- Elements of a contract; enforcement of rights/warranties under a contract; what may be the subject matter of contracts
- What are the sources of obligation; what is joint and solidary obligation and under what circumstances may parties be held jointly and solidarily liable; Read Articles 141 and 142 of the Revised Penal Code in conjunction of liabilities of innkeepers, etc; and employers and teachers.
- Extinguishment of Obligations; manner – voluntary and involuntary.
Philippine National Bank v. Teresita Tan Dee, et al., G.R. No. 182128, February 19, 2014.
The basic principle of relativity of contracts is that contracts can only bind the parties who entered into it, and cannot favor or prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof “Where there is no privity of contract, there is likewise no obligation or liability to speak about.” Article 1308 of the Civil Code; principle of mutuality of contracts. The credit agreement executed succinctly stipulated that the loan would be subjected to interest at a rate “determined by the Bank to be its prime rate plus applicable spread,
prevailing at the current month.” This stipulation was carried over to or adopted by the subsequent renewals of the credit agreement. PNB thereby arrogated unto itself the sole
prerogative to determine and increase the interest rates imposed on the Spouses Manalo. Such a unilateral determination of the interest rates contravened the principle of mutuality of contracts embodied in Article 1308 of the Civil Code.
Philippine National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al., G.R. No.
174433, February 24, 2014: The Court has declared that a contract where there is no mutuality between the parties partakes of the nature of a contract of adhesion, and any obscurity will be construed against the party who prepared the contract, the latter being presumed the stronger party to the agreement, and who caused the obscurity. PNB should then suffer the consequences of its failure to specifically indicate the rates of interest in the credit agreement.
We spoke clearly on this in Philippine Savings Bank v. Castillo, to wit: The unilateral
determination and imposition of the increased rates is violative of the principle of mutuality of contracts under Article 1308 of the Civil Code, which provides that ‘[t]he contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.’ A perusal of the Promissory Note will readily show that the increase or decrease of interest rates hinges solely on the discretion of petitioner. It does not require the conformity of the maker before a new interest rate could be enforced. Any contract which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result, thus partaking of the nature of a contract of adhesion, is void. Any stipulation regarding the validity or compliance of the contract left solely to the will of one of the parties is likewise invalid.
Bignay EX-IM Philippines, Inc. v. Union Bank of the Philippines / Union Bank of the Philippines v. Bignay EX-IM Philippines, Inc., G.R. No. 171590 & G.R. No. 171598, February 12, 2014: In culpa contractual or breach of contract, gross negligence of a party amounting to bad faith is a ground for the recovery of damages by the injured party.
Metropolitan Fabrics, Inc., et al. v. Prosperity Credit Resources, Inc. et al., G.R. No. 154390, March 17, 2014: According to Article 1338 of the Civil Code, there is fraud when one of the contracting parties, through insidious words or machinations, induces the other to enter into the contract that, without the inducement, he would not have agreed to. Yet, fraud, to vitiate consent, must be the causal (dolo causante), not merely the incidental (dolo incidente), inducement to the making of the contract. In Samson v. Court of Appeals (G.R. No. 108245, November 25, 1994, 238 SCRA 397), causal fraud is defined as “a deception employed by one party prior to or simultaneous to the contract in order to secure the consent of the other.”
Fraud cannot be presumed but must be proved by clear and convincing evidence. Whoever alleges fraud affecting a transaction must substantiate his allegation, because a person is always presumed to take ordinary care of his concerns, and private transactions are similarly presumed to have been fair and regular. To be remembered is that mere allegation is definitely not
evidence; hence, it must be proved by sufficient evidence..
Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent of the contracting parties was obtained through fraud, the contract is considered voidable and may be annulled within four years from the time of the discovery of the fraud.
Iglesia Felipina Independiente v. Heirs of Bernardino Taeza,G.R. No. 179597, February 3, 2014: Under Article 1403 of the Civil Code. The following contracts are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; In Mercado v. Allied Banking Corporation, the Court explained that: x x x Unenforceable contracts are those which cannot be enforced by a proper action in court, unless they are ratified, because either they are entered into without or in excess of authority or they do not comply with the statute of frauds or both of the contracting parties do not possess the required legal capacity. x x x..
Closely analogous cases of unenforceable contracts are those where a person signs a deed of extrajudicial partition in behalf of co-heirs without the latter’s authority; where a mother as judicial guardian of her minor children, executes a deed of extrajudicial partition wherein she favors one child by giving him more than his share of the estate to the prejudice of her other children; and where a person, holding a special power of attorney, sells a property of his principal that is not included in said special power of attorney.
Philippine National Bank v. Teresita Tan Dee, et al., G.R. No. 182128, February 19, 2014:
Dacion en pago is a mode of extinguishing an existing obligation and partakes the nature of sale as the creditor is really buying the thing or property of the debtor, the payment for which is to be charged against the debtor’s debt. Dacion in payment extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement – express or implied, or by their silence – consider the thing as
equivalent to the obligation, in which case the obligation is totally extinguished.
However, the Court held that where the bank ” with undue haste when it granted and released the loan in less than three days, it also acted negligently in preparing the Real Estate Mortgage as it failed to indicate that Concepcion was signing it for and on behalf of petitioner. We need not belabor that the words “as attorney-in-fact of,” “as agent of,” or “for and on behalf of,” are vital in order for the principal to be bound by the acts of his agent.” Without these words, any
mortgage, although signed by the agent, cannot bind the principal as it is considered to have been signed by the agent in his personal capacity.
Flordeliza Emilio v. Bilma Rapal, G.R. No. 181855, March 30, 2010: For an action for reformation of instrument to prosper, the following requisites must concur: (1) there must have been a meeting of the minds of the parties to the contract; (2) the instrument does not express the true intention of the parties; and (3) the failure of the instrument to express the true intention of the parties is due to mistake, fraud, inequitable conduct or accident.
7. Sales
Essential Elements of a Contract of Sale; enforceable and unenforceable contracts; who bears the loss; how ownership is transferred; how may defective contracts be reformed; liability for breach of contracts
Philippine National Bank v. Teresita Tan Dee, et al., G.R. No. 182128, February 19, 2014.
“[P.D.] No. 957 cannot totally prevent the owner or developer from mortgaging the subdivision lot or condominium unit when the title thereto still resides in the owner or developer awaiting the full payment of the purchase price by the installment buyer.”
Partnership/Agency/Insolvency
Who may form partnerships; what are the rights of partners; how partnership may be dissolved;
what are the rights of creditors in case of insolvency; how assets may be assigned
Appointment of Agents; powers under a general power of attorney and those in special power of attorney; how agency is revoked
Credit Transactions
What is suretyship; obligations of a surety; liabilities of parties under suretyship; review provisions on antichresis (have not been asked in recent bar exams)
Trade and Investment Development Corporation of the Philippines (Formerly Philippine Export and Foreign Loan Guarantee Corporation) v. Asia Paces Corporation, et al., G.R. No.
187403. February 12, 2014: The fundamental reason therefore is that a contract of suretyship effectively binds the surety as a solidary debtor. This is provided under Article 2047 of the Civil Code which states: By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. Thus, since the
surety is a solidary debtor, it is not necessary that the original debtor first failed to pay before the surety could be made liable; it is enough that a demand for payment is made by the creditor for the surety’s liability to attach.
Comparing a surety’s obligations with that of a guarantor, the Court, in the case of Palmares v.
CA, illumined that a surety is responsible for the debt’s payment at once if the principal debtor makes default, whereas a guarantor pays only if the principal debtor is unable to pay, viz.: “A surety is an insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor. A suretyship is an undertaking that the debt shall be paid; a guaranty, an undertaking that the debtor shall pay. Stated differently, a surety promises to pay the principal’s debt if the principal will not pay, while a guarantor agrees that the creditor, after proceeding against the principal, may proceed against the guarantor if the principal is unable to pay. A surety binds himself to perform if the principal does not, without regard to his ability to do so. A guarantor, on the other hand, does not contract that the principal will pay, but simply that he is able to do so. In other words, a surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default, while a guarantor contracts to pay if, by the use of due diligence, the debt cannot be made out of the principal.”
Iglesia Felipina Independiente v. Heirs of Bernardino Taeza,G.R . No. 179597, February 3, 2014: A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical trust, confidence is reposed in one person who is named a trustee for the benefit of another who is called the cestui que trust, respecting property which is held by the trustee for the benefit of the cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary.
A constructive trust having been constituted by law between respondents as trustees and petitioner as beneficiary of the subject property, may respondents acquire ownership over the said property? The Court held in the same case of Aznar, that unlike in express trusts and resulting implied trusts where a trustee cannot acquire by prescription any property entrusted to him unless he repudiates the trust, in constructive implied trusts, the trustee may acquire the property through prescription even if he does not repudiate the relationship.
Mariano Lim v. Security Bank Corporation,G.R . No. 188539, March 12, 2014: The essence of a continuing surety has been highlighted in the case of Totanes v. China Banking Corporation in this wise: Comprehensive or continuing surety agreements are, in fact, quite commonplace in present day financial and commercial practice. A bank or financing company which anticipates entering into a series of credit transactions with a particular company, normally requires the projected principal debtor to execute a continuing surety agreement along with its sureties. By executing such an agreement, the principal places itself in a position to enter into the projected series of transactions with its creditor; with such suretyship agreement, there would be no need to execute a separate surety contract or bond for each financing or credit accommodation extended to the principal debtor..
Philippine National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al., G.R. No.
174433, February 24, 2014: Indeed, the Court said in Eastern Shipping Lines, Inc. v. Court of Appeals that interest should be computed from the time of the judicial or extrajudicial demand.
However, this case presents a peculiar situation, the peculiarity being that the Spouses Manalo did not demand interest either judicially or extrajudicially. Spouses Manalo made no judicial or extrajudicial demand from which to reckon the interest on any amount to be refunded to them. Such demand could only be reckoned from the promulgation of the CA’s decision because it was there that the right to the refund was first judicially recognized. Nevertheless, pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals, the amount to be refunded and the interest thereon should earn interest to be computed from the finality of the judgment until the full refund has been made.
Anent the correct rates of interest to be applied on the amount to be refunded by PNB, the Court, in Nacar v. Gallery Frames and S.C. Megaworld Construction v. Parada, already applied
Monetary Board Circular No. 799 by reducing the interest rates allowed in judgments from 12%
per annum to 6% per annum Book V: Torts and Damages
- What is tort; quasi-delict; when liability attaches; definition of proximate cause; chain of events leading to injury; negligence, how proved;
- How act of omission may lead to tort; special liability for tort of local governments or other persons
- Damages; what may damages may be awarded – please note that the court may not award damages if not included in the prayer (may be asked as part of Legal Ethics question in Civil Law)-; proofs needed to award damages; when may the Court reduce or increase the award;
nature of liquidated damages under contract.
Oriental Petroleum & Minerals Corp. v. Tuscan Realty, Inc., 701 SCRA 95 & 97: The term
"procuring cause" refers to a cause which starts a series of events and results, without break in their continuity, in the accomplishment of a broker’s prime objective of producing a purchaser who is ready, willing, and able to buy on the owner’s terms. This is similar to the concept of proximate cause in Torts, without which the injury would not have occurred. To be regarded as the procuring cause of a sale, a broker’s efforts must have been the foundation of the negotiations which subsequently resulted in a sale. The Court has always recognized the broker’s right to his commission, although the owner revoked his authority and directly negotiated with the buyer whom he met through the broker’s efforts. It would be unfair not to give the broker the reward he had earned for helping the owner find a buyer who would pay the price.
BJDC Construction, Inc represented by its Manager/Proprieto Janet S. Dela Cruz v. Nena E.
Lanuzo, et al., G.R. No. 161151, March 24, 2014: Negligence, the Court said in Layugan v.
Intermediate Appellate Court (G.R. No. L-73998, November 14, 1988), is “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, or as Judge Cooley defines it, ‘(t)he failure to observe for the protection of the interests of another person, that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury.’ In order that a party may be held liable for damages for any injury brought about by the negligence of another, the claimant must prove that the negligence was the immediate and proximate cause of the injury.
For the doctrine to apply, the following requirements must be shown to exist, namely: (a) the accident is of a kind that ordinarily does not occur in the absence of someone’s negligence;
(b) it is caused by an instrumentality within the exclusive control of the defendant or defendants; and (c) the possibility of contributing conduct that would make the plaintiff responsible is eliminated.
Dr. Fernando P. Solidum v. People of the Philippines, G.R. No. 192123, March 10, 2014:
An action upon medical negligence – whether criminal, civil or administrative – calls for the plaintiff to prove by competent evidence each of the following four elements, namely: (a) the duty owed by the physician to the patient, as created by the physician-patient relationship, to act in accordance with the specific norms or standards established by his profession; (b) the breach of the duty by the physician’s failing to act in accordance with the applicable standard of care;
(3) the causation, i.e., there must be a reasonably close and causal connection between the negligent act or omission and the resulting injury; and (4) the damages suffered by the patient.
The Court aptly explained in Cruz v. Court of Appeals that: Whether or not a physician has committed an “inexcusable lack of precaution” in the treatment of his patient is to be determined according to the standard of care observed by other members of the profession in good standing under similar circumstances bearing in mind the advanced state of the profession at the time of treatment or the present state of medical science. In the recent case of Leonila Garcia-Rueda v.
Wilfred L. Pacasio,et. al., this Court stated that in accepting a case, a doctor in effect represents that, having the needed training and skill possessed by physicians and surgeons practicing in the same field, he will employ such training, care and skill in the treatment of his patients. He therefore has a duty to use at least the same level of care that any other reasonably competent doctor would use to treat a condition under the same circumstances. It is in this aspect of medical
malpractice that expert testimony is essential to establish not only the standard of care of the profession but also that the physician’s conduct in the treatment and care falls below such standard. Further, inasmuch as the causes of the injuries involved in malpractice actions are determinable only in the light of scientific knowledge, it has been recognized that expert testimony is usually necessary to support the conclusion as to causation
The applicability of the doctrine of res ipsa loquitur in medical negligence cases was
The applicability of the doctrine of res ipsa loquitur in medical negligence cases was