CASE DIGESTS in OBLIGATIONS AND CONTRACTS

SALEN vs. BALCE, G.R. NO. L-14414, April 27, 1960

FACTS: Gumersindo Balce, single, minor and living with the defendant, his
father Jose Balce, was convicted of homicide and was ordered to pay
the plaintiffs, the parents of the victim-Carlos Salen, for indemnity
amounting to 2,000.00. Gumersindo was insolvent, hence, the
Salens demanded from Jose Balce but he refused to pay on the
defense his sons civil liability should be governed by the Revised
Penal Code (RPC) and not under Art. 2180 of the Civil Code.
ISSUE: WON Jose Balce can be subsidiarily liable to pay the indemnity his
son.
HELD: Yes, Jose Balce is subsidiarily liable with his son to pay the indemnity.
Generally, the civil liability arising from a crime shall be governed by
the RPC but since RPC made no mention of the liability of parents in
cases of minors over 15 years old who act with discernment, the
remedy would be to refer to the general law which is the Civil Code.
Under Article 2180 (2), the father or the mother can be held
subsidiarily liable unless the damage is caused with criminal intent.
MERALCO vs. RAMOY, G.R. NO. 158911, March 4, 2008
FACTS: The National Power Corporation (NPC) won an ejectment case
against several persons allegedly illegally occupying its properties in
Baesa, Quezon City. To execute such, NPC requested from MERALCO
that the electrical service connection of those residential and
commercial establishments beneath the NPC lines be immediately
disconnected and MERALCO agreed upon determination of the
affected establishments by NPC. One of which includes the residence
of the plaintiffs- the Ramoys.
ISSUE: WON MERALCO is liable for damages to the Ramoys for the sudden
disconnection of their electric power supply.
HELD: Yes. MERALCO is liable for damages to the Ramoys for the sudden
disconnection of their electric power supply which turned out to be
without any valid ground, pursuant to Articles 1170 and 1173 of the
Civil Code. Therefore, MERALCO failed to exercise the required utmost
diligence as a public utility service provider, hence, liable for culpacontractual being negligent in its performance of its obligation
derived from the Service Contract between MERALCO and its
consumers, one of which is the Ramoys.

UNLAD RESOURCES DEVELOPMENT CORPORATION vs. DRAGON,

G.R. NO. 149338, July 28, 2008
FACTS: The parties in this case entered in a Memorandum of Agreement
(MoA) that UNLAD will invest in additional stocks worth 4.8M and
pay up immediately 1.2M for said subscription while the
respondents, Dragon and company, shall transfer control and
management over the Rural Bank to UNLAD Resources. The
respondents complied with their obligation but the petitioners did not,
thus respondents filed a complaint for rescission of the agreement
and the return of control and management of the Rural Bank from
petitioners to respondents, plus damages.
ISSUE:

WON the rescission of the MoA between the parties is proper.

HELD: Yes, the MoA between the parties can be rescinded pursuant to
Article 1191 of the Civil Code which states that the power to rescind
obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him. Since UNLAD
failed to comply with what is incumbent upon him, the other partythe respondents can ask for rescission of the MoA on such ground.
Clearly, the petitioners failed to fulfill their end of the agreement, and
thus, there was just cause for rescission. With the contract, thus
rescinded, the parties must be restored to the original state, that is,
before they entered into the Memorandum of Agreement.
SPOUSES CACAYORIN vs. ARMED FORCES AND POLICE MUTUAL
BENEFIT ASSOCIATION , INC. (AFPMBAI), G.R. NO.171298,
April 15, 2013
FACTS: Rural Bank approved a loan in favor of Oscar Cacayorin to buy one of
the properties of AFPMBAI. Subsequently, the Rural Bank was closed
and placed under receivership by Philippine Deposit Insurance
Corporation (PDIC). Since PDIC cannot locate the loan records and
title, the petitioners-the spouses, then, filed a complaint for
consignation of loan payment, while the respondent filed a motion to
dismiss on the ground that the case falls within the jurisdiction of the
Housing and Land Use Regulatory Board (HLURB).
ISSUES: 1. WON the case falls within the exclusive jurisdiction of the HLURB.
2. WON the case makes out a case of consignation.
HELD: 1. No. Consignation of payment is necessarily judicial (Article 1258),
thus, jurisdiction lies with the Trial Court and not HLURB.

2. Yes, in the case, the creditor is unknown as there are two (2)
entities which claim the same right to collect 1) Rural Bank, through
PDIC and 2) AFPMBAI, who was currently in the possession of the loan
records and title and make demands. Thus, for the debtor to be
released in such case, he must deposit it to the proper judicial court
even without prior tender of payment pursuant to Article 1256 (2).
AJAX MARKETING vs. HON. COURT OF APPEALS,
G.R. NO. 118585 September 14, 1995
FACTS:There are three (3) Real Estate Mortgages (REMs) over a single
property between AJAX Marketing & Development Corporation and
Metropolitan Bank & Trust Co. First loan was under the name YlangYlang Merchandising Company, a partnership, for the amount of
250,000.00. The second was when it changed its name to AJAX
Marketing Co. for the amount of 150,000.00. And third was during
its incorporation as AJAX Marketing & Development Corporation for
the amount of 600,000.00. Later on, the AJAX Marketing executed a
Promissory Note to restructure and consolidate the 3 loans.
Subsequently, the bank foreclosed the mortgaged property.
ISSUE:

WON there is novation by virtue of the consolidation of the three

(3) loans into a single Promissory Note.

HELD: No, novation is never presumed. To effect either objective/subjective

novation, it must be imperative that the new obligation expressly
declare that the old obligation is thereby extinguished or that the
original debtor/s is/are released. In the case, there is nothing
mentioned about the intention of the parties to novate the three (3)
loans nor their extinguishment. In addition, the annotations in the
mortgaged property remained uncancelled. The conversion from
partnership to corporation, likewise, did not expressly release the old
debtor/s. Clearly, neither objective nor subjective novation took
place.
LEONARDO BOGNOT vs. RRI LENDING CORPORATION, REPRESENTED
BY ITS GENERAL MANAGER, DARIO J. BERNARDEZ,
G.R. No. 180144, September 24, 2014, J. Brion
FACTS:
Leonardo Bognot executed a promissory note in favor of RRI
Lending Corporation, with Rolando Bognot, his brother, as a comaker, for a loan they obtained in the amount of 500,000.00,
secured by a post-dated check. Eventually, the loan was renewed
several times on a monthly basis by the siblings until Rolandos wife,
Julieta Bognot, renewed the said loan and got the loan documents for
the Bognot siblings signatures but she never returned them. Despite

repeated demands, the loan was left unpaid. The petitioner, then,
pleaded that he had paid the loan but failed to prove it.
ISSUE:

WON the Bognot siblings obligation was extinguished by

novation through substitution of debtors?

HELD: No, there is no novation to talk about since to legally effect a

novation, the original debtor must be expressly released from the
obligation and the new debtor assumes his place. The renewal of the
loan made by Mrs. Bognot is not, in effect, a substitution since she
merely renewed the original loan by executing a new promissory note
and check. Nevertheless, the respondent never agreed to the
substitution which is essential to validly substitute the old debtor.
GAISANO CAGAYAN, INC. vs INSURANCE COMPANY OF NORTH
AMERICA, G.R. NO. 147839, June 8, 2006
FACTS:
Intercapitol Marketing Corporation (IMC) and Levi Strauss Phils.
Inc. (LSPI) separately obtained their insurance policies from Insurance
Company of North America (ICNA) for their book debt endorsements
for products sold to customers which are unpaid 45 days after the
time of the loss. Gaisanao Cagayan, Inc. bought ready-made clothing
products from IMC and LSPI which were, subsequently, included in the
stocks lost when its store was consumed by fire.
ISSUE:WON Gaisano Cagayan Inc. can be held liable despite the occurrence
of fortuitous event.
HELD: Yes, Gaisano Cagayan Inc. is liable even if the goods were lost
through fortuitous event, thus, its liability to pay the price of the
goods purchased was not extinguished. Article 1263 of the Civil Code
states that in an obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not extinguish the
obligation (genus nunquam perit). The obligation of Gaisano is
pecuniary in nature and money is generally considered as a generic
thing.
FRANCIA vs. IAC, G.R. NO. L-67649 June 28, 1988
FACTS: Engracio Francia owned a house and lot located in Pasay City, a
portion of which was expropriated by the government for 4,116.00
deposited in Philippine National Bank (PNB) but was never withdrawn.
Francia failed to pay his real estate taxes amounting to 2,400.00,
hence, his remaining property was auctioned.
ISSUE:

WON the expropriation payment may compensate for the real

estate taxes due.

HELD: No, the expropriation payment cannot be compensated with the real
estate taxes due because the Government and the taxpayer are not
mutually creditors and debtors of each other pursuant to Article 1278
of the Civil Code. There can never be an offsetting of taxes against
the claims that the taxpayer may have against the government. He
would have withdrawn the expropriation payment to pay the real
estate taxes due to avoid the auction. Moreover, the taxes assessed
were derived from law while the money judgment against the
government is an obligation arising from a contract, whether express
or implied.
AIR FRANCE vs. HONORABLE COURT OF APPEALS,
G.R. NO. 104234 June 30, 1995
FACTS:
A court judgment was held in favor of petitioner, Air France
against Multinational Travel Corporation of the Philippines, Fiorello
Panopio and Vicky Panopio, the private respondents, who were held
jointly and severally liable. However, judgment was unsatisfied, thus,
Air France issued an alias writ of execution and further alleged that
the private respondent spouses sold a property to a certain Iolani
Dionisio registered in the name of Multinational Food and Catering
Corporation where the private respondent spouses were said to own
91% of its share, thus, viewed as made to defraud the creditors.
ISSUE: WON the contract between Multinational Food and Iolani Dionisio is
rescissible.
HELD: No, the contract cannot be determined as rescissible in the present
case instead an independent action is necessary to prove that the
contract is rescissible. Under Article 1389 of the Civil Code, an
"accion pauliana", the action to rescind contracts made in favor of
creditors, must be commenced within four years. The rights and
defenses which the parties in a rescissible contract may raise or set
up cannot be properly discussed in a motion but only in a full trial.