Heirs of Jose Reyes vs Amanda Reyes

Heirs of Jose Reyes vs Amanda Reyes

GR 158377, August 13, 2010

Bersamin, J.:

Facts:

Leoncia and her 3 sons executed the Kasulatan ng Biling Mabibiling Muli by which they sold their parcel to Sps. Francia for P500, subject to the vendors' right to repurchase for the same amount sa oras na sila'y makinabang. Potenciana's heirs did not assent to that deed. Nonetheless, Teofilo and Jose, Jr. and their respective families remained in possession of the property and paid the realty taxes thereon. Leoncia and her children did not repay the amount of P500.00.

Alejandro, the son of Jose, Sr., first partially paid to the Sps Francia P265.00 for the obligation of Leoncia, his uncles and his father. Alejandro later paid the balance of P235.00. Thus, on August 11, 1970, the heirs of Spouses Francia executed a deed entitled Pagsasa-ayos ng Pag-aari at Pagsasalin, whereby they transferred and conveyed to Alejandro all their rights and interests in the property for P500.00.

Leoncia and her 3 sons excuted the Kasulatan ng Biling Mabibiling Muli by which they sold their parcel to Sps. Francia for P500, subject to the vendors' right to repurchase for the same amount sa oras na sila'y makinabang. Potenciana's heirs did not assent to that deed. Nonetheless, Teofilo and Jose, Jr. and their respective families remained in possession of the property and paid the realty taxes thereon. Leoncia and her children did not repay the amount of P500.00.

On August 21, 1970, Alejandro executed a Kasulatan ng Pagmeme-ari, wherein he declared that he had acquired all the rights and interests of the heirs of the Sps Francia, including the ownership of the property, after the vendors had failed to repurchase within the given period. From then on, he had paid the realty taxes for the property.

Nevertheless, on October 17, 1970, Alejandro, his grandmother (Leoncia), and his father (Jose, Sr.) executed a Magkasanib na Salaysay, by which Alejandro acknowledged the right of Leoncia, Jose, Jr., and Jose, Sr. to repurchase the property at any time for the same amount of P500.00.

Amanda filed a suit to quiet the title.

Issues:

1. Whether the transaction entered into by Alejandro, Leoncia, Jose Sr., Jose Jr. and Teofilo was an equitable mortgage and not a pacto de retro sale;
2. Whether upon the execution of the Kasulatan ng Pagmeme-ari, ownership was consolidated to Alejandro upon failure of Leoncia and her sons to redeem within the agreed period; and
3. Whether the Magkasanib na Salaysay executed by Alejandro granted Leoncia and her three sons a right to repurchase at any time for P500.

Held:

1.      It was an equitable mortgage.

There was no dispute that the purported vendors (Leoncia and sons) had continued in the possession of the property even after the execution of the agreement; and that the property had remained declared for taxation purposes under Leoncia's name, with the realty taxes due being paid by Leoncia, despite the execution of the agreement. Such established circumstances are among the badges of an equitable mortgage enumerated in Article 1602, paragraphs 2 and 5 of the Civil Code, to wit:

Art. 1602. The contract shall be presumed to be an equitable mortgage, …:

x x x

(2) When the vendor remains in possession as lessee or otherwise;

x x x

(5) When the vendor binds himself to pay the taxes on the thing sold;

x x x

The existence of any one of the conditions enumerated under Article 1602 of the Civil Code, not a concurrence of all or of a majority thereof, suffices to give rise to the presumption that the contract is an equitable mortgage. Consequently, the contract between the vendors and vendees (Spouses Francia) was an equitable mortgage.

Considering that sa oras na sila'y makinabang, the period of redemption stated in the Kasulatan ng Biling Mabibiling Muli, signified that no definite period had been stated, the period to redeem should be ten years from the execution of the contract, pursuant to Articles 1142 and 1144 of the Civil Code. Thus, the full redemption price should have been paid by July 9, 1955; and upon the expiration of said 10-year period, mortgagees Sps Francia or their heirs should have foreclosed the mortgage, but they did not do so. Instead, they accepted Alejandro's payments, until the debt was fully satisfied by August 11, 1970.

The acceptance of the payments even beyond the 10-year period of redemption estopped the mortgagees' heirs from insisting that the period to redeem the property had already expired. Their actions impliedly recognized the continued existence of the equitable mortgage. The conduct of the original parties as well as of their successors-in-interest manifested that the parties to the Kasulatan ng Biling Mabibiling Muli really intended their transaction to be an equitable mortgage, not a pacto de retro sale.

2.      No, ownership was not consolidated to Alejandro upon failure of Leoncia and her sons to redeem within the agreed period.

It is true that Alejandro became a co-owner of the property by right of representation upon the death of his father, Jose Sr. As a co-owner, however, his possession was like that of a trustee and was not regarded as adverse to his co-owners but in fact beneficial to all of them.

Yet, the respondents except to the general rule, asserting that Alejandro, having earlier repudiated the co-ownership, acquired ownership of the property through prescription.

The Court cannot accept the respondents' posture.

In order that a co-owner's possession may be deemed adverse to that of the cestui que trust or the other co-owners, the following elements must concur:

1. The co-owner has performed unequivocal acts of repudiation of the co-ownership amounting to an ouster of the cestui que trust or the other co-owners;

2. Such positive acts of repudiation have been made known to the cestui que trust or the other co-owners;

3. The evidence on the repudiation is clear and conclusive; and

4. His possession is open, continuous, exclusive, and notorious.

The concurrence of the foregoing elements was not established herein. For one, Alejandro did not have adverse and exclusive possession of the property, as, in fact, the other co-owners had continued to possess it, with Alejandro and his heirs occupying only a portion of it. Neither did the cancellation of the previous tax declarations in the name of Leoncia, the previous co-owner, and the issuance of a new one in Alejandro's name, and Alejandro's payment of the realty taxes constitute repudiation of the co-ownership. The sole fact of a co-owner declaring the land in question in his name for taxation purposes and paying the land taxes did not constitute an unequivocal act of repudiation amounting to an ouster of the other co-owner and could not constitute adverse possession as basis for title by prescription.

Moreover, according to Blatero v. IAC, if a sale a retro is construed as an equitable mortgage, then the execution of an affidavit of consolidation by the purported buyer to consolidate ownership of the parcel of land is of no consequence and the "constructive possession" of the parcel of land will not ripen into ownership, because only possession acquired and enjoyed in the concept of owner can serve as title for acquiring dominion.

In fine, the respondents did not present proof showing that Alejandro had effectively repudiated the co-ownership. Their bare claim that Alejandro had made oral demands to vacate to his co-owners was self-serving and insufficient. Alejandro's execution of the affidavit of consolidation of ownership on August 21, 1970 and his subsequent execution on October 17, 1970 of the joint affidavit were really equivocal and ambivalent acts that did not manifest his desire to repudiate the co-ownership.

The only unequivocal act of repudiation was done by the respondents when they filed the instant action for quieting of title on September 28, 1994, nearly a year after Alejandro's death on September 2, 1993. However, their possession could not ripen into ownership considering that their act of repudiation was not coupled with their exclusive possession of the property.

The Kasulatan ng Pagmeme-ari executed by Alejandro on August 21, 1970 was ineffectual to predicate the exclusion of the petitioners and their predecessors in interest from insisting on their claim to the property. Alejandro's being an assignee of the mortgage did not authorize him or his heirs to appropriate the mortgaged property for himself without violating the prohibition against pactum commissorium contained in Article 2088 of the Civil Code, to the effect that "[t]he creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them[;] [a]ny stipulation to the contrary is null and void." Aptly did the Court hold in Montevirgen v. Court of Appeals:

The declaration, therefore, in the decision of July 1, 1971 to the effect that absolute ownership over the subject premises has become consolidated in the respondents upon failure of the petitioners to pay their obligation within the specified period, is a nullity, for consolidation of ownership is an improper and inappropriate remedy to enforce a transaction declared to be one of mortgage. It is the duty of respondents, as mortgagees, to foreclose the mortgage if he wishes to secure a perfect title to the mortgaged property if he buys it in the foreclosure sale.

Moreover, the respondents, as Alejandro's heirs, were entirely bound by his previous acts as their predecessors-in-interest. Thus, Alejandro's acknowledgment of the effectivity of the equitable mortgage agreement precluded the respondents from claiming that the property had been sold to him with right to repurchase.

3.      No, the Magkasanib na Salaysay executed by Alejandro did not grant Leoncia and her three sons a right to repurchase at any time for P500.

The provisions of the Civil Code governing equitable mortgages disguised as sale contracts are primarily designed to curtail the evils brought about by contracts of sale with right to repurchase, particularly the circumvention of the usury law and pactum commissorium. Courts have taken judicial notice of the well-known fact that contracts of sale with right to repurchase have been frequently resorted to in order to conceal the true nature of a contract, that is, a loan secured by a mortgage. It is a reality that grave financial distress renders persons hard-pressed to meet even their basic needs or to respond to an emergency, leaving no choice to them but to sign deeds of absolute sale of property or deeds of sale with pacto de retro if only to obtain the much-needed loan from unscrupulous money lenders. This reality precisely explains why the pertinent provision of the Civil Code includes a peculiar rule concerning the period of redemption, to wit:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

x x x

(3)When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;

x x x

Ostensibly, the law allows a new period of redemption to be agreed upon or granted even after the expiration of the equitable mortgagor's right to repurchase, and treats such extension as one of the indicators that the true agreement between the parties is an equitable mortgage, not a sale with right to repurchase. It was indubitable, therefore, that the Magkasanib na Salaysay effectively afforded to Leoncia, Teofilo, Jose, Sr. and Jose, Jr. a fresh period within which to pay to Alejandro the redemption price of P500.00.

Martinez vs CA (56 SCRA 647)

Martinez vs CA (56 SCRA 647)

GR No. L- 31271, April 29 1974

Esguerra, J.:

Facts:

The spouses Romeo Martinez and Leonor Suarez are the registered owners of two (2) parcels of land located in Lubao, Pampanga. The disputed property was originally owned by one Paulino Montemayor, who secured a "titulo real" over it way back in 1883. After the death of Paulino Montemayor the said property passed to his successors-in-interest, Maria Montemayor and Donata Montemayor, who in turn, sold it, as well as the first parcel, to a certain Potenciano Garcia.

Because Potenciano Garcia was prevented by the then municipal president of Lubao, Pedro Beltran, from restoring the dikes constructed on the contested property, Garcia filed a civil case with the Court of First Instance against Beltran to restrain the latter in his official capacity from molesting him in the possession of said second parcel, and on even date, applied for a writ of preliminary injunction, which was issued against said municipal president. The Court declared permanent the preliminary injunction.

On April 17, 1925. Potenciano Garcia applied for the registration of both parcels of land in his name, and the Court of First Instance of Pampanga, sitting as land registration court, granted the registration.

Thereafter, the ownership of these properties changed hands until eventually they were acquired by the spouses.

To avoid any untoward incident, the disputants agreed to refer the matter to the Committee on Rivers and Streams, which, after conducting an ocular inspection, reported that the parcel was not a public river but a private fishpond owned by the herein spouses.

The Secretary of Public Works and Communications, ordered another investigation of the said parcel of land, directing the spouses to remove the dikes they had constructed, threatening that the dikes would be demolished should the spouses fail to comply therewith within 30 days.

Issue:

Whether the spouses are purchasers for value and in good faith on the parcel alleged to be a public river.

Held:

No, they are not.

There is no weight in the spouses' argument that, being a purchaser for value and in good faith of Lot No. 2, the nullification of its registration would be contrary to the law and to the applicable decisions of the Supreme Court as it would destroy the stability of the title which is the core of the system of registration. Appellants cannot be deemed purchasers for value and in good faith as in the deed of absolute conveyance executed in their favor.

Before purchasing a parcel of land, it cannot be contended that the spouses did not know exactly the condition of the land that they were buying and the obstacles or restrictions thereon that may be put up by the government in connection with their project of converting Lot No. 2 in question into a fishpond. Nevertheless, they willfully and voluntarily assumed the risks attendant to the sale of said lot. One who buys something with knowledge of defect or lack of title in his vendor cannot claim that he acquired it in good faith.

The ruling that a purchaser of a registered property cannot go beyond the record to make inquiries as to the legality of the title of the registered owner, but may rely on the registry to determine if there is no lien or encumbrances over the same, cannot be availed of as against the law and the accepted principle that rivers are parts of the public domain for public use and not capable of private appropriation or acquisition by prescription.

Sun Brothers vs. Velasco (54 O.G. 5143)

Sun Brothers vs. Jose Velasco (54 OG 5143)

L-17085-R, January 13, 1958

Angeles, J.:

Facts:

Sun Brothers & company delivered to Lopez an Admiral refrigerator under a “Conditional Sale Agreement”. Out of the P1,700 purchase price, only P500 was paid as downpayment.

Inter alia, they stipulated that Lopez shall not remove the refrigerator from his address nor part possession therewith without the express written consent of Sun brothers. In violation thereof, Sun Brothers may rescind the sale, recover possession and the amounts paid shall be forfeited. The refrigerator shall remain the absolute property of Sun Brothers until Lopez has fully paid the purchase price.

Lopez sold the refrigerator to JV Trading (owned by Jose Velasco) without knowledge of Sun brothers for P850, misrepresented himself as Jose Lim and executed a document stating that he is the absolute owner. Thereafter, Velasco displayed the refrigerator in his store abd Co Kang Chui bought it for P985.

Issue:

Whether Co Kang Chiu, an innocent buyer from a store, has a better right as owner than Sun Brothers, a conditional vendor

Held:

Co Kang Chiu has a better right than Sun Brothers.

Article 1505 of the Civil Code provides:

“Art. 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner if the goods is by his conduct precluded from denying the seller’s authority to sell.

“Nothing in this Title, however, shall affect:

(1)   The provisions of any factors’ acts, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were  the true owner thereof;

…

(3) Purchases made in a merchant’s store, or in fairs, or markets, …”

The lower court committed error when it applied the 1^st paragraph of Article 1505. It is true that Francisco Lopez, the conditional vendee, never had any title to the refrigerator in question, because the stipulation between him and the conditional vendor, Sun Brothers, is that title shall vest in the vendee upon payment in full of the purchase price, and Lopez has not fully paid such price. When Lopez, who has not tile to the refrigerator, sold it to Jose Velasco, the latter did not acquire any better right than what Lopez had --- which is practically nothing. We do not agree with the court a quo that Velasco was a purchaser in good faith and for value for the reason that Lopez, being a private person who is not engaged in the business of selling refrigerators, Velasco must be reasonably expected to have inquired from Lopez whether or not the refrigerator he was selling has been paid in full. In this, Velasco has been negligent.

            Also, since Co Kang Chui purchased the refrigerator from JV Trading, a merchant store and displayed thereat, the 3^rd paragraph of Art. 1505 applies, from which Co Kang Chui should be declared as having acquired a valid title to the refrigerator, although his predecessors in interest did not have any right of ownership over it. This is a case of imperfect or void title ripening into a valid one, as a result of some intervening causes. The policy of the law which we do not feel justified to deviate, has always been that where the rights and interests of a vendor comes into clash with that of an innocent buyer for value, the latter must be protected.

The rule embodied in Article 1505 (3) protecting innocent third parties who have made purchases at merchants’ stores in good faith and for value appears to us to be a wise and necessary rule not only to facilitate commercial sales on movables but to give stability to business transactions. This rule is necessary in a country such as ours where free enterprise prevails, for buyers cannot be reasonably expected to look behind the title of every article when he buys at a store. The doctrine of caveat emptor [the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made] is now rarely applied, and if it is ever mentioned, it is more of an exception rather than the general rule.

Upon the whole, we are persuaded to believe that Co Kang Chui who is now is possession of the refrigerator should be adjudged the owner thereof, because he bought it at a merchant’s store in good faith and for value.

Bognot vs. RRI Lending

Bognot vs. RRI Lending

GR No. 180144, September 24, 2014

Brion, J.:

Facts:

In September 1996, Leonardo Bognot and his younger brother, Rolando Bognot applied for and obtained a loan of P500,000.00 from RRI Lending, payable on November 30, 1996. The loan was evidenced by a promissory note and was secured by a post dated check dated November 30, 1996.

Evidence on record shows that Leonardo renewed the loan several times on a monthly basis. He paid a renewal fee of P54,600.00 for each renewal, issued a new post-dated check as security, and executed and/or renewed the promissory note previously issued. RRI Lending on the other hand, cancelled and returned to Leonardo the post-dated checks issued prior to their renewal.

Leonardo purportedly paid the renewal fees and issued a post-dated check dated June 30, 1997 as security. As had been done in the past, RRI Lending superimposed the date "June 30, 1997" on the promissory note to make it appear that it would mature on the said date.

Several days before the loan’s maturity, Rolando’s wife, Julieta, went to the respondent’s office and applied for another renewal of the loan. She issued in favor of RRI Lending a promissory note and a check dated July 30, 1997, in the amount of P54,600.00 as renewal fee.

On the excuse that she needs to bring home the loan documents for the Bognot siblings’ signatures and replacement, Julieta asked the RRI Lending clerk to release to her the promissory note, the disclosure statement, and the check dated July 30, 1997. Julieta, however, never returned these documents nor issued a new post-dated check. Consequently, RRI Lending sent Leonardo follow-up letters demanding payment of the loan, plus interest and penalty charges. These demands went unheeded.

In his Answer, Leonardo, claimed, among other things, that the complaint states no cause of action because RRI Lending’s claim had been paid, waived, abandoned or otherwise extinguished, and that the one (1) month loan contracted by Rolando and his wife in November 1996 which was lastly renewed in March 1997 had already been fully paid and extinguished in April 1997.

Issue:

Whether the parties’ obligation was extinguished by payment

Held:

Jurisprudence tells us that one who pleads payment has the burden of proving it; the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment. Indeed, once the existence of an indebtedness is duly established by evidence, the burden of showing with legal certainty that the obligation has been discharged by payment rests on the debtor.

In the present case, Leonardo failed to satisfactorily prove that his obligation had already been extinguished by payment. As the CA correctly noted, the petitioner failed to present any evidence that RRI Lending had in fact encashed his check and applied the proceeds to the payment of the loan. Neither did he present official receipts evidencing payment, nor any proof that the check had been dishonored.

We note that the petitioner merely relied on the respondent’s cancellation and return to him of the check dated April 1, 1997. The evidence shows that this check was issued to secure the indebtedness. The acts imputed on the respondent, standing alone, do not constitute sufficient evidence of payment.

Article 1249, paragraph 2 of the Civil Code provides:

x x x x

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. (Emphasis supplied)

Also, we held in Bank of the Philippine Islands v. Spouses Royeca:

Settled is the rule that payment must be made in legal tender. A check is not legal tender and, therefore, cannot constitute a valid tender of payment. Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized.(Emphasis supplied)

Although Article 1271 of the Civil Code provides for a legal presumption of renunciation of action (in cases where a private document evidencing a credit was voluntarily returned by the creditor to the debtor), this presumption is merely prima facie and is not conclusive; the presumption loses efficacy when faced with evidence to the contrary.

Moreover, the cited provision merely raises a presumption, not of payment, but of the renunciation of the credit where more convincing evidence would be required than what normally would be called for to prove payment. Thus, reliance by the petitioner on the legal presumption to prove payment is misplaced.

To reiterate, no cash payment was proven by the petitioner. The cancellation and return of the check dated April 1, 1997, simply established his renewal of the loan – not the fact of payment. Furthermore, it has been established during trial, through repeated acts, that the respondent cancelled and surrendered the post-dated check previously issued whenever the loan is renewed.

Smith Bell vs. Sotelo Matti (44 Phil. 874)

Smith Bell vs. Sotelo Matti (44 Phil. 874)

GR No. 16570, March 9, 1922

Romualdez, J.:

Facts:

Plaintiff corporation undertook to sell and deliver equipment for Mr. Sotelo but no definite dates were fixed for the delivery. The periods were couched in ambiguous terms such as “within 3 or 4 months”, “in the month of September or as soon as possible”, and “approximate delivery with 90 days-This is not guaranteed.” When the goods arrived, Mr. Sotelo refused to receive them and to pay the prices. Mr. Sotelo then sued for damages because of the delay suffered.

Issue:

Whether Smith Bell incurred delay in the delivery of goods to Sotelo

Held:

No, it did not incur delay.

From the record it appears that these contracts were executed at the time of the world war when there existed connection with the tanks and "Priority Certificate, subject to the United -States Government requirements," with respect to the motors. At the time of the execution of the contracts, the parties were not unmindful of the contingency of the United States Government not allowing the export of the goods, nor of the fact that the other foreseen circumstances therein stated might prevent it.

Considering these contracts in the light of the civil law, we cannot but conclude that the term which the parties attempted to fix is so uncertain that one cannot tell just whether, as a matter of fact, those articles could be brought to Manila or not. If that is the case, as we think it is, the obligation must be regarded as conditional.

When the delivery was subject to a condition the fulfillment of which depended not only upon the effort of the herein plaintiff, but upon the will of third persons who could in no way be compelled to fulfill .the condition. In cases like this, which are not expressly provided for, but impliedly covered, by the Civil Code, the obligor will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in reality.

In connection with this obligation to deliver, occurring in a contract of sale like those in question, the rule in North America is that when the time of delivery is not fixed in the contract, time is regarded unessential.

When the contract provides for delivery 'as soon as possible' the seller is entitled to a reasonable time, in view of all the circumstances, such as the necessities of manufacture, or of putting the goods in condition for delivery. The term does not mean immediately or that the seller must stop all his other work and devote himself to that particular order. But the seller must nevertheless act with all reasonable diligence or without unreasonable delay. It has been held that a requirement that the shipment of goods should be the 'earliest possible' must be construed as meaning that the goods should be sent as soon as the seller could possibly send them, and that it signified rather more than that the goods should be sent within a reasonable time.

"The question as to what is a reasonable time for the delivery of the goods by the seller is to be determined by the circumstances attending the particular transaction, such as the character of the goods, and the purpose for which they are intended, the ability of the seller to produce the goods if they are to be manufactured, the facilities available for transportation, and the distance the goods must be carried, and the usual course of business in the particular trade." (35 Cyc., 181-184.)

The record shows, as we have stated, that the plaintiff did all within its power to have the machinery arrive at Manila as soon as possible, and immediately upon its arrival it notified the purchaser of the fact and offered to deliver it to him. Taking these circumstances into account, we hold that the said machinery was brought to Manila by the plaintiff within a reasonable time.

Therefore, the plaintiff has not been guilty of any delay in the fulfillment of its obligation, and, consequently, it could not have incurred any of the liabilities mentioned by the intervenor in its counterclaim or set-off.

Ruks Konsult vs. Adworld Sign

Ruks Konsult vs. Adworld Sign

GR No. 204866, January 21, 2015

Perlas-Bernabe, J.:

Facts:

Adworld filed for damages against Transworld when Transworld’s billboard structure collapsed and crashed against Adworld’s billboard structure, which was misaligned and its foundation impaired.

In its Answer with Counterclaim, Transworld averred that the collapse of its billboard structure was due to extraordinarily strong winds that occurred instantly and unexpectedly, and maintained that the damage caused to Adworld’s billboard structure was hardly noticeable. Transworld likewise filed a Third-Party Complaint against Ruks, the company which built the collapsed billboard structure in the former’s favor. It was alleged therein that the structure constructed by Ruks had a weak and poor foundation not suited for billboards, thus, prone to collapse, and as such, Ruks should ultimately be held liable for the damages caused to Adworld’s billboard structure.

Issue:

Whether Ruks was solidarily liable with Transworld for the damages in Adworld’s billboard

Held:

Yes.

Jurisprudence defines negligence as the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do. It is the failure to observe for the protection of the interest of another person that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury.

In this case, the CA correctly affirmed the RTC’s finding that Transworld’s initial construction of its billboard’s lower structure without the proper foundation, and that of Ruks’s finishing its upper structure and just merely assuming that Transworld would reinforce the weak foundation are the two (2) successive acts which were the direct and proximate cause of the damages sustained by Adworld. Worse, both Transworld and Ruks were fully aware that the foundation for the former’s billboard was weak; yet, neither of them took any positive step to reinforce the same. They merely relied on each other’s word that repairs would be done to such foundation, but none was done at all. Clearly, the foregoing circumstances show that both Transworld and Ruks are guilty of negligence in the construction of the former’s billboard, and perforce, should be held liable for its collapse and the resulting damage to Adworld’s billboard structure.

As joint tortfeasors, therefore, they are solidarily liable to Adworld. Verily, "[j]oint tortfeasors are those who command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the commission of a tort, or approve of it after it is done, if done for their benefit. They are also referred to as those who act together in committing wrong or whose acts, if independent of each other, unite in causing a single injury. Under Article 2194 of the Civil Code, joint tortfeasors are solidarily liable for the resulting damage. In other words, joint tortfeasors are each liable as principals, to the same extent and in the same manner as if they had performed the wrongful act themselves." The Court’s pronouncement in People v. Velasco is instructive on this matter, to wit:

Where several causes producing an injury are concurrent and each is an efficient cause without which the injury would not have happened, the injury may be attributed to all or any of the causes and recovery may be had against any or all of the responsible persons although under the circumstances of the case, it may appear that one of them was more culpable, and that the duty owed by them to the injured person was not same. No actor's negligence ceases to be a proximate cause merely because it does not exceed the negligence of other actors. Each wrongdoer is responsible for the entire result and is liable as though his acts were the sole cause of the injury.

There is no contribution between joint [tortfeasors] whose liability is solidary since both of them are liable for the total damage. Where the concurrent or successive negligent acts or omissions of two or more persons, although acting independently, are in combination the direct and proximate cause of a single injury to a third person, it is impossible to determine in what proportion each contributed to the injury and either of them is responsible for the whole injury.

Millare vs. Hernando (151 SCRA 484)

Millare vs. Hernando (151 SCRA 484)

GR No. L-555480, 6/30/1987

Feliciano, J.:

Facts:

A five-year Contract of Lease was executed between Millare as lessor and the Spouses Co as lessee. They agreed on a monthly rental rate of P350 of the “People’s Restaurant” until May 31, 1980.

During the last week of May 1980, Millare informed the Co spouses that they could continue leasing the property so long as they were amenable to paying P1,200 a month. The Spouses Co counter-offered with P700 a month. At this point, Millare allegedly stated that the amount of monthly rentals could be resolved at a later time since “the matter is simple among us”, which alleged remark was supposedly taken by the spouses Co to mean that the Contract of Lease had been renewed, prompting them to continue occupying the subject premises and to forego their search for a substitute place to rent. In contrast, the lessor flatly denied ever having considered, much less offered, a renewal of the Contract of Lease.

On July 22 and 28, 1980, Millare sent demand letters requesting them to vacate as she had no intention of renewing the Contract of Lease, which had expired. The spouses Co signified their intention to deposit the P700 monthly rental in court, in view of Mrs. Millare’s refusal to accept their counter-offer.

As the parties were filing suits against each other in court, the trial judge rendered a “Judgment by Default” dated 26 November 1980 ordering the renewal of the lease contract for a term of 5 years counted from the expiration date of the original lease contract, and fixing monthly rentals thereunder at P700.00 a month, payable in arrears.

Issue:

Whether the court may order the renewal of the Contract of Lease for another five-year term at P700 a month

Held:

No, it cannot order the renewal of the Contract of Lease.

The respondent judge cited Articles 1197 and 1670 of the Civil Code to sustain the “Judgment by Default” by which he ordered the renewal of the lease for another term of five years and fixed monthly rentals thereunder at P700.00 a month. Article 1197 of the Civil Code provides as follows:

“If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof.

The courts shall also fix the duration of the period when it depends upon the will of the debtor.

In every case, the courts shall determine such period as may, under the circumstances, have been probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by them.” (Italics supplied.)

The first paragraph of Article 1197 is clearly inapplicable, since the Contract of Lease did in fact fix an original period of five years, which had expired. It is also clear from paragraph 13 of the Contract of Lease that the parties reserved to themselves the faculty of agreeing upon the period of the renewal contract. The second paragraph of Article 1197 is equally clearly inapplicable since the duration of the renewal period was not left to the will of the lessee alone, but rather to the will of both the lessor and the lessee. Most importantly, Article 1197 applies only where a contract of lease clearly exists. Here, the contract was not renewed at all, there was in fact no contract at all the period of which could have been fixed.

Article 1670 of the Civil Code reads thus:

“If at the end of the contract the lessee should continue enjoying the thing left for 15 days with the acquiescence of the lessor and unless a notice to the contrary by either party has previously been given. It is understood that there is an implied new lease, not for the period of the original contract, but for the time established in Articles 1682 and 1687. The other terms of the original contract shall be revived.” (Italics supplied.)

The parties do not pretend that the continued occupancy of the leased premises after 31 May 1980, the date of expiration of the contract, was with the acquiescence of the lessor. The implied new lease could not possibly have a period of five years, but rather would have been a month-to-month lease since the rentals (under the original contract) were payable on a monthly basis. At the latest, an implied new lease (had one arisen) would have expired as of the end of July 1980 in view of the written demands served by the petitioner upon the private respondents to vacate the previously leased premises,

It follows that the respondent judge’s decision requiring renewal of the lease has no basis in law or in fact. Save in the limited and exceptional situations envisaged in Articles 1197 and 1670 of the Civil Code, which do not obtain here, courts have no authority to prescribe the terms and conditions of a contract for the parties. As pointed out by Mr. Justice J.B.L. Reyes in Republic vs. Philippine Long Distance Telephone, Co.,

“[P]arties cannot be coerced to enter into a contract where no agreement is had between them as to the principal terms and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our contractual system, and by express provision of the statute, a contract may be annulled if tainted by violence, intimidation or undue influence (Article 1306, 1336, 1337, Civil Code of the Philippines).

Chaves vs. Gonzales (32 SCRA 547)

Chaves vs. Gonzales (32 SCRA 547)

GR No. 27454, April 30, 1970

Reyes, JBL, J.:

Facts:

Chaves delivered his portable typewriter for routine cleaning and servicing to Gonzales. Gonzales was not able to finish the job despite repeated reminders from Chaves. Gonzales asked for P6 for the purchase of spare parts, but he was still not able to repair the typewriter. Exasperated with Gonzales’ delay, Chaves asked for the return of the typewriter, whose parts were not complete anymore upon being returned to Chaves. Chaves sues for breach, but Gonzales argues that he is not liable for costs and damages because their contract did not contain a period within which to perform his obligation. He avers that Chaves should have first filed a petition for the court to fix the period before he could be held liable for breach of contract.

Issue:

Whether a period must be set by the court first before one could sue for a breach

Held:

No, one could sue for a breach even without asking the court to set a period within which to perform the obligation.

The inferences derivable from these findings of fact are that Chaves and Gonzales had a perfected contract for cleaning and servicing a typewriter; that they intended that Gonzales was to finish it at some future time although such time was not specified; and that such time had passed without the work having been accomplished, for Gonzales returned the typewriter cannibalized and unrepaired, which in itself is a breach of his obligation, without demanding that he should be given more time to finish the job, or compensation for the work he had already done. The time for compliance having evidently expired, and there being a breach of contract by non-performance, it was academic for Chaves to have first petitioned the court to fix a period for the performance of the contract before filing his complaint in this case. Gonzales cannot invoke Article 1197 of the Civil Code for he virtually admitted non-performance by returning the typewriter that he was obliged to repair in a nonworking condition, with essential parts missing. The fixing of a period would thus be a mere formality and would serve no purpose than to delay (cf. Tiglao, et al. v. Manila Railroad Co., 98 Phil. 181).

It is clear that the Gonzales contravened the tenor of his obligation because he not only did not repair the typewriter but returned it “in shambles”, according to the appealed decision. For such contravention, as Chaves contends, he is liable under Article 1167 of the Civil Code, for the cost of executing the obligation in a proper manner. The cost of the execution of the obligation in this case should be the cost of the labor or service expended in the repair of the typewriter, which is in the amount of P58.75 because the obligation or contract was to repair it.

Malayan Insurance vs. CA (165 SCRA 536)

Malayan Insurance vs. CA (165 SCRA 536)
GR No. L-36413, 9/26/2016
Padilla, J.:

Facts:
Malayan Insurance issued a Private Car Policy in favor of Sio Choy covering a Willys jeep for third-party liability for P20,000. The insured jeep, while being driven by Campollo, an employee of San Leon, collided with a PANTRANCO passenger bus causing damage to the jeep and injuries to its driver and to its passenger, Vallejos.

Vallejos filed an action for damages against Sio Choy, Malayan Insurance Co., Inc. and the PANTRANCO.

Sio Choy, however, later filed a separate answer with a cross-claim against Malayan wherein he alleged that he had actually paid Vallejos the amount of P5,000.00 for hospitalization and other expenses, and, in his cross-claim against Malayan, he alleged that the Malayan had issued in his favor a private car comprehensive policy wherein the insurance company obligated itself to indemnify Sio Choy, as insured, for the damage to his motor vehicle, as well as for any liability to third persons arising out of any accident during the effectivity of such insurance contract. He prayed that he be reimbursed by the insurance company for the amount that he may be ordered to pay.

Also later, Malayan sought, and was granted, leave to file a third-party complaint against the San Leon because the person driving the jeep of Sio Choy, at the time of the accident, was an employee of San Leon, performing his duties within the scope of his assigned task, and not an employee of Sio Choy; and that, as San Leon is the employer of the deceased driver, Campollo, it should be liable for the acts of its employee, pursuant to Art. 2180 of the Civil Code. Malayan prayed that judgment be rendered against San Leon, making it liable for the amounts claimed by Vallejos and/or ordering said San Leon to reimburse and indemnify the Malayan for any sum that it may be ordered to pay Vallejos.

Malayan prays that San Leon be ordered to reimburse Malayan any amount, in excess of one-half (1/2) of the entire amount of damages, because it is jointly and severally liable with Sio Choy.

Issue:Whether Malayan was solidarily liable with Sio Choy and San Leon for damages to Vallejos

Held:No, Malayan is liable to Vallejos, but is NOT solidarily liable with Sio Choy and San Leon.Sio Choy is made liable to said plaintiff as owner of the ill-fated Willys jeep, pursuant to Article 2184 of the Civil Code which provides:

Art. 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the former, who was in the vehicle, could have, by the use of due diligence, prevented the misfortune it is disputably presumed that a driver was negligent, if he had been found guilty of reckless driving or violating traffic regulations at least twice within the next preceding two months.

If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.

On the other hand, the basis of liability of San Leon to Vallejos, the former being the employer of the driver of the Willys jeep at the time of the motor vehicle mishap, is Article 2180 of the Civil Code:

Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged ill any business or industry.
xxx xxx xxx
The responsibility treated in this article shall cease when the persons herein mentioned proved that they observed all the diligence of a good father of a family to prevent damage.

It thus appears that respondents Sio Choy and San Leon Rice Mill, Inc. are the principal tortfeasors who are primarily liable to respondent Vallejos. The law states that the responsibility of two or more persons who are liable for a quasi-delict is solidarily.

On the other hand, the basis of Malayan's liability is its insurance contract with respondent Sio Choy. If petitioner is adjudged to pay respondent Vallejos in the amount of not more than P20,000.00, this is on account of its being the insurer of respondent Sio Choy under the third party liability clause included in the private car comprehensive policy existing between petitioner and respondent Sio Choy at the time of the complained vehicular accident.

While it is true that where the insurance contract provides for indemnity against liability to third persons, such third persons can directly sue the insurer, however, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault. The liability of the insurer is based on contract; that of the insured is based on tort.

In the case at bar, Malayan as insurer of Sio Choy, is liable to Vallejos, but it cannot be made "solidarily" liable with the two principal tortfeasors namely Sio Choy and San Leon. For if Malayan were solidarily liable with said two (2) respondents by reason of the indemnity contract against third party liability-under which an insurer can be directly sued by a third party — this will result in a violation of the principles underlying solidary obligation and insurance contracts.

In solidary obligation, the creditor may enforce the entire obligation against one of the solidary debtors.

In the case at bar, the trial court held Malayan, Sio Choy and San Leon solidarily liable to respondent Vallejos for a total amount of P29,103.00, but  Malayan's liability is only up to P20,000.00. In the context of a solidary obligation, Malayan may be compelled by Vallejos to pay the entire obligation of P29,013.00, notwithstanding the qualification made by the trial court. But Malayan cannot be obliged to pay the entire obligation when the amount stated in its insurance policy with respondent Sio Choy for indemnity against third party liability is only P20,000.00. Moreover, the qualification made in the decision of the trial court to the effect that petitioner is sentenced to pay up to P20,000.00 only when the obligation to pay P29,103.00 is made solidary, is an evident breach of the concept of a solidary obligation. Thus, We hold that the trial court, as upheld by the Court of Appeals, erred in holding Malayan as solidarily liable with respondents Sio Choy and San Leon to Vallejos.