Cerrano Vs Tan Chuco

CERRANO vs TAN CHUCO
FACTS:
1. Vivencio Cerrano rented a casco (boat) from Tan Chuco for P70 a month. There was no express agreement
as regards the duration of the contract. The rent was payable at the end of each month
2. Tan Chuco informed Cerrano that the boat would have to be dry-docked for maintenance. Cerrano offered to
rent the boat again, once maintenance was completed, for a higher fee of P80 a month. Cerrano claims that
Tan Chuco accepted.
3. After the maintenance work, Tan Chuco sold the boat to Siy Cong Bieng & Co.
4. Cerrano claimed he had the right to possession of the casco and adversely kept it from Siy Cong Bieng & Co.
by inducing Santos, an employee of Tan Chuco, to refuse delivery of the boat. Siy Cong Bieng & Co thus had
to file for a writ of replevin to gain possession of the casco. In that case, Cerrano was ordered to return the
casco and pay P453 as damages.
5. Cerrano then sued Tan Chuco for violating the terms of their lease contract when the latter sold the casco to
Sy Cong Bien. She prayed for damages due to lost profits caused by Tan Chuco reneging on his obligation
under the lease contract
6. RTC ruled in favor of Cerrano and ordered Tan Chuco to pay P600 plus the P453 damages in the replevin
suit. Hence this appeal by Tan Chuco.
ISSUES:
1. Was there a valid agreement between Cerrano and Tan Chuco whereby the latter would lease the casco
back to the former after dry-docking? Yes, there was a valid agreement
2. (MAIN ISSUE) Should actual damages be awarded to Cerrano based on unrealized income he would
have received had Tan Chuco not reneged on their agreement? Yes, but only P50, not P600 +453. First,
there’s no proof that there is a custom in the Port of Manila that in the absence of a stipulation, the
period of the rent should last until the next drydocking. Second, Tan Chuco shouldn’t be held liable
for the P453, because the proximate cause of the damage was Cerrano’s illegal act of withholding the
boat.
DISPOSITION: The judgment of the lower court is therefore reversed, and it is adjudged and decreed that the plaintiff
recover from defendant P50 as damages, and his costs in the Court of First Instance. No costs will be allowed in this
court. So ordered.
RULING + RATIO:
1. Yes, there was a valid agreement. The evidence sustains the conclusion of the lower court that it was
understood between the parties, when the casco was taken to Malabon in June, that Cerrano was to have it
again at the increased rental as soon as the contemplated repairs had been completed. That such was the
understanding is shown by the fact that:
a. Cerrano paid for the towage of the casco to the dry dock at Malabon;
b. that he left his equipment in it;
c. and that his patron stayed with the casco in Malabon during the time it was on the dock.
2. Yes. Cerrano is entitled to recover, as damages for the breach of the contract by the defendant, the profit
which he would have been able to make had the contract been performed. But only 50 pesos.
. He has testified, without contradiction, that the average net profit made by him from the casco in question
during the time it was in his possession was P60 a month. During this period he was paying rent for it at the rate of P70
a month.
a. Under the terms of the contract now under consideration he was to have paid P80 a month for it, which we
must assume would have reduced the profit to P50 a month.
b. Article 1106 of the Civil Code establishes the rule that prospective profits may be recovered as damages,
while article 1107 of the same Code provides that the damages recoverable for the breach of obligations not originating
in fraud (dolo) are those which were or might have been foreseen at the time the contract was entered into.
c. Applying these principles to the facts in this case, the court found that it is unquestionable that defendant must
be deemed to have foreseen at the time he made contract that in the event of his failure perform it, the plaintiff would
be damaged by the loss of the profit he might reasonably have expected to derive from its use.
d. But damages were awarded only for one month of lost profit because Cerrano’s claim that the
traditional period of a casco lease is 10 months was without basis, therefore they applied Article 1581 of the
old civil code which states that when there is no period specified in the lease, it shall be deemed to be on a
month to month basis. Hence, the award of only 50 pesos.
e. Serrano’s argument is that the rent lasts until the next time the casco has to be drydocked for maintenance,
which is around 10 months in the Port of Manila. SC found this argument untenable because there is no definite season
of the year where casco’s are drydocked and the time it takes for a casco to be sent for repairs varies with each owner.
A new vessel might last for more than a year before having to be drydocked, while others might just last a few months.
f. Lastly, Tan Chuco isn’t liable to pay P453 to Cerrano because Tan Chuco had nothing to do with the
replevin case. The Defendant is liable for the damages which he might have foreseen as those reasonably to
be anticipated as the natural and probable consequence of the breach of the contract, but the damages
suffered by plaintiff by reason of his voluntary assumption of the liability incurred by Santos by reason of his
unlawful attempt to withhold possession of the casco from its owners, by whom he was put in charge of it, are
not attributable to defendant and he is not responsible for them. The proximate cause of the loss incurred for
the unlawful acts of Santos was not the breach of his contract by defendant herein, but plaintiff's own
imprudence.

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