1. MAKATI STOCK EXCHANGE, INC.
VS MIGUEL The petition filled by the respondent, Miguel
CAMPOS
G.R. NO. 138814, APRIL 26, 2009
FACTS:
SEC Case No. 02-94-4678 was instituted on 10
February 1994 by respondent Miguel V. Campos with the
Securities, Investigation and Clearing Department
(SICD) of the Securities and Exchange Commission
(SEC), a Petition against herein petitioners Makati Stock
Exchange, Inc. (MKSE).
The Petition, sought: (1) the nullification of the
Resolution dated 3 June 1993 of the MKSE Board of
Directors, which allegedly deprived him of his right to
participate equally in the allocation of Initial Public
Offerings (IPO) of corporations registered with MKSE;
(2) the delivery of the IPO shares he was allegedly
deprived of, for which he would pay IPO prices; and (3)
the payment of P2 million as moral damages, P1 million
as exemplary damages, and P500,000.00 as attorneys
fees and litigation expenses.
The SICD issued an Order granting
respondents prayer for the issuance of a Temporary
Restraining Order to enjoin petitioners from
implementing or enforcing the Resolution of the MKSE
Board of Directors. Subsequently issued another Order
on 10 March 1994 granting respondents application for
a Writ of Preliminary Injunction, to continuously enjoin,
during the pendency of SEC Case No. 02-94-4678, the
implementation or enforcement of the MKSE Board
Resolution in question.
On 11 March 1994, petitioners filed a Motion to
Dismiss respondents Petition based on the following
grounds: (1) the Petition became moot due to the
cancellation of the license of MKSE; (2) the SICD had no
jurisdiction over the Petition; and (3) the Petition failed to
state a cause of action. The SICD denied petitioners
Motion to Dismiss. Petitioners again challenged Order of
SICD before the SEC en banc through another Petition
for Certiorari.
The SEC en banc nullified the Order of SICD
granting a Writ of Preliminary Injunction in favour of
respondent. SEC en banc annulled the Order of SICD in
SEC Case No. 02-94-4678 denying petitioners Motion to
Dismiss, and accordingly ordered the dismissal of
respondents Petition before the SICD.
Respondent filed a Petition for Certiorari with the
Court of Appeals. Petitioners filed a Motion for
Reconsideration but was denied by the Court of Appeals.
ISSUE: WHETHER OR NOT THE PETITION
FAILED TO STATE A CAUSE OF ACTION.
RULING:
Campos should be dismissed for failure to state a cause
of action.
A cause of action is the act or omission by which
a party violates a right of another. A complaint states a
cause of action where it contains three essential
elements of a cause of action, namely: (1) the legal right
of the plaintiff, (2) the correlative obligation of the
defendant, and (3) the act or omission of the defendant
in violation of said legal right. If these elements are
absent, the complaint becomes vulnerable to dismissal
on the ground of failure to state a cause of action.
However, the terms right and obligation are not
magic words that would automatically lead to the
conclusion that such Petition sufficiently states a cause
of action. Right and obligation are legal terms with
specific legal meaning. A right is a claim or title to an
interest in anything whatsoever that is enforceable by
law while an obligation is defined in the Civil Code as a
juridical necessity to give, to do or not to do. Justice
J.B.L. Reyes offers the definition given by Arias Ramos
as a more complete definition:
An obligation is a juridical
relation whereby a person (called the
creditor) may demand from another
(called the debtor) the observance of a
determinative conduct (the giving,
doing or not doing), and in case of
breach, may demand satisfaction from
the assets of the latter.
Art. 1157 of the Civil Code provides that
Obligations arise from (1) Law; (2) Contracts; (3) Quasi-
contracts; (4) Acts or omissions punished by law; and (5)
Quasi-delicts.
The mere assertion of a right and claim of an
obligation in an initiatory pleading, whether a Complaint
or Petition, without identifying the basis or source
thereof, is merely a conclusion of fact and law. (In the
case at bar, although the Petition in SEC Case No. 02-
94-4678 does allege respondents right to subscribe to
the IPOs of corporations listed in the stock market at
their offering prices, and petitioners obligation to
continue respecting and observing such right, the
Petition utterly failed to lay down the source or basis of
respondents right and/or petitioners obligation.)
Respondent merely quoted in his Petition the
MKSE Board Resolution, passed sometime in 1989,
granting him the position of Chairman Emeritus of MKSE
for life. However, there is nothing in the said Petition
from which the Court can deduce that respondent, by
virtue of his position as Chairman Emeritus of MKSE,
was granted by law, contract, or any other legal source,
the right to subscribe to the IPOs of corporations listed in
the stock market at their offering prices. (allocation of
IPO shares was merely alleged to have been done in
accord with a practice normally observed by the
members of the stock exchange) A practice or custom is,
as a general rule, not a source of a legally demandable
or enforceable right.
FLAVIO K. MACASAET & ASSOCIATES, INC.,
petitioner, vs. COMMISSION ON AUDIT and
PHILIPPINE TOURISM AUTHORITY,
1. CIVIL LAW; CONTRACTS; INTERPRETATION
OF CONTRACTS; LITERAL MEANING OF
TERMINOLOGIES OF CONTRACT CONTROL WHEN
THEY ARE CLEAR. The terminologies in the contract
being clear, leaving no doubt as to the intention of the
contracting parties, their literal meaning control (Article
1370, Civil Code).
2. ID.; OBLIGATIONS; HAVE FORCE OF LAW
BETWEEN CONTRACTING PARTIES AND SHOULD
BE COMPLIED WITH IN GOOD FAITH WHEN ARISING
FROM CONTRACT. The price escalation cost must
be deemed included in the final actual project cost and
petitioner held entitled to the payment of its additional
professional fees. Obligations arising from contract
have the force of law between the contracting
parties and should be complied with in good faith
(Article 1159, Civil Code).
MELENCIO-HERRERA, J p:
In this Petition for Certiorari, pursuant to Section 7,
Article IX of the 1987 Constitution, 1 petitioner, Flavio K.
Macasaet & Associates, Inc., prays that the ruling of
public respondent Commission on Audit (COA) denying
its claim for completion of payment of professional fees
be overturned.
The facts follow:
On 15 September 1977 respondent Philippine Tourism
Authority (PTA) entered into a Contract for "Project
Design and Management Services for the
development of the proposed Zamboanga Golf and
Country Club, Calarian, Zamboanga City" with
petitioner company, but originally with Flavio K.
Macasaet alone (hereinafter referred to simply as the
"Contract").
Under the Contract, PTA obligated itself to pay
petitioner a professional fee of seven (7%) of the
actual construction cost, as follows:
"ARTICLE IV PROFESSIONAL FEE
"In consideration for the professional services to be
performed by Designer under Article I of this Agreement,
the Authority shall pay seven percent (7%) of the actual
construction cost."
In addition, a Schedule of Payments was provided for
while the construction was in progress and up to its final
completion, thus:
"ARTICLE V SCHEDULE OF PAYMENTS
"1. Upon the execution of the Agreement but not
more than fifteen (15) days, a minimum payment
equivalent to 10 percent of the professional fee as
provided in Art. IV computed upon a reasonable
estimated construction cost of the project.
"2. Upon the completion of the schematic design
services, but not more than 15 days after the submission
of the schematic design to the Authority, a sum
equivalent to 15% of the professional fee as stated in
Art. IV computed upon the reasonable estimated
construction cost of the project.
"3. Upon completion of the design development
services, but not more than 15 days after submission of
the design development to the authority, a sum
equivalent to 20% of the professional fee as stated in
Art. IV, computed upon the reasonable estimated
construction cost.
"4. Upon completion of the contract document
services but not more than 15 days after submission of
the contract document to the Authority, a sum equivalent
to 25% of the professional fee as stated in Art. IV, shall
be paid computed on the same basis as above.
"5. Upon completion of the work and acceptance
thereof by the Authority, the balance of the professional
fee, computed on the final actual project cost shall be
paid." (Emphasis supplied)
Pursuant to the foregoing Schedule, the PTA made
periodic payments of the stipulated professional fees to
petitioner. And, upon completion of the project, PTA paid
petitioners what it perceived to be the balance of the
latter's professional fees.
It turned out, however, that after the project was
completed, PTA paid Supra Construction Company, the
main contractor, the additional sum of P3,148,198.26
representing the escalation cost of the contract price
due to the increase in the price of construction
materials.
Upon learning of the price escalation, petitioner
requested payment of P219,302.47 additional
professional fee representing seven (7%) percent of
P3,148,198.26.
On 3 July 1985 PTA denied payment on the ground that
"the subject price escalation referred to increased cost of
construction materials and did not entail additional work
on the part of petitioner as to entitle it to additional
compensation under Article VI of the contract" 2
Reconsiderations sought by the petitioner, up to
respondent COA, were to no avail. The latter expressed
the opinion that "to allow subject claim in the absence
of a showing that extra or additional services had
been rendered by claimant would certainly result in
overpayment to him to the prejudice of the
Government" (1st Endorsement, July 10, 1987, p. 3,
Rollo, p. 42).
Hence this Petition, to which we gave due course.
The basic issue for resolution is petitioner's
entitlement to additional professional fees, which, in
turn, hinges on whether or not the price escalation
should be included in the "final actual project cost."
Public respondents, through the Solicitor General,
maintain that petitioner had been paid its professional
fee upon completion of the project and that its claim for
additional payment is without any legal and factual basis
for, after all, no additional architectural services were
rendered other than the ones under the terms of the
Contract. LLphil
On the other hand, petitioner anchors its claim to
additional professional fees, not on any change in
services rendered, but on Article IV, and paragraph 5 of
Article V, of the Contract, supra.
The very terminologies used in the Contract call for
affirmative relief in petitioner's favor.
Under Article IV of said Contract, petitioner was to be
entitled to seven (7%) of the "actual construction cost."
Under paragraphs 1, 2, 3, and 4, Article V, periodic
payments were to be based on a "reasonable estimated
construction cost." Ultimately, under paragraph 5, Article
V, the balance of the professional fee was to be
computed on the basis of "the final actual project cost."
The use of the terms "actual construction cost",
gradating into "final actual project cost" is not without
significance. The real intendment of the parties, as
shown by paragraph 5, Article V, of their Contract was to
base the ultimate balance of petitioner's
professional fees not on "actual construction cost"
alone but on the final actual project cost; not on
"construction cost" alone but on " project cost." By
so providing, the Contract allowed for flexibility based on
actuality and as a matter of equity for the contracting
parties. For evidently, the final actual project cost would
not necessarily tally with the actual construction cost
initially computed. The final actual project cost" covers
the totality of all costs as actually and finally determined,
and logically includes the escalation cost of the contract
price.
It matters not that the price escalation awarded to the
construction company did not entail additional work for
petitioner. As a matter of fact, neither did it for the main
contractor. The increased cost of materials was not the
doing of either contracting party.
That an escalation clause was not specifically provided
for in the Contract is of no moment either for it may be
considered as already "built-in" and understood from the
very terms "actual construction cost," and eventually
"final actual project cost."
Article VI of the Contract, supra, has no bearing on the
present controversy either. It speaks of any major
change in the planning and engineering aspects
necessitating the award and payment of additional
compensation. Admittedly, there was no additional work
by petitioner, which required additional compensation.
Rather, petitioner's claim is for payment of the balance of
its professional fees based on the "final actual project
cost" and not for additional compensation based on
Article VI.
The terminologies in the contract being clear, leaving no
doubt as to the intention of the contracting parties, their
literal meaning control (Article 1370, Civil Code). The
price escalation cost must be deemed included in the
final actual project cost and petitioner held entitled to the
payment of its additional professional fees. Obligations
arising from contract have the force of law between the
contracting parties and should be complied with in good
faith (Article 1159, Civil Code). LLphil
WHEREFORE, the ruling of respondent Commission on
Audit is hereby SET ASIDE and respondent Philippine
Tourism Authority is hereby ordered to pay
petitioner the additional amount of P219,302.47 to
complete the payment of its professional fee under
their Contract for Project Design and Management
Services.
SO ORDERED.
Fernan (C.J.), Narvasa, Gutierrez, Jr., Cruz, Paras,
Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Cortes,
Grio-Aquino, Medialdea and Regalado, JJ., concur.
Footnotes
1. Section 7. . . . Unless otherwise provided
by this Constitution or by law, any decision, order, or
ruling of each Commission may be brought to the
Supreme Court on certiorari by the aggrieved party
within thirty days from receipt of a copy thereof.
2. Article VI CHANGE OF ORDERS.
Should the Authority order any major change on
the planning and engineering aspects after definite
designs have been previously agreed upon and
computation, designing, and drafting works completed
resulting in additional work, additional compensation
shall be equitably paid for such additional work as
mutually agreed upon by both parties.
Philippine Export and Foreign Loan Guarantee
Corporation v V.P. Eusebio Construction Inc.
Facts:
1. The State Organization of Buildings (SOB), Ministry of
Housing and Construction, Baghdad, Iraq awarded the
construction of the Institute of Physical Therapy-Medical
Rehabilitation Center in Iraq to Ayjal Trading and
Contracting Company for a total contract price of about
$18M.
2. Spouses Santos, in behalf of 3-Plex International, Inc.,
a local contractor engaged in construction business,
entered into a joint venture agreement with Ayjal wherein
the former undertook the execution of the entire a
project, while the latter would be entitled to a
commission of 4%.
3. 3-Plex not accredited by the Philippine Overseas
Construction Board (POCB) assigned and transferred all
its rights and interests to VPECI.
4. The SOB required the contractors to submit a
performance bond representing 5% of the total contract
price, an advance payment bond representing 10% of
the advance payment to be released upon signing of the
contract. To comply with these requirements 3-Plex and
VPECI applied for a guarantee with Philguarantee, a
government financial institution empowered to issue
guarantees for qualified Filipino contractors.
5. But what SOB required was a guarantee from the
Rafidain Bank of Baghdad so Rafidain Bank issued a
performance bond in favor of SOB on the condition that
another foreign bank (not Phil Guarantee) would issue
the counter-guarantee. Hence, Al Ahli Bank of Kuwait
was chosen to provide the counter guarantee.
6.Afterwards, SOB and the joint venture of VPECI and
Ayjal executed the service contract. Under the contract,
the joint venture would supply manpower and materials,
SOB would refund 25% of the project cost in Iraqi Dinar
and 75% in US dollars at an exchange rate of 1 Dinar to
$3.37.
7.The project was not completed. Upon seeing the
impossibility of meeting the deadline, the joint venture
worked for the renewal or extension (12x) of the
performance bond up to December 1986.
8. In October 1986, Al Ahli Bank sent a telex call
demanding full payment of its performance bond
counter-guarantee. Upon receipt, VPECI requested Iraq
Trade and Economic Development Minister Fadhi
Hussein to recall the telex for being in contravention of
its mutual agreement that the penalty will be held in
abeyance until completion of the project. It also wrote
SOB protesting the telex since the Iraqi government
lacks foreign exchange to pay VPECI and the non-
compliance with the 75% billings in US dollars.
9. Philguarantee received another telex from Al Ahli
stating that it already paid to Rafidain Bank. The Central
Bank authorized the remittance to Al Ahli Bank
representing the full payment of the performance
counter-guarantee for VPECI's project in Iraq.
10. Philguarantee sent letters to respondents demanding
the full payment of the surety bond. Respondents failed
to pay so petitioner filed a civil case for collection of sum
of money.
11. Trial Court ruling: Dismissed. Philguarantee had no
valid cause of action against the respondents. The joint
venture incurred no delay in the execution of the project
considering that SOB's violations of the contract
rendered impossible the performance of its undertaking.
12. CA: Affirmed.
Issue:
What law should be applied in determining whether or
not contractor (joint venture) has defaulted?
Held:
The question of whether there is a breach of the
agreement which includes default pertains to the
INTRINSIC validity of the contract.
No conflicts rule on essential validity of contracts is
expressly provided for in our laws. The rule followed by
most legal systems is that the intrinsic validity of a
contract must be governed by lex contractus (proper law
of the contract). This may be the law voluntarily agreed
upon by the parties (lex loci voluntatis) or the law
intended by them either expressly or implicitly (lex loci
intentionis). The law selected may be implied from
factors such as substantial connection with the
transaction, or the nationality or domicile of the parties.
Philippine courts adopt this: to allow the parties to select
the law applicable to their contract, SUBJECT to the
limitation that it is not against the law, morals, public
policy of the forum and that the chosen law must bear a
substantive relationship to the transaction.
In the case, the service contract between SOB and
VPECI contains no express choice of law. The laws of
Iraq bear substantial connection to the transaction and
one of the parties is the Iraqi government. The place of
performance is also in Iraq. Hence, the issue of whether
VPECI defaulted may be determined by the laws of Iraq.
BUT! Since foreign law was not properly pleaded or
proved, processual presumption will apply.
According to Art 1169 of the Civil Code: In reciprocal
obligations, neither party incurs in delay if the other party
does not comply or is not ready to comply in a proper
manner what is incumbent upon him.
As found by the lower courts: the delay or non-
completion of the project was caused by factors not
imputable to the Joint Venture, it was rather due to the
persistent violations of SOB, particularly it's failure to pay
75% of the accomplished work in US dollars. Hence, the
joint venture does not incur in delay if the other
party(SOB) fails to perform the obligation incumbent
upon him.
TANGUILING VS CA
FACTS OF THE CASE:
Herce contracted Tanguilig to construct a windmill
system for him, for consideration of 60,000.00. Pursuant
to the agreement Herce paid the downpayment of
30,000.00 and installment of 15,000.00 leaving a
15,000.00 balance.
Herce refused to pay the balance because he had
already paid this amount to SPGMI which constructed a
deep well to which the windmill system was to be
connected since the deepwell, and assuming that he
owed the 15,000.00 this should be offset by the defects
in the windmill system which caused the structure to
collapse after strong winds hit their place. According to
Tanguilig, the 60,000.00 consideration is only for the
construction of the windmill and the construction of the
deepwell was not part of it. The collapse of the windmill
cannot be attributed to him as well, since he delivered it
in good and working condition and Herce accepted it
without protest. Herce contested that the collapse is
attributable to a typhoon, a force majeure that relieved
him of liability.
The RTC ruled in favor of Tanguilig, but this decision was
overturned by the Court of Appeals which ruled in favor
of Herce
ISSUES OF THE CASE:
Can the collapse of the windmill be attributed to force
majeure? Thus, extinguishing the liability of Tanguilig?
- Yes, in order for a party to claim exemption from liability
by reason of fortuitous event under Art 1174 of the Civil
Code the event should be the sole and proximate cause
of the loss or destruction of the object of the contract.
- In Nakpil vs. Court of Appeals, the S.C. held that 4
requisites must concur that there must be a (a) the
cause of the breach of the obligation must be
independent of the will of debtor (b) the event must be
either unforeseeable or unavoidable; (c) the event be
such to render it impossible for the debtor to fulfill his
obligation in a normal manner; and (d) the debtor must
be free from any participation in or aggravation of the
injury to the creditor.
- Tanguilig merely stated that there was a strong wind,
and a strong wind in this case is not fortuitous, it was not
unforeseeable nor unavoidable, places with strong winds
are the perfect locations to put up a windmill, since it
needs strong winds for it to work.
HELD:
WHEREFORE, the appealed decision is MODIFIED.
Respondent VICENTE HERCE JR. is directed to pay
petitioner JACINTO M. TANGUILIG the balance of
P15,000.00 with interest at the legal rate from the date of
the filing of the complaint. In return, petitioner is ordered
to "reconstruct subject defective windmill system, in
accordance with the one-year guaranty" and to complete
the same within three (3) months from the finality of this
decision.
Obligations and Contracts Terms:
Fortuitous Events- Refers to an occurrence or happening
which could not be foreseen, or even if foreseen, is
inevitable. It is necessary that the obligor is free from
negligence. Fortuitous events may be produced by two
(2) general causes: (1) by Nature, such as but not limited
to, earthquakes, storms, floods, epidemics, fires, and (2)
by the act of man, such as but not limited to, armed
invasion, attack by bandits, governmental prohibitions,
robbery, provided that they have the force of an
imposition which the contractor or supplier could not
have resisted.
Barzaga v CA Digest
G.R. No. 115129 February 12, 1997
Facts:
The petitioners wife was suffering from a debilitating
ailment and with forewarning of her impending death,
she expressed her wish to be laid to rest before
Christmas day to spare her family of the long vigils as it
was almost Christmas. After his wife passed away,
petitioner bought materials from herein private
respondents for the construction of her niche. Private
respondents however failed to deliver on agreed time
and date despite repeated follow-ups. The niche was
completed in the afternoon of the 27th of December, and
Barzaga's wife was finally laid to rest. However, it was
two-and-a-half (2-1/2) days behind schedule.
Issue: Was there delay in the performance of the private
respondent's obligation?
Ruling: Yes. Since the respondent was negligent and
incurred delay in the performance of his contractual
obligations, the petitioner is entitled to be indemnified for
the damage he suffered as a consequence of the delay
or contractual breach. There was a specific time agreed
upon for the delivery of the materials to the cemetery.
This is clearly a case of non-performance of a reciprocal
obligation, as in the contract of purchase and sale, the
petitioner had already done his part, which is the
payment of the price. It was incumbent upon respondent
to immediately fulfill his obligation to deliver the goods
otherwise delay would attach. An award of moral
damages is incumbent in this case as the petitioner has
suffered so much.
NPC v. CA
Facts:
At the height of the typhoon Kading, a flash flood
covered the towns near the Angat Dam, causing deaths
and destructions to residents and their properties.
Respondents blamed the tragedy to the reckless and
imprudent opening of the 3 floodgates by petitioner,
without prior warning to the residents within the vicinity
of the dam. Petitioners denied the allegations and
contended that they have kept the water at a safe level,
that the opening of floodgates was done gradually, that it
exercises diligence in the selection of its employees, and
that written warnings were sent to the residents. It further
contended that there was no direct causal relationship
between the damage and the alleged negligence on their
part, that the residents assumed the risk by living near
the dam, and that what happened was a fortuitous event
and are of the nature of damnum absque injuria.
Issues:
(1) Whether the petitioner can be held liable even though
the coming of the typhoon is a fortuitous event
(2) Whether a notice was sent to the residents
(3) Whether the damage suffered by respondents is one
of damnum absque injuria
Held:
(1) The obligor cannot escape liability, if upon the
happening of a fortuitous event or an act of God, a
corresponding fraud, negligence, delay or violation or
contravention in any manner of the tenor of the
obligation as provided in Article 1170 of the Civil Code
which results in loss or damage. Even if there was no
contractual relation between themselves and private
respondents, they are still liable under the law on quasi-
delict. Article 2176 of the Civil Code explicitly provides
"whoever by act or omission causes damage to another
there being fault or negligence is obliged to pay for the
damage done." Act of God or force majeure, by
definition, are extraordinary events not foreseeable or
avoidable, events that could not be foreseen, or which,
though foreseen, are inevitable. It is therefore not
enough that the event should not have been foreseen or
anticipated, as is commonly believed, but it must be one
impossible to foresee or to avoid. The principle
embodied in the act of God doctrine strictly requires that
the act must be occasioned solely by the violence of
nature. Human intervention is to be excluded from
creating or entering into the cause of the mischief. When
the effect is found to be in part the result of the
participation of man, whether due to his active
intervention or neglect or failure to act, the whole
occurrence is then humanized and removed from the
rules applicable to the acts of God. In the case at bar,
although the typhoon "Kading" was an act of God,
petitioners can not escape liability because their
negligence was the proximate cause of the loss and
damage.
(2) The letter itself, addressed merely "TO ALL
CONCERNED", would not strike one to be of serious
importance, sufficient enough to set alarm and cause
people to take precautions for their safety's sake. The
notices were not delivered, or even addressed to
responsible officials of the municipalities concerned who
could have disseminated the warning properly. They
were delivered to ordinary employees and policemen. As
it happened, the said notices do not appear to have
reached the people concerned, which are the residents
beside the Angat River. The plaintiffs in this case
definitely did not receive any such warning. Indeed, the
methods by which the defendants allegedly sent the
notice or warning was so ineffectual that they cannot
claim, as they do in their second assignment of error,
that the sending of said notice has absolved them from
liability.
(3) We cannot give credence to petitioners' third
assignment of error that the damage caused by the
opening of the dam was in the nature of damnum
absque injuria, which presupposes that although there
was physical damage, there was no legal injury in view
of the fortuitous events. There is no question that
petitioners have the right, duty and obligation to operate,
maintain and preserve the facilities of Angat Dam, but
their negligence cannot be countenanced, however
noble their intention may be. The end does not justify the
means, particularly because they could have done
otherwise than simultaneously opening the spillways to
such extent. Needless to say, petitioners are not entitled
to counterclaim.
PICART vs. SMITH, JR.
FACTS: On the Carlatan Bridge in La Union. Picart was
riding on his pony over said bridge. Before he had gotten
half way across, Smith approached from the opposite
direction in an automobile. As the defendant neared the
bridge he saw a horseman on it and blew his horn to
give warning of his approach. He continued his course
and after he had taken the bridge he gave two more
successive blasts, as it appeared to him that the man on
horseback before him was not observing the rule of the
road.
Picart saw the automobile coming and heard the warning
signals. However, being perturbed by the novelty of the
apparition or the rapidity of the approach, he pulled the
pony closely up against the railing on the right side of the
bridge instead of going to the left. He says that the
reason he did this was that he thought he did not have
sufficient time to get over to the other side. As the
automobile approached, Smith guided it toward his left,
that being the proper side of the road for the machine. In
so doing the defendant assumed that the horseman
would move to the other side. Seeing that the pony was
apparently quiet, the defendant, instead of veering to the
right while yet some distance away or slowing down,
continued to approach directly toward the horse without
diminution of speed. When he had gotten quite near,
there being then no possibility of the horse getting
across to the other side, the defendant quickly turned his
car sufficiently to the right to escape hitting the horse;
but in so doing the automobile passed in such close
proximity to the animal that it became frightened and
turned its body across the bridge, got hit by the car and
the limb was broken. The horse fell and its rider was
thrown off with some violenceAs a result of its injuries
the horse died. The plaintiff received contusions which
caused temporary unconsciousness and required
medical attention for several days.
From a judgment of the CFI of La Union absolving Smith
from liability Picart has appealed.
ISSUE: WON Smith was guilty of negligence such as
gives rise to a civil obligation to repair the damage done
HELD: the judgment of the lower court must be
reversed, and judgment is here rendered that the Picart
recover of Smith damages
YES
The test by which to determine the existence of
negligence in a particular case may be stated as follows:
Did the defendant in doing the alleged negligent act use
that person would have used in the same situation? If
not, then he is guilty of negligence. The existence of
negligence in a given case is not determined by
reference to the personal judgment of the actor in the
situation before him. The law considers what would be
reckless, blameworthy, or negligent in the man of
ordinary intelligence and prudence and determines
liability by that. The question as to what would constitute
the conduct of a prudent man in a given situation must of
course be always determined in the light of human
experience and in view of the facts involved in the
particular case.
Could a prudent man, in the case under consideration,
foresee harm as a result of the course actually pursued?
If so, it was the duty of the actor to take precautions to
guard against that harm. Reasonable foresight of harm,
followed by ignoring of the suggestion born of this
prevision, is always necessary before negligence can be
held to exist. Stated in these terms, the proper criterion
for determining the existence of negligence in a given
case is this: Conduct is said to be negligent when a
prudent man in the position of the tortfeasor would have
foreseen that an effect harmful to another was
sufficiently probable to warrant his foregoing conduct or
guarding against its consequences.
Applying this test to the conduct of the defendant in the
present case we think that negligence is clearly
established. A prudent man, placed in the position of the
defendant, would in our opinion, have recognized that
the course which he was pursuing was fraught with risk,
and would therefore have foreseen harm to the horse
and the rider as reasonable consequence of that course.
Under these circumstances the law imposed on the
Smith the duty to guard against the threatened harm.
It goes without saying that the plaintiff himself was not
free from fault, for he was guilty of antecedent
negligence in planting himself on the wrong side of the
road. But as we have already stated, Smith was also
negligent; and in such case the problem always is to
discover which agent is immediately and directly
responsible. It will be noted that the negligent acts of the
two parties were not contemporaneous, since the
negligence of the defendant succeeded the negligence
of the plaintiff by an appreciable interval. Under these
circumstances the law is that the person who has the
last fair chance to avoid the impending harm and fails to
do so is chargeable with the consequences, without
reference to the prior negligence of the other party.
Saludaga vs FEU
FACTS:
Petitioner Joseph Saludaga was a sophomore law
student of (FEU) when he was shot by Alejandro Rosete,
one of the security guards on duty at the school
premises on August 18, 1996. Petitioner was rushed to
FEU Hospital due to the wound he sustained.
Meanwhile, Rosete was brought to the police station
where he explained that the shooting was accidental. He
was eventually released considering that no formal
complaint was filed against him.
Saludaga thereafter filed with RTC Manila a complaint
for damages against respondents on the ground that
they breached their obligation to provide students with a
safe and secure environment and an atmosphere
conducive to learning.
Respondents, in turn, filed a Third-Party Complaint
against Galaxy Dvpt and Mgt Corp. (Galaxy), the agency
contracted by FEU to provide security services within its
premises and Mariano D. Imperial (Imperial), Galaxy's
President, to indemnify them for whatever would be
adjudged in favor of petitioner, if any; and to pay
attorney's fees and cost of the suit. On the other hand,
Galaxy and Imperial filed a Fourth-Party Complaint
against AFP General Insurance.
On Nov.10, 2004, the trial court ruled in favor of
Saludaga, the dispositive portion of which reads:
WHEREFORE, from the foregoing, judgment is hereby
rendered ordering:
1. FEU and Edilberto de Jesus, in his capacity as
president of FEU to pay jointly and severally Joseph
Saludaga the amount of P35,298.25 for actual damages
with 12% interest per annum from the filing of the
complaint until fully paid; moral damages xxx, exemplary
damages xx, attorney's fees xx and cost of the suit;
2. Galaxy Corp. and its president, Col. Mariano Imperial
to indemnify jointly and severally 3rd party plaintiffs (FEU
and Edilberto de Jesus in his capacity as President of
FEU) for the above-mentioned amounts;
3. And the 4th party complaint is dismissed for lack of
cause of action. No pronouncement as to costs.
Respondents appealed to the CA which ruled in its favor,
reversing the RTC decision, dismissing the complaint,
and also denying Saludagas subsequent MR. Hence,
the instant petition based on the following grounds:
THE CA SERIOUSLY ERRED....IN RULING THAT:
5.1. THE SHOOTING INCIDENT IS A FORTUITOUS
EVENT;
5.2. RESPONDENTS ARE NOT LIABLE FOR
DAMAGES FOR THE INJURY RESULTING FROM A
GUNSHOT WOUND SUFFERED BY THE
PETITIONER.....IN VIOLATION OF
THEIR....CONTRACTUAL OBLIGATION TO
PETITIONER.......TO PROVIDE HIM WITH A SAFE AND
SECURE EDUCATIONAL ENVIRONMENT;
5.3. ALEJANDRO ROSETE....IS NOT FEUS
EMPLOYEE.....; and
5.4. RESPONDENT EXERCISED DUE DILIGENCE IN
SELECTING GALAXY AS THE AGENCY WHICH
WOULD PROVIDE SECURITY SERVICES WITHIN
THE PREMISES OF RESPONDENT FEU.
ISSUES:
WON Saludaga may claim damages from FEU for
breach of student-school contract for a safe learning
environment
Whether FEUs liability is based on quasi-delict or on
contract
From what source of obligation did the other claims
arose?
HELD:
1) Yes.
2) FEUs liability is based on contract, not quasi-delict.
3) Quasi-delict vicarious liability between Galaxy
Agency and security guard Rosete
Quasi-delict but SC held that there is no vicarious
liability between FEU and Rosete
Quasi-delict damage to FEU due to the negligence of
Galaxy Agency in supplying FEU with an unqualified
guard (Imperial, the president of Galaxy is solidarily
liable with the agency)
It is undisputed that Saludaga was enrolled as a
sophomore law student in FEU. As such, there was
created a contractual obligation between the two parties.
On Saludaga's part, he was obliged to comply with the
rules and regulations of the school. On the other hand,
FEU, as a learning institution is mandated to impart
knowledge and equip its students with the necessary
skills to pursue higher education or a profession. At the
same time, it is obliged to ensure and take adequate
steps to maintain peace and order within the campus.
It is settled that in culpa contractual, the mere proof of
the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of
relief. In the instant case when Saludaga was shot inside
the campus by no less the security guard who was hired
to maintain peace and secure the premises, there is a
prima facie showing that FEU failed to comply with its
obligation to provide a safe and secure environment to
its students.
In order to avoid liability, however, FEU alleged that the
shooting incident was a fortuitous event because they
could not have reasonably foreseen nor avoided the
accident caused by Rosete as he was not their
employee; and that they complied with their obligation to
ensure a safe learning environment for their students by
having exercised due diligence in selecting the security
services of Galaxy.
After a thorough review of the records, the SC found that
FEU failed to discharge the burden of proving that they
exercised due diligence in providing a safe learning
environment for their students. They failed to prove that
they ensured that the guards assigned in the campus
met the requirements stipulated in the Security Service
Agreement. Certain documents about Galaxy were
presented during trial; however, no evidence as to the
qualifications of Rosete as a security guard for the
university was offered. FEU also failed to show that they
undertook steps to ascertain and confirm that the
security guards assigned to them actually possess the
qualifications required in the Security Service
Agreement.
Consequently, FEU's defense of force majeure must fail.
In order for force majeure to be considered, FEU must
show that no negligence or misconduct was committed
that may have occasioned the loss. An act of God
cannot be invoked to protect a person who has failed to
take steps to forestall the possible adverse
consequences of such a loss. When the effect is found
to be partly the result of a person's participation -
whether by active intervention, neglect or failure to act -
the whole occurrence is humanized and removed from
the rules applicable to acts of God.
Article 1170 of the Civil Code provides that those who
are negligent in the performance of their obligations are
liable for damages. Accordingly, for breach of contract
due to negligence in providing a safe learning
environment, respondent FEU is liable to petitioner for
damages.
We note that the trial court held respondent De Jesus
solidarily liable with respondent FEU. In Powton
Conglomerate, Inc. v. Agcolicol, we held that:
... Personal liability of a corporate director, trustee or
officer along (although not necessarily) with the
corporation may so validly attach, as a rule, only when -
(1) he assents to a patently unlawful act of the
corporation, or when he is guilty of bad faith or gross
negligence in directing its affairs, or when there is a
conflict of interest resulting in damages to the
corporation, its stockholders or other persons; (2) he
consents to the issuance of watered down stocks or
who, having knowledge thereof, does not forthwith file
with the corporate secretary his written objection thereto;
(3) he agrees to hold himself personally and solidarily
liable with the corporation; or (4) he is made by a
specific provision of law personally answerable for his
corporate action.
None of the foregoing exceptions was established in the
instant case; hence, respondent De Jesus should not be
held solidarily liable with respondent FEU.
Incidentally, although the main cause of action in the
instant case is the breach of the school-student contract,
petitioner, in the alternative, also holds respondents
vicariously liable under Article 2180 of the Civil Code.
However, respondents cannot be held liable for
damages under Art. 2180 of the Civil Code because
respondents are not the employers of Rosete. The latter
was employed by Galaxy. The instructions issued by
respondents' Security Consultant to Galaxy and its
security guards are ordinarily no more than requests
commonly envisaged in the contract for services entered
into by a principal and a security agency.
As to the Third Party Claim against Galaxy, evidence
duly supports that Galaxy is negligent not only in the
selection of its employees but also in their supervision.
Indeed, no administrative sanction was imposed against
Rosete despite the shooting incident; moreover, he was
even allowed to go on leave of absence which led
eventually to his disappearance. Galaxy also failed to
monitor petitioner's condition or extend the necessary
assistance. For these acts of negligence and for having
supplied respondent FEU with an unqualified security
guard, which resulted to the latter's breach of obligation
to petitioner, it is proper to hold Galaxy liable to
respondent FEU for such damages equivalent to the
above-mentioned amounts awarded to petitioner.
Unlike respondent De Jesus, we deem Imperial to be
solidarily liable with Galaxy for being grossly negligent in
directing the affairs of the security agency. It was
Imperial who assured petitioner that his medical
expenses will be shouldered by Galaxy but said
representations were not fulfilled.
Consolidated Bank and Trust Corporation vs. Court
of Appeals G.R. No. 138569,
Solidbanks tellers must exercise a high degree of
diligence in insuring that they return the passbook only
to the depositor or his authorized representative. The
tellers know, or should know, that the rules on savings
account provide that any person in possession of the
passbook is presumptively its owner.
Facts: Solidbank is a domestic banking corporation
while private respondent L.C. Diaz and Company, CPAs
(L.C. Diaz), is a professional partnership engaged in
the practice of accounting and which opened a savings
account with Solidbank. Diaz through its cashier,
Mercedes Macaraya , filled up a savings cash deposit
slip and a savings checks deposit slip. Macaraya
instructed the messenger of L.C. Diaz, Ismael Calapre,
to deposit the money with Solidbank and give him the
Solidbank passbook. Calapre went to Solidbank and
presented to Teller No. 6 the two deposit slips and the
passbook. The teller acknowledged receipt of the
deposit by returning to Calapre the duplicate copies of
the two deposit slips. Since the transaction took time
and Calapre had to make another deposit for L.C. Diaz
with Allied Bank, he left the passbook with Solidbank.
When Calapre returned to Solidbank to retrieve the
passbook, Teller No. 6 informed him that somebody got
the passbook. Calapre went back to L.C. Diaz and
reported the incident to Macaraya. The following day,,
L.C. Diaz through its Chief Executive Officer, Luis C.
Diaz, called up Solidbank to stop any transaction using
the same passbook until L.C. Diaz could open a new
account followed by a formal written request later that
day. It was also on the same day that L.C. Diaz learned
of the unauthorized withdrawal the day before of
P300,000 from its savings account. The withdrawal slip
bore the signatures of the authorized signatories of L.C.
Diaz, namely Diaz and Rustico L. Murillo. The
signatories, however, denied signing the withdrawal slip.
A certain Noel Tamayo received the P300,000.
L.C. Diaz demanded from Solidbank the return of its
money but to no avail. Hence, L.C. Diaz filed a
Complaint for Recovery of a Sum of Money against
Solidbank with the Regional Trial Court. After trial, the
trial court rendered a decision absolving Solidbank and
dismissing the complaint. Court of Appeals reversed the
decision of the trial court.
Issue: Whether or not Solidbank must be held liable for
the fraudulent withdrawal on private respondents
account.
Held: Solidbanks tellers must exercise a high degree
of diligence in insuring that they return the passbook
only to the depositor or his authorized representative.
The tellers know, or should know, that the rules on
savings account provide that any person in possession
of the passbook is presumptively its owner. If the tellers
give the passbook to the wrong person, they would be
clothing that person presumptive ownership of the
passbook, facilitating unauthorized withdrawals by that
person. For failing to return the passbook to Calapre,
the authorized representative of L.C. Diaz, Solidbank
and Teller No. 6 presumptively failed to observe such
high degree of diligence in safeguarding the passbook,
and in insuring its return to the party authorized to
receive the same. However, L.C. Diaz was guilty of
contributory negligence in allowing a withdrawal slip
signed by its authorized signatories to fall into the hands
of an impostor. Thus, the liability of Solidbank should be
reduced. Hence, the liability of Solidbank for actual
damages was reduced to only 60%, the remaining 40%
was borne by private respondent.
The contract between the bank and its depositor is
governed by the provisions of the Civil Code on simple
loan. There is a debtor-creditor relationship between the
bank and its depositor. The bank is the debtor and the
depositor is the creditor. The law imposes on banks high
standards in view of the fiduciary nature of banking. RA
8791 declares that the State recognizes the fiduciary
nature of banking that requires high standards of
integrity and performance. This new provision in the
general banking law, introduced in 2000, is a statutory
affirmation of Supreme Court decisions holding that the
bank is under obligation to treat the accounts of its
depositors with meticulous care, always having in mind
the fiduciary nature of their relationship.
Schmitz Transport & Brokerage Corporation vs.
Transport Venture, Inc. (458 SCRA 557)
Petitioner, who was in charge of securing requisite
clearances, receive the cargoes from the shipside and
deliver it to the consignee Little Giant Steel Pipe
Corporation warehouse at Cainta, Rizal, hired the
services of respondent Transport Venture Incorporation
(TVI)s tugboat for the hot rolled steel sheets in coil.
Coils were unloaded to the barge but there was no
tugboat to pull the barge to the pier. Due to strong waves
caused by approaching storm, the barge was
abandoned. Later, the barge capsized washing 37 coils
into the sea. Consignee was executed a subrogation
receipt by Industrial Insurance after the formers filing of
formal claim. Industrial Insurance filed a complaint
against both petitioner and respondent herein. The trial
court held that petitioner and respondent TVI were jointly
and severally liable for the subrogation.
ISSUE:
Whether or not the loss of cargoes was due to fortuitous
event.
RULING:
NO. In order, to be considered a fortuitous event: (1) the
cause of the unforeseen and unexpected occurrence, or
the failure of the debtor to comply with his obligation,
must be independent of human will; (2) it must be
impossible to foresee the event which constitute the
caso fortuito, or if it can be foreseen it must be
impossible to avoid; (3) the occurrence must be such as
to render it impossible for the debtor to fulfill his
obligation in any manner; and (4) the obligor must be
free from any participation in the aggravation of the
injury resulting to the creditor.
Petitioner and respondent TVI were jointly and severally
liable for the amount of paid by the consignee plus
interest computed from the date of decision of the trial
court.
Philippine Communications Satellite Corp. vs. Globe
Telecom
FACTS: Globe had been engaged in the coordination of
the provision of various communication facilities for the
military bases of the US in Clark Air Base and Subic
Naval Base. The said communication facilities were
installed and configured for the exclusive use of the US
Defense Communications Agency (USDCA), and for
security reasons, were operated only by its personnel or
those of American companies contracted by it to operate
said facilities. The USDCA contracted with said
American companies, and the latter, in turn, contracted
with Globe for the use of the communication facilities.
Globe, on the other hand, contracted with local service
providers such as the Philippine Communications
Satellite Corporation (Philcomsat) for the provision of the
communication facilities.
On 07 May 1991, Philcomsat and Globe entered into an
Agreement whereby Philcomsat obligated itself to
establish, operate and provide an IBS Standard B earth
station (earth station) within Cubi Point for the exclusive
use of the USDCA. The term of the contract was for 5
years. In turn, Globe promised to pay Philcomsat
monthly rentals for each leased circuit involved.
Both parties knew that the Military Bases Agreement
between the Republic of the Philippines and the US was
to expire in 1991. On August 6, 1992, Globe notified
Philcomsat of its intention to discontinue the use of the
earth station effective November 8, 1992 in view of the
termination of the RP-US Military Bases Agreement.
After the US military forces left Subic Naval Base,
Philcomsat sent Globe a letter dated November 24, 1993
demanding payment of its outstanding obligations under
the Agreement amounting to US$4,910,136.00 plus
interest and attorneys fees. However, Globe refused to
heed Philcomsats demand.
ISSUES:
1. Whether the termination of the RP-US Military
Bases Agreement constitute force majeure which would
exempt Globe from complying with its obligation to pay
rentals under its Agreement with Philcomsat;
2. Whether Globe is liable to pay rentals under the
Agreement for the month of December 1992; and
3. Whether Philcomsat is entitled to attorneys fees
and exemplary damages.
HELD:
First Issue: Yes. Article 1174, which exempts an obligor
from liability on account of fortuitous events or force
majeure, refers not only to events that are
unforeseeable, but also to those which are foreseeable,
but inevitable. Philcomsat and Globe agreed in Section 8
of the Agreement that the following events shall be
deemed events constituting force majeure: particularly:
1. any law, order, regulation, direction or request of the
Philippine Government. Under Article 1306 of the Civil
Code, parties to a contract may establish such
stipulations, clauses, terms and conditions as they may
deem fit, as long as the same do not run counter to the
law, morals, good customs, public order or public policy.
Not being contrary to law, morals, good customs, public
order, or public policy, Section 8 of the Agreement which
Philcomsat and Globe freely agreed upon has the force
of law between them.
Second Issue: Yes. The US military forces and
personnel completely withdrew from Cubi Point only on
December 31, 1992. Thus, until that date, the USDCA
had control over the earth station and had the option of
using the same thus the Court of Appeals did not err
when it affirmed the trial courts ruling that Globe is liable
for payment of rentals until December 1992.
Third Issue: No. Philcomsat is not entitled to attorneys
fees and exemplary damages.
The award of attorneys fees is the exception rather than
the rule, and must be supported by factual, legal and
equitable justifications. In previously decided cases, the
Court awarded attorneys fees where a party acted in
gross and evident bad faith in refusing to satisfy the
other partys claims and compelled the former to litigate
to protect his rights; when the action filed is clearly
unfounded, or where moral or exemplary damages are
awarded. However, in cases where both parties have
legitimate claims against each other and no party
actually prevailed, such as in the present case where the
claims of both parties were sustained in part, an award
of attorneys fees would not be warranted.
Exemplary damages may be awarded in cases involving
contracts or quasi-contracts, if the erring party acted in a
wanton, fraudulent, reckless, oppressive or malevolent
manner. In the present case, it was not shown that
Globe acted wantonly or oppressively in not heeding
Philcomsats demands for payment of rentals. It was
established during the trial of the case before the trial
court that Globe had valid grounds for refusing to comply
with its contractual obligations after 1992.
Security and Trust Company and R. Manhit vs CA
and Ferrer
Facts: Ferrer was contracted by the SBTC to construct a
bldg in Davao. The contract provided that it be finished
within 200 working days, it was finished upon stipulated
time but additional expenses were incurred amounting to
300k on top of the original cost, these expenses were
made known to SBTC and timely demands for the
payment of the increased cost were done by Ferrer to
SBTC, the latter only recommended that the verified cost
is 200k. SBTC contend that in the contract, should there
be any increase in the expenses, the owner shall
equitably make the appropriate adjustment on mutual
agreement of both parties. Ferrer filed for damages and
the trial court ruled in his favor, the defendants were
ordered to pay. On appeal, CA affirmed the tcs decision.
Issue: WON SBTC is liable for damages and payment of
the additional expenses.
Held: CA decision AFFIRMED.
Ratio: Art. 22 states that, Every person who through an
act or performance by another or any other means,
acquires or comes into possession of something at the
expense of the latter without just or legal ground, shall
return the same to him.
It is not denied that private respondent incurred
additional expenses in constructing petitioner banks
bldg due to a drastic and unexpected in construction
cost. Hence, to allow petitioner bank to acquire the
constructed bldg at a price far below its actual cost
would undoubtedly constitute unjust enrichment for the
bank to the prejudice of Ferrer, such cannot be allowed
by law.
MACTAN-CEBU INTERNATIONAL AIRPORT
AUTHORITY vs. TUDTUD Case Digest
The former owner reacquires the property expropriated if
the expropriation of the same was subject to condition
that when that purpose is ended or abandoned, it shall
be returned to the owner.
FACTS: The National Airports Corporation (NAC) filed a
complaint for expropriation in order to expand the Cebu
Lahug Airport. It sought to acquire, by negotiated sale or
expropriation, several lots adjoining the then existing
airport which included the parcels of land owned by the
predecessors-in-interest of respondents Benjamin
Tudtud et al. NAC assured the owners that they would
reacquire the land if it is no longer needed by the airport.
The Court of First Instance of Cebu granted the
expropriation.
No structures related to the operation of the Cebu Lahug
Airport were constructed on the land expropriated.
Respondent Lydia Adlawan (Lydia), acting as attorney-
in-fact of the original owners, sent a letter to the general
manager of the petitioner Mactan Cebu International
Airport Authority (MCIAA), the new owner of the lot and
demanded to repurchase the lot at the same price paid
at the time of the taking, without interest.
Lydia filed a complaint before the Regional Trial Court
(RTC) of Cebu City for reconveyance and damages
against the MCIAA. The RTC of Cebu rendered
judgment in favor of Tudtud et al. MCIAA appealed to the
Court of Appeals but it affirmed the RTC decision.
MCIAA then filed a Motion for Reconsideration but was
denied.
ISSUE: Whether or not Tudtud et al. are entitled for the
reconveyance of the land expropriated
HELD: Tudtud et al.s witness respondent Justiniano
Borga declared that the original owners did not oppose
the expropriation of the lot upon the assurance of the
NAC that they would reacquire it if it is no longer needed
by the airport. The rights and duties between the MCIAA
and Tudtud et al are governed by Article 1190 of the Civil
Code which provides: When the conditions have for their
purpose the extinguishment of an obligation to give, the
parties, upon the fulfillment of said conditions, shall
return to each other what they have received. In case of
the loss, deterioration, or improvement of the thing, the
provisions which, with respect to the debtor, are laid
down in the preceding article [Article 1189] shall be
applied to the party who is bound to return.
While the MCIAA is obliged to reconvey Lot No. 988 to
Tudtud et al., they must return to the MCIAA what they
received as just compensation for the expropriation of
Lot No. 988, plus legal interest to be computed from
default, which in this case runs from the time the MCIAA
complies with its obligation to the respondents. Tudtud et
al., must likewise pay the MCIAA the necessary
expenses it may have incurred in sustaining Lot No. 988
and the monetary value of its services in managing it to
the extent that Tudtud et al., were benefited thereby.
Following Article 1187 of the Civil Code, the MCIAA may
keep whatever income or fruits it may have obtained
from Lot No. 988, and Tudtud et al., need not account for
the interests that the amounts they received as just
compensation may have earned in the meantime.
ROQUE VS. LAPUS
FACTS:
Sometime in 1964, plaintiff and defendant entered into
an agreement of sale covering Lots 1, 2 and 9, Block 1,
of said property, payable in 120 equal monthly
installments at the rate of P16.00, P15.00 per square
meter, respectively. In accordance with said agreement,
defendant paid to plaintiff the sum of P150.00 as deposit
and the further sum of P740.56 to complete the payment
of four monthly installments covering the months of July,
August, September, and October, 1954.
On January 24, 1955, defendant requested plaintiff that
he be allowed to abandon and substitute Lots 1, 2 and 9,
the subject with Lots 4 and 12, Block 2 of the Rockville
Subdivision, which are corner lots, to which request
plaintiff graciously acceded. The evidence discloses that
defendant proposed to plaintiff modification of their
previous contract to sell because he found it quite
difficult to pay the monthly installments on the three lots,
and besides the two lots he had chosen were better lots,
being corner lots. In addition, it was agreed that the
purchase price of these two lots would be at the uniform
rate of P17.00 per square meter payable in 120 equal
monthly installments, with interest at 8% annually on the
balance unpaid. Pursuant to this new agreement,
defendant occupied and possessed Lots 4 and 12, and
enclosed them, including the portion where his house
now stands, with barbed wires and adobe walls.
However, aside from the deposit of P150.00 and the
amount of P740.56, which were paid under their
previous agreement, defendant failed to make any
further payment on account of the agreed monthly
installments for the two lots in dispute, under the new
contract to sell. Plaintiff demanded upon defendant not
only to pay the stipulated monthly installments in arrears,
but also to make up-to-date his payments, but defendant
refused to comply with plaintiff's demands.
On or about November 3, 1957, plaintiff demanded upon
defendant to vacate the lots in question and to pay the
reasonable rentals thereon at the rate of P60.00 per
month from August, 1955. On January 22, 1960,
petitioner Felipe C, Roque filed the complaint against
defendant Nicanor Lapuz for rescission and cancellation
of the agreement of sale between them involving the two
lots in question and prayed that judgment be rendered
ordering the rescission and cancellation of the
agreement of sale, the defendant to vacate the two
parcels of land and remove his house therefrom and to
pay to the plaintiff the reasonable rental thereof at the
rate of P60.00 a month from August 1955 until such time
as he shall have vacated the premises, and to pay the
sum of P2,000.00 as attorney's fees, costs of the suit
and award such other relief or remedy as may be
deemed just and equitable in the premises.
The Court of Appeals rendered its decision that the
defendant Nicanor Lapuz is granted a period of ninety
(90) days from entry hereof within which to pay the
balance. Hence, this appeal.
ISSUE:
Can private respondent be entitled to the Benefits of the
third paragraph of Article 1191, New Civil Code, for the
fixing of period
RULING: No. Respondent as obligor is not entitled to the
benefits of paragraph 3 of Art. 1191, NCC Having been
in default and acted in bad faith, he is not entitled to the
new period of 90 days from entry of judgment within
which to pay petitioner the balance of P11,434.44 with
interest due on the purchase price of P12,325.00 for the
two lots. To allow and grant respondent an additional
period for him to pay the balance of the purchase price,
which balance is about 92% of the agreed price, would
be tantamount to excusing his bad faith and sanctioning
the deliberate infringement of a contractual obligation
that is repugnant and contrary to the stability, security
and obligatory force of contracts. Moreover, respondent's
failure to pay the succeeding 116 monthly installments
after paying only 4 monthly installments is a substantial
and material breach on his part, not merely casual,
which takes the case out of the application of the
benefits of pa paragraph 3, Art. 1191, N.C.C.
Pursuant to Art. 1191, New Civil Code, petitioner is
entitled to rescission with payment of damages which
the trial court and the appellate court, in the latter's
original decision, granted in the form of rental at the rate
of P60.00 per month from August, 1955 until respondent
shall have actually vacated the premises, plus P2,000.00
as attorney's fees. The Court affirmed the same to be
fair and reasonable. The Court also sustained the right
of the petitioner to the possession of the land, ordering
thereby respondent to vacate the same and remove his
house therefrom.
GIL VS CA AND HEIRS OF MATULAC
FACTS:
Concepcion Palma Gil, and her sister, Nieves Palma Gil,
married to AngelVillarica, were the co-owners of a parcel
of commercial land with an area of 829 square meters in
Davao City. The spouses Angel and Nieves Villarica
hadconstructed a two-storey commercial building on the
property.On October 13, 1953, Concepcion filed a
complaint against her sisterNieves with the then Court of
First Instance of Davao City for specificperformance, to
compel the defendant to cede and deliver to her an
undividedportion of the said property with an area of
256.2 square meters. After dueproceedings, the court
rendered judgment on April 7, 1954 in favor of
Concepcion, ordering the defendant to deliver to the
plaintiff an undividedportion of the said property with an
area of 256.2 square meters.Nieves appealed to the
Court of Appeals which affirmed the assaileddecision.
The court issued a writ of execution. Nieves, however,
refused toexecute the requisite deed in favor of her
sister.On April 27, 1956, the court issued an order
authorizing ex-officio Sheriff Eriberto Unson to execute
the requisite deed of transfer to the plaintiff over
anundivided portion of the property with a total area of
256.2 square meters.Instead of doing so, the sheriff had
the property subdivided into four lots namely,Lot 59-C-1,
with an area of 218 square meters; Lot 59-C-2, with an
area of 38square meters; Lot 59-C-3, with an area of 14
square meters; and Lot 59-C-4,with an area of 560
square meters, all covered by a subdivision plan. The
sheriff thereafter executed a Deed of Transfer to
Concepcion over Lot 59-C-1 and Lot59-C-2 with a total
area of 256.2 square meters.On October 24, 1956,
Concepcion executed a deed of absolute sale overLot
59-C-1 in favor of Iluminada Pacetes for a purchase
price of P21,600.00 uponwhich P7,500.00 is to be paid
upon signing of the contract and the balance of
P14,100.00 to be paid upon delivery of the Title. On
March 16, 1966, spousesIluminada Pacetes and Agapito
Pacetes executed a deed of absolute sale overthe
disputed lots in favor Constancio Maglana. And on April
22, 1980, Maglanaewecuted a deed of sale in favor of
Emilio Matulac for the purchase price of P150,000.00.
And on August 4, 1959, Concepcion died, leaving all
herobligations to her heirs including the petitioners.On
June 11, 1993, the trial court rendered judgment in favor
of thedefendants. The trial court ruled that this Court had
affirmed, in G.R. No. 85538and G.R. No. L-60690, the
sales of the property from Concepcion Palma Gil
toIluminada Pacetes, then to Constancio Maglana and to
Emilio Matulac; hence,the trial court was barred by the
rulings of the Court. The plaintiffs appealed tothe Court
of Appeals which affirmed the latters decision.
ISSUE:Whether or not the trial court erred in not
declaring the sale of theproperties in question from
Iluminada Pacetes to Constancio Maglana, thence,from
Constancio Maglana to Emilio Matulac NULL and VOID
for there was delayincurred by Concepcion in not
delivering the Title of the subject lands to Pacetes.
RULING: Article 1191 in tandem with Article 1592 of the
New Civil Code are centralto the issues at bar. Under the
last paragraph of Article 1169 of the New CivilCode, in
reciprocal obligations, neither party incurs in delay if the
other does notcomply or is not ready to comply in a
proper manner with what is incumbentupon him.From
the moment one of the parties fulfills his obligation, delay
in theother begins. Thus, reciprocal obligations are to be
performed simultaneously sothat the performance of one
is conditioned upon the simultaneous fulfillment of the
other. The right of rescission of a party to an obligation
under Article 1191of the New Civil Code is predicated on
a breach of faith by the other party thatviolates the
reciprocity between them. The petitioners therefore, as
successors-in-interest of the vendor, are notthe injured
parties entitled to a rescission of the deed of absolute
sale. It wasConcepcions heirs, including the petitioners,
who were obliged to deliver to thevendee a certificate of
title over the property under the latters name, free
fromall liens and encumbrances within 120 days from
the execution of the deed of absolute sale on October
24, 1956, but had failed to comply with the
obligation.Furthermore, the consignation by the vendee
of the purchase price of theproperty is sufficient to defeat
the right of the petitioners to demand for arescission of
the said deed of absolute sale. The petition for review
was denied for lack of merit.
SPOUSES RAYOS vs.REYES et al
FACTS: 3 parcels of unregistered land in Pangasinan
were formerly owned by the spouses Tazal who on 1
September 1957 sold them to respondents predecessor-
in-interest, Reyes, with right to repurchase within two 2
years from date thereof by paying to the vendee the
purchase price and all expenses incident to their
reconveyance. After the sale the vendee a retro took
physical possession of the properties and paid the taxes
thereon.
The otherwise inconsequential sale became
controversial when 2 of the 3 parcels were again sold by
Tazal in favor of petitioners predecessor-in-interest
Rayos without first availing of his right to repurchase the
properties. In the meantime, the conventional right of
redemption in favor of spouses Tazal expired without the
right being exercised by either the Tazal spouses or the
vendee Rayos.
After the expiration of the redemption period, Tazal
attempted to repurchase the properties from Reyes by
asserting that the 1 September 1957 deed of sale with
right of repurchase was actually an equitable mortgage
and offering the amount of P724.00 to pay for the
alleged debt. (consignation) But Reyes refused the
tender of payment and vigorously claimed that their
agreement was not an equitable mortgage.3
On 9 May 1960 Francisco Tazal filed a complaint with
the CFI Reyes for the declaration of the 1 September
1957 transaction as a contract of equitable mortgage. He
also prayed for an order requiring defendant Mamerto
Reyes to accept the amount of P724.00 which he had
deposited with the trial court as full payment for his debt,
and canceling the supposed mortgage on the three (3)
parcels of land with the execution of the corresponding
documents of reconveyance in his favor.
The trial court in the Civil Case rejected the contention of
Tazal that the deed of sale executed on 1 September
1957 was an equitable mortgage but held that Tazal
could nonetheless redeem the three (3) parcels of land
within thirty (30) days from finality of judgment by paying
to Reyes the purchase price and all expenses to execute
the reconveyance. Reyes appealed the Decision to the
CA which in turn elevated the appeal to this Court since
only questions of law were involved. When Reyes died,
petitioner-spouses Rayos wrested physical possession
of the disputed properties from Reyess heirs.
This Court considered the case closed and terminated
for failure of the parties therein to manifest their interest
to further prosecute the case. The judgment in the Civil
Case became final and executory.
Subsequent to the finality of judgment in the Civil Case
petitioner-spouses did nothing to repurchase the three
(3) parcels of land within the thirty (30) day grace
period from finality of judgment.

Respondents as heirs of Reyes executed an affidavit
adjudicating to themselves the ownership of the parcels
of land and declared the properties in their names for
assessment and collection of real estate taxes. The
respondents registered the 1 September 1957 deed of
sale with right of repurchase with the RD.
Respondents filed a complaint for damages and
recovery of ownership and possession of the 3 parcels
of land in dispute against herein petitioner-spouses
Rayos and the administrator thereof before the RTC. It
was respondents theory that neither petitioners nor their
predecessors-in-interest Tazal and Rayos repurchased
the properties before buying them or when the judgment
in the Civil Case became final and executory, hence the
sale of the three (3) parcels of land to petitioner-spouses
did not transfer ownership thereof to them.
Petitioners argued on the other hand that the
consignation of P724.00 in Civil Case No. A-245 had the
full effect of redeeming the properties from respondents
and their predecessor-in-interest, and that respondents
were guilty of estoppel and laches since Reyes as their
predecessor-in-interest did not oppose the sale to Rayos
and to petitioner-spouses Rayos. The parties then filed
their respective memoranda after which the case was
submitted for decision.
The trial court promulgated its Decision in the Civil Case
void the separate deeds of absolute sale thereof
executed by Tazal in favor of Rayos and to spouses
Rayos and by Rayos to the same spouses, and ordered
herein petitioners and Francisco Tazal to vacate and
reconvey the lands to respondents as heirs of Reyes
and to pay damages. Petitioners appealed the Decision
to the CA.
The appellate court promulgated its Decision affirming in
toto the judgment appealed from. Hence, the instant
petition for review.
ISSUE:
1. WON the consignation is valid
2. WON the respondents are barred by estoppel and
laches
3. Won the petitioners are in good faith
HELD:
1. In order that consignation may be effective the debtor
must show that:
(a) there was a debt due;
(b) the consignation of the obligation had been made
because the creditor to whom a valid tender of payment
was made refused to accept it;
(c) previous notice of the consignation had been given to
the person interested in the performance of the
obligation;
(d) the amount due was placed at the disposal of the
court; and, (e) after the consignation had been made the
person interested was notified thereof.
In the instant case, petitioners failed,
first, to offer a valid and unconditional tender of payment;
second, to notify respondents of the intention to deposit
the amount with the court; and
third, to show the acceptance by the creditor of the
amount deposited as full settlement of the obligation, or
in the alternative, a declaration by the court of the
validity of the consignation. The failure of petitioners to
comply with any of these requirements rendered the
consignation ineffective.
Consignation and tender of payment must not be
encumbered by conditions if they are to produce the
intended result of fulfilling the obligation. In the instant
case, the tender of payment of P724.00 was conditional
and void as it was predicated upon the argument of
Tazal that he was paying a debt which he could do at
any time allegedly because the 1 September 1957
transaction was a contract of equitable mortgage and not
a deed of sale with right to repurchase. The ostensible
purposes of offering the amount in connection with a
purported outstanding debt were to evade the stipulated
redemption period in the deed of sale which had already
expired when the tender of payment was made and the
Civil Case was instituted, and as a corollary, to avail of
the thirty (30)-day grace period under Art. 1606 of the
Civil Code within which to exercise the right to
repurchase. Reyes was therefore within his right to
refuse the tender of payment offered by petitioners
because it was conditional upon his waiver of the two
(2)-year redemption period stipulated in the deed of sale
with right to repurchase.
Moreover, petitioners failed to prove in the Civil Cases
that any form of notice regarding their intention to
deposit the amount of P724.00 with the CFI had been
served upon respondents. This requirement is not
fulfilled by the notice which could have ensued from the
filing of the complaint in the civil case or the stipulation
made between Tazal and Reyes regarding the
consignation of P724.00. The latter constitutes the
second notice required by law as it already concerns the
actual deposit or consignation of the amount and is
different from the first notice that makes known the
debtors intention to deposit the amount, a requirement
missing in the instant case. Without any announcement
of the intention to resort to consignation first being made
to the persons interested in the fulfillment of the
obligation, the consignation as a means of payment is
void.
It is also futile to argue that the deposit of P724.00 with
the Court of First Instance could have perfected the
redemption of the three (3) parcels of land because it
was not approved by the trial court, much less accepted
by Mamerto Reyes or his heirs, herein respondents. The
dispositive portion of the Decision in Civil Case No. A-
245, which reads x x x x the Court, hereby renders
judgment declaring the contract x x x entered into by the
plaintiffs and the defendant and captioned Deed of Sale
with Right to Repurchase as a true sale with right to
repurchase x x x and not an equitable mortgage x x x
and declaring the plaintiffs entitled to repurchase the
property in question within thirty (30) days from finality of
this decision x x x x plainly rejected the complaint for
lack of merit and necessarily also the consignation done
pursuant thereto. This conclusion is buttressed by the
directive of the trial court in the body of the Decision that
Francisco Tazal may still exercise the right to
repurchase the property in question by returning to the
[Mamerto Reyes] the purchase price of P724.00 plus all
expenses incident to the reconveyance within the period
of thirty (30)-days from the time this decision becomes
final x x x x21 The obvious reference of this statement
was the stipulation made by the parties therein that the
defendant [Mamerto Reyes] has been paying the taxes
on said properties from 1958 to 1969 x x x x22 where
the taxes paid constituted necessary expenses that
petitioners had to reimburse to respondents
predecessor-in-interest aside from the P724.00 earlier
deposited by Tazal.
To be sure, while it has been held that approval of the
court or the obligees acceptance of the deposit is not
necessary where the obligor has performed all acts
necessary to a valid consignation such that court
approval thereof cannot be doubted, Sia v. Court of
Appeals23 clearly advises that this ruling is applicable
only where there is unmistakable evidence on record
that the prerequisites of a valid consignation are present,
especially the conformity of the proffered payment to the
terms of the obligation which is to be paid.24 In the
instant case, since there is no clear and preponderant
evidence that the consignation of P724.00 satisfied all
the requirements for validity and enforceability, and since
Mamerto Reyes vehemently contested the propriety of
the consignation, petitioners cannot rely upon sheer
speculation and unfounded inference to construe the
Decision of the Court of First Instance as one impliedly
approving the consignation of P724.00 and perfecting
the redemption of the three (3) parcels of land.
It should be recalled that one of the requisites of
consignation is the filing of the complaint by the debtor
against the creditor. Hence it is the judgment on the
complaint where the court declares that the consignation
has been properly made that will release the debtor from
liability. Should the consignation be disapproved by the
court and the case dismissed, there is no payment and
the debtor is in mora and he shall be liable for the
expenses and bear the risk of loss of the thing.25
To sanction the argument of petitioners and in the
process excuse them from their responsibility of securing
from the trial court in Civil Case No. A-245 a categorical
declaration that the consignation of P724.00 had
complied with all the essential elements for its validity
would only dilute the rule requiring absolute compliance
with the requisites of consignation.26 It also disturbs a
steady and stable status of proprietary rights, i.e., x x x
el acreedor tan solo, y no el juez, puede autorizar la
variacion que para los derechos de aquel suponga la
que se intente en el objeto, cuantia o forma de las
obligaciones,27 since parties are left guessing on
whether the repurchase of the properties had been
effected. In a broader sense, this uncertain state will only
depress the market value of the land and virtually
paralyze efforts of the landowner to meet his needs and
obligations and realize the full value of his land.
Moreover, we do not think that respondents causes of
action in Civil Case No. A-2032 are now barred by
estoppel and laches. The essence of estoppel and
laches is the failure or neglect for an unreasonable and
unexplained length of time to do that which by exercising
due diligence could or should have been done earlier; it
is the negligence or omission to assert a right within a
reasonable time warranting a presumption that the party
entitled to assert it either has abandoned or declined to
assert it although there is no absolute rule as to what
constitutes staleness of demand as each case is to be
determined according to its particular circumstances.28
In the instant case, it was prudent and discerning for
respondents and their predecessor-in-interest Mamerto
Reyes that they deferred any action against petitioners,
i.e., Civil Case No. A-2032, to recover ownership and
possession of the three (3) pieces of real estate, until the
finality of judgment in Civil Case No. A-245. For patiently
electing not to inundate our courts of justice with cases
the outcome of which may well depend upon the then
pending civil suit, respondents cannot now be penalized
by barring their complaint in Civil Case No. A-2032 on
the equitable grounds of estoppel and laches.
We also find no reason to disturb our findings upon
petitioners assertion that they were purchasers of the
three (3) parcels of land in good faith and for value. As
we held in David v. Bandin, the issue of good faith or
bad faith of the buyer is relevant only where the subject
of the sale is registered land and the purchaser is buying
the same from the registered owner whose title to the
land is clean x x x in such case the purchaser who relies
on the clean title of the registered owner is protected if
he is a purchaser in good faith for value.29 Since the
properties in question are unregistered lands, petitioners
as subsequent buyers thereof did so at their peril. Their
claim of having bought the land in good faith, i.e., without
notice that some other person has a right to or interest in
the property, would not protect them if it turns out, as it
actually did in this case, that their seller did not own the
property at the time of the sale.
At any rate, petitioners failed to discharge their burden of
proof that they were purchasers of the three (3) parcels
of land in good faith. For, as we ruled in Embrado v.
Court of Appeals,30 the burden of proving the status of a
purchaser in good faith and for value lies upon him who
asserts that status, which is not discharged by simply
invoking the ordinary presumption of good faith, i.e., that
everyone is presumed to act in good faith, since the
good faith that is here essential is integral with the very
status which must be established.
In the proceedings a quo, what is evident is the admitted
fact of payment made by Mamerto Reyes as
respondents predecessor-in-interest of the taxes on the
properties prior to and at the time when the contracts of
sale in favor of petitioner-spouses were perfected, which
undoubtedly confirms the precedence of respondents
possession of the parcels of land in question. This
situation should have compelled petitioners to
investigate the right of respondents over the properties
before buying them, and in the absence of such inquiry,
the rule is settled that a buyer in the same
circumstances herein involved cannot claim to be a
purchaser in good faith.
The absence of good faith on the part of petitioner-
spouses Teofilo and Simeona Rayos in purchasing the
three (3) parcels of unregistered land precludes the
application of the rule on double sales enunciated in Art.
1544 of the Civil Code.31 In any event, even if we apply
Art. 1544, the facts would nonetheless show that
respondents and their predecessor-in-interest registered
first the source of their ownership and possession, i.e.,
the 1 September 1957 deed of sale with right to
repurchase, held the oldest title, and possessed the real
properties at the earliest time. Applying the doctrine of
priority in time, priority in rights or prius tempore, potior
jure, respondents are entitled to the ownership and
possession of the parcels of land in dispute.
The instant Petition for Review is DENIED. The assailed
Decision of the CA is AFFIRMED with MODIFICATION
concerning the damages.
There is no evidence to prove that petitioners paid at any
time the repurchase price for the three (3) parcels of
land in dispute except for the deposit of P724.00 in the
Court of First Instance which however fell short of all the
acts necessary for a valid consignation and discharge of
their obligation to respondents.
In order that consignation may be effective the debtor
must show that (a) there was a debt due; (b) the
consignation of the obligation had been made because
the creditor to whom a valid tender of payment was
made refused to accept it; (c) previous notice of the
consignation had been given to the person interested in
the performance of the obligation; (d) the amount due
was placed at the disposal of the court; and, (e) after the
consignation had been made the person interested was
notified thereof.
NOTES:
No evidence to prove actual damages was offered in
Civil Case No. A-2032 since the parties therein
submitted the case for decision on the basis of their
respective memoranda, hence no actual damages can
be awarded.32 In the same manner, there is no clear
and convincing showing that petitioners acted in a
wanton, fraudulent, reckless, oppressive, or malevolent
manner to warrant the imposition of exemplary damages
in respondents favor.33 In any event, exemplary
damages cannot be adjudicated in the instant case since
there is no award of moral, temperate or compensatory
damages.
It is appropriate to stress that the mere filing of a
complaint does not ipso facto entitle a party to attorneys
fees since this act is a means sanctioned by law to
protect rights and interests even if found subsequently to
be unmeritorious.