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Villaroel vs Estrada

FACTS: On May 9 1912, Alejandra F. Callao mother of herein petitioner obtained from the Sps Mariano
Estrada and Severina a loan of 1000 pesos payable in 6 years. Alejandra died leaving petitioner as the
sole heir. The Sps Mariano Estrada and Severina died as well leaving the respondent as the sole heir. On
Aug 9 1930, petitioner signed a document assuming the obligation to pay the respondent 1000 plus 12%
per annum interest. Hence the action filed to recover said amount.
The CFI ruled in favor of the respondent ordering the petitioner to pay 1000 plus interest of 12% per
annum to be counted from Aug 9 1930.

ISSUE: Whether or not the present action may prosper notwithstanding the prescription of the action to
recover the original debt?
HELD: Yes. The present action is not based on the original debt contracted by petitioner’s mother – which
has already prescribed – but on petitioner’s undertaking on Aug 9 1930 to assume the original
obligation. For the petitioner who is the sole heir of the original debtor with rights to the latter’s
inheritance, the debt legally contracted by his mother even if it has already lost enforceability due to
prescription, has become a moral obligation which is a sufficient consideration to make the obligation
he voluntarily assumedon Aug 9 1930 enforceable and legally demandable.

Fisher vs Robb
FACTS:
Defendant John C. Robb was told by the board of directors of the Philippine Greyhound Club, Inc. to
make a business trip to Shanghai to study the operation of a dog racing course. In Shanghai, defendant
met plaintiff A.O. Fisher who was a manager of a dog racing course. Plaintiff upon knowing defendant’s
purpose of his trip, became interested in the Philippine Greyhound Club and asked defendant if he could
be one of the stockholders. Defendant answered in affirmative which thereupon filed a blank subscription
and sent Greyhound Club Php3,000 in payment of the first installment of his subscription. Upon receiving
a call from the said club, he paid the second installment amounting to Php2,000. Due to manipulations of
those who control the said club and during defendant’s absence, the company was changed to “Philippine
Racing Club.” Defendant endeavored the investments of those who subscribed, particularly of that of
plaintiff. Defendant,. through sending a letter, assured plaintiff for any loss which he might suffer in
connection with Philippine Greyhound Club in the same that he could not expect anyone to reimburse him
for his own losses which were more than that of plaintiff.

ISSUE:

Whether a moral obligation will sustain an express executory promise

HELD:

NO. Defendant, although morally responsible because of the failure of the enterprise, is not a
consideration under Article 1261 of the Civil Code as an essential element for the legal existence for an
onerous contract which could bind the promisor to comply with his promise.

Article 1261 states, “there is no contract unless the following requisites exists: consent of the contracting
parties; definite object; consideration.” In the present case, it does not appear that plaintiff consented to
the said form of reimbursement. The first requisite of 1261 is lacking.

With regards of the third requisite, it is now a well-established rule that a mere moral obligation arising
from wholly ethical motives not connected with any legal obligation will not furnish a consideration from an
executory promise.
Barredo vs Garcia
At about 1:30am on May 3, 1936, Fontanilla’s taxi collided with a “kalesa” thereby killing the 16 year old
Faustino Garcia. Faustino’s parents filed a criminal suit against Fontanilla and reserved their right to file a
separate civil suit. Fontanilla was eventually convicted. After the criminal suit, Garcia filed a civil suit
against Barredo – the owner of the taxi (employer of Fontanilla). The suit was based on Article 1903 of
the civil code (negligence of employers in the selection of their employees). Barredo assailed the suit
arguing that his liability is only subsidiary and that the separate civil suit should have been filed against
Fontanilla primarily and not him.
ISSUE: Whether or not Barredo is just subsidiarily liable.
HELD: No. He is primarily liable under Article 1903 which is a separate civil action against negligent
employers. Garcia is well within his rights in suing Barredo. He reserved his right to file a separate civil
action and this is more expeditious because by the time of the SC judgment Fontanilla is already serving
his sentence and has no property. It was also proven that Barredo is negligent in hiring his employees
because it was shown that Fontanilla had had multiple traffic infractions already before he hired him –
something he failed to overcome during hearing. Had Garcia not reserved his right to file a separate civil
action, Barredo would have only been subsidiarily liable. Further, Barredo is not being sued for damages
arising from a criminal act (his driver’s negligence) but rather for his own negligence in selecting his
employee (Article 1903).

Mendoza v. Arrieta

Facts:

A three- way vehicular accident occurred involving a car owned and driven by petitioner Edgardo
Mendoza, a private jeep owned and driven by respondent Rodolfo Salazar, and a gravel and sand truck
owned by respondent Felipino Timbol and driven by Freddie Montoya. As a consequence of said mishap,
two separate Informations for Reckless Imprudence Causing Damage to Property were filed against
Rodolfo Salazar and Freddie Montoya with the CFI of Bulacan. The trial Court absolved jeep-owner-driver
Salazar of any liability, civil and criminal, in view of its findings that the collision between Salazar’s jeep
and petitioner’s car was the result of the former having been bumped from behind by the truck driven by
Montoya. Neither was petitioner awarded damages as he was not a complainant against truck-driver
Montoya but only against jeep-owner-driver Salazar. After the termination of the criminal cases, petitioner
filed a civil case against respondents Salazar and Timbol for the damages sustained by his car as a result
of the collision involving their vehicles.

Issue:

Whether or not the lower court in dismissing petitioner’s complaint for damages based on quasi-delict
against private respondents

Held:

Insofar as Timbol is concerned the answer is yes. The respondent Judge wrongfully sustained Timbol’s
allegations that the civil suit is barred by the prior joint judgment in a criminal case filed against him,
wherein no reservation to file a separate civil case was made by petitioner and where the latter actively
participated in the trial and tried to prove damages against Salazar only. For petitioner's cause of action
against Timbol in the civil case is based on quasi-delict. Respondent Judge committed reversible error
when he dismissed the civil suit against the truck-owner, as said case may proceed independently of the
criminal proceedings and regardless of the result of the latter. Article 31 of the Civil Code provides that,
“When the civil action is based on an obligation not arising from the act or omission complained of as a
felony, such civil action may proceed independently of the criminal proceedings and regardless of the
result of the latter.” Timbol’s submission that petitioner's failure to make a reservation in the criminal
action of his right to file an independent civil action, as required under section 2, Rule 111, Rules of Court,
bars the institution of such separate civil action is untenable. For inasmuch as Article 31 (in relation to
Articles 2176 and 2177) of the Civil Code creates a civil liability distinct and different from the civil action
arising from the offense of negligence under the Revised Penal Code, no reservation is required to be
made in the criminal case. And so, to reiterate, the civil case filed against Timbol is not barred by the fact
that petitioner failed to reserve, in the criminal action, his right to file an independent civil action based on
quasi-delict.

But insofar as Salazar is concerned the answer is no. Inasmuch as civil liability co-exists with criminal
responsibility in negligence cases, the offended party has the option between an action for enforcement
of civil liability based on culpa criminal under Article 100 of the Revised Penal Code, and an action for
recovery of damages based on culpa aquiliana under Article 2177 of the Civil Code. The action for
enforcement of civil liability based on culpa criminal under section 1 of Rule 111 of the Rules of Court is
deemed simultaneously instituted with the criminal action, unless expressly waived or reserved for
separate application by the offended party. The circumstances attendant to the criminal case yields the
conclusion that petitioner had opted to base his cause of action against Salazar on culpa criminal and not
on culpa aquiliana as evidenced by his active participation and intervention in the prosecution of the
criminal suit against said Salazar. The latter's civil liability continued to be involved in the criminal action
until its termination. Such being the case, there was no need for petitioner to have reserved his right to file
a separate civil action as his action for civil liability was deemed impliedly instituted in the criminal case.

Salazar cannot be held civilly liable for damages sustained by petitioner’s car for considering that the
collision between the jeep driven by him and the car owned and driven by Mendoza was the result of the
hitting on the rear of the jeep by the truck driven by Montoya, it cannot be said that Salazar was at fault.
Hence, the right of petitioner to claim damages from Salazar did not arise. Accordingly, inasmuch as
petitioner's cause of action as against jeep-owner-driver Salazar is ex- delictu, founded on Article 100 of
the Revised Penal Code, the civil action must be held to have been extinguished in consonance with
Section 3(c) which provides that, “Extinction of the penal action does not carry with it extinction of the
civil, unless the extinction proceeds from a declaration in a final judgment that the fact from which the civil
right arise did not exist…”
Delta Motor Corporation vs Genuino
Doctrine: Rescission will be ordered only where the breach complained of is substantial as to defeat the
object of the parties in entering into the agreement. It will not be granted where the breach is slight or
casual. Further, the question of whether a breach of a contract is substantial depends upon the attendant
circumstances.

Facts:

 Private respondents are owners of an iceplant and cold storage who ordered black iron pipes
from Delta Motors, for which the latter provided two letter quotations indicating the selling price
and delivery of said pipes. Terms of payment are also included. Genuino made initial payments
on both contracts but delivery of pipes was not made by Delta, thus, Genuino did not made
subsequent payments notwithstanding agreed terms of payment. On July 1972, Delta offered to
deliver the pipes but Genuino refused because construction of ice plant building where pipes
were to be installed was not yet finished.
 Three years later, Genuino asked Delta to deliver the iron pipes within 30 days upon receipt of
request. Delta is unwilling to deliver unless Genuino agree to a new quotation price set by former.
Respondent rejected new quoted price ad instead filed a complaint for specific performance with
damages seeking Delta to deliver the pipes. Meanwhile, Delta in its answer prayer for rescission
of contract pursuant to Art. 1191 of NCC.
 After trial the Court of First Instance ruled in favor of Delta. On appeal, the Court of Appeals
reversed CFI decision. MR was filed but was denied. Hence, this petition.

Issue:

W/N Genuinos' non-performance of its obligations was a substantial breach, let alone a breach of
contract, as would warrant rescission under Art. 1191 of NCC.

Held:

No. In construing Art. 1191, the Supreme Court has stated that, "[r]escission will be ordered only where
the breach complained of is substantial as to defeat the object of the parties in entering into the
agreement. It will not be granted where the breach is slight or casual." [Phil. Amusement Enterprises, Inc.
v. Natividad, G.R. No. L-21876, September 29, 1967, 21 SCRA 284, 290.] Further, "[t]he question of
whether a breach of a contract is substantial depends upon the attendant circumstances." [Universal
Food Corporation v. Court of Appeals, G. R. No. L-29155, May 13,1970,33 SCRA 1, 18].

In the case at bar, the conduct of Delta indicates that the Genuinos' non-performance of its obligations
was not a substantial breach, let alone a breach of contract, as would warrant rescission.

First, Delta did not do anything when Genuinos refused to accept the delivery of the pipes two months
after the execution of contract.

Secondly, three (3) years later when the Genuinos offered to make payment Delta did not raise any
argument but merely demanded that the quoted prices be increased. Moreover, the power to rescind
under Art. 1191 is not absolute. "[T]he act of a party in treating a contract as cancelled or resolved on
account of infractions by the other contracting party must be made known to the other and is always
provisional, being ever subject to scrutiny and review by the proper court." In the instant case, Delta made
no manifestation whatsoever that it had opted to rescind its contracts with the Genuinos. It only raised
rescission as a defense when it was sued for specific performance by private respondents.

Further, it would be highly inequitable for petitioner Delta to rescind the two (2) contracts considering the
fact that not only does it have in its possession and ownership the black iron pipes, but also the
P15,900.00 down payments private respondents have paid. And if petitioner Delta claims the right to
rescission, at the very least, it should have offered to return the P15,900.00 down payments [See Art.
1385, Civil Code and Hodges v. Granada, 59 Phil. 429 (1934)].

Vermen Realty vs CA
FACTS:
Under the conditions of the so-called “Offsetting Agreement”, Vermen Realty (the first party in the
contract) and Seneca Hardware (the second party) were under a reciproca l obligation. Seneca Hardware
shall deliver to Vermen Realty construction materials worth P552,000.00. Vermen Realty's obligation
under the agreement is threefold: he shall pay Seneca Hardware P276,000.00 in cash; he shall deliver
possession of units 601 and 602, Phase I, Vermen Pines Condominiums (with total value of
P276,000.00) to Seneca Hardware; upon completion of Vermen Pines Condominiums Phase II, Seneca
Hardware shall be given option to transfer to similar units therein. As found by the appellate court and
admitted by both parties, Seneca Hardware had paid Vermen Realty the amount of P110,151.75, and at
the same time delivered construction materials worth P219,727.00. Pending completion of Phase II of the
Vermen Pines Condominiums, Vermen Realty delivered to Seneca Hardware units 601 and 602 at Phase
I of the Vermen Pines Condominiums (Rollo, p. 28).

In 1982, the Vermen Realty repossessed unit 602. As a consequence of the repossession, the officers of
the Seneca Hardware corporation had to rent another unit for their use when they went to Baguio on April
8, 1982.

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

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

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

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

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

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

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

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

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