Song Fo and Co., vs. Hawaiian-Philippine Co. [47 SCRA 821 G.R. No. 23769.

September
16, 1925]
Post under case digests, Civil Law at Tuesday, March 20, 2012 Posted by Schizophrenic Mind

Facts: Hawaiian-Philippine Co. got into a contract with Song Fo & Co. where it would deliver
molasses to the latter.

Hawaiian-Philippine Co. was able to deliver 55,006 gallons of molasses before the breach of
contract.

SFC filed a complaint for breach of contract against Hawaiian-Philippine Co. and asked
P70,369.50. Hawaiian-Philippine Co. answered that there was a delay in the payment from
Song Fo & Co. and that Hawaiian-Philippine Co. has the right to rescind the contract due to that
and claims it as a special defense.

The judgment of the trial court condemned Hawaiian-Philippine Co. to pay Song Fo & Co. a total
of P35,317.93, with legal interest from the date of the presentation of the complaint, and with
costs.

Issue:
(1) Did Hawaiian-Philippine Co. agree to sell 400,000 gallons of molasses or 300,000 gallons of
molasses?

(2) Had Hawaiian-Philippine Co. the right to rescind the contract of sale made with Song Fo &
Co.?

(3) On the basis first, of a contract for 300,000 gallons of molasses, and second, of a contract
imprudently breached by Hawaiian-Philippine Co., what is the measure of damages?

Held:

(1) Only 300,000 gallons of molasses was agreed to by Hawaiian-Philippine Co. as seen in the
documents presented in court. The language used with reference to the additional 100,000
gallons was not a definite promise.
(2) With reference to the second question, doubt has risen as to when Song Fo & Co. was
supposed to make the payments for the delivery of molasses as shown in the documents
presented by the parties.

The Supreme Court said that Hawaiian-Philippine Co. does not have the right to rescind the
contract. It should be noted that the time of payment stipulated for in the contract should be
treated as of the presence of the contract. There was only a slight breach of contract when the
payment was delayed for 20 days after which Hawaiian-Philippine Co. accepted the payment of
the overdue accounts and continued with the contract, waiving its right to rescind the contract.
The delay in the payment of Song Fo & Co. was not such a violation for the contract.

(3) With regard to the third question, the first cause of action of Song Fo & Co. is based on the
greater expense to which it was put in being compelled to secure molasses from other sources
to which Supreme Court ruled that P3,000 should be paid by Hawaiian-Philippine Co. with legal
interest from October 2, 1923 until payment.

The second cause of action was based on the lost profits on account of the breach of contract.
Supreme Court said that Song Fo & Co. is not entitled to recover anything under the second
cause of action because the testimony of Mr. Song Heng will follow the same line of thought as
that of the trial court which in unsustainable and there was no means for the court to find out
what items make up the P14,000 of alleged lost profits.
BRICKTOWN DEVELOPMENT CORP vs MOR TIERRA DEVELOPMENT CORPORATION
Case Digest
BRICKTOWN DEVELOPMENT CORP. and MARIANO Z. VERALDE VS. AMOR TIERRA
DEVELOPMENT CORPORATION and the HON. COURT OF APPEALS
G.R. No. 112182
December 12, 1994
239 SCRA 127

FACTS: Bricktown Development Corporation, represented by its President and co-petitioner Mariano
Z. Velarde, executed two Contracts to Sell in favor of Amor Tierra Development Corporation,
represented in these acts by its Vice-President, Moises G. Petilla, covering a total of 96 residential
lots at the Multinational Village Subdivision, La Huerta, Parañaque, Metro Manila.

The total price of P21,639,875.00 was stipulated to be paid by private respondent in such amounts
and maturity dates, as follows: P2,200,000.00 on 31 March 1981; P3,209,968.75 on 30 June 1981;
P4,729,906.25 on 31 December 1981; and the balance of P11,500,000.00 to be paid by means of an
assumption by private respondent of petitioner corporation's mortgage liability to the Philippine
Savings Bank or, alternately, to be made payable in cash. On date, March 31, 1981, the parties
executed a Supplemental Agreement, providing that private respondent would additionally pay to
petitioner corporation the amounts of P55,364.68, or 21% interest on the balance of down payment
for the period from 31 March to 30 June 1981, and of P390,369.37 representing interest paid by
petitioner corporation to the Philippine Savings Bank in updating the bank loan for the period from 01
February to 31 March 1981.

Private respondent was only able to pay petitioner corporation the sum of P1,334,443.21. However,
the parties continued to negotiate for a possible modification of their agreement, but nothing
conclusive happened. And on October 12, 1981, petitioner’s counsel sent private respondent a
“Notice of Cancellation of Contract” because of the latter’s failure to pay the agreed amount.

Several months later, private respondent’s counsel, demanded the refund of private respondent's
various payments to petitioner corporation, allegedly "amounting to P2,455,497.71," with interest
within fifteen days from receipt of said letter, or, in lieu of a cash payment, to assign to private
respondent an equivalent number of unencumbered lots at the same price fixed in the contracts.
When the demand was not heeded, Amor Tierra filed an action with the court a quo which rendered
a decion in its favor. The decision of the lower court was affirmed in toto by the Court of Appeals.
Hence, this petition.

ISSUE:
1. Whether or not the contract was properly rescinded.
2. Whether or not Bricktown properly forfeited the payments of Amor Tierra.
RULING: The contract between Bricktown and Amor Tierra was validly rescinded because of the
failure of the latter to pay the agreed amounts stipulated in the contract on the proper date even after
the sixty-days grace period. Furthermore, the records showed that private respondent corporation
paid less than the amount agreed upon. The Supreme Court also added that such cancellation must
be respected. It may also be noteworthy to add that in a contract to sell, the non-payment of the
purchase price can prevent the obligation to convey title from acquiring any obligatory force.

On the second issue, the Supreme Court ruled that since the private respondent did not actually
possessed the property under the contract, the petitioner is then ordered to return to private
respondent the amount remitted. However, to adjudge any interest payment by petitioners on the
amount to be thus refunded, private respondent should not be allowed to totally free itself from its
own breach.
Juntilla vs Fontanar Case Digest
Juntilla vs Fontanar
(136 SCRA 624)
Article 1174 - “fortuitous events

Facts:

- Juntilla was a passenger of the jeepney on course from danao city to cebu city
- The jeepney was driven by Camoro and owned by Fontanar.
- When the jeepney reached mandaue city, the right rear tire of the jeepney exploded causing the
vehicle to turn turtle.
- Juntilla was thrown out of the vehicle and suffered injuries on different parts of his body.
- And he also lost his watch during the incident and no longer could be found

- Petitioner Roberto Juntilla filed a case breach of contract with damages before the City Court of
Cebu City against the respondents Clemente Fontanar, Fernando Banzon and Berfol Camoro.

- Defendants, in their answer, alleged that the tire blow out was beyond their control, taking into
account that the tire that exploded was newly bought and was only slightly used at the time it
blew up.

- The judge rendered judgment in favor of the petitioner and against the respondents.

- Respondents appealed and the decision was reversed upon a finding that the accident in
question was due to a fortuitous event.

Issue: Whether or not the tire blow-out is a fortuitous event?

Held: No.

- In the case at bar, there are specific acts of negligence on the part of the respondents. The
records show that the passenger jeepney turned turtle and jumped into a ditch immediately after
its right rear tire exploded. The evidence shows that the passenger jeepney was running at a
very fast speed before the accident. We agree with the observation of the petitioner that a public
utility jeep running at a regular and safe speed will not jump into a ditch when its right rear tire
blows up. There is also evidence to show that the passenger jeepney was overloaded at the time
of the accident. The petitioner stated that there were three (3) passengers in the front seat and
fourteen (14) passengers in the rear.

- While it may be true that the tire that blew-up was still good because the grooves of the tire were
still visible, this fact alone does not make the explosion of the tire a fortuitous event. No evidence
was presented to show that the accident was due to adverse road conditions or that precautions
were taken by the jeepney driver to compensate for any conditions liable to cause accidents. The
sudden blowing-up, therefore, could have been caused by too much air pressure injected into
the tire coupled by the fact that the jeepney was overloaded and speeding at the time of the
accident.

- The cause of the unforeseen and unexpected occurrence was not independent of the human
will. The accident was caused either through the negligence of the driver or because of
mechanical defects in the tire. Common carriers should teach drivers not to overload their
vehicles, not to exceed safe and legal speed limits, and to know the correct measures to take
when a tire blows up thus insuring the safety of passengers at all times.
- It is sufficient to reiterate that the source of a common carrier's legal liability is the contract of
carriage, and by entering into the said contract, it binds itself to carry the passengers safely as
far as human care and foresight can provide, using the utmost diligence of a very cautious
person, with a due regard for all the circumstances. The records show that this obligation was
not met by the respondents.

- the decision of the Court of First Instance of Cebu, Branch IV appealed from is hereby
REVERSED and SET ASIDE, and the decision of the City Court of Cebu, Branch I is
REINSTATED, with the modification that the damages shall earn interest at 12% per annum and
the attorney's fees are increased to SIX HUNDRED PESOS (P600.00). Damages shall earn
interests from January 27, 1975.

Article 1174 - Is there liability for loss

due to fortuitous event?
General Rule:

There is no liability for loss in case of fortuitous event.

Exceptions:

1. Law

2. Nature of the obligation requires the assumption of risk

3. Stipulation

4. The debtor is guilty of dolo, malice or bad faith, has Promised the same thing
to two or more persons who does not have the same interest

5. The debtor Contributed to the loss (Tan v. Inchausti & Co., G.R. No. L-6472, Mar.
7, 1912)

6. The possessor is in Bad faith (Art. 552)

7. The obligor is Guilty of fraud, negligence or delay or if he contravened the

tenor of the obligation (Juan Nakpil v. United Construction Co., Inc. v. CA, G.R.
No. L-47851, Apr. 15, 1988)
NATIONAL POWER CORPORATION

vs.

EIN CHEMICAL CORPORATION and PHILIPPINE INTERNATIONAL SURETY CO.

G.R. No. L-24856 November 14, 1986

Facts:The National Power Corp. (NPC) awarded a contract to Ein Chemical Corp.(Ein) to supply and
deliver 3,691 long tons of crude sulfur in one shipment to the Maria Cristina Fertilizer Plant in Iligan City
on or before May 10, 1956, for the priceof P374,374.91 to be paid by NPC. To guarantee its obligation,
EIN posted a bond from the Philippine InternationalSurety Co. in the amount of P74,874.98. Thereafter,
NPC opened a letter of credit with PNB for Ein where the expiry date of such letter of credit were thrice
adjusted from its original date of expiration upon Ein’s request for extension of the expiration date for it
anticipated that it cannot deliver its obligation on the date agreed in the contract. However on the day of
its delivery, Ein only delivered 1,000 long tons of crude sulfur ostensibly due to lack of bottoms; but was
paidtherefor by NPC the amount of P101,764.05. As a consequence for failure to comply with its
obligation, NPC prohibited Ein to participate in another of its public bidding. The failure also led NPC to
file an action against EIN for breach of contract. The lower court ruled in favour of EIN on the ground
that the extension of the expiry date of the letter of credit carried with it the extension of the delivery
time. Hence, NPC appealed the adverse ruling of the lower court.

Issue:Whether or not EIN committed a breach of contract which would entitle NPC to damages?

Held: Yes.Ratio:

The EIN clearly committed a breach of contract by failing to completely deliver on its contract in spite of
the leniencyof the NPC in enforcing its rights. Laxity of a contracting party in the enforcement of its rights
under the contractdoes not in any manner diminish its rights there under.

The provisions of the contract, however, indicate that there is no relationship between the delivery date
and theopening of the letter of credit which was anyway opened within a reasonable time after the
signing of the contract.The extensions of the expiry dates of the letter of credit cannot, by any means, be
interpreted as extensions of thedelivery date. If this was the intention of the parties, then a
corresponding date or deadline could have beenprovided. As the terms show, no other delivery date can
even be inferred.

NPC has been very lenient by extending the expiry date of the letter of credit thrice despite the failure of
EIN to fullydeliver on the contract. The problem of bottoms is one that is well-known and anticipated by
suppliers and shippers,and NPC cannot be faulted for such problem since it opened the letter of credit
within a reasonable time after thesigning of the contract. The NPC, in fact, had no duty to inform EIN of
-the shipping time between the US Atlanticports and the Philippines since all shippers and suppliers are
presumed to know this as part of their business.

Vda. De Ungson v. Lopez

G.R. No. 10180-R

Facts:

On November 5, 1940, defendant spouses Natividad and Emilio Lopez obtained a loan ofP3,000 from
plaintiff Nieves Vda. De Ungson. Ten years after or on May 17, 1951, the plaintiff filed a complaint for
collection of debt. The defendants filed a motion to dismiss, but was denied. Subsequently, the
defendants moved for an extension from July 16, within which to file their answer to the complaint. The
motion was granted. On July 26, 1951, the defendants filed another motion for further extension of 10
days, which was also granted. On August 3, 1951, the defendants filed their answer which was duly
admitted. The plaintiff then filed a petition praying that the defendants be declared in default because
their second motion for extension was filed out of the previous extension granted. After hearing the case
on the merits, the trial court declared that the defendants’ answer was filed in time, and dismissed the
complaint on the ground that the action has already prescribed and expired. On appeal, the plaintiff
asserts, among others, that (1) 10 days of the first extension expired on July 25 and not on July 26, (2)
the trial court should have fixed the period within which the defendants must pay the obligation, and (3)
the period of limitations was suspended or interrupted by the “Debt Moratorium Law.”

Issue:

Whether or not the plaintiff can still collect the loan

Held:

No. Following the “exclude-the-first and include-the-last method,” the tenth day from July 16 fell on July
26. Since the extension on the second extension of 10 days from July 26 was granted and the answer was
filed during that period, the defendants could not be in default. Pursuant to Article 1128 of the Old Civil
Code, for obligations without a fixed term, the only action that can be maintained is to ask the court to
determine the term within which the obligor must comply because the fulfillment of the obligation itself
cannot be demanded until after the court has fixed the period for its compliance and such period has
 arrived. Being purely for collection of the debt without any petition for fixing a term of the obligation,
the action in this case is improper. Whether a petition for the fulfillment of an obligation or fixing of a
term, the action, nonetheless, already prescribed considering that 10 years have elapsed. Moreover, the
action for the fixing of a term of an obligation is not affected or covered by the debt moratorium.

NATELCO VS. CA

NATELCO VS. CA
G.R. No. 107112 February 24, 1994

FACTS:
NATELCO: telephone company rendering local and long distance services in Naga.
Entered into contract with Camarines Sur II Electric Cooperative (electrice
power service):
“For the use in operation of its telephone service, electric light posts of CASURECO II”.
ii. In return, free use of 10 telephone connections.
iii. Period: as long as NATELCO needs electric light posts, CASURECO understands that
contract will terminate when they are forced to stop, abandon operation and remove
lightposts.

CASURECO after 10 years: filed for reformation of contract with damages, not conforming to
guidelines of National Electrification Administration (NEA)- reasonable compensation for use
of posts.
Compensation is P10/posts but consumption of telephone cables costs P2630.
ii. NATELCO used 319 posts without any contract at P10.00; refused to pay.
iii. Poor servicing- damage not less than P100,000.
NATELCO
Compensation:
No cause of action for reformation of contract.
ii. Barred by prescription (10 years execution of contract)
iii. Barred by estoppel.
iv. Utilization could not have cause deterioration because already used for 11 years.
v. Value of expenses been equal to use of telephone lines.

TRIAL COURT
ORDERED REFORMATION OF AGREEMENT:
NATELCO to pay for electric polls sum of P10/pole from January 1989.
Contract eventually became unfair due to increase in volume of subscribers
without increase of telephone connections which are free of charge to
CASURECO.
REFORMATION OF CONTACT: cannot make another contract but abolish
inequities.
 Contract does not mention use of posts outside Naga City. Contract should be
reformed including provision that for the use posts outside Naga.

CA: agreed to TRIAL COURT but for different reasons:

Article 1267 applicable
Contract POTESTATIVE CONDITION, THUS VOID.

ISSUE:
Is Article 1267 applicable? YES
Has the filing of reformation of contract prescribed? NO.
Is the period of contract, “as long as the party of the first part has need for electrive
light posts…” potestative? YES.

HELD:
1. ARTICLE 1267, EVEN THOUGH NEVER RAISED BEFORE, IS APPLICABLE.
1. ARTICLE 1267: Art. 1267. When the service has become so difficult as to be
manifestly beyond the contemplation of the parties, the obligor may also be
released therefrom, in whole or in part.
2. PRESTATION: payment of money; a toll or duty; also, the rendering of a service.
3. Contract was one-sided unfair, and disadvantageous to plaintiff.

2. PRESCRIPTION HAS NOT YET LAPSED.

1. What is reformed is not the contract itself, but the instrument embodying the contract.
It follows that whether the contract is disadvantageous or not is irrelevant to
reformation and therefore, cannot be an element in the determination of the period for
prescription of the action to reform.
2. Article 1144: Action upon a written contract must be brought within 10 years from the
time the right of action accrues.
i. “From the time the right of action accrues” not necessarily the date of execution of the
contract.
ii. As correctly ruled by respondent court, private respondent's right of action arose
"sometime during the latter part of 1982 or in 1983 when according to Atty. Luis
General, Jr. . . ., he was asked by (private respondent's) Board of Directors to study said
contract as it already appeared disadvantageous to (private respondent) in 1989.
iii. 10 years had not yet elapsed.

3. PERIOD OF CONTRACT IS POTESTATIVE, THUS INVALID.

a. Leaves the continued effectivity of the aforesaid agreement to the latter's sole and
exclusive will as long as plaintiff is in operation
b. Leaves leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive
will of the lessee.
GONZALES VS JOSEGR No. 43429 October 24, 1938

FACTS:

The plaintiff Benito Gonzales filed an action to recover from the defendant the totalamount of
Php547.95 from two promissory notes dated June 22, 1922 and September 13, 1922.The CFI granted his
petition. The defendant now assails that decision claiming that the complaint was uncertain inasmuch as
the notes did not specify when the indebtedness was incurred or when it was demandable, and
that, granting that plaintiff has any cause of action, the same has prescribed in accordance with law.

ISSUE:Does plaintiff have a cause of action?

RULING:

Article 1128 of the Civil Code stipulates that if the obligation does not specify a term, but itis inferred
from its nature and circumstances that it was intended to grant the debtor time for its performance, the
period of the term shall be fixed by the Court.The two promissory notes are governed by Article 1128
because under the terms thereof,the plaintiff intended to grant the defendant a period within which to
pay his debts. However, theaction to ask the court to fix a period has already prescribed. The period of
prescription is tenyears, which has already elapsed from the execution of the promissory notes until the
filing ofthe action on June 1, 1934.
Vasquez Vs. CA
G.R. No. L-42926, September 13, 1985

138 SCRA 553

Facts:
 Spouses Alfonso Vasquez and Filipinas Bagaipo and a four-year old boy, Mario Marlon
Vasquez, among passengers of an inter-island vessel MV "Pioneer Cebu" left the Port of Manila
in the early morning of May 15, 1966 bound for Cebu. The MV "Pioneer Cebu" encountered
typhoon "Klaring" and struck a reef on the southern part of Malapascua Island, located
somewhere north of the island of Cebu and subsequently sunk. The aforementioned passengers
were unheard from since then.
 The parents of the aforementioned passengers, seek the recovery of damages due to the loss of
Alfonso Vasquez, Filipinas Bagaipo and Mario Marlon Vasquez involving the vessel of the private
respondent when it sailed despite a typhoon.

 Respondent defended on the plea of force majeure, and the extinction of its liability by the actual
total loss of the vessel.

 Trial court award damages to the petitioner but respondent Court reversed the aforementioned
judgment and absolved private respondent from any and all liability.
Issue: 1) W/n it is a fortuitous event

2) W/n respondents are liable

HELD:
1) No. It is not a caso fortuito. The elements to consider in sustaining a case of caso fortuito
are the ff: 1) the event must be independent of the human will, 2) the occurrence must
render it impossible for the debtor to fulfill the obligation in a normal manner, 3) the obligor
must be free of participation in, aggravation of, the injury to the creditor.

 It is an admitted fact that even before the vessel left on its last voyage, its officers and
crew were already aware of the typhoon brewing somewhere in the same general
direction to which the vessel was going.

 The crew of the vessel took a calculated risk when it proceeded despite the typhoon
advisory.

 This is quite evident from the fact that the officers of the vessel had to conduct
conferences amongst themselves to decide whether or not to proceed. The crew
assumed a greater risk when, instead of seeking shelter in Romblon and other islands
the vessel passed en route, they decided to take a change on the expected continuation
of the good weather the vessel was encountering, and the possibility that the typhoon
would veer to some other directions.

 The eagerness of the crew of the vessel to proceed on its voyage and to arrive at its
destination is readily understandable. It is undeniably lamentable, however, that they did
so at the risk of the lives of the passengers on board.

2) Respondents are liable as it is not a caso fortuito. There is no caso fortuito when the ship
captain proceeded en route despite a typhoon advice close to the area where the vessel will
pass. Moreover, the Board of Marine’s inquiry conclusion that the ship captain was not
negligent is not binding on the Court when said finding is not complete. The liability of the
ship owner also extends to the value of vessel and the insurance proceeds thereon.

WHEREFORE, the appealed judgment is hereby REVERSED and the judgment of the then Court of
First Instance of Manila, Branch V, in Civil Case No. 67139, is hereby reinstated.

12 Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons
which may arise from the conduct of the captain in the vigilance over the goods which the vessel
carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and
the freight he may have earned during the voyage.
UNIVERSITY OF THE PHILIPPINES VS. DE LOS
ANGELES
35 SCRA 102

FACTS:
On November 2, 1960, UP and ALUMCO entered into a logging agreement whereby the latter
was granted exclusive authority to cut, collect and remove timber from the Land Grant for a
period starting from the date of agreement to December 31, 1965, extendible for a period of
5 years by mutual agreement.

On December 8, 1964, ALUMCO incurred an unpaid account of P219,362.94. Despite repeated

demands, ALUMCO still failed to pay, so UP sent a notice to rescind the logging agreement. On
the other hand, ALUMCO executed an instrument entitled “Acknowledgment of Debt and
Proposed Manner of Payments. It was approved by the president of UP, which stipulated the
following:
3. In the event that the payments called for are not sufficient to liquidate the foregoing
indebtedness, the balance outstanding after the said payments have been applied shall be paid
by the debtor in full no later than June 30, 1965.

5. In the event that the debtor fails to comply with any of its promises, the Debtor agrees without
reservation that Creditor shall have the right to consider the Logging Agreement rescinded,
without the necessity of any judicial suit… ALUMCO continued its logging operations, but
again incurred an unpaid account. On July 19,1965, UP informed ALUMCO that it had, as of that
date, considered rescinded and of no further legal effect the logging agreement, and that UP had
already taken steps to have another concessionaire take over the logging operation. ALUMCO
filed a petition to enjoin UP from conducting the bidding. The lower court ruled in favor of
ALUMCO, hence, this appeal.

ISSUE:
Can petitioner UP treat its contract with ALUMCO rescinded, and may disregard the same
before any judicial pronouncement to that effect?

RULING:
Yes. In the first place, UP and ALUMCO had expressly stipulated that upon default by the
debtor, UP has the right and the power to consider the Logging Agreement of December 2, 1960
as rescinded without the necessity of any judicial suit. As to such special stipulation and in
connection with Article 1191 of the Civil Code, the Supreme Court, stated in Froilan vs. Pan
Oriental Shipping Co:
“There is nothing in the law that prohibits the parties from entering into agreement that
violation of the terms of the contract would cause cancellation thereof, even without court
intervention. In other words, it is not always necessary for the injured party to resort to court
for rescission of the contract.”

Corporate Law Case Digest: Bayla V. Silang Traffic Co. (1942)

Lessons Applicable: Purchase Agreement (Corporation Law)

FACTS:

 Petitioners purchased the following:

Sofronio T.
8 shares P360
Bayla.......

Venancio
8 shares 375
Toledo........

Josefa Naval.............. 15 shares 675

 purchase price to be paid 5% upon the execution of the contract and the remainder in installments of 5%,
payable within the 1st month of each and every quarter startingJuly 1, 1935, w/ interest on deferred payments at
6%/annum until paid
 They also agreed to forfeit in favor of seller in case of default w/o court proceedings
 BOD resolution Aug 1, 1937: rescinding the agreement
 Petitoners filed an action in the CFI against Silang Traffic Co. Inc to recover certain sum of money w/c they
had paid severally to the corp. on account of shares of stock they indiv. agreed to take and pay for under certain
conditions
 Defenses:

1. That the resolution is not applicable to the petitioners Sofronio T. Bayla, Josefa Naval, and Paz Toledo
because on the date thereof "their subscribed shares of stock had already automatically reverted to the
defendant, and the installments paid by them had already been forfeited"
2. that said resolution of August 1, 1937, was revoked and cancelled by a subsequent resolution

 RTC: absolved defendant. BOD resolution cancelled

 Petitioners appealed
ISSUES:
1. W/N the subsequent BOD resolution is valid
2. W/N under the contract between the parties the failure of the purchaser to pay any of the quarterly
installments on the purchase price automatically gave rise to the forfeiture of the amounts already paid and
the reversion of the shares to the corporation
HELD: NO. CA reversed. Silang Traffic to pay petitioners
1. NO
 noted agreement is entitled "Agreement for Installment Sale of Shares in the Silang Traffic Company,
Inc.,"; that while the purchaser is designated as "subscriber," the corporation is described as "seller"
 Whether a particular contract is a subscription or a sale of stock is a matter of construction and
depends upon its terms and the intention of the parties
 subscription - mutual agreement of the subscribers to take and pay for the stock of a corporation
 purchase - independent agreement bet. the individual and the corp. to buy shares of stock from it at
stipulated price
 rules governing subscriptions and sales of shares are different
 Corporation Law regarding calls for unpaid subscription and assessment of stock (sections 37-50)
do not apply to a purchase of stock
 corporation has no legal capacity to release an original subscriber to its capital stock from the
obligation to pay for his shares, is inapplicable to a contract of purchase of shares.
 The contract in question being one of purchase and not subscription as we have heretofore pointed out, we
see no legal impediment to its rescission by agreement of the parties
 We may add that there is no intimation in this case that the corporation was insolvent, or that the right of
any creditor of the same was in any way prejudiced by the rescission.
 The attempted revocation of said rescission by the resolution of August 22, 1937, was invalid, it not having
been agreed to by the petitioners.
2. NO
 The provision regarding interest on deferred payments would not have been inserted if it had been the
intention of the parties to provide for automatic forfeiture and cancelation of the contract
 contract did not expressly provide that the failure of the purchaser to pay any installment would give rise to
forfeiture and cancelation without the necessity of any demand from the seller
 Art. 1100 of the Civil Code: persons obliged to deliver or do something are not
in default until the moment the creditor demands of them judicially or extrajudicially the
fulfillment of their obligation, unless
(1) the obligation or the law expressly provides that demand shall not be necessary in
order that default may arise
(2) by reason of the nature and circumstances of the obligation it shall appear that the
designation of the time at which that thing was to be delivered or the service rendered
was the principal inducement to the creation of the obligation.
Digest: Pilipinas Bank vs IAC June 30, 1987
FACTS: Hacienda Benito, Inc. as vendor, and private respondents, as vendees executed Contract to Sell No. over a
parcel of land on monthly installments subject to the condition: “The contract shall be considered automatically
rescinded and cancelled and of no further force and effect upon failure of the vendee to pay when due, three or
more consecutive installments as stipulated therein or to comply with any of the terms and conditions thereof…”

During the contract, petitioner sent series of notices to private respondents (PR) for thei latter’s
balances/arrearages. From time to time, PR partially complied with this and requested for extensions. On May 19,
1970, the petitioner, for the last time, reminded the PR to pay their balance. After more than two years, PR sent a
letter expressing their desire to settle their desire to fully settle their obligation. On March 27, 1974, petitioner
wrote a letter to PR , informing them that the contract to sell had been rescinded. PR filed Complaint for Specific
Performance with Damages to compel petitioner to execute a deed of sale.

After trial, the lower court rendered a decision in PR’s favor, holding that petitioner could not rescind the
contract to sell, because: (a) petitioner waived the automatic rescission clause by accepting payment and by
sending letters advising private respondents of the balances due, thus, looking forward to receiving payments
thereon. Said decision was affirmed on appeal. Hence, this Petition For Review on Certiorari,
ISSUE: whether or not the Contract to Sell was rescinded, under the automatic rescission clause contained therein.

HELD: In case the rescission is found unjustified under the circumstances, still in the instant case there is a clear
waiver of the stipulated right of "automatic rescission," as evidenced by the many extensions granted private
respondents by the petitioner. In all these extensions, the petitioner never called attention to the proviso on
"automatic rescission." The assailed decision is affirmed.

Filoil Refinery Corp. v. Mendoza, June 15, 1987

(1191, Simple breach) G.R. No. L-55526 (June 15, 1987)

FACTS

In a complaint filed by herein private respondents, the lower court rendered on

May 14, 1976, a decision rescinding the contract of lease over a 750square meters
lot situated in Cebu City covered by TCT No. 30712 entered into between Filoil
Refinery Corporation and private respondents Jesus P.Garcia and Severina B.
Garcia and ordering the petitioner to vacate the leased premises. It appears that
the petitioners violated the terms and conditions of the lease agreement in the
sense that the signatory Filoil Refinery Corporation subleased it to Filoil Marketing
and subsequently
to petitioner Petrophil Corporation and that herein petitioners were delayed
several times in the payment of the monthly rentals. Private respondents filed a
Motion for Execution pending appeal which was opposed by petitioners in their
Motion for Reconsideration. Said Motion for Reconsideration was denied by the
lower court prompting petitioners to file a Petition for certiorari and Review with
the Court of Appeals. On September 29, 1980, the Court of Appeals rendered its
decision denying
the petition for certiorari and review to annul and set aside the order of thelower
court granting the Motion for Execution pending appeal. Private respondents filed
a motion to dismiss the appeal of petitioners in the original complaint on the
ground of alleged abandonment by reason of the failure of the petitioners to
amend their record on appeal. On September 24, 1979, the lower court dismissed
the appeal because it
is believed the Court of Appeals will not be in a position to know why thecase was
decided on summary judgment, what exhibits have been admitted in evidence
and why Filoil Marketing Corporation had been ordered impleaded. Petitioners
filed their Motion for Reconsideration which was denied by the lower court
Hence, the present petition for certiorari and mandamus. Petitioners' contentions
of the alleged failure however, it is a fact that petitioners filed their record on
appeal well within the reglementary period and that the lower court never issued
an order declaring the Record on Appeal incomplete or defective nor an order
ordering petitioners to complete or correct the same. In addition, that had the
lower court approved outright the record on appeal, or had it required petitioners
to amend the same and petitioners complied, constraining it to give its approval
thereto, it would have lost its jurisdiction to order execution of the decision
pending appeal. Petitioners cited the ruling handed by Us in the case of De Leon
vs.De Los Santos:To invoke the rule that once an appeal has been perfected, the
trial court loses jurisdiction over the case and cannot generally act anymore on
any matter raised therein. It was more for these reasons that petitioners felt there
was no need to follow up or to inquire about the approval of their record on
appeal rather than an act of abandonment of their appeal as theorized by private
respondents.
ISSUE:

1. Whether or not rescinding the contract of lease between petitionersand

respondents is valid

2. Whether or not petitioners breach the simple contract

HELD:

WHEREFORE premises considered the petition is hereby DISMISSED, with the

petitioners ordered to VACATE the premises.

1. The contract of lease sought to be rescinded expired or terminatedlast

September 16, 1982 or almost 5 years ago by its own terms as provided for in the
Lease Contract. An examination of the lease contract reveals that there is no
express prohibition against the assignment of the leasehold right.

Under the law, when there is no express prohibition, the lessee may sublet the
thing leased and all rights acquired by virtue of an obligation are transmissible, if
there has been no stipulation to the
contrary.2. Petitioners admit that on a few occasions, they were late in payingthe
rentals which were due within the first 15 days of each month but their delay was
only for a few days. Such breaches were not as substantial and fundamental as to
defeat the object of the parties in making the agreement because the law is not
concerned with such trifles.
 G.R. No. 84698 February 4, 1992

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, JUAN D. LIM, BENJAMIN P. PAULINO,

ANTONIO M. MAGTALAS, COL. PEDRO SACRO and LT. M. SORIANO, petitioners,
vs.
COURT OF APPEALS, HON. REGINA ORDOÑEZ-BENITEZ, in her capacity as Presiding Judge
of Branch 47, Regional Trial Court, Manila, SEGUNDA R. BAUTISTA and ARSENIA D.
BAUTISTA, respondents.

o School's responsibility in loco parentis over its own students: the harm or
negligent act must be committed by its students against another student,
not by an outsider
o General rule on the application of quasi-delict: no pre-existing contract
between the parties

FACTS:

Carlitos Bautista, a third-year commerce student of PSBA, was stabbed

to death while on the second-floor premises of the school. The
assailants were not members of the schools’ academic community but
were elements from outside the school. The parents of Carlitos filed a
civil action against the school authorities, alleging them negligent,
reckless and with failure to take security precautions, means and
methods before, during and after the attack on the victim. The
appellate court found in their favor, primarily anchoring its decision on
the law of quasi-delicts.

Hence, the petition.

ISSUE:

o Whether or not the appellate court was correct in deciding the case
based on Article 2180 (in loco parentis)
o Whether or not the application of the law on quasi-delict is proper
when there is a pre-existing contract

HELD:

The SC did not agree with the premises of the CA’s ruling. Article 2180,
in conjunction with Article 2176 of the Civil Code, establishes the rule
in in loco parentis. It had been stressed that the law (Article 2180)
plainly provides that the damage should have been caused or inflicted
by pupils or students of the educational institution sought to be held
liable for the acts of its pupils or students while in its custody.
However, the assailants of Carlitos were not students of PSBA, for
whose acts the school could have been made liable.

IS PSBA EXCULPATED FROM LIABILITY?

It does not necessarily follow. When an academic institution accepts
students for enrollment, there is established a contract between them,
resulting in bilateral obligations which both parties are bound to
comply with. Moreover, there is that “built-in” obligation to provide
students with an atmosphere that promotes or assists in attaining its
primary undertaking of imparting knowledge. The school must ensure
that adequate steps are taken to maintain peace and order within the
campus premises and to prevent the breakdown thereof.

Because the circumstances of the present case evince a contractual

relation between PSBA and Carlitos, the rules on quasi-delict do not
really govern. However, the mere fact that a person is bound to another
by contract does not relieve him from extra-contractual liability to
such person. When such a contractual relation exists the obligor may
break the contract under such conditions that the same act which
constitutes a breach of the contract would have constituted the
source of an extra-contractual obligation had no contract existed
between the parties. Art. 21 of the Civil Code comes to mind, so that
should the act which breaches a contract be done in bad faith and
violative of Art. 21, then there is a cause to view the act as
constituting a quasi-delict.

In the present case, there is no finding that the contract between the
school and Carlitos had been breached thru the former’s negligence in
providing proper security measures.

As the proceedings a quo have yet to commence on the substance of the private respondents'
complaint, the record is bereft of all the material facts. Obviously, at this stage, only the trial court
can make such a determination from the evidence still to unfold.

WHEREFORE, the foregoing premises considered, the petition is DENIED. The court of origin (RTC,
Manila, Br. 47) is hereby ordered to continue proceedings consistent with this ruling of the Court.
Juan F. Nakpil and Sons et al. – petitioners vs. Court of Appeals et al., respondent
Ponente: Paras, J.,

Facts:
- The plaintiff Philippine Bar Association (PBA) decided to construct an office building
and the construction is undertaken by the United Construction Co. Inc.(UCCI) and The
plans and specifications for the building were prepared by the other third-party
defendants Juan F. Nakpil & Sons. The building was completed on June 1966.

- On August 2, 1968 an unusually strong earthquake hit Manila and the building
sustained major damage. The plaintiff filed an action for the recovery of damages
against the UCCI alleging that the collapse of the building was due to the defects of
construction and the failure of the contractors to follow the plans and specification and
they have violated the contract.

- On the other hand, the defendant contended that the earthquake is an act of God
therefore they must be relieved from liability.

- The lower court appointed a commissioner to assess the situation and in his report,
it is found out that it is not purely an act of God but it is also caused by the defect in
the plans and specification. On the other hand, based on amicus curiae of the United
Architects of the Philippines there is no defect in the plans and specifications of the
Nakpil’s.

- The lower court in favor of the plaintiff stating that even if there is no defect in the
plans and specification there exist deficiency on the original design.

Issue: Is the act of God (earthquake) exempt the defendants from liability?

Held: No.

 There is no question that an earthquake and other forces of nature such as

cyclones, drought, floods, lightning, and perils of the sea are acts of God. It does not
necessarily follow, however, that specific losses and suffering resulting from the
occurrence of these natural force are also acts of God. Of the thousands of
structures in Manila, God singled out the blameless PBA building in Intramuros and
around six or seven other buildings in various parts of the city for collapse or severe
 damage and that God alone was responsible for the damages and losses thus
suffered.

 It is reasonable to conclude, therefore, that the proven defects, deficiencies and

violations of the plans and specifications of the PBA building contributed to the
damages which resulted during the earthquake of August 2, 1968 and the vice of
these defects and deficiencies is that they not only increase but also aggravate the
weakness mentioned in the design of the structure. In other words, these defects
and deficiencies not only tend to add but also to multiply the effects of the
shortcomings in the design of the building. We may say, therefore, that the defects
and deficiencies in the construction contributed greatly to the damage which
occurred.

 The afore-mentioned facts clearly indicate the wanton negligence of both the
defendant and the third-party defendants in effecting the plans, designs,
specifications, and construction of the PBA building and We hold such negligence as
equivalent to bad faith in the performance of their respective tasks.

 One who negligently creates a dangerous condition cannot escape liability for the
natural and probable consequences thereof, although the act of a third person, or an
act of God for which he is not responsible, intervenes to precipitate the loss.

 As already discussed, the destruction was not purely an act of God. Truth to tell
hundreds of ancient buildings in the vicinity were hardly affected by the earthquake.
Only one thing spells out the fatal difference; gross negligence and evident bad faith,
without which the damage would not have occurred.

 The act of God in this case is coupled with gross negligence and evident bad faith of
the defendants. If in act of God there concurs a corresponding fraud, negligence,
delay, or violation in contravention in any manner of the tenor of the obligation
(art.1170 cc - ) which results to loss or damage, the obligor cannot escape liability.
To exempt the obligor from liability under the act of Got the following requisites must
concur:

1. The cause of the breach of the obligation must be independent of the will of the
debtor;
2. The event must be either unforeseeable or unavoidable;
3. The event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and
 4. The debtor must be free from any participation in, or aggravation of the injury to
the creditor.

Therefore the decision of the CA is modified.

The applicable law governing the rights and liabilities of the parties herein is Article 1723
of the New Civil Code, which provides:

Art. 1723. The engineer or architect who drew up the plans and
specifications for a building is liable for damages if within fifteen years
from the completion of the structure the same should collapse by reason
of a defect in those plans and specifications, or due to the defects in the
ground. The contractor is likewise responsible for the damage if the edifice
fags within the same period on account of defects in the construction or
the use of materials of inferior quality furnished by him, or due to any
violation of the terms of the contract. If the engineer or architect
supervises the construction, he shall be solidarily liable with the contractor.

Acceptance of the building, after completion, does not imply waiver of any
of the causes of action by reason of any defect mentioned in the
preceding paragraph.

The action must be brought within ten years following the collapse of the
building.

On the other hand, the general rule is that no person shall be responsible for events
which could not be foreseen or which though foreseen, were inevitable (Article 1174,
New Civil Code).

An act of God has been defined as an accident, due directly and exclusively to natural
causes without human intervention, which by no amount of foresight, pains or care,
reasonably to have been expected, could have been prevented. (1 Corpus Juris 1174).

There is no dispute that the earthquake of August 2, 1968 is a fortuitous event or an act
of God.

To exempt the obligor from liability under Article 1174 of the Civil Code, for a breach of
an obligation due to an "act of God," the following must concur: (a) the cause of the
breach of the obligation must be independent of the will of the debtor; (b) the event must
be either unforseeable or unavoidable; (c) the event must be such as to render it
impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor
must be free from any participation in, or aggravation of the injury to the creditor.
(Vasquez v. Court of Appeals, 138 SCRA 553; Estrada v. Consolacion, 71 SCRA 423;
Austria v. Court of Appeals, 39 SCRA 527; Republic of the Phil. v. Luzon Stevedoring
Corp., 21 SCRA 279; Lasam v. Smith, 45 Phil. 657).

ANTONIO RAMON ONGSIAKO, petitioner,

vs. INTERMEDIATE APPELLATE COURT and THE PEOPLE OF THE
PHILIPPINES, respondents.

Facts: A collision occurred between the car driven by the petitioner and the jeep of Robert Ha
on December 30, 1981, at about 4 o’clock in the afternoon at MacArthur Highway, in Moncada,
Tarlac. The petitioner had a companion, Leon Miguel Heras, who was seated beside him.
Robert Ha was at the wheel of his vehicle, which had seven other passengers. It appears that
the petitioner was south-bound, toward Manila, and the jeep was coming from the opposite
direction; that a Philippine Rabbit bus ahead of the jeep swerved into the petitioner’s lane to
overtake and bypass a tricycle; and that as a result of this sudden move, the petitioner, to avoid
a head-on collision, immediately veered his car to the shoulder of the highway. The car went out
of control when it hit the soft shoulder, moved back diagonally across the cemented highway,
then collided with Ha’s jeep, damaging it and causing multiple injuries to its passengers. The
Philippine Rabbit bus sped away. The trial court rendered judgment holding the petitioner guilty
of simple negligence resulting in serious physical injuries and damage to property. Respondent
court affirmed said decision lowering the total indemnification. Hence the appeal.

Issue: WON the respondent court erred in affirming the decision of the lower court as there were
discrepancies in the factual findings of the lower court and the evidence of record.

Held: The evidence of record is that the distance was not 150 meters but 150 feet, which
makes quite a difference, indeed. The Court considers this discrepancy important because the
finding of negligence by the trial court is based on whether or not the accused had enough
opportunity to avoid the collision. And that opportunity depended on the distance between the
two vehicles. If the trial judge had carefully considered the evidence and discovered that the
distance was 150 feet and not meters, it is doubtful that he would have concluded as he did
that the accused was negligent. The distance of 150 feet is less than one-third of 150 meters,
which means that the sufficient time imagined by the trial judge would have been
correspondingly — and significantly — reduced by two-thirds of the actual period. The time as
shortened could not have, if we apply the trial judge’s own calculations, prevented the petitioner
from avoiding the collision. In view of the misappreciation of the evidence of record by the
respondent court and the trial court, that the guilt of the petitioner has not been proved beyond
reasonable doubt. Consequently, he should not have been held guilty of even simple negligence
and instead is entitled to be completely absolved of criminal responsibility.
Nevertheless, from the totality of the facts presented, it was declared there was a
preponderance of evidence to hold the accused liable in damages for the tragic mishap that
befell the victim. We make a similar finding in this case and hold the petitioner civilly answerable
for his quasi-delict. WHEREFORE, the petitioner is ACQUITTED and his conviction is
REVERSED, but he is held liable in the total sum of P46,131.04 for damages as above
specified.