Bar Q and A #26

The action will prosper not on the ground invoked but on the ground that the farmers have not given their consent to the assignment. The milling contract imposes reciprocal obligations on the parties. The sugar central has the obligation to mill the sugar cane of the farmers while the latter have the obligation to deliver their sugar cane to the sugar central. As to the obligation to mill the sugar cane, the sugar central is a debtor of the farmers. In assigning its rights under the contract, the sugar central will also transfer to the Taiwanese its obligation to mill the sugar cane of the farmers. This will amount to a novation of the contract by substituting the debtor with a third party. Under Article 1293 of the Civil Code, such substitution cannot take effect without the consent of the creditor. The formers, who are creditors as far as the obligation to mill their sugar cane is concerned, may annul such assignment for not having given their consent thereto.

a. The payment by Sergio resulted in the extinguishment of the obligation of Samantha to the utility company and Sergio was legal subrogated to the utility company’s credit. Sergio, thus, became Samantha’s new creditor. Under Article 1302 (3), Civil Code, it is presumed that there is legal subrogation when, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter's share. A person interested in the fulfillment is one who will benefit from the extinguishment of the obligation. Here, Sergio is an interested person since he was the business successor-in-interest of the Samantha and he cannot conduct his business without paying the debtor of Samantha. Since there is legal subrogation, Sergio stepped into the shoes of the utility company as the new creditor to the P50,000 credit; thus there can be valid legal compensation of the two credits between him and Samantha who are principally debtors and creditors of each other up to the concurrent amount of P50,000 (Art. 1279, NCC).

b. Yes, Samantha is guilty of mora accipiendi. The requisites for mora accipiendi are: (i) offer of performance by the debtor; (ii) offer must be to comply with prestation as it should be performed; and (iii) the creditor refuses to accept the performance without just cause. Here, Sergio validly made an offer to comply with the prestation of payment, albeit for P950,000 only. Sergio’s offer is justified based on the concept of partial legal compensation up to the amount of P50,000, since Sergio and Samantha are in their own right principal debtors and creditors of each other. Samantha’s refusal was without just cause as she cannot be permitted to benefit or use as a defense her own failure to fulfill her part of the obligation to pay the electricity bills.

Yes, Pinoy Airlines breached its contract of carriage by upgrading the seat accommodation of the Almedas without their consent. The object of their contract was the transportation of the Almedas from Manila to Hongkong and back to Manila, with seats in the business class section of the aircraft. They should have been consulted first whether they wanted to avail themselves of the privilege and would consent to a change of seat accommodation. It should not have been imposed on them over their vehement objection. By insisting on the upgrade, Pinoy Airlines breached its contract of carriage with the Almedas.

However, the upgrading or the breach of contract was not attended by fraud or bad faith. They were not induced to agree to the upgrading through insidious words or deceitful machination or through wailful concealment of material facts. Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud.

Neither is Pinoy Airlines in bad faith since Section 3 of the Economic Regulation No. 7 of the Civil Aeronautics Board provides that an overbooking that does not exceed ten percent is not considered deliberate and therefore does not amount to bad faith.

As a result, the Almedas are not entitled to recover moral damages. Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the carrier is guilty of fraud or bad faith or when the mishap resulted in the death of a passenger. Where in breaching the contract of carriage the airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequence of the breach of the obligation which the parties had foreseen or could have reasonably foreseen. In such a case the liability does not include moral and exemplary damages.

It is a requisite in the grant of exemplary damages that the act of the offender be accompanied by bad faith or done in wanton, fraudulent or malevolent manner. Such requisite is absent in this case. Moreover, to be entitled thereto the claimant must first establish his right to moral, temperate, or compensatory damages. Since the Almedas are not entitled to any of these damages, the award for exemplary damages has no legal basis. And where the awards for moral and exemplary damages are eliminated, so must the award for attorney’s fees.

The most that can be awarded for the breach of contract is an award for nominal damages. Pinoy Airlines may be said to have disturbed the spouses’ wish to be with their companions at the Business Class on their flight to Manila. (Cathay Pacific v. Spouses Vasquez, 399 SCRA 207 [2003])

a) The withdrawal of Marvin’s offer is valid because there was no consideration paid for the option. An option is a separate contract from the contract, which is the subject of the offer, and if not supported by any consideration, the option contract is not deemed perfected. Thus, Marvin may withdraw the offer at any time before acceptance of the offer.

b) If Carlos paid P10,000.00 as consideration for that option, Marvin cannot withdraw the offer prior to expiration of the option period. The option is a separate contract and if founded on consideration is a perfected option contract and must be respected by Marvin.

c) If Carlos has already accepted the offer and such acceptance has been communicated to Marvin before Marvin communicates the withdrawal, the acceptance creates a perfected construction contract, even if no consideration was as yet paid for the option. If Marvin does not perform his obligations under the perfected contract of construction, he shall be liable for all consequences arising from the breach thereof based on any of the available remedies which may be instituted by Carlos, such as specific performance, or rescission with damages in both cases.

Inexistent contracts are considered as not having been entered into and, therefore, void ab initio. They do not create any obligation and cannot be ratified or validated, as there is no agreement to ratify or validate. In the other hand, annullable or voidable contracts are valid until invalidated by the court but may be ratified.

In inexistent contracts, one or more requisites of a valid contract are absent. In annullable contracts, all the elements of a contract are present except that the consent of one of the contracting parties was vitiated or one of them has no capacity to give consent.

As judge, I will grant the motion to dismiss. Armando has no personality to bring the action for annulment of the sale to conrado. Only an aggrieved party to the contract may bring the action for annulment thereof. (Art. 1397, NCC) While Armando is heir and successor-in-interest of his mother (Art. 1311, NCC), he (standing in place of his mother) has no personality to annul the contract. Both are not aggrieved parties on account of their own violation of the condition of, or restriction on, their ownership imposed by the donation. Only the donor or his heirs would have the personality to bring an action to revoke a donation for violation of a condition thereof or a restriction thereon. (Garrido v. CA, 236 SCRA 450) Consequently, while the donor or his heirs were not parties to the sale, they have the right to annul the contract of sale because their rights are prejudiced by one of the contracting parties thereof. (DBP v. CA, 96 SCRA 342; Teves v. PHHC,23 SCRA 1141) Since Armando is neither the donor nor heir of the donor, he has no personality to bring the action for annulment.

Yes, a person may sell something which does not belong to him. For the sale to be valid, the law does not require the seller to be the owner of the property at the time of the sale. (Art. 1434, NCC) If the seller cannot transfer ownership over the thing sold at the time of delivery because he was not the owner thereof, he shall be liable for breach of contract.