Arrieta v.
NARIC performance bond it executed in favor of
G.R. No. L-15645
January 31, 1964
Facts:
Mrs. Paz Arrieta participated in public
bidding called by NARIC on May 19, 1952 for the
supply of 20,000 metric tons of Burmese rice.
Her bid was $ 203.00 per metric ton, it was the
lowest that’s why the contract was awarded to
her. On July 1,1952, Arrieta and NARIC entered
into contract. Arrieta was obligated to deliver
20,000 metric ton of Burmese rice at $203.00
per metric ton to NARIC. In return, NARIC
committed itself to pay for the imported rice “
by means of an irrevocable, confirmed and
assignable letter of credit in US currency in
favor of Arrieta and/or supplier in Burma (THIRI
SETKYA), immediately.”
NARIC took the first step to open the
letter of credit on July 30, 1952 by forwarding to
the PNB its application for commercial letter of
credit. Arrieta with the help of a counsel,
advised NARIC of the necessity for the opening
of the letter because she tender her supplier in
Ragoon, Burma of 5% of the price of 20,000
tons at $180.70 and if she didn’t comply the 5%
will be confiscated if the required letter of
credit is not received by them before August 4,
1952. PNB informed NARIC that their
application of credit letter amounting to
$3,614,000.00 was approved with the condition
of 50% marginal cash be paid. NARIC does not
meet the condition. The allocation of Arrieta’s
supplier in Ragoon was cancelled and the 5%
deposit was forfeited.
When the futility of restoring the
cancelled Burmese rice allocation became clear,
Arrieta offered to provide the NARIC with Thai
rice instead. They rejected the offer and later
contended that it amounted to a waiver of
rights with regard to the breach of contract.
Arrieta sent a letter to NRIC demanding
compensation for the damages caused her in
the sum of $286, 000.00, representing
unrealized profit. The demand having been
rejected, she instituted the case.
NARIC filed a counterclaim, asserting
that it has suffered likewise by way of
unrealized profit, damages of $406,000 from
the failure of the projected contract to
materialize. It also sued the Manila
Underwriters Insurance Company as a third
party defendant to hold it liable on the
Arrieta.
Issue:
Whether or not NARIC’s failure to open
immediately the letter of credit amounted to a
breach of the contract for which it may be held
liable in damages.
Held:
Yes, because the reason of the
cancellation of the contract by Arrieta in
Ragoon, Burma was the failure of NARIC to
open the letter of credit within a specific period
of time. One who assumes contractual
obligation and fails to perform in which he knew
and was aware when he entered in the
contract, should be liable for his failure to do
what is required by a law. Under the Art. 1170
of the Civil Code, not only the debtors guilty of
fraud, negligence or default but also a debtor of
every, in general, who fails in the performance
of his obligation is bound to indemnify for the
losses and damages caused thereby.
Magat v. Medialdia
G.R. No. L-37120
April 20, 1983
Facts:
Sometime in September 1972,
respondent entered into a contract with the
U.S. Navy Exchange, Subic Bay, Philippines, for
the operation of a fleet of taxicabs, each taxicab
to be provided with the necessary taximeter
and a radio transceiver. Isidro Q. Aligada, acting
as an agent, approached the petitioner in behalf
of the respondent and proposed to import from
Japan thru the plaintiff herein or thru plaintiff’s
Japanese business associates, all taximeters and
radio transceivers needed by the defendant.
Petitioner was able to import the same and a
firm offer, in written form, was made by
Aligada. Petitioner received notice of the fact
that the defendant accepted plaintiff’s offer to
sell to the defendant the items specified as well
as the terms and conditions of said offer. After
petitioner received advice from the defendant
as to the radio frequency to be assigned by the
proper authorities to the defendant, petitioner
requested a letter of credit from the defendant,
a normal business practice in case of foreign
importation. Petitioner was repeatedly assured
by Aligada and respondent of the latter’s
financial capabilities to pay and refused to open
a letter of credit. Thereafter, petitioner found
out that defendant had already been operating
his taxicabs without the required radio
transceivers. And when pressed by the U.S.
Navy to comply, defendant blamed petitioner,
claiming the latter was in delay. Petitioner sent
a letter to the defendant ascertaining his
intention to fulfill his end of the bargain but he
did not reply. In view of defendant’s failure to
fulfill his contractual obligations with the
petitioner, the petitioner filed a case against the
defendant for breach of contract and damages.
Respondent filed a motion to dismiss
alleging a lack of cause of action. He contended
that plaintiff was merely anticipating his loss or
damage which might result from the alleged
failure of defendant to comply with the terms of
the alleged contract. Plaintiff’s right therefore
under his cause of action is not yet fixed or
vested. Respondent Judge in this case dismissed
the complaint.
Issue:
Whether or not the respondent is guilty
for breach of contract.
Held:
Yes. The Court contends that the
parties, both businessmen, entered into the
aforesaid contract with the evident intention of
deriving some profits therefrom. Upon breach
of the contract by either of them, the other
would necessarily suffer loss of his expected
profits. Since the loss comes into being at the
very moment of breach, such loss is real, “fixed
and vested” and, therefore, recoverable under
the law.
Article 1170 of the Civil Code provides:
Those who in the performance of their
obligation are guilty of fraud, negligence, or
delay, and those who in any manner contravene
the tenor thereof are liable for damages.
The phrase “in any manner contravene
the tenor” of the obligation includes any illicit
act or omission which impairs the strict and
faithful fulfillment of the obligation and every
kind of defective performance. The damages
which the obligor is liable for includes not only
the value of the loss suffered by the obligee
[daño emergente] but also the profits which the
latter failed to obtain [lucro cesante]. If the
obligor acted in good faith, he shall be liable for
those damages that are the natural and
probable consequences of the breach of the
obligation and which the parties have foreseen
or could have reasonably foreseen at the time
the obligation was constituted; and in case of
fraud, bad faith, malice or wanton attitude, he
shall be liable for all damages which may be
reasonably attributed to the non-performance
of the obligation. The same is true with respect
to moral and exemplary damages. The
applicable legal provisions on the matter,
Articles 2220 and 2232 of the Civil Code, allow
the award of such damages in breaches of
contract where the defendant acted in bad
faith.
Chavez v. Gonzales
G.R. No. L-27454
April 30, 1970
Facts:
On July 1963, Rosendo Chavez brought
his typewriter to Fructuoso Gonzales a
typewriter repairman for the cleaning and
servicing of the said typewriter but the latter was
not able to finish the job. During October 1963,
the plaintiff gave the amount of P6.00 to the
defendant which the latter asked from the
plaintiff for the purchase of spare parts, because
of the delay of the repair the plaintiff decided to
recover the typewriter to the defendant which he
wrapped it like a package.
When the plaintiff reached their home he
opened it and examined that some parts and
screws was lost. That on October 29, 1963 the
plaintiff sent a letter to the defendant for the
return of the missing parts, the interior cover and
the sum of P6.00 (Exhibit D). The following day,
the defendant returned to the plaintiff some of
the missing parts, the interior cover and the
P6.00.
The plaintiff brought his typewriter to
Freixas Business Machines and the repair cost
the amount of P89.85. He commenced this
action on August 23, 1965 in the City Court of
Manila, demanding from the defendant the
payment of P90.00 as actual and compensatory
damages, P100.00 for temperate damages,
P500.00 for moral damages, and P500.00 as
attorney’s fees.
The defendant made no denials of the
facts narrated above, except the claim of the
plaintiff that the cost of the repair made by
Freixas Business Machines be fully chargeable
against him.
Issue:
Whether or not the defendant is liable
for the total cost of the repair made by Freixas
Business Machines with the plaintiff typewriter?
Held:
No, he is not liable for the total cost of
the repair made by Freixas Business Machines
instead he is only liable for the cost of the
missing parts and screws. The defendant
contravened the tenor of his obligation in
repairing the typewriter of the plaintiff that he
fails to repair it and returned it with the missing
parts, he is liable under “ART. 1167. If a person
obliged to do something fails to do it, the same
shall be executed at his cost.
This same rule shall be observed if he
does it in contravention of the tenor of the
obligation. Furthermore it may be decreed that
what has been poorly done he undone.”
It is clear that the defendant-appellee
contravened the tenor of his obligation because
he not only did not repair the typewriter but
returned it "in shambles", according to the
appealed decision. For such contravention, as
appellant contends, he is liable under Article
1167 of the Civil Code for the cost of executing
the obligation in a proper manner. The cost of
the execution of the obligation in this case
should be the cost of the labor or service
expended in the repair of the typewriter, which is
in the amount of P58.75. because the obligation
or contract was to repair it.
In addition, the defendant-appellee is
likewise liable, under Article 1170 of the Code,
for the cost of the missing parts, in the amount of
P31.10, for in his obligation to repair the
typewriter he was bound, but failed or neglected,
to return it in the same condition it was when he
received it.
Appellant’s claims for moral and
temperate damages and attorney’s fees were,
however, correctly rejected by the trial court, for
these were not alleged in his complaint (Record
on Appeal, pages 1-5). Claims for damages and
attorney’s fees must be pleaded, and the
existence of the actual basis thereof must be
proved. 2 The appealed judgment thus made no
findings on these claims, nor on the fraud or
malice charged to the appellee. As no findings of
fact were made on the claims for damages and
attorney’s fees, there is no factual basis upon
which to make an award therefor. Appellant is
bound by such judgment of the court, a quo, by
reason of his having resorted directly to the
Supreme Court on questions of law.
IN VIEW OF THE FOREGOING
REASONS, the appealed judgment is hereby
modified, by ordering the defendant-appellee to
pay, as he is hereby ordered to pay, the plaintiff-
appellant the sum of P89.85, with interest at the
legal rate from the filing of the complaint. Costs
in all instances against appellee Fructuoso
Gonzales.
Tanguilig v. CA
G.R. No. 117190
January 2, 1997
Facts:
The parties agreed on the construction
of the windmill for a consideration of P60,000.00
with a one-year guaranty from the date of
completion and acceptance by respondent.
Petitioner a down payment of P30,000.00and an
installment payment of P15,000.00, leaving a
balance of P15,000.00. On 14 March 1988, due
to the refusal and failure of respondent to pay
the balance, petitioner filed a complaint to collect
the amount. Respondent denied the claim
saying that he had already paid this amount to
the San Pedro General Merchandising Inc.
(SPGMI) which constructed the deep well to
which the windmill system was to be connected.
The balance of P15,000.00 should be offset by
the defects in the windmill system which caused
the structure to collapse after a strong wind hit
their place. Petitioner contended that the
collapse was attributable to a typhoon, a force
majeure, which relieved him of any liability. The
trial court held that the construction of the deep
well was not part of the windmill project. The
Court of Appeals reversed the trial court.
Issue:
Whether or not petitioner is liable to
reconstruct the windmill after it collapsed.
Held:
Yes, in order for a party to claim
exemption from liability by reason of fortuitous
event under Art 1174 of the Civil Code the event
should be the sole and proximate cause of the
loss or destruction of the object of the contract.
In Nakpil vs. Court of Appeals, the S.C.
held that 4 requisites must concur that there
must be a (a) the cause of the breach of the
obligation must be independent of the will of
debtor (b) the event must be either
unforeseeable or unavoidable; (c) the event be
such 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.
Tanguilig merely stated that there was a
strong wind, and a strong wind in this case is not
fortuitous, it was not unforeseeable nor
unavoidable, places with strong winds are the
perfect locations to put up a windmill, since it
needs strong winds for it to work.
WHEREFORE, the appealed decision is
MODIFIED. Respondent VICENTE HERCE JR.
is directed to pay petitioner JACINTO M.
TANGUILIG the balance of P15,000.00 with
interest at the legal rate from the date of the
filing of the complaint. In return, petitioner is
ordered to "reconstruct subject defective
windmill system, in accordance with the one-
year guaranty" and to complete the same within
three (3) months from the finality of this decision.
Khe Hong Cheng v. CA
G.R. No. 144169
March 28, 2001

Facts:
Petitioner is the owner of Butuan
Shipping Lines. In one of the vessels owned by
the petitioner, Philippine Agricultural Trading
Corporation boarded 3,400 bags of copra to be
shipped from Masbate to Dipolog City and which
said shipment of copra was insured by PhilAm.
accion pauliana on February 1997, a month after
the discovery that petitioner had no property in
his name to satisfy the judgment, action for
rescission of subject deeds had not yet
prescribed.

While on board, the ship sank

amounting to total loss of the shipments.
Because of the loss, the insurer paid the
damages to the consignee. Having subrogated
the rights of the consignee, PhilAm instituted a
civil case to recover the money paid to the
consignee based on breach of contract of
carriage. While the case was pending, petitioner
executed deeds of donations of parcels of land
to his children.

The trial court rendered judgment

against the petitioner, Khe Hong Cheng in the
civil case on December 29, 1993. After the
decision became final, a writ of execution was
issued but it was not served. Therefore, an alias
writ was applied for which was granted. The
sheriff did not found any property under Butuan
Shipping Lines and/or Khe Hong Cheng. In
1997, PhilAm filed complaint for annulling the
deeds of donation made by herein petitioner to
his children and alleged the donation was to
defraud his creditors including PhilAm. Petitioner
filed an answer stating that the action had
already prescribed.

Issue:
Whether or not the action to rescind the
donation had already prescribed.

Held:
No, the action for rescission has not yet
prescribed.

Article 1389 of the Civil Code simply

provides that the action to claim rescission must
be commenced within four years. When the law
is silent as to when the prescriptive period shall
commence, general rule must apply that it will
commence when the moment the action
accrues.
According to the trial court, the period began
from December 29, 1993 when the civil case
was resolved. Thus, the CA maintained that the
four year period began only on January 1997,
the time when it first learned that the judgment
award could not be satisfied because Khe Hong
Cheng had no more properties in his name.

An action for rescission must be the last

resort of the creditors and can only be availed
after the creditor had exhausted all the
properties. The herein respondent came to know
only in January 1997 about the unlawful
conveyances of the petitioner when, together
with the sheriff and counsel, were to attach the
property of the petitioner and it was then only
when they found out it is no longer in the name
of the petitioner. Since the respondent filed