Oblicon Digest
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Obligations and Contracts Case Notes/Digests
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San Ildefonso Lines vs. CA FACTS: At around 3:30 in the afternoo afternoon n of June 24, 1991, a Toyota Lite Ace Van being driven by its oner Annie !" Jao and a #assenger bus of herein #etitioner $an %&defonso Lines, %nc" 'hereafter, $%L%( )gured in a vehicu&ar veh icu&ar *isha# at the intersection of Ju&ia Vargas Avenue and +odrigue Lanua Avenue in -asig, .etro .ani&a, tota&&y rec/ing rec/ing the Toyota van and inuring inuring .s" Jao and her to '2( #assengers #assengers in the #rocess" A cri*in cri*ina& a& case case as thereaf thereafter ter )&ed )&ed ith ith the +e +egio giona& na& Tria& ria& ourt ourt of -asig asig on $e#te*ber 1, 1991 charging the driver of the bus, herein #etitioner duardo Javier, ith rec/&ess i*#rudence resu&ting in da*age to #ro#erty ith *u&ti#&e #hysica& inuries" About four '4( *onths &ater, or on January 13, 1992, herein #rivate res#ondent -ione ioneer er %nsur %nsuranc ance e and and $uret $urety y o or#o r#ora rati tion on '-%$ '-%$( (,, as insur insurer er of the the van van and and subrogee, )&ed a case for da*ages against #etitioner $%L% ith the +egiona& Tria& ourt of .ani&a, see/ing to recover the su*s it #aid the assured under a *otor vehi vehic& c&e e insu insura ranc nce e #o&i #o&icy cy as e e&& && as othe otherr da*a da*age ges, s, tota tota&i &ing ng -54 -54, ,00 00"0 "00 0 '-4 '-44, 4,00 000" 0"00 00 as actu actua& a&6c 6co* o*#e #ensa nsato tory ry da*a da*ages ges77 -0, -0,00 000" 0"00 00 as e8e* e8e*#& #&ar ary y da*ages7 -0,000"00 as attorneys fees7 -10,000"00 as &itigation e8#enses7 and -00"00 as a##earance fees"( ISSUEs: 1( %f a cri*ina& case as )&ed, can an inde#endent civi& action based on uasi;de&ict under Artic&e 21ended #arty *aintain an inde#endent civi& action during the the #end #endenc ency y of a cri* cri*in ina& a& acti action on hen hen no rese reserv rvat atio ion n of the right right to )&e )&e an inde#endent civi& action as *ade in the cri*ina& action and des#ite the fact that the #rivate co*#&ainant is active&y #artici#ating through a #rivate #rosecutor in the afore*entioned cri*ina& case= RULING: ?@+B+, #re*ises considered, the assai&ed decision of the ourt of A##ea&s dated ebruary 24, 199 and the +eso&ution dated A#ri& 3, 199 denying the *otion for reconsideration thereof are hereby +V+$C and $T A$%C" The D.AE D.AE% %$ $T TAT%BE T%BE AEC AEC .BT% .BT%BE BE TB $!$$!$-E EC C %V% %V%L L -+ -+B B C% C%EF EF$D $D )&ed )&ed by #etitioners is F+AETC" RATIO: Eo that the necessity of a #rior reservation is the standing ru&e that sha&& govern the institution of the inde#endent civi& actions referred to in +u&e 111 of the +u&es of ourt, #ast #ronounce*ents that vie the reservation reuire*ent as an Dunautho Dunauthori ried ed a*e a*end*e nd*entD ntD to substan substantiv tive e &a ; i"e", i"e", the ivi& ivi& ode, ode, shou&d shou&d no &onger be contro&&ing" There *ust be a reneed adherence to the ti*e;honored dictu* that #rocedura& ru&es are designed, not to defeat, but to safeguard the ends of substantia& ustice" And for this nob&e reason, no &ess than the onstitution itse&f has *andated this ourt to #ro*u&gate ru&es concerning the enforce*ent of rights Christian Arbiol 1A – San Beda College Alabang Alabang School of Law
Obligations and Contracts Case Notes/Digests
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ith the end in vie of #roviding a si*#&i)ed and ine8#ensive #rocedure for the s#ee s#eedy dy dis#o dis#osi siti tion on of case cases s hic hich h shou& shou&d d not not di*i di*inis nish, h, incr increa ease se or *o *odi dify fy substantive rights" ar fro* a&tering a&tering substantive substantive rights, the #ri*ary #ri*ary #ur#ose #ur#ose of the reser eserva vati tion on is, is, to borr borro o the the o orrds of the the ourt ourt in DaG DaGo os v" -era era&ta &taD &ear&y then, #rivate res#ondent -%$, as subrogee under Artic&e 220< of the ivi& ode, is not e8e*#t fro* the reservation reuire*ent ith res#ect to its da*ages suit based on uasi;de&ict arising fro* the sa*e act or o*ission of #etitioner Javier co*#&ained of in the cri*ina& case" As #rivate res#ondent -%$ *ere&y ste##ed into the shoes of .s" Jao 'as oner oner of the insure insured d Toyota oyota van(, then it is bound to observe the #rocedura& reuire*ents hich .s" Jao ought to fo&&o had she herse&f instituted the civi& case" Rafael Reyes Trucking vs. People Facts: %n the the ea ear& r&y y *o *orn rnin ing g of June June 20, 20, 199 199,, the the ?hit ?hite e Truc/ ruc/ drive driven n by Cunc Cunca a &eft &eft Tuguegarao, Tuguegarao, agayan bound to $an ernando, ernando, -a*#anga -a*#anga &oaded ith 2,000 cases of e*#t e* #ty y beer beer HFran FrandeI deI bott bott&e &es" s" $eat $eated ed at the fron frontt right right seat seat besi beside de hi* hi* a as s erdinand Co*ingo, his truc/ he&#er" At around 4:00 oc&oc/ that sa*e *orning hi&e the truc/ as descending at a s&ight dongrade a&ong the nationa& road at Tagaran, Tagaran, auayan, %sabe&a, it a##roached a da*aged #ortion of the road covering the fu&& idth of the truc/s right &ane going south and about si8 *eters in &ength" These *ade the surface of the road road uneven because the #otho&es ere about )ve to si8 si8 inch inches es dee# dee#"" The The &eft &eft &ane &ane #ara #ara&& &&e& e& to this this da*a da*age ged d #ort #ortio ion n is s*oo s*ooth th"" As narrated by erdinand Co*ingo, before a##roaching the #otho&es, he and Cunca sa the Eissan ith its head&ights on co*ing fro* the o##osite direction" They used to evade this da*aged road by ta/ing the &eft &ance but at that #articu&ar *o*ent, because of the inco*ing vehic&e, they had to run over it" This caused the truc/ to bounce i&d&y" Cunca &ost contro& of the hee&s and the truc/ served to the &eft invading invading the &ane of the Eissan" Eissan" As a resu&t, Cuncas vehic&e vehic&e ra**ed the inco*ing inco*ing Eissan dragging it to the &eft shou&der of the road and c&i*bed a ridge above said shou&der here it )na&&y sto##ed" The Eissan as severe&y da*aged and its to #assen #assengers gers,, na*e&y na*e&y,, e&icia e&iciano no Ka&cit Ka&cita a and rancis rancisco co Cy, Jr" Jr" died died instan instant&y t&y"" Bn Bctobe Bctoberr 10, 199, 199, -rovi -rovinci ncia& a& -rose -rosecut cutor or Curian Curian )&ed )&ed ith ith the +T an a*e a*ended nded infor*ation charging Cunca ith rec/&ess i*#rudence resu&ting in doub&e ho*icide and da*age to #ro#erty" Bn Eove*ber 29, 199, the o>ended #arties )&ed ith the +T a co*#&aint against #etitioner +afae& +eyes Truc/ing or#oration, as e*#&oyer of driver Cunca, based on uasi de&ict" +es#ondents o#ted to #ursue the cri*ina& acti action on but did did not not ithd ithdra ra the the civi civi&& case case uasi uasi e8 de&i de&ict cto o they they )&ed )&ed agai agains nstt #etitioner" Bn Cece*ber 1, 199, res#ondents ithdre the reservation to )&e a se#arate civi& action against the accused and *anifested that they ou&d #rosecute the civi& as#ect e8 de&icto in the cri*ina& action" @oever, they did not ithdra the se#arate civi& action based on uasi de&ict against #etitioner as e*#&oyer arising fro* the sa*e act or o*ission of the accused driver" The +T he&d that the driver Christian Arbiol 1A – San Beda College Alabang Alabang School of Law
Obligations and Contracts Case Notes/Digests
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as gui&ty" gui&ty" +es#ondents *oved for a*end*ent a*end*en t of the dis#ositive #ortion # ortion of the oint decision so as to ho&d #etitioner subsidiari&y &iab&e for the da*ages aarded to the #rivate res#ondents in the event of inso&vency of the accused, hich the &oer court granted" Issues: '1( ?hether or not #etitioner as oner of the truc/ invo&ved in the accident *ay be he&d subsidiari&y &iab&e for the da*ages aarded to the o>ended #arties in the cri*ina& action against the truc/ driver des#ite the )&ing of a se#arate civi& action by the o>ended #arties against the e*#&oyer of the truc/ driver7 and '2( ?hether or not the ourt *ay aard da*ages to the o>ended #arties in the cri*ina& case des#ite the )&ing of a civi& action against the e*#&oyer of the truc/ driver" Held: '1( Eo" %n neg&igence cases, the aggrieved #arty has the choice beteen '1( an action to enforce civi& &iabi&ity arising fro* cri*e under Artic&e 100 of the +evised -ena& ode7 and '2( a se#arate action for uasi de&ict under Artic&e 21ended #arties e&ected to )&e a se#arate civi& action for da*ages against #etitioner as e*#&oyer of the accused, based on uasi de&ict, under Artic&e 21 7t would be solidar. $ contractual obligation can be breached b tort and when the same act or omission causes the in)ur! one resulting in culpa contractual and the other in culpa aquiliana! $rticle 0-;? of the *ivil *ode can well appl. 7n fine! a liabilit for tort ma arise even under a contract! where tort is that which breaches the contract. Stated differentl! when an act which constitutes a breach of ontract would have itself constituted the source of a 3uasi8delictual liabilit had no contract e+isted between the parties! the contract can be said to have been breached b tort! thereb allowing the rules on tort to appl. $o%inal Da%ages # The award of nominal damages in addition to actual damages is untenable. Nominal damages are ad)udicated in order that a right of the plaintiff! which has been violated or invaded b the defendant! ma be vindicated or recogni'ed! and not for the purpose of indemnifing the plaintiff for an loss suffered b him. 7t is an established rule that nominal damages cannot co8e+ist with compensator damages. The award was deleted/@.
Liga vs. Allegro Resources acts: Brtigas o*#any, Li*ited -artnershi# entered into a &ease agree*ent ith La -a %nvest*ent +ea&ty or#oration herein the for*er &eased to the &atter its #arce& of &and &ocated in $an Juan" La -a constructed the Freenhi&&s $ho##ing Arcade and divided it into
Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests severa& sta&&s and sub&eased the* to other #eo#&e" Bne of the sub;&essees as dse& Liga 'Liga(, ho obtained the &easeho&d right to !nit Eo" 25, Leve& A of the F$A" As the &ease e8#ired, the sta&&ho&ders *ade severa& atte*#ts to have their &easeho&d rights e8tended" A&&egro +esources beca*e the ne &essee" As the ne &essee, A&&egro o>ered to sub&ease !nit Eo" 25, Leve& A to Liga" They entered into a &ease agree*ent dubbed +enta& %nfor*ation in hich Liga agreed to #ay renta& of -40M *onth&y" $he a&so agreed to #ay the bac/ renta&s due Brtigas" Liga a&so gave -40M as one *onth advance renta& and another -40M as one *onth security de#osit as #rovided in the agree*ent" Liga fai&ed to #ay the subseuent due rent" Ces#ite re#eated de*ands fro* A&&egro, Liga had fai&ed to #ay her renta&s for the sub&eased #ro#erty, as e&& as the bac/ renta&s fro* January to August 2001 due Brtigas" %ssues: ?BE Liga shou&d #ay to Brtigas bac/ renta&s covering the #eriod 1 January 2001 to 31 August
2001=
EB
?BE Liga shou&d #ay to A&&egro bac/ renta&s in the a*ount of -40M a *onth starting fro* 1 $e#te*ber
2001
unti&
such
ti*e
as
she
vacates
the
&eased
#ro#erty=
N$
?BE Liga shou&d #ay to A&&egro the a*ount of -20M as attorneys fees and the costs of suit= N$ @e&d: '1( Brtigas is not a #arty to this case, hether as #&ainti> or otherise" %t is basic that no re&ief can be e8tended in a udg*ent to a stranger or one ho is not a #arty to a case" '2( A&&egro cannot ustify the aard as a &ega& re#resentative by virtue of a #rovision in its &ease agree*ent ith Brtigas" A&&egro did not aver in its co*#&aint that it as acting as Brtigass &ega& re#resentative and see/ing the bac/ renta&s due Brtigas" '3( There is no a&&egation or #rayer in the co*#&aint that A&&egro as see/ing the co&&ection of the bac/ renta&s due Brtigas" The ourt cannot countenance the obstinate refusa& of Liga to #ay -40M a *onth to A&&egro since she had a&ready acuiesced to #ay such renta& rate hen she signed the +enta& %nfor*ation" %t is funda*enta& that a contract is the &a beteen the #arties" Bb&igations
Christian Arbiol 1A – San Beda College Alabang School of Law
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Obligations and Contracts Case Notes/Digests arising fro* contracts have the force of &a beteen the contracting #arties and shou&d be co*#&ied ith in good faith" %t is a genera& #rinci#&e of &a that no one *ay be #er*itted to change his *ind or disavo and go bac/ u#on his on acts, or to #roceed contrary thereto, to the #reudice of the other #arty" Li/eise, it is sett&ed that if the ter*s of the contract c&ear&y e8#ress the intention of the contracting #arties, the &itera& *eaning of the sti#u&ations ou&d be contro&&ing" La and uris#rudence su##ort the aard of attorneys fees and costs of suit in favor of A&&egro" Attorneys fees and costs of &itigation are aarded in instances here Hthe defendant acted in gross and evident bad faith in refusing to satisfy the #&ainti>s #&ain&y va&id, ust and de*andab&e c&ai*"I @aving de&ivered #ossession over the &eased #ro#erty to Liga, A&&egro had a&ready #erfor*ed its ob&igation under the &ease agree*ent" Liga shou&d have e8ercised fairness and good udg*ent in dea&ing ith A&&egro by re&igious&y #aying the agreed *onth&y renta& of -40,000"00"
.a/ati $toc/ 8change vs" a*#os acts: $ ase Eo" 02;94;45erings '%-B( of cor#orations registered ith .M$7 '2( the de&ivery of the %-B shares he as a&&eged&y de#rived of, for hich he ou&d #ay %-B #rices7 and '3( the #ay*ent of -2 *i&&ion as *ora& da*ages, -1 *i&&ion as e8e*#&ary da*ages, and -00,000"00 as attorneys fees and &itigation e8#enses" Bn 14 ebruary 1994, the $%C issued an Brder granting res#ondents #rayer for the issuance of a Te*#orary +estraining Brder to enoin #etitioners fro* i*#&e*enting or enforcing the 3 June 1993 +eso&ution of the .M$ Koard of Cirectors" Bn 11 .arch 1994, #etitioners )&ed a .otion to Cis*iss res#ondents -etition in $ ase Eo" 02;94;45, '2( the corre&ative ob&igation of the defendant, and '3( the act or o*ission of the defendant in vio&ation of said &ega& right" %f these e&e*ents are absent, the co*#&aint beco*es vu&nerab&e to dis*issa& on the ground of fai&ure to state a cause of action" The test of suOciency of the facts found in a co*#&aint as constituting a cause of action is hether or not ad*itting the facts a&&eged, the court can render a va&id udg*ent u#on the sa*e in accordance ith the #rayer thereof" ?hi&e, by )&ing the *otion to dis*iss, the defendant hy#othetica&&y ad*its the aver*ents stated in the co*#&aint" There is no uestion that the -etition in $ ase Eo" 02;94;45ering #rices7 and sti#u&ates the corre&ative o"ligation of #etitioners to res#ect res#ondents right, s#eci)ca&&y, by continuing to a&&o res#ondent to subscribe to the %-Bs of cor#orations &isted in the stoc/*ar/et at their o>ering #rices" @oever, the ter*s ri'%t and obli'ation in res#ondents -etition are not *agic ords that ou&d auto*atica&&y &ead to the conc&usion that such -etition suOcient&y states a cause of action" Ri'%t and obli'ation are &ega& ter*s ith s#eci)c &ega& *eaning" A ri'%t is a c&ai* or tit&e to an interest in anything hatsoever that is enforceab&e by &a" An obli'ation is de)ned in the ivi& ode as a uridica& necessity to give, to do or not to do" or every right enoyed by any #erson, there is a corres#onding ob&igation on the #art of another #erson to res#ect such right" @oever, an ob&igation i*#osed u#on a #erson *ust be one of the sources enu*erated under Art" 11< of the ivi& ode" The *ere assertion of a right and c&ai* of an ob&igation in an initiatory #&eading, hether a o*#&aint or -etition, Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests
ithout identifying the basis or source thereof, is *ere&y a conclusion o( (act an" la. The co*#&aint on its face re&ies on the right of the res#ondent in a custo*ary *anner, hich is not a*ong those #rovided under Art" 11< of the E" A&though a custo* is not one of those #rovided under Art" 11ering #rices, into an enforceab&e or de*andab&e right" Thus, even if it is hy#othetica&&y ad*itted that nor)all$ , tenty )ve #ercent '2P( of the %-Bs are divided eua&&y beteen the to stoc/ e8changes Q hich, in turn, divide their res#ective a&&ocation eua&&y a*ong their *e*bers, inc&uding the hair*an *eritus, ho #ay for %-B shares at the o>ering #rice Q the ourt cannot grant res#ondents #rayer for da*ages hich a&&eged&y resu&ted fro* the .M$ Koard +eso&ution dated 3 June 1993 deviating fro* said #ractice by no &onger a&&ocating any shares to res#ondent"
have vs" +eyes acts: %n the ear&y #art of Ju&y, 1953, the #&ainti> de&ivered to the defendant, ho is a ty#eriter re#airer, a #ortab&e ty#eriter for routine c&eaning and servicing" The defendant as not ab&e to )nish the ob after so*e ti*e des#ite re#eated re*inders *ade by the #&ainti>" The defendant *ere&y gave assurances, but fai&ed to co*#&y ith the sa*e" %n Bctober, 1953, the defendant as/ed fro* the #&ainti> the su* of -5"00 for the #urchase of s#are #arts, hich a*ount the #&ainti> gave to the defendant" Bn Bctober 25, 1953, after getting e8as#erated ith the de&ay of the re#air of the ty#eriter, the #&ainti> ent to the house of the defendant and as/ed for the return of the ty#eriter" The defendant de&ivered the ty#eriter in a ra##ed #ac/age" Bn reaching ho*e, the #&ainti> e8a*ined the ty#eriter returned to hi* by the defendant and found out that the sa*e as in sha*b&es, ith the interior cover and so*e #arts and scres *issing" Bn Bctober 29, 1953" the #&ainti> sent a &etter to the defendant for*a&&y de*anding the return of the *issing #arts, the interior cover and the su* of -5"00 '8hibit C(" The fo&&oing day, the defendant returned to the #&ainti> so*e of the *issing #arts, the interior cover and the -5"00" Bn August 29, 1954, the #&ainti> had his ty#eriter re#aired by rei8as Kusiness .achines, and the re#air ob cost hi* a tota& of -9", inc&uding &abor and *ateria&s" The error of the court a #uo, according to the #&ainti>;a##e&&ant, +osendo B" haves, is that it aarded on&y the va&ue of the *issing #arts of the ty#eriter, instead of the ho&e cost of &abor and *ateria&s that ent into the re#air of the *achine, as #rovided for in Artic&e 115< of the ivi& ode" Bn the other hand, the #osition of the defendant;a##e&&ee, ructuoso Fona&es, is that he is not &iab&e at a&&, not even for the su* of -31"10, because his contract ith Christian Arbiol 1A – San Beda College Alabang School of Law
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Obligations and Contracts Case Notes/Digests
#&ainti>;a##e&&ant did not contain a #eriod, so that #&ainti>;a##e&&ant shou&d have )rst )&ed a #etition for the court to )8 the #eriod, under Artic&e 119< of the ivi& ode, ithin hich the defendant a##e&&ee as to co*#&y ith the contract before said defendant;a##e&&ee cou&d be he&d &iab&e for breach of contract" %ssue: ?hether the res#ondent shou&d be he&d &iab&e for the contract of &abor and services as e&& as for the *ateria&s hich the #&ainti> s#ent for the entire re#air of the ty#eriter" @e&d: The a##ea&ed udg*ent states that the D#&ainti> de&ivered to the defendant " " " a #ortab&e ty#eriter for routine c&eaning and servicingD7 that the defendant as not ab&e to )nish the ob after so*e ti*e des#ite re#eated re*inders *ade by the #&ainti> D7 that the Ddefendant *ere&y gave assurances, but fai&ed to co*#&y ith the sa*eD7 and that Dafter getting e8as#erated ith the de&ay of the re#air of the ty#eriterD, the #&ainti> ent to the house of the defendant and as/ed for its return, hich as done" The inferences derivab&e fro* these )ndings of fact are that the a##e&&ant and the a##e&&ee had a #erfected contract for c&eaning and servicing a ty#eriter7 that they intended that the defendant as to )nish it at so*e future ti*e a&though such ti*e as not s#eci)ed7 and that such ti*e had #assed ithout the or/ having been acco*#&ished , far the defendant returned the ty#eriter canniba&ied and unre#aired, hich in itse&f is a breach of his ob&igation, #it!out de$anding t!at !e s!ould "e given $ore ti$e to %nis! t!e &o"' or co$pensation for t!e #ork !e !ad already done" 'T%at t%e "e(en"ant is alrea"$ liable (or t%e breac% o( contract, so t%ere is no )ore nee" (or i)&osin' t%e &erio" (or co)&liance "( The ti*e for co*#&iance having evident&y e8#ired, and there being a breach of contract by non;#erfor*ance, it as acade*ic for the #&ainti> to have )rst #etitioned the court to )8 a #eriod for the #erfor*ance of the contract before )&ing his co*#&aint in this case" Cefendant cannot invo/e Artic&e 119< of the ivi& ode for he virtua&&y ad*itted non;#erfor*ance by returning the ty#eriter that he as ob&iged to re#air in a non;or/ing condition, ith essentia& #arts *issing" The )8ing of a #eriod ou&d thus be a *ere for*a&ity and ou&d serve no #ur#ose than to de&ay 'cf" Tig&ao" et a&" V" .ani&a +ai&road o" 9 -hi&" 11(" %t is c&ear that the defendant;a##e&&ee contravened the tenor of his ob&igation because he not on&y did not re#air the ty#eriter but returned it Din sha*b&esD, according to the a##ea&ed decision" or such contravention, as a##e&&ant contends, he is &iab&e under Artic&e 115< of the ivi& ode" *a) #uot, for the cost of e8ecuting the ob&igation in a #ro#er *anner" The cost of the e8ecution of the ob&igation in this case shou&d be the cost of the &abor or service e8#ended in the re#air of the ty#eriter, hich is in the a*ount of -"ers of a#o&ogy ere *et by their tour*ates ith stony si&ence" The tour grou#s visib&e irritation as aggravated hen the tour guide announced that the city tour of A*sterda* as to be cance&ed due to &ac/ of re*aining ti*e, as they had to catch a 3:00 #"*" ferry at a&ais, Ke&giu* to London" .rs" -anta&eon ended u# ee#ing, hi&e her husband had to ta/e a tranui&ier to ca&* his nerves" %t &ater e*erged that -anta&eons #urchase as )rst trans*itted for a##rova& to res#ondents A*sterda* oOce at -:*+ a.$.' A*sterda* ti*e, then referred to res#ondents .ani&a oOce at 9:33 a"*", then )na&&y a##roved at ,+:,- a.$.' A*sterda* ti*e" The A##rova& ode as trans*itted to res#ondents A*sterda* oOce at ,+:56 a.$", severa& *inutes after #etitioner had a&ready &eft oster, and Apart from the lack of any demandable obligation, we also 0nd that antaleon failed to make the demand reuired by Article **1 of the -ivil -ode. XXXAs #revious&y estab&ished, the use of a credit card to pay for a purchase is only an o(er to the credit card company to enter a loan agreement with the credit card holder " >efore t!e credit card issuer accepts t!is o?er' no o"ligation relating to t!e loan agree$ent e9ists "et#een t!e$. Bn the other hand, a de*and is de)ned as the Dassertion of a &ega& right7 " " " an as/ing ith authority, c&ai*ing or cha&&enging as due"D A de$and presupposes t!e e9istence of an o"ligation "et#een t!e parties@ #!ic! is clearly a"sent in t!is case' as t!ere #as no de$anda"le o"ligation yet on t!e part of A$89 to approve any transactions t!at #ill "e incurred "y t!e credit card !older. ???T%us, ever$ ti)e t%at 8antaleon use" %is AME; cre"it car" to &a$ (or %is &urc%ases, what the stores transmitted to AM! were his o(ers to e&ecute loan contracts. 2hese obviously could not be classi0ed as the demand reuired by law to make the debtor in default , 'iven t%at no obli'ation coul" arise on t%e &art o( AME; until a(ter AME; trans)itte" its acce&tance o( 8antaleon@s oers. 8antaleon@s act o( 7insistin' on an" aitin' (or t%e c%ar'e &urc%ases to be Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests
1
a&&rove" b$ AME;7 is not t%e "e)an" conte)&late" b$ Article 336 o( t%e Civil Co"e.
A. AM! acted in 3ood faith ur recognition of t!ese entitle$ents' !o#ever' does not give A8B an unli$ited rig!t to put o? action on card!olders0 purc!ase re=uests for inde%nite periods of ti$e. %n acting on cardho&ders #urchase reuests, A.W *ust ta/e care not to abuse its rights and cause inury to its c&ients and6or third #ersons" ?e cite in this regard Artic&e 19, in conunction ith Artic&e 21, of the ivi& ode" B%ic% tec%nicall$ &rovi"es t%at t%e ri'%t o( AME;, alt%ou'% t%ere is no "e!nite &erio" in %ic% t%e act, s%oul" be &er(or)e" in a a$ t%at is not to be abuse" to t%e &re*u"ice o( t%e car"%ol"ers.%t is an e&e*entary ru&e in our urisdiction that good faith is presumed and that the burden of proving bad faith rests upon the party alleging it " %t is but natura& for A.W to ant to ensure that it i&& e8tend credit on&y to #eo#&e ho i&& have suOcient *eans to #ay for their #urchases" A.W, after a&&, is running a business, not a charity, and it ou&d si*#&y be &udicrous to suggest that it ou&d not ant to earn #ro)t for its services" Thus, so &ong as A.W e8ercises its rights, #erfor*s its ob&igations, and genera&&y acts ith good faith, ith no intent to cause har*, even if it *ay occasiona&&y inconvenience others, it cannot be he&d &iab&e for da*ages" As dgardo Jaurigue c&ari)ed, the reason hy -anta&eon had to ait for A.Ws a##rova& as because he had to go over -anta&eons credit card history for the #ast te&ve *onths" %t ou&d certain&y be unust for us to #ena&ie A.W for *ere&y e8ercising its right to revie -anta&eons credit history *eticu&ous&y" II. As to t!e petitioners assertion t!at t!e respondent s!ould act to approve or disapprove t!e transaction #it!in a D$atter of secondsE. Eeverthe&ess, every ti$e Pantaleon c!arges a purc!ase on !is credit card' t!e credit card co$pany still !as to deter$ine #!et!er it #ill allo# t!is c!arge' "ased on !is past credit !istory" This right to revie a card ho&ders credit history, a&though not s#eci)ca&&y set out in the card *e*bershi# agree*ent, is a necessary i*#&ication of A.Ws right to deny authoriation for any reuested charge" ?e ne8t e8a*ine the credit card *e*bershi# agree*ent, the contract that #ri*ari&y governs the re&ationshi# beteen A.W and -anta&eon" $igni)cant&y, t!ere is no provision in t!is agree$ent t!at o"ligates A8B to act on all card!older purc!ase re=uests #it!in a speci%cally de%ned period of ti$e" Thus, regard&ess of hether the ob&igation is orded as to Dact in a *atter of secondsD or to Dact in ti*e&y dis#atch,D the fact re*ains that no ob&igation e8ists on the #art of A.W to act ithin a s#eci)c #eriod of ti*e" ven -anta&eon ad*its in his testi*ony that he cou&d not reca&& any #rovision in the Agree*ent that guaranteed A.Ws a##rova& of his charge reuests ithin a *atter of *inutes" Eor can -anta&eon &oo/ to the &a or govern*ent issuances as the source of A.Ws a&&eged ob&igation to act u#on his credit card #urchases ithin a *atter of seconds" As the fo&&oing survey of -hi&i##ine &a on credit card transactions de*onstrates, Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests
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the $tate does not reuire credit card co*#anies to act u#on its cardho&ders #urchase reuests ithin a s#eci)c #eriod of ti*e" ven if -anta&eon did #rove that A.W, as a *atter of #ractice or custo*, acted on its custo*ers #urchase reuests in a *atter of seconds, this ou&d sti&& not be enough to estab&ish a &ega&&y de*andab&e right7 as a genera& ru&e, a practice or custom is not a source of a legally demandable or enforceable right. 'Kecause !$TB. is not a*ong those sources of ob&igations set forth by &a, sa*e ru&ing as to .M$ vs" a*#os"(
Ange&es vs" a&asan Facts: Bn (ece$"er ,-' ,-4, defendants;a##e&&ants !rsu&a Torres a&asan and To*as a&asan and #&ainti>s;a##e&&ees Kuenaventura Ange&es and Teo)&a Juani entered into a contract to se&& a #iece of &and &ocated in ainta, +ia& for the a*ount of -3,920"00 #&us s;a##e&&ees #aid the *onth&y insta&&*ents unti& Guly ,-//,, hen their aggregate #ay*ent a&ready a*ounted to -4,33"3" Bn nu*erous occasions, the defendants;a##e&&ants acce#ted and received de&ayed insta&&*ent #ay*ents fro* the #&ainti>s;a##e&&ees" Bn Cece*ber s;a##e&&ees a &etter reuesting the re*ittance of #ast due accounts" Bn January 2, 195< 2, the defendants;a##e&&ants cancelled the said contract because the plainti(s4appellees failed to meet subseuent payments. The #&ainti>s &etter ith their #&ea for reconsideration of the said cance&&ation as denied by the defendants;a##e&&ants" The #&ainti>s;a##e&&ees )&ed ivi& ase Eo" 943 ith the ourt of irst %nstance of +ia&, $eventh Judicia& Cistrict, Kranch W to co*#e& the defendants;a##e&&ants to e8ecute in their favor the )na& deed of sa&e a&&eging inter a&ia that after co*#uting a&& subseuent #ay*ents for the &and in uestion, they found out t!at t!ey !ave already paid t!e total a$ount of P3'455.56 including interests' realty ta9es and incidental e9penses for t!e registration and transfer of t!e land.
1 9 years, to be e8act" 2 ro* that ti*e, the #&ainti>s sto##ed #ay*ent unti& Cece*ber, since the res#ondent argued that the #ay*ent re#resenting the *onth of August has been de&ayed for *ore than *onths" Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests
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The defendants;a##e&&ants a&&eged in their anser that the co*#&aint states no cause of action and that the #&ainti>s;a##e&&ees violated paragraph si& #1% of the contract to sell when they failed and refused to pay and/or o(er to pay the monthly installments corresponding to the month of August, *11 for more than 0ve #5% months, thereby constraining the defendants4 appellants to cancel the said contract "3 Issue: ?hether or not the contract to se&& has been auto*atica&&y and va&id&y cance&&ed by the defendants;a##e&&ants" Ruling: %n reci#roca& ob&igations, either #arty has the right to rescind the contract u#on the fai&ure of the other to #erfor* the ob&igation assu*ed thereunder" .oreover, there is nothing in the law that prohibits the parties from entering into an agreement that violation of the terms of the contract would cause its cancellation even without court intervention. Universit$ o( t%e 8%ili&&ines v. +e los An'eles, '3 $+A 102( here e e8#&ained that:
DBf course, it *ust be understood that the act of a #arty in treating a contract as cance&&ed or reso&ved on account of infractions by the other contracting #arty must be made known to the other and is always provisional, being ever sub6ect to scrutiny and review by the proper court 7" %f the other #arty denies that rescission is usti)ed, it is free to resort to 6udicial action in its on beha&f, and bring the *atter to court" Then, shou&d the court, after due hearing, decide that the reso&ution of the contract as not arranted, the res#onsib&e #arty i&& be sentenced to da*ages7 in the contrary case, the reso&ution i&& be aOr*ed, and the conseuent inde*nity aarded to the #arty #reudiced" D%n other ords, the #arty ho dee*s the contract vio&ated *any considers it reso&ved or rescinded, and act according&y, ithout #revious court action, but it &rocee"s at its on ris " 8or it is only the 0nal 6udgment of the corresponding court that will conclusively and 0nally settle whether the action taken was or was not correct in law " " " D?e see no conRict beteen this ru&ing and the #revious uris#rudence of this ourt invo/ed by res#ondent decå that udicia& action is necessary for the reso&ution of a reci#roca& ob&igation7 'Bceo, -ere o" v" %nternationa& Kan/ing or#", 3< -hi&" 5317 +e#ub&ic v" @os#ita& de $an Juan de Cios, et a&", 4 -hi&" 20( 3 The +T rendered udg*ent in favor of #&ainti>s" Ky ho&ding that the contract as EBT VAL%CLN cance&&ed by the res#ondent" 4 -rovisiona& in a sense, unti& and after the #arty had concurred ith it, that the recission6cance&&ation can be dee*ed to be fu&&y in e>ect" Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests
since in every case where the e&tra6udicial resolution is contested only the 0nal award of the court of competent 6urisdiction can conclusively settle whether the resolution was proper or not " %t is in this sense that udicia& action i&& be necessary, as ithout it, the e8traudicia& reso&ution i&& re*ain contestab&e and subect to udicia& inva&idation, unless attack thereon should become barred by acuiescence, estoppel or prescription"D The right to rescind the contract for non;#erfor*ance of one of its sti#u&ations, therefore, is not abso&ute" %n Universal Foo" Cor&. v. Court o( A&&eals '33 $+A 1( the ourt stated that Q DThe genera& ru&e 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 ob6ect of the parties in making the agreement " '$ong o o" v" @aaiian;-hi&i##ine o", 4< -hi&" 21, 2s;a##e&&ees" The defendants, instead of rescinding the contract, received the #ay*ents *ade by the #&ainti>s considering the de&ay that they *ay have caused" Eo, they are barred fro* e8ercising their right to rescind, a&though it as granted by the contract, nonethe&ess, they are a&ready esto##ed fro* raising such" The defendants;a##e&&ants drafted and #re#ared the contract" The #&ainti>s; a##e&&ees, eager to acuire a &ot u#on hich they cou&d bui&d a ho*e, aO8ed their signatures and assented to the ter*s and conditions of the contract" They had no o##ortunity to uestion nor change any of the ter*s of the agree*ent" %t as o>ered to the* on a Dta/e it or &eave itD basis" The contract to se&&, being a contract of adhesion, *ust be construed against the #arty causing it" ?e agree ith the observation of the #&ainti>s;a##e&&ees to the e>ect that Dthe ter*s of a contract *ust be inter#reted against the orre&ate to Art" 1234 as to $ubstantia& co*#&iance *ade by a #arty in good faith" '$a*e ith Ciese& case( Christian Arbiol 1A – San Beda College Alabang School of Law
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Obligations and Contracts Case Notes/Digests
#arty ho drafted the sa*e, es#ecia&&y here such inter#retation i&& he&# e>ect ustice to buyers ho, after having invested a big a*ount of *oney, are no sought to be de#rived of the sa*e thru the #rayed a##&ication of a contract c&ever in its #hraseo&ogy, conde*nab&e in its &o#sidedness and inurious in its e>ect hich, in essence, and in its entirety is *ost unfair to the buyers" After consideration of the nature of the contract of adhesion, the courts shou&d on&y order the #ay*ent of the fe re*aining insta&&*ents but not u#ho&d the cance&&ation of the contract"
+oue vs" La#u Facts: $o*eti*e in 194, #rior to the a##rova& by the Eationa& -&anning o**ission of the conso&idation and subdivision #&an of #&ainti>s #ro#erty /non as the +oc/vi&&e $ubdivision, situated in Ka&intaa/, Yueon ity, #&ainti> and defendant entered into an agree*ent of sa&e covering Lots 1, 2 and 9, K&oc/ 1, of said #ro#erty, ith an aggregate area of 1,200 suare *eters, #ayab&e in 120 eua& *onth&y insta&&*ents at the rate of -15"00, -1"00 #er suare *eter, res#ective&y" %n accordance ith said agree*ent, defendant #aid to #&ainti> the su* of P,4+.++ as deposit and t!e furt!er su$ of P3+.4/ to co$plete t!e pay$ent of four $ont!ly install$ents ,*+ 3 ,,/ pay$ents are yet to "e $ade' #!ic! #as not co$plied #it! "y t!e respondent any$ore; covering t!e $ont!s of Guly' August' Septe$"er' and cto"er' ,-43. '8hibits A and K(" ?hen the docu*ent 8hibit DAD as e8ecuted on June 2, 194, the #&an covering #&ainti>s #ro#erty as *ere&y tentative, and the #&ainti> referred to the #ro#osed &ots a##earing in the tentative #&an" After the a##rova& of the subdivision #&an by the Kureau of Lands on January 24, 19, defendant reuested #&ainti> that he be a&&oed to abandon and substitute Lots 1, 2 and 9, the subect *atter of their #revious agree*ent, ith Lots 4 and 12, K&oc/ 2 of the a##roved subdivision #&an, of the +oc/vi&&e $ubdivision, ith a tota& area of be&o( )&ed the co*#&aint against defendant EicanorLa#u '#rivate res#ondent herein( ith the ourt of irst %nstance of +ia&, Yueon ity Kranch, for rescission and cance&&ation of the agree*ent of sa&e beteen the* invo&ving the to &ots in uestion" Cefendant )&ed a .otion to Cis*iss on the ground that the co*#&aint states no cause of action, hich as denied by the court" As aOr*ative and s#ecia& defenses, defendant a&&eges that the co*#&aint states no cause of action7 that the present action for rescission !as prescri"ed7 t!at no de$and for pay$ent of t!e "alance #as ever $ade@ and t!at t!e action "eing "ased on reciprocal o"ligations' "efore one party $ay co$pel perfor$ance' !e $ust %rst co$ply #!at is incu$"ent upon !i$. / '@e a&&eged a&so that the #&ainti> did not co*#&y ith #utting u# the reuisite faci&ities in the subdivision, thats hy"( 5 The +T rendered its decision in favor of #&ainti>7 afterards, an a##ea& as *ade but the A aOr*ed in toto. Christian Arbiol 1A – San Beda College Alabang School of Law
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Obligations and Contracts Case Notes/Digests
Acting on the .otion for +econsideration, the ourt of A##ea&s sustained the si8th ground raised by the a##e&&ant 'La#us(, t!at assu$ing t!at a cause of action for rescission e9ists' !e s!ould nevert!eless "e entitled to t!e %9ing of a period #it!in #!ic! to co$ply #it! !is o"ligation "< The ourt, hoever, concedes that #&ainti>s fai&ure to co*#&y ith his ob&igation to #ut u# the necessary faci&ities in the subdivision i&& not deter hi* fro* as/ing for the rescission of the agree*ent since t!is o"ligation is not correlative #it! defendant0s o"ligation to "uy t!e property. Issue: 7!et!er private respondent is entitled to t!e "ene%ts of t!e t!ird paragrap! of Article ,,-,' e# Civil Code' for t!e %9ing of a period #it!in #!ic! !e s!ould co$ply #it! #!at is incu$"ent upon !i$. Ruling: %n a contract to se&&, the full payment of the price through the punctual performance of the monthly payments is a condition precedent to the e&ecution of the 0nal sale and to the transfer of the property from the owner to the proposed buyer 7 so that there i&& be no actua& sa&e unti& and un&ess fu&& #ay*ent is *ade" The decision a&so stressed that there can be no rescission or resolution of an obligation as yet non4e&istent, because the suspensive condition did not happen. Artic&e 192 of the Ee ivi& ode 'Art" 104 of B&d ivi& ode( reuiring de*and by suit or notaria& act in case the vendor of rea&ty ants to rescind does not apply to a contract to sell or pro$ise to sell' #!ere title re$ains #it! t!e vendor until ful%ll$ent to a positive condition' suc! as full pay$ent of t!e price"D '.anue& vs" +odrigue, 109 -hi&" 9( t is irrelevant whether a party9s infringement of its contract was casual or seriousD for as #ointed out in .anue& vs" +odrigue, '%(n contracts to se&&, hether onershi# is retained by the se&&er and is not to #ass unti& the fu&& #ay*ent of the #rice, suc! pay$ent' as #e said' is a positive suspensive condition, the fai&ure of hich is not a breach, casua& or serious, but si*#&y an event that #revented the ob&igation of the vendor to convey tit&e fro* acuiring binding force" -etitioner 'La#us( contends that D'n(othing in the decision of the courts be&o ou&d sho that onershi# of the #ro#erty re*ained ith #&ainti> for so &ong as the insta&&*ents have not been fu&&y #aid" :hich yields the conclusion that, by the delivery of the lots to defendant, ownership likewise was transferred to the latter. @oever, The ourt he&d that the contract beteen the #etitioner and the res#ondent as a contract to se&& here the onershi# or tit&e is retained by the se&&er and is not to #ass unti& the fu&& #ay*ent of the #rice, such #ay*ent being a #ositive sus#ensive condition and fai&ure of hich is not a breach, < Bn the basis that the #ro#erty earned substantia& i*#rove*ents, to grant the recission ou&d be tanta*ount to inustice to the defendant" Christian Arbiol 1A – San Beda College Alabang School of Law
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Obligations and Contracts Case Notes/Digests
casua& or serious, but si*#&y an event that #revented the ob&igation of the vendor to convey tit&e fro* acuiring binding force" 2here is no writing or document evidencing the agreement #as to the intent to an absolute sale; or to the immediate transfer of the same% 2his absence of a formal deed of conveyance is a very strong indication that the parties did not intend immediate transfer of ownership and title, but only a transfer after full payment of the price To a&&o and grant res#ondent an additiona& #eriod for hi* to #ay the ba&ance of the #urchase #rice, hich ba&ance is about 92P of the agreed #rice, would be tantamount to e&cusing his bad faith and sanctioning the deliberate infringement of a contractual obligation that is repugnant and contrary to the stability, security and obligatory force of contracts" .oreover, res#ondents fai&ure to #ay the succeeding 115 *onth&y insta&&*ents after #aying on&y 4 *onth&y insta&&*ents is a substantia& and *ateria& breach on his #art, not *ere&y casua&, hich ta/es the case out of the a##&ication of the bene)ts of #aragra#h 3, Art" 1191, E""" The euitab&e grounds or considerations hich are the basis of the res#ondent court in the )8ing of an additiona& #eriod because res#ondent had constructed va&uab&e i*#rove*ents on the &and, that he has bui&t his house on the #ro#erty orth -4,000"00 and #&aced adobe stone a&&s ith barbed ires around, do not arrant the )8ing of an additiona& #eriod" :e cannot sanction this claim for euity of the respondent for to grant the same would place the vendor at the mercy of the vendee who can easily construct substantial improvements on the land but beyond the capacity of the vendor to reimburse in case he elects to rescind the contract by reason of the vendee's default or deliberate refusal to pay or continue paying the purchase price of the land. de&ivered to the defendant, ho is a ty#eriter re#airer, a #ortab&e ty#eriter for routine c&eaning and servicing" The defendant as not ab&e to )nish the ob after so*e ti*e des#ite re#eated re*inders *ade by the #&ainti>" The defendant *ere&y gave assurances, but fai&ed to co*#&y ith the sa*e" %n Bctober, 1953, the defendant as/ed fro* the #&ainti> the su* of -5"00 for the #urchase of s#are #arts, hich a*ount the #&ainti> gave to the defendant" Bn Bctober 25, 1953, after getting e8as#erated ith the de&ay of the re#air of the ty#eriter, the #&ainti> ent to the house of the defendant and as/ed for the return of the ty#eriter" The defendant de&ivered the ty#eriter in a ra##ed #ac/age" Bn reaching ho*e, the #&ainti> e8a*ined the ty#eriter returned to hi* by the defendant and found out that the sa*e as in sha*b&es, ith the interior cover and so*e #arts and scres *issing" Bn Bctober 29, 1953" the #&ainti> sent a &etter to the defendant for*a&&y de*anding the return of the *issing #arts, the interior cover and the su* of -5"00 '8hibit C(" The fo&&oing day, the defendant returned to the #&ainti> so*e of the *issing #arts, the interior cover and the -5"00" Bn August 29, 1954, the #&ainti> had his ty#eriter re#aired by rei8as Kusiness .achines, and the re#air ob cost hi* a tota& of -9", inc&uding &abor and *ateria&s" The error of the court a #uo, according to the #&ainti>;a##e&&ant, +osendo B" haves, is that it aarded on&y the va&ue of the *issing #arts of the ty#eriter, instead of the ho&e cost of &abor and *ateria&s that ent into the re#air of the *achine, as #rovided for in Artic&e 115< of the ivi& ode" Bn the other hand, the #osition of the defendant;a##e&&ee, ructuoso Fona&es, is that he is not &iab&e at a&&, not even for the su* of -31"10, because his contract ith #&ainti>;a##e&&ant did not contain a #eriod, so that #&ainti>;a##e&&ant shou&d have )rst )&ed a #etition for the court to )8 the #eriod, under Artic&e 119< of the ivi& ode, ithin hich the defendant a##e&&ee as to co*#&y ith the contract before said defendant;a##e&&ee cou&d be he&d &iab&e for breach of contract" %ssue: ?hether the res#ondent shou&d be he&d &iab&e for the contract of &abor and services as e&& as for the *ateria&s hich the #&ainti> s#ent for the entire re#air of the ty#eriter" @e&d: The a##ea&ed udg*ent states that the D#&ainti> de&ivered to the defendant " " " a #ortab&e ty#eriter for routine c&eaning and servicingD7 that the defendant as not ab&e to )nish the ob after so*e ti*e des#ite re#eated re*inders *ade by the #&ainti> D7 that the Ddefendant *ere&y gave assurances, but fai&ed to co*#&y ith the sa*eD7 and that Dafter getting e8as#erated ith the de&ay of the re#air of the ty#eriterD, the #&ainti> ent to the house of the defendant and as/ed for its return, hich as done" The inferences derivab&e fro* these )ndings of fact are that the a##e&&ant and the a##e&&ee had a #erfected contract for c&eaning and servicing a ty#eriter7 that they intended that the defendant as to )nish it at so*e future ti*e a&though such ti*e as not s#eci)ed7 and that such ti*e had #assed ithout the or/ having been acco*#&ished , far the defendant returned the ty#eriter canniba&ied and unre#aired, hich in itse&f is a breach of his ob&igation, Christian Arbiol 1A – San Beda College Alabang School of Law
2
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#it!out de$anding t!at !e s!ould "e given $ore ti$e to %nis! t!e &o"' or co$pensation for t!e #ork !e !ad already done" 'T%at t%e "e(en"ant is alrea"$ liable (or t%e breac% o( contract, so t%ere is no )ore nee" (or i)&osin' t%e &erio" (or co)&liance "( The ti*e for co*#&iance having evident&y e8#ired, and there being a breach of contract by non;#erfor*ance, it as acade*ic for the #&ainti> to have )rst #etitioned the court to )8 a #eriod for the #erfor*ance of the contract before )&ing his co*#&aint in this case" Cefendant cannot invo/e Artic&e 119< of the ivi& ode for he virtua&&y ad*itted non;#erfor*ance by returning the ty#eriter that he as ob&iged to re#air in a non;or/ing condition, ith essentia& #arts *issing" The )8ing of a #eriod ou&d thus be a *ere for*a&ity and ou&d serve no #ur#ose than to de&ay 'cf" Tig&ao" et a&" V" .ani&a +ai&road o" 9 -hi&" 11(" %t is c&ear that the defendant;a##e&&ee contravened the tenor of his ob&igation because he not on&y did not re#air the ty#eriter but returned it Din sha*b&esD, according to the a##ea&ed decision" or such contravention, as a##e&&ant contends, he is &iab&e under Artic&e 115< of the ivi& ode" *a) #uot, for the cost of e8ecuting the ob&igation in a #ro#er *anner" The cost of the e8ecution of the ob&igation in this case shou&d be the cost of the &abor or service e8#ended in the re#air of the ty#eriter, hich is in the a*ount of -"er an i*#rison*ent of four '4( *onths and one '1( day as *ini*u* to to '2( years and four '4( *onths as *a8i*u*, to inde*nify the o>ended #arty in the a*ount of -9"0, ith subsidiary i*#rison*ent in case of inso&vency, and to #ay the costs"I The a##e&&ant is a businesso*an" on January 10, 1955, the a##e&&ant ent to the house of .aria Ayroso and #ro#osed to se&& Ayrosos tobacco" Ayroso agreed to the #ro#osition of the a##e&&ant to se&& her tobacco consisting of 51 /i&os at -1"30 a /i&o" The a##e&&ant as to receive the over#rice for hich she cou&d se&& the tobacco" This agree*ent as *ade in the #resence of #&ainti>s sister, $a&ud F" Kantug" $a&vador Kantug dre the docu*ent, 8h" A, dated January 10, 1955, hich reads: LibLe8 To ?ho* %t .ay oncern: Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests
This is to certify that % have received fro* .rs" .aria de Fu*an Vda" de Ayroso, of Fa#an, Eueva cia, si8 hundred )fteen /i&os of &eaf tobacco to be so&d at -1"30 #er /i&o" The #roceed in the a*ount of $even @undred Einety Eine -esos and 06100 '-% a!!roved the revision of the +eed estrictions% wherein direct height restrictions were abolished in favor of floor area li$its co$!uted on the basis of floor area ratios. %5DC did not vote for the approval of the %evised Deed %estrictions and, therefore, it continued to be bound by the original Deed %estrictions. 5hile the a!!eal was !ending before the Office of the President% the Se!te$ber ,1% 199- issue of the Business orld $aga?ine featured the 7rafalgar PlaIa as a modern 78&storey structure which will soon rise in Salcedo ;illage% "a4ati Cit(. Stunned b( this infor$ation% ADALA% through counsel% then sent a letter to B+C demanding the latter to cease the construction of the building which dimensions do not conform to the previous plans it earlier approved.,-
20 or +KCs fai&ure to heed the de*and, ANALA )&ed an action for s#eci)c #erfor*ance of the contract or for recission of the sa*e" $ince the 2< storey unit bui&ding #er*it acuired by +KC fro* the .B contravened their origina& agree*ent" Christian Arbiol 1A – San Beda College Alabang School of Law
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B+C alleged in essence that even if said deed restrictions eist% the sa$e are not econo$icall( viable and should not be enforced because they constitute unreasonable restrictions on its property rights and are, therefore, contrary to law, morals, good customs, public order or public policy#;& 2ssue: 5hether a contract of adhesion is invalid per se. 6eld: A contract of adhesion in itself is not an invalid agreement. &his t(!e of contract is as binding as a $utuall( eecuted transaction. 5e have e$!haticall( ruled in the case of 5ng 6iu vs. "ourt of !ppeals% et . al . that contracts of adhesion wherein one !art( i$!oses a read(G$ade for$ of contract on the other . . # are contracts not entirely prohibited. 7he one who adheres to the contract is in reality free to reject it entirely3 if he adheres he gives his consent. &his ruling was reiterated in 4hilippine !merican %eneral Insurance "o.% Inc. vs. Sweet 7ines% Inc.% et . al .% 9# wherein we further declared through #ustice Floren? egalado that not even an allegation of ignorance of a party excuses non> compliance with the contractual stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of carriage :a contract of adhesion< devolves not on the carrier but on the owner, shipper, or consignee as the case may be#= Contracts of adhesion% however% stand out fro$ other contracts @which are bilaterall( drafted b( the !arties> in that the former is accorded inordinate vigilance and scrutiny by the courts in order to shield the unwar( fro$ dece!tive sche$es contained in read(G$ade covenants. &he stringent treat$ent towards contracts of adhesion which the courts are en'oined to observe is in !ursuance of the $andate in rticle ;3 of the New Civil Code that @i>n all contractual% !ro!ert( or other relations% when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap% the courts $ust be vigilant for his !rotection. &he Court ruled against B+C for violating the sti!ulations of their contract. Obiter: &he fact that B+C was issued b( the "7O the authorit( to construct its own building even if it was be(ond the agree$ent $ade b( the !arties is not a 'ustifiable reason for the for$er to violate their agree$ent% which includes the s!ecial restrictions i$!osed b( ADALA in their agree$ent. &o rule otherwise would violate the ver( tran0uilit( of contracts% As Art. 119 !rovides that it should be the law between the !arties which also re0uires that both of the$ should co$!l( with their agree$ents in good faith.
)avarra vs. Planters +evelo!$ent Ban4 Facts: On #ul( % 19 !arcels of land. nfortunatel(% the couple failed to pay their loan obligation . 6ence% Planters Ban4 foreclosed on the
21 The +T ru&ed in favor of +KC e*#hasiing on the fact that the contract as i&&ega& because of the *ere fact that it is a contract of adhesion" 'or #ur#oses of re&ating the case to the subect( ANALA a##ea&ed, but the A aOr*ed in toto the udg*ent of the +T" Christian Arbiol 1A – San Beda College Alabang School of Law
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$ortgage and the $ortgaged assets were sold to it for P1%/=1% of "alolos% Bulacan% Branch 18% dated +ece$ber 1=% 199% in Civil Case )o. /8G"G centares% . located at Lolo$bo(% Bocaue% Bulacan. Said !arcel was registered in her na$e under &ransfer Certificate of &itle @&C&> )o. &G1=. in FortunatoEs na$e. ) Fortunato declared the !ro!ert( for taation !ur!oses and !aid realt( taes due thereon. 1 ometime between ugust &(1. to eptember &(11, Fortunato mortgaged the property three :+< times to one 6rlinda de BuIman for the sums of P;.,, P., and P&,# ( Fortunato was unable to pay these loans. On #anuar( 11% 19 now clai$ ownershi! over Lots 1/,- and 1///. On the other hand% !rivate res!ondents Consolacion Alivio Alovera @Consolacion for brevit(> and 7lena Alovera Santos @7lena for brevit(> anchor their right of ownership over "ots &+; and &+++ on the bsolute ale eecuted b( Filo$ena on A!ril ,=% 199 @Absolute Sale for brevit(>. Filo$ena sold the two lots in favor of Consolacion and her husband% #ulian Alovera @#ulian for brevit(>. 7lena is the daughter of Consolacion and #ulian @deceased>. On "arch /-% 19 and +e!art$ent of &rans!ortation and Co$$unication @+O&C for brevit(>. &he case was raffled to the egional &rial Court% Branch 1. lthough there was no separate title in the name of 2ulio Barcia, there were tax declarations in his name to the extent of his grandfather9s share covering an area of ,1%=- s0uare $eters. On #ul( % 19 rescission of the return b( res!ondent to !etitioners of the !ossession of the sub'ect !arcel of land3 and @c> !a($ent b( res!ondent of da$ages in favor of !etitioners. Petitioners clai$ed that the( a!!roached res!ondent several ti$es to deliver &C& )o. &G1-8 but respondent told them that he did not have money to pay the balance of the purchase price. 3 es!ondent% on the other hand% filed a counterclai$ for da$ages and averred that he refused to $a4e further !a($ents because of !etitionersE failure to deliver to hi$ a se!arate title in the na$e of #ulio *arcia. &he trial court 2n its decision% the trial court noted that !roceedings for the issuance of a se!arate title covering the !ro!ert( sub'ect of sale entail ti$e and the !arties could not have intended delivery by petitioners to respondent of a separate title in the name of 2ulio Barcia as a condition for respondent9s payment of the full purchase price within six months from the time of the execution of the :asunduan. Said court observed that even if !etitioners were obliged to deliver a se!arate title in the na$e of #ulio *arcia to res!ondent% the latter appeared to have insufficient funds to settle his obligation as indicated b( the fact that his !a($ents a$ounting to PN8N6 and (;/& :P&1,.&&,(((#(;< and a guarant( de!osit of P60J 0N6 $8""80N 6@6N 4END%6D 68B47? 740END @P1%8 contrar( to the e!ress $andate of esolution )o. ,% series of 199% of the "unici!al Planning and +evelo!$ent Council i$!le$enting Sangguniang Ba(an esolution )o. 19% unwarranted benefits and advantage and causing undue injury to the government#
&he "unici!alit( of "alungon listed as one of its priority programs % the ac0uisition of a fleet of heav( e0ui!$ent needed b( the $unici!alit( in its develo!$ent !ro'ects. . For this !ur!ose% it a!!ro!riated an a$ount of P,., "illion per annum for a !eriod of five @> (ears beginning in 199 for the a$orti?ation of such !urchase. * Pursuant thereto% the municipality conducted two :;< public biddings for suppliers of the re-uired fleet of heavy e-uipment# 5oth attempts, however, failed# 6ence% the Sangguniang Bayan instead !assed esolution )o. ,1 on ,, Februar( 199% authori?ing !etitioner Constantino to enter into a negotiated contract for the leaseK!urchase of the needed fleet of heav( e0ui!$ent. On ,< Februar( 199% Constantino entered into a 7ease !greement 1 with )orlovanian Cor!oration% re!resented b( Lindong. 7he agreement re-uired, among others, the municipality to provide Norlovanian Corporation with a guaranty deposit# &he following da(% Lindong a!!eared before theSangguniang Bayan to discuss the 7ease !greement . )ot one of the $e$bers of the Sanggunian 0uestioned the legalit( of the agree$ent. Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests &hereafter%
on
1< A!ril 199%
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the Sangguniang Bayan unani$ousl( !assed esolution )o.
/< &; re0uesting !etitioner to o!erate the newl( ac0uired fleet of heav( e0ui!$ent. &he $unici!alit( subse0uentl( utili?ed the fleet. &+ 6owever% onl( five @> da(s later% or on ,/ A!ril 199% Sanggunian $e$bers Ben'a$in C. Asga!o% afael #. Suson% Sr. @Suson>% Leo *. 2nga( @2nga(>% Pablo ;. Octavio @Octavio> and 5ilfredo P. 7s!inosa @7s!inosa>% and ;ice "a(or Pri$itiva L. 7s!inosa @;ice "a(or 7s!inosa> filed a for$al co$!laint against !etitioners Constantino and Lindong for violation of .A. )o. /-19. On #une 199% the Sangguniang Bayan !assed esolution )o. =8% urging the $unici!alit( to sto! all for$s of unauthori?ed !a($entKe!enditure relative to the illegall( ac0uired !ool of heav( e0ui!$ent b( the "unici!alit( of "alungon. 2n #anuar( 1998% &o$anan , to e$bod( one contract of leaseK!urchase could be regarded as fatall( defective% and even indicative of a cri$inal cons!irac(% or wh( said two writings should be inter!reted in such a wa ( as to $agnif( their see$ing inconsistencies. 7he fundamental and familiar legal principle L which the 0ffice of the 0mbudsman ignored L is that it is perfectly legitimate for a bilateral contract to Christian Arbiol 1A – San Beda College Alabang School of Law
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be embodied in two or more separate writings, and that in such an event the writings should be read and interpreted together in such a way as to eliminate seeming inconsistencies and render the parties9 intention effectual#
2t $a( be true that the basis of ad$inistrative liabilit( differs fro$ cri$inal liabilit( as the !ur!ose of ad$inistrative !roceedings on the one hand is $ainl( to !rotect the !ublic service% based on the ti$eG honored !rinci!le that a !ublic office is a !ublic trust. On the other hand% the !ur!ose of the cri$inal !rosecution is the !unish$ent of cri$e. . 6owever% the dis$issal b( the Court of the ad$inistrative case against Constantino based on the sa$e sub'ect $atter and after ea$ining the sa$e crucial evidence o!erates to dis$iss the cri$inal case because of the !recise finding that the act fro$ which liabilit( is anchored does not eist. 2t is li4ewise clear fro$ the decision of the Court in "onstantino that the level of proof re&uired in administrative cases which is substantial evidence was not mustered therein. 'he same evidence is again before the "ourt in connection with the appeal in the criminal case. *neluctably, the same evidence cannot with greater reason satisfy the higher standard in criminal cases such as the present case which is evidence beyond reasonable doubt .@ 7he elementary principle is that it is perfectly legitimate for a bilateral contract + to be embodied in two or more separate writings, and that in such an event the writings should be read and interpreted together in such a wa( as to eli$inate see$ing inconsistencies and render the intention of
the !arties effectual. 2n construing a written contract% the reason behind and the circu$stances surrounding its eecution are of !ara$ount i$!ortance to !lace the inter!reter in the situation occu!ied b( the !arties concerned at the ti$e the writing was eecuted. Construction of the ter$s of a contract% which would a$ount to i$!air$ent or loss of right% is not favored. Conservation and !reservation% not waiver% abandon$ent or forfeiture of a right% is the rule. 2n case of doubts in contracts% the sa$e should be settled in favor of the greatest reci!rocit( of interests. 7scano v. Ortigas &he $ain contention raised in this !etition is that !etitioners are not under obligation to rei$burse res!ondent% a clai$ that can be easil( debun4ed. &he $ore !er!leing 0uestion is whether this obligation to re!a( is solidar(% as contended b( res!ondent and the lower courts% or $erel( 'oint as argued b( !etitioners.
30 The one referred to is the &ease6#urchase agree*ent as e&& as the attached underta/ing" Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests
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On ,< A!ril 19 & entered into a loan agreement with Falcon "inerals% 2nc. @Falcon> whereb( P+CP agreed to $a4e available and lend to Falcon the a$ount of S/,-%---.--% for s!ecific !ur!oses and sub'ect to certain ter$s and conditions. ; On the sa$e da(% three stoc4holdersGofficers of Falcon% na$el(: res!ondent afael Ortigas% #r. @Ortigas>% *eorge A. Schole( and *eorge &. Schole( executed an ssumption of olidary "iability whereby they agreed to assume in Mtheir individual capacity % solidar( liabilit( with FalconQ for the due and !unctual !a($ent of the loan contracted b( Falcon with P+CP. + 2n the $eanti$e% two separate guaranties were executed to guarantee the payment of the sa$e loan b( other stoc4holders and officers of Falcon% acting in their !ersonal and individual ca!acities. One *uarant( 3 was eecuted b( !etitioner Salvador 7scao @7scao>% while the other . b( !etitioner "ario ". Silos @Silos>% icardo C. Silverio @Silverio>% Carlos L. 2nductivo @2nductivo> and #oa0uin #. odrigue? @odrigue?>. &wo (ears later% an agree$ent develo!ed to cede control of Falcon to 7scao% Silos and #ose!h ". "atti @"atti>. &hus% contracts were eecuted whereb( Ortigas% *eorge A. Schole(% 2nductivo and the heirs of then alread( deceased *eorge &. Schole( assigned their shares of stoc4 in Falcon to 7scao% Silos and "atti. * Part of the consideration that induced the sale of stoc! was a desire by 0rtigas, et al #, to relieve themselves of all liability arising from their previous joint and several underta!ings with Falcon% including those related to the loan with P+CP. Falcon eventuall( availed of the su$ of S18 against Falcon% Ortigas% 7scao% Silos% Silverio and 2nductivo. &he crossGclai$ lodged against 7scao and Silos was predicated on the &(1; Enderta!ing, wherein they agreed to assume the liabilities of 0rtigas with respect to the PDCP loan# +& 7scao% Ortigas and
Silos each sought to see4 a settle$ent with P+CP. &he first to co$e to ter$s with P+CP was 7scao% who in +ece$ber of 199/% entered into a co$!ro$ise agree$ent whereb( he agreed to !a( the ban4 P1%---%---.--. 8n exchange, PDCP waived or assigned in favor of 6scaOo one>third :&/+< of its entire claim in the complaint against all of the other defendants in the case# && 7he compromise agreement was approved by the %7C in a 2udgment &; dated * 2anuary &((3#
&hen on ,= Februar( 199=% Ortigas entered into his own co$!ro$ise agree$ent &+ with P+CP% allegedly without the !nowledge of 6scaOo, $atti and ilos# &hereb(% Ortigas agreed to !a( P+CP
P1%/--%---.-- as full satisfaction of the P+CPEs clai$ against Ortigas% &3 in echange for P+CPEs
31 They e8ecuted an underta/ing hereby the guarantors '#etitioner( i&& assu*e a&& &iabi&ities of the defendant, #rovided it is *ade ith #ro*#t and due notice" Bbiter: The cross;c&ai* is suOcient notice #ursuant to their agree*ent" Christian Arbiol 1A – San Beda College Alabang School of Law
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release of Ortigas fro$ an( liabilit( or clai$ arising fro$ the Falcon loan agree$ent% and a renunciation of its clai$s against Ortigas. 2n 199% Silos and P+CP entered into a Partial Co$!ro$ise Agree$ent whereb( he agreed to !a( P--%---.-- in echange for P+CPEs waiver of its clai$s against hi$. 2n the $eanti$e% after having settled with P+CP% Ortigas !ursued his clai$s against 7scao% Silos and "atti% on the basis of the 19 of the nderta4ing does i$!ose a re0uire$ent that an( of the OBL2*OS shall i$$ediatel( infor$ S7&27S if the( received an( de$and for !a($ent of FALCO)Es obligations to P+CP% but that re0uire$ent is reasoned so that the S7&27SQ can ti$el( ta4e a!!ro!riate $easures ++ !resu$abl( to settle the obligation without having to burden the OBL2*OS. &his notice re0uire$ent in !aragra!h / @a> is $ar4edl( wa(
Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests off fro$ the suggestion of !etitioners that Ortigas% after alread( having been i$!leaded as a defendant in the collection suit% was obliged under the 19 calendar da(s fro$ such !a($ent +) $a4es it clear that !etitioners re$ain liable to rei$burse Ortigas for the su$s he !aid P+CP. Petitioners sub$it that the( could onl( be held 'ointl(% not solidaril(% liable to Ortigas% clai$ing that the nderta4ing did not !rovide for e!ress solidarit(. &he( cite Article 1,-8 of the )ew Civil Code% which states in !art that tQhere is a solidar( liabilit( onl( when the obligation e!ressl( so states% or when the law or the nature of the obligation re0uires solidarit(. &hese Civil Code !rovisions establish that in case of concurrence of two or $ore creditors or of two or $ore debtors in one and the sa$e obligation% and in the absence of e!ress and indubitable ter$s characteri?ing the obligation as solidar(% the !resu$!tion is that the obligation is onl( 'oint. 2t thus beco$es incu$bent u!on the !art( alleging that the obligation is indeed solidar( in character to !rove such fact with a !re!onderance of evidence. &he nderta4ing does not contain an( e!ress sti!ulation that the !etitioners agreed to bind the$selves 'ointl( and severall( in their obligations to the Ortigas grou!% or an( such ter$s to that effect. 6ence% such obligation established in the Enderta!ing is presumed only to be joint# rtigas, as the party alleging that the obligation is in fact solidary, bears the burden to overcome the presumption of % the Batangas egional 6os!ital @Batangas Pro'ect> and the Cora?on L. "ontelibano "e$orial egional 6os!ital in Bacolod Cit( @Bacolod Pro'ect>. &he Agree$ents% which contained almost identical language% re0uired the !re!aration b( !rivate res!ondents of the following docu$ents: detailed architectural and engineering design !lans3 technical s!ecifications and detailed esti$ates of cost of construction of the hos!ital% including the !re!aration of bid docu$ents and re0uire$ents3 and construction su!ervision until co$!letion of handGover and issuance of final certificate./= &he Agree$ents contained a co$$on !rovision stating that !rivate res!ondentsE consultancy or professional fees would be )#.' of the project fund allocation% bro4en down into detailed architectural and engineering services @ *'time construction su!ervision :&#.'< 5hile the Agree$ents were witnessed b( the res!ective chief accountants of the hos!itals and were dul( a!!roved b( the Secretar( of 6ealth% & the former did not issue corresponding certificates of availability of funds to cover the professional or consultancy fees# Petitioner% acting through its re!resentative Architect "a. ebecca ". Peafiel% b( se!arate letters &; to the res!ective chiefs of hos!itals% all dated October 1% 199% confirmed its acceptance of private respondents9 complete Contract or 5id Documents. FullGti$e construction su!ervision having been ecluded / fro$ !rivate res!ondentsE sco!e of wor4% their !rofessional fee was correspondingly reduced fro$ 8.I of the !ro'ect fund allocation to I of the project contract cost# +uring the construction of the !ro'ects% various deficiencies in the !erfor$ance of the agreed sco!e of !rivate res!ondentsE wor4 were allegedl( discovered &) which were not% however, communicated to private respondents. &1 +ue to such deficiencies% P678780N6% 87446"D !a($ent of the
34 To su**arie: it as divided into 2 #roects, na*e&y: Architectura& and ngineering and onstruction $!-+V%$%BE" 3 The #etitioners a*ended the 3 agree*ents instead of having fu&& $u#ervision, they indicated -+%BC% V%$%T$" Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests
&he for$alities e!ressl( re0uired b( the Auditing Code of the Phili!!ines and &he Ad$inistrative Code of 19 "anual directing that fees for architectural% engineering design% and si$ilar !rofessional services should be 0*=2 *4 54T"(> ( P3 "564T3 % instead of as percentage of the pro8ect cost . As the i$$ediatel(G0uoted !rovisions of law $andate% the issuance of a certification that funds are available is a legal dut( i$!osed on the chief accountant or the head of the accounting unit. And ascertain$ent that such certification eists !rior to entering into an( govern$ent contract or incurring an( obligation chargeable against !ublic funds is a res!onsibilit( which devolves on the officer concerned. /9 2n the case at bar then% the nullit( of the herein Agree$ents notwithstanding% the ends of substantial 'ustice and e0uit( will be better served if !a($ent to !rivate res!ondents for their consultanc( services is allowed on a &uantum meruit basis. &he $easure of recover( under the !rinci!le of &uantum meruit should relate to the reasonable value of the services !erfor$ed% *( ta4ing into account the standard of !ractice in the !rofession% the architectural and engineering s4ills of !rivate res!ondents% and their !rofessional e!ertise and standing. ) es!ecting !etitionerEs argu$ent that the State is i$$une fro$ suit% the sa$e deserves scant consideration. &o sustain the argu$ent would not onl( !er!etuate a grave in'ustice on !rivate res!ondents who performed their services in good faith and were given the run>around for over eight years% but would sanction as well un'ust enrich$ent on the !art of the State.
"enchave? v. &eves On Februar( , onl( $otive for such transfer was !recisel( one of !reserving the !ro!ert( within her bloodline and that so$eone ad$inister the !ro!ert(. &; &he CA also ruled that !etitioner alread( ac4nowledged the transfer of ownershi! and is dee$ed to have waived its right to !urchase the !ro!ert(. &+ &he CA even further went on to rule that even if the sale is annulled% !etitioner could not achieve an(thing because the !ro!ert( will be eventuall( transferred to Pacuna(en after FaustoEs death. 5hen a lease contract contains a right of first refusal% the lessor is under a legal dut( to the lessee not to sell to an(bod( at an( !rice until after he has $ade an offer to sell to the latter at a certain !rice and the lessee has failed to acce!t it. 7he lessee has a right that the lessor9s first offer shall be in his favor. &1 PetitionerEs right of first refusal is an integral and indivisible !art of the contract of lease and is inse!arable fro$ the whole contract. 7he consideration for the lease includes the consideration for the right of first refusal &( and is built into the reciprocal obligations of the parties# 2n this case% the wording of the sti!ulation giving !etitioner the right of first refusal is !lain and una$biguous% and leaves no roo$ for inter!retation. 2t si$!l( $eans that should Fausto decide to sell the leased !ro!ert( during the ter$ of the lease% such sale should first be offered to !etitioner. &he sti!ulation does not !rovide for the 0ualification that such right $a( be eercised onl( when the sale is $ade to strangers or !ersons other than FaustoEs 4in. &hus% under the ter$s of !etitionerEs right of first refusal% FE70 4 746 "6B" DE7? 70 P678780N6% N07 70 6"" 746 P%0P6%7? 70 N?50D?, 6@6N 46% %6"78@6, 7 N? P%8C6 EN78" F76% 46 4 $D6 N 0FF6% 70 6"" 70 P678780N6% 7 C6%78N P%8C6 ND 8D 0FF6% %626C76D 5? P678780N6% . Pursuant to their contract% it was essential that Fausto should have first offered the !ro!ert( to !etitioner before she sold it to res!ondent. 2t was onl( after !etitioner failed to eercise its right of first !riorit( could Fausto then lawfull( sell the !ro!ert( to res!ondent. &he rule is that a sale $ade in violation of a right of first refusal is @"8D. 6owever% it may be rescinded, or, as in this case, may be the subject of an action for specific performance# ?uzman, Bocaling @ Co. v. Bonnevie and 'uatorial (ealty 2evelopment, *nc. v. 5ayfair Theater, *nc.% held that in order to have full compliance with the contractual right granting petitioner the first option to purchase, the sale of the properties for the price for which they were finally sold to a third person should have likewise been first offered to the former. urther, there should be identity of terms and conditions to be offered to the buyer holding a right of first refusal if such right is not to be
Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests
0
rendered illusory . 7astly, the basis of the right of first refusal must be the current offer to sell of the seller or offer to purchase of any prospective buyer .
&he !revailing doctrine therefore% is that a right of first refusal $eans identit( of ter$s and conditions to be offered to the lessee and all other !ros!ective bu(ers and a contract of sale entered into in violation of a right of first refusal of another !erson% while valid% is rescissible. 2t was also incorrect for the CA to rule that it would be useless to annul the sale between Fausto and res!ondent because the !ro!ert( would still re$ain with res!ondent after the death of her $other b( virtue of succession% as in fact% Fausto died in "arch 199% and the !ro!ert( now belongs to res!ondent% being FaustoEs heir. ;. For one% Fausto was bound b( the ter$s and conditions of the lease contract. nder the right of first refusal clause% she was obligated to offer the !ro!ert( first to !etitioner before selling it to an(bod( else. 5hen she sold the !ro!ert( to res!ondent without offering it to !etitioner% the sale while valid is rescissible so that !etitioner $a( eercise its o!tion under the contract. 5ith the death of Fausto% whatever rights and obligations she had over the property, including her obligation under the lease contract, were transmitted to her heirs by way of succession % a $ode of ac0uiring the !ro!ert(% rights and obligation of the decedent to the etent of the value of the inheritance of the heirs. @Article 1/11 of the Civil Code> A lease contract is not essentiall( !ersonal in character. =, &hus% the rights and obligations therein are trans$issible to the heirs. s to 6stoppel
Petitioner cannot be faulted for $erel( see4ing a renewal of the lease contract because obviousl(% it was wor4ing on the assu$!tion that title to the !ro!ert( is still in FaustoEs na$e and the latter has the sole authorit( to decide on the fate of the !ro!ert(. 2nstead% it was res!ondent who re!lied% advising !etitioner to re$ove all the i$!rove$ents on the !ro!ert(% as the lease is to e!ire on the 1st of August 1991. es!ondent also infor$ed !etitioner that her $other has alread( sold the !ro!ert( to her. +. 8n order to resolve the matter% a $eeting was called a$ong !etitionerEs stoc4holders% including res!ondent% on #ul( ,8% 1991% where !etitioner% again% !ro!osed that the lease be renewed. es!ondent% however% declined. 5hile !etitioner $a( have sought the renewal of the lease% it cannot be construed as a relin0uish$ent of its right of first refusal. 670PP6" $E7 56 8N76N780N" ND EN6E8@0C"# Also% in the ecer!ts fro$ the $inutes of the s!ecial $eeting% it was further stated that the possibility of a sale was li!ewise considered . +) But res!ondent also refused to sell the land% while the i$!rove$ents% if for sale shall be sub'ect for a!!raisal. +1 After respondent refused to sell the land% it was then that !etitioner filed the co$!laint for annul$ent of sale% s!ecific !erfor$ance and da$ages. +( PetitionerEs acts of see4ing all !ossible avenues for the a$enable resolution of the conflict do not a$ount to an intentional and une0uivocal abandon$ent of its right of first refusal. &he circu$stances of this case% however% dictate the a!!lication of a different ruling. n offer of the property to petitioner under identical terms and conditions of the offer previously given to respondent Pacunayen would be ine-uitable. &he sub'ect !ro!ert( was sold in 199- to res!ondent
42 Eeither there as a sti#u&ation nor a #rovision of a &a #rovide otherise Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests Pacuna(en for a $easl( su$ of P1-%---.--. Obviousl(% the value 8 8N $"" $0EN7 56CE6 746 "6 56766N $0746% ND DEB476%# As ad$itted b( said res!ondent% the sale made in her favor by her mother was just a formality so that she may have the proper representation with 7%CDC in the absence of her parents. . . 3; Conse0uentl(% the offer to be $ade to !etitioner in this case should be under reasonable ter$s and conditions% ta4ing into account the fair $ar4et value of the !ro!ert( at the ti$e it was sold to res!ondent. :7o consider the hereditary rights of Pacunayen and to avoid unnecessary proceedings !er s0uare $eter. Since e(es was not a$enable to the said !rice and insisted on Five &housand Pesos @P%---.--> !er s0uare $eter% Angeles re0uested e(es to allow hi$ to consult the other $e$bers of the Board of +irectors of iviera. < Seven @8> $onths later% or so$eti$e in October 19 !er s0uare $eter but e(es did not accede to said !rice as it was still lower than his 0uoted !rice of Si &housand Pesos @P%---.--> !er s0uare $eter. 1, Angeles as4ed e(es to give hi$ until the end of )ove$ber 19 !er s0uare $eter. So$eti$e in Februar( 19.
43 ro* the initia& o>er of ,000"00 to 5/ 44 @e *et ith Traba&&o, #resident of y#ress" 4 @is ne#he ho tried to negotiate again ith #etitioner, as the &atter as rea&&y #ersistent in his )na& o>er of /" Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests &he trial court dis$issed the co$!laint of iviera as well as the counterclai$s and crossGclai$s of the other !arties. 6owever% the a!!ellate court% through its S!ecial Seventh +ivision% rendered a +ecision dated #une % 199= which affir$ed the decision of the trial court in its entiret(. uling of the Court &hus% the !revailing doctrine is that a right of first refusal $eans identit( of ter$s and conditions to be offered to the lessee and all other !ros!ective bu(ers and a contract of sale entered into in violation of a right of first refusal of another !erson% while valid% is rescissible. ather% laws are inter!reted in the contet of the !eculiar factual situation of each !roceeding. 7ach case has its own flesh and blood and cannot be ruled u!on on the basis of isolated clinical classroo$ !rinci!les. 3& Anal(sis and construction should not be li$ited to the words used in the contract% as the( $a( not accuratel( reflect the !artiesE true intent. 3; &he court $ust read a contract as the average !erson would read it and should not give it a strained or forced construction. 2n the case at bar% the Court finds relevant and significant the cardinal rule in the inter!retation of contracts that the intention of the !arties shall be accorded !ri$ordial consideration and in case of doubt% their conte$!oraneous and subse0uent acts shall be !rinci!all( considered. 33 5here the !arties to a contract have given it a !ractical construction b( their conduct as b( acts in !artial !erfor$ance% such construction $a( be considered b( the court in construing the contract% deter$ining its $eaning and ascertaining the $utual intention of the !arties at the ti$e for contracting. &he !artiesE !ractical construction of their contract has been characteri?ed as a clue or inde to% or as evidence of% their intention or $eaning and as an i$!ortant% significant% convincing% !ersuasive% or influential factor in deter$ining the !ro!er construction of the contract. As clearl( shown b( the records and transcri!ts of the case% the actions of the !arties to the contract of lease% e(es and iviera% sha!ed their understanding and inter!retation of the lease !rovision right of first refusal to $ean si$!l( that should the lessor e(es decide to sell the leased property during the term of the lease, such sale should first be offered to the lessee iviera. And that is what eactl( ensued between e(es and iviera% a series of negotiations on the !rice !er s0uare $eter of the sub'ect !ro!ert( with neither !art(% es!eciall( %iviera% unwilling to budge fro$ his offer% as evidenced b( the echange of letters between the two contenders. iviera was so intractable in its !osition and &OOJ OB;2OS A+;A)&A*7 OF &67 J)O5L7+*7 OF &67 &2"7 7L7"7)& 2) 2&S )7*O&2A&2O)S with e(es as the rede$!tion !eriod of the sub'ect foreclosed !ro!ert( drew near. iviera strongl( ehibited a ta4eGit or leaveGit attitude in its negotiations with e(es. 2t 0uoted its fied and final !rice as Five &housand Pesos @P%---.--> and not an( !eso $ore. 2t voiced out that it had other !ro!erties to consider so e(es should decide and $a4e 4nown its decision within fifteen da(s. iviera% in its letter dated Februar( =% 19 before Branch 1/ of the &C of "a4ati% on ,= #une 199/. &he case was doc4eted as Civil Case )o. 9/G,-9. es!ondentsGs!ouses *il and Fernandina *alang obtained a loan fro$ Fortune Savings T Loan Association for P18/% )o. &G. A +eed of Sale with Assu$!tion of "ortgage Obligation & dated ,- August 199- was $ade and entered into b( and between s!ouses Fernandina and *il *alang @vendors> and s!ouses Leticia and Feli!e Cannu @vendees> over the house and lot in 0uestion. +es!ite re0uests fro$ Adelina . &i$bang and Fernandina *alang to !a( the balance of P=%---.-in the alternative to vacate the !ro!ert( in 0uestion% !etitioners refused to do so.
=8
or
2n a letter &1 dated ,9 "arch 199/% !etitioner Leticia Cannu infor$ed "r. Fer$in &. Ar?aga% ;ice President% Fund "anage$ent *rou! of the )6"FC% that the ownershi! rights over the land covered b( &C& )o. &G be declared the owners of the !ro!ert( involved sub'ect to rei$burse$ents of the a$ount $ade b( res!ondentsGs!ouses @defendants therein> in !reter$inating the $ortgage loan with )6"FC. 2n their Answer% ;; res!ondentsGs!ouses alleged that because of !etitionersGs!ousesE failure to full( !a( the consideration and to u!date the $onthl( a$orti?ations with the )6"FC% the( !aid in full the eisting obligations with )6"FC as an initial ste! in the rescission and annul$ent of the +eed of Sale with Assu$!tion of "ortgage. 2n their counterclai$% &67D "A2)&A2) &6A& &67 AC&S OF P7&2&2O)7S 2) )O& FLLD CO"PLD2)* 52&6 &672 OBL2*A&2O)S *2;7 2S7 &O 7SC2SS2O) OF &67 +77+ OF SAL7 52&6 ASS"P&2O) OF "O&*A*7 52&6 &67 CO7SPO)+2)* +A"A*7S.=< uling of the Court 6owever% after going over the record of the case% $ore !articularl( the Answer of res!ondentsGs!ouses% the evidence shows the consideration therefore is P1,-%---.--% !lus the !a($ent of the outstanding loan $ortgage with )6"FC% and of the e0uit( or second $ortgage with C7F ealt( @+evelo!er of the !ro!ert(>. Settled is the rule that rescission or% $ore accuratel(% resolution% ++ of a !art( to an obligation under Article 1191 +3 is !redicated on a breach of faith b( the other !art( that violates the reci!rocit( between the$. escission will not be !er$itted for a slight or casual breach of the contract. escission $a( be had onl( for such breaches that are substantial and funda$ental as to defeat the ob'ect of the !arties in $a4ing the agree$ent. +* &he 0uestion of whether a breach of contract is substantial de!ends u!on the attending circu$stances +) and not $erel( on the !ercentage of the a$ount not !aid. 2n the case at bar% we find !etitionersE failure to !a( the re$aining balance of P=%---.-- to be substantial. 7ven assu$ing arguendo that onl( said a$ount was left out of the su!!osed consideration of P,-%---.--% or eighteen @1 !ercent thereof% this !ercentage is still substantial. &a4en together with the fact that the last !a($ent $ade was on ,< )ove$ber 1991% eighteen $onths before the res!ondent
4 Koth the +T and A decided in favor of res#ondents and ho&ding that the breach co**itted by the #etitioner in *a/ing on&y si8 '5( #ay*ents fro* 1990;1993 constitutes substantia& breach of contract ustifying the rescission granted" Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests
5
Fernandina *alang !aid the outstanding balance of the $ortgage loan with )6"FC% the intention of !etitioners to renege on their obligation is utterl( clear. &he fact that !etitioners tendered a "anagerEs Chec4 to res!ondentsGs!ouses *alang in the a$ount of P,8 or in the alternative to vacate the !ro!ert( in 0uestion% but still% !etitioners refused to fulfill their obligations under the +eed of Sale with Assu$!tion of "ortgage. So$eti$e in "arch 199/% due to the fact that full !a($ent has not been !aid and that the $onthl( a$orti?ations with the )6"FC have not been full( u!dated% she $ade her intentions clear with !etitioner Leticia Cannu that she will rescind or annul the +eed of Sale with Assu$!tion of "ortgage. 5e li4ewise rule that there was no waiver on the !art of !etitioners to de$and the rescission of the +eed of Sale with Assu$!tion of "ortgage. &he fact that res!ondentsGs!ouses acce!ted% through their attorne(G inGfact% !a($ents in install$ents +O7S )O& CO)S&2&&7 5A2;7 on their !art to eercise their right to rescind the +eed of Sale with Assu$!tion of "ortgage. Adelina &i$bang $erel( acce!ted the install$ent !a($ents as an acco$$odation to !etitioners since the( 4e!t on !ro$ising the( would !a(. 6owever% after the la!se of considerable ti$e @1< $onths fro$ last !a($ent> and the !urchase !rice was not (et full( !aid% res!ondentsGs!ouses eercised their right of rescission when the( !aid the outstanding balance of the $ortgage loan with )6"FC. 2t was onl( after !etitioners sto!!ed !a(ing that res!ondentsG s!ouses $oved to eercise their right of rescission.
Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests
<
Petitioners cite the case of !ngeles v. "alasanD 3* to su!!ort their clai$ that res!ondentsGs!ouses waived their right to rescind. 5e cannot a!!l( this case since it is not on all fours with the case before us. First% in !ngeles% the breach was onl( slight and casual which is not true in the case before us. Second% in !ngeles% the bu(er had alread( !aid $ore than the !rinci!al obligation% while in the instant case% the bu(ers @!etitioners> did not !a( P=%---.-- of the P1,-%---.-- the( were obligated to !a(. 2f one !art( has co$!lied or fulfilled his obligation% and the other has not% then the for$er can eercise his right to rescind. 2n this case% res!ondentsGs!ouses co$!lied with their obligation when the( gave the !ossession of the !ro!ert( in 0uestion to !etitioners. &hus% the( have the right to as4 for the rescission of the +eed of Sale with Assu$!tion of "ortgage. On the fourth assigned error% !etitioners% rel(ing on Article 1/ of res!ondents o$an% C6*CC2 and S2L6O7&&7% however% beca$e final and eecutor( for their failure to a!!eal therefro$. )onetheless% these res!ondents were able to thereafter file before the trial court another $otion to dis$iss grounded% again% on !rescri!tion which the trial court in an Order of October 199 granted. uling of the Court
49 2. as initia& #ay*ent u#on the sa&es a##rova& and the re*aining is to be #aid ithin 1 year" 0 Koth +T and A dis*issed the co*#&aint" Christian Arbiol 1A – San Beda College Alabang School of Law
Obligations and Contracts Case Notes/Digests Petitioner "5SS clai$s as erroneous both the lower courtsE unifor$ finding that the action has !rescribed% arguing that its co$!laint is one to declare the "5SSGS2L6O7&&7 sale% and all subse0uent conve(ances of the sub'ect !ro!ert(% void which is i$!rescri!tible. &he ver( allegations in !etitioner "5SSE co$!laint show that the sub'ect !ro!ert( was sold through contracts which% at $ost% can be considered onl( as voidable% and not void. 1 &he three ele$ents of a contract R consent% the ob'ect% and the cause of obligation & are all !resent. 2t cannot be otherwise argued that the contract had for its ob'ect the sale of the !ro!ert( and the cause or consideration thereof was the !rice to be !aid @on the !art of res!ondents C6*CC2KS2L6O7&&7> and the land to be sold @on the !art of !etitioner "5SS>. Li4ewise% !etitioner "5SSE consent to the "a( 11% 19
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