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Velarde v CA novate necessitating a new agreement between the

Facts: Petitioners entered into a deed of sale with parties."

assumption of mortgage with private respondents
paying a downpayment of P800,000 and assuming Ruling: The petition is granted
the mortgage amount of P1.8M in favor of BPI.
The failure of the vendee to pay the balance of the
Petitioners further agreed "to strictly and faithfully purchase price constitutes a breach on the
comply with all the terms and conditions appearing performance of a reciprocal obligation, and not a
in the real estate mortgage signed and executed by violation of the terms and conditions of the
the vendor in favor of BPI . . . as if the same were mortgage contract. This gave rise to the vendor's
originally signed and executed by the vendee." As right to rescind the contract. However, the automatic
part of the deed, petitioner Avelina with her rescission and forfeiture of payment clauses in the
husband's consent executed an undertaking that mortgage contract does not apply. Considering that
during the pendency of the application for the the rescission of the contract was based on Article
assumption of mortgage she agreed to continue 1191 of the Civil Code, mutual restitution by the
paying said loan in accordance with the mortgage parties is required.
deed and that in the event of violation of any of the
terms and conditions of the deed of real estate CIVIL LAW; SPECIAL CONTRACTS; SALES;
mortgage, she agreed that the P800,000 down CONSTRUED; CASE AT BAR. In a contract of
payment shall be forfeited as liquidated damages and sale, the seller obligates itself to transfer the
the deed of sale with assumption of mortgage shall ownership of and deliver a determinate thing, and
be deemed automatically cancelled. When the bank the buyer to pay therefor a price certain in money or
denied the application for assumption of mortgage, its equivalent. Private respondents had already
petitioners stopped making payments. Thus, notice performed their obligation through the execution of
of cancellation/rescission was sent to petitioners for the Deed of Sale, which effectively transferred
non-performance of their obligation. Aggrieved, ownership of the property to petitioner through
petitioners filed a complaint against private constructive delivery. Prior physical delivery or
respondent for specific performance, nullity of possession is not legally required, and the
cancellation, writ of possession and damages. execution of the Deed of Sale is deemed
equivalent to delivery.
Both parties admitted that their agreement mandated
that petitioners should pay the purchase price RESCISSION; OBLIGOR'S FAILURE TO
balance of P1.8M to private respondents in case the COMPLY WITH EXISTING OBLIGATION.
request to assume the mortgage would be The right of rescission of a party to an obligation
disapproved. The trial court dismissed the complaint, under Article 1191 of the Civil Code is predicated on
but on reconsideration, directed the parties to a breach of faith by the other party who violates the
proceed with the sale. On appeal, the Court of reciprocity between them. The breach contemplated
Appeals upheld the validity of the rescission. Hence, in the said provision is the obligor's failure to
this recourse comply with an existing obligation. When the
obligor cannot comply with what is incumbent upon
Issue: it, the obligee may seek rescission and, in the
1. The Court of Appeals erred in holding that the absence of any just cause for the court to determine
non-payment of the mortgage obligation resulted in the period of compliance, the court shall decree the
a breach of the contract. rescission.
2. The Court of Appeals erred in holding that the
rescission (resolution) of the contract by private CASE AT BAR. In the present case, private
respondents was justified. respondents validly exercised their right to rescind
3. The Court of Appeals erred in holding that the contract, because of the failure of petitioners to
petitioners' January 7, 1987 letter gave three 'new comply with their obligation to pay the balance of
conditions' constituting mere offers or an attempt to the purchase price. Indubitably, the latter violated
the very essence of reciprocity in the contract of
sale, a violation that consequently gave rise to compelled to cancel and rescind the said contract.
private respondents' right to rescind the same in The case was submitted for decision on a stipulation
accordance with law. of facts and the exhibits therein mentioned

FORFEITURE OF PAYMENT DOES NOT APPLY The judgment of the trial court condemned the
WHERE BREACH WAS NON-PERFORMANCE; defendant to pay to the plaintiff a total of
MUTUAL RESTITUTION, REQUIRED. As P35,317.93, with legal interest from the date of the
discussed earlier, the breach committed by presentation of the complaint, and with costs
petitioners was the nonperformance of a reciprocal
obligation, not a violation of the terms and Issue:
conditions of the mortgage contract. Therefore, the 1. The lower court erred in finding that appellant had
automatic rescission and forfeiture of payment agreed to sell to the appellee 400,000, and not only
clauses stipulated in the contract does not apply. 300,000, gallons of molasses
Instead, Civil Code provisions shall govern and 2. The lower court erred in finding that the appellant
regulate the resolution of this controversy. rescinded without sufficient cause the contract for
Considering that the rescission of the contract is the sale of molasses executed by it and the appellee
based on Article 1191 of the Civil Code, mutual 3. The lower court erred in rendering judgment in
restitution is required to bring back the parties to favor of the appellee and not in favor of the
their original situation prior to the inception of the appellant in accordance with the prayer of its answer
contract. Accordingly, the initial payment of and cross-complaint
P800,000 and the corresponding mortgage payments 4. The lower court erred in denying appellant's
in the amounts of P27,225, P23,000 and P23,925 motion for a new trial
(totaling P874,150.00) advanced by petitioners
should be returned by private respondents, lest the Ruling: The petition is granted with modification
latter unjustly enrich themselves at the expense of (Molasses- thick, dark brown syrup obtained from
the former. raw sugar during the refining process, a version of
which is used in baking)
OBLIGATION CREATED. Rescission creates
the obligation to return the object of the contract. It 1. The trial court found the former amount to be
can be carried out only when the one who demands correct. The appellant contends that the smaller
rescission can return whatever he may be obliged to amount was the basis of the agreement.
restore. To rescind is to declare a contract void at its
inception and to put an end to it as though it never We agree with appellant that the above quoted
was. It is not merely to terminate it and release the correspondence is susceptible of but one
parties from further obligations to each other, but to interpretation. The Hawaiian-Philippine Co. agreed
abrogate it from the beginning and restore the parties to deliver to Song Fo & Company 300,000 gallons
to their relative positions as if no contract has been of molasses. The Hawaiian-Philippine Co. also
made. believed it possible to accommodate Song Fo &
Company by supplying the latter company with an
Song Fo v Hawaiian Philippines extra 100,000 gallons. But the language used with
Facts: In the court of First Instance of Iloilo, Song reference to the additional 100,000 gallons was not a
Fo & Company, plaintiff, presented a complaint with definite promise. Still less did it constitute an
two causes of action for breach of contract against obligation
the Hawaiian-Philippine Co., defendant, in which
judgment was asked for P70,369.50, with legal 2. Some doubt has risen as to when Song Fo &
interest, and costs Company was expected to make payments for the
molasses delivered. Exhibit F speaks of payments
The defendant set up the special defense that since "at the end of each month." Exhibit G is silent on the
the plaintiff had defaulted in the payment for the point. Exhibit M, a letter of March 28, 1923, from
molasses delivered to it by the defendant under the Warner, Barnes & Co., Ltd., the agent of the
contract between the parties, the latter was Hawaiian-Philippine Co. to Song Fo & Company,
mentions "payment on presentation of bills for each rescission for non-performance. Not only this, but
delivery." Exhibit O, another letter from Warner, the Hawaiian-Philippine Co. waived this condition
Barnes & Co., Ltd. to Song Fo & Company dated when it arose by accepting payment of the overdue
April 2, 1923, is of a similar tenor. Exhibit P, a accounts and continuing with the contract.
communication sent direct by the Hawaiian- Thereafter, Song Fo & Company was not in default
Philippine Co. to Song Fo & Company on April 2, in payment so that the Hawaiian-Philippine co. had
1923, by which the Hawaiian-Philippine Co. gave in reality no excuse for writing its letter of April 2,
notice of the termination of the contract, gave as the 1923, cancelling the contract.
reason for the rescission, the breach by Song Fo & We rule that the plaintiff is entitled to recover
Company of this condition: "You will recall that damages from the defendant for breach of contract
under the arrangements made for taking our on the first cause of action in the amount of P3,000
molasses, you were to meet our accounts upon and on the second cause of action in no amount.
presentation and at each delivery." Not far removed Appellant's assignments of error are accordingly
from this statement, is the allegation of plaintiff in found to be well taken in part and not well taken in
its complaint that "plaintiff agreed to pay defendant, part.
at the end of each month upon presentation
accounts." Vermen Realty v CA
Facts: On March 2, 1981, petitioner Vermen Realty
Resolving such ambiguity as exists and having in and Development Corporation, as First Party, and
mind ordinary business practice, a reasonable private respondent Seneca Hardware Co., Inc., as
deduction is that Song Fo & Company was to pay Second Party, entered into a contract denominated as
the Hawaiian-Philippine Co. upon presentation of "Offsetting Agreement"
accounts at the end of each month. Under this
hypothesis, Song Fo & Company should have paid On June 21, 1985, private respondent filed a
for the molasses delivered in December, 1922, and complaint with the Regional Trial Court of Quezon
for which accounts were received by it on January 5, City (Branch 92) for rescission of the Offsetting
1923, not later than January 31 of that year. Instead, Agreement with damages. In said complaint, private
payment was not made until February 20, 1923. All respondent alleged that petitioner Vermen Realty
the rest of the molasses was paid for either on time Corporation had stopped issuing purchase orders of
or ahead of time. construction materials after April, 1982, without
valid reason, thus resulting in the stoppage of
The terms of payment fixed by the parties are deliveries of construction materials on its (Seneca
controlling. The time of payment stipulated for in Hardware) part, in violation of the Offsetting
the contract should be treated as of the essence of Agreement.
the contract. Theoretically, agreeable to certain
conditions which could easily be imagined, the In its Answer filed on August 15, 1985, petitioner
Hawaiian-Philippine Co. would have had the right to alleged that the fault lay with private respondent
rescind the contract because of the breach of Song (plaintiff therein): although petitioner issued
Fo & Company. But actually, there is here present no purchase orders, it was private respondent who
outstanding fact which would legally sanction the could not deliver the supplies ordered, alleging that
rescission of the contract by the Hawaiian-Philippine they were out of stock. (However, during a hearing
Co. on January 28, 1987, the Treasurer of petitioner
corporation, when asked where the purchase orders
The general rule is that rescission will not be were, alleged that she was going to produce the
permitted for a slight or casual breach of the same in court, but the same was never produced
contract, but only for such breaches as are so (Rollo. p. 30). Moreover, private respondent quoted
substantial and fundamental as to defeat the higher prices for the construction materials which
object of the parties in making the agreement. A were available. Thus, petitioner had to resort to its
delay in payment for a small quantity of molasses other suppliers. Anent the query as to why Unit 602
for some twenty days is not such a violation of an was leased to another tenant, petitioner averred that
essential condition of the contract was warrants
this was done because private respondent had not UNDER ARTICLE 1191 OF THE CIVIL CODE;
paid anything for it. GENERAL RULE; PETITIONER'S
As of December 16, 1986, private respondent had UNDER THE OFFSETTING AGREEMENT
paid petitioner P110,151.75 in cash, made deliveries CONSTITUTES SUBSTANTIAL BREACH,
of construction materials worth P219,727.00, NECESSITATING RESOLUTION OF THE
leaving a balance of P27,848.25 representing the CONTRACT. Article 1191 of the Civil Code
purchase price of unit 601 (Rollo, p. 28). The price provides the remedy of rescission in (more
of one condominium unit was P138,000.00. appropriately, the term is "resolution") in case of
reciprocal obligations, where one of the obligors
After conducting hearings, the trial court rendered a fails to comply with what is incumbent upon him.
decision dismissing the complaint and ordering the The general rule is that rescission of a contract will
plaintiff (private respondent in this petition) to pay not be permitted for a slight or causal breach, but
defendant (petitioner in this petition) on its only for such substantial and fundamental breach as
counterclaim in the amount of P27,848.25 would defeat the very object of the parties in
representing the balance due on the purchase price executing the agreement. The question of whether a
of condominium unit 601. breach of contract is substantial depends upon the
attendant circumstances (Universal Food Corp. vs.
Issue: Whether or not the circumstances of the case Court of Appeals, 33 SCRA 1, [1970]). The
warrant rescission of the Offsetting Agreement as impossibility of fulfillment of the obligation on the
prayed for by Private Respondent when he instituted part of petitioner necessitates resolution of the
the case before the trial court. contract for indeed, the non-fulfillment of the
obligation aforementioned constitutes substantial
Ruling: The petition is denied. breach of the Offsetting Agreement. The possibility
of exercising the option of whether or not to transfer
CIVIL LAW; OBLIGATION AND CONTRACTS; to condominium units in Phase II was one of the
RECIPROCAL OBLIGATION; ITS NATURE. factors which were considered by private respondent
Reciprocal obligations are those created or when it entered into the agreement.
established at the same time, out of the same cause,
and which results in a mutual relationship of creditor Since the construction of the Vermen Pines
and debtor between parties. In reciprocal Condominium Phase II has stopped, petitioner
obligations, the performance of one is conditioned would be in no position to perform its obligation to
on the simultaneous fulfillment of the other give private respondent the option to transfer to
obligation (Abaya vs. Standard Vacuum Oil Co., 101 Phase II. It would be the height of injustice to make
Phil. 1262 [1957]). private respondent wait for something that may
Under the agreement, private respondent shall never come.
deliver to petitioner construction materials worth
P552,000.00 under the conditions set forth in the Woodhouse v Halili
Offsetting Agreement. Petitioner's obligation under Facts:
the agreement is three-fold: he shall pay private On November 29, 1947, plaintiff Woodhouse entered
respondent P276,000.00 in cash; he shall deliver into a written agreement with defendant Halili
possession of units 601 and 602, Phase I, Vermen stating among others that:
Pines Condominiums (with total value of 1) that they shall organize a partnership for the
P276,000.00) to private respondent; upon bottling and distribution of Missionsoft drinks,
completion of Vermen Pines Condominiums Phase plaintiff to act as industrial partner or manager, and
II, private respondent shall be given option to the defendant as a capitalist, furnishing the capital
transfer to similar units therein. necessary therefore;
2) that plaintiff was to secure the Mission Soft
RESCISSION (BETTER TERM IS Drinks franchise for and in behalf of the proposed
3) that the plaintiff was to receive 30 per cent of the 2. WON false representation, if it existed, annuls the
net profits of the business. agreement to form the partnership

Prior to entering into this agreement, plaintiff had Ruling: With modification above indicated, the
informed the Mission Dry Corporation of Los judgment appealed from is hereby affirmed.
Angeles, California, that he had interested a
prominent financier (defendant herein) in the FRAUD; FALSE REPRESENTATION; DOLO
business, who was willing to invest half a CAUSANTE AND DOLO
milliondollars in the bottling and distribution of the INCIDENTE; IT IS THE FORMER THAT
said beverages, and requested, in order that he may VITIATES CONSENT. Fraud is manifested in
close the deal with him, that the right to bottle and illimitable number of degrees or gradations from
distribute be granted him for a limited time under the the innocent praises of a salesman about the
condition that it will finally be transferred to the excellence of his wares to those malicious
corporation. Pursuant to this request, plaintiff was machinations and representations that the law
given a thirty days option on exclusive bottling and punishes as a crime. In consequence, article 1270
distribution rights for the Philippines. The contract of the Spanish Civil Code distinguishes two kinds
was finally signed by plaintiff on December 3, 1947. of (civil) fraud, the causal fraud which may be a
ground for the annulment of a contract, and the
When the bottling plant was already in operation, incidental deceit which only renders the party who
plaintiff demanded of defendant that the partnership employs it liable for damages. In order that fraud
papers be executed. Defendant Halili gave excuses may vitiate consent, it must be the causal (dolo
and would not execute said agreement, thus the causante), not merely the incidental (dolo
complaint by the plaintiff. incidente), inducement to the making of the contract
Plaintiff prays for the: (art. 1270, Span. Civ. Code; Hill vs. Veloso, 31 Phil.,
1)execution of the contract of partnership; 160).
2) accounting of profits In the case at bar, inasmuch as the principal
3)share thereof of 30 percent with 4) damages in the consideration, the main cause that induced defendant
amount of P200,000. to enter into the partnership agreement with plaintiff,
The Defendant on the other hand claims that: was the ability of plaintiff to get the exclusive
1) the defendants consent to the agreement, was franchise to bottle and distribute for the defendant or
secured by the representation of plaintiff that he was for the partnership, the false representation made by
the owner, or was about to become owner of an the plaintiff was not the casual consideration, or the
exclusive bottling franchise, which representation principal inducement, that led the defendant to enter
was false, and that plaintiff did not secure the into the partnership agreement.
franchise but was given to defendant himself
2) that defendant did not fail to carry out his DAMAGES FOR DOLO INCIDENTE;
undertakings, but that it was plaintiff who failed and PARTNERSHIP. While the representation that
3)that plaintiff agreed to contribute to the exclusive plaintiff had the exclusive franchise did not vitiate
franchise to the partnership, but plaintiff failed to do defendant' consent to the contract, it was used by
so with a plaintiff to get from defendant a share of 30 percent
4) counterclaim for P200,00 as damages. of the net profits; in other words, by pretending that
he had the exclusive franchise and promising to
The CFI ruling: 1) accounting of profits and to pay transfer it to defendant, he obtained the consent of
plaintiff 15 % of the profits and that the the latter to give him (plaintiff) a big slice in the net
2) execution of contract cannot be enforced upon profits. This is the dolo incidente defined in article
parties. Lastly, the 1270 of the Spanish Civil Code, because it was used
3) fraud wasnt proved to get the other party's consent to a big share in the
profits, an incidental matter in the agreement. (8
Issue:1. WON plaintiff falsely represented that he Manresa, 602.)
had an exclusive franchise to bottle Mission
CONTRACTS AND OBLIGATIONS; CONSENT, but the mother, together with several other members
NOT VITIATED BY DOLO INCIDENTE; of the Gutierrez family were accommodated therein.
PARTNERSHIP, CANNOT BE ENFORCED. A passenger in the autobus, by the name of Narciso
Having arrived at the conclusion that the agreement Gutierrez, was en route from San Pablo, Laguna, to
to organize a partnership may not be declared null Manila. The collision between the bus and the
and void, may the agreement be carried out or automobile resulted in Narciso Gutierrez suffering a
executed? Held: Under the Spanish Civil Code, the fractured right leg which required medical
defendant has an obligation to do, not to give. The attendance for a considerable period of time, and
law recognizes the individual's freedom or liberty to which even at the date of the trial appears not to
do an act he has promised to do, or not to do it, as he have healed properly.
pleases. This is a very personal act (acto
personalisimo) of which courts may not compel Issue: Whether or not both the driver of the truck
compliance, as it is considered as an act of violence and automobile are liable for damages and
to do so. (29 as it is considered as an act of violence indemnification due to their negligence. What are
to do so. (19 Scaevolla, 428, 431-432.) the legal obligations of the defendants?

FALSE REPRESENTATION; DAMAGES FOR Ruling: The petition is granted

DOLO INCIDENTE. Plaintiff is entitled under
the terms of the agreement to 30 per cent of the net DAMAGES; MASTER AND SERVANT; MOTOR
profits of the business. Against this amount of VEHICLES; LIABILITY OF
damages, the damage the defendant suffered by HEAD OF HOUSE FOR ACTS OF DRIVER WHO
plaintiff's misrepresentation that he had the IS HIS MINOR CHILD. The head of a house, the
exclusive franchise, must be set off. (Art. 1101, owner of an automobile, who maintains it for the
Span. Civ. Code.) When the defendant learned, in general use of his family, is
Los Angeles, California, that plaintiff did not have liable for its negligent operation by one of his
the exclusive franchise which he pretended he had children, whom he designates or permits to run it,
and which he had agreed to transfer to the where the car is occupied and being used at the time
partnership, his spontaneous reaction was to reduce of the injury for the
the plaintiff's share from 30 per cent to 15 per cent pleasure of other members of the owner's family
only, to which reduction plaintiff appears to have than the child driving it.
readily given his assent. Held: By the
misrepresentation of the plaintiff, he obtained a very CASE AT BAR. One G, a passenger in a truck,
high percentage (30%) of share in the profits. Upon recovers damages in the amount of P5,000 from the
learning of the misrepresentation, defendant reduced owner of a private automobile not in the car, the
plaintiff's share to 15 per cent, to which defendant machine being operated by a son 18 years of age,
assented. The court can do no better than follow with other members of the family accommodated
such appraisal of the damages as the parties therein, and from the chauffeur and owner of the
themselves had adopted. truck which collided with the private automobile on
a bridge, causing physical injuries to G as a result of
Guiterrez v Guiterrez the automobile accident
Facts: On February 2, 1930, a passenger truck and
an automobile of private ownership collided while Vasquez v Borja
attempting to pass each other on a bridge. The truck Facts:
was driven by the chauffeur Abelardo Velasco, and In January 1932, Francisco De Borja entered into a
was owned by saturnine Cortez. The automobile was contract of sale with the NVSD (Natividad-Vasquez
being operated by Bonifacio Gutierrez, a lad 18 Sabani Development Co., Inc.). The subject of the
years of age, and was owned by Bonifacios father sale was 4,000 cavans of rice valued at Php2.10 per
and mother, Mr. and Mrs. Manuel Gutierrez. At the cavan. On behalf of the company, the contract was
time of the collision, the father was not in the car, executed by Antonio Vasquez as the companys
acting president. NVSD. only delivered 2,488
cavans and failed and refused despite demand to fault and negligence referred to in articles 1101-1104
deliver the rest hence De Borja incurred damages of the Civil Code are those incidental to the
(apparently, NVSD was insolvent). He then sue fulfillment or nonfulfillment of a contractual
Vasquez for payment of damages. obligation; while the fault or negligence referred to
in article 1902 is the culpa aquiliana of the civil law,
Issue: Whether or not Vasquez is liable for damages. homologous but not identical to tort of the common
law, which gives rise to an obligation independently
Ruling: The petition is dismissed. of any contract. (Cf. Manila R. R. Co. vs. Cia.
Trasatlantica, 38 Phil., 875, 887-890; Cangco vs.
CORPORATIONS; OFFICERS' PERSONAL Manila R. R. Co., 38 Phil., 768.) The fact that the
LIABILITY ON CONTRACTS. It is well known corporation, acting thru Vazquez as its manager, was
that a corporation is an artificial being invested by guilty of negligence in the fulfillment of the
law with a personality of its own, separate and contract, did not make Vazquez principally or even
distinct from that of its stockholders and from that of subsidiarily liable for such negligence. Since it was
its officers who manage and run its affairs. The mere the corporation's contract, its nonfulfillment,
fact that its personality is owing to a legal fiction whether due to negligence or fault or to any other
and that it necessarily has to act thru its agents, does cause, made the corporation and not its agent liable.
not make the latter personally liable on a contract
duly entered into, or for an act lawfully performed, On the other hand, independently of the contract
by them for and in its behalf. The legal fiction by Vazquez by his fault or negligence caused damage to
which the personality of a corporation is created is a the plaintiff, he would be liable to the latter under
practical reality and necessity. Without it no article 1902 of the Civil Code. But then the
corporate entities may exist and no corporate plaintiff's cause of action should be based on culpa
business may be transacted. Such legal fiction may aquiliana and not on the contract alleged in his
be disregarded only when an attempt is made to use complaint herein; and Vazquez' liability would be
it as a cloak to hide an unlawful or fraudulent principal and not merely subsidiary, as the Court of
purpose. No such thing has been alleged or proven Appeals has erroneously held.
in this case. It has not been alleged nor even
intimated that Vazquez personally benefited by the NO CAUSE OF ACTION BASED ON "CULPA
contract of sale in question and that he is merely AQUILIANA" ALLEGED IN COMPLAINT OR
invoking the legal fiction to avoid personal liability. LITIGATED IN TRIAL COURT; NO
Neither is it contended that he entered into said JURISDICTION OVER THE ISSUE. No such
contract for the corporation in bad faith and with cause of action was alleged in the complaint or tried
intent to defraud the plaintiff. We find no legal and by express or implied consent of the parties by virtue
factual basis upon which to hold him liable on the of section 4 of Rule 17. Hence the trial court had no
contract either principally or subsidiarily jurisdiction over the issue and could not adjudicate
upon it. (Reyes vs. Diaz, G. R. No. 48754.)
NEGLIGENCE. The trial court found him guilty Consequently it was error for the Court of Appeals
of negligence in the performance of the contract and to remand the case to the trial court to try and decide
held him personally liable on that account. On the such issue
other hand, the Court of Appeals found that he "no
solamente obro con negligencia, sino interviniendo De Guia v Manila Electric
culpa de su parte, por lo que de acuerdo con los arts. Facts:
1102, 1103 y 1902 del Codigo Civil, el debe ser
responsable subsidiariamente del pago de la The plaintiff had boarded the car as a passenger for
cantidad objeto de la demanda." We think both the the city of Manila and the company undertook to
trial court and the Court of Appeals erred in law in convey him for hire. The relation between the parties
so holding. They have manifestly failed to was, therefore, of a contractual nature, and the duty
distinguish a contractual from an extracontractual of the carrier is to be determined with reference to
obligation, or an obligation arising from contract the principles of contract law, that is, the company
from an obligation arising from culpa aquiliana. The was bound to convey and deliver the plaintiff safely
and securely with reference to the degree of care for the breach of a contract must be determined in
which, under the circumstances, is required by law the light of the situation in existence at the time the
and custom applicable to the case (art. 1258, Civil contract is made; and the damages ordinarily
Code). Upon failure to comply with that obligation recoverable are in all events limited to such as might
the company incurred the liability defined in articles be reasonably foreseen in the light of the facts then
1103-1107 of the Civil Code. (Cangco vs. Manila known to the contracting parties."
Railroad Company, 38 Phil. Rep., 768; Manila
Railroad Company vs. Compaia Trasatlantica, and It results from the foregoing that the judgment
Atlantic, Gulf & Pacific Co., 38 Phil. Rep., 875 appealed from must be modified by reducing the
amount of the recovery to eleven hundred pesos
Ruling: (P1,100), with legal interest from November 8,
From the nature of the liability thus incurred, it is 1916. As thus modified the judgment is affirmed,
clear that the defendant company can not avail without any special pronouncement as to costs of
itself of the last paragraph of article 1903 of the this instance
Civil Code, since that provision has reference to
liability incurred by negligence in the absence of LIABILITY OF CARRIER FOR NEGLIGENCE
contractual relation, that is, to the culpa aquiliana OF EMPLOYEE. Upon failure to comply with
of the civil law. It was therefore irrelevant for the this obligation the carrier incurs the liability
defendant company to prove, as it did, that the commonly incident to the breach of contractual
company had exercised due care in the selection and obligations; and where the delinquency is due to the
instruction of the motorman who was in charge of its negligence if its employee, the carrier cannot avail
car and that he was in fact an experienced and itself of the defense that it had exercised due care in
reliable servant. the selection and instruction of such employee and
that he was in fact an experienced and reliable
At this point, however, it should be observed that servant.
although in case like this the defendant must answer
for the consequences of the negligence of its EXTENT OF CARRIER S LIABILITY FOR
employee, the court has the power to moderate LOSSES AND DAMAGES; GOOD FAITH. A
liability according to the circumstances of the case street-railway company which has exercised due
(art. 1103, Civ. Code) . Furthermore, we think it care in the selection and instruction of the motorman
obvious that an employer who has in fact upon one of its cars should be considered a debtor in
displayed due diligence in choosing and good faith as regards liability towards a passenger
instructing his servants is entitled to be who is injured by the negligence of the motorman in
considered a debtor in good faith, within the directing the car; and the liability of the carrier to the
meaning of article 1107 of the same Code. injured party extends to such losses and damages
Construing these two provisions together, and only as could be reasonably foreseen as a probable
applying them to the facts of this case, it results consequence of the physical injuries inflicted upon
that the defendant's liability is limited to such the passenger and which are in fact a necessary
damages as might, at the time of the accident, result of those injuries.
have been reasonably foreseen as a probable
consequence of the physical injuries inflicted PHYSICAL INJURIES; DAMAGES; EXPENSES
upon the plaintiff and which were in fact a OF MEDICAL SERVICE. A person who is
necessary result of those injuries. There is nothing entitled to recover expenses of cure as an item of
novel in this proposition, since both the civil and the damage in a civil action for physical injuries cannot
common law are agreed upon the point that the recover doctor's bills for services gratuitously
damages ordinarily recoverable for the breach of a rendered; and the claim must furthermore be limited
contractual obligation, against a person who has to medical services reasonably suited to the case.
acted in good faith, are such as can reasonably be Charges of professional experts retained merely with
foreseen at the time the obligation is contracted. In a view to promote the success of the action for
Daywalt vs. Corporacion de PP. Agustinos Recoletos damages should not be allowed.
(39 Phil., 687), we said: "The extent of the liability
Sarmiento v Spouses Cabrido PERFORMANCE THEREOF. Obligations
Facts: arising from contracts have the force of law between
The controversy herein arose when a piece of the contracting parties. Corollarily, those who in the
diamond was broken by Zenon Santos, an employee performance of their obligations are guilty of fraud,
at the jewelry shop, in the process of dismounting it negligence or delay and those who in any manner
from an original setting. The diamond was claimed contravene the tenor thereof, are liable for damages.
to be .33 carat and almost perfect in cut and clarity. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the
As a result of the incident, the petitioner herein was nature of the obligation and corresponds with the
forced to replace the broken diamond to its owner in circumstances of the persons, of the time and of the
the amount of P30,000.00. The petitioner filed a place.
complaint for damages with the Metropolitan Trial
Court in Cities (MTCC) and claimed that the DAMAGES; MORAL DAMAGES; GENERALLY
dismounting of the diamond from its original setting NOT RECOVERABLE IN ACTIONS
was part of the obligation assumed by the FOR BREACH OF CONTRACT; EXCEPTION.
respondents under the contract of service, the As a general rule, moral damages are not
respondent spouses being the owner of the jewelry recoverable in actions for damages predicated on a
shop and the other respondent their employee. Thus, breach of contract for it is not one of the items
they should be held liable for the damages arising enumerated under Article 2219 of the Civil Code.
from its breakage. The MTCC decided in favor of Moral damages may be awarded in a breach of
the petitioner herein. But on appeal, the Regional contract only when there is proof that defendant
Trial Court (RTC) reversed the decision; thus acted in bad faith, or was guilty of gross negligence
absolving the respondents of any responsibility amounting to bad faith, or in wanton disregard of his
arising from breach of contract. The Court of contractual obligation.
Appeals affirmed the judgment of the RTC, hence,
this petition for review. Crisostomo v CA
Ruling: The petition is granted. Petitioner Estela L. Crisostomo contracted the
According to the Supreme Court, preponderance of services of respondent Caravan Travel and Tours
evidence supported the view that Marilou and Zenon International, Inc. to facilitate her tour known as
Santos were employed at the jewelry shop in order "Jewels of Europe." On June 12, 1991, Meriam
to perform activities, which were usually necessary Menor, respondent's ticketing manager as well as
or desirable in its business. The Court, therefore, petitioner's niece, delivered petitioner's travel
held that an obligation to pay actual damages arose documents and plane tickets and informed her to be
in favor of the petitioner against the respondent at the airport on June 15, 1991, two hours before
spouses who admittedly owned and managed the departure. On the stated date when the petitioner
jewelry shop. It was proven that petitioner replaced went to the airport, the flight that she was supposed
the damaged jewelry in the amount of P30,000.00. to take had departed the previous day. She
The facts of the case also justified the award of complained to Menor, but the latter prevailed upon
moral damages. The petition was granted and the her to take another tour known as "British Pageant."
assailed decision of the Court of Appeals was
reversed and set aside by the Supreme Court Upon petitioner's return from Europe, she demanded
ordering the respondent spouses to pay petitioner from respondent the reimbursement of P61,421.70
actual damages of P30,000.00 and moral damages of representing the difference between the sum she paid
P10,000.00. for "Jewels of Europe" and the amount she owed
respondent for the "British Pageant" tour, but despite
several demands, respondent company refused to
CIVIL LAW; OBLIGATIONS; SHALL HAVE THE reimburse the amount, contending that the same was
FORCE OF LAW BETWEEN PARTIES non-refundable. Thus, she filed a complaint against
WHEN THE SAME AROSE FROM CONTRACTS; respondent for breach of contract of carriage and
EFFECT OF FAULT OR NEGLIGENCE IN THE damages. In its answer, respondent denied the
responsibility and insisted that petitioner was duly water or air, for compensation, offering their
informed of the correct departure as legibly printed services to the public.
on the plane ticket two days ahead of the scheduled
trip. After trial, the lower court awarded damages to TRAVEL AGENCY IS NOT A COMMON
the petitioner on the basis that the respondent was CARRIER. It is obvious from the above
negligent, but it deducted 10% from the amount for definition that respondent is not an entity engaged in
the contributory negligence of petitioner. On appeal, the business of transporting either passengers or
the Court of Appeals found petitioner to be more goods and is therefore, neither a private nor a
negligent, hence, it directed her to pay the balance of common carrier. Respondent did not undertake to
the price for the "British Pageant." Hence, this transport petitioner from one place to another since
petition. its covenant with its customers is simply to make
travel arrangements in their behalf.
Issue: Whether or not Menor is liable for negligence Respondent's services as a travel agency include
procuring tickets and facilitating travel permits or
Ruling: The petition is denied. visas as well as booking customers for tours. While
The Court did not agree with the finding of the petitioner concededly bought her plane ticket
lower court that Menor's negligence concurred with through the efforts of respondent company, this does
the negligence of petitioner and resultantly caused not mean that the latter ipso facto is a common
damage to the latter. Menor's negligence was not carrier. At most, respondent acted merely as an agent
sufficiently proved, considering that the only of the airline, with whom petitioner ultimately
evidence presented was petitioner's uncorroborated contracted for her carriage to Europe.
narration of the events. It is well-settled that the
party alleging a fact has the burden of proving it and OBLIGATIONS AND CONTRACTS; CONTRACT
a mere allegation cannot take the place of evidence. BETWEEN THE TRAVEL AGENCY
If the plaintiff, upon whom rests the burden of AND ITS CLIENT IS ONE FOR SERVICES AND
proving his cause of action, fails to show in a NOT ONE OF CARRIAGE. Respondent's
satisfactory manner facts upon which he bases his obligation to petitioner in this regard was simply to
claim, the defendant is under no obligation to prove see to it that petitioner was properly booked with the
his exception or defense. Contrary to petitioner's airline for the appointed date and time. Her transport
claim, the evidence on record showed that to the place of destination, meanwhile, pertained
respondent exercised due diligence in performing its directly to the airline. The object of petitioner's
obligation under the contract and followed standard contractual relation with respondent is the latter's
procedure in rendering its services to petitioner. service of arranging and facilitating petitioner's
Accordingly, petitioner was ordered to pay booking, ticketing and accommodation in the
respondent the amount of P12,901.00 representing package tour. In contrast, the object of a contract of
the balance of the price of the British Pageant carriage is the transportation of passengers or goods.
Package tour. It is in this sense that the contract between the
parties in this case was an ordinary one for services
CIVIL LAW; LEASE; COMMON CARRIERS; and not one of carriage. Petitioner's submission is
CONTRACT OF CARRIAGE; ELUCIDATED. premised on a wrong assumption.
By definition, a contract of carriage or transportation
is one whereby a certain person or association of TRAVEL AGENCY IS NOT BOUND TO
persons obligate themselves to transport persons, OBSERVE EXTRAORDINARY DILIGENCE IN
things, or news from one place to another for a fixed THE PERFORMANCE OF ITS OBLIGATION.
price. Such person or association of persons are The nature of the contractual relation
regarded as carriers and are classified as private or between petitioner and respondent is determinative
special carriers and common or public carriers. of the degree of care required in the performance of
A common carrier is defined under Article 1732 of the latter's obligation under the contract. For reasons
the Civil Code as persons, corporations, firms or of public policy, a common carrier in a contract of
associations engaged in the business of carrying or carriage is bound by law to carry passengers as far
transporting passengers or goods or both, by land, as human care and foresight can provide using the
utmost diligence of very cautious persons and with incumbent upon her to take ordinary care of her
due regard for all the circumstances. As earlier concerns. This undoubtedly would require that she at
stated, however, respondent is not a common carrier least read the documents in order to assure herself of
but a travel agency. It is thus not bound under the the important details regarding the trip.
law to observe extraordinary diligence in the
performance of its obligation, as petitioner claims. NEGLIGENCE OF THE OBLIGOR IN THE
GOOD FATHER OF A FAMILY. Since the OBLIGEE. The negligence of the obligor in the
contract between the parties is an ordinary one for performance of the obligation renders him liable for
services, the standard of care required of respondent damages for the resulting loss suffered by the
is that of a good father of a family under Article obligee. Fault or negligence of the obligor consists
1173 of the Civil Code. This connotes reasonable in his failure to exercise due care and prudence in
care consistent with that which an ordinarily prudent the performance of the obligation as the nature of the
person would have observed when confronted with a obligation so demands. There is no fixed standard of
similar situation. The test to determine whether diligence applicable to each and every contractual
negligence attended the performance of an obligation and each case must be determined upon
obligation is: did the defendant in doing the alleged its particular facts. The degree of diligence required
negligent act use that reasonable care and caution depends on the circumstances of the specific
which an ordinarily prudent person would have used obligation and whether one has been negligent is a
in the same situation? If not, then he is guilty of question of fact that is to be determined after taking
negligence. into account the particulars of each case.


DILIGENCE IN PERFORMING ITS It appears that in the early morning hours of October
OBLIGATIONS UNDER THE CONTRACT; CASE 27, 1978, at the height of typhoon "Kading", a
AT BAR. Contrary to petitioner's claim the massive flood covered the towns near Angat Dam,
evidence on record shows that respondent exercised particularly the town of Norzagaray, causing several
due diligence in performing its obligations under the deaths and the loss and destruction of houses, farms,
contract and followed standard procedure in plants, working animals and other properties of the
rendering its services to petitioner. As correctly people residing near the Angat River.
observed by the lower court, the plane ticket issued
to petitioner clearly reflected the departure date and Private respondents blamed the sudden rush of water
time, contrary to petitioner's contention. The travel to the reckless and imprudent opening of all the
documents, consisting of the tour itinerary, vouchers three (3) floodgates of the Angat Dam spillway,
and instructions, were likewise delivered to without prior warning to the people living near or
petitioner two days prior to the trip. Respondent also within the vicinity of the dam.
properly booked petitioner for the tour, prepared the
necessary documents and procured the plane tickets. One of the contentions of the petitioner that it had
It arranged petitioner's hotel accommodation as well always exercised the diligence of a good father in
as food, land transfers and sightseeing excursions, in the selection of its officials and employees and in
accordance with its avowed undertaking. Therefore, their supervision. It also claimed that written
it is clear that respondent performed its prestation warnings were earlier sent to the towns concerned.
under the contract as well as everything else that was At the time typhoon "Kading" hit Bulacan with its
essential to book petitioner for the tour. Had torrential rain, a great volume of flood water flowed
petitioner exercised due diligence in the conduct of into the dam's reservoir necessitating the release of
her affairs, there would have been no reason for her the water therein in order to prevent the dam from
to miss the flight. Needless to say, after the travel collapsing and causing the loss of lives and
papers were delivered to petitioner, it became tremendous damage to livestock and properties.
Article 2176 of the Civil Code explicitly provides
Petitioners further contended that there was no direct "whoever by act or omission causes damage to
causal relationship between the alleged damages another there being fault or negligence is obliged to
suffered by the respondents and the acts and pay for the damage done."
omissions attributed to the former. That it was the
respondents who assumed the risk of residing near FORCE MAJEURE; CONSTRUED. Neither can
the Angat River, and even assuming that respondents petitioners escape liability by invoking force
suffered damages, the cause was due to a fortuitous majeure. Act of God or force majeure, by definition,
event and such damages are of the nature and are extraordinary events not foreseeable or
character of damnum absque injuria, hence, avoidable, events that could not be foreseen, or
respondents have no cause of action against them which, though foreseen, are inevitable. It is therefore
not enough that the event should not have been
Issue: Whether or not the petitioners NPC is guilty foreseen or anticipated, as is commonly believed,
of negligence. but it must be one impossible to foresee or to avoid.

Ruling: The petition is denied. WHERE NEGLIGENCE CONCURS

CIVIL LAW; OBLIGATIONS AND CONTRACTS; general rule, no person shall be responsible for those
NATURE AND EFFECT OF events which could not be foreseen or which though
OBLIGATIONS; CONCURRENT LIABILITY OF foreseen, were inevitable. However, the principle
OBLIGOR IN CASE OF FORCE MAJEURE. embodied in the act of God doctrine strictly requires
The doctrine laid down in the case of Juan F. Nakpil that the act must be occasioned solely by the
and Sons vs. Court of Appeals, (144 SCRA 596 violence of nature. Human intervention is to be
[1986]) is still good law, as far as the concurrent excluded from creating or entering into the cause of
liability of an obligor, in case of a force majeure, is the mischief. When the effect is found to be in part
concerned. The case of National Power Corp. v. the result of the participation of man, whether due to
Court of Appeals, (L-47481, 161 SCRA 334 [1988]) his active intervention or neglect or failure to act, the
reiterated the ruling in Juan F. Nakpil & Sons. In the whole occurrence is then humanized and removed
former case, this Court ruled that the obligor cannot from the rules applicable to the acts of God. It has
escape liability, if upon the happening of a fortuitous been held in several cases that when the negligence
event or an act of God, a corresponding fraud, of a person concurs with an act of God in producing
negligence, delay or violation or contravention in a loss, such person is not exempt from liability by
any manner of the tenor of the obligation as showing that the immediate cause of the damage
provided in Article 1170 of the Civil Code which was the act of God. To be exempt he must be free
results in loss or damage. from any previous negligence or misconduct by
which the loss or damage may have been
contended that unlike in Juan F. Nakpil & INJURIA; NOT APPLICABLE IN
Sons, (supra) there was no privity of contract THE PRESENCE OF GROSS NEGLIGENCE;
between herein petitioners and private respondents. CASE AT BAR. We cannot give credence to
They further alleged that they owed no specific duty petitioners' third assignment of error that the damage
to private respondents in the same way that the caused by the opening of the dam was in the nature
architect of a building owed a specific duty to its of damnum absque injuria, which presupposes that
owner. although there was physical damage, there was no
Petitioners, however, failed to consider that even if legal injury in view of the fortuitous events. There is
there was no contractual relation between no question that petitioners have the right, duty and
themselves and private respondents, they are still obligation to operate, maintain and preserve the
liable under the law on quasi-delict. facilities of Angat Dam, but their negligence cannot
be countenanced, however noble their intention may
be. The end does not justify the means, particularly without prejudice to the filing of ejectment suit. For
because they could have done otherwise than failure of the private respondents to vacate the
simultaneously opening the spillways to such extent. premises as demanded, petitioner filed an ejectment
suit against them.
CASE AT BAR. Petitioners insist that their Issue: Whether or not there is delay on the part of
giving of prior written warning should absolve them the private respondents to pay for monthly rental
from liability. However, as observed by the Court of
Appeals: "The notices were not delivered, or even Ruling: The petition is denied.
addressed to responsible officials of the
municipalities concerned who could have CIVIL LAW; OBLIGATIONS AND CONTRACTS;
disseminated the warning properly. They were ARTICLE 1169 OF THE CIVIL CODE;
delivered to ordinary employees and policemen. As APPLICABLE IN CASE AT BAR. It is very
it happened, the said notices do not appear to have clear that in the case at bar, no cause of action for
reached the people concerned, which are the ejectment has accrued. There was no failure yet on
residents beside the Angat River. The plaintiffs in the part of private respondents to pay rents for three
this case definitely did not receive any such warning. consecutive months. As the terms of the individual
Indeed, the methods by which the defendants verbal leases which were on a month-to-month basis
allegedly sent the notice or warning was so were not alleged and proved, the general rule on
ineffectual that they cannot claim, as they do in their necessity of demand applies, to wit: there is default
second assignment of error, that the sending of said in the fulfillment of an obligation when the creditor
notice has absolved them from liability." demands payment at the maturity of the obligation
or at anytime thereafter. This is explicit in Article
Cetus Development v CA 1169, New Civil Code which provides that "(t)hose
Facts: obliged to deliver or to do something incur in delay
The private respondents, Ederlina Navalta, Ong from the time the obligee judicially or extrajudicially
Teng, Jose Liwanag, Leandro Canlas, Victoria demands from them the fulfillment of their
Sudario, and Flora Nagbuya were the lessees of the obligation." Petitioner has not shown that its case
premises located at No. 512 Quezon Boulevard, falls on any of the following exceptions where
Quiapo, Manila, here private respondents were the demand is not required: (a) when the obligation or
lessees of the premises originally owned by Susana the law so declares; (b) when from the nature and
Realty. The payments of the rentals were paid by circumstances of the obligation it can be inferred
them to a collector of the Susana Realty who went that time is of the essence of the contract; and (c)
the premises monthly. Susana Realty, however, sold when demand would be useless, as when the obligor
the property to petitioner Cetus Development, Inc. has rendered it beyond his power to perform
The private respondents then continued to pay their
monthly rentals to a collector sent by the petitioner. The facts on record fail to show proof that petitioner
In succeeding months, for three months, the private demanded the payment of the rentals when the
respondents failed to pay their rentals because no obligation matured. Coupled with the fact that no
collector came. They then contacted the petitioner collector was sent as previously done in the past, the
over the telephone as to where they should pay their private respondents cannot be held guilty of mora
rentals. The petitioner then told them that they solvendi or delay in the payment of rentals. Thus,
would send a collector to collect the rentals. Private when petitioner first demanded the payment of the
respondents waited but no collector came. Petitioner 3-month arrearages and private respondents lost no
then sent a letter to each of the private respondents time in making tender and payment, which petitioner
demanding that they vacate the subject premises and accepted, no cause of action for ejectment accrued.
to pay their arrearages within 15 days from the Hence, its demand to vacate was premature as it was
receipt thereof. With this, private respondents an exercise of a non-existing right to rescind.
immediately upon the receipt of such demand, In contradistinction, where the right of rescission
tendered their payments which were accepted by the exists, payment of the arrearages in rental after the
petitioner with the condition that the acceptance was demand to pay and to vacate under Section 2, Rule
70 does not extinguish The cause of action for
ejectment as the lessor is not only entitled to recover WHERE THERE IS LACK OF DEMAND FOR
the unpaid rents but also to eject the lessee. PAYMENT, ARTICLE 1256 OF THE CIVIL CODE,
REQUISITES THAT MUST CONCUR BEFORE argues that neither is its refusal to accept the rentals
AN ACTION MAY BE FILED. For the purpose a defense for non-payment as Article 1256 provides
of bringing an ejectment suit, two requisites must that "[i]f the creditor to whom the tender of payment
concur, namely: has been made refuses without just cause to accept
(1) there must be failure to pay rent or comply with it, the debtor shall be released from responsibility by
the conditions of the lease and the consignation of the thing due." It bears emphasis
(2) there must be demand both to pay or to comply that in this case there was no unjustified on the part
and vacate with in the period specified of petitioner or non-acceptance without reason that
in Section 2, Rule 70, namely 15 days in case of would constitute mora accipiendi and warrant
lands and 5 days in case of buildings. consignation. There was simply lack of demand for
The first requisite refers to the existence of the cause payment of the rentals.
of action for unlawful detainer while the second
refers to the jurisdictional requirement of demand in Abella v Francisco
order that said cause of action may be pursued. Facts:
Defendant Guillermo B. Francisco purchased from
DEMAND REQUIRED UNDER ART. 1169 CIVIL the Government on installments, lots 937 to 945 of
CODE; MAY BE ORAL OR WRITTEN. The the Tala Estate in Novaliches, Caloocan, Rizal. He
demand required in Article 1169 of the Civil Code was in arrears for some of these installments
may be in any form, provided that it can be proved.
The proof of this demand lies upon the creditor. After having made this agreement, the plaintiff
Without such demand, oral or written, the effects of proposed the sale of these lots at
default do not arise. This demand is different from a higher price to George C. Sellner, collecting
the demand required under Section 2, Rule 70, P10,000 on account thereof on December
which is merely a jurisdictional requirement before 29, 1928.
an existing cause of action may be pursued
Besides the P500 which, according to the instrument
FAILURE TO SEND COLLECTOR WHEN quoted above, the plaintiff paid, he made another
CUSTOMARY, CONSIDERED VALID payment of P415.31 on November 13, 1928, upon
DEFENSE FOR NON-PAYMENT OF RENT; demand made by the defendant. On December 27th
DOMICILE OF LESSEE, PLACE OF PAYMENT of the same year, the defendant, being in the
IN THE ABSENT OF AGREEMENT. Petitioner Province of Cebu, wrote to Roman Mabanta of this
claims that its failure to send a collector to collect City of Manila, attaching a power of attorney
the rentals cannot be considered a valid defense for authorizing him to sign in behalf of the defendant all
the reason that sending a collector is not one of the the documents required by the Bureau of Lands for
obligations of the lessor under Article 1654. While it the transfer of the lots to the plaintiff. In that letter
is true that a lessor is not obligated to send a the defendant instructed Roman Mabanta, in the
collector, it has been duly established that it has been event that the plaintiff failed to pay the remainder of
customary for private respondents to pay the rentals the selling price, to inform him that the option would
through a collector. Besides Article 1257, New Civil be considered cancelled, and to return to him the
Code provides that where no agreement has been amount of P915.31 already delivered. On January 3,
designated for the payment of the rentals, the place 1929, Mabanta notified the plaintiff that he had
of payment is at the domicile of the defendants. received the power of attorney to sign the deed of
Hence, it could not be said that they were in default conveyance of the lots to him, and that he was
in the payment of their rentals as the delay in paying willing go execute the proper deed of sale upon
the same was not imputable to them. Rather, it was payment of the balance due. The plaintiff asked for a
attributable to petitioner's omission or neglect to few days' time, but Mabanta, following the
collect. instructions he had received from the defendant,
only gave him until the 5th of that month. The defendant, and this view in borne out by his letter to
plaintiff did not pay the rest of the price on the 5th of his representative Mabanta instructing him to
January, but on the 9th of the month attempted to do consider the contract rescinded if the price was not
so; Mabanta, however, refused to accept it, and gave completed in time. In accordance with article 1124
him to understand that he regarded the contract as of the Civil Code, the defendant is entitled to resolve
rescinded. On the same day, Mabanta returned by the contract for failure to pay the price within the
check the sum of P915.31 which the plaintiff had time specified.
The plaintiff brought this action to compel the OF SELLING PRICE; RESOLUTION OF
defendant to execute the deed of sale of the lots in CONTRACT. Having agreed that the selling
question, upon receipt of the balance of the price, price (even supposing it was a contract of sale)
and asks that he be judicially declared the owner of would be paid not later than December, 1928, and in
said lots and that the defendant be ordered to deliver view of the fact that the vendor executed said
them to him. contract in order to pay off with the proceeds thereof
certain obligations which fell due in the same month
The court below absolved the defendant from the of December, it is held that the time fixed for the
complaint, and the plaintiff appealed. payment of the selling price was essential in the
transaction, and, therefore, the vendor, under article
Ruling: The petition is denied. 1124 of the Civil Code, is entitled to resolve the
It is to be noted that in the document signed by the contract for failure to pay the price within the time
defendant, the 15th of December was fixed as the specified.
date, extendible for fifteen days, for the payment by
the plaintiff of the balance of the selling price. It has Vda. De Villaruel v Manila Motor
been admitted that the plaintiff did not offer to Facts:
complete the payment until January 9, 1929. He On May 31, 1940, the plaintiffs Villaruel and
contends that Mabanta, as attorney-in-fact for the defendant Manila Motor Co. Inc. entered into a
defendant in this transaction, granted him an contract whereby the defendant agreed to lease
extension of time until the 9th of January. But plaintiffs building premises. On October 31, 1940,
Mabanta has stated that he only extended the time the leased premises were placed in the possession of
until the 5th of that month. Mabanta's testimony on the defendant until the invasion of 1941. The
this point is corroborated by that of Paz Vicente and Japanese military occupied and used the property
by the plaintiff's own admission to Narciso Javier leased as part of their quarters from June, 1942 to
that his option to purchase those lots expired on March, 1945, in which no payment of rentals were
January 5, 1929. made. Upon the liberation of the said city, the
American forces occupied the same buildings that
In holding that the period was an essential element were vacated by the Japanese. When the United
of the transaction between plaintiff and defendant, States gave up the occupancy of the premises,
the trial court considered that the contract in defendant decided to exercise their option to renew
question was an option for the purchase that the the contract, in which they agreed. However, before
contract in question was an option for the purchase resuming the collection of rentals, Dr. Alfredo
of the lots, and that in an agreement of this nature Villaruel upon advice demanded payment of rentals
the period is deemed essential. The opinion of the corresponding to the time the Japanese military
court is divided upon the question of whether the occupied the leased premises, but the defendant
agreement was an option or a sale, but even refused to pay. As a result plaintiff gave notice
supposing it was a sale, the court holds that time was seeking the rescission of the contract and the
an essential element in the transaction. The payment of rentals from June, 1942 to March, 1945;
defendant wanted to sell those lots to the plaintiff in this was rejected by the defendant. Despite the fact
order to pay off certain obligation which fell due in the defendant under new branch manager paid to
the month of December, 1928. The time fixed for the plaintiff the sum of P350 for the rent, the plaintiff
payment of the price was therefore essential for the still demanded for rents in arrears and for the
rescission of the contract of lease. The plaintiff the Japanese army exempted the lessee from his
commenced an action before the CFC of Neg. obligation to pay rent for the period of its ouster; and
Occidental against defendant company. During the second, because even if the lessee had been liable
pendency of the case, the leased building was burned for that rent, its collection in 1946 was barred by the
down. Because of the occurrence, plaintiffs moratorium order, Executive Order No. 32, that
demanded reimbursement from the defendants, but remained in force until replaced by Rep. Act 342 in
having been refused, they filed a supplemental 1948. To apply the current rentals to the occupation
complaint to include a 3rd cause of action, the obligations would amount to enforcing them
recovery of the value of the burned building. The contrary to the moratorium decreed by the
trial court rendered judgment in favor of the government.
plaintiff. Hence the defendants appeal.
Clearly, then, the lessor' insistence upon collecting
Issue: Is Manila Motor Co. Inc. liable for the loss of the occupation rentals for 1942-1945 was
the leased premises? unwarranted in law. Hence, their refusal to accept
the current rentals without qualification placed them
Ruling: The petition is granted. in default (mora creditoris or acci piendi) with the
It is also worthy of note that the lessors, through Dr. result that thereafter, they had to bear all
Javier Villaruel, agreed after liberation to a renewal supervening risks of accidental injury or destruction
of the contract of lease for another five years (from of the leased premises. While not expressly declared
June 1, 1946 to May 31 of 1951) without making by the Code of 1889, this result is clearly inferable
any reservation regarding the alleged liability of the from the nature and effects of mora, and from
lessee company for the rentals corresponding to the Articles 1185, 1452 [par. 3] and 1589
period of occupancy of the premises by the Japanese
army, and without insisting that the non-payment of While there is a presumption that the loss of the
such rental was a breach of the contract of lease. thing leased is due to the fault of the lessee (Civil
This passivity of the lessors strongly supports the Code of 1889, Art. 1563), it is noteworthy that the
claim of the lessees that the rentals in question were lessors have not invoked that presumption either
verbally waived. The proffered explanation is that here or in the court below. On the contrary, the
the lessors could not refuse to renew the lease, parties and the trial court have all proceeded and
because the privilege of renewal had been granted to discussed the issues taking for granted that the
the lessees in the original contract. Such excuse is destruction of the leased buildings was purely
untenable: if the lessors deemed that the contract had fortuitous. We see no reason for departing from that
been breached by the lessee's non-payment of the assumption and further prolonging this litigation.
occupation rents how could they admit the lessee's That the lessee and sublessee did not consign or
right to renew a contract that the lessee itself had deposit in court the rentals tendered to and
violated? improperly rejected by the lessors, did not render the
debtor liable for default (mora solvendi) nor
But this is not all. The lessors accepted payment of answerable for fortuitous events because, as
current rentals from October 1945 to June 1946. It explained by the Supreme Court of Spain in its
was only in July 1946 that they insisted upon Sentencia of 5 June 1944
collecting also the 1942-1945 rents, and refused to
accept further payments tendered by the lessee LIABILITY OF LESSEE FOR RENTS DURING
unless their right to collect the occupation rental was OCCUPATION OF PROPERTY. Such
recognized or reserved. After refusing the rents from dispossession, though not due to the fault of the
July to November 1946, unless the lessee recognized lessors or lessee nevertheless deprived the lessee of
their right to occupation rentals, the appellees the enjoyment of the thing leased. Wherefore, the
(lessors) demanded rescission of the contract and lessee's corresponding obligation to pay rentals
a rental of P1,740 monthly in lieu of the stipulated ceased during such deprivation.
P350 per month. (Exhibit "C").
This attitude of the lessors was doubly wrongful: IMPORTER REFUSAL TO ACCEPT RENTS
first, because as already shown, the dispossession by PLACES LESSORS IN DEFAULT; LIABILITY
FOR SUPERVENING RISK. Since the lessee 12% annual interest. After the agreement, a mere
was exempt from paying the rents for the period of P17K partial release of the loan was made by the
its ouster, the insistence of the lessors to collect the bank and Tolentino and his wife signed a promissory
rentals corresponding to said period was note for the P17,000 at 12% annual interest payable
unwarranted and their refusal to accept the currant w/in 3 yrs. An advance interest was deducted fr the
rents tendered by the lessee was unjustified. Such partial release but this prededucted interest was
refusal places the lessors in default (mora) and they refunded to Tolentino after being informed that there
must shoulder the subsequent accidental loss of the was no fund yet for the release of the P63K balance.
premises leased.
Monetary Board of Central Bank, after finding that
MORA OF LESSORS NOT CURED BY FAILURE bank was suffering liquidity problems, prohibited
OF LESSEE TO CONSIGN RENTS IN COURT. the bank fr making new loans and investments. And
The mora of the lessors was not cured by the failure after the bank failed to restore its solvency, the
of the lessee to make the consignation of the rejected Central Bank prohibited Island Savings Bank from
payments, but the lessee remained obligated to pay doing business in the Philippines. Island Savings
the amounts tendered and not consigned by it in Bank in view of the non-payment of the P17K filed
court. an application for foreclosure of the real estate
mortgage. Tolentino filed petition for specific
PLEADING AND PRACTICE; CHANGE IN THE performance or rescission and damages with
RELIEF PRAYED DURING THE PENDENCY OF preliminary injunction, alleging that since the bank
THE ACTION. A change in the relief prayed, failed to deliver P63K, he is entitled to specific
brought about by circumstances occurring during the performance and if not, to rescind the real estate
pendency of the action, is not improper. This is mortgage.
justified under Section 2, Rule 17 of the Rules of
Court (on amendments) "to the end that the real Issue:
matter in dispute and all matters in the action in 1. Can the action of Sulpicio M. Tolentino for
dispute between the parties may, as far as possible be specific performance prosper?
completely determined in a single proceeding." 2. Is Sulpicio M. Tolentino liable to pay the
P17,000.00 debt covered by the promissory note?
DISMISSAL WITHOUT PREJUDICE. The 3. If Sulpicio M. Tolentino's liability to pay the
dismissal of plaintiffs' two causes of action in the P17,000.00 subsists, can his real estate mortgage be
case at bar was premised on the existence of the foreclosed to satisfy said amount?
"Debt Moratorium" which suspended the
enforcement of the obligation up to a certain time. Ruling: The petition is granted.
The reference thereto by the court amounted to a
dismissal "without prejudice", since in effect it ruled When Island Savings Bank and Sulpicio M.
that the plaintiffs could not, at the time they sought Tolentino entered into an P80,000.00 loan agreement
it, enforce their right of action against the on April 28, 1965, they undertook reciprocal
defendants, but they must wait until the moratorium obligations. In reciprocal obligations, the obligation
was lifted. In this way, the court qualified its or promise of each party is the consideration for that
dismissal. of the other (Penaco vs. Ruaya, 110 SCRA 46
[1981]; Vda. de Quirino vs. Pelarca, 29 SCRA 1
Central Bank v CA [1969]); and when one party has performed or is
Facts: Island Savings Bank, upon favorable ready and willing to perform his part of the contract,
recommendation of its legal department, approved the other party who has not performed or is not
the loan application for P80,000.00 of Sulpicio M. ready and willing to perform incurs in delay (Art.
Tolentino, who, as a security for the loan, executed 1169 of the Civil Code). The promise of Sulpicio M.
on the same day a real estate mortgage over his 100- Tolentino to pay was the consideration for the
hectare land located in Cubo, Las Nieves, Agusan. obligation of Island Savings Bank to furnish the
The loan called for a lump sum of P80,000, P80,000.00 loan. When Sulpicio M. Tolentino
repayable in semi-annual installments for 3 yrs, with executed a real estate mortgage on April 28, 1965,
he signified his willingness to pay the P80,000.00 to give the P63,000.00. As far as the partial release
loan. From such date, the obligation of Island of P17,000.00, which Sulpicio M. Tolentino
Savings Bank to furnish the P80,000.00 loan accepted and executed a promissory note to cover it,
accrued. Thus, the Bank's delay in furnishing the the bank was deemed to have complied with its
entire loan started on April 28, 1965, and lasted for a reciprocal obligation to furnish a P17,000.00 loan.
period of 3 years or when the Monetary Board of the The promissory note gave rise to Sulpicio M.
Central Bank issued Resolution No. 967 on June 14, Tolentino's reciprocal obligation to pay the
1968, which prohibited Island Savings Bank from P17,000.00 loan when it falls due. His failure to
doing further business. Such prohibition made it pay the overdue amortizations under the
legally impossible for Island Savings Bank to promissory note made him a party in default,
furnish the P63,000.00 balance of the P80,000.00 hence not entitled to rescission (Article 1191 of the
loan. The power of the Monetary Board to take over Civil Code). If there is a right to rescind the
insolvent banks for the protection of the public is promissory note, it shall belong to the aggrieved
recognized by Section 29 of R.A. No. 265, which party, that is, Island Savings Bank. If Tolentino
took effect on June 15, 1948, the validity of which is had not signed a promissory note setting the date
not in question. for payment of P17,000.00 within 3 years, he
would be entitled to ask for rescission of the
The Monetary Board Resolution No. 1049 issued on entire loan because he cannot possibly be in
August 13, 1965 cannot interrupt the default of default as there was no date for him to perform
Island Savings Bank in complying with its his reciprocal obligation to pay.
obligation of releasing the P63,000.00 balance
because said resolution merely prohibited the Bank Since both parties were in default in the performance
from making new loans and investments, and of their respective reciprocal obligations, that is,
nowhere did it prohibit Island Savings Bank from Island Savings Bank failed to comply with its
releasing the balance of loan agreements previously obligation to furnish the entire loan and Sulpicio M.
contracted. Besides, the mere pecuniary inability to Tolentino failed to comply with his obligation to pay
fulfill an engagement does not discharge the his P17,000.00 debt within 3 years as stipulated,
obligation of the contract, nor does it constitute any they are both liable for damages.
defense to a decree of specific performance
(Gutierrez Repide vs. Afzelins and Afzelins, 39 Phil. Article 1192 of the Civil Code provides that in case
190 [1918]). And, the mere fact of insolvency of a both parties have committed a breach
debtor is never an excuse for the non-fulfillment of of their reciprocal obligations, the liability of the
an obligation but instead it is taken as a breach of the first infractor shall be equitably tempered
contract by him (Vol. 17A, 1974 ed., CJS p. 650). by the courts. WE rule that the liability of Island
Savings Bank for damages in not furnishing
Since Island Savings Bank was in default in the entire loan is offset by the liability of Sulpicio
fulfilling its reciprocal obligation under their M. Tolentino for damages, in the form of
loan agreement, Sulpicio M. Tolentino, under Article penalties and surcharges, for not paying his overdue
1191 of the Civil Code, may choose P17,000.00 debt. The liability of
between specific performance or rescission with Sulpicio M. Tolentino for interest on his P17,000.00
damages in either case. But since Island debt shall not be included in offsetting
Savings Bank is now prohibited from doing further the liabilities of both parties. Since Sulpicio M.
business by Monetary Board Resolution Tolentino derived some benefit for his use
No. 967, WE cannot grant specific performance in of the P17,000.00, it is just that he should account
favor of Sulpicio M. Tolentino. for the interest thereon.

Rescission is the only alternative remedy left. WE 2) Whether or not the mortgagor is liable to pay the
rule, however, that rescission is only for the amount covered by the promissory note
P63,000.00 balance of the P80,000.00 loan, because
the bank is in default only insofar as such amount is The promissory note gave rise to Sulpicio M.
concerned, as there is no doubt that the bank failed Tolentinos reciprocal obligation to pay the
P17,000.00 loan when it falls due. His failure to pay some of the missing parts, the interior cover and the
the overdue amortizations under the promissory note P6.00. The plaintiff brought his typewriter to Freixas
made him a party in default, hence not entitled to Business Machines and the repair cost the amount of
rescission (Article 1191 of the Civil Code). If there P89.85. He commenced this action on August 23,
is a right to rescind the promissory note, it shall 1965 in the City Court of Manila, demanding from
belong to the aggrieved party, that is, Island Savings the defendant the payment of P90.00 as actual and
Bank. If Tolentino had not signed a promissory note compensatory damages, P100.00 for temperate
setting the date for payment of P17,000.00 within 3 damages, P500.00 for moral damages, and P500.00
years, he would be entitled to ask for rescission of as attorneys fees. The defendant made no denials of
the entire loan because he cannot possibly be in the facts narrated above, except the claim of the
default as there was no date for him to perform his plaintiff that the cost of the repair made by Freixas
reciprocal obligation to pay. Since both parties were Business Machines be fully chargeable against him.
in default in the performance of their respective
reciprocal obligations, that is, Island Savings Bank Issue: Whether or not the defendant is liable for the
failed to comply with its obligation to furnish the total cost of the repair made by Freixas Business
entire loan and Sulpicio M. Tolentino failed to Machines with the plaintiff typewriter?
comply with his obligation to pay his P17,000.00
debt within 3 years as stipulated, they are both liable Ruling: The petition granted
for damages.
On the other hand, the position of the defendant-
3) Whether or not the real estate mortgage can be appellee, Fructuoso Gonzales, is that he is not liable
foreclosed at all, not even for the sum of P31.10, because his
contract with plaintiffappellant did not contain a
Since Island Savings Bank failed to furnish the period, so that plaintiff-appellant should have first
P63,000.00 balance of the P80,000.00 loan, the real filed a petition for the court to fix the period, under
estate mortgage of Sulpicio M. Tolentino became Article 1197 of the Civil Code, within which the
unenforceable to such extent. P63,000.00 is 78.75% defendant appellee was to comply with the contract
of P80,000.00, hence the real estate mortgage before said defendant-appellee could be held liable
covering 100 hectares is unenforceable to the extent for breach of contract
of 78.75 hectares. The mortgage covering the
remainder of 21.25 hectares subsists as a security for The appealed judgment states that the "plaintiff
the P17,000.00 debt. 21.25 hectares is more than delivered to the defendant . . . a portable typewriter
sufficient to secure a P17,000.00 debt. for routine cleaning and servicing"; that the
defendant was not able to finish the job after some
Chavez v Gonzales time despite repeated reminders made by the
Facts: On July 1963, Rosendo Chavez brought his plaintiff"; that the "defendant merely gave
typewriter to Fructuoso Gonzales a typewriter assurances, but failed to comply with the same"; and
repairman for the cleaning and servicing of the said that "after getting exasperated with the delay of the
typewriter but the latter was not able to finish the repair of the typewriter", the plaintiff went to the
job. During October 1963, the plaintiff gave the house of the defendant and asked for its return,
amount of P6.00 to the defendant which the latter which was done. The inferences derivable from
asked from the plaintiff for the purchase of spare these findings of fact are that the appellant and the
parts, because of the delay of the repair the plaintiff appellee had a perfected contract for cleaning and
decided to recover the typewriter to the defendant servicing a typewriter; that they intended that the
which he wrapped it like a package. When the defendant was to finish it at some future time
plaintiff reached their home he opened it and although such time was not specified; and that such
examined that some parts and screws was lost. That time had passed without the work having been
on October 29, 1963 the plaintiff sent a letter to the accomplished, far the defendant returned the
defendant for the return of the missing parts, the typewriter cannibalized and unrepaired, which in
interior cover and the sum of P6.00 (Exhibit D). The itself is a breach of his obligation, without
following day, the defendant returned to the plaintiff demanding that he should be given more time to
finish the job, or compensation for the work he had CLAIMS FOR DAMAGES OR ATTORNEY'S
already done. The time for compliance having FEES NOT RECOVERABLE; NOT
evidently expired, and there being a breach of ALLEGED OR PROVED IN INSTANT CASE.
contract by non-performance, it was academic for Claims for damages and attorney's fees must be
the plaintiff to have first petitioned the court to fix a pleaded, and the existence of the actual basis thereof
period for the performance of the contract before must be proved. As no findings of fact were made on
filing his complaint in this case. Defendant cannot the claims for damages and attorney's fees, there is
invoke Article 1197 of the Civil Code for he no factual basis upon which to make an award
virtually admitted non-performance by returning the therefor.
typewriter that he was obliged to repair in a non-
working condition, with essential parts missing. The No, he is not liable for the total cost of the repair
fixing of a period would thus be a mere formality made by Freixas Business Machines instead he is
and would serve no purpose than to delay (cf. only liable for the cost of the missing parts and
Tiglao. et al. V. Manila Railroad Co. 98 Phil. 181). screws. The defendant contravened the tenor of his
obligation in repairing the typewriter of the plaintiff
CIVIL LAW; CONTRACTS; BREACH OF that he fails to repair it and returned it with the
CONTRACT FOR NON-PERFORMANCE; missing parts, he is liable under ART. 1167. If a
FIXING OF PERIOD BEFORE FILING OF person obliged to do something fails to do it, the
COMPLAINT FOR NON-PERFORMANCE, same shall be executed at his cost.
ACADEMIC. Where the time for compliance had
expired and there was breach of contract by non- This same rule shall be observed if he does it in
performance, it was academic for the plaintiff to contravention of the tenor of the obligation.
have first petitioned the court to fix a period for the Furthermore it may be decreed that what has been
performance of the contract before filing his poorly done he undone.
Telefast v Castro
OF THE CIVIL CODE OF THE PHILIPPINES. The petitioner is a company engaged in transmitting
Where the defendant virtually admitted non- telegrams. The plaintiffs are the children and spouse
performance of the contract by returning the of Consolacion Castro who died in the Philippines.
typewriter that he was obliged to repair in a non- One of the plaintiffs, Sofia sent a telegram thru
working condition, with essential parts missing, Telefast to her father and other siblings in the USA
Article 1197 of the Civil Code of the Philippines to inform about the death of their mother.
cannot be invoked. The fixing of a period would thus Unfortunately, the deceased had already been
be a mere formality and would serve no purpose interred but not one from the relatives abroad was
than to delay. able to pay their last respects. Sofia found out upon
her return in the US that the telegram was never
DAMAGES RECOVERABLE; CASE AT BAR. received. Hence the suit for damages on the ground
Where the defendant-appellee contravened the tenor of breach of contract. The defendant-petitioner
of his obligation because he not only did not repair argues that it should only pay the actual amount paid
the typewriter but returned it "in shambles,'' he is to it.
liable for the cost of the labor or service expended in
the repair of the typewriter, which is in the amount The lower court ruled in favor of the plaintiffs and
of P58.75, because the obligation or contract was to awarded compensatory, moral, exemplary, damages
repair it. In addition, he is likewise liable under Art. to each of the plaintiffs with 6% interest p.a. plus
1170 of the Code, for the cost of the missing parts, in attorneys fees. The Court of Appeals affirmed this
the amount of P31.10, for in his obligation to repair ruling but modified and eliminated the
the typewriter he was bound, but failed or neglected, compensatory damages to Sofia and exemplary
to return it in the same condition it was when he damages to each plaintiff, it also reduced the moral
received it. damages for each. The petitioner appealed
contending that, it can only be held liable for P
31.92, the fee or charges paid by Sofia C. Crouch for Civil Code applicable to the case at bar. It states:
the telegram that was never sent to the addressee, "Moral damages include physical suffering, mental
and that the moral damages should be removed since anguish, fright, serious anxiety, besmirched
defendant's negligent act was not motivated by reputation, wounded feelings, moral shock, social
"fraud, malice or recklessness. humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be
Issue: Whether or not the award of the moral, recovered if they are the proximate results of the
compensatory and exemplary damages is proper. defendant's wrongful act or omission." Here,
Ruling: The petition is denied. petitioner's act or omission, which amounted to
gross negligence, was precisely the cause of the
Art. 1170 of the Civil Code provides that "those who suffering private respondents had to undergo.
in the performance of their obligations are guilty of
fraud, negligence or delay, and those who in any COMPENSATORY DAMAGES; AWARDED TO A
manner contravene the tenor thereof, are liable for PARTY WHO INCURRED TRAVEL EXPENSES
damages." Art. 2176 also provides that "whoever by TO TESTIFY IN A COURT CASE. We also
act or omission causes damage to another, there sustain the trial court's award of
being fault or negligence, is obliged to pay for the P16,000.00 as compensatory damages to Sofia C.
damage done." Crouch representing the expenses she incurred when
In the case at bar, petitioner and private respondent she came to the Philippines from the United States to
Sofia C. Crouch entered into a contract whereby, for testify before the trial court. Had petitioner not been
a fee, petitioner undertook to send said private remiss in performing its obligation, there would
respondent's message overseas by telegram. This, have been no need for this suit or for Mrs. Crouch's
petitioner did not do, despite performance by said testimony.
private respondent of her obligation by paying the
required charges. Petitioner was therefore guilty of EXEMPLARY DAMAGES; AWARDED TO A
contravening its obligation to said private PARTY AS A WARNING TO ALL
respondent and is thus liable for damages. TELEGRAM COMPANIES. The award of
exemplary damages by the trial court is likewise
This liability is not limited to actual or quantified justified and, therefore, sustained in the amount of
damages. To sustain petitioner's contrary position in P1,000.00 for each of the private respondents, as a
this regard would result in an inequitous situation warning to all telegram companies to observe due
where petitioner will only be held liable for the diligence in transmitting the messages of their
actual cost of a telegram fixed thirty (30) years ago. customers.


THEREON. In the case at bar, petitioner and Mrs. Paz Arrieta participated in public bidding
private respondent Sofia C. Crouch entered into a called by NARIC on May 19, 1952 for the supply of
contract whereby, for a fee, petitioner undertook to 20,000 metric tons of Burmese rice. Her bid was $
send said private respondent's message overseas by 203.00 per metric ton, it was the lowest thats why
telegram. This, petitioner did not do, despite the contract was awarded to her. On July 1,1952,
performance by said private respondent of her Arrieta and NARIC entered into contract. Arrieta
obligation by paying the required charges. Petitioner was obligated to deliver 20,000 metric ton of
was therefore guilty of contravening its obligation to Burmese rice at $203.00 per metric ton to NARIC.
said private respondent and is thus liable for In return, NARIC committed itself to pay for the
damages under Articles 1170 and 2196 of the Civil imported rice by means of an irrevocable,
Code. confirmed and assignable letter of credit in US
currency in favour of Arrieta and/or supplier in
EMOTIONAL SUFFERING took the first step to open the letter of credit on July
ENTITLEDTHERETO. We find Art. 2217 of the 30, 1952 by forwarding to the PNB its application
for commercial letter of credit. Arrieta with the help negligence or default but also every debtor, in
of a counsel, advised NARIC of the necessity for the general, who fails in the performance of his
opening of the letter because she tender her supplier obligations is bound to indemnify for the losses and
in Ragoon, Burma of 5 % of the price of 20,000 damages caused thereby.
tons at $180.70 and if she didnt comply the 5% will
be confiscated if the required letter of credit is not MEANING OF PHRASE "IN ANY MANNER
received by them before August 4, 1952. PNB CONTRAVENE THE TENOR" OF THE
informed NARIC that their application of credit OBLIGATION IN ART. 1170, CIVIL CODE. The
letter amounting to $3,614,000.00 was approved phrase "in any manner contravene the tenor" of the
with the condition of 50% marginal cash be paid. obligation in Art. 1170, Civil Code, includes any
NARIC does not meet the condition. The allocation illicit task which impairs the strict and faithful
of Arrietas supplier in Ragoon was cancelled and fulfillment of the obligation, or every kind of
the 5% deposit was forfeited. defective performance.

Issue: Does NARIC liable for damages WAIVER OF BREACH OF CONTRACT NOT
PRESUMED. Waivers are not presumed, but
Ruling: The petition is denied. must be clearly and convincingly shown, either by
express stipulation or
OBLIGATIONS AND CONTRACTS; LIABILITY acts admitting of no other reasonable explanation.
PERIOD. One who assumes a contractual CURRENCY. In view of Republic Act 529 which
obligation and fails to perform the same on account specifically requires the discharge of obligations
of his inability to meet certain bank requirements, only "in any coin or currency which
which inability he knew and was aware of when he at the time of payment is legal tender for public and
entered into the contract, should be held liable in private debt", the award of damages in
damages for breach of contract. U.S. dollars made by the lower court in the case at
bar is modified by converting it into
OBLIGATIONS AND CONTRACTS; LIABILITY Philippine pesos at the rate of exchange prevailing at
OF NON-PERFORMANCE. Under Article 1170 the time the obligation was incurred or when the
of the Civil Code, not only debtors guilty of fraud, contract in question was executed.