ARTICLES 1156-1177-page1

Ang Yu Asuncion vs CA

G.R. No. 109125, December 2, 1994

FACTS:

Petitioners allege that they are tenants or lessees of residential and commercial spaces owned by defendants in Ongpin Street, Binondo, Manila since 1935 and that on several occasions before October 9, 1986, defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same. During the negotiations, Bobby Cu Unjieng offered a price of P6-million while petitioners made a counter offer of P5-million. On October 24, 1986, petitioners asked the respondents to specify the terms and conditions of the offer to sell. Petitioners now raise that since respondents failed to specify the terms and conditions of the offer to sell and because of information received that the latter were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them.

The trial court found that the respondents’ offer to sell was never accepted by the petitioners for the reason that they did not agree upon the terms and conditions of the proposed sale, hence, there was no contract of sale at all. The Court of Appeals affirmed the decision of the lower court. This decision was brought to the Supreme Court by petition for review on certiorari which subsequently denied the appeal on May 6, 1991 “for insufficiency in form and substance”.

On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this Court, the Cu Unjieng spouses executed a Deed of Sale transferring the property in question to herein respondent Buen Realty and Development Corporation, for P15,000,000.00. On July 1, 1991, respondent as the new owner of the subject property wrote a letter to the petitioners demanding that the latter vacate the premises. On July 16, 1991, the petitioners wrote a reply to respondent corporation stating that the latter brought the property subject to the notice of lis pendens regarding Civil Case No. 87-41058 annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs.

The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case No. 87-41058 as modified by the Court of Appeals in CA-G.R. CV No. 21123.

On August 30, 1991, the RTC ordered the Cu Unjiengs to execute the necessary Deed of Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of petitioners’ right of first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer. The court also set aside the title issued to Buen Realty Corporation for having been executed in bad faith. On September 22, 1991, the Judge issued a writ of execution.

On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and declared without force and effect the above questioned orders of the court a quo.

ISSUE:

Whether or not Buen Realty can be bound by the writ of execution by virtue of the notice of lis pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter’s purchase of the property on 15 November 1991 from the Cu Unjiengs.

HELD:

We affirm the decision of the appellate court.

In the law on sales, the so-called “right of first refusal” is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code.

In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor’s eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.

The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a “right of first refusal” in favor of petitioners. The consequence of such a declaration entails no more than what has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose.

Furthermore, Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its day in court.

PLDT v. Paguio

Facts:

1. Telecoms company PLDT (Petitioner) has 27 exchanges and respondent Paguio was the head of the Garnet Exchange. The petitioner conducted a performance evaluation which was criticized by the respondent due to an alleged unfair criteria used. Despite this, Garnet exchange obtained the top rating. Subsequently, Paguio was transferred to another center based on a finding of insubordination. Aggrieved, respondent filed a complaint for illegal dismissal which was later amended to one for illegal demotion.

Labor Arbiter: Dismissed the complaint and upheld the validity of the transfer

NLRC: Reversed the LA decision and held that the transfer is unlawful

CA: Affirmed.

2. Hence this petition. Petitioner contended that the transfer was not a demotion.

Issue: W/N there was a valid transfer

RULING: No, the transfer constitutes a demotion. The exercise of management prerogative has its limits. It cannot be utilized to circumvent the laws and public policy on labor and social justice. It must be exercised with fair play and justice. The employer must show that the transfer is not unreasonable, inconvenient or prejudicial to the employee. Not does it involve a demotion in the rank or diminution of salaries or other benefits.

SOLEDAD CARPIO V. LEONORA VALMONTE

GR No. 151866

September 9, 2004

FACTS:

Respondent Leonora Valmonte is a wedding coordinator. Michelle del Rosarioand Jon Sierra engaged her services for their church weddinng on October 10, 1996. Atabout 430 pm on that day, Valmonte went to the Manila Hotel and when she arrived atSuite 326-A, several persons were already there including Soledad Carpio, the aunt of the bride.

After reporting to the bride, Valmonte went out of the suite to go to the receptionhall to give the meal allowance to the band and to pay the suppliers. Upon entering thesuite, Valmonte noticed the people staring at her and it was at this juncture that SoledadCarpio allegedly uttered the following words to Valmonte: " Ikaw lang ang lumabas ngkwarto, nasaan ang dala mong bag? Saan ka pumunta? Ikaw lang ang lumabas ng kwarto,ikaw ang kumuha." It turned out that after Valmonte left the room to attend to her duties, petitioner discovered that the pieces of jewelry which she placed inside the comfort roomin a paper bag were lost and these include diamond rings, earrings, bracelet and diamongnecklace with a total value of about 1M pesos. Valmonte was allegedly bodily searched,interrogated and trailed by the police officers, but the petitioner kept on saying the words" Siya lang ang lumabas ng kwarto ". Valmonte's car was also searched but the searchyielded nothing.

Few days after the incident, petitioner received a letter from Valmonte demandinga formal letter of apology which she wanted to be circulated to the newlyweds' relativesand guests to redeem her smeared reputation but the petitioner did not respond. Valmontefiled a suit for damages.

The trial court dismissed the complaint and ruled that when sought investigationfor the loss of her jewelry, she was merely exercising her right and if damage results froma person exercising his legal right, it is damnum absque injuria. It added that no proof was presented by Valmonte to show that petitioner acted maliciously and in bad faith in pointing to her as the culprit.

The CA ruled out differently and opined that Valmonte has clearly establishedthat she was singled out by the petitioner as the one responsible for the loss of her jewelry. However, the court find no sufficient evidence to justify the award of actualdamages.Hence, this petition.

Regino v Pangasinan College of Science and Technology

FACTS:

Petitioner Khristine Rea M. Regino was a first year computer science student at Respondent Pangasinan Colleges of Science and Technology (PCST). Reared in a poor family, Regino went to college mainly through the financial support of her relatives. During the second semester of school year 2001-2002, she enrolled in logic and statistics subjects under Respondents Rachelle A. Gamurot and Elissa Baladad, respectively, as teachers.

In February 2002, PCST held a fund raising campaign dubbed the “Rave Party and Dance Revolution,” the proceeds of which were to go to the construction of the school’s tennis and volleyball courts. Each student was required to pay for two tickets at the price of P100 each. The project was allegedly implemented by recompensing students who purchased tickets with additional points in their test scores; those who refused to pay were denied the opportunity to take the final examinations.

Financially strapped and prohibited by her religion from attending dance parties and celebrations, Regino refused to pay for the tickets. On March 14 and March 15, 2002, the scheduled dates of the final examinations in logic and statistics, her teachers -- Respondents Rachelle A. Gamurot and Elissa Baladad -- allegedly disallowed her from taking the tests. According to petitioner, Gamurot made her sit out her logic class while her classmates were taking their examinations. The next day, Baladad, after announcing to the entire class that she was not permitting petitioner and another student to take their statistics examinations for failing to pay for their tickets, allegedly ejected them from the classroom. Petitioner’s pleas ostensibly went unheeded by Gamurot and Baladad, who unrelentingly defended their positions as compliance with PCST’s policy.

On April 25, 2002, petitioner filed, as a pauper litigant, a Complaint[5] for damages against PCST, Gamurot and Baladad. In her Complaint, she prayed for P500,000 as nominal damages; P500,000 as moral damages; at least P1,000,000 as exemplary damages; P250,000 as actual damages; plus the costs of litigation and attorney’s fees.

On May 30, 2002, respondents filed a Motion to Dismiss[6] on the ground of petitioner’s failure to exhaust administrative remedies. According to respondents, the question raised involved the determination of the wisdom of an administrative policy of the PCST; hence, the case should have been initiated before the proper administrative body, the Commission of Higher Education (CHED).

In her Comment to respondents’ Motion, petitioner argued that prior exhaustion of administrative remedies was unnecessary, because her action was not administrative in nature, but one purely for damages arising from respondents’ breach of the laws on human relations. As such, jurisdiction lay with the courts.

On July 12, 2002, the RTC dismissed the Complaint for lack of cause of action.

ISSUES:

“Whether or not the principle of exhaustion of administrative remedies applies in a civil action exclusively for damages based on violation of the human relation provisions of the Civil Code, filed by a student against her former school.

“Whether or not there is a need for prior declaration of invalidity of a certain school administrative policy by the Commission on Higher Education (CHED) before a former student can successfully maintain an action exclusively for damages in regular courts.

“Whether or not the Commission on Higher Education (CHED) has exclusive original jurisdiction over actions for damages based upon violation of the Civil Code provisions on human relations filed by a student against the school.”[9]

*All of the foregoing point to one issue -- whether the doctrine of exhaustion of administrative remedies is applicable. The Court, however, sees a second issue which, though not expressly raised by petitioner, was impliedly contained in her Petition: whether the Complaint stated sufficient cause(s) of action.

RULING:

Exhaustion of Administrative Remedies-

Respondents anchored their Motion to Dismiss on petitioner’s alleged failure to exhaust administrative remedies before resorting to the RTC. According to them, the determination of the controversy hinge on the validity, the wisdom and the propriety of PCST’s academic policy. Thus, the Complaint should have been lodged in the CHED, the administrative body tasked under Republic Act No. 7722 to implement the state policy to “protect, foster and promote the right of all citizens to affordable quality education at all levels and to take appropriate steps to ensure that education is accessible to all.”[10]

Petitioner counters that the doctrine finds no relevance to the present case since she is praying for damages, a remedy beyond the domain of the CHED and well within the jurisdiction of the courts.[11]

Petitioner is correct. First, the doctrine of exhaustion of administrative remedies has no bearing on the present case. In Factoran Jr. v. CA,[12] the Court had occasion to elucidate on the rationale behind this doctrine:

“The doctrine of exhaustion of administrative remedies is basic. Courts, for reasons of law, comity, and convenience, should not entertain suits unless the available administrative remedies have first been

resorted to and the proper authorities have been given the appropriate opportunity to act and correct their alleged errors, if any, committed in the administrative forum. x x x.[13]”

Petitioner is not asking for the reversal of the policies of PCST. Neither is she demanding it to allow her to take her final examinations; she was already enrolled in another educational institution. A reversal of the acts complained of would not adequately redress her grievances; under the circumstances, the consequences of respondents’ acts could no longer be undone or rectified.

Second, exhaustion of administrative remedies is applicable when there is competence on the part of the administrative body to act upon the matter complained of.[14] Administrative agencies are not courts; they are neither part of the judicial system, nor are they deemed judicial tribunals.[15] Specifically, the CHED does not have the power to award damages.[16] Hence, petitioner could not have commenced her case before the Commission.

Third, the exhaustion doctrine admits of exceptions, one of which arises when the issue is purely legal and well within the jurisdiction of the trial court.[17] Petitioner’s action for damages inevitably calls for the application and the interpretation of the Civil Code, a function that falls within the jurisdiction of the courts.

Nikko Hotel Manila vs. Reyes

GR No. 154259, February 28, 2005

FACTS:

Petitioners Nikko Hotel Manila and Ruby Lim assailed the decision of the Court of Appeals in reversing the decision of RTC of Quezon City. CA held petitioner liable for damages to Roberto Reyes aka “Amang Bisaya”, an entertainment artist.

There are two versions of the story:

Mr. Reyes: On the eve of October 13, 1994, Mr. Reyes while having coffee at the lobby of Nikko Hotel was approached by Dr. Violet Filart, a friend several years back. According to Mr. Reyes, Dr. Filart invited him to join a birthday party at the penthouse for the hotel’s former General Manager, Mr. Tsuruoka. Plaintiff agreed as Dr. Filart agreed to vouch for him and carried a basket of fruits, the latter’s gift. He He lined up at the buffet table as soon as it was ready but to his great shock, shame and embarrassment, Ruby Lim, Hotel’s Executive Secretary, asked him to leave in a loud voice enough to be heard by the people around them. He was asked to leave the party and a Makati policeman accompanied him to step-out the hotel. All these time, Dr Filart ignored him adding to his shame and humiliation.

Ms. Ruby Lim: She admitted asking Mr. Reyes to leave the party but not in the manner claimed by the plaintiff. Ms. Lim approached several people including Dr. Filart’s sister, Ms. Zenaida Fruto, if Dr. Filart did invite him as the captain waiter told Ms. Lim that Mr. Reyes was with Dr. Filart’s group. She wasn’t able to ask it personally with Dr. Filart since the latter was talking over the phone and doesn’t want to

interrupt her. She asked Mr. Reyes to leave because the celebrant specifically ordered that the party should be intimate consisting only of those who part of the list. She even asked politely with the plaintiff to finish his food then leave the party.

During the plaintiff’s cross-examination, he was asked how close was Ms. Lim when she approached him at the buffet table. Mr. Reyes answered “very close because we nearly kissed each other”. Considering the close proximity, it was Ms. Lim’s intention to relay the request only be heard by him. It was Mr. Reyes who made a scene causing everybody to know what happened.

ISSUE: Whether or not petitioners acted abusively in asking Mr. Reyes to leave the party.

HELD:

Supreme Court held that petitioners did not act abusively in asking Mr. Reyes to leave the party. Plaintiff failed to establish any proof of ill-motive on the part of Ms. Lim who did all the necessary precautions to ensure that Mr. Reyes will not be humiliated in requesting him to leave the party. Considering almost 20 years of experience in the hotel industry, Ms. Lim is experienced enough to know how to handle such matters. Hence, petitioners will not be held liable for damages brought under Article 19 and 20 of the Civil Code.

Intestate Estate of the Late Ricardo P. Presbiterio, Sr. vs. Court of Appeals

Facts:

Petition for review on certiorari of the decision of the Court of Appeals.

Presbiterio, Sr. entered into two contracts with respondent Canoso regarding the negotiation of with Land Bank of the Philippines and Ministry of Agrarian Reform for the sale of the former’s Hacienda Maria in North Cotabato and the other being the arrangement of compensation for respondent Canoso upon the fulfillment of the obligation upon the 120-day period given to him, 17.5% of the proceeds of the sale shall be paid to Canoso.

A part of the proceeds were released and Canoso was not given his share. Canoso files a suit against Presbiterio, Sr. Presbiterio, Sr. contends that Canoso had no right to be compensated since he defaulted when he failed to fulfill the obligation in 120 days.

Issue: Whether Canoso lost his right to be compensated since he failed to fulfill the obligation within 120 days, albeit the late compliance.

Held:

1. Obligations arising from contracts have the force of law between the parties and should be complied with in good faith. A reciprocal obligation arose between the parties, albeit the late compliance of Canoso, he is still entitled to compensation. Moreover, Presbiterio, Sr. initially authorized the release of funds for payment to Canoso, establishing the complete acceptance of the same to the fullfilment of Canoso’s obligation.

2. The collection of proceeds was not among the stipulations of the parties, Canoso had already fulfilled his part of the obligation to negotiate the sale of said Hacienda Maria.

3. Rescission of the contract is not permitted for slight or causal breach. No substantial breach has been committed in the case at bar. Substantial compliance is in order, and Canoso has fulfilled the obligation in good faith.

Metro Manila Transport Corporation and Apolinario Ajoc vs. C.A. and Col. Sabalburo et al

G.R.No. 141089 01August2002

FACTS OF THE CASE:

Last December 24 1986 Florentina Sabalburo and her companions were making their way to Baclaran to buy foodstuffs for Noche Buena. Florentina Sabalburo and her companions waited for the traffic light to turn red so that they could cross the street to take a ride to Baclaran. Upon crossing the street during the red light, Florentina Sabalburo was hit by a fast moving MMTC bus, driven by Apolinario Ajoc.

Ms. Sabalburo was then taken by the driver and conductress of the MMTC bus to San Juan de Dios hospital. The victim was not able to regain consciousness and she succumbed to her injuries on January 03, 1987. The Trial court decided in favor of Sabalburo et. al and ordered MMTC to pay damages. MMTC then appealed the case to the Court of Appeals which affirmed the decision of the trial court.

ISSUES OF THE CASE:

Was the RTC and CA correct in ordering MTCC to pay damages to the plaintiff?

- Yes, According to the S.C. both courts are correct in awarding damages to the plaintiff.

- Even though MMTC argues that the proximate cause of the victim’s death is her negligence thus requesting the court to apply Art 2179 of the civil code, instead of Art 2176, the S.C upheld the findings of the trial courts that the driver and MMTC had been negligent in its duties and it is this negligence that led to the death of the victim thus showing that Art 2176 is the more applicable provision in this case.

- Also MMTC is liable for the death of the victim due to Art 2180 of the civil code, wherein the obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions-, but also for those of persons for whom one is responsible.

- It should be shown that whenever an employee’s negligence causes damage or injury to another, there instantly arises a presumption juris tantum that there was negligence on the part of the employer, either in the selection of the employee (culpa in eligiendo) or the supervision over him after the selection (culpa in vigilando). Hence, to escape solidary liability for a quasi-delict committed by his employee, an employer must rebut the presumption by presenting convincing proof that in the selection and supervision of his employee, he has exercised the care and diligence of a good father of a family. In the present case, petitioner MMTC failed to rebut the presumption of negligence on its part.

HELD:

The Decision of the Court of Appeals is affirmed.

Obligations and Contracts Terms:

CULPA AQUILIANA- refers to acts or omissions which cause damage to another, there being fault or negligence on the part of the defendant, who is obliged by law to pay for the damages done.

Art 2176 of the Civil Code is applied if there’s no pre-existing contractual relation between the parties. Although the Supreme Court has already held that a quasi- delict can occur even if there is a contractual relation, since the act that lead to the breaking a contract may also be a tort.

GEORGE W. BATCHELDER vs. THE CENTRAL BANK OF THE PHILIPPINES

G.R. No. L-25071

March 29, 1972

Facts:

Monetary Board Resolution No. 857 requires Filipino and American resident contractors for constructions in U.S. military bases in the Philippines to surrender to the Central Bank their dollar earnings under their respective contracts but were entitled to utilize 90% of their surrendered dollars for importation at the preferred rate of commodities for use within oroutside said U.S. military bases. Resolution 695 moreover, denies their right to reacquire at the preferred rate ninety per cent (90%) of the foreign exchange the sold or surrendered earnings to Central Bank for the purpose of determining whether the imports against proceeds of contracts entered into prior to April 25, 1960 are classified as dollar-to-dollar transactions or not. George Batchelder, an American Citizen permanently residing in the Philippines who is engaged in

the Construction Business, surrendered to the Central Bank his dollar earnings amounting to U.S. $199,966.00. He compels Central Bank of the Philippines to resell to him$170,210.60 at the preferred rate of exchange of two Philippine pesos for one American dollar, more specifically P2.00375 which was denied by the court. He then contended that said decision failed to consider that if there was no contract obligating the bank to resell to him at the preferred rate, the judgment of the lower court can and should nevertheless be sustained on the basis of there being such an obligation arising from law.

Issue:

Whether or not Central Bank has the obligation arising from law to resell theUS$154,094.56 to Batchelder at the preferred rate.

Held:

Central Bank was intended to attain basic objectives in the field of currency and finance.

“It shall be the responsibility of the Central Bank of the Philippines to administer the monetary and banking system of the Republic. It shall be the duty of the Central Bank to use the powers granted to it under this Act to achieve the following objectives: (a) to maintain monetary stability in the Philippines; (b) to preserve the international value of the peso and the convertibility of the peso into other freely convertible currencies; and (c) to promote a rising level of production, employment and real income in the Philippines. "It is, of course, true that obligations arise from 1) law; 2) contracts; 3) quasi-contracts;4) acts or omissions punished by law and 5) quasi-delicts. One of the sources an obligation then is a law. A legal norm could so require that a particular party be chargeable with a prestation or undertaking to give or to deliver or to do or to render some service. It is an indispensable requisite though that such a provision, thus in fact exists. There must be a showing to that effect.As early as 1909 in Pelayo v. Lauron, Court through Justice Torres, categorically declared: "Obligation arising from law are not presumed." For in the language of Justice Street in LeungBen v. O'Brien, a 1918 decision, such an obligation is "a creation of the positive law." They are ordinarily traceable to code or statute. It is true though, as noted in the motion forreconsideration following People v. Que Po Lay, that a Central Bank circular may have the force and effect of law, especially when issued in pursuance of its quasi-legislative power. That of itself, however, is no justification to conclude that it has thereby assumed an obligation.

Arturo Pelayo vs Marcelo Lauron, Et. Al.

Facts: Oct. 13, 1906, nighttime – Arturo Pelayo, a physician based in Cebu, was called to the house of Marcelo Lauron & Juana Abella (defendants) in San Nicolas. Their daughter-in-law was about to give birth & they requested him to render medical assistance. Since it was a difficult birth, he had to perform a surgery to remove the fetus using forceps. He also removed the afterbirth. He finished all of these until the following morning.

He visited the patient several times the following day. Just & equitable value for the services he rendered: P500.00. Without any good reason, defendants refused to pay said amount. Thus he filed a case praying

for a judgment in his favor against defendants for the sum of P500.00 + costs along with other relief that may be deemed proper.

The Defendants alleged that their daughter-in-law died in consequence of the childbirth. Also, that their son & daughter-in-law lived independently & her giving birth in their house was only accidental. They prayed that they be absolved.

CFI: Defendants absolved due to lack of sufficient evidence to establish right of action.

ISSUE: WON the defendants are bound to pay the bill for the services Pelayo has rendered.

HELD: NO. CFI judgment affirmed.

RATIO: Rendering of medical assistance in case of illness is among the mutual obligations to which spouses are bound by way of mutual support. (Arts. 142 & 143, CC) The party bound to give support should therefore be liable for all the expenses including the fees of the physician. Thus, it is the husband’s obligation to pay Pelayo and not the defendants. The husband would still be liable even if his parents were the one who called & requested for Pelayo’s assistance. The defendants are not under any obligation to pay the fees claimed (An obligation according to CC Art. 1089 is created by law, contracts, quasi-contracts, & by illicit acts & omissions or by those in which any kind of fault/negligence occurs.). There was no contract between Pelayo & the defendants thus they can’t be compelled to pay him.

Morla vs Corazon Belmonte

FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation and Lambert Eroles

G.R. No. 141910

August 6, 2002

FACTS:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on June 18, 1994, 30 units of Condura S.D. white refrigerators aboard its Isuzu truck driven by Lambert Eroles, to the Central Luzon Appliances in Dagupan City. While traversing the North Diversion Road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes.

FGU, an insurer of the shipment, paid the value of the covered cargoes (P204,450.00) to Concepcion Industries, Inc.,. Being subrogee of CII’s rights & interests, FGU, in turn, sought reimbursement from GPS. Since GPS failed to heed the claim, FGU filed a complaint for damages & breach of contract of carriage against GPS and Eroles with the RTC. In its answer, respondents asserted that GPS was only the exclusive hauler of CII since 1988, and it was not so engaged in business as a common carrier. Respondents further claimed that the cause of damage was purely accidental.

GPS filed a motion to dismiss the complaint by way of demurrer to evidence on the ground that petitioner had failed to prove that it was a common carrier.

The RTC granted the motion to dismiss on April 30, 1996. It subsequently dismissed the complaint holding that GPS was not a common carrier defined under the law & existing jurisprudence. The subsequent motion for reconsideration having been denied, FGU interposed an appeal to the CA. The CA rejected the FGU’s appeal & ruled in favor of GPS. It also denied petitioner’s motion for reconsideration.

ISSUES:

1. WON GPS may be considered a common carrier as defined under the law & existing jurisprudence.

2. WON GPS, either as a common carrier or a private carrier, may be presumed to have been negligent when the goods it undertook to transport safely were subsequently damaged while in its protective custody & possession.

3. Whether the doctrine of Res ipsa loquitur is applicable in the instant case.

HELD:

1. The SC finds the conclusion of the RTC and the CA to be amply justified. GPS, being an exclusive contractor & hauler of Concepcion Industries, Inc., rendering/offering its services to no other individual or entity, cannot be considered a common carrier. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for hire or compensation, offering their services to the public, whether to the public in general or to a limited clientele in particular, but never on an exclusive basis. The true test of a common carrier is the carriage of passengers/goods, providing space for those who opt to avail themselves of its transportation service for a fee. Given accepted standards, GPS scarcely falls within the term “common carrier.”

2. GPS cannot escape from liability. In culpa contractual, the mere proof of the existence of the contract & the failure of its compliance justify, prima facie, a corresponding right of relief. The law will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost/suffered. The remedy serves to preserve the interests of the promisee that may include his:

a. Expectation interest – interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed;

b. Reliance interest – interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made;

c. Restitution interest – interest in having restored to him any benefit that he has conferred on the other party.

Agreements can accomplish little unless they are made the basis for action. The effect of every infraction is to create a new duty, or to make recompense to the one who has been injured by the failure of another to observe his contractual obligation unless he can show extenuating circumstances, like proof of his exercise of due diligence (normally that of the diligence of a good father of a family or, exceptionally by stipulation or by law such as in the case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his ensuing liability.

A default on, or failure of compliance with, the obligation gives rise to a presumption of lack of care & corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do so.

Eroles, on the other hand, may not be ordered to pay petitioner without concrete proof of his negligence/fault. The driver, not being a party to the contract of carriage between petitioner’s principal and defendant, may not be held liable under the agreement. A contract can only bind the parties who have entered into it or their successors who have assumed their personality/juridical position. Consonantly with the axiom res inter alios acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third person. Petitioner’s civil action against the driver can only be based on culpa aquiliana, which would require the claimant for damages to prove the defendant’s negligence/fault.

3. Res ipsa loquitur holds a defendant liable where the thing which caused the injury complained of is shown to be under the latter’s management and the accident is such that, in the ordinary course of things, cannot be expected to happen if those who have its management/control use proper care. In the absence of the defendant’s explanation, it affords reasonable evidence that the accident arose from want of care. It is not a rule of substantive law and does not create an independent ground of liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience since it furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific proof of negligence. The maxim simply places the burden of going forward with the proof on the defendant.

However, resort to the doctrine may only be allowed when:

(a) the event is of a kind which does not ordinarily occur in the absence of negligence;

(b) other responsible causes are sufficiently eliminated by the evidence (includes the conduct of the plaintiff and third persons); and

(c) the indicated negligence is within the scope of the defendant’s duty to the plaintiff.

Thus, it is not applicable when an unexplained accident may be attributable to one of several causes, for some of which the defendant could not be responsible.

Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the plaintiff and the defendant, for the inference of negligence arises from the circumstances and nature of the occurrence and not from the nature of the relation of the parties. Nevertheless,for the doctrine to apply, the requirement that responsible causes (other than those due to defendant’s conduct) must first be

eliminated should be understood as being confined only to cases of pure (non-contractual) tort since obviously the presumption of negligence in culpa contractual immediately attaches by a failure of the covenant or its tenor.

On the other hand, while the truck driver, whose civil liability is predicated on culpa acquiliana, can be said to have been in control & management of the vehicle, it is not equally shown that the accident has been exclusively due to his negligence. If it were so, the negligence could allow res ipsa loquitur to properly work against him. However, clearly this is not the case.

Articles 1156-1177- page2

Nostradamus Villanueva vs Priscilla and Leandro Domingo

(GR No 144274, Sept 20, 2006, Corona)

Application of the Registered Owner Rule

The registered owner of a vehicle is directly and principally responsible for any accident, injury or death caused by the operation of the vehicle in the streets and highways.

The purpose is to protect the public in general and for easy identification of the persons who could be held responsible for the injury sustained.

Addendum:

Extraordinary diligence is required to common carriers in transporting goods and passengers

Reasons:

1. nature of the business

2. public policy

Registered owner primarily and solidarily liable with driver under the KABIT SYSTEM. Kabit system is contrary to public policy; therefore, void and inexistent.

Cerezo vs. Tuazon

GR No. 141538, March 23, 2004

Post under case digests, Remedial Law at Thursday, January 26, 2012 Posted by Schizophrenic Mind

Facts:

A passenger bus collided with a tricycle somewhere in Pampanga. The tricycle driver Tuazon filed a complaint for damages against Mrs. Cerezo, as owner of the bus line, and her husband Attorney Juan Cerezo. Tuazon also filed a motion to litigate as a pauper which was granted by the trial court. Subsequently, the trial court issued summons against Atty. Cerezo and Mrs. Cerezo (“the Cerezo spouses”) at the Makati address stated in the complaint. However, the summons was returned unserved as the Cerezo spouses no longer held office nor resided in Makati. The trial court issued alias summons against the Cerezo spouses at their address in Camiling, Tarlac. The alias summons and a copy of the complaint were finally served on 20 April 1994 at the office of Atty. Cerezo, who was then working as Tarlac Provincial Prosecutor. Atty. Cerezo reacted angrily on learning of the service of summons upon his person. Atty. Cerezo allegedly told Sheriff William Canlas: “Punyeta, ano ang gusto mong mangyari? Gusto mong hindi ka makalabas ng buhay dito? Teritoryo ko ito. Wala ka sa teritoryo mo.”

The records show that the Cerezo spouses participated in the proceedings before the trial court. Another lawyer, Atty. Valera, even represented the spouses. The Cerezo spouses did not file an answer and upon motion of Tuazon, they were declared in default. A copy of the decision was received on June 25 and Mrs. Cerezo filed a Petition from Relief of Judgment on July 10. Atty. Valera also denied having received a copy of a decision.

Issue: Whether or not Petition for Relief from Judgment was the proper remedy for a party declared in default.

Held: The Court ruled in the NEGATIVE. The remedies available to a party declared in default:

The defendant in default may, at any time after discovery thereof and before judgment, file a motion under oath to set aside the order of default on the ground that his failure to answer was due to fraud, accident, mistake or excusable negligence, and that he has a meritorious defense (Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]);

If the judgment has already been rendered when the defendant discovered the default, but before the same has become final and executory, he may file a motion for new trial under Section 1 (a) of Rule 37;

If the defendant discovered the default after the judgment has become final and executory, he may file a petition for relief under Section 2 [now Section 1] of Rule 38; and

He may also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no petition to set aside the order of default has been presented by him (Sec. 2, Rule 41). (Emphasis added)

Moreover, a petition for certiorari to declare the nullity of a judgment by default is also available if the trial court improperly declared a party in default, or even if the trial court properly declared a party in default, if grave abuse of discretion attended such declaration.

Mrs. Cerezo could have taken advantage of the abovementioned remedies. Moreover, she also had the alternative of filing under Rule 65 a petition for certiorari assailing the order of default within 60 days from notice of the judgment. An order of default is interlocutory, and an aggrieved party may file an appropriate special civil action under Rule 65. In a petition for certiorari, the appellate court may declare void both the order of default and the judgment of default. Clearly, Mrs. Cerezo had every opportunity to avail of these remedies within the reglementary periods provided under the Rules of Court. However, Mrs. Cerezo opted to file a petition for relief from judgment, which is available only in exceptional cases. A petition for relief from judgment should be filed within the reglementary period of 60 days from knowledge of judgment and six months from entry of judgment.

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, versus

MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY

FACTS:

Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing a “token” (representing payment of the fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard assigned to the area approached him. A misunderstanding or an altercation between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how the fight started or who, between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously. The widow of Nicanor, Marjorie Navidad, along with her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband. Trial court ruled in favor Navidad’s wife and against the defendants Prudent Security and Junelito Escartin . LRTA and Rodolfo Roman were dismissed for lack of merit. CA held LRTA and Roman liable, hence the petition.

ISSUE: Whether or not there was a perfected contract of carriage between Navidad and LRTA

HELD:

AFFIRMED with MODIFICATION but only in that (a) the award of nominal damages is DELETED and (b) petitioner Rodolfo Roman is absolved from liability

Contract of carriage was deemed created from the moment Navidad paid the fare at the LRT station and entered the premises of the latter, entitling Navidad to all the rights and protection under a contractual relation. The appellate court had correctly held LRTA and Roman liable for the death of Navidad in failing to exercise.

Articles 1156-1177 – page4

NPC v. CA

Facts:

At the height of the typhoon “Kading”, a flash flood covered the towns near the Angat Dam, causing deaths and destructions to residents and their properties. Respondents blamed the tragedy to the reckless and imprudent opening of the 3 floodgates by petitioner, without prior warning to the residents within the vicinity of the dam. Petitioners denied the allegations and contended that they have kept the water at a safe level, that the opening of floodgates was done gradually, that it exercises diligence in the selection of its employees, and that written warnings were sent to the residents. It further contended that there was no direct causal relationship between the damage and the alleged negligence on their part, that the residents assumed the risk by living near the dam, and that what happened was a fortuitous event and are of the nature of damnum absque injuria.

Issues:

(1) Whether the petitioner can be held liable even though the coming of the typhoon is a fortuitous event

(2) Whether a notice was sent to the residents

(3) Whether the damage suffered by respondents is one of damnum absque injuria

Held:

(1) The obligor cannot escape liability, if upon the happening of a fortuitous event or an act of God, a corresponding fraud, negligence, delay or violation or contravention in any manner of the tenor of the obligation as provided in Article 1170 of the Civil Code which results in loss or damage. Even if there was no contractual relation between themselves and private respondents, they are still liable under the law on quasi-delict. Article 2176 of the Civil Code explicitly provides "whoever by act or omission causes damage to another there being fault or negligence is obliged to pay for the damage done." Act of God or force majeure, by definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which, though foreseen, are inevitable. It is therefore not enough that the event should not have been foreseen or anticipated, as is commonly believed, but it must be one impossible to foresee or to avoid. The principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by the violence of nature. Human intervention is to be excluded from creating or entering into the

cause of the mischief. When the effect is found to be in part the result of the participation of man, whether due to his active intervention or neglect or failure to act, the whole occurrence is then humanized and removed from the rules applicable to the acts of God. In the case at bar, although the typhoon "Kading" was an act of God, petitioners can not escape liability because their negligence was the proximate cause of the loss and damage.

(2) The letter itself, addressed merely "TO ALL CONCERNED", would not strike one to be of serious importance, sufficient enough to set alarm and cause people to take precautions for their safety's sake. The notices were not delivered, or even addressed to responsible officials of the municipalities concerned who could have disseminated the warning properly. They were delivered to ordinary employees and policemen. As it happened, the said notices do not appear to have reached the people concerned, which are the residents beside the Angat River. The plaintiffs in this case definitely did not receive any such warning. Indeed, the methods by which the defendants allegedly sent the notice or warning was so ineffectual that they cannot claim, as they do in their second assignment of error, that the sending of said notice has absolved them from liability.

(3) We cannot give credence to petitioners' third assignment of error that the damage caused by the opening of the dam was in the nature of damnum absque injuria, which presupposes that although there was physical damage, there was no legal injury in view of the fortuitous events. There is no question that petitioners have the right, duty and obligation to operate, maintain and preserve the facilities of Angat Dam, but their negligence cannot be countenanced, however noble their intention may be. The end does not justify the means, particularly because they could have done otherwise than simultaneously opening the spillways to such extent. Needless to say, petitioners are not entitled to counterclaim.

GLOBE TELECOM, INC., petitioner, vs.PHILIPPINE COMMUNICATION SATELLITE CORPORATION, respondent.

Facts:

Globe Telecom, Inc., formerly known as Globe McKay Cable and Radio Corporation installed and configured communication facilities for the exclusive use of the US Defense Communications Agency (USDCA) in Clark Air Base and Subic Naval Base. Globe Telecom later contracted the Philippine Communications Satellite Corporation (Philcomsat) for the provision of the communication facilities. As both companies entered into an Agreement, Globe obligated itself to operate and provide an IBS Standard B earth station with Cubi Point for the use of the USDCA. The term of the contract was for 60 months, or five (5) years. In turn, Globe promised to pay Philcomsat monthly rentals for each leased circuit involved.

As the saga continues, the Philippine Senate passed and adopted Senate Resolution No. 141 and decided not to ratify the Treaty of Friendship, Cooperation and Security, and its Supplementary Agreements to extend the term of the use by the US of Subic Naval Base, among others. In other words, the RP-US Military Bases Agreement was suddenly terminated.

Because of this event, Globe notified Philcomsat of its intention to discontinue the use of the earth station effective 08 November 1992 in view of the withdrawal of US military personnel from Subic Naval Base

after the termination of the RP-US Military Bases Agreement.

After the US military forces left Subic Naval Base, Philcomsat sent Globe a letter in 1993 demanding payment of its outstanding obligations under the Agreement amounting to US$4,910,136.00 plus interest and attorney’s fees. However, Globe refused to heed Philcomsat’s demand. On the other hand, the latter with the Regional Trial Court of Makati a Complaint against Globe, however, Globe filed an Answer to the Complaint, insisting that it was constrained to end the Agreement due to the termination of the RP-US Military Bases Agreement and the non-ratification by the Senate of the Treaty of Friendship and Cooperation, which events constituted force majeure under the Agreement. Globe explained that the occurrence of said events exempted it from paying rentals for the remaining period of the Agreement.

Four years after, the trial court its decision but both parties appealed to the Court of Appeals.

Issues:

1. Whether or not the non-ratification by the Senate of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements constitutes force majeure which exempts Globe from complying with its obligations under the Agreement;

2. Whether Globe is not liable to pay the rentals for the remainder of the term of the Agreement; and

3. Whether Globe is liable to Philcomsat for exemplary damages.

Held:

Decision on Issue No. 1: Fortuitous Event under Article 1174

The appellate court ruled that the non-ratification by the Senate of the Treaty of Friendship, Cooperation and Security, and its Supplementary Agreements, and the termination by the Philippine Government of the RP-US Military Bases Agreement effective 31 December 1991 as stated in the Philippine Government’s Note Verbale to the US Government, are acts, directions, or requests of the Government of the Philippines which constitute force majeure.

However, the Court of Appeals ruled that although Globe sought to terminate Philcomsat’s services by 08 November 1992, it is still liable to pay rentals for the December 1992, amounting to US$92,238.00 plus interest, considering that the US military forces and personnel completely withdrew from Cubi Point only on 31 December 1992.

No reversible error was committed by the Court of Appeals in issuing the assailed Decision; hence the petitions are denied.

Article 1174, which exempts an obligor from liability on account of fortuitous events or force majeure, refers not only to events that are unforeseeable, but also to those which are foreseeable, but inevitable:

A fortuitous event under Article 1174 may either be an "act of God," or natural occurrences such as floods or typhoons,24 or an "act of man," such as riots, strikes or wars.

Philcomsat and Globe agreed in Section 8 of the Agreement that the following events shall be deemed events constituting force majeure:

1. Any law, order, regulation, direction or request of the Philippine Government;2. Strikes or other labor difficulties;3. Insurrection; 4. Riots; 5. National emergencies;6. War;7. Acts of public enemies;8. Fire, floods, typhoons or other catastrophes or acts of God; 9. Other circumstances beyond the control of the parties.

Clearly, the foregoing are either unforeseeable, or foreseeable but beyond the control of the parties. There is nothing in the enumeration that runs contrary to, or expands, the concept of a fortuitous event under Article 1174.

The Supreme Court agrees with the Court of Appeals and the trial court that the abovementioned requisites are present in the instant case. Philcomsat and Globe had no control over the non-renewal of the term of the RP-US Military Bases Agreement when the same expired in 1991, because the prerogative to ratify the treaty extending the life thereof belonged to the Senate. Neither did the parties have control over the subsequent withdrawal of the US military forces and personnel from Cubi Point in December 1992.

Decision on Issue No. 2: Exemption of Globe from Paying Rentals for the Facility

The Supreme Court finds that the defendant is exempted from paying the rentals for the facility for the remaining term of the contract. As a consequence of the termination of the RP-US Military Bases Agreement (as amended) the continued stay of all US Military forces and personnel from Subic Naval Base would no longer be allowed, hence, plaintiff would no longer be in any position to render the service it was obligated under the Agreement.

The Court of Appeals was correct in ruling that the happening of such fortuitous events rendered Globe exempt from payment of rentals for the remainder of the term of the Agreement.

Decision on Issue No 3: No Exemplary Damages

Exemplary damages may be awarded in cases involving contracts or quasi-contracts, if the erring party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.

In the present case, it was not shown that Globe acted wantonly or oppressively in not heeding Philcomsat’s demands for payment of rentals. It was established during the trial of the case before the

trial court that Globe had valid grounds for refusing to comply with its contractual obligations after 1992.

Ruling:

WHEREFORE, the Petitions are DENIED for lack of merit. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 63619 is AFFIRMED.SO ORDERED.

FGU Insurance Corporation v. CA

FACTS:

Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping business operating two common carriers

o M/T ANCO tugboat 

o D/B Lucio barge - no engine of its own, it could not maneuver by itself and had to be towed by a tugboat for it to move from one place to another.

September 23 1979: San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO:

o 25,000 cases Pale Pilsen and 350 cases Cerveza Negra - consignee SMC’s Beer Marketing Division (BMD)-Estancia Beer Sales Office, Estancia, Iloilo

o 15,000 cases Pale Pilsen and 200 cases Cerveza Negra - consignee SMC’s BMD-San Jose Beer Sales Office, San Jose, Antique

September 30, 1979: D/B Lucio was towed by the M/T ANCO arrived and M/T ANCO left the barge immediately

o The clouds were dark and the waves were big so SMC’s District Sales Supervisor, Fernando Macabuag, requested ANCO’s representative to transfer the barge to a safer place but it refused so around the midnight, the barge sunk along with 29,210 cases of Pale Pilsen and 500 cases of Cerveza Negra totalling to P1,346,197

When SMC claimed against ANCO it stated that they agreed that it would not be liable for any losses or damages resulting to the cargoes by reason of fortuitous event and it was agreed to be insured with FGU for 20,000 cases or P858,500

ANCO filed against FGU

o FGU alleged that ANCO and SMC failed to exercise ordinary diligence or the diligence of a good father of the family in the care and supervision of the cargoes

RTC: ANCO liable to SMC and FGU liable for 53% of the lost cargoes

CA affirmed

ISSUE: W/N FGU should be exempted from liability to ANCO for the lost cargoes because of a fortuitous event and negligence of ANCO 

HELD: YES. Affirmed with modification.  Third-party complainant is dismissed. Art. 1733.  Common carriers, from the nature of their business and for reasons of public policy

are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.

Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . .

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

(1)     Flood, storm, earthquake, lightning, or other natural disaster or calamity;

.  .  .

Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss.  However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be exempted from liability  for the loss, destruction, or deterioration of the goods . . . 

Caso fortuito or force majeure 

o extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which though foreseen, were inevitable

o not enough that the event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid - not in this case

other vessels in the port of San Jose, Antique, managed to transfer to another place

To be exempted from responsibility, the natural disaster should have been the proximate and only cause of the loss. There must have been no contributory negligence on the part of the common carrier.  

o there was blatant negligence on the part of M/T ANCO’s crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy of the storm without the assistance of the tugboat, and again in failing to heed the request of SMC’s representatives to have the barge transferred to a safer place

When evidence show that the insured’s negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be exonerated.

ANCO’s employees is of such gross character that it amounts to a wrongful act which must exonerate FGU from liability under the insurance contract

o both the D/B Lucio and the M/T ANCO were blatantly negligent

Schmitz Transport & Brokerage Corporation vs. Transport Venture, Inc. (458 SCRA 557)

FACTS:

Petitioner, who was in charge of securing requisite clearances, receive the cargoes from the shipside and deliver it to the consignee  Little Giant Steel Pipe Corporation warehouse at Cainta, Rizal, hired the services of respondent Transport Venture Incorporation (TVI)’s tugboat for the hot rolled steel sheets in coil. Coils were unloaded to the barge but there was no tugboat to pull the barge to the pier. Due to strong waves caused by approaching storm, the barge was abandoned. Later, the barge capsized washing 37 coils into the sea. Consignee was executed a subrogation receipt by Industrial Insurance after the former’s filing of formal claim. Industrial Insurance filed a complaint against both petitioner and respondent herein. The trial court held that petitioner and respondent TVI were jointly and severally liable for the subrogation.

ISSUE:

Whether or not the loss of cargoes was due to fortuitous event.

RULING:

NO. In order, to be considered a fortuitous event: (1) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligation, must be independent of human will; (2) it must be impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it must be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in any manner; and (4) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor.

Petitioner and respondent TVI were jointly and severally liable for the amount of paid by the consignee plus interest computed from the date of decision of the trial court.

Philippines Free Press, Inc. vs. Court of Appeals (473 SCRA 639)

FACTS:

Petitioner, thru Teodoro Locsin, Sr., filed a case of Annulment of Sale of its building, lot and printing machineries during the regime of Martial Law to private respondent then represented by late B/Gen. Menzi on February 26, 1987. Petitioner contends that there was vitiated consent and gross inadequacy of purchase price during its sale on October 23, 1973. The trial court dismissed petitioner’s complaint and granted private respondent’s counterclaim. It was elevated to the Court of Appeals but was also dismissed for lack of merit.

ISSUE: Whether or not the action for annulment has already prescribed.

RULING:

YES. Article 391 of the Civil Code pertinently reads “The action for annulment shall be brought within four years. This period shall begin: In cases of intimidation, violence or undue influence, from the time the defect of consent ceases x x x”.

[The Supreme Court] cannot accept the petitioners’ contention that the period during which authoritarian rule was in force had interrupted prescription and that the same began to run only on February 25, 1986, when the Aquino government took power.  It is true that under Article 1154 [of the Civil Code] xxx fortuitous events have the effect of tolling the period of prescription.  However, [the Supreme Court] cannot say, as a universal rule, that the period from September 21, 1972 through February 25, 1986 involves a force majeure.  Plainly, [the Supreme Court] can not box in the “dictatorial” period within the term without distinction, and without, by necessity, suspending all liabilities, however demandable, incurred during that period, including perhaps those ordered by this Court to be paid.

Eastern Shipping vs CAGR No. 97412, 12 July 1994234 SCRA 78

FACTS:            Two fiber drums were shipped owned by Eastern Shipping from Japan. The shipment as insured with a marine policy. Upon arrival in Manila unto the custody of metro Port Service, which excepted to one drum, said to be in bad order and which damage was unknown the Mercantile Insurance Company. Allied Brokerage Corporation received the shipment from Metro, one drum opened and without seal. Allied delivered the shipment to the consignee’s warehouse. The latter excepted to one drum which contained spillages while the rest of the contents was adulterated/fake. As consequence of the loss, the insurance company paid the consignee, so that it became subrogated to all the rights of action of consignee against the defendants Eastern Shipping, Metro Port and Allied Brokerage. The insurance company filed before the trial court. The trial court ruled in favor of plaintiff an ordered defendants to pay the former with present legal interest of 12% per annum from the date of the filing of the complaint. On appeal by defendants, the appellate court denied the same and affirmed in toto the decision of the trial court.

ISSUE:(1)   Whether the applicable rate of legal interest is 12% or 6%.

(2)   Whether the payment of legal interest on the award for loss or damage is to be computed from the time the complaint is filed from the date the decision appealed from is rendered.

HELD:(1)The Court held that the legal interest is 6% computed from the decision of the court a quo.

When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damaes awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty.

When the judgment of the court awarding a sum of money becomes final and executor, the rate of legal interest shall be 12% per annum from such finality until satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of money.

The interest due shall be 12% PA to be computed fro default, J or EJD.

(2) From the date the judgment is made. Where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or EJ but when such certainty cannot be so reasonably established at the time the demand is made, the interest shll begin to run only from the date of judgment of the court is made.

(3)   The Court held that it should be computed from the decision rendered by the court a quo.

SAMPAGUITA BUILDERS v PNB

Mini digest:

Sampaguita loaned money from PNB. PNB unilaterally increased rates of interest in the loan w/o informing Sampaguita. PNB c l a i m e d t h e y w e r e a u t h o r i z e d t o d o i t a s t h e r e w a s a c l a u s e i n t h e agreement that they may do so. Besides, Usury law was no longer in force= SC said NO! PNB cannot do so; it will violate mutuality of contracts under1 3 0 8 . B e s i d e s , S C m a y i n t e r v e n e w h e n a m o u n t o f i n t e r e s t i s unconscionable.

Facts: Sampaguita secured a loan from PNB in an aggregate amount of 8M pesos, mortgaging the properties of Sampaguita’s president and chairman of the b o a r d . S a m p a g u i t a a l s o e x e c u t e d s e v e r a l p r o m i s s o r y n o t e s d u e o n different dates (payment dates). The first promissory note had 19.5%interest rate. The 2nd and 3rd had 21.5%. a uniform clause therein permitted PNB to increase the rate “within the limits allowed by law at any time depending on whatever policy it may adopt in the future x x x,” without even giving prior notice to petitioners. There was also a clause in the promissory note that stated that if the same is not paid 2 years after release then it shall be converted to a medium term loan – and the interest rate for such loan would apply. Later on, Sampaguita defaulted on its payments and failed to comply with obligations on promissory notes. Sampaguita thus requested for a 90 day extension to pay the loan. Again they defaulted, so they asked for loan restructuring. It partly paid the loan and promised to pay the balance later o n . A G A I N t h e y f a i l e d t o p a y s o P N B e x t r a j u d i c i a l l y f o r e c l o s e d t h e mortgaged properties. It was sold for 10M. PNB claimed that Sampaguita owed it 12M so they filed a case in court asking sampaguita to pay fordeficiency.RTC found that Sampaguita was automatically entitled to the debt relief  package of PNB and ruled that the latter had no cause of action against the former. CA reversed, saying Sampaguita was not entitled, thus ordered them to pay the deficiency – Appeal = Went to SC. Sampaguita claims the loan was bloated s o t h e y d o n ’ t r e a l l y o w e P N B a n y m o r e , b u t i t j u s t overcharged them!

Issues/Ruling:

W/N the loan accounts are bloated: YES. There is no deficiency; there is actually an overpayment of more than 3M based on the computation of the SC. Whether PNB could unilaterally increase interest rates: NO

Ratio:Sampaguita’s accessory duty to pay interest did not give PNB unrestrained freedom to charge any rate other than that which was agreed upon. No interest shall be due, unless expressly stipulated in writing. It would be the z e n i t h o f f a r c i c a l i t y t o s p e c i f y a n d a g r e e u p o n r a t e s t h a t c o u l d b e subsequently upgraded at whim by only one party to the agreement.  T h e “ u n i l a t e r a l d e t e r m i n a t i o n a n d i m p o s i t i o n ” o f i n c r e a s e d r a t e s i s “violative of the principle of mutuality of contracts ordained in Article 1308of the Civil Code.” One-sided impositions do not have the force of law between the parties, because such impositions are not based on the parties’ essential equality. Although escalation clauses are valid in maintaining fiscal stability and retaining the value of money on long-term contracts, giving respondent an unbridled right to adjust the interest independently and upwardly would completely take away from petitioners the “right to assent to an important modification in their agreement” and would also negate the element of mutuality in their contracts. The clause cited earlier made the fulfillment of the contracts “dependent exclusively upon the uncontrolled will” of  respondent and was therefore void. Besides, the pro forma promissory notes have the character of a contract d’ adhesion, “where the parties do n o t b a r g a i n o n e q u a l f o o t i n g , t h e w e a k e r p a r t y ’ s [ t h e d e b t o r ’ s ] participation being reduced to the alternative ‘to take it or leave it.’”C i r c u l a r t h a t l i f t e d t h e c e i l i n g o f i n t e r e s t r a t e s o f u s u r y l a w d i d n o t authorize either party to unilaterally raise the interest rate without the other’s consent. the interest ranging from 26 percent to 35 percent in the statements of  account -- “must be equitably reduced for being iniquitous, unconscionable and exorbitant.” Rates found to be iniquitous or unconscionable are void, as if it there were no express contract thereon. Above all, it is undoubtedly against public policy to charge excessively for the use of money.

Lilibeth Sunga-Chan vs Lamberto Chua and Honorable Court of Appeals

FACTS: In 1977, Chua and Jacinto Sunga verbally agreed to form a partnership for the sale and distribution of Shellane LPGs. Their business was very profitable but in 1989 Jacinto died. Upon Jacinto’s death, his daughter Lilibeth took over the business as well as the business assets. Chua then demanded for an accounting but Lilibeth kept on evading him. In 1992 however, Lilibeth gave Chua P200k. She said that the same represents a partial payment; that the rest will come after she finally made an accounting. She never made an accounting so in 1992, Chua filed a complaint for “Winding Up of Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary Attachment” against Lilibeth.

Lilibeth in her defense argued among others that Chua’s action has prescribed.

ISSUE: Whether or not Chua’s claim is barred by prescription.

HELD: No. The action for accounting filed by Chua three (3) years after Jacinto’s death was well within the prescribed period.   The Civil Code provides that an action to enforce an oral contract prescribes in six (6) years while the right to demand an accounting for a partner’s interest as against the person continuing

the business accrues at the date of dissolution, in the absence of any contrary agreement. Considering that the death of a partner results in the dissolution of the partnership, in this case, it was after Jacinto’s death that Chua as the surviving partner had the right to an account of his interest as against Lilibeth.  It bears stressing that while Jacinto’s death dissolved the partnership, the dissolution did not immediately terminate the partnership.  The Civil Code expressly provides that upon dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business, culminating in its termination.