B. FRAUD
Legaspi Oil Co., Inc. v Court of Appeals, GR No. 96505, 01 July 1993
Facts: Petitioner Legaspi Oil Company had several transactions with Oseraos through the agents of
the latter. The transactions involve the sale of copras (coconut husk) by private respondent to the
petitioner. The selling price of Oseraos for every 100 kilos of copras depends on the prevailing
market price at the time the contract was entered into.
In one transaction, Oseraos committed to sell 100 tons of copra to Legaspi Oil for the price of P82
per 100 kilos with delivery terms of 20 days effective 8 March 1975. After the period to deliver had
lapsed, Oseraos was only able to sell 46,334 kilos of copra thus leaving a balance of 53,666 kilos as
per running account. Accordingly, demands were made upon Oseraos to deliver the balance with a
final warning embodied in a letter dated 6 October 1976 that failure to deliver will mean cancellation
of the contract, the balance to be purchased at open market and the price deferential to be charged
against Oseraos. Since there was still no compliance, Legaspi Oil purchased the undelivered balance
from the open market at the prevailing price of P168.00 per 100 kilos, or a price differential of P86.00
per 100 kilos, a net loss of P46,152.76 chargeable against private respondent.
Issue: WoN Oseraos is liable for damages arising from fraud or bad faith in deliberately breaching
the contract of sale entered into by the parties.
Held: Despite repeated demands by petitioner, private respondent failed to fulfill his contractual
obligation to deliver the remaining 53,666 kilograms of copra. Based on the foregoing facts, the
actuality of private respondent’s fraud cannot be gainsaid. In general fraud may be defined as the
voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which
naturally and necessarily arise from such act or omission. The conduct of the private respondent
clearly manifests his deliberate faudulent intent to evade his contractual obligation for the price of
copra had in the meantime more than doubled from P82.00 to P168.00 per 100 kilograms. Under
Art. 1170 of the Civil Code, those who in the performance of their obligation are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for
damages. Pursuant to said article, private respondent is liable for damages.
RCBC vs CA
G.R. No 133107, March 25, 1999
Facts: Petitioner and private respondent stipulated a contract of sale, where payment of latter consisted
of an initial lump sum and monthly installments, which he already made in post-dated checks. They also
executed a contract of chattel mortgage (the car itself) stating that in the event of private respondent’s
default, he is bound to pay the entire remaining balance, along with the interests of the balance.
Unfortunately, one of the checks were left unsigned, thus money debited from private respondent was
returned in his account. Later thereafter, petitioner declared him in default
Remedies: Regional Trial Court (won by PRIVATE RESPONDENT)
Court of Appeals (won by PRIVATE RESPONDENT)
Issue: Given of the facts, the questions posed is whether or not the unsigned check causes respondent
to be in default, and (underlying issue?) whether or not the chattel mortgage should be enforced.
Rule: Art. 1159 of the Civil Code provides contractual obligations must be complied with good faith. Also,
Art. 1370 provides that if the terms of a contract are clear and leave no doubt of intention of the
contracting parties, the literal meaning shall control.
Application: In this case, petitioner could have simply communicated such error to private respondent
and asked for the signature. Instead, the former chose to inform him late that he “defaulted” from his
payments, clearly an absence of good faith (Art. 1159). Also, it is clearly indicated that the chattel
mortgage should only be enforced in the event that private respondent fails to pay for any of the
installments (Art. 1370). He however did not fail to pay, given of the existence of sufficient funds, only
the absence of required signature.
Conclusion: From the foregoing, it is likely the Court may declare him not in default, and the mortgage
will not be enforced.
c. NEGLIGENCE
Tort distinguished from breach of contract
JUAN J. SYQUIA, CORAZON C. SYQUIA, CARLOTA C. SYQUIA, CARLOS C. SYQUIA and
ANTHONY C. SYQUIA vs. THE HONORABLE COURT OF APPEALS, and THE MANILA
MEMORIAL PARK CEMETERY, INC.
G.R. No. 98695, January 27, 1993, J. Campos, Jr.
FACTS:
Juan Syquia, father of the deceased Vicente Syquia, entered in a contract of Deed of Sale and
Interment Order with Manila Memorial Park Cemetery Inc (MMPCI). In the contract, there
contained a provision which stated that the coffin would be placed in a sealed concrete vault
to protect the remains of the deceased from the elements. During the preparation for the
transfer of Vicente’s remains in the newly bought lot in Manila Memorial, it was discovered
that there was a hole in the concrete vault which caused total flooding inside, damaged the
coffin as well as the body of the deceased and covered the same with filth. Syquia filed a
complaint for recovery of damages arising from breach of contract and/or quasi-delict
against the MMPCI for failure to deliver a defect-free concrete vault to protect the remains of
the deceased. In its defense, MMPCI claimed that the boring of the hole was necessary in order
to prevent the vault from floating when water fills the grave. The trial court dismissed the
complaint holding that there was no quasi-delict because the defendant is not guilty of any
fault or negligence and because there was a pre-existing contract between the parties. The
CA affirmed the decision of the trial court. Hence, the present petition.
ISSUE:
Whether or not the private respondent is guilty of tort
HELD:
Denied. Decision of the CA affirmed.
We are more inclined to answer the foregoing questions in the negative. There is not enough
ground, both in fact and in law, to justify a reversal of the decision of the respondent Court
and to uphold the pleas of the petitioners. Although a pre-existing contractual relation
between the parties does not preclude the existence of a culpa aquiliana, We find no reason
to disregard the respondent’s Court finding that there was no negligence.
“Article 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict x x x.”
In this case, it has been established that the Syquias and the Manila Memorial Park Cemetery,
Inc., entered into a contract entitled “Deed of Sale and Certificate of Perpetual Care” on August
27, 1969. That agreement governed the relations of the parties and defined their respective
rights and obligations.
Hence, had there been actual negligence on the part of the Manila Memorial Park Cemetery,
Inc., it would be held liable not for a quasi-delict or culpa aquiliana, but for culpa contractual
as provided by Article 1170 of the Civil Code, to wit: “Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene
the tenor thereof, are liable for damages.”
METROPOLITAN BANK AND TRUST COMPANY v. COURT OF APPEALS
GR. No. 112576, October 26, 1994
ROMERO, J.: (Bank’s Negligence as Source of Liability)
FACTS: Isabel Katigbak, president and owner of 65% shares of Rural Bank of
Padre Garcia, Inc., maintains a current account with Metropolitan Bank and Trust
Company. MBTC received from Central Bank a credit memo that its demand
deposit account was credited with P304k for the account of RBPG, representing
loans granted by the CB.
On the basis of the credit memo, Katigbak issued several checks against its
account with MBTC, two of which were payable to Dr. and Mrs. Roque. The
checks were deposited with Philippine Banking Corp. however the same bounced
when they were forwarded to MBTC. It was twice dishonored. Dr. Roque went to
RBPG for the bounced checks. RBPG paid Dr. Roque an amount of P50k
representing the checks.
Katigbak, who was on vacation in Hongkong with her family, received an overseas
call from Mrs. Maris Katigbak-San Juan at her residence in Makati that Mr. Dungo,
Asst. Cashier of MBTC, berating her about the bounced checks and saying “Nagissue kayo ng tseke, wala naming pondo”. Mrs. San Juan was instructed by
Katigbak to check and verify regarding the credit memo of CB for P304K in favor
of RBPG as she was certain that the checks were covered by the credit memo.
Mrs. San Juan another insulting phone call from Mr. Dungo (“Bakit kayo nag-iisue
ng tseke na wala namang pondo, P300K na”).
He also brushed aside the request to check and verify the credit memo, telling
her sarcastically that he was very sure that no such credit memo existed.
Katigbak had to cut short her vacation and went back home. She then called
MBTC and she was able to talk to Mr. Dungo who arrogantly said “Bakit kayo
magagalit, wala naman kayog pondo?” This shocked Katigbak which caused her
blood pressure to rise to a dangerous level and she had to undergo medical
treatment at the Makati Medical Center for two days. MBTC did not only
dishonored the check, it also issued four debit memos representing service and
penalty charges for the returned checks.
Katigbak filed the civil case in RTC Lipa against MBTC for damages. RTC rendered
decision in favor of petitioner. The same was affirmed by CA with deletion as to
temperate damages, and deduction as to amount of moral damages.
ISSUE: Is there a basis as to negligent act of MBTC as the ground for the awarding
of
damages
in
the
civil
suit
of
Katigbak?
HELD: YES. The presence of malice and the evidence of besmirched reputation
or loss of credit and business standing, as well as a reappraisal of its probative
value, involves factual matters which have been determined by the lower court.
There is no merit in petitioner’s argument that it should not be considered
negligent, much less be held liable for damages on account of inadvertence of
its bank employee as Art. 1173 of the Civil Code only requires it to exercise the
diligence of a good pater familias. The dishonoring of the respondent’s checks
committed through negligence by the petitioner was rectified nine days after
receipt of the credit memo. MBTC was remiss in its duty and obligation to treat
private respondent account with the highest degree of care, considering the
fiduciary nature of their relationship. The bank is under the obligation to treat
the accounts of its depositors with meticulous care. Responsibility arising from
negligence in the performance of every kind of obligation is demandable. While
the bank’s negligence may not have been attended with malice and bad faith,
nevertheless, it caused serious anxiety, embarrassment and humiliation to
private respondents for which they are entitled to recover reasonable moral
damages. Insult was added to injury by petitioner bank’s issuance of debit
memoranda representing service and penalty charges for the returned checks,
not to mention the insulting remarks from its Asst. Cashier. Moral and temperate
damages which are not susceptible of pecuniary estimation are not awarded to
penalize the petitioner but to compensate the respondents from injuries suffered
as a result of the former’s fault and negligence. AFFIRMED.
PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS and LILY S. PUJOL, respondents.
[G.R. No. 126152. September 28, 1999]
FACTS:
Sometime prior to 23 October 1990 private respondent Lily S. Pujol opened with petitioner PNB
Mandaluyong an account denominated as "Combo Account," a combination of Savings Account and
Current Account in private respondent's business name "Pujol Trading," under which checks drawn
against private respondents checking account could be charged against her Savings Account should
the funds in her Current Account be insufficient to cover the value of her checks. Hence, private
respondent was issued by pthe etitioner a passbook on the front cover of which was typewritten the
words "Combo Deposit Plan."
On 23 and 24 October 1990, a private respondent issued a check in the amount of P30,000.00 each
in favor of her daughter-in-law, Dr. Charisse M. Pujol and daughter Venus De Ocampo, respectively.
When issued and presented for payment, private respondent had sufficient funds in her Savings
Account. However, the petitioner dishonored her check allegedly for insufficiency of funds and
debited her account with P500.00 as a penalty charge (P250 each per check transaction).
On 4 November 1990, after realizing its mistake, the petitioner accepted and honored the second
check for P30,000.00 and re-credited to private respondents account the P250.00 previously debited
as penalty.
Private respondent Lily S. Pujol filed with Pasig RTC a complaint about moral and exemplary
damages against the petitioner for dishonoring her checks despite the sufficiency of her funds in the
bank. Petitioner bank admitted in its answer that private respondent Pujol opened a "Combo
Account," a combination of Savings Account and Current Account, with its Mandaluyong branch. It
however justified the dishonor of the two (2) checks by claiming that at the time of their issuance
private respondent Pujols account was not yet operational due to lack of documentary requirements.
On 27 September 1994 the trial court (RTC) rendered a decision ordering petitioner to pay private
respondent Pujol moral damages of P100,000.00 and attorneys fees of P20,000.00.
CA affirmed RTC’s decision in toto.
ISSUE:
W/N the appellate court (C/A) erred in holding that petitioner was estopped from denying the
existence of a "Combo Account" and the fact that it was operational at the time of the issuance of
the checks in not holding that the award by the trial court of moral damages of P100,000.00 and
attorneys fees of P20,000.00 was inordinately disproportionate and unconscionable.
RULING:
We cannot sustain the petitioner.
Although the petitioner presented evidence before the trial court to prove that the arrangement was
not yet operational at the time respondent issued the two checks, it failed to prove that she had
actual knowledge that it was not yet operational at the time she issued the checks considering that
the passbook in her Savings Account already indicated the words "Combo Deposit Plan."
Hence, respondent Pujol had justifiable reason to believe that her accounts were effectively covered
by the arrangement during the issuance of the checks. Either by its own deliberate act, or its
negligence in causing the "Combo Deposit Plan" to be placed in the passbook, petitioner is
considered estopped to deny the existence of and perfection of the combination deposit agreement
with respondent Pujol.
A bank is under obligation to treat the accounts of its depositors with meticulous care whether such
account consists only of a few hundred pesos or of millions of pesos. Responsibility arising from
negligence in the performance of every kind of obligation is demandable. While petitioners
negligence in this case may not have been attended with malice and bad faith, nevertheless, it
caused serious anxiety, embarrassment and humiliation to private respondent Lily S. Pujol for which
she is entitled to recover reasonable moral damages.
RTC and CA decision affirmed.
PNB vs CA - SYPNOSIS
Spouses Antonio M. Chua and Asuncion M. Chua were the owners of a parcel of land covered by
Transfer Certificate of Title No. P-142. Upon Antonio's death, the probate court appointed his son,
Allan M. Chua, as special administrator of his estate. It also authorized Allan to obtain a loan
accommodation of five hundred fifty thousand pesos (P550,000) to be secured by a real estate
mortgage over the above-mentioned parcel of land. Pursuant thereto, on June 29, 1989, Allan
obtained a loan of P450,000.00 from the Philippine National Bank (PNB). However, for failure to pay
the loan in full, the bank extrajudicially foreclosed the real estate mortgage. During the auction, PNB
was the highest bidder with a bid price P372,825.63. Subsequently, to claim the deficiency, PNB
instituted an action with the Regional Trial Court (RTC), Branch 10 of Balayan, Batangas, against
both Mrs. Asuncion M. Chua and Allan M. Chua in his capacity as special administrator of his father's
estate. Despite summons having been duly served, Asuncion Chua and Allan Chua did not answer
the complaint. The trial court declared them in default and received evidence ex parte. Thereafter,
the RTC rendered its decision, ordering the dismissal of PNB's complaint. The Court of Appeals
affirmed the RTC decision. Hence, the PNB filed the instant petition. cHaADC
The Court ruled that case law now holds that Section 7 of Rule 86 of the Rules of Court rule grants
to the mortgagee three distinct, independent and mutually exclusive remedies that can be
alternatively pursued by the mortgage creditor for the satisfaction of his credit in case the mortgagor
dies, among them: (1) to waive the mortgage and claim the entire debt from the estate of the
mortgagor
Modes of Breach: Contravention of the Tenor
No. L-73867
Telefast Communication/Philippine Wireless Inc. vs Castro, Sr.
J. Herrera
Petitioner is being charged by Sandiganbayan for failing to secure the truck seized from Ancla
by the BIR for failure to pay taxes.
IMPORTANT PEOPLE
Telefast: petitioner/defendant-appellant
Ignacio Castro, Sr.: respondents/plaintiffs-appellees
FACTS
1. petition for review on certiorari on the decision of Intermediate Appellate Court
2. Sofia Crouch, daughter of Castro announced the death of her mother through telegram, which
was accepted by defendant in its Dagupan Office but the telegram never reached hence the
funeral of the mother was not attended by Castro and the other children who were all residing
in the US
3. daughter only discovered that the telegram wasn't received so she and the plaintiffs brought
action for damages; case was filed in CFI Pangasinan
4. defense of defendant: technical and atmospheric factors beyond its control; but it did not
advise Sofia
5. CFI Pangasinan ordered defendant to pay plaintiffs damages
6. petitioner appealed and the Intermediate Appellate Court affirmed the decision but modified
the award of damages
7. compensatory damages to Sofia and exemplary damages were eliminated, and moral damages
were reduced
8. petitioner appealed from the modified judgment of the appellate court contending that moral
damages should be eliminated since its negligent act was not motivated by fraud, malice or
recklessness; it can only be held liable for the fees paid by Sofia for the telegram
ISSUE with HOLDING
W/N petitioner is not liable for moral damages (NO)
● Art. 2176 Civil Code: whoever by act of omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done
● petitioner and respondent entered into a contract whereby for a fee, petitioner undertook to
send respondent's message
● petitioner did not do so despite respondent's performance of obligation (paying the fee) thus
petitioner is guilty of contravening its obligation and is liable for damages
● liability is not limited to actual or qualified damages
● Article 2217 Civil Code: Moral damages include physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation,
and similar injury. Though incapable of pecuniary computation, moral damages may be
recovered if they are the proximate results of the defendant's wrongful act or omission.
● petitioner's act or omission was the cause of respondent's suffering
● trial court's award of compensatory damages is upheld, as well as exemplary damages
DISPOSITIVE PORTION
petition is denied and decision appealed from is modified
NANCY GO & ALEX GO versus C.A. et al.
GR No. 114791; May 29, 1997
FACTS:
Private respondents contracted with the petitioner for the video coverage of their wedding.
Three times thereafter, the newlyweds tried to claim the videotape, which they planned to
show to their relatives in the US, and thrice they failed because the tape was apparently not
yet processed. Upon their return, they found out that the tape had been erased by petitioners
and therefore, could no longer be delivered. Private respondents filed a complaint about
specific performance and damages against petitioners, which was granted by the RTC and
affirmed by the CA. Hence, this petition.
ISSUE
Whether or not Nancy and Alex Go should be held liable for the damages sought
RULING
Yes. It is contrary to human nature for any newlywed couple to neglect to claim the video
coverage of their wedding; the fact that private respondents filed a case against petitioners
belies such assertion. Clearly, petitioners are guilty of actionable delay for having failed to
process the video tape. Considering that private respondents were about to leave for the
United States, they took care to inform petitioners that they would just claim the tape upon
their return two months later. Thus, the erasure of the tape after the lapse of thirty days was
unjustified. In this regard, Article 1170 of the Civil Code provides that “those who in the
performance of their obligations are guilty of fraud, negligence or delay, and those who is
any manner contravene the tenor thereof, are liable for damages.” In the instant case,
petitioners and private respondents entered into a contract whereby, for a fee, the former
undertook to cover the latter’s wedding and deliver to them a video copy of said event. For
whatever reason, petitioners failed to provide private respondents with their tape. Clearly,
petitioners are guilty of contravening their obligation to said private respondents and are
thus liable for damages.
Fortuitous Event
ACTIONS FOR UNDOING OF POOR WORK
Tanguilig vs CA
117190
Bellosillo, J
Petitioner entered into a contract to construct a windmill for private
respondents. subject windmill was destroyed by a “strong wind”. Court
demands petitioner to reconstruct windmill.
Important People
Jacinto Tanguilig- owner JMT Eng’g and General Merchandise(pet)
Vicente Herce Jr- availed services of JMT, (resp)
FACTS
1.
Parties entered into a contract to build a windmill. Tanguilig offered
to construct in consideration of P60,000 from Herce Jr. Contract came with
a 1-year guarantee;
2.
Herce Jr tendered dp 30k, and another installment of 15k. Balance of
15k was not paid;
3.
Tanguilig filed a complaint to collect the unpaid sum of 15k from
Herce Jr;
4.
In his answer, Herce Jr alleges he already paid said sum to certain Mr.
Pili owner of SPGMI in consideration of a deep well constructed as a part of
the windmill project. He claims therefore that he has fulfilled his obligation
and that in any case his non-payment of the balance should be offset by
the defects of the windmill which lead it to collapse after a strong wind
struck their place
Furthermore, the petitioner states that non-payment may also because of
the destruction of the windmill, which he claims a cause of the fortuitous
event
5.
RTC ruled in favor of pet by finding no agreement between Tanguilig
and Herce Jr to construct a well, that it was not part of their contract
contrary to Mr Pili’s claim that he was commissioned by the pet. It also
found no clear and convincing proof that the windmill fell down due to a
defect in its construction;
6.
CA reversed, finding the deep well was included in the contract to
build the mill and that there can be no finding of force majeure that could
free Tanguilig from his liability to reconstruct;
7.
Tangulig finds error in the CA’s reversal
Issue: Given these set of facts, the questions posed is whether or not such
construction of the windmill included the installation of deep well
(underlying issue: which may institute respondent to commission it to
another – if it was allowed.) and whether petitioner is under obligation the
reconstruction.
Rule:
Art. 1371 of the Civil Code provides that the parties’
contemporaneous and subsequent acts shall be the consideration to
judge intention of contracting parties. Next, Art. 1240 provides that
payment shall be made to the person whose favor the obligation has been
constituted or any person authorized to receive it. Then, Art. 1174 provides
that no person shall be responsible for events that could not be foreseen or
inevitable. Finally, Nakpil v CA provides for the precepts to who may avail
defense of a “fortuitous event.”
Application: In this case, the words “suitable for” and “for” in the proposal
were meant to convey the idea it appropriateness for a deep well. Also
acts before and after the contract does not uphold the respondent’s
defense (Art. 1371). Consequently, Art. 1240 cannot be raised for two
reasons: (1) obligation did not include construction of the deep well, (2) no
substantial proof that he was authorized to receive such payment in lieu of
petitioner.
Onto the second issue, Art. 1174 cannot be invoked
because it was proven that it was not a typhoon that wrecked the windmill
but a strong wind, which does not constitute a fortuitous event.
Conclusion: From the foregoing, it is likely that the Court will award the
petitioner of the balance. However, he is liable for the reconstruction of the
windmill
WHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE
HERCE JR. is directed to pay petitioner JACINTO M. TANGUILIG the balance
of P15,000.00 with interest at the legal rate from the date of the filing of the
complaint. In return, the petitioner is ordered to "reconstruct subject
defective windmill system, in accordance with the one-year guaranty and
to complete the same within three (3) months from the finality of this
decision.
RELEVANCE TO THE LESSON:
Art 1167, supra
Art. 1169. Those obliged to deliver or to do something incur in delay from
the time the obligee judicially or extra-judicially demands from them the
fulfillment of their obligation.-
However, the demand by the creditor shall not be necessary in order that
delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it
appears that the designation of the time when the thing is to be delivered
or the service is to be rendered was a controlling motive for the
establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it
beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfills his
obligation, delay by the other begins. (1100a
LUZAN SIA, petitioner, vs. COURT OF APPEALS and SECURITY BANK and
TRUST COMPANY, respondents.
G.R. No. 102970 May 13, 1993
GOVERNING LAWS / PROVISIONS / DOCTRINES
CIVIL CODE LEASE
Art. 1643. In the lease of things, one of the parties binds himself to give to another
the enjoyment or use of a thing for a price certain, and for a period which may be
definite or indefinite
DEPOSIT
Art. 1962. A deposit is constituted from the moment a person receives a thing
belonging to another, with the obligation of safely keeping it and of returning the
same. If the safekeeping of the thing delivered is not the principal purpose of the
contract, there is no deposit but some other contract. (1758a)
Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who
acted in good faith is liable shall be those that are the natural and probable
consequences of the breach of the obligation, and which the parties have foreseen
or could have reasonably foreseen at the time the obligation was constituted. In
case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible
for all damages which may be reasonably attributed to the non-performance of the
obligation. (1107a)
GENERAL BANKING LAW
Sec. 72. In addition to the operations specifically authorized elsewhere in this Act,
banking institutions other than building and loan associations may perform the
following services:
(a) Receive in custody funds, documents, and valuable objects, and rent
safety deposit boxes for the safeguarding of such effects;
**********
FACTS:
On March 22, 1985, plaintiff Luzan Sia, herewith referred to as “plaintiff” rented
from Security Bank and Trust Co., herewith referred to as “respondent”, safety
deposit box #54 to store rare collections of stamps. Such safety deposit box which
was leased to the plaintiff by respondent at its Binondo branch was located at the
bottom of the lowest level of safety deposit boxes.
During the floods that took place in 1985 and 1986, floodwater entered into the
defendant's premises, seeped into the safety deposit box leased by the plaintiff
and caused, according to the plaintiff, damage to his stamps collection. The
defendant rejected the plaintiff's claim for compensation for his damaged stamps
collection and denied liability, on the basis of the "Rules and Regulations
Governing the Lease of Safe Deposit Boxes".
The defendant bank also contended that its contract with the plaintiff over safety
deposit box No. 54 was one of lease and not of deposit and, therefore, governed
by the lease agreement which should be the applicable law; that the destruction of
the plaintiff's stamps collection was due to a calamity beyond obligation on its part
to notify the plaintiff about the floodwaters that inundated its premises at Binondo
branch which allegedly seeped into the safety deposit box leased to the plaintiff.
The plaintiff thus instituted an action for damages against the defendant, which the
trial court upheld and so ordered defendant to pay the sum of —
a) Twenty Thousand Pesos (P20,000.00), Philippine Currency, as actual
damages;
b) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as moral
damages; and
c) Five Thousand Pesos (P5,000.00), Philippine Currency, as attorney's fees and
legal expenses.
The counterclaim set up by the defendant was hereby dismissed for lack of merit.
No costs.
The defendant appealed the trial court’s decision to the Court of Appeals and
contended that the latter erred in
(a) holding that the lease agreement is a contract of adhesion;
(b) finding that the defendant had failed to exercise the required diligence
of a bank in maintaining the safety deposit box;
c) awarding to the plaintiff actual damages in the amount of P20,000.00,
moral damages in the amount of P100,000.00 and attorney's fees and
legal expenses in the amount of P5,000.00; and
(d) dismissing the counterclaim.
The Court of Appeals reversed the decision of the trial court and dismissed both
the complaint of the plaintiff and the appeal of the respondent on the basis of the
Lease Agreement contract. The plaintiff filed an instant petition where he insists
that the trial court correctly ruled that SBTC had failed "to exercise the required
diligence expected of a bank maintaining such safety deposit box . . . in the light
of the environmental circumstance of said safety deposit box after the floods of
1985 and 1986."
ISSUE:
a. Was this a contract of lease or contract of deposit?
b. Whether or not the bank is liable for negligence?
RULING:
a. A contract for the use of a safety deposit box is a contract of deposit governed
by Book IV of the Civil Code. The relationship between a bank renting out safe
deposit boxes and its customer with respect to the contents of the box is that of a
bailor-bailee, the bailment being for hire and mutual benefit has been adopted in
this jurisdiction.
b. SBTC was aware of the floods of 1985 and 1986; it also knew that the
floodwaters inundated the room where the safe deposit box was located. In view
thereof, it should have lost no time in notifying the petitioner in order that the box
could have been opened to retrieve the stamps, thus saving the same from
further deterioration and loss. The bank’s negligence aggravated the injury or
damage to the stamp collection.
In this respect, it failed to exercise the reasonable care and prudence expected
of a good father of a family, thereby becoming a party to the aggravation of the
injury or loss. Hence, the petition was granted.
V. Extinguishment of Liability in Case of Breach Due To Fortuitous Event
B. Requisites
Concurrent Fault
G.R. No. L-47851
Nakpil & Sons v. CA
Paras, J.
An earthquake caused PBA’s building to partially collapse. PBA sought recovery for damages from UCI
and Nakpil. The Court ruled that both UCI and Nakpil are liable for damages despite the fortuitous
event due to their concurrent negligence resulting to defects in construction and in the plans and
specifications.
IMPORTANT PEOPLE
Philippine Bar Association (PBA) – plaintiff, owner of building
Juan F. Nakpil & Sons (Nakpil) – prepared the plans, specifications (architects)
The United Construction Co., Inc. (UCI) – construction company
FACTS
1.
PBA decided to construct an office building and sought the services of UCI and Nakpil.
2.
Aug. 2,1968 – an earthquake hit Manila and the building sustained major damage.
3.
PBA filed for recovery of damages against UCI, alleging that the partial collapse was due to
defects in construction.
4.
UCI filed a complaint against architects Nakpil, alleging the collapse to be due to defects in the
plans and specifications.
5.
Technical issues were referred to Commissioner Hizon whose findings stated that while the
damage sustained was caused directly by the August 2, 1968 earthquake, they were also caused by the
defects in the plans prepared by Nakpil and deviations from said plans by UCI and even the owners to
exercise the requisite degree of supervision in the construction of subject building.
6.
Trial Court agreed with the findings (except regarding the owner) and ruled in favor of PBA.
7.
Defendants claim that the damages were due to the earthquake, which was an act of God, and
therefore they should not be liable.
ISSUE with HOLDING
1.
W/N the earthquake, an act of God which caused the collapse of the building, exempts from
UCI and Nakpil from liability? NO.
·
The general rule is that no person shall be responsible for events which could not be foreseen or
which though foreseen, were inevitable (Article 1174, New Civil Code).
·
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. (1 Corpus Juris 1174). The earthquake of August 2, 1968 is a
fortuitous event.
·
To exempt the obligor from liability under Article 1174 of the Civil Code, the following must
concur:
(a) the cause of the breach of the obligation must be independent of the will
of the debtor;
(b) the event must be either unforseeable or unavoidable;
(c) the event must be such as to render it impossible for the debtor to fulfill
his obligation in a normal manner; and
(d) the debtor must be free from any participation in, or aggravation of the
injury to the creditor.
·
Thus, if upon the happening of a fortuitous event, there concurs a corresponding fraud,
negligence, delay or violation or contravention in any manner of the tenor of the obligation
which results in loss or damage, the obligor cannot escape liability.
·
The negligence of UCI and Nakpil was established beyond dispute both in the lower court and
in the CA. UCI was found to have made substantial deviations from the plans and specifications
and to have failed to observe the requisite workmanship in the construction as well as to exercise
the requisite degree of supervision; while Nakpil were found to have inadequacies or defects in
the plans and specifications prepared by them. 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 August 2, 1968. (CA also affirmed the observation that buildings situated in the same
area withstood the earthquake.) For this reason the defendants cannot claim exemption from liability.
DISPOSITIVE PORTION
Decision appealed from is hereby MODIFIED. Court imposes upon defendants indemnity in favor of
PBA of P5,000,000.00 to cover all damages occasioned by the loss of the building and an additional
P100,000.00 for attorney's fees.
DOCTRINE
When the negligence of a person concurs with an act of God in producing a loss, such person is not
exempt from liability by showing that the immediate cause of the damage was the act of God. To be
exempt from liability for loss because of an act of God, he must be free from any previous negligence
or misconduct by which that loss or damage may have been occasioned.
Extinguishment of Liability in Case of Breach Due to Fortuitous Event
G.R. No. L-47379
NPC vs. CA
Gutierrez, Jr.
ECI was tasked with a construction project for NAWASA. Due to a strong typhoon, NPC had open the
spillway gates of Angat Dam which was near the project site. This damaged and destroyed the
equipment and facilities of ECI. Court reduced the award of damages due to ECI but found NPC to be
negligent and liable despite thepresence of an act of God.
FACTS
1. Consolidated petitions seeking to set aside the decision of the CA, declaring NPC liable for damages
against Engineering Construction Inc. (ECI)
2. August 4, 1964 — ECI executed a contract in Manila with National Waterworks and Sewerage
Authority (NAWASA) where it would furnish all tools, labor, equipment and materials and construct
the 2nd Ipo-Bicti Tunnel and the necessary structures within 800 calendar days
3. ECI finished the tunnel excavation phase by September 1967 but in November of that year,
typhoon “Welming” struck causing the water levels of NPC’s Angat dam (which was near the project
site) to rise up to dangerous levels. Because of this, they opened the spillway gates and caused ECI’s
materials and supplies as well as camp facilities and some permanent structures to be destroyed
4. CA found NPC liable due to the negligent manner with which they let the spillway gates be opened,
allowing an “extraordinary large volume of water” out when they should have opened them gradually
before the climax (??) of the storm. Note that
NPC knew the typhoon was coming
5. Damages awarded equalled P675,785.31 but this was reduced by the court
(a) P213,200 was for the rentals of a crane for 1 year to temporarily replace the one that was
destroyed but it appears that they were able to buy another crane which, if the contract of sale was
adhered to, arrived in a month. So the temporary replacement was probably only rented for that time
for a total cost of P19,200.
(b) P120,000 was supposed to be given to ECI for finishing the project a month early (within the 800
days) but the court rejected the award of this because the incident occurred after 1170 days
(c) Exemplary damages were also eliminated because there was no bad faith on the part of NPC
ISSUE with HOLDING
NPC’s petition: the destruction of ECI’s equipment and facilities were due to force majeure and the
rapid rise of water in the reservoir of its damn could not have been foreseen
ECI’s petition: the CA has no basis in concluding that they acquired a new crane and so the reduction
of consequential damages from P333,200 to P19K is unwarranted and the award of P120k for lost
bonus is justified
1. Whether or not the destruction of ECI’s equipment and facilities was due to force majeure
• based on the trial court’s and appellate court’s findings, NPC was NEGLIGENT because it
opened the spillway gates of the Angat Dam only at the height of the typhoon when they
knew it would’ve been safer to open it gradually and earlier since they knew it was coming 4
days before it arrived
• the typhoon may have been force majeure but the proximate cause of the loss
and damage was their negligence so they cannot escape liability
• Juan Nakpil & Sons vs. CA: “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 CC which
results in loss or damage, the obligor cannot escape liability”
• to escape liability, the damage done must be caused exclusively by the violence of nature
• Also, whether or not there was negligence on the part of NPC is a question of fact which the
court will not address
2. Whether or not the CA erred in reducing the consequential damages
• considering the fact that there was a contract of sale with the promise by Asian
Enterprises that they would deliver the new crane within 60 days (after the flooding) and
this would have been cheaper than renting a crane for a year, there’s no reason that ECI
would’ve opted to rent a crane instead. Also, it was found that they were able to repair their
crane for P77k which was already included in the compensatory damages. No reason, then,
to find anything erroneous about the award of damages
• The P120k supposedly lost for failing to earn the one month bonus from NAWASA cannot
be granted because the damage was incurred long after the deadline to finish construction.
They wouldn’t have earned it anyway.
• Additionally, the court was right in ruling that there was no bad faith on the part of NPC
and the deletion of exemplary damages is justified
DISPOSITIVE PORTION
Wherefore, the petitions in G.R. No. 47379 and G.R. No. 47481 are both
DISMISSED for LACK OF MERIT. The decision appealed from is AFFIRMED.
DOCTRINE
One cannot escape liability on the basis of force majeure (act of God) if the
proximate cause of the damage caused is their fraudulence, negligence, delay, or
violation or contravention in any manner of the tenor of the obligation. The damage
caused must be exclusively due to the act of God
Dioquino vs. Laureano | G.R. No. L-25906 | May 28, 1970 | Ponente:
Fernando, J.
Nature of Case: Liability on fortuitious events
Plaintiff(s): Pedro D. Dioquino
Defendant(s): Federico Laureano, Aida de Laureano, Juanito Laureano
SUMMARY: While Federico Laureano was using the car owned by Atty. Dioquino, some
‘mischievous boys’ stoned the car which resulted to a broken windshield. Although the car was
driven by the plaintiff’s driver, Laureano being only a passenger, Dioquino proceeded against
Laureano to claim damages. Plaintiff also included Laureano’s wife and father in the suit filed.
Lower court ruled for Dioquino, while dismissing the suit filed against the defendant’s wife and
father. Supreme Court granted Laureano’s appeal because the case falls within the definition of a
fortuitous event, making defendant not liable.
FACTS
• Atty. Dioquino, a practicing lawyer of Masbate, owns the car
• Dioquino went to the office of the MVO, Masbate to have his car registered
• Plaintiff met defendant Federico Laureano, a patrol officer of said MVO office, who was waiting
for a jeepney to take him to the office of the Provincial Commander (P.C.), Masbate
- Dioqunio requested defendant to introduce him to one of the clerks in the MVO offive who
could facilitate the registration of his car
• Laureano rode on the car of Dioquino on his way to P.C. Barracks
- car, driven by Dioquino’s river and with Laureano as the sole passenger, was stoned by
some ‘mischievous boys’ —> windshield was broken
• Laureano was only able to catch one of the boys
- boy admitted to having thrown the stone
- the father of the boy was called but no satisfactory arrangements were made about the
damage to the windshield
• Laureano refused to file charges against the boy and his parents believing that the stone-throwing
was merely accidental and that it was due to force majeure
- defendant Laureano also refused to pay the windshield himself
• Plaintiff now holds defendant Federico Laureano accountable for the loss sustained
- also included in the action filed were the defendant’s wife, Aida Laureano, and his father,
Juanito Laureano
• Lower court granted plaintiff’s action for damages but absolved defendant’s wife and father of
any responsibility
• all 3 Laureanos’ appealed, raising the following:
1. lower court failed to dismiss such a suit as no liability could have been incurred as a result
of fortuitous event
2. lower court failed to award damages against plaintiff for the unwarranted inclusion of the
wife and the father in this litigation
ISSUE(S) + RULING
1. WON the lower court erred in not dismissing the suit against Laureano — YES
• Art. 1174, Civil Code: "Except in cases expressly specified by the law, or when it is otherwise
declared by stipulation, or when the nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not be, foreseen, or which,
though foreseen were inevitable.”
• In obligations arising from contract that some extraordinary circumstance independent of the
will of the obligor, or of his employees —> essential element in fortuitous events
- if the above situation happens, there is no liability
- the law does not require diligence beyond what human are and foresight can provide
• Caso fortuito or force majeure are extraordinary events not forseeable or avoidable, events
that could not be foreseen, or which, though foreseen, were inevitable (must be impossible to
foresee or to avoid)
• What happened to the car was clearly unforeseen — it was a fortuitous event resulting in a loss
which must be borne by the owner of the car
2. WON damages could be awarded for the unwarranted inclusion of defendant’s wife and
father in the litigation — NO
• Plaintiif included the wife and the father because, according to him, the father was the
administrator of the inheritance of an undivided property to which defendant could lay claim and
the wife for the conjugal partnership would be made to respond for whatever liability would be
adjudicated against the husband
• Plaintiff was merely propmted by the desire to inflict needless and unjustified vexation on them
(wife and father)
• Since plaintiff already suffered a pecuniary loss which was the result of a fortuitous event (would
have not occured if defendent Laureano had not borrowed his car), court feels that he is not to
be penalized further by his mistaken view of the law in including them in his complaint
Decision of lower court REVERSED.
LESSON: Effect of concurrent fault
No. L-21749
Republic vs. Luzon Stevedoring Corporation
Reyes, JBL
Appeal from a decision of the CFI of Manila adjudging the defendant-appellant, Luzon Stevedoring
Corporation, liable in damages to the plaintiff-appellee Republic of the Philippines.
IMPORTANT PEOPLE
Republic of the Philippines
Luzon Stevedoring Corporation (LSC)
FACTS
8.
A barge owned by the LSC rammed against one of the wooden piles of the Nagtahan bridge,
smashing the posts and causing the bridge to list.
9.
There was a heavy downpour the previous days, causing the river to swell and making the
currents swift.
10. LSC disclaimed liability on the grounds that:
It had exercised due diligence in the selection and supervision of its employees
Damages to the bridge were caused by force majeure
Plaintiff has no capacity to sue
Nagtahan bridge is an obstruction to navigation
11. CFI held the defendant liable for the damage caused by its employees and ordering it to pay to
plaintiff the actual cost of the repair of the Nagtahan bridge.
ISSUE with HOLDING
2.
Whether or not the collision of appellant’s barge with the supports or piers of the Nagtahan
bridge was in law caused by fortuitous event or force majeure.
No
The appellant strongly stresses the precautions taken by it on the day in question and
concludes that it had done all it was called to do, and that the accident, therefore, should be held due
to force majeure or fortuitous event.
These very precautions, however, completely destroy the appellant's defense.
Caso fortuito or force majeure are extraordinary events not foreseeable or avoidable, "events
that could not be foreseen, or which, though foreseen, were inevitable" (Art. 1174, Civil Code)
It is not enough that the event should not have been foreseen or anticipated, but it must be
one impossible to foresee or to avoid.
The mere difficulty to foresee the happening is not impossibility to foresee the same.
The very measures adopted by appellant prove that the possibility of danger was not only
foreseeable, but actually foreseen, and was not caso fortuito.
3.
Whether or not it was error for the Court to have permitted the plaintiff-appellee to introduce
additional evidence of damage after said party had rested its case.
No
Whether or not further evidence will be allowed after a party offering the evidence has rested
his case, lies within the sound discretion of the trial Judge, and this discretion will not be reviewed
except in clear case of abuse.
In the present case, no abuse of that discretion is shown.
DISPOSITIVE PORTION
WHEREFORE, finding no error in the decision of the lower Court appealed from, the same is hereby
affirmed. Costs against the defendant-appellant.
DOCTRINE
Caso fortuito or force majeure are extraordinary events not foreseeable or avoidable, "events that
could not be foreseen, or which, though foreseen, were inevitable." (Art. 1174, Civil Code)
RELEVANCE TO THE LESSON
For an event to be considered a fortuitous event, it is not enough that the event should not have been
foreseen or anticipated, but it must be one impossible to foresee or to avoid.
VICTORIAS PLANTERS ASS., INC., ET AL. VS. VICTORIAS MILLING CO.,
INC. G.R. No. L-6648 July 25, 1955
FACTS:
The petitioners Victorias Planters Association, Inc. and North Negros Planters
Association, Inc. and the respondent Victorias Milling Co., Inc entered into a milling
contract whereby they stipulated a 30-year period within which the sugar cane produced
by the petitioner would be milled by the respondent central. The parties also stipulated
that in the event of force majuere, the contract shall be deemed suspended during this
period. The petitioner failed to deliver the sugar cane during the four years of the Japanese
occupation and the two years after liberation when the mill was being rebuilt or a total of
six years.
ISSUE:
Can the petitioners be compelled to deliver sugar cane for six more years after the
expiration of the 30-year period to make up for what they failed to deliver to the
respondent?
RULING:
No. Fortuitous event relieves the obligor from fulfilling the contractual obligation
under Article 1174 of the Civil Code. The stipulation in the contract that in the event of
force majeure the contract shall be deemed suspended during the said period does not
mean that the happening of any of those events stops the running of the period agreed
upon. It only relieves the parties from the fulfillment of their respective obligations during
that timethe petitioner from delivering the sugar cane and the respondent central from
milling. In order that the respondent central may be entitled to demand from the petitioner
the fulfillment of their part in the contracts, the latter must have been able to perform it but
failed or refused to do so and not when they were prevented by force majeure such as
war. To require the petitioners to
deliver the sugar cane which they failed to deliver during the six years is to demand from
them the fulfillment of an obligation, which was impossible of performance during the time
it became due. Nemo tenetur ed impossibilia. The respondent central not being entitled to
demand from the petitioners the performance of the latter’s part of the contracts under
those circumstances cannot later on demand its fulfillment. The performance of what the
law has written off cannot be demanded and required. The prayer that the petitioners be
compelled to deliver sugar cannot for six years more to make up for what they failed to
deliver, the fulfillment of which was impossible, of granted, would in effect be an extension
of the terms of the contracts entered into by and between the parties.
ARRIETA VS. NATIONAL RICE AND CORN CORPORATIONGR L-15645 January 31, 1964
Regala, J.
FACTS:
On May 19, 1952, plaintiff-appellee Mrs. Paz Arrieta participated in a public
biddingcalled by NARIC for the supply of 20,000 metric tons of Burmese rice. As her bid
of$203.00 per metric ton was the lowest, she was awarded she contract for the same.
OnJuly 1, 1952,Arrieta and NARIC entered into Contract of Sale of Rice under the termof
which the former obligated herself to deliver to the latter 20,000 metric tons ofBurmese rice
at $203.00 per metric ton. In turn, NARIC committed itself to pay forthe imported
rice“by means of an irrevocable,confirmed and assignable letter ofcredit in US currency in
favor of Arrieta and/or supplier in Burma, immediately.”
However, it was only on July 30, 1952 that NARIC took the first step to open a letterof
credit by forwarding to the PNB its application for Commercial Letter of Credit. On the
same day, Arrieta, thru counsel, advised NARIC ofthe extreme necessity for theopening of
the letter of credit since she had by then made a tender to her supplier in Rangoon, Burma
equivalent to 5% of the F.O.B. price of 20, 000 tons at $180.70 andin compliance with the
regulations in Rangoon, this 5% will be confiscated if therequired letter of credit is not
received by them before August 4, 1952.On August 4,PNB informed NARIC that its
application for a letter of credit has been approved bythe Board of Directors with the
condition that 50% marginal cash deposit be paid andthat drafts to be paid upon
presentment.
It
turned
out
that
NARIC
was
not
in
financial position to meet the condition. As a result of the delay, the allocation of Arrieta’s
supplier in Rangoon was cancelled and the 5% deposit amounting to 524 kyats
orapproximately P200,000 was forfeited.
ISSUE:
Was NARIC liable for damages?
RULING:
Yes. One who assumes a contractual obligation and fails to perform the same on account of
his inability to meet certain bank which inability he knew and was aware of when he entered
into contract, should be held liable in damages for breach of contract. Under Article 1170
of the Civil Code, not only debtors guilty of fraud, negligence or default but also debtor of
every, in general, who fails in the performance of his obligations is bound to indemnify for
the losses and damages caused thereby.
[G.R. No. 126152. September 28, 1999] PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS and LILY S.
PUJOL, respondents.
FACTS:
Sometime prior to 23 October 1990 private respondent Lily S. Pujol opened with petitioner PNB Mandaluyong an account
denominated as "Combo Account," a combination of Savings Account and Current Account in private respondent's business
name "Pujol Trading," under which checks drawn against private respondents checking account could be charged against her
Savings Account should the funds in her Current Account be insufficient to cover the value of her checks. Hence, private
respondent was issued by petitioner a passbook on the front cover of which was typewritten the words "Combo Deposit Plan."
On 23 and 24 October 1990, private respondent issued a check in the amount of P30,000.00 each in favor of her daughter-inlaw, Dr. Charisse M. Pujol and daughter Venus De Ocampo, respectively.
When issued and presented for payment, private respondent had sufficient funds in her Savings Account. However, petitioner
dishonored her check allegedly for insufficiency of funds and debited her account with P500.00 as penalty charge (P250 each
per check transaction).
On 4 November 1990, after realizing its mistake, petitioner accepted and honored the second check for P30,000.00 and recredited to private respondents account the P250.00 previously debited as penalty.
Private respondent Lily S. Pujol filed with Pasig RTC a complaint for moral and exemplary damages against petitioner for
dishonoring her checks despite sufficiency of her funds in the bank. Petitioner bank admitted in its answer that private
respondent Pujol opened a "Combo Account," a combination of Savings Account and Current Account, with its Mandaluyong
branch. It however justified the dishonor of the two (2) checks by claiming that at the time of their issuance private
respondent Pujols account was not yet operational due to lack of documentary requirements.
On 27 September 1994 the trial court (RTC) rendered a decision ordering petitioner to pay private respondent Pujol moral
damages of P100,000.00 and attorneys fees of P20,000.00.
CA affirmed RTC decision in toto.
ISSUE:
W/N the appellate court (C/A) erred
in holding that petitioner was estopped from denying the existence of a "Combo Account" and the fact that it was operational
at the time of the issuance of the checks
in not holding that the award by the trial court of moral damages of P100,000.00 and attorneys fees of P20,000.00 was
inordinately disproportionate and unconscionable.
RULING:
We cannot sustain petitioner.
Although petitioner presented evidence before the trial court to prove that the arrangement was not yet operational at the
time respondent issued the two checks, it failed to prove that she had actual knowledge that it was not yet operational at the
time she issued the checks considering that the passbook in her Savings Account already indicated the words "Combo Deposit
Plan."
Hence, respondent Pujol had justifiable reason to believe that her accounts were effectively covered by the arrangement
during the issuance of the checks. Either by its own deliberate act, or its negligence in causing the "Combo Deposit Plan" to be
placed in the passbook, petitioner is considered estopped to deny the existence of and perfection of the combination deposit
agreement with respondent Pujol.
A bank is under obligation to treat the accounts of its depositors with meticulous care whether such account consists only of a
few hundred pesos or of millions of pesos. Responsibility arising from negligence in the performance of every kind of
obligation is demandable. While petitioners negligence in this case may not have been attended with malice and bad faith,
nevertheless, it caused serious anxiety, embarrassment and humiliation to private respondent Lily S. Pujol for which she is
entitled to recover reasonable moral damages.
RTC and CA decision affirmed.
PNB vs CA - SYPNOSIS
Spouses Antonio M. Chua and Asuncion M. Chua were the owners
of a parcel of land covered by Transfer Certificate of Title No. P142. Upon Antonio's death, the probate court appointed his son,
Allan M. Chua, as special administrator of his estate. It also
authorized Allan to obtain a loan accommodation of five hundred
fifty thousand pesos (P550,000) to be secured by a real estate
mortgage over the above-mentioned parcel of land. Pursuant
thereto, on June 29, 1989, Allan obtained a loan of P450,000.00
from the Philippine National Bank (PNB). However, for failure to
pay the loan in full, the bank extrajudicially foreclosed the real
estate mortgage. During the auction, PNB was the highest bidder
with a bid price P372,825.63. Subsequently, to claim the
deficiency, PNB instituted an action with the Regional Trial Court
(RTC), Branch 10 of Balayan, Batangas, against both Mrs.
Asuncion M. Chua and Allan M. Chua in his capacity as special
administrator of his father's estate. Despite summons having been
duly served, Asuncion Chua and Allan Chua did not answer the
complaint. The trial court declared them in default and received
evidence ex parte. Thereafter, the RTC rendered its decision,
ordering the dismissal of PNB's complaint. The Court of Appeals
affirmed the RTC decision. Hence, the PNB filed the instant
petition. cHaADC
The Court ruled that case law now holds that Section 7 of Rule 86
of the Rules of Court rule grants to the mortgagee three distinct,
independent and mutually exclusive remedies that can be
alternatively pursued by the mortgage creditor for the satisfaction of
his credit in case the mortgagor dies, among them: (1) to waive the
mortgage and claim the entire debt from the estate of the mortgagor
as an ordinary claim; (2) to foreclose the mortgage judicially and
prove any deficiency as an ordinary claim; and (3) to rely on the
mortgage exclusively, foreclosing the same at any time before it is
barred by prescription without right to file a claim for any
deficiency. The plain result of adopting the last mode of foreclosure
is that the creditor waives his right to recover any deficiency from
the estate. Clearly, petitioner herein has chosen the mortgagecreditor's
Woodhouse v Halili, GR No L-4811 31 July 1953
Facts: The Plaintiff entered into an agreement with the defendant for the establishment of a
partnership for bottling and distribution of Mission soft drinks. Before the partnership was actually
established the defendant required the plaintiff to secure an exclusive franchise for the said venture.
In behalf of the said partnership and upon obtaining the said exclusive franchise the defendant
stipulated to pay the plaintiff 30% of the profits. The plaintiff sought to obtain the said exclusive
franchise but was only given a temporary one, subject only to 30 days. The parties then proceeded
with the signing of the agreement. The partnership was still not initiated, only the agreement to work
with each other, with the plaintiff as manager and the defendant as financer, was established.
Together the two parties went to the US to formally sign the contract of franchise with Mission Dry
Corporation. The defendant then found out about the temporary franchise right given to the plaintiff,
different from the exclusive franchise rights they stipulated in their contract.
When the operations of the business began he was paid P 2,000 and was allowed the use of a car.
But in the next month, the pay was decreased to P 1,000 and the car was withdrawn from him.
The plaintiff demanded the execution of the partnership, but the defendant excused himself, saying
that there was no hurry to do so. The Court of First Instance ordered the defendant to render an
accounting of the profits and to pay the plaintiff 15% of such amount. It also held that execution of
the contract of partnership cannot be enforced upon the defendant and that fraud as alleged by the
defendant was also not proved. Hence the present action.
Issues:
(1) WoN plaintiff falsely represented that he had an exclusive franchise to bottle Mission
beverages
(2) WoN the representation of the plaintiff in saying that he had exclusive franchise rights rather
than the actual temporary right he possessed invalidated the contract
Held:
(1) Yes. Plaintiff did make false representations and this can be seen through his letters to Mission
Dry Corporation asking for the latter to grant him temporary franchise so that he could settle the
agreement with defendant. The trial court reasoned, and the plaintiff on this appeal argues, that
plaintiff only undertook in the agreement “to secure the Mission Dry franchise for and in behalf of the
proposed partnership.” The existence of this provision in the final agreement does not militate
against plaintiff having represented that he had the exclusive franchise; it rather strengthens belief
that he did actually make the representation. The defendant believed, or was made to believe, that
plaintiff was the grantee of an exclusive franchise. Thus it is that it was also agreed upon that the
franchise was to be transferred to the name of the partnership, and that, upon its dissolution or
termination, the same shall be reassigned to the plaintiff.
Again, the immediate reaction of defendant, when in California he learned that plaintiff did not have
the exclusive franchise, was to reduce, as he himself testified, plaintiff’s participation in the net profits
to one half of that agreed upon. He could not have had such a feeling had not plaintiff actually made
him believe that he(plaintiff) was the exclusive grantee of the franchise.
(2) No. In consequence, article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud,
the causal fraud, which may be ground for the annulment of a contract, and the incidental deceit,
which only renders the party who employs it liable for damages only. The Supreme Court has held
that in order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the
incidental (dolo incidente) inducement to the making of the contract.
The record abounds with circumstances indicative of the fact that the principal consideration, the
main cause that induced defendant to enter into the partnership agreement with plaintiff, was the
ability of plaintiff to get the exclusive franchise to bottle and distribute for the defendant or for the
partnership. The original draft prepared by defendant’s counsel was to the effect that plaintiff
obligated himself to secure a franchise for the defendant. But if plaintiff was guilty of a false
representation, this was not the causal consideration, or the principal inducement, that led plaintiff
to enter into the partnership agreement. On the other hand, this supposed ownership of an exclusive
franchise was actually the consideration or price plaintiff gave in exchange for the share of 30 per
cent granted him in the net profits of the partnership business. Defendant agreed to give plaintiff 30
per cent share in the net profits because he was transferring his exclusive franchise to the
partnership.
Having arrived at the conclusion that the contract cannot be declared null and void, may the
agreement be carried out or executed? The SC finds no merit in the claim of plaintiff that the
partnership was already a fait accompli from the time of the operation of the plant, as it is evident
from the very language of the agreement that the parties intended that the execution of the
agreement to form a partnership was to be carried out at a later date. , The defendant may not be
compelled against his will to carry out the agreement nor execute the partnership papers. The law
recognizes the individual’s freedom or liberty to do an act he has promised to do, or not to do it, as
he pleases.
Geraldez v CA 230 108253, 23 February 1994
Facts: Petitioner booked the Volare 3 tour with private respondent, Kenstar. The tour covered a 22day tour of Europe for $2,990.00 which she paid the total equivalent amount of P190, 000.00 charged
by private respondent for her and her sister, Dolores. At the tour, petitioner claimed that what was
alleged in the brochure was not what they experienced. There was no European tour manager as
stated in the brochure, the hotels where they stayed in which were advertised as first class were not
(the hotels lacked basic amenities and were of considerable distance from the city center), the UGC
leather factory which was specifically included as a highlight of the tour was not visited and The
Filipino tour guide provided by Kenstar was a first timer thus inexperienced. The Quezon City RTC
rendered a decision ordering respondent Kenstar to pay moral, nominal, and exemplary damages
totaling P1, 000,000 and P50, 000 attorney’s fees. On appeal, respondent Court of Appeals deleted
the award for moral and exemplary damages and reduced the nominal damages and attorney’s fees
to P30,000 and P10,000 respectively.
Issue: WoN Kenstar acted with fraud or in bad faith or with gross negligence in discharging its
obligations in the contract
Held: The fraud or dolo, which is present or employed at the time of birth or perfection of a contract,
may either be dolo causante or dolo incidente. The first, or causal fraud referred to in Article 1338, are
those deceptions or misrepresentations of a serious character employed by one party and without
which the other party would not have entered into the contract. Dolo incidente, or incidental fraud
which is referred to in Article 1344, are those, which are not serious in character and without which
the other party would still have entered into the contract. Dolo causante determines or is the essential
cause of the consent, while dolo incidente refers only to some particular or accident of the
obligations. The effects of dolo causante are the nullity of the contract and the indemnification of
damages, and dolo incidente also obliges the person employing it to pay damages.
Kenstar’s choice of the tour guide is a manifest disregard of its specific assurances to the tour group,
and which deliberate omission is contrary to the rules of good faith and fair play. Providing the Volare
3 group with an inexperienced first timer as a tour guide, Kenstar manifested indifference to the
satisfaction, convenience and peace of mind to its clients. The election of the tour guide was a
deliberate and conscious choice on the part of Kenstar in order to afford her on-the job-training
making the tour group her unknowing guinea pigs, furthermore the inability to visit the UGC leather
factory is reflective of the ineptness and neglect of the tour guide. The failure of Kenstar to provide
a European Tour Manager although it specifically advertised and promised to do so is also a
contractual breach. Kenstar expressly stated in its advertisement that a European Tour Manager
would be present.
Kenstar’s contention that the European Tour Manager does not refer to a natural person but a
juridical personality does not hold because a corporate entity could not possibly accompany the tour
group. Lastly Kenstar committed grave misrepresentation when it assured in its tour package that
the hotels provided would provide complete amenities and would be conveniently located along the
way for the daily itineraries. The testimonies by petitioner and private respondent show that the
hotels were unsanitary and sometimes did not even provide towels and soap. Further testimonies
claim that the hotels were also located in locations far from the city making it difficult to go to. The
fact that Kenstar could only book them in such hotels because of budget constraints is not the fault
of the tour group. Kenstar should not have promised such accommodations if they couldn’t afford
it. Kenstar should have increased the price to ensure accommodations.
Petitioners therefore should be awarded moral damages because of breach of contract because the
obligor acted fraudulently or in bad faith.
International Corporate Bank v Gueco, GR No 141968, 12 February 2001
Facts: Respondent Gueco spouses obtained a loan from petitioner International Corporate Bank
(now Union Bank of Philippines) to purchase a car – Nissan Sentra 1989 model. In consideration,
spouses executed promissory note which were payable in monthly installment & chattel mortgage
over the car.
The spouses defaulted payment. In the ensuing events Dr. Gueco had a meeting with petitioner to
negotiate for the payment of the unpaid installment of P184,000 (balance of the loan). The load was
eventually reduced to P150,000. However, the car was detained by the bank pending its payment.
When Dr. Gueco delivered the manager’s check amounting to P150,000, the car was not released
because of his refusal to sign the Joint Motion to Dismiss.The bank insisted that the Joint Motion to
Dismiss is a standard operating procedure to effect a compromise & to preclude future filing of
claims or suits for damages.
The Gueco spouses, on the other hand, maintain that no such requirement was agreed upon during
the negotiation for the payment of the loan. As a result, Gueco filed an action against the bank for
fraud, failing to inform them regarding Joint Motion to Dismiss requiment during the meeting & for
failing to release the car despite payment of the P150,000 obligation.
Issues: WoN the bank was guilty of fraud?
Held: No. Fraud has been defined as the deliberate intention to cause damage or prejudice. It is the
voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which
naturally and necessarily arise from such act or omission. the fraud referred to in Article 1170 of the
Civil Code is the deliberate and intentional evasion of the normal fulfillment of obligation.
Petitioner’s act of requiring respondents to sign the Joint Motion to Dismiss can not be said to be a
deliberate attempt on the part of petitioner to renege on the compromise agreement of the parties.
The motion to dismiss was in fact also for the benefit of Dr. Gueco, as the case filed by petitioner
against it before the lower court would be dismissed with prejudice. The whole point of the parties
entering into the compromise agreement was in order that Dr. Gueco would pay his outstanding
account and in return petitioner would return the car and drop the case for money and replevin before
the Metropolitan Trial Court. The joint motion to dismiss was but a natural consequence of the
compromise agreement and simply stated that Dr. Gueco had fully settled his obligation, hence, the
dismissal of the case. Petitioner’s act of requiring Dr. Gueco to sign the joint motion to dismiss
cannot be said to be a deliberate attempt on the part of petitioner to renege on the compromise
agreement of the parties.
The law presumes good faith. Dr. Gueco failed to present an iota of evidence to overcome this
presumption. In fact, the act of petitioner bank in lowering the debt of Dr. Gueco from P184,000.00
to P150,000.00 is indicative of its good faith and sincere desire to settle the case. If respondent did
suffer any damage, as a result of the withholding of his car by petitioner, he has only himself to
blame. Necessarily, the claim for exemplary damages must fail. In no way, may the conduct of
petitioner be characterized as “wanton, fraudulent, reckless, oppressive or malevolent.”