CIVIL LAW REVIEW 2

First Semester SY 2017-2018

ATTY. LYSSA GRACE S. PAGANO CALDE

CASE RULINGS IN OBLIGATIONS

A. SOURCES OF OBLIGATIONS

1. Barredo v. Garcia, 73 Phil 607

Sources of Obligations: Death in an accident caused by negligence of driver

Issue: Subsidiary liability under the Revised Penal Code for crime committed by
the employee or primary liability under the Civil Code for cuasi delito or culpa
aquiliana.

Ruling:

ART. 1089 Obligations arise from law, from contracts and quasi-contracts, and
from acts and omissions which are unlawful or in which any kind of fault or
negligence intervenes.

ART. 1092. Civil obligations arising from felonies or misdemeanors shall be

governed by the provisions of the Penal Code.

ART. 1093. Those which are derived from acts or omissions in which fault or
negligence, not punishable by law, intervenes shall be subject to the provisions
of Chapter II, Title XVI of this book.

ART 1902. Any person who by an act or omission causes damage to another by
his fault or negligence shall be liable for the damage so done.

ART. 1903. The obligation imposed by the next preceding article is enforcible,
not only for personal acts and omissions, but also for those of persons for whom
another is responsible.
 From this article two things are apparent: (1) That when an injury is caused by
the negligence of a servant or employee there instantly arises a presumption of
law that there was negligence on the part of the matter or employer either in the
selection of the servant or employee, or in supervision over him after the
selection, or both; and (2) that presumption is juris tantum and not juris et de jure,
and consequently, may be rebutted. It follows necessarily that if the employer
shows to the satisfaction of the court that in selection and supervision he has
exercised the care and diligence of a good father of a family, the presumption is
overcome and he is relieve from liability.

This theory bases the responsibility of the master ultimately on his own
negligence and not on that of his servant.

2. Mendoza v. Arrieta, 91 SCRA 113

Against truck-owner who caused the accident:

Petitioner's cause of action being based on quasi-delict, the case may proceed
independently of the criminal proceedings and regardless of the result of the
latter.

Art. 31. When the civil action is based on an obligation not arising from the act or
omission complained of as a felony, such civil action may proceed independently
of the criminal proceedings and regardless of the result of the latter.

Failure to reserve is not a bar. The same negligent act causing damages may
produce a civil liability arising from crime or create an action for quasi-delict or
culpa extra-contractual. The former is a violation of the criminal law, while the
latter is a distinct and independent negligence, having always had its own
foundation and individuality. Some legal writers are of the view that in
accordance with Article 31, the civil action based upon quasi-delict may proceed
independently of the criminal proceeding for criminal negligence and regardless
of the result of the latter.

Articles 2176 and 2177 of the Civil Code create a civil liability distinct and
different from the civil action arising from the offense of negligence under the
Revised Penal Code. No reservation, therefore, need be made in the criminal
case; that Section 2 of Rule 111 is inoperative, "it being substantive in character
and is not within the power of the Supreme Court to promulgate; and even if it
were not substantive but adjective, it cannot stand because of its inconsistency
with Article 2177, an enactment of the legislature superseding the Rules of
1940."

Against the driver of the jeepney that rammed his car because of the truck:
 It being clear from the judgment in the criminal case that Salazar's acquittal was
not based upon reasonable doubt, but on the fact from which the civil might arise
did not exist. Consequently, a civil action for damages can no longer be
instituted. This is explicitly provided for in Article 29 of the Civil Code:

Art. 29. When the accused in a criminal prosecution is acquitted on the ground
that his guilt has not been proved beyond reasonable doubt, a civil action for
damages for the same act or omission may be instituted. Such action requires
only a preponderance of evidence. If in a criminal case the judgment of acquittal
is based upon reasonable doubt, the court shall so declare. In the absence of
any declaration to that effect, it may be inferred from the text of the decision
whether or not the acquittal is due to that ground.

3. PSBA v. CA, 205 SCRA 729

Death of a student by outsiders

Ruling:

Article 2180, in conjunction with Article 2176 of the Civil Code, establishes the
rule of in loco parentis. This Court discussed this doctrine in the afore-cited cases
of Exconde, Mendoza, Palisoc and, more recently, in Amadora vs. Court of
Appeals. In all such cases, 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, this material situation does not
exist in the present case for, as earlier indicated, the assailants of Carlitos were
not students of the PSBA, for whose acts the school could be made liable.

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.

Because the circumstances of the present case evince a contractual relation

between the PSBA and Carlitos Bautista, the rules on quasi-delict do not really
govern. A perusal of Article 2176 shows that obligations arising from quasi-delicts
or tort, also known as extra-contractual obligations, arise only between parties
not otherwise bound by contract, whether express or implied. However, this
impression has not prevented this Court from determining the existence of a tort
even when there obtains a contract.

The field of non-contractual obligation is much broader than that of contractual

obligation, comprising, as it does, the whole extent of juridical human relations.
These two fields, figuratively speaking, concentric; that is to say, 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.

Civil Code on Human Relations, particularly Article 21, which provides:

Any person who wilfully causes loss or injury to another in a manner that is
contrary to morals, good custom or public policy shall compensate the latter for
the damage.

In the circumstances obtaining in the case at bar, however, there is, as yet, no
finding that the contract between the school and Bautista had been breached
thru the former's negligence in providing proper security measures. This would
be for the trial court to determine. And, even if there be a finding of negligence,
the same could give rise generally to a breach of contractual obligation only.
Using the test of Cangco, supra, the negligence of the school would not be
relevant absent a contract. In fact, that negligence becomes material only
because of the contractual relation between PSBA and Bautista. In other words,
a contractual relation is a condition sine qua non to the school's liability. The
negligence of the school cannot exist independently of the contract, unless the
negligence occurs under the circumstances set out in Article 21 of the Civil Code.

Remand.

4. Amadora v. CA, 160 SCRA 315

Student shot by a classmate

Ruling:

The provision in question should apply to all schools, academic as well as non-
academic. Where the school is academic rather than technical or vocational in
nature, responsibility for the tort committed by the student will attach to the
teacher in charge of such student, following the first part of the provision. This is
the general rule. In the case of establishments of arts and trades, it is the head
thereof, and only he, who shall be held liable as an exception to the general rule.
In other words, teachers in general shall be liable for the acts of their students
except where the school is technical in nature, in which case it is the head
thereof who shall be answerable.

As long as the defendant can show that he had taken the necessary precautions
to prevent the injury complained of, he can exonerate himself from the liability
imposed by Article 2180, which also states that:
 The responsibility treated of in this article shall cease when the Persons herein
mentioned prove that they observed all the diligence of a good father of a family
to prevent damages.

In this connection, it should be observed that the teacher will be held liable not
only when he is acting in loco parentis for the law does not require that the
offending student be of minority age. Unlike the parent, who wig be liable only if
his child is still a minor, the teacher is held answerable by the law for the act of
the student under him regardless of the student's age. Thus, in the Palisoc Case,
liability attached to the teacher and the head of the technical school although the
wrongdoer was already of age. In this sense, Article 2180 treats the parent more
favorably than the teacher.

B. BREACH

5. De Guia v. Manila Electric Co, 40 Phil 706

There was negligence on the part of the motorman in driving the car, it results
that the company is liable for the damage resulting to the plaintiff as a
consequence of that negligence. The plaintiff had boarded the car as a
passenger for the city of Manila and the company undertook to convey him for
hire. The relation between the parties was, therefore, of a contractual nature, and
the duty of the carrier is to be determined with reference to the principles of
contract law, that is, the company was bound to convey and deliver the plaintiff
safely and securely with reference to the degree of care which, under the
circumstances, is required by law and custom applicable to the case (art. 1258,
Civil Code). Upon failure to comply with that obligation the company incurred the
liability defined in articles 1103-1107 of the Civil Code. (Cangco vs. Manila
Railroad Company, 38 Phil. Rep., 768; Manila Railroad Company vs. Compañia
Transatlantica, and Atlantic, Gulf & Pacific Co., 38 Phil. Rep., 875.)

From the nature of the liability thus incurred, it is clear that the defendant
company can not avail itself of the last paragraph of article 1903 of the Civil
Code, since that provision has reference to liability incurred by negligence in the
absence of contractual relation, that is, to the culpa aquiliana of the civil law. It
was therefore irrelevant for the defendant company to prove, as it did, that the
company had exercised due care in the selection and instruction of the
motorman who was in charge of its car and that he was in fact an experienced
and reliable servant.

6. US v. Barias, 23 Phil 434

Three year old ran over by the tram

 Ruling:

Negligence: "The failure to observe, for the protection of the interests of another
person, that degree of care, precaution and vigilance which the circumstances
justly demand, whereby such other persons suffers injury."

In the case of U. S. vs. Nava, (1 Phil. Rep., 580), we held that: "Reckless
negligence consists of the failure to take such precautions or advance measures
in the performance of an act as the most prudence would suggest whereby injury
is caused to persons or to property."

The word "negligencia" used in the code, and the term "imprudencia" with which
this punishable act is defined, express this idea in such a clear manner that it is
not necessary to enlarge upon it. He who has done everything on his part to
prevent his actions from causing damage to another, although he has not
succeeded in doing so, notwithstanding his efforts, is the victim of an accident
and can not be considered responsible for the same. (Vol. 2, p. 127 [153].)

Negligence is want of the care required by the circumstances. It is a relative or

comparative, not an absolute, term and its application depends upon the situation
of the parties and the degree of care and vigilance which the circumstances
reasonably require. Where the danger is great, a high degree of care is
necessary, and the failure to observe it is a want of ordinary care under the
circumstances. (Ahern vs. Oregon Telephone Co., 24 Oreg., 276, 294; 35 Pac.,
549.)

Ordinary care, if the danger is great, may arise to the grade of a very exact and
unchangeable attention. (Parry Mfg. Co. vs. Eaton, 41 Ind. App., 81, 1908; 83 N.
E., 510.)

In the case of U. S. vs. Reyes (1 Phil. Rep., 375-377), we held that: "The
diligence with which the law requires the individual at all the time to govern his
conduct varies with the nature of the situation in which he is placed and with the
importance of the act which he is to perform.lawph!l.net

7. Sarmiento v. Sps. Cabrido, 401 SCRA 122

Diamond ring

Ruling:

Obligations arising from contracts have the force of law between the contracting
parties. Corollarily, those who in the performance of their obligations are guilty of
fraud, negligence or delay and those who in any manner contravene the tenor
thereof, are liable for damages. The fault or negligence of the obligor consists in
 the omission of that diligence which is required by the nature of the obligation
and corresponds with the circumstances of the persons, of the time and of the
place.

8. Crisostomo v. CA, 409 SCRA 528

Passenger did not read ticket acquired from travel agency.

Ruling:

By definition, a contract of carriage or transportation is one whereby a certain

person or association of persons obligate themselves to transport persons,
things, or news from one place to another for a fixed price. A common carrier is
defined under Article 1732 of the Civil Code as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation, offering their services to
the public.

It is obvious from the above definition that respondent is not an entity engaged in
the business of transporting either passengers or goods and is therefore, neither
a private nor a common carrier. Respondent did not undertake to transport
petitioner from one place to another since its covenant with its customers is
simply to make travel arrangements in their behalf. Respondents services as a
travel agency include procuring tickets and facilitating travel permits or visas as
well as booking customers for tours.

The nature of the contractual relation between petitioner and respondent is

determinative of the degree of care required in the performance of the latters
obligation under the contract. For reasons of public policy, a common carrier in a
contract of carriage is bound by law to carry passengers as far as human care
and foresight can provide using the utmost diligence of very cautious persons
and with due regard for all the circumstances. As earlier stated, however,
respondent is not a common carrier but a travel agency. It is thus not bound
under the law to observe extraordinary diligence in the performance of its
obligation, as petitioner claims.

Since the contract between the parties is an ordinary one for services, the
standard of care required of respondent is that of a good father of a family under
Article 1173 of the Civil Code. This connotes reasonable care consistent with that
which an ordinarily prudent person would have observed when confronted with a
similar situation. The test to determine whether negligence attended the
performance of an obligation is: did the defendant in doing the alleged negligent
act use that reasonable care and caution which an ordinarily prudent person
would have used in the same situation? If not, then he is guilty of negligence.
 The negligence of the obligor in the performance of the obligation renders him
liable for damages for the resulting loss suffered by the obligee. Fault or
negligence of the obligor consists in his failure to exercise due care and
prudence in the performance of the obligation as the nature of the obligation so
demands. There is no fixed standard of diligence applicable to each and every
contractual obligation and each case must be determined upon its particular
facts. The degree of diligence required depends on the circumstances of the
specific obligation and whether one has been negligent is a question of fact that
is to be determined after taking into account the particulars of each case.

9. Song Fo v. Hawaiian Philippines, 47 Phil 821

Rescission as a remedy for breach

The general rule is that rescission will not be permitted for a slight or casual
breach of the contract, but only for such breaches as are so substantial and
fundamental as to defeat the object of the parties in making the agreement. A
delay in payment for a small quantity of molasses for some twenty days is not
such a violation of an essential condition of the contract was warrants rescission
for non-performance. Not only this, but the Hawaiian-Philippine Co. waived this
condition when it arose by accepting payment of the overdue accounts and
continuing with the contract. Thereafter, Song Fo & Company was not in default
in payment so that the Hawaiian-Philippine co. had in reality no excuse for writing
its letter of April 2, 1923, cancelling the contract. (Warner, Barnes & Co. vs. Inza
[1922], 43 Phil., 505.)

We rule that the appellant had no legal right to rescind the contract of sale
because of the failure of Song Fo & Company to pay for the molasses within the
time agreed upon by the parties.

10. Velarde v. CA, 361 SCRA 56

Deed of sale with assumption of mortgage

Petitioners aver that their nonpayment of private respondents' mortgage

obligation did not constitute a breach of contract, considering that their request to
assume the obligation had been disapproved by the mortgagee bank.
Accordingly, payment of the monthly amortizations ceased to be their obligation
and, instead, it devolved upon private respondents again.

They rely on their letter that required three additional conditions: (a) you deliver
actual possession of the property to her not later than January 15, 1987 for her
immediate occupancy; (b) you cause the release of title and mortgage from the
Bank of P.I. and make the title available and free from any liens and
encumbrances; and (c) you execute an absolute deed of sale in her favor free
from any liens or encumbrances not later than January 21, 1987.

J. Panganiban

A substantial breach of a reciprocal obligation, like failure to pay the price in the
manner prescribed by the contract, entitled the injured party to rescind the
obligation. Rescission abrogates the contract from its inception and requires a
mutual restitution of benefits received.

The breach committed by petitioners was not so much their nonpayment of the
mortgage obligations, as their nonperformance of their reciprocal obligation to
pay the purchase price under the contract of sale. Private respondents' right to
rescind the contract finds basis in Article 1191 of the Civil Code, which explicitly
provides as follows:

"Art. 1191. -- The power to rescind obligations is implied in reciprocal ones, in

case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission even after he has chosen fulfillment, if the latter should become
impossible."

The right of rescission of a party to an obligation under Article 1191 of the Civil
Code is predicated on a breach of faith by the other party who violates the
reciprocity between them. The breach contemplated in the said provision is the
obligor's failure to comply with an existing obligation. When the obligor cannot
comply with what is incumbent upon it, the obligee may seek rescission and, in
the absence of any just cause for the court to determine the period of
compliance, the court shall decree the rescission.

In Song Fo there was, on the part of the buyer, only a delay of twenty (20) days
to pay for the goods delivered. Moreover, the buyer's offer to pay was
unconditional and was accepted by the seller. In the instant case, the breach
committed did not merely consist of a slight delay in payment or an irregularity;
such breach would not normally defeat the intention of the parties to the contract.
Here, petitioners not only failed to pay the P1.8 million balance, but they also
imposed upon private respondents new obligations as preconditions to the
performance of their own obligation. In effect, the qualified offer to pay was a
repudiation of an existing obligation, which was legally due and demandable
under the contract of sale. Hence, private respondents were left with the legal
option of seeking rescission to protect their own interest.
 Considering that the rescission of the contract is based on Article 1191 of the
Civil Code, mutual restitution is required to bring back the parties to their original
situation prior to the inception of the contract.

Rescission creates the obligation to return the object of the contract. It can be
carried out only when the one who demands rescission can return whatever he
may be obliged to restore. To rescind is to declare a contract void at its inception
and to put an end to it as though it never was. It is not merely to terminate it and
release the parties from further obligations to each other, but to abrogate it from
the beginning and restore the parties to their relative positions as if no contract
has been made.

C. MODES OF BREACH

 FRAUD

11. Woodhouse v. Halili, 93 Phil 526

Misrepresentation by plaintiff that he was the holder of the exclusive franchise

and defendant was made to believe, and he actually believed, that plaintiff had
the exclusive franchise.

Does it amount to a fraud that would vitiate the contract? It must be noted that
fraud is manifested in illimitable number of degrees or gradations, from the
innocent praises of a salesman about the excellence of his wares to those
malicious machinations and representations that the law punishes as a crime. In
consequence, article 1270 of the Spanish Civil Code distinguishes two kinds of
(civil) fraud, the causal fraud, which may be a ground for the annulment of a
contract, and the incidental deceit, which only renders the party who employs it
liable for damages. This Court had held that in order that fraud may vitiate
consent, it must be the causal (dolo causante), not merely the incidental (dolo
causante), inducement to the making of the contract. (Article 1270, Spanish Civil
Code; Hill vs. Veloso, 31 Phil. 160.)

While the representation that plaintiff had the exclusive franchise did not vitiate
defendant's consent to the contract, it was used by plaintiff to get from defendant
a share of 30 per cent of the net profits; in other words, by pretending that he had
the exclusive franchise and promising to transfer it to defendant, he obtained the
consent of the latter to give him (plaintiff) a big slice in the net profits. This is the
dolo incidente defined in article 1270 of the Spanish Civil Code, because it was
used to get the other party's consent to a big share in the profits, an incidental
matter in the agreement.

12. Geraldez v. CA, 230 SCRA 329

Advertisement of travel agency

 Moral damages may be awarded in breaches of contract where the obligor acted
fraudulently or in bad faith. From the facts earlier narrated, private respondent
can be faulted with fraud in the inducement, which is employed by a party to a
contract in securing the consent of the other.

This fraud or dolo which is present or employed at the time of birth or perfection
of a contract may either be dolo causante or dolo incidente. The first, or causal
fraud referred to in Article 1338, are those deceptions or misrepresentations of a
serious character employed by one party and without which the other party would
not have entered into the contract. Dolo incidente, or incidental fraud which is
referred to in Article 1344, are those which are not serious in character and
without which the other party would still have entered into the contract. Dolo
causante determines or is the essential cause of the consent, while dolo
incidente refers only to some particular or accident of the obligations. The effects
of dolo causante are the nullity of the contract and the indemnification of
damages, and dolo incidente also obliges the person employing it to pay
damages.

When moral damages are awarded, especially for fraudulent conduct, exemplary
damages may also be decreed. Exemplary damages are imposed by way of
example or correction for the public good, in addition to moral, temperate,
liquidated or compensatory damages. According to the code Commission,
exemplary damages are required by public policy, for wanton acts must be
suppressed. While, under the present state of the law, extraordinary diligence is
not required in travel or tour contracts, such as that in the case at bar, the travel
agency acting as tour operator must nevertheless be held to strict accounting for
contracted services, considering the public interest in tourism, whether in the
local or in the international scene. Consequently, we have to likewise reject the
theory of private respondent that the promise it made in the tour brochure may be
regarded only as "commendatory trade talk."

 NEGLIGENCE

13. Gutierrez v. Gutierrez, 56 Phil 177

Physical injuries due to vehicular accident

We are dealing with the civil law liability of parties for obligations which arise from
fault or negligence. At the same time, we believe that, as has been done in other
cases, we can take cognizance of the common law rule on the same subject. In
the United States, it is uniformly held that the head of a house, the owner of an
automobile, who maintains it for the general use of his family is liable for its
negligent operation by one of his children, whom he designates or permits to run
it, where the car is occupied and being used at the time of the injury for the
 pleasure of other members of the owner's family than the child driving it. The
theory of the law is that the running of the machine by a child to carry other
members of the family is within the scope of the owner's business, so that he is
liable for the negligence of the child because of the relationship of master and
servant. (Huddy On Automobiles, 6th ed., sec. 660; Missell vs. Hayes [1914], 91
Atl., 322.) The liability of Saturnino Cortez, the owner of the truck, and of his
chauffeur Abelardo Velasco rests on a different basis, namely, that of contract
which, we think, has been sufficiently demonstrated by the allegations of the
complaint, not controverted, and the evidence. The reason for this conclusion
reaches to the findings of the trial court concerning the position of the truck on
the bridge, the speed in operating the machine, and the lack of care employed by
the chauffeur. While these facts are not as clearly evidenced as are those which
convict the other defendant, we nevertheless hesitate to disregard the points
emphasized by the trial judge. In its broader aspects, the case is one of two
drivers approaching a narrow bridge from opposite directions, with neither being
willing to slow up and give the right of way to the other, with the inevitable result
of a collision and an accident.

14. Vasquez v. Borja, 74 Phil 560

It is well known that a corporation is an artificial being invested by law with a

personality of its own, separate and distinct from that of its stockholders and from
that of its officers who manage and run its affairs. The mere fact that its
personality is owing to a legal fiction and that it necessarily has to act thru its
agents, does not make the latter personally liable on a contract duly entered into,
or for an act lawfully performed, by them for an in its behalf. The legal fiction by
which the personality of a corporation is created is a practical reality and
necessity. Without it no corporate entities may exist and no corporate business
may be transacted. Such legal fiction may be disregarded only when an attempt
is made to use it as a cloak to hide an unlawful or fraudulent purpose. No such
thing has been alleged or proven in this case. It has not been alleged nor even
intimated that Vazquez personally benefited by the contract of sale in question
and that he is merely invoking the legal fiction to avoid personal liability. Neither
is it contended that he entered into said contract for the corporation in bad faith
and with intent to defraud the plaintiff. We find no legal and factual basis upon
which to hold him liable on the contract either principally or subsidiarily.

Distinction between a contractual from an extra-contractual obligation, or an

obligation arising from contract from an obligation arising from culpa aquiliana:
The fault and negligence referred to in articles 1101-1104 of the Civil Code are
those incidental to the fulfillment or non-fullfillment of a contractual obligation;
while the fault or negligence referred to in article 1902 is the culpa aquiliana of
the civil law, homologous but not identical to tort of the common law, which gives
rise to an obligation independently of any contract. (Cf. Manila R.R. Co. vs. Cia.
 Trasatlantica, 38 Phil., 875, 887-890; Cangco vs. Manila R.R. Co., 38 Phil. 768.)
The fact that the corporation, acting thru Vazquez as its manager, was guilty of
negligence in the fulfillment of the contract, did not make Vazquez principally or
even subsidiarily liable for such negligence. Since it was the corporation's
contract, its nonfulfillment, whether due to negligence or fault or to any other
cause, made the corporation and not its agent liable.

On the other hand if independently of the contract Vazquez by his fault or

negligence cause damaged to the plaintiff, he would be liable to the latter under
article 1902 of the Civil Code. But then the plaintiff's cause of action should be
based on culpa aquiliana and not on the contract alleged in his complaint herein;
and Vazquez' liability would be principal and not merely subsidiary.

 DELAY

15. Cetus Development Corp. v. CA, 176 SCRA 72

Ejectment case

As to whether this demand is merely a demand to pay rent or comply with the
conditions of the lease or also a demand to vacate, the answer can be gleaned
from said Section 2. This section presupposes the existence of a cause of action
for unlawful detainer as it speaks of "failure to pay rent due or comply with the
conditions of the lease." The existence of said cause of action gives the lessor
the right under Article 1659 of the New Civil Code to ask for the rescission of the
contract of lease and indemnification for damages, or only the latter, allowing the
contract to remain in force. Accordingly, if the option chosen is for specific
performance, then the demand referred to is obviously to pay rent or to comply
with the conditions of the lease violated. However, if rescission is the option
chosen, the demand must be for the lessee to pay rents or to comply with the
conditions of the lease and to vacate. Accordingly, the rule that has been
followed in our jurisprudence where rescission is clearly the option taken, is that
both demands to pay rent and to vacate are necessary to make a lessee a
deforciant in order that an ejectment suit may be filed (Casilan et al. vs. Tomassi,
L-16574, February 28,1964, 10 SCRA 261; Rickards vs. Gonzales, 109 Phil. 423,
Dikit vs. Icasiano, 89 Phil. 44).lâwphî1.ñèt

Thus, for the purpose of bringing an ejectment suit, two requisites must concur,
namely: (1) there must be failure to pay rent or comply with the conditions of the
lease and (2) there must be demand both to pay or to comply and vacate within
the periods specified in Section 2, Rule 70, namely 15 days in case of lands and
5 days in case of buildings. The first requisite refers to the existence of the cause
of action for unlawful detainer while the second refers to the jurisdictional
requirement of demand in order that said cause of action may be pursued.
 The general rule on necessity of demand applies, to wit: there is default in the
fulfillment of an obligation when the creditor demands payment at the maturity of
the obligation or at anytime thereafter. This is explicit in Article 1169, New Civil
Code which provides that "(t)hose obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially demands from them
the fulfillment of their obligation." Petitioner has not shown that its case falls on
any of the following exceptions where demand is not required: (a) when the
obligation or the law so declares; (b) when from the nature and circumstances of
the obligation it can be inferred that time is of the essence of the contract; and (c)
when demand would be useless, as when the obligor has rendered it beyond his
power to perform.

The demand required in Article 1169 of the Civil Code may be in any form,
provided that it can be proved. The proof of this demand lies upon the creditor.
Without such demand, oral or written, the effects of default do not arise. This
demand is different from the demand required under Section 2, Rule 70, which is
merely a jurisdictional requirement before an existing cause of action may be
pursued.

The facts on record fail to show proof that petitioner demand

16. Santos Ventura Hocorna Foundation v. Santos, GR 153004, 04 Nov 2004

A compromise is a contract whereby the parties, by making reciprocal

concessions, avoid a litigation or put an end to one already commenced. It is an
agreement between two or more persons, who, for preventing or putting an end
to a lawsuit, adjust their difficulties by mutual consent in the manner which they
agree on, and which everyone of them prefers in the hope of gaining, balanced
by the danger of losing.

The general rule is that a compromise has upon the parties the effect and
authority of res judicata, with respect to the matter definitely stated therein, or
which by implication from its terms should be deemed to have been included
therein. This holds true even if the agreement has not been judicially approved.
From the time a compromise is validly entered into, it becomes the source of the
rights and obligations of the parties thereto. The purpose of the compromise is
precisely to replace and terminate controverted claims.

In accordance with the compromise agreement, the respondents asked for the
dismissal of the pending civil cases. The petitioner, on the other hand, paid the
initial P1.5 million upon the execution of the agreement. This act of the petitioner
showed that it acknowledges that the agreement was immediately executory and
enforceable upon its execution. As to the remaining P13 million, the two-year
period must be counted from October 26, 1990, the date of execution of the
compromise agreement, and not on the judicial approval of the compromise
agreement.
 Article 1169 of the New Civil Code provides: Those obliged to deliver or to do
something incur in delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.

Delay as used in this article is synonymous to default or mora which means delay
in the fulfillment of obligations. It is the non-fulfillment of the obligation with
respect to time.

In order for the debtor to be in default, it is necessary that the following requisites
be present: (1) that the obligation be demandable and already liquidated; (2) that
the debtor delays performance; and (3) that the creditor requires the performance
judicially or extrajudicially.

When the debtor knows the amount and period when he is to pay, interest as
damages is generally allowed as a matter of right. The complaining party has
been deprived of funds to which he is entitled by virtue of their compromise
agreement. The goal of compensation requires that the complainant be
compensated for the loss of use of those funds. This compensation is in the form
of interest. In the absence of agreement, the legal rate of interest shall prevail.
The legal interest for loan as forbearance of money is 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.

17. Vasquez v. Ayala Corp., GR 149734, 19 Nov 2004

MOA for the development of property and difference in 1984 and 1990 prices

The point of this petition is the alleged failure of Ayala Corporation to offer the
subject lots for sale to petitioners within three (3) years from the execution of the
MOA. It is not that Ayala Corporation committed or intended to develop the first
phase of its amended development plan within three (3) years. Whether it did or
did not is actually beside the point since the subject lots are not located in the
first phase anyway.

We now come to the issue of default or delay in the fulfillment of the obligation.

Article 1169 of the Civil Code provides:

Art. 1169. Those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extrajudicially demands from them the fulfillment of
their obligation.

However, the demand by the creditor shall not be necessary in order that delay
may exist:
 (1) When the obligation or the law expressly so declares; or

(2) When from the nature and the circumstances of the obligation it appears that
the designation of the time when the thing is to be delivered or the service is to
be rendered was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond
his power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply
or is not ready to comply in a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his obligation, delay by the other
begins.

In order that the debtor may be in default it is necessary that the following
requisites be present: (1) that the obligation be demandable and already
liquidated; (2) that the debtor delays performance; and (3) that the creditor
requires the performance judicially or extrajudicially.

Under Article 1193 of the Civil Code, obligations for whose fulfillment a day
certain has been fixed shall be demandable only when that day comes. However,
no such day certain was fixed in the MOA. Petitioners, therefore, cannot demand
performance after the three (3) year period fixed by the MOA for the development
of the first phase of the property since this is not the same period contemplated
for the development of the subject lots. Since the MOA does not specify a period
for the development of the subject lots, petitioners should have petitioned the
court to fix the period in accordance with Article 1197 of the Civil Code. As no
such action was filed by petitioners, their complaint for specific performance was
premature, the obligation not being demandable at that point. Accordingly, Ayala
Corporation cannot likewise be said to have delayed performance of the
obligation.

Even assuming that the MOA imposes an obligation on Ayala Corporation to

develop the subject lots within three (3) years from date thereof, Ayala
Corporation could still not be held to have been in delay since no demand was
made by petitioners for the performance of its obligation.

18. Abella v. Francisco, 55 Phil 447

The plaintiff brought this action to compel the defendant to execute the deed of
sale of the lots in question, upon receipt of the balance of the price, and asks that
he be judicially declared the owner of said lots and that the defendant be ordered
to deliver them to him.

The court below absolved the defendant from the complaint, and the plaintiff
appealed. In rendering that judgment, the court relied on the fact that the plaintiff
 had failed to pay the price of the lots within the stipulated time; and that since the
contract between plaintiff and defendant was an option for the purchase of the
lots, time was an essential element in it.

In holding that the period was an essential element of the transaction between
plaintiff and defendant, the trial court considered that the contract in question was
an option for the purchase that the contract in question was an option for the
purchase of the lots, and that in an agreement of this nature the period is
deemed essential. The opinion of the court is divided upon the question of
whether the agreement was an option or a sale, but even supposing it was a
sale, the court holds that time was an essential element in the transaction. The
defendant wanted to sell those lots to the plaintiff in order to pay off certain
obligation which fell due in the month of December, 1928. The time fixed for the
payment of the price was therefore essential for the defendant, and this view in
borne out by his letter to his representative Mabanta instructing him to consider
the contract rescinded if the price was not completed in time. In accordance with
article 1124 of the Civil Code, the defendant is entitled to resolve the contract for
failure to pay the price within the time specified.

19. Vda. de Villaruel v. Manila Motor Co.,104 Phil 926

Mora accipiendi

The lessor' insistence upon collecting the occupation rentals for 1942-1945 was
unwarranted in law. Hence, their refusal to accept the current rentals without
qualification placed them in default (mora creditoris or accipiendi) with the result
that thereafter, they had to bear all supervening risks of accidental injury or
destruction of the leased premises.

ART. 1185. When the obligation to deliver a certain and determinate thing arises
from the commission of a crime or misdemeanor the obligor shall not be
exempted from the payment of its value, whatever the cause of its loss may have
been, unless, having offered the thing to the person entitled to receive it, the
latter should have refused without reason to accept it.

Art. 1452. If fungible things should be sold for a price fixed with relation to weight,
number, or measure, they shall not be at the purchaser's risk until they have
been weighed, counted, or measured, unless the purchaser should be in default.

ART. 1589. If the person who contracted to do the work bound himself to furnish
the materials, he shall bear the loss in case of the destruction of the work before
it is delivered, unless its acceptance has been delayed by the default of the other
party.
 While there is a presumption that the loss of the thing leased is due to the fault of
the lessee (Civil Code of 1889, Art. 1563), it is noteworthy that the lessors have
not invoked that presumption either here or in the court below.

That the lessee and sublessee did not consign or deposit in court the rentals
tendered to and improperly rejected by the lessors, did not render the debtor
liable for default (mora solvendi) nor answerable for fortuitous events. In other
words, the only effect of the failure to consign the rentals in court was that the
obligation to pay them subsisted (P.N.B. vs. Relativo, 92 Phil., 203) and the
lessee remained liable for the amount of the unpaid contract rent, corresponding
to the period from July to November, 1946; it being undisputed that, from
December 1946 up to March 2, 1948, when the commercial buildings were
burned, the defendants-appellants have paid the contract rentals at the rate of
P350 per month. But the failure to consign did not eradicate the default (mora) of
the lessors nor the risk of loss that lay upon them. (3 Castan, Der. Civ., 8th Ed.,
p. 145; 4 Puig Peña, Der. Civ., part. 1, p. 234; Diaz Pairo, Teoria Gen. de las
Obligaciones [3rd Ed.], Vol. 1, pp. 192-193).

In view of the foregoing, we hold:lawphil.net

(a) That the dispossession of the lessee from the premises by the Japanese
army of occupation was not an act of mere trespass ( perturbacion de mero
hecho) but one de derecho chargeable to the lessors;

(b) That such dispossession, though not due to fault of lessors or lessee,
nevertheless resulted in the exemption of the lessee from its obligation to pay
rent during the period that it was deprived of the possession and enjoyment of
the premises leased;

(c) That the insistence of the lessors to collect such rentals was unwarranted;

(d) That the lessors were not justified in refusing to accept the tender of current
rentals unless the lessee should recognize their right to the rents corresponding
to the period that the lessee was not in possession;

(e) That by their improper refusal to accept the current rents tendered by the
lessee, the lessors incurred in default (mora) and they must shoulder the
subsequent accidental loss of the premises leased;

(f) That the mora of the lessors was not cured by the failure of the lessee to make
the consignation of the rejected payments, but the lessee remained obligated to
pay the amounts tendered and not consigned by it in court.

20. Tengco v. CA, GR 49852, 19 Oct 1989

Mora accipiendi
 There is also no merit in the petitioner's contention that the lessor is guilty of
mora accipiendi.

Under the circumstances, the refusal to accept the proffered rentals is not without
justification. The ownership of the property had been transferred to the private
respondent and the person to whom payment was offered had no authority to
accept payment. It should be noted that the contract of lease between the
petitioner and Lutgarda Cifra, the former owner of the land, was not in writing
and, hence, unrecorded. The Court has held that a contract of lease executed by
the vendor, unless recorded, ceases to have effect when the property is sold, in
the absence of a contrary agreement. The petitioner cannot claim ignorance of
the transfer of ownerhip of the property because, by her own account, Aurora
Recto and the private respondent, at various times, had informed her of their
respective claims to ownership of the property occupied by the petitioner. The
petitioner should have tendered payment of the rentals to the private respondent
and if that was not possible, she should have consigned such rentals in court.

21. Central Bank v. CA, 139 SCRA 46

Since both parties were in default in the performance of their respective

reciprocal obligations, that is, Island Savings Bank failed to comply with its
obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply
with his obligation to pay his P17,000.00 debt within 3 years as stipulated, they
are both liable for damages.

Article 1192 of the Civil Code provides that in case both parties have committed
a breach of their reciprocal obligations, the liability of the first infractor shall be
equitably tempered by the courts. WE rule that the liability of Island Savings Bank
for damages in not furnishing the entire loan is offset by the liability of Sulpicio M.
Tolentino for damages, in the form of penalties and surcharges, for not paying his
overdue P17,000.00 debt.