ARTICLE 1167

Jacinto Tanguilig, etc vs. Court of Appeals, et al., G.R. No. 117190. January 2, 1997

Facts

Sometime in April 1987 petitioner Jacinto M. Tanguilig doing business under the name and style J.M.T.
Engineering and General Merchandising proposed to respondent Vicente Herce Jr. to construct a
windmill system for him. After some negotiations they agreed on the construction of the windmill for a
consideration of P60,000.00 with a one-year guaranty from the date of completion and acceptance by
respondent Herce Jr. of the project. Pursuant to the agreement respondent paid petitioner a down
payment of P30,000.00 and an installment payment of P15,000.00, leaving a balance of P15,000.00.

On 14 March 1988, due to the refusal and failure of respondent to pay the balance, petitioner filed a
complaint to collect the amount. In his Answer before the trial court respondent denied the claim saying
that he had already paid this amount to the San Pedro General Merchandising Inc. (SPGMI) which
constructed the deep well to which the windmill system was to be connected. According to respondent,
since the deep well formed part of the system the payment he tendered to SPGMI should be credited to
his account by petitioner. Moreover, assuming that he owed petitioner a balance of P15,000.00, this
should be offset by the defects in the windmill system which caused the structure to collapse after a
strong wind hit their place.

Petitioner denied that the construction of a deep well was included in the agreement to build the
windmill system, for the contract price of P60,000.00 was solely for the windmill assembly and its
installation, exclusive of other incidental materials needed for the project. He also disowned any
obligation to repair or reconstruct the system and insisted that he delivered it in good and working
condition to respondent who accepted the same without protest. Besides, its collapse was attributable
to a typhoon, a force majeure, which relieved him of any liability.

Issues

1. Whether the agreement to construct the windmill system included the installation of a deep
well.
2. Whether petitioner is under obligation to reconstruct the windmill after it collapsed.

Ruling

1. the installation of a deep well was not included in the proposals of petitioner to construct a
windmill system for respondent. There is absolutely no mention in the two (2) documents that a
deep well pump is a component of the proposed windmill system. The contract prices fixed in
both proposals cover only the features specifically described therein and no other. While the
words "deep well" and "deep well pump" are mentioned in both, these do not indicate that a
deep well is part of the windmill system. They merely describe the type of deep well pump for
which the proposed windmill would be suitable.

it is a cardinal rule in the interpretation of contracts that the intention of the parties shall be
accorded primordial consideration5 and, in case of doubt, their contemporaneous and
subsequent acts shall be principally considered.
 2. In order for a party to claim exemption from liability by reason of fortuitous event under Art.
1174 of the Civil Code the event should be the sole and proximate cause of the loss or
destruction of the object of the contract. In Nakpil vs. Court of Appeals,12 four (4) requisites
must 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 unforeseeable 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.

Petitioner failed to show that the collapse of the windmill was due solely to a fortuitous event.
The appellate court correctly observed that "given the newly-constructed windmill system, the
same would not have collapsed had there been no inherent defect in it which could only be
attributable to the appellee."13 It emphasized that respondent had in his favor the presumption
that "things have happened according to the ordinary course of nature and the ordinary habits
of life." This presumption has not been rebutted by petitioner.

Petitioner's argument that private respondent was already in default in the payment of his outstanding
balance of P15,000.00 and hence should bear his own loss, is untenable. In reciprocal obligations,
neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. When the windmill failed to function properly it became incumbent
upon petitioner to institute the proper repairs in accordance with the guaranty stated in the contract.
Thus, respondent cannot be said to have incurred in delay; instead, it is petitioner who should bear the
expenses for the reconstruction of the windmill. Article 1167 of the Civil Code is explicit on this point
that if a person obliged to do something fails to do it, the same shall be executed at his cost.

ARTICLE 1168

ELISEO FAJARDO, JR., and MARISSA FAJARDO, petitioners, vs. FREEDOM TO BUILD, INC., respondent.,
[G.R. No. 134692. August 1, 2000]

Facts

Freedom To Build, Incorporated, an owner-developer and seller of low-cost housing, sold to petitioner-
spouses, a house and lot designated Lot No. 33, Block 14, of the De la Costa Homes in Barangka,
Marikina, Metro Manila. The Contract to Sell executed between the parties, contained a Restrictive
Covenant providing certain prohibitions, to wit:

"Easements. For the good of the entire community, the homeowner must observe a two-meter
easement in front. No structure of any kind (store, garage, bodega, etc.) may be built on the front
easement.

xxx xxx xxx

"Upward expansion. A second storey is not prohibited. But the second storey expansion must be placed
above the back portion of the house and should not extend forward beyond the apex of the original
building.
xxx xxx xxx

"Front expansion: 2nd Storey: No unit may be extended in the front beyond the line as designed and
implemented by the developer in the 60 sq. m. unit. In other words, the 2nd floor expansion, in front, is
6 meters back from the front property line and 4 meters back from the front wall of the house, just as
provided in the 60 sq. m. units."

The above restrictions were also contained in Transfer Certificate of Title No. N-115384 covering the lot
issued in the name of petitioner-spouses.

The controversy arose when petitioners, despite repeated warnings from respondent, extended the roof
of their house to the property line and expanded the second floor of their house to a point directly
above the original front wall. Respondent filed before the Regional Trial Court, National Capital Judicial
Region, Branch 261, Pasig City, an action to demolish the unauthorized structures.

Issue

Whether restrictive covenant are valid.

Ruling

Article 1168 of the New Civil Code states:

"When the obligation consists in not doing and the obligor does what has been forbidden him, it shall
be undone at his expense."

the Court holds that -

(1)....The provisions of the Restrictive Covenant are valid;

ARTICLE 1169

KABISIG REAL WEALTH DEV., INC. AND FERNANDO C. TIO, Petitioners, v. DBP vs. Guarina Agricultural
and Realty Development Corporation (2014) G.R. No. 160758 | 2014-01-15YOUNG CORPORATION
BUILDERS, Respondent. G.R. No. 212375, January 25, 2017

Facts:

Sometime in April 2001, Kabisig Real Wealth Dev., Inc. (Kabisig), through Ferdinand Tio (Tio), contracted
the services of Young Builders Corporation (Young Builders) to supply labor, tools, equipment, and
materials for the renovation of its building in Cebu City. Young Builders then finished the work in
September 2001 and billed Kabisig for P4,123,320.95. However, despite numerous demands, Kabisig
failed to pay. It contended that no written contract was ever entered into between the parties and it
was never informed of the estimated cost of the renovation. Thus, Young Builders filed an action for
Collection of Sum of Money against Kabisig.
As modified by the CA, the defendants Kabisig Real Wealth Dev., Inc. and Ferdinand Tio are ordered to
jointly pay the plaintiff Young Builders Corporation Two Million Four Hundred Thousand (P2,400,000.00)
Pesos as TEMPERATE DAMAGES for the value of services, rendered and materials used in the renovation
of defendants-appellants building. In addition, the total amount adjudged shall earn interest at the rate
of 12% per annum from September 11, 2001, until it is fully paid.

Issue

Whether or not Kabisig is liable to Young Builders for the damages claimed.

Ruling

Under the Civil Code, a contract is a meeting of minds, with respect to the other, to give something or to
render some service. Article 1318 reads:

Art. 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract; and

(3) Cause of the obligation which is established.

Kabisig's claim as to the absence of a written contract between it and Young Builders simply does not
hold water. It is settled that once perfected, a contract is generally binding in whatever form, whether
written or oral, it may have been entered into, provided the aforementioned essential requisites for its
validity are present. Article 1356 of the Civil Code provides:

Art. 1356. Contracts shall be obligatory in whatever form they may have been entered into, provided
all the essential requisites for their validity are present.

The rate of interest should be modified. When the obligation is breached, and it consists in the payment
of a sum of money, as in this case, the interest due should be that which may have been stipulated in
writing. In the absence of stipulation, the rate of interest shall be 12%, later reduced to 6%, per annum
to be computed from default, i.e., from judicial or extrajudicial demand, subject to the provisions of
Article 1169 of the Civil Code. Here, the records would show that Young Builders made the demand on
September 11, 2001. Also, the rate of legal interest for a judgment awarding a sum of money shall be 6%
per annum from the time such judgment becomes final and executory until its satisfaction, this interim
period being deemed to be by then an equivalent to a forbearance of credit.

[ G.R. No. 228435, June 21, 2017 ], KT CONSTRUCTION SUPPLY, INC., REPRESENTED BY WILLIAM GO,
PETITIONER, VS. PHILIPPINE SAVINGS BANK, RESPONDENT.

Facts

On October 12, 2006, petitioner KT Construction Supply, Inc. (KT Construction) obtained a loan from
respondent Philippine Savings Bank (PSBank) in the amount of ₱2.5 million. The said loan was evidenced
by a Promissory Note4 executed on the same date. The said note was signed by William K. Go (Go) and
Nancy Go-Tan (Go-Tan) as Vice-President/General Manager and Secretary/Treasurer of KT Construction,
respectively. In addition, both Go and Go-Tan signed the note in their personal capacities.

The promissory note stipulated that the loan was payable within a period of sixty (60) months from
November 12, 2006 to October 12, 2011. In addition, the said note provided for the payment of
attorney's fees in case of litigation.

On January 3, 2011, PSBank sent a demand letter to KT Construction asking the latter to pay its
outstanding obligation in the amount of ₱725,438.81, excluding interest, penalties, legal fees, and other
charges. For its failure to pay despite demand, PSBank filed a complaint for sum of money against KT
Construction.

Issue

Whether the complaint was premature because it was not alleged that it had defaulted in paying any of
the installments due and that it had received a demand letter from PSBank.

Ruling

It has long been settled that an acceleration clause is valid and produces legal effects. In the case at
bench, the promissory note explicitly stated that default in any of the installments shall make the entire
obligation due and demandable notice even without demand. Thus, KT Construction was erroneous in
saying that PSBank's complaint was premature on the ground that the loan was due only on October 12,
2011. KT Construction's entire loan obligation became due and demandable when it failed to pay an
installment pursuant to the acceleration clause.

KT Construction could not evade responsibility by claiming that it had not received any demand letter
for the payment of the loan. PSBank had sent a demand letter, dated February 3, 2011, asking KT
Construction to pay the remaining obligation within five (5) days from receipt of the letter. More
importantly, even granting that KT Construction did not receive the demand letter, the loan still became
due and demandable because the parties expressly waived the necessity of demand.

G.R. No. 220211, June 05, 2017 - EDRON CONSTRUCTION CORPORATION AND EDMER Y. LIM,
Petitioners, v. THE PROVINCIAL GOVERNMENT OF SURIGAO DEL SUR, REPRESENTED BY GOVERNOR
VICENTE T. PIMENTEL, JR., Respondents.

Facts

The instant petition stemmed from a Complaint for specific performance and damages filed by
petitioners Edron Construction Corporation and Edmer Y. Lim (Lim; collectively, petitioners) against
respondent before the RTC. Petitioners alleged that they entered into three (3) separate construction
agreements with respondent for the construction of the Leaming Resource Center of Tandag, Tandag
Bus/Jeepney Terminal, and Tandag Public Market. Petitioners claimed that despite their completion and
respondent's consequent acceptance of the works as evidenced by Certificates of Final Acceptance, the
latter had yet to pay them the aggregate amount of ₱8,870,729.67, despite numerous oral and written
demands. Thus, they filed the instant complaint to claim the aforesaid amount, plus ₱500,000.00 as
actual damages and ₱250,000.00 as attorney's fees.
In its Answer with Counterclaim dated January 6, 2009, respondent admitted the existence of the
aforesaid construction contracts. However, it nevertheless maintained, inter alia, that: (a) there is no
unpaid balance; (b) petitioners are in fact liable for underruns and defective works; (c) petitioners had
already waived or abandoned their right to collect any amount on the ground of prescription; and (d)
petitioners are guilty of nonobservance of the specifications indicated in the construction contracts.

Issue

Whether or not the Provincial Government of Surigao del Sur is liable for specific performance and
damages.

Ruling

The SC uphold the RTC's finding of liability on the part of respondents, especially considering that it
issued Certificates of Final Acceptance essentially stating that the projects were satisfactorily completed,
free from major defects, and that it was formally accepting the same. As a result, respondent is hereby
adjudged to be liable to petitioners in the amount of ₱4,326,174.50, which is the valuation of such
liability according to the Presidential Flagship Committee's valuation accepted by petitioners.

And in line with prevailing jurisprudence, such amount shall earn legal interest of twelve percent (12%)
per annum, computed from FIRST Demand on June 20, 2000 to June 30, 2013, and six percent (6%) per
annum from July 1, 2013 until finality of the Decision. Said sum, as well as the other amounts awarded
by the RTC (i.e., ₱50,000.00 as attorney's fees and the costs of suit) shall then earn legal interest of six
percent (6%) per annum from finality of the Decision until fully paid.

BP Oil and Chemicals International Philippines, Inc. Vs. Total Distribution & Logistic Systems, Inc. G.R.
No. 214406. February 6, 2017

Facts

A Complaint for Sum of Money was filed by petitioner BP Oil against respondent Total Distribution &
Logistic Systems, Inc. (TDLSI) on April 15, 2002, seeking to recover the sum of ₱36,440,351.79
representing the total value of the moneys, stock and accounts receivables that TDLSI has allegedly
refused to return to BP Oil.

According to the allegations in the complaint, the defendant entered into an Agency Agreement (the
Agreement) with BP Singapore on September 30, 1997, whereby it was given the right to act as the
exclusive agent of the latter for the sales and distribution of its industrial lubricants in the Philippines.
The agency was for a period of five years from 1997 to 2002. When the defendant did not meet its
target sales volume for the first year of the Agreement, the plaintiff informed the defendant that it was
going to appoint other distributors to sell the BP's industrial lubricant products in the Philippines. The
defendant did not object to the plan of the plaintiff but asked for ₱10,000,000.00 as compensation for
the expenses. The plaintiff did not agree to the demand made by the defendant. The defendant through
its lawyer, wrote the plaintiff a letter where it demanded that it be paid damages in the amount of
₱40,000,000.00 and announced that it was withholding remittance of the sales until it was paid by the
plaintiff.
Issue

Whether the plaintiff has the right to collect the amount from the defendant together with legal
interest computed from September 1, 1999, attorney's fees and costs of suit.

Ruling

Yes. It is important to note, however, that interest shall be compounded at the time judicial demand is
made pursuant to Article 2212 of the Civil Code of the Philippines, and sustained in Eastern Shipping
Lines v. Court of Appeals, then later on in Nacar v. Gallery Frames, save for the reduction of interest rate
to 6% for loans or forbearance of money, thus:

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.

Philippine Airlines, Inc. Vs. PAL Employees Savings & Loan Association, Inc., G.R. No. 201073. February
10, 2016

Facts

Respondent Philippine Airlines (PAL) Employees Savings and Loan Association, Inc. (PESALA) is a private
non-stock corporation, the principal purposes of which are "(t)o promote and cultivate the habit of thrift
and saving among its members; and to that end, to receive moneys on deposits from said members; (t)o
loan said deposits to members when in need.

The controversy began on July 11, 1997, when PESALA received from Atty. Jose C. Blanco (Blanco), then
PAL Labor Affairs Officer-in-Charge, a Letter informing it that PAL shall implement a maximum 40%
salary deduction on all its Philippine-based employees effective August 1, 1997. The Letter stated that,
as all present Philippine-based collective bargaining agreements (CBAs) contain this maximum 40%
salary deduction provision and to prevent "zero net pay" situations, PAL was going to strictly enforce
said provision.

Foreseeing difficulties, PESALA estimated that if the 40% ceiling will be implemented, "then only around
8% (P19,200,000.00) of the total monthly payroll of P240,000,000.00 due to PESALA will be collected by
PAL. The balance of around P48,000,000.00 will have to be collected directly by plaintiff PESALA from its
members who number around 13,000 and who have different offices nationwide." PESALA claimed that
this scenario is highly possible as PESALA was only ninth in the priority order of payroll deductions. In
the obtaining circumstances, PESALA's computation showed that "(t)here will remain an uncollected
amount of P38,400,000.00 monthly for which plaintiff will suffer loss of interest income of around
P3,840,000.00 monthly."

PESALA filed a Complaint for Specific Performance, Damages or Declaratory Relief with a Prayer for
Temporary Restraining Order and injunction.
Issue

Whether or not defendants are liable to pay to PESALA the amount of P3,840,000.00 monthly as
damages reckoned from the time PAL starts applying the 40% maximum deductions on the PESALA
deductions.

Ruling

In the case at bar, PAL admitted the amount of P44,488,716.41 without an expressed nor implied denial
of liability. This admission, coupled with an assurance of payment, binds PAL.

In addition, the Court finds that an award of interest is in order. In Nacar v. Gallery Frames, the Court
clarified that:

When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be
on the amount finally adjudged.

As further elucidated by the Court in Nacar, when the judgment of the court awarding a sum of money
becomes final and executory, a legal interest at the rate of 6% per annum shall be imposed, counted
from the time of finality until full satisfaction of the judgment, as this interim period is deemed an
equivalent to a forbearance of credit.

On a last note, the SC clarifies that the Court's directive for PAL to remit to PESALA the amount of
P44,488,716.41 does not preclude PAL from seeking due reimbursement from the members of PESALA
whose accounts were not accordingly deducted. This clarification is in consonance with the principle
against unjust enrichment.