Lo v.

Court of Appeals
Facts:
Lo cquired the subject parcel of lands in an auction sale from Land
Bank of the Philippines. National Onion Growers (NOG) was the
occupant of the disputed parcels of land under a contract of lease
with Land Bank. Upon expiration of the contract, Lo demanded that
NOG vacate the leased premises and surrender possession to him.
However, NOG refused on the ground that it was, at that time,
contesting Los acquisition of the lands in question in an
action for annulment of sale, redemption and damages.

For this reason, Lo filed an action for ejectment asking for the
imposition of the contractually stipulated penalty of P5000 per day
of delay in surrendering the possession of the property to him.

After trial, the court rendered a decision in favor of Lo, ordering
NOG to:

1. Vacate the leased premises
2. Pay Lo P5000 per day of delay
3. Pay P36,000 a month from 1996 until it finally vacates the
premises as compensation for the use and occupancy
4. Pay P20,000 as attorneys fees and
5. Pay costs of the suit.

On appeal, it was affirmed. On petition for review, the Court of
Appeals affirmed the decision of the trial courts with modification
that the penalty imposed upon NOG to pay for the delay in
turning over the leased property to Lo. It reduced it from
P5000 to P1000 per day.

Issue:
Whether or not the Court of Appeals has the authority to reduce the
penalty awarded by the trial court, the same having been stipulated
in the Contract of Lease.

Ratio:
Yes. This power is sanctioned by Article 1229 of the Civil Code which
states that the judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with by
the debtor. Even if there has been no performance, it may also be
reduced if it is iniquitous or unconscionable.

Whether it is iniquitous or unconscionable is addressed to the sound
discretion of the court and will depend on several factors (i.e. type,
extent, and purpose of the penalty, nature of obligation, mode of
breach, consequences, supervening realities, standing and
relationship of parties).

In this case, the CA considered it to be iniquitous and
unconscionable. The penalty herein was pegged at P5000 for each
day of delay of P150,000 per month (an amount 5x the amount of the
monthly rent). This penalty is exorbitant and unconscionable, taking
into account that the delay in surrendering the leased premises was
because of a well-founded belief that its right of preemption to
purchase the land has been violated.

Saura v. DBP
Facts:
Saura applied to the Rehabilitation Finance Corporation (RFC)
before its conversion into DBP for an industrial loan of P500,000 for
construction of a factory building, payment of the balance of the
purchase price of a jute mill machinery and equipment and as
additional working capital.

The loan application was approved secured by a first mortgage on the
factory building to be constructed, the land site thereof and the
machinery and equipment to be installed. However, before it was
approved, a cancellation of the mortgage was requested to make way
for the registration of a mortgage contract over the same property in
favor of Prudential Bank and Trust Co., the latter having issued
Saura letter of credit for the release of the jute machinery. As
security, Saura executed a trust receipt in favor of the Prudential. For
failure of Saura to pay said obligation, Prudential sued Saura.

After 9 years after the mortgage was cancelled, Saura sued RFC
alleging failure to comply with its obligations to release the loan
proceeds, thereby prevented it from paying the obligation to
Prudential Bank.

Issue:
Whether or not there is a contract between Saura and RFC.

Ratio:
There is no contract as the same was already extinguished.
In this case, it should be noted that RFC entertained the loan
application of Saura on the assumption that the factory to be
constructed would utilize locally grown raw materials. When it
approved the loan application, it imposed two conditions (1) that the
taw materials needed by the borrower-corporation to carry out its
operation are available in the immediate vicinity; and (2) that there
is prospect of increased production thereof to provide adequately for
the requirements of the factory.
The imposition of those conditions was by no means a deviation from
the terms of the agreement, but rather a step in its implementation.
There was nothing in said conditions that contradicted the terms laid
down in RFC Resolution No. 145, namely "that the proceeds of the
loan shall be utilized exclusively for the following purposes: for
construction of factory building P250,000.00; for payment of the
balance of purchase price of machinery and equipment
P240,900.00; for working capital P9,100.00."

Evidently, Saura realized that it could not meet the
conditions required by RFC, and so wrote its letter stating that
local jute "will not be able in sufficient quantity this year or probably
next year," and asking that out of the loan agreed upon the sum of
P67,586.09 be released "for raw materials and labor." This was a
deviation from the terms laid down in Resolution No. 145
and embodied in the mortgage contract, implying as it did a
diversion of part of the proceeds of the loan to purposes
other than those agreed upon.

When RFC turned down the request the negotiations which had been
going on for the implementation of the agreement reached an
impasse. Saura obviously was in no position to comply with
RFC's conditions. So instead of doing so and insisting that
the loan be released as agreed upon, Saura, Inc. asked that
the mortgage be cancelled, which was done.

The action thus taken by both parties was in the nature of mutual
desistance what Manresa terms "mutuo disenso" which is a
mode of extinguishing obligations. It is a concept that derives from
the principle that since mutual agreement can create a
contract, mutual disagreement by the parties can cause its
extinguishment.

The subsequent conduct of Saura confirms this desistance. It did not
protest against any alleged breach of contract by RFC, or even point
out that the latter's stand was legally unjustified. Its request for
cancellation of the mortgage carried no reservation of whatever
rights it believed it might have against RFC for the latter's non-
compliance.

Cathay Pacific v. Vazquez
Facts:
In respondents return flight to Manila from Hongkong, they were
deprived of their original seats in Business Class with their
companions because of overbooking. Since respondents were
privileged members, their seats were upgraded to First Class.
Respondents refused but eventually persuaded to accept it. Upon
return to Manila, they demanded that they be indemnified in the
amount of P1million for the humiliation and embarrassment
caused by its employees.

Issue:
Whether or not there is a breach of contract in upgrading the seat
accommodation of the Vasquezes.

Ratio:
Yes. Breach of contract is defined as the failure without legal reason
to comply with the terms of a contract. It is also defined as the
failure, without legal excuse to perform any promise which forms the
whole or part of the contract. The contract between the parties was
for Cathay to transport the Vazquezes to Manila on a Business Class
accommodation in Flight CX-905. After checking-in their luggage at
the Kai Tak Airport in Hong Kong, the Vazquezes were given
boarding cards indicating their seat assignments in the Business
Class Section. However, during the boarding time, when the
Vazquezes presented their boarding passes, they were
informed that they had a seat change from Business Class
to First Class. It turned out that the Business Class was
overbooked in that there were more passengers than the
number of seats. Thus, the seat assignments of the Vazquezes
were given to waitlisted passengers, and the Vazquezes, being
members of the Marco Polo Club, were upgraded from Business
Class to First Class.

Normally, one would appreciate and accept an upgrading, for it
would mean a better accommodation. But, whatever their reason
was and however odd it might be, the Vazquezes had every right to
decline the upgrade and insist on the Business Class accommodation
they had booked for and which was designated in their boarding
passes. They clearly waived their priority or preference when they
asked that other passengers be given the upgrade. It should not have
been imposed on them over their vehement objection. By insisting
on the upgrade, Cathay breached its contract of carriage
with the Vazquezes.

Lo v. KJS
Facts:
Lo ordered scaffolding equipment from KJS. A downpayment in the
amount of P150,000 was paid and the balance was made payable in
10 monthly installments. When KJS delivered the scaffoldings, Lo
was able to pay the first 2 months. When his business encountered
financial difficulties, he was unable to settle his obligation despite
oral and written demands. To satisfy his obligation, Lo executed a
Deed of Assignment whereby his receivables from one
Jomero Realty was assigned to KJS.

However, when KJs tried to collect from Jomero, the latter refused
because it claimed that Lo was also indebted to it. Consequently, an
action for recovery of sum of money was filed.

After trial, the court rendered a decision dismissing the complaint on
the ground that the assignment extinguished the obligation.
On appeal, the CA reversed.

Issue:
Whether or not the assignment extinguished the obligation.

Ratio:
No. An assignment of credit is an agreement by virtue of which the
owner of a credit, known as the assignor, by a legal cause, such as
sale, dacion en pago, exchange or donation, and without the consent
of the debtor, transfers his credit and accessory rights to another,
known as the assignee, who acquires the power to enforce it to the
same extent as the assignor could enforce it against the debtor.

Dacion en pago, as a special mode of payment, the debtor offers
another thing to the creditor who accepts it as equivalent of payment
of an outstanding debt. In order that there be a valid dation in
payment, the following are the requisites:
1. There must be the performance of the prestation in lieu of
payment (animo solvendi) which may consist in the delivery
of a corporeal thing or a real right or a credit against the
third person;
2. There must be some difference between the prestationdue
and that which is given in substitution (aliud pro alio);
3. There must be an agreement between the creditor and debtor
that the obligation is immediately extinguished by reason of
the performance of a prestation different from that due.

The undertaking really partakes in one sense of the nature of sale,
that is, the creditor is really buying the thing or property of the
debtor, payment for which is to be charged against the debtors
debt. As such, the vendor in good faith shall be responsible, for the
existence and legality of the credit at the time of the sale but not for
the solvency of the debtor, in specified circumstances.

From the above provision, Lo, as vendor or assignor, is bound to
warrant the existence and legality of the credit at the time of the sale
or assignment. When Jomero claimed that it was no longer indebted
to Lo since the latter also had an unpaid obligation to it, it essentially
meant that its obligation to petitioner has been extinguished by
compensation. In other words, respondent alleged the non-existence
of the credit and asserted its claim to petitioners warranty under the
assignment. Therefore, it behooved on petitioner to make good its
warranty and paid the obligation.

Tibajia v. Court of Appeals
Facts:
This is a suit for collection of a sum of money filed by Eden Tan against
Tibajia where a writ of attachment was issued by the trial court. A writ of
attachment was issued by the trial court

The Deputy Sheriff filed a return stating that a deposit made by the Tibajia
spouses had been garnished by him. Tibajia spouses delivered to Deputy
Sheriff Eduardo Bolima the total money judgment in check.

Private respondent refused to accept the payment made by the Tibajia
spouses and instead insisted that the garnished funds deposited be
withdrawn to satisfy the judgment obligation. Petitioners filed a motion to
lift the writ of execution on the ground that the judgment debt had already
been paid. Motion was denied by the trial court on the ground that
payment in cashier's check is not payment in legal tender and that
payment was made by a third party other than the defendant

Issue:
Whether or not the BPI cashiers check tendered is legal tender.

Ratio:
Article 1249 of the Civil Code provides that the payment of debts in money
shall be made in the currency stipulated, and if it is not possible to deliver
such currency, then in the currency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or
other mercantile documents shall produce the effect of payment only
when they have been cashed, or when through the fault of the creditor
they have been impaired. In the meantime, the action derived from the
original obligation shall be held in abeyance.;

Section 1 of Republic Act No. 529 provides that every provision contained
in, or made with respect to, any obligation which purports to give the
obligee the right to require payment in gold or in any particular kind of
coin or currency other than Philippine currency or in an amount of money
of the Philippines measured thereby, shall be as it is hereby declared
against public policy null and void, and of no effect, and no such provision
shall be contained in, or made with respect to, any obligation thereafter
incurred. Every obligation heretofore and hereafter incurred, whether or
not any such provision as to payment is contained therein or made with
respect thereto, shall be discharged upon payment in any coin or currency
which at the time of payment is legal tender for public and private debts

Section 63 of Republic Act No. 265, as amended (Central Bank Act)
provides: Checks representing deposit money do not have legal tender
power and their acceptance in the payment of debts, both public and
private, is at the option of the creditor: Provided, however, that a check
which has been cleared and credited to the account of the creditor shall be
equivalent to a delivery to the creditor of cash in an amount equal to the
amount credited to his account.

A check, whether a manager's check or ordinary check, is not legal tender,
and an offer of a check in payment of a debt is not a valid tender of
payment and may be refused receipt by the obligee or creditor.