MAKATI STOCK EXCHANGE, INC. VS MIGUEL CAMPOSG.R. NO. 138814, APRIL 26, 2009

FACTS:

SEC Case No. 02-94-4678 was instituted on 10 February 1994 by respondent Miguel V. Campos with the Securities, Investigation and Clearing Department (SICD) of the Securities and Exchange Commission (SEC), a Petition against herein petitioners Makati Stock Exchange, Inc. (MKSE).

The Petition, sought: (1) the nullification of the Resolution dated 3 June 1993 of the MKSE Board of Directors, which allegedly deprived him of his right to participate equally in the allocation of Initial Public Offerings (IPO) of corporations registered with MKSE; (2) the delivery of the IPO shares he was allegedly deprived of, for which he would pay IPO prices; and (3) the payment of  P2 million as moral damages, P1 million as exemplary damages, and P500,000.00 as attorney’s fees and litigation expenses.

The SICD issued an Order granting respondent’s prayer for the issuance of a Temporary Restraining Order to enjoin petitioners from implementing or enforcing the Resolution of the MKSE Board of Directors. Subsequently issued another Order on 10 March 1994 granting respondent’s application for a Writ of Preliminary Injunction, to continuously enjoin, during the pendency of SEC Case No. 02-94-4678, the implementation or enforcement of the MKSE Board Resolution in question. 

On 11 March 1994, petitioners filed a Motion to Dismiss respondent’s Petition based on the following grounds: (1) the Petition became moot due to the cancellation of the license of MKSE; (2) the SICD had no jurisdiction over the Petition; and (3) the Petition failed to state a cause of action. The SICD denied petitioner’s Motion to Dismiss. Petitioners again challenged Order of SICD before the SEC en banc through another Petition for Certiorari.

The SEC en banc nullified the Order of SICD granting a Writ of Preliminary Injunction in favour of respondent. SEC en banc annulled the Order of SICD in SEC Case No. 02-94-4678 denying petitioners’ Motion to Dismiss, and accordingly ordered the dismissal of respondent’s Petition before the SICD.

Respondent filed a Petition for Certiorari with the Court of Appeals. Petitioners filed a Motion for Reconsideration but was denied by the Court of Appeals.

ISSUE: WHETHER OR NOT THE PETITION FAILED TO STATE A CAUSE OF ACTION.

RULING:

The petition filled by the respondent, Miguel Campos should be dismissed for failure to state a cause of action.

A cause of action is the act or omission by which a party violates a right of another.  A complaint states a cause of action where it contains three essential elements of a cause of action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said legal right. If these elements are absent, the complaint becomes vulnerable to dismissal on the ground of failure to state a cause of action. 

However, the terms right and obligation are not magic words that would automatically lead to the conclusion that such Petition sufficiently states a cause of action.  Right and obligation are legal terms with specific legal meaning.  A right is a claim or title to an interest in anything whatsoever that is enforceable by law while an obligation is defined in the Civil Code as a juridical necessity to give, to do or not to do. Justice J.B.L. Reyes offers the definition given by Arias Ramos as a more complete definition:

 An obligation is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the observance of a determinative conduct (the giving, doing or not doing), and in case of breach, may demand satisfaction from the assets of the latter.

Art. 1157 of the Civil Code provides that Obligations arise from (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts.

 The mere assertion of a right and claim of an obligation in an initiatory pleading, whether a

Complaint or Petition, without identifying the basis or source thereof, is merely a conclusion of fact and law.  (In the case at bar, although the Petition in SEC Case No. 02-94-4678 does allege respondent’s right to subscribe to the IPOs of corporations listed in the stock market at their offering prices, and petitioners’ obligation to continue respecting and observing such right, the Petition utterly failed to lay down the source or basis of respondent’s right and/or petitioners’ obligation.)

 Respondent merely quoted in his Petition the MKSE Board Resolution, passed sometime in

1989, granting him the position of Chairman Emeritus of MKSE for life. However, there is nothing in the said Petition from which the Court can deduce that respondent, by virtue of his position as Chairman Emeritus of MKSE, was granted by law, contract, or any other legal source, the right to subscribe to the IPOs of corporations listed in the stock market at their offering prices. (allocation of IPO shares was merely alleged to have been done in accord with a practice normally observed by the members of the stock exchange) A practice or custom is, as a general rule, not a source of a legally demandable or enforceable right.

Asilo vs People

On 15 March 1978, Private Respondent Visitacion’s late mother Marciana Vda. De Coronado (Vda. De Coronado) and the Municipality of Nagcarlan, Laguna (represented by the then Municipal Mayor Crisostomo P. Manalang) entered into a lease contract whereby the Municipality allowed the use and enjoyment of property comprising of a lot and a store located at the corner of Coronado and E. Fernandez Sts. at Poblacion, Nagcarlan, Laguna, in favor of the respondent’s mother for a period of twenty (20) years beginning on 15 March 1978 until 15 March 1998, extendible for another 20 years.8

The lease contract provided that the late Vda. De Coronado could build a firewall on her rented property which must be at least as high as the store; and in case of modification of the public market, she or her heir/s would be given preferential rights.

Visitacion took over the store when her mother died sometime in 1984.9 From then on up to January 1993, Visitacion secured the yearly Mayor’s permits.10

Sometime in 1986, a fire razed the public market of Nagcarlan. Upon Visitacion’s request for inspection on 15 May 1986, District Engineer Marcelino B. Gorospe (Engineer Gorospe) of the then Ministry of Public Works and Highways,11 Regional Office No. IV-A, found that the store of Visitacion remained intact and stood strong. This finding of Engineer Gorospe was contested by the Municipality of Nagcarlan.

The store of Visitacion continued to operate after the fire until 15 October 1993.

Visitacion received a letter12 from Mayor Comendador directing her to demolish her store in order to give way for the construction of a new municipal market building. Mayor Comendador relying on the strength of Sangguniang Bayan Resolutions authorized the demolition of the store with Asilo and Angeles supervising the work. Spouses Bombasi, thereafter, filed a criminal complaint21 against Mayor Comendador, Asilo and Angeles for violation of Sec. 3(e) of Republic Act No. 3019 otherwise known as the "Anti-Graft and Corrupt Practices Act" before the Office of the Ombudsman.

Issue: Whether or not the government is stopped from questioning the legality of the market stalls thus establishing that the demolition was done in bad faith

Held:Section 3(e) of Republic Act No. 3019 provides:

In addition to acts or omissions of public officers already penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful:

x x x x

(e) Causing any undue injury to any party, including the Government, or giving any private party any unwarranted benefits, advantage or preference in the discharge of his official, administrative or judicial functions throughmanifest partiality, evident bad faith or gross inexcusable negligence. This provision shall apply to officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions.

The elements of the offense are as follows: (1) that the accused are public officers or private persons charged in conspiracy with them; (2) that said public officers commit the prohibited acts during the performance of their official duties or in relation to their public positions; (3) that they caused undue injury to any party, whether the Government or a private party; (4) OR that such injury is caused by giving unwarranted benefits, advantage or preference to the other party; and (5) that the public officers have acted with manifest partiality, evident bad faithor gross inexcusable negligence.33

We sustain the Sandiganbayan in its finding of criminal and civil liabilities against petitioner Asilo and petitioner Mayor Comendador as here represented by his widow Victoria Bueta.

Sangguniang Bayan resolutions are not enough to justify demolition. Unlike its predecessor law,42the present Local Government Code43 does not expressly provide for the abatement of nuisance.44 And even assuming that the power to abate nuisance is provided for by the present code, the accused public officials were under the facts of this case, still devoid of any power to demolish the store. 

Furthermore, the Municipality of Nagcarlan, Laguna, as represented by the then Mayor Comendador, was placed in estoppel after it granted yearly business permits45 in favor of the Spouses Bombasi. Art. 1431 of the New Civil Code provides that, through estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. The representation made by the municipality that the Spouses Bombasi had the right to continuously operate its store binds the municipality. It is utterly unjust for the Municipality to receive the benefits of the store operation and later on claim the illegality of the business.

The bad faith of the petitioners completes the elements of the criminal offense of violation of Sec. 3(e) of Republic Act No. 3019. The same bad faith serves as the source of the civil liability of Asilo, Angeles, and Mayor Comendador.

Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost.

WOODHOUSE VS. HALILI

Facts: The Plaintiff entered into an agreement with the defendant for the establishment of a partnership for bottling and distribution of Mission soft drinks. Before the partnership was actually established the defendant required the plaintiff to secure an exclusive franchise for the said venture. In behalf of the said partnership and upon obtaining the said exclusive franchise the defendant stipulated to pay the plaintiff 30% of the profits. The plaintiff sought to obtain the said exclusive franchise but was only given a temporary one, subject only to 30 days. The parties then proceeded with the signing of the agreement. The partnership was still not initiated, only the agreement to work with each other, with the plaintiff as manager and the defendant as financer, was established.

Together the two parties went to the US to formally sign the contract of franchise with Mission Dry Corporation. The defendant then found out about the temporary franchise right given to the plaintiff, different from the exclusive franchise rights they stipulated in their contract.

When the operations of the business began he was paid P 2,000 and was allowed the use of a car. But in the next month, the pay was decreased to P 1,000 and the car was withdrawn from him.

The plaintiff demanded the execution of the partnership, but the defendant excused himself, saying that there was no hurry to do so. The Court of First Instance ordered the defendant to render an accounting of the profits and to pay the plaintiff 15% of such amount. It also held that execution of the contract of partnership cannot be enforced upon the defendant and that fraud as alleged by the defendant was also not proved. Hence the present action.

Issues:

(1) Whether the representation of the plaintiff in saying that he had exclusive franchise rights rather than the actual temporary right he possessed invalidated the contract

(2) Whether the court may compel the defendant to execute the contract of partnership between the parties

(3) What will be the amount of damages to be paid to the plaintiff?

Held: The Decision of the Court of First Instance is affirmed with modification.

Fraud was undoubtedly employed by the plaintiff to secure the consent of the defendant to enter into the contract with him by representing himself as holder of exclusive franchise rights when in fact he only holds a temporary franchise right good for 30 days. The fraud employed was not such as to render the contract null and void but only such as to hold the plaintiff liable for damages. Such fraud is merely incidental (dolo incidental) and not the causal fraud (dolo causante) that is detrimental to a contract. It does not invalidate the contract since fraud was only employed to secure the 30% stipulated share from the partnership.

The parties cannot be compelled to enter into a contract of partnership. The law recognizes the liberty of an individual to do or not to do an act. The action falls within Acto Personalisimo (a very personal act) which courts may not compel compliance.

The 15% that the Trial court ordered the defendant to pay the plaintiff is deemed to be the appropriate and reasonable. Such amount was the spontaneous reaction of the defendant upon knowledge of the misrepresentation of the plaintiff and amounts to the virtual modification of their contract.

GUTIERREZ VS GUTIERREZ G.R. NO. 34840 SEPTEMBER 23, 1931

FACTS:

On February 2, 1930, a passenger truck and an automobile of private ownership collided while attempting to pass each other on a bridge. The truck was driven by the chauffeur Abelardo Velasco, and was owned by saturnine Cortez. The automobile was being operated by Bonifacio Gutierrez, a lad 18 years of age, and was owned by Bonifacio’s father and mother, Mr. and Mrs. Manuel Gutierrez. At the time of the collision, the father was not in the car, but the mother, together with several other members of the Gutierrez family were accommodated therein.

The collision between the bus and the automobile resulted in Narciso Gutierrez suffering a fractured right leg which required medical attendance for a considerable period of time.

ISSUE: Whether or not both the driver of the truck and automobile are liable for damages and indemnification due to their negligence. What are the legal obligations of the defendants?

HELD: Bonifacio Gutierrez’s obligation arises from culpa aquiliana. On the other hand, Saturnino Cortez’s and his chauffeur Abelardo Velasco’s obligation rise from culpa contractual.

The youth Bonifacio was na incompetent chauffeur, that he was driving at an excessive rate of speed, and that, on approaching the bridge and the truck, he lost his head and so contributed by his negligence to the accident. The guaranty given by the father at the time the son was granted a license to operate motor vehicles made the father responsible for the acts of his son. Based on these facts, pursuant to the provisions of Art. 1903 of the Civil Code, the father alone and not the minor or the mother would be liable for the damages caused by the minor.

The liability of Saturnino Cortez, the owner of the truck, and his chauffeur Abelardo Velasco rests on a different basis, namely, that of contract.

PEDRO ELCANO and PATRICIA ELCANO, in their capacity as Ascendants of Agapito Elcano, deceasedvs.REGINALD HILL, minor, and MARVIN HILL, as father and Natural Guardian of said minorG.R. No. L-24803 May 26, 1977

Facts:

Reginald Hill, a minor, caused the death of Agapito (son of Elcano). Elcano filed acriminal case against Reginald but Reginald was acquitted for “lack of intent coupled with mistake.” Elcano then filed a civil action against Reginald and his dad (Marvin Hill) for damages based on Article 2180 of the Civil Code. Hill argued that the civil action is barred by his son’s acquittal in the criminal case; and that if ever, his civil liability as a parent has been extinguished by the fact that his son is already an emancipated minor by reason of his marriage.

ISSUE: Whether or not Marvin Hill may be held civilly liable under Article 2180.

HELD: Yes. The acquittal of Reginald in the criminal case does not bar the filing of a separate civil action. A separate civil action lies against the offender in a criminal act, whether or not he is criminally prosecuted and found guilty or acquitted, provided that the offended party is not allowed, if accused is actually charged also criminally, to recover damages on both scores, and would be entitled in such eventuality only to the bigger award of the two, assuming the awards made in the two cases vary. In other words, the extinction of civil liability referred to in Par. (e) of Section 3, Rule 111, refers exclusively to civil liability founded on Article 100 of the Revised Penal Code, whereas the civil liability for the same act considered as a quasi-delict only and not as a crime is not extinguished even by a declaration in the criminal case that the criminal act charged has not happened or has not been committed by the accused. Briefly stated, culpa aquiliana includes voluntary and negligent acts which may be punishable by law.

Philippine National Construction Corporation, Petitioner, vs. Court of Appeals, et. al.

FACTS:

The case sparked by the petitioners refusal to pay the rentals as stipulated in the contract of lease which was executed sometime in November 1985. The term of the lease reads in part as follows:

"commencing on the date of issuance of industrial clearance by the Ministry of Human Settlements"

"monthly rate of Php 20,000.00 and shall be increased by five percent (5%) yearly"

"shall be paid yearly in advance"

"Property shall be used by the Lessee as the site, grounds and premises of rock crushing plant and field office, sleeping quarters and canteen/mess hall. Furthermore, was granted to erect structures and improvements necessary for or incidental to the Lessee's purpose"

"may be terminated by mutual agreement"

The petitioner obtained a Temporary Use Permit for the proposed rock crushing project. The private respondent wrote the petitioner requesting payment of the first annual rental. In reply-letter, petitioner argued that payment of rental would commence on the date of issuance of an industrial clearance by the Ministry of Human Settlements, and not from the date of signing of the contract. It then expressed its intention to terminate the contract due to financial, as well as technical, difficulties. However, the private respondent refused to accede to petitioner's request for the pretermination of the lease contract. They insisted on the performance of the obligation and reiterated their demand for payment. The petitioner objected to the respondent's claim and argued that they are only obligated to pay Php 20,000.00 as rental payment for 1 month.

The private responded filed a case to the Regional Trial Court against petitioner for specific performance with damages. After due hearing, the trial court rendered a decision ordering petitioner to pay private respondents the amount of Php 492,000.00 which represented the rentals for two years.

The petitioner then appealed to the Court of Appeals alleging that the trial court erred in ordering it to pay the private respondent and denying it the right to be heard.

The CA affirmed the trial courts decision and the denial of its motion to reconsideration, petitioner alleviated the case to the Supreme Court ascribing the same alleged errors and reiterating their arguments.

ISSUE:

1. Whether or not the suspensive condition has been fulfilled and that the lease contract has become operative?

2. Whether or not the petitioner can invoke Article 1266 and the principle of rebus sic stantibus in the case at bar?

3. Whether or not the amount of Php 492,000.00 is excessive?

RULING:

The petitioner's contentions were denied by the Supreme Court.

First, the petitioner considered the Temporary Use Permit as "Industrial permit" as showed in the petitioner's letter to the private respondent and recognized its obligation to pay rentals counted from the date the permit was issued.

It can be deduced that the suspensive condition-issuance of industrial clearance-has already been fulfilled and the lease contract has become operative.

Second, the petitioner can not invoke 1266 and the principle of rebus sis stantibus. It is a fundamental rule that contracts, once perfected, bind both the contracting parties, and obligations arising therefrom have the force of law between the parties and should be complied with in good faith. However, the law recognizes exceptions to the principle of obligatory force of contracts. Article 1266 is one of the exceptions, which read: THE DEBTOR IN THE OBLIGATION TO DO SHALL BE RELEASED WHEN THE PRESTATION BECOME LEGALLY OR PHYSICALLY IMPOSSIBLE WITHOUT THE FAULT OF THE OBLIGOR.

The petitioner cannot successfully take refuge in the said article, since it is applicable only in obligation to do and not on obligation to give. The obligation to pay rentals falls under obligation to give.

The principle of rebus sic stantibus neither fits in with the facts of the case. Under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist, the contract also ceases to exist.

In this case, petitioner wants the Court to believe that the abrupt change in political climate and its poor financial condition rendered the performance of the obligation impractical and inimical.

However, anent petitioner alleged poor financial condition, the same will neither release the petitioner from the binding effect of the contract of lease. Mere pecuniary inability to fulfill an engagement does not discharge a contractual obligation, nor does it constitute a defense to an action for specific performance.(Central Bank vs. CA)

Non-materialization of purpose in entering the contract of lease. As a general principle, the motive of a particular purpose in entering into a contract does not affect the validity nor existence of the contract.

Third, the private respondent unquestionably suffered pecuniary losses because of the inability to use the leased premises. Thus, in accordance with article 1659 of the Civil Code, they are entitled to indemnification for damages; and the award of Php492,000.00 is fair and just. Thus, the instant petition is DENIED and the decision of the CA is Affirmed in toto.