FIDELA SALES GONZAGA v.

CROWN LIFE
91 Phil 10

FACTS:
Crown Life Insurance Co.’s whose home office is in Toronto Canada, issued to Ramon Gonzaga
through its Manila branch office a 20-year endowment policy for P15K. Ramon paid in due time
the agreed yearly premium of P591 for 3 consecutive years, and last payment was on September
6, 1941.
On account of the outbreak of war, no premiums were paid after that date, although the policy
continued in force up to June 12, 1943 under its automatic premium loan clause.
When Ramon died in 1945 from an accident, his widow plaintiff Fidela Sales Gonzaga and
beneficiary attempted to collect the amount of the policy but was unsuccessful causing them to
file a suit against Crown Life.
Crown Life argued that the policy had lapsed by non-payment of the stipulated premiums of the
stipulated dates. The trial court ruled in favor of Crown Life
Crown Life alleged that during the Japanese occupation, it had its offices open in Manila through
its General Agents Hanson Orth and Stevenson, Inc.
Fidela asserts that it was Life Crown’s duty to notify her husband Ramon of its new postal address
during the war, and that its failure to do so excused delinquency in the payment of premiums.

ISSUE: WON plaintiff Fidela may claim for benefits even after non-payment due to the war
outbreak-

HELD:
-No. According to evidence, Crown being an enemy corporation, its offices were housed at the
Chaco building when the hostilities broke out, were ordered closed by Japanese Military
authorities in January 1942, and officers of Hanson, Orth and Stevenson, Inc., Crown’s general
agents, being American citizens were interned.

-Japanese administration issued Instruction No. 71 by which enemy alien insurance companies
were expressly prohibited from doing business.

-Before Instruction No. 71 was promulgated, Hanson Orth and Stevenson, had opened in the
house of one of their Filipino employees, an office with skeleton force, all Filipinos, for the
purpose of receiving premiums from their policy holders; notwithstanding the prohibition that
office was not closed.

-In the face of the Japanese Military decrees, which found sanctions of international law, the
failure of Crown or its Filipino employees to advice the insured Ramon of Life Crown’s new
address did not work as forfeiture of the right to have premiums satisfied promptly.

-While secret transactions between parties during the war might be binding, it was not obligatory
on the insurer, and it was risky for its employees to send out notices to its widely scattered policy
holders, with the postal service under the control and administration of the Japanese. There is
no duty where the law forbids; and there is no obligation without a corresponding right enjoyed
by another.

- Crown’s opening of an interim office partook the nature of the privilege to the policy holders to
keep their policies operative rather than a duty to them under the contract

-Furthermore, the policy carried a clause providing for its reinstatement under certain conditions
within 3 years from the date of lapse on application of the insured

Lapse of present policy: June 12, 1943

Opening of Crown Life in Manila (Wilson Building): May 1, 1945
Death of Ramon Gonzaga: June 27, 1945

- It is undoubted that Ramon knew the reopening and resuming of business of Crown since he
was an employee of the US Navy, and that the US Navy had an office in the same Wilson Building
that he came to at least 2x a month for his salary

Petition is DISMISSED.

JUAN F. VILLARROEL vs BERNARDINO ESTRADA

71 Phil 140

FACTS:
On May 9, 1912, Alejandra F. Callao, mother of defendant John F. Villarroel, obtained from the
spouses Mariano Estrada and Severina a loan of P1, 000 payable within seven aiios. Upon death
of both creditors and debtors, On August 9, 1930, John F. Villarroel signed a document with
Bernardino Estrada by which the applicant must declare in the amount of P1, 000, with 12
percent of interest to be recovered.
Lower court ruled that payment should be made.

ISSUE: Whether action will prosper despite original debt has prescribed?

HELD:
Yes.The right to succeed her in his inheritance, that debt legally contracted by his mother,
although it lost its effectiveness by prescription, is now, however, for a moral obligation is
sufficient consideration to create and make effective and enforceable obligation voluntarily
contracted.
The rule that a new promise to pay a debt required to be made by the same person obligated or
otherwise legally authorized by it, not applicable to the present case is not required in compliance
with the obligation of the originally required, but which later would voluntarily assume this
obligation.

FISHER vs ROBB
69 Phil 101
FACTS:
John C. Robb met A.O. Fisher in a business trip in Shanghai. The two became acquainted through
friends and exchanged knowledge regarding dog racing. Plaintiff as manager of a dog racing
course, became interested with the business of the Philippine Greyhound Club, Inc., in Manila and
later informed defendant of his interest to subscribe and be a stockholder of said business. He sent
his first installment via Manila telegram. Later, said business was later change to The Philippine
Racing Club, and upon asking for the second installment from plaintiff, he said he already did send
the second installment.

The defendant endeavored to save the investment of those who had subscribed to the Philippine
Greyhound Club, Inc., by having the Philippine Racing Club acquire the remaining assets of the
Philippine Greyhound Club, Inc. Through exchange of letters, the plaintiff-appellee wrote the
defendant-appellant requiring him to return the entire amount paid by him to the Philippine
Greyhound Club, Inc., Upon receiving this letter, the defendant-appellant answered the plaintiff-
appellee for any loss which he might have suffered in connection with the Philippine Greyhound
Club, Inc., in the same way that he could not expect anyone to reimburse him for his own losses
which were much more than those of the plaintiff-appellee

ISSUE: Whether a moral obligation will sustain an express executory promise?

HELD:
No. Defendant although was morally responsible because of the failure of the enterprise, is not the
consideration required by article 1261 of the Civil Code as an essential element for the legal
existence of an onerous contract which would bind the promisor to comply with his promise.
The first essential requisite, therefore, required by the cited article 1261 of the Civil Code for the
existence of a contract, does not exists.
As to the third essential requisite, namely, "A consideration for the obligation established," article
1274 of the same Code provides:
In onerous contracts the consideration as to each of the parties is the delivery or
performance or the promise of delivery or performance of a thing or service by the other
party; in remuneratory contracts the consideration is the service or benefit for which the
remuneration is given, and in contracts of pure beneficence the consideration is the
liberality of the benefactors.
And article 1275 of the same Code provides:
ART. 1275. Contracts without consideration or with an illicit consideration produce
no effect whatsoever. A consideration is illicit when it is contrary to law or morality.

MAKATI STOCK EXCHANGE vs MIGUEL CAMPOS

585 SCRA 120

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 attorney’s fees and litigation expenses.

The SICD issued an Order granting respondent’s 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
respondent’s application for a Writ of Preliminary Injunction, to continuously enjoin, during the
pendency of SEC Case No. 02-94-4678, the implementation or forcement of the MKSE Board
Resolution in question.

On 11 March 1994, petitioners filed a Motion to Dismiss respondent’s 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 petitioner’s 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 respondent’s 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.

HELD:
The petition filled by the respondent, Miguel 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
respondent’s 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 respondent’s 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.