Art.

1159
ORTIGAS AND CO, LTD., VS. THE COURT OF APPEALS G.R. NO. 126102; DECEMBER 4, 2000 DIGEST NO.1 Facts: On August 25, 1976, petitioner Ortigas & Company sold to Emilia Hermoso, a parcel of land known as Lot 1, Block 21, Psd-66759, located in Greenhills Subdivision IV, San Juan, Metro Manila. One stipulation of the contract provided that the lot will be used exclusively for residential purposes only, and not more than one single-family residential building will be constructed thereon. In 1981, the Metropolitan Manila Commission (now Metropolitan Manila Development Authority) enacted MMC Ordinance No. 81-01, also known as the Comprehensive Zoning Area for the National Capital Region. The ordinance reclassified as a commercial area a portion of Ortigas Avenue from Madison to Roosevelt Streets of Greenhills Subdivision where the lot is located. On June 8, 1984, private respondent Ismael Mathay III leased the lot from Emilia Hermoso and J.P. Hermoso Realty Corp.. The lease contract did not specify the purposes of the lease. Thereupon, private respondent constructed a single story commercial building for Greenhills Autohaus, Inc., a car sales company. Thus on January 18, 1995 Ortigas and Co. filed a complaint which sought to the demolition of the said structure , thus in his defense Mathay denied any knowledge of the restriction on the lot , he further contends in his special civil action to the court of appeals that , the MCC Ordinance classified the area where the lot was located as a commercial area and said ordinance must be read as a concrete exercise of Police power. The contention however of the petitioner Ortigas, is that it is observed that the contract of sale was entered into in August 1976, while the zoning ordinance was enacted only in March 1981. The trial court reasoned that since private respondent had failed to show that MMC Ordinance No. 81-01 had retroactive effect, said ordinance should be given prospective application only. And the contract of Ortigas Co and Hermosos should not be affected. Issues: Whether or not the ordinance of the MCC nullified the building restriction imposing exclusive residential use on the property inquisition. Held: In general, we agree that laws are to be construed as having only prospective operation. Lex prospicit, non respicit. Equally settled, only laws existing at the time of the execution of a contract are applicable thereto and not later statutes, unless the latter are specifically intended to have retroactive effect. A later law which enlarges, abridges, or in any manner changes the intent of the parties to the contract necessarily impairs the contract itself and cannot be given retroactive effect without violating the constitutional prohibition against impairment of contracts. But, the foregoing principles do admit of certain exceptions. One involves police power. A law enacted in the exercise of police power to regulate or govern certain activities or transactions could be given retroactive effect and may reasonably impair vested rights or contracts. Police power legislation is applicable not only to future contracts, but equally to those already in existence. Non impairment of contracts or vested rights clauses will have to yield to the superior and legitimate exercise by the State of police power to promote the health, morals, peace, education, good order, safety, and general welfare of the people. Moreover, statutes in exercise of valid police power must be read into every contract. Noteworthy, in Sangalang vs. Intermediate Appellate Court, we already upheld MMC Ordinance No. 81-01 as a legitimate police power measure. Rafael M. Soro 1-M ; Obligations & Contracts SY 2005- 2006 ; San Beda College of Law

FLAVIO K MACASAET & ASSOCIATES, INC., VS. COA AND PHILIPPINE TOURISM AUTHORITY G.R. NO. 83748 MAY 12, 1989 DIGEST NO. 2 Facts: On 15 September 1977 respondent Philippine Tourism Authority (PTA) entered into a Contract for "Project Design and Management Services for the development of the proposed Zamboanga Golf and Country Club, Calarian, Zamboanga City" with petitioner company, but originally with Flavio K Macasaet alone (hereinafter referred to simply as the "Contract"). Under the Contract, PTA obligated itself to pay petitioner a professional fee of seven (7%) of the actual construction cost. Upon the completion of the project , PTA paid petitioner what it perceived to be the balance of the latters professional fee, it turned out, however, that after the project was completed, PTA paid Supra Construction Company, the main contractor, the additional sum of P3,148,198.26 representing the escalation cost of the contract price due to the increase in the price of construction materials. Thus upon learning of the price escalation , petitioner requested payment of his additional professional fee on the basis of the actual contraction cost of the project, it was denied however by the PTA contending that petitioner was already paid. Hence this petition. Issue: Whether or not the price escalation should be included in the final actual project cost. Held: The terminologies in the contract being clear, leaving no doubt as to the intention of the contracting parties, their literal meaning control (Article 1370, Civil Code). The price escalation cost must be deemed included in the final actual project cost and petitioner held entitled to the payment of its additional professional fees. Obligations arising from contract have the force of law between the contracting parties and should be complied with in good faith (Article 11 59, Civil Code).

Rafael M. Soro 1-M ; Obligations & Contracts SY 2005- 2006 ; San Beda College of Law

LRTA

& RODOLFO ROMAN VS. MARJORIE NAVIDAD ET AL. G.R. NO. 145804; FEBRUARY 6, 2003 DIGEST NO. 3

Facts: On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of the fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard assigned to the area approached Navidad. A misunderstanding or an altercation between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how the fight started or who, between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously. Thus claims for damages of the widow of Navidad and their heirs to the LRTA , Roman and Escartin, The Metro Transit Organization , Inc. And Prudent for the death of her husband. However denied this claims, LRTA and Romans contention is that they have acted due diligence and that it was Navidad who was negligent which eventually caused his death. Prudent and Escartin however contends that Navidad had failed to prove that Escartin was negligent in his assigned task. The trial Court however sustained the claims of Navidad, ordering all the defendant to pay the damages causes, hence this instant petition and a review of the decision of the lower court. Issue: Whether or not Roman , LRTA , Escartin and Prudent are liable for damages, for the death of Navidad. Held: The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due regard for all circumstances. Such duty of a common carrier to provide safety to its passengers so obligates it not only during the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage.

Rafael M. Soro 1-M ; Obligations & Contracts SY 2005- 2006 ; San Beda College of Law

Art. 1160
TRADERS ROYAL BANK EMPLOYEES UNION-INDEPENDENT VS. NLRC AND EMMANUEL NOEL A. CRUZ G.R. NO. 120592 MARCH 14, 1997 DIGEST NO. 4 Facts: Petitioner TRB Employees Union and private respondent Atty. Emmanuel Noel A. Cruz, head of the E.N.A. Cruz and Associates law firm, entered into a retainer agreement on February 26, 1987 whereby the former obligated itself to pay the latter a monthly retainer fee of P3,000.00 in consideration of the law firm's undertaking to render the services enumerated in their contract. During the existence of that agreement, petitioner union referred to private respondent the claims of its members for holiday, mid-year and year-end bonuses against their employer, Traders Royal Bank (TRB). After the appropriate complaint was filed by private respondent, the NLRC rendered a decision in the foregoing case in favor of the employees, awarding them holiday pay differential, mid-year bonus differential, and year-end bonus differential. However, pending the hearing of the application for the writ of execution, TRB challenged the decision of the NLRC before the Supreme Court. The Court, in its decision, modified the decision of the NLRC by deleting the award of mid-year and year-end bonus differentials while affirming the award of holiday pay differential. The bank voluntarily complied with such final judgment and determined the holiday pay differential to be in the amount of P175,794.32. The latter duly paid its concerned employees their respective entitlement in said sum through their payroll. After private respondent received the above decision of the Supreme Court on, he notified the petitioner union, the TRB management and the NLRC of his right to exercise and enforce his attorney's lien over the award of holiday pay differential.Thereafter E.N.A. filed a petition before the labor arbiter , the determination of his attorneys fees and was give a favorable decision to the E.N.A., hence this petition. The petitioner contends that attorney's fees due to private respondent were covered by the retainer fee of P3,000.00 which it has been regularly paying to private respondent under their retainer agreement. To be entitled to the additional attorney's fees as provided in Part D (Special Billings) of the agreement, it avers that there must be a separate mutual agreement between the union and the law firm prior to the performance of the additional services by the latter. Issue: Whether or not the contracted retainership of the respondent and petitioner, include the attorneys fee in agreement in consideration of Php 3000.00 Held: Obligations do not emanate only from contracts. One of the sources of extra-contractual obligations found in our Civil Code is the quasi-contract premised on the Roman maxim that nemo cum alterius detrimento locupletari protest. As embodied in our law,certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.A quasi-contract between the parties in the case at bar arose from private respondent's lawful, voluntary and unilateral prosecution of petitioner's cause without awaiting the latter's consent and approval. Petitioner cannot deny that it did benefit from private respondent's efforts as the law firm was able to obtain an award of holiday pay differential in favor of the union. It cannot even hide behind the cloak of the monthly retainer of P3,000.00 paid to private respondent because, as demonstrated earlier, private respondent's actual rendition of legal services is not compensable merely by said amount. Rafael M. Soro 1-M ; Obligations & Contracts SY 2005- 2006 ; San Beda College of Law

Art. 1162
FAUSTO BARREDO VS. SEVERINO GARCIA, ET AL. G.R. NO. L-48006; JULY 8, 1942 DIGEST NO. 5 Facts: About 1:30 am , of May 3, 1936, on the road between Malabon and Navotas, Province of Rizal, there was a head-on collision between a taxi of the Malate Taxicab driven by Pedro Fontanilla and a carretela guided by Pedro Dimapalis. The carretela was overturned, and one of its passengers, 16-year-old boy Faustino Garcia, suffered injuries from which he died two days later. A criminal action was filed against Fontanilla in the Court of First Instance of Rizal, and he was convicted. The court in the criminal case granted the petition that the right to bring a separate civil action be reserved. The Court of Appeals affirmed the sentence of the lower court in the criminal case. Severino Garcia and Timotea Almario, parents of the deceased , brought an action in the Court of First Instance of Manila against Fausto Barredo as the sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla. The Court of First Instance of Manila awarded damages in favor of the plaintiffs. This decision was modified by the Court of Appeals by reducing the damages to P1,000 with legal interest from the time the action was instituted. It is undisputed that Fontanilla 's negligence was the cause of the mishap, as he was driving on the wrong side of the road, and at high speed. In fact it is shown he was careless in employing Fontanilla who had been caught several times for violation of the Automobile Law and speeding violation which appeared in the records of the Bureau of Public Works available to be public and to himself. Therefore, he must indemnify plaintiffs under the provisions of article 1903 of the Civil Code. hence This petition and further contention.The defense is that the liability of Fausto Barredo is governed by the Revised Penal Code; hence, his liability is only subsidiary, and as there has been no civil action against Pedro Fontanilla, the person criminally liable, Barredo cannot be held responsible in the case. The CA holds that the petitioner is being sued for his failure to exercise all the diligence of a good father of a family in the selection and supervision of Pedro Fontanilla to prevent damages suffered by the respondents. Issue: Whether or not a separate civil action against Fausto Barredo making him primarily and directly, responsible under art.1903 of the NCC as an employer of Pedro Fontanilla. Held: At this juncture, it should be said that the primary and direct responsibility of employers and their presumed negligence are principles calculated to protect society. Workmen and employees should be carefully chosen and supervised in order to avoid injury to the public. It is the masters or employers who principally reap the profits resulting from the services of these servants and employees. It is but right that they should guarantee the latter's careful conduct for the personnel and patrimonial safety of others. Because of the broad sweep of the provisions of both the Penal Code and the Civil Code on this subject, which has given rise to the overlapping or concurrence of spheres already discussed, and for lack of understanding of the character and efficacy of the action for culpa aquiliana, there has grown up a common practice to seek damages only by virtue of the civil responsibility arising from a crime, forgetting that there is another remedy, which is by invoking articles 1902-1910 of the Civil Code. Although this habitual method is allowed by our laws, it has nevertheless rendered practically useless and nugatory the more expeditious and effective remedy based on culpa aquiliana or culpa extra-contractual. In the present case, we are asked to help perpetuate this usual course. But we believe it is high time we pointed out to the harm done by such practice and to restore the principle of responsibility for fault or negligence under articles 1902 et seq. of the Civil Code to its full rigor. Rafael M. Soro 1-M ; Obligations & Contracts SY 2005- 2006 ; San Beda College of Law

METRO MANILA TRANSIT CORPORATION VS. THE COURT OF APPEALS GR NO. 141089; AUGUST 1, 2002 DIGEST NO. 6 Facts: Bases on the testimony of an eyewitness, Florentina Sabalburo, together with here companions and were on there way to Baclaran to buy some foodstuff, however while standing in an island, and waiting for the traffic lights to change and at the moment it signaled , go an MMTC bus was moving at a fast speed, hit Florentina, which caused her unconsciousness which she never regained. Private its driver , traffic rules others , thus respondent filed a complaint for damages against MMTC and Ajoc for the reckless driving , in gross violation of and regulations , with out due regard for the safety of causing the untimely death of the victim.

Petitioner denied the allegation of the private respondent and insisted that the accident was solely due to the victims own negligence. The trial court favored the version of the private respondent, thus petitioner appealed to the court of appeals and the court of appeals affirmed the decision of the lower court hence this petition, and further assailed that the accident happened 8 hours before Christmas, and that the victim disregarded her safety because in was in here mind which was preoccupied by the holyday festivities. Thus Ajoc cannot be liable for the damages as to he cannot see what was in the mind of the pedestrian. Issue: Whether or not the Art.2179 as an exception to Article 2176 of the civil code is applicable in the instant case. Held: As the court a quo noted , Ajocs claim that he failed to see the victim and her companions proves his recklessness and lack of caution in driving his vehicle. Finding of the fact of the trial court , especially when affirmed by the Court of Appeals ,a re binding and conclusive on the Supreme Court. More so as in this case, where petitioners have not adequately show that courts below overlooked or disregarded certain facts or circumstances of such import as would have altered the outcome of the case. Contrary to petitioners insistence, the applicable law in this case is Art 2176 of the new civil code and not Art. 2179.

Rafael M. Soro 1-M ; Obligations & Contracts SY 2005- 2006 ; San Beda College of Law

EQUITABLE LEASING CORPORATION VS. LUCITA SUYOM, ET Al. G.R. NO. 143360; SEPTEMBER 5, 2002 DIGEST NO. 7 Facts: A Fuso Road Tractor driven by Raul Tutor rammed into the house cum store of Myrna Tamayo located at Pier 18, Vitas, Tondo, Manila. A portion of the house was destroyed. Pinned to death under the engine of the tractor were Respondent Myrna Tamayos son, Reniel Tamayo, and Respondent Felix Oledans daughter, Felmarie Oledan. Injured were Respondent Oledan himself, Respondent Marissa Enano, and two sons of Respondent Lucita Suyom. Tutor was charged with and later convicted of reckless imprudence resulting in multiple homicide and multiple physical. Upon verification with the Land Transportation Office, respondents learned that the registered owner of the tractor was Equitable Leasing Corporation/leased to Edwin Lim. On April 15, 1995, respondents filed against Raul Tutor, Ecatine Corporation (Ecatine) and Equitable Leasing Corporation (Equitable) a Complaint for damages. Petitioner alleged that the vehicle had already been sold to Ecatine and that the former was no longer in possession and control thereof at the time of the incident. It also claimed that Tutor was an employee, not of Equitable, but of Ecatine. After trial on the merits, the RTC rendered its Decision ordering petitioner to pay actual and moral damages and attorneys fees to respondents. It held that since the Deed of Sale between petitioner and Ecatine had not been registered with the Land Transportation Office (LTO), the legal owner was still Equitable. Thus, petitioner was liable to respondents. The Court of Appeals sustained the decision of the lower court hence this petition Issue: Whether or not the petitioner liable for damages suffered by private respondents in an action based on quasi delict for the negligent acts of a driver who was not the employee of the petitioner. Held: We hold petitioner liable for the deaths and the injuries complained of, because it was the registered owner of the tractor at the time of the accident. The Court has consistently ruled that, regardless of sales made of a motor vehicle, the registered owner is the lawful operator insofar as the public and third persons are concerned; consequently, it is directly and primarily responsible for the consequences of its operation In contemplation of law, the owner/operator of record is the employer of the driver, the actual operator and employer being considered as merely its agent. The same principle applies even if the registered owner of any vehicle does not use it for public service.

Rafael M. Soro 1-M ; Obligations & Contracts SY 2005- 2006 ; San Beda College of Law

SMITH BELL DODWELL SHIPPING AGENCY CORPORATION VS. CATALINO BORJA ,ET AL. G.R. NO. 143008; JUNE 10, 2002 DIGEST NO. 8 Facts: On September 23, 1987, Smith Bell-petitioner filed a written request with the Bureau of Customs for the attendance of the latter's inspection team on vessel M/T King Family which was due to arrive at the port of Manila on September 24, 1987.Said vessel contained 750 metric tons of alkyl benzene and methyl methacrylate monomer. On the same day, Supervising Customs Inspector instructed Respondent Catalino Borja to board said vessel and perform his duties as inspector upon the vessel's arrival until its departure. At about 11 o'clock in the morning on September 24, 1987, while M/T King Family was unloading chemicals unto two (2) owned by Respondent ITTC, a sudden explosion occurred setting the vessels afire. Upon hearing the explosion, Borja, who was at that time inside the cabin preparing reports, ran outside to check what happened. Again, another explosion was heard. Seeing the fire and fearing for his life, Borja hurriedly jumped over board to save himself. However, the water was likewise on fire due mainly to the spilled chemicals. Despite the tremendous heat, Borja swam his way until he was rescued by the people living in the squatters' area and sent to San Juan De Dios Hospital. After weeks of intensive care at the hospital, his attending physician diagnosed Borja to be permanently disabled due to the incident. Borja made demands against Smith Bell and ITTC for the damages caused by the explosion. However, both denied liabilities and attributed to each other negligence. The trial court ruled in favor of Respondent Borja and held petitioner liable for damages and loss of income. Affirming the trial court, the CA rejected the plea of petitioner that it be exonerated from liability for Respondent Borja's injuries. Hence, this Petition Issues: Whether or not, petitioner injuries of Catalino Borja. should be held liable for the

Held: We find no cogent reason to overturn these factual findings. Nothing is more settled in jurisprudence than that this Court is bound by the factual findings of the Court of Appeals when these are supported by substantial evidence and are not under any of the exceptions in Fuentes v. Court of Appeals;12 more so, when such findings affirm those of the trial court.13 Verily, this Court reviews only issues of law. Negligence is conduct that creates undue risk of harm to another. It is the failure to observe that degree of care, precaution and vigilance that the circumstances justly demand, whereby that other person suffers injury.14 Petitioner's vessel was carrying chemical cargo -- alkyl benzene and methyl methacrylate monomer.15 While knowing that their vessel was carrying dangerous inflammable chemicals, its officers and crew failed to take all the necessary precautions to prevent an accident. Petitioner was, therefore, negligent. The three elements of quasi delict are: (a) damages suffered by the plaintiff, (b) fault or negligence of the defendant, and (c) the connection of cause and effect between the fault or negligence of the defendant and the damages inflicted on the plaintiff.16 All these elements were established in this case. Knowing fully well that it was carrying dangerous chemicals, petitioner was negligent in not taking all the necessary precautions in transporting the cargo.

Rafael M. Soro 1-M ; Obligations & Contracts SY 2005- 2006 ; San Beda College of Law

Art. 1163
FABARE VS. COURT OF APPEALS 259 SCRA 426 DIGEST NO. 9 Facts: Petitioner Engracio Fabare , jr. and his wife were owners of the 1982 Mazda minibus used principally in connection with a bus service children , which they operated in manila . The couples had a driver, Porfirio J. Cabil. Private respondent Word for World Christian Fellowship, Inc. (WWCF) arranged with the petitioners for the transportation of 33 members of it Young Adults Ministry from Manila to La Union and Back. The usual route was not used since the bridge at Carmen was under repair. Cabil came upon a sharpe sure on the highway , running on south to east direction. The road was slippery because it was raining , causing the bus which was running at the speed of 50 kph, to skid to the left road and rammed the fence of one Jesus Escano, then turned over and landed on its left side , coming to a full stop only after a series of impacts. Several passengers was injured. Private respondent Amyline Antonio was thrown on the floor of the bus and pinned down by a wooden seat , which came off after being unscrewed. The case was filed with the Lengayen RTC. Petitioner Fabare paid Escano for the damages on the latters fence. On the basis of Escanos affidavit of desistance , the case against the Fabare wad dismissed. Amyline Antonio brought this case in the RTC of Makati. The trial court found the Fabare Spouses and Cabil jointly and severally liable. The Court of Appeals affirmed the decision with respect to Amyline but dismissed with respect to the other plaintiffs on the ground that they failed to prove their respective claims. The CA also modified the award of damages hence , this petition. Issue : Whether or not the driver was negligent thus making the bus company liable for damges. Held: The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus causing an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, and Metro Manila Transit Corporation v. Court of Appeals, the bus company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and severally held liable to the injured passenger or the latters' heirs. The basis of this allocation of liability was explained in Viluan v. Court of Appeals, thus: Nor should it make any difference that the liability of petitioner [bus owner] springs from contract while that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally liable for damages. Some members of the Court, though, are of the view that under the circumstances they are liable on quasi-delict. It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals this Court exonerated the jeepney driver from liability to the injured passengers and their families while holding the owners of the jeepney jointly and severally liable, but that is because that case was expressly tried and decided exclusively on the theory of culpa contractual. The trial court was therefore right in finding that Manalo (the driver) and spouses Mangune and Carreon (the jeepney owners) were negligent. However, its ruling that spouses Mangune and Carreon are jointly and severally liable with Manalo is erroneous. The driver cannot be held jointly and severally liable with carrier in case of breach of the contract of carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage is between the carrier is exclusively responsible therefore to the passenger, even if such breach be due to the negligence of his driver. Rafael M. Soro 1-M ; Obligations & Contracts SY 2005- 2006 ; San Beda College of Law

Art. 1169 : Delay after Extrajudicial Demand

OLIVIA M. NAVOA VS. COURT OF APPEALS ET AL G.R. NO. 59255 ; DECEMBER 29, 1995 DIGEST NO. 10 Facts: December 17, 1977 private respondents filed with the Regional Trial Court of Manila an action against petitioners for collection of various sums of money based on loans obtained by the latter. On 3 January 1978 petitioners filed a motion to dismiss the complaint on the ground that the complaint stated no cause of action and that plaintiffs had no capacity to sue. After private respondents submitted their opposition to the motion to dismiss the trial court dismissed the case. A motion to reconsider the dismissal was denied. Private respondents appealed to the Court of Appeals which modified the order of dismissal by returning the records of this case for trial on the merits, upon filing of an answer subject to the provisions of Articles 1182 and 1197 of the Civil Code for the first cause of action. The other causes of action should be tried on the merits subject to the defenses the defendants may allege in their answer. The instant petition alleges that respondent court erred in not dismissing the appeal for lack of appellate jurisdiction over the case which involves merely a question of law and in not affirming the order of dismissal for lack of cause of action; and in holding that private respondents have a cause of action under the second to the sixth causes of action of the complaint. Petitioners submit that private respondents failed to specify in their complaint a fixed period within which petitioners should pay their obligations; that instead of stating that petitioners failed to discharge their obligations upon maturity private respondents sought to collect on the checks which were issued to them merely as security for the loans; and, that private respondents failed to make a formal demand on petitioners to satisfy their obligations before filing the action. Issue: Whether or not the complaint be dismissed for lack of cause of action. Held: In determining the existence of a cause of action, only the statements in the complaint may properly be considered. Lack of cause of action must appear on the face of the complaint and its existence may be determined only by the allegations of the complaint, consideration of other facts being proscribed and any attempt to prove extraneous circumstances not being allowed. All the loans granted to petitioners are secured by corresponding checks dated a month after each loan was obtained. In this regard, the term security is defined as a means of ensuring the enforcement of an obligation or of protecting some interest in property. It may be personal, as when an individual becomes a surety or a guarantor; or a property security, as when a mortgage, pledge, charge, lien, or other device is used to have property held, out of which the person to be made secure can be compensated for loss. Security is something to answer for as a promissory note. That is why a secured creditor is one who holds a security from his debtor for payment of a debt. From the allegations in the complaint there is no other fair inference than that the loans were payable one month after they were contracted and the checks issued by petitioners were drawn to answer for their debts to private respondents. Petitioners failed to make good the checks on their due dates for the payment of their obligations. Hence, private respondents filed the action with the trial court precisely to compel petitioners to pay their due and demandable obligations. Art. 1169 of the Civil Code is explicit. .Court of Appeals therefore is correct in remanding the case to the trial court for the filing of an answer by petitioners and to try the case on the merits. Rafael M. Soro 1-M ; Obligations & Contracts SY 2005- 2006 ; San Beda College of Law

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