Agcaoili v.

GSIS
G.R. No. L-30056 August 30, 1988

Facts:
Petitioner was awarded the house by GSIS on the condition that he
should reside on it immediately. As the house is uninhabitable, petitioner
vacated the area after 1 day and refused to pay further installments until
respondent make it habitable. Respondent cancelled the award.

Issue: W/n the petitioner incurred delay in fulfilling his obligations

HELD:
In reciprocal obligations, a party incurs delay if the other does not
comply or is not ready to comply in a proper manner with what is
incumbent upon him. Respondent did not fulfil its obligation to deliver the
house in a habitable state, therefore, it cannot invoke the petitioner’s
suspension of payment as a cause to cancel the contract between them.
There was a perfected contract of sale, it was then the duty of GSIS as
seller to deliver the thing sold in a condition suitable for its enjoyment by
the buyer and for the purpose contemplated. The house contemplated was
one that could be occupied for purpose of residence in reasonable comfort
and convenience.
 Song Fo & Company vs Hawaiian Philippine Co.
G.R. No. 23769 – September 16, 1925
FACTS:

Hawaiian-Philippine Co (HPC) entered into a contract with Song Fo

and Co (SFC) where it would deliver molasses to the latter evidenced by a
letter containing their contract. The same states that Mr. Song Fo agreed
to the delivery of 300,000 gallons of molasses and the same requested for
an additional 100,000 molasses which the HPC promised that it will do its
best to comply with the additional shipment. However, the HPC was only
able to deliver 55,006 gallons. SFC thereafter filed a complaint with two
causes of action for breach of contract against the HPC and asked for
P70,369.50. HPC answered that there was a delay in the payment from
SFC and that HPC has the right to rescind the contract because of the
same· The trial court condemned HPC to pay SFC a total of P35,317.93,
with legal interest.

ISSUES:

1. Whether or not SFC is entitled to damages

2. Whether or not HPC has a right to rescind the contract?

RULING:

As to the first question, yes, SFC is entitled to damages. Article 1170

of the Civil Code provides “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”
 The failure of HPC to deliver the rest of the molasses constitutes a
breach of contract by contravention of tenor and is thus liable for
damages. The bases for damages is the cost in excess of the agreed price
in the contract when SFC was made to acquire the needed molasses from
another supplier and the expenses related to the transportation of the
same. Loss of profits would have been included as part of damages had
SFC been able to substantiate such a claim.

As to the second question, no, HPC has no right to rescind the

contract.

The court provided that the general rule is that rescission will not
be permitted for a slight or casual breach of the contract, but only
for such breaches as are so substantial and fundamental as to defeat the
object of the parties in making the agreement.

It should be noted that the time of payment stipulated for in the

contract should be treated as of the essence of the contract. There was
only a slight breach of contract when the payment was delayed for 20 days
and does not violate essential condition of the contract which warrants
rescission for non-performance. Furthermore, HPC accepted the payment
of the overdue accounts and continued with the contract, waiving its right
to rescind the same.

Petition of partly granted, and the judgment appealed is modified.

Plaintiff shall have and recover from the defendant the sum of P3,000, with
legal interest from date of judgment, no special costs.
 Spouse Velarde, vs. Court of Appeals
[G.R. No. 108346, July 11, 2001]

FACTS:

David Raymund executed a Deed of Sale with Assumption of

Mortgage in favor if Avelina Velarde for a parcel of land under TCT
142177. The land together with the house and improvements thereon were
mortgaged by David Raymundo to BPI to secure a loan of 1.8M. As part of
the consideration of the sale, the Avelina Velarde assumes to pay the
mortgage obligations on the property. The Application for Assumption of
Mortgage with BPI was not approved. This prompted plaintiffs not to make
any further payment.

David and George Raymundo, thru counsel, wrote Sps. Velarde

informing the latter that their non-payment to the mortgage bank
constitute[d] non-performance of their obligation

Sps. Velarde, thru counsel, responded, as follows:

“This is to advise you, therefore, that our client is willing to pay the
balance in cash not later than January 21, 1987 provided:

(a) you deliver actual possession of the property to her not later than
January 15, 1987 for her immediate occupancy;

(b) you cause the re- lease of title and mortgage from the Bank of P.I.
and make the title available and free from any liens and encumbrances;
and

(c) you execute an absolute deed of sale in her favor free from any
liens or encumbrances not later than January”

David and George Raymundo sent Sps. Velarde a notarial notice of

cancellation/rescission of the intended sale of the subject property
allegedly due to the latter’s failure to comply with the terms and
conditions of the Deed of Sale with Assumption of Mortgage and the
Undertaking.

Issues:

Whether there was a breach of contract.

 Whether the defendant has the right to rescind the contract.

Ruling:

First Issue:

Yes. In a contract of sale, the seller obligates itself to transfer the

ownership of and deliver a determinate things, and the buyer to pay
therefor a price certain in money or its equivalent.

Private respondents had already performed their obligation through

the execution of the Deed of Sale, which effectively transferred ownership
of the property to petitioner through constructive delivery. Prior physical
delivery or possession is not legally required, and the execution of the
Deed of Sale is deemed equivalent to delivery.

Petitioners, on the other hand, did not perform their correlative

obligation of paying the contract price in the manner agreed upon. Worse,
they wanted private respondents to perform obligations beyond those
stipulated in the contract before fulfilling their own obligation to pay the
full purchase price.

Second Issue:

Yes. Private respondents validly exercised their right to rescind the

contract, because of the failure of petitioners to comply with their
obligation to pay the balance of the purchase price. Indubitably, the latter
violated the very essence of reciprocity in the contract of sale, a violation
that consequently gave rise to private respondent’s right to rescind the
same in accordance with law.
 True, petitioners expressed their willingness to pay the balance of the
purchase price one month after it became due; however, this was not
equivalent to actual payment as would constitute a faithful compliance of
their reciprocal obligation. Moreover, the offer to pay was conditioned on
the performance by private respondents of additional burdens that had not
been agreed upon in the original contract. Thus, it cannot be said that the
breach committed by petitioners was merely slight or casual as would
preclude the exercise of the right to rescind.

Angeles v. Calasanz
G.R. No. L-42283, March 18, 1985, 135 SCRA 323

FACTS:

Ursula and Tomas Calasanz sold a piece of land to Buenaventura

Angeles and Teofila Juani covered by a contract to sell. Angeles paid a
down payment upon the execution of the contract and started paying the
balance in monthly installments for nine years with only a few remaining
installments left to pay. Although Calasanz accepted late payments before,
Angeles was now five months late. Calasanz demanded payment of past
due accounts, but did not receive any. Eventually, Calansanz canceled the
said contract and Angeles asked for reconsideration, but was denied.

A provision in the contract to sell gave Calasanz the right to cancel

the contract and consider the amounts paid as rent for the property.
However, the lower court ruled that the contract was not validly canceled
and ordered Calasanz to execute a final Deed of Sale in favor of Angeles.
ISSUE:

Was the contract to sell validly canceled?

RULING:

No. The act of a party in treating a contract as canceled or resolved

on account of infractions by the other must be made known to the other
and is always provisional, being ever subject to scrutiny and review by the
proper court. If the other party denies that rescission is justified, it is free
to bring the matter to court. Then, should the court decide that the
resolution of the contract was not warranted, the responsible party will be
sentenced to damages; in the contrary case, the resolution will be affirmed
and indemnity awarded to the party prejudiced.

The right to rescind the contract for non-performance of one of its

stipulations is not absolute. The general rule is that rescission of a contract
will not be permitted for a slight or casual breach, but only for such
substantial and fundamental breach as would defeat the very object of the
parties in making the agreement. The question of whether a breach of a
contract is substantial depends upon the attendant circumstances.

The breach of the contract alleged by Calasanz is so slight

considering that Angeles had already paid monthly installments for almost
nine years. In only a short time, the entire obligation would have been
paid.

To mitigate the unilateral act of Calasanz in cancelling the contract,

Article 1234 of the Civil Code provides that: If the obligation has been
substantially performed in good faith, the obligor may recover as though
there had been a strict and complete fulfillment, less damages suffered by
the obligee.
 Cetus Development, Inc. vs. Court of Appeals
G.R. No. 77648, August 7, 1989, 176 SCRA 72

FACTS:

The private respondents were the lessees of the premises originally

owned by the Susana Realty. These individual verbal leases were on a
month-to-month basis and were paying to a collector of the Susana Realty
who went to the premises monthly. Sometime on March 1984, Susana
Realty sold the leased premises to the petitioner, Cetus Development, Inc.
From April to June 1984, the respondents continued to pay their monthly
rentals to a collector sent by the petitioner, but in the succeeding months,
they failed to pay as no collector came.

On October 9, 1984, the petitioner sent a letter to each of the private

respondents demanding that they vacate the subject premises and to pay
the back rentals for the unpaid monthly rentals. Immediately upon receipt
thereof, the private respondents paid their respective arrearages in rent
which were accepted by the petitioner. However, private respondents did
not vacate the leased premises. Hence, petitioner filed with the
Metropolitan Trial Court of Manila complaints for ejectment against the
private respondents.

The private respondents, in their respective answers assailed that

they were paying their monthly rental regularly since they occupied such
premises, that their non-payment of the rentals was due to the failure of
the petitioner to send its collector, that they were at a loss as to where
they should pay their rentals, that one of them called the office of the
petitioner to inquire as to where they would make payment and was told
that a collector would be sent to receive the same, that no collector was
subsequently sent, and that instead they received a uniform demand letter.

The trial court rendered its decision dismissing the six cases. It held
that the plaintiff cannot eject the defendants from the leased premises
because at the time cases were instituted, there are no rentals in arrears.
The alleged rental arrearages were paid immediately after receipt of the
demand letter and that the rentals of the tenants are relatively small to
which the ejectment may not lie on grounds of equity and for humanitarian
reasons. Petitioner appealed to the Regional Trial Court and the Court of
Appeals, but both dismissed the appeal for lack of merit, affirming the
decision of the trial court. Hence, this case.

ISSUE:

Whether or not there exists a cause of action when the complaints for
unlawful detainer were filed considering the fact that upon demand by
petitioner from private respondents for payment of their back rentals, the
latter immediately tendered payment which was accepted by petitioner.

RULING:

No, there is lack of cause of action. We held that the demand required
and contemplated by law is a jurisdictional requirement for the purpose of
bringing an unlawful detainer suit for failure to pay rent or comply with
the conditions of the lease. It partakes of an extrajudicial remedy that must
be pursued before resorting for judicial action so much so that when there
is full compliance with the demand, there arises no necessity for court
action.

For the purpose of bringing an ejectment suit, two requisites must

concur, namely: (1) there must be failure to pay rent or comply with the
conditions of the lease and (2) there must be demand both to pay or to
comply and vacate within the periods specified by law.

In the case at bar, it is very clear that no cause of action for ejectment
has accrued. There was no failure yet on the part of the private
respondents to pay rents for three consecutive months. As the terms of the
individual verbal leases which were on a month-to- month basis were not
alleged and proved, the general rule on necessity of demand applies, to
wit: there is default in the fulfillment of an obligation when the creditor
demands payment at the maturity of the obligation or at anytime
thereafter.

Santos Ventura Hocorma Foundation, Inc. vs. Ernesto V. Santos

G.R. No. 153004 (November 5, 2004)

FACTS:

On October 26, 1990, the parties executed a Compromise Agreement

wherein Foundation shall pay Santos P14.5 Million in the following
manner: (a) P1.5 Million immediately upon the execution of this
agreement; and (b) the balance of P13 Million shall be paid, whether in
lump sum or in installments, at the discretion of the Foundation, within a
period of not more than two (2) years from the execution of this
agreement.
 In compliance with the Compromise Agreement, respondent Santos
moved for the dismissal of the aforesaid civil cases. He also caused the
lifting of the notices of lis pendens on the real properties involved. For its
part, petitioner SVHFI, paid P1.5 million to respondent Santos, leaving a
balance of P13 million. Subsequently, petitioner SVHFI sold to
Development Exchange Livelihood Corporation two real properties, which
were previously subjects of lis pendens. Discovering the disposition made
by the petitioner, respondent Santos sent a letter to the petitioner
demanding the payment of the remaining P13 million, which was ignored
by the latter. Respondent Santos sent another letter to petitioner inquiring
when it would pay the balance of P13 million. There was no response from
petitioner. Consequently, respondent Santos applied with the Regional
Trial Court of Makati City for the issuance of a writ of execution.

On June 2, 1995, Santos and Riverland Inc. filed a Complaint for

Declaratory Relief and Damages alleging delay on the part of SVHFI in
paying the balance. They further alleged that under the Compromise
Agreement, the obligation became due on October 26, 1992, but payment
of the remaining balance was effected only on November 22, 1994. Thus,
respondents prayed that petitioner be ordered to pay legal interest on the
obligation, penalty, attorney’s fees and costs of litigation. SVHFI alleged
that the legal interest on account of fault or delay was not due and
payable, considering that the obligation had been superseded by the
compromise agreement. Moreover, SVHFI argued that absent a
stipulation, Santos must ask for judicial intervention for purposes of fixing
the period.

ISSUE:
 Whether or not SVHFI incurred in delay based on the compromise
agreement and thereby liable for legal interest

RULING:

Yes. SVHFI is liable for legal interest as penalty on account of delay.

The general rule is that a compromise has upon the parties the effect and
authority of res judicata, with respect to the matter definitely stated
therein, or which by implication from its terms should be deemed to have
been included therein. This holds true even if the agreement has not been
judicially approved. Article 1169 of the New Civil Code provides that those
obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of
their obligation.

In order for the debtor to be in default, it is necessary that the

following requisites be present: (1) that the obligation be demandable and
already liquidated; (2) that the debtor delays performance; and (3) that the
creditor requires the performance judicially or extrajudicially.

In the case at bar, the obligation was already due and demandable
after the lapse of the two-year period from the execution of the contract.
The Compromise Agreement was entered into by the parties on October
26, 1990. It was judicially approved on September 30, 1991. Applying
existing jurisprudence, the compromise agreement as a consensual
contract became binding between the parties upon its execution and not
upon its court approval. From the time a compromise is validly entered
into, it becomes the source of the rights and obligations of the parties
thereto. Hence, the two-year period must be counted from October 26,
1990. Verily, the petitioner is liable for damages for the delay in the
performance of its obligation. This is provided for in Article 1170 of the
New Civil Code.

Abella v. Francisco
55 Phil. 447 (1931)

FACTS:

Defendant Guillermo B. Francisco purchased from the Government on

installments, lots 937 to 945 of the Tala Estate in Novaliches, Caloocan,
Rizal. He was in arrears for some of these installments. On the 31st of
October, 1928, he signed a document acknowledging payment of P500 and
the balance to be paid on or before December 15, 1928, extendible fifteen
days thereafter. On December 27th of the same year, the defendant, being
in the Province of Cebu, wrote to Roman Mabanta of this City of Manila,
attaching a power of attorney authorizing him to sign in behalf of the
defendant all the documents required by the Bureau of Lands for the
transfer of the lots to the plaintiff. Mabanta, as attorney-in-fact, did what
was instructed to him. The plaintiff, asked for an extension until January 9,
1929. However, Mabanta, only extended it until January 5, 1929. When
Abella was not able to pay of the said date, Mabanta refused to accept the
full payment on January 9, 1929 and already considered the contract
rescinded. On the same day, Mabanta returned by check the sum of
P915.31 which the plaintiff had paid.

ISSUE:

Whether or not the defendant be compelled to accept the payment

and the plaintiff be judicially declared as owner of the land.

RULING:

The court relied on the fact that the plaintiff had failed to pay the
price of the lots within the stipulated time; and that since the contract
between plaintiff and defendant was an option for the purchase of the lots,’
time was an essential element in it. It is to be noted that in the document
signed by the defendant, the 15th of December was fixed as the date,
extendible for fifteen days, for the payment by the plaintiff of the balance
of the selling price. It has been admitted that the plaintiff did not offer to
complete the payment until January 9, 1929. He contends that Mabanta, as
attorney-in-fact for the defendant in this transaction, granted him an
extension of time until the 9th of January. But Mabanta has stated that he
only extended the time until the 5th of that month. Mabanta’s testimony on
this point is corroborated by that of Paz Vicente and by the plaintiff’s own
admission to Narciso Javier that his option to purchase those lots expired
on January 5, 1929. The defendant wanted to sell those lots to the plaintiff
in order to pay off certain obligations which fell due in the month of
December, 1928. The time fixed for the payment of the price was therefore
essential for the defendant, and this view is borne out by his letter to his
representative Mabanta instructing him to consider the contract rescinded
if the price was not completed in time. In accordance with article 1124 of
the Civil Code, the defendant is entitled to resolve the contract for failure
to pay the price within the time specified.
 DELA CRUZ v. LEGASPI AND SAMPEROY
G.R. No. L-8024 November 29, 1955
Bengzon, J.

Doctrine:

Subsequent non-payment of the price at the time agreed upon did not
convert the contract into one without cause or consideration: a nudum
pactum.

Facts:

Plaintiff sued defendant Legaspi to compel delivery of the parcel of

land sold to plaintiff. The complaint alleged the defendant’s refusal to
accept payment of the purchase price of P450 undue retention of the
realty.

The defendants alleged that before the document of sale was made,
the plaintiff agreed to pay the defendants the price right after the
document is executed that very day but after the document was signed and
ratified by the Notary Public and after the plaintiff has taken the original of
the said document, the sad plaintiff refused to pay. They asserted that for
lack of consideration and for deceit, the document of said should be
annulled.

Issue:
 Whether or not the contract of sale is void on the ground that it lacks
consideration

Held:

No. It cannot be denied that when the document was signed the cause
or consideration existed: P450. The document specifically said so.
Subsequent non-payment of the price at the time agreed upon did not
convert the contract into one without cause or consideration: a nudum
pactum. (Levy vs. Johnson, 4 Phil. 650; Puato vs. Mendoza, 64 Phil, 457).
The situation was rather one in which there is failure to pay the
consideration, with its resultant consequences. In other words, when after
the notarization of the contract, plaintiff failed to hand the money to
defendants as he previously promised, there was default on his part at
most, and defendants’ right was to demand interest — legal interest —.

Woodhouse v Halili
July 31, 1953, 93 Phil. 526

FACTS: On November 29, 1947, plaintiff Woodhouse entered into a

written agreement with defendant Halili for a partnership for the bottling
and distribution of Mission soft drinks, plaintiff to act as industrial partner
or manager, and the defendant as a capitalist. The plaintiff was to secure
the Mission Soft Drinks franchise for and in behalf of the proposed
partnership and that the plaintiff was to receive 30 per cent of the net
profits of the business.

Prior to the agreement, plaintiff had informed the Mission Dry

Corporation that he had interested a prominent financier who was willing
to invest in the bottling and distribution of the said beverages, and
requested, in order that he may close the deal with him, that the right to
bottle and distribute be granted him for a limited time under the condition
that it will finally be transferred to the corporation. Pursuant to this
request, plaintiff was given thirty days option on exclusive bottling and
distribution rights.

Plaintiff prayed for the execution of the contract of partnership;

accounting of profits and share thereof of 30 percent with damages. The
Defendant on the other hand claims that the defendant’s consent to the
agreement, was secured by false representation of plaintiff that he was the
owner, or was about to become owner of an exclusive bottling franchise.
Further, he contended that plaintiff did not secure the franchise but was
given to defendant himself. He also filed a counterclaim for damages.

ISSUE:

WON false representation, if it existed, annuls the agreement to form

the partnership

RULING:

No. 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.

If ever the plaintiff was guilty of a false representation, this was not
the causal consideration that led plaintiff to enter into the partnership
agreement. 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.

Geraldez, vs. CA & Kenstar Travel Corporation

G.R. No. 108253, February 23, 1994

FACTS:

Petitioner Geraldez filed an action for damages by reason of

contractual breach against respondent Kenstar Travel Corp. Petitioner
booked the Volare 3 tour with Kenstar. The tour covered a 22-day 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 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 totalling 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:

Whether or not Kenstar acted in bad faith or with gross negligence in

discharging its obligations in the contract?

RULING:
 Yes. Kenstar acted in bad faith and with gross negligence in
discharging its obligation. When they authorized an inexperienced and a
first timer to be a tour escort, private respondent manifested its
indifference to the convenience, satisfaction and peace of mind of its
clients during the trip despite its express commitment to provide such
facilities under the Volare 3 Tour Program which had the grandiose slogan
“Let your heart sing”. This incompetence must necessarily be traced to the
lack of due diligence on the part of private respondent in the selection of
its employees. It is true that among the thirty-two destinations, which
included twenty-three cities and special visits to nine tourist spots, this
was the only place that was not visited. Clearly, therefore, private
respondent’s choice of Zapanta as the tour guide is a manifest disregard of
its specific assurances to the tour group, resulting in agitation and anxiety
on their part, and which deliberate omission is contrary to the elementary
rules of good faith and fair play. It is extremely doubtful if any group of
Filipino tourists would knowingly agree to be used in effect as guinea pigs
in an employees’ training program of a travel agency, to be conducted in
unfamiliar European countries with their diverse cultures, lifestyles and
languages.

In either case, whether private respondent has committed dolo

causante or dolo incidente by making misrepresentations in its contracts
with petitioner and other members of the tour group, which deceptions
became patent in the light of after-events when, contrary to its
representations, it employed an inexperienced tour guide, housed the
tourist group in substandard hotels, and reneged on its promise of a
European tour manager and the visit to the leather factory, it is
indubitably liable for damages to petitioner. The effects of dolo causante
are the nullity of the contract and the indemnification of damages, 63 and
dolo incidente also obliges the person employing it to pay damages.
Wherefore, ordering private respondent Kenstar Travel Corporation to pay
petitioner Lydia L. Geraldez the sums of P100,000.00 by way of moral
damages, P50,000.00 as exemplary damages, and P20,000.00 as and for
attorney’s fees, with costs against private respondent.

GUTIERREZ VS GUTIERREZ
G.R. NO. 34840 SEPTEMBER 23, 1931

FACTS:
 On February 2, 1930, a passenger truck and an automobile of private
ownership collided while attempting to pass each other on a bridge. The
truck was driven by the chauffeur Abelardo Velasco, and was owned by
saturnine Cortez. The automobile was being operated by Bonifacio
Gutierrez, a lad 18 years of age, and was owned by Bonifacio’s father and
mother, Mr. and Mrs. Manuel Gutierrez. At the time of the collision, the
father was not in the car, but the mother, together with several other
members of the Gutierrez family were accommodated therein.

The collision between the bus and the automobile resulted in Narciso
Gutierrez suffering a fractured right leg which required medical
attendance for a considerable period of time.

ISSUE:

Whether or not both the driver of the truck and automobile are liable
for damages and indemnification due to their negligence. What are the
legal obligations of the defendants?

HELD:

Bonifacio Gutierrez’s obligation arises from culpa aquiliana. On the

other hand, Saturnino Cortez’s and his chauffeur Abelardo Velasco’s
obligation rise from culpa contractual.

The youth Bonifacio was na incompetent chauffeur, that he was

driving at an excessive rate of speed, and that, on approaching the bridge
and the truck, he lost his head and so contributed by his negligence to the
accident. The guaranty given by the father at the time the son was granted
a license to operate motor vehicles made the father responsible for the
acts of his son. Based on these facts, pursuant to the provisions of Art.
1903 of the Civil Code, the father alone and not the minor or the mother
would be liable for the damages caused by the minor.
 The liability of Saturnino Cortez, the owner of the truck, and his
chauffeur Abelardo Velasco rests on a different basis, namely, that of
contract.

VAZQUEZ Vs. DE BORJA;

Torts and Damages – Distinction of Liability of Employers Under

Article 2180 and
Their Liability for Breach of Contract

FACTS: In January 1932, De Borja entered into a contract of sale with the
NVSD Co., Inc.
The subject of the sale was 4,000 cavans of rice valued at Php2.10 per
cavan.
On behalf of the company, the contract was executed by Vasquez as the
company’s acting president. NVSD Co. only delivered 2,488 cavans and
failed
and refused despite demand to deliver the rest hence De Borja incurred
damages (apparently, NVSD Co was insolvent). He then sue Vasquez for
payment of damages.

ISSUE:

Whether or not Vasquez is liable for damages.

HELD:
 No. Vasquez is not party to the contract as it was NVSD Co which De
Borja
contracted with. It is well known that a corporation is an artificial being
invested
by law with a personality of its own, separate and distinct from that of its
stockholders and from that of its officers who manage and run its affairs.
The
mere fact that its personality is owing to a legal fiction and that it
necessarily has
to act thru its agents, does not make the latter personally liable on a
contract
duly entered into, or for an act lawfully performed, by them for an in its
behalf.
The fact that the corporation, acting thru Vazquez as its manager, was
guilty of
negligence in the fulfillment of the contract did not make Vazquez
principally or
even subsidiarily liable for such negligence. Since it was the corporation’s
contract, its non fulfillment, whether due to negligence or fault or to any
other
cause, made the corporation and not its agent liable.

JUSTICE PARAS Dissenting :

Vasquez as president of NVSD Co is liable for damages. Vasquez, as

acting
president and manager of Natividad-Vazquez Sabani Development Co.,
Inc.,
and with full knowledge of the then insolvent status of his company,
agreed to
sell to De Borja 4,000 cavans of palay. Further, NVSD Co was soon
thereafter
dissolved.
De Guia v. Manila Electric Co.;
28 January 1920

FACTS:

Plaintiff Dr. De Guia was a passenger of a street-car owned by

Defendant Manila
Electric Railroad & Light Co. when the said car driven by employee of
defendant had been derailed and thereby causing injuries upon Dr. De
Guia.
Both parties filed for an appeal from the Court of First Instance
decision which had awarded damages to Dr. De Guia.

ISSUE: WON Dr. De Guia was entitled to the damages awarded.

RULING:
The court held that there was negligence on the part of the motorman
under the
employment of the company since the parties have a contractual relation
of that of a
carrier and a passenger.

The defense of observing the diligence of a good father of a family to

prevent damage is
untenable as the obligation arose from a contract and not a quasi-delict.

In determining damages, the court held that plaintiff cannot seek to

recover those which are speculative.
 Sarmiento v. Sps. Cabrido
G.R. No. 141258, April 9, 2003, 401 SCRA 122

FACTS:

Tomasa Sarmiento’s friend, Dra. Virginia Lao, requested her to find

someone to reset a pair of diamond earrings into two gold rings. Sarmiento
sent Tita Payag with the earrings to Dingding’s Jewelry Shop, owned and
managed by spouses Luis and Rose Cabrido, which accepted the job order
for P400. Respondent Marilou Sun went on to dismount the diamond from
original settings. Unsuccessful, she asked their goldsmith, Zenon Santos,
to do it. He removed the diamond by twisting the setting with a pair of
pliers, breaking the gem in the process. Petitioner required the
respondents to replace the diamond with the same size and quality. When
they refused, the petitioner was forced to buy a replacement in the amount
of P30,000. Rose Cabrido, manager, denied having any transaction with
Payag whom she met only after the latter came to seek compensation for
the broken piece of jewelry. Marilou, on the other hand, admitted knowing
Payag to avail their services and recalled that when Santos broke the
jewelry, Payag turned to her for reimbursement thinking she was the
owner. Santos also recalled that Payag requested him to dismount what
appeared to him as sapphire and that the stone accidentally broke. He
denied being an employee of the Jewelry shop.

ISSUE:

WoN dismounting of the diamond from its original setting was part of
the obligation

WoN respondents are liable for damages and moral damages.

RULING:

Yes. The contemporaneous and subsequent acts of the parties reveal

the scope of obligation assumed by the jewelry shop to reset the pair of
earrings. Marilou expressed no reservation regarding the dismounting of
the diamonds. She could have instructed Payag to have the diamonds
dismounted first, but instead, she readily accepted the job order and
charged P400. After the new settings were completed, she called
petitioner to bring the diamond earrings to be reset. She examined one of
them and went on to dismount the diamond from the original setting. After
failing to do the same, she delegated it to the goldsmith. Having acted the
way she did, she cannot deny that the dismounting was part of the shop’s
obligation to reset the pair of earrings.

Yes. 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. Santos acted negligently in
dismounting the diamond from its original setting. Instead of using a
miniature wire, which is the practice of the trade, he used a pair of pliers.
Moral damages may also be awarded in a breach of contract when there is
proof that defendant acted in bad faith, or was guilty of gross negligence
amounting to bad faith, or in wanton disregard of his contractual
obligation.

Doctrine:

Obligations arising from contracts have the force of law between the
contracting parties. Corollarily, 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. The fault or
negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place.
 Crisostomo v. CA
G.R. No. 138334, August 25, 2003, 409 SCRA 528

FACTS:

Petitioner contracted the services of respondent Caravan Travel and

Tours International, Inc. to arrange and facilitate her booking, ticketing
and accommodation in a tour dubbed Jewels of Europe. Pursuant to said
contract, the travel documents and plane tickets were delivered to the
petitioner who in turn gave the full payment for the package tour on June
12, 1991. Without checking her travel documents, petitioner went to NAIA
on Saturday, June 15, 1991, to take the flight for the first leg of her journey
from Manila to Hongkong. To petitioner’s dismay, she discovered that the
flight she was supposed to take had already departed the previous day.
She learned that her plane ticket was for the flight scheduled on June 14,
1991. She thus called up Menor to complain. Subsequently, Menor
prevailed upon petitioner to take another tour- the British Pageant. Upon
petitioner’s return from Europe, she demanded from respondent the
reimbursement of the difference between the sum she paid for Jewels of
Europe and the amount she owed respondent for the British Pageant tour.

Petitioner filed a complaint against respondent for breach of contract

of carriage and damages alleging that her failure to join Jewels of Europe
was due to respondent’s fault since it did not clearly indicate the departure
date on the plane, failing to observe the standard of care required of a
common carrier when it informed her wrongly of the flight schedule. For
its part, respondent company, denied responsibility for petitioner’s failure
to join the first tour, insisting that petitioner was informed of the correct
departure date, which was clearly and legibly printed on the plane ticket.
The travel documents were given to petitioner two days ahead of the
scheduled trip. Respondent further contend that petitioner had only
herself to blame for missing the flight, as she did not bother to read or
confirm her flight schedule as printed on the ticket.

ISSUE:

Whether or not Caravan Travel & Tours International Inc. is negligent

in the fulfilment of its obligation to petitioner Crisostomo thus granting to
the petitioner the consequential damages due her as a result of breach of
contract of carriage.

RULING:

Contention of petitioner has no merit. A contract of carriage or

transportation is one whereby a certain person or association of persons
obligate themselves to transport persons, things, or news from one place
to another for a fixed price. Such person or association of persons are
regarded as carriers and are classified as private or special carriers and
common or public carriers. Respondent is not an entity engaged in the
business of transporting either passengers or goods and is therefore,
neither a private nor a common carrier. Respondent did not undertake to
transport petitioner from one place to another since its covenant with its
customers is simply to make travel arrangements in their behalf.
Respondent’s services as a travel agency include procuring tickets and
facilitating travel permits or visas as well as booking customers for tours.
 The object of petitioner’s contractual relation with respondent is the
service of arranging and facilitating petitioners booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of
carriage is the transportation of passengers or goods. It is in this sense
that the contract between the parties in this case was an ordinary one for
services and not one of carriage. Since the contract between the parties is
an ordinary one for services, the standard of care required of respondent is
that of a good father of a family under Article 1173 of the Civil Code. The
evidence on record shows that respondent exercised due diligence in
performing its obligations under the contract and followed standard
procedure in rendering its services to petitioner. As correctly observed by
the lower court, the plane ticket issued to petitioner clearly reflected the
departure date and time, contrary to petitioner’s contention. The travel
documents, consisting of the tour itinerary, vouchers and instructions,
were likewise delivered to petitioner two days prior to the trip. Respondent
also properly booked petitioner for the tour, prepared the necessary
documents and procured the plane tickets. It arranged petitioner’s hotel
accommodation as well as food, land transfers and sightseeing excursions,
in accordance with its avowed undertaking. The evidence on record shows
that respondent company performed its duty diligently and did not commit
any contractual breach. Hence, petitioner cannot recover and must bear
her own damage.
 Telefast v. Castro
G.R. No. 73867, February 29, 1988, 158 SCRA 445

FACTS:

Sofia, one of the plaintiffs, sent a telegram thru Telefast to her father
and other siblings in the USA to inform about the death of their mother.
Unfortunately, the deceased had already been interred but not one from
the relatives abroad was able to pay their last respects. Sofia found out
upon her return in the US that the telegram was never received. Hence the
suit for damages on the ground of breach of contract. The defendant-
petitioner argues that it should only pay the actual amount paid to it.

The lower court ruled in favor of the plaintiffs and awarded

compensatory, moral, exemplary damages to each of the plaintiffs with 6%
interest per annum plus attorney’s fees. The Court of Appeals affirmed this
ruling but modified and eliminated the compensatory damages to Sofia and
exemplary damages to each plaintiff, it also reduced the moral damages
for each. The petitioner appealed contending that, it can only be held liable
for P 31.92, the fee or charges paid by Sofia for the telegram that was
never sent to the addressee, and that the moral damages should be
removed since defendant’s negligent act was not motivated by “fraud,
malice or recklessness.

ISSUE:
 Whether or not the award of the moral, compensatory and exemplary
damages is proper.

RULING:

Yes, award of moral, compensatory and exemplary damages is proper.

Art. 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 in any manner contravene the tenor thereof, are liable for
damages.” Art. 2176 also provides that “whoever by act or omission causes
damage to another, there being fault or negligence, is obliged to pay for
the damage done.”

The petitioner’s act or omission, which amounted to gross negligence,

was precisely the cause of the suffering private respondents had to
undergo. Art. 2217 of the Civil Code states: “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.”

Then, the award of P16,000.00 as compensatory damages to Sofia

representing the expenses she incurred when she came to the Philippines
from the United States to testify before the trial court. Had petitioner not
been remiss in performing its obligation, there would have been no need
for this suit or for her testimony. The award of exemplary damages by the
trial court is likewise justified for each of the private respondents, as a
warning to all telegram companies to observe due diligence in transmitting
the messages of their customers.
 Arrieta v. National Rice and Corn Corporation
10 SCRA 79
G.R. No. L-15645 January 31, 1964 PAZ P. ARRIETA and VITALIADO
ARRIETA, plaintiffs-appellees, VS. NATIONAL RICE AND CORN
 CORPORATION, defendant-appellant, MANILA UNDERWRITERS
INSURANCE CO., INC., defendant- appellee

FACTS:

May 19, 1952,plaintif participated in the public bidding called by the

NARIC for the supply of 20,000 Metric tons of Burmese rice, as her bid of
$203.00 per metric tons was the lowest, she was awarded with the
contract. On July 1, 1952, Paz P. Arrieta and the appellant corporation
entered into a contract of a sale of rice, under the terms which the former
obligated to deliver to the latter 20,000 metric tons of Burmese Rice at
$203.00 per metric tons. The defendants committed itself to pay for the
imported rice by means of irrevocable, confirmed and assignable letter of
credit in U.S. currency in favor of plaintiff.

ISSUES:

Whether the appellant’s failure to open immediately the letter of

credit dispute amounted to a breach of contract.

HELD:

The lower court decision dated Feb 20, 1958 is awarding to the
plaintiff-appellees the amount of $ 286,000 as damages for breach of
contract and dismissing the counterclaim and third party complaint of the
defendant-appelant NARIC.

The court of appeals granted the award of the lower court to be fair
and equitable and the appealed decision is affirmed , with a sole
modification that the award should be converted into Philippine peso at the
rate of exchange prevailing at the time of obligation was incurred when
the contract was executed. The appellee insurance company, in light of
this judgment, is relieved of any liability under this suit. No
pronouncement as to cost.

Magat vs. Medialdea

G.R. No. L-37120, 20 April 1983

FACTS:

Sometime in September 1972, respondent entered into a contract

with the U.S. Navy Exchange, Subic Bay, Philippines, for the operation of a
fleet of taxicabs, each taxicab to be provided with the necessary taximeter
and a radio transceiver. Isidro Q. Aligada, acting as an agent, approached
the petitioner in behalf of the respondent and proposed to import from
Japan thru the plaintiff herein or thru plaintiff’s Japanese business
associates, all taximeters and radio transceivers needed by the defendant.
Petitioner was able to import the same and a firm offer, in written form,
was made by Aligada. Petitioner received notice of the fact that the
defendant accepted plaintiff’s offer to sell to the defendant the items
specified as well as the terms and conditions of said offer. After petitioner
received advice from the defendant as to the radio frequency to be
assigned by the proper authorities to the defendant, petitioner requested a
letter of credit from the defendant, a normal business practice in case of
foreign importation. Petitioner was repeatedly assured by Aligada and
respondent of the latter’s financial capabilities to pay and refused to open
a letter of credit. Thereafter, petitioner found out that defendant had
already been operating his taxicabs without the required radio
transceivers. And when pressed by the U.S. Navy to comply, defendant
blamed petitioner, claiming the latter was in delay. Petitioner sent a letter
to the defendant ascertaining his intention to fulfill his end of the bargain
but he did not reply. In view of defendant’s failure to fulfill his contractual
obligations with the petitioner, the petitioner filed a case against the
defendant for breach of contract and damages.

Respondent filed a motion to dismiss alleging a lack of cause of

action. He contended that plaintiff was merely anticipating his loss or
damage which might result from the alleged failure of defendant to comply
with the terms of the alleged contract. Plaintiff’s right therefore under his
cause of action is not yet fixed or vested. Respondent Judge in this case
dismissed the complaint.

ISSUE:

Whether or not the respondent is guilty for breach of contract.

RULING:

Yes. The Court contends that the parties, both businessmen, entered
into the aforesaid contract with the evident intention of deriving some
profits therefrom. Upon breach of the contract by either of them, the other
would necessarily suffer loss of his expected profits. Since the loss comes
into being at the very moment of breach, such loss is real, “fixed and
vested” and, therefore, recoverable under the law.

Article 1170 of the Civil Code provides:

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.
 The phrase “in any manner contravene the tenor” of the obligation
includes any illicit act or omission which impairs the strict and faithful
fulfillment of the obligation and every kind of defective performance. The
damages which the obligor is liable for includes not only the value of the
loss suffered by the obligee [daño emergente] but also the profits which
the latter failed to obtain [lucro cesante]. If the obligor acted in good faith,
he shall be liable for those damages 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; and in case of fraud, bad faith, malice or wanton attitude, he
shall be liable for all damages which may be reasonably attributed to the
non-performance of the obligation. The same is true with respect to moral
and exemplary damages. The applicable legal provisions on the matter,
Articles 2220 and 2232 of the Civil Code, allow the award of such damages
in breaches of contract where the defendant acted in bad faith.