Tuesday, September 25, 2012

case digest 3 cases

G.R. No. 170405 February 2, 2010
RAYMUNDO S. DE LEON, Petitioner,
BENITA T. ONG. Respondent.

On March 10, 1993, Raymundo S. De Leon (petitioner) sold 3 parcels of land to Benita T. Ong(respondent). The said properties were mortgaged to a financial institution; Real Savings & Loan Association Inc. (RSLAI). The parties then executed a notarized deed of absolute sale with assumption of mortgage. As indicated in the deed of mortgage, the parties stipulated that the petitioner (de Leon) shall execute a deed of assumption of mortgage in favor of Ong (respondent)after full payment of the P415,000. They also agreed that the respondent (Ong) shall assume the mortgage. The respondent then subsequently gave petitioner P415,000 as partial payment. On the other hand, de Leon handed the keys to Ong and de Leon wrote a letter to inform RSLAI that the mortgage will be assumed by Ong. Thereafter, the respondent took repairs and made improvements in the properties. Subsequently, respondent learned that the same properties were sold to a certain Viloria after March 10, 1993 and changed the locks, rendering the keys given to her useless. Respondent proceeded to RSLAI but she was informed that the mortgage has been fully paid and that the titles have been given to the said person. Respondent then filed a complaint for specific performance and declaration of nullity of the second sale and damages. The petitioner contended that respondent does not have a cause of action against him because the sale was subject to a condition which requires the approval of RSLAI of the mortgage. Petitioner reiterated that they only entered into a contract to sell. The RTC dismissed the case. On appeal, the CA upheld the sale to respondent and nullified the sale to Viloria. Petitioner moved for reconsideration to the SC.

Whether the parties entered into a contract of sale or a contract to sell?

In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. The non-payment of the price is a negative resolutory condition. Contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownership of the property until he fully pays the purchase price.In the present case, the deed executed by the parties did not show that the owner intends to reserve ownership of the properties. The terms and conditions affected only the manner of payment and not the immediate transfer of ownership. It was clear that the owner intended a sale because he unqualifiedly delivered and transferred ownership of the properties to the respondent

G.R. No. 167330. September 18, 2009


Commissioner of Internal Revenue [CIR] sent petitioner a formal demand letter and the corresponding assessment notices demanding the payment of deficiency taxes, including surcharges and interest, for the taxable years1996 and the deficiency [documentary stamp tax (DST)] assessment was imposed on petitioner's health care agreement with the members of its health care program pursuant to Section 185 of the 1997 Tax Code. Petitioner protested theassessment in a letter dated February 23, 2000. As respondent did not act on the protest filed a petition for review in the Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT and DST assessments. The CTA ruled that petitioner is liable for the VAT but not the DST. Respondent appealed the CTA decision to the [Court of Appeals (CA)]insofar as it cancelled the DST assessment. CA held that petitioner's health care agreement was in the nature of a non-life insurance contract subject to DST.In a decision dated June 12, 2008, the Supreme Court denied the petition and held that petitioner's health care agreement during the pertinent period was in the nature of non-life insurance which is a contract of indemnity. Unable to accept the verdict filed the present motion for reconsideration and supplemental motion for reconsideration. In its motion for reconsideration reveals for the first time that it availed of a tax amnesty under RA 9480 7 (also known as the "Tax Amnesty Act of 2007") by fully paying the amount of P5,127,149.08 representing 5% of its net worth as of the yearending December 31, 2005.

Issue/ Held
W/N petitioner is liable for the DST- NO

A second hard look at the relevant law and jurisprudence convinces the Court that the arguments of petitioner are meritorious. Petitioner is admittedly an HMO. Under RA 7875 (or "The National Health Insurance Act of 1995"), an HMO is "an entity that provides, offers or arranges for coverage of designated health services needed by plan members for a fixed prepaid premium". 19 The payments do not vary with the extent, frequency or type of services provided.The question is: was petitioner, as an HMO, engaged in the business of insurance during the pertinent taxable years? The Court held that it was not. Applying the "principal objects and purpose test", there is significant American case law supporting the argument that a corporation (such as an HMO, whether or not organized for profit), whose main object is to provide the members of a group with health services, is not engaged in the insurance business. American courts have pointed out that the main difference between an HMO and an insurance company is that HMOs undertake to provide or arrange for the provision of medical services through participating physicians while insurance companies simply undertake to indemnify the insured for medical expenses incurred up to a pre-agreed limit.In short, even if petitioner assumes the risk of paying the cost of these services even if significantly more than what the member has prepaid, it nevertheless cannot be considered as being engaged in the insurance business. Overall appears to provide insurance-type benefits to its members (with respect to its curative medical services), but these are incidental to the principal activity of providing them medical care. The "insurance-like" aspect of petitioner's business is miniscule compared to its non-insurance activities. Therefore, since it substantially provides health care services rather than insurance services, it cannot be considered as being in the insurance business. We are aware that, in Blue Cross and Philamcare, the Court pronounced that a health care agreement is in the nature of non-life insurance, which is primarily a contract of indemnity. However, those cases did not involve the interpretation of a tax provision. Instead, they dealt with the liability of a health service provider to a member under the terms of their health care agreement. Such contracts, as contracts of adhesion, are liberally interpreted in favor of the member and strictly against the HMO. Not all the necessary elements of a contract of insurance are present in petitioner's agreements.

 Although risk is a primary element of an insurance contract, it is not necessarily true that risk alone is sufficient toestablish it. Almost anyone who undertakes a contractual obligation always bears a certain degree of financial risk.Consequently, there is a need to distinguish prepaid service contracts (like those of petitioner) from the usual insurance contracts.Furthermore, it was held in a recent case that DST is one of the taxes covered by the tax amnesty program under RA 9480. There is no other conclusion to draw than that petitioner's liability for DST for the taxable years 1996and 1997 was totally extinguished by its availment of the tax amnesty under RA 9480

178 SCRA 188, G.R. No. 82508
September 29, 1989


Herein private respondents spouses Jose Sy Bang and Iluminada Tan were engaged in the sale of gravel produced from crushed rocks and used for construction purposes. They intended to buy rock crusher from Rizal Consolidated Corporation which carried a cash price tag of P550,000.00. They applied for financial assistance from herein petitioner Filinvest Credit Corporation, who agreed to extend financial aid on the certain conditions.
A contract of lease of machinery (with option to purchase) was entered into by the parties whereby the private respondents agreed to lease from the petitioner the rock crusher for two years starting from July 5, 1981, payable as follows: P10,000.00 – first 3 months, P23,000.00 – next 6 months, P24,800.00 – next 15 months. It was likewise stipulated that at the end of the two-year period, the machine would be owned by the private respondents. Thus the private respondent issued in favor of the petitioner a check for P150,550.00, as initial rental (or guaranty deposit), and 24 postdated checks corresponding to the 24 monthly rentals. In addition, to guarantee their compliance with the lease contract, the private respondent executed a real estate mortgage over two parcels of land in favor of the petitioner. The rock crusher was delivered to the spouses.
However, 3 months later, the souses stopped payment when petitioner had not acted on the complaints of the spouses about the machine. As a consequence, petitioner extra-judicially foreclosed the real estate mortgage. The spouses filed a complaint before the RTC. The RTC rendered a decision in favor of private respondent. The petitioner elevated the case to CA which affirmed the decision in toto. Hence, this petition.
1. Whether or not the nature of the contract is one of a contract of sale.\
2. Whether or not the remedies of the seller provided for in Article 1484 are cumulative.
1. Yes. The intent of the parties to the subject contract is for the so-called rentals to be the installment payments. Upon the completion of the payments, then the rock crusher, subject matter of the contract, would become the property of the private respondents. This form of agreement has been criticized as a lease only in name.
Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently restored to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results, by the terms of bargain, in the transfer of title to the lessee.
2. No, it is alternative. The seller of movable in installments, in case the buyer fails to pay 2 or more installments, may elect to pursue either of the following remedies: (1) exact fulfillment by the purchaser of the obligation; (2) cancel the sale; or (3) foreclose the mortgage on the purchased property if one was constituted thereon. It is now settled that the said remedies are alternative and not cumulative, and therefore, the exercise of one bars the exercise of the others. Indubitably, the device – contract of lease with option to buy – is at times resorted to as a means to circumvent Article 1484, particularly paragraph (3) thereof. Through the set-up, the vendor, by retaining ownership over the property in the guise of being the lessor, retains, likewise the right to repossess the same, without going through the process of foreclosure, in the event the vendee-lessee defaults in the payment of the installments. There arises therefore no need to constitute a chattel mortgage over the movable sold. More important, the vendor, after repossessing the property and, in effect, canceling the contract of sale, gets to keep all the installments-cum-rentals already paid.

G.R. No. 52267 January 24, 1996
Almeda and Engineering signed a contract, wherein Engineering undertook to fabricate, furnish and install the air-conditioning system in the latter’s building along Buendia Avenue, Makati in consideration of P210,000.00. Petitioner was to furnish the materials, labor, tools and all services required in order to so fabricate and install said system. The system was completed in 1963 and accepted by private respondent, who paid in full the contract price.
Almeda learned from the employees of NIDC of the defects of the air-conditioning system of the building. Almeda spent for the repair of the air-conditioning system. He now sues Engineering for the refund of the repair. Engineering contends that the contract was of sale and the claim is barred by prescription since the responsibility of a vendor for any hidden faults or defects in the thing sold runs only for 6 months (Arts 1566, 1567, 1571). Almeda contends that since it was a contract for a piece of work, hence the prescription period was ten years (Hence Art 1144 should apply on written contracts).
RTC found that Engineering failed to install certain parts and accessories called for by the contract, and deviated from the plans of the system, thus reducing its operational effectiveness to achieve a fairly desirable room temperature.


1) Whether the contract for the fabrication and installation of a central air-conditioning system in a building, one of “sale” or “for a piece of work”? CONTRACT FOR PIECE OF WORK.
2) Corrollarily whether the claim for refund was extinguished by prescription? NO.


1) A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order, of the person desiring it. In such case, the contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given, then the contract is one of sale.
A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work .
The contract in question is one for a piece of work. It is not petitioner’s line of business to manufacture air-conditioning systems to be sold “off-the-shelf.” Its business and particular field of expertise is the fabrication and installation of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with the customers.
2)The original complaint is one for damages arising from breach of a written contract – and not a suit to enforce warranties against hidden defects – we here – with declare that the governing law is Article 1715 (supra). However, inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will apply. Said provision states, inter alia, that actions “upon a written contract” prescribe in ten (10) years. Since the governing contract was executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is clear that the action has not prescribed.

G.R. No. 122039 May 31, 2000



Eliza Jujeurche G. Sunga, a college freshman at the Siliman University, took a passenger jeepney owned and operated by petitioner Vicente Calalas. Sunga was given by the conductor an "extension seat," at the rear end of the vehicle. Sunga gave way to the outgoing passenger.Just as she was doing so, an Isuzu truck driven by Iglecerio Verena and owned by Francisco Salva bumped the left rear portion of the jeepney. As a result, Sunga was injured and confinement in the hospital. Her attending physician certified she would remain on a cast for a period of three months and would have to ambulate in crutches during said period.Sunga filed a complaint for damages against Calalas, alleging violation of the contract of carriage. Calalas, on the other hand, filed a third-party complaint against Francisco Salva, the owner of the Isuzu truck. The lower court rendered judgment against Salva as third-party defendant and absolved Calalas of liability, holding that it was the driver of the Isuzu truck who was responsible for the accident. It took cognizance of another case, filed by Calalas against Salva and Verena, for quasi-delict, the same court held Salva and his driver Verena jointly liable to Calalas for the damage to his jeepney. On appeal to the Court of Appeals, the ruling of the lower court was reversed and dismissed the third-party complaint against Salva and adjudged Calalas liable for damages to Sunga. Hence this petition.


(1)Whether or not the negligence of Verena was the proximate cause of the accident negates the liability and that to rule otherwise would be to make the common carrier an insurer of the safety of its passengers.
(2) Whether or not that the bumping of the jeepney by the truck owned by Salva was a caso fortuito.
(3) Whether or not the award of moral damages to Sunga is supported evidence.


(1)   Finding Salva and his driver Verena liable for the damage to petitioner's jeepney, should be binding on Sunga. It is immaterial that the proximate cause of the collision between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving breach of contract. The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts of carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers.

(2)   This is also true of petitioner's contention that the jeepney being bumped while it was improperly parked constitutes caso fortuito. The jeepney was not properly parked, its rear portion being exposed about two meters from the broad shoulders of the highway,and facing the middle of the highway in a diagonal angle and that petitioner's driver took in more passengers than the allowed seating capacity of the jeepney. Petitioner should have foreseen the danger of parking his jeepney with its body protruding two meters into the highway.

(3)   In this case, there is no legal basis for awarding moral damages since there was no factual finding by the appellate court that petitioner acted in bad faith in the performance of the contract of carriage. Sunga's contention that petitioner's admission in open court that the driver of the jeepney failed to assist her in going to a nearby hospital cannot be construed as an admission of bad faith. The fact that it was the driver of the Isuzu truck who took her to the hospital does not imply that petitioner was utterly indifferent to the plight of his injured passenger. If at all, it is merely implied recognition by Verena that he was the one at fault for the accident.