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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

174269 May 8, 2009

POLO S. PANTALEON, Petitioner, vs. AMERICAN EXPRESS INTERNATIONAL, INC., Respondent. DECISION TINGA, J.: he petitioner, la!"er Polo Pantaleon, his !ife #ulialinda, dau$hter %nna Re$ina and son %drian Roberto, &oined an escorted tour of 'estern Europe or$ani(ed b" rafal$ar ours of Europe, )td., in October of *++*. he tour $roup arrived in %,sterda, in the afternoon of -. October *++*, the second to the last da" of the tour. %s the $roup had arrived late in the cit", the" failed to en$a$e in an" si$ht/seein$. Instead, it !as a$reed upon that the" !ould start earl" the ne0t da" to see the entire cit" before endin$ the tour. he follo!in$ da", the last da" of the tour, the $roup arrived at the Coster Dia,ond 1ouse in %,sterda, around *2 ,inutes before +322 a.,. he $roup had a$reed that the visit to Coster should end b" +342 a.,. to allo! enou$h ti,e to ta5e in a $uided cit" tour of %,sterda,. he $roup !as ushered into Coster shortl" before +322 a.,., and listened to a lecture on the art of dia,ond polishin$ that lasted for around ten ,inutes.* %fter!ards, the $roup !as led to the store6s sho!roo, to allo! the, to select ite,s for purchase. Mrs. Pantaleon had alread" planned to purchase even before the tour be$an a -.. 5arat dia,ond brilliant cut, and she found a dia,ond close enou$h in appro0i,ation that she decided to bu".- Mrs. Pantaleon also selected for purchase a pendant and a chain, 4 all of !hich totaled 7.S. 8*4,9-:.22. o pa" for these purchases, Pantaleon presented his %,erican E0press credit card to$ether !ith his passport to the Coster sales cler5. his occurred at around +3*. a.,., or *. ,inutes before the tour $roup !as slated to depart fro, the store. he sales cler5 too5 the card6s i,print, and as5ed Pantaleon to si$n the char$e slip. he char$e purchase !as then referred electronicall" to respondent6s %,sterda, office at +3-2 a.,. en ,inutes later, the store cler5 infor,ed Pantaleon that his %,e0Card had not "et been approved. 1is son, !ho had alread" boarded the tour bus, soon returned to Coster and infor,ed the other ,e,bers of the Pantaleon fa,il" that the entire tour $roup !as !aitin$ for the,. %s it !as alread" +3;2 a.,., and he !as alread" !orried about further inconveniencin$ the tour $roup, Pantaleon as5ed the store cler5 to cancel the sale. he store ,ana$er thou$h as5ed plaintiff to !ait a fe! ,ore ,inutes. %fter *. ,inutes, the store ,ana$er infor,ed Pantaleon that respondent had de,anded ban5 references. Pantaleon supplied the na,es of his depositar" ban5s, then instructed his dau$hter to return to the bus and apolo$i(e to the tour $roup for the dela". %t around *2322 a.,, or around ;. ,inutes after Pantaleon had presented his %,e0Card, and 42 ,inutes after the tour $roup !as supposed to have left the store, Coster decided to release the ite,s even !ithout respondent6s approval of the purchase. he spouses Pantaleon returned to the bus. It is alle$ed that their offers of apolo$" !ere ,et b" their tour,ates !ith ston" silence.; he tour $roup6s visible irritation !as a$$ravated !hen the tour $uide announced that the cit" tour of %,sterda, !as to be canceled due to lac5 of re,ainin$ ti,e, as the" had to catch a 4322 p.,. ferr" at Calais, <el$iu, to )ondon.. Mrs. Pantaleon ended up !eepin$, !hile her husband had to ta5e a tran=uili(er to cal, his nerves. It later e,er$ed that Pantaleon6s purchase !as first trans,itted for approval to respondent6s %,sterda, office at +3-2 a.,., %,sterda, ti,e, then referred to respondent6s Manila office at +344 a.,, then finall" approved at *23*+ a.,., %,sterda, ti,e.: he %pproval Code !as trans,itted to respondent6s %,sterda, office at *2349 a.,., several ,inutes after petitioner had alread" left Coster, and >9 ,inutes fro, the ti,e the purchases !ere electronicall" trans,itted b" the &e!elr" store to respondent6s %,sterda, office. %fter the star/crossed tour had ended, the Pantaleon fa,il" proceeded to the 7nited States before returnin$ to Manila on *- Nove,ber *++-. 'hile in the 7nited States, Pantaleon continued to use his %,E0 card, several ti,es !ithout hassle or dela", but !ith t!o other incidents si,ilar to the %,sterda, brouhaha. On 42 October *++*, Pantaleon purchased $olf e=uip,ent a,ountin$ to 7S 8*,;>..22 usin$ his %,E0 card, but he cancelled his credit card purchase and borro!ed ,one" instead fro, a friend, after ,ore than 42 ,inutes had transpired !ithout the purchase havin$ been approved. On 4 Nove,ber *++*, Pantaleon used the card to purchase children6s shoes !orth 89>.22 at a store in <oston, and it too5 -2 ,inutes before this transaction !as approved b" respondent. On ; March *++-, after co,in$ bac5 to Manila, Pantaleon sent a letter> throu$h counsel to the respondent, de,andin$ an apolo$" for the ?inconvenience, hu,iliation and e,barrass,ent he and his fa,il" thereb" suffered? for respondent6s refusal to provide credit authori(ation for the afore,entioned purchases.9 In response, respondent sent a letter dated -; March *++-,+ statin$ a,on$ others that the dela" in authori(in$ the purchase fro, Coster !as attributable to the circu,stance that the char$ed purchase of 7S 8*4,9-:.22 ?!as out of the usual char$e purchase pattern established.?*2 Since respondent refused to accede to Pantaleon6s de,and for an apolo$", the a$$rieved cardholder instituted an action for

da,a$es !ith the Re$ional rial Court @R CA of Ma5ati Cit", <ranch *;..** Pantaleon pra"ed that he be a!arded P-,222,222.22, as ,oral da,a$esB P.22,222.22, as e0e,plar" da,a$esB P*22,222.22, as attorne"6s feesB and P.2,222.22 as liti$ation e0penses.*On . %u$ust *++:, the Ma5ati Cit" R C rendered a decision*4 in favor of Pantaleon, a!ardin$ hi, P.22,222.22 as ,oral da,a$es, P422,222.22 as e0e,plar" da,a$es, P*22,222.22 as attorne"6s fees, and P9.,-44.2* as e0penses of liti$ation. Respondent filed a Notice of %ppeal, !hile Pantaleon ,oved for partial reconsideration, pra"in$ that the trial court a!ard the increased a,ount of ,oral and e0e,plar" da,a$es he had pra"ed for.*; he R C denied Pantaleon6s ,otion for partial reconsideration, and thereafter $ave due course to respondent6s Notice of %ppeal. *. On *9 %u$ust -22:, the Court of %ppeals rendered a decision*: reversin$ the a!ard of da,a$es in favor of Pantaleon, holdin$ that respondent had not breached its obli$ations to petitioner. 1ence, this petition. he 5e" =uestion is !hether respondent, in connection !ith the afore,entioned transactions, had co,,itted a breach of its obli$ations to Pantaleon. In addition, Pantaleon sub,its that even assu,in$ that respondent had not been in breach of its obli$ations, it still re,ained liable for da,a$es under %rticle -* of the Civil Code. he R C had concluded, based on the testi,onial representations of Pantaleon and respondent6s credit authori(er, Ed$ardo #auri$ue, that the nor,al approval ti,e for purchases !as ?a ,atter of seconds.? <ased on that standard, respondent had been in clear dela" !ith respect to the three sub&ect transactions. %s it appears, the Court of %ppeals conceded that there had been dela" on the part of respondent in approvin$ the purchases. 1o!ever, it ,ade t!o critical conclusions in favor of respondent. Cirst, the appellate court ruled that the dela" !as not attended b" bad faith, ,alice, or $ross ne$li$ence. Second, it ruled that respondent ?had e0ercised dili$ent efforts to effect the approval? of the purchases, !hich !ere ?not in accordance !ith the char$e pattern? petitioner had established for hi,self, as e0e,plified b" the fact that at Coster, he !as ?,a5in$ his ver" first sin$le char$e purchase of 7S8*4,9-:,? and ?the record of DpetitionerE6s past spendin$ !ith DrespondentE at the ti,e does not favorabl" support his abilit" to pa" for such purchase.?*> On the pre,ise that there !as an obli$ation on the part of respondent ?to approve or disapprove !ith dispatch the char$e purchase,? petitioner ar$ues that the failure to ti,el" approve or disapprove the purchase constituted ,ora solvendi on the part of respondent in the perfor,ance of its obli$ation. Cor its part, respondent characteri(es the depiction b" petitioner of its obli$ation to hi, as ?to approve purchases instantaneousl" or in a ,atter of seconds.? Petitioner correctl" cites that under ,ora solvendi, the three re=uisites for a findin$ of default are that the obli$ation is de,andable and li=uidatedB the debtor dela"s perfor,anceB and the creditor &udiciall" or e0tra&udiciall" re=uires the debtor6s perfor,ance. *9 Petitioner asserts that the Court of %ppeals had !ron$l" applied the principle of ,ora accipiendi, !hich relates to dela" on the part of the obli$ee in acceptin$ the perfor,ance of the obli$ation b" the obli$or. he re=uisites of ,ora accipiendi are3 an offer of perfor,ance b" the debtor !ho has the re=uired capacit"B the offer ,ust be to co,pl" !ith the prestation as it should be perfor,edB and the creditor refuses the perfor,ance !ithout &ust cause.*+ he error of the appellate court, ar$ues petitioner, is in rel"in$ on the invocation b" respondent of ?&ust cause? for the dela", since !hile &ust cause is deter,inative of ,ora accipiendi, it is not so !ith the case of ,ora solvendi. 'e can see the possible source of confusion as to !hich t"pe of ,ora to appreciate. Fenerall", the relationship bet!een a credit card provider and its card holders is that of creditor/debtor,-2 !ith the card co,pan" as the creditor e0tendin$ loans and credit to the card holder, !ho as debtor is obli$ed to repa" the creditor. his relationship alread" ta5es e0ception to the $eneral rule that as bet!een a ban5 and its depositors, the ban5 is dee,ed as the debtor !hile the depositor is considered as the creditor.-* Petitioner is as5in$ us, not baselessl", to a$ain shift perspectives and a$ain see the credit card co,pan" as the debtorGobli$or, insofar as it has the obli$ation to the custo,er as creditorGobli$ee to act pro,ptl" on its purchases on credit. 7lti,atel", petitioner6s perspective appears ,ore sensible than if !e !ere to still re$ard respondent as the creditor in the conte0t of this cause of action. If there !as dela" on the part of respondent in its nor,al role as creditor to the cardholder, such dela" !ould not have been in the acceptance of the perfor,ance of the debtor6s obli$ation @i.e., the repa",ent of the debtA, but it !ould be dela" in the e0tension of the credit in the first place. Such dela" !ould not fall under ,ora accipiendi, !hich conte,plates that the obli$ation of the debtor, such as the actual purchases on credit, has alread" been constituted. 1erein, the establish,ent of the debt itself @purchases on credit of the &e!elr"A had not "et been perfected, as it re,ained pendin$ the approval or consent of the respondent credit card co,pan". Still, in order for us to appreciate that respondent !as in ,ora solvendi, !e !ill have to first reco$ni(e that there !as indeed an obli$ation on the part of respondent to act on petitioner6s purchases !ith ?ti,el" dispatch,? or for the purposes of this case, !ithin a period si$nificantl" less than the one hour it apparentl" too5 before the purchase at Coster !as finall" approved. he findin$s of the trial court, to our ,ind, a,pl" established that the tardiness on the part of respondent in actin$ on petitioner6s purchase at Coster did constitute culpable dela" on its part in co,pl"in$ !ith its obli$ation to act pro,ptl" on its custo,er6s purchase re=uest, !hether such action be favorable or unfavorable. 'e =uote the trial court, thus3 %s to the first issue, both parties have testified that nor,al approval ti,e for purchases !as a ,atter of seconds. Plaintiff testified that his personal e0perience !ith the use of the card !as that e0cept for the three char$e purchases sub&ect of this case, approvals of his char$e purchases !ere al!a"s obtained in a ,atter of seconds.

Defendant6s credit authori(er Ed$ardo #auri=ue li5e!ise testified3 H. I Jou also testified that on nor,al occasions, the nor,al approval ti,e for char$es !ould be 4 to ; secondsK %. I Jes, Ma6a,. <oth parties li5e!ise presented evidence that the processin$ and approval of plaintiff6s char$e purchase at the Coster Dia,ond 1ouse !as !a" be"ond the nor,al approval ti,e of a ?,atter of seconds?. Plaintiff testified that he presented his %,e0Card to the sales cler5 at Coster, at +3*. a.,. and b" the ti,e he had to leave the store at *232. a.,., no approval had "et been received. In fact, the Credit %uthori(ation S"ste, @C%SA record of defendant at Phoeni0 %,e0 sho!s that defendant6s %,sterda, office received the re=uest to approve plaintiff6s char$e purchase at +3-2 a.,., %,sterda, ti,e or 2*3-2, Phoeni0 ti,e, and that the defendant rela"ed its approval to Coster at *2349 a.,., %,sterda, ti,e, or -349, Phoeni0 ti,e, or a total ti,e lapse of one hour and D*9E ,inutes. %nd even then, the approval !as conditional as it directed in co,puterese DsicE ?Positive Identification of Card holder necessar" further char$es re=uire ban5 infor,ation due to hi$h e0posure. <" #ac5 Manila.? he dela" in the processin$ is apparent to be undue as sho!n fro, the frantic successive =ueries of %,e0co %,sterda, !hich reads3 ?7S8*4,9-:. Card,e,ber bu"in$ &e!els. ID seen. %dvise ho! lon$ !ill this ta5eK? he" !ere sent at 2*344, 2*34>, 2*3;2, 2*3;., 2*3.- and 2-329, all ti,es Phoeni0. Manila %,e0co could be una!are of the need for speed in resolvin$ the char$e purchase referred to it, "et it sat on its hand, unconcerned. 000 o repeat, the Credit %uthori(ation S"ste, @C%SA record on the %,sterda, transaction sho!s ho! %,e0co Netherlands vie!ed the dela" as unusuall" frustratin$. In se=uence e0pressed in Phoeni0 ti,e fro, 2*3-2 !hen the char$e purchased !as referred for authori(ation, defendants o!n record sho!s3 2*3-- I the authori(ation is referred to Manila %,e0co 2*34- I Netherlands $ives infor,ation that the identification of the card,e,ber has been presented and he is bu"in$ &e!elries !orth 7S 8*4,9-:. 2*344 I Netherlands as5s ?1o! lon$ !ill this ta5eK? 2-329 I Netherlands is still as5in$ ?1o! lon$ !ill this ta5eK? he Court is convinced that defendants dela" constituteDsE breach of its contractual obli$ation to act on his use of the card abroad ?!ith special handlin$.?-- @Citations o,ittedA 000 Not!ithstandin$ the popular notion that credit card purchases are approved ?!ithin seconds,? there reall" is no strict, le$all" deter,inative point of de,arcation on ho! lon$ ,ust it ta5e for a credit card co,pan" to approve or disapprove a custo,er6s purchase, ,uch less one specificall" contracted upon b" the parties. Jet this is one of those instances !hen ?"ou6d 5no! it !hen "ou6d see it,? and one hour appears to be an a!full" lon$, patentl" unreasonable len$th of ti,e to approve or disapprove a credit card purchase. It is lon$ enou$h ti,e for the custo,er to !al5 to a ban5 a 5ilo,eter a!a", !ithdra! ,one" over the counter, and return to the store. Notabl", petitioner fra,es the obli$ation of respondent as ?to approve or disapprove? the purchase ?in ti,el" dispatch,? and not ?to approve the purchase instantaneousl" or !ithin seconds.? Certainl", had respondent disapproved petitioner6s purchase ?!ithin seconds? or !ithin a ti,el" ,anner, this particular action !ould have never seen the li$ht of da". Petitioner and his fa,il" !ould have returned to the bus !ithout dela" I internall" hu,iliated perhaps over the re&ection of his card I "et spared the sha,e of bein$ held accountable b" ne!l"/,ade friends for ,a5in$ the, ,iss the chance to tour the cit" of %,sterda,. 'e do not !ish do dispute that respondent has the ri$ht, if not the obli$ation, to verif" !hether the credit it is e0tendin$ upon on a particular purchase !as indeed contracted b" the cardholder, and that the cardholder is !ithin his ,eans to ,a5e such transaction. he culpable failure of respondent herein is not the failure to ti,el" approve petitioner6s purchase, but the ,ore ele,ental failure to ti,el" act on the sa,e, !hether favorabl" or unfavorabl". Even assu,in$ that respondent6s credit authori(ers did not have sufficient basis on hand to ,a5e a &ud$,ent, !e see no reason !h" respondent could not have pro,ptl" infor,ed petitioner the reason for the dela", and dul" advised hi, that resolvin$ the sa,e could ta5e so,e ti,e. In that !a", petitioner !ould have had infor,ed basis on !hether or not to pursue the transaction at Coster, $iven the attendin$ circu,stances. Instead, petitioner !as left unco,fortabl" dan$lin$ in the chill" autu,n !inds in a forei$n land and soon forced to confront the !rath of forei$n fol5.

Moral da,a$es avail in cases of breach of contract !here the defendant acted fraudulentl" or in bad faith, and the court should find that under the circu,stances, such da,a$es are due. he findin$s of the trial court are a,ple in establishin$ the bad faith and un&ustified ne$lect of respondent, attributable in particular to the ?dill"/dall"in$? of respondent6s Manila credit authori(er, Ed$ardo #auri=ue. -4 'rote the trial court3 'hile it is true that the Card,e,bership %$ree,ent, !hich defendant prepared, is silent as to the a,ount of ti,e it should ta5e defendant to $rant authori(ation for a char$e purchase, defendant ac5no!led$ed that the nor,al ti,e for approval should onl" be three to four seconds. Speciall" so !ith cards used abroad !hich re=uires ?special handlin$?, ,eanin$ !ith priorit". Other!ise, the ob&ect of credit or char$e cards !ould be lostB it !ould be so inconvenient to use that bu"ers and consu,ers !ould be better off carr"in$ bundles of currenc" or traveller6s chec5s, !hich can be delivered and accepted =uic5l". Such ri$ht !as not accorded to plaintiff in the instances co,plained off for reasons 5no!n onl" to defendant at that ti,e. his, to the Court6s ,ind, a,ounts to a !anton and deliberate refusal to co,pl" !ith its contractual obli$ations, or at least abuse of its ri$hts, under the contract.-; 000 he dela" co,,itted b" defendant !as clearl" attended b" un&ustified ne$lect and bad faith, since it alle$es to have consu,ed ,ore than one hour to si,pl" $o over plaintiff6s past credit histor" !ith defendant, his pa",ent record and his credit and ban5 references, !hen all such data are alread" stored and readil" available fro, its co,puter. his Court also ta5es note of the fact that there is nothin$ in plaintiff6s billin$ histor" that !ould !arrant the i,prudent suspension of action b" defendant in processin$ the purchase. Defendant6s !itness #auri=ue ad,its3 H. I <ut did "ou discover that he did not have an" outstandin$ accountK %. I Nothin$ in arrears at that ti,e. H. I Jou !ere !ell a!are of this fact on this ver" dateK %. I Jes, sir. Mr. #auri=ue further testified that there !ere no ?delin=uencies? in plaintiff6s account.-. It should be e,phasi(ed that the reason !h" petitioner is entitled to da,a$es is not si,pl" because respondent incurred dela", but because the dela", for !hich culpabilit" lies under %rticle **>2, led to the particular in&uries under %rticle --*> of the Civil Code for !hich ,oral da,a$es are re,unerative.-: Moral da,a$es do not avail to soothe the plaints of the si,pl" i,patient, so this decision should not be cause for relief for those !ho ti,e the len$th of their credit card transactions !ith a stop!atch. he so,e!hat unusual attendin$ circu,stances to the purchase at Coster I that there !as a deadline for the co,pletion of that purchase b" petitioner before an" dela" !ould redound to the in&ur" of his several travelin$ co,panions I $ave rise to the ,oral shoc5, ,ental an$uish, serious an0iet", !ounded feelin$s and social hu,iliation sustained b" the petitioner, as concluded b" the R C.-> hose circu,stances are fairl" unusual, and should not $ive rise to a $eneral entitle,ent for da,a$es under a ,ore ,undane set of facts. 'e sustain the a,ount of ,oral da,a$es a!arded to petitioner b" the R C. here is no hard/and/fast rule in deter,inin$ !hat !ould be a fair and reasonable a,ount of ,oral da,a$es, since each case ,ust be $overned b" its o!n peculiar facts, ho!ever, it ,ust be co,,ensurate to the loss or in&ur" suffered.-9 Petitioner6s ori$inal pra"er for P.,222,222.22 for ,oral da,a$es is e0cessive under the circu,stances, and the a,ount a!arded b" the trial court of P.22,222.22 in ,oral da,a$es ,ore see,l".1avvphi1 )i5e!ise, !e dee, e0e,plar" da,a$es available under the circu,stances, and the a,ount of P422,222.22 appropriate. here is si,ilarl" no cause thou$h to disturb the deter,ined a!ard of P*22,222.22 as attorne"6s fees, and P9.,-44.2* as e0penses of liti$ation. '1ERECORE, the petition is FR%N ED. he assailed Decision of the Court of %ppeals is REVERSED and SE %SIDE. he Decision of the Re$ional rial Court of Ma5ati, <ranch *;. in Civil Case No. +-/*::. is hereb" REINS % ED. Costs a$ainst respondent. SO ORDERED. DANTE O. TINGA %ssociate #ustice Lp 'E CONC7R3 CONCHITA CARPIO MORALESM %ssociate #ustice %ctin$ Chairperson

PRES ITERO !. "ELASCO, !R. %ssociate #ustice

TERESITA LEONARDO DE CASTROMM %ssociate #ustice ARTURO D. RION %ssociate #ustice % ES % ION

I attest that the conclusions in the above Decision had been reached in consultation before the case !as assi$ned to the !riter of the opinion of the Court6s Division. CONCHITA CARPIO MORALES %ssociate #ustice %ctin$ Chairperson, Second Division CER ICIC% ION

Pursuant to Section *4, %rticle VIII of the Constitution, and the Division %ctin$ Chairperson6s %ttestation, it is hereb" certified that the conclusions in the above Decision had been reached in consultation before the case !as assi$ned to the !riter of the opinion of the Court6s Division. RE#NATO S. PUNO Chief #ustice

$oo%&o%'(
M

%ctin$ Chairperson.

MM

Per Special Order No. :*+, #ustice eresita #. )eonardo/De Castro is hereb" desi$nated as additional ,e,ber of the Second Division in lieu of #ustice )eonardo %. Huisu,bin$, !ho is on official leave
*

Id. at >;>. Id. at >;9/>;+. Id. at >.2. Id. at -2. Id. at -2/-*. Id. at -*/--B citin$ defendant6s E0hibit ?+/F,? ?+/1? and ?+/I.? Id. at 442/44*. Id. at 44*. Id. at 44-/444. Id. at 44-. Doc5eted as Civil Case No. +-/*::.. Id. at 44./4;2. Id. at 44+.

>

*2

**

*-

*4

Penned b" #ud$e Crancisco Donato VillanuevaB id. at +-/**2. Id. at 4;9/4.*. Id. at 4:2/4:-. Decision penned b" Court of %ppeals %ssociate #ustice E.#. %suncion, , concurred b" %ssociate #ustices #. Mendo(a and %. a"a$. Rollo, p. 92. See, e.g., Sele$na Mana$e,ent v. 7CP<, F.R. No. *:.::-, 4 Ma" -22:. %. olentino, IV Civil Code of the Philippines @*++* ed.A, at *29.

*;

*.

*:

*>

*9

*+

-2

See, e.g., Pacific <an5in$ Corp. v. I%C, F.R. No. >-->., *4 Nove,ber *++*, -24 SCR% ;+:B Molino v. Securit" Diners International Corp., F.R. No. *4:>92, *: %u$ust -22*, 4.9 SCR% 4:4.
-*

See, e.g., Citiban5, N.%. v. Caba,on$an, F.R. No. *;:+*9, - Ma" -22:, ;99 SCR% .*>. Rollo, pp. +>/++. Id. at *2*. Id. at *2./*2:. Id. at *2;.

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-4

-;

-.

-:

?Moral da,a$es include ph"sical sufferin$, ,ental an$uish, fri$ht, serious an0iet", bes,irched reputation, !ounded feelin$s, ,oral shoc5s, social hu,iliation, and si,ilar in&ur". hou$h incapable of pecuniar" co,putation, ,oral da,a$es ,a" be recovered if the" are the pro0i,ate result of the defendantNs !ron$ful act or o,ission.?
->

See rollo, p. *2>. Mercur" Dru$ v. <a5in$, F.R. No. *.:24>, Ma" -., -22>, .-4 SCR% *9;, *+*. Republic of the Philippines SUPREME COURT Manila

-9

G.R. No. 181206

O)%o*'+ 9, 2009

MEGA,ORLD GLO US ASIA, INC., Petitioner, vs. MILA S. TANSECO, Respondent. DECISION CARPIO MORALES, J.: On #ul" >, *++., petitioner Me$a!orld Flobus %sia, Inc. @Me$a!orldA and respondent Mila S. anseco @ ansecoA entered into a Contract to <u" and Sell* a --; s=uare/,eter @,ore or lessA condo,iniu, unit at a pre/sellin$ pro&ect, ? he Salcedo Par5,? located alon$ Senator Fil Pu"at %venue, Ma5ati Cit". he purchase price !as P*:,92-,24>.4-, to be paid as follo!s3 @*A 42O less the reservation fee of P*22,222, orP;,+;2,:**.*+, b" postdated chec5 pa"able on #ul" *;, *++.B @-A P+,-;*,*-2..2 throu$h 42 e=ual ,onthl" install,ents of P429,24>.4. fro, %u$ust *;, *++. to #anuar" *;, *++9B and @4A the balance of P-,.-2,42..:4 onOctober 4*, *++9, the stipulated deliver" date of the unitB provided that if the construction is co,pleted earlier, anseco !ould pa" the balance !ithin seven da"s fro, receipt of a notice of turnover.

Section ; of the Contract to <u" and Sell provided for the construction schedule as follo!s3 ;. CONSTRUCTION SCHEDULE - he construction of the Pro&ect and the unitGs herein purchased shall be co,pleted and delivered not later than October 4*, *++9 !ith additional $race period of si0 @:A ,onths !ithin !hich to co,plete the Pro&ect and the unitGs, barrin$ dela"s due to fire, earth=ua5es, the ele,ents, acts of Fod, !ar, civil disturbances, stri5es or other labor disturbances, $overn,ent and econo,ic controls ,a5in$ it, a,on$ others, i,possible or difficult to obtain the necessar" ,aterials, acts of third person, or an" other cause or conditions be"ond the control of the SE))ER. In this event, the co,pletion and deliver" of the unit are dee,ed e0tended accordin$l" !ithout liabilit" on the part of the SE))ER. he fore$oin$ not!ithstandin$, the SE))ER reserves the ri$ht to !ithdra! fro, this transaction and refund to the <7JER !ithout interest the a,ounts received fro, hi, under this contract if for an" reason not attributable to SE))ER, such as but not li,ited to fire, stor,s, floods, earth=ua5es, rebellion, insurrection, !ars, coup de etat, civil disturbances or for other reasons be"ond its control, the Pro&ect ,a" not be co,pleted or it can onl" be co,pleted at a financial loss to the SE))ER. In an" event, all construction on or of the Pro&ect shall re,ain the propert" of the SE))ER. @7nderscorin$ suppliedA anseco paid all install,ents due up to #anuar", *++9, leavin$ unpaid the balance of P-,.-2,42..:4 pendin$ deliver" of the unit.- Me$a!orld, ho!ever, failed to deliver the unit !ithin the stipulated period on October 4*, *++9 or %pril 42, *+++, the last da" of the si0/,onth $race period. % fe! da"s sh" of three "ears later, Me$a!orld, b" notice dated %pril -4, -22- @notice of turnoverA, infor,ed anseco that the unit !as read" for inspection preparator" to deliver".4 anseco replied throu$h counsel, b" letter of Ma" :, -22-, that in vie! of Me$a!orld6s failure to deliver the unit on ti,e, she !as de,andin$ the return ofP*;,-9*,>4*.>2 representin$ the total install,ent pa",ent she had ,ade, !ith interest at *-O per annu, fro, %pril 42, *+++, the e0piration of the si0/,onth $race period. anseco pointed out that none of the e0cepted causes of dela" e0isted. ; 1er de,and havin$ been unheeded, anseco filed on #une ., -22- !ith the 1ousin$ and )and 7se Re$ulator" <oard6s @1)7R<A E0panded National Capital Re$ion Cield Office a co,plaint a$ainst Me$a!orld for rescission of contract, refund of pa",ent, and da,a$es. . In its %ns!er, Me$a!orld attributed the dela" to the *++> %sian financial crisis !hich !as be"ond its controlB and ar$ued that default had not set in, anseco not havin$ ,ade an" &udicial or e0tra&udicial de,and for deliver" before receipt of the notice of turnover. : <" Decision of Ma" -9, -224,> the 1)7R< %rbiter dis,issed anseco6s co,plaint for lac5 of cause of action, findin$ that Me$a!orld had effected deliver" b" the notice of turnover before anseco ,ade a de,and. anseco !as thereupon ordered to pa" Me$a!orld the balance of the purchase price, plus P-.,222 as ,oral da,a$es,P-.,222 as e0e,plar" da,a$es, and P-.,222 as attorne"6s fees. On appeal b" anseco, the 1)7R< <oard of Co,,issioners, b" Decision of Nove,ber -9, -224,9 sustained the 1)7R< %rbiter6s Decision on the $round of laches for failure to de,and rescission !hen the ri$ht thereto accrued. It deleted the a!ard of da,a$es, ho!ever. anseco6s Motion for Reconsideration havin$ been denied,+ she appealed to the Office of the President !hich dis,issed the appeal b" Decision of %pril -9, -22:*2 for failure to sho! that the findin$s of the 1)7R< !ere tainted !ith $rave abuse of discretion. 1er Motion for Reconsideration havin$ been denied b" Resolution dated %u$ust 42, -22:,** anseco filed a Petition for Revie! under Rule ;4 !ith the Court of %ppeals.*<" Decision of Septe,ber -9, -22>,*4 the appellate court $ranted anseco6s petition, disposin$ thus3 ,HERE$ORE, pre,ises considered, petition is hereb" GRANTED and the assailed Ma" -9, -224 decision of the 1)7R< Cield Office, the Nove,ber -9, -224 decision of the 1)7R< <oard of Co,,issioners in 1)7R< Case No. REM/%/242>**/2*:-, the %pril -9, -22: Decision and %u$ust 42, -22: Resolution of the Office of the President in O.P. Case No. 2./I/4*9, are hereb" RE"ERSED and SET ASIDE and a ne! one entered3 @*A RESCINDING, as pra"ed for b" %NSECO, the a$$rieved part", the contract to bu" and sellB @-A DIRECTING MEF%'OR)D TO PA# %NSECO the a,ount she had paid totalin$ P*;,-9*,>4*.>2 !ith !elve @*-OA Percent interest per annu, fro, October 4*, *++9B @4A ORDERING MEF%'OR)D TO PA# %NSECO P-22,222.22 b" !a" of e0e,plar" da,a$esB @;A ORDERING MEF%'OR)D TO PA# %NSECO P-22,222.22 as attorne"6s feesB and @.A ORDERINGMEF%'OR)D TO PA# %NSECO the cost of suit. @E,phasis in the ori$inalB underscorin$ suppliedA he appellate court held that under %rticle **:+ of the Civil Code, no &udicial or e0tra&udicial de,and is needed to put the obli$or in default if the contract, as in the herein parties6 contract, states the date !hen the obli$ation should be perfor,edB that ti,e !as of the essence because anseco relied on Me$a!orld6s pro,ise of ti,el" deliver" !hen she a$reed to part !ith her ,one"B that the dela" should be rec5oned fro, October 4*, *++9, there bein$ no force ,a&eure to !arrant the application of the %pril 42, *+++ alternative dateB and that specific perfor,ance could not be ordered in lieu of rescission as the ri$ht to choose the re,ed" belon$s to the a$$rieved part". he appellate court a!arded anseco e0e,plar" da,a$es on a findin$ of bad faith on the part of Me$a!orld in forcin$ her to accept its lon$/ dela"ed deliver"B and attorne"6s fees, she havin$ been co,pelled to sue to protect her ri$hts. Its Motion for Reconsideration havin$ been denied b" Resolution of #anuar" 9, -229,*; Me$a!orld filed the present Petition for Revie! on Certiorari, echoin$ its position before the 1)7R<, addin$ that anseco had not sho!n an" basis for the a!ard of da,a$es and attorne"6s fees. *. anseco, on the other hand, ,aintained her position too, and citin$ Me$a!orld6s bad faith !hich beca,e evident !hen it insisted on ,a5in$ the deliver" despite the lon$ dela",*: insisted that she deserved the a!ard of da,a$es and attorne"6s fees.

%rticle **:+ of the Civil Code provides3 %rt. **:+. hose obli$ed to deliver or to do so,ethin$ incur in dela" fro, the ti,e the obli$ee &udiciall" or e0tra&udiciall" de,ands fro, the, the fulfill,ent of their obli$ation. 1o!ever, the de,and b" the creditor shall not be necessar" in order that dela" ,a" e0ist3 @*A 'hen the obli$ation or the la! e0pressl" so declaresB or @-A 'hen fro, the nature and the circu,stances of the obli$ation it appears that the desi$nation of the ti,e !hen the thin$ is to be delivered or the service is to be rendered !as a controllin$ ,otive for the establish,ent of the contractB or @4A 'hen de,and !ould be useless, as !hen the obli$or has rendered it be"ond his po!er to perfor,. In reciprocal obli$ations, neither part" incurs in dela" if the other does not co,pl" or is not read" to co,pl" in a proper ,anner !ith !hat is incu,bent upon hi,. Cro, the ,o,ent one of the parties fulfills his obli$ation, dela" b" the other be$ins. @7nderscorin$ suppliedA he Contract to <u" and Sell of the parties contains reciprocal obli$ations, i.e., to co,plete and deliver the condo,iniu, unit on October 4*, *++9 or si0 ,onths thereafter on the part of Me$a!orld, and to pa" the balance of the purchase price at or about the ti,e of deliver" on the part of anseco. Co,pliance b" Me$a!orld !ith its obli$ation is deter,inative of co,pliance b" anseco !ith her obli$ation to pa" the balance of the purchase price. Me$a!orld havin$ failed to co,pl" !ith its obli$ation under the contract, it is liable therefor. *> hat Me$a!orld6s sendin$ of a notice of turnover preceded anseco6s de,and for refund does not abate her cause. Cor de,and !ould have been useless, Me$a!orld ad,ittedl" havin$ failed in its obli$ation to deliver the unit on the a$reed date. %rticle **>; of the Civil Code provides3 %rt. **>;. E0cept in cases e0pressl" specified b" the la!, or !hen it is other!ise declared b" stipulation, or !hen the nature of the obli$ation re=uires the assu,ption of ris5, no person shall be responsible for those events !hich could not be foreseen, or !hich, thou$h foreseen, !ere inevitable.*9 he Court cannot $enerali(e the *++> %sian financial crisis to be unforeseeable and be"ond the control of a business corporation. % real estate enterprise en$a$ed in the pre/sellin$ of condo,iniu, units is concededl" a ,aster in pro&ections on co,,odities and currenc" ,ove,ents, as !ell as business ris5s. he fluctuatin$ ,ove,ent of the Philippine peso in the forei$n e0chan$e ,ar5et is an ever"da" occurrence, hence, not an instance of caso fortuito.*+ Me$a!orld6s e0cuse for its dela" does not thus lie. %s for Me$a!orld6s ar$u,ent that anseco6s clai, is considered barred b" laches on account of her belated de,and, it does not lie too. )aches is a creation of e=uit" and its application is controlled b" e=uitable considerations. -2 It bears notin$ that anseco reli$iousl" paid all the install,ents due up to #anuar", *++9, !hereas Me$a!orld rene$ed on its obli$ation to deliver !ithin the stipulated period. % circu,spect !ei$hin$ of e=uitable considerations thus tilts the scale of &ustice in favor of anseco. Pursuant to Section -4 of Presidential Decree No. +.>-* !hich reads3 Sec. -4. Non/Corfeiture of Pa",ents. / No install,ent pa",ent ,ade b" a bu"er in a subdivision or condo,iniu, pro&ect for the lot or unit he contracted to bu" shall be forfeited in favor of the o!ner or developer !hen the bu"er, after due notice to the o!ner or developer, desists fro, further pa",ent due to the failure of the o!ner or developer to develop the subdivision or condo,iniu, pro&ect accordin$ to the approved plans and !ithin the ti,e li,it for co,pl"in$ !ith the sa,e. Such bu"er ,a", at his option, be rei,bursed the total a,ount paid includin$a,orti(ation interests but e0cludin$ delin=uenc" interests, !ith interest thereon at the le$al rate. @E,phasis and underscorin$ suppliedA, anseco is, as thus pra"ed for, entitled to be rei,bursed the total a,ount she paid Me$a!orld. 'hile the appellate court correctl" a!arded P*;,-9*,>4*.>2 then, the interest rate should, ho!ever, be :O per annu, accruin$ fro, the date of de,and on Ma" :, -22-, and then *-O per annu, fro, the ti,e this &ud$,ent beco,es final and e0ecutor", confor,abl" !ith Eastern Shippin$ )ines, Inc. v. Court of %ppeals.-he a!ard of P-22,222 attorne"6s fees and of costs of suit is in order too, the parties havin$ stipulated in the Contract to <u" and Sell that these shall be borne b" the losin$ part" in a suit based thereon,-4 not to ,ention that anseco !as co,pelled to retain the services of counsel to protect her interest. %nd so is the a!ard of e0e,plar" da,a$es. 'ith pre/sellin$ ventures ,ushroo,in$ in the ,etropolis, there is an increasin$ need to correct the insidious practice of real estate co,panies of profferin$ all sorts of e,pt" pro,ises to entice innocent bu"ers and ensure the profitabilit" of their pro&ects.

he Court finds the appellate court6s a!ard of P-22,222 as e0e,plar" da,a$es e0cessive, ho!ever. E0e,plar" da,a$es are i,posed not to enrich one part" or i,poverish another but to serve as a deterrent a$ainst or as a ne$ative incentive to curb sociall" deleterious actions. -; he Court finds that P*22,222 is reasonable in this case. Cinall", since %rticle **+*-. of the Civil Code does not appl" to a contract to bu" and sell, the suspensive condition of full pa",ent of the purchase price not havin$ occurred to tri$$er the obli$ation to conve" title,cancellation, not rescission, of the contract is thus the correct re,ed" in the pre,ises.-: '1ERECORE, the challen$ed Decision of the Court of %ppeals is, in li$ht of the fore$oin$, %CCIRMED !ith MODICIC% ION. %s ,odified, the dispositive portion of the Decision reads3 he #ul" >, *++. Contract to <u" and Sell bet!een the parties is cancelled. Petitioner, Me$a!orld Flobus %sia, Inc., is directed to pa" respondent, Mila S. anseco, the a,ount of P*;,-9*,>4*.>2, to bear :O interest per annu, startin$ Ma" :, -22- and *-O interest per annu, fro, the ti,e the &ud$,ent beco,es final and e0ecutor"B and to pa" P-22,222 attorne"6s fees, P*22,222 e0e,plar" da,a$es, and costs of suit. Costs a$ainst petitioner. SO ORDERED. CONCHITA CARPIO MORALESMM %ssociate #ustice 'E CONC7R3

RENATO C. CORONAM %ssociate #ustice ARTURO D. RION %ssociate #ustice

ANTONIO EDUARDO . NACHURAMMM %ssociate #ustice RO ERTO A. A AD %ssociate #ustice

ES

ION

I attest that the conclusions in the above Decision had been reached in consultation before the case !as assi$ned to the !riter of the opinion of the Court6s Division. CONCHITA CARPIO MORALES %ssociate #ustice %ctin$ Chairperson CER ICIC% ION

Pursuant to Section *4, %rticle VIII of the Constitution, and the Division Chairperson6s %ttestation, I certif" that the conclusions in the above decision had been reached in consultation before the case !as assi$ned to the !riter of the opinion of the Court6s Division. ANTONIO T. CARPIO %ctin$ Chief #ustice

$oo%&o%'(
M

%dditional ,e,ber per Special Order No. >*9 dated October -, -22+. Desi$nated %ctin$ Chairperson per Special Order No. :+2 dated Septe,ber ;, -22+.

MM

MMM

%dditional ,e,ber per Special Order No. >42 dated October ., -22+.

1)7R< records, pp. *:;/*:+. Id. at *;9/*:4. Id. at --. Id. at *;:/*;>. Id. at *4/*+. Id. at -;/4*. Id. at *4:/*4+. Id. at -;>/-.2. Id. at 42;/42.. Rollo, pp. -:2/-:4. Id. at -:;. C% rollo, pp. 9/...

>

*2

**

*-

*4

Penned b" %ssociate #ustice Vicente H. Ro0as, !ith the concurrence of %ssociate #ustices #osefina Fuevara/Salon$a and Ra,on R. FarciaB C% rollo, pp. :+-/>*;.
*;

Id. at 9*:. Vide Petition, rollo, pp. -+/>;. Vide Co,,ent, id. at ;4-/;:.. Vide )eaPo v. Court of %ppeals, ;-2 Phil. 94:, 9;9 @-22*A. %rticle **>2 of the Civil Code provides3 %rt. **>2. hose !ho in the perfor,ance of their obli$ations are $uilt" of fraud, ne$li$ence, or dela", and those !ho in an" ,anner contravene the tenor thereof, are liable for da,a$es.

*.

*:

*>

*9

Mondra$on )eisure and Resorts Corporation v. Court of %ppeals, ;++ Phil. -:9, ->+ @-22.A. Cil/Estate Properties, Inc., v. Fo, F.R. No. *:.*:;, %u$ust *>, -22>, .42 SCR% :-*, :-9. 1eirs of ran=uilino )abiste v. 1eirs of #ose )abiste, F.R. No. *:-244, Ma" 9, -22+. REF7)% INF 1E S%)E OC S7<DIVISION )O S %ND CONDOMINI7MS, PROVIDINF PEN%) IES COR VIO)% IONS 1EREOC. F.R. No. +>;*-, #ul" *-, *++;, -4; SCR% >9, +:/+>. he Court, in this case, su$$ested rules on the a!ard of interest, vi(3 0000 -. 'hen an obli$ation, not constitutin$ a loan or forbearance of ,one", is breached, an interest on the a,ount of da,a$es a!arded ,a" be i,posed at the discretion of the court at the rate of :O per annu,. No interest, ho!ever, shall be ad&ud$ed on unli=uidated clai,s or da,a$es e0cept !hen or until the de,and can be established !ith reasonable certaint". %ccordin$l", !here the de,and is established !ith reasonable certaint", the interest shall be$in to run fro, the ti,e the

*+

-2

-*

--

clai, is ,ade &udiciall" or e0tra&udiciall" @%rt. **:+, Civil CodeA but !hen such certaint" cannot be so reasonabl" established at the ti,e the de,and is ,ade, the interest shall be$in to run onl" fro, the date the &ud$,ent of the court is ,ade @at !hich ti,e the =uantification of da,a$es ,a" be dee,ed to have been reasonabl" ascertainedA. he actual base for the co,putation of le$al interest shall, in an" case, be on the a,ount finall" ad&ud$ed. 4. 'hen the &ud$,ent of the court a!ardin$ a su, of ,one" beco,es final and e0ecutor", the rate of le$al interest . . . shall be *-O per annu, fro, such finalit" until its satisfaction, this interi, period bein$ dee,ed to be b" then an e=uivalent to a forbearance of credit. 0000
-4

1)7R< records, p. *::. <ataan Seedlin$ %ssociation, Inc. v. Republic of the Philippines, F.R. No. *;*22+, #ul" -, -22-, 494 SCR% .+2, :22/:2*.

-;

-.

%rticle **+*. he po!er to rescind obli$ations is i,plied in reciprocal ones in case one of the obli$ors should not co,pl" !ith !hat is incu,bent upon hi,. he in&ured part" ,a" choose bet!een the fulfill,ent and the rescission of the obli$ation, !ith the pa",ent of da,a$es in either case. 1e ,a" also see5 rescission, even after he has chosen fulfill,ent, if the latter should beco,e possible. he court shall decree the rescission clai,ed, unless there be &ust cause authori(in$ the fi0in$ of a period. his is understood to be !ithout pre&udice to the ri$hts of third persons !ho have ac=uired the thin$, in accordance !ith %rticles *49. and *499 and the Mort$a$e )a!.
-:

Vide Sta. )ucia Realt" v. Ro,eo 7"ecio, F.R. No. *>:-*>, %u$ust *4, -229, .:- SCR% --:, -4;/-4.. Republic of the Philippines SUPREME COURT Manila THIRD DI"ISION

G.R. No. 170479

$'*+.a+y 18, 2008

ANDRE T. ALMOCERA, petitioner, vs. !OHNN# ONG, respondent. DECISION CHICO/NA0ARIO, J.1 <efore 7s is a Petition for Revie! on Certiorari under Rule ;. of the *++> Rules of Civil Procedure !hich see5s to set aside the Decision * of the Court of %ppeals dated *9 #ul" -22. in C%/F.R. CV No. >.:*2 affir,in$ in toto the Decision- of <ranch ** of the Re$ional rial Court @R CA of Cebu Cit" in Civil Case No. CE</-4:9> and its Resolution4 dated *: Nove,ber -22. den"in$ petitioner6s ,otion for reconsideration. he R C decision found petitioner %ndre . %l,ocera, Chair,an and Chief E0ecutive Officer of Cirst <uilder Multi/Purpose Cooperative @C<MCA, solidaril" liable !ith CM<C for da,a$es. Stripped of non/essentials, the respective versions of the parties have been su,,ari(ed b" the Court of %ppeals as follo!s3 Plaintiff #ohnn" On$ tried to ac=uire fro, the defendants a ?to!nho,e? described as 7nit No. ; of %triu, o!nho,es in Cebu Cit". %s reflected in a Contract to Sell, the sellin$ price of the unit !as P4,;22,222.22 pesos, for a lot area of ei$ht"/ei$ht @99A s=uare ,eters !ith a three/store" buildin$. Out of the purchase price, plaintiff !as able to pa" the a,ount of P*,2:2,222.22. Prior to the full pa",ent of this a,ount, plaintiff clai,s that defendants %ndre %l,ocera and Cirst <uilders fraudulentl" concealed the fact that before and at the ti,e of the perfection of the aforesaid contract to sell, the propert" !as alread" ,ort$a$ed to and encu,bered !ith the )and <an5 of the Philippines @)<PA. In addition, the construction of the house has lon$ been dela"ed and re,ains unfinished. On March *4, *+++, )ot ;/a covered b" C No. *;99*9, coverin$ the unit !as advertised in a local tabloid for public auction for foreclosure of ,ort$a$e. It is the assertion of the plaintiff that had it not for the fraudulent conceal,ent of the ,ort$a$e and encu,brance b" defendants, he !ould have not entered into the contract to sell.

On the other hand, defendants assert that on March -2, *++., Cirst <uilders Multi/purpose Coop. Inc., borro!ed ,one" in the a,ount of P.22,222.22 fro, o,," On$, plaintiff6s brother. his a,ount !as used to finance the docu,entation re=uire,ents of the )<P for the fundin$ of the %triu, o!n 1o,es. his loan !ill be applied in pa",ent of one @*A to!n house unit !hich o,," On$ ,a" eventuall" purchase fro, the pro&ect. 'hen the pro&ect !as under !a", o,," On$ !anted to bu" another to!nhouse for his brother, #ohnn" On$, plaintiff herein, !hich then, the a,ount of P*.2,222.22 !as $iven as additional partial pa",ent. 1o!ever, the particular unit !as not "et identified. It !as onl" on #anuar" *2, *++> that o,," On$ identified 7nit No. ; plaintiff6s chosen unit and a$ain tendered P4.2,222.22 as his third partial pa",ent. 'hen the contract to sell for 7nit ; !as bein$ drafted, o,," On$ re=uested that another contract to sell coverin$ 7nit . be ,ade so as to $ive #ohnn" On$ another option to choose !hichever unit he ,i$ht decide to have. 'hen the construction !as alread" in full blast, defendants !ere infor,ed b" o,," On$ that their final choice !as 7nit .. It !as onl" upon 5no!in$ that the defendants !ill be sellin$ 7nit ; to so,e other persons for P;,illion that plaintiff chan$ed his choice fro, 7nit . to 7nit ;.; In tr"in$ to recover the a,ount he paid as do!n pa",ent for the to!nhouse unit, respondent #ohnn" On$ filed a co,plaint for Da,a$es before the R C of Cebu Cit", doc5eted as Civil Case No. CE</-4:9>, a$ainst defendants %ndre . %l,ocera and C<MC alle$in$ that defendants !ere $uilt" of fraudulent conceal,ent and breach of contract !hen the" sold to hi, a to!nhouse unit !ithout divul$in$ that the sa,e, at the ti,e of the perfection of their contract, !as alread" ,ort$a$ed !ith the )and <an5 of the Philippines @)<PA, !ith the latter causin$ the foreclosure of the ,ort$a$e and the eventual sale of the to!nhouse unit to a third person. In their %ns!er, defendants denied liabilit" clai,in$ that the foreclosure of the ,ort$a$e on the to!nhouse unit !as caused b" the failure of co,plainant #ohnn" On$ to pa" the balance of the price of said to!nhouse unit. %fter the pre/trial conference !as ter,inated, trial on the ,erits ensued. Respondent and his brother, ho,as J. On$, too5 the !itness stand. Cor defendants, petitioner testified. In a Decision dated -2 Ma" -22-, the R C disposed of the case in this ,anner3 '1ERECORE, in vie! of all the fore$oin$ pre,ises, &ud$,ent is hereb" rendered in this case in favor of the plaintiff and a$ainst the defendants3 @aA Orderin$ the defendants to solidaril" pa" to the plaintiff the su, of P*,2:2,222.22, to$ether !ith a le$al interest thereon at :O per annu, fro, %pril -*, *+++ until its full pa",ent before finalit" of the &ud$,ent. hereafter, if the a,ount ad&ud$ed re,ains unpaid, the interest rate shall be *-O per annu, co,puted fro, the ti,e !hen the &ud$,ent beco,es final and e0ecutor" until full" satisfiedB @bA Orderin$ the defendants to solidaril" pa" to the plaintiff the su, of P*22,222.22 as ,oral da,a$es, the su, of P.2,222.22 as attorne"6s fee and the su, of P*.,:*+.92 as e0penses of liti$ationB and @cA Orderin$ the defendants to pa" the cost of this suit.. he trial court ruled a$ainst defendants for not actin$ in $ood faith and for not co,pl"in$ !ith their obli$ations under their contract !ith respondent. In the Contract to Sell: involvin$ 7nit ; of the %triu, o!nho,es, defendants a$reed to sell said to!nhouse to respondent for P4,;22,222.22. he do!n pa",ent !asP*,222,222.22, !hile the balance of P-,;22,222.22 !as to be paid in full upon co,pletion, deliver" and acceptance of the to!nhouse. 7nder the contract !hich !as si$ned on *2 #anuar" *++>, defendants a$reed to co,plete and conve" to respondent the unit !ithin si0 ,onths fro, the si$nin$ thereof. he trial court found that respondent !as able to ,a5e a do!n pa",ent or partial pa",ent of P*,2:2,222.22 and that the defendants failed to co,plete the construction of, as !ell as deliver to respondent, the to!nhouse !ithin si0 ,onths fro, the si$nin$ of the contract. Moreover, respondent !as not infor,ed b" the defendants at the ti,e of the perfection of their contract that the sub&ect to!nhouse !as alread" ,ort$a$ed to )<P. he ,ort$a$e !as foreclosed b" the )<P and the to!nhouse !as eventuall" sold at public auction. It said that defendants !ere $uilt" of fraud in their dealin$ !ith respondent because the ,ort$a$e !as not disclosed to respondent !hen the contract !as perfected. here !as also non/co,pliance !ith their obli$ations under the contract !hen the" failed to co,plete and deliver the to!nhouse unit at the a$reed ti,e. On the part of respondent, the trial court declared he !as &ustified in suspendin$ further pa",ents to the defendants and !as entitled to the return of the do!n pa",ent. %$$rieved, defendants appealed the decision to the Court of %ppeals assi$nin$ the follo!in$ as errors3 *. 1E )O'ER CO7R ERRED IN 1O)DINF 1% P)%IN ICC 1%S % V%)ID C%7SE OC %C ION COR D%M%FES %F%INS DECEND%N @SA. -. 1E )O'ER CO7R ERRED IN 1O)DINF 1% DECEND%N %NDRE . %)MOCER% IS SO)ID%RI)J )I%<)E 'I 1 1E COOPER% IVE COR 1E D%M%FES O 1E P)%IN ICC.> he Court of %ppeals ruled that the defendants incurred dela" !hen the" failed to deliver the to!nhouse unit to the respondent !ithin si0 ,onths fro, the si$nin$ of the contract to sell. It a$reed !ith the findin$ of the trial court that the nonpa",ent of the balance of P-.;M b" respondent to

defendants !as proper in li$ht of such dela" and the fact that the propert" sub&ect of the case !as foreclosed and auctioned. It added that the trial court did not err in $ivin$ credence to respondent6s assertion that had he 5no!n beforehand that the unit !as used as collateral !ith the )<P, he !ould not have proceeded in bu"in$ the to!nhouse. )i5e the trial court, the Court of %ppeals $ave no !ei$ht to defendants6 ar$u,ent that had respondent paid the balance of the purchase price of the to!nhouse, the ,ort$a$e could have been released. It e0plained3 'e cannot find fault !ith the choice of plaintiff not to further dole out ,one" for a propert" that in all events, !ould never be his. Moreover, defendants could, if the" !ere reall" desirous of satisf"in$ their obli$ation, de,anded that plaintiff pa" the outstandin$ balance based on their contract. his the" had not done. 'e can fairl" sur,ise that defendants could not co,pl" !ith their obli$ation the,selves, because as testified to b" Mr. %l,ocera, the" alread" si$nified to )<P that the" cannot pa" their outstandin$ loan obli$ations resultin$ to the foreclosure of the to!nhouse.9 Moreover, as to the issue of petitioner6s solidar" liabilit", it said that this issue !as belatedl" raised and cannot be treated for the first ti,e on appeal. On *9 #ul" -22., the Court of %ppeals denied the appeal and affir,ed in toto the decision of the trial court. he dispositive portion of the decision reads3 IN LIGHT O$ ALL THE $OREGOING, this appeal is DENIED. he assailed decision of the Re$ional rial Court, <ranch **, Cebu Cit" in Civil Case No. CE</-4:9> is A$$IRMED in toto.+ In a Resolution dated *: Nove,ber -22., the Court of %ppeals denied defendants6 ,otion for reconsideration. Petitioner is no! before us pleadin$ his case via a Petition for Revie! on Certiorari under Rule ;. of the *++> Rules of Civil Procedure. he petition raises the follo!in$ issues3 I. 1E 1ONOR%<)E CO7R OC %PPE%)S FR%VE)J ERRED IN 1O)DINF 1% DECEND%N 1%S INC7RRED DE)%J. II. 1E 1ONOR%<)E CO7R OC %PPE%)S FR%VE)J ERRED IN S7S %ININF RESPONDEN 6S REC7S%) O P%J 1E <%)%NCE OC 1E P7RC1%SE PRICE. III. 1E 1ONOR%<)E CO7R OC %PPE%)S FR%VE)J ERRED IN 1O)DINF 1% DECEND%N %NDRE . %)MOCER% IS SO)ID%RI)J )I%<)E 'I 1 1E DECEND%N COOPER% IVE COR D%M%FES O P)%IN ICC. *2 It cannot be disputed that the contract entered into b" the parties !as a contract to sell. he contract !as deno,inated as such and it contained the provision that the unit shall be conve"ed b" !a" of an %bsolute Deed of Sale, to$ether !ith the attendant docu,ents of O!nership I the ransfer Certificate of itle and Certificate of Occupanc" I and that the balance of the contract price shall be paid upon the co,pletion and deliver" of the unit, as !ell as the acceptance thereof b" respondent. %ll these clearl" indicate that o!nership of the to!nhouse has not passed to respondent. In Serrano v. Caguiat, ** !e e0plained3 % contract to sell is a5in to a conditional sale !here the efficac" or obli$ator" force of the vendor6s obli$ation to transfer title is subordinated to the happenin$ of a future and uncertain event, so that if the suspensive condition does not ta5e place, the parties !ould stand as if the conditional obli$ation had never e0isted. he suspensive condition is co,,onl" full pa",ent of the purchase price. he differences bet!een a contract to sell and a contract of sale are !ell/settled in &urisprudence. %s earl" as *+.*, in Sing Yee v. Santos D;> O.F. :4>- @*+.*AE, !e held that3 ?0 0 0 DaE distinction ,ust be ,ade bet!een a contract of sale in !hich title passes to the bu"er upon deliver" of the thin$ sold and a contract to sell 0 0 0 !here b" a$ree,ent the o!nership is reserved in the seller and is not to pass until the full pa",ent of the purchase price is ,ade. In the first case, non/pa",ent of the price is a ne$ative resolutor" conditionB in the second case, full pa",ent is a positive suspensive condition. <ein$ contraries, their effect in la! cannot be identical. In the first case, the vendor has lost and cannot recover the o!nership of the land sold until and unless the contract of sale is itself resolved and set aside. In the second case, ho!ever, the title re,ains in the vendor if the vendee does not co,pl" !ith the condition precedent of ,a5in$ pa",ent at the ti,e specified in the contract.? In other !ords, in a contract to sell, o!nership is retained b" the seller and is not to pass to the bu"er until full pa",ent of the price. he Contract to Sell entered into b" the parties contains the follo!in$ pertinent provisions3

;. ERMS OC P%JMEN 3 ;a. ONE MI))ION PESOS @P*,222,222.22A is hereb" ac5no!led$ed as Do!npa",ent for the above/,entioned Contract Price. ;b. he <alance, in the a,ount of 'O MI))ION CO7R 17NDRED PESOS @P-,;22,222.22A shall be paid thru financin$ Institution facilitated b" the SE))ER, preferabl" )andban5 of the Philippines @)<PA. 7pon co,pletion, deliver" and acceptance of the <7JER of the o!nhouse 7nit, the <7JER shall have paid the Contract Price in full to the SE))ER. 0000 :. COMP)E ION D% ES OC 1E O'N1O7SE 7NI 3 he unit shall be co,pleted and conve"ed b" !a" of an %bsolute Deed of Sale to$ether !ith the attendant docu,ents of O!nership in the na,e of the <7JER I the ransfer Certificate of itle and Certificate of Occupanc" !ithin a period of si0 @:A ,onths fro, the si$nin$ of Contract to Sell.*Cro, the fore$oin$ provisions, it is clear that petitioner and C<MC had the obli$ation to co,plete the to!nhouse unit !ithin si0 ,onths fro, the si$nin$ of the contract. 7pon co,pliance there!ith, the obli$ation of respondent to pa" the balance of P-,;22,222.22 arises. 7pon pa",ent thereof, the to!nhouse shall be delivered and conve"ed to respondent upon the e0ecution of the %bsolute Deed of Sale and other relevant docu,ents. he evidence adduced sho!s that petitioner and C<MC failed to fulfill their obli$ation // to co,plete and deliver the to!nhouse !ithin the si0/ ,onth period. 'ith petitioner and C<MC6s non/fulfill,ent of their obli$ation, respondent refused to pa" the balance of the contract price. Respondent does not as5 that o!nership of the to!nhouse be transferred to hi,, but ,erel" as5s that the a,ount or do!n pa",ent he had ,ade be returned to hi,. %rticle **:+ of the Civil Code reads3 %rt. **:+. hose obli$ed to deliver or to do so,ethin$ incur in dela" fro, the ti,e the obli$ee &udiciall" or e0tra&udiciall" de,ands fro, the, the fulfill,ent of their obli$ation. 1o!ever, the de,and b" the creditor shall not be necessar" in order that dela" ,a" e0ist3 @*A 'hen the obli$ation or the la! e0pressl" so declaresB or @-A 'hen fro, the nature and the circu,stances of the obli$ation it appears that the desi$nation of the ti,e !hen the thin$ is to be delivered or the service is to be rendered !as a controllin$ ,otive for the establish,ent of the contractB or @4A 'hen de,and !ould be useless, as !hen the obli$or has rendered it be"ond his po!er to perfor,. In reciprocal obli$ations, neither part" incurs in dela" if the other does not co,pl" or is not read" to co,pl" in a proper ,anner !ith !hat is incu,bent upon hi,. Cro, the ,o,ent one of the parties fulfills his obli$ation, dela" b" the other be$ins. he contract sub&ect of this case contains reciprocal obli$ations !hich !ere to be fulfilled b" the parties, i.e., to co,plete and deliver the to!nhouse !ithin si0 ,onths fro, the e0ecution of the contract to sell on the part of petitioner and C<MC, and to pa" the balance of the contract price upon co,pletion and deliver" of the to!nhouse on the part of the respondent. In the case at bar, the obli$ation of petitioner and C<MC !hich is to co,plete and deliver the to!nhouse unit !ithin the prescribed period, is deter,inative of the respondent6s obli$ation to pa" the balance of the contract price. 'ith their failure to fulfill their obli$ation as stipulated in the contract, the" incurred dela" and are liable for da,a$es.*4 he" cannot insist that respondent co,pl" !ith his obli$ation. 'here one of the parties to a contract did not perfor, the underta5in$ to !hich he !as bound b" the ter,s of the a$ree,ent to perfor,, he is not entitled to insist upon the perfor,ance of the other part".*; On the first assi$ned error, petitioner insists there !as no dela" !hen the to!nhouse unit !as not co,pleted !ithin si0 ,onths fro, the si$nin$ of the contract inas,uch as the ,ere lapse of the stipulated si0 @:A ,onth period is not b" itself enou$h to constitute dela" on his part and that of C<MC, since the la! re=uires that there ,ust either be &udicial or e0tra&udicial de,and to fulfill an obli$ation so that the obli$or ,a" be declared in default. 1e ar$ues there !as no evidence introduced sho!in$ that a prior de,and !as ,ade b" respondent before the ori$inal action !as instituted in the trial court.

'e do not a$ree. De,and is not necessar" in the instant case. De,and b" the respondent !ould be useless because the i,possibilit" of co,pl"in$ !ith their @petitioner and C<MCA obli$ation !as due to their fault. If onl" the" paid their loans !ith the )<P, the ,ort$a$e on the sub&ect to!nhouse !ould not have been foreclosed and thereafter sold to a third person. %nent the second assi$ned error, petitioner ar$ues that if there !as an" dela", the sa,e !as incurred b" respondent because he refused to pa" the balance of the contract price. 'e find his ar$u,ent specious. %s above/discussed, the obli$ation of respondent to pa" the balance of the contract price !as conditioned on petitioner and C<MC6s perfor,ance of their obli$ation. Considerin$ that the latter did not co,pl" !ith their obli$ation to co,plete and deliver the to!nhouse unit !ithin the period a$reed upon, respondent could not have incurred dela". Cor failure of one part" to assu,e and perfor, the obli$ation i,posed on hi,, the other part" does not incur dela".*. 7nder the circu,stances obtainin$ in this case, !e find that respondent is &ustified in refusin$ to pa" the balance of the contract price. 1e !as never in possession of the to!nhouse unit and he can no lon$er be its o!ner since o!nership thereof has been transferred to a third person !ho !as not a part" to the proceedin$s belo!. It !ould si,pl" be the hei$ht of ine=uit" if !e are to re=uire respondent to pa" the balance of the contract price. o allo! this !ould result in the un&ust enrich,ent of petitioner and C<MC. he funda,ental doctrine of un&ust enrich,ent is the transfer of value !ithout &ust cause or consideration. he ele,ents of this doctrine !hich are present in this case are3 enrich,ent on the part of the defendantB i,poverish,ent on the part of the plaintiffB and lac5 of cause. he ,ain ob&ective is to prevent one to enrich hi,self at the e0pense of another. It is co,,onl" accepted that this doctrine si,pl" ,eans a person shall not be allo!ed to profit or enrich hi,self ine=uitabl" at anotherNs e0pense.*:1ence, to allo! petitioner and C<MC 5eep the do!n pa",ent ,ade b" respondent a,ountin$ to P*,2:2,222.22 !ould result in their un&ust enrich,ent at the e0pense of the respondent. hus, said a,ount should be returned. 'hat is !orse is the fact that petitioner and C<MC intentionall" failed to infor, respondent that the sub&ect to!nhouse !hich he !as $oin$ to purchase !as alread" ,ort$a$ed to )<P at the ti,e of the perfection of their contract. his deliberate !ithholdin$ b" petitioner and C<MC of the ,ort$a$e constitutes fraud and bad faith. he trial court had this sa"3 In the li$ht of the fore$oin$ environ,ental circu,stances and ,ilieu, therefore, it appears that the defendants are $uilt" of fraud in dealin$ !ith the plaintiff. he" perfor,ed voluntar" and !illful acts !hich prevent the nor,al reali(ation of the prestation, 5no!in$ the effects !hich naturall" and necessaril" arise fro, such acts. heir acts i,port a dishonest purpose or so,e ,oral obli=uit" and conscious doin$ of a !ron$. he said acts certainl" $tive rise to liabilit" for da,a$es @9 Manresa >-B <orrell/Macia -:/->B 4 Ca,us 4;B O6)ear" v. Macondra" Q Co,pan", ;.; Phil. 9*-B 1eredia v. Salinas, *2 Phil. *.>A. %rticle **>2 of the Ne! Civil Code of the Philippines provides e0pressl" that ?those !ho in the perfor,ance of their obli$ations are $uilt" of fraud and those !ho in an" ,anner contravene the tenor thereof are liable for da,a$es. *> On the last assi$ned error, petitioner contends that he should not be held solidaril" liable !ith defendant C<MC, because the latter is a separate and distinct entit" !hich is the seller of the sub&ect to!nhouse. 1e clai,s that he, as Chair,an and Chief E0ecutive Officer of C<MC, cannot be held liable because his representin$ C<MC in its dealin$s is a corporate act for !hich onl" C<MC should be held liable. his issue of piercin$ the veil of corporate fiction !as never raised before the trial court. he sa,e !as raised for the first ti,e before the Court of %ppeals !hich ruled that it !as too late in the da" to raise the sa,e. he Court of %ppeals declared3 In the case belo!, the pleadin$s and the evidence of the defendants are one and the sa,e and never had it ,ade to appear that %l,ocera is a person distinct and separate fro, the other defendant. In fine, !e cannot treat this error for the first ti,e on appeal. 'e cannot in $ood conscience, let the defendant %l,ocera raise the issue of piercin$ the veil of corporate fiction &ust because of the adverse decision a$ainst hi,. 0 0 0.*9 o allo! petitioner to pursue such a defense !ould under,ine basic considerations of due process. Points of la!, theories, issues and ar$u,ents not brou$ht to the attention of the trial court !ill not be and ou$ht not to be considered b" a revie!in$ court, as these cannot be raised for the first ti,e on appeal. It !ould be unfair to the adverse part" !ho !ould have no opportunit" to present further evidence ,aterial to the ne! theor" not ventilated before the trial court.*+ %s to the a!ard of da,a$es $ranted b" the trial court, and affir,ed b" the Court of %ppeals, !e find the sa,e to be proper and reasonable under the circu,stances. ,HERE$ORE, the petition is DENIED. he Decision of the Court of %ppeals dated *9 #ul" -22. in C%/F.R. CV No. >.:*2 is A$$IRMED. Costs a$ainst the petitioner. SO ORDERED.

MINITA ". CHICO/NA0ARIO %ssociate #ustice

'E CONC7R3 CONSUELO #NARES/SANTIAGO %ssociate #ustice Chairperson MA. ALICIA AUSTRIA/MARTINE0 %ssociate #ustice RU EN T. RE#ES %ssociate #ustice ANTONIO EDUARDO . NACHURA %ssociate #ustice

ATTESTATION I attest that the conclusions in the above Decision !ere reached in consultation before the case !as assi$ned to the !riter of the opinion of the Court6s Division. CONSUELO #NARES/SANTIAGO %ssociate #ustice Chairperson, hird Division

CERTI$ICATION Pursuant to Section *4, %rticle VIII of the Constitution, and the Division Chairperson6s %ttestation, it is hereb" certified that the conclusions in the above Decision !ere reached in consultation before the case !as assi$ned to the !riter of the opinion of the Court6s Division. RE#NATO S. PUNO Chief #ustice

$oo%&o%'(
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%ssociate #ustice Pa,pio %. %barintos !ith %ssociate #ustices Mercedes Fo(o/Dadole and Ra,on M. <ato, #r., concurrin$B rollo, pp. -./4-B
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Penned b" 1on. Isaias P. Dicdican. Id. at 44/4;. Rollo, pp. -:/->. Id. at ;>. E0hibit %.

>

Rollo, pp. *./*:. Id. at 42. Id. at 4-. Id. at *:. F.R. No. *4+*>4, -9 Cebruar" -22>, .*> SCR% .>, :;/:.. Rollo, p. -9/-+. Leao v. Court of Appeals, ;-2 Phil. 94:, 9;9 @-22*A. Agustin v. Court of Appeals, F.R. No. 9;>.*, : #une *++2, *9: SCR% 4>., 494. Agustin v. Court of Appeals, id., citin$ Abaya v. Standard-Vacuu !il Co., *2* Phil. *-:- @*+.>A. ".C. #avier $ Sons% &nc. v. Court of Appeals, F.R. No. *-+..-, -+ #une -22., ;:- SCR% 4:, ;>. Rollo, p. ;;. Id. at 4*. Valde' v. China (an)ing Corporation, F.R. No. *..22+, *- %pril -22., ;.. SCR% :9>, :+:.

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CIRS DIVISION

2G.R. No. 117190. !a&.a+y 2, 19973

!ACINTO

TANGUILIG 4o5&6 *.(5&'(( .&4'+ %7' &a8' a&4 (%y9' !.M.T. ENGINEERING MERCHANDISING, petitioner, vs. COURT O$ APPEALS a&4 "ICENTE HERCE !R., respondents. DECISION

AND

GENERAL

ELLOSILLO, J.1 his case involves the proper interpretation of the contract entered into bet!een the parties. So,eti,e in %pril *+9> petitioner #acinto M. an$uili$ doin$ business under the na,e and st"le #. *. +. ,ngineering and -eneral *erchandising proposed to respondent Vicente 1erce #r. to construct a !ind,ill s"ste, for hi,. %fter so,e ne$otiations the" a$reed on the construction of the !ind,ill for a consideration of P:2,222.22 !ith a one/"ear $uarant" fro, the date of co,pletion and acceptance b" respondent 1erce #r. of the pro&ect. Pursuant to the a$ree,ent respondent paid petitioner a do!n pa",ent of P42,222.22 and an install,ent pa",ent ofP*.,222.22, leavin$ a balance of P*.,222.22. On *; March *+99, due to the refusal and failure of respondent to pa" the balance, petitioner filed a co,plaint to collect the a,ount. In his Ans.er before the trial court respondent denied the clai, sa"in$ that he had alread" paid this a,ount to the San Pedro Feneral Merchandisin$ Inc. @SPFMIA !hich constructed the deep !ell to !hich the !ind,ill s"ste, !as to be connected. %ccordin$ to respondent, since the deep !ell for,ed part of the s"ste, the pa",ent he tendered to SPFMI should be credited to his account b" petitioner. Moreover, assu,in$ that he o!ed petitioner a balance of P*.,222.22, this should be offset b" the defects in the !ind,ill s"ste, !hich caused the structure to collapse after a stron$ !ind hit their place.D*E Petitioner denied that the construction of a deep !ell !as included in the a$ree,ent to build the !ind,ill s"ste,, for the contract price of P:2,222.22 !as solel" for the !ind,ill asse,bl" and its installation, e0clusive of other incidental ,aterials needed for the pro&ect. 1e also

diso!ned an" obli$ation to repair or reconstruct the s"ste, and insisted that he delivered it in $ood and !or5in$ condition to respondent !ho accepted the sa,e !ithout protest. <esides, its collapse !as attributable to a t"phoon, a force a/eure% !hich relieved hi, of an" liabilit". In findin$ for plaintiff, the trial court held that the construction of the deep !ell !as not part of the !ind,ill pro&ect as evidenced clearl" b" the letter proposals sub,itted b" petitioner to respondent. D-E It noted that ?DiEf the intention of the parties is to include the construction of the deep !ell in the pro&ect, the sa,e should be stated in the proposals. In the absence of such an a$ree,ent, it could be safel" concluded that the construction of the deep !ell is not a part of the pro&ect underta5en b" the plaintiff.? D4E 'ith respect to the repair of the !ind,ill, the trial court found that ?there is no clear and convincin$ proof that the !ind,ill s"ste, fell do!n due to the defect of the construction.? D;E he Court of %ppeals reversed the trial court. It ruled that the construction of the deep !ell !as included in the a$ree,ent of the parties because the ter, ?deep !ell? !as ,entioned in both proposals. It also $ave credence to the testi,on" of respondentNs !itness Fuiller,o Pili, the proprietor of SPFMI !hich installed the deep !ell, that petitioner an$uili$ told hi, that the cost of constructin$ the deep !ell !ould be deducted fro, the contract price of P:2,222.22. 7pon these pre,ises the appellate court concluded that respondentNs pa",ent of P*.,222.22 to SPFMI should be applied to his re,ainin$ balance !ith petitioner thus effectivel" e0tin$uishin$ his contractual obli$ation. 1o!ever, it re&ected petitionerNs clai, of force a/eure and ordered the latter to reconstruct the !ind,ill in accordance !ith the stipulated one/"ear $uarant". 1is ,otion for reconsideration havin$ been denied b" the Court of %ppeals, petitioner no! see5s relief fro, this Court. 1e raises t!o issues3 firstly, !hether the a$ree,ent to construct the !ind,ill s"ste, included the installation of a deep !ell and, secondly% !hether petitioner is under obli$ation to reconstruct the !ind,ill after it collapsed. 'e reverse the appellate court on the first issue but sustain it on the second. he preponderance of evidence supports the findin$ of the trial court that the installation of a deep !ell !as not included in the proposals of petitioner to construct a !ind,ill s"ste, for respondent. here !ere in fact t!o @-A proposals3 one dated *+ Ma" *+9> !hich pe$$ed the contract price at P9>,222.22 @E0h. ?*?A. his !as re&ected b" respondent. he other !as sub,itted three da"s later, i.e., on -- Ma" *+9> !hich contained ,ore specifications but proposed a lo!er contract price of P:2,222.22 @E0h. ?%?A. he latter proposal !as accepted b" respondent and the construction i,,ediatel" follo!ed. he pertinent portions of the first letter/proposal @E0h. ?*?A are reproduced hereunder / In connection !ith "our 'ind,ill S"ste, and Installation, !e !ould li5e to =uote to "ou as follo!s3 One @*A Set / 'ind,ill suitable for - inches dia,eter deep!ell, - 1P, capacit", *; feet in dia,eter, !ith -2 pieces blade, o!er ;2 feet hi$h, includin$ ,echanis, !hich is not advisable to operate durin$ e0tra/intensit" !ind. E0cludin$ c"linder pu,p. 7NI CON R%C PRICE P9>,222.22 he second letter/proposal @E0h. ?%?A provides as follo!s3 In connection !ith "our 'ind,ill s"ste, Suppl" of )abor Materials and Installation, operated !ater pu,p, !e !ould li5e to =uote to "ou as follo!s / One @*A set / 'ind,ill asse,bl" for - inches or 4 inches deep/!ell pu,p, : Stro5e, *; feet dia,eter, */lot blade ,aterials, ;2 feet o!er co,plete !ith standard appurtenances up to C"linder pu,p, shaftin$ 7.S. ad&ustable International Metal. One @*A lot / %n$le bar, F. I. pipe, Reducer Couplin$, Elbo! Fate valve, cross ee couplin$. One @*A lot / Cloat valve. One @*A lot / Concretin$ ,aterials foundation. C. O. <. )a$una Contract Price P:2,222.22 Notabl", no!here in either proposal is the installation of a deep !ell ,entioned, even re,otel". Neither is there an ite,i(ation or description of the ,aterials to be used in constructin$ the deep !ell. here is absolutel" no ,ention in the t!o @-A docu,ents that a deep !ell pu,p is a co,ponent of the proposed !ind,ill s"ste,. he contract prices fi0ed in both proposals cover onl" the features specificall" described therein and no other. 'hile the !ords 0deep .ell0 and 0deep .ell pu p0 are ,entioned in both, these do not indicate that a deep !ell is part of the !ind,ill s"ste,. he" ,erel" describe the t"pe of deep !ell pu,p for !hich the proposed !ind,ill !ould be suitable. %s correctl" pointed out b" petitioner, the !ords 0deep .ell0 preceded b" the prepositions 0for0 and 0suitable for0 !ere ,eant onl" to conve" the idea that the proposed !ind,ill !ould be appropriate for a deep !ell pu,p !ith a dia,eter of - to 4 inches. Cor if the real intent of petitioner !as to include a deep !ell in the a$ree,ent to construct a !ind,ill, he !ould have used instead the con&unctions 0and0 or 0.ith.0 Since the ter,s of the instru,ents are clear and leave no doubt as to their ,eanin$ the" should not be disturbed.

Moreover, it is a cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded pri,ordial considerationD.E and, in case of doubt, their conte,poraneous and subse=uent acts shall be principall" considered. D:E %n e0a,ination of such conte,poraneous and subse=uent acts of respondent as !ell as the attendant circu,stances does not persuade us to uphold hi,. Respondent insists that petitioner verball" a$reed that the contract price of P:2,222.22 covered the installation of a deep !ell pu,p. 1e contends that since petitioner did not have the capacit" to install the pu,p the latter a$reed to have a third part" do the !or5 the cost of !hich !as to be deducted fro, the contract price. o prove his point, he presented Fuiller,o Pili of SPFMI !ho declared that petitioner an$uili$ approached hi, !ith a letter fro, respondent 1erce #r. as5in$ hi, to build a deep !ell pu,p as ?part of the priceGcontract !hich En$ineer @1erceA had !ith Mr. an$uili$.?D>E 'e are disinclined to accept the version of respondent. he clai, of Pili that 1erce #r. !rote hi, a letter is unsubstantiated. he alle$ed letter !as never presented in court b" private respondent for reasons 5no!n onl" to hi,. <ut $rantin$ that this !ritten co,,unication e0isted, it could not have si,pl" contained a re=uest for Pili to install a deep !ellB it !ould have also ,entioned the part" !ho !ould pa" for the underta5in$. It strains credulit" that respondent !ould 5eep silent on this ,atter and leave it all to petitioner an$uili$ to verball" conve" to Pili that the deep !ell !as part of the !ind,ill construction and that its pa",ent !ould co,e fro, the contract price of P:2,222.22. 'e find it also unusual that Pili !ould readil" consent to build a deep !ell the pa",ent for !hich !ould co,e supposedl" fro, the !ind,ill contract price on the ,ere representation of petitioner, !ho, he had never ,et before, !ithout a !ritten co,,it,ent at least fro, the for,er. Cor if indeed the deep !ell !ere part of the !ind,ill pro&ect, the contract for its installation !ould have been strictl" a ,atter bet!een petitioner and Pili hi,self !ith the for,er assu,in$ the obli$ation to pa" the price. hat it !as respondent 1erce #r. hi,self !ho paid for the deep !ell b" handin$ over to Pili the a,ount of P*.,222.22 clearl" indicates that the contract for the deep !ell !as not part of the !ind,ill pro&ect but a separate a$ree,ent bet!een respondent and Pili. <esides, if the price of P:2,222.22 included the deep !ell, the obli$ation of respondent !as to pa" the entire a,ount to petitioner !ithout pre&udice to an" action that Fuiller,o Pili or SPFMI ,a" ta5e, if an", a$ainst the latter. Si$nificantl", !hen as5ed !h" he tendered pa",ent directl" to Pili and not to petitioner, respondent e0plained, rather la,el", that he did it ?because he has @sicA the ,one", so @heA &ust paid the ,one" in his possession.?D9E Can respondent clai, that Pili accepted his pa",ent on behalf of petitionerK No. 'hile the la! is clear that ?pa",ent shall be ,ade to the person in !hose favor the obli$ation has been constituted, or his successor in interest, or an" person authori(ed to receive it,?. D+E It does not appear fro, the record that Pili andGor SPFMI !as so authori(ed. Respondent cannot clai, the benefit of the la! concernin$ ?pa",ents ,ade b" a third person.? D*2E he Civil Code provisions do not appl" in the instant case because no creditor/debtor relationship bet!een petitioner and Fuiller,o Pili andGor SPFMI has been established re$ardin$ the construction of the deep !ell. Specificall", !itness Pili did not testif" that he entered into a contract !ith petitioner for the construction of respondentNs deep !ell. If SPFMI !as reall" co,,issioned b" petitioner to construct the deep !ell, an a$ree,ent particularl" to this effect should have been entered into. he conte,poraneous and subse=uent acts of the parties concerned effectivel" belie respondentNs assertions. hese circu,stances onl" sho! that the construction of the !ell b" SPFMI !as for the sole account of respondent and that petitioner ,erel" supervised the installation of the !ell because the !ind,ill !as to be connected to it. here is no le$al nor factual basis b" !hich this Court can i,pose upon petitioner an obli$ation he did not e0pressl" assu,e nor ratif". he second issue is not a novel one. In a lon$ line of casesD**E this Court has consistentl" held that in order for a part" to clai, e0e,ption fro, liabilit" b" reason of fortuitous event under %rt. **>; of the Civil Code the event should be the sole and pro0i,ate cause of the loss or destruction of the ob&ect of the contract. In Na5pil vs. Court of %ppeals,D*-E four @;A re=uisites ,ust concur3 @aA the cause of the breach of the obli$ation ,ust be independent of the !ill of the debtorB @bA the event ,ust be either unforeseeable or unavoidableB @cA the event ,ust be such as to render it i,possible for the debtor to fulfill his obli$ation in a nor,al ,annerB and, @dA the debtor ,ust be free fro, an" participation in or a$$ravation of the in&ur" to the creditor. Petitioner failed to sho! that the collapse of the !ind,ill !as due solel" to a fortuitous event. Interestin$l", the evidence does not disclose that there !as actuall" a t"phoon on the da" the !ind,ill collapsed. Petitioner ,erel" stated that there !as a ?stron$ !ind.? <ut a stron$ !ind in this case cannot be fortuitous / unforeseeable nor unavoidable. On the contrar", a stron$ !ind should be present in places !here !ind,ills are constructed, other!ise the !ind,ills !ill not turn. he appellate court correctl" observed that ?$iven the ne!l"/constructed !ind,ill s"ste,, the sa,e !ould not have collapsed had there been no inherent defect in it !hich could onl" be attributable to the appellee.? D*4E It e,phasi(ed that respondent had in his favor the presu,ption that ?thin$s have happened accordin$ to the ordinar" course of nature and the ordinar" habits of life.? D*;E his presu,ption has not been rebutted b" petitioner. Cinall", petitionerNs ar$u,ent that private respondent !as alread" in default in the pa",ent of his outstandin$ balance of P*.,222.22 and hence should bear his o!n loss, is untenable. In reciprocal obli$ations, neither part" incurs in dela" if the other does not co,pl" or is not read" to co,pl" in a proper ,anner !ith !hat is incu,bent upon hi,. D*.E 'hen the !ind,ill failed to function properl" it beca,e incu,bent upon petitioner to institute the proper repairs in accordance !ith the $uarant" stated in the contract. hus, respondent cannot be said to have incurred in dela"B instead, it is petitioner !ho should bear the e0penses for the reconstruction of the !ind,ill. %rticle **:> of the Civil Code is e0plicit on this point that if a person obli$ed to do so,ethin$ fails to do it, the sa,e shall be e0ecuted at his cost. ,HERE$ORE, the appealed decision is MODICIED. Respondent VICEN E 1ERCE #R. is directed to pa" petitioner #%CIN O M. %NF7I)IF the balance of P*.,222.22 !ith interest at the le$al rate fro, the date of the filin$ of the co,plaint. In return, petitioner is ordered to ?reconstruct sub&ect defective !ind,ill s"ste,, in accordance !ith the one/"ear $uarant"? D*:Eand to co,plete the sa,e !ithin three @4A ,onths fro, the finalit" of this decision. SO ORDERED. "adilla% 1Chair an2% Vitug% 3apunan% and 4er osisi a% ##.% concur.

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SN, -2 Dece,ber *+99, pp. *2/*-. E0h. ?%? and E0h. ?*.? Rollo, p. 4:. &d., p. 4>. 3asilag v. Rodrigue', :+ Phil. -*> @*+4+A. %rt. *4>*, Ne! Civil CodeB -S&S v. Court of Appeals, F.R. No. .-;>9, 42 October *+9:, *;. SCR% 4**B Serrano v. Court of Appeals, No. )/ ;:4.>, + October *+9., *4+ SCR% *>+. SN, *4 %pril *+9+, pp. *9/*+. SN, *4 %pril *+9+, p. --. %rt. *-;2, Ne! Civil Code. %rts. *-4: and *-4>, Ne! Civil Code . Na5pil v. Court of %ppeals% Nos. )/;>9.*, )/;>9:4, )/;>9+:, 4 October *+9:, *;; SCR% .+:B National Po!er Corporation v. Court of %ppeals% F.R. Nos. )/;>4>+ and ;>;9*, *: Ma" *+99, *:* SCR% 44;B National Po!erCorporation v. Court of %ppeals% F.R. Nos. *24;;-/;., -* Ma" *++4, --- SCR% ;*.. See Note **. Rollo, p. ;;. Sec. 4, par. @"A, Rule *4*, Revised Rules on Evidence. %rt. **:+, last par., Ne! Civil Code. See C% Decision, p. >B Rollo, p. ->.

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