Case Digest Obligcon

Barredo vs. Garcia and Almario 73 Phil. 607 Facts: A head-on collision between a taxicab owned by Barredo and a carretela occurred. The carretela was overturned and one of its passengers, a 16-year old boy, the son of Garcia and Almario, died as a result of the injuries which he received. The driver of the taxicab, a employee of Barredo, was prosecuted for the crime and was convicted. When the criminal case was instituted, Garcia and Almario reserved their right to institute a separate civil action for damages. Subsequently, Garcia and Almario instituted a civil action for damages against Barredo, the employer of the taxicab driver. Held: “The pivotal question in this case is whether the plaintiffs may bring this separate civil action against Fausto Barredo thus making him primarily and directly responsible under Article 1903 of the Civil Code as an employer of Pedro Fontanilla. The defendant maintains that Fontanilla’s negligence being punishable by the Penal Code, his (defendant’s) liability as an employer is only subsidiary, according to said Penal Code, but Fontanilla has not been sued in a civil action and his property has not been exhausted. To decide the main issue, we must cut thru the tangle that has, in the minds of many, confused and jumbled together delitos and cuasi delitos, or crimes under the Penal Code and fault or negligence under Articles 1902-1910 of the Civil Code. This should be done because justice may be lost in a labyrinth, unless principles and remedies are distinctly envisaged. Fortunately, we are aided in our inquiry by the luminous presentation of this perplexing subject by renowned jurists and we are likewise guided by the decisions of this Court in previous cases as well as by the solemn clarity of the considerations in several sentences of the Supreme Tribunal of Spain. “Authorities support the proposition that a quasi-delict or ‘culpa aquiliana’ is a separate legal institution under the Civil Code, with a substantivity all its own, and individuality that is entirely apart and independent from a delict or crime. Upon this principle, and on the wording and spirit of Article 1903 of the Civil Code, the primary and direct responsibility of employers may be safely anchored. xxxxx “It will thus be seen that while the terms of Article 1902 of the Civil Code seem to be broad enough to cover the driver’s negligence in the instant case, nevertheless Article 1903 limits cuasi-delitos TO ACTS OR OMISSIONS ‘NOT PUNISHABLE BY LAW.’ But inasmuch as Article 365 of the Revised Penal Code punishes not only reckless but even simple imprudence or negligence, the fault or negligence under Article 1902 of the Civil Code has apparently been crowded out. It is this overlapping that makes the “confusion worse confounded.’ However, a closer study shows that such a concurrence of scope in regard to negligent acts does not destroy the distinction between the civil liability arising from a crime and the responsibility for cuasi-delitos or culpa extra-contractual. The same negligent act causing damages may produce civil liability arising from a crime under Article 100 of the Revised Penal Code; or create an action for cuasidelito or culpa extra-contractual under Articles 1902-1910 of the Civil Code. “The individuality of cuasi-delito or culpa extra-contractual looms clear and uamistakable [sic] unmistakable. This legal institution is of ancient lineage, one of its early ancestors being the Lex Aquilia in Roman Law. In fact, in Spanish legal terminology, this responsibility is often referred to as culpa aquiliana. The Partidas also contributed to the genealogy of the present fault or negligence under the Civil Code: x x x . “The distinctive nature of cuasi-delitos survives in the Civil Code. According to Article 1089, one of the five sources of obligations is the legal institution of cuasi-delito or culpa extra-contractual:

‘ los actos . . . . en que intervenga cualqier genero de culpa or negligencia.’ Then Article 1093 provides that this kind of obligation shall be governed by Chapter 11 of Title XVI of Book IV , meaning Articles 1902-1910. This portion of the civil Code is exclusively devoted to the legal institution of culpa aquiliana. “Some of the differences between crimes under the Penal Code are: “1. That crimes affect the public interest, while quasi-delitos are only of private concern. “2. That consequently, the Penal Code punishes or corrects the criminal act, while the Civil Code, by means of indemnification, merely repairs the damage. “3. That delicts are not as broad as quasi-delicts, because for the former are punished only if there is a penal law clearly covering them, while the latter, cuasi-delitos, include all acts in which ‘ any kind of fault or negligence intervenes.’ However, it should be noted that not all violations of the penal law produce civil responsibility, such as begging in contravention of ordinances, violation of the game laws, infraction of the rules of traffic when nobody is hurt. xxxxx “The foregoing authorities clearly demonstrate the separate individuality of cuasi-delitos or culpa aquiliana under the Civil Code. Specifically they show that there is a distinction between civil liability arising from criminal negligence (governed by the Penal Code) and responsibility for fault or negligence under Articles 1902 to 1910 of the Civil Code, and that the same negligent act may produce either a civil liability arising from a crime under the Penal Code, or a separate responsibility for fault or negligence under Articles 1902 to 1910 of the Civil Code, and that the same negligent act may produce either a civil liability arising from a crime under the penal Code, or a separate responsibility for fault or negligence under Articles 1902 to 1910 of the Civil Code. Still more concretely the authorities above cited render it inescapable to conclude that the employer – in this case the defendant-petitioner – is primarily and directly liable under Article 1903 of the Civil Code.” The Barredo case was decided by the Supreme Court prior to the present Civil Code. However, the principle enunciated in said case, that responsibility for fault or negligence as quasi-delict is distinct and separate from negligence penalized under the Revised Penal Code, is now specifically embodied in Art. 2177 of the Civil Code

Amadora v. CA [1988] Cruz, J. Facts: • April 13, 1972: Alfredo Amadora, a high school graduating student of Colegio de San JoseRecoletos went to school to finish a Physics experiment. However, while he was in the auditorium, his classmate Pablito Daffon fired a gun that hit him. He died at 17. Daffon was convicted of homicide thru reckless imprudence.

• • •

Amadora’s parents filed a civil action for damages under CC Art. 2180 against the school, its rector, HS principal, dean of boys & Physics teacher, plus Daffon & 2 other students thru their parents. Complaint against students was later dropped. CFI Cebu: defendants were liable in the sum of P294,984.00 (death compensation, loss of earning capacity, costs of litigation, funeral expenses, moral damages, exemplary damages & attorney’s fees) CA: reversed, all defendants absolved completely. 1. As per Rules of Court (ROC) Rule 45, CC Art. 2180 is not applicable since the school was an academic institution of learning & not a school of arts & trades. 2. Students were not in custody of the school at the time of the incident since the semester had already ended. 3. No clear identification of the fatal gun. 4. Defendants exercised necessary diligence in preventing injury. • Petitioners claim their son was still under school’s custody because he went to school to

comply w/a requirement for graduation. Respondents: Amadora went to school to submit a Physics report & he was no longer in their custody since the semester was over. • A gun was confiscated by Sergio Damaso, dean of boys, from Jose Gumban on April 7, 1972. It was an unlicensed pistol w/c was later on returned to Gumban w/o reporting such to the principal or taking further action. Gumban was one Daffon’s companions when the incident happened. Petitioners claim it was this gun that killed their son w/c respondents rebutted by saying there was no proof that they were one and the same. ISSUE & RATIO: WON respondents are liable. – NO. • Exconde v Capuno: Capuno, a student of Balintawak Elementary School & a boy scout attended a Rizal Day parade on city school supervisor’s instructions. Afterwards, Capuno boarded a jeep & drove it recklessly that it turned turtle killing 2 passengers. SC exculpated school in obiter dictum (it was not party to the case) since it was not a school of arts & trades. Some justices dissented claiming that liability under CC Art. 2180 applied to teachers in general & heads of schools of arts & trades in particular. • Mercado v. CA: a student cut a classmate w/a razor blade at the Lourdes Catholic School, QC. Exconde ruling reiterated. Custody requirement was defined as a situation where student lives & boards w/teacher such that control, direction & influences on pupil supersede those of parents. • Palisoc v. Brillantes: a 16-yr old student was killed by a classmate w/fist blows in the lab of Manila Technical Institute. Court ruled that even if offender was already of age & not boarding in the school, the head & teacher-in-charge were solidarily liable w/him. Custody was defined as the protective & supervisory custody that school, its heads & teachers exercise over students for as long as they are at the attendance in the school including recess time. No such requirement as actual living & boarding in the school before such liability is attached. It set aside Mercado ruling. Even students of age were still covered by provision since they’re equally in custody of school & subj to its discipline. • CC Art. 2180 applies to all schools whether academic or non-academic. In the former, teacher-in-charge of student is the person responsible (general rule). Whereas in the latter (arts & trades), it is the head (exception). SC agrees w/dissent in Exconde, saying that while the child is in school, parent is not supposed to interfere w/discipline of school nor w/authority & supervision of teacher. W/o authority, there can be no responsibility. No reason to differentiate the vigilance expected from teachers from academic institutions and non-academic ones. History of disparity: a. head of school of arts & trades exercised closer tutelage over his students who apprenticed to their master, the school head. He was personally involved in teaching his students who usually boarded w/him & thus he exercised constant control, supervision & influence. b. Head of academic school: exercised only administrative duties over teachers who were directly dealing w/students. Thus, teacher is liable. • CC Art. 2180’s custody requirement is not limited to boarding w/school authorities. It’s not co-terminous w/sem. It includes periods of registration or before graduation during w/c, student is still subj to the disciplinary authority of the school. There is custody for as long as he’s under control & influence of school & w/in its premises regardless of time and for as long as student can show that he is in school in pursuance of a legitimate student objective, exercise & enjoyment of a legitimate student rt/privilege. It includes relaxing in the campus. • Under similar circumstances, teacher-in-charge should be liable for his students’ torts. He need not be physically present or in a position to prevent the injury. Custody refers more to his influence on the child & the discipline instilled. Applicable as well to head of school of arts & trade. Teacher is liable regardless of student’s age. Teacher should be liable & not school itself unless he can prove that he exercised the diligence of a good father such as by employing sufficient no. of security guards, etc. This defense is made available to the teacher considering that his responsibility/influence over the child cannot be equated to that of the parents. Parents can expect more obedience from the child since kid depends more on parents. Parent can instill more lasting discipline on child than teacher & thus, should be held to a greater accountability for tort committed by kid. WRT liability for kids of the age of majority, leniency should be observed in assessing teacher’s responsibility considering that parents are no longer liable for the acts of their emancipated children. HOLDING: Petition denied. •

1. Rector, principal & dean – not liable because they are not teachers-in-charge. They only had general authority over students. 2. Teacher-in-charge: not disclosed by evidence. Just because Amadora went to school in connection w/a physics report doesn’t necessarily make physics teacher the teacher-in-charge. Besides, there’s no showing that the teacher was negligent in any manner. He was not even required to report to school on that day thus, his absence cannot be considered as negligence. On the contrary, they have proven that they exercised due diligence. 3. Dean of boys – no proof that the gun he released was the same gun that killed Amadora. 4. School – only teacher or head is responsible

Velarde v. CA SUMMARY OF DOCTRINE:  Failure to pay the price in the manner prescribed by the contract constitutes a substantial breach of contract  A substantial breach of contract entitles injured party to rescind the obligation.  Rescission abrogates the contract from its inception and requires mutual restitution of benefits. FACTS:

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David Raymundo is the owner of a parcel of land together with the house and other improvements erected upon it.

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The property was mortgaged to the Bank of the Philippine Islands (BPI) for P1.8M through a Deed of Real Estate Mortgage (DREM).

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George Raymundo, David’s father, negotiated the sale of the property to spouses Avelina and Mariano Velarde.

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The parties executed a Deed of Sale with Assumption of Mortgage (DSAM) where the Velardes agreed, inter alia, to: 1. Pay Raymundo P800,000.00 2. Assume the obligation to repay the mortgage worth P1.8M 3. Strictly and faithfully comply with all terms and conditions of the mortgage agreement with BPI 4. Pay interests and other charges for late payment levied by the Bank (all in all, to treat the mortgage as if it were originally signed and executed by them)

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Avelina Velarde also executed an Undertaking further stating, inter alia, that:

1. 2.

While her application for assumption of mortgage obligations on the property was still being processed, she will still pay the mortgage obligations in the name of the owner Raymundo should she violate any of the terms and conditions of the DREM, she agrees to (1) forfeit in favor of David Raymundo the P800T plus all payments made to BPI as liquidated damages without necessity of judicial declaration; (2) Raymundo’s resumption of total ownership of the property; and (3) automatic cancellation of the DSAM

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However, Velarde’s application for assumption of mortgage obligations was not approved.

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From then on, the Velardes stopped payment of the mortgage loan

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In response, Raymundo wrote to the Velardes stating that their nonpayment of the mortgage constituted nonperformance of their obligation.

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Velardes replied through a letter stating their willingness to pay the balance provided that Raymundo: 1. deliver actual possession of the property for Velardes’ immediate occupancy; 2. cause the release of the title and mortgage from BPI and make the title available free from any liens and encumbrances; and 3. execute an absolute deed of sale in Avelina Velarde’s favor

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Raymundo then sent the Velardes a Notice of Cancellation/Rescission of the Intended Sale on the grounds of failure to comply with the terms and conditions of the DSAM and Undertaking

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The Velardes filed a Complaint for: 1. Specific performance (enforcement of the DSAM); 2. Nullity of Cancellation; 3. Issuance of a writ of possession; and 4. Damages Judge Ynares-Santiago of the RTC of Makati dismissed the complaint, but a new judge granted the Motion for Reconsideration after Justice Ynares-Santiago was promoted to the CA The new judge ruled in favor of the Velardes, ordering them to pay the P1.8M and ordering Raymundo to execute a deed of absolute sale and to surrender possession of the property

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Raymundo appealed to the CA, which ruled in favor of him, finding that:

1. 2. 3.

the nonpayment of the mortgage resulted in a breach of contract that the rescission of the contract was, therefore, justified that the letter giving new conditions was an attempt to novate, which requires a new agreement between the parties.

ISSUES:

I. W/N there was a Breach of Contract. HELD: YES. Velardes’ failure to perform their correlative obligation (payment of the balance of P1.8M) resulted in a breach.  Petitioners allege that disapproval of their application to assume obligation of the mortgage extinguished their obligation to pay the monthly amortizations, which then devolved upon Raymundo again.  Failure to pay the mortgage would not have been a problem if they paid the balance of the purchase price amounting to P1.8M, as agreed upon in the event the application is disapproved.  Thus, when the application was disapproved, they should have proceeded to pay Raymundo the balance of P1.8M  The breach was not the nonpayment of the mortgage, but the nonperformance of their reciprocal obligation to pay the price under the contract of sale  Their conditional offer to pay cannot take the place of actual payment that would discharge a buyer’s obligation under a contract of sale

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In a contract of sale, seller obligates itself to transfer ownership and deliver a determinate thing, and the buyer obligates itself to pay a price certain in money or its equivalent

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When Raymundo executed the DSAM, his obligation has already been performed through constructive delivery, where prior physical delivery is not legally required. Deed of Sale is deemed equivalent to delivery Petitioners did not only fail to perform their correlative obligation, they also tried to compel Raymundo to perform obligations beyond those stipulated in the contract before fulfilling their own.

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II. W/N the breach was substantial enough to justify the rescission of the contract. HELD: YES. The Velardes, in failing to pay the purchase price under the contract of sale, violated the very essence of reciprocity in the contract of sale. LEGAL BASIS: Article 1191 of the Civil Code: The power to rescind obligations is implied in reciprocal ones in case one of the obligors should not comply with what in incumbent upon him. The injured party may choose between fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission even after he has chosen fulfillment, if the latter should become possible

  

Since it is established that the Velardes violated the reciprocity of the contract of sale, the right of rescission under Article 1191 was validly exercised This right is predicated on a breach of faith While it is true that they expressed their willingness to pay the price one month after it became due, this does not constitute faithful compliance of their reciprocal obligation, especially considering the “offer” was made conditional.

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Petitioners tried to invoke the cases of Song Fo , Zepeda v. CA and Tan v. CA

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The court held that the facts of this case are distinguishable from the other cases because those involved only delays of a few days and the buyers’ offers to pay were unconditional and accepted by the seller

III.W/N the payments were forfeited HELD: NO. Rescission requires mutual restitution.

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Since the breach consisted of the nonperformance of reciprocal obligation, and not a breach of the mortgage contract, what applies are the Civil Code provisions and not the automatic rescission and forfeiture clause of the Undertaking.

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Rescission under the Civil Code required mutual restitution to bring back the parties to their original situations prior to the inception of the contract The payments of P800T and monthly amortizations must be returned, lest one party enrich itself in the expense of the other (Principle of Unjust Enrichment)

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This is because to rescind is to declare the contract void, to put an end to it as if it never was, and not merely to terminate it and release the parties from further obligations to each other. Woodhouse v. Halili

Ponente: J. Labrador

Facts:

Issues:

♦

November 29, 1947 – Woodhouse entered into a written agreement with Halili. The important provisions of the agreement are: o Organize a partnership for the bottling and distribution of Mission soft drinks o Halili was to decide matters of general policy regarding the business while Woodhouse was to attend to the operation and development of the plant. o Woodhouse was to secure the Mission Soft Drinks Franchise o Woodhouse was to receive 30% of the net profits.

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Prior to the agreement Woodhouse was able to obtain a thirty day option on exclusive bottling and distribution rights for the Philippines.

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December 3, 1947 – Woodhouse signed the contract

♦

Operations started during the first week of February. When the bottling plant was already in operation, plaintiff demanded that the partnership papers be executed. Halili failed to comply with the demand of Woodhouse and such this complaint was instituted. In his complaint Woodhouse was asking for the execution of the contract of partnership, an accounting of the profits, and his share of 30% and damages.

♦

COFI ordered Halili to render an accounting of the profits and to pay Woodhouse 15% thereof. It held that the execution of the contract of partnership could not be enforce upon the parties, but it also held that the defense of fraud was not proved.

1.

WON the defendant had falsely represented that he had an exclusive franchise to bottle Mission beverages. YES

♦

Fraud is never presumed and must be proved. The fact that the parties were represented by attorneys would not invalidate the agreement.

♦

Halili insist that Woodhouse did represent that he had an exclusive franchise, when as a matter of fact, at the time of its execution, he no longer had it as the same had expired, and that, therefore, consent of Halili was vitiated by fraud and consequently null and void.

♦

The first draft that the counsel of Woodhouse prepared expressly states that Woodhouse had the exclusive franchise.

♦

In the acts or statements prior to the agreement are essential and relevant to the determination of WON the Woodhouse represent that he had an exclusive franchise.

♦

From the statements “ …and the manager is ready and willing to allow the capitalist to use the exclusive franchise” and “…In the event of the dissolution of the partnership… the Franchise from Mission Dry Corporation shall be reassigned to the Manager…” it can be seen that the conclusion that Halili believed or was made to believe that Woodhouse was the grantee of an exclusive franchise.

2. ♦

WON the false representation or fraud would annul the agreement to form the partnership. NO

♦

The principal consideration for Halili in entering the partnership agreement was the ability of Woodhouse to get the exclusive franchise to bottle and distribute for the partnership.

♦

Halili was led to believe that Woodhouse had the exclusive franchise but the same was to be secured for or transferred to the partnership.

♦

The principal obligation of Woodhouse was to secure the franchise for the partnership, as the bottler and distributor for the Mission Dry Corporation. If he was guilty of false representation, this was not the causal consideration, or the principal inducement, that led to the partnership agreement.

♦

Supposed ownership of an exclusive franchise was the actual consideration for the 30% stake in the net profits. (See quoted draft page 538) Woodhouse was able to obtain a bigger share in the net profit by his representation that he had an exclusive franchise.

♦

Agreement cannot be considered as null and void.

3.

WON the court can compel Halili to execute the agreement. No

♦

December 10, 1947 – a franchise agreement was entered into between Mission Dry Corporation granting the defendant the exclusive right, license, and authority to produce, bottle, distribute and sell Mission beverages in the Philippines.

Two types of fraud:

o o

Dolo Casante – ground for the annulment of a contract Dolo Incidente – only liable for damages

Woodhouse contends that the partnership was already a fait accompli from the time of the operation of the plant.  no merit

♦

Language of the agreement that the parties intended that the execution of the agreement to form a partnership was to be carried out a later date.

♦ ♦

Claim of Woodhouse is inconsistent with their intention and incompatible with his own conduct. Halili may not be compelled against his will to carry out the agreement nor execute the partnership papers. The law recognizes the individual’s freedom or liberty to do an act he has promised to do or not to do it.

4. ♦ ♦

WON Woodhouse is entitled to receive damages.

♦ ♦

Agreement to reduce the share from 30 to 15% constitutes virtual modification of the contract.

Measure of damages is the actual loss suffered and the profits reasonably expected to be received. Must set off the damage the defendant suffered by the plaintiff’s misrepresentation that he had an exclusive franchise, by which representation he obtained a very high percentage of share in the profits Halili’s decision to reduce the share of Woodhouse amount to an admission on the part of each of the reasonableness of this amount as the share.

Antonio Vazquez Vs Francisco de Borja Antonio Vazquez, petitioner vs. Francisco de Borja, respondent GR 48930 2/23/44 Francisco de Borja, petitioner vs. Antonio Vazquez, respondent GR 48931 2/23/44 Facts: • •

1 2

st nd rd

• •

Borja instituted this claim to recover 4,702.7 from 3 alleged causes from Vazquez(co. acting president and manager) and Fernando Busuego(co. treasurer). Jan, 1932 Vazquez and Busuego obligated themselves to sell to Borja 4,000 cavans of palay at P2.10/cavan. And they were able to receive the full, paymkent of P8400 from Borja. Vazquez and Busuego were only able to deliver 2,488 cavans, equivalent to P5,224. Borja cited 3 causes of action from his losses.:

:They then refused to deliver the balance of 1,512 cavans or P3,175.2 of the money , after repeated demands from Borja. :Borja suffered damages of P1,000 from theiur refusal.

3 : Borja had an additional P150 damages when Vazquez and Busuego refused to return 1,510 of the unused sacks consigned to them for the 4,000 cavans)since only 2,488 was delivered and used). • Vazquez denied the contract entered either with or without Busuego. He alleges that the agreement was between Natividad-Vazquez Sabani Dev’t (NVSD)Co. Inc. He was only an acting manager. He further claims his own damages of P1000. • • • • • • • • • •

RTC ruled that Vazquez should pay Borja(plaintiff) P3,175.2 plus sum of P377.5 and legal interest. Busuego was then absolved. CA modified to reduce damages to come up with a total of P3,314.78 with legal interest and cost. Then the defendant Vazquez filed for an MFR. CA ruled to set aside its decision and to remand the case. Vazquez filed for certiorari to review and reverse the CA. Borja filed for certiorari for CA to maintain decision. SC denied Borja’s filing for certiorari because the remanding was for his benefit, to allow him opportunity to refute Vazquez’s contention. Anyway, the SC said this was an action on a contract. CA was wrong in the case analysis. The SC then found the CA’s decision of remanding the case wrong. Since they had no justification for ordering a new trial. The parties themselves didn’t demand it. And the issue in the CA of WON the company had sufficient stock at the time the appellant sold 1,500 cavans to another buyer(Kwong ah Poy) is irrelevant to the real issue.

Issue: WON plaintiff. Borja entered into a contract with Vazquez in his personal capacity or as manager of the NVSD Co. Inc. NO. • The Sc said that the CA itself admitted that accdg. to preponderance of evidence said that Vazquez acted as acting manger of the NVSD co. Inc., when he sold 4,000 cavans of palay. • Then instead of remanding the case, the CA should have dismissed the complaint because the real party which is the company is not included in the case. • Even the plaintiff’s argument that it was Vazquez contracted and who received the money from Borja was invalid and insufficient that the president of the corporation was personally liable. Even if the corporation was an artificial being by law, the mere fact that it is a legal fiction and only able to act through its agents, doesn’t make these agents liable.

• •

• • •

The RTC and CA held Vazquez negligent, but they are wrong. They have neglected to distinguish a contractual from an extra-contractual obligation. The fault under Art. 1101-1104 of the CC are those incidental to the fulfillment or nonfulfillment of contractual obligation. While the fault or negligence referred to in Art. 1902 is the culpa aquiliana of the civil law, w/c gives rise to obligation independent of any contract. The fact that the corporation acting thru Vazquez even if he is negligent will not make him liable whether principally or subsidiarily. SINCE IT WAS THE CORPORATION’S CONTRACT, THEN IT IS LIABLE. So, if outsidew of the contract, Vazquez by a negligent act caused damage to Borja, then he would be liable under Art.1902 CC. And Borja’s cause of action must be culpa aquiliana and not contract. By then, Vazquez would have been principally liable. As this was not alleged then the RTC could not have this in its jurisdiction.

WON the lower court’s refusal to entertain Vazuez’ s counterclaim for damagesin the lower courts against Borja was wrong NO Since the lower courts decided for Borja then naturally they wouldn’t grant Vazquez’s counterclaim fro damages for bringing this suit to court. The court found no sufficient reason to grant the claim. It didn’t warrant to his claim that the suit was malicious and tortuous against him, And although, from the legal point of view he wasn’t liable, the court said that it was in his moral duty to at least see the contract through. PAras, J. Dissenting It was his refusal to deliver the remaining obligations that warrant his negligence. But it was also his fault that his own negligence prevented the fulfillment of the obligation. And when he made the sale, he knew the corporation to be insolvent, and now dissolved. Since he owned a considerable part of the corporation, then if he isn’t punished, then he will profit from his own wrong.