1.) Baldomero leased his house with a telephone to Jose. The lease contract provided that Jose shall pay for all electricity, water and telephone services in the leased premises during the period of the lease. Six months later, Jose surreptitiously vacated the premises. He left behind unpaid telephone bills for overseas telephone calls amounting to over P20,000.00. Baldomero refused to pay the said bills on the ground that Jose had already substituted him as the customer of the telephone company. The latter maintained that Baldomero remained as his customer as far as their service contract was concerned, notwithstanding the lease contract between Baldomero and Jose. Who is correct, Baldomero or the telephone company? Explain.
The telephone company is correct because as far as it is concerned, the only person it contracted with was Baldomero. The telephone company has no contract with Jose. Baldomero cannot substitute Jose in his stead without the consent of the telephone company. (Art. 1293, NCC) Baldomero is, therefore, liable under the contract.
2.) The sugar cane planters of Batangas entered into a long-term milling contract with the Central Azucarera de Don Pedro Inc. Ten years later, the Central assigned its rights to the said milling contract to a Taiwanese group which would take over the operations of the sugar mill. The planters filed an action to annul the said assignment on the ground that the Taiwanese group was not registered with the Board of Investments. Will the action prosper or not? Explain briefly.
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.
3.) Samantha sold all her business interest in a sole proprietorship to Sergio for the amount of PhP1 million. Under the sale agreement, Samantha was supposed to pay for all prior unpaid utility bills incurred by the sole proprietorship. A month after the Contract to Sell was executed, Samantha still had not paid the PhP50,000 electricity bills incurred prior to the sale. Since Sergio could not operate the business without electricity and the utility company refused to restore electricity services unless the unpaid bills were settled in full, Sergio had to pay the unpaid electricity bills. When the date for payment arrived, Sergio only tendered PhP950,000 representing the full purchase price, less the amount he paid for the unpaid utility bills. Samantha refused to accept the tender on the ground that she was the one supposed to pay the bills and Sergio did not have authorization to pay on her behalf. A. What is the effect of payment made by Sergio without the knowledge and consent of Samantha. B. Is Samantha guilty of mora accipiendi?
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.
4.) Dr. and Mrs. Almeda are prominent citizens of the country and are frequent travellers abroad. In 1996, they booked round-trip business class tickets for the Manila-Hong Kong-Manila route of the Pinoy Airlines, where they are holders of Gold Mabalos Class Frequent Flier cards. On their return flight, Pinoy Airlines upgraded their tickets to first class without their consent and, in spite of their protestations to be allowed to remain in the business class so that they could be with their friends, they were told that the business class was already fully booked, and that they were given priority in upgrading because they are elite members/holders of Gold Mabalos Class cards. Since they were embarrassed at the discussions with the flight attendants, they were forced to take the flight at the first-class section apart from their friends who were in the business class. Upon their return to Manila, they demanded a written apology from Pinoy Airlines. When it went unheeded, the couple sued Pinoy Airlines for breach of contract claiming moral and exemplary damages, as well as attorney's fees. Will the action prosper? Give reasons.
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 )
5.) Marvin offered to construct the house of Carlos for a very reasonable price of P900,000.00, giving the latter 10 days within which to accept or reject the offer. On the fifth day, before Carlos could make up his mind, Marvin withdrew his offer. a) What is the effect of the withdrawal of Marvin's offer? b) Will your answer be the same if Carlos paid Marvin P10,000.00 as consideration for that option? Explain. c) Supposing that Carlos accepted the offer before Marvin could communicate his withdrawal thereof? Discuss the legal consequences.
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.
6.) In a 20-year lease contract over a building, the lessee is expressly granted a right of first refusal should the lessor decide to sell both the land and building. However, the lessor sold the property to a third person who knew about the lease and in fact agreed to respect it. Consequently, the lessee brings an action against both the lessor-seller and the buyer (a) to rescind the sale and (b) to compel specific performance of his right of first refusal in the sense that the lessor should be ordered to execute a deed of absolute sale in favor of the lessee at the same price. The defendants contend that the plaintiff can neither seek rescission of the sale nor compel specific performance of a “mere” right of first refusal. Decide the case.
The action filed by the lessee, for both rescission of the offending sale and specific performance of the right of first refusal which was violated, should prosper. The ruling in Equatorial Realty Development, Inc. v. Mayfair Theater, Inc, (264 SCRA 482), a case with similar facts, sustains both rights of action because the buyer in the subsequent sale knew the existence of right of first refusal, hence in bad faith.
7.) Distinguish briefly but clearly between inexistent and annullable contracts.
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.
8.) X was the owner of a 10, 000 square meter property. X married Y and out of their union, A, B and C were born. After the death of Y, X married Z and they begot as children, D, E and F. After the death of X, the children of the first and second marriages executed an extrajudicial partition of the aforestated property on May 1, 1970. D, E and F were given a one thousand square meter portion of the property. They were minors at the time of the execution of the document. D was 17 years old, E was 14 and F was 12; and they were made to believe by A, B and C that unless they sign the document they will not get any share. Z was not present then. In January 1974, D E and F filed an action in court to nullify the suit alleging they discovered the fraud only in 1973. a) Can the minority of D, E and F be a basis to nullify the partition? Explain your answer b) How about fraud? Explain your answer.
Yes, minority can be a basis to nullify the partition because D, E and F were not properly represented by their parents or guardians at the time they contracted the extrajudicial (Articles 1327, 1391, Civil Code)
In the case of fraud, when through insidious words or machinations of one of the other is induced to enter into the contract without which he would not have agreed to, the action still prosper because under 1391 of the Civil Code, in case of fraud, the action for annulment may be brought within four years from the discovery of the fraud.