225 Velayo, etc. vs Shell Co., of the Philippines, et al. | Felix, J. G.R. No.

L-7817, October 31, 1956 | 100 PHIL 186 FACTS ommercial Air Lines (CALI) was supplied by Shell Co. of the Philippines Islands C (defendant) ever since it started its operations As per the books of the defendant, it had reasons to believe that the financial condition of CALI was far from being satisfactory. The management of CALI informally convened its principal creditors on August 6, 1948, and informed them that CALI was in a state of insolvency and had to stop operations. The creditors present agreed to the formation of a working committee to continue the discussion of the payment of claims and preferences alleged by certain creditors, and it was further agreed that said working committee would supervise the preservation of the properties of the corporation while the creditors attempted to come to an under standing as a fair distribution of the assets among them. To this committee, Mr. Fitzgerald the credit manager of the defendant, Mr. Agcaoili of the National airports corporation and Atty Alexander Sycip were appointed. It was agreed upon that the creditors would not file suit to achieve a fair pro-rata distribution, although CALI announced that in the event of non-agreement, it was to file for insolvency proceedings. However, on the very day of the meeting of the working committee, which Mr. Fitzgerald attended, the defendant effected a telegraphic transfer of its credit against CALI to the American corporation Shell Oil Company, Inc., assigning its credit, which was subsequently followed by a deed of assignment of credit dated August 10, 1948. The American corporation then sued CALI in the superior court of californinia, USA for the amount of the credit thus assigned. And a writ of attachment was issued against a C-54 PLANE in Ontario International Airport. And on January 5, 1949, a judgment by default had been issued by the American court against CALI. The stockholders of CALI were unaware of this. When the suit in the american court was found out, on the first weeks of September 1948, CALI immediately file for voluntary insolvency and the court issued the order of insolvency accordingly on the same day. The court appointed Mr. Velayo as Assignee. On December 17, 1948, Velayo filed for a writ of injuction to stop the foreign court from prosecuting the claim, and in the alternative, he prayed for damages in double the amount of the plane which was attached. The plaintiff having failed to restrain the progress of the attachment suit in the US by denial of the application of the writ of injuction and the consequences on execution of the C-54 plane in the state of California, USA, he confines his action to the recovery of damages against the defendant. The complaint was dismissed, hence this petition. ISSUES & ARGUMENTS W/N the defendant acted in bad faith and btrayed the trust and confidence of the other creditors of CALI. W/N by reason of the betrayal,, defendant may be made to answer for the damages prayed for by the plaintiff. HOLDING & RATIO DECIDENDI Moreover, we might say that DEFENDANT could not have accomplished the

transfer of its credit to its sister corporation if all the shell companies throughout the wworld would not have a sort of union, relation or understanding among themselves to come to the aid of each other. The telegraphic transfer made without the knowledge and at the back of the other creditors of CALI may be a shrewd and surprise move that enabled the DEFENDANT to collect almost allif not the entire amount of its credit, but the Court of Justice cannot countenance cuch attitude at all, and much less a foreign corporation to the detriment of our Government and local business. Chapter 2 of the preliminary title of the civil code on human relations, proveides the following; Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. It maybe said that this article only contains a mere declaration of principles and while such statement is essentially correct, yet We find that such declaration is implemented by Article 21and the sequence of the same chapter, which prescribe the following: Article 21. Any person who wilfully causes loss or injury to another in manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.

Llorente v Sandiganbayan | Sarmiento G.R. No. 85464 October 3, 1991 | FACTS As a result of a massive reorganization in 1981, hundreds of Philippine Coconut Authority (PCA) employees resigned effective October 31, 1981. Among them were Mr. Curio, Mrs. Perez, Mr. Azucena, and Mrs. Javier. By reason of which they were all required to apply for PCA clearances in support of their gratuity benefits, one of the condition of which: The clearance shall be signed by the PCA officers concemed only when there is no item appearing under "PENDING ACCOUNTABILITY" or after every item previously entered thereunder is fully settled. Settlement thereof shall be written in RED ink. After the clearance was signed by the PCA officers concerned, it was to be approved, first, by Atty. Llorente, in the case of a rank-and-file employee, or by Col. Dueas, the acting administrator, in the case of an officer, and then by Atty. Rodriguez, the corporate auditor . The clearance of Mrs. Javier dated October 30, 1991 was signed by all PCA officers concerned, including Mrs. Sotto even though the former had unsettled obligations noted thereon, viz 'SIS loan P5,387.00 and UCPB car loan P19,705.00, or a total of P25,092.00, and later on approveed by Col. Dueas, Mrs Javier being an officer, and Atty. Rodriguez. Similarilv the, voucher of Mrs. Javier for her gratuity benefits likewise recited her accountabilities of P25,092.00 plus P92.000.00, which was handwritten. Both accounts were deducted from her gratuity benefits, and the balance released to her on November 16, 1981. The voucher passed post-audit by Atty. Rodriguez on December 1, 1981. The said P92,000.00 was the disallowed portion of the cash advances received by Mr. Curio in connection with his duties as "super cargo" in the distribution of seed nuts throughout the country. He received them through and in the name of Mrs. Javier from the UCPB. When the amount was disallowed, the UCPB withheld from the PCA certain receivables; the latter, in turn, deducted the same amount from the gratuity benefits of Mrs. Javier, she being primarily liable therefor. At the time of the

deduction, the additional liquidation papers had already been submitted and were in process. Just in case she would not be successful in having the entire amount wiped out, she requested Mr. Curio, who admittedly received it, to execute, as he did, an affidavit dated November 26, 1981, in which he assumed whatever portion thereof might not be allowed. The clearance of Mr. Curio dated November 4,1981, likewise favorably passed all officers concerned, including Mrs. Sotto, the latter signing despite the notation handwritten on December 8, 1981, that Mr. Curio had pending accountabilities, namely: GSIS loan 2,193.74, 201 accounts receivable P3,897.75, and UCPB loan P3,623.49, or a total of P10,714.78. However, when the clearance was submitted to Atty. Llorente for approval, he refused to approve stating as cause the fact that he was already aware of the affidavit dated November 26, 1981, in which Mr. Curio assumed to pay any residual liability for the disallowed cash advances, which at the time, December 8, 1981. Moreover, Mr. Curio had other pending obligations noted on his clearance totalling Pl0,714.98. For this reason, the clearance was held up in his office and did not reach Atty. Rodriguez. It appears that Mr. Curio heavily pursued the passing of his clearance to the point that he filed a case in the Tanodbayan against Atty. Llorente and Col. Dueas. Subsequently, Mr. Curio was able to file another clearance which did not require the aforesaid condition. Between December 1981 and December 1986, Mr. Curio failed to get gainful employment; as a result, his family literally went hungry. In 1981, he applied for work with the Philippine Cotton Authority, but was refused, because he could not present his PCA clearance. The same thing happened when he sought employment with the Philippine Fish Marketing Administration in January 1982. In both prospective employers, the item applied for was P2,500.00 a month. At that time, he was only about 45 years old and still competitive in the job market. But in 1986, being already past 50 years, he could no longer be hired permanently, there being a regulation to that effect. His present employment with the Philippine Ports Authority, which started on March 16, 1987, was casual for that reason. Had his gratuity benefits been paid in 1981, he would have received a bigger amount, considering that since then interest had accrued and the foreign exchange rate of the peso to the dollar had gone up. On December 10, 1986, an Information for violation of Section 3(c) of the AntiGraft and Corrupt Practices Act was filed against Atty. Llorente for which he was acquitted but held civilly liable for damages (P90,000) under Article 19 of the Civil Code. ISSUES & ARGUMENTS W/N Sandiganbayan erred in holding Atty. Llorente civilly liable despite his acquittal? o Petitioner: The Sandiganbayan's Decision is erroneous even if the Sandiganbayan acquitted him therein, because he was never in bad faith as indeed found by the Sandiganbayan. HOLDING & RATIO DECIDENDI NO. It is the essence of Article 19 of the Civil Code, under which the petitioner was made to pay damages, together with Article 27, that the performance of duty be done with justice and good faith. The records show that the office practice indeed in the PCA was to clear the employee (retiree) and deduct his accountabilities from his gratuity benefits. There seems to be no debate about the existence of this practice (the petitioner admitted it later on) and in fact, he cleared three employees on the condition that their obligations should be deducted from their benefits. The Court quotes: Confronted with these evidence (sic), Atty. Llorente conceded, albeit grudgingly, the existence of the practice by the accounting division of not complying with Condition (a). He, however, claimed that he learned of the practice only during the trial of the case and that he must have

inadvertently approved the clearances of Mrs. Perez, Mr. Azucena, and possibly others who were similarly situated (TSN, March 9/88,pp. 4-5). This the evidence belies. First, he himself testified that when the clearance of Mr. Curio was presented to him in December 1981, it already bore the signature of Mrs. Sotto of the accounting division and the notation set opposite her name about the outstanding accountabilities of Mr. Curio; but he (Atty. Llorente) significantly did not ask her why she signed the clearance (TSN, Nov. 24/87, pp. 24-25). Second, in that month, Atty. Llorente approved Mrs. Perez's and Mr. Azucena's vouchers showing that hey has pending obligations to the GSIS and the UCPB, which were being deducted from their gratuity benefits (thus are similarly situated with Mr. Curio). Attached to those vouchers were the clearances as supporting documents (Exhs. M-2 and N-1; TSN, Dec. 7/87, pp. 13,23). And third, in the same month, Atty. Llorente was already aware of the case of Mrs. Javier whose clearance and voucher were, according to him, precisely withheld because of her unsettled accountability for the cash advances of P92,000.00, but here later on given due course; and her gratuity benefits released on November 16, 1981, minus that amount (TSN, Nov. 24/87, pp. 31-32; Exhs. L, L-1, L-2 and L-3). The cash advances of P92,000.00 were the primary obligation of Mrs. Javier, since they were secured through her and in her name from the UCPB. That was why they were charged to and deducted from, her gratuity benefits. Consequently, as early as that date and in so far as the PCA and the UCPB were concerned, the accountability was already fully paid. The assumption of residual liability by Mr. Curio for the cash advances on November 26, 1981, was a matter between him and Mrs. Javier. The general rule is that this Court is bound by the findings of fact of the Sandiganbayan. The acts of Atty, Llorente were legal (that is, pursuant to procedures), as he insists in this petition, yet it does not follow, as we said, that his acts were done in good faith. For emphasis, he had no valid reason to "go legal" all of a sudden with respect to Mr. Curio, since he had cleared three employees who, as the Sandiganbayan found, "were all similarly circumstanced in that they all had pending obligations when, their clearances were filed for consideration, warranting similar official action." The Court is convinced that the petitioner had unjustly discriminated against Mr. Curio. It is no defense that the petitioner was motivated by no ill-will (a grudge, according to the Sandiganbayan), since the facts speak for themselves. It is no defense either that he was, after all, complying merely with legal procedures since, as we indicated, he was not as strict with respect to the three retiring other employees. There can be no other logical conclusion that he was acting unfairly, no more, no less, to Mr. Curio.

UE Vs. Jader FACTS Plaintiff was enrolled in the defendants' College of Law from 1984 up to 1988. In the first semester of his last year (School year 1987-1988), he failed to take the regular final examination in Practice Court I for which he was given an incomplete grade He enrolled for the second semester as fourth year law student in UE and on February 1, 1988 he filed an application for the removal of the incomplete grade given him by Professor Ortega which was approved by Dean Tiongson after payment of the required fee. He took the examination on March 28, 1988. On May 30, 1988, Professor Ortega submitted his grade. It was a grade of five (5), a failing grade. In the meantime, the Dean and the Faculty Members of the College of Law met to deliberate on who among the fourth year students should be allowed to graduate. The plaintiff's name appeared in the Tentative List of Candidates for graduation for

the Degree of Bachelor of Laws (LL.B) as of Second Semester (1987-1988) with the following annotation: JADER ROMEO A. Def. Conflict of Laws x-1-87-88, Practice Court I Inc., 1-87-88 C-1 to submit transcript with S.O. The name of the plaintiff appeared as one of the candidates for graduation. At the foot of the list of the names of the candidates there appeared however the following annotation: This is a tentative list Degrees will be conferred upon these candidates who satisfactorily complete requirements as stated in the University Bulletin and as approved of the Department of Education, Culture and Sports The plaintiff attended the grad ceremonies on 16th of April 1988 and during the program of which he went up the stage when his name was called, escorted by her (sic) mother and his eldest brother who assisted in placing the Hood, and his Tassel was turned from left to right, and he was thereafter handed by Dean Celedonio a rolled white sheet of paper symbolical of the Law Diploma. His relatives took pictures of the occasion. He tendered a blow-out that evening which was attended by neighbors, friends and relatives who wished him good luck in the forthcoming bar examination. There were pictures taken too during the blow-out He thereafter prepared himself for the bar examination. He took a leave of absence without pay from his job from April 20, 1988 to September 30, 1988 and enrolled at the pre-bar review class in Far Eastern University. Having learned of the deficiency he dropped his review class and was not able to take the bar examination. Respondent sued petitioner for damages alleging that he suffered moral shock, mental anguish, serious anxiety, besmirched reputation, wounded feelings and sleepless nights when he was not able to take the 1988 bar examinations arising from the latter's negligence. He prayed for an award of moral and exemplary damages, unrealized income, attorney's fees, and costs of suit. ISSUES & ARGUMENTS W/N UE liable for damages o Jader: UE misled me through their negligence. o UE: We never misled you. We have good faith. HOLDING & RATIO DECIDENDI YES, UE liable for damages. When a student is enrolled in any educational or learning institution, a contract of education is entered into between said institution and the student. The professors, teachers or instructors hired by the school are considered merely as agents and administrators tasked to perform the school's commitment under the contract. Petitioner, in belatedly informing respondent of the result of the removal examination, particularly at a time when he had already commenced preparing for the bar exams, cannot be said to have acted in good faith. Absence of good faith must be sufficiently established for a successful prosecution by the aggrieved party in a suit for abuse of right under Article 19 of the Civil Code. Good faith connotes an honest intention to abstain from taking undue advantage of another, even though the forms and technicalities of the law, together with the absence of all information or belief of facts, would render the transaction unconscientious. It is the school that has access to those information and it is only the school that can compel its professors to act and comply with its rules, regulations and policies with respect to the computation and the prompt submission of grades. Students do not exercise control, much less influence, over the way an educational institution should run its affairs, particularly in disciplining its professors and teachers and ensuring their compliance with the school's rules

and orders. Being the party that hired them, it is the school that exercises general supervision and exclusive control over the professors with respect to the submission of reports involving the students' standing. The college dean is the senior officer responsible for the operation of an academic program, enforcement of rules and regulations, and the supervision of faculty and student services. He must see to it that his own professors and teachers, regardless of their status or position outside of the university, must comply with the rules set by the latter. The negligent act of a professor who fails to observe the rules of the school, for instance by not promptly submitting a student's grade, is not only imputable to the professor but is an act of the school, being his employer. Considering further, that the institution of learning involved herein is a university which is engaged in legal education, it should have practiced what it inculcates in its students, more specifically the principle of good dealings enshrined in Articles 19 and 20 of the Civil Code which states: Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same. Art. 19 was intended to expand the concept of torts by granting adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to provide specifically in statutory law.8 In civilized society, men must be able to assume that others will do them no intended injury that others will commit no internal aggressions upon them; that their fellowmen, when they act affirmatively will do so with due care which the ordinary understanding and moral sense of the community exacts and that those with whom they deal in the general course of society will act in good faith. The ultimate thing in the theory of liability is justifiable reliance under conditions of civilized society.9 Schools and professors cannot just take students for granted and be indifferent to them, for without the latter, the former are useless. Educational institutions are duty-bound to inform the students of their academic status and not wait for the latter to inquire from the former. The conscious indifference of a person to the rights or welfare of the person/persons who may be affected by his act or omission can support a claim for damages. Want of care to the conscious disregard of civil obligations coupled with a conscious knowledge of the cause naturally calculated to produce them would make the erring party liable. Petitioner ought to have known that time was of the essence in the performance of its obligation to inform respondent of his grade. It cannot feign ignorance that respondent will not prepare himself for the bar exams since that is precisely the immediate concern after graduation of an LL.B. graduate. It failed to act seasonably. Petitioner cannot just give out its student's grades at any time because a student has to comply with certain deadlines set by the Supreme Court on the submission of requirements for taking the bar. Petitioner's liability arose from its failure to promptly inform respondent of the result of an examination and in misleading the latter into believing that he had satisfied all requirements for the course. It is apparent from the testimony of Dean Tiongson that defendantappellee University had been informed during the deliberation that the professor in Practice Court I gave plaintiff-appellant a failing grade. Yet, defendant-appellee still did not inform plaintiff-appellant of his failure to complete the requirements for the degree nor did they remove his name from the tentative list of candidates for graduation. Worse, defendantappellee university, despite the knowledge that plaintiff-appellant failed

in Practice Court I, again included plaintiff-appellant's name in the "tentative list of candidates for graduation which was prepared after the deliberation and which became the basis for the commencement rites program. Dean Tiongson reasons out that plaintiff-appellant's name was allowed to remain in the tentative list of candidates for graduation in the hope that the latter would still be able to remedy the situation in the remaining few days before graduation day. Dean Tiongson, however, did not explain how plaintiff appellant Jader could have done something to complete his deficiency if defendant-appellee university did not exert any effort to inform plaintiff-appellant of his failing grade in Practice Court I.

255 H.L. Carlos Construction v. MPC G.R. No. 137147. January 29, 2002 FACTS ARINA PROPERTIES CORPORATION (MPC for brevity) is engaged in M the business of real estate development. It entered into a contract with H.I. CARLOS CONSTRUCTION, INC. (HLC) to construct Phase III of a condominium complex called MARINA BAYHOMES CONDOMINIUM PROJECT, consisting of townhouses and villas, totaling 31 housing units, for a total consideration of P38,580,609.00, within a period of 365 days from receipt of Notice to Proceed. The original completion date of the project was May 16, 1989, but it was extended to October 31, 1989 with a grace period until November 30, 1989. The contract was signed by Jovencio F. Cinco, president of MPC, and Honorio L. Carlos, president of HLC. On December 15, 1989, HLC instituted this case for sum of money against not only MPC but also against the latters alleged president, [Respondent] Jesus K. Typoco, Sr. (Typoco) and [Respondent] Tan Yu (Tan), seeking the payment of various sums with an aggregate amount of P14 million pesos, broken down as follows: a. P7,065,885.03 for costs of labor escalation, change orders and material price escalation; ISSUES & ARGUMENTS W/N H.L. is liable for actual and liquidated damages for failing to finish the construction it undertook to complete ( Which party was in delay) HOLDING & RATIO DECIDENDI Yes. petitioner did not fulfill its contractual obligations. It could not totally pass the blame to MPC for hiring a second contractor, because the latter was allowed to terminate the services of the contractor. Either party shall have the right to terminate this Contract for reason of violation or non-compliance by the other party of the terms and conditions herein agreed upon. As of November 1989, petitioner accomplished only approximately 80 percent of the project. In other words, it was already in delay at the time. In addition, Engineer Miranda testified that it would lose money even if it finished the project; thus, respondents already suspected that it had no intention of finishing the project at all. Petitioner was in delay and in breach of contract. Clearly, the obligor is liable for damages that are the natural and probable consequences of its breach of obligation. In order to finish the project, the latter had to contract the services of a second

construction firm for P11,750,000. Hence, MPC suffered actual damages in the amount of P4,604,579 for the completion of the project. Petitioner is also liable for liquidated damages as provided in the Contract. Liquidated damages are those that the parties agree to be paid in case of a breach. As worded, the amount agreed upon answers for damages suffered by the owner due to delays in the completion of the project. Under Philippine laws, these damages take the nature of penalties. A penal clause is an accessory undertaking to assume greater liability in case of a breach. It is attached to an obligation in order to ensure performance. MAGIC

CASE DIGEST ON GLOBE MACKAY V. CA [176 S 778 (1989)] - While an employer has the right to dismiss an employee who was involved in anomalous transactions, the right of dismissal should not be exercised in an abusive manner, such as by making accusations of being a crook, forcing him to take a forced leave, threatening to file a hundred suits against him. Hence, the employer is liable for damages. Art. 21 was adopted to remedy the countless gaps in the statutes, which leave so many victims of moral wrongs helpless, even though they have actually suffered material and moral injury. This article should vouchsafe adequate legal remedy for that untold number of moral wrongs which it is impossible for human foresight to provide for specifically in the statutes.

Quimiguing vs. ICAO G.R. No. L-26795. 31 July 1970. REYES, J.B.L., J.: Appeal on points of law from an order of the CFI of Zamboanga del Norte. Facts: Plaintiff and defendant were neighbors and had close and confidential relations. Defendant, although married, succeeded in having carnal intercourse with the plaintiff several times by force and intimidation and without her consent. As a result she became pregnant and had to stop studying. Later she gave birth to a baby girl. She instituted an action to recover damages from the defendant. The lower court dismissed the case on the ground that the original complaint averred no cause of action. Plaintiff appealed. Issue: W/N defendant is liable for damages. Held: The orders under appeal are reversed and set aside. Ratio: A second reason for reversing the orders appealed from is that for a married man to force a woman not his wife to yield to his lust (as averred in the original complaint in this case) constitutes a clear violation of the rights of his victim that entitles her to claim compensation for the damage caused. Says Article 21 of Civil Code of the Philippines: Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage