by OCT No. RT 1615.

At the auction sale, PNB was the highest bidder with a bid price of P1,000,001.00. However, when said

property was about to be awarded to PNB, the representative of the mortgagor-spouses objected and

demanded from the PNB the difference between the bid price of P1,000,001.00 and the indebtedness of

P499,060.25 of the Arroyo spouses on their personal account. It was the contention of the spouses

Arroyo's representative that the foreclosure proceedings referred only to the personal account of the

mortgagor spouses without reference to the account of TCC.

ISSUE:

Was TCC's liability extinguished by the repossession of PNB of the imported cement plant

machinery and equipment?

HELD:

No. PNB's possession of the subject machinery and equipment being precisely as a form of

security for the advances given to TCC under the Letter of Credit, said possession by itself cannot be

considered payment of the secured loan. Payment would legally result only after PNB had foreclosed onsaid securities, sold the same, and applied the proceeds thereof to TCC's loan obligation. Mere

possession does not amount to foreclosure for foreclosure denotes the procedure adopted by the

mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself.

Neither can said repossession amount to dacion en pago. Dation in payment takes place when property

is alienated to the creditor in satisfaction of a debt in money and the same is governed by sales. Dation


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in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an

accepted equivalent of the performance of the obligation. As aforesaid, the repossession of the

machinery and equipment in question was merely to secure the payment of TCC's loan obligation and

not for the purpose of transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion

en pago was ever accomplished.

JOSE CANGCO VS MANILA RAILROAD

38 PHIL. 768

FACTS:

Cangco, herein plaintiff, was an employee of the defendant in this case, Manila Railroad Company.

Upon the occasion in question, plaintiff was returning home by train from his daily labors. As the train

drew up to the station, plaintiff arose from his seat. As the train slowed down, plaintiff stepped off, but

one or both of his feet came in contact with a sack of watermelons. As a result, his feet slipped from

under him and he fell violently on the platform.

The accident occurred between 7-8 oclock on a dark night as the railroad station was lighted dimly,

objects on the platform were difficult to discern especially to a person emerging from a lighted car.

Plaintiff sued the defendant company for damages. The latter interposed the defense that the direct and

proximate cause of the injury suffered by the plaintiff was his own contributory negligence in failing towait until the train had come to a complete stop before alighting.

ISSUE:

Should Manila Railroad be held liable?

RULING:

Yes. The Supreme Court reversed the decision of the lower court holding that it was important to

note that the foundation of the legal liability of the defendant was the contract of carriage, and that the

obligation to respond for the damage which plaintiff has suffered arises, if at all, from the breach of that

contract by reason of the failure of defendant to exercise due care in its performance. That was to say, its

liability was direct and immediate, differing essentially, in legal viewpoint from that presumptive


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responsibility for the negligence of its servants, imposed by article 1903 of the Civil Code, which can be

rebutted by proof of the exercise of due care in their selection and supervision. Article 1903 of the Civil

Code is not applicable to obligations arising ex contractu, but only to extra-contractual obligations, or to

use the technical form of expression, that article relates only to culpa aquiliana and not to culpa

contractual.

Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code, clearly points

out this distinction, which was also recognized by this Court in its decision in the case of

Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa

clearly points out the difference between "culpa, substantive and independent, which of itself

constitutes the source of an obligation between persons not formerly connected by any legal tie"

and culpa considered as an accident in the performance of an obligation already existing . . . ."

On the railroad companys defense of contributory negligence on the part of Cangco, the Court held that

the plaintiff was ignorant of the fact that the obstruction which was caused by the sacks of melds piled

on the platform existed. Moreover, the place was dark or dimly lighted. Thus, there was failure on the

part of the defendant to afford to its passengers facilities for safe egress from its trains.

NIETES VS CA

46 SCRA 654

FACTS:

On October 19, 1959, Dr. Pablo Garcia and Aquilino Nietes entered into a "Contract of Lease with Option

to Buy." Dr. Garcia (lessor) is the owner of the Angeles Educational Institute which is the subject of the

lease. the stipulates, among others, the manner of payment, that the lese will be for a period of 5 years,

and the option to buy agreement for a price of P100,000.00 within the period of the lease.

Nietes was able to pay P 24,757.00 plus P5200.00 of which Dr. Garcia issued receipts. However, Dr.

Garcia sent a letter to Nietes expressing his desire to rescind the contract. Nietes on the other hand

contended that he has not violated any provision on the contract and thus, expressed his desire to buy

the land and building.

A year after, Nietes paid the balance of P 84,860.00 of the purchase price of the property. He then

demanded Dr. Garcia for specific performance to execute a deed of absolute sale of the leased property

in his (Nietes) favor.


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ISSUE:

Can Nietes still exercise his option to buy the land and building?

RULING:

Yes. The contract didoes not say that Nietes had to pay the stipulated price of P100,000 before exercising

his option to buy the property in question. Accordingly, said option is governed by Art 1169, the general

principles on obligations, pursuant to which:

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to

comply in a proper manner with what is incumbent upon him. From the moment one of the parties

fulfills his obligation, delay by the other begins.

In the case of an option to buy, the creditor may validly and effectively exercise his right by merely

advising the debtor of the former's decision to buy and expressing his readiness to pay the stipulated

price, provided that the same is available and actually delivered to the debtor upon execution and

delivery by him of the corresponding deed of sale. Unless and until the debtor shall have done this the

creditor is not and cannot be in default in the discharge of his obligation to pay.In other words, notice of

the creditor's decision to exercise his option to buy need not be coupled with actual payment of the

price, so long as this is delivered to the owner of the property upon performance of his part of the

agreement.

UNIVERSAL FOOD CORPORATION VS. CA

33 SCRA 1

FACTS:

This is a petition for certiorari by the UFC against the CA decision of February 13, 1968 declaring

the BILL OF ASSIGNMENT rescinded, ordering UFC to return to Magdalo Francisco his Mafran sauce

trademark and to pay his monthly salary of P300.00 from Dec. 1, 1960 until the return to him of said

trademark and formula.

In 1938, plaintiff Magdalo V. Francisco, Sr. discovered a formula for the manufacture of a food

seasoning (sauce) derived from banana fruits popularly known as MAFRAN sauce. It was used

commercially since 1942, and in the same year plaintiff registered his trademark in his name as owner

and inventor with the Bureau of Patents. However, due to lack of sufficient capital to finance the

expansion of the business, in 1960, said plaintiff secured the financial assistance of Tirso T. Reyes who,

after a series of negotiations, formed with others defendant Universal Food Corporation eventually


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leading to the execution on May 11, 1960 of the aforequoted "Bill of Assignment" (Exhibit A or 1).

On May 31, 1960, Magdalo Francisco entered into contract with UFC stipulating among other

things that he be the Chief Chemist and Second Vice-President of UFC and shall have absolute control

and supervision over the laboratory assistants and personnel and in the purchase and safekeeping of the

chemicals used in the preparation of said Mafran sauce and that said positions are permanent in nature.

In line with the terms and conditions of the Bill of Assignment, Magdalo Francisco was appointed

Chief Chemist with a salary of P300.00 a month. Magdalo Francisco kept the formula of the Mafran

sauce secret to himself. Thereafter, however, due to the alleged scarcity and high prices of raw materials,

on November 28, 1960, Secretary-Treasurer Ciriaco L. de Guzman of UFC issued a Memorandum duly

approved by the President and General Manager Tirso T. Reyes that only Supervisor Ricardo Francisco

should be retained in the factory and that the salary of plaintiff Magdalo V. Francisco, Sr., should be

stopped for the time being until the corporation should resume its operation. On December 3, 1960,

President and General Manager Tirso T. Reyes, issued a memorandum to Victoriano Francisco ordering

him to report to the factory and produce "Mafran Sauce" at the rate of not less than 100 cases a day so

as to cope with the orders of the corporation's various distributors and dealers, and with instructions to

take only the necessary daily employees without employing permanent employees. Again, on December

6, 1961, another memorandum was issued by the same President and General Manager instructing the

Assistant Chief Chemist Ricardo Francisco, to recall all daily employees who are connected in the

production of Mafran Sauce and also some additional daily employees for the production of Porky Pops.

On December 29, 1960, another memorandum was issued by the President and General Manager

instructing Ricardo Francisco, as Chief Chemist, and Porfirio Zarraga, as Acting Superintendent, to

produce Mafran Sauce and Porky Pops in full swing starting January 2, 1961 with further instructions to

hire daily laborers in order to cope with the full blast operation. Magdalo V. Francisco, Sr. received his

salary as Chief Chemist in the amount of P300.00 a month only until his services were terminated on

November 30, 1960. On January 9 and 16, 1961, UFC, acting thru its President and General Manager,authorized Porfirio Zarraga and Paula de Bacula to look for a buyer of the corporation including its

trademarks, formula and assets at a price of not less than P300,000.00. Due to these successive

memoranda, without plaintiff Magdalo V. Francisco, Sr. being recalled back to work, he filed the present

action on February 14, 1961. Then in a letter dated March 20, 1961, UFC requested said plaintiff to

report for duty, but the latter declined the request because the present action was already filed in court.

ISSUES:

1. Was the Bill of Assignment really one that involves transfer of the formula for Mafran sauce itself?

2. Was petitioners contention that Magdalo Francisco is not entitled to rescission valid?

RULING:

1. No. Certain provisions of the bill would lead one to believe that the formula itself was


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transferred. To quote, the respondent patentee "assign, transfer and convey all its property rights and

interest over said Mafran trademark and formula for MAFRAN SAUCE unto the Party of the Second Part,"

and the last paragraph states that such "assignment, transfer and conveyance is absolute and irrevocable

(and) in no case shall the PARTY OF THE First Part ask, demand or sue for the surrender of its rights and

interest over said MAFRAN trademark and mafran formula."

However, a perceptive analysis of the entire instrument and the language employed

thereinwould lead one to the conclusion that what was actually ceded and transferred was only

the use of the Mafran sauce formula. This was the precise intention of the parties.

The SC had the following reasons to back up the above conclusion. First, royalty was paid by UFC

to Magdalo Francisco. Second, the formula of said Mafran sauce was never disclosed to anybody

else. Third, the Bill acknowledged the fact that upon dissolution of said Corporation, the patentee rights

and interests of said trademark shall automatically revert back to Magdalo Francisco. Fourth, paragraph

3 of the Bill declared only the transfer of the use of the Mafran sauce and not the formula itself which

was admitted by UFC in its answer. Fifth, the facts of the case undeniably show that what was

transferred was only the use. Finally, our Civil Code allows only the least transmission of right, hence,

what better way is there to show the least transmission of right of the transfer of the use of the transfer

of the formula itself.

2. No. Petitioners contention that Magdalo Franciscos petition for rescission should be denied

because under Article 1383 of the Civil Code of the Philippines rescission can not be demanded except

when the party suffering damage has no other legal means to obtain reparation, was of no merit

because it is predicated on a failure to distinguish between a rescission for breach of contract under

Article 1191 of the Civil Code and a rescission by reason of lesion or economic prejudice, under Article

1381, et seq. This was a case of reciprocal obligation. Article 1191 may be scanned without disclosing

anywhere that the action for rescission thereunder was subordinated to anything other than theculpable breach of his obligations by the defendant. Hence, the reparation of damages for the breach

was purely secondary. Simply put, unlike Art. 1383, Art. 1191 allows both the rescission and the payment

for damages. Rescission is not given to the party as a last resort, hence, it is not subsidiary in nature.

ZULUETA VS. MARIANO111 SCRA 206

FACTS:

Petitioner Zulueta was the owner of a house and lot in Antonio Subdivision, Pasig Rizal, whileprivate respondent is a movie director. They entered into a Contract to Sell the said property of

petitioner for P75,000 payable in 20 years with respondent buyer assuming to pay a down payment of

P5,000 and a monthly installment of P630 payable in advance before the 5th day of the corresponding

month, starting with December, 1964.

One of their stipulations was that upon failure of the buyer to fulfill any of the conditions being


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stipulated, the buyer automatically and irrevocably authorizes owner to recover extra-judicially, physical

possession of the land, building and other improvements, which were the subject of the said contract,

and to take possession also extra-judicially whatever personal properties may be found within the

aforesaid premises from the date of said failure to answer for whatever unfulfilled monetary obligations

buyer may have with owner. Demand was also waived.

On the allegation that private respondent failed to comply with the monthly amortizations

stipulated in the contract, despite demands to pay and to vacate the premises, and that thereby the

contract was converted into one of lease, petitioner commenced an Ejectment suit against respondent

before the Municipal Court of Pasig, praying that judgment be rendered ordering respondent to 1)

vacate the premises; 2) pay petitioner the sum of P11, 751.30 representing respondents balance owing

as of May, 1966; 3) pay petitioner the sum of P630 every month after May, 1966, and costs. Private

respondent contended that the Municipal Court had no jurisdiction over the nature of the action as it

involved the interpretation and/or rescission of the contract.

ISSUE:

Was the action before the Municipal Court essentially one for rescission or annulment of a

contract?

RULING:

Yes. According to the Supreme Court, ...proof of violation is a condition precedent to resolutionor rescission. It is only when the violation has been established that the contract can be declared

resolved or rescinded. Upon such rescission in turn, hinges a pronouncement that possession of the

realty has become unlawful.

The Supreme Court, in Nera vs. Vacante (3 SCRA 505), also said, A violation by a party of any of

the stipulations of a contract on agreement to sell real property would entitle the other party to resolved

or rescind it.

Also, according to the book of Tolentino, Civil Code of the Phil., Vol. IV, 1962 ed. P. 168, citing

Magdalena Estate vs. Myrick, 71 Phil. 344 (1941), extra-judicial rescission has legal effect when the

parties does not oppose it. If it is objected to, judicial determination of the issue is still necessary.

With regards to the jurisdictions of inferior courts, the Supreme Court said that the CFI correctly

ruled that the Municipal Court had no jurisdiction over the case and correctly dismissed the

appeal. However, the CFI erred in assuming original jurisdiction, in the face of the objection interposed

by petitioner. Section 11, Rule 40, leaves no room for doubt on this point.


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Section 11 of Rule 40:

Section 11. Lack of jurisdiction. A case tried by an inferior court without jurisdiction over the

subject matter shall be dismissed on appeal by the Court of First Instance. But instead of dismissing thecase, the Court of First Instance may try the case on the merits, if the parties therein file their pleadings

and go to trial without any objection to such jurisdiction.

AYSON-SIMON VS. ADAMOS AND FERIA

G.R. NO. L-39378 AUGUST 28, 1984

FACTS:

Defendants, Nicolas Adamos and Vicente Feria, purchased two lots forming part of the Piedad Estate

in Quezon City, from Juan Porciuncula. Thereafter, the successors-in-interest of the latter filed Civil Case

No. 174 for annulment of the sale and the cancellation of TCT No. 69475, which had been issued to

defendants-appellants by virtue of the disputed sale. The Court rendered a Decision annulling the

saleThe said judgment was affirmed by the Appellate Court and had attained finality.

Meanwhile, during the pendency of the case above, defendants sold the said two lots to Petitioner

Generosa Ayson-Simon for Php3,800.00 plus Php800.00 for facilitating the issuance of the new titles in

favor of petitioner. Due to the failure of the defendants to deliver the said lots, petitioner filed a civil

case for specific performance. The trial court rendered judgment to petitioners favor. However,defendants could not deliver the said lots because the CA had already annulled the sale of the two lots in

Civil Case No. 174. Thus, petitioner filed another civil case for the rescission of the contract. Defendants

were contending that petitioner cannot choose to rescind the contract since petitioner chose for specific

performance of the obligation. Also, even though petitioner can choose to rescind the contract, it would

not be possible, because it has already prescribed.

ISSUES:

1. Can petitioner choose to rescind the contract even after choosing for the specific performance ofthe obligation?

Had the option to rescind the contract prescribed?


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RULING:

1. Yes. The rule that the injured party can only choose between fulfillment and rescission of the

obligation, and cannot have both, applies when the obligation is possible of fulfillment. If, as in this case,the fulfillment has become impossible, Article 1191 allows the injured party to seek rescission even after

he has chosen fulfillment.

2. No. Article 1191 of the Civil Code provides that the injured party may also seek rescission, if the

fulfillment should become impossible. The cause of action to claim rescission arises when the fulfillment

of the obligation became impossible when the Court of First Instance of Quezon City in Civil Case No. 174

declared the sale of the land to defendants by Juan Porciuncula a complete nullity and ordered the

cancellation of Transfer Certificate of Title No. 69475 issued to them. Since the two lots sold to plaintiff

by defendants form part of the land involved in Civil Case No. 174, it became impossible for defendants

to secure and deliver the titles to and the possession of the lots to plaintiff. But plaintiff had to wait for

the finality of the decision in Civil Case No. 174, According to the certification of the clerk of the Court of

First Instance of Quezon City (Exhibit "E-2"), the decision in Civil Case No. 174 became final and

executory "as per entry of Judgment dated May 3, 1967 of the Court of Appeals." The action for

rescission must be commenced within four years from that date, May 3, 1967. Since the complaint for

rescission was filed on August 16, 1968, the four year period within which the action must be

commenced had not expired.

SINGSON ENCARNACION VS. BALDOMAR

77 PHIL 470

FACTS:

Vicente Singson Encarnacion leased his house to Jacinta Baldomar and her son, Lefrando Fernando

upon a month-to-month basis. After Manila was liberated in the last war, Singson Encarnacio notified

Baldomar and her son Fernando to vacate the house because he needed it for his office as a result of the

destruction of the building where he had his office before. Despite the demand, the Baldomar and

Fernando continued their occupancy.

The defense of Baldomar and Fernando was that the contract with Singson Encarnacion authorized

them to continue occupancy indefinitely while they should faithfully fulfill their obligation with respect

to payment of rentals. Singson Encarnacion contended that the lease had always and since the beginning

been upon a month-to-month basis.


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ISSUE:

Was it tenable for Singson Encarnacion to discontinue the lease of Baldomar and her son?

RULING:

The continuance and fulfillment of the contract of lease cannot be made to depend solely and

exclusively upon the free and uncontrolled choice of the lessees between continuing paying the rentals

or not, completely depriving the owner of all say in the matter. The defense of Baldomar and Fernando

would leave to the sole and exclusive will of one of the contracting parties the validity and fulfillment of

the contract of lease, within the meaning of Article 1256 of the Civil Code. For if this were allowed, so

long as the lessee elected to continue the lease by continuing the payment of the rentals the owner

would never be able to discontinue the lease; conversely, although the owner should desire the lease to

continue, the lessee could effectively thwart his purpose if he should prefer to terminate the contract by

the simple expedient of stopping payment of the rentals.

PHILIPPINE BANKING CORPORATION VS. LUI SHE

1967 SEPTEMBER 12

FACTS:

Justina Santos y Canon Faustino and her sister Lorenza were the owners in common of a piece of land in

Manila.

The sisters lived in one of the houses, while Wong Heng, a Chinese, lived with his family in the

restaurant. Wong had been a long-time lessee of a portion of the property, having a monthly rental of

P2,620.

On September 22, 1957 Justina Santos became the owner of the entire property as her sister died with

no other heir. Then already well advanced in years, being at the time 90 years old, blind, crippled and an

invalid, she was left with no other relative to live with, but she was taken cared of by Wong.

"In grateful acknowledgment of the personal services of the Lessee to her," Justina Santos executed on

November 15, 1957, a contract of lease in favor of Wong, covering the portion then already leased to

him and another portion fronting Florentino Torres street. The lease was for 50 years, although

the lessee was given the right to withdraw at any time from the agreement; the monthly rental was

P3,120. Ten days later (November 25), the contract was amended so as to make it cover the entire


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property, including the portion on which the house of Justina Santos stood, at an additional monthly

rental of P360.

On December 21 she executed contract giving Wong the option to buy the leased premises for P120,000,

payable within ten years at a monthly installment of P1,000. The option was conditioned on his

obtaining Philippine citizenship,a petition for which was then pending in the Court of First Instance ofRizal.

On November 18, 1958 she executed two other contracts, one extending the term of the lease to 99

years, and another fixing the term of the option at 50 years. Both contracts are written in Tagalog. In two

wills executed on August 24 and 29, 1959, she bade her legatees to respect the contracts she had

entered into with Wong, but in a codicil of a later date (November 4, 1959) she appears to have a change

of heart. Claiming that the various contracts were made by her because of machinations and

inducements practised by him, she now directed her executor to secure the annulment of the contracts.

Both parties however died, Wong Heng on October 21, 1962 and Justina Santos on December 28, 1964.

Wong was substituted by his wife, Lui She, the other defendant in this case, While Justina Santos was

substituted by the Philippine Banking Corporation. Justina Santos maintained now reiterated by the

Philippine Banking Corporation that the lease contract should have been annulled along with the four

other contracts because it lacks mutuality, among others

Paragraph 5 of the lease contract states that "The lessee may at any time withdraw from this

agreement." It is claimed that this stipulation offends article 1308 of the Civil Code which provides that

"the contract must bind both contracting parties; its validity or compliance cannot be left to the will of

one of them."

ISSUES:

1. (OBLICON ISSUE) Was the insertion in the contract of a resolutory condition, permitting the

cancellation of the contract by one of the parties, valid?

2. (RELATED, but Consitutional Issue) Was the contract between Wong (Lui She) and Justina Santos (Phil.

Banking) enforceable?

RULING:

1. Yes. In the early case of Taylor vs. Uy Tiong Piao, the Supreme Court said:

Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment to the insertion in a

contract for personal service of a resolutory condition permitting the cancellation of the contract by one


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of the parties. Such a stipulation, as can be readily seen, does not make either the validity or the

fulfillment of the contract dependent upon the will of the party to whom is conceded the privilege of

cancellation; for where the contracting parties have agreed that such option shall exist, the exercise of

the option is as much in the fulfillment of the contract as any other act which may have been the subject

of agreement. Indeed, the cancellation of a contract in accordance with conditions agreed upon

beforehand is fulfillment

Further, in the case at bar, the right of the lessee to continue the lease or to terminate it was so

circumscribed by the term of the contract that it cannot be said that the continuance of the lease

depends upon his will. At any rate, even if no term had been fixed in the agreement, this case would at

most justify the fixing of a period but not the annulment of the contract.

2. No. The contract of lease, as in this case, cannot be sustained. However, to be sure, a lease to an alien

for a reasonable period was valid, so was an option giving an alien the right to buy real property on

condition that he is granted Philippine citizenship.

But if an alien was given not only a lease of, but also an option to buy, a piece of land, by virtue of which

the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it

became clear that the arrangement was a virtual transfer of ownership whereby the owner divested

himself in stages not only of the right to enjoy the land (jus possidendi, jus utendi, jus fruendi and jus

abutendi) but also of the right to dispose of it (jus disponendi) rights the sum total of which make up

ownership. It was just as if today the possession is transferred, tomorrow, the use, the next day, the

disposition, and so on, until ultimately all the rights of which ownership is made up are consolidated in

an alien. And yet this was just exactly what the parties in this case did within this pace of one year, with

the result that Justina Santos' ownership of her property was reduced to a hollow concept. If this can be

done, then the Constitutional ban against alien landholding in the Philippines, is indeed in grave peril.

The contracts in question are annulled and set aside; the land subject-matter of the contracts was

ordered returned to the estate of Justina Santos as represented by the Philippine Banking Corporation.


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ROMERO VS. COURT OF APPEALS

G.R. No. 107207

FACTS:

Petitioner Virgilio R. Romero was engaged in the business of production, manufacture and

exportation of perlite filter aids, permalite insulation and processed perlite ore. In 1988, petitioner and

his foreign partners decided to put up a central warehouse in Metro Manila on a land area of

approximately 2,000 square meters.

Alfonso Flores and his wife, accompanied by a broker, offered a parcel of land measuring 1,952 square

meters. Petitioner visited the property and, except for the presence of squatters in the area, he found

the place suitable for a central warehouse.

Later, the Flores spouses called on petitioner with a proposal that should he advance the amount of

P50,000.00 which could be used in taking up an ejectment case against the squatters, private

respondent would agree to sell the property for only P800.00 per square meter. Petitioner expressed his

concurrence. On 09 June 1988, a contract, denominated "Deed of Conditional Sale," was executed

between petitioner and private respondent.

Pursuant to the agreement, private respondent filed a complaint for ejectment against the squatter

families. Judgment was rendered ordering the defendants to vacate the premises. The decision was

handed down beyond the 60-day period stipulated in the contract. The writ of execution of the

judgment was issued, still later, on 30 March 1989.

In a letter, dated 07 April 1989, private respondent sought to return the P50,000.00 she received from

petitioner since, she said, she could not "get rid of the squatters" on the lot. Atty. Sergio A.F. Apostol,

counsel for petitioner, in his reply of 17 April 1989, refused the tender

A few days later, private respondent, prompted by petitioner's continued refusal to accept the return of

the P50,000.00 advance payment, filed with the Regional Trial Court of Makati, Branch 133, Civil Case

No. 89-4394 for rescission of the deed of "conditional" sale, plus damages, and for the consignation of

P50,000.00 cash.

The Regional Trial Court of Makatirendered its decision holding that private respondent had no right torescind the contract since it was she who "violated her obligation to eject the squatters from the subject

property" and that petitioner, being the injured party, was the party who could, under Article 1191 of

the Civil Code, rescind the agreement. The court ruled that the provisions in the contract relating to (a)

the return/reimbursement of the P50,000.00 if the vendor were to fail in her obligation to free the

property from squatters within the stipulated period or (b), upon the other hand, the sum's forfeiture by

the vendor if the vendee were to fail in paying the agreed purchase price, amounted to "penalty


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clauses".

Private respondent appealed to the Court of Appeals who opined that the contract entered into by the

parties was subject to a resolutory condition, i.e., the ejectment of the squatters from the land, the non-

occurrence of which resulted in the failure of the object of the contract; that private respondent

substantially complied with her obligation to evict the squatters; that it was petitioner who was notready to pay the purchase price and fulfill his part of the contract, and that the provision requiring a

mandatory return/reimbursement of the P50,000.00 in case private respondent would fail to eject the

squatters within the 60-day period was not a penal clause.

ISSUE:

May the vendor demand the rescission of a contract for the sale of a parcel of land for a cause

traceable to his own failure to have the squatters on the subject property evicted within the

contractually-stipulated period?

RULING:

No. From the moment the contract was perfected, the parties were bound not only to the

fulfillment of what has been expressly stipulated but also to all the consequences which, according to

their nature, may be in keeping with good faith, usage and law. Under the agreement, private

respondent was obligated to evict the squatters on the property. The ejectment of the squatters was

a condition the operative act of which sets into motion the period of compliance by petitioner of his ownobligation, i.e., to pay the balance

obligations cases 1

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