oblicon

NATIONAL MARKETING CORPORATION VS.
FEDERATION OF UNITED NAMARCO
DISTRIBUTORS, INC.
49 SCRA 238

FACTS:
On November 16, 1959, the NAMARCO and the
FEDERATION entered into a Contract of Sale stipulating
among others that Two Hundred Thousand Pesos
(P200,000.00) be paid as part payment, and
FEDERATION deposits with the NAMARCO upon signing
of the items and/or merchandise a cash basis payment
upon delivery of the duly indorsed negotiable shipping
document covering the same. To insure payment of the
goods by the FEDERATION, the NAMARCO accepted
three domestic letters of credit which is an accepted draft
and duly executed trust receipt approved by the Philippine
National Bank.

Upon arrival of the goods in Manila in January,
1960, the NAMARCO billed FEDERATION Statement of
Account for P277,357.91, covering shipment of the 2,000
cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit
Chewing Gums, and 500 cartons of Adams Chicklets;
Statement of Account of P135,891.32, covering shipment of
the 168 cartons of Blue Denims; and Statement of Account
of P197,824.12, covering shipment of the 183 bales of
Khaki Twill, or a total of P611,053.35. Subsequently, it was
received by FEDERATION on January 29, 1960. However,
on March 2, 1960 FEDERATION filed a complaint against
Namarco for undelivery of some items contained in the
contract of sale. FEDERATION refuses to pay
acknowledge the domestic letters of credit until full
delivery is done by NAMARCO.

ISSUE:
Should FEDERATION be obliged to pay the
amount of the merchandise even if there was still
incomplete delivery of items by NAMARCO?

RULING:
Yes. The right of the NAMARCO to the cost of the
goods existed upon delivery of the said goods to the
FEDERATION which, under the Contract of Sale, had to
pay for them. Therefore, the claim of the NAMARCO for
the cost of the goods delivered arose out of the failure of
the FEDERATION to pay for the said goods, and not out of
the refusal of the NAMARCO to deliver the other goods to
the FEDERATION. Furthermore, FEDERATION’s nonpayment
would result to it being unjustly enriched.
However, the lower court erred in imposing interest at the
legal rate on the amount due, "from date of delivery of the
merchandise", and not from extra-judicial demand. In the
absence of any stipulations on the matter, the rule is that
the obligor is considered in default only from the time the
obligee judicially or extra-judicially demands fulfillment of
the obligation and interest is recoverable only from the
time such demand is made. There being no stipulation as
to when the aforesaid payments were to be made, the
FEDERATION is therefore liable to pay interest at the legal
rate only from June 7, 1960, the date when NAMARCO
made the extra-judicial demand upon said party.

PICZON VS. PICZON
G.R. No. L-29139, November 15, 1974

FACTS:
This an appeal from the decision of the Court of
First Instance of Samar in its Civil Case No. 5156, entitled
Consuelo P. Piczon, et al. vs. Esteban Piczon, et al.,
sentencing defendants-appellees, Sosing Lobos and Co.,
Inc., as principal, and Esteban Piczon, as guarantor, to pay
plaintiffs-appellants "the sum of P12,500.00 with 12%
interest from August 6, 1964 until said principal amount of
P12,500.00 shall have been duly paid, and the costs."
Annex "A", the actionable document of appellants
reads thus:
AGREEMENT OF LOAN
KNOW YE ALL MEN BY THESE PRESENTS:
That I, ESTEBAN PICZON, of legal age, married,
Filipino, and resident of and with postal address in
the municipality of Catbalogan, Province of Samar,
Philippines, in my capacity as the President of the
corporation known as the "SOSING-LOBOS and
CO., INC.," as controlling stockholder, and at the
same time as guarantor for the same, do by these
presents contract a loan of Twelve Thousand Five
Hundred Pesos (P12,500.00), Philippine
Currency, the receipt of which is hereby
acknowledged, from the "Piczon and Co., Inc."
another corporation, the main offices of the two
corporations being in Catbalogan, Samar, for
which I undertake, bind and agree to use the loan
as surety cash deposit for registration with the
Securities and Exchange Commission of the
incorporation papers relative to the "Sosing-Lobos
and Co., Inc.," and to return or pay the same
amount with Twelve Per Cent (12%) interest per
annum, commencing from the date of execution
hereof, to the "Piczon and Co., Inc., as soon as the
said incorporation papers are duly registered and
the Certificate of Incorporation issued by the
aforesaid Commission.

IN WITNESS WHEREOF, I hereunto signed my
name in Catbalogan, Samar, Philippines, this 28th
day of September, 1956.
(signed)Esteban Piczon

ISSUE:
Was the trial court correct in its decision that
defendant will only have to pay the interest from August 6,
1964 instead of September 28, 1956?

RULING:
No. Instead of requiring appellees to pay interest
at 12% only from August 6, 1964, the trial court should
have adhered to the terms of the agreement which plainly
provides that Esteban Piczon had obligated Sosing-Lobos
and Co., Inc. and himself to "return or pay (to Piczon and
Co., Inc.) the same amount (P12,500.00) with Twelve Per
Cent (12%) interest per annum commencing from the date
of the execution hereof", Annex A, which was on
September 28, 1956. Under Article 2209 of the Civil Code
"(i)f the obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the indemnity for
damages, there being no stipulation to the contrary, shall
be the payment of the interest agreed upon, and in the
absence of stipulation, the legal interest, which is six per
cent per annum." In the case at bar, the "interest agreed
upon" by the parties in Annex A was to commence from
the execution of said document.
Appellees' contention that the reference in Article
2209 to delay incurred by the debtor which can serve as
the basis for liability for interest is to that defined in
Article 1169 of the Civil Code is untenable. In Quiroz vs.
Tan Guinlay, 5 Phil. 675, it was held that the article cited
by appellees (which was Article 1100 of the Old Civil Code
read in relation to Art. 1101) is applicable only when the
obligation is to do something other than the payment of
money. And in Firestone Tire & Rubber Co. (P.I.) vs.
Delgado, 104 Phil. 920, the Court squarely ruled that if the
contract stipulates from what time interest will be counted,
said stipulated time controls, and, therefore interest is
payable from such time, and not from the date of the filing
of the complaint (at p. 925). Were that not the law, there
would be no basis for the provision of Article 2212 of the
Civil Code providing that "(I)nterest due shall earn legal
interest from the time it is judicially demanded, although
the obligation may be silent upon this point." Incidentally,
appellants would have been entitled to the benefit of this
article, had they not failed to plead the same in their
complaint. Their prayer for it in their brief is much too
late. Appellees had no opportunity to meet the issue
squarely at the pre-trial.


FIRESTONE TIRE VS. DELGADO
G.R. No. L-11162, December 4, 1958

FACTS:
On September 22, 23, and 25, 1953, the
defendants, Mario Delgado and Leonor Delgado Dee,
doing business under the trade name of Caltex Quick
Service Station, in Cebu City, received from the plaintiff
Firestone Tire Rubber, Co., goods and merchandise valued
at P6,966.73, payable on October 31, 1953, subject to the
condition that in case of default, defendants would pay
interest of 12 per cent a year from the date of default, plus
25 per cent of the said amount as attorney's fees and
liquidated damages in case of suit. Demand for payment
was duly made by the plaintiff. and defendants in a letter
dated May 21, 1954, proposed to pay the outstanding
balance of P5,865.00 according to the following schedule:
May-P500.00, June-500.00, July-,500.00, August-
1,500.00, September-1,600.00 and October-1,265.00. In a
letter dated June 12, 1954, plaintiff accepted the proposal
on the condition, however, "that if you fail to comply with
your schedule, we will immediately refer the balance of
your account to our lawyer for collection without further
notice." Defendants paid the May installment of P500.00
on May 16, 1954. On account of the June installment, they
paid P200.00 on June 25, 1954 and P250.00 on July 10,
1954, or a total of P450.00. After said payments, there
remained a balance of P4,915.62, which the defendants
had not paid up to the present time. In view of said failure,
plaintiff brought the present action on July 19, 1954 to
collect said unpaid balance.

ISSUE:
May the Plaintiff enforce a judicial action against
defendant for failure to meet the obligation?

RULING:
Yes. This case is a plain case of a debtor failing,
without any valid reason, to pay for goods and
merchandise bought and received by him on the date he
promised to pay. He made a proposition to the vendor to
pay the balance of the value of the goods in six monthly
installments, and the vendor, out of consideration, granted
the request, but with the condition that failure to strictly
observe the installments payments would result in a
judicial suit without further notice for the recovery of the
whole amount.

After paying less than two monthly installments,
and without any satisfactory explanation, the debtor
simply failed and refused to pay the balance of over
P4,000.00 up to the present time. The courts cannot look
with favor upon such delinquency in the performance of a
clear obligation, especially when, as in this case, a debtor
presumably a merchant and trader, received the goods
bought and presumably had sold them and received the
price and benefits of the sale.


VERMEN REALTY DEVELOPMENT
CORPORATION VS. COURT OF APPEALS G.R. No.
101762

FACTS:
Under the conditions of the so-called “Offsetting
Agreement”, Vermen Realty (the first party in the contract)
and Seneca Hardware (the second party) were under a
reciprocal obligation. Seneca Hardware shall deliver to
Vermen Realty construction materials worth P552,000.00.
Vermen Realty's obligation under the agreement is threefold:
he shall pay Seneca Hardware P276,000.00 in cash;
he shall deliver possession of units 601 and 602, Phase I,
Vermen Pines Condominiums (with total value of
P276,000.00) to Seneca Hardware; upon completion of
Vermen Pines Condominiums Phase II, Seneca Hardware
shall be given option to transfer to similar units therein.
As found by the appellate court and admitted by
both parties, Seneca Hardware had paid Vermen Realty
the amount of P110,151.75, and at the same time delivered
construction materials worth P219,727.00. Pending
completion of Phase II of the Vermen Pines
Condominiums, Vermen Realty delivered to Seneca
Hardware units 601 and 602 at Phase I of the Vermen
Pines Condominiums (Rollo, p. 28). In 1982, the Vermen
Realty repossessed unit 602. As a consequence of the
repossession, the officers of the Seneca Hardware
corporation had to rent another unit for their use when
they went to Baguio on April 8, 1982.

In its reply the Vermen Realty corporation averred
that Room 602 was leased to another tenant because
Seneca Hardware corporation had not paid anything for
purchase of the condominium unit. Vermen Realty
corporation demanded payment of P27,848.25
representing the balance of the purchase price of Room
601.

On June 21, 1985, Seneca Hardware filed a
complaint with the Regional Trial Court of Quezon City
(Branch 92) for rescission of the Offsetting
Agreement with damages. In said complaint, Seneca
Hardware alleged that Vermen Realty Vermen Realty
Corporation had stopped issuing purchase orders of
construction materials after April, 1982, without valid
reason, thus resulting in the stoppage of deliveries of
construction materials on its (Seneca Hardware) part, in
violation of the Offsetting Agreement.
After conducting hearings, the trial court rendered
a decision dismissing the complaint and ordering the
plaintiff (Seneca Hardware in this petition) to pay
defendant (Vermen Realty in this petition) on its
counterclaim in the amount of P27,848.25 representing
the balance due on the purchase price of condominium
unit 601.

On appeal, respondent court reversed the trial
court's decision as adverted to above.

ISSUE:
Do the circumstances of the case warrant
rescission of the Offsetting Agreement as prayed for by
Seneca Hardware?

RULING:
Yes. The Court ruled in favor of Seneca Hardware.
There is no controversy that the provisions of the
Offsetting Agreement are reciprocal in nature. Reciprocal
obligations are those created or established at the same
time, out of the same cause, and which results in a mutual
relationship of creditor and debtor between parties. In
reciprocal obligations, the performance of one is
conditioned on the simultaneous fulfillment of the other
obligation Under the agreement, Seneca Hardware shall
deliver to Vermen Realty construction materials. Vermen
Realty's obligation under the agreement is three-fold: he
shall pay Seneca Hardware P276,000.00 in cash; he shall
deliver possession of units 601 and 602, Phase I, Vermen
Pines Condominiums (with total value of P276,000.00) to
Seneca Hardware; upon completion of Vermen Pines
Condominiums Phase II, Seneca Hardware shall be given
option to transfer to similar units therein.
Article 1191 of the Civil Code provides the remedy
of rescission in (more appropriately, the term is
"resolution") in case of reciprocal obligations, where one of
the obligors fails to comply with what is incumbent upon
him.

In the case at bar, Vermen Realty argues that it
was Seneca Hardware who failed to perform its obligation
in the Offsetting Agreement.
Seneca Hardware, on the other hand, points out
that the subject of the Offsetting Agreement is Phase II of
the Vermen Pines Condominiums. It alleges that since
construction of Phase II of the Vermen Pines
Condominiums has failed to begin it has reason to move
for rescission of the Offsetting Agreement, as it cannot
forever wait for the delivery of the condominium units to
it.

It is evident from the facts of the case that Seneca
Hardware did not fail to fulfill its obligation in the
Offsetting Agreement. The discontinuance of delivery of
construction materials to Vermen Realty stemmed from
the failure of Vermen Realty to send purchase orders to
Seneca Hardware.

The impossibility of fulfillment of the obligation on
the part of Vermen Realty necessitates resolution of the
contract for indeed, the non-fulfillment of the obligation
aforementioned constitutes substantial breach of the
Offsetting Agreement.

ABAYA VS. STANDARD VACUUM OIL CO.
The errors assigned boils down to the singles
question of whether or not the appellant is entitled to the
damages, compensatory as well as moral and exemplary,
supposedly sustained as a consequences of appealles’
refusal to appoint him operator of the station in
controversy. The trial court correctly termed the
stipulation of appointing the appellant as operator subject
to the condition of the “operator’s agreement” as a
reciprocal obligation.
In reciprocal obligations, the performance of one is
conditioned on the simultaneous fulfillment of the other.
When one party to the reciprocal obligation refuses to
assume and perform the obligation imposed on him,
the other party does not incur in delay, Article 119 of the Civil
Code provides that “the power to rescind obligation is
implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him”.
There is no reason here to sustain the contention that in
the circumstances fulfillment of the obligation was
impossible.

AGCAOILI VS. GSIS
No. L-30056, August 30, 1988
FACTS:
The appellant Government Service Insurance
System (GSIS) approved the application of the appellee
Marcelo Agcaoili for the purchase of the house and lot in
the GSIS Housing Project at Nangka, Marikina, Rizal, but
said application was subject to the condition that the latter
should forthwith occupy the house. Agcaoili lost no time in
occupying the house but he could not stay in it and had to
leave the very next day because the house was nothing
more than a shell, in such a state that civilized occupation
was not possible: ceiling, stairs, double walling, lighting
facilities, water connection, bathroom, toilet kitchen,
drainage, were inexistent. Agcaoili did however asked a
homeless friend, a certain Villanueva, to stay in the
premises as some sort of watchman, pending the
completion of the construction of the house. He thereafter
complained to the GSIS but to no avail.
Subsequently, the GSIS asked Agcaoili to pay the
monthly amortizations of P35.56 and other fees. He paid
the first monthly amortizations and incidental fees, but
refused to make further payments until and unless the
GSIS completed the housing unit. Thereafter, GSIS
cancelled the award and required Agcaoili to vacate the
premise. The house and lot was consequently awarded to
another applicant. Agcaoili reacted by instituting suit in
the Court of First Instance of Manila for specific
performance and damages. The judgment was rendered in
favor of Agcaoili. GSIS then appealed from that judgment.

ISSUE:
Was the cancellation by GSIS of the award in favor
of petitioner Agcaoili just and proper?

RULING:
No. It was the duty of the GSIS, as seller, to deliver
the thing sold in a condition suitable for its enjoyment by
the buyer for the purpose contemplated. There would be
no sense to require the awardee to immediately occupy and
live in a shell of a house, structure consisting only of four
walls with openings, and a roof. GSIS had an obligation to
deliver to Agcaoili a reasonably habitable dwelling in
return for his undertaking to pay the stipulated price.
Since GSIS did not fulfill that obligation, and was not
willing to put the house in habitable state, it cannot invoke
Agcaoili’s suspension of payment of amortizations as cause
to cancel the contract between them. It is axiomatic that
“In reciprocal obligations, neither party incurs in delay if
the other does not comply


ARRIETA VS. NATIONAL RICE AND CORN
CORPORATION
GR L-15645 January 31, 1964
FACTS:
On May 19, 1952, plaintiff-appellee Mrs. Paz
Arrieta participated in a public bidding called by NARIC
for the supply of 20,000 metric tons of Burmese rice. As
her bid of $203, 000 per metric ton was the lowest, she
was awarded he contract for the same. On July 1, 1952,
Arrieta and NARIC entered into Contract of Sale of Rice
under the term of which the former obligated herself to
deliver to the latter 20, 000 metric tons of Burmese rice at
$203, 000 per metric ton. In turn, NARIC committed itself
to pay for the imported rice “by means of an irrevocable,
confirmed and assignable letter of credit in US currency in
favor of Arrieta and/or supplier in Burma, immediately.”
However, it was only on July 30, 1952 that NARIC
took the first step to open a letter of credit by forwarding to
the PNB its application for Commercial Letter of Credit.
On the same day, Arrieta, thru counsel, advised NARIC of
the extreme necessity for the opening of the letter of credit
since she had by then made a tender to her supplier in
Rangoon, Burma equivalent to 5% of the F.O.B. price of
20, 000 tons at $180.70 and in compliance with the
regulations in Rangoon, this 5% will be confiscated if the
required letter of credit is not received by them before
August 4, 1952.
On August 4, PNB informed NARIC that its
application for a letter of credit has been approved by the
Board of Directors with the condition that 50% marginal
cash deposit be paid and that drafts a5e to be paid upon
presentment. It turned out that NARIC was not in financial
position to meet the condition. As a result of the delay, the
allocation of Arrieta’s supplier in Rangoon was cancelled
and the 5% deposit amounting to 524 kyats or
approximately P200, 000 was forfeited.

ISSUE:
Was NARIC liable for damages?

RULING:
Yes. One who assumes a contractual obligation
and fails to perform the same on account of his inability to
meet certain bank which inability he knew and was aware
of when he entered into contract, should be held liable in
damages for breach of contract.

Under Article 1170 of the Civil Code, not only
debtors guilty of fraud, negligence or default but also
debtor of every, in general, who fails in the performance of
his obligations is bound to indemnify for the losses and
damages caused thereby.

CLAUDINA VDA. DE VILLARUEL, ET AL. VS.
MANILA MOTOR CO., INC.
104 PHIL. 926
FACTS:
On May 31, 1940, the plaintiffs Villaruel and
defendant Manila Motor Co. Inc. entered into a contract
whereby the defendant agreed to lease plaintiffs building
premises.
On October 31, 1940, the leased premises were placed in
the possession of the defendant until the invasion of 1941.
The Japanese military occupied and used the property
leased as part of their quarters from June, 1942 to March,
1945, in which no payment of rentals were made. Upon the
liberation of the said city, the American forces occupied
the same buildings that were vacated by the Japanese.
When the United States gave up the occupancy of the
premises, defendant decided to exercise their option to
renew the contract, in which they agreed. However, before
resuming the collection of rentals, Dr. Alfredo Villaruel
upon advice demanded payment of rentals corresponding
to the time the Japanese military occupied the leased
premises, but the defendant refused to pay. As a result
plaintiff gave notice seeking the rescission of the contract
and the payment of rentals from June, 1942 to March,
1945; this was rejected by the defendant. Despite the fact
the defendant under new branch manager paid to plaintiff
the sum of P350 for the rent, the plaintiff still demanded
for rents in arrears and for the rescission of the contract of
lease. The plaintiff commenced an action before the CFC of
Neg. Occidental against defendant company. During the
pendency of the case, the leased building was burned
down. Because of the occurrence, plaintiffs demanded
reimbursement from the defendants, but having been
refused, they filed a supplemental complaint to include a
3rd cause of action, the recovery of the value of the burned
building. The trial court rendered judgment in favor of the
plaintiff. Hence the defendants appeal.

ISSUE:
Is Manila Motor Co. Inc. liable for the loss of the
leased premises?

RULING:
No. Clearly, the lessor's insistence upon collecting
the occupation rentals for 1942-1945 was unwarranted in
law. Hence, their refusal to accept the current rentals
without qualification placed them in default (mora
creditoris or accipiendi) with the result that thereafter,
they had to bear all supervening risks of accidental injury
or destruction of the leased premises. While not expressly
declared by the Code of 1889, this result is clearly inferable
from the nature and effects of mora.
In other words, the only effect of the failure to
consign the rentals in court was that the obligation to pay
them subsisted and the lessee remained liable for the
amount of the unpaid contract rent, corresponding to the
period from July to November, 1946; it being undisputed
that, from December 1946 up to March 2, 1948, when the
commercial buildings were burned, the defendantsappellants
have paid the contract rentals at the rate of
P350 per month. But the failure to consign did not
eradicate the default (mora) of the lessors nor the risk of
loss that lay upon them.

MARANAN VS PEREZ
20 SCRA 412

FACTS:
Rogelio Corachea, a passenger in a taxicab owned
and operated by Pascual Perez, was stabbed and killed by
the driver, Simeon Valenzuela. Valenzuela was found
guilty for homicide by the Court of First Instance and was
sentenced to suffer Imprisonment and to indemnify the
heirs of the deceased in the sum of P6000. While pending
appeal, mother of deceased filed an action in the Court of
First Instance of Batangas to recover damages from Perez
and Valenzuela. Defendant Perez claimed that the death
was a caso fortuito for which the carrier was not liable. The
court a quo, after trial, found for the plaintiff and awarded
her P3,000 as damages against defendant Perez. The claim
against defendant Valenzuela was dismissed. From this
ruling, both plaintiff and defendant Perez appealed to this
Court, the former asking for more damages and the latter
insisting on non-liability.

Defendant-appellant relied solely on the ruling
enunciated in Gillaco vs. Manila Railroad Co. that the
carrier is under no absolute liability for assaults of its
employees upon the passengers.

ISSUE:
Was the contention of the defendant valid?

RULING:
No. The attendant facts and controlling law of that
case and the one at bar were very different. In the Gillaco
case, the passenger was killed outside the scope and the
course of duty of the guilty employee. The Gillaco case was
decided under the provisions of the Civil Code of 1889
which, unlike the present Civil Code, did not impose upon
common carriers absolute liability for the safety of
passengers against willful assaults or negligent acts
committed by their employees. The death of the passenger
in the Gillaco case was truly a fortuitous event which
exempted the carrier from liability. It is true that Art. 1105
of the old Civil Code on fortuitous events has been
substantially reproduced in Art. 1174 of the Civil Code of
the Philippines but both articles clearly remove from their
exempting effect the case where the law expressly provides
for liability in spite of the occurrence of force majeure. The
Civil Code provisions on the subject of Common Carriers
are new and were taken from Anglo-American Law. The
basis of the carrier's liability for assaults on passengers
committed by its drivers rested either on the doctrine of
respondent superior or the principle that it was the
carrier's implied duty to transport the passenger safely.
Under the second view, upheld by the majority and also by
the later cases, it was enough that the assault happens
within the course of the employee's duty. It was no defense
for the carrier that the act was done in excess of authority
or in disobedience of the carrier's orders. The carrier's
liability here was absolute in the sense that it practically
secured the passengers from assaults committed by its own
employees.

LAWYERS COOPERATIVE PUBLISHING
COMPANY VS. PERFECTO
13 SCRA 762

FACTS:
On May 3, 1955, Perfecto Tabora bought from
Lawyers Cooperative Publishing Company one complete
set of American jurisprudence, in an installment basis
amounting to Php 1,682.40, including freight charges. He
made a partial payment of Php 300.00. The books were
then delivered on May 15, 1955. However, on that same
day, a big fire broke out, which destroyed the buildings,
including the law office and library of Tabora. When
Tabora reported the incident to the company, they replied
in good will and sent him free books.

Subsequently, Tabora failed to pay the
installments agreed upon, even when demanded by them.
So the company filed a case to recover the balance plus 25
percent of the amount due as damages. Tabora used force
majeure as a defense. He contended that since the loss was
due to fortuitous event he cannot be held liable for the loss.
The court ruled in favor of the company. So Tabora took
the case to the Court of Appeals, which later modified the
decision, eliminating the portion that referred to
liquidated damages.

ISSUE:
Should Tabora be exempted from liability because
of fortuitous event?

RULING:
No. Though it was agreed that the title of the
ownership of the books should remain with the seller until
the purchase price shall have been fully paid, it was also
expressly agreed upon that the loss or damage after
delivery shall be borne by the buyer. In pursuance of the
contract, the ownership of the goods has been retained by the seller merely to secure performance by the buyer of his
obligation. Moreover, the goods were at the buyer’s risk
from the time of the delivery.


PEDRO D. DIOQUINO VS. LAUREANO
G.R. No. L-25906 May 28, 1970
FACTS:
Attorney Pedro Dioquino is the owner of a car. He
went to the office of the MVO, Masbate, to register the
same where he met the defendant Federico Laureano, a
patrol officer of said MVO office. Dioquino requested
Laureano to introduce him to one of the clerks in the MVO
Office, who could facilitate the registration of his car and
the request was attended to. Laureano rode on the car of
Atty. Dioquino on his way to the P.C. Barracks at Masbate.
While about to reach their destination, the car driven by
plaintiff's driver and with Laureano as the sole passenger
was stoned by some 'mischievous boys,' and its windshield
was broken. Laureano chased the boys and he was able to
catch one of them. The plaintiff and Laureano with the boy
returned to the P.C. barracks and the father of the boy was
called, but no satisfactory arrangements were made about
the damage to the windshield.
It was likewise noted in the decision now on
appeal: "The defendant Federico Laureano refused to file
any charges against the boy and his parents because he
thought that the stone-throwing was merely accidental and
that it was due to force majeure. So he did not want to take any action and after delaying the settlement, after perhaps
consulting a lawyer, the defendant Federico Laureano
refused to pay the windshield himself and challenged that
the case be brought to court for judicial adjudication.
There is no question that the plaintiff tried to convince the
defendant Federico Laureano just to pay the value of the
windshield and he even came to the extent of asking the
wife to convince her husband to settle the matter amicably
but the defendant Federico Laureano refused to make any
settlement, clinging [to] the belief that he could not be held
liable because a minor child threw a stone accidentally on
the windshield and therefore, the same was due to force
majeure."

ISSUE:
Is Federico Laureano liable for the payment of the
windshield of Atty Dioquino?

RULING:
No. The law being what it is, such a belief on the
part of defendant Federico Laureano was justified. The
express language of Art. 1174 of the present Civil Code
which is a restatement of Art. 1105 of the Old Civil Code,
except for the addition of the nature of an obligation
requiring the assumption of risk, compels such a
conclusion. It reads thus: "Except in cases expressly
specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires
the assumption of risk, no person shall be responsible for
those events which could not be, foreseen, or which,
though foreseen were inevitable." Even under the old Civil
Code then, as stressed by us in the first decision dating
back to 1908, in an opinion by Justice Mapa, the rule was
well-settled that in the absence of a legal provision or an
express covenant, "no one should be held to account
for fortuitous cases." Its basis, as Justice Moreland
stressed, is the Roman law principle major casus est,
cui humana infirmitas resistere non potest.
Authorities of repute are in agreement, more specifically
concerning an obligation arising from contract "that some
extraordinary circumstance independent of the will of the
obligor, or of his employees, is an essential element of a
caso fortuito." If it could be shown that such indeed was
the case, liability is ruled out. There is no requirement of
"diligence beyond what human care and foresight can
provide."
The error committed by the lower court in holding
defendant Federico Laureano liable appears to be thus
obvious. Its own findings of fact repel the motion that he
should be made to respond in damages to the plaintiff for
the broken windshield. What happened was clearly
unforeseen. It was a fortuitous event resulting in a loss
which must be borne by the owner of the car. It was
misled, apparently, by the inclusion of the exemption from
the operation of such a provision of a party assuming the
risk, considering the nature of the obligation undertaken.
A more careful analysis would have led the lower court to a
different and correct interpretation. The very wording of
the law dispels any doubt that what is therein
contemplated is the resulting liability even if caused by a
fortuitous event where the party charged may be
considered as having assumed the risk incident in the
nature of the obligation to be performed. It would be an
affront, not only to the logic but to the realities of the
situation, if in the light of what transpired, as found by the
lower court, defendant Federico Laureano could be held as
bound to assume a risk of this nature. There was no such
obligation on his part.
The decision of the lower court of November 2, 1965
insofar as it orders defendant Federico Laureano to pay
plaintiff the amount of P30,000.00 as damages plus the
payment of costs, is hereby reversed. It is affirmed insofar
as it dismissed the case against the other two defendants, Juanita Laureano and Aida de Laureano, and declared that
no moral damages should be awarded the parties.

AUSTRIA VS. COURT OF APPEALS
39 SCRA 527
FACTS:
Maria G. Abad received from Guillermo Austria a
pendant with diamonds to be sold on a commission basis
or to be returned on demand. While walking home, the
purse containing the jewelry and cash was snatched by two
men. A complaint of the incident was filed in the Court of
First Instance against certain persons.
Abad failed to return the jewelry or pay for its
value despite demands made by Austria. Austria brought
an action against the Abad spouses for the recovery of the
pendant or of its value and damages. Abad spouses set up
the defense that the alleged robbery had extinguished their
obligation.

ISSUE:
Should the Abad spouse be held liable for the loss
of the pendant?

RULING:
No. The Court ruled that the exempting provision
of Article 1174 of the Civil Code is applicable in the case. It
is a recognized jurisdiction that to constitute a caso
fortuito that would exempt a person from responsibility, it
is necessary that the event must be independent of the
human will or of the obligor’s will; the occurrence must
render it impossible for the debtor to fulfill the obligation
in a normal manner; and that the obligor must be free of
participation in, or aggravation of, the injury to the
creditor. To avail of the exemption granted, it is not
necessary that the persons responsible for the event should
be found or punished. It is sufficient that to unforeseeable
event which is the robbery took place without concurrent
fault or negligence on the part of the obligor which can be
proven by preponderant evidence. It was held that the act
of Maria Abad in walking home alone carrying the jewelry
was not negligent for at that time the incidence of crimes
was not high.

REPUBLIC VS. LUZON STEVEDORING
CORPORATION
21 SCRA 279
FACTS:
In the early afternoon of August 17, 1960, barge L-
1892, owned by the Luzon Stevedoring Corporation was
being towed down the Pasig River by two tugboats when
the barge rammed against one of the wooden piles of the
Nagtahan bailey bridge, smashing the posts and causing
the bridge to list. The river, at the time, was swollen and
the current swift, on account of the heavy downpour in
Manila and the surrounding provinces on August 15 and
16, 1960.

The Republic of the Philippines sued Luzon
Stevedoring for actual and consequential damage caused
by its employees, amounting to P200,000. Defendant
Corporation disclaimed liability on the grounds that it had
exercised due diligence in the selection and supervision of
its employees that the damages to the bridge were caused
by force majeure, that plaintiff has no capacity to sue, and
that the Nagtahan bailey bridge is an obstruction to
navigation.

After due trial, the court rendered judgment on
June 11, 1963, holding the defendant liable for the damage
caused by its employees and ordering it to pay plaintiff the
actual cost of the repair of the Nagtahan bailey bridge
which amounted to P192,561.72, with legal interest from
the date of the filing of the complaint.

ISSUE:
Was the collision of appellant's barge with the
supports or piers of the Nagtahan bridge caused by
fortuitous event or force majeure?

RULING:
Yes. Considering that the Nagtahan bridge was an
immovable and stationary object and uncontrovertedly
provided with adequate openings for the passage of water
craft, including barges like of appellant's, it was undeniable
that the unusual event that the barge, exclusively
controlled by appellant, rammed the bridge supports raises
a presumption of negligence on the part of appellant or its
employees manning the barge or the tugs that towed it. For
in the ordinary course of events, such a thing will not
happen if proper care is used. In Anglo American
Jurisprudence, the inference arises by what is known as
the "res ipsa loquitur" rule
The appellant strongly stressed the precautions
taken by it on the day in question: that it assigned two of
its most powerful tugboats to tow down river its barge L-
1892; that it assigned to the task the more competent and
experienced among its patrons, had the towlines, engines
and equipment double-checked and inspected' that it instructed its patrons to take extra precautions; and
concludes that it had done all it was called to do, and that
the accident, therefore, should be held due to force
majeure or fortuitous event.

These very precautions, however, completely
destroyed the appellant's defense. For caso fortuito or
force majeure (which in law are identical in so far as they
exempt an obligor from liability) by definition, are
extraordinary events not foreseeable or avoidable, "events
that could not be foreseen, or which, though foreseen, were
inevitable" (Art. 1174, Civ. Code of the Philippines). It was,
therefore, not enough that the event should not have been
foreseen or anticipated, as was commonly believed but it
must be one impossible to foresee or to avoid. The mere
difficulty to foresee the happening was not impossibility to
foresee the same. The very measures adopted by appellant
prove that the possibility of danger was not only
foreseeable, but actually foreseen, and was not caso
fortuito.


LASAM VS. SMITH
45 PHIL 657
FACTS:
The defendant was the owner of a public garage in the
town of San Fernando, La Union, and engaged in the
business of carrying passengers for hire from one point to
another in the Province of La Union and the surrounding
provinces. Defendant undertook to convey the plaintiffs
from San Fernando to Currimao, Ilocos Norte, in a Ford
automobile. On leaving San Fernando, the automobile was
operated by a licensed chauffeur, but after having reached
the town of San Juan, the chauffeur allowed his assistant,
Bueno, to drive the car. Bueno held no driver’s license, but
had some experience in driving. The car functioned well
until after the crossing of the Abra River in Tagudin, when,
according to the testimony of the witnesses for the
plaintiffs, defects developed in the steering gear so as to
make accurate steering impossible, and after zigzagging for
a distance of about half kilometer, the car left the road and
went down a steep embankment. The automobile was
overturned and the plaintiffs pinned down under it. Mr.
Lasam escaped with a few contusions and a dislocated rib,
but his wife, Joaquina, received serious injuries, among
which was a compound fracture of one of the bones in her
left wrist. She also suffered nervous breakdown from
which she has not fully recovered at the time of trial.
The complaint was filed about a year and a half after
and alleges that the accident was due to defects in the
automobile as well as to the incompetence and negligence
of the chauffeur.
The trial court held, however, that the cause of action rests
on the defendant’s breach of the contract of carriage and
that, consequently, articles 1101-1107 of the Civil Code, and
not article 1903, are applicable. The court further found
that the breach of contact was not due to fortuitous events
and that, therefore the defendant was liable in damages.

ISSUE:
Is the trial court correct in its findings that the breach
of contract was not due to a fortuitous event?

RULING:
Yes. It is sufficient to reiterate that the source of the
defendant’s legal liability is the contract of carriage; that by
entering into that contract he bound himself to carry the
plaintiffs safely and securely to their destination; and that
having failed to do so he is liable in damages unless he
shows that the failure to fulfill his obligation was due to
causes mentioned in article 1105 of the Civil Code, which
reads:
“No one shall be liable for events which could not be
foreseen or which, even if foreseen, were inevitable, with
the exception of the cases in which the law expressly
provides otherwise and those in which the obligation itself
imposes such liability.”

As will be seen, some extraordinary circumstances
independent of the will of the obligor, or of his employees,
is an essential element of a caso fortuito. In the present
case, this element is lacking. It is not suggested that the
accident in question was due to an act of God or to adverse
road conditions which could have been foreseen. As far as
the record shows, the accident was caused either by defects
in the automobile or else through the negligence of its
driver. That is not a caso fortuito.

VICTORIAS PLANTERS ASS., INC., ET AL. VS.
VICTORIAS MILLING CO., INC.
G.R. No. L-6648 July 25, 1955
FACTS:
The petitioners Victorias Planters Association, Inc.
and North Negros Planters Association, Inc. and thr
respondent Victorias Milling Co., Inc entered into a milling
contract whereby they stipulated a 30-year period within
which the sugar cane produced by the petitioner would be
milled by the respondent central. The parties also
stipulated that in the event of force majuere, the contract
shall be deemed suspended during this period. The
petitioner failed to deliver the sugar cane during the four
years of the Japanese occupation and the two years after
liberation when the mill was being rebuilt or a total of six
years.
ISSUE:
Can the petitioners be compelled to deliver sugar
cane for six more years after the expiration of the 30-year
period to make up for what they failed to deliver to the
respondent?

RULING: No. Fortuitous event relieves the obligor from
fulfilling the contractual obligation under Article 1174 of
the Civil Code. The stipulation in the contract that in the
event of force majeure the contract shall be deemed
suspended during the said period does not mean that the
happening of any of those events stops the running of the
period agreed upon. It only relieves the parties from the
fulfillment of their respective obligations during that timethe
petitioner from delivering the sugar cane and the
respondent central from milling. In order that the
respondent central may be entitled to demand from the
petitioner the fulfillment of their part in the contracts, the
latter must have been able to perform it but failed or
refused to do so and not when they were prevented by
force majeure such as war. To require the petitioners to
deliver the sugar cane which they failed to deliver during
the six years is to demand from them the fulfillment of an
obligation, which was impossible of performance during
the time it became due. Nemo tenetur ed impossibilia. The
respondent central not being entitled to demand from the
petitioners the performance of the latter’s part of the
contracts under those circumstances cannot later on
demand its fulfillment. The performance of what the law
has written off cannot be demanded and required. The
prayer that the petitioners be compelled to deliver sugar
cannot for six years more to make up for what they failed
to deliver, the fulfillment of which was impossible, of
granted, would in effect be an extension of the terms of the
contracts entered into by and between the parties.




ANGEL WAREHOUSING VS. CHELDA
G.R. No. L-25704 April 24, 1968
FACTS:
Plaintiff corporation filed suit in the Court of First
Instance of Manila on May 29, 1964 against the
partnership Chelda Enterprises and David Syjueco, its
capitalist partner, for recovery of alleged unpaid loans in
the total amount of P20,880.00, with legal interest from
the filing of the complaint, plus attorney's fees of
P5,000.00. Alleging that post dated checks issued by
defendants to pay said account were dishonored, that
defendants' industrial partner, Chellaram I. Mohinani, had
left the country, and that defendants have removed or
disposed of their property, or are about to do so, with
intent to defraud their creditors, preliminary attachment
was also sought.
Answering, defendants averred that they obtained
four loans from plaintiff in the total amount of
P26,500.00, of which P5,620.00 had been paid, leaving a
balance of P20,880.00; that plaintiff charged and
deducted from the loan usurious interests thereon, at rates
of 2% and 2.5% per month, and, consequently, plaintiff has
no cause of action against defendants and should not be
permitted to recover under the law. A counterclaim for
P2,000.00 attorney's fees was interposed.
Plaintiff filed on June 25, 1964 an answer to the
counterclaim, specifically denying under oath the
allegations of usury.

ISSUE:
In a loan with usurious interest, may the creditor
recover the principal of the loan?

RULING:
Great reliance is made by appellants on Art. 1411 of
the New Civil Code which states:
Art. 1411. When the nullity proceeds from the illegality of
the cause or object of the contract, and the act constitutes
criminal offense, both parties being in pari delicto, they
shall have no action against each other, and both shall be
prosecuted. Moreover, the provisions of the Penal Code
relative to the disposal of effects or instruments of a crime
shall be applicable to the things or the price of the
contract.

This rule shall be applicable when only one of the
parties is guilty; but the innocent one may claim what he
has given, and shall not be bound to comply with his
promise.

The Supreme Court do not agree with such
reasoning. Article 1411 of the New Civil Code is not new; it
is the same as Article 1305 of the Old Civil Code. Therefore,
said provision is no warrant for departing from previous
interpretation that, as provided in the Usury Law (Act No.
2655, as amended), a loan with usurious interest is not
totally void only as to the interest.

True, as stated in Article 1411 of the New Civil
Code, the rule of pari delicto applies where a contract's nullity proceeds from illegality of the cause or object of
said contract.

However, appellants fail to consider that a contract
of loan with usurious interest consists of principal and
accessory stipulations; the principal one is to pay the debt;
the accessory stipulation is to pay interest thereon. And
said two stipulations are divisible in the sense that the
former can still stand without the latter. Article 1273, Civil
Code, attests to this: "The renunciation of the principal
debt shall extinguish the accessory obligations; but the
waiver of the latter shall leave the former in force."



BRIONES VS CAMMAYO
GR 23559 October 4, 1971
FACTS:

Aurelio G. Briones filed an action in the Municipal
Court of Manila against Primitivo, Nicasio, Pedro, Hilario
and Artemio, all surnamed Cammayo, to recover from
them, jointly and severally, the amount of P1,500.00, plus
damages, attorney's fees and costs of suit.
Defendants executed the real estate mortgage as
security for the loan of P1,200.00 given to Primitivo P.
Cammayo upon the usurious agreement that defendant
pays to the plaintiff, out of the alleged loan of P1,500.00
(which includes as interest the sum of P300.00) for one
year.
Although the mortgage contract was executed for
securing the payment of P1,500.00 for a period of one
year, without interest, the truth and the real fact is that
plaintiff delivered to the defendant Primitivo P. Cammayo
only the sum of P1,200.00 and withheld the sum of
P300.00 which was intended as advance interest for one
year.

On account of said loan of P1,200.00, defendant
Primitivo P. Cammayo paid to the plaintiff during the
period from October 1955 to July 1956 the total sum of
P330.00 which plaintiff, illegally and unlawfully refused to
acknowledge as part payment of the account but as in
interest of the said loan for an extension of another term of
one year.

ISSUE:
Can Briones recover the amount of P1,500.00?

RULING:
Loan is valid but usurious interest is void. Creditor
has the right to recover his capital by judicial action. To
discourage stipulations on usurious interest, said
stipulations are treated as wholly void, so that the loan
becomes one without stipulation as to payment of interest.
It should not, however, be interpreted to mean forfeiture
even of the principal, for this would unjustly enrich the
borrower at the expense of the lender. Furthermore, penal
sanctions are available against a usurious lender, as a
further deterrence to usury.
In simple loan with stipulation of usurious
interest, the prestation of the debtor to pay the principal
debt, which is the cause of the contract (Article 1350, Civil
Code), is not illegal. The illegality lies only as to the
prestation to pay the stipulated interest; hence, being
separable, the latter only should be deemed void, since it is
the only one that is illegal.

Barrredo, J., concurring
The Usury law is clear that he may recover only all
interests, including of course, the legal part thereof, with
legal interests from the date of judicial demand, without
maintaining that he can also recover the principal he has
already paid to the lender.

Castro Fernando, and Conception, JJ., dissenting
In a contract which is tainted with usury, that is,
with a stipulation (whether written or unwritten) to pay
usurious interest, the prestation to pay such interest is an
integral part of the cause of the contract. It is also the
controlling cause, for a usurer lends his money not just to
have it returned but indeed, to acquire in coordinate gain.
Article l957, which declares the contract itself – not
merely the stipulation to pay usurious interest -- void,
necessarily regards the prestation to pay usurious interest
as an integral part of the cause, making it illegal.

MANILA TRADING SUPPLY CO. VS. MEDINA
2 SCRA 549 (1961)

FACTS:
Mariano Medina had an account prior to May 7,
1956 with Manila Trading and Supply Co. with an amount
of P60,000 for which Medina executed a promissory note.
The note provided that upon failure to pay the
installments, the remaining amount will immediately
become due and payable at the option of the holder of the
note with 33.33% amount due for attorney’s fees and
expenses of collection.

On January 8, 1957, Manila Trading & Co. filed a
complaint against Medina for failure to pay installments
from September 1956 to January 7, 1957. Medina filed an
answer admitting allegations but said the 33.33% for
attorneys fees were exorbitant and unconscionable. He
pleaded that on January 24, 1957, an additional P4,000
was paid so that he will not be sued and allowed to pay the
balance. Upon petition of plaintiff, a writ of attachment
was issued and levied upon eleven of defendant's buses.
His counterclaim was damages for the loss of his earnings.
Plaintiff denied the defense and counterclaim.
Plaintiff provided evidence of 21 payments made
by defendant from June 6, 1956 to Jan. 21, 1957. The
defendant testified that he has 10 other payments with
receipts but the dates and serial numbers are unclear for it
was eaten by ‘anay’. Defendant claims that his payment on
Jan. 1957 gives rise to the presumption that prior
installments have been paid.

ISSUE:
Are the presented receipts genuine to raise the
presumption that prior installments were paid?

RULING:
No. Appellant avers that the genuine receipts
dated January, 1957 raise the presumption that prior
installments were paid. This might be true if such receipts
recited that they were issued for the installments
corresponding to the month of January, 1957; but nowhere
does that fact appear. And even if such recital had been
made, the resulting presumption would only be prima
facie, and the evidence before us is clear that the payments
made do not correspond to the installments falling due on
the dates of the genuine receipts.
As pointed out by the trial court, it is highly
suspicious that these receipts should be mutilated precisely
at the places where the serial numbers and the year of
issue must appear, while the receipts for intervening
payments recognized by the plaintiff remained intact. In
addition, the numbers that Medina attributed to them are
not in sequence. It is difficult to believe that a trading
company should issue receipts numbered at random, since
it would make auditing control impossible.


GALAR VS. SASI
47 O.G. 6241

FACTS:
Luis Galar borrowed Php 15,000 from Juan Isasi
for which the former drew two promissory notes. As a
payment, Galar paid to PNB on behalf of Aberri Inc., which
was controlled by Isasi and his wife, the outstanding
balance of Php 15,848.90. In turn, PNB cancelled the
indebtedness of Aberri Inc., released the mortgage that
had been constituted, and delivered the title to Galar.
Upon notifying Isasi of the payment made, Isasi refused to
recognize the payment of Galar to PNB. Hence the attorney
of Galar advised Isasi that they would consign in the court
the sum of Php 20,000, representing the face value of the
promissory notes. They then filed a case in the court to
declare the promissory notes paid and discharged.
Isasi, on the other hand, tendered the sum of Php
15,848.90 paid by Galar to the PNB for the account and in
the name of Aberri Inc. Upon refusal by Galar, Isasi, on
behalf of the company, consigned the amount in the CFI of
Manila and filed a complaint, praying that Galar be
ordered to restore to Aberri Inc. all documents relative to
the obligation formerly due to the PNB and to reimburse
the amount paid by Galar to the bank be considered
cancelled in view of the consignation.

ISSUE:
1. Can Luis Galar legally pay the debt without
awaiting the demand on the part of Isasi?
2. Should Galar’s payment of the debt of Aberri
Inc. to the bank be set off against the notes?

RULING:
1. Yes. A demand note was subject neither to
suspensive condition nor a suspensive period. The demand
was not a condition precedent since the effectivity and
binding effect of the note does not depend upon the
making of the demand. The note was binding even before
the demand is made. Neither did the note constitute an
implied suspensive period since there was nothing to
prevent the creditor for making demand at any time. It
follows, therefore, that the demand note was strictly a pure
obligation as defined in Article 1179. The periods of 15 and
30 days after demand stipulated in the promissory notes
could have no other purpose but to protect the debtor by
giving him sufficient time to raise money to meet the
demand. The period being solely for the debtor’s
protection and benefit, the debtor could renounce it validly
at any time. Galar was lawfully entitled to make payment
even if no demand had yet been made by Isasi.
2. Yes. The payment of Galar of the indebtedness
of Aberri Inc to the PNB redounded to the benefit of Isasi
who had absolute control of said corporation. Thus, said
payment was valid and discharged the obligation, even if
such payment was not authorized by Isasi or Aberri Inc.,
for which Galar had the right to demand reimbursement
for the amount paid. However, such reimbursement was
unnecessary. Such reimbursement was extinguished by its
total absorption in the larger amount due from Galar to
Isasi. The consignation, therefore, of Isasi was invalid since
it no longer had any obligation towards Galar. On the
other hand, the balance of Php 4,151.10 due and owing
from Galar to Isasi was extinguished upon the
consignation of Galar in the court the sum of Php 20,000.