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    COURTESY OF SU LAW 2011

    ANG YU ASUNCION VS. COURT OF APPEALS

    238 SCRA 602

    FACTS:

    On July 29, 1987, a Second Amended Complaint for Specific Performance was filed by Ang Yu

    Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng and Jose Tan before the Regional Trial Court of

    Manila.

    The plaintiffs were tenants or lessees of residential and commercial spaces owned by defendants in

    Binondo, Manila. On several conditions defendants informed the plaintiffs that they are offering to sell

    the premises and are giving them priority to acquire the same. During negotiations, Bobby Cu Unjiengoffered a price of P6-million while plaintiffs made a counter of offer of P5-million. Plaintiff thereafter

    asked the defendants to put their offer in writing to which the defendants acceded. In reply to

    defendants letter, plaintiffs wrote, asking that they specify the terms and conditions of the offer to sell.

    When the plaintiffs did not receive any reply, they sent another letter with the same request.Since

    defendants failed to specify the terms and conditions of the offer to sell and because of information

    received that the defendants were about to sell the property, plaintiffs were compelled to file the

    complaint to compel defendants to sell the property to them.

    The court dismissed the complaint on the ground that the parties did not agree upon the terms and

    conditions of the proposed sale, hence, there was no contact of sale at all.

    On November 15, 1990, the Cu Unjieng spouses executed a Deed of Sale transferring the property in

    question to Buen Realty and Development Corporation. Buen Realty, as the new owner of the subject

    property, wrote to the lessees demanding the latter to vacate the premises. In its reply, it stated that

    Buen Realty and Development Corporation brought the property subject to the notice of lis pendens.

    ISSUE:

    Can Buen Realty be bound by the writ of execution by virtue of the notice of lis pendens?

    RULING:

    No.An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation

    is upon the concurrence of the essential elements thereof, viz:

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    (a) the vinculum juris or juridical tie which is the efficient cause established by the various sources of

    obligations; (b) the object which is the prestation or conduct, required to observed; and (c) the subject-

    persons who, viewed demandability of the obligation are the active (oblige) and the passive (obligor)

    subjects.

    Among the sources of an obligation is a contract (Art. 1157), which is a meeting of minds between two

    persons whereby one binds himself, with respect to the other, to give something or to render some

    service. A contract undergoes various stages that include its negotiation or preparation, its perfection

    and, finally, its consummation.

    Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding

    juridical relation. In sales, particularly, to which the case at bench belongs, the contract is perfected

    when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer

    ownership of a thing or right to another, called the buyer, over which the latter agrees.

    The registration of lis pendens must be independently addressed in appropriate proceedings.Therefore,

    Buen Realty cannot be held subject to the writ of execution issued by the respondent Judge, let alone

    ousted from the ownership and possession of the property, without first being duly afforded its day in

    court.

    SAGRADA ORDEN vs. NATIONAL COCONUT CORPORATION

    91 PHIL. 503

    FACTS:

    Plaintiff Sagrada Orden owned a piece of real property in Pandacan, Manila. During the Japanese

    occupation, the land was acquired by a Japanese corporation Taiwan Tekkoshho. After the liberation, the

    Alien Property Custodian of the United States took possession, control, and custody of the real property.

    During the year 1946, the property was occupied by the Copra Export Management Company under the

    custodianship agreement with United States Alien Property Custodian, and when it vacated, the propertywas occupied by defendant National Coconut Corporation. Sagrada Orden made claim to the property

    before the Alien Property Custodian of the United States but was denied. So plaintiff brought an action

    in court to annul the sale of property of Taiwan Tekkosho, and recover its possession. The case did not

    come for trial because the parties presented a joint petition in which it is claimed by Sagrada Orden that

    the sale in favor of Taiwan Tekkosho was null and void because it was executed under threats, duress,

    and intimidation, and that the title be re-issued to Sagrada Orden. The court rendered judgment

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    releasing the defendant from liability, but reversing to the plaintiff the right to recover from the

    defendant reasonable rentals for the use and occupation of the premises.

    The present action to recover the reasonable rentals from August 1946, the date when defendant began

    to occupy, to the date it vacated it. The defendant did not contest its liability for the rentals at the rate of

    P3, 000 per month from February 28, 1949, but resisted the claim therefore prior to that date.Defendant contends that it occupied the property in good faith, under no obligation to pay rentals for

    the use and occupation. Judgment rendered for the plaintiff to recover from the defendant the sum of

    P3, 000 a month, from August, 1946, to the date the defendant vacates the premises. Thus this appeal

    made by defendant.

    ISSUE:

    Can the defendant company be held liable to pay rentals from August 1946 to the date it vacated?

    RULING:

    No. If defendant-appellant is liable at all, its obligations, must arise from any of the four sources of

    obligations, namely, law, contract or quasi-contract, crime, or negligence. Defendant-appellant is not

    guilty of any offense at all, because it entered the premises and occupied it with the permission of the

    entity which had the legal control and administration thereof, the Alien Property Administration. Neither

    was there any negligence on its part. There was also no privity between the Alien Property Custodian

    and the Taiwan Tekkosho, which had secured the possession of the property from the plaintiff-appelleeby the use of duress, such that the Alien Property Custodian or its permittee (defendant-appellant) may

    be held responsible for the supposed illegality of the occupation of the property by the said Taiwan

    Tekkosho. The Alien Property Administration had the control and administration of the property not as

    successor to the interests of the enemy holder of the title, the Taiwan Tekkosho. Neither is it a trustee of

    the former owner, the plaintiff-appellee herein, but a trustee of then Government of the United States,

    in its own right, to the exclusion of, and against the claim or title of, the enemy owner. From August,

    1946, when defendant-appellant took possession, to the late of judgment on February 28, 1948, Alien

    Property Administration had the absolute control of the property as trustee of the Government of the

    United States, with power to dispose of it by sale or otherwise, as though it were the absolute owner.

    Therefore, even if defendant-appellant were liable to the Alien Property Administration for rentals, these

    would not accrue to the benefit of the plaintiff-appellee, the owner, but to the United StatesGovernment.

    PE VS INTERMEDIATE APPELLATE COURT

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    195 SCRA 137

    FACTS:

    Plaintiff spouses Francisco and Anita Pe entered into a contract to sell their 5 parcels of

    land. These parcels of land were mortgaged with different banking institutions. Lots Nos. 40 and 41

    were mortgaged to the Philippine Veterans Bank (PVB) for P351,162.59; Lots Nos. 42 and 45 were

    mortgaged to the Development Bank of the Philippines (DBP) for P189,322.49; and Lot No. 47 to

    Philippine Commercial and Industrial Bank (PCIB) for P57,000.

    On September 20, 1976, the plaintiffs executed a contract to sell. The plaintiffs were paid the

    total amount of 351,162.59 to PVB for lots 40 and 41. On the same date, they executed in favor of

    Domingo Sy a deed of sale over Lots Nos. 42 and 45 after payment by the latter of the former's account

    with the DBP in the amount of P189,322.49. Consequently, a contract to sell and a corresponding deed

    of sale covering Lot No. 47 were prepared but the deed did not materialize as the buyers offer of

    P49,454.92, as payment for Lot No. 47, was rejected by the Pe spouses, the latter insisted on the full

    payment of their obligation with the (PCIB) in the amount of P383,615.97 and P620,000 as the alleged

    consideration stipulated in the Contract to Sell. Pe allege that the consideration of the Contract to Sell

    was P1,544,161.05 and not P620,000.

    ISSUE:

    Was the contention of the plaintiffs valid?

    RULING:

    No. The words of the Contract to Sell were clear and left no doubt upon the true intention of the

    contracting parties. The condition laid down in paragraph (2) of the contract did not provide for an

    additional consideration, but only for the manner in which the consideration was to be applied. It clearly

    provided that payment shall be applied to petitioners' obligations with the bank where the respective

    properties were mortgaged, and upon their release, petitioners shall execute the final deed of sale. The

    subsequent acts of the parties conformed with this condition. Thus, the parties should be bound by suchwritten contract. It should also be noted that at the time of the execution of the Contract to Sell, the

    total obligation due to the PCIB as regards Lot No. 47 was only P 99,374.89. The rise of the same

    obligation to P383,615.96 was brought about by subsequent loans the petitioners obtained with the

    same bank for which the tractor and an "Offset Discharrow" were given as additional security.

    Contracts are respected as the law between the contracting parties. The parties may establish

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    such stipulations, clauses, terms and conditions as they may want to include. As long as such agreements

    are not contrary to law, morals, good customs, public policy or public order, they shall have the force of

    law between.

    LEUNG BEN VS. P. J. O'BRIEN

    G.R. No. L-13602 April 6, 1918

    FACTS:

    An action was instituted in the Court of First Instance of the city of Manila by P. J. O'Brien to recover the

    sum of P15,000 alleged to have been lost by Leung Ben to P.J. OBrien in a series of gambling, banking

    and percentage games conducted during the two or three months prior to the institution of the suit. In

    Leung Bens verified complaint,OBrien asked for an attachment against the property of Leung Ben on

    the ground that the latter was about to depart from the Philippine Islands with intent to defraud his

    creditors. This attachment was issued, and acting under that authority, the sheriff attached the sum of

    P15,000 which had been deposited by the OBrien with the International Banking Corporation.

    Leung Bien filed a motion to quash the attachment, which was dismissed by the court. Hence this

    application for a writ of certiorari, the purpose of which was to quash an attachment issued from the

    Court of First Instance of the City of Manila.

    ISSUE:

    Was the statutory obligation to restore money won at gaming an obligation arising from "contract,

    express or implied?"

    RULING:

    Yes.Upon general principles, recognized both in the civil and common law, money lost in gaming and

    voluntarily paid by the loser to the winner cannot, in the absence of statute, be recovered in a civil

    action. But Act No. 1757 of the Philippine Commission, which defines and penalizes several forms ofgambling, contains numerous provisions recognizing the right to recover money lost in gambling or in

    playing certain games. The original complaint filed in the Court of First Instance was not clear as to the

    particular section of Act No. 1757 under which the action was brought, but was alleged that the money

    was lost at gambling, banking, and percentage game in which the defendant was a banker. It must

    therefore be assumed that the action was based upon the right of recovery given in section 7 of said Act,

    which declared that an action may be brought against the banker by any person losing money at a

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    banking or percentage game.

    It was observed that according to the Civil Code obligations are supposed to be derived either from (1)

    the law, (2) contracts and quasi-contracts, (3) illicit acts and omission, or (4) acts in which some sort ob

    lame or negligence is present. This enumeration of sources of obligations and the obligation imposed by

    law are different types. The obligations which in the Code are indicated as quasi-contracts, as well asthose arising ex lege, are in the common la system, merged into the category of obligations imposed by

    law, and all are denominated implied contracts.

    In the case under consideration, the duty of O Brien to refund the money which he won from the Leung

    Ben at gaming was a duty imposed by statute. It therefore arose ex lege. Furthermore, it was a duty to

    return a certain sum which had passed from OBrien to Leung Ben. By all the criteria which the common

    law supplies, this a duty in the nature of debt and is properly classified as an implied contract. It was

    well- settled by the English authorities that money lost in gambling or by lottery, if recoverable at all, can

    be recovered by the loser in an action of indebitatus assumpsit for money had and received. This meant

    that in the common law the duty to return money won in this way was an implied contract, or quasi-

    contract. The phase in question should be interpreted in such a way as to include all obligations, whether

    arising from consent or ex lege, because that was equivalent to eliminating all distinction between the

    first and the fifth paragraphs by practically striking out the first two lines of paragraph one. The

    Legislature had deliberately established this distinction, and while we may be unable to see any reason

    why it should have been made, it was our duty to apply and interpret the law, and we were not

    authorized under the guise of interpretation to virtually repeal part of the statute.

    Nor can it be said that the relations between the parties litigant constitute a quasi-contract. In the first

    place, quasi- contracts are "lawful and purely voluntary acts by which the authors thereof become

    obligated in favor of a third person. . . ." The act which gave rise to the obligation ex lege relied upon by

    Leung Ben in the court below is illicit an unlawful gambling game. In the second place, the firstparagraph of section 412 of the Code of Civil Procedure does not authorize an attachment in actions

    arising out of quasi contracts, but only in actions arising out of contract, express or implied.

    SAGRADA ORDEN VS. NATIONAL COCONUT CORPORATION

    91 SCRA 503

    FACTS:

    Petitioner, Sagrada Orden owned a land which was acquired by a Japanese corporation during the

    Japanese military occupation. After the liberation, the Alien Property Custodian took possession, control

    and custody of the land. The Copra Export Management Company occupied the property and when it

    vacated, the respondent, National Coconut Corporation occupied it through the representation made by

    the Philippine Government to the Alien Property Custodian.

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    The property was returned to Sagrada Orden upon judgment that the contract of sale of the

    property in favor of the Japanese corporation was null and void and upon payment of the consideration

    it received for the property to the Philippine Alien Property Administration. Sagrada Orden was also

    given the right to recover from National Coconut Corporation reasonable rentals for the use and

    occupation of the premises.

    Sagrada Orden filed an action to recover rentals from National Coconut Corporation from the time

    it used and occupied the premises. National Coconut Corporation claimed that it was willing to pay only

    from the time the property was returned to Sagrada Orden and not before, for it occupied the property

    in good faith, under no obligation to pay the rentals.

    ISSUE:

    Was National Coconut Corporation liable for rentals prior to the date the property was returned

    to Sagrada Orden?

    RULING:

    No. National Coconut Corporation was not liable for the rentals prior to the date the property was

    returned to Sagrada Orden. For National Coconut Corporation to be liable, its obligation must arise from

    the law, contract or quasi- contract, crime or negligence as provided by Article 1157 of the Civil Code

    which was taken from Article 1089 of the old Civil Code. As none of these sources were present, National

    Coconut Corporation cannot be held liable.

    There was also no express agreement between the entity which had legal control and

    administration of the property and the National Coconut Corporation for the latter to pay rentals on the

    property so there was no obligation.

    PELAYO VS. LAURON

    12 Phil. 453

    FACTS:

    On November 23, 1906, a physician named Arturo Pelayo filed a complaint against Marelo Lauron

    and Juana Abellana. On the night of October 13th of the same year, the plaintiff was called to render

    medical assistance to the defendants daughter-in-law, who was about to gie birth. After the consultation

    of Dr. Escao, it was deemed that the operation was going to be difficult for child birth, but regardless,

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    Dr. Pelayo proceeded with the job of operating on the subject and also removed the afterbirth. The

    operation went on until morning, and on the same day, visited several times and billed the defendants

    the just amount of P500 for the services rendered to which defendants refused to pay.

    In answer to the complaint, counsel for the defendants denied all of the allegation and alleged as

    a special defense, that their daughter-in-law had died in consequence of the said childbirth, that whenshe was alive she lived with her husband independently and in a separate house without any relation

    whatever with them, and that, if on the day when she gave birth she was in the house of the defendants,

    her stay their was accidental and due to fortuitous circumstances. Therefore, he prayed that the

    defendants be absolved of the complaint with costs against the plaintiff.

    ISSUE:

    Can the defendants be held liable to pay for the obligation?

    RULING:

    No. According to article 1089 of the Civil Code, obligations are created by law, by contracts, by

    quasi-contracts, and by illicit acts and omissions or by those in which any kind of fault or negligence

    occurs.

    Obligations arising from law are not presumed. Those expressly determined in the code or in special

    laws, etc., are the only demandable ones. Obligations arising from contracts have legal force betweenthe contracting parties and must be fulfilled in accordance with their stipulations. (Arts. 1090 and 1091.)

    The rendering of medical assistance in case of illness was comprised among the mutual obligations to

    which the spouses were bound by way of mutual support. (Arts. 142 and 143.)

    If every obligation consists in giving, doing or not doing something (art. 1088), and spouses were

    mutually bound to support each other, there can be no question but that, when either of them by

    reason of illness should be in need of medical assistance, the other was under the unavoidable

    obligation to furnish the necessary services of a physician in order that health may be restored, and he

    or she may be freed from the sickness by which life is jeopardized. The party bound to furnish such

    support was therefore liable for all expenses, including the fees of the medical expert for his professionalservices.

    In the face of the above legal precepts, it was unquestionable that the person bound to pay the fees due

    to the plaintiff for the professional services that he rendered to the daughter-in-law of the defendants

    during her childbirth, was the husband of the patient and not her father and mother- in-law of the

    defendants herein.

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    DIANA VS. BATANGAS TRANSPORTATION, CO.

    93 Phil 391

    FACTS:

    On June 21, 1945, Truck No. 14 belonging to the defendant Batangas Transportation, Co. driven by

    Vivencio Bristol ran into a ditch at Bay, Laguna resulting in the death of Florenio Diana and other

    passengers. Plaintiffs were the heirs of Diana. Bristol was charged and convicted of multiple homicide

    through reckless imprudence where he was ordered to indemnify the heirs of the deceased in the

    amount of Php 2,000. When the decision became final, a writ of execution was issued in order that the

    indemnity may be , but the sheriff filed a return stating that the accused had no visible leviable property.

    The present case (civil case No. 9221) was started when defendant failed to pay the indemnity under its

    subsidiary liability under article 103 of the Revised Penal Code.

    Defendant filed a motion to dismiss on the ground that there was another action pending

    between the same parties for the same cause (civil case No. 8023) in which the same plaintiffs sought to

    recover from the same defendant the amount of P4,500 as damages resulting from the death of Florenio

    Diana, who died while on board a truck of defendant due to the negligent act (culpa aquiliana) of the

    driver Vivencio Bristol.

    Plaintiffs filed a written opposition to the motion to dismiss. The lower court, having found the motion

    well founded, dismissed the complaint, without special pronouncement as to costs, and their motion forreconsideration having been denied, plaintiffs took the present appeal.

    ISSUE:

    Did the lower court correctly dismiss the complaint on the sole ground that there was another

    action pending between the same parties for the same cause?

    RULING:

    No. The present case (civil case No. 9221) stemmed from a criminal case in which the driver of the

    defendant was found guilty of multiple homicide through reckless imprudence and was ordered to pay

    an indemnity of P2,000 for which the defendant was made subsidiarily liable under article 103 of the

    Revised Penal Code. While the other case (civil case No. 8023) was an action for damages based on culpa

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    aquiliana which underlies the civil liability predicated on articles 1902 to 1910 of the old Civil Code.

    These two cases involved two different remedies. As this court aptly said: "A quasi-delict or culpa

    aquiliana is a separate legal institution under the Civil Code, with a substantivity all its own, and

    individuality that is entirely apart and independent from a delict or crime. * * *. A distinction exists

    between the civil liability arising from a crime and the responsibility for cuasi-delictos or culpa extra-

    contractual. The same negligent act causing damages may produce civil liability arising from a crimeunder article 100 of the Revised Penal Code, or create an action for cuasi-delito or culpa extra-

    contractual under articles 1902-1910 of the Civil Code.

    It was a mistake to say that the present action should be dismissed, because of the pendency of

    another action between the same parties involving the same cause. Evidently, both cases involved

    different causes of action.

    FAUSTO BARREDO VS. SEVERINO GARCIA AND TIMOTEA ALAMARIO

    73 PHIL. 607

    FACTS:

    On the road between Malabon and Navotas, Province of Rizal, there was a head-on collision between a

    taxi of the Malate Taxicab driven by Pedro Fontanilla and a carretela guided by Pedro Dimapalis. The

    carretela was overturned, and one of its passengers, 16-year-old boy Faustino Garcia, suffered injuries

    from which he died two days later. A criminal action was filed against Fontanilla in the Court of First

    Instance of Rizal, where he was convicted and sentenced acoordingly. The court in the criminal case

    granted the petition that the right to bring a separate civil action be reserved.

    The respondents, Severino Garcia and Timotea Almario, parents of the deceased on March 7, 1939,

    brought an action in the Court of First Instance of Manila against the petitioner Fausto Barredo as the

    sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla. The Court of First Instance of

    Manila awarded damages in favor of the respondents for P2,000 plus legal interest from the date of the

    complaint, which was modified by the Court of Appeals by reducing the damages to P1,000 with legal

    interest from the time the action was instituted. It was undisputed that Fontanillas negligence was the

    cause of the mishap, as he was driving on the wrong side of the road, and at high speed. As to Barredo's

    responsibility, the Court of Appeals found that there was proof that Barredo as employer exercised the

    diligence of a good father of a family to prevent damage. In fact, it was shown he was careless in

    employing Fontanilla, who had been caught several times for violation of the Automobile Law andspeeding. Defendant contended that his liability was governed by the Revised Penal Code, according to

    which his responsibility was only secondary, but no civil action had been brought against the taxi driver.

    ISSUE:

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    May the plaintiffs bring a separate civil action against Fausto Barredo, thus making him primarily and

    directly responsible under article 1903 of the Civil Code as an employer of Pedro Fontanilla?

    RULING:

    Yes. Authorities support the proposition that a quasi-delict or "culpa aquiliana " is a separate legal

    institution under the Civil Code with a substantivity all its own, and individuality that is entirely apart and

    independent from delict or crime. Upon this principle and on the wording and spirit of article 1903 of

    the Civil Code, the primary and direct responsibility of employers may be safely anchored.

    It will thus be seen that while the terms of articles 1902 of the Civil Code seem to be broad enough to

    cover the driver's negligence in the instant case, nevertheless article 1093 limits cuasi-delitos to acts or

    omissions "not punishable by law." But inasmuch as article 365 of the Revised Penal Code punishes not

    only reckless but even simple imprudence or negligence, the fault or negligence under article 1902 of

    the Civil Code has apparently been crowded out. It is this overlapping that makes the "confusion worse

    confounded." However, a closer study shows that such a concurrence of scope in regard to negligent acts

    does not destroy the distinction between the civil liability arising from a crime and the responsibility for

    cuasi-delitos or culpa extra-contractual. The same negligent act causing damages may produce civil

    liability arising from a crime under article 100 of the Revised Penal Code, or create an action for cuasi-

    delito or culpa extra-contractual under articles 1902-1910( 2176, 2180- NCC) of the Civil Code.

    GASHEM SHOOKAT BAKSH VS CA AND MARILOU T. GONZALES

    GR 97336 February 19, 1993

    FACTS:

    Gashem Shookat Baksh, an Iranian citizen, was an exchange student taking medical course at the Lyceum

    Northwestern College in Dagupan City. Private respondent, Marilou Gonzales on the other hand, was an

    employee at Mabuhay Luncheonette, a high school graduate and of good moral character and

    reputation duly respected in her community.

    The two met at a party on August 3, 1986 and later on became inseparable lovers. Not long after, Baksh

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    proposed to marry Marilou which she willingly accepted.

    Even before their engagement, Baksh and private respondent were already living together. In the course

    of their cohabitation, Baksh attitude towards her changed. She was maltreated. As a result, private

    respondent decided to leave. Thereafter, she filed a complaint against Baksh who renounced their

    marriage agreement and asked her not to live with him anymore, because he was already married tosomeone living in Bacolod.

    ISSUE:

    Was private respondent entitled to damages?

    RULING:

    Yes. Article 2176 of the Civil Code, which defines a quasi-delict thus:

    "Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to

    pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation

    between the parties, is called aquasi-delict and is governed by the provisions of this Chapter."

    limited to negligent acts or omissions and excludes the notion of willfulness or intent. Quasi-delict,

    known in Spanish legal treatises as culpa aquiliana, is a civil law concept while torts is an Anglo-American

    or common law concept. Tortsis much broader than culpa aquiliana because it includes not onlynegligence, but international criminal acts as well such as assault and battery, false imprisonment and

    deceit. In the general scheme of the Philippine legal system envisioned by the Commission responsible

    for drafting the New Civil Code, intentional and malicious acts, with certain exceptions, are to be

    governed by the Revised Penal Code, while negligent acts or omissions are to be covered by Article 2176

    of the Civil Code.

    DIANA VS. BATANGAS TRANSPORTATION, CO.

    93 PHIL 391

    FACTS:

    On June 21, 1945, Truck No. 14 belonging to the defendant Batangas Transportation, Co. driven by

    Vivencio Bristol ran into a ditch at Bay, Laguna resulting in the death of Florenio Diana and other

    passengers. Plaintiffs are the heirs of Diana. Bristol was charged and convicted of multiple homicide

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    through reckless imprudence where he was ordered to indemnify the heirs of the deceased in the

    amount of Php 2,000. When the decision became final, a writ of execution was issued in order that the

    indemnity may be satisfied but the sheriff filed a return stating that the accused had no visible leviable

    property. The present case (civil case No. 9221) was started when defendant failed to pay the indemnity

    under its subsidiary liability under article 103 of the Revised Penal Code.

    Defendant filed a motion to dismiss on the ground that there was another action pending

    between the same parties for the same cause (civil case No. 8023) in which the same plaintiffs sought to

    recover from the same defendant the amount of P4,500 as damages resulting from the death of Florenio

    Diana, who died while on board a truck of defendant due to the negligent act (culpa aquiliana) of the

    driver Vivencio Bristol.

    Plaintiffs filed a written opposition to the motion to dismiss. The lower court, having found the motion

    well founded, dismissed the complaint, without special pronouncement as to costs; and their motion for

    reconsideration having been denied, plaintiffs took the present appeal.

    ISSUE:

    Was the lower court correct in dismissing the complaint on the sole ground that there was

    another action pending between the same parties for same cause under Rule 8, section 1(d) of the Rules

    of Court?

    RULING:

    No. Rule 8, section 1 (d) allows the dismissal of a case on the ground that "there is another action

    pending between the same parties for the same cause." But where the present case stems from a

    criminal case in which the river of the defendant was found guilty of multiple homicide through reckless

    imprudence and was ordered to pay an indemnity of P2,000 for which the defendant was made

    subsidiarily liable under article 103 of the Revised Penal Code, while the other case (civil case No. 8023)

    was an action for damages based on culpa aquiliana which underlies the civil liability predicated on

    articles 1902 to 1910 of the old Civil Code, the two cases involved two different remedies and the

    present case should not be dismissed.

    "A quasi-delict or culpa aquiliana is a separate legal institution under the Civil Code, with asubstantivity all its own, and individuality that is entirely apart and independent from a delict or crime. *

    * *. A distinction exists between the civil liability arising from a crime and the responsibility for cuasi-

    delictos or culpa extra-contractual. The same negligent act causing dam- ages may produce civil liability

    arising from a crime under article 100 of the Revised Penal Code, or create an action for cuasi-

    delito or culpa extra-contractual under articles 1902-1910 of the Civil Code.

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    VALENZUELA VS. CA

    253 SCRA 303

    FACTS:

    A case was filed by Ma. Lourdes Valenzuela, which was an action to recover damages based on

    quasi-delict, for serious physical injuries sustained in a vehicular accident on June 24, 1990. During the

    accident, Valenzuelas left leg was severed up to the middle of her thigh, with only some skin and muscle

    connected to the rest of the body so she had to be amputated. She was confined in the hospital for

    twenty days and was eventually fitted with an artificial leg.

    The lower court found Richard Li, the person driving the Mitsubishi Lancer, guilty of gross

    negligence and liable for damages under 2176 of the Civil Code. Alexander Commercial Inc., Lis

    employer, was also found jointly and severally liable.

    Upon appeal, CA agreed with the decision of the lower court regarding the liability of Li. However,

    CA absolved the liability of Alexander Commercial Inc. CA also reduced the claim for moral damages.

    Hence, both parties assailed the respondent courts decision by filing two separate petitions.

    ISSUE:

    Should Alexander Commercial Inc. be held jointly and severally liable?

    RULING:

    Yes. The Court agreed with the CA that the relationship of the employer and employee was not

    based on the principle of respondent superior, which held the master liable for acts of the servant, but

    that of pater familias, in which the liability ultimately fell upon the employer for his failure to exercisethe diligence of a good father of the family in the selection and supervision of his employees. Under the

    concept of pater familias embodied by Article 2180, the employer may be relieved from any liability

    upon showing that he exercised the diligence of a good father of the family. Once the evidence is

    introduced showing that the employer exercised the required amount of care, half of the employers

    burden is overcome. However, the question of diligent supervision depends on the circumstances of

    employment.

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    In the instant case, Li, as an Assistant Manager of the company, admitted that his functions did

    not require him to scrupulously keep normal office hours as he performs social and work-related

    functions. The service car assigned to Li, therefore, enabled both to put up the front of a highly

    successful entity, increasing the latters goodwill before its clientele. It also facilitated meeting between

    Li and its clients by providing the former with a convenient mode of travel. Assuming that he really camefrom his officemates place as Li claimed, the same could give rise to speculation that he and his

    officemate had just been from a work-related function, or they were together to discuss sales and other

    work related strategies.

    Moreover, Alexander Commercial Inc. had not demonstrated to the satisfaction of the court that it

    exercised the care and diligence of a good father of the family in entrusting its company car to Li. No

    allegations were made as to whether or not the company took the steps necessary to determine or

    ascertain the driving proficiency and history of Li to whom it gave full and unlimited use of a company

    car. Not having been able to overcome the burden of demonstrating that should be absolved of liability

    for entrusting its company car to Li, said company based on the principle of bonus pater familias, ought

    to be jointly and severally liable with Li for the injuries sustained by Valenzuela during the accident.

    Thus, the decision of the CA was modified with the effect of reinstating the decision of the RTC.

    MANILA RAILROAD CO. VS. COMPANIA TRANSATLANTICA

    38 Phil 875

    FACTS:

    SS/Alicante, belonging to Compania Transatlantica de Barcelona was transporting two locomotive

    boilers for the Manila Railroad Company. The equipment of the ship for discharging the heavy cargo was

    not strong enough to handle the boilers. Compania Transatlantica contracted the services of Atlantic

    gulf and Pacific Co., which had the best equipment to lift the boilers out of the ships hold. When

    Alicante arrived in Manila, Atlantic company sent out its floating crane under the charge of one Leyden.

    When the first boiler was being hoisted out of the ships hold, the boiler could not be brought out

    because the sling was not properly placed and the head of the boiler was caught under the edge of the

    hatch. The weight on the crane was increased by a strain estimated at 15 tons with the result that the

    cable of the sling broke and the boiler fell to the bottom of the ships hold. The sling was again adjusted

    and the boiler was again lifted but as it was being brought up the bolt at the end of the derrick broke and

    the boiler fell again. The boiler was so badly damaged that it had to be shipped back to England to be

    rebuilt. The damages suffered by Manila Railroad amounted to P23,343.29. Manila Railroad then filed

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    an action against the Streamship Company to recover said damages. The Steamship Company caused

    Atlantic Company to be brought as co-defendant arguing that Atlantic Company as an independent

    contractor, who had undertaken to discharge the boilers had become responsible for the damage.

    The Court of First Instance decided in favor of Manila Railroad, the plaintiff, against Atlantic Company

    and absolved the Steamship Company. Manila Railroad appealed from the decision because theSteamship Company was not held liable also. Atlantic Company also appealed from the judgment

    against it.

    ISSUES:

    1. Was the Steamship Company liable to Manila Railroad for delivering the boiler in a damaged

    condition?

    2. Was Atlantic Company liable to the Steamship Company for the amount it may be required to pay

    the plaintiff?

    Was Atlantic Company directly liable to plaintiff as held by the trial court?

    RULING:

    There was a contractual relation between the Steamship Company and Manila Railroad. There wasalso a contractual relation between the Steamship Company and Atlantic. But there was no contractual

    relation between the Railroad Company and Atlantic Company.

    There was no question that the Steamship Company was liable to Manila Railroad as it had the

    obligation to transport the boiler in a proper manner safe and securely under the circumstances required

    by law and customs. The Steamship Company cannot escape liability simply because it employed a

    competent independent contractor to discharge the boiler.

    Atlantic Company claimed that it was not liable, because it had employed all the diligence of a good

    father of a family and proper care in the selection of Leyden. Said argument was not tenable, because

    said defense was not applicable to negligence arising in the course of the performance of a contractual

    obligation. The same can be said with respect to the liability of Atlantic Company upon its contract with

    the Steamship Company. There was a distinction between negligence in the performance of a

    contractual obligation (culpa contractual) and negligence considered as an independent source of

    obligation (culpa aquiliana). Atlantic Company wasis liable to the Steamship Company for the damage

    brought upon the latter by the failure of Atlantic Company to use due care in discharging the boiler,

    regardless of the fact that the damage was caused by the negligence of an employee who was qualified

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    for the work, duly chose with due care.

    Since there was no contract between the Railroad Company and Atlantic Company, Railroad Company

    can had no right of action to recover damages from Atlantic Company for the wrongful act which

    constituted the violation of the contract. The rights of Manila Railroad can only be made effective

    through the Steamship Company with whom the contract of affreightment was made.

    MARANAN VS PEREZ

    20 SCRA 412

    FACTS:

    Rogelio Corachea, a passenger in a taxicab owned and operated by Pascual Perez, was stabbed

    and killed by the driver, Simeon Valenzuela. Valenzuela was found guilty for homicide by the Court of

    First Instance and was sentenced to suffer Imprisonment and to indemnify the heirs of the deceased in

    the sum of P6000. While pending appeal, mother of deceased filed an action in the Court of First

    Instance of Batangas to recover damages from Perez and Valenzuela. Defendant Perez claimed that the

    death was a caso fortuito for which the carrier was not liable. The court a quo, after trial, found for the

    plaintiff and awarded her P3,000 as damages against defendant Perez. The claim against defendant

    Valenzuela was dismissed. From this ruling, both plaintiff and defendant Perez appealed to this Court,

    the former asking for more damages and the latter insisting on non-liability.

    Defendant-appellant relied solely on the ruling enunciated in Gillaco vs. Manila Railroad Co. that

    the carrier is under no absolute liability for assaults of its employees upon the passengers.

    ISSUE:

    Was the contention of the defendant valid?

    RULING:

    No. The attendant facts and controlling law of that case and the one at bar were very different. In the

    Gillaco case, the passenger was killed outside the scope and the course of duty of the guilty employee.

    The Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present

    Civil Code, did not impose upon common carriers absolute liability for the safety of passengers against

    willful assaults or negligent acts committed by their employees. The death of the passenger in the

    Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art. 1105

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    of the old Civil Code on fortuitous events has been substantially reproduced in Art. 1174 of the Civil Code

    of the Philippines but both articles clearly remove from their exempting effect the case where the law

    expressly provides for liability in spite of the occurrence of force majeure. The Civil Code provisions on

    the subject of Common Carriers are new and were taken from Anglo-American Law. The basis of the

    carrier's liability for assaults on passengers committed by its drivers rested either on the doctrine of

    respondent superior or the principle that it was the carrier's implied duty to transport the passengersafely. Under the second view, upheld by the majority and also by the later cases, it was enough that the

    assault happens within the course of the employee's duty. It was no defense for the carrier that the act

    was done in excess of authority or in disobedience of the carrier's orders. The carrier's liability here was

    absolute in the sense that it practically secured the passengers from assaults committed by its own

    employees.

    REPUBLIC VS. LUZON STEVEDORING CORPORATION

    21 SCRA 279

    FACTS:

    In the early afternoon of August 17, 1960, barge L-1892, owned by the Luzon Stevedoring

    Corporation was being towed down the Pasig River by two tugboats when the barge rammed against

    one of the wooden piles of the Nagtahan bailey bridge, smashing the posts and causing the bridge to list.

    The river, at the time, was swollen and the current swift, on account of the heavy downpour in Manila

    and the surrounding provinces on August 15 and 16, 1960.

    The Republic of the Philippines sued Luzon Stevedoring for actual and consequential damage

    caused by its employees, amounting to P200,000. Defendant Corporation disclaimed liability on the

    grounds that it had exercised due diligence in the selection and supervision of its employees that the

    damages to the bridge were caused by force majeure, that plaintiff has no capacity to sue, and that the

    Nagtahan bailey bridge is an obstruction to navigation.

    After due trial, the court rendered judgment on June 11, 1963, holding the defendant liable for the

    damage caused by its employees and ordering it to pay plaintiff the actual cost of the repair of the

    Nagtahan bailey bridge which amounted to P192,561.72, with legal interest from the date of the filing of

    the complaint.

    ISSUE:

    Was the collision of appellant's barge with the supports or piers of the Nagtahan bridge caused by

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    fortuitous event or force majeure?

    RULING:

    Yes. Considering that the Nagtahan bridge was an immovable and stationary object and

    uncontrovertedly provided with adequate openings for the passage of water craft, including barges like

    of appellant's, it was undeniable that the unusual event that the barge, exclusively controlled by

    appellant, rammed the bridge supports raises a presumption of negligence on the part of appellant or its

    employees manning the barge or the tugs that towed it. For in the ordinary course of events, such a

    thing will not happen if proper care is used. In Anglo American Jurisprudence, the inference arises by

    what is known as the "res ipsa loquitur" rule

    The appellant strongly stressed the precautions taken by it on the day in question: that it assigned

    two of its most powerful tugboats to tow down river its barge L-1892; that it assigned to the task the

    more competent and experienced among its patrons, had the towlines, engines and equipment double-

    checked and inspected' that it instructed its patrons to take extra precautions; and concludes that it had

    done all it was called to do, and that the accident, therefore, should be held due to force majeure or

    fortuitous event.

    These very precautions, however, completely destroyed the appellant's defense. For caso fortuito or

    force majeure (which in law are identical in so far as they exempt an obligor from liability) by definition,

    are extraordinary events not foreseeable or avoidable, "events that could not be foreseen, or which,

    though foreseen, were inevitable" (Art. 1174, Civ. Code of the Philippines). It was, therefore, not enough

    that the event should not have been foreseen or anticipated, as was commonly believed but it must be

    one impossible to foresee or to avoid. The mere difficulty to foresee the happening was not impossibilityto foresee the same. The very measures adopted by appellant prove that the possibility of danger was

    not only foreseeable, but actually foreseen, and was not caso fortuito.

    TRILLANA VS QUEZON COLLEGE, INC.

    93 Phil. 383

    FACTS:

    Damasa Crisostomo wrote a letter to the Quezon College, Inc. for the subscription of shares of

    stock of the said college wherein payment was to be made through money she was going to generate

    from fishing. However, she died and as no payment appears to have been made on the subscription

    mentioned in the foregoing letter, the Quezon College, Inc. presented a claim before the Court of First

    Instance in her testate proceeding, for the collection of the said sum of money. The claim was dismissed

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    by the trial court on the ground that the subscription in question was neither registered in nor

    authorized by the Securities and Exchange Commission. From this order the Quezon College, Inc.

    appealed.

    ISSUE:

    Was Damasa Crisostomo liable for the claim made by Quezon Colleges, Inc?

    RULING:

    No. The application sent by Damasa Crisostomo to the Quezon College, Inc. was written on a

    general form indicating that an applicant will enclose an amount as initial payment and will pay the

    balance in accordance with law and the rules or regulations of the College. In the letter actually sent by

    Damasa Crisostomo, she not only did not enclose any initial payment, but stated that "babayaran kong

    lahat pagkatapos na ako ay makapagpahuli ng isda." The acceptance of Quezon College, Inc. was

    essential, because it would be unfair to immediately obligate the Quezon College, Inc. under Damasa's

    promise to pay the price of the subscription after she had caused fish to be caught. In other words, the

    relation between Damasa Crisostomo and the Quezon College, Inc. had only thus reached the

    preliminary stage whereby the latter offered its stock for subscription on the terms stated in the form

    letter, and Damasa applied for subscription fixing her own plan of payment, a relation in the absence, as

    in the present case of acceptance by the Quezon College, Inc. of the counter offer of Damasa

    Crisostomo, that had not ripened into an enforceable contract.

    The need for express acceptance on the part of the Quezon College, Inc. imperative, in view of the

    proposal of Damasa Crisostomo to pay the value of the subscription after she had harvested fish, a

    condition obviously dependent upon her sole will and, therefore, facultative in nature, rendering the

    obligation void, under article 1115 of the old Civil Code (1182 of NCC).

    PNB VS PINEDA

    197 SCRA 1

    FACTS:

    In 1963, the Arroyo Spouses, obtained a loan of P580,000.00 from petitioner bank to purchase

    60% of the subscribed capital stock and thereby acquire the controlling interest of private respondent

    Tayabas Cement Company, Inc. (TCC). As security for said loan, the spouses Arroyo executed a real estate

    mortgage over a parcel of land known as the La Vista property.

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    TCC filed with petitioner bank an application and agreement for the establishment of an eight (8)

    year deferred letter of credit (L/C) for $7,000,000.00 in favor of Toyo Menka Kaisha, Ltd. of Tokyo, Japan,

    to cover the importation of a cement plant machinery and equipment. Upon approval of said

    application, the Arroyo spouses executed a Surety Agreement dated August 5, 1964 3 and Covenant

    dated August 6, 1964 to secure the loan.

    The imported cement plant machinery and equipment arrived from Japan and were released to

    TCC under a trust receipt agreement. Subsequently, Toyo Menka Kaisha, Ltd. made the corresponding

    drawings against the L/C as scheduled, but TCC failed to remit and/or pay the corresponding amount

    covered by the drawings. Thus, pursuant to the agreement, PNB repossessed the imported machinery

    and equipment for failure of TCC to settle its obligations under the L/C.

    On July 18, 1975, PNB filed a petition for extra-judicial foreclosure of the real estate mortgage

    over the La Vista property as well as the mortgaged properties located at Isabela, Negros Occidental and

    covered by OCT No. RT 1615.

    At the auction sale, PNB was the highest bidder with a bid price of P1,000,001.00. However, when said

    property was about to be awarded to PNB, the representative of the mortgagor-spouses objected and

    demanded from the PNB the difference between the bid price of P1,000,001.00 and the indebtedness of

    P499,060.25 of the Arroyo spouses on their personal account. It was the contention of the spouses

    Arroyo's representative that the foreclosure proceedings referred only to the personal account of the

    mortgagor spouses without reference to the account of TCC.

    ISSUE:

    Was TCC's liability extinguished by the repossession of PNB of the imported cement plant

    machinery and equipment?

    HELD:

    No. PNB's possession of the subject machinery and equipment being precisely as a form of

    security for the advances given to TCC under the Letter of Credit, said possession by itself cannot be

    considered payment of the secured loan. Payment would legally result only after PNB had foreclosed onsaid securities, sold the same, and applied the proceeds thereof to TCC's loan obligation. Mere

    possession does not amount to foreclosure for foreclosure denotes the procedure adopted by the

    mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself.

    Neither can said repossession amount to dacion en pago. Dation in payment takes place when property

    is alienated to the creditor in satisfaction of a debt in money and the same is governed by sales. Dation

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    in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an

    accepted equivalent of the performance of the obligation. As aforesaid, the repossession of the

    machinery and equipment in question was merely to secure the payment of TCC's loan obligation and

    not for the purpose of transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion

    en pago was ever accomplished.

    JOSE CANGCO VS MANILA RAILROAD

    38 PHIL. 768

    FACTS:

    Cangco, herein plaintiff, was an employee of the defendant in this case, Manila Railroad Company.

    Upon the occasion in question, plaintiff was returning home by train from his daily labors. As the train

    drew up to the station, plaintiff arose from his seat. As the train slowed down, plaintiff stepped off, but

    one or both of his feet came in contact with a sack of watermelons. As a result, his feet slipped from

    under him and he fell violently on the platform.

    The accident occurred between 7-8 oclock on a dark night as the railroad station was lighted dimly,

    objects on the platform were difficult to discern especially to a person emerging from a lighted car.

    Plaintiff sued the defendant company for damages. The latter interposed the defense that the direct and

    proximate cause of the injury suffered by the plaintiff was his own contributory negligence in failing towait until the train had come to a complete stop before alighting.

    ISSUE:

    Should Manila Railroad be held liable?

    RULING:

    Yes. The Supreme Court reversed the decision of the lower court holding that it was important to

    note that the foundation of the legal liability of the defendant was the contract of carriage, and that the

    obligation to respond for the damage which plaintiff has suffered arises, if at all, from the breach of that

    contract by reason of the failure of defendant to exercise due care in its performance. That was to say, its

    liability was direct and immediate, differing essentially, in legal viewpoint from that presumptive

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    responsibility for the negligence of its servants, imposed by article 1903 of the Civil Code, which can be

    rebutted by proof of the exercise of due care in their selection and supervision. Article 1903 of the Civil

    Code is not applicable to obligations arising ex contractu, but only to extra-contractual obligations, or to

    use the technical form of expression, that article relates only to culpa aquiliana and not to culpa

    contractual.

    Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code, clearly points

    out this distinction, which was also recognized by this Court in its decision in the case of

    Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa

    clearly points out the difference between "culpa, substantive and independent, which of itself

    constitutes the source of an obligation between persons not formerly connected by any legal tie"

    and culpa considered as an accident in the performance of an obligation already existing . . . ."

    On the railroad companys defense of contributory negligence on the part of Cangco, the Court held that

    the plaintiff was ignorant of the fact that the obstruction which was caused by the sacks of melds piled

    on the platform existed. Moreover, the place was dark or dimly lighted. Thus, there was failure on the

    part of the defendant to afford to its passengers facilities for safe egress from its trains.

    NIETES VS CA

    46 SCRA 654

    FACTS:

    On October 19, 1959, Dr. Pablo Garcia and Aquilino Nietes entered into a "Contract of Lease with Option

    to Buy." Dr. Garcia (lessor) is the owner of the Angeles Educational Institute which is the subject of the

    lease. the stipulates, among others, the manner of payment, that the lese will be for a period of 5 years,

    and the option to buy agreement for a price of P100,000.00 within the period of the lease.

    Nietes was able to pay P 24,757.00 plus P5200.00 of which Dr. Garcia issued receipts. However, Dr.

    Garcia sent a letter to Nietes expressing his desire to rescind the contract. Nietes on the other hand

    contended that he has not violated any provision on the contract and thus, expressed his desire to buy

    the land and building.

    A year after, Nietes paid the balance of P 84,860.00 of the purchase price of the property. He then

    demanded Dr. Garcia for specific performance to execute a deed of absolute sale of the leased property

    in his (Nietes) favor.

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    ISSUE:

    Can Nietes still exercise his option to buy the land and building?

    RULING:

    Yes. The contract didoes not say that Nietes had to pay the stipulated price of P100,000 before exercising

    his option to buy the property in question. Accordingly, said option is governed by Art 1169, the general

    principles on obligations, pursuant to which:

    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 the case of an option to buy, the creditor may validly and effectively exercise his right by merely

    advising the debtor of the former's decision to buy and expressing his readiness to pay the stipulated

    price, provided that the same is available and actually delivered to the debtor upon execution and

    delivery by him of the corresponding deed of sale. Unless and until the debtor shall have done this the

    creditor is not and cannot be in default in the discharge of his obligation to pay.In other words, notice of

    the creditor's decision to exercise his option to buy need not be coupled with actual payment of the

    price, so long as this is delivered to the owner of the property upon performance of his part of the

    agreement.

    UNIVERSAL FOOD CORPORATION VS. CA

    33 SCRA 1

    FACTS:

    This is a petition for certiorari by the UFC against the CA decision of February 13, 1968 declaring

    the BILL OF ASSIGNMENT rescinded, ordering UFC to return to Magdalo Francisco his Mafran sauce

    trademark and to pay his monthly salary of P300.00 from Dec. 1, 1960 until the return to him of said

    trademark and formula.

    In 1938, plaintiff Magdalo V. Francisco, Sr. discovered a formula for the manufacture of a food

    seasoning (sauce) derived from banana fruits popularly known as MAFRAN sauce. It was used

    commercially since 1942, and in the same year plaintiff registered his trademark in his name as owner

    and inventor with the Bureau of Patents. However, due to lack of sufficient capital to finance the

    expansion of the business, in 1960, said plaintiff secured the financial assistance of Tirso T. Reyes who,

    after a series of negotiations, formed with others defendant Universal Food Corporation eventually

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    leading to the execution on May 11, 1960 of the aforequoted "Bill of Assignment" (Exhibit A or 1).

    On May 31, 1960, Magdalo Francisco entered into contract with UFC stipulating among other

    things that he be the Chief Chemist and Second Vice-President of UFC and shall have absolute control

    and supervision over the laboratory assistants and personnel and in the purchase and safekeeping of the

    chemicals used in the preparation of said Mafran sauce and that said positions are permanent in nature.

    In line with the terms and conditions of the Bill of Assignment, Magdalo Francisco was appointed

    Chief Chemist with a salary of P300.00 a month. Magdalo Francisco kept the formula of the Mafran

    sauce secret to himself. Thereafter, however, due to the alleged scarcity and high prices of raw materials,

    on November 28, 1960, Secretary-Treasurer Ciriaco L. de Guzman of UFC issued a Memorandum duly

    approved by the President and General Manager Tirso T. Reyes that only Supervisor Ricardo Francisco

    should be retained in the factory and that the salary of plaintiff Magdalo V. Francisco, Sr., should be

    stopped for the time being until the corporation should resume its operation. On December 3, 1960,

    President and General Manager Tirso T. Reyes, issued a memorandum to Victoriano Francisco ordering

    him to report to the factory and produce "Mafran Sauce" at the rate of not less than 100 cases a day so

    as to cope with the orders of the corporation's various distributors and dealers, and with instructions to

    take only the necessary daily employees without employing permanent employees. Again, on December

    6, 1961, another memorandum was issued by the same President and General Manager instructing the

    Assistant Chief Chemist Ricardo Francisco, to recall all daily employees who are connected in the

    production of Mafran Sauce and also some additional daily employees for the production of Porky Pops.

    On December 29, 1960, another memorandum was issued by the President and General Manager

    instructing Ricardo Francisco, as Chief Chemist, and Porfirio Zarraga, as Acting Superintendent, to

    produce Mafran Sauce and Porky Pops in full swing starting January 2, 1961 with further instructions to

    hire daily laborers in order to cope with the full blast operation. Magdalo V. Francisco, Sr. received his

    salary as Chief Chemist in the amount of P300.00 a month only until his services were terminated on

    November 30, 1960. On January 9 and 16, 1961, UFC, acting thru its President and General Manager,authorized Porfirio Zarraga and Paula de Bacula to look for a buyer of the corporation including its

    trademarks, formula and assets at a price of not less than P300,000.00. Due to these successive

    memoranda, without plaintiff Magdalo V. Francisco, Sr. being recalled back to work, he filed the present

    action on February 14, 1961. Then in a letter dated March 20, 1961, UFC requested said plaintiff to

    report for duty, but the latter declined the request because the present action was already filed in court.

    ISSUES:

    1. Was the Bill of Assignment really one that involves transfer of the formula for Mafran sauce itself?

    2. Was petitioners contention that Magdalo Francisco is not entitled to rescission valid?

    RULING:

    1. No. Certain provisions of the bill would lead one to believe that the formula itself was

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    transferred. To quote, the respondent patentee "assign, transfer and convey all its property rights and

    interest over said Mafran trademark and formula for MAFRAN SAUCE unto the Party of the Second Part,"

    and the last paragraph states that such "assignment, transfer and conveyance is absolute and irrevocable

    (and) in no case shall the PARTY OF THE First Part ask, demand or sue for the surrender of its rights and

    interest over said MAFRAN trademark and mafran formula."

    However, a perceptive analysis of the entire instrument and the language employed

    thereinwould lead one to the conclusion that what was actually ceded and transferred was only

    the use of the Mafran sauce formula. This was the precise intention of the parties.

    The SC had the following reasons to back up the above conclusion. First, royalty was paid by UFC

    to Magdalo Francisco. Second, the formula of said Mafran sauce was never disclosed to anybody

    else. Third, the Bill acknowledged the fact that upon dissolution of said Corporation, the patentee rights

    and interests of said trademark shall automatically revert back to Magdalo Francisco. Fourth, paragraph

    3 of the Bill declared only the transfer of the use of the Mafran sauce and not the formula itself which

    was admitted by UFC in its answer. Fifth, the facts of the case undeniably show that what was

    transferred was only the use. Finally, our Civil Code allows only the least transmission of right, hence,

    what better way is there to show the least transmission of right of the transfer of the use of the transfer

    of the formula itself.

    2. No. Petitioners contention that Magdalo Franciscos petition for rescission should be denied

    because under Article 1383 of the Civil Code of the Philippines rescission can not be demanded except

    when the party suffering damage has no other legal means to obtain reparation, was of no merit

    because it is predicated on a failure to distinguish between a rescission for breach of contract under

    Article 1191 of the Civil Code and a rescission by reason of lesion or economic prejudice, under Article

    1381, et seq. This was a case of reciprocal obligation. Article 1191 may be scanned without disclosing

    anywhere that the action for rescission thereunder was subordinated to anything other than theculpable breach of his obligations by the defendant. Hence, the reparation of damages for the breach

    was purely secondary. Simply put, unlike Art. 1383, Art. 1191 allows both the rescission and the payment

    for damages. Rescission is not given to the party as a last resort, hence, it is not subsidiary in nature.

    ZULUETA VS. MARIANO111 SCRA 206

    FACTS:

    Petitioner Zulueta was the owner of a house and lot in Antonio Subdivision, Pasig Rizal, whileprivate respondent is a movie director. They entered into a Contract to Sell the said property of

    petitioner for P75,000 payable in 20 years with respondent buyer assuming to pay a down payment of

    P5,000 and a monthly installment of P630 payable in advance before the 5th day of the corresponding

    month, starting with December, 1964.

    One of their stipulations was that upon failure of the buyer to fulfill any of the conditions being

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    stipulated, the buyer automatically and irrevocably authorizes owner to recover extra-judicially, physical

    possession of the land, building and other improvements, which were the subject of the said contract,

    and to take possession also extra-judicially whatever personal properties may be found within the

    aforesaid premises from the date of said failure to answer for whatever unfulfilled monetary obligations

    buyer may have with owner. Demand was also waived.

    On the allegation that private respondent failed to comply with the monthly amortizations

    stipulated in the contract, despite demands to pay and to vacate the premises, and that thereby the

    contract was converted into one of lease, petitioner commenced an Ejectment suit against respondent

    before the Municipal Court of Pasig, praying that judgment be rendered ordering respondent to 1)

    vacate the premises; 2) pay petitioner the sum of P11, 751.30 representing respondents balance owing

    as of May, 1966; 3) pay petitioner the sum of P630 every month after May, 1966, and costs. Private

    respondent contended that the Municipal Court had no jurisdiction over the nature of the action as it

    involved the interpretation and/or rescission of the contract.

    ISSUE:

    Was the action before the Municipal Court essentially one for rescission or annulment of a

    contract?

    RULING:

    Yes. According to the Supreme Court, ...proof of violation is a condition precedent to resolutionor rescission. It is only when the violation has been established that the contract can be declared

    resolved or rescinded. Upon such rescission in turn, hinges a pronouncement that possession of the

    realty has become unlawful.

    The Supreme Court, in Nera vs. Vacante (3 SCRA 505), also said, A violation by a party of any of

    the stipulations of a contract on agreement to sell real property would entitle the other party to resolved

    or rescind it.

    Also, according to the book of Tolentino, Civil Code of the Phil., Vol. IV, 1962 ed. P. 168, citing

    Magdalena Estate vs. Myrick, 71 Phil. 344 (1941), extra-judicial rescission has legal effect when the

    parties does not oppose it. If it is objected to, judicial determination of the issue is still necessary.

    With regards to the jurisdictions of inferior courts, the Supreme Court said that the CFI correctly

    ruled that the Municipal Court had no jurisdiction over the case and correctly dismissed the

    appeal. However, the CFI erred in assuming original jurisdiction, in the face of the objection interposed

    by petitioner. Section 11, Rule 40, leaves no room for doubt on this point.

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    Section 11 of Rule 40:

    Section 11. Lack of jurisdiction. A case tried by an inferior court without jurisdiction over the

    subject matter shall be dismissed on appeal by the Court of First Instance. But instead of dismissing thecase, the Court of First Instance may try the case on the merits, if the parties therein file their pleadings

    and go to trial without any objection to such jurisdiction.

    AYSON-SIMON VS. ADAMOS AND FERIA

    G.R. NO. L-39378 AUGUST 28, 1984

    FACTS:

    Defendants, Nicolas Adamos and Vicente Feria, purchased two lots forming part of the Piedad Estate

    in Quezon City, from Juan Porciuncula. Thereafter, the successors-in-interest of the latter filed Civil Case

    No. 174 for annulment of the sale and the cancellation of TCT No. 69475, which had been issued to

    defendants-appellants by virtue of the disputed sale. The Court rendered a Decision annulling the

    saleThe said judgment was affirmed by the Appellate Court and had attained finality.

    Meanwhile, during the pendency of the case above, defendants sold the said two lots to Petitioner

    Generosa Ayson-Simon for Php3,800.00 plus Php800.00 for facilitating the issuance of the new titles in

    favor of petitioner. Due to the failure of the defendants to deliver the said lots, petitioner filed a civil

    case for specific performance. The trial court rendered judgment to petitioners favor. However,defendants could not deliver the said lots because the CA had already annulled the sale of the two lots in

    Civil Case No. 174. Thus, petitioner filed another civil case for the rescission of the contract. Defendants

    were contending that petitioner cannot choose to rescind the contract since petitioner chose for specific

    performance of the obligation. Also, even though petitioner can choose to rescind the contract, it would

    not be possible, because it has already prescribed.

    ISSUES:

    1. Can petitioner choose to rescind the contract even after choosing for the specific performance ofthe obligation?

    Had the option to rescind the contract prescribed?

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    RULING:

    1. Yes. The rule that the injured party can only choose between fulfillment and rescission of the

    obligation, and cannot have both, applies when the obligation is possible of fulfillment. If, as in this case,the fulfillment has become impossible, Article 1191 allows the injured party to seek rescission even after

    he has chosen fulfillment.

    2. No. Article 1191 of the Civil Code provides that the injured party may also seek rescission, if the

    fulfillment should become impossible. The cause of action to claim rescission arises when the fulfillment

    of the obligation became impossible when the Court of First Instance of Quezon City in Civil Case No. 174

    declared the sale of the land to defendants by Juan Porciuncula a complete nullity and ordered the

    cancellation of Transfer Certificate of Title No. 69475 issued to them. Since the two lots sold to plaintiff

    by defendants form part of the land involved in Civil Case No. 174, it became impossible for defendants

    to secure and deliver the titles to and the possession of the lots to plaintiff. But plaintiff had to wait for

    the finality of the decision in Civil Case No. 174, According to the certification of the clerk of the Court of

    First Instance of Quezon City (Exhibit "E-2"), the decision in Civil Case No. 174 became final and

    executory "as per entry of Judgment dated May 3, 1967 of the Court of Appeals." The action for

    rescission must be commenced within four years from that date, May 3, 1967. Since the complaint for

    rescission was filed on August 16, 1968, the four year period within which the action must be

    commenced had not expired.

    SINGSON ENCARNACION VS. BALDOMAR

    77 PHIL 470

    FACTS:

    Vicente Singson Encarnacion leased his house to Jacinta Baldomar and her son, Lefrando Fernando

    upon a month-to-month basis. After Manila was liberated in the last war, Singson Encarnacio notified

    Baldomar and her son Fernando to vacate the house because he needed it for his office as a result of the

    destruction of the building where he had his office before. Despite the demand, the Baldomar and

    Fernando continued their occupancy.

    The defense of Baldomar and Fernando was that the contract with Singson Encarnacion authorized

    them to continue occupancy indefinitely while they should faithfully fulfill their obligation with respect

    to payment of rentals. Singson Encarnacion contended that the lease had always and since the beginning

    been upon a month-to-month basis.

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    ISSUE:

    Was it tenable for Singson Encarnacion to discontinue the lease of Baldomar and her son?

    RULING:

    The continuance and fulfillment of the contract of lease cannot be made to depend solely and

    exclusively upon the free and uncontrolled choice of the lessees between continuing paying the rentals

    or not, completely depriving the owner of all say in the matter. The defense of Baldomar and Fernando

    would leave to the sole and exclusive will of one of the contracting parties the validity and fulfillment of

    the contract of lease, within the meaning of Article 1256 of the Civil Code. For if this were allowed, so

    long as the lessee elected to continue the lease by continuing the payment of the rentals the owner

    would never be able to discontinue the lease; conversely, although the owner should desire the lease to

    continue, the lessee could effectively thwart his purpose if he should prefer to terminate the contract by

    the simple expedient of stopping payment of the rentals.

    PHILIPPINE BANKING CORPORATION VS. LUI SHE

    1967 SEPTEMBER 12

    FACTS:

    Justina Santos y Canon Faustino and her sister Lorenza were the owners in common of a piece of land in

    Manila.

    The sisters lived in one of the houses, while Wong Heng, a Chinese, lived with his family in the

    restaurant. Wong had been a long-time lessee of a portion of the property, having a monthly rental of

    P2,620.

    On September 22, 1957 Justina Santos became the owner of the entire property as her sister died with

    no other heir. Then already well advanced in years, being at the time 90 years old, blind, crippled and an

    invalid, she was left with no other relative to live with, but she was taken cared of by Wong.

    "In grateful acknowledgment of the personal services of the Lessee to her," Justina Santos executed on

    November 15, 1957, a contract of lease in favor of Wong, covering the portion then already leased to

    him and another portion fronting Florentino Torres street. The lease was for 50 years, although

    the lessee was given the right to withdraw at any time from the agreement; the monthly rental was

    P3,120. Ten days later (November 25), the contract was amended so as to make it cover the entire

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    property, including the portion on which the house of Justina Santos stood, at an additional monthly

    rental of P360.

    On December 21 she executed contract giving Wong the option to buy the leased premises for P120,000,

    payable within ten years at a monthly installment of P1,000. The option was conditioned on his

    obtaining Philippine citizenship,a petition for which was then pending in the Court of First Instance ofRizal.

    On November 18, 1958 she executed two other contracts, one extending the term of the lease to 99

    years, and another fixing the term of the option at 50 years. Both contracts are written in Tagalog. In two

    wills executed on August 24 and 29, 1959, she bade her legatees to respect the contracts she had

    entered into with Wong, but in a codicil of a later date (November 4, 1959) she appears to have a change

    of heart. Claiming that the various contracts were made by her because of machinations and

    inducements practised by him, she now directed her executor to secure the annulment of the contracts.

    Both parties however died, Wong Heng on October 21, 1962 and Justina Santos on December 28, 1964.

    Wong was substituted by his wife, Lui She, the other defendant in this case, While Justina Santos was

    substituted by the Philippine Banking Corporation. Justina Santos maintained now reiterated by the

    Philippine Banking Corporation that the lease contract should have been annulled along with the four

    other contracts because it lacks mutuality, among others

    Paragraph 5 of the lease contract states that "The lessee may at any time withdraw from this

    agreement." It is claimed that this stipulation offends article 1308 of the Civil Code which provides that

    "the contract must bind both contracting parties; its validity or compliance cannot be left to the will of

    one of them."

    ISSUES:

    1. (OBLICON ISSUE) Was the insertion in the contract of a resolutory condition, permitting the

    cancellation of the contract by one of the parties, valid?

    2. (RELATED, but Consitutional Issue) Was the contract between Wong (Lui She) and Justina Santos (Phil.

    Banking) enforceable?

    RULING:

    1. Yes. In the early case of Taylor vs. Uy Tiong Piao, the Supreme Court said:

    Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment to the insertion in a

    contract for personal service of a resolutory condition permitting the cancellation of the contract by one

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    of the parties. Such a stipulation, as can be readily seen, does not make either the validity or the

    fulfillment of the contract dependent upon the will of the party to whom is conceded the privilege of

    cancellation; for where the contracting parties have agreed that such option shall exist, the exercise of

    the option is as much in the fulfillment of the contract as any other act which may have been the subject

    of agreement. Indeed, the cancellation of a contract in accordance with conditions agreed upon

    beforehand is fulfillment

    Further, in the case at bar, the right of the lessee to continue the lease or to terminate it was so

    circumscribed by the term of the contract that it cannot be said that the continuance of the lease

    depends upon his will. At any rate, even if no term had been fixed in the agreement, this case would at

    most justify the fixing of a period but not the annulment of the contract.

    2. No. The contract of lease, as in this case, cannot be sustained. However, to be sure, a lease to an alien

    for a reasonable period was valid, so was an option giving an alien the right to buy real property on

    condition that he is granted Philippine citizenship.

    But if an alien was given not only a lease of, but also an option to buy, a piece of land, by virtue of which

    the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it

    became clear that the arrangement was a virtual transfer of ownership whereby the owner divested

    himself in stages not only of the right to enjoy the land (jus possidendi, jus utendi, jus fruendi and jus

    abutendi) but also of the right to dispose of it (jus disponendi) rights the sum total of which make up

    ownership. It was just as if today the possession is transferred, tomorrow, the use, the next day, the

    disposition, and so on, until ultimately all the rights of which ownership is made up are consolidated in

    an alien. And yet this was just exactly what the parties in this case did within this pace of one year, with

    the result that Justina Santos' ownership of her property was reduced to a hollow concept. If this can be

    done, then the Constitutional ban against alien landholding in the Philippines, is indeed in grave peril.

    The contracts in question are annulled and set aside; the land subject-matter of the contracts was

    ordered returned to the estate of Justina Santos as represented by the Philippine Banking Corporation.

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    ROMERO VS. COURT OF APPEALS

    G.R. No. 107207

    FACTS:

    Petitioner Virgilio R. Romero was engaged in the business of production, manufacture and

    exportation of perlite filter aids, permalite insulation and processed perlite ore. In 1988, petitioner and

    his foreign partners decided to put up a central warehouse in Metro Manila on a land area of

    approximately 2,000 square meters.

    Alfonso Flores and his wife, accompanied by a broker, offered a parcel of land measuring 1,952 square

    meters. Petitioner visited the property and, except for the presence of squatters in the area, he found

    the place suitable for a central warehouse.

    Later, the Flores spouses called on petitioner with a proposal that should he advance the amount of

    P50,000.00 which could be used in taking up an ejectment case against the squatters, private

    respondent would agree to sell the property for only P800.00 per square meter. Petitioner expressed his

    concurrence. On 09 June 1988, a contract, denominated "Deed of Conditional Sale," was executed

    between petitioner and private respondent.

    Pursuant to the agreement, private respondent filed a complaint for ejectment against the squatter

    families. Judgment was rendered ordering the defendants to vacate the premises. The decision was

    handed down beyond the 60-day period stipulated in the contract. The writ of execution of the

    judgment was issued, still later, on 30 March 1989.

    In a letter, dated 07 April 1989, private respondent sought to return the P50,000.00 she received from

    petitioner since, she said, she could not "get rid of the squatters" on the lot. Atty. Sergio A.F. Apostol,

    counsel for petitioner, in his reply of 17 April 1989, refused the tender

    A few days later, private respondent, prompted by petitioner's continued refusal to accept the return of

    the P50,000.00 advance payment, filed with the Regional Trial Court of Makati, Branch 133, Civil Case

    No. 89-4394 for rescission of the deed of "conditional" sale, plus damages, and for the consignation of

    P50,000.00 cash.

    The Regional Trial Court of Makatirendered its decision holding that private respondent had no right torescind the contract since it was she who "violated her obligation to eject the squatters from the subject

    property" and that petitioner, being the injured party, was the party who could, under Article 1191 of

    the Civil Code, rescind the agreement. The court ruled that the provisions in the contract relating to (a)

    the return/reimbursement of the P50,000.00 if the vendor were to fail in her obligation to free the

    property from squatters within the stipulated period or (b), upon the other hand, the sum's forfeiture by

    the vendor if the vendee were to fail in paying the agreed purchase price, amounted to "penalty

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    clauses".

    Private respondent appealed to the Court of Appeals who opined that the contract entered into by the

    parties was subject to a resolutory condition, i.e., the ejectment of the squatters from the land, the non-

    occurrence of which resulted in the failure of the object of the contract; that private respondent

    substantially complied with her obligation to evict the squatters; that it was petitioner who was notready to pay the purchase price and fulfill his part of the contract, and that the provision requiring a

    mandatory return/reimbursement of the P50,000.00 in case private respondent would fail to eject the

    squatters within the 60-day period was not a penal clause.

    ISSUE:

    May the vendor demand the rescission of a contract for the sale of a parcel of land for a cause

    traceable to his own failure to have the squatters on the subject property evicted within the

    contractually-stipulated period?

    RULING:

    No. From the moment the contract was perfected, the parties were bound not only to the

    fulfillment of what has been expressly stipulated but also to all the consequences which, according to

    their nature, may be in keeping with good faith, usage and law. Under the agreement, private

    respondent was obligated to evict the squatters on the property. The ejectment of the squatters was

    a condition the operative act of which sets into motion the period of compliance by petitioner of his ownobligation, i.e., to pay the balance