Phil. School of Business Administration v.

CA
G.R. No. 84698, Jan. 4, 1992

School's responsibility in loco parentis over its own students: the harm or negligent act
must be committed by its students against another student, not by an outsider

General rule on the application of quasi-delict: no pre-existing contract between the

parties

FACTS:
Carlitos Bautista, a third-year commerce student of PSBA, was stabbed to death while on the
second-floor premises of the school. The assailants were not members of the schools academic
community but were elements from outside the school. The parents of Carlitos filed a civil
action against the school authorities, alleging them negligent, reckless and with failure to take
security precautions, means and methods before, during and after the attack on the victim.
Theappellate court found in their favor, primarily anchoring its decision on the law of quasidelicts.
Hence, the petition.
ISSUE:

Whether or not the appellate court was correct in deciding the case based on Article
2180 (in loco parentis)

Whether or not the application of the law on quasi-delict is proper when there is a
pre-existing contract

HELD:
The SC did not agree with the premises of the CAs ruling. Article 2180, in conjunction with
Article 2176 of the Civil Code, establishes the rule in in loco parentis. It had been stressed that
the law (Article 2180) plainly provides that the damage should have been caused or inflicted by
pupils or students of the educational institution sought to be held liable for the acts of its pupils
or students while in its custody. However, this material situation does not exist in the present case
for, as earlier indicated, the assailants of Carlitos were not students of PSBA, for whose acts the
school could have been made liable.
IS PSBA EXCULPATED FROM LIABILITY?

It does not necessarily follow. When an academic institution accepts students for enrollment,
there is established a contract between them, resulting in bilateral obligations which both parties
are bound to comply with. Moreover, there is that built-in obligation to provide students with
an atmosphere that promotes or assists in attaining its primary undertaking of imparting
knowledge. The school must ensure that adequate steps are taken to maintain peace and order
within the campus premises and to prevent the breakdown thereof.
Because the circumstances of the present case evince a contractual relation between PSBA
and Carlitos, the rules on quasi-delict do not really govern. However, the mere fact that a person
is bound to another by contract does not relieve him from extra-contractual liability to such
person. When such a contractual relation exists the obligor may break the contract under such
conditions that the same act which constitutes a breach of the contract would have constituted the
source of an extra-contractual obligation had no contract existed between the parties. Art. 21 of
the Civil Code comes to mind, so that should the act which breaches a contract be done in bad
faith and violative of Art. 21, then there is a cause to view the act as constituting a quasi-delict.
In the present case, there is no finding that the contract between the school and Carlitos had been
breached thru the formers negligence in providing proper security measures.

FIRST DIVISION
[G.R. No. 115129. February 12, 1997]

IGNACIO BARZAGA, petitioner, vs. COURT

ANGELITO ALVIAR, respondents.

OF

APPEALS

and

DECISION
BELLOSILLO, J.:

The Fates ordained that Christmas 1990 be bleak for Ignacio Barzaga and
his family. On the nineteenth of December Ignacio's wife succumbed to a
debilitating ailment after prolonged pain and suffering. Forewarned by her
attending physicians of her impending death, she expressed her wish to be
laid to rest before Christmas day to spare her family from keeping lonely vigil
over her remains while the whole of Christendom celebrate the Nativity of their
Redeemer.
Drained to the bone from the tragedy that befell his family yet preoccupied
with overseeing the wake for his departed wife, Ignacio Barzaga set out to

arrange for her interment on the twenty-fourth of December in

obedience semper fidelis to her dying wish. But her final entreaty,
unfortunately, could not be carried out. Dire events conspired to block his
plans that forthwith gave him and his family their gloomiest Christmas ever.
This is Barzaga's story. On 21 December 1990, at about three o`clock in
the afternoon, he went to the hardware store of respondent Angelito Alviar to
inquire about the availability of certain materials to be used in the construction
of a niche for his wife. He also asked if the materials could be delivered at
once. Marina Boncales, Alviar's storekeeper, replied that she had yet to verify
if the store had pending deliveries that afternoon because if there were then
all subsequent purchases would have to be delivered the following day. With
that reply petitioner left.
At seven o' clock the following morning, 22 December, Barzaga returned
to Alviar's hardware store to follow up his purchase of construction
materials. He told the store employees that the materials he was buying would
have to be delivered at the Memorial Cemetery in Dasmarias, Cavite, by eight
o'clock that morning since his hired workers were already at the burial site and
time was of the essence. Marina Boncales agreed to deliver the items at the
designated time, date and place. With this assurance, Barzaga purchased the
materials and paid in full the amount of P2,110.00. Thereafter he joined his
workers at the cemetery, which was only a kilometer away, to await the
delivery.
The construction materials did not arrive at eight o'clock as promised. At
nine o' clock, the delivery was still nowhere in sight. Barzaga returned to the
hardware store to inquire about the delay. Boncales assured him that although
the delivery truck was not yet around it had already left the garage and that as
soon as it arrived the materials would be brought over to the cemetery in no
time at all. That left petitioner no choice but to rejoin his workers at the
memorial park and wait for the materials.
By ten o'clock, there was still no delivery. This prompted petitioner to
return to the store to inquire about the materials. But he received the same
answer from respondent's employees who even cajoled him to go back to the
burial place as they would just follow with his construction materials.

After hours of waiting - which seemed interminable to him - Barzaga

became extremely upset. He decided to dismiss his laborers for the day. He
proceeded to the police station, which was just nearby, and lodged a
complaint against Alviar. He had his complaint entered in the police
blotter. When he returned again to the store he saw the delivery truck already
there but the materials he purchased were not yet ready for
loading. Distressed that Alviar's employees were not the least concerned,
despite his impassioned pleas, Barzaga decided to cancel his transaction with
the store and look for construction materials elsewhere.
In the afternoon of that day, petitioner was able to buy from another
store. But since darkness was already setting in and his workers had left, he
made up his mind to start his project the following morning, 23 December. But
he knew that the niche would not be finish in time for the scheduled burial the
following day. His laborers had to take a break on Christmas Day and they
could only resume in the morning of the twenty-sixth. The niche was
completed in the afternoon and Barzaga's wife was finally laid to
rest. However, it was two-and-a-half (2-1/2) days behind schedule.
On 21 January 1991, tormented perhaps by his inability to fulfill his wife's
dying wish, Barzaga wrote private respondent Alviar demanding recompense
for the damage he suffered. Alviar did not respond. Consequently, petitioner
sued him before the Regional Trial Court.
[1]

Resisting petitioner's claim, private respondent contended that legal delay

could not be validly ascribed to him because no specific time of delivery was
agreed upon between them. He pointed out that the invoices evidencing the
sale did not contain any stipulation as to the exact time of delivery and that
assuming that the materials were not delivered within the period desired by
petitioner, the delivery truck suffered a flat tire on the way to the store to pick
up the materials. Besides, his men were ready to make the delivery by tenthirty in the morning of 22 December but petitioner refused to accept
them. According to Alviar, it was this obstinate refusal of petitioner to accept
delivery that caused the delay in the construction of the niche and the
consequent failure of the family to inter their loved one on the twenty-fourth of
December, and that, if at all, it was petitioner and no other who brought about
all his personal woes.

Upholding the proposition that respondent incurred in delay in the delivery

of the construction materials resulting in undue prejudice to petitioner, the trial
court ordered respondent Alviar to pay petitioner (a) P2,110.00 as refund for
the purchase price of the materials with interest per annum computed at the
legal rate from the date of the filing of the complaint, (b) P5,000.00 as
temperate damages, (c) P20,000.00 as moral damages, (d) P5,000.00 as
litigation expenses, and (e) P5,000.00 as attorney's fees.
On appeal, respondent Court of Appeals reversed the lower court and
ruled that there was no contractual commitment as to the exact time of
delivery since this was not indicated in the invoice receipts covering the sale.
[2]

The arrangement to deliver the materials merely implied that delivery

should be made within a reasonable time but that the conclusion that since
petitioner's workers were already at the graveyard the delivery had to be
made at that precise moment, is non-sequitur. The Court of Appeals also held
that assuming that there was delay, petitioner still had sufficient time to
construct the tomb and hold his wife's burial as she wished.
We sustain the trial court. An assiduous scrutiny of the record convinces
us that respondent Angelito Alviar was negligent and incurred in delay in the
performance of his contractual obligation. This sufficiently entitles petitioner
Ignacio Barzaga to be indemnified for the damage he suffered as a
consequence of delay or a contractual breach. The law expressly provides
that 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.
[3]

Contrary to the appellate court's factual determination, there was a specific

time agreed upon for the delivery of the materials to the cemetery. Petitioner
went to private respondent's store on 21 December precisely to inquire if the
materials he intended to purchase could be delivered immediately. But he was
told by the storekeeper that if there were still deliveries to be made that
afternoon his order would be delivered the following day. With this in mind
Barzaga decided to buy the construction materials the following morning after
he was assured of immediate delivery according to his time frame. The
argument that the invoices never indicated a specific delivery time must fall in

the face of the positive verbal commitment of respondent's

storekeeper. Consequently it was no longer necessary to indicate in the
invoices the exact time the purchased items were to be brought to the
cemetery. In fact, storekeeper Boncales admitted that it was her custom not to
indicate the time of delivery whenever she prepared invoices.
[4]

Private respondent invokes fortuitous event as his handy excuse for that
"bit of delay" in the delivery of petitioner's purchases. He maintains that
Barzaga should have allowed his delivery men a little more time to bring the
construction materials over to the cemetery since a few hours more would not
really matter and considering that his truck had a flat tire. Besides, according
to him, Barzaga still had sufficient time to build the tomb for his wife.
This is a gratuitous assertion that borders on callousness. Private
respondent had no right to manipulate petitioner's timetable and substitute it
with his own. Petitioner had a deadline to meet. A few hours of delay was no
piddling matter to him who in his bereavement had yet to attend to other
pressing family concerns. Despite this, respondent's employees still made
light of his earnest importunings for an immediate delivery. As petitioner
bitterly declared in court " x x x they (respondent's employees) were making a
fool out of me."
[5]

We also find unacceptable respondent's justification that his truck had a

flat tire, for this event, if indeed it happened, was forseeable according to the
trial court, and as such should have been reasonably guarded against. The
nature of private respondent's business requires that he should be ready at all
times to meet contingencies of this kind. One piece of testimony by
respondent's witness Marina Boncales has caught our attention - that the
delivery truck arrived a little late than usual because it came from a delivery of
materials in Langcaan, Dasmarias, Cavite. Significantly, this information was
withheld by Boncales from petitioner when the latter was negotiating with her
for the purchase of construction materials. Consequently, it is not
unreasonable to suppose that had she told petitioner of this fact and that the
delivery of the materials would consequently be delayed, petitioner would not
have bought the materials from respondent's hardware store but elsewhere
which could meet his time requirement. The deliberate suppression of this
[6]

information by itself manifests a certain degree of bad faith on the part of

respondent's storekeeper.
The appellate court appears to have belittled petitioner's submission that
under the prevailing circumstances time was of the essence in the delivery of
the materials to the grave site. However, we find petitioner's assertion to be
anchored on solid ground. The niche had to be constructed at the very least
on the twenty-second of December considering that it would take about two
(2) days to finish the job if the interment was to take place on the twenty-fourth
of the month. Respondent's delay in the delivery of the construction materials
wasted so much time that construction of the tomb could start only on the
twenty-third. It could not be ready for the scheduled burial of petitioner's
wife. This undoubtedly prolonged the wake, in addition to the fact that work at
the cemetery had to be put off on Christmas day.
This case is clearly one of non-performance of a reciprocal obligation. In
their contract of purchase and sale, petitioner had already complied fully with
what was required of him as purchaser, i.e., the payment of the purchase
price of P2,110.00. It was incumbent upon respondent to immediately fulfill his
obligation to deliver the goods otherwise delay would attach.
[7]

We therefore sustain the award of moral damages. It cannot be denied

that petitioner and his family suffered wounded feelings, mental anguish and
serious anxiety while keeping watch on Christmas day over the remains of
their loved one who could not be laid to rest on the date she herself had
chosen. There is no gainsaying the inexpressible pain and sorrow Ignacio
Barzaga and his family bore at that moment caused no less by the ineptitude,
cavalier behavior and bad faith of respondent and his employees in the
performance of an obligation voluntarily entered into.
We also affirm the grant of exemplary damages. The lackadaisical and
feckless attitude of the employees of respondent over which he exercised
supervisory authority indicates gross negligence in the fulfillment of his
business obligations. Respondent Alviar and his employees should have
exercised fairness and good judgment in dealing with petitioner who was then
grieving over the loss of his wife. Instead of commiserating with him,

respondent and his employees contributed to petitioner's anguish by causing

him to bear the agony resulting from his inability to fulfill his wife's dying wish.
We delete however the award of temperate damages. Under Art. 2224 of
the Civil Code, temperate damages are more than nominal but less than
compensatory, and may be recovered when the court finds that some
pecuniary loss has been suffered but the amount cannot, from the nature of
the case, be proved with certainty. In this case, the trial court found that
plaintiff suffered damages in the form of wages for the hired workers for 22
December 1990 and expenses incurred during the extra two (2) days of the
wake. The record however does not show that petitioner presented proof of
the actual amount of expenses he incurred which seems to be the reason the
trial court awarded to him temperate damages instead. This is an erroneous
application of the concept of temperate damages. While petitioner may have
indeed suffered pecuniary losses, these by their very nature could be
established with certainty by means of payment receipts. As such, the claim
falls unequivocally within the realm of actual or compensatory
damages. Petitioner's failure to prove actual expenditure consequently
conduces to a failure of his claim.For in determining actual damages, the court
cannot rely on mere assertions, speculations, conjectures or guesswork but
must depend on competent proof and on the best evidence obtainable
regarding the actual amount of loss.
[8]

We affirm the award of attorney's fees and litigation expenses. Award of

damages, attorney's fees and litigation costs is left to the sound discretion of
the court, and if such discretion be well exercised, as in this case, it will not be
disturbed on appeal.
[9]

WHEREFORE, the decision of the Court of Appeals is REVERSED and

SET ASIDE except insofar as it GRANTED on a motion for reconsideration the
refund by private respondent of the amount of P2,110.00 paid by petitioner for
the construction materials. Consequently, except for the award of P5,000.00
as temperate damages which we delete, the decision of the Regional Trial
Court granting petitioner (a)P2,110.00 as refund for the value of materials with
interest computed at the legal rate per annum from the date of the filing of the
case; (b)P20,000.00 as moral damages; (c) P10,000.00 as exemplary

damages; (d) P5,000.00 as litigation expenses; and (4) P5,000.00 as

attorney's fees, is AFFIRMED. No costs.
SO ORDERED.
Padilla, (Chairman), Vitug, Kapunan, and Hermosisima, Jr., JJ., concur.

SECOND DIVISION
[G.R. No. 147324. May 25, 2004]

PHILIPPINE
COMMUNICATIONS
SATELLITE
CORPORATION, petitioner, vs. GLOBE TELECOM, INC. (formerly
and Globe Mckay Cable and Radio Corporation), respondents.
[G.R. No. 147334. May 25, 2004]

GLOBE TELECOM, INC., petitioner, vs. PHILIPPINE COMMUNICATION

SATELLITE CORPORATION,respondent.
DECISION
TINGA, J.:

Before the Court are two Petitions for Review assailing the Decision of the
Court of Appeals, dated 27 February 2001, in CA-G.R. CV No. 63619.
[1]

The facts of the case are undisputed.

For several years prior to 1991, Globe Mckay Cable and Radio
Corporation, now Globe Telecom, Inc. (Globe), had been engaged in the
coordination of the provision of various communication facilities for the military
bases of the United States of America (US) in Clark Air Base, Angeles,
Pampanga and Subic Naval Base in Cubi Point, Zambales. The said
communication facilities were installed and configured for the exclusive use of
the US Defense Communications Agency (USDCA), and for security reasons,
were operated only by its personnel or those of American companies

contracted by it to operate said facilities. The USDCA contracted with said

American companies, and the latter, in turn, contracted with Globe for the use
of the communication facilities. Globe, on the other hand, contracted with
local service providers such as the Philippine Communications Satellite
Corporation (Philcomsat) for the provision of the communication facilities.
On 07 May 1991, Philcomsat and Globe entered into an Agreement
whereby Philcomsat obligated itself to establish, operate and provide an IBS
Standard B earth station (earth station) within Cubi Point for the exclusive use
of the USDCA. The term of the contract was for 60 months, or five (5) years.
In turn, Globe promised to pay Philcomsat monthly rentals for each leased
circuit involved.
[2]

[3]

[4]

At the time of the execution of the Agreement, both parties knew that the
Military Bases Agreement between the Republic of the Philippines and the US
(RP-US Military Bases Agreement), which was the basis for the occupancy of
the Clark Air Base and Subic Naval Base in Cubi Point, was to expire in
1991. Under Section 25, Article XVIII of the 1987 Constitution, foreign military
bases, troops or facilities, which include those located at the US Naval Facility
in Cubi Point, shall not be allowed in the Philippines unless a new treaty is
duly concurred in by the Senate and ratified by a majority of the votes cast by
the people in a national referendum when the Congress so requires, and such
new treaty is recognized as such by the US Government.
Subsequently, Philcomsat installed and established the earth station at
Cubi Point and the USDCA made use of the same.
On 16 September 1991, the Senate passed and adopted Senate
Resolution No. 141, expressing its decision not to concur in the ratification of
the Treaty of Friendship, Cooperation and Security and its Supplementary
Agreements that was supposed to extend the term of the use by the US of
Subic Naval Base, among others. The last two paragraphs of the Resolution
state:
[5]

FINDING that the Treaty constitutes a defective framework for the continuing
relationship between the two countries in the spirit of friendship, cooperation and
sovereign equality: Now, therefore, be it

Resolved by the Senate, as it is hereby resolved, To express its decision not to concur
in the ratification of the Treaty of Friendship, Cooperation and Security and its
Supplementary Agreements, at the same time reaffirming its desire to continue
friendly relations with the government and people of the United States of America.
[6]

On 31 December 1991, the Philippine Government sent a Note Verbale to

the US Government through the US Embassy, notifying it of the Philippines
termination of the RP-US Military Bases Agreement. The Note Verbale stated
that since the RP-US Military Bases Agreement, as amended, shall terminate
on 31 December 1992, the withdrawal of all US military forces from Subic
Naval Base should be completed by said date.
In a letter dated 06 August 1992, Globe notified Philcomsat of its intention
to discontinue the use of the earth station effective 08 November 1992 in view
of the withdrawal of US military personnel from Subic Naval Base after the
termination of the RP-US Military Bases Agreement. Globe invoked as basis
for the letter of termination Section 8 (Default) of the Agreement, which
provides:
Neither party shall be held liable or deemed to be in default for any failure to perform
its obligation under this Agreement if such failure results directly or indirectly from
force majeure or fortuitous event. Either party is thus precluded from performing its
obligation until such force majeure or fortuitous event shall terminate. For the
purpose of this paragraph, force majeure shall mean circumstances beyond the control
of the party involved including, but not limited to, any law, order, regulation, direction
or request of the Government of the Philippines, strikes or other labor difficulties,
insurrection riots, national emergencies, war, acts of public enemies, fire, floods,
typhoons or other catastrophies or acts of God.
Philcomsat sent a reply letter dated 10 August 1992 to Globe, stating that
we expect [Globe] to know its commitment to pay the stipulated rentals for
the remaining terms of the Agreement even after [Globe] shall have
discontinue[d] the use of the earth station after November 08,
1992. Philcomsat referred to Section 7 of the Agreement, stating as follows:
[7]

7.

DISCONTINUANCE OF SERVICE

Should [Globe] decide to discontinue with the use of the earth station after it has been
put into operation, a written notice shall be served to PHILCOMSAT at least sixty
(60) days prior to the expected date of termination. Notwithstanding the non-use of
the earth station, [Globe] shall continue to pay PHILCOMSAT for the rental of the
actual number of T1 circuits in use, but in no case shall be less than the first two (2)
T1 circuits, for the remaining life of the agreement. However, should PHILCOMSAT
make use or sell the earth station subject to this agreement, the obligation of [Globe]
to pay the rental for the remaining life of the agreement shall be at such monthly rate
as may be agreed upon by the parties.
[8]

After the US military forces left Subic Naval Base, Philcomsat sent Globe
a letter dated 24 November 1993 demanding payment of its outstanding
obligations under the Agreement amounting to US$4,910,136.00 plus interest
and attorneys fees. However, Globe refused to heed Philcomsats demand.
On 27 January 1995, Philcomsat filed with the Regional Trial Court of
Makati a Complaint against Globe, praying that the latter be ordered to pay
liquidated damages under the Agreement, with legal interest, exemplary
damages, attorneys fees and costs of suit. The case was raffled to Branch 59
of said court.
Globe filed an Answer to the Complaint, insisting that it was constrained to
end the Agreement due to the termination of the RP-US Military Bases
Agreement and the non-ratification by the Senate of the Treaty of Friendship
and Cooperation, which events constituted force majeureunder the
Agreement. Globe explained that the occurrence of said events exempted it
from paying rentals for the remaining period of the Agreement.
On 05 January 1999, the trial court rendered its Decision, the dispositive
portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1.

Ordering the defendant to pay the plaintiff the amount of Ninety Two
Thousand Two Hundred Thirty Eight US Dollars (US$92,238.00) or its
equivalent in Philippine Currency (computed at the exchange rate prevailing
at the time of compliance or payment) representing rentals for the month of

December 1992 with interest thereon at the legal rate of twelve percent
(12%) per annum starting December 1992 until the amount is fully paid;
2.

Ordering the defendant to pay the plaintiff the amount of Three Hundred
Thousand (P300,000.00) Pesos as and for attorneys fees;

3.

Ordering the DISMISSAL of defendants counterclaim for lack of merit; and

4.

With costs against the defendant.

SO ORDERED.

[9]

Both parties appealed the trial courts Decision to the Court of Appeals.
Philcomsat claimed that the trial court erred in ruling that: (1) the nonratification by the Senate of the Treaty of Friendship, Cooperation and
Security and its Supplementary Agreements constitutes force majeure which
exempts Globe from complying with its obligations under the Agreement; (2)
Globe is not liable to pay the rentals for the remainder of the term of the
Agreement; and (3) Globe is not liable to Philcomsat for exemplary damages.
Globe, on the other hand, contended that the RTC erred in holding it liable
for payment of rent of the earth station for December 1992 and of attorneys
fees. It explained that it terminated Philcomsats services on 08 November
1992; hence, it had no reason to pay for rentals beyond that date.
On 27 February 2001, the Court of Appeals promulgated
its Decision dismissing Philcomsats appeal for lack of merit and affirming the
trial courts finding that certain events constituting force majeure under
Section 8 the Agreement occurred and justified the non-payment by Globe of
rentals for the remainder of the term of the Agreement.
The appellate court ruled that the non-ratification by the Senate of the
Treaty of Friendship, Cooperation and Security, and its Supplementary
Agreements, and the termination by the Philippine Government of the RP-US
Military Bases Agreement effective 31 December 1991 as stated in the
Philippine Governments Note Verbale to the US Government, are acts,
directions, or requests of the Government of the Philippines which
constitute force majeure. In addition, there were circumstances beyond the

control of the parties, such as the issuance of a formal order by Cdr. Walter
Corliss of the US Navy, the issuance of the letter notification from ATT and the
complete withdrawal of all US military forces and personnel from Cubi Point,
which prevented further use of the earth station under the Agreement.
However, the Court of Appeals ruled that although Globe sought to
terminate Philcomsats services by 08 November 1992, it is still liable to pay
rentals for the December 1992, amounting to US$92,238.00 plus interest,
considering that the US military forces and personnel completely withdrew
from Cubi Point only on 31 December 1992.
[10]

Both parties filed their respective Petitions

the Decision of the Court of Appeals.
In G.R. No. 147324, petitioner
assignments of error:
[11]

Philcomsat

for

raises

Review assailing

the

following

A.

THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING A

DEFINITION OF FORCE MAJEURE DIFFERENT FROM WHAT ITS
LEGAL DEFINITION FOUND IN ARTICLE 1174 OF THE CIVIL CODE,
PROVIDES, SO AS TO EXEMPT GLOBE TELECOM FROM
COMPLYING WITH ITS OBLIGATIONS UNDER THE SUBJECT
AGREEMENT.

B.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT

GLOBE TELECOM IS NOT LIABLE TO PHILCOMSAT FOR RENTALS
FOR THE REMAINING TERM OF THE AGREEMENT, DESPITE THE
CLEAR TENOR OF SECTION 7 OF THE AGREEMENT.

C.

THE HONORABLE OCURT OF APPEALS ERRED IN DELETING THE

TRIAL COURTS AWARD OF ATTORNEYS FEES IN FAVOR OF
PHILCOMSAT.

D.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT

GLOBE TELECOM IS NOT LIABLE TO PHILCOMSAT FOR
EXEMPLARY DAMAGES.
[12]

Philcomsat argues that the termination of the RP-US Military Bases

Agreement cannot be considered a fortuitous event because the happening
thereof was foreseeable. Although the Agreement was freely entered into by
both parties, Section 8 should be deemed ineffective because it is contrary to
Article 1174 of the Civil Code. Philcomsat posits the view that the validity of
the parties definition of force majeure in Section 8 of the Agreement as
circumstances beyond the control of the party involved including, but not
limited to, any law, order, regulation, direction or request of the Government of
the Philippines, strikes or other labor difficulties, insurrection riots, national
emergencies, war, acts of public enemies, fire, floods, typhoons or other
catastrophies or acts of God, should be deemed subject to Article 1174 which
defines fortuitous events as events which could not be foreseen, or which,
though foreseen, were inevitable.
[13]

Philcomsat further claims that the Court of Appeals erred in holding that
Globe is not liable to pay for the rental of the earth station for the entire term
of the Agreement because it runs counter to what was plainly stipulated by the
parties in Section 7 thereof. Moreover, said ruling is inconsistent with the
appellate courts pronouncement that Globe is liable to pay rentals for
December 1992 even though it terminated Philcomsats services effective 08
November 1992, because the US military and personnel completely withdrew
from Cubi Point only in December 1992. Philcomsat points out that it was
Globe which proposed the five-year term of the Agreement, and that the other
provisions of the Agreement, such as Section 4.1 thereof, evince the intent of
Globe to be bound to pay rentals for the entire five-year term.
[14]

[15]

Philcomsat also maintains that contrary to the appellate courts findings, it

is entitled to attorneys fees and exemplary damages.
[16]

In its Comment to Philcomsats Petition, Globe asserts that Section 8 of

the Agreement is not contrary to Article 1174 of the Civil Code because said
provision does not prohibit parties to a contract from providing for other
instances when they would be exempt from fulfilling their contractual
obligations. Globe also claims that the termination of the RP-US Military
Bases Agreement constitutes force majeure and exempts it from complying
with its obligations under the Agreement. On the issue of the propriety of
awarding attorneys fees and exemplary damages to Philcomsat, Globe
[17]

maintains that Philcomsat is not entitled thereto because in refusing to pay

rentals for the remainder of the term of the Agreement, Globe only acted in
accordance with its rights.
[18]

In G.R. No. 147334, Globe, the petitioner therein, contends that the
Court of Appeals erred in finding it liable for the amount of US$92,238.00,
representing rentals for December 1992, since Philcomsats services were
actually terminated on 08 November 1992.
[19]

[20]

In its Comment, Philcomsat claims that Globes petition should be

dismissed as it raises a factual issue which is not cognizable by the Court in a
petition for review on certiorari.
[21]

On 15 August 2001, the Court issued a Resolution giving due course to

Philcomsats Petition in G.R. No. 147324 and required the parties to submit
their respective memoranda.
[22]

Similarly, on 20 August 2001, the Court issued a Resolution giving due

course to the Petition filed by Globe in G.R. No. 147334 and required both
parties to submit their memoranda.
[23]

Philcomsat and Globe thereafter filed their respective Consolidated

Memoranda in the two cases, reiterating their arguments in their respective
petitions.
The Court is tasked to resolve the following issues: (1) whether the
termination of the RP-US Military Bases Agreement, the non-ratification of the
Treaty of Friendship, Cooperation and Security, and the consequent
withdrawal of US military forces and personnel from Cubi Point
constitute force majeure which would exempt Globe from complying with its
obligation to pay rentals under its Agreement with Philcomsat; (2) whether
Globe is liable to pay rentals under the Agreement for the month of December
1992; and (3) whether Philcomsat is entitled to attorneys fees and exemplary
damages.
No reversible error was committed by the Court of Appeals in issuing the
assailed Decision; hence the petitions are denied.

There is no merit is Philcomsats argument that Section 8 of the

Agreement cannot be given effect because the enumeration of events
constituting force majeure therein unduly expands the concept of a fortuitous
event under Article 1174 of the Civil Code and is therefore invalid.
In support of its position, Philcomsat contends that under Article 1174 of
the Civil Code, an event must be unforeseen in order to exempt a party to a
contract from complying with its obligations therein. It insists that since the
expiration of the RP-US Military Bases Agreement, the non-ratification of the
Treaty of Friendship, Cooperation and Security and the withdrawal of US
military forces and personnel from Cubi Point were not unforeseeable, but
were possibilities known to it and Globe at the time they entered into the
Agreement, such events cannot exempt Globe from performing its obligation
of paying rentals for the entire five-year term thereof.
However, Article 1174, which exempts an obligor from liability on account
of fortuitous events or force majeure, refers not only to events that are
unforeseeable, but also to those which are foreseeable, but inevitable:
Art. 1174. Except in cases specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which, could not be foreseen, or which,
though foreseen were inevitable.
A fortuitous event under Article 1174 may either be an act of God, or
natural occurrences such as floods or typhoons, or an act of man, such as
riots, strikes or wars.
[24]

[25]

Philcomsat and Globe agreed in Section 8 of the Agreement that the

following events shall be deemed events constituting force majeure:
1.

Any law, order, regulation, direction or request of the Philippine

Government;

2.

Strikes or other labor difficulties;

3.

Insurrection;

4.

Riots;

5.

National emergencies;

6.

War;

7.

Acts of public enemies;

8.

Fire, floods, typhoons or other catastrophies or acts of God;

9.

Other circumstances beyond the control of the parties.

Clearly, the foregoing are either unforeseeable, or foreseeable but beyond

the control of the parties. There is nothing in the enumeration that runs
contrary to, or expands, the concept of a fortuitous event under Article 1174.
Furthermore, under Article 1306 of the Civil Code, parties to a contract
may establish such stipulations, clauses, terms and conditions as they may
deem fit, as long as the same do not run counter to the law, morals, good
customs, public order or public policy.
[26]

[27]

Article 1159 of the Civil Code also provides that [o]bligations arising from
contracts have the force of law between the contracting parties and should be
complied with in good faith. Courts cannot stipulate for the parties nor
amend their agreement where the same does not contravene law, morals,
good customs, public order or public policy, for to do so would be to alter the
real intent of the parties, and would run contrary to the function of the courts to
give force and effect thereto.
[28]

[29]

Not being contrary to law, morals, good customs, public order, or public
policy, Section 8 of the Agreement which Philcomsat and Globe freely agreed
upon has the force of law between them.
[30]

In order that Globe may be exempt from non-compliance with its obligation
to pay rentals under Section 8, the concurrence of the following elements
must be established: (1) the event must be independent of the human will; (2)
the occurrence must render it impossible for the debtor to fulfill the obligation

in a normal manner; and (3) the obligor must be free of participation in, or
aggravation of, the injury to the creditor.
[31]

The Court agrees with the Court of Appeals and the trial court that the
abovementioned requisites are present in the instant case. Philcomsat and
Globe had no control over the non-renewal of the term of the RP-US Military
Bases Agreement when the same expired in 1991, because the prerogative to
ratify the treaty extending the life thereof belonged to the Senate. Neither did
the parties have control over the subsequent withdrawal of the US military
forces and personnel from Cubi Point in December 1992:
Obviously the non-ratification by the Senate of the RP-US Military Bases Agreement
(and its Supplemental Agreements) under its Resolution No. 141. (Exhibit 2) on
September 16, 1991 is beyond the control of the parties. This resolution was followed
by the sending on December 31, 1991 o[f] a Note Verbale(Exhibit 3) by the
Philippine Government to the US Government notifying the latter of the formers
termination of the RP-US Military Bases Agreement (as amended) on 31 December
1992 and that accordingly, the withdrawal of all U.S. military forces from Subic Naval
Base should be completed by said date. Subsequently, defendant [Globe] received a
formal order from Cdr. Walter F. Corliss II Commander USN dated July 31, 1992 and
a notification from ATT dated July 29, 1992 to terminate the provision of T1s services
(via an IBS Standard B Earth Station) effective November 08, 1992. Plaintiff
[Philcomsat] was furnished with copies of the said order and letter by the defendant
on August 06, 1992.
Resolution No. 141 of the Philippine Senate and the Note Verbale of the Philippine
Government to the US Government are acts, direction or request of the Government
of the Philippines and circumstances beyond the control of the defendant. The formal
order from Cdr. Walter Corliss of the USN, the letter notification from ATT and the
complete withdrawal of all the military forces and personnel from Cubi Point in the
year-end 1992 are also acts and circumstances beyond the control of the defendant.
Considering the foregoing, the Court finds and so holds that the afore-narrated
circumstances constitute force majeure or fortuitous event(s) as defined under
paragraph 8 of the Agreement.

From the foregoing, the Court finds that the defendant is exempted from paying the
rentals for the facility for the remaining term of the contract.
As a consequence of the termination of the RP-US Military Bases Agreement (as
amended) the continued stay of all US Military forces and personnel from Subic
Naval Base would no longer be allowed, hence, plaintiff would no longer be in any
position to render the service it was obligated under the Agreement. To put it blantly
(sic), since the US military forces and personnel left or withdrew from Cubi Point in
the year end December 1992, there was no longer any necessity for the plaintiff to
continue maintaining the IBS facility. (Emphasis in the original.)
[32]

The aforementioned events made impossible the continuation of the

Agreement until the end of its five-year term without fault on the part of either
party. The Court of Appeals was thus correct in ruling that the happening of
such fortuitous events rendered Globe exempt from payment of rentals for the
remainder of the term of the Agreement.
Moreover, it would be unjust to require Globe to continue paying rentals
even though Philcomsat cannot be compelled to perform its corresponding
obligation under the Agreement. As noted by the appellate court:
We also point out the sheer inequity of PHILCOMSATs position. PHILCOMSAT
would like to charge GLOBE rentals for the balance of the lease term without there
being any corresponding telecommunications service subject of the lease. It will be
grossly unfair and iniquitous to hold GLOBE liable for lease charges for a service that
was not and could not have been rendered due to an act of the government which was
clearly beyond GLOBEs control. The binding effect of a contract on both parties is
based on the principle that the obligations arising from contracts have the force of law
between the contracting parties, and there must be mutuality between them based
essentially on their equality under which it is repugnant to have one party bound by
the contract while leaving the other party free therefrom (Allied Banking Corporation
v. Court of Appeals, 284 SCRA 357).
[33]

With respect to the issue of whether Globe is liable for payment of rentals
for the month of December 1992, the Court likewise affirms the appellate
courts ruling that Globe should pay the same.

Although Globe alleged that it terminated the Agreement with Philcomsat

effective 08 November 1992 pursuant to the formal order issued by Cdr.
Corliss of the US Navy, the date when they actually ceased using the earth
station subject of the Agreement was not established during the trial.
However, the trial court found that the US military forces and personnel
completely withdrew from Cubi Point only on 31 December 1992. Thus, until
that date, the USDCA had control over the earth station and had the option of
using the same. Furthermore, Philcomsat could not have removed or
rendered ineffective said communication facility until after 31 December 1992
because Cubi Point was accessible only to US naval personnel up to that
time. Hence, the Court of Appeals did not err when it affirmed the trial courts
ruling that Globe is liable for payment of rentals until December 1992.
[34]

[35]

Neither did the appellate court commit any error in holding that Philcomsat
is not entitled to attorneys fees and exemplary damages.
The award of attorneys fees is the exception rather than the rule, and
must be supported by factual, legal and equitable justifications. In previously
decided cases, the Court awarded attorneys fees where a party acted in
gross and evident bad faith in refusing to satisfy the other partys claims and
compelled the former to litigate to protect his rights; when the action filed is
clearly unfounded, or where moral or exemplary damages are awarded.
However, in cases where both parties have legitimate claims against each
other and no party actually prevailed, such as in the present case where the
claims of both parties were sustained in part, an award of attorneys fees
would not be warranted.
[36]

[37]

[38]

[39]

[40]

Exemplary damages may be awarded in cases involving contracts or

quasi-contracts, if the erring party acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner. In the present case, it was not shown that
Globe acted wantonly or oppressively in not heeding Philcomsats demands
for payment of rentals. It was established during the trial of the case before
the trial court that Globe had valid grounds for refusing to comply with its
contractual obligations after 1992.
[41]

WHEREFORE, the Petitions are DENIED for lack of merit. The

assailed Decision of the Court of Appeals in CA-G.R. CV No. 63619 is
AFFIRMED.
SO ORDERED.
Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur.
Puno, J., (Chairman), on official leave.

Nakpil & Sons vs CA

Post under case digests, Civil Law at Tuesday, February 21, 2012 Posted by Schizophrenic Mind

Facts: The Philippine Bar Association wanted to erect a

building in its lot in Intramuros. They were able to obtain a
contract with the United Construction Company Inc for the
construction of the building and the design was obtained
from Juan M. Nakpil & Sons and Juan F. Nakpil. The
Building was completed in June 1966. On August 2, 1968
a massive earthquake hit Manila with an intensity of about
7.3. This earthquake caused damage to the building and
caused it to lean forward dangerously which led to the
vacation of the building. United Construction Company in
turn shored up the building and incurred 13,661.28 php as
costs. The PBA then instituted a case against UCC for
damages due to its negligence regarding the construction
of the said building thru its failure to follow the designs
coming from the architects. UCC then filed a complint
against the archetechts (Nakpil & Sons) alleging that it
was the designs that are flawed and that caused the
buildings inability to withstand an earthquake. UCC also
included the president of PBA for including them in their
petition. Nakpil & Sons answer that the petitioners need

not to change the defendants in their petition as UCC

deviated from the plans which caused the damages to the
building. In the course of the trial a commissioner was
appointed by both parties to give a report regarding the
technical aspects of the case. His report concluded that
indeed there were faults arising from the negligence of
both defendants. The report stated that the design was
flawed and that UCC deviated from the designs which
aggravated the problem. The defendants then put up the
Act of God defense.
Issue: Whether or not the defendants could escape
liability from the building due to a fortuitous event which is
unforeseeable and inevitable even if their negligence is
established
Held: The defendants cannot validly invoke the Act of God
defense. This is because of the report submitted by the
appointed Commissioner which established their
negligence. Acceptance of the building, after completion,
does not imply waiver of any of the causes of action by
reason of any defect. To exempt the obligor from its liability
these requisites should first concur: (a) the cause of the
breach of the obligation must be independent of the will of
the debtor; (b) the event must be either unforseeable or
unavoidable; (c) the event must be such as to render it
impossible for the debtor to fulfill his obligation in a normal
manner; and (d) the debtor must be free from any
participation in, or aggravation of the injury to the creditor.
The report of the Commissioner established that the
defects that occurred to the building could be attributed to

the act of man specifically that of the architects and the

engineers as well as the builders. This was because of the
fact that UCC deviated from the plans submitted by the
architects and their failure to observe the required
marksmanship in constructing the building as well as the
required degree of supervision. Nakpil & Sons are also
liable for the inadequacies and defect in their submitted
plan and specifications. These circumstances are the
proximate causes of the damages that the PBA building
incurred. The costs are to be paid by the defendants
amounting to 5M which includes all appreciable damages
as well as indemnity plus 100,000php for the atty fee.
One who negligently creates a dangerous condition
cannot escape liability for the natural and probable
consequences thereof, although the act of a third person,
or an act of God for which he is not responsible,
intervenes to precipitate the loss.

Juan Nakpil and Sons v. CA

Digest
G.R. No. L-47851 October 3, 1986
Facts of the Case:
The private respondent (Philippine Bar Association) hired the services of the petitioner to make the
plans and specifications for the construction of their office building. The building was completed by
the contractor but subsequently, an earthquake struck causing its partial collapse and damage.
Issue: Is the petitioner liable for damages in this case?
HELD: Yes. The petitioner made substantial deviations from the plans and specifications and failed
to observe requisite workmanship standards in the construction of the building while their architect
drew plans that contain defects and other inadequacies. Both the contractor and the architect cannot

escape liability for damages when the building collapsed due to an earthquake. Other buildings in
the area withstood the tremor. The lower court also found that the spirals in one of the columns in
the ground floor has been cut. One who creates a dangerous condition cannot escape liability even if
an act of God may have intervened as in this case. As such, the liability of the contractor (herein
petitioner) and the architect for the collapse of the building is solidary.

- See more at: http://lawsandfound.blogspot.com/2012/07/juan-nakpil-and-sons-v-cadigest.html#sthash.edt9OuUG.dpuf

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 102432 January 21, 1993

INTESTATE ESTATE OF THE LATE RICARDO P. PRESBITERO, SR., represented by its
Administrator, RICARDO PRESBITERO, JR., petitioner,
vs.
HONORABLE COURT OF APPEALS, and LEONARDO CAOSO, respondents.
Roem J. Arbolado for petitioner.
Tahir A. Lidasan for private respondent.

DAVIDE, JR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse the 6
February 1991 Decision 1 of the Eleventh Division of the Court of Appeals in CA-G.R. CV No.
18255 2 which affirmed, with modification, the ruling of the Regional Trial Court (RTC) (Branch XV,
Cotabato City) in Civil Case No. 68.
The antecedents of this case, culled from the pleadings, are not disputed.
On 19 August 1981, Ricardo Presbitero, Sr. entered into two (2) written contracts with private
respondent Leonardo Caoso. In the first, entitled "Conformity of Agreement," 3 Presbitero retained
the services of the later to negotiate with the Land Bank of the Philippines (LBP) and the Ministry of
Agrarian Reform (MAR) in Cotabato City for the sale, under a voluntary offer arrangement, of Hacienda
Maria which comprises some 270 hectares of land located at Balogo, Pigcawayan, North Cotabato and
which is owned by the former. The hacienda had been placed under Operation Land Transfer pursuant to

Presidential Decree No. 27. The private respondent bound himself "to finish the processing and
submission of documents with in (sic) the period of One hundred (sic) Twenty Days (120 days) to Manila,
by the Land Bank of the Philippines and Ministry of Agrarian Reform Cotabato City and shall be subjected
to the delay of the approval of the DBP additional loan negotiated by RICARDO P. PRESBITERO in
Bacolod City . . . ." In the second contract, denominated as a "Contract of Service," 4 Presbitero bound
himself to compensate the private respondent "for his efforts, services and other related expenses in
making the necessary follow up (sic) of the preparation, production of pertinent documents required," and
"to effect the recovery of the proceed (sic) of the land transfer payment from the Land Bank of the
Philippines," in an amount equivalent to "Twenty Five per cent (25%) of the gross total sales of my
properties described above which is (sic) subject of Operation Land Transfer."

Before Presbitero's claim with the LBP was approved, a third agreement was entered into with the
private respondent in Bacolod City under which the latter's original fee of 25% was reduced to 17
1/2%.
When his claim was finally approved, Presbitero sent two (2) letters to the LBP concerning the
release of a part of the proceeds to the private respondent. The first letter, dated 16 May 1983 and
addressed to the LBP President, 5requested that the "amount equivalent to Seventeen and One Half (17
1/2%) per cent be released in the name of Leonardo Caoso, proportionate to (sic) cash and Land Bank
Bonds, on every releases (sic) until the final release of the claim." The second, dated 14 June
1983, 6 made reference to the LBP's letter of 6 June 1983 and requested that he (Presbitero) be notified in
writing upon receipt; the latter also informed the LBP that he will "personally release the cash and bonds
to Mr. Caoso due to advances made by him during the processing of the documents." However, when a
part of the proceeds was released, the private respondent was not given his share as agreed upon.
Hence, the latter filed a complaint against Presbitero before the RTC of Cotabato City which was
docketed as Civil Case No. 68 and assigned to Branch 15 of the said court.
In due time, after the issues were joined, the case was calendared for trial. Several postponements
were obtained by the petitioner. The hearing set for 1 July 1987 was postponed to 31 August 1987
and 1-3 September 1987 "'upon agreement of both parties and in order to dispose this (sic) case as
early as possible it appearing that it is long pending.'" 7 However, petitioner, through counsel, Atty. Alex
Abastillas, sent a telegram, which was received by the trial court only on 1 September 1987, asking for
the postponement of the hearing last agreed upon. The reason given was that the petitioner was
financially handicapped to come for the hearing. The court denied the motion in an order issued on that
date, the pertinent portion of which reads:
. . . Atty. Alex Abastillas knows very well that the Rules of Court do (sic) not recognize
financial handicap for the postponement of the case and for this purpose (sic)
therefore the motion for postponement is hereby denied. Moreover, when the Order
of this Court dated July 1, 1987 was made, the defendant was represented by two
counsels: one Atty. Alex Abastillas and another lawyer in the person of Atty. Antonio
Sumayod who is a resident of this City and there is no reason why the defendant
could not be represented by a counsel. While the Court was preparing an order the
motion of Atty. Alex Abastillas was handed over to the Presiding Judge for his perusal
but notwithstanding the arrival of this urgent motion for postponement, the Court
denied the said motion for lack of merit. 8

The trial court then allowed the private respondent to present his evidence ex-parte.
On 18 September 1987, Presbitero filed an "Alternative Motion for Reconsideration and/or to CrossExamine Witnesses for the Plaintiff." The court denied the motion in its Order of 22 September 1987
and then reconsidered the same in the Order of 20 October 1987; the latter order also granted
Presbitero's motion for the reception of his evidence. 9
On 18 April 1988, the trial court handed down a decision in favor of the private respondent, the
dispositive portion of which reads:
IN view of the foregoing, JUDGMENT is hereby rendered ordering the defendant to
pay the plaintiff in the amount of P65,227.01 in cash and P586,875.00 in bonds
which is 25% of the collectible (sic) of the defendant from the Land Bank and
ordering the defendant to pay plaintiff the amount of P20,000.00 as attorney's fee
plus the sum of P20,000.00 as compensatory damages. For the enforcement of the
payment of the above-mentioned amount, Land Bank of the Philippines is hereby
directed to segregate the above-mentioned amount from the amount payable to
defendant in order that it can be paid directly to plaintiff for the purpose of complying
the (sic) Order of this court. 10
Dissatisfied with the decision, Presbitero appealed to the public respondent Court of Appeals. In his
Brief, Presbitero asserted that the trial court erred: a) in allowing evidence ex-parte for private
respondent without giving him the right to cross-examine the witnesses despite the fact that his
motion for postponement was based on reasonable grounds; b) in declaring that the contract
between him and the private respondent which was for the follow-up on LBP claims, and therefore
similar to influence peddling, is valid; c) in not holding that his consent to the contract was procured
through fraud; d) in declaring, granting the contract's validity, that the private respondent has fully
complied with its terms and conditions; e) in declaring that private respondent had followed up on the
claims with the LBP and other government entities; and f) in ordering the LBP of Manila to set aside
the claims of the private respondent although the former is not a party to the case; hence, the court
acquired no jurisdiction over the same. 11
In its decision, 12 respondent Court modified the decision appealed from by reducing the principal award
to the private respondent from 25% to 17 1/2% of the amount to be collected by Presbitero from the LBP.
The dispositive portion thereof reads:
PREMISES CONSIDERED, the decision appealed from is hereby MODIFIED to read
thus: In view of the foregoing, JUDGMENT is hereby rendered ordering the
defendant to pay the plaintiff 17 1/2% of the collectible (sic) of the defendant from the
Land Bank (to be paid in cash and in bonds in the stipulated proportion) and ordering
the defendant to pay plaintiff the amount of P20,000.00 as attorney's fee plus the
sum of P20,000.00 as compensatory damages. For the enforcement of the payment
of the above-mentioned amount, Land Bank of the Philippines is hereby directed to
segregate the above-mentioned amount from the amount payable to defendant in
order that it can be paid directly to plaintiff for the purpose of complying with the
Order of this Court.

SO ORDERED. 13
His motion for reconsideration having been denied by the respondent Court on 8 October
1991, 14 Presbitero decided to bring his cause to this Court by way of a petition for review under Rule 45
of the Rules of Court. On 18 October 1991, he filed a motion for extension of time to file the
petition, 15 which was granted. It appears, however, that he subsequently died; as a result thereof, the
petition was filed, by mail, on 3 December 1991 in the name of the Intestate Estate of the Late Ricardo
Presbitero, Sr., represented by Ricardo Presbitero, Jr. who was duly appointed administrator by the RTC
of Negros Occidental in Special Proceedings No. 100. 16
Following the submission of the comment of the private respondent to the petition, as well as the
reply of the petitioner thereto and the private respondent's rejoinder to said reply, We gave due
course to the petition and required the parties to submit their respective memoranda, 17 which they
subsequently complied with.
Petitioner contends in its Petition and Memorandum that the respondent Court erred: (a) in not
reversing the trial court's order which allowed the private respondent to present evidence exparte without affording Presbitero the right of cross examination despite the fact that the motion
for postponement of the scheduled hearings was based on very valid grounds, and (b) in finding that
the private respondent has complied with the terms and conditions of the contract in question. 18
Petitioner argues that Presbitero sought the postponement of the scheduled hearings to 31 August
and 1-3 September 1987 "not so much for the financial constraint on his ability to provide funds for
the trip to Cotabato City where the trial court sits, as for the physical difficulty, as well as the risks
and inadvisability of travel during those perilous days which properly constituted themselves to be of
judicial notice which the trial court sadly chose to ignore." In justifying Presbitero's failure to obtain
the necessary plane accommodations, petitioner referred to "the coup attempt staged by some
military elements which consequently disrupted travel nationwide." 19
As to the second assigned error, petitioner contends that the respondent Court erred in declaring
that the terms and conditions of the contract were complied with. As provided thereunder, the private
respondent was to submit all requirements needed by the DAR and the LBP for the land transfer to
effect the payment thereof from the LBP. This was to be completed within a stipulated period of 120
days. In failing to comply with the said stipulation, the private respondent acquired no right to be
compensated. It is also asserted that the rule on promissory estoppel enunciated in the case
of Ramos vs. Central Bank of the Philippines, 20 applies in this case.
Upon the other hand, the private respondent maintains that the respondent Court did not commit any
grave abuse of discretion or error in affirming the decision of the lower court. There was no denial of
Presbitero's right to due process since he was afforded the opportunity to cross examine the private
respondent's witnesses during trial but advertently refused to do so. He also alleges that there is an
erroneous interpretation by the petitioner of the 120-day period stipulated in the contract. Contrary to
the petitioner's allegations, no promise was ever made by the private respondent to deliver the
proceeds of the sale of Presbitero's property within the period of 120 days.
Additionally, private respondent faults Presbitero for the delay of the submission of some of the
needed requirements. In conclusion, the private respondent prays that the payment of his claim be

made in accordance with what was originally agreed upon in the contract entered into by both
parties.
Except as hereinafter modified, the decision subject of this petition must be affirmed.
1. A motion for postponement is not a matter of right; 21 it is addressed to the sound discretion of the
court 22 which should be predicated on the consideration that more than the mere convenience of the
courts or of the parties in the case, the ends of justice and fairness would be served thereby. 23 Unless
grave abuse thereof is shown, 24 such discretion will not be interfered with either by mandamus, 25 or by
appeal. 26 Furthermore, as a rule, postponements may be granted only upon meritorious grounds. 27 No
party has the right to presume that his motion for postponement would be granted. 28
The trial court committed no error or grave abuse of discretion in denying the petitioner's motion to
postpone the hearings of 31 August and 1-3 September 1987. That setting resulted from the
agreement of the parties made as early as July 1987 after Presbitero had already obtained several
prior postponements. Moreover, this last motion was most informally made through a telegram
thereby violating the basic rule on motions. 29 In some instances, resort thereto may be allowed
because of extraordinary circumstances such as a party's or counsel's sudden death, force majeure or
an act of God rendering impossible the accomplishment of its purpose. In the instant case, no such
circumstances existed. Petitioner grounded his motion on financial incapacity, which was not alleged to
have taken place so unexpectedly or a few days before 31 August 1987. Thus, he could have been under
that ordeal for some time; if this were true, then there is no reason why he could not have seasonably
filed the motion. Moreover, one of his lawyers resides in Cotabato City; this lawyer could have appeared
on the scheduled dates. Clearly then, the motion was a dilatory tactic. The plea that there was a coup
d'etat at the time is a delayed afterthought. This was not the reason proffered in the telegram. Besides,
Presbitero was in fact allowed to present his evidence per the Order of 20 October 1987. 30 Moreover, any
due process deficiency arising from an ex-parte reception of evidence despite a motion for postponement
of hearing may be cured by a subsequent motion for reconsideration. 31 It is to be noted that the trial court
was rather liberal to the petitioner as the latter's previous motions this was not the only time Presbitero
had moved for a postponement had all been granted.
2. Obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith. 32 Unless the stipulations in a contract are contrary to law, morals,
good customs, public order or public policy, the same are binding as between the parties. 33
In this case, the contracts entered into by the parties were valid contracts. The two (2)
complementary instruments gave rise to reciprocal obligations which are defined as those that arise
from the same cause, and in which each party is a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the other. 34
No error was committed by the appellate and trial courts in concluding that the private respondent
complied with the terms and conditions of the contracts. This is supported by the evidence, both
testimonial and documentary, presented by the private respondent during trial before the lower court.
Moreover, Presbitero's letter to the LBP authorizing the release of a portion of the proceeds to the
private respondent reinforces the latter's position that he had actually complied with the terms and
conditions of the contract. It upholding the trial court's decision, the Court of Appeals emphasized:

xxx xxx xxx

The assertion regarding non-performance could well be traversed by the fact that on
May 16, 1983, the defendant-appellant wrote a letter (Exhibit "C") to the Land Bank
of the Philippines authorizing the release of 17 1/2% of the proceeds due the
appellant in favor of plaintiff-appellee Caoso. May 16, 1983 is way past the 120
days deadline which ended in December, 1981. The P12,000.00 and P7,500 prices
per hectare (sic) were known to the defendant-appellant as early as November 18,
1981 (Exhibit H). The survey was conducted not later than 1982 (pp. 22-23, t.s.n.,
September 3, 1987). The disposition of the office and bodega was negotiated from
the very start (Exhibit "H-12"); hence if there has been any failure, thereof, the
defendant-appellant would have known of it before writing Exhibit C. The
negotiations with the land occupants were among the very first steps taken relative to
the land transfer (pp. 5-9, t.s.n., September 3, 1987).
Exhibit C (supra) is perceived by this Court as evidence of the fact that strict
compliance with the provisions of Exhibits A and B were no longer expected and
demanded by the defendant-appellant, resulting in a waiver of the stipulations abovespecified or a novation of the agreements entered into. This Court notes that the
defendant-appellant has advanced the following two reasons for his retraction of
Exhibit C. First is his claim that it was made on the basis of the plaintiff-appellee's
representation that all documents were already submitted. Second is his fear that he
may not be able to collect the advances he made to the said plaintiff-appellee. None
of those two reasons is related to the above terms and conditions allegedly
breached. 35
In the interpretation of contracts, it is the general rule that if the terms thereof are clear as to the
intention of the contracting parties, the literal meaning of the stipulations shall control. 36 Furthermore,
subsequent or contemporaneous acts of the contracting parties shall be considered in judging their
intention. 37 In this case, it was clearly agreed upon by the contracting parties that the private respondent
would undertake, among others, the processing, negotiation and follow-up of Presbitero's claim with the
LBP within a stipulated period of 120 days. The collection of the proceeds from the LBP was not among
the matters contemplated by the parties in the said agreement. All they had in mind was that the
preparation, processing and filing of the necessary documents were needed to effect the recovery of
proceeds from the LBP.
And even if We are to assume that the private respondent breached the agreement by not fully
accomplishing his obligation within the stipulated period, said breach was not of a nature which
would justify a rescission of the contract. We ruled in the case of Bacolod-Murcia Milling Co., Inc. vs.
Court of
Appeals 38 that rescission of a contract will not be permitted for a slight or casual breach, but only for such
substantial and fundamental breach as would defeat the very object of the parties in making the
agreement; the question of whether a breach of contract is substantial depends upon the attending
circumstances. 39 In the case at bar, no substantial breach was committed by the private respondent
sufficient enough to warrant a rescission. From all indications, private respondent was able to perform his
obligation; this conclusion follows in the wake of the approval of the claim. Under Article 1234 of the New
Civil Code, if the obligation has been substantially performed in good faith, the obligor (private

respondent) may recover as though there had been a strict and complete fulfillment, less damages
suffered by the obligee (Presbitero). Moreover, when the obligee accepts the performance, as what
happened in this case, knowing its incompleteness or irregularity, and without expressing a protest or
objection, the obligation is deemed fully complied
with. 40 Finally, to allow Presbitero to rescind the contract would not only violate the well-settled rule on
mutuality of contracts which provides that the validity or compliance of a contract cannot be left to the
will of one of the contracting parties 41 but would also work an injustice to the rights of the private
respondent who has already performed his obligation pursuant to their agreement. Presbitero's correlative
obligation must perforce be also fulfilled. There is no evidence to indicate that the private respondent was
remise or negligent in the performance of his obligation. Neither was there any evidence presented to
show that it was through Presbitero's own efforts that this claim with the LBP was approved.

The two (2) assigned errors in this case must thus fail.
However, We find the award for compensatory damages to be improper. There is nothing that
supports it in the findings of fact of the trial court and of the respondent Court of Appeals. Also,
considering that the LBP was not a party in Civil Case No. 68, it cannot be ordered to perform an act
for or against any of the parties in this case.
WHEREFORE, IN THE LIGHT OF THE FOREGOING, the challenged Decision of the respondent
Court of Appeals of 6 February 1991 in CA-G.R. CV No. 18255 is hereby AFFIRMED subject to the
above modifications on the dispositive portion thereof. As modified, the award of P20,000.00 as
compensatory damages and the last sentence of the said dispositive portion affecting the Land Bank
of the Philippines are DELETED.
No pronouncement as to costs.
SO ORDERED.
Gutierrez, Jr., Bidin, Romero and Melo, JJ., concur.

Sales Week 3Dacion en Pago

Philippine Lawin Bus Co. (Lawin) vs CADoctrine:Nature:
RTC- Suit to claim for a sum of money against Lawin, case was dismissedCA- Reversed RTC
and ruled that Lawin has to pay ACCSC- Affirmed CAs decision and ordered
Facts:

Lawin initially loaned from Advance Capital Corp. (ACC) Php 8M payable w/in1 yr and
guaranteed by a chattel mortgage of Lawins 9 buses. Lawin was indefault in its
payments and was able to pay only Php 1.8M.

Lawin obtained its second loan of 2M payable in one month under apromissory note.
Lawin was in default again hence it asked ACC for arestructuring of the loan despite this
Lawin was still not able to pay. Thebuses for foreclosed and it was sold for 2M.


ACC sent Lawin demand letters to settle its indebtedness amounting to
hp16,484,992.42 then subsequently filed a suit for sum of money againstLawin. Lawin
in its defense said that there was already an arrangement tosettle the obligation
o
A. Sale of 9 buses and its proceeds will cover for the full payment; OR
o
B. ACC will shoulder the rehabilitation of the buses and the earnings of the operation
will be then applied to the loan
Issue/Held:
W/N there was a dacion en pago bet. the parties? NO
Ratio:

Dacion en Pago is a special mode of payment, the debtor offers another thingto the
creditor who accepts it as equivalent of payment of the outstandingobligation. It
partakes the nature of a sale whose essential elements are a)consent b)object certain
and c) cause and the contract is perfected at themoment of the meeting of the minds of
the parties.

In this case there was no meeting of the minds between Lawin and ACC thatthe
obligation would be extinguished by dacion en pago. The receipts showsthat the
delivery of the 2 buses to ACC didnt transfer the ownership of thebus to ACC rather
they were deemed to be only as Lawins agent in the saleof the bus whereby the
proceeds are then to be applied as payment for theloan

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 116805

June 22, 2000

MARIO S. ESPINA, petitioner,

vs.
THE COURT OF APPEALS and RENE G. DIAZ, respondents.
PARDO, J.:
The case before the Court is an appeal from a decision of the Court of Appeals 1 reversing that of the
Regional Trial Court, Antipolo, Rizal, 2 affirming in all respects the decision of the Municipal Trial
Court, Antipolo, Rizal, 3ordering respondent Rene G. Diaz to vacate the condominium unit owned by
petitioner and to pay back current rentals, attorney's fees and costs.
1wphi1.nt

The facts, as found by the Court of Appeals, are as follows:

Mario S. Espina is the registered owner of a Condominium Unit No. 403, Victoria Valley
Condominium, Valley Golf Subdivision, Antipolo, Rizal. Such ownership is evidenced by
Condominium Certificate of Title No. N-10 (p. 31, Rollo).
On November 29, 1991, Mario S. Espina, the private respondent as seller, and Rene G.
Diaz, the petitioner as buyer, executed a Provisional Deed of Sale, whereby the former sold
to the latter the aforesaid condominium unit for the amount of P100,000.00 to be paid upon
the execution of the contract and the balance to be paid through PCI Bank postdated checks
as follows:
1. P400,000.00
Check No. 301245
January 15, 1992
2. P200,000.00
Check No. 301246
February 1, 1992
3. P200,000.00
Check No. 301247
February 22, 1992
4. P200,000.00
Check No. 301248
March 14, 1992
5. P200,000.00
Check No. 301249
April 4, 1992
6. P200,000.00
Check No. 301250
April 25, 1992
(pp. 59-61, Rollo).
Subsequently, in a letter dated January 22, 1992, petitioner informed private respondent that
his checking account with PCI Bank has been closed and a new checking account with the
same drawee bank is opened for practical purposes. The letter further stated that the
postdated checks issued will be replaced with new ones in the same drawee bank (p.
63, Rollo).

On January 25, 1992, petitioner through Ms. Socorro Diaz, wife of petitioner, paid private
respondent Mario Espina P200,000.00, acknowledged by him as partial payment for the
condominium unit subject of this controversy (p. 64, Rollo).
On July 26, 1992, private respondent sent petitioner a "Notice of Cancellation" of the
Provisional Deed of Sale (p. 48, Rollo).
However, despite the Notice of Cancellation from private respondent, the latter accepted
payment from petitioner per Metrobank Check No. 395694 dated and encashed on October
28, 1992 in the amount of P100,000.00 (p. 64, Rollo).
On February 24, 1993, private respondent filed a complaint docketed as Civil Case No. 2104
for Unlawful Detainer against petitioner before the Municipal Trial Court of Antipolo, Branch
1.
On November 12, 1993, the trial court rendered its decision, the dispositive portion of which
reads:
WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered
ordering the defendant and all persons claiming rights under him to vacate unit 403
of the Victoria Golf Valley Condominium, Valley Golf Subdivision, Antipolo, Rizal; to
pay the total arrears of P126,000.00, covering the period July 1991 up to the filing
(sic) complaint, and to pay P7,000.00 every month thereafter as rentals unit (sic) he
vacates the premises; to pay the amount of P5,000.00 as and attorney's fees; the
amount of P300.00 per appearance, and costs of suit.
However, the plaintiff may refund to the defendant the balance from (sic)
P400,000.00 after deducting all the total obligations of the defendant as specified in
the decision from receipt of said decision.
SO ORDERED. (Decision, Annex "B"; p. 27, Rollo).
From the said decision, petitioner appealed to the Regional Trial Court Branch 71, Antipolo,
Rizal. On April 29, 1994, said appellate court affirmed in all respects the decision of the trial
court. 4
On June 14, 1994, petitioner filed with the Court of Appeals a petition for review.
On July 20, 1994, the Court of Appeals promulgated its decision reversing the appealed decision
and dismissing the complaint for unlawful detainer with costs against petitioner Espina.
On August 8, 1994, petitioner filed a motion for reconsideration of the decision of the Court of
Appeals. 5
On August 19, 1994, the Court of Appeals denied the motion.

Hence, this appeal via petition for review on certiorari. 7

The basic issue raised is whether the Court of Appeals erred in ruling that the provisional deed of
sale novated the existing contract of lease and that petitioner had no cause of action for ejectment
against respondent Diaz.

We resolve the issue in favor of petitioner.

According to respondent Diaz, the provisional deed of sale that was subsequently executed by the
parties novated the original existing contract of lease. The contention cannot be sustained.
Respondent originally occupied the condominium unit in question in 1987 as a lessee. 8 While he
occupied the premises as lessee, petitioner agreed to sell the condominium unit to respondent by
installments. 9 The agreement to sell was provisional as the consideration was payable in
installments.
The question is, did the provisional deed of sale novate the existing lease contract? The answer is
no. The novation must be clearly proved since its existence is not presumed. 10 "In this light, novation
is never presumed; it must be proven as a fact either by express stipulation of the parties or by
implication derived from an irreconcilable incompatibility between old and new obligations or
contracts." 11 Novation takes place only if the parties expressly so provide, otherwise, the original
contract remains in force. In other words, the parties to a contract must expressly agree that they are
abrogating their old contract in favor of a new one. 12 Where there is no clear agreement to create a
new contract in place of the existing one, novation cannot be presumed to take place, unless the
terms of the new contract are fully incompatible with the former agreement on every point. 13 Thus, a
deed of cession of the right to repurchase a piece of land does not supersede a contract of lease
over the same property. 14 In the provisional deed of sale in this case, after the initial down payment,
respondent's checks in payment of six installments all bounced and were dishonored upon
presentment for the reason that the bank account was closed. 15 Consequently, on July 26, 1992,
petitioner terminated the provisional deed of sale by a notarial notice of cancellation. 16 Nonetheless,
respondent Diaz continued to occupy the premises, as lessee, but failed to pay the rentals due. On
October 28, 1992, respondent made a payment of P100,000.00 that may be applied either to the
back rentals or for the purchase of the condominium unit. On February 13, 1993, petitioner gave
respondent a notice to vacate the premises and to pay his back rentals. 17 Failing to do so,
respondent's possession became unlawful and his eviction was proper. Hence, on February 24,
1993, petitioner filed with the Municipal Trial Court, Antipolo, Rizal, Branch 01 an action for unlawful
detainer against respondent Diaz. 18
Now respondent contends that the petitioner's subsequent acceptance of such payment effectively
withdrew the cancellation of the provisional sale. We do not agree. Unless the application of
payment is expressly indicated, the payment shall be applied to the obligation most onerous to the
debtor. 19 In this case, the unpaid rentals constituted the more onerous obligation of the respondent
to petitioner. As the payment did not fully settle the unpaid rentals, petitioner's cause of action for
ejectment survives. Thus, the Court of Appeals erred in ruling that the payment was "additional
payment" for the purchase of the property.
WHEREFORE, the Court GRANTS the petition for review on certiorari, and REVERSES the decision
of the Court of Appeals. 20 Consequently, the Court REVIVES the decision of the Regional Trial
Court, Antipolo, Rizal, Branch 71, 21 affirming in toto the decision of the Municipal Trial Court,
Antipolo, Rizal, Branch 01. 22
No costs.
SO ORDERED.

1wphi1.nt

Davide, Jr., C.J., Puno, Kapunan and Ynares-Santiago, JJ., concur.