Obligations and Contracts - Article 1157 To 1174

ATENEO COLLEGE OF LAW
Obligations and Contracts – Cases | Atty. Jocelyn Valencia 1
CHAPTER 1 – GENERAL PROVISIONS Facts: One Arsenio Virata died as a result of having
been bumped by a passenger jeepney driven by
ARTICLE 1157 – Sources of Obligations
Maximo Borilla and owned by Victorio Ochoa. The
Vicente Navales vs Eulogia Rias (1907) heirs of Virata then instituted a criminal action for
G.R. No. L-3489 homicide through reckless imprudence against the
driver. The heirs of Virata made a reservation to file
Principle: Exclusive Enumeration of the sources of
a separate civil action for damages.
obligations.
The heirs of Virata instituted a civil action for
Facts: The Nipa house of petitioner situated in
damages based on quasi-delict against the driver and
Naga was destroyed by virtue of a final and
Ochoa, the owner. The respondents filed a motion to
executory judgement rendered by the Justice of the
dismiss on the ground that there is another action
Peace in an ejectment suit filed against him, which
pending between the same parties for the same
obliged the deputy sheriff to execute the said
cause and that Borilla, by virtue of the decision
decision and remove the house from the land owned
rendered by the Court of First Instance (CFI) of
by the respondents.
Cavite, was acquitted of the crime charged. The CFI
Thus, the petitioner filed a complaint for sum granted the motion to dismiss, hence this petition for
of money and damages amounting to ₱1,200.00 certiorari.
before the Court of First Instance of Cebu. He alleged
Issue: Whether or not the petitioners can
that the defendants, without due cause, ordered the
prosecute an action for damages based on quasi-
pulling down and destruction of his house.
delict against Maximo Borilla and Victorio Ochoa,
Issue: Whether or not the respondent is obliged to driver and owner, respectively of the passenger
pay the damages said to have been caused by the jeepney that bumped Arsenio Virata.
execution of a judgment rendered by the justice of
Held: Yes. It is settled that in negligence cases, the
the peace in an action for ejectment.
aggrieved parties may choose between an action
Held: No proof has been submitted that a contract under the Revised Penal Code or for quasi-delict
had been entered into between the plaintiff and the under Article 2176 of the Civil Code. What is
defendants, or that the latter had committed illegal prohibited by Article 2177 of the Civil Code is to
acts or omissions or incurred in any kind of fault or recover twice for the same negligent act.
negligence, from any of which an obligation might
In the instant case, the petitioners are not
have arisen on the part of the defendants to
seeking to recover twice for the same negligent act.
indemnify the plaintiff. For this reason, the claim for
Before the Criminal Case was decided, they
indemnity, on account of acts performed by the
manifested in the said case that they were filing a
sheriff while enforcing a judgment, cannot under any
separate civil action for damages against the owner
consideration be sustained.
and driver of the passenger jeepney based on quasi-
Virata et al. vs Ochoa et al. (1978) delict. This acquittal of the driver of the crime
G.R. No. L-46179 charged in the Criminal Case is not a bar to the
prosecution of the Civil Case for damages based on
Principle: Delicts and Quasi-Delicts are different
quasi-delict. The source of the obligation sought to
sources of obligations.
be enforced in the Civil Case is based on quasi-delict,
not on an act or omission punishable by law.
ALAG, Miguel Alleandro M. | Manresa ‘18-19

ARTICLE 1158 – Obligations Ex Lege impose upon chronic delinquent banks as such
action may inevitably result to panic or bank "runs".
Manuel Serrano vs Central Bank of the Philippines
and Overseas Bank of Manila (1980) Issue: Whether or not the Central Bank is under the
G.R. No. L-30511 obligation to pay the petitioner’s time deposits.
Principle: Obligations derived from law are not Held: No.

presumed.
In the concurring opinion of Justice Aquino,
Ministerial duty – an obligation imposed by law upon he opined that the petitioner has no causes of action
any tribunal, board, corporation, or person(s). against the Central Bank to obtain those reliefs. They
cannot be granted in petitioner's instant original
Facts: Petitioner and one Concepcion Maneja
actions in this Court for mandamus and prohibition.
made a time deposit for one year with the
It is not the Central Bank's ministerial duty to pay
respondent Overseas Bank of Manila (₱150,000.00
petitioner's time deposits or to hold the mortgaged
and ₱200,000.00 with 6% interest, respectively).
properties in trust for the depositors of the Overseas
Maneja thereafter conveyed her time deposit to
Bank of Manila. The petitioner has no cause of action
petitioner. Notwithstanding series of demands for
for prohibition, a remedy usually available against
encashment, not a single one of the time deposit
any tribunal, board, corporation or person exercising
certificates was honored by respondent Overseas
judicial or ministerial functions.
Bank of Manila.
ARTICLE 1159 – Obligations Ex Contractu
In a case entitled Emerito Ramos et al. vs
Central Bank of the Philippines, herein respondent United Alloy Philippines Corp. and Sps Chua vs
Overseas Bank of the Philippines sought to prevent United Coconut Planters Bank (2017)
the Central Bank from closing, declaring the former G.R. No. 175949
insolvent, and liquidating its assets. The Court ruled
Principle: Obligations arising from contracts x x x
in favor of Overseas Bank. Based in the said decision,
shall be complied with in good faith.
herein petitioner filed a petition for mandamus and
prohibition with preliminary injunction, praying that Facts: United Alloy Philippines Corporation
the Central Bank and the Overseas Bank of the (UNIALLOY) applied for and was granted a credit
Philippines to be jointly and severally liable for the accommodation by United Coconut Planters Bank
P350,000.00 time deposit plus interests. (UCPB) in the amount of ₱50 million, as evidenced by
a credit agreement. Part of UNIALLOY’s obligation
Respondent Central Bank admitted that it is
under the credit agreement was secured by a Surety
charged with the duty of administering the banking
Agreement, executed by its chairman, vice-president
system of the Republic but it denied the petitioner’s
and his spouse, and one Yang. In addition, UNIALLOY
allegation that it has the duty to exercise a most rigid
and UCPB also entered into a "lease-purchase"
and stringent supervision of banks and that it is
contract wherein the former assured the latter that
guarantor of the permanent solvency of any banking
it will purchase several real properties which UCPB
institution as claimed by petitioner. It claims that
co-owns with the Development Bank of the
neither the law nor sound banking supervision
Philippines.
requires respondent Central Bank to advertise or
represent to the public any remedial measures it may

Subsequently, UNIALLOY failed to pay its pay respondent the amounts awarded by the RTC of
loan obligations. As a result, UCPB filed against Makati.
UNIALLOY, its chairman, vice-president and his
Held: Yes. As ruled upon by both the RTC and the
spouse, and Yang an action for Sum of Money with
CA, UNIALLOY failed to pay its obligations under the
Prayer for Preliminary Attachment before the RTC of
promissory notes and that herein petitioner Spouses
Makati. Consequently, UCPB also unilaterally
Chua, together with their co-defendants Van Der
rescinded its lease-purchase contract with
Sluis and Yang, freely executed a Surety Agreement
UNIALLOY.
whereby they bound themselves jointly and severally
On the other hand, UNIALLOY filed against with UNIALLOY, to pay the latter's loan obligations
UCPB, its Vice-President and its Chairman a with UCPB.
complaint for Annulment and/or Reformation of
As correctly held by both the RTC and the CA,
Contract with Damages, with a prayer for Writ of
Article 1159 of the Civil Code expressly provides that
Preliminary Injunction before the RTC of Cagayan de
"obligations arising from contracts have the force of
Oro. UNIALLOY contended that Van Der Sluis, in
law between the contracting parties and should be
conspiracy with Chua, committed fraud,
complied with in good faith." The RTC as well as the
manipulation and misrepresentation to obtain the
CA found nothing which would justify or excuse
subject loan for their own benefit. UNIALLOY also
petitioners from non-compliance with their
filed a motion to dismiss the collection case filed by
obligations under the contract they have entered
UCPB on the ground of forum shopping and lis
into. Thus, it becomes apparent that petitioners are
pendentia.
merely attempting to evade or, at least, delay the
In the meantime, UCPB and its co- inevitable performance of their obligation to pay
defendants filed a motion to dismiss UNIALLOY’s under the Surety Agreement and the subject
complaint for annulment of contract on the grounds promissory notes which were executed in
of improper venue, forum shopping, lis pendentia, respondent's favor. However, the court finds it
and harassment or nuisance suit. The RTC of CDO proper to modify the interest rates imposed on
issued an order, dismissing the complaint of respondents’ obligation pursuant to the rule that
UNIALLOY based on the said grounds. Thereafter, on “any stipulation regarding the validity or compliance
motion, the RTC of CDO ordered an Order of of the contract which is left solely to the will of one
Execution, directing UNIALLOY to turn over to UCPB of the parties, is likewise, invalid.”
the property subject of their Lease-Purchase
Sps Inocencio and Adoracion Antonio vs CA and
Agreement (LPA). UNIALLOY filed a petition for
Sps Mario and Gregoria Geronimo (2001)
certiorari and mandamus with the CA, questioning
G.R. No. 121810
the decision of the RTC of CDO, which was granted.
UCPB questioned the said resolution of the CA via Principle: Contractual obligations between parties
certiorari. The SC promulgated a decision, denying have the force of law between them and absent any
UNIALLOY’s petition and held that the CA did not err allegation that the same are contrary to law, morals,
in affirming the decision of the RTC of CDO. good customs, public order or public policy, they
must be complied with in good faith.
Issue: Whether or not petitioners, together with
co-defendants Van Der Sluis and Yang are liable to Facts: Spouses Geronimo obtained a loan in the
amount of ₱1,028,000.00 from spouses San Antonio.

To secure the loan, spouses Geronimo mortgaged Held: Yes. A compromise agreement, once
two parcels of land, both situated in Bulacan. approved by final order of the court, has the force of
Subsequently, spouses Geronimo obtained an res judicata between the parties and should not be
additional loan of ₱991,859.00 with an interest of disturbed except for vices of consent or forgery.
3.33% per month, thus making their total obligation
In the instant case, the compromise
in the amount of ₱2,019,859.00 payable on or before
agreement clearly provided the private respondents
February 15, 1991. Private respondents failed to pay
six months (from August 25, 1993 to February 25,
the loan and the interest on the due date, hence, the
1994) to deliver the titles to the three parcels of land
mortgage was extra-judicially foreclosed. During the
described in the agreement. If after the lapse of the
auction sale, petitioners, being the highest bidder
said period and no delivery is yet made by private
bought the two parcels of land.
respondents, ownership over the land covered by
Before the one-year redemption period TCT No. RT-6652 would be transferred to petitioners.
expired, spouses Geronimo filed a complaint for As the facts of this case show, private respondents
annulment of extra-judicial foreclosure with failed to deliver the titles on February 25, 1994, as it
preliminary mandatory injunction before the RTC of was only on March 4, 1994, when they gave the titles
Bulacan, Branch 22. After the parties presented their to petitioners.
respective evidence(s), they submitted to the court a
Hence, pursuant to the terms of the
Compromise Agreement which was approved.
compromise agreement, petitioners could rightfully
In accordance with the stipulations in refuse acceptance of the titles. It was error therefore
paragraph 1 of the Compromise Agreement, for the trial court to grant the writ of execution in
petitioners executed a Certificate of Redemption and favor of private respondents because it effectively
Cancellation of Sale covering TCT No. RT-6653 after compelled petitioners to accept delivery of the three
private respondents paid them ₱2,000,000. Private titles in exchange for the release of the land covered
respondents, however, failed to transfer the by TCT No. RT-6652 even after the lapse of the six-
ownership and deliver the titles of the three parcels month period.
of land described in paragraph 2 of the agreement or
Private respondents claim that the trial
to pay 2 Million Pesos within the six-month period
court, in issuing the writ, was merely performing a
from August 25, 1993. It was only on March 4, 1994,
ministerial duty. While it becomes the trial court's
after the lapse of six months that private
ministerial duty to issue a writ of execution when a
respondents delivered the three titles to petitioners.
judgment or order becomes final and executory, a
Spouses Geronimo filed a motion for writ of execution may be refused on equitable
execution of the compromise agreement which was grounds. In this case, it will be unjust to petitioners if
granted. Spouses San Antonio moved for we compel them to accept the three titles despite
reconsideration but was denied. Thus, petitioners the lapse of the agreed period. Contractual
filed a petition for certiorari with application for a obligations between parties have the force of law
TRO and/or Writ of Preliminary Injunction with the between them and absent any allegation that the
CA, but was denied. Hence, this petition for review. same are contrary to law, morals, good customs,
public order or public policy, they must be complied
Issue: Whether or not the CA erred in granting the
with in good faith. Private respondents could have
writ to execute the compromise agreement.
delivered the titles earlier, but they did not. This only

shows that private respondents did not intend to the criminal case against his driver. But, the trial
truly comply with their obligations. court denied his motion on the ground that pursuant
to the Civil Code, the action could proceed
Side-Issue: Is Article 1191 of the Civil Code
independently of the criminal action, in addition to
applicable?
the fact that the petitioner was not the accused in
Held: No. The petitioners asserted that they were the criminal case.
not seeking rescission of the compromise agreement
Petitioner took the matter on certiorari and
but its full enforcement regardless of whether the
prohibition to the CA, maintaining that the civil
delay is slight or substantial. In their view, the trial
action could not proceed independently of the
court should have enforced the compromise
criminal action. However, the CA dismissed his
agreement instead of rescinding it.
petition, citing Garcia vs Florido and Abellana vs
Applicable here is Article 1159 which enjoins Marave, which it held allowed a civil action for
compliance in good faith by the parties who entered damages to be filed independently of the criminal
into a valid contract. Compromise agreements are action even though no reservation to file the same
contracts, whereby the parties undertake reciprocal has been made. Hence, this petition for review.
obligations to avoid litigation, or put an end to one
Issue: Whether or not private respondent may
already commenced.
bring an action for damages against petitioner under
Article 1161 – Obligations Ex Delicto Arts. 2176 and 2180 despite the absence of
reservation to file the same.
Ruben Maniago vs Court of Appeals et al. (1996)
G.R. No. 104392 Held: No. A reservation must be made to institute
separately ALL civil actions for the recovery of civil
Principle: The right of the injured party to sue
liability, otherwise they will be deemed to have been
separately for the recovery of the civil liability
instituted with the criminal case. Such civil actions
whether arising from crimes (ex delicto) or from
are not limited to those which arise "from the
quasi-delict under Art. 2176 of the Civil Code must be
offense charged," but also includes those which arise
reserved otherwise, they will be deemed instituted
from criminal negligence or quasi-delicts.
with the criminal action.
San Ildefonso Lines Inc. and Javier vs CA and
Facts: One of the buses owned by the petitioner
Pioneer Insurance and Surety Corp. (1998)
figured in a vehicular accident with a passenger
G.R. No. 119771
jeepney. As a result, Andaya, his driver, was charged
with Reckless Imprudence resulting to Damage to Principle: An independent civil action based on
Property and Multiple Physical Injuries with the RTC quasi-delict cannot be filed if no reservation was
of Baguio, Branch III. made in the criminal case previously instituted.
A month later, a civil action for damages was Facts: A Toyota Lite Ace Van being driven by its
instituted by the private respondent Boado, the owner Annie Jao and a passenger bus of herein
owner of the jeepney, against the petitioner himself petitioner San Ildefonso Lines Inc. (SILI) figured in a
despite the absence of reservation to file the same. vehicular mishap, totally wrecking the van and
Petitioner moved for the suspension of the injured Ms. Jao and her two passengers in the
proceedings filed against him, citing the pendency of process. The driver of the bus, herein petitioner

Javier, was then charged with Reckless Imprudence action and shall require only a preponderance of
resulting to Damage to Property and Multiple evidence.”
Physical Injuries with the RTC of Pasig.
It is easily deducible from the present
About 4 months later, herein private wording of Section 3 as brought about by the 1988
respondent Pioneer Insurance and Surety Corp. amendments to the Rules on Criminal Procedure -
(PISC), as insurer of the van and subrogee, filed a particularly the phrase "which has been reserved" -
case for damages against petitioner SILI with the RTC that the "independent" character of these civil
of Manila, seeking to recover the sums it paid the actions does not do away with the preservation
assured under a motor vehicle insurance policy as requirement. In other words, prior reservation is a
well as other damages, totaling ₱564,500.00. condition sine qua non before any of these
independent civil actions can be instituted and
Petitioners filed a Manifestation and Motion
thereafter have a continuous determination apart
to Suspent Civil Proceedings on the ground of the
from or simultaneous with the criminal action.
pendency of the criminal case against the petitioner
Javier in the RTC of Pasig and the failure of Thus, it is clear that private respondent PISC,
respondent PISC to make a reservation to file a as subrogee under Article 2207 of the Civil Code, is
separate damage suit in said criminal action. This was not exempt from the reservation requirement with
denied by the RTC of Manila, citing the exceptions respect to its damages suit based on quasi-delict
under Rule 111 of the Rules of Court. The petitioners arising from the same act or omission of petitioner
moved for reconsideration but was denied. Javier complained of in the criminal case. As private
Petitioners elevated the case to the SC but was respondent PISC merely stepped into the shoes of
referred to the CA for disposition, which affirmed the Ms. Jao (as owner of the insured Toyota van), then it
decision of the RTC of Manila. Hence, this petition for is bound to observe the procedural requirements
review for review on certiorari after a motion for which Ms. Jao ought to follow had she herself
reconsideration filed by SILI was denied. instituted the civil case.
Issue: Whether or not an independent civil action

based on quasi-delict under Article 2176 of the Civil
CHAPTER 2 – NATURE AND EFFECT OF
Code can be filed if no reservation was made in the
OBLIGATIONS
criminal case instituted prior the said civil action.
ARTICLE 1164 – When Creditor is entitled to Fruits
Held: No, an independent civil action based on
quasi-delict cannot be filed if no reservation was Philippine National Bank vs Sps Bernard and
made in the criminal case instituted prior the said Cresencia Marañon (2013)
civil action. G.R. No. 189316
Under Sec. 3 of Rule 111 of the Rules of Principle: The rule that improvements shall follow
Court, it is provided that “in the cases provided for in the principal in a mortgage under Article 2127 of the
Articles 32, 33, 34 and 2176 of the Civil Code of the Civil Code does not apply when the mortgagors are
Philippines, the independent civil action which has not the real owners of the mortgaged property.
been reserved may be brought by the offended
Facts: Spouses Montealegre mortgaged the subject
party, shall proceed independently of the criminal
152-square meter parcel of land as security for a loan

with the Philippine National Bank (PNB). Spouses The said lease payments were for the five (5)-month
Montealagre failed to pay the loan obligations, thus period from August 1999 to December 1999, which
the subject property was foreclosed and sold in a was also granted.
public auction, wherein PNB is the highest bidder. It
The PNB moved for reconsideration,
was issued a corresponding Certificate of Sale which
averring that as declared by the RTC in its decision,
was subsequently registered.
its mortgage lien should be carried over to the new
Before the expiration of the redemption title reconveying the lot to Spouses Marañon. The
period, herein respondents Spouses Marañon filed RTC issued an order, directing PNB to release the
before the RTC of Bacolod a complaint for amount being demanded as well as denying its
Annulment of Title, Reconveyance and Damages motion for reconsideration. PNB sought recourse
against Spouses Montealegre, PNB, the Register of with the CA via a prohibition and mandamus, which
Deeds of Bacolod and the Ex-Officio Sheriff. Spouses affirmed the decision of the RTC, citing that PNB is
Marañon alleged that they are the true registered not a mortgagee in good faith. PNB moved for
owners of the subject property which was illegally reconsideration but was denied. Hence, this current
cancelled under the name of Emilie Montealagre petition whereby PNB further claims that its
who used a falsified Deed of Sale bearing the forged mortgage lien was carried over to the new title
signatures of Spouses Marañon. In its answer, PNB issued to Spouses Marañon and thus it retained the
averred that it is a mortgagee in good faith and for right to foreclose the subject lot upon non-payment
value and that its mortgage lien on the property was of the secured debt. PNB asserts that it is entitled to
registered thus valid and binding against the whole the rent because it became the subject lot’s new
world. owner when the redemption period expired without
the property being redeemed.
While the trial proceedings were ongoing,
Paterio Tolete, one of the tenants of the building Issue: Whether or not PNB has a right to the fruits
erected on the subject property deposited his rental of the subject property owned by Spouses Marañon,
payments to the Clerk of Court in the amount of as its mortgage lien was carried over to the new title.
₱144,000.00. The RTC rendered its decision in favor
Held: No.
of Spouses Marañon upon finding that indeed, the
signatures of Spouses Marañon in the Deed of Sale Rent, as an accessory, follow the principal. In
presented by Spouses Montealegre before the fact, when the principal property is mortgaged, the
Register of Deeds were forged. mortgage shall include all natural or civil fruits and
improvements found thereon when the secured
The controversy raised in the instant case
obligation becomes due as provided in Article 2127
arose when Spouses Marañon filed an Urgent
of the Civil Code. Consequently, in case of non-
Motion for Withdrawal of Deposited Rentals, praying
payment of the secured debt, foreclosure
that the ₱144,000.00 amount deposited by Tolete be
proceedings shall cover not only the hypothecated
released in their favor for having been adjudged as
property but all its accessions and accessories as
the real owner of the subject lot, which was granted
well. However, the provision is irrelevant and
by the RTC. Spouses Marañon again filed with the
inapplicable to mortgages and their resultant
RTC an Urgent Ex-Parte Motion for Withdrawal of
foreclosures if the mortgagor is later on found or
Deposited Rentals, praying that the ₱30,000 rental
declared to be not the true owner of the property.
fees paid to PNB by Tolete be released in their favor.

In the instant case, it is beyond question that Pastrano executed another Deed of Absolute Sale of
PNB’s mortgagors, Spouses Montealegre, are not the Registered Land in favor of herein petitioner Fe
true owners of the subject lot much less of the Bragat with an area of 1,015 sq. m. On the same date,
building which produced the disputed rent. The Azur Pastrano executed an Affidavit of Loss reporting
foreclosure proceedings on August 16, 1991 caused the loss of the owner’s duplicate copy of the OCT of
by PNB could not have, thus, included the building the subject property. It was Bragat, however, who
found on the subject lot and the rent it yields. petitioned the court for the issuance of a new
owner’s duplicate copy. Thus, the RTC issued a new
PNB’s lien as a mortgagee in good faith
owner’s copy of the OCT of the subject property.
pertains to the subject lot alone because the rule
that improvements shall follow the principal in a The Spouses Pastrano executed yet another
mortgage under Article 2127 of the Civil Code does Deed of Sale of Registered Land in favor of Bragat,
not apply under the premises. Accordingly, since the which land is again covered by OCT No. P-2035 with
building was not foreclosed, it remains a property of an area of 1,015 sq. m. Bragat, through her counsel,
Spouses Marañon; it is not affected by non- made a written demand to vacate against the
redemption and is excluded from any consolidation Spouses Badilla. In response, the Spouses Badilla,
of title made by PNB over the subject lot. also through their counsel’s letter, refused the
demand and raised the earlier sale made by the
Thus, PNB’s claim for the rent paid by Tolete
Spouses Pastrano to Ledesma and the subsequent
has no basis.
sale by Ledesma to the Badillas. Hence, the parties
Sps Badilla vs Fe Bragat (2015) filed their respective complaints of each other.
G.R. No. 187013
Fe Bragat filed her Complaint for Recovery of
Principle: Ownership of the thing sold is transferred Posession and Damages against the spouses Badilla
to the vendee (buyer) upon the actual or alleging that she is the absolute owner of the subject
constructive delivery of the same. property. She claimed that she first purchased the
property from Ledesma but later, when she found
Facts: Spouses Pastrano were the original owners
out that Ledesma was unauthorized to sell, she made
of the 1,015 sq. m. lot located in Cagayan de Oro City.
another purchase of the property to spouses
Before the issuance of the Original Certificate of
Pastrano. Thus, she prays for the Spouses Badilla to
Title, spouses Pastrano sold the subject property to
be ordered to vacate the around 149-square-meter
Eustaquio Ledesma as evidenced by a Deed of
portion that they occupy in the property.
Absolute Sale of Unregistered Coconut and
Residential Land. The petitioners, spouses Badilla The Spouses Badilla filed their own
claimed that in 1970, Ledesma sold to them, “on Complaint for Quieting of Title, Declaration of Nullity
installment” basis, a portion amounting to 200 sq.m. of TCT No. T-47759 and Damages against Bragat,
of the lot. The sale was not reduced into writing claiming that the Spouses Badilla are the lawful
however, but possession of the portion sold was owners and possessors of the portion of the subject
transferred to the Badillas. lot having it acquired in 1970 from Ledesma. The
latter, on his part, allegedly bought the bigger lot
Spouses Bragat bought 991 sq. m. of the
from Pastrano. However, they claimed that Pastrano
property from Ledesma and his wife via a Deed of
was subsequently able to obtain a free patent and a
Absolute Sale of a Residential Lot. The Spouses
title over the property. The Badillas alleged that the

sale between Pastrano and Bragat is invalid on the the control and possession of the vendee. Payment
ground that Pastrano is no longer the owner of the of the purchase price is not essential to the transfer
property. The two cases were then consolidated as of ownership as long as the property sold has been
they involved the same parties and the same subject. delivered. The same is true even if the sale is a verbal
one, because it is held that when a verbal contract
The RTC ruled in favor of Bragat, noting that
has been completed, executed or partially
the sketch map shows the 152-square-meter portion
consummated, its enforceability will not be barred
occupied by the Spouses Badilla is within the titled
by the Statute of Frauds, which applies only to an
property of Bragat. It also found Bragat’s title as valid
executory agreement.
for what it saw as the result of a purchase in good
faith and for value. In contrast, the trial court Pastrano had previously sold on November
observed a lack of evidence of the Spouses Badilla. 18, 1968, via a Deed of Definite Sale of Unregistered
The latter allegedly presented handwritten and Coconut and Residential Land, the property to
typewritten receipts which were purportedly signed Eustaquio Ledesma. Therefore, as early as such date,
by Ledesma but the court claimed that it found no it is established that the Pastranos no longer had
evidence of Ledesma’s absolute ownership. The ownership over the property. Then, as Ledesma
court noted that Ledesma had sold previously to the subsequently sold, in 1970, a portion of the property
Spouses Bragat via a Deed of Absolute Sale of to the petitioner Spouses Badilla, who immediately
Residential Land. Hence, in the trial court’s view, took delivery and possession, ownership of this
Ledesma no longer owned the land and transferred portion had also been transferred to the said
nothing to the Badillas. spouses. Although that sale appears to be merely
verbal, and payment therefor was to be made on
Spouses Badilla appealed to the CA, which
installment, it is a partially consummated sale, with
affirmed the decision of the RTC, but modified the
the Badillas paying the initial purchase price and
same on a finding that Ledesma sold only 991 sq. m.
Ledesma surrendering possession.
of the property to Bragat in 1978; hence, it held that
the remaining 24 sq. m. of the 1,015-sq.-m. property Therefore, with the Spouses Badilla owning
was validly sold to the Badillas in 1991 and, and occupying the said 152-square-meter portion
therefore, must be reconveyed to the latter. It also since 1970, it may be concluded that TCT No. T-
removed the award of damages. Hence, this petition. 47759 (which canceled OCT No. P-2035) covering the
Petitioners Spouses Badilla contend that ownership said portion has been wrongfully issued. In addition,
of the 200-sq.-m. portion was transferred to them the Deed of Sale issed to Bragat is void for being
when they purchased the same and possession was simulated, since both the vendor (Pastrano) and the
delivered to them by Ledesma in 1970. vendee (Bragat) knew at the time of its execution of
the vendor’s lack of ownership over the subject
Issue: Whether or not the subject property was
property. Well-settled is the rule that no one can give
delivered to the spouses Badilla by Ledesma in 1970.
what one does not have — nemo dat quod non habet
Held: Yes. — and, accordingly, one can sell only what one owns
or is authorized to sell, and the buyer acquires no
The Civil Code states that ownership of the
better title than the seller. Thus, the sales made on
thing sold is transferred to the vendee upon the
the dates May 5, 1984 and October 2, 1987 are void
actual or constructive delivery of the same. And the
for being simulated and for lack of a subject matter.
thing is understood as delivered when it is placed in

On these sales, Bragat cannot claim good faith as she with costs. The defendants filed a general denial,
herself knew of Pastrano’s lack of ownership. alleging that the plaintiff has not sustained damages
of any kind or character, and praying that the case be
ARTICLE 1165 – Classification of Obligation from
dismissed at the cost of the plaintiff.
the viewpoint of the Subject Matter
The trial court, after finding the facts as
Gutierrez Repide vs Afzelius and Afzelius (1918)
herein stated, made application thereto of the law of
No. 13438
Specific Performance. The judgment then was in
Principle: A person is obligated to do a certain thing favor of the defendants, dismissing the plaintiff's
according to the tenor of the obligation. Thus, the complaint, without prejudice to any other remedy
person prejudiced may choose between ‘to compel which the plaintiff might have, and without any
the fulfillment of the obligation’ or ‘its resolution finding as to the costs.
with indemnity for damages and payment of interest
Issue: Whether or not the vendor (Gutierrez) can
in either cases.’
compel the vendee (Afzelius) to perform the
Facts: Herein plaintiff Gutierrez owned a parcel of obligation.
land with an area of 2,695.24 sq.m. situated in
Held: Yes.
Manila. The defendants made a proposition to
Gutierrez for the purchase of the said property. After The performance of contracts must and
negotiations, it was agreed upon by the parties that should be mutual. The contract is ordinarily bilateral.
the defendants would pay Gutierrez the sum of So should the respective rights of the parties be. Nor
₱10,000 for the land, ₱2,000 of which was to be paid does an action to recover damages for breach of
upon the signing of the deed, and the balance of contract ordinarily afford a complete and adequate
₱8,000 to be paid in monthly installments of ₱150. remedy. The equitable doctrine is not applied where
The property was to be mortgaged to the- plaintiff to it will be productive of great hardship.
secure the payment of this balance of ₱8,000. The
In the instant case, there is a good and valid
plaintiff proceeded to have survey made of the land
contract, bilateral in character, and free from all taint
and to prepare the deed and mortgage. Expenses to
of fraud. The stability of commercial transactions
the amount of P83.93 were incurred.
requires that the rights of the seller be protected just
The deed was ready about December 28, as effectively as the rights of the buyer. If this
1916, when the defendants were notified to appear plaintiff had refused to comply with the contract,
and sign the same. They failed to do this, and instead, specific performance of the obligation could have
the defendant, Patrocinio R. Afzelius, wrote a letter been asked by the defendants.
to plaintiff, saying that it is absolutely impossible for
The excuse of the defendants is that they do
them to effect the purchase of the property for their
not now have the money to pay the first installment.
business had failed which cause the loss of their
In other words, they plead impossibility of
savings.
performance. The rule of equity jurisprudence in
Gutierrez filed an action with the Court of such a case is that mere pecuniary inability to fulfill
First Instance of Manila, compelling the defendants an engagement does not discharge the obligation of
to sign the Deed and Mortgage to the subject the contract, nor does it constitute any defense to a
property, and to pay the purchase price stipulated, decree for specific performance.

ARTICLE 1169 – Default or Mora vacate the premises and to pay ₱250 per month by
way of compensation for the use and occupation of
Leaño vs Court of Appeals and Hermogenes
the property. A writ of execution was issued
Fernando (2001)
thereafter and was duly served on Leaño.
G.R. No. 129018
Leaño then filed a complaint for Specific
Principle: Even if the contract provided that the total
Performance with Preliminary Injunction before the
purchase price is payable within a ten-year period,
RTC of Malolos. Petitioner averred that she
specifying that the price shall be paid in monthly
deposited ₱18,000 with the clerk of court to cover
installments for which the corresponding penalty
the balance of the total cost of the subject lot. She
shall be imposed in case of default, the vendee
also posted a cash bond. The RTC issued a writ of
cannot ignore the provision on the payment of
Preliminary Injunction to stay the enforcement of the
monthly installments by claiming that the ten-year
decision of the RTC, and also ordered petitioner to
period within which to pay has not elapsed.
pay P103,090.70 corresponding to her unpaid
Facts: Hermogenes Fernando, as vendor, and installments plus interests. Upon motion by
Carmelita Leaño, as vendee, executed a Contract to Fernando, the RTC modified and increased the said
Sell involving a piece of land with an area of 431 amount to P183,687.00. The RTC held that the
sq.m. located in Bulacan. In the contract, Leaño contract between the parties is an absolute sale. On
bound herself to pay Fernando the sum of the issue of delay, the trial court held that ‘the
₱107,750.00 as total purchase of the lot (₱10,775 as contract clearly specifies that the purchase price
downpayment; the balance of ₱96,975 shall be paid shall be payable in monthly installments for which
within a period of ten (10) years at a monthly the corresponding penalty shall be imposed in case
amortization of ₱1,747.30 with an interest at 18% of default.’ Hence, it is clear that she defaulted in the
per annum based on balances. payment of the monthly amortizations and she
should be liable for the payment of interest and
The contract also provided for a grace period
penalties in accordance with the stipulations of the
of one month within which to make the payments.
contract. The petitioner appealed to the CA which
Should the month of grace expire without satisfying
affirmed the decision of the RTC in toto. Hence, this
the installments, an interest of 18% per annum will
petition.
be charged on the unpaid installments. After 90 days
from the grace period, no payment was made with Issue: Whether or not petitioner was in delay in the
respect to the unpaid installments together with the payment of monthly amortizations due him.
corresponding interests, Fernando, as vendor, was
Held: Yes.
authorized to declare the contract cancelled and to
dispose of the parcel of land, as if the contract had Article 1169 of the Civil Code provides that in
not been entered into. reciprocal obligations, neither party incurs in delay if
the other does not comply or is not ready to comply
After the execution of the contract, Leaño
in a proper manner with what is incumbent upon
made several lump-sum payments. Thereafter, she
him. From the moment one of the parties fulfills his
constructed a house thereon, valued at ₱800,000.
obligation, delay by the other begins.
The last payment she made was on April 1, 1989.
Fernando instituted an ejectment case against In the case at bar, respondent Fernando
Leaño, which was granted, ordering the latter to performed his part of the obligation by allowing

petitioner Leaño to continue in possession and use request of Mr. Lawrence Glauber, a bank client,
of the property. Clearly, when petitioner Leaño did arrangements were being made to allow Faustino
not pay the monthly amortizations in accordance Duray to borrow funds of approximately P700,000 to
with the terms of the contract, she was in delay and enable him to meet his obligations under the
liable for damages. However, the default committed contract with Luis Bacus.
by petitioner Leaño in respect of the obligation could
Having failed to reach an agreement before
be compensated by the interest and surcharges
the Lupon, private respondents filed a complaint for
imposed upon her under the contract in question.
Specific Performance with Damages against
Heirs of Bacus vs Hon. CA and Sps Duray (2001) petitioners before the Regional Trial Court. On the
G.R. No. 127695 other hand, petitioners alleged that before Luis
Bacus' death, private respondents conveyed to them
Principle: In reciprocal obligations, neither party
the former's lack of interest to exercise their option
incurs in delay if the other does not comply or is not
because of insufficiency of funds, but they were
ready to comply in a proper manner with what is
surprised to learn of private respondents' demand.
incumbent upon him. Only from the moment one of
In turn, they requested private respondents to pay
the parties fulfills his obligation, does delay by the
the purchase price in full but the latter refused. They
other begin.
further alleged that private respondents did not
Facts: In 1984, Luis Bacus leased a parcel of deposit the money as required by the Lupon and
agricultural land (3,002 sq.m.) to private respondent instead presented a bank certification which cannot
Faustino Duray. The lease was for six years, with an be deemed legal tender. The RTC ruled in favor of the
option to buy the 2,000 sq.m. portion of the land respondents. Petitioners appealed to the CA which
after five (5) years from the effectivity of the denied the appeal on the ground that the private
contract. Close to the expiration of the contract, Luis respondents exercised their option to buy the leased
Bacus died on October 10, 1989. Thereafter, on property before the expiration of the contract of
March 15, 1990, the Duray spouses informed Roque lease. Hence, this petition for review.
Bacus, one of the heirs of Luis Bacus, that they were
Issue: Whether or not Spouses Duray private
willing and ready to purchase the property under the
respondents incurred delay when they did not
option to buy clause. They requested Roque Bacus to
deliver the purchase price or consign it in court on or
prepare the necessary documents, such as a Special
before the expiration of the contract.
Power of Attorney authorizing him to enter into a
contract of sale. Held: No.
Due to the refusal of the petitioners to sell Obligations under an option to buy are
the property, Duray’s adverse claim was annotated reciprocal obligations. The performance of one
by the Register of Deeds of Cebu. Subsequently, obligation is conditioned on the simultaneous
Duray filed before the Lupon Tagapamayapa of Brgy. fulfillment of the other obligation. In other words, in
Bulacao a complaint for Specific Performance against an option to buy, the payment of the purchase price
the petitioners, asking he be allowed to purchase the by the creditor is contingent upon the execution and
lot referred to in the lease contract with an option to delivery of a deed of sale by the debtor.
buy. At the hearing, Duray presented a certification
In this case, when private respondents opted
from the manager of Standard Chartered Bank
to buy the property, their obligation was to advise
addressed to to Luis Bacus, stating that at the

petitioners of their decision and their readiness to within the stipulated period on October 31, 1998 or
pay the price. They were not yet obliged to make April 30, 1999, the last day of the six-month grace
actual payment. Only upon petitioners' actual period.
execution and delivery of the deed of sale were they
Three years later, Megaworld, by notice
required to pay.
dated April 23, 2002 (notice of turnover), informed
Therefore, as there was no compliance yet Tanseco that the unit was ready for inspection
with what was incumbent upon petitioners under preparatory to delivery. Tanseco replied through
the option to buy, private respondents had not counsel, that in view of Megaworld's failure to
incurred in delay when the cashier's check was deliver the unit on time, she was demanding the
issued even after the contract expired. return of P14,281,731.70 representing the total
installment payment she had made, with interest at
Megaworld Globus Asia Inc. vs Mila Tanseco (2009)
12% per annum. Her demand having been
G.R. No. 181206
unheeded, Tanseco filed on June 5, 2002 with the
Principle: In reciprocal obligations, neither party Housing and Land Use Regulatory Board's (HLURB) a
incurs in delay if the other does not comply or is not complaint against Megaworld for rescission of
ready to comply in a proper manner with what is contract, refund of payment, and damages. In its
incumbent upon him. From the moment one of the Answer, Megaworld attributed the delay to the 1997
parties fulfills his obligation, delay by the other Asian financial crisis which was beyond its control;
begins. and argued that default had not set in, Tanseco not
having made any judicial or extrajudicial demand for
Facts: Petitioner Megaworld Globus Asia, Inc.
delivery before receipt of the notice of turnover.
(Megaworld) and respondent Mila S. Tanseco
entered into a Contract to Buy and Sell a 224 square- The HLURB Arbiter dismissed Tanseco's
meter (more or less) condominium unit at a pre- complaint for lack of cause of action, finding that
selling project, "The Salcedo Park," located along Megaworld had effected delivery by the notice of
Senator Gil Puyat Avenue, Makati City. The purchase turnover before Tanseco made a demand. On
price was P16,802,037.32, to be paid as follows: (1) appeal, the HLURB Board of Commissioners
30% less the reservation fee of P100,000, or sustained the HLURB Arbiter's Decision on the
P4,940,611.19, by postdated check payable on July ground of laches for failure to demand rescission
14, 1995; (2) P9,241,120.50 through 30 equal when the right thereto accrued. With her motion for
monthly installments of P308,037.35 from August reconsideration having been denied, she appealed to
14, 1995 to January 14, 1998; and (3) the balance of the Office of the President which dismissed the
P2,520,305.63 on October 31, 1998, the stipulated appeal for failure to show that the findings of the
delivery date of the unit; provided that if the HLURB were tainted with grave abuse of discretion.
construction is completed earlier, Tanseco would Her Motion for Reconsideration having been denied,
pay the balance within seven days from receipt of a Tanseco filed a Petition for Review with the CA,
notice of turnover. which granted the said petition, directing Megaworld
to pay Tanseco the amount she had paid. Its Motion
Tanseco paid all installments due up to
for Reconsideration having been denied, Megaworld
January, 1998, leaving unpaid the balance of
filed the present Petition for Review on Certiorari
P2,520,305.63 pending delivery of the unit.
Megaworld, however, failed to deliver the unit

Issue: Whether or not Megaworld incurred delay collection of sum of money against them on
when they did not deliver the unit on time. November 19, 1999 before the RTC of Bacoor, Cavite.
Held: Yes. Leonardo died during the pendency of the

case and was substituted by his widow, Esperanza.
The Contract to Buy and Sell of the parties
Meanwhile, Gruspe sold the wrecked car for
contains reciprocal obligations, i.e., to complete and
P130,000.00. The RTC thereafter ruled in favor of
deliver the condominium unit on October 31, 1998
Gruspe and ordered Cruz and Leonardo to pay
or six months thereafter on the part of Megaworld,
P220,000.00,6 plus 15% per annum from November
and to pay the balance of the purchase price at or
15, 1999 until fully paid, and the cost of suit. On
about the time of delivery on the part of Tanseco.
appeal, the CA affirmed the RTC decision, but
Compliance by Megaworld with its obligation is
reduced the interest rate to 12% per annum
determinative of compliance by Tanseco with her
pursuant to the Joint Affidavit of Undertaking. It
obligation to pay the balance of the purchase price.
declared that despite its title, the Joint Affidavit of
Megaworld having failed to comply with its
Undertaking is a contract as it has all its elements
obligation under the contract, it is liable therefor.
(consent, object and consideration). By signing the
Rodolfo Cruz and Esperanza Ibias vs Atty. Delfin Joint Affidavit of Undertaking, they voluntarily
Gruspe (2013) assumed the obligation for the damage they caused
G.R. No. 191431 to Gruspe’s car; Leonardo, who was not a party to
the incident, could have refused to sign the affidavit,
Principle: In order that the debtor may be in default,
but he did not.
it is necessary that the following requisites be
present: (1) that the obligation be demandable and In their appeal by certiorari with the Court,
already liquidated; (2) that the debtor delays Cruz and Esperanza assail the CA ruling, contending
performance; and (3) that the creditor requires the that the Joint Affidavit of Undertaking is not a
performance judicially and extrajudicially. contract that can be the basis of an obligation to pay
a sum of money in favor of Gruspe. They also claimed
Facts: The mini bus owned and operated by Cruz
that prior to the filing of the complaint for sum of
and driven by one Arturo Davin collided with the
money, Gruspe did not make any demand upon
Toyota Corolla car of Gruspe; Gruspe’s car was a total
them. Hence, pursuant to Article 1169 of the Civil
wreck. The next day, on October 25, 1999, Cruz,
Code, they could not be considered in default.
along with Leonardo Q. Ibias went to Gruspe’s office,
Without this demand, Cruz and Esperanza contend
apologized for the incident, and executed a Joint
that Gruspe could not yet take any action.
Affidavit of Undertaking promising jointly and
severally to replace the Gruspe’s damaged car in 20 Issue: Whether or not the petitioners incurred
days, or until November 15, 1999, of the same model delay as there was no demand made by the
and of at least the same quality; or, alternatively, respondent.
they would pay the cost of Gruspe’s car amounting
Held: Yes, they incurred delay.
to P350,000.00, with interest at 12% per month for
any delayed payment after November 15, 1999, until A simple reading of the terms of the Joint
fully paid. When Cruz and Leonardo failed to comply Affidavit of Undertaking readily discloses that it
with their undertaking, Gruspe filed a complaint for contains stipulations characteristic of a contract. As
quoted in the CA decision, the Joint Affidavit of

Undertaking contained a stipulation where Cruz and Thereafter, private respondent issued a
Leonardo promised to replace the damaged car of check in the amount of P11,500.00 in favor of one
Gruspe, 20 days from October 25, 1999 or up to Belen Legaspi. It was issued to Legaspi as payment
November 15, 1999, of the same model and of at for jewelry which private respondent had purchased.
least the same quality. In the event that they cannot Legaspi, who was in jewelry trade, endorsed the
replace the car within the same period, they would check to one Philip Lhuillier, a businessman also in
pay the cost of Gruspe’s car in the total amount of the jewelry business. When Lhuillier deposited the
P350,000.00, with interest at 12% per month for any check in his account with the PCIB, Pasay Branch, it
delayed payment after November 15, 1999, until was dishonored for being drawn against insufficient
fully paid. These, as read by the CA, are very simple funds. Lhuillier's secretary informed the secretary of
terms that both Cruz and Leonardo could easily Legaspi of the dishonor. The latter told the former to
understand. re-deposit the check. Legaspi's secretary tried to
contact private respondent but to no avail.
Default generally begins from the moment
the creditor demands the performance of the Upon her return from the province, private
obligation. In this case, demand could be considered respondent was surprised to learn of the dishonor of
to have been made upon the filing of the complaint the check. She went to the Valenzuela Branch of
on November 19, 1999, and it is only from this date Prudential Bank on July 4, 1988, to inquire why her
that the interest should be computed. check was dishonored. She approached the officer in
charge of current account, and requested him for the
Article 1170 – Non Performance by Fraud,
ledger of her current account. Private respondent
Negligence, or Delay
discovered a debit of P300.00 penalty for the
Prudential Bank vs CA and Valenzuela (2000) dishonor of her check. She asked why her check was
G.R. No. 125536 dishonored when there were sufficient funds in her
account as reflected in her passbook. The OIC, Reyes
Principle: Negligence on part of the obligor shall
told her that there was no need to review the
hold him liable for damages.
passbook because the bank ledger was the best
Facts: Private respondent Leticia Tupasi Valenzuela proof that she did not have sufficient funds.
opened Savings Account No. 5744 and Current
Later, it was found out that the check in the
Account No. 01016-3 in the Valenzuela Branch of
amount of P35,271.60 deposited by private
petitioner Prudential Bank, with automatic transfer
respondent on June 1, 1988, was credited in her
of funds from the savings account to the current
savings account only on June 24, 1988, or after a
account.
period of 23 days. Thus the P11,500.00 check was
On June 1, 1988, herein private respondent redeposited by Lhuillier on June 24, 1988, and
deposited in her savings account a check in the properly cleared on June 27, 1988. Because of this
amount of P35,271.60, drawn against the Philippine incident, the bank tried to mollify private respondent
Commercial International Bank (PCIB). Taking into by explaining to Legaspi and Lhuillier that the bank
account that deposit and a series of withdrawals, was at fault. Since this was not the first incident
private respondent as of June 21, 1988 had a balance private respondent had experienced with the bank,
of P35,993.48 in her savings account and P776.93 in private respondent was unmoved by the bank's
her current account, or total deposits of P36,770.41, apologies and she commenced the present suit for
with petitioner. damages before the RTC of Valenzuela.

Issue: Whether or not the petitioner is liable for Prudential Bank vs Rapanot and HLURB (2017)
damages. G.R. No. 191636
Held: Yes. Petitioner is liable for damages due to Principle: In loan transactions, banks have the
its negligence. particular obligation of ensuring that clients
In the instant case, petitioner bank had comply with all the documentary requirements
committed a mistake. The bank misposted private pertaining to the approval of their loan
respondent's check deposit to another account and applications and the subsequent release of their
delayed the posting of the same to the proper proceeds. Consequently, the highest degree of
account of the private respondent. The mistake diligence is expected, and high standards of
resulted to the dishonor of the private respondent's integrity and performance are even required, of
check. The trial court found that “the misposting of it.
plaintiff's check deposit to another account and the Facts: Golden Dragon is the developer of Wack-
delayed posting of the same to the account of the Wack Twin Towers Condominium, located in
plaintiff is a clear proof of lack of supervision on the Mandaluyong City. Private Repondent Rapanot paid
part of the defendant bank.” Similarly, the appellate Golden Dragon the amount of P453,329.64 as
court also found that "while it may be true that the reservation fee for a unit in said condominium,
bank's negligence in dishonoring the properly funded particularly designated as Unit 2308-B2.
check of appellant might not have been attended
On September 13, 1995, the Bank extended
with malice and bad faith, as appellee [bank]
a loan to Golden Dragon amounting to
submits, nevertheless, it is the result of lack of due
P50,000,000.00 to be utilized by the latter as
care and caution expected of an employee of a firm
additional working capital. To secure the loan,
engaged in so sensitive and accurately demanding
Golden Dragon executed a Mortgage Agreement in
task as banking."
favor of the Bank, which had the effect of
Thus, even if malice or bad faith was not constituting a real estate mortgage over several
sufficiently proved in the instant case, the fact condominium units owned and registered under
remains that petitioner has committed a serious Golden Dragon's name. Among the units subject of
mistake. It dishonored the check issued by the the Mortgage Agreement was Unit 2308-B2.
private respondent who turned out to have sufficient
Rapanot and Golden Dragon entered into a
funds with petitioner. The bank's negligence was the
Contract to sell, covering Unit 2308-B2. Rapanot
result of lack of due care and caution required of
completed payment of the full purchase price of said
managers and employees of a firm engaged in so
unit amounting to P1,511,098.97. Golden Dragon
sensitive and demanding business as banking.
executed a Deed of Absolute Sale in favor of Rapanot
Accordingly, the award of moral damages by the
of the same date. Thereafter, Rapanot made several
respondent Court of Appeals could not be said to be
verbal demands for the delivery of the unit.
in error nor in grave abuse of its discretion.
Prompted by Rapanot's verbal demands, Golden
Dragon sent a letter to the Bank, requesting for a
substitution of collateral for the purpose of replacing
Unit 2308-B2 with another unit with the same area.
However, the Bank denied Golden Dragon's request
due to the latter's unpaid accounts. Because of this,

Golden Dragon failed to comply with Rapanot's Bank's failure to comply with PD 957. Moreover,
verbal demands. contrary to the Bank's assertions, it cannot be
considered a mortgagee in good faith. The Bank
Thereafter, Rapanot, through his counsel,
failed to ascertain whether Golden Dragon secured
sent several demand letters to Golden Dragon and
HLURB's prior written approval as required by PD 957
the Bank, formally demanding the delivery of the
before it accepted Golden Dragon's properties as
unit and its corresponding CCT, free from all liens and
collateral. It also failed to ascertain whether any of
encumbrances. Neither Golden Dragon nor the Bank
the properties offered as collateral already had
complied with Rapanot's written demands.
corresponding buyers at the time the Mortgage
Rapanot filed a Complaint with the HLURB. Agreement was executed.
The Arbiter issued an order, declaring Golden Dragon
Petitioner should not have relied only on the
and its President Maria Victoria Vazquez in default
representation of the mortgagor that the latter had
and thereafter rendered a decision in favor of
secured all requisite permits and licenses from the
Rapanot, ordering respondents to pay jointly and
government agencies concerned. The former should
severally the complainant. The Bank filed a Petition
have required the submission of certified true copies
for Review with the HLURB Board, which affirmed
of those documents and verified their authenticity
and modified the Arbiter’s decision. The Bank
through its own independent effort. If only the Bank
appealed the decision of the HLURB Board to the
exercised the highest degree of diligence required by
Office of the President (OP), which denied its appeal.
the nature of its business as a financial institution, it
The Bank filed a Petition for Review with the CA,
would have discovered that: (i) Golden Dragon did
arguing that the CA erred when it held that it is jointly
not comply with the approval requirement imposed
and severally liable with Golden Dragon for damages.
by Section 18 of PD 957, and (ii) that Rapanot already
Issue: Whether or not the CA erred when it paid a reservation fee and had made several
affirmed the resolution of the OP, holding that the installment payments in favor of Golden Dragon,
Bank cannot be considered a mortgagee in good faith with a view of acquiring Unit 2308-B2.
and thus, should not be held jointly and severally
Therefore, the Bank's failure to exercise the
liable with Golden Dragon and its President.
diligence required of it constitutes negligence, and
Held: No. negates its assertion that it is a mortgagee in good
faith.
Under Presidential Decree No. 957 (PD 957),
no mortgage on any condominium unit may be Article 1174 – Doctrine of Fortuitous Event
constituted by a developer without prior written
Philippine Airlines Inc. vs CA and Pedro Zapatos
approval of the National Housing Authority, now
(1993)
HLURB. PD 957 further requires developers to notify
G.R. No. 82619
buyers of the loan value of their corresponding
mortgaged properties before the proceeds of the Principle: If the cause of non-fulfillment of the
secured loan are released. contract is due to a fortuitous event, it has to be
the sole and only cause.
In the case at bar, the Mortgage Agreement
cannot have the effect of curtailing Rapanot's right Facts: Private respondent filed a complaint for
as buyer of Unit 2308-B2, precisely because of the damages for breach of contract of carriage against

PAL. On August 2, 1976, he was among the 21 If the cause of non-fulfillment of the contract
passengers of Flight 477 that took off from Cebu for is due to a fortuitous event, it has to be the sole and
Osamiz. only cause.
About fifteen minutes before landing, the In the case at bar, as correctly ruled by the
pilot received a radio message that the airport was appellate court, “since part of the failure to comply
closed due to heavy rains and inclement weather and with the obligation of common carrier to deliver its
should proceed to Cotabato instead. Upon arrival in passengers safely to their destination lay in the
Cotabato City, PAL informed the passengers of their defendant’s failure to provide comfort and
options to return to Cebu on Flight 560 on the same convenience to its stranded passengers using extra-
day and to Ozamis the next day, or take the next ordinary diligence, the cause of non-fulfillment is not
flight to Cebu then to Ozamis the day after the next. solely and exclusively due to fortuitous event, but
From Flight 560, there were only six seats left and the due to something which defendant airline could have
priority is based on check-in sequence in Cebu. prevented, defendant becomes liable to plaintiff.”
Private respondent was no. 9.
Southeastern College Inc. vs CA et al. (1998)
Private respondent insisted on being given G.R. No. 126389
priority but refused for the predicament was due to
force majeure, not of PAL’s own doing. He tried to Principle: A person claiming damages for the
stop the flight due to some packages still on board. negligence of another has the burden of proving
PAL issued a free plane ticket to Iligan which he the existence of fault or negligence causative of
received under protest. Private respondent was left his injury or loss.
in the airport with no food and accommodation for Facts: Private respondents are owners of a house
his stay in Cotabato City. In Iligan City, private in Pasay while petitioners owns a 4-storey school
respondent hired a car from the airport to Ozamis building along the same road. On October 11, 1989,
City and his personal effects were no longer typhoon Saling hit Manila. Buffeted by strong winds,
recovered. the roof of the petitioner’s building ripped was
ripped and blown away, landing on and destroying
PAL answered, denying its unjust refusal to
portions of the roof of the house of private
accommodate respondent. It argued that the first six
respondent.
passengers chose to take Flight 560 and it was
explained of the inability to transport all of them After an ocular inspection, it was
back to Cebu and it was only the private respondent recommended that the fourth floor of the school
who insisted on such. RTC ruled in favor of building was to be declared as a structural hazard
respondent. PAL appealed to the CA which affirmed due to a defective roofing structure to avoid any
the RTC. Hence this petition for review. further loss and damage to lives, limbs and property
of persons living in the vicinity.
Issue: Whether or not PAL is liable for damages
because the diversion of the flight was due to a In a complaint for culpa aquiliana before the
fortuitous event. RTC of Pasay City, respondents alleged that the
damage to their house rendered the same
Held: Yes.
uninhabitable, forcing them to stay temporarily in
other houses. In their answer, the school averred

that subject school building had withstood several In the present case, other than the said
devastating typhoons and other calamities in the ocular inspection, no investigation was conducted to
past, without its roofing or any portion thereof giving determine the real cause of the partial unroofing of
way. It also argued that it has not been remiss in its petitioner's school building. Private respondents did
responsibility to see to it that said school building, not even show that the plans, specifications and
which houses school children, faculty members, and design of said school building, were deficient and
employees, is "in tip-top condition", and defective. Neither did they prove any substantial
furthermore, typhoon "Saling" was "an act of God deviation from the approved plans and
and therefore beyond human control" such that specifications. Nor did they conclusively establish
petitioner cannot be answerable for the damages that the construction of such building was basically
wrought thereby, absent any negligence on its part. flawed.
The RTC ruled in favor of respondents. It held On the other hand, petitioner elicited from
that the damage to private respondents' house could one of the witnesses of private respondents, city
have been avoided if the construction of the roof of building official Jesus Reyna, that the original plans
petitioner's building was not faulty. The petitioners and design of petitioner's school building were
appealed to the CA which affirmed the RTC’s approved prior to its construction. Engr. Reyna
decision. Hence this petition for review. admitted that it was a legal requirement before the
construction of any building to obtain a permit from
Issue: Whether or not petitioner is liable for the
the city building official. In like manner, after
damage on the roof of the house of private
construction of the building, a certification must be
respondents resulting from the impact of the falling
secured from the same official attesting to the
portions of the school building's roof ripped off by
readiness for occupancy of the edifice. Having
the strong winds of the typhoon.
obtained both building permit and certificate of
Held: No. occupancy, these are, at the very least, prima facie
evidence of the regular and proper construction of
There is no question that a typhoon or storm
subject school building.
is a fortuitous event, a natural occurrence which may
be foreseen but is unavoidable despite any amount Private respondents failed to adduce
of foresight, diligence or care. In order to be exempt adequate and competent proof of the pecuniary loss
from liability arising from any adverse consequence they actually incurred. It is not enough that the
engendered thereby, there should have been no damage be capable of proof but must be actually
human participation amounting to a negligent act. In proved with a reasonable degree of certainty,
other words, the person seeking exoneration from pointing out specific facts that afford a basis for
liability must not be guilty of negligence. Negligence, measuring whatever compensatory damages are
as commonly understood, is conduct which naturally borne. Private respondents merely submitted an
or reasonably creates undue risk or harm to others. estimated amount needed for the repair of the roof
It may be the failure to observe that degree of care, of their subject building. What is more, whether the
precaution, and vigilance which the circumstances "necessary repairs" were caused ONLY by
justly demand, or the omission to do something petitioner's alleged negligence in the maintenance of
which a prudent and reasonable man, guided by its school building, or included the ordinary wear and
considerations which ordinarily regulate the conduct tear of the house itself, is an essential question that
of human affairs, would do. remains indeterminable.

Philippine Communications Satellite Corp. vs Globe the withdrawal of US Military Personnel. Globe
Telecom Inc. (2004) invoked Section 8 on Default of the Agreement
G.R. No. 147324 stipulating about force majeure. Philcomsat however
demanded payment of outstanding obligations
Principle: Article 1174 of the Civil Code exempts
under the Agreement. However, Globe refused to
the obligor from liability because fortuitous
heed Philcomsat’s demand.
event or force majeure, which refers not only to
events that are unforeseeable, but also those Philcomsat then filed a complaint for
which are foreseeable but inevitable. damages with the RTC of Makati. Globe filed an
Answer to the Complaint, insisting that it was
Facts: For several years prior to 1991, Globe
constrained to end the Agreement due to the
Telecom had been engaged in the coordination of
termination of the RP-US Military Bases Agreement
the provision of various communication facilities for
and the non-ratification by the Senate of the Treaty
the military bases of US. They were configured for
of Friendship and Cooperation, which events
the exclusive use of US Defense Communications
constituted force majeure under the Agreement.
Agency (USDCA). The USDCA contracted with Globe
Globe explained that the occurrence of said events
for the use of communication facilities. Globe, on the
exempted it from paying rentals for the remaining
other hand, contracted with local service providers
period of the Agreement. The RTC ruled that the non-
such as PHILCOMSAT for the provision of
ratification by the Senate of the Treaty of Friendship,
communication facilities.
Cooperation and Security and its Supplementary
On May 07, 1991 Philcomsat and Globe Agreements constitutes force majeure which
entered into Agreement whereby Philcomsat exempts Globe from complying with its obligations
obligated itself to establish, operate and provide and under the Agreement, thus Globe is not liable to pay
IBS Standard B Earth Station for exclusive use of the the rentals for the remainder of the term of the
USDCA. The term of the contract was for 60 months Agreement but is liable to pay for the rentals of the
or 5 years. Globe promised to pay Philcomsat earth station for the dates prior to the non-
monthly rentals for each leased circuit involved. ratification. Both parties appealed the RTC’s decision
to the CA, which affirmed the RTC’s decision. Both
At the time of the execution of the
parties filed their respective Petitions for Review
agreement, both parties knew that the Military Bases
assailing the Decision of the CA.
Agreement between the Republic of the Philippines
and the US (RP-US Military Bases Agreement)*, Issue: Whether or not the termination of the RP-US
which was the basis for the occupancy of the Clark Agreement constitutive of force majeure that would
Air Base and Subic Naval Base in Cubi Point, was to exempt obligation to perform payment of rent.
expire in 1991. Subsequently, they installed and
Held: Yes.
established the earth station. On September 16,
1991 the senate decided not to concur on the Treaty Philcomsat and Globe agreed in Section 8 of
of Friendship that was supposed to extend the term the Agreement that the following events shall be
of the use by the US of Subic Naval Base, among deemed events constituting force majeure: x x x (9)
others. Other circumstances beyond the control of the
*Shall terminate on December 31, 1992.
parties. Clearly, the foregoing are either
unforeseeable, or foreseeable but beyond the
On August 06, 1992, Globe notified control of the parties.
Philcomsat of its intention to discontinue the use of
the earth station on November 06, 1992 in view of In order that Globe may be exempt from
non-compliance with its obligation to pay rentals

under Section 8, the concurrence of the following Petitioner is a customer and dealer of the
elements must be established: (1) the event must be products of IMC and LSPI. On February 25, 1991 the
independent of the human will; (2) the occurrence Gaisano Superstore Complex in CDO was consumed
must render it impossible for the debtor to fulfill the by fire. Included in the items lost were stocks of
obligation in a normal manner; and (3) the obligor ready-made clothing materials by IMC and LSPI.
must be free of participation in, or aggravation of,
On February 4, 1992, respondent filed a
the injury to the creditor.
complaint for damages against petitioner. It alleged
The Court agrees with the Court of Appeals that IMC and LSPI filed with respondent their claims
and the trial court that the abovementioned under their respective fire insurance policies with
requisites are present in the instant case. Philcomsat book debt endorsements. It averred that petitioner
and Globe had no control over the non-renewal of has unpaid accounts on the sale and delivery of
the term of the RP-US Military Bases Agreement ready-made clothing materials with IMC and LSPI,
when the same expired in 1991, because the and by virtue of such, respondent was subrogated to
prerogative to ratify the treaty extending the life their rights against petitioner, that respondent made
thereof belonged to the Senate. Neither did the several demands but remained unheeded.
parties have control over the subsequent withdrawal
In its Answer with Counter Claim, petitioner
of the US military forces and personnel from Cubi
contends that it could not be held liable because the
Point in December 1992.
property covered by the insurance policies were
The aforementioned events made destroyed due to fortuities event or force majeure. It
impossible the continuation of the Agreement until also averred that respondent's right of subrogation
the end of its five-year term without fault on the part has no basis inasmuch as there was no breach of
of either party. The Court of Appeals was thus correct contract committed by it since the loss was due to
in ruling that the happening of such fortuitous events fire which it could not prevent or foresee.
rendered Globe exempt from payment of rentals for Furthermore, it claimed that IMC and LSPI never
the remainder of the term of the Agreement. communicated to it that they insured their
properties and that it never consented to paying the
Gaisano Cagayan Inc. vs Insurance Company of
claim of the insured.
North America (2006)
G.R. No. 147839 The RTC dismissed respondent’s complaint,
holding that the fire was purely accidental and that it
Principle: The rule that an obligor should be held was not attributable to the negligence of the
exempt from liability when the loss occurs thru a petitioner. It also held that it has not been
fortuitous event does not apply when the established that petitioner is the debtor of IMC and
obligation is pecuniary in nature. LSPI. Furthermore, it held that that since the sales
Facts: Intercapitol Marketing Corp. (IMC) is the invoices state that "it is further agreed that merely
maker of Wrangler Blue Jeans. Levi Strauss Phils. for purpose of securing the payment of purchase
(LSPI) is the local distributor of products bearing price, the above-described merchandise remains the
trademarks owned by Levi Strauss & Co. IMC and LSPI property of the vendor until the purchase price is
separately obtained from respondent fire insurance fully paid", IMC and LSPI retained ownership of the
policies with book debt endorsements which refers delivered goods and must bear the loss.
to the unpaid account still appearing in the Book of On appeal, the CA reversed and set aside the
Account of the Insured 45 days after the time of the
RTC’s decision, holding that that the loss of the goods
loss covered under this Policy
in the fire must be borne by petitioner since the

proviso contained in the sales invoices is an Roberto Sicam and Agencia de R.C. Sicam Inc. vs
exception under Article 1504 (1) of the Civil Code, to Lulu Jorge and Cesar Jorge (2007)
the general rule that if the thing is lost by a fortuitous G.R. No. 159617
event, the risk is borne by the owner of the thing at
the time the loss under the principle of res perit Principle: In order for a fortuitous event to
domino. Petitioner filed a motion for reconsideration exempt one from liability, it is necessary that one
but was denied. Hence, this petition for review. has committed no negligence or misconduct that
may have occasioned the loss.
Issue: Whether or not petitioner liable for the
unpaid accounts. Facts: On different dates from September to
October 1987, Lulu V. Jorge (respondent Lulu)
Held: Yes.
pawned several pieces of jewelry with Agencia de R.
Under Article 1263 of the Civil Code, "in an C. Sicam to secure a loan in the total amount of
obligation to deliver a generic thing, the loss or P59,500.00. On October 19, 1987, two armed men
destruction of anything of the same kind does not entered the pawnshop and took away whatever cash
extinguish the obligation." If the obligation is generic and jewelry were found inside the pawnshop vault.
in the sense that the object thereof is designated
Petitioner Sicam sent respondent Lulu a
merely by its class or genus without any particular
letter, informing her of the loss of her jewelry due to
designation or physical segregation from all others of
the robbery incident in the pawnshop. On November
the same class, the loss or destruction of anything of
2, 1987, respondent Lulu then wrote a letter to
the same kind even without the debtor's fault and
petitioner Sicam, expressing disbelief stating that
before he has incurred in delay will not have the
when the robbery happened, all jewelry pawned
effect of extinguishing the obligation. This rule is
were deposited with Far East Bank near the
based on the principle Genus nunquan perit – that
pawnshop since it had been the practice that before
the the genus of a thing can never perish.
they could withdraw, advance notice must be given
An obligation to pay money is generic; to the pawnshop so it could withdraw the jewelry
therefore, it is not excused by fortuitous loss of any from the bank. Respondent Lulu then requested
specific property of the debtor. The insurance in this petitioner Sicam to prepare the pawned jewelry for
case is not for loss of goods by fire but for petitioner's withdrawal on November 6, 1987 but petitioner
accounts with IMC and LSPI that remained unpaid 45 Sicam failed to return the jewelry.
days after the fire. Accordingly, petitioner's
Respondent Lulu joined by her husband,
obligation is for the payment of money. As correctly
Cesar Jorge, filed a complaint against petitioner
stated by the CA, where the obligation consists in the
Sicam with the RTC Court of Makati, seeking
payment of money, the failure of the debtor to make
indemnification for the loss of pawned jewelry and
the payment even by reason of a fortuitous event
payment of actual, moral and exemplary damages as
shall not relieve him of his liability.
well as attorney's fees.
Thus, whether fire is a fortuitous event or
Petitioner Sicam filed his Answer contending
petitioner was negligent are matters immaterial to
that he is not the real party-in-interest as the
this case. What is relevant here is whether it has
pawnshop was incorporated on April 20, 1987 and
been established that petitioner has outstanding
known as Agencia de R.C. Sicam, Inc. He also argued
accounts with IMC and LSPI.
that petitioner corporation had exercised due care
and diligence in the safekeeping of the articles
pledged with it and could not be made liable for an

event that is fortuitous. Respondents subsequently concluded that both petitioners should be jointly and
filed an Amended Complaint to include Petitioner severally held liable to respondents for the loss of the
Corporation. pawned jewelry. Petitioner’s motion for
reconsideration was denied. Hence, this petition for
The RTC held that petitioner Sicam could not
review.
be made personally liable for a claim arising out of a
corporate transaction. In the Amended Complaint of Issue: Whether petitioners are liable for the loss of
respondents, they asserted that "plaintiff pawned the pawned articles in their possession.
assorted jewelries in defendants' pawnshop," and as
Held: Yes.
a consequence of the separate juridical personality
of a corporation, the corporate debt or credit is not To constitute a fortuitous event, the
the debt or credit of a stockholder. following elements must concur: (a) the cause of the
unforeseen and unexpected occurrence or of the
The RTC further ruled that petitioner
failure of the debtor to comply with obligations must
corporation could not be held liable for the loss of
be independent of human will; (b) it must be
the pawned jewelry since it had not been rebutted
impossible to foresee the event that constitutes the
by respondents that the loss of the pledged pieces of
caso fortuito or, if it can be foreseen, it must be
jewelry in the possession of the corporation was
impossible to avoid; (c) the occurrence must be such
occasioned by armed robbery – that robbery is a
as to render it impossible for the debtor to fulfill
fortuitous event which exempts the victim from
obligations in a normal manner; and, (d) the obligor
liability for the loss. It further held that the parties'
must be free from any participation in the
transaction was that of a pledgor and pledgee and
aggravation of the injury or loss.
under Art. 1174 of the Civil Code, the pawnshop as a
pledgee is not responsible for those events which Robbery per se, just like carnapping, is not a
could not be foreseen. fortuitous event. It does not foreclose the possibility
of negligence on the part of herein petitioners.
On appeal, the CA reversed and set aside
RTC’s decision, In finding petitioner Sicam liable In the case at bar, petitioners failed to show
together with petitioner corporation, the CA applied that they were free from any negligence by which the
the doctrine of piercing the veil of corporate entity, loss of the pawned jewelry may have been
reasoning that respondents were misled into occasioned. A review of the records clearly shows
thinking that they were dealing with the pawnshop that petitioners failed to exercise reasonable care
owned by petitioner Sicam as all the pawnshop and caution that an ordinarily prudent person would
tickets issued to them bear the words "Agencia de have used in the same situation. Petitioners were
R.C. Sicam". The CA further held that the guilty of negligence in the operation of their
corresponding diligence required of a pawnshop is pawnshop business.
that it should take steps to secure and protect the
pledged items and should take steps to insure itself Revealing that there were no security
against the loss of articles which are entrusted to its measures adopted by petitioners in the operation of
custody as it derives earnings from the pawnshop the pawnshop. Evidently, no sufficient precaution
trade which petitioners failed to do, and that they and vigilance were adopted by petitioners to protect
are at least guilty of contributory negligence and the pawnshop from unlawful intrusion. There was no
should be held liable for the loss of jewelries. The CA clear showing that there was any security guard at
also held that that robberies and hold-ups are all. Or if there was one, that he had sufficient training
foreseeable risks in that those engaged in the in securing a pawnshop. Further, there is no showing
pawnshop business are expected to foresee. The CA that the alleged security guard exercised all that was

necessary to prevent any untoward incident or to Petitioners failed to settle their obligations
ensure that no suspicious individuals were allowed under the aforementioned promissory note and
to enter the premises. In fact, it is even doubtful that trust receipts, hence, Allied Bank, through counsel,
there was a security guard, since it is quite sent them demand letters seeking payment of the
impossible that he would not have noticed that the total amount of P51,064,093.62, but to no avail.
robbers were armed with caliber .45 pistols each, Thus, Allied Bank was prompted to file a complaint
which were allegedly poked at the employees. for collection of sum of money against petitioners
Significantly, the alleged security guard was not before the RTC.
presented at all to corroborate petitioner Sicam's
In their amended answer, petitioners
claim; not one of petitioners' employees who were
admitted their indebtedness to Allied Bank but
present during the robbery incident testified in
denied liability for the interests and penalties
court.
charged, claiming to have paid the total sum of
Furthermore, petitioner Sicam's admission P65,073,055.73 by way of interest charges for the
that the vault was open at the time of robbery is period covering 1992 to 1997.24 They also alleged
clearly a proof of petitioners' failure to observe the that the economic reverses suffered by the
care, precaution and vigilance that the Philippine economy in 1998 as well as the
circumstances justly demanded. Petitioner Sicam devaluation of the peso against the US dollar
testified that once the pawnshop was open, the contributed greatly to the downfall of the steel
combination was already off. Consideringpetitioner industry, directly affecting the business of Metro
Sicam's testimony that the robbery took place on a Concast and eventually leading to its cessation. In
Saturday afternoon and the area in BF Homes order to settle their debts with Allied Bank,
Parañaque at that time was quiet, there was more petitioners offered the sale of Metro Concast’s
reason for petitioners to have exercised reasonable remaining assets, consisting of machineries and
foresight and diligence in protecting the pawned equipment, to Allied Bank, which the latter,
jewelries. Instead of taking the precaution to protect however, refused. Instead, Allied Bank advised them
them, they let open the vault, providing no difficulty to sell the equipment and apply the proceeds of the
for the robbers to cart away the pawned articles. sale to their outstanding obligations. Accordingly,
petitioners offered the equipment for sale, but since
Metro Concast Steel Corp. et al. vs Allied Bank
there were no takers, the equipment was reduced
Corp. (2013)
into ferro scrap or scrap metal over the years.
G.R. No. 177921
During the negotiations with Peakstar,
Principle: Fortuitous events must be those petitioners claimed that Atty. Peter Saw , a member
events that are "impossible" to foresee or even of Allied Bank’s legal department, acted as the
an event which is "independent of human will." latter’s agent. Eventually, with the alleged
conformity of Allied Bank, through Atty. Saw, a
Facts: On various dates and for different amounts,
Memorandum of Agreement dated November 8,
Metro Concast, a corporation duly organized and
2002 (MoA) was drawn between Metro Concast,
existing under and by virtue of Philippine laws and
represented by petitioner Jose Dychiao, and
engaged in the business of manufacturing steel,
Peakstar, through Camiling, under which Peakstar
through its officers, herein individual petitioners,
obligated itself to purchase the scrap metal for a
obtained several loans from Allied Bank. These loan
total consideration of P34,000,000.00, payable in
transactions were covered by a promissory note and
monthly installments. Unfortunately, Peakstar
separate letters of credit/trust receipts.
reneged on all its obligations under the MoA.

In this regard, petitioners asseverated that: must be free from any participation in the
(a) their failure to pay their outstanding loan aggravation of the injury or loss.
obligations to Allied Bank must be considered as
While it may be argued that Peakstar’s
force majeure; and (b) since Allied Bank was the
breach of the MoA was unforeseen by petitioners,
party that accepted the terms and conditions of
the same is clearly not "impossible" to foresee or
payment proposed by Peakstar, petitioners must
even an event which is "independent of human will."
therefore be deemed to have settled their
Neither has it been shown that said occurrence
obligations to Allied Bank.
rendered it impossible for petitioners to pay their
The RTC dismissed the subject complaint, loan obligations to Allied Bank and thus, negates the
holding that the “causes of action sued upon had former's force majeure theory altogether. In any
been paid or otherwise extinguished.” On appeal, case, as earlier stated, the performance or breach of
the CA reversed and set aside RTC’s ruling, the MoA bears no relation to the performance or
ratiocinating that there was “no legal basis in fact breach of the subject loan transactions, they being
and in law to declare that when Bankwise reneged its separate and distinct sources of obligation. The fact
guarantee under the MoA, herein petitioners should of the matter is that petitioners' loan obligations to
be deemed to be discharged from their obligations Allied Bank remain subsisting for the basic reason
lawfully incurred in favor of Allied Bank.” Petitioners that the former has not been able to prove that the
filed a motion for reconsideration but was denied. same had already been paid or, in any way,
Hence, this petition for review. Petitioners classify extinguished. In this regard, petitioners' liability, as
Peakstar’s default as a form of force majeure in the adjudged by the CA, must perforce stand.
sense that they have, beyond their control, lost the Considering, however, that Allied Bank's extra-
funds they expected to have received from the judicial demand on petitioners appears to have been
Peakstar (due to the MoA) which they would, in turn, made only on December 10, 1998, the computation
use to pay their own loan obligations to Allied Bank. of the applicable interests and penalty charges
should be reckoned only from such date.
Issue: Whether or not the loan obligations incurred
by the petitioners under the subject promissory note
and various trust receipts have already been
extinguished.
Held: No, Peakstar’s breach of its obligations to

Metro Concast arising from the MoA cannot be
classified as a fortuitous event under jurisprudential
formulation.
To constitute a fortuitous event, the

following elements must concur: (a) the cause of the
unforeseen and unexpected occurrence or of the
failure of the debtor to comply with obligations must
be independent of human will; (b) it must be
impossible to foresee the event that constitutes the
caso fortuito or, if it can be foreseen, it must be
impossible to avoid; (c) the occurrence must be such
as to render it impossible for the debtor to fulfill
obligations in a normal manner; and, (d) the obligor

Obligations and Contracts - Article 1157 To 1174

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Obligations and Contracts - Article 1157 To 1174

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ATENEO COLLEGE OF LAW

Obligations and Contracts – Cases | Atty. Jocelyn Valencia 1

ALAG, Miguel Alleandro M. | Manresa ‘18-19

Principle: Obligations derived from law are not Held: No.

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

Issue: Whether or not an independent civil action

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

Held: Yes. Leonardo died during the pendency of the

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

ALAG, Miguel Alleandro M. | Manresa ‘18-19

Held: No, Peakstar’s breach of its obligations to

To constitute a fortuitous event, the

ALAG, Miguel Alleandro M. | Manresa ‘18-19

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