ARTURO PELAYO VS.

MARCELO LAURON
12 Phil 453
January 12, 1909

FACTS: On November 23, 1906, Arturo Pelayo, a physician, filed a complaint against Marcelo and Juana
Abella. He alleged that on October 13, 1906 at night, Pelayo was called to the house of the defendants to assist
their daughter-in-law who was about to give birth to a child. Unfortunately, the daughter-in-law died as a
consequence of said childbirth. Thus, the defendant refuses to pay. The defendants argue that their daughter-in-
law lived with her husband independently and in a separate house without any relation, that her stay there was
accidental and due to fortuitous event.

ISSUE: Whether or not the defendants should be held liable for the fees demanded by the plaintiff upon
rendering medical assistance to the defendants’ daughter-in-law.

RULING: No. The Court held that the rendering of medical assistance is one of the obligations to which spouses
are bound by mutual support, expressly determined by law and readily demanded. Therefore, there was no
obligation on the part of the in-laws but rather on the part of the husband who is not a party.

Thus, decision affirmed.

LEUNG BEN VS. P. J. O’BRIEN, JAMES A. OSTRAND and GEO. R. HARVEY, Judges of First Instance of
the City of Manila
April 6, 1918

FACTS: On December 12, 1917, an action was instituted in the Court of First Instance of Manila by P.J. O’Brien
to recover of Leung Ben the sum of P15,000, all alleged to have been lost by the plaintiff to the defendant in a
series of gambling, banking, and percentage games conducted during the two or three months prior to the
institution of the suit. The plaintiff asked for an attachment against the property of the defendant, on the ground
that the latter was about to depart from the Philippines with intent to defraud his creditors. This attachment was
issued. The provision of law under which this attachment was issued requires that there should be a cause of
action arising upon contract, express or implied. The contention of the petitioner is that the statutory action to
recover money lost at gaming is not such an action as is contemplated in this provision, and he insists that the
original complaint shows on its face that the remedy of attachment is not available in aid thereof; that the Court
of First Instance acted in excess of its jurisdiction in granting the writ of attachment; that the petitioner has no
plain, speedy, and adequate remedy by appeal or otherwise; and that consequently the writ of certiorari supplies
the appropriate remedy for this relief.

ISSUE: Whether or not the statutory obligation to restore money won at gaming is an obligation arising from
contract, express or implied.

RULING: Yes. In permitting the recovery money lost at play, Act No. 1757 has introduced modifications in the
application of Articles 1798, 1801, and 1305 of the Civil Code.

The first two of these articles relate to gambling contracts, while article 1305 treats of the nullity of contracts
proceeding from a vicious or illicit consideration. Taking all these provisions together, it must be apparent that
the obligation to return money lost at play has a decided affinity to contractual obligation; and the Court believes
that it could, without violence to the doctrines of the civil law, be held that such obligations is an innominate
quasi-contract.

It is however, unnecessary to place the decision on this ground. In the opinion of the Court, the cause of action
stated in the complaint in the court below is based on a contract, express or implied, and is therefore of such
nature that the court had authority to issue the writ of attachment. The application for the writ of certiorari must
therefore be denied and the proceedings dismissed.
William Ollendorf vs. Ira Abrahamson
38 Phil. 585

Facts: The record discloses that Ollendorf is and for a long time past has been engaged in the city of Manila
and elsewhere in the Philippines in the business of manufacturing ladies' embroidered underwear for export.
Ollendorf imports the material from which this underwear is made and adopts decorative designs which are
embroidered upon it by Filipino needle workers from patterns selected and supplied by him. Most of the
embroidery work is done in the homes of the workers. The embroiderers employed by plaintiff are under
contract to work for plaintiff exclusively.

On September 1915, plaintiff and defendant entered into a contract. Under the terms of this, agreement
defendant entered the employ of plaintiff and worked for him until April 1916, when defendant, on account of ill
health, left plaintiff's employ and went to the United States. While in plaintiff's employ defendant had access to
all parts of plaintiff's establishment, and had full opportunity to acquaint himself with plaintiff's business methods
and business connections. The duties performed by him were such as to make it necessary that he should have
this knowledge of plaintiff s business. Defendant had a general knowledge of the Philippine embroidery
business before his employment by plaintiff, having been engaged in similar work for several years.

Some months after his departure, defendant returned to Manila as the manager of the Philippine Underwear
Company, a corporation. This corporation does not maintain a factory in the Philippine Islands, but sends
material and embroidery designs from New York to its local representative here who employs Filipino needle
workers to embroider the designs and make up the garments in their homes. The only difference between
plaintiff's business and that of the firm by which the defendant is employed, is the method of doing the finishing
work — the manufacture of the embroidered material into finished garments.

Shortly after defendant's return to Manila and the commencement by him of the discharge of the duties of his
position as local manager of the Philippine Embroidery Company, plaintiff commenced this action, the principal
purpose of which is to prevent, by injunction, any further breach of that part of defendant's contract of
employment by plaintiff, by which he agreed that he would not "enter into or engage himself directly or indirectly
. . . in a similar or competitive business to that of (plaintiff) anywhere within the Philippine Islands for a period of
five years . . ." from the date of the agreement.

Issue: Whether or not the said contract is valid.

Ruling: The contract is a valid one. The only limitation upon the freedom of contractual agreement is that the
pacts established shall not be contrary to "law, morals or public order." (Civil Code, art. 1255.)

Public welfare is first considered, and if it be not involved, and the restraint upon one party is not greater than
protection to the other party requires, the contract may be sustained. The question is whether, under the
particular circumstances of the case and the nature of the particular contract involved in it the contract is, or is
not, unreasonable.

The Courts adopt the modern rule that the validity of restraints upon trade or employment is to be determined by
the intrinsic reasonableness of the restriction in each case, rather than by any fixed rule, and that such
restrictions may be upheld when not contrary to the public welfare and not greater than is necessary to afford a
fair and reasonable protection to the party in whose favor it is imposed.

A business enterprise may and often does depend for its success upon the owner's relations with other dealers,
his skill in establishing favorable connections, his methods of buying and selling — a multitude of details, none
vital if considered alone, but which in the aggregate constitute the sum total of the advantages which are the
result of the experience or individual aptitude and ability of the man or men by whom the business has been
built up. Failure or success may depend upon the possession of these intangible but all-important assets, and it
is natural that their possessor should seek to keep them from falling into the hands of his competitors.

It is with this object in view that such restrictions as that now under consideration are written into contracts of
employment. Their purpose is the protection of the employer, and if they do not go beyond what is reasonably
necessary to effectuate this purpose they should be upheld. We are of the opinion, and so hold, that in the light
of the established facts the restraint imposed upon defendant by his contract is not unreasonable.
G.R No. 142971, May 7, 2002
Art. 1315 – Contracts perfected by mere consent.
Section 19 of R.A. No. 7160 – Just compensation shall be determined as of the time of actual taking.

Petitioner – The City of Cebu

Respondents –Sps. Apolonio & Blasa Dedamo

Facts:
· The City of Cebu filed a complaint for eminent domain against the spouses Apolonio and Blasa
Dedamo, alleging that it needed their two parcels of land for a public purpose, i.e. for the construction of a public
road.
· The total area sought to be expropriated is 1,624 square meters with an assessed value of
P1,786,400.
· The City of Cebu deposited with the Philippine National Bank the amount representing 15% of the fair
market value of the property to enable the petitioner to take immediate possession of the property pursuant to
Section 19 of R.A. No. 7160.
· Dedamo filed a motion to dismiss the complaint because of the following reasons:
(a) That the purpose for which their property was to be expropriated was not for public use, but for benefit
of a single private entity;
(b) That the price offered was very low; and
(c) That they have no other land in Cebu City.
· A pre-trial ensued, but the parties executed and submitted to the trial court an Agreement to partially
settle the case.
· Thereafter, the trial court directed the City of Cebu to pay the Dedamo the just compensation of
P24,865,930.00 based on the recommendation of the appointed commissioners. But the said compensation was
amended to P20,826,339.50, excluding an area which was not subject to expropriation.
· The City of Cebu elevated the case to the CA, asserting that the value of just compensation should be
based on the date of the filing of the complaint. But the CA affirmed in toto the decision of the trial court.

Issue:
WoN just compensation should be determined as of the date of the filing of the complaint pursuant to
Section 4, Rule 67 of the Rules of Court.

Held:
No, the Court holds that just compensation shall be determined by the proper court, based on the fair
market value at the time of the taking of the property in accordance with Section 19 of R.A. No. 7160, a
substantive law that must prevail over procedural law.
Under Art. 1315 also, contracts are perfected by mere consent, and from that moment the parties are
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.
In the case at bar, the parties agreed to be bound by the report of the commission and approved by the
trial court. The agreement is a contract between the parties. It has the force of law between them and should be
complied with in good faith. Since the petitioner did not interpose a serious objection during the hearing, it is
therefore too late for petitioner to question the valuation.
Thus, the petition is DENIED.

LOCSIN v. MEKENI FOOD CORP.

G.R. No. 192105| 9 December 2013

Nature and Form of Contracts

DOCTRINE: Express stipulation is needed to consider payment installments as rentals.

FACTS:
• Mekeni offered Locsin a car plan.
• The vehicle was a used Honda Civic valued at P280,000.
o ½ of the cost of the vehicle will be paid by the company and the other half to be deducted
from the salary of Locsin.
 o The deduction would be P5,000 each from his salary.
• 2 years after, Locsin resigned. A total of P112,500 has been deducted and applied as his share in
the car plain.
• Locsin filed a complaint for recovery of monthly salary deductions which were earmarked for his
cost-sharing in the car plan.
• Mekeni asserts further that the service vehicle was merely a loan which had to be paid through the
monthly salary deductions.
• CA considered such payments as rentals for the use of his service and installments paid.

ISSUE:Whether or not the payments by Locsin may be considered rentals

HELD: No. installments made on the car plan may be treated as rentals only when there is an express
stipulation in the car plan agreement to such effect.

• Under a typical car plan, there are also stipulations in car plan agreements to the effect that should
the employment of the employee concerned be terminated before all installments are fully paid,
the vehicle will be taken by the employer and all installments paid shall be considered rentals per
agreement.

VIRGINIA VENZON V. RURAL BANK OF BUENAVISTA

GR No. 178031, August 28, 2013

PONENTE: Del Castillo, J.

TOPIC: Obligation with penal clause

FACTS:
This is a Petition for Review on Certiorari questioning the decision resolution of the Court of Appeals
which dismissed the Petition in said case and denying reconsideration thereof. Virginia Venzon (Venzon) and
his spouse obtained a Php 5,000.00 loan from Rural Bank of Buenavista (Bank) against a mortgage on their
house and lot. Not able to settle her account, the Bank foreclosed the property and sold at auction to the Bank
for Php 6,472.76. Venzon then filed a Petition with the Regional Trial Court of Butuan City to annul the
foreclosure proceedings and the tax declarations issued in the name of the Bank.
The trial court dismissed the case in favor of the Bank. It held that Venzon erroneously relied on the
mandatory requirement on publication that under the Rural Bank Act, the foreclosure of mortgages covering
loans granted by rural banks xxx involving real properties levied upon by a sheriff shall be exempt from
publication where the total amount of the loan, including interests due and unpaid, does not exceed Php 10,000.
Since Venzon’s outstanding obligation amounted to just over Php 6,000.00 publication was not necessary. The
Court of Appeals also dismissed her petition, this time because her remedy should have been an appeal under
Rule 41 and not under Rule 65 of the Rules of Court since the resolution of trial court is a FINAL ORDER of
DISMISSAL. She moved for reconsideration but was also denied.

Hence this petition.

ISSUE:
Whether or not foreclosure proceedings was legal foreclosure proceedings was legal.

RULING:
The Court finds no error in the CA’s treatment of the Petition for Certiorari. It was indeed to be treated
as a final order. And since Venzon’s outstanding obligation did not exceed Php 10,000.00 and thus constitutes a
dismissal with the character of finality. Hence, she should have availed of the remedy under Rule 41 and not
Rule 65. However, Petitioner is entitled to a return of Php 6,00.00 she paid to the Bank in 1995. The Bank has
no right to receive the amount. In its Answer with Counterclaims, it is interesting that the Bank did not deny
being the issuer of Official Receipt No. 410848, which amount under the circumstances it had no right to
receive. Here, the Bank failed to refute Venzon’s claim of having paid the amount of Php 6,000. By making such
an ambiguous allegations in its Answer with Counterclaims, the Bank is deemed to have admitted receiving the
amount of Php 6,000.00 from Venzon as evidenced by Official Receipt No. 410848, which amount under the
circumstances it had no right to receive.
DRA, LEILA A DELA LLANO, Petitioner, vs. REBECCA BIONG, doing business under the name and style
of Pongkay Trading, Respondent.
G.R. No. 182356
December 4, 2013
Ponente: Brion

DOCTRINE: Under Article 2176, the elements necessary to establish a quasi-delict case are (1) damages
to the plaintiff;(2) negligence, by act or omission, of the defendant or by some person for whose acts the
defendant must respond, was guilty; and(3) the connection of cause and effect between such negligence
and the damages. In the present case, the burden of proving the proximate causation between Joel’s
negligence and Dra. dela Llana’s whiplash injury rests on Dra. dela Llana. She must establish by
preponderance of evidence that Joel’s negligence, in its natural and continuous sequence, unbroken by
any efficient intervening cause, produced her whiplash injury, and without which her whiplash injury would
not have occurred.

FACTS:

1. On March 30, 2000, at around 11:00 p.m., Juan dela Llana was driving a 1997 Toyota Corolla car along North
Avenue, Quezon City.

2. His sister, Dra. dela Llana, was seated at the front passenger seat while a certain Calimlim was at the
backseat.

3. Juan stopped the car across the Veterans Memorial Hospital when the signal light turned red.

4. A few seconds after the car halted, a dump truck suddenly rammed the car’s rear end, violently pushing the
car forward1.

5. Due to the impact, the car’s rear end collapsed and its rear windshield was shattered. Glass splinters flew,
puncturing Dra. dela Llana. Apart from these minor wounds, Dra. dela Llana did not appear to have suffered
from any other visible physical injuries.

6. In the first week of May 2000, Dra. dela Llana began to feel mild to moderate pain on the left side of her neck
and shoulder. The pain became more intense as days passed by. Her injury became more severe. Her health
deteriorated to the extent that she could no longer move her left arm.

7. Dra. Dela Llana needed to undergo operation of her spine and neck due to severe pain. The operation
released the impingement of the nerve, but incapacitated Dra. dela Llana from the practice of her profession
since June 2000 despite the surgery.

8. Dra. dela Llana demanded from Rebecca compensation for her injuries, but Rebecca refused to pay.

9. Dra. dela Llana sued Rebecca for damages before the Regional Trial Court of Quezon City (RTC). She
alleged that she lost the mobility of her arm as a result of the vehicular accident. 2

10. In defense, Rebecca maintained that Dra. dela Llana had no cause of action against her as no reasonable
relation existed between the vehicular accident and Dra. dela Llana’s injury. She pointed out that Dra. dela
Llana’s illness became manifest one month and one week from the date of the vehicular accident. As a
counterclaim, she demanded the payment of attorney’s fees and costs of the suit.

11. Rebecca testified that Dra. dela Llana was physically fit and strong when they met several days after the
vehicular accident. She also asserted that she observed the diligence of a good father of a family in the
selection and supervision of Joel. She pointed out that she required Joel to submit a certification of good moral
character as well as barangay, police, and NBI clearances prior to his employment. She also stressed that she

1
The driver testified that his truck hit the car because the truck’s brakes got stuck.
2
Dra. dela Llana reiterated that she lost the mobility of her arm because of the vehicular accident. To prove her claim, she identified and
authenticated a medical certificate dated November 20, 2000 issued by Dr. Milla. The medical certificate stated that Dra. dela Llana suffered
from a whiplash injury. It also chronicled her clinical history and physical examinations.
only hired Primero after he successfully passed the driving skills test conducted by Alberto Marcelo, a licensed
driver-mechanic.

12. RTC: The RTC ruled in favor of Dra. dela Llana and held that the proximate cause of Dra. dela Llana’s
whiplash injury to be Joel’s reckless driving.3

13. CA: the CA reversed the RTC ruling. It held that Dra. dela Llana failed to establish a reasonable connection
between the vehicular accident and her whiplash injury by preponderance of evidence. 4

ISSUE:

Whether Joel’s reckless driving is the proximate cause of Dra. dela Llana’s whiplash injury.

HELD: NO

Dra. dela Llana failed to establish her case by preponderance of evidence

Article 2176 of the Civil Code provides that "[w]hoever 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 a quasi-delict." Under this provision, the elements necessary
to establish a quasi-delict case are:

(1) damages to the plaintiff;

(2) negligence, by act or omission, of the defendant or by some person for whose acts the defendant must
respond, was guilty; and

(3) the connection of cause and effect between such negligence and the damages.

These elements show that the source of obligation in a quasi-delict case is the breach or omission of mutual
duties that civilized society imposes upon its members, or which arise from non-contractual relations of certain
members of society to others.29

Based on these requisites, Dra. dela Llana must first establish by preponderance of evidence the three
elements of quasi-delict before we determine Rebecca’s liability as Joel’s employer.

She should show the chain of causation between Joel’s reckless driving and her whiplash injury.

Only after she has laid this foundation can the presumption - that Rebecca did not exercise the diligence of a
good father of a family in the selection and supervision of Joel - arise.

Once negligence, the damages and the proximate causation are established, this Court can then proceed with
the application and the interpretation of the fifth paragraph of Article 2180 of the Civil Code.

Under Article 2176 of the Civil Code, in relation with the fifth paragraph of Article 2180, "an action predicated on
an employee’s act or omission may be instituted against the employer who is held liable for the negligent act or
omission committed by his employee."

3
It found that a whiplash injury is an injury caused by the sudden jerking of the spine in the neck area. It pointed out that the massive
damage the car suffered only meant that the truck was over-speeding. It maintained that Joel should have driven at a slower pace because
road visibility diminishes at night. He should have blown his horn and warned the car that his brake was stuck and could have prevented the
collision by swerving the truck off the road. The RTC further declared that Joel’s negligence gave rise to the presumption that Rebecca did
not exercise the diligence of a good father of a family in Joel's selection and supervision of Joel. Rebecca was vicariously liable because she
was the employer and she personally chose him to drive the truck.
4
Citting Nutrimix Feeds Corp. v. Court of Appeals, it declared that courts will not hesitate to rule in favor of the other party if there is no
evidence or the evidence is too slight to warrant an inference establishing the fact in issue. It noted that the interval between the date of the
collision and the date when Dra. dela Llana began to suffer the symptoms of her illness was lengthy.
The rationale for these graduated levels of analyses is that it is essentially the wrongful or negligent act or
omission itself which creates the vinculum juris in extra-contractual obligations.

In civil cases, a party who alleges a fact has the burden of proving it.

He who alleges has the burden of proving his allegation by preponderance of evidence or greater weight of
credible evidence.

The reason for this rule is that bare allegations, unsubstantiated by evidence, are not equivalent to proof.

In short, mere allegations are not evidence.

In the present case, the burden of proving the proximate causation between Joel’s negligence and Dra. dela
Llana’s whiplash injury rests on Dra. dela Llana. She must establish by preponderance of evidence that Joel’s
negligence, in its natural and continuous sequence, unbroken by any efficient intervening cause, produced her
whiplash injury, and without which her whiplash injury would not have occurred.

Notably, Dra. dela Llana anchors her claim mainly on three pieces of evidence:

(1) the pictures of her damaged car,5

(2) the medical certificate6 dated November 20, 2000, and

(3) her testimonial evidence.7 However, none of these pieces of evidence show the causal relation
between the vehicular accident and the whiplash injury. In other words,

Dra. dela Llana, during trial, did not adduce the factum probans

Indeed, a perusal of the pieces of evidence presented by the parties before the trial court shows that Dra. Dela
Llana did not present any testimonial or documentary evidence that directly shows the causal relation
between the vehicular accident and Dra. Dela Llana’s injury. Her claim that Joel’s negligence causes her
whiplash injury was not established because of the deficiency of the presented evidence during trial. We point
out in this respect that courts cannot take judicial notice that vehicular ccidents cause whiplash injuries. This
proportion is not public knowledge, or is capable of unquestionable demonstration, or ought to be known to
judges because of their judicial functions.We have no expertise in the field of medicine. Justices and judges are
only tasked to apply and interpret the law on the basis of the parties’ pieces of evidence and their corresponding
legal arguments.

In sum, Dra. dela Llana miserably failed to establish her cause by preponderance of evidence. While we
commiserate with her, our solemn duty to independently and impartially assess the merits of the case binds us

5
These pictures indeed demonstrate the impact of the collision. However, it is a far-fetched assumption that the whiplash injury can also be
inferred from these pictures.
6
However, even if we consider the medical certificate in the disposition of this case, the medical certificate has no probative value for being
hearsay. It is a basic rule that evidence, whether oral or documentary, is hearsay if its probative value is not based on the personal
knowledge of the witness but on the knowledge of another person who is not on the witness stand. Evidently, it was Dr. Milla who had
personal knowledge of the contents of the medical certificate. However, she was not presented to testify in court and was not even able to
identify and affirm the contents of the medical certificate.

7
In the present case, Dra. dela Llana’s medical opinion cannot be given probative value for the reason that she was not presented as an
expert witness. As an ordinary witness, she was not competent to testify on the nature, and the cause and effects of whiplash injury.
Furthermore, we emphasize that Dra. dela Llana, during trial, nonetheless did not provide a medical explanation on the nature as well as the
cause and effects of whiplash injury in her testimony.
to rule against Dra. dela Llana’s favor. Her claim, unsupported by prepondernace of evidence, is merely a bare
assertion and has no leg to stand on.

WHEREFORE, premises considered, the assailed Decision dated February 11, 2008 and Resolution dated
March 31, 2008 of the Court of Appeals are hereby AFFIRMED and the petition is hereby DENIED for lack of
merit.
SO ORDERED.

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ROGELIO BAYOTAS y CORDOVA, accused-

appellant
G.R. No. 102207. September 2, 1994

FACTS:
Rogelio Bayotas, accused and charged with Rape, died on February 4, 1992 due to cardio respiratory arrest.
The Solicitor General then submitted a comment stating that the death of the accused does not excuse him from
his civil liability (supported by the Supreme Court’s decision in People vs Sendaydiego). On the other hand, the
counsel of the accused claimed that in the Supreme Court’s decision in People vs Castillo, civil liability is
extinguished if accused should die before the final judgement is rendered.

ISSUE:
Whether or not the death of the accused pending appeal of his conviction extinguish his civil liability.

RULING:
The Court decided on this case through stating the cases of Castillo and Sendaydiego. In the Castillo case, the
Court said that civil liability is extinguished only when death of the accused occurred before the final judgement.
Judge Kapunan further stated that civil liability is extinguished because there will be “no party defendant” in the
case. There will be no civil liability if criminal liability does not exist. Further, the Court stated “it is, thus, evident
that… the rule established was that the survival of the civil liability depends on whether the same can be
predicated on the sources of obligations other than delict.
In the Sendaydiego case, the Court issued Resolution of July 8, 1977 where it states that civil liability will only
survive if death came after the final judgement of the CFI of Pangasinan. However, Article 30 of the Civil Code
could not possibly lend support to the ruling in Sendaydiego. Civil liability ex delicto is extinguished by the death
of the accused while his conviction is on appeal. The Court also gave a summary on which cases should civil
liability be extinguished, to wit:
Death of the accused pending appeal of his conviction extinguishes his criminal liability as well as the civil
liability based solely thereon. Therefore, Bayotas’s death extinguished his criminal and civil liability based solely
on the act complained of.

G.R. No. 82562 April 11, 1997

LYDIA VILLEGAS, MA TERESITA VILLEGAS, ANTONIO VILLEGAS, JR., and ANTONIETTE VILLEGAS vs.
THE COURT OF APPEALS, PEOPLE OF THE PHILIPPINES and ANTONIO V. RAQUIZA

G.R. No. 82592 April 11, 1997

ANTONIO V. RAQUIZA vs. COURT OF APPEALS, LYDIA A. VILLEGAS, ANTONIO VILLEGAS, JR., MA.
ANTONETTE VILLEGAS, MA. LYDIA VILLEGAS and ESTATE OF ANTONIO J. VILLEGAS

FACTS: This case originated from a libel suit filed by then Assemblyman Antonio V. Raquiza against then
Manila Mayor Antonio J. Villegas, who allegedly publicly imputed to him acts constituting violations of the Anti-
Graft and Corrupt Practices Act. He did this on several occasions in August 1968 xxx
An Information for libel was filed against Villegas who denied the charge. After losing in the 1971 elections,
Villegas left for the United States where he stayed until his death. Nevertheless, trial proceeded on absentia.
Two months after the prosecution rested its case, the court issued an order dismissing the criminal aspect of the
case but reserving the right to resolve its civil aspect.
Subsequently the Court awarded Raquiza actual, moral, exemplary damages and cost of suit. On appeal, the
CA affirmed but reduced the amount of damages. Hence, this petition.
ISSUE: (related to the subject matter) did the death of the accused before final judgment extinguish his civil
liability?

HELD: NO (Guys, take note of Article 33 of the Civil Code. Raquiza’s right to recover damages arose from this
article not from delict)
Fortunately, this Court has already settled this issue with the promulgation of the case of People v. Bayotas
(G.R. No. 102007) on September 2, 1994, 4 viz.:
1 Death of the accused pending appeal of his conviction extinguishes his criminal liability as well as the civil
liability xxx
2 Corollarily the claim for civil liability survives notwithstanding the death of (the) accused, if the same may also
be predicated on a source of obligation other than delict. Article 1157 of the Civil Code enumerates these other
sources of obligation from which the civil liability may arise as a result of the same act or omission:
a) Law
b) Contracts
c) Quasi-contracts
d) x x x x x x x x x
e) Quasi-delicts

3. Where the civil liability survives, as explained in Number 2 above, an action for recovery therefor may be
pursued but only by way of filing a separate civil action and subject to Section 1, Rule 111 of the 1985 Rules on
Criminal Procedure as amended. 8 This separate civil action may be enforced either against the
executor/administrator o(f) the estate of the accused, depending on the source of obligation upon which the
same is based as explained above.

4. Finally, the private offended party need not fear a forfeiture of his right to file this separate civil action by
prescription, in cases where during the prosecution of the criminal action and prior to its extinction, the private
offended party instituted together therewith the civil action. In such case, the statute of limitations on the civil
liability is deemed interrupted during the pendency of the criminal case (Art. 1155)

The source of Villegas’ civil liability in the present case is the felonious act of libel he allegedly committed. Yet,
this act could also be deemed a quasi-delict within the purview of Article 33 9 in relation to Article 1157 of the
Civil Code.

The Bayotas ruling, however, makes the enforcement of a deceased accused’s civil liability dependent on two
factors, namely, that it be pursued by filing a separate civil action and that it be made subject to Section 1, Rule
111 of the 1985 Rules on Criminal Procedure, as amended.

Obviously, in the case at bar, the civil action was deemed instituted with the criminal. There was no waiver of
the civil action and no reservation of the right to institute the same, nor was it instituted prior to the criminal
action. What then is the recourse of the private offended party in a criminal case such as this which must be
dismissed in accordance with the Bayotas doctrine.

Now, where the civil action was impliedly instituted with it?

The answer is likewise provided in Bayatas, thus:

Assuming that for lack of express reservation, Belamala’s civil civil for damages was to be considered instituted
together with the criminal action still, since both proceedings were terminated without finals adjudication, the civil
action of the offended party under Article 33 may yet be enforced separately

The resolution of the civil aspect of the case after the dismissal of the main criminal action by the trial court was
technically defective. There was no proper substitution of parties, as correctly pointed out by the Heirs and
repeatedly put in issue by Atty. Quisumbing. What should have been followed by the court a quo was the
procedure laid down in the Rules of Court, specifically, Section 17, Rule 3, in connection with Section 1, Rule
87.

WHEREFORE, the petition in G.R. No. 82562 is GRANTED and the petition in G.R. No. 82592 is DENIED xxx
without prejudice to the right of the private offended party Antonio V. Raquiza, to file the appropriate civil action
for damages against the executor or administrator of the estate or the heirs of the late Antonto J. Villegas in
accordance with the foregoing procedure.

Metropolitan Bank and Trust Company v

Ana Grace Rosales
GR No. 183204, 13 Jan 2014
Del Castillo, J.:
FACTS:
In 2000, respondent Ana Grace Rosales, an owner of a travel agency, and her mother Yo Yuk To opened a
Joint Peso Account10 with petitioner bank. In May 2002, respondent Rosales accompanied her client Liu Chiu
Fang, a Taiwanese National applying for a retiree’s visa from the Philippine Leisure and Retirement Authority
(PLRA), to petitioner’s branch in Escolta to open a savings account.

On 31 July 2003, petitioner issued a "Hold Out" order against respondents’ accounts. On 3 Sept 2003,
petitioner filed a criminal case for Estafa through False Pretences, Misrepresentation, Deceit and Use of
Falsified Documents against the respondent. It was alleged that the respondents are the one responsible for
the unauthorized withdrawal fo $75,000 from Liu Chiu Fang’s account. Petitioner alleged that on 5 Feb 2003, it
received from the PLRA a Withdrawal Clearance for the account of Liu Chiu Fang, that in the afternoon of the
same day, respondents went to inform the branch head Gutierrez that Liu Chiu Fang was going to withdraw her
deposits in cash. Gutierrez told respondents to come back the following day for the bank did not have enough
dollars. On 6 Feb, respondents accompanied an unidentified impostor to the bank with enabled them to
withdraw Liu Chiu Fang’s dollar deposit.

On 3 Mar 2003, respondents opened a Joint Dollar Account with petitioner bank with an initial deposit of
$14,000. The bank later discovered that the serial numbers of the dollar notes deposited by respondents were
the same as those withdrawn by the impostor.

On 10 Sept 2004, respondents filed before the RTC of Manila a Complaint for Breach of Obligation and Contract
with Damages, against petitioner. Respondents alleged that they attempted several times to withdraw their
deposits but were unable to because petitioner had placed their accounts under "Hold Out" status. No
explanation, however, was given by petitioner as to why it issued the "Hold Out" order. Petitioner alleged that
respondents have no cause of action because it has a valid reason for issuing the "Hold Out" order. It averred
that due to the fraudulent scheme of respondent Rosales, it was compelled to reimburse Liu Chiu Fang the
amount of US$75,000.0050 and to file a criminal complaint for Estafa against respondent Rosales.

ISSUE:
Whether or not the Metrobank breached its contract with respondents Rosales.

HELD:
Yes. The Court held that Metrobank’s reliance on the “Hold Out” clause in the Application and
Agreement for Deposit Account is misplaced. Bank deposits, which are in the nature of a simple loan or
mutuum, must be paid upon demand by the depositor.

The “Hold Out” clause applies only if there is a valid and existing obligation arising from any of the
sources of obligation enumerated in Article 1157 of the Civil Code, to wit: law, contracts, quasi-contracts, delict,
and quasi-delict. In this case, petitioner failed to show that respondents have an obligation to it under any law,
contract, quasi-contract, delict, or quasi-delict. And although a criminal case was filed by petitioner against
respondent Rosales, this is not enough reason for petitioner to issue a “Hold Out” order as the case is still
pending and no final judgment of conviction has been rendered against respondent Rosales.

In fact, it is significant to note that at the time petitioner issued the “Hold Out” order, the criminal
complaint had not yet been filed. Thus, considering that respondent Rosales is not liable under any of the five
sources of obligation, there was no legal basis for petitioner to issue the “Hold Out” order. Accordingly, we agree
with the findings of the RTC and the CA that the “Hold Out” clause does not apply in the instant case.

In view of the foregoing, the Court found that petitioner is guilty of breach of contract when it unjustifiably
refused to release respondents’ deposit despite demand. Having breached its contract with respondents,
petitioner is liable for damages.
G.R. No. 107737 October 1, 1999
JUAN L. PEREZ, LUIS KEH, CHARLIE LEE and ROSENDO G. TANSINSIN, JR., petitioners,
vs.
COURT OF APPEALS, LUIS CRISOSTOMO and VICENTE ASUNCION, respondents.

FACTS:

Petitioner Juan Perez, along with Maria Perez, Fructuosa Perez, Victoria Perez, Apolonio Lorenzo and
Vicente Asuncion, is a usufructuary of a parcel of land popularly called the "Papaya Fishpond in located in
Bulacan.

On June 5, 1975, the usufructuaries entered into a contract leasing the fishpond to Luis Keh for a period of
five (5) years and renewable for another five (5) years by agreement of the parties, under the condition that
for the first five-year period the annual rental would be P150,000.00 and for the next five years,
P175,000.00. Paragraph 5 of the lease contract states that the lessee "cannot sublease" the fishpond "nor
assign his rights to anyone." 3

Private respondent Luis Crisostomo is a businessman engaged in the operation of fishponds. On

September 20, 1977, his friend named Ming Cosim arrived with petitioner Charlie Lee. The two persuaded
private respondent to take over the operation of "Papaya Fishpond" as petitioner Lee and his partner,
petitioner Luis Keh, were allegedly losing money in its operation.

Private respondent and petitioners Lee and Keh executed a written agreement denominated as "pakiao
buwis" whereby private respondent would take possession of the "Papaya Fishpond" from January 6, 1978
to June 6, 1978 in consideration of the amount of P128,000.00

Private respondent made the full payment only after he had received a copy of a written agreement dated
January 9, 1978 4 whereby petitioner Keh ceded, conveyed and transferred all his "rights and interests"
over the fishpond to petitioner Lee, "up to June 1985." From private respondent's point of view, that
document assured him of continuous possession of the property for as long as he paid the agreed rentals
of P150,000.00 until 1980 and P.175,000.00 until 1985.
1âw phi1.nêt

For the operation of the fishpond from June 1978 to May 1979, private respondent paid the amount of
P150,000.00 at the office of petitioner Keh wherein a receipt was issued to him signed by the Atty.
Rosendo Tansinsin, Jr. in behalf of the Juan Perez et al. with a notation below said receipt that the amount
was received from him.

Private respondent incurred expenses for repairs in and improvement of the fishpond in the total amount of
P486,562.65. 6 However, sometime in June 1979, petitioners Tansinsin and Juan Perez, in the company of
men bearing armalites, went to the fishpond and presented private respondent with a letter dated June 7,
1979 showing that petitioner Luis Keh had surrendered possession of the fishpond to the usufructuaries.

Because of the threat to deprive him of earnings and the refusal of petitioners Keh, Juan Perez and Lee to
accept the rental for June 5, 1979 to June 6, 1980, private respondent filed on June 14, 1979 with the then
Court of First Instance of Bulacan an action for injunction and damages.

On September 6, 1989, the lower court rendered its decision in favor of private respondent Luis
Crisostomo directing the possession of private respondent of the fishpond and entitlement of damages.

The defendants elevated the case to the Court of Appeals which affirmed the decision of the trial court.

The Court of Appeals ruled further that appellee Crisostomo "cannot be considered a possessor in bad
faith, considering that he took possession of the fishpond when appellants Keh and Lee assigned to him
appellant Keh's leasehold right." It held that appellant Perez knew of the transfer of possession of the
fishpond to appellee and that the receipt evidencing payment of the 1978-1979 rental even bears an
expressed admission by Lee that the payment came from appellee Crisostomo.

Agreeing with the court a quo that "defendants-appellants employed fraud to the damage and prejudice of
plaintiff-appellee," the Court of Appeals held that appellants should be held liable for damages.

ISSUES:
1. WON private respondent Crisostomo has a right to possess the Papaya Fishpond as a
lessee?
2. WON private respondent is entitled to the reimbursement of the improvements he made in
the fishpond?

RULING:
1. Yes. The Court rules the contract between the usufructuaries and petitioner Keh has a provision barring
the sublease of the fishpond. However, it was petitioner Keh himself who violated that provision in offering
the operation of the fishpond to private respondent. Apparently on account of private respondent's
apprehensions as regards the right of petitioners Keh and Lee to transfer operation of the fishpond to him,
on January 9, 1978, petitioner Keh executed a document ceding and transferring his rights and interests
over the fishpond to petitioner Lee. That the same document might have been a deception to persuade
private respondent to agree to their proposal that he operate the fishpond is of no moment. The fact is,
petitioner Keh did transfer his rights as a lessee to petitioner Lee in writing and that, by virtue of that
document, private respondent acceded to take over petitioner Keh's rights as a lessee of the fishpond.

Although no written contract to transfer operation of the fishpond to private respondent was offered in
evidence, 33 the established facts further show that petitioner Juan Perez and his counsel, petitioner
Tansinsin, knew of and agreed to that arrangement by their act of receiving from the private respondent
the rental for 1978-79. By their act of receiving rental from private respondent through the peculiarly written
receipt dated June 6, 1978, petitioners Perez and Tansinsin were put in estoppel to question private
respondent's right to possess the fishpond as a lessee.

However, the Court also ruled that it cannot grant private respondent's prayer that he should be restored to
the possession of the fishpond as a consequence of his unjustified ejectment therefrom. To restore
possession of the fishpond to him would entail violation of contractual obligations that the usufructuaries
have entered into over quite a long period of time now. To place private respondent in the same position
he was in before the lifting of the restraining order in 1980 when he was deprived the right to operate the
fishpond under the contract that already expired in 1985 shall be to sanction injustice and inequity. This
Court, after all, may not supplant the right of the usufructuaries to enter into contracts over the fishpond
through this Decision.

2. Yes. The Court ruled that under the circumstances of the case, it is but proper that private respondent
should be properly compensated for the improvements he introduced in the fishpond. 1âw phi 1.nêt

Art. 1168 of the Civil Code provides that when an obligation "consists in not doing and the obligor does
what has been forbidden him, it shall also be undone at his expense." The lease contract prohibited
petitioner Luis Keh, as lessee, from subleasing the fishpond. In entering into the agreement for pakiao-
buwis with private respondent, not to mention the apparent artifice that was his written agreement with
petitioner Lee on January 9, 1978, petitioner Keh did exactly what was prohibited of him under the contract
— to sublease the fishpond to a third party. That the agreement for pakiao-buwis was actually a sublease
is borne out by the fact that private respondent paid petitioners Luis Keh and Juan Perez, through
petitioner Tansinsin the amount of annual rental agreed upon in the lease contract between the
usufructuaries and petitioner Keh. Petitioner Keh led private respondent to unwittingly incur expenses to
improve the operation of the fishpond. By operation of law, therefore, petitioner Keh shall be liable to
private respondent for the value of the improvements he had made in the fishpond or for P486,562.65 with
interest of six percent (6%) per annum from the rendition of the decision of the trial court on September 6,
1989. 35
G.R. No. 81551 April 27, 1989
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner,
vs.
PHILIPPINE NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) AND NICOLAS
SACEDA, respondents.

FACTS:
In the first week of December, 1981, petitioner Philippine National Construction Corporation or PNCC, a
hired private respondent Nicolas L. Saceda as HT Driver I for its road project in the Kingdom of Saudi
Arabia. Respondent Saceda was hired for 24 months contract period to be effective upon his departure. He
left the Philippines on January 8, 1982.

On January 8, 1984, private respondent Saceda completed his two (2) years overseas contract. However,
it was extended by petitioner up to January 27, 1984.
On February 9, 1984, private respondent was dispatched to Jeddah, Saudi Arabia for immediate
repatriation to the Philippines. He was first booked for departure on February 21, 1984.

However, private respondent refused to depart because he wanted to await the final disposition on the
complaint he filed against petitioner PNCC for payment of his completion bonus, unused vacation/sick
leave and unpaid wages from December 1, 1983 up to January 27, 1984. The decision of the Saudi labor
authorities which was favorable to private respondent was rendered on March 24, 1984. Private
respondent agreed to be repatriated on March 27, 1984, after petitioner PNCC paid him the award granted
by the Saudi labor authorities.

Upon his arrival in the Philippines, private respondent Saceda found out that the allotment representing
70% of his salary for the period November 16, 1983 to January 15,1984, amounting to $408.00 was not
paid by petitioner PNCC to his designated beneficiary in the Philippines. Despite repeated demands,
petitioner failed to pay said claim without justifiable reason.

Private respondent Saceda filed a complaint with the POEA for non-payment of withheld salary/allotment
and stand-by pay corresponding to the period January 27, 1984 to March 27, 1984. He claimed that he
was not repatriated soon upon the termination of his contract but was made to wait and remain Idle for two
months.

In 1986, the POEA render a decision ordering the payment of stand-by pay and withheld allotment to
respondent Saceda which was affirmed in toto by the NLRC.

ISSUE:
WON the respondent is entitled to the stand-by pay?

RULING:
The Court ruled that The stand-by compensation which the employer is required to pay the employee while
the latter waits for his travel papers, is actually the damages caused to him by the employer's delay in
getting his travel papers ready. As correctly pointed out by the Solicitor General in his Comment, the basis
of the employer's liability for such damages is Article 1170 of the Civil Code which provides:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence,
or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

As it was the petitioners obligation to get Saceda's travel documents ready for his repatriation to the
Philippines upon the termination of his overseas contract, the petitioner must answer in damages for the
delay in Saceda's departure which compelled him to "stand-by," idle and jobless in a foreign land, while
waiting for his employer to hand him his ticket and travel papers for his trip home. The measure of those
damages is the income he could have earned if he were repatriated promptly in order that he could work
again in his country.
The fact that Saceda refused to depart on February 21, 1984 because he wanted to wait for the outcome
of the complaint which he filed against petitioner for the payment of his completion bonus, unused
vacation/sick leaves, and unpaid wages from December 1, 1983 up to January 27, 1984 (when his
extended contract of employment expired) does not shift to him the blame for his delayed departure, for, as
it turned out, his suit was justified. The decision promulgated by the Saudi Labor Authorities on March
24,1984 upheld his claims.

Since Saceda was compelled to litigate by reason of the petitioner's unjust refusal to pay his valid and
demandable claims, the petitioner is answerable for the damages he suffered by having to stay on to see
his case through. The petitioner should, therefore, pay him stand-by compensation from January 28, 1984
up to March 27, 1984 when he was repatriated after the petitioner paid the judgment in his favor.

G.R. No. 98695 January 27, 1993

JUAN J. SYQUIA, CORAZON C. SYQUIA, CARLOTA C. SYQUIA, CARLOS C. SYQUIA and ANTHONY
C.SYQUIA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, and THE MANILA MEMORIAL PARK CEMETERY,
INC., respondents.

FACTS:
In 1979, Juan Syquia along with his relatives filed a complaint for damages against defendant-appellee,
Manila Memorial Park Cemetery, Inc.

The complaint alleged among others, that pursuant to a Deed of Sale executed between plaintiff-appellant
Juan J. Syquia and defendant-appellee, the former authorized and instructed defendant-appellee to inter
the remains of his deceased son in the Manila Memorial Park Cemetery in accordance with defendant-
appellant's interment procedures.

However, during the transfer of the said remains to a newly purchased family plot also at the Manila
Memorial Park Cemetery, plaintiffs-appellants discovered that the concrete vault had a hole, water drained
out of the hole; that because of the aforesaid discovery, plaintiffs-appellants became agitated and upset;
that they, through a court order, caused the opening of the concrete vault on discovered that coffin and the
remains of the deceased were damaged.

And so, due to the alleged unlawful and malicious breach by the defendant-appellee of its obligation to
deliver a defect-free concrete vault designed to protect the remains of the deceased and the coffin against
the elements which resulted in the desecration of deceased's grave and in the alternative, because of
defendant-appellee's gross negligence conformably to Article 2176 of the New Civil Code in failing to seal
the concrete vault, the plaintiffs-appellants filed a complaint before the Court of First Instance against
MMPCI asking for damages.

The trial dismissed the complaint and held that the contract between the parties did not guarantee that
the cement vault would be waterproof; that there could be no quasi-delict because the defendant was not
guilty of any fault or negligence, and because there was a pre-existing contractual relation between the
Syquias and defendant Manila Memorial Park Cemetery, Inc.

The trial court also noted that the father himself, Juan Syquia, chose the gravesite despite knowing that
said area had to be constantly sprinkled with water to keep the grass green and that water would
eventually seep through the vault. The trial court also accepted the explanation given by defendant for
boring a hole at the bottom side of the vault: "The hole had to be bored through the concrete vault because
if it has no hole the vault will (sic) float and the grave would be filled with water and the digging would
caved (sic) in the earth, the earth would caved (sic) in the (sic) fill up the grave."3

The Court of Appeals affirmed the judgment of dismissal.

ISSUE:
WON MMPCI breached its obligations with the plaintiffs-appellants by failing to deliver a
defect free concrete vault? Or WON MMPCI is negligent in failing to seal the concrete vault?

RULING:
The Court ruled that MMPCI did not commit a breach contract with the plaintiffs-appellants as there was no
stipulation in the Deed of Sale and Certificate of Perpetual Care and in the Rules and Regulations of the
Manila Memorial Park Cemetery, Inc. that the vault would be waterproof. The Court held that the word
"sealed" cannot be equated with "waterproof".

That, well settled is the rule that when the terms of the contract are clear and leave no doubt as to the
intention of the contracting parties, then the literal meaning of the stipulation shall control. 11 Contracts
should be interpreted according to their literal meaning and should not be interpreted beyond their obvious
intendment. 12

The Court cited the findings of the CA that when plaintiff-appellant Juan J. Syquia has accepted defendant-
appellee's undertaking to merely provide a concrete vault, he cannot claim that said concrete vault must
also be waterproofed and that, if the terms of the contract are clear and leave no doubt upon the intention
of the contracting parties, the literal meaning of its stipulations shall control.

On the other hand, the Court found no evidence of negligence on the part of MMPCI as it had the diligence
required to be observed in the performance of the obligation is that which is expected of a good father of a
family. The hole placed on the vault by MMPCI was necessary, as explained by the Internment Foreman,
to prevent the accumulation of water inside the vault which would have resulted in the caving in of earth
around the grave filling the same with earth.

Moreover, the Court ruled that with respect to the allegation that MMPCI has committed culpa aquiliana,
the Court of Appeals found no negligent act on the part of private respondent to justify an award of
damages against it. Although a pre-existing contractual relation between the parties does not preclude the
existence of a culpa aquiliana, We find no reason to disregard the respondent's Court finding that there
was no negligence.

Art. 2176. 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 a quasi-delict . . . . (Emphasis supplied).

In this case, it has been established that the Syquias and the Manila Memorial Park Cemetery, Inc.,
entered into a contract entitled "Deed of Sale and Certificate of Perpetual Care"6 on August 27, 1969. That
agreement governed the relations of the parties and defined their respective rights and obligations. Hence,
had there been actual negligence on the part of the Manila Memorial Park Cemetery, Inc., it would be held
liable not for a quasi-delict or culpa aquiliana, but for culpa contractual as provided by Article 1170 of the
Civil Code, to wit:

Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages.
Legaspi Oil Co., Inc. v Court of Appeals, GR No. 96505, 01 July 1993

Facts: Petitioner Legaspi Oil Company had several transactions with Oseraos through the agents of the
latter. The transactions involve the sale of copras (coconut husk) by private respondent to the petitioner.
The selling price of Oseraos for every 100 kilos of copras depends on the prevailing market price at the
time the contract was entered into.

In one transaction, Oseraos committed to sell 100 tons of copra to Legaspi Oil for the price of P82 per 100
kilos with delivery terms of 20 days effective 8 March 1975. After the period to deliver had lapsed, Oseraos
was only able to sell 46,334 kilos of copra thus leaving a balance of 53,666 kilos as per running account.
Accordingly, demands were made upon Oseraos to deliver the balance with a final warning embodied in a
letter dated 6 October 1976 that failure to deliver will mean cancellation of the contract, the balance to be
purchased at open market and the price deferential to be charged against Oseraos. Since there was still
no compliance, Legaspi Oil purchased the undelivered balance from the open market at the prevailing
price of P168.00 per 100 kilos, or a price differential of P86.00 per 100 kilos, a net loss of P46,152.76
chargeable against private respondent.

Issue:
WoN Oseraos is liable for damages arising from fraud or bad faith in deliberately breaching the contract of
sale entered into by the parties.

Held:
Despite repeated demands by petitioner, private respondent failed to fulfill his contractual obligation to
deliver the remaining 53,666 kilograms of copra. Based on the foregoing facts, the actuality of private
respondent’s fraud cannot be gainsaid. In general fraud may be defined as the voluntary execution of a
wrongful act, or a willful omission, knowing and intending the effects which naturally and necessarily arise
from such act or omission. The conduct of the private respondent clearly manifests his deliberate faudulent
intent to evade his contractual obligation for the price of copra had in the meantime more than doubled
from P82.00 to P168.00 per 100 kilograms. Under Art. 1170 of the Civil Code, those who in the
performance of their obligation are guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages. Pursuant to said article, private respondent is liable
for damages.

SPS. GUANIO VS. MAKATI SHANGRI-LA HOTEL

G.R. No. 190601 February 7, 2011

Facts:
Petitioner spouses, Luigi M. Guanio and Anna Hernandez-Guanio, booked respondent Makati Shangre-La
Hotel for their wedding reception.

A week before their wedding reception, the hotel scheduled a food tasting. Eventually, the parties agreed
to a package where the final price was P1,150.00 per person.

According to the complainants, when the actual reception took place, ” the respondent’s representatives
did not show up despite their assurance that they would; their guests complained of the delay in the
service of the dinner; certain items listed in the published menu were unavailable; the hotel’s waiters were
rude and unapologetic when confronted about the delay; and despite Alvarez’s promise that there would
be no charge for the extension of the reception beyond 12:00 midnight, they were billed and paid P8,000
per hour for the three-hour extension of the event up to 4:00 A.M. the next day. They further claim that they
brought wine and liquor in accordance with their open bar arrangement, but these were not served to the
guests who were forced to pay for their drinks. They sent a letter-complaint to hotel and received an
apologetic reply from the hotel’s Executive Assistant Manager in charge of Food and Beverage.
They nevertheless filed a complaint for breach of contract and damages before the Regional Trial Court
(RTC) of Makati City.

Answering, the hotel said that complainants requested a combination of king prawns and salmon, hence,
the price was increased to P1,200.00 per person, but discounted at P1,150.00; that contrary to their claim,
the hotel representatives were present during the event, albeit they were not permanently stationed thereat
as there were three other hotel functions; that while there was a delay in the service of the meals, the
same was occasioned by the sudden increase of guests to 470 from the guaranteed expected minimum
number of guests of 350 to a maximum of 380, as stated in the Banquet Event Order (BEO);2 and the
Banquet Service Director in fact relayed the delay in the service of the meals to complainant’s father.
The RTC, relying heavily on the letter of the hotel’s Executive Assistant ruled in favour of the complainants
and awarded damages in their favour.

The Court of Appeals reversed the decision, noting that the proximate cause of the complainant’s injury
was the unexpected increase in the number of their guests.

Issue:
WON Makati Shangri-La Hotel may be held liable for damages.

Held:
The Supreme Court reversed the Court of Appeals decision, noting that in this case, the obligation was
based on a contract; hence, the concept of proximate cause has no application.

In absolving the hotel from damages, the Supreme Court noted that: “The appellate court, and even the
trial court, observed that petitioners were remiss in their obligation to inform respondent of the change in
the expected number of guests. The observation is reflected in the records of the case. Petitioners’ failure
to discharge such obligation thus excused, as the above-quoted paragraph 4.5 of the parties’ contract
provide, respondent from liability for “any damage or inconvenience” occasioned thereby”

Nevertheless, on grounds of equity, the High Court awarded P50,000.00 in favour of the complainants and
justified it by saying:

“The exculpatory clause notwithstanding, the Court notes that respondent could have managed the
“situation” better, it being held in high esteem in the hotel and service industry. Given respondent’s vast
experience, it is safe to presume that this is not its first encounter with booked events exceeding the
guaranteed cover. It is not audacious to expect that certain measures have been placed in case this
predicament crops up. That regardless of these measures, respondent still received complaints as in the
present case, does not amuse.

Respondent admitted that three hotel functions coincided with petitioners’ reception. To the Court, the
delay in service might have been avoided or minimized if respondent exercised prescience in scheduling
events. No less than quality service should be delivered especially in events which possibility of repetition
is close to nil. Petitioners are not expected to get married twice in their lifetimes.”

What applies in the present case is Article 1170 of the Civil Code which reads:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence or delay, and
those who in any manner contravene the tenor thereof, are liable for damages.

RCPI v. Verchez, et al. enlightens: In culpa contractual x x x the mere proof of the existence of the contract
and the failure of its compliance justify, prima facie, a corresponding right of relief. The law, recognizing the
obligatory force of contracts, will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach upon the
contract confers upon the injured party a valid cause for recovering that which may have been lost or
suffered.
The remedy serves to preserve the interests of the promissee that may include his “expectation interest ,”
which is his interest in having the benefit of his bargain by being put in as good a position as he would
have been in had the contract been performed, or his “reliance interest ,”which is his interest in being
reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have
been in had the contract not been made; or his”restitution interest,” which is his interest in having restored
to him any benefit that he has conferred on the other party. Indeed, agreements can accomplish little,
either for their makers or for society, unless they are made the basis for action.

The effect of every infraction is to create a new duty, that is, to make RECOMPENSE to the one who has
been injured by the failure of another to observe his contractual obligation unless he can show extenuating
circumstances, like proof of his exercise of due diligence or of the attendance of fortuitous event to excuse
him from his ensuing liability.