2.
second, the boy was authorized or designated by his father to run
EFFECTS OF NEGLIGENCE
Gutierrez v Gutierrez (1931)
Malcolm, J.
Re: Quasi-delict
FACTS: In its broader aspects, the case is one of two drivers
approaching a narrow bridge from opposite directions, with neither
being willing to slow up and give the right of way to the other, with the
inevitable result of a collision and an accident.
On February 2, 1930, a passenger truck and an automobile of private
ownership collided while attempting to pass each other on the Talon
bridge on the Manila South Road in the municipality of Las Pias. The
driver of the car is an 18 y/o boy, son of the cars owners.
Trial court found that both the boy and the driver of the autobus were
negligent by which neither of them were willing to slow up and give the
right of way to the other. Plaintiff is the passenger of the bus who as a
result of the incident fractured his right leg. Thus, plaintiff sued the boy,
his parents as owners of the car, the bus driver and its owner for
damages. The trial court ruled in favor of plaintiff. Hence, this appeal.
ISSUE: What are the bases of the parties liabilities?
HELD: The case is dealing with the civil liability of parties for
obligations that arise from fault or negligence.
For the boy, it is his father who is liable (based on culpa
aquiliana) to the plaintiff because of the following conditions:
1. first, the car was of general use of the family,
the car,
3. third, at the time of the collision the car is used for the purpose
not of the childs pleasure but that of the other members of the
car owners family members.
The theory of the law is that the running of the machine by a child to
carry other members of the family is within the scope of the owners
business, so that he is liable for the negligence of the child because of
the relationship of master and servant. For the chauffer and the
bus owner (based on culpa contractual), their liability rests upon the
contract (the safety that is assured by the operator upon the
passenger) whereas that degree of care expected from the chauffer is
lacking.
The liability of the owner of the truck, and of his chauffeur
rests on a different basis, namely, that of contract which, we think, has
been sufficiently demonstrated by the allegations of the complaint, not
controverted, and the evidence. The reason for this conclusion reaches
to the findings of the trial court concerning the position of the truck on
the bridge, the speed in operating the machine, and the lack of care
employed by the chauffeur.
Vasquez v. Borja (1944)
Topic: Negligence; Effects
Doctrine: The fact that the corporation, acting thru Vazquez as its
manager, was guilty of negligence in the fulfillment of the contract did
not make Vazquez principally or even subsidiarily liable for such
negligence. Since it was the corporations contract, its non-fulfillment,
whether due to negligence or fault or to any other cause, made the
corporation and not its agent liable.
Facts: In 1932, Francisco De Borja entered into a contract of sale with
the NVSD (Natividad-Vasquez Sabani Development Co., Inc.). The
subject of the sale was 4,000 cavans of rice valued at Php2.10 per cavan.
On behalf of the company, the contract was executed by Antonio
Vasquez as the companys acting president. NVSD only delivered 2,488
cavans and failed and refused despite demand to deliver the rest hence
De Borja incurred damages (apparently, NVSD was insolvent). He then
sue Vasquez for payment of damages.
Issue: WON Vasquez is liable for damages.
Held: NO.
Vasquez is not party to the contract as it was NVSD which De Borja
contracted with. It is well known that a corporation is an artificial being
invested by law with a personality of its own, separate and distinct from
that of its stockholders and from that of its officers who manage and run
its affairs. The mere fact that its personality is owing to a legal fiction
and that it necessarily has to act thru its agents, does not make the latter
personally liable on a contract duly entered into, or for an act lawfully
performed, by them for an in its behalf.
The fact that the corporation, acting thru Vazquez as its manager, was
guilty of negligence in the fulfillment of the contract did not make
Vazquez principally or even subsidiarily liable for such negligence. Since
it was the corporations contract, its non-fulfillment, whether due to
negligence or fault or to any other cause, made the corporation and not
its agent liable.
Justice Paras, dissenting:
Vasquez as president of NVSD is liable for damages. Vasquez, as acting
president and manager of NVSD, and with full knowledge of the then
insolvent status of his company, agreed to sell to De Borja 4,000 cavans
of palay. Further, NVSD was soon thereafter dissolved.
Federal Builders v Foundation Specialists
G.R. No. 194507, September 8, 2014
Negligence
Facts: On August 20, 1990, Federal Builders, Inc. (FBI) entered into an
agreement with Foundation Specialists, Inc. (FSI) whereby the latter, as
sub-contractor, undertook the construction of the diaphragm wall,
capping beam, and guide walls of the Trafalgar Plaza located at Salcedo
Village, Makati City.
FSI filed a complaint for Sum of Money against FBI before the RTC of
Makati City seeking to collect the amount of One Million Six Hundred
Thirty-Five Thousand Two Hundred Seventy-Eight Pesos and Ninety-
One Centavos (P1,635,278.91), representing Billings No. 3 and 4, with
accrued interest from August 1, 1991 plus moral and exemplary damages
with attorneys fees. In its complaint, FSI alleged that FBI refused to pay
said amount despite demand and its completion of ninety-seven percent
(97%) of the contracted works.
In its Answer with Counterclaim, FBI claimed that FSI completed only
eighty-five percent (85%) of the contracted works, failing to finish the
diaphragm wall and component works in accordance with the plans and
specifications and abandoning the jobsite. FBI maintains that because
of FSIs inadequacy, its schedule in finishing the Project has been
delayed resulting in the Project owners deferment of its own progress
billings. It further interposed counterclaims for amounts it spent for the
remedial works on the alleged defects in FSIs work. FBI is claiming
P8,582,756.29 representing the cost of the measures it
undertook to rectify the alleged defects.
After evaluating the evidence of both parties, the RTC ruled in favor of
FSI awarding the sum of P1,024,600.00 representing billings 3 and 4,
less the amount of P33,354.40 plus 12% legal interest from August 30, Thus, in the absence of any record to otherwise prove FSIs neglect in
1991;The sum of P279,585.00 representing the cost of undelivered the fulfilment of its obligations under the contract, this Court shall
cement; the sum of P200,000.00 as attorneys fees; and the cost of suit. refrain from reversing the findings of the lower courts, which are fully
supported by and deducible from, the evidence on record. FBI failed to
On appeal, the CA affirmed the Decision of the lower court, but deleted present any evidence to justify its refusal to pay FSI for the works it was
the sum of P279,585.00 representing the cost of undelivered cement and contracted to perform. As such, the court do not see any reason to
reduced the award of attorneys fees to 50,000.00. In its Decision, the deviate from the assailed rulings.
CA explained that FSI failed to substantiate how and in what manner it
incurred the cost of cement by stressing that its claim was not supported
by actual receipts. Also, it found that while the trial court did not err in
awarding attorneys fees, the same should be reduced for being
unconscionable and excessive. It also dismissed FBIs counterclaim.
Issue: Whether or not the CA committed an error when it dismissed the
counterclaim of the petitioner notwithstanding the overwhelming
evidence supporting its claim of P8,582,756.29 as actual damages.
Ruling: It is clear from the case that contrary to the allegations of FBI,
FSI had indeed completed its assigned obligations, with the exception of
certain assigned tasks, which was due to the failure of FBI to fulfil its end
of the bargain.
It can similarly be deduced that the defects FBI complained of, such as
the misaligned diaphragm wall and the erroneous location of the rebar
dowels, were not only anticipated by the parties, having stipulated
alternative plans to remedy the same, but more importantly, are also
attributable to the very actions of FBI.
Accordingly, considering that the alleged defects in FSIs contracted
works were not so much due to the fault or negligence of the FSI, but
were satisfactorily proven to be caused by FBIs own acts, FBIs claim of
P8,582,756.29 representing the cost of the measures it undertook to
rectify the alleged defects must necessarily fail. In fact, as the lower court
noted, at the time when FBI had evaluated FSIs works, it did not
categorically pose any objection thereto.
FORTUITOUS EVENT : REQUISITES
Nakpil v. CA (1986)
Topic: Not attributable to the debtor; Fortuitous event
Doctrine: To be exempt from liability due to an act of God, the
engineer/architect/contractor must not have been negligent in the
construction of the building.
Facts: Private respondents Philippine Bar Association (PBA) a non-
profit organization formed under the corporation law decided to put up
a building in Intramuros, Manila. Hired to plan the specifications of the
building were Juan Nakpil & Sons, while United Construction was hired
to construct it. The proposal was approved by the Board of Directors and
signed by the President, Ramon Ozaeta. The building was completed in
1966.
In 1968, there was an unusually strong earthquake which caused the
building heavy damage, which led the building to tilt forward, leading
the tenants to vacate the premises. United Construction took remedial
measures to sustain the building. PBA filed a suit for damages against
United Construction, but United Construction subsequently filed a suit
against Nakpil and Sons, alleging defects in the plans and specifications.
Technical Issues in the case were referred to Mr. Hizon, as a court
appointed Commissioner. PBA moved for the demolition of the building,
but was opposed. PBA eventually paid for the demolition after the
building suffered more damages in 1970 due to previous earthquakes.
The Commissioner found that there were deviations in the specifications
and plans, as well as defects in the construction of the building.
Issue: WON an act of God (fortuitous event) exempts from liability
parties who would otherwise be due to negligence.
Held: NO.
An act of God has been defined as an accident, due directly and
exclusively to natural causes without human intervention, which by no
amount of foresight, pains or care, reasonably to have been expected,
could have been prevented. There is no dispute that the earthquake
which took place in 1968 was a fortuitous event or an act of God.
Art. 1723 dictates that the engineer/architect and contractor are liable
for damages should the building collapse within 15 years from
completion.
Art. 1174 of the NCC, however, states that no person shall be responsible
for events, which could not be foreseen. But to exempt the obligor from
liability due to an act of God, the following must occur:
1) Cause of breach must be independent of the will of the debtor
2) Event must be unforeseeable or unavoidable
3) Event must be such that it would render it impossible for the
debtor to fulfill the obligation
4) Debtor must be free from any participation or aggravation of
the industry to the creditor.
Thus, if upon the happening of a fortuitous event or an act of God, there
concurs a corresponding fraud, negligence, delay or violation or
contravention in any manner of the tenor of the obligation as provided
for in Article 1170 of the Civil Code, which results in loss or damage, the
obligor cannot escape liability.
The principle embodied in the act of God doctrine strictly requires that
the act must be one occasioned exclusively by the violence of nature and
all human agencies are to be excluded from creating or entering into the
cause of the mischief. When the effect, the cause of which is to be
considered, is found to be in part the result of the participation of man,
whether it be from active intervention or neglect, or failure to act, the
whole occurrence is thereby humanized, as it were, and removed from
the rules applicable to the acts of God.
In the case at bar, although the damage was ultimately caused by the
earthquake which was an act of God, the defects in the construction, as
well as the deviations in the specifications and plans aggravated the
damage, and lessened the preventive measures that the building would
otherwise have had. As correctly assessed by both courts, the defects in
the construction and in the plans and specifications were the proximate
causes that rendered the PBA building unable to withstand the
earthquake of 1968. For this reason the defendant and third-party
defendants cannot claim exemption from liability.
Fil-Estate v Ronquillo (2014)
G.R. No. 185789, January 13, 2014
Fortuitous Event
Doctrine: the Asian financial crisis is not a fortuitous event that would
excuse petitioners from performing their contractual obligation
Facts: Petitioner Fil-Estate Properties, Inc. is the owner and developer
of the Central Park Place Tower while co-petitioner Fil-Estate Network,
Inc. is its authorized marketing agent. Respondent Spouses Conrado
and Maria Victoria Ronquillo purchased from petitioners a
condominium unit for a pre-selling contract price of FIVE MILLION
ONE HUNDRED SEVENTY-FOUR THOUSAND ONLY
(P5,174,000.00). As agreed upon, respondents paid the full
downpayment of P1,552,200.00 and had been paying the P63,363.33
monthly amortizations until September 1998.
Upon learning that construction works had stopped, respondents
likewise stopped paying their monthly amortization. Claiming to have
paid a total of P2,198,949.96 to petitioners, respondents through two (2)
successive letters, demanded a full refund of their payment with interest.
When their demands went unheeded, respondents were constrained to
file a Complaint for Refund and Damages before the Housing and Land
Use Regulatory Board (HLURB).
Respondents prayed for reimbursement/refund of P2,198,949.96
representing the total amortization payments, P200,000.00 as and by
way of moral damages, attorneys fees and other litigation expenses.
On 21 October 2000, the HLURB issued an Order of Default against
petitioners for failing to file their Answer within the reglementary period
despite service of summons.
Petitioners filed a motion to lift order of default and attached their
position paper attributing the delay in construction to the 1997 Asian
financial crisis. Petitioners denied committing fraud or
misrepresentation which could entitle respondents to an award of moral
damages.
Issue: Whether or not the Asian financial crisis constitute a fortuitous
event which would justify delay by petitioners in the performance of
their contractual obligation;
Ruling: According to the Supreme Court, the rulings were consistent
that first, the Asian financial crisis is not a fortuitous event that would
excuse petitioners from performing their contractual obligation; second,
as a result of the breach committed by petitioners, respondents are
entitled to rescind the contract and to be refunded the amount of
amortizations paid including interest and damages; and third,
petitioners are likewise obligated to pay attorneys fees and the
administrative fine.
The court cannot generalize that the Asian financial crisis in 1997 was
unforeseeable and beyond the control of a business corporation. It is
unfortunate that petitioner apparently met with considerable difficulty
e.g. increase cost of materials and labor, even before the scheduled
commencement of its real estate project as early as 1995. However, a real
estate enterprise engaged in the pre-selling of condominium units is
concededly a master in projections on commodities and currency
movements and business risks. The fluctuating movement of the
Philippine peso in the foreign exchange market is an everyday
occurrence, and fluctuations in currency exchange rates happen
everyday, thus, not an instance of caso fortuito.
In said case, the Court ordered the refund of the total amortizations paid
by respondents plus 6% legal interest computed from the date of
demand. The Court also awarded attorneys fees.
USURY
Medel vs Court of Appeals, 299 SCRA 481; GR No.
131622, November 27, 1998, digested
Posted by Pius Morados on November 30, 2011
(Credit Transactions Loans, Usury Law, Interest Rates)
Facts: Defendants obtained a loan from Plaintiff in the amount P50, 000.00, payable
in 2 months and executed a promissory note. Plaintiff gave only the amount of P47,
000.00 to the borrowers and retained P3, 000.00 as advance interest for 1 month at
6% per month.
Defendants obtained another loan from Defendant in the amount of P90, 000.00,
payable in 2 months, at 6% interest per month. They executed a promissory note to
evidence the loan and received only P84, 000.00 out of the proceeds of the loan.
For the third time, Defendants secured from Plaintiff another loan in the amount of
P300, 000.00, maturing in 1 month, and secured by a real estate mortgage. They
executed a promissory note in favor of the Plaintiff. However, only the sum of P275,
000.00, was given to them out of the proceeds of the loan.
Upon maturity of the three promissory notes, Defendants failed to pay the
indebtedness.
Defendants consolidated all their previous unpaid loans totalling P440, 000.00, and
sought from Plaintiff another loan in the amount of P60, 000.00, bringing their
indebtedness to a total of P50,000.00. They executed another promissory note in
favor of Plaintiff to pay the sum of P500, 000.00 with a 5.5% interest per month plus
2% service charge per annum, with an additional amount of 1% per month as penalty
charges.
On maturity of the loan, the Defendants failed to pay the indebtedness which prompt
the Plaintiffs to file with the RTC a complaint for collection of the full amount of the
loan including interests and other charges.
Declaring that the due execution and genuineness of the four promissory notes has
been duly proved, the RTC ruled that although the Usury Law had been repealed,
the interest charged on the loans was unconscionable and revolting to the
conscience and ordered the payment of the amount of the first 3 loans with a 12%
interest per annum and 1% per month as penalty.
On appeal, Plaintiff-appellants argued that the promissory note, which consolidated
all the unpaid loans of the defendants, is the law that governs the parties.
The Court of Appeals ruled in favor of the Plaintiff-appellants on the ground that the
Usury Law has become legally inexistent with the promulgation by the Central Bank
in 1982 of Circular No. 905, the lender and the borrower could agree on any interest
that may be charged on the loan, and ordered the Defendants to pay the Plaintiffs the
sum of P500,000, plus 5.5% per month interest and 2& service charge per annum ,
and 1% per month as penalty charges.
Defendants filed the present case via petition for review on certiorari.
Issue: WON the stipulated 5.5% interest rate per month on the loan in the sum of
P500, 000.00 is usurious.
Held: No.
A stipulated rate of interest at 5.5% per month on the P500, 000.00 loan is excessive,
iniquitous, unconscionable and exorbitant, but it cannot be considered usurious
because Central Bank Circular No. 905 has expressly removed the interest ceilings
prescribed by the Usury Law and that the Usury Law is now legally inexistent.
Doctrine: A CB Circular cannot repeal a law. Only a law can repeal another law.
Jurisprudence provides that CB Circular did not repeal nor in a way amend the Usury
Law but simply suspended the latters effectivity (Security Bank and Trust Co vs
RTC). Usury has been legally non-existent in our jurisdiction. Interest can now be
charged as lender and borrower may agree upon.
Law: Article 2227, Civil Code
The courts shall reduce equitably liquidated damages, whether intended as an
indemnity or a penalty if they are iniquitous or unconscionable.
Note: While the Usury Law ceiling on interest rates was lifted by the CB Circular 905,
nothing in the said circular could possibly be read as granting carte blanche authority
to lenders to raise interest rates to levels which would either enslave their borrowers
or lead to a haemorrhaging of their assets (Almeda vs. CA, 256 SCRA 292 [1996]).
Accion Pauliana
Khe Hong Cheng v CA (2001)
Kapunan, J.
Re: Accion Pauliana
DOCTRINE: When the law is silent as to when the prescriptive shall
commence, general rule must apply that it will commence when the
moment the action accrues. An action for rescission must be the last
resort of the creditors and can only be availed after the creditor had
exhausted all the properties.
FACTS: Petitioner is the owner of Butuan Shipping Line. In one the
vessels owned by the petitioner, Philippine Agricultural Trading
Corporation boarded 3,400 bags of copra to be shipped from Masbate to
Dipolog City and which said shipment of copra was insured by PhilAm.
While on board, the ship sank amounting to total loss of the shipments.
Because of the loss, the insurer paid the damages to the consignee.
Having subrogated the rights of the consignee, PhilAm instituted a civil
case to recover the money paid to the consignee based on breach of
contract of carriage. While the case was pending, petitioner executed
deeds of donations of parcels of land to his children.
The trial court rendered judgment against the petitioner Ke Hong Cheng
in the civil case on December 29, 1993. After the decision became final a
writ of execution was issued but it was not served, Therefore an alias writ
was was applied for which was granted. The sheriff did not found any
property under Butuan Shipping Lines and/or Ke Hong Cheng.
In 1997, PhilAm filed complaint for annulling the deeds of donation
made by herein petitioner to his children and alleged the donation was
to defraud his creditors including PhilAm. Petitioner filed an answer
stating that the action had already prescribed.
ISSUE: Whether or not the action to rescind the donation had already
prescribed.
HELD: According to the trial court, the period began from December
29, 1993 when the civil case was resolved. Thus, The CA maintained that,
that the four year period began only on January 1997, the time when it
first learned that the judgment award could not be satisfied because the
Ke Hong Cheng had no more properties in his name. Article 1389 of the
Civil Code simply provide that "The action to claim rescission must be
commenced within four years." When the law is silent as to when
the prescriptive shall commence, general rule must apply
that it will commence when the moment the action accrues.
An action for rescission must be the last resort of the
creditors and can only be availed after the creditor had
exhausted all the properties. The herein respondent came to know
only in January 1997 about the unlawful conveyances of the petitioner
when together with the sheriff and counsel were to attach the property
of the petitioner and it was then only when they found out it is no longer
in the name of the petitioner. Since the respondent filed accion pauliana
on February 1997, a month after the discovery that petitioner had no
property in his name to satisfy the judgment, action for rescission of
subject deeds had not yet prescribed.
Siguan v Lim
Accion Pauliana
Doctrine: The action to rescind contracts in fraud of creditors is
known as accion pauliana. For this action to prosper, the following
requisites must be present: (1) the plaintiff asking for rescission has a
credit prior to the alienation, although demandable later; (2) the
debtor has made a subsequent contract conveying a patrimonial
benefit to a third person; (3) the creditor has no other legal remedy to
satisfy his claim; (4) the act being impugned is fraudulent; (5) the third
person who received the property conveyed, if it is by onerous title, has
been an accomplice in the fraud.
Facts: On 25 and 26 August 1990, Rosa Lim issued 2 checks payable to
cash. Upon presentment by petitioner with the drawee bank, the checks
were dishonored for the reason account closed. Demands to make
good the checks proved futile. A criminal case for violation of BP 22 was
filed by petitioner against Lim. RTC convicted Lim as charged. The case
is pending before this Court for review. On 31 July 1990, Lim was
convicted of estafa by the RTC filed by Victoria Suarez. This decision
was affirmed by the CA. However, this Court, acquitted Lim but held her
civilly liable in the amount of P169,000, as actual damages, plus legal
interest.
On 2 July 1991, a Deed of Donation conveying several parcels of land and
purportedly executed by Lim on 10 August 1989 in favor of her children,
Linde, Ingrid and Neil, was registered. New TCTs were issued in the
names of the donees. On 23 June 1993, petitioner filed an accion
pauliana against Lim and her children before the RTC to rescind the
Deed of Donation. Petitioner claimed that Lim fraudulently transferred
all her real property to her children in bad faith and in fraud of creditors,
including her; that Lim conspired with her children in antedating the
Deed of Donation, to petitioners and other creditors prejudice; and that
Lim, at the time of the fraudulent conveyance, left no sufficient
properties to pay her obligations.
RTC ordered the rescission of the deed of donation. CA reversed the
decision of the RTC. It held that 2 of the requisites for filing an accion
pauliana were absent, namely, (1) there must be a credit existing prior
to the celebration of the contract; and (2) there must be a fraud, or at
least the intent to commit fraud, to the prejudice of the creditor seeking
the rescission. The Deed of Donation, which was executed and
acknowledged before a notary public, appears on its face to have been
executed on 10 August 1989. Under Section 23 of Rule 132, the Deed,
being a public document, is evidence of the fact which gave rise to its
execution and of the date thereof. No antedating of the Deed of
Donation was made, there being no convincing evidence on record to
indicate that the notary public and the parties did antedate it. Since
Lims indebtedness to petitioner was incurred in August 1990, or a year
after the execution of the Deed of Donation, the first requirement for
accion pauliana was not met. Anent petitioners contention that
assuming that the Deed was not antedated it was nevertheless in fraud
of creditors because Suarez became Lims creditor on 8 October 1987,
CA found the same untenable, for the rule is basic that the fraud must
prejudice the creditor seeking the rescission.
Issue: Whether the questioned Deed of Donation was made in fraud of
petitioner and, therefore, rescissible.
Ruling: No. Article 1381 enumerates the contracts which are
rescissible, and among them are those contracts undertaken in fraud of
creditors when the latter cannot in any other manner collect the claims
due them.
The general rule is that rescission requires the existence of creditors at
the time of the alleged fraudulent alienation, and this must be proved as
one of the bases of the judicial pronouncement setting aside the contract.
Without any prior existing debt, there can neither be injury nor fraud.
While it is necessary that the credit of the plaintiff in the accion pauliana
must exist prior to the fraudulent alienation, the date of the judgment
enforcing it is immaterial. Even if the judgment be subsequent to the
alienation, it is merely declaratory, with retroactive effect to the date
when the credit was constituted.
The alleged debt of Lim in favor of petitioner was incurred in August
1990, while the deed of donation was purportedly executed on 10 August
1989. We are not convinced with the allegation of the petitioner that the
deed was antedated to make it appear that it was made prior to
petitioners credit. Notably, that deed is a public document, it having
been acknowledged before a notary public. As such, it is evidence of the
fact which gave rise to its execution and of its date, pursuant to Section
23, Rule 132. The fact that the Deed was registered only on 2 July 1991
is not enough to overcome the presumption as to the truthfulness of the
statement of the date in the deed, which is 10 August 1989. Petitioners
claim against Lim was constituted only in August 1990, or a year after
the alienation. Thus, the first 2 requisites for the rescission of contracts
are absent.
Even assuming arguendo that petitioner became a creditor of Lim prior
to the celebration of the contract of donation, still her action for
rescission would not fare well because the third requisite was not met.
Under Article 1381, contracts entered into in fraud of creditors may be
rescinded only when the creditors cannot in any manner collect the
claims due them. Also, Article 1383 provides that the action for
rescission is but a subsidiary remedy which cannot be instituted except
when the party suffering damage has no other legal means to obtain
reparation for the same. The term subsidiary remedy has been defined
as the exhaustion of all remedies by the prejudiced creditor to collect
claims due him before rescission is resorted to. It is, therefore, essential
that the party asking for rescission prove that he has exhausted all other
legal means to obtain satisfaction of his claim. Petitioner neither alleged
nor proved that she did so. On this score, her action for the rescission of
the deed is not maintainable even if the fraud charged actually did exist.
The fourth requisite for an accion pauliana to prosper is not present
either.
Article 1387, first paragraph, provides: All contracts by virtue of which
the debtor alienates property by gratuitous title are presumed to have
been entered into in fraud of creditors when the donor did not reserve
sufficient property to pay all debts contracted before the donation.
Likewise, Article 759, second paragraph, states that the donation is
always presumed to be in fraud of creditors when at the time thereof the
donor did not reserve sufficient property to pay his debts prior to the
donation.
For this presumption of fraud to apply, it must be established that the
donor did not leave adequate properties which creditors might have
recourse for the collection of their credits existing before the execution
of the donation.
Petitioners alleged credit existed only a year after the deed of donation
was executed. She cannot, therefore, be said to have been prejudiced or
defrauded by such alienation. Besides, the evidence disclose that as of
10 August 1989, when the deed of donation was executed, Lim still had
several properties. It was not sufficiently established that the properties
left behind by Lim were not sufficient to cover her debts existing before
the donation was made. Hence, the presumption of fraud will not come
into play.
Nevertheless, a creditor need not depend solely upon the presumption
laid down in Articles 759 and 1387. Under the third paragraph of Article
1387, the design to defraud may be proved in any other manner
recognized by the law of evidence. Thus in the consideration of whether
certain transfers are fraudulent, the Court has laid down specific rules
by which the character of the transaction may be determined. The
following have been denominated by the Court as badges of fraud:
(1) The fact that the consideration of the conveyance is fictitious or
is inadequate;
(2) A transfer made by a debtor after suit has begun and while it is
pending against him;
(3) A sale upon credit by an insolvent debtor;
(4) Evidence of large indebtedness or complete insolvency;
(5) The transfer of all or nearly all of his property by a debtor,
especially when he is insolvent or greatly embarrassed
financially;
(6) The fact that the transfer is made between father and son, when
there are present other of the above circumstances; and
(7) The failure of the vendee to take exclusive possession of all the
property.
The above enumeration is not an exclusive list. The circumstances
evidencing fraud are as varied as the men who perpetrate the fraud in
each case. This Court has therefore declined to define it, reserving the
liberty to deal with it under whatever form it may present itself.
Petitioner failed to discharge the burden of proving any of the
circumstances enumerated above or any other circumstance from which
fraud can be inferred. Accordingly, since the 4 requirements for the
rescission of a gratuitous contract are not present in this case,
petitioners action must fail.
Petitioner brings to our attention the 31 July 1990 Decision of the RTC
wherein Lim was held guilty of estafa and was ordered to pay Victoria
Suarez P169,000 for the obligation Lim incurred on 8 October 1987.
This decision was affirmed by the CA. Upon appeal, however, this Court
acquitted Lim of estafa but held her civilly liable for P169,000 as actual
damages.
It should be noted that the complainant in that case, Victoria Suarez,
albeit a creditor prior to the alienation, is not a party to this accion
pauliana. Article 1384 provides that rescission shall only be to the extent
necessary to cover the damages caused. Thus, only the creditor who
brought the action for rescission can benefit from the rescission; those
who are strangers to the action cannot benefit from its effects. And the
revocation is only to the extent of the plaintiff creditors unsatisfied
credit; as to the excess, the alienation is maintained. Thus, petitioner
cannot invoke the credit of Suarez to justify rescission of the deed of
donation.
Gaite v Fonacier
2 SCRA 830 (1961)
TOPIC: Kinds of Obligations; According to Demandability;
Conditional Obligations
Facts: Defendant-appellant Fonacier was the owner/holder of 11 iron
lode mineral claims, known as the Dawahan Group, situated in
Camrines Norte.
By Deed of Assignment, Respondent constituted and appointed
plaintiff-appellee Gaite as attorney-in-fact to enter into contract for the
exploration and development of the said mining claims on. On March
1954, petitioner executed a general assignment conveying the claims
into the Larap Iron Mines, which owned solely and belonging to him.
Thereafter, he underwent development and the exploitation for the
mining claims which he estimates to be approximately 24 metric tons of
iron ore.
However, Fonacier decide to revoke the authority given to Gaite,
whereas respondent assented subject to certain conditions.
Consequently a revocation of Power of Attorney and Contract was
executed transferring P20k plus royalties from the mining claims, all
rights and interest on the road and other developments done, as well as
, the right to use of the business name, goodwill, records, documents
related to the mines. Furthermore, included in the transfer was the
rights and interest over the 24K+ tons of iron ore that had been
extracted. Lastly the balance of P65K was to be paid for covering the first
shipment of iron ores.
To secure the payment of P65k, respondent executed a surety bond with
himself as principal, the Larap Mines and Smelting Co. and its
stockholder as sureties. Yet, this was refused by petitioner. Appelle
further required another bond underwritten by a bonding
company tosecure the payment of the balance. Hence a second bond was
produced with Far Eastern Surety as an additional surety, provided the
liability of Far Eastern would only prosper when there had been an
actual sale of the iron ores of not less than the agreed amount of P65k,
moreover, its liability was to automatically expire on December 1955.
On December 1955, the second bond had expired and no sale amounting
to the stipulation as prior agreed nor had the balance been paid to
petitioner by respondent. Thus such failure, prompted petitioner to file
a complaint in the CFI of Manila for the payment of the balance and
other damages.
The Trial Court ruled in favor of plaintiff ordering defendant to pay the
balance of P65k with interest. Afterwards an appeal was affected by the
respondent where several motions were presented for resolution: a
motion for contempt; two motions to dismiss the appeal for becoming
moot and academic; motion for a new trial, filed by appellee Gaite. The
motion for contempt was held unmeritorious, while the rest of the
motions were held unnecessary to resolve
Issue: Whether or not the Lower Court erred in holding the obligation
of appellant Fonacier to pay appelle Gaite the balance of P65k, as one
with a period or term and not one with a suspensive condition; and that
the term expired on December 1955
Held: No
Ratio: Error was found, affirming the decision of the lower court. Gaite
acted within his rights in demanding payment and instituting this action
one year from and after the contract was executed, either because the
appellant debtors had impaired the securities originally given and
thereby forfeited any further time within which to pay; or because the
term of payment was originally of no more than one year, and the
balance of P65k, became due and payable thereafter.
The Lower Court was legally correct in holding the shipment or sale of Appellants' failure to renew or extend the surety company's bond upon
the iron ore is not a condition or suspensive to the payment of the its expiration plainly impaired the securities given to the creditor
balance of P65k, but was only a suspensive period or term. What (appellee Gaite), unless immediately renewed or replaced.
characterizes a conditional obligation is the fact that its efficacy or
obligatory force as distinguished from its demandability, is Nevertheless, there is no merit in appellants' argument that Gaite's
subordinated to the happening of a future and uncertain event; so that acceptance of the surety company's bond with full knowledge that on its
if the suspensive condition does not take place, the parties would stand face it would automatically expire within one year was a waiver of
as if the conditional obligation had never existed. its renewal after the expiration date. No such waiver could have been
intended, for Gaite stood to lose and had nothing to gain barely; and if
The sale of the ore to Fonacier was a sale on credit, and not an aleatory there was any, it could be rationally explained only if the appellants had
contract where the transferor, Gaite, would assume the risk of not being agreed to sell the ore and pay Gaite before the surety company's bond
paid at all; and that the previous sale or shipment of the ore was not a expired on December 8, 1955. But in the latter case the defendants-
suspensive condition for the payment of the balance of the agreed price, appellants' obligation to pay became absolute after one year from the
but was intended merely to fix the future date of the payment. transfer of the ore to Fonacier by virtue of the deed, first bond.
While as to the right of Fonacier to insist that Gaite should wait forthe
sale or shipment of the ore before receiving payment; or, in other words,
whether or not they are entitled to take full advantage of the period
granted them for making the payment. The appellant had indeed have
forfeited the right to compel Gaite to wait for the sale of the ore before
receiving payment of the balance of P65,000.00, because of their failure
to renew the bond of the Far Eastern Surety Company or else replace it
with an equivalent guarantee. The expiration of the bonding company's
undertaking on December 8, 1955 substantially reduced the security of
the vendor's rights as creditor for the unpaid P65,000.00, a security that
Gaite considered essential and upon which he had insisted when he
executed the deed of sale of the ore to Fonacier (first bond).
Under paragraphs 2 and 3 of Article 1198 of the Civil Code of the
Philippines: ART. 1198. The debtor shall lose every right to make use of
the period: (2) When he does not furnish to the creditor the guaranties
or securities which he has promised. (3) When by his own acts he has
impaired said guaranties or securities after their establishment, and
when through fortuitous event they disappear, unless he immediately
gives new ones equally satisfactory.
Gonzales v. Heirs of Thomas (1999)
Topic: Kinds of Obligations; According to Demandability;
Conditional Obligations
Doctrine: A condition is every future and uncertain event upon which
an obligation or provision is made to depend or upon which the
acquisition or resolution of rights is made to depend by those who
execute the juridical act. Without it, the sale of the property under the
contract cannot be perfected, and petitioner cannot be obliged to
purchase such property.
Facts: On December 1, 1983, Paula Ao Cruz together with the plaintiffs
heirs of Thomas and Paula Cruz entered into a contract of lease with the
defendant, Felix L. Gonzales of a half portion of a land containing an
area if 12 hectares, more or less, and an accretion of 2 hectares, more or
less, situated in Rodriguez Town, Province of Rizal. As stipulated
therein:
Paragraph 9 The LESSORS hereby commit themselves and shall
undertake to obtain a separate and distinct TCT over the herein leased
portion to the LESSEE within a reasonable period of time which shall
not in any case exceed four (4) years, after which a new Contract shall be
executed by the herein parties which shall be the same in all respects
with this Contract of Lease/Purchase insofar as the terms and conditions
are concerned.
The contracts term is for a period of one year upon the signing
thereof. After the period, Gonzales shall purchase the property
P1,000,000.00, 2 years payable with 12% per annum interest subject to
the devalued amount of the Philippine Peso. Gonzales shall also pay
annual rental equivalent to P2,500.00 per hectare, upon the signing of
this contract and that the lessors (CRUZ) shall undertake to obtain a
separate certificate over leased portion to the LESSEE within a
reasonable period of time which shall not in any case exceed four (4)
years. A new Contract shall then be executed by the herein parties which
shall be the same in all respects with this Contract of Lease/Purchase
insofar as the terms and conditions are concerned. Under the contract,
Gonzales paid the rental fees but did not choose to exercise the option of
paying the 1,000,000 purchase price. A letter was issued by one of the
heirs to rescind the said contract following the breach and ordered
Gonzales to vacate the premises within 10 days. Gonzales did not vacate.
A few days later, Paula Cruz died. As case was launched in Court by the
heirs of Paula Cruz.
Issue: WON paragraph 9 of the Lease/Purchase Contract a condition
precedent before petitioner could exercise his option to buy the
property.
Held: YES.
Paragraph 9 required respondents to obtain a separate and distinct TCT
in their names and not in the name of petitioner. It logically follows that
it was a condition precedent to the latters obligation to purchase and
pay for the land.
When an obligation assumed by a party to a contract is expressly
subjected to a condition, the obligation cannot be enforced against him
unless the condition is complied with. Obligatory force of a conditional
obligation is subordinated to the happening of a future and uncertain
event, so that if that event does not take place, the parties would stand
as if the conditional obligation had never existed.
If a stipulation in a contract admits of several meanings, it shall be
understood as bearing that import most adequate to render it effectual.
An obligation cannot be enforced unless the plaintiff has fulfilled the
condition upon which it is premised. The 9th provision was intended to
ensure that respondents would have a valid title over the specific portion
they were selling to petitioner. Only after the title is assured may the
obligation to buy the land and to pay the sums stated in the contract be
enforced within the period stipulated. Verily, the petitioners obligation
to purchase has not yet ripened and cannot be enforced until and unless
respondents can prove their title to the property subject of the contract.
The Court also held that there can be no rescission (or resolution) of an
obligation as yet non-existent, because the suspensive condition has not
happened.