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Obligations and Contracts
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Obligation and Contracts (Cases)
SUBMITTED TO: Atty. Lulu Reyes SUBMITTED BY: Pic-it, Christian B. Aguilar, Joana Rose Balusdan, Septfonette Fe Belvis, Eunice Bondad, Nicole Y. Cortez, Kimberly Agniezka R. Datario, Mary Ruth V. De Guzman, Chanell Dolor D. Fango-ok, Cita C. (LL.B. I; Block B)
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Table of Contents Note: For Easy Navigation of Cases, Press Ctrl then click the case of choice. OCAMPO III. VS. PEOPLE ........................................................................................................................ 16 Leung Ben v. O'Brien ............................................................................................................................. 17 Pelayo v. Lauron .................................................................................................................................... 18 ASJ Corporation v. Sps. Evangelista ........................................................................................................ 20 RAMAS VS.QUIAMCO.............................................................................................................................. 21 Nikko Hotel Manila Garden v. Reyes ...................................................................................................... 22 St. Mary's Academy v. Carpitanos .......................................................................................................... 24 TSPI, INCORPORATION VS. TSPIC EMPLOYEES UNION ............................................................................ 26 REGINO VS. PCST ................................................................................................................................... 27 PSBA v. Court of Appeals ....................................................................................................................... 28 Cosmo Entertainment v. La Ville ............................................................................................................ 30 Ayala Corp. vs. Rosa Diana Realty .......................................................................................................... 31 Bricktown Development vs. Amor Tierra Development.......................................................................... 33 Sarte Flores v. Sps. Lindo ....................................................................................................................... 38 Philippine Realty and Holding Corp. v. Ley Const. and Dev. Corp. ........................................................... 40 Titan-Ikeda Construction v. Primetown Property ................................................................................... 42 PADCOM v. Ortigas................................................................................................................................ 44 MC Engineering v. Court of Appeals ....................................................................................................... 46 BPI v. Pineda.......................................................................................................................................... 48 State Investment v. CA .......................................................................................................................... 49 People v. Nurfrasir Hashim, et al............................................................................................................ 51 Abellana v. People ................................................................................................................................. 53 People v. Malicsi.................................................................................................................................... 56 People v. Sia .......................................................................................................................................... 58 People v. Doctolero ............................................................................................................................... 59 People v. Abulencia ............................................................................................................................... 61 Bermudez v. Melencio-Herrera.............................................................................................................. 62 People v. Relova .................................................................................................................................... 64 Manantan v. Court of Appeals ............................................................................................................... 65 People v. Bayotas .................................................................................................................................. 67 Barredo v. Garcia ................................................................................................................................... 69 Del Carmen, Jr. v. Geronimo Bacoy et.al ................................................................................................ 70 Ludo and Luym Corp. v. Court of Appeals .............................................................................................. 72 Thermochem v. Naval............................................................................................................................ 73 Philippine Hawk Corp. v. Lee.................................................................................................................. 75 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Dy Teban v. Ching .................................................................................................................................. 77 Safeguard Security v. Tangco ................................................................................................................. 78 Villanueva v. Domingo ........................................................................................................................... 79 Calalas v. Court of Appeals .................................................................................................................... 80 Picart v. Smith ....................................................................................................................................... 82 Durban apartments v. Pioneer Insurance ............................................................................................... 83 Lagon v. Hooven Comalco...................................................................................................................... 85 Francisco v. Court of Appeals ................................................................................................................. 87 Spouses Lorenzo G. Francisco and Lorenza D. Francisco, Petitioners, versus Honorable Court of Appeals, and Bienvenido C. Mercado, respondents.............................................................................................. 87 Tanguilig v. Court of Appeals. ................................................................................................................ 88 Periquet v. Court of Appeals .................................................................................................................. 90 Legaspi Oil v. Court of Appeals............................................................................................................... 92 Philippine Charter v. Central Colleges .................................................................................................... 93 Titan-Ikeda Construction v. Primetown Property ................................................................................... 95 PNB Madecor vs. Uy .............................................................................................................................. 96 Barzaga vs. Court of Appeals.................................................................................................................. 97 Tanguilig v Court of Appeals .................................................................................................................. 98 Tayag vs. Court of Appeals ..................................................................................................................... 99 Periquet v. Court of Appeals ................................................................................................................ 100 Raquel-Santos vs. Court of Appeals ..................................................................................................... 101 RCBC vs. Court of Appeals.................................................................................................................... 102 State Investment vs. Court of Appeals ................................................................................................. 103 BPI Investment vs. Court of Appeals .................................................................................................... 105 Leano vs. Court of Appeals .................................................................................................................. 106 Heirs of Bacus v. Court of Appeals ....................................................................................................... 107 Integrated Packaging Corp. v. Court of Appeals ................................................................................... 108 Laforteza v. Machuca .......................................................................................................................... 111 Regala v. Carin..................................................................................................................................... 113 International Corporate Bank v. Gueco ................................................................................................ 115 Republic v. CTA.................................................................................................................................... 117 Diaz v. Davao Light and Power Co. ....................................................................................................... 118 Yasona v. De Ramos............................................................................................................................. 119 Yambao v. Zuniga ................................................................................................................................ 122 Smith bell Corp v. Borja ....................................................................................................................... 123 Ilusorio v. Court of Appeals .................................................................................................................. 124 NPC v. Court of Appeals ....................................................................................................................... 126 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Muaje-Tuazon v. Verchez .................................................................................................................... 127 RCPI v. Verchez.................................................................................................................................... 128 Victory Liner v Gammad, 444 S 355 ..................................................................................................... 130 FGU v. Sarmiento, 386 S 355................................................................................................................ 131 LRTA v. Natividad ................................................................................................................................ 132 Rodzssen v. Far East Bank, 357 S 618 ................................................................................................... 134 UE v. Jader........................................................................................................................................... 136 Bayne Adjusters v. Court of Appeals .................................................................................................... 137 Delsan v. C & A Construction ............................................................................................................... 139 Philippine Commercial Bank v. Court of Appeals ................................................................................. 142 SMC v. Court of Appeals ...................................................................................................................... 144 Heirs of Ochoa v. G & S Transport Corp................................................................................................ 147 Pacis v. Morales................................................................................................................................... 148 Philippine Hawk Corporation v. Lee ..................................................................................................... 150 Mercury Drug Corp., v. Huang ............................................................................................................. 152 Mendoza v. Soriano ............................................................................................................................. 153 Cerezo v. Tuazon ................................................................................................................................. 155 Filcar Transport Services v. Espinas ...................................................................................................... 157 FEB Leasing v. Sps. Baylon ................................................................................................................... 160 Filipinas Synthetic v. De Los Santos ...................................................................................................... 163 Viron v. De Los Santos ......................................................................................................................... 164 Mercury Drug v. Baking ....................................................................................................................... 166 Safeguard Security v. Tangco ............................................................................................................... 168 Pleyto v. Lomboy ................................................................................................................................. 171 SYKL VS. BEGASA ................................................................................................................................. 173 Yambao v. Zuniga ................................................................................................................................ 175 Mindanao Terminal v. Phoenix ............................................................................................................ 178 YHT Realty v. CA .................................................................................................................................. 180 Ramos v. CA ........................................................................................................................................ 181 Reyes v. Sister of Mercy ....................................................................................................................... 184 Nogales v. Capitol Medical Center ....................................................................................................... 186 Professional Services v. Agana ............................................................................................................. 188 Professional Services v. CA .................................................................................................................. 190 Cantre v. Sps. Go ................................................................................................................................. 191 Dr. Rubi Li v. Sps Soliman ..................................................................................................................... 193 People v. Delos Santos......................................................................................................................... 195 L.G. Foods v. Agraviador ...................................................................................................................... 196 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Magat v. Medialdea............................................................................................................................. 198 Vda. De Mistica v. Naguiat ................................................................................................................... 199 Co v. Court of Appeals ......................................................................................................................... 200 Heirs of Quirong v. DBP ....................................................................................................................... 202 Heirs of Gaite v. The Plaza ................................................................................................................... 204 Solar Harvest Incorporated vs. Davao Corrugated ................................................................................ 207 Reyes v. Tuparan ................................................................................................................................. 209 G.G. Sportwear Mfg. Corp v. World Class Properties, Inc. .................................................................... 211 Movido v. Reyes Pastor ....................................................................................................................... 213 Spouse Tongson v. Emergency Pawnshop ............................................................................................ 214 Sanz Maceda v. DBO ............................................................................................................................ 216 Raquel-Santos v. CA............................................................................................................................. 218 Francisco v. DEAC Const. Inc. ............................................................................................................... 220 Cannu V. Galang .................................................................................................................................. 222 Villanueva v. Estate of Gonzaga ........................................................................................................... 224 Paguyo v. Astorga ................................................................................................................................ 226 Casino v. CA......................................................................................................................................... 228 Carrascoso v. CA .................................................................................................................................. 230 Goldenrod v. CA .................................................................................................................................. 233 Serrano v. CA....................................................................................................................................... 236 Gil v. Court of Appeals ......................................................................................................................... 236 Reyes v. Lim ........................................................................................................................................ 238 Ong v. Tui ............................................................................................................................................ 239 Equatorial Realty v. Mayfair Theater .................................................................................................... 241 Velarde v. CA ....................................................................................................................................... 243 Asuncion v. Evangelista ....................................................................................................................... 244 Uy v. Court of Appeals ......................................................................................................................... 246 Tamayo et al. v. Abad Senora .............................................................................................................. 248 Tan v. OMC Carriers............................................................................................................................. 249 Victory liner v. Heirs ............................................................................................................................ 251 GSIS v. Labung-Deang .......................................................................................................................... 253 BPI Investment v. D.G. Carreon ............................................................................................................ 255 Khe Hong v. Court of Appeals .............................................................................................................. 256 Philippine Realty v. Ley Const. and Dev. Corp....................................................................................... 258 Megaworld Globus Asia, Inc. v. Tanseco .............................................................................................. 259 Sicam v. Jorge ...................................................................................................................................... 260 Huibonhoa v. Court of Appeals ............................................................................................................ 262 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Ace Agro v. Court of Appeals ............................................................................................................... 263 Dioquino v. Laureano.......................................................................................................................... 265 Bachelor Express v. Court of Appeals ................................................................................................... 266 Vasquez v. Court of Appeals ................................................................................................................ 267 Yobido v. Court of Appeals .................................................................................................................. 268 Juntilla v. Fontanar .............................................................................................................................. 270 Philamgen Insurance v. MGG Marine................................................................................................... 271 Mindex v. Morillo ................................................................................................................................ 273 NAPOCOR v. Phillip Bros. ..................................................................................................................... 275 Ong Genato v. Bayhon, et al. ............................................................................................................... 278 Union Bank v. Santibanez .................................................................................................................... 279 San Agustin v. Court of Appeals ........................................................................................................... 281 Project Builders, Inc. v. Court of Appeals ............................................................................................. 282 Hong Kong and Shanghai Bank v. Sps. Broqueza .................................................................................. 283 DBP v. Court of Appeals ....................................................................................................................... 285 Tomimbang v. Tomimbang .................................................................................................................. 287 Gonzales v. Heirs ................................................................................................................................. 288 Insular Life v. Young............................................................................................................................. 290 Direct Funders v. Lavina....................................................................................................................... 291 Vda. De Mistica v. Naguiat ................................................................................................................... 292 Hermosa v. Longara............................................................................................................................. 293 Trillana v. Quezon Colleges .................................................................................................................. 294 Visayan Sawmill v. Court of Appeals .................................................................................................... 295 Leano v. Court of Appeals .................................................................................................................... 296 De Leon v. Ong .................................................................................................................................... 297 Heirs of Sandejas v. Lina ...................................................................................................................... 298 CIR v. Primetown ................................................................................................................................. 299 NAMARCO v. Tecson ........................................................................................................................... 301 Berg v. Magdalena Estates ................................................................................................................... 302 Lirag v. Court of Appeals ...................................................................................................................... 304 Daguhoy v. Ponce ................................................................................................................................ 306 Victoria Planters v. Victoria Milling ...................................................................................................... 307 Jespajo v. CA........................................................................................................................................ 308 Borromeo v. Court of Appeals ............................................................................................................. 309 Gonzales v. Jose .................................................................................................................................. 310 Baluyut v. Poblete ............................................................................................................................... 311 Malayan Realty v. Uy ........................................................................................................................... 313 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Kasapian ng Manggagawa ng Coca-cola v. Court of Appeals................................................................. 314 Santos vs. Santos ................................................................................................................................. 315 Melotindos v. Tobias ........................................................................................................................... 318 LL and Co. v. Huang ............................................................................................................................. 319 Brent School v. Zamora........................................................................................................................ 322 Lim v. People ....................................................................................................................................... 322 Pacific Banking v. Court of Appeals ...................................................................................................... 323 Agoncillo v. Javier ................................................................................................................................ 325 Ong Guan v. Century ........................................................................................................................... 327 Legarda v. Miailhe ............................................................................................................................... 328 Reyes v. Martinez ................................................................................................................................ 329 Quizana v. Redugerio........................................................................................................................... 330 Marsman v. Philippine Geoanalytics .................................................................................................... 331 Alipio v. Court of Appeals .................................................................................................................... 333 PH Credit Corp. v. Court of Appeals ..................................................................................................... 334 CDCP VS ESTRELLA ............................................................................................................................... 336 Republic Glass Corp. v. Qua ................................................................................................................. 337 Industrial Management v. NLRC........................................................................................................... 338 Metro Manila Transit Corp. v. Court of Appeals ................................................................................... 339 Inciong v.Court of Appeals ................................................................................................................... 341 Philippine Blooming Mills v. Court of Appeals ...................................................................................... 344 Queensland-Tokyo v. George............................................................................................................... 346 Shrimp Specialist, Inc., v. Fuji Triumph ................................................................................................. 348 Asset Builders v. Stronghold ................................................................................................................ 350 Eparwa Secutrity v. Liceo de Cagayan .................................................................................................. 352 Carlos Dimayuga v.PCIB ....................................................................................................................... 354 Cerna v. Court of Appeals .................................................................................................................... 356 Nazareno v. Court of Appeals .............................................................................................................. 358 Alonzo v. San Juan ............................................................................................................................... 359 David v. Court of Appeals .................................................................................................................... 361 RP v. Thi Thu Thuy ............................................................................................................................... 361 Marques v. Far East Bank..................................................................................................................... 364 Prisma Construction v. Menchavez ...................................................................................................... 366 Macalalag v. People ............................................................................................................................. 367 Tan v. Court of Appeals........................................................................................................................ 369 Eastern Shipping v. Court of Appeals ................................................................................................... 370 PCI vs Ng Shueng Ngor......................................................................................................................... 372 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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NSBC v. PNB ........................................................................................................................................ 374 Polotan v. Court of Appeals ................................................................................................................. 375 NSBC v. PNB ........................................................................................................................................ 377 Estores v. Sps Supangan ...................................................................................................................... 379 Hung v. BPI Card .................................................................................................................................. 381 Marques v. Far East Bank..................................................................................................................... 383 Land Bank v. Ong ................................................................................................................................. 385 RGM Industries v. United Pacific .......................................................................................................... 386 Prisma Industries v. United Pacific ....................................................................................................... 388 Maceda, Jr. v. DBO .............................................................................................................................. 389 PNB v. Encina ...................................................................................................................................... 391 Imperial v. Jaucian ............................................................................................................................... 393 Pabugais v. Sahijwani .......................................................................................................................... 395 Lo v. Court of Appeals .......................................................................................................................... 397 Ligutan v. Court of Appeals .................................................................................................................. 400 Pascual v. Ramos ................................................................................................................................. 402 First Metro Investment v. Este Del Sol ................................................................................................. 403 Domel Trading v. Court of Appeals ...................................................................................................... 405 Medel v. Court of Appeals ................................................................................................................... 407 Reformina v. Tomol ............................................................................................................................. 409 Lo v. KJH .............................................................................................................................................. 411 PNB v. Court of Appeals ....................................................................................................................... 412 Cathay Pacific Airways v. Vazquez..................................................................................................... 413 Citibank v. Sabeniano .......................................................................................................................... 414 Telengton Bros. v. US Lines .................................................................................................................. 415 C.F. Sharp
v. Northwest Airlines .................................................................................................... 416
Padilla v. Paredes ................................................................................................................................ 417 Tibajia v. Court of Appeals ................................................................................................................... 418 DBP v. Court of Appeals ....................................................................................................................... 419 Vitarich vs. Losin.................................................................................................................................. 421 Metrobank vs. Cabilzo ......................................................................................................................... 422 Almeda v. Bathala Marketing............................................................................................................... 424 PCI vs Ng Shueng Ngor......................................................................................................................... 426 Palanca v. Guides ................................................................................................................................ 427 PCIB v. Court of Appeals ...................................................................................................................... 428 Lagon v. Hooven Comalco.................................................................................................................... 429 BPI v. Court of Appeals ........................................................................................................................ 431 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Republic v. Thi Thu Thuy De Guzman ................................................................................................... 432 Audion Electric v. NLRC........................................................................................................................ 433 Land Bank of the Philippines v. Ong ..................................................................................................... 435 Binalbagan v. CA .................................................................................................................................. 437 Lorenzo Shipping v. BJ Marthel ............................................................................................................ 438 Luzon Development Bank v. Enriquez .................................................................................................. 439 Estanislao v. East-West Bank Corp. ...................................................................................................... 441 Aquintey v. Tibong............................................................................................................................... 442 Vda de Jayme v. CA.............................................................................................................................. 443 Caltex v IAC ......................................................................................................................................... 444 Lo v. Court of Appeals .......................................................................................................................... 446 ASI Corp. v. Evangelista........................................................................................................................ 447 Paculdo v. Regalado ............................................................................................................................ 448 CBC v. Court of Appeals ....................................................................................................................... 449 Mobil v. Court of Appeals .................................................................................................................... 450 Dalton v. FGR Realty and Development Corp. ...................................................................................... 451 Benos v. Lawilao .................................................................................................................................. 452 People’s Industrial v. Court of Appeals................................................................................................. 453 Eternal Gardens v. Court of Appeals .................................................................................................... 454 Rayos v. Reyes ..................................................................................................................................... 455 Cebu International v. Court of Appeals ................................................................................................ 456 De Mesa v. Court of Appeals ................................................................................................................ 457 Occena v. Court of Appeals .................................................................................................................. 458 Ortigas v. Feati Bank ............................................................................................................................ 459 So v. Food Fest Land, Inc. ..................................................................................................................... 460 Magat v. Court of Appeals ................................................................................................................... 462 PNCC v. Court of Appeals..................................................................................................................... 463 NATELCO v. Court of Appeals ............................................................................................................... 465 Reyna v. COA ....................................................................................................................................... 466 Trans Pacific v. Court of Appeals .......................................................................................................... 467 Dalupan v. Harden ............................................................................................................................... 468 Lopez Vito v. Tambunting .................................................................................................................... 469 Estate of Mota v. Serra ........................................................................................................................ 470 Yek Ton Lin v. Yusingco ........................................................................................................................ 471 EGV Realty v. Court of Appeals ............................................................................................................ 472 Aerospace Chemical v. Court of Appeals .............................................................................................. 473 Apodaca v. NLRC ................................................................................................................................. 474 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Sps Chung v. Ulanday Construction ...................................................................................................... 475 Insular Investment v. Capital One ........................................................................................................ 476 Lao, et al. v. Special Plans Inc. .............................................................................................................. 477 United Planters Sugar v. Court of Appeals............................................................................................ 478 PNB Management v. R&R Metal .......................................................................................................... 479 Silahis Marketing Corp. v. IAC .............................................................................................................. 480 Francia v. IAC ....................................................................................................................................... 482 Trinidad v. Acapulco ............................................................................................................................ 484 Heirs of Franco v. Sps. Gonzales........................................................................................................... 486 Hernandez-Nievera v. Hernandez ........................................................................................................ 488 St. James College of Paranaque v. Equitable PCI .................................................................................. 489 Tomimbang v. Tomimbang .................................................................................................................. 490 Mindanao Savings and Loan Association, Inc. v. Willkom ..................................................................... 491 Aquintey v. Sps. Tibong ....................................................................................................................... 493 Loadmasters Customs Services, Inc. v. Glodel Brokerage Corp. ............................................................ 495 Metropolitan Bank v. Rural Bank of Gerona ......................................................................................... 497 Swagman Hotels and Travel, Inc. v. Court of Appeals ........................................................................... 498 Yuseco v. Court of Appeals .................................................................................................................. 500 California bus lines, inc. V. State investment house, Inc. ...................................................................... 502 Ocampo-Paule v. Court of Appeals ...................................................................................................... 504 Reyes v. Court of Appeals .................................................................................................................... 505 Sps. Bautista v. Pilar Development Corp. ............................................................................................. 506 Evadel Realty and Development Corp. v. Sps. Soriano .......................................................................... 509 Villeza v. German Management and Services, Inc. ............................................................................... 511 Insurance of the Philippine Islands Corp. v. Sps. Gregorio .................................................................... 512 Mariano v. Petron Corp. ...................................................................................................................... 514 Sps. Bernales v. Heirs of Sambaan ....................................................................................................... 515 B & I Realty Co. v. Caspe ...................................................................................................................... 517 Mesina v. Garcia .................................................................................................................................. 519 Laureano v. Court of Appeals ............................................................................................................... 523 Banco Filipino v. Court of Appeals........................................................................................................ 524 Vda. De Delgado v. Court of Appeals.................................................................................................... 525 Maestrado v. Court of Appeals ............................................................................................................ 527 F.A.T. Kee Computer System v. Online Networks International ............................................................ 528 Tanay Recreation Center v. Fausto ...................................................................................................... 530 Mendoza v. Court of Appeals ............................................................................................................... 532 Lim v. Queensland Tokyo Commodities ............................................................................................... 533 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Placewell International v. Camote ....................................................................................................... 535 Heirs of Ragua v. Court of Appeals ....................................................................................................... 537 Metrobank v. Court of Appeals ............................................................................................................ 539 Sps. Del Ocampo v. Court of Appeals ................................................................................................... 540 Cuenco v. Vda. De Manguerra ............................................................................................................. 541 Laurel v. Desierto ................................................................................................................................ 543 Hanopo v. Shoemart Incorporated....................................................................................................... 545 Terminal Facilities v. PPA ..................................................................................................................... 547 Mendoza v. Court of Appeals ............................................................................................................... 549 Marques v. Far East Bank..................................................................................................................... 552 Roblett Construction v. CA ................................................................................................................... 553 Simedarby v. Goodyear ....................................................................................................................... 555 Far East Bank v. Borja .......................................................................................................................... 557 Kings Properties Corporation, Inc. v. Galido ......................................................................................... 558 Metrobank v. Cabilzo........................................................................................................................... 560 Mesina v. Garcia .................................................................................................................................. 562 Pahamotang v. PNB ............................................................................................................................. 564 Shopper's Paradise v. Roque ................................................................................................................ 565 Meatmasters v. Lelis Integrated........................................................................................................... 567 Larena v. Mapili ................................................................................................................................... 568 Santos v. Santos .................................................................................................................................. 570 Villanueva- Mijares v. CA ..................................................................................................................... 572 Garcia v. Villar ..................................................................................................................................... 573 Sps. Edralin v. Phil. Veterans Bank ....................................................................................................... 574 University Physicians’ Services v. Marian Clinics................................................................................... 576 Martin, et al. v. DBS Bank Philippines, Inc., et al., ................................................................................. 577 Heirs of Zabala, et al. v. CA .................................................................................................................. 581 Duncan v. Glaxo................................................................................................................................... 582 Star Paper v. Simbol ............................................................................................................................ 584 Tiu v. Platinum Plans ........................................................................................................................... 587 Avon Cosmetics v. Luna ....................................................................................................................... 588 Del Castillo v. Richmond ...................................................................................................................... 590 Arwood v. DM Consunji ....................................................................................................................... 591 Sps. Tecklo v. Rural Bank of Pamplona ................................................................................................. 593 Banate v. Phil. Countryside .................................................................................................................. 594 Pascual v. Ramos ................................................................................................................................. 597 GQ Garments v. Miranda ..................................................................................................................... 601 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Bercero v. Capitol Development .......................................................................................................... 605 Hemedes v. CA .................................................................................................................................... 606 PUP v. Golden Horizon......................................................................................................................... 609 Villegas v. CA ....................................................................................................................................... 612 Equatorial Realty v. Carmelo................................................................................................................ 613 PUP v. CA ............................................................................................................................................ 616 Litonjua v. L and R ............................................................................................................................... 617 Josefa v Zhandong ............................................................................................................................... 621 Saludo v. Security Bank ........................................................................................................................ 623 PCI v. Ng Sheung Ngor ......................................................................................................................... 625 Dio v. St. Ferdinand Memorial ............................................................................................................. 628 PILTEL v. Tecson .................................................................................................................................. 632 PAL v. CA ............................................................................................................................................. 634 Ermitano v. CA..................................................................................................................................... 636 Uniwide v. Titan-Ikeda ......................................................................................................................... 639 Heirs of Salas v. Laperal ....................................................................................................................... 643 Medrano v. CA..................................................................................................................................... 645 Tan v. Gullas ........................................................................................................................................ 648 Gozun v. Mercado ............................................................................................................................... 651 Sta. Lucia Realty vs. Sps. Buenaventura ............................................................................................... 652 Chan v. Maceda ................................................................................................................................... 656 Baluyot vs. CA...................................................................................................................................... 661 Cuyco v Cuyco ..................................................................................................................................... 663 Go, doing business under the name and style of “ACG Express Liner” v Cordero .................................. 664 Tayag vs. CA ........................................................................................................................................ 667 So vs. CA.............................................................................................................................................. 669 International Freeport v. Danzas.......................................................................................................... 672 Rockland V Mid-Pasig Development .................................................................................................... 676 MMDA v. JANCOM .............................................................................................................................. 679 Rockland V Mid-Pasig Development .................................................................................................... 681 Manila Metal v. PNB ............................................................................................................................ 682 Montecillo v. Reynes ........................................................................................................................... 685 Soler v CA ............................................................................................................................................ 687 Palattao vs. CA .................................................................................................................................... 689 ABS-CBN v. CA ..................................................................................................................................... 692 Limson v. CA ........................................................................................................................................ 694 Villanueva v. PNB................................................................................................................................. 696 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Catalan v. Basa .................................................................................................................................... 699 Domingo v. CA ..................................................................................................................................... 702 Mendozana v. Ozamiz ......................................................................................................................... 704 Lim v. CA ............................................................................................................................................. 705 Ruiz v. CA ............................................................................................................................................ 706 Dela Cruz v. Sison ................................................................................................................................ 711 Rural Bank of Sta. Maria v. CA.............................................................................................................. 713 Carabeo v. Sps. Dingco ........................................................................................................................ 716 Melliza v. City of Iloilo.......................................................................................................................... 717 Catindig v. Vda. De Meneses................................................................................................................ 720 Orduna, et al. v. Fuentabella................................................................................................................ 722 Brobio Mangahas v. Brobio.................................................................................................................. 724 Golden Apple Realty v. Sierra Grande Realty........................................................................................ 726 Askay v. Cosalan .................................................................................................................................. 729 Heirs of Balite v. Lim ............................................................................................................................ 731 Suntay v. CA ........................................................................................................................................ 732 Uy v. Court of Appeals ......................................................................................................................... 734 Pentacapital v. Makilito Mahinay ......................................................................................................... 736 Heirs of Gaite v. The Plaza ................................................................................................................... 737 Catly v. Navarro, et al. ......................................................................................................................... 740 Liguez v. CA ......................................................................................................................................... 742 Philbank v. Lui She ............................................................................................................................... 743 Londres v. CA....................................................................................................................................... 744 Sps. Vega v. SSS ................................................................................................................................... 745 Balatbat v. Court of Appeals ................................................................................................................ 746 Universal Robina v. Heirs of Teves ....................................................................................................... 748 Sarming v. Dy ...................................................................................................................................... 749 Cebu v. Court of Appeals ..................................................................................................................... 751 ADR Shipping v. Gallardo ..................................................................................................................... 751 Movido v. Pastor ................................................................................................................................. 752 TSPIC Corp. v. TSPIC Employees Union ................................................................................................. 754 Estanislao v. East-West Banking Corp. ................................................................................................. 755 Aquintey v. Tibong............................................................................................................................... 756 Cruz vs. Court of Appeals ..................................................................................................................... 757 Gonzales v. Court of Appeals ............................................................................................................... 759 Almira v. Court of Appeals ................................................................................................................... 761 Philbank v. Lim .................................................................................................................................... 763 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Rigor v. Consolidated Leasing .............................................................................................................. 765 Heirs of Quiring v. DBP ........................................................................................................................ 768 Lee v. Bangkok Bank ............................................................................................................................ 770 Equatorial Realty v. Mayfair Theater .................................................................................................... 771 Siguan v. Lim ....................................................................................................................................... 773 Khe Hong v. Court of Appeals .............................................................................................................. 775 Suntay v. Court of Appeals ................................................................................................................... 777 Brobio Mangahas v. Brobio.................................................................................................................. 779 Hernandez v. Hernandez ..................................................................................................................... 781 Fuentes, et al v. Roca ........................................................................................................................... 782 Associated Bank v. Sps. Montano ........................................................................................................ 784 Miailhe v. Court of Appeals.................................................................................................................. 785 First Philippine Holdings v. Trans Middle East ...................................................................................... 786 Sanchez v. Mapalad Realty .................................................................................................................. 787 Oesmer v. PDC..................................................................................................................................... 788 Vda. De Ape v. Court of Appeals .......................................................................................................... 789 Francisco v. Herrera............................................................................................................................. 790 Braganza v. Villa Abrille ....................................................................................................................... 791 Katipunan v. Katipunan ....................................................................................................................... 792 Jumalon v. Court of Appeals ................................................................................................................ 793 Cabales v. Court of Appeals ................................................................................................................. 793 VDA. DE OUANO v. RP ......................................................................................................................... 795 SHOEMAKER v. LA TONDEÑA ............................................................................................................... 796 PNB v. PHILIPPINE VEGETABLE OIL CO., INC., ....................................................................................... 797 VDA. DE OUANO v. RP ......................................................................................................................... 798 THE MUNICIPALITY OF HAGONOY, BULACAN v. DUMDUM, JR. ............................................................ 800 Sps. Tan v. Villapaz .............................................................................................................................. 801 Sps. David v. Tiongson ......................................................................................................................... 802 Cordial v. Miranda ............................................................................................................................... 804 Villanueva-Mijares v. Court of Appeals ................................................................................................ 805 Rosencor v. Inquing ............................................................................................................................. 808 Firme v. UKAL ...................................................................................................................................... 810 Heirs of M. Doronio v. Heirs of F. Doronio ........................................................................................... 811 Gurrea v. Suplico ................................................................................................................................. 812 Frenzel v. Catito................................................................................................................................... 813 La Buga'al-Blaan v. Ramos ................................................................................................................... 814 Agan v. PIATCO.................................................................................................................................... 815 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
15
COMELEC v. Quijano-Padilla ................................................................................................................ 816 Jaworski v. PAGCOR ............................................................................................................................. 818 Oesmer v. PDC..................................................................................................................................... 819 Heirs of Balite v. Lim ............................................................................................................................ 819 Pineda v. CA ........................................................................................................................................ 824 Cruz v. Bancom .................................................................................................................................... 827 Cuaton v. Salud ................................................................................................................................... 831 Infotech v. COMELEC ........................................................................................................................... 833 Pabugais v. Sahijwan ........................................................................................................................... 837 Liguez v. CA ......................................................................................................................................... 841 Philbank v. Lui She ............................................................................................................................... 842 Vigilar v. Aquino .................................................................................................................................. 845 EPG Construction v. Vigilar .................................................................................................................. 848 Go Chan v. Young ................................................................................................................................ 851 Francisco v. Herrera............................................................................................................................. 853 Mendezona v. Ozamiz ......................................................................................................................... 855 Manzanilla v. Court of Appeals ............................................................................................................ 856 Rural Bank of Paranaque v. Remolado ................................................................................................. 858 Republic v. Cojuangco.......................................................................................................................... 860 Ringor v. Ringor ................................................................................................................................... 864 Salvador v. Court of Appeals ................................................................................................................ 866 Huang v. Court of Appeals ................................................................................................................... 867 Vda. De Esconde v. Court of Appeals ................................................................................................... 869 Medina v. Court of Appeals ................................................................................................................. 873 Filipinas Port v. Go............................................................................................................................... 874 Mendizabel v. Apao ............................................................................................................................. 875 Heirs of Yap v. Court of Appeals ........................................................................................................... 877 Heirs of Kionisala v. Heirs of Dacut ...................................................................................................... 879 Ramos v. Ramos .................................................................................................................................. 881 Ty v. Court of Appeals .......................................................................................................................... 883 Vda. De Retuerto v. Barz ...................................................................................................................... 884 Chia Liong Tan v. Court of Appeals ....................................................................................................... 886 O'laco v. Co Cho Chit ........................................................................................................................... 888
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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OCAMPO III. VS. PEOPLE MARIANO UN OCAMPO III, Petitioner, versus PEOPLE OF THE PHILIPPINES, Respondent. G.R. Nos. 156547-51, 2008 Feb 6, 1st Division AZCUNA, J.: FACTS: The Department of Budget and Management(DBM) released the amountof Php 100 Million for the support of the local government unit of the province of Tarlac. However, petitioner Ocampo, governor of Tarlac,loaned out more than P 56.6 million in which he contracted with Lingkod Tarlac Foundation, Inc., thus, it was the subject of 25 criminal charges against the petitioner. Th e S a n d i g a n b a y a n c o n v i c t e d t h e p e t i t i o n e r o f t h e c r i m e o f malversation of public funds. However, the petitioner contended that the loan was private in character since it was a loan contracted with the Taralc Foundation.
ISSUE: Whether or not the amount loaned out was private in nature.
HELD: Yes, the loan was private in nature because Art. 1953 of the NewCivil Code provides that ―a person who receives a loan of money or anyother fungible thing acquires the ownership thereof, and is bound to paythe creditor an equal amount of the same kind and quality.‖ The fact that the petitioner-Governor contracted the loan, the publicfund changed its nature to private character, thus it is not malversation which is the subject of this case, instead it must be a simple collection of money suit against the petitioner in case of non payment . Therefore, thepetitioner is acquitted for the crime of malversation.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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Leung Ben v. O'Brien LEUNG BEN; plaintiff, VS. P. J. O‟BRIEN, JAMES A. OSTRAND and GEO. R. HARVEY, Judgesof First Instance of the City of Manila, defendants April 6, 1918 FACTS: On December 12, 1917, an action was instituted in the Court of First Instance of Manila by P.J. O‘Brien to recover of Leung Ben the sum of P15, 000, all a l l e g e d t o h a v e b e e n l o s t b y t h e p l a i n t i f f t o t h e d e f e n d a n t i n a s e r i e s o f gambling, banking, and percentage games conducted during the two or three months prior to the institution of the suit. The plaintiff asked for an attachment against the property of the defendant, on the ground that the latter was about to depart from the Philippines with intent to defraud his creditors. This attachment was issued. The provision of law under which this attachment was issued requires that there should be a cause of action arising upon contract, express or implied. The contention of the petitioner is that the statutory action to recover money lost at gaming is not such an action as is contemplated in this provision, and he insists that the original complaint shows on its face that the remedy of attachment is not available in aid thereof; that the Court of First Instance acted in excess of its jurisdiction in granting the writ of attachment; that the petitioner has no plain, speedy, and adequate remedy by appeal or otherwise; and that consequently the writ of certiorari supplies the appropriate remedy for this relief.
ISSUE: Whether or not the statutory obligation to restore money won at gaming is an obligation arising from contract, express or implied.
HELD: Yes. In permitting the recovery money lost at play, Act No. 1757 has introduced modifications in the application of Articles 1798, 1801, and 1305 of the Civil Code. The first two of these articles relate to gambling contracts, while article 1 3 0 5 t r e a t s o f t h e n u l l i t y o f c o n t r a c t s p r o c e e d i n g f r o m a v i c i o u s o r i l l i c i t consideration. Taking all these provisions together, it must be apparent that the obligation to return money lost at play has a decided affinity to contractual obligation; and the Court believes that it could, without violence to the doctrines of the civil law, be held that such obligations is an innominate quasi-contract. It is however, unnecessary to place the decision on this ground. In the opinion of the Court, the cause of action stated in the compla int in the court below is based on a contract, express or implied, and is therefore of such nature that the court had authority to issue the writ of attachment. The Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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application for the writ of certiorari must therefore be denied and the proceedings dismissed.
Pelayo v. Lauron Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
19
ARTURO PELAYO, plaintiff-appellant VS. MARCELO LAURON, defendantappellee 12 Phil 453 January 12, 1909 FACTS: On November 23, 1906, Arturo Pelayo, a physician, filed a complaint against Marcelo and Juana Abella. He alleged that on October 13, 1906 at night, Pelayo was called to the house of the defendants to assist their daughter-in-law who was about to give birth to a child. Unfortunately, the daughter-in-law died as a consequence of said childbirth. Thus, the defendant refuses to pay. The d e f e n d a n t s a r g u e t h a t t h e i r d a u g h t e r - i n - l a w l i v e d w i t h h e r h u s b a n d independently and in a separate house without any relation, that her stay there was accidental and due to fortuitous event.
ISSUE: W h e t h e r o r n o t t h e d e f e n d a n t s s h o u l d b e h e l d l i a b l e
f o r t h e f e e s demanded by the plaintiff upon rendering medical assistance to the defendants‘ daughter-in-law. HELD: No. The Court held that the rendering of medical assistance is one of the o b l i g a t i o n s t o w h i c h s p o u s e s a r e b o u n d b y m u t u a l s u p p o r t , e x p r e s s l y determined by law and readily demanded. Therefore, there was no obligation on the part of the in-laws but rather on the part of the husband who is not a party. Thus, decision affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
20
ASJ Corporation v. Sps. Evangelista ASJ CORPORATION and ANTONIO SAN JUAN, Petitioners, versus SPS. EFREN & MAURA EVANGELISTA, Respondents., G.R. No. 158086, 2008 Feb 14, 2nd Division QUISUMBING, J.: FACTS: Private respondent Evangelista contracted P e t i t i o n e r A S J Corporation for the incubation and hatching of eggs and by products owned by Evangelista Spouses. The contract includes the scheduled payments of the service of ASJ Corporation that the amount of installment s h a l l b e p a i d a f t e r t h e d e l i v e r y o f t h e c h i c k s . H o w e v e r , t h e A S J Corporation detained the chicks because Evangelista Spouses failed to pay the installment on time.
ISSUE: W h e t h e r o r n o t t h e d e t e n t i o n o f t h e a l l e g e d c h i c k s v a l i d a n d recognized under the law.
HELD: N o , b e c a u s e A S J C o r p o r a t i o n m u s t g i v e d u e t o t h e E v a n g e l i s t a Spouses in paying the installment, thus, it must not delay the delivery of the chicks. Thus, under the law, they are obliged to pay damages with each other for the breach of the obligation. Therefore, in a contract of service, each party must be in good faith i n t h e p e r f o r m a n c e o f t h e i r o b l i g a t i o n , t h u s w h e n t h e p e t i t i o n e r h a d detained the hatched eggs of the respondents spouses, it is an implication of putting prejudice to the business of the spouses due to the delay of paying installment to the petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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RAMAS VS.QUIAMCO NESTO RAMAS UYPITCHING and RAMAS UYPITCHING SONS, INC., Petitioners, versus ERNESTO QUIAMCO, Respondent., G.R. No. 146322, 2006 Dec 6, 2nd Division CORONA, J.: FACTS: Q u i a m c o has amicably settled with Davalan, G a b u t e r o a n d Generoso for the crime of robbery and that in r e t u r n , t h e t h r e e h a d surrendered to Quiamco a motorcycle with its registration. However, Atty. Ramas has sold to Gabutero the motorcycle in installment but when the latter did not able to pay the installment, Davalon continued the payment but when he became insolvent, he said that the motorcycle was taken by Q u i a m c o ‘ s m e n . H o w e v e r , a f t e r s e v e r a l y e a r s , t h e p e t i t i o n e r R a m a together with policemen took the motorcycle without the respondent‘s permit and shouted that the respondent Quiamco is a thief of motorcycle. Respondent then filed an action for damages against petitioner alleging t h a t p e t i t i o n e r i s l i a b l e f o r u n l a w f u l t a k i n g o f t h e m o t o r c y c l e a n d utterance of a defamatory remark and filing a baseless complaint. Also, p e t i t i o n e r s claim that they should not be held liable for petitioner‘s exercise of its right as seller -mortgagee to recover the m o r t g a g e d motorcycle preliminary to the enforcement of its right to foreclose on the mortgage in case of default.
ISSUE: Whether or not the act of the petitioner is correct.
HELD: No. The petitioner being a lawyer must know the legal procedure for the recovery of possession of the alleged mortgaged property in which said procedure must be conducted through judicial action. Furthermore, t h e petitioner acted in malice and intent to cause damage to the respondent when even without probable cause, he still instituted an act against the law on mortgage.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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Nikko Hotel Manila Garden v. Reyes NIKKO HOTEL MANILA GARDEN AND RUBY LIMVS. ROBERTO REYES a.k.a. “AMAY BISAYA” G.R. No. 154259 2005 Feb 28 FACTS: In the evening of October 13, 1994, while drinking coffee at the lobby of Hotel Nikko, respondent was invited by a friend, Dr. Filart to join her in a party in celebration of the birthday of the hotel‘s manager. During the party and when respondent was lined-up at the buffet table, he was stopped by Ruby Lim, the Executive Secretary of the hotel, and asked to leave the party. Shocked and embarrassed, he tried to explain that he was invited by Dr. Filart, who was h e r s e l f a g u e s t . N o t l o n g a f t e r , a M a k a t i p o l i c e m a n a p p r o a c h e d h i m a n d escorted him out of her party. Ms. Lim admitted having asked respondent to leave the party but not under the ignominious circumstances painted by Mr. Reyes, that she did the act politely and discreetly. Mindful of the wish of the celebrant to keep the party intimate and exclusive, she spoke to the respondent herself when she saw him by the buffet table with no other guests in the immediate vicinity. She asked him to leave the party after he finished eating. After she had turned to leave, the latter screamed and made a big scene. Dr. Filart testified that she did not want the celebrant to think that she invited Mr. Reyes to the party. Respondent filed an action for actual, moral and/or exemplary damages and attorney‘s fees. The lower court dismissed the complaint. On appeal, the Court of Appeals reversed the HELD of the trial court, consequently imposing upon Hotel Nikko moral and exemplary damages and attorney‘s fees. On motion for reconsideration, the Court of Appeals affirmed its decision. Thus, this instant petition for review.
ISSUES: Whether or not Ms. Ruby Lim is liable under Articles 19 and 21 of the Civil C o d e i n a s k i n g M r . R e y e s t o l e a v e t h e p a r t y a s h e w a s n o t i n v i t e d b y t h e celebrant thereof and whether or not Hotel Nikko, as the employer of Ms. Lim, be solidarily liable with her.
HELD: The Court found more credible the lower court‘s findings of facts. There was no proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and to e x p o s e h i m t o r i d i c u l e a n d s h a m e . M r . R e y e s ‘ v e r s i o n o f t h e s t o r y w a s unsupported, failing to present any witness to back his story. Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party to which he was not invited, cannot be made liable for damages under Articles 19 and 21 of the Civil Code. Necessarily, neither can her employer, Hotel Nikko, be held liable as its liability springs from that of its employees. When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
23
must be responsible. Article 21states that 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. Without proof of any ill-motive on her part, Ms. Lim‘s act cannot amount to abusive conduct. The maxim ―Volenti Non Fit Injuria‖ (self-inflicted injury) was upheld by the Court, that is, to which a person assents is not esteemed in law as injury, t h a t c o n s e n t t o i n j u r y p r e c l u d e s t h e r e c o v e r y o f d a m a g e s b y o n e w h o h a s knowingly and voluntarily exposed himself to danger.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
24
St. Mary's Academy v. Carpitanos ST. MARY‟S ACADEMY, petitioner,VS. WILLIAM CARPITANOS and LUCIA S. CARPITANOS, GUADA DANIEL, JAMES DANIEL II, JAMES DANIEL, SR., and VIVENCIO VILLANUEVA,respondents February 6, 2002 FACTS: From February 13 to 20, 1995, defendant-appellant St. Mary‘s Academy of Dipolog City conducted an enrollment drive for the school year 1995-1996. As a student of St. Mary‘s Academy, Sherwin Carpitanos was part of the campaigning group. Accordingly, Sherwin, along with other high school students were riding in a Mitsubishi jeep owned by defendant Vivencio Villanueva on their way to Larayan Elementary School, Larayan, Dapitan City. The jeep was driven by James Daniel II then 15 years old and a student of the same school. Allegedly, the latter drove the jeep in a reckless manner and as a result the jeep turned turtle. Sherwin Carpitanos died as a result of the injuries he sustained from the accident. The trial court ordered the defendants, St. Mary‘s Academy principally liable and the parents of James Daniel as subsidiarily liable for damages. The Court of Appeals affirmed the decision of the trial court. The Court of Appeals held petitioner St. Mary‘s Academy liable for the death of Sherwin Carpitanos under Articles 218 and 219 of the Family Code, pointing out that petitioner was negligent in allowing a minor to drive and in not having a teacher accompany the minor students in the jeep.
ISSUE: Whether or not the appellant St. Mary‘s Academy is principally liable for damages for the death of Sherwin.
HELD: No. Under Article 219 of the Family Code, if the person under custody is a minor, those exercising special parental authority are principally and solidarily liable for damages caused by the acts or omissions of the unemancipated minor while under their supervision, instruction, or custody. However, for petitioner to be liable, there must be a finding that the act or omission considered as negligent was the proximate cause of the injury caused because the negligence must have a causal connection to the accident. Respondents Daniel spouses and Villanueva admitted that the immediate cause of the accident was not the negligence of petitioner or the reckless driving of James Daniel II, but the detachment of the steering wheel guide of the jeep. Hence, liability for the accident, whether caused by the negligence of the minor driver or mechanical detachment of the steering wheel guide of the jeep, must be pinned on the minor‘s parents primarily. The negligence of petitioner St. Mary‘s Academy was only a remote cause of the accident. Between the remote cause and the injury, there intervened Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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the negligence of the minor‘s parents or the detachment of the steering wheel guide of the jeep. Considering that the negligence of the minor driver or the detachment of the steering wheel guide of the jeep owned by respondent Villanueva was an event over which petitioner St. Mary‘s Academy had no control, and which was the proximate cause of the accident, petitioner may not be held liable for the death resulting from such accident.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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TSPI, INCORPORATION VS. TSPIC EMPLOYEES UNION TSPIC CORPORATION, Petitioner, versus TSPIC EMPLOYEES UNION (FFW), representing MARIA FE FLORES, FE CAPISTRANO, AMY DURIAS,[1] CLAIRE EVELYN VELEZ, JANICE OLAGUIR, JERICO ALIPIT, GLEN BATULA, SER JOHN HERNANDEZ, RACHEL NOVILLAS, NIMFA ANILAO, ROSE SUBARDIAGA, VALERIE CARBON, OLIVIA EDROSO, MARICRIS DONAIRE, ANALYN AZARCON, ROSALIE RAMIREZ, JULIETA ROSETE, JANICE NEBRE, NIA ANDRADE, CATHERINE YABA, DIOMEDISA ERNI,[2] MARIO SALMORIN, LOIDA COMULLO,[3] MARIE ANN DELOS SANTOS,[4] JUANITA YANA, and SUZETTE DULAY, Respondents., G.R. No. 163419, 2008 Feb 13, 2nd Division
VELASCO, JR., J.:
FACTS: TSPI Corporation entered into a Collective Bargaining Agreement w i t h t h e c o r p o r a t i o n U n i o n f o r t h e i n c r e a s e o f s a l a r y f o r t h e l a t t e r ‘ s members for the year 2000 to 2002 starting from January 2000. Thus, the increased in salary was materialized on January 1, 2000. However, on October 6, 2000, the Regional Tripartite Wage and production Board raised daily minimum wage from P 223.50 to P 250.00 starting November1, 2000. Conformably, the wages of the 17 probationary employees were increased to P250.00 and became regular employees therefore receiving another 10% increase in salary. In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine employees who were senior to the 17 recently regularized employees received fewer wage. On January 19, 2001, TSPIC‘s HRD notified the 24 employees who are private respondents, that due to an error in the automated payroll system, they were overpaid and the overpayment would be deducted from their salaries starting February 2001. The Union on the other hand , asserted that there was no error and the deduction of the a l l e g e d over payment constituted diminution of pay.
ISSUE: Whether the alleged overpayment constitutes diminution of pay as alleged by the Union.
HELD: Yes, because it is considered that Collective Bargaining Agreement entered into by unions and their employers are binding upon the parties and be acted in strict compliance therewith. Thus, the CBA in this case is the law between the employers and their employees. Therefore, there was no overpayment when there was an increase of salary for the members of the union simultaneous with the increasing of minimum wage for workers in the National Capital Region. The CBA should be followed thus; the senior employees who were first promoted as regular employees shall be entitled for the increase in their salaries and the same with lower rank workers.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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REGINO VS. PCST REGINO VS. PCST G.R No. 156109. November 18, 2004
FACTS: P e t i t i o n e r K r i s t i n e R e g i n o w a s a p o o r s t u d e n t e n r o l l e d a t t h e P a n g a s i n a n C o l l e g e o f S c i e n c e a n d Te c h n o l o g y . Th u s , a f u n d r a i s i n g project pertaining to a dance party was organized by PCST, requiring all its students to purchase two tickets in consideration as a prerequisite for the final exam. Regino, an underprivileged, failed to purchase the tickets because of her status as well as that project was against her religious belief, thus, she was not allowed to take the final examination by her two professors.
ISSUE: Was the refusal of the university to allow Regino to take the final examination valid?
HELD: No, the Supreme Court declared that the act of PCST was not valid, though, it can impose its administrative policies, necessarily, and the amount of tickets or payment shall be included or expressed in the s t u d e n t handbooks given to every student before the start of the regular classes of the semester. In this case, the fund raising project was not included in the activities to be undertaken by the university during the semester. The petitioner is entitled for damages due to her traumatic experience on the acts of the university causing her to stop studying sand later transfer to another school.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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PSBA v. Court of Appeals PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, JUAN D. LIM, BENJAMIN P. PAULINO, ANTONIO M. MAGTALAS, COL. PEDRO SACRO and LT. M. SORIANO, petitioners, versus COURT OF APPEALS, HON. REGINA ORDOÑEZ-BENITEZ, in her capacity as Presiding Judge of Branch 47, Regional Trial Court, Manila, SEGUNDA R. BAUTISTA and ARSENIA D. BAUTISTA, respondents. (G.R. No. 84698, February 4, 1992, 2nd Division) PADILLA, J.: FACTS: A stabbing incident on 30 August 1985 which caused the death of Carlitos Bautista while on the second-floor premises of the Philippine School of Business Administration (PSBA) prompted the parents of the deceased to file suit in the Regional Trial Court of Manila (RTC Branch 47) presided over by Judge Regina Ordoñez-Benitez, for damages against the said PSBA and its corporate officers. At the time of his death, Carlitos was enrolled in the third year commerce course at the PSBA. It was established that his assailants were not members of the school's academic community but were elements from outside the school. The plaintiffs (now private respondents) sought to adjudge them liable for the victim's untimely demise due to their alleged negligence, recklessness and lack of security precautions, means and methods before, during and after the attack on the victim. On the other side, defendants a quo (now petitioners) sought to have the suit dismissed, alleging that since they are presumably sued under Article 2180 of the Civil Code, the complaint states no cause of action against them, as jurisprudence on the subject is to the effect that academic institutions, such as the PSBA, are beyond the ambit of the rule in the afore-stated article. The respondent trial court, however, overruled petitioners' contention and thru an order dated 8 December 1987, denied their motion to dismiss. A subsequent motion for reconsideration was similarly dealt with by an order dated 25 January 1988. Petitioners then assailed the trial court's disposition before the respondent appellate court which, in a decision promulgated on 10 June 1988, affirmed the trial court's orders. On 22 August 1988, the respondent appellate court resolved to deny the petitioners' motion for reconsideration. Hence, this petition is. ISSUE: Whether or not the case should be dismiss base on the contention that the complaint states no cause of action against them. HELD: No. Based on the petitioners‘ contention, it is true that this is not under the provision of Article 2180 in conjunction with Article 2176 of the Civil Code as established by jurisprudence that, it had been stressed that the law (Article 2180) plainly provides that the damage should have been caused or inflicted by pupils or students of the educational institution sought to be held liable for Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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the acts of its pupils or students while in its custody. The victim‘s assailant is not a student neither an employee of the petitioner so it must be absolve of damages. However as ruled by this court, the respondent cause of action is based on a bilateral contract or obligation which the parties are bound to comply with not based on the precepts of quasi-delicts as the petitioner based its contention to dismiss the said case. When an academic institution accepts students for enrolment, there is established a contract between them, resulting in bilateral obligations which both parties are bound to comply with. For its part, the school undertakes to provide the student with an education that would presumably suffice to equip him with the necessary tools and skills to pursue higher education or a profession. On the other hand, the student covenants to abide by the school's academic requirements and observe its rules and regulations. Aside from this, academic institution must meet also the implicit obligation which to provide an atmosphere which is conducive to learning and this cannot be achieve if upon entering the school premises there is a fear or threat against to student‘s life or limb. In order to held the petitioners liable this should be proven in court according to rule of evidence that there is a lack of negligence corresponding to the circumstance of person, time and place to fulfil its obligation. It is also unduly oppressive to the academic institution to just make them liable res ipsa loquitor on the damage itself. This case is now remanded to the lower court of origin to continue the proceedings. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Cosmo Entertainment v. La Ville COSMO ENTERTAINMENT MANAGEMENT, INC., petitioner, versus LA VILLE COMMERCIAL CORPORATION, respondent. (G.R. No. 152801, August 20, 2004, 2nd Division) CALLEJO, SR., J.: FACTS: The respondent, La Ville Commercial Corporation, is the registered owner of a parcel of land covered by Transfer Certificate of Title (TCT) No. 174250 of the Registry of Deeds of Makati City together with the commercial building thereon situated at the corner of Kalayaan and Neptune Streets in Makati City. On March 17, 1993, it entered into a Contract of Lease with petitioner Cosmo Entertainment Management, Inc. over the subject property for a period of seven years with a monthly rental of P250 per square meter of the floor area of the building and a security deposit equivalent to three monthly rentals in the amount of P447,000 to guarantee the faithful compliance of the terms and conditions of the lease agreement. Upon execution of the contract, the petitioner took possession of the subject property. The petitioner, however, suffered business reverses and was constrained to stop operations in September 1996. Thereafter, the petitioner defaulted in its rental payments. Consequently, on February 1, 1997, the respondent made a demand on the petitioner to vacate the premises as well as to pay the accrued rentals plus interests. After negotiations between the parties failed, the respondent, on May 27, 1997, reiterated its demand on the petitioner to pay the unpaid rentals as well as to vacate and surrender the premises to the respondent. When the petitioner refused to comply with its demand, the respondent filed with the Metropolitan Trial Court (MeTC) of Makati City, Branch 62, a complaint for illegal detainer. The petitioner, in its answer to the complaint, raised the defense that, under the contract, it had the right to sublease the premises upon prior written consent by the respondent and payment of transfer fees. However, the respondent, without any justifiable reason, refused to allow the petitioner to sublease the premises. After due proceedings, the MeTC rendered judgment in favor of the respondent holding that the petitioner was bound by the terms of the contract that it could only sublease the premises upon the respondent‘s consent and as consequence order the petitioner all accrued rentals, interest and tax dues. The Regional Trial Court (RTC) affirmed the decision of MeTC and furnished the copy on its decision to the petitioner which he received on July 6, 2000. On July 21, 2000, the last day to file its petition for review on certiorari of the RTC decision, the petitioner filed with the Court of Appeals (CA) a Motion for Extension to File Petition for Review which was duly granted. Notwithstanding the clear tenor of the said resolution granting a nonextendible period, the petitioner filed, on August 4, 2000, a second Motion for Extension to File Petition for Review asking that it be given another fifteen (15) Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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days from August 5, 2000, or until August 20, 2000, within which to file the said pleading. On August 18, 2000, the petitioner filed its Petition for Review on Certiorari with the CA but was dismissed base on the fact that it was filed beyond the extended period granted to the petitioner. Hence, the recourse to this Court is sought by the petitioner. ISSUE: Whether or not the petition for review on certiorari should be dismissed for having been filed out of time. HELD: Yes. In accordance to the provision of Rule 42 of the 1997 Rule of Court, the CA may grant an additional period of fifteen (15) days only within which to file the petition for review and no further extension shall be granted except the most compelling reason and in no case to extend fifteen (15) days. As adjudge by the Court, the granting is based not on a matter of right but upon the sound discretion of the court. The reason of the petitioner that ―heavy volume of work and equally urgent filings in courts and administrative agencies,‖ was not considered a compelling reason by the CA as it subsequently denied the petition for review for being filed out of time. The CA could not be faulted for this. In fact, jurisprudence had held that pressure and large volume of work do not excuse a party for filing the petition for certiorari out of time. When the petitioner thus filed its petition for review on certiorari beyond the extended period, the CA had the reason to deny the same outright. Wise to consider also is the directive qualification expressly provided by appellate court on not further extending the filing of the petition thus behoved the petitioner to comply on it. Granting liberally would tantamount of not following an express provision of law which is against public order and our system of justice for the sake of only a single private individual. Petition denied.
Ayala Corp. vs. Rosa Diana Realty
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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AYALA CORPORATION, petitioner, vs. ROSA-DIANA REALTY AND DEVELOPMENT CORPORATION, respondent. (G.R. No. 134284, December 1, 2000 2nd Division) DE LEON, JR., J.: FACTS: Petitioner Ayala Corporation (Ayala) was the registered owner of a parcel of land located in Alfaro Street, Salcedo Village, Makati City with an area of 840 square meters, more or less and covered by Transfer Certificate of Title (TCT) No. 233435 of the Register of Deeds of Rizal. On April 20, 1976, Ayala sold the lot to Manuel Sy married to Vilma Po and Sy Ka Kieng married to Rosa Chan. The Deed of Sale executed between Ayala and the buyers contained Special Conditions of Sale and Deed Restrictions. Among the Special Conditions of Sale were: a) The vendees shall build on the lot and submit the building plans to the vendor before September 30, 1976 for the latter’s approval b) the construction of the building shall start on or before March 30, 1977 and completed before 1979. Before such completion, neither the deed of sale shall be registered nor the title released even if the purchase price shall have been fully paid c) There shall be no resale of the property The Deed Restrictions, on the other hand, contained the stipulation that the gross floor area of the building to be constructed shall not be more than five (5) times the lot area and the total height shall not exceed forty two (42) meters. The restrictions were to expire in the year 2025. Manuel Sy and Sy Ka Kieng failed to construct the building in violation of the Special Conditions of Sale. Notwithstanding the violation, Manuel Sy and Sy Ka Kieng, in April 1989, were able to sell the lot to respondent Rosa-Diana Realty and Development Corporation (Rosa-Diana) with Ayala‘s approval. As a consideration for Ayala to release the Certificate of Title of the subject property, Rosa-Diana, on July 27, 1989 executed an Undertaking promising to abide by said special conditions of sale executed between Ayala and the original vendees. Upon the submission of the Undertaking, together with the building plans for a condominium project, known as ―The Peak‖, Ayala released title to the lot, thereby enabling Rosa-Diana to register the deed of sale in its favor and obtain Certificate of Title No. 165720 in its name. The title carried as encumbrances the special conditions of sale and the deed restrictions. RosaDiana‘s building plans as approved by Ayala were ―subject to strict compliance of cautionary notices appearing on the building plans and to the restrictions encumbering the Lot regarding the use and occupancy of the same.‖ Thereafter, Rosa-Diana submitted to the building official of Makati another set of building plans for ―The Peak‖ which were substantially different from those that it earlier submitted to Ayala for approval. While the building plans which Rosa-Diana submitted to Ayala for approval envisioned a 24-meter high, seven (7) storey condominium project with a gross floor area of 3,968.56 square meters, the building plans which Rosa-Diana submitted to the building official of Makati, contemplated a 91.65 meter high, 38 storey condominium Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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building with a gross floor area of 23,305.09 square meters. Needless to say, while the first set of building plans complied with the deed restrictions, the latter set exceeded the same. Because of this, Ayala filed an injunctive relief but was denied by the Regional Trial Court (RTC) that led Rosa-Diana to complete the building. Ayala then filed a violation of the Deed of Restriction but was denied by the RTC based on no cause of action. The Court of Appeals affirmed the lower court base on the principle of estoppel and/or abandonment, hence this petition is. ISSUE: Whether or not there is a violation of the Deed of Restriction which can be a valid ground to grant the plaintiff for its prayer of either rescission or specific performance. HELD: Yes. It is obvious base on the facts that there is a violation of the Deed of Restriction but this cannot be used as a valid ground to grant the petitioner its prayer of either rescission of contract of its specific performance. It is true that Article 1159 of the New Civil Code provides that ―Obligations arising from contracts have the force of the law of the contracting parties and should be complied with in good faith‖, and this is clearly violated not only negligently but with bad faith but the prayer of relief is not justifiable base on merit of the case. First, the specific performance is not feasible as the building already completed neither the cancellation of the sale because the original parties are not impleaded (Manuel Sy and Sy Ka Kieng). Second, rescinding the sale is not granted as the original parties already violated the first requirement of the contract and Ayala did nothing to it impliedly allowing or ratifying it. Third, Ayala allowed other corporation to violate the Deed of Restriction which they made and instead of praying relief of specific performance or cancellation of sale, they prayed instead for damages. Therefore, instead of Rescission or Specific Performance as the petitioner prayed, the Court grants instead damages to the petitioner by virtue of the violation of the Deed of Restriction by the defendant in accordance to case decided by this court ―Ayala vs. Rey Burton Development Corporation‖.
Bricktown Development vs. Amor Tierra Development Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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BRICKTOWN DEVELOPMENT CORP. (its new corporate name MULTINATIONAL REALTY DEVELOPMENT CORPORATION) and MARIANO Z. VERALDE, petitioners, vs. AMOR TIERRA DEVELOPMENT CORPORATION and the HON. COURT OF APPEALS, respondents. (G.R. No. 112182, December 12, 1994 3rd Division) VITUG, J.: FACTS: On 31 March 1981, Bricktown Development Corporation (petitioner), represented by its President and co-petitioner Mariano Z. Velarde, executed two Contracts to Sell in favor of Amor Tierra Development Corporation (private), represented in these acts by its Vice-President, Moises G. Petilla, covering a total of 96 residential lots, situated at the Multinational Village Subdivision, La Huerta, Parañaque, Metro Manila, with an aggregate area of 82,888 square meters. The total price of P21,639,875.00 was stipulated to be paid by private respondent in such amounts and maturity dates, as follows: P2,200,000.00 on 31 March 1981; P3,209,968.75 on 30 June 1981; P4,729,906.25 on 31 December 1981; and the balance of P11,500,000.00 to be paid by means of an assumption by private respondent of petitioner corporation's mortgage liability to the Philippine Savings Bank or, alternatively, to be made payable in cash. On even date, 31 March 1981, the parties executed a Supplemental Agreement, providing that private respondent would additionally pay to petitioner corporation the amounts of P55,364.68, or 21% interest on the balance of down payment for the period from 31 March to 30 June 1981, and of P390,369.37 representing interest paid by petitioner corporation to the Philippine Savings Bank in updating the bank loan for the period from 01 February to 31 March 1981. Private respondent was only able to pay petitioner corporation the sum of P1,334,443.21. In the meanwhile, however, the parties continued to negotiate for a possible modification of their agreement, although nothing conclusive would appear to have ultimately been arrived at. Finally, on 12 October 1981, Petitioner Corporation, through its legal counsel, sent private respondent a "Notice of Cancellation of Contract" on account of the latter's continued failure to pay the instalment due 30 June 1981 and the interest on the unpaid balance of the stipulated initial payment. Petitioner Corporation advised private respondent, however, that it (private respondent) still had the right to pay its arrearages within 30 days from receipt of the notice "otherwise the actual cancellation of the contract (would) take place." Several months later, or on 26 September 1983, private respondent, through counsel, demanded the refund of private respondent's various payments to petitioner corporation, allegedly "amounting to P2,455,497.71," with interest within fifteen days from receipt of said letter, or, in lieu of a cash payment, to assign to private respondent an equivalent number of unencumbered lots at the same price fixed in the contracts. The Regional Trial Court (RTC) grant the respondent relief and order the return of P1,334,443.21 representing the payment made by the respondent to Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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the petitioner with legal interest. The Court of Appeals affirmed in toto the RTC decision, hence this petition is. ISSUE: Whether or not the initial payment should be forfeited in favor of the petitioner as liquidated damages in accordance to the contract as the contract is validly rescinded. HELD: No. It is established in the decision of the Court that the contract is validly rescinded as it clearly establish in the contract the right of the petitioner to rescind it if there is a failure of payment. But this will not give rise or guarantee the right also of the petitioner to forfeit the initial payment. As stated in the contract, ―The OWNER shall have the right to resell the lot/s subject hereof to another buyer and all payments made, together with all improvements introduced on the aforementioned lot/s shall be forfeited in favor of the OWNER as liquidated damages, and in this connection, the PURCHASER obligates itself to peacefully vacate the aforesaid lot/s without necessity of notice or demand by the OWNER.‖ This give rise that there is a reciprocal condition before forfeiture is guaranteed that the respondent should have been in possession of the said land in order for him to vacate it. It is well establish on the facts that the respondent never had the possession of the land. This argument not only guarantee the return of the initial payment but also the payment of interest as the petitioner enjoy the benefit of the money when in its possession that should have been use to benefit the respondent. The Court also in its decision highlight the good faith of the respondent as there are negotiation happened in order to amend the contract but this contract never materialize. The court therefore orders the petitioner to return the initial payment made by the respondent to the petitioner with interest. Decision of the lower courts is hereby affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Pilipinas Hino vs. Court of Appeals PILIPINAS HINO, INC., petitioner, vs. COURT OF APPEALS, FERNANDO V. REYES, PONCIANO REYES, and TERESITA R. TAN, respondents. (G.R. No. 126570, August 18, 2000 1st Division) KAPUNAN, J.: FACTS: This is an action for Sum of Money and Damages filed by Pilipinas Hino, Inc., thereinafter referred to as the plaintiff against Fernando V. Reyes, Ponciano V. Reyes, and Teresita R. Tan, hereinafter referred to as the defendants. That on or about 15 August 1989, a contract of lease was entered into between herein parties, under which the defendants, as lessors, leased real property located at Bigaa, Balagtas, Bulacan, to herein plaintiff for a term of two (2) years, from 16 August 1989 to 15 August 1991. Pursuant to the contract of lease, plaintiff-lessee deposited with the defendants-lessors the amount of Four Hundred Thousand (P400,000.00) Pesos to answer for repairs and damages that may be caused by the lessee on the leased premises during the period of the lease. After the expiration of the lease contract, the plaintiff and defendants made a joint inspection of the premises to determine the extent of the damages thereon, both agreed that the cost of repairs would amount to P60,000.00 and that the amount of P340,000.00 shall then be returned by the defendants to plaintiff. However, defendants returned to plaintiff only the amount of P200,000.00, still having a balance of P140,000.00. Notwithstanding repeated demands, defendants unjustifiably refused to return the balance of P140,000.00 holding that the true and actual damage on the lease premises amounted to P298,738.90. On August 10, 1990, plaintiff and defendants entered into a contract to sell denominated as a Memorandum of Agreement to sell whereby the latter agreed to sell to the former the leased property subject of this suit in the amount of P45,611,000.00. The aforesaid Memorandum of Agreement to sell granted the owner (defendants) the option to rescind the same upon failure of the buyer (plaintiff) to pay any of the first six (6) installments with the corresponding obligation to return to the buyer any amount paid by the buyer in excess of the downpayment as stated in paragraphs 7 and 9 of the Memorandum of Agreement. Pursuant to said Memorandum of Agreement, plaintiff remitted on August 10, 1990 to the defendants the amount of P1,811,000.00 as downpayment. Subsequently, plaintiff paid the first and second installments in the amount of P1,800,000.00 and P5,250,000.00, respectively, thereby making the total amount paid by the plaintiff to the defendants, on top of the downpayment, P7,050,000.00. Unfortunately, plaintiff failed to pay the 3rd installment and subsequent installments: and thereupon, defendants decided to, and in fact did, in a letter dated 20 November 1990, rescinded and terminated the contract and promised to return to the plaintiff all the amounts paid in excess of the downpayment after deducting the interest due from 3rd to 6th installments, inclusive. Thus, from the amount of P7,050,000.00 due to be returned to the plaintiff, defendants Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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deducted P924,000.00 as interest and P220,000.00 as rent for the period from 15 February to 15 March 1991, thereby returning to the plaintiff the amount of P5,906,000.00 only, as acknowledged by plaintiff in the letter dated 4 April 1991. The Regional Trial Court, as affirmed by the Court of Appeals, partly grant the petition and required the defendant to return the P924,000.00 with interest but dismiss the claim of balance of P140,000.00 base on no cause of action. Not satisfied with the judgement, the plaintiff elevated the suit. Hence this petition is. ISSUE: Whether or not the amount of P924,000.00 is unjustly withhold as interest by defendant and the claim of balance of P140,000.00 claiming that defendant has no cause of action. HELD: The decision of lower court is hereby affirmed ordering the return of P924,000.00 and dismissing the claim of balance of P140,000.00. As to the case of claim of balance of P140,000.00, the contention of the plaintiff that they agreed for only the P60,000.00 as payment for repairs and damages of the subject property has no merit. There is no evidence presented in the proceeding that would support that contention so it is justified for the defendant to claim that amount to cover the damages and repairs as per agreed upon in the contract. Worthy to mention is, the total amount that was claim by defendant as repairs and damages is far lesser than actual damages proven in court. As to the case of the amount of P924,000.00, this is unjustly withhold as interest because it is expressly stated in the contract that no interest should be collected when the defendant exercise their right to forfeit, ―When the owners exercise their option to forfeit the downpayment, they shall return to the buyer any amount paid by the buyer in excess of the downpayment with no obligation to pay interest thereon.‖. This is very categorical and should be complied as expressly state pursuant to Article 1159 of the New Civil Code which state that ―Obligation arising from contract have the force of the law between the contracting parties and should be complied with in good faith.‖ There is nothing wrong against this stipulation to make it void as this never contradict any law, morals, good customs, public policy and public order. Therefore, the defendant is required to return this amount to the petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Sarte Flores v. Sps. Lindo ARTURO SARTE FLORES, petitioner, VS. SPOUSES ENRICO L. LINDO, JR. AND EDNA C. LINDO, respondent. (G.R. No. 183984, April 13, 2011, 2nd Division) CARPIO, J.: FACTS: On 31 October 1995, Edna Lindo (Respondent) obtained a loan from Arturo Flores (petitioner) amounting to P400,000 payable on 1 December 1995 with 3% compounded monthly interest and 3% surcharge in case of late payment. To secure the loan, Edna executed a Deed of Real Estate Mortgage (the Deed) covering a property in the name of Edna and her husband Enrico (Enrico) Lindo, Jr. (collectively, respondents). Edna also signed a Promissory Note and the Deed for herself and for Enrico as his attorney-in-fact. Edna issued three checks as partial payments for the loan. All checks were dishonored for insufficiency of funds, prompting petitioner to file a Complaint for Foreclosure of Mortgage with Damages against respondents. Regional Trial Court (RTC), Branch 33 ruled that petitioner was not entitled to judicial foreclosure of the mortgage. The RTC, Branch 33 found that the Deed was executed by Edna without the consent and authority of Enrico. The RTC, Branch 33 noted that the Deed was executed on 31 October 1995 while the Special Power of Attorney (SPA) executed by Enrico was only dated 4 November 1995. On 8 September 2004, petitioner filed a Complaint for Sum of Money with Damages against respondents at RTC, Branch 22. Respondents filed their Answer with Affirmative Defenses and Counterclaims where they admitted the loan but stated that it only amounted to P340,000. Respondents further alleged that Enrico was not a party to the loan because it was contracted by Edna without Enrico's signature. Respondents prayed for the dismissal of the case on the grounds of improper venue, res judicata and forum-shopping, invoking the Decision of the RTC, Branch 33. The RTC grant the petition. Respondents filed a Petition for Certiorari and Mandamus with Prayer for a Writ of Preliminary Injunction and/or Temporary Restraining Order before the Court of Appeals. In its 30 May 2008 Decision, the Court of Appeals set aside the 22 July 2005 and 8 February 2006 Orders of the RTC, Branch 42 for having been issued with grave abuse of discretion. The Court of Appeals ruled that while the general rule is that a motion to dismiss is interlocutory and not appealable, the rule admits of exceptions. The Court of Appeals ruled that the RTC, Branch 42 acted with grave abuse of discretion in denying respondents' motion to dismiss. The Court of Appeals ruled that under Section 3, Rule 2 of the 1997 Rules of Civil Procedure, a party may not institute more than one suit for a single cause of action. If two or more suits are instituted on the basis of the same cause of action, the filing of one on a judgment upon the merits in any one is available ground for the dismissal of the others. The Court of Appeals ruled that on a non-payment of a note secured by a mortgage, the creditor has a single cause of action against the debtor, that is recovery of the credit with execution of the suit. Thus, the creditor may institute two Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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alternative remedies: either a personal action for the collection of debt or a real action to foreclose the mortgage, but not both. The Court of Appeals ruled that petitioner had only one cause of action against Edna for her failure to pay her obligation and he could not split the single cause of action by filing separately a foreclosure proceeding and a collection case. By filing a petition for foreclosure of the real estate mortgage, the Court of Appeals held that petitioner had already waived his personal action to recover the amount covered by the promissory note. Petitioner filed a motion for reconsideration but was denied. Hence this petition. ISSUE: Whether or not the loan obtained by the defendant can be recovered without violating the multiplicity of suit base on single action or cause. HELD: Yes. There is unjust enrichment "when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience." The principle of unjust enrichment requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at the expense of another. The cause is not justified as it did not foreclose the property or payment was made and the benefit was enjoyed by the respondent at petitioner expense. The requisite is therefore fulfilled rendering the respondent responsible for the payment of the loaned as Article 22 of the New Civil Code state ―Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.‖ The multiplicity of suit is a procedural law and cannot bar the filling of this suit considering the circumstances of this case, the principle against unjust enrichment, being a substantive law, should prevail over the procedural rule on multiplicity of suits. The lower courts performed numerous errors in this case in the interpretation and application of the law like not recognizing the RATIFICATION made by the husband as it is a continuing offer cited in Article 96 of the Family Code in its last sentences and declaring the mortgage null and void. The CA even recognized these decisions and did not reverse it. As conclusion, the defendant should not be allowed to unjustly enrich at expense of others just for the reason of wrong interpretation and misapplication done by the various lower courts. The lower court decision is hereby set aside and further ordering the RTC Branch 42 to proceed with the claim of loan and damages base on the merit of evidence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Philippine Realty and Holding Corp. v. Ley Const. and Dev. Corp. PHILIPPINE REALTY AND HOLDINGS CORPORATION, Petitioner, vs LEY CONSTRUCTION AND DEVELOPMENT CORPORATION, Respondent. (G. R. No. 165548, June 13, 2011 3rd Division) SERENO, J.: FACTS: Ley Construction and Development Corporation (LCDC) was the project contractor for the construction of several buildings and other improvements for Philippine Realty & Holdings Corporation (PRHC), the project owner. Engineer Dennis Abcede (Abcede) was the project construction manager of PRHC, while Joselito Santos (Santos) was its general manager and vicepresident for operations. In their contract they expressly stipulate the rule on what to do if there increase in prices and changes in the project. It is stated that ―The Contract Price shall not be subject to escalation except due to work addition, (approved by the OWNER and the ARCHITECT) and to official increase in minimum wage as covered by the Labor Adjustment Clause below. All costs and expenses over and above the Contract Price except as provided in Article V hereof shall be for the account of the CONTRACTOR. It is understood that there shall be no escalation on the price of materials. However, should there be any increase in minimum daily wage level, the adjustment on labor cost only shall be considered based on conditions as stipulated below‖. The embodied term in the construction of several buildings agreements were almost identical. In the course of the construction of the one of its building specifically Tektile Building, it became evident to both parties that LCDC would not be able to finish the project within the agreed period. Thus, through its president, LCDC met with Abcede to discuss the cause of the delay. LCDC explained that the unanticipated delay in construction was due mainly to the sudden, unexpected hike in the prices of cement and other construction materials. It claimed that without the corresponding increase in the fixed prices found in the agreements, it would be impossible for it to finish the construction of the Tektile Building. In their analysis of the project plans for the building and of all the external factors affecting the completion of the project, the parties discovered that even if LCDC were able to collect the entire balance from the contract, the collected amount would still be insufficient to purchase all the materials needed to complete the construction of the building. In spite of these, Abcede indicate that the most important is the Tektile Building should be completed on scheduled and agreed to reimburse the cost that LCDC will incur up to P36,000,000.00 disregarding the stipulation above mention about the restriction with regard to the hike of the price of the materials. After the project and LCDC demand the payment, PRHC refuse to pay some of the amount stipulated including the P36,000,000.00 claiming that it was offset due to the delay in finishing of the construction rendering PRHC to incur damage. LCDC then file in the Regional Trial Court (RTC) and was granted for its demand. PRHC then appealed in the Court of Appeals( CA) and the CA reversed the decision of the RTC. Hence this petition is. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
41
ISSUE: Whether or not the claim of LCDC is valid including the P36,000,000.00 in spite of the agreement that an increase of the price of the material should be the liability of LCDC. HELD: Yes. All the claim of LCDC is valid and should not be offset to the claim of PRHC except the overpayment and the expenses of repaired that was done by PRHC on the poorly done waterproofing construction. Actually the claim that the P36,000,000.00 that was used to augment the increase of the price of the material is valid because it was tacitly authorize by the agent of PRHC base on the circumstances and facts presented rendering the first agreement which the increase in price of material should be bore by LCDC amended. Acts of agent always bind the principal unless contrary is proven as he is its alter ego. Actually the excess which is P2,248,463.00 which was infuse by LCDC beyond this amount agreed was correctly decided by lower court that it should be on the account of LCDC. This cannot be claim through the virtue of unjust enrichment. In unjust enrichment one of its elements is the one should be unjustly benefited at the others expense. Unjustly benefited should be cause or derive or confer through mistake, fraud, coercion, or request. LCDC knowing that they only agreed the maximum amount of P36,000,000.00 spent more and did not confer it through mistake, coercion, fraud or request. The claim of PRHC that the damage incurred by it from the delay of the completion cannot also be tenable. The increase in the material price and lack of supply of the materials was not due solely to LCDC fault or LCDC act in bad faith to delay the completion but due to fortuitous event such us typhoon, power failure and interruption of water supplies. The elements of fortuitous event that would lead the excuse of the debtor to its obligation are: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfil his obligation in a normal manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor. These elements are all satisfied as base on presented facts and circumstance. Therefore, the PRHC is oblige to pay the remaining contract price unpaid including the payment of P36,000,000.00 and offset the overpayment made to LCDC including the repairs of the work of waterproofing which was poorly done.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
42
Titan-Ikeda Construction v. Primetown Property TITAN-IKEDA CONSTRUCTION & DEVELOPMENT CORPORATION, Petitioner, vs. PRIMETOWN PROPERTY GROUP, INC., Respondent. (G.R. No. 158768, February 12, 2008 1st Division) CORONA, J.: FACTS: In 1992, respondent Primetown Property Group, Inc. awarded the contract for the structural works of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-Ikeda Construction and Development Corporation. The parties formalized their agreement in a construction contract dated February 4, 1993. Upon the completion of MPT's structural works, respondent awarded the P130,000,000 contract for the tower's architectural works (project) to petitioner. Thus, on January 31, 1994, the parties executed a supplemental agreement. It was agreed that upon the posting and acceptance by respondent of the performance bond an 80% payment should be made through the delivery of the condominium unit as payment. Pursuant to this agreement the respondent deliver by executing a deed of sale covering 114 condominium units and 20 parkings slots of the MPT collectively valued by the parties at P112,416,716.88. Shortly thereafter, petitioner sold some of its units to third persons. In September 1995, respondent engaged the services of Integratech, Inc. (ITI), an engineering consultancy firm, to evaluate the progress of the project. In its September 7, 1995 report, ITI informed respondent that petitioner, at that point, had only accomplished 31.89% of the project (or was 11 months and six days behind schedule). Meanwhile, petitioner and respondent were discussing the possibility of the latter‘s takeover of the project‘s supervision. Despite ongoing negotiations, respondent did not obtain petitioner‘s consent in hiring ITI as the project‘s construction manager. Neither did it inform petitioner of ITI‘s September 7, 1995 report. In its September 7, 1995 report, ITI estimated that petitioner should have accomplished 48.71% of the project as of the October 12, 1995 takeover date. Petitioner repudiated this figure but qualifiedly admitted that it did not finish the project. Records showed that respondent did not merely take over the supervision of the project but took full control thereof. Petitioner consequently conducted an inventory. On the basis thereof, petitioner demanded from respondent the payment of its cost amounting to P1,779,744.85 and sent a second demand amounting to P2,023,876.25 because of additional material delivered recently. The respondent did not heed this demand instead it send a demand amounting to P69,785,023.47 as a reimbursement of actual cost incurred to complete the project. Petitioner then filed a specific performance of the demand in the Housing and Land Use Regulatory Board (HLURB) and the HLURB granted the petitioner relief. The petitioner instead of appealing this file a complaint for the collection of the actual cost incurred to complete the project to Regional Trial Court (RTC) but the RTC dismissed this. Respondent appealed then in the Court of Appeals which overturned the decision and order the petitioner to pay Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
43
the actual cost of completing the project amounting to P66,677,00.00. The petitioner then appealed CA decision to Supreme Court (SC) hence this petition is. ISSUE: Whether or not the petitioner is liable to the actual cost of completing the project. HELD: No. But the petitioner is liable to return the condominiums to the respondent in excess of the compensation it justly would receive for the service work it rendered to the respondent in building the tower‘s architectural work of MPT. The SC then remanded this case to the lower court for the proper identification of the value of the condominiums in order to offset it to the actual finish work made by the petitioner before the actual takeover so that the excess will be return to the respondent. This is in accordance to the concept of solution indebiti as this is mistakenly delivered to the petitioner as payment of the construction but unfortunately it was not completed. The claim that delay was incurred is no merit because the respondent never sent a written demand letter to the petitioner as required in the contract. It should have sent this demand letter before it takeover of the said project but the respondent instead just came and takeover the project. The report of ITI also is not binding because as evidence of delay of the on-going construction because the petitioner did not consent for it to take over the management as the respondent just authorize it to assess the percentage of accomplishment in spite of the present of a construction manager. Therefore the decision of the lower court is reversed and the proceeding should be in accordance to the decision of the SC. This case is therefore remanded.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
44
PADCOM v. Ortigas PADCOM CONDOMINIUM CORPORATION, petitioner, vs. ORTIGAS CENTER ASSOCIATION, INC., respondent. (G.R. No. 146807, May 9, 2002 1st Division) DAVIDE, JR., C.J.: FACTS: Petitioner Padcom Condominium Corporation (PADCOM) owns and manages the Padilla Office Condominium Building (PADCOM Building) located at Emerald Avenue, Ortigas Center, Pasig City. The land on which the building stands was originally acquired from the Ortigas & Company, Limited Partnership (OCLP), by Tierra Development Corporation (TDC) under a Deed of Sale dated 4 September 1974. Among the terms and conditions in the deed of sale was the requirement that the transferee and its successor-in-interest must become members of an association for realty owners and long-term lessees in the area later known as the Ortigas Center. Subsequently, the said lot, together with improvements thereon, was conveyed by TDC in favor of PADCOM in a Deed of Transfer dated 25 February 1975. In 1982, respondent Ortigas Center Association, Inc. (hereafter the Association) was organized to advance the interests and promote the general welfare of the real estate owners and long-term lessees of lots in the Ortigas Center. It sought the collection of membership dues in the amount of two thousand seven hundred twenty-four pesos and forty centavos (P2,724.40) per month from PADCOM. The corporate books showed that PADCOM owed the Association P639,961.47, representing membership dues, interests and penalty charges from April 1983 to June 1993. The letters exchanged between the parties through the years showed repeated demands for payment, requests for extensions of payment, and even a settlement scheme proposed by PADCOM in September 1990. In view of PADCOM‘s failure and refusal to pay its arrears in monthly dues, including interests and penalties thereon, the Association filed a complaint for collection of sum of money before the trial court. The Association averred that purchasers of lands within the Ortigas Center complex from OCLP are obligated under their contracts of sale to become members of the Association. This obligation was allegedly passed on to PADCOM when it bought the lot from TDC, its predecessor-in-interest. The trial court dismiss this petition but was reversed by the Court of Appeals. Hence, this petition is. ISSUE: Whether or not the petitioner based on the foregoing facts can be required to be a member of the respondent association and should pay the corresponding membership fee. HELD: Yes. This is in accordance to Article 1159, ―Obligation arising from contracts have the force of the law between the contracting parties and should be complied with in good faith‖. It is stipulated on the contract that a buyer of the said property should be automatically a member of the respondent association. The freedom of association as enshrined in our Constitution is not Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
45
violated in here because petitioner corporation has the right not to buy it in order for it to escape the membership requirement. The petitioner at the first place buy it knowing that the contract required membership and it should be complied with in good faith. By virtue of this he should pay the membership fee as it is required to all members. The membership fee also can be based on the principle of unjust enrichment. Assuming in gratis argumenti that PADCOM is not a member of the Association, it cannot evade payment without violating the equitable principles underlying quasi-contracts. Article 2142 of the Civil Code provides: 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. Generally, it may be said that a quasi-contract is based on the presumed will or intent of the obligor dictated by equity and by the principles of absolute justice. Examples of these principles are: (1) it is presumed that a person agrees to that which will benefit him; (2) nobody wants to enrich himself unjustly at the expense of another; or (3) one must do unto others what he would want others to do unto him under the same circumstances. As resident and lot owner in the Ortigas area, PADCOM was definitely benefited by the Association‘s acts and activities to promote the interests and welfare of those who acquire property therein or benefit from the acts or activities of the Association. The petition is therefore denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
46
MC Engineering v. Court of Appeals MC ENGINEERING, INC., petitioner, vs. THE COURT OF APPEALS, GERENT BUILDERS, INC. and STRONGHOLD INSURANCE CO., INC., respondents. (G.R. No. 104047, April 3, 2002 3rd Division) CARPIO, J.: FACTS: On October 29, 1984, Mc Engineering, Inc. and Surigao Coconut Development Corporation (Sucodeco) signed a contract for the restoration of the latter‘s building, land improvement, electrical, and mechanical equipment located at Lipata, Surigao City, which was damaged by typhoon Nitang. The agreed consideration was P5,150,000.00 of which P2,500,000.00 was for the restoration of the damaged buildings and land improvement, while the P3,000,000.00 was for the restoration of the electrical and mechanical works. The next day, on October 30, 1984 defendant Mc Engineering and plaintiff Gerent Builders, Inc. entered into an agreement wherein defendant subcontracted to plaintiff the restoration of the buildings and land improvement phase of its contract with Sucodeco but defendant retained for itself the restoration of the electrical and mechanical works. The subcontracted work covered the restoration of the buildings and improvement forP1,665,000.00. Two (2) months later, on December 3, 1984, Sucodeco and defendant Mc Engineering entered into an agreement amending provision No. VII, par 1 of their contract dated October 29, 1984, by increasing the price of the civil works from P2,250,000.00 to P3,104,851.51, or an increase of P854,851.51, with the express proviso that ‗except for the amendment above specified, all the other provisions of the original contract shall remain the same‘). The civil work aspect consisting of the building restoration and land improvement from which plaintiff would get P1,665,000.00 was completed and the corresponding certificate of acceptance was executed but the electrical works were cancelled. On January 2, 1985, plaintiff received from defendant the amount of P1,339,720.00 as full payment of the sub-contract price, after deducting earlier payments made by defendant to plaintiff, as evidenced by the affidavit executed by plaintiff‘s president, Mr. Narciso C. Roque wherein the latter acknowledged complete satisfaction for such payment on the basis of the Statement of Account which plaintiff had earlier forwarded to defendant. Nevertheless, plaintiff is still claiming from defendant the sum of P632,590.13 as its share in the adjusted contract cost in the amount of P854,851.51, alleging that the sub-contract is subject to the readjustment provided for in Section VII of the agreement, and also the sum of P166,252.00 in payment for additional electrical and civil works outside the scope of the sub-contract. Petitioner refused to pay respondent Gerent. Thus, respondent Gerent filed the complaint against petitioner. On March 28, 1985, the trial court issued the corresponding writ of preliminary attachment upon the filing by Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
47
respondent Gerent of a P632,590.13 bond issued by respondent Surety. On April 24, 1985, petitioner moved to quash the writ on the ground that it was improperly issued. The trial court denied the motion but the Court of Appeals (CA) reverses it. On January 5, 1988, petitioner filed an application against the attachment bond to recover damages it suffered due to the wrongful issuance of the writ of attachment. Respondent Surety opposed the application. The trial court dismissed the petition but CA reversed it ordering petitioner to pay P632,590.13 and attorney‘s fee, hence this petition is. ISSUE: Whether or not the petitioner is liable for the increase in the price of the main contract to the respondent amounting to P632,590.13. HELD: No. The main contract clearly provides that as a condition precedent for any upward or downward adjustment in the contract price, there must first be a TRUE VALUATION of the materials and labor costs to be determined through evaluation and inspection by representatives of petitioner and Sucodeco. A similar provision is found in the subcontract requiring, before any change in the subcontract price, for a TRUE VALUATION to be determined by Sucodeco, petitioner and respondent Gerent. The records establish that respondent Gerent was responsible for making the estimates of the actual cost of the civil works which served as basis for the original price of the main contract. But actually there is no true valuation that was made and only estimate. The claim should have been granted if the increase in the contract is based on true valuation but is not. There is no true valuation that happened so there is no cause to support the claim. The contention of the respondent that its claim is based on the principle of unjust enrichment particularly ―accion in rem verso‖ as enshrined in Article 22 of the Civil Code has no merit. Article 22 of the Civil Code provides that ―[e]very person who through an act or performance by another, or by any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.‖ Two conditions must generally concur before the rule on unjust enrichment can apply, namely: (a) a person is unjustly benefited, and (b) such benefit is derived at another‘s expense or damage. Such a situation does not exist in this case. The benefit or profit derived by petitioner neither comes from respondent Gerent nor makes the Gerent any poorer. The profit derived by petitioner comes from Sucodeco by virtue of the main contract to which respondent Gerent is not a party. Respondent Gerent‘s rights under the subcontract are not diminished in any way, and Gerent remains fully compensated according to the terms of its own subcontract. The profit derived by petitioner is neither unjust, nor made at the expense of respondent Gerent.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
48
BPI v. Pineda Bank of the Philippine Islands, as Successor to Peoples Bank and Trust Company, Petitioner, versus Benjamin Pineda, doing business under the name and style of Pioneer Iron Works, Respondent. (G.R. No. L-62441, December 14, 1987, 3rd Division) BIDIN, J: FACTS: Southern Industrial Project, Inc. (SIP) and Bacong Shipping Company (Bacong) purchased the three vessels thru financing furnished by Peoples Bank and Trust Company, now the Bank of the Philippine Islands (BPI). To secure payment, said vessels were mortgaged to BPI. The operation of the said vessels were placed under the booking agency of Interocean Shipping Corporation (Interocean), with the undertaking that the freight revenues from their charter and operation shall be deposited with the Trust Department of BPI and that disbursements made therefrom shall be covered by vouchers bearing the approval of SIP. BPI and SIP were not satisfied with the amount of revenues being deposited with the said bank, and so S.A. Gacet, Inc. (Gacet) was organized to manage and supervise the operation of the vessels, as such, a Management Contract was entered into by the parties. Gacet and Interocean contracted the services of respondent Benjamin Pineda to carry out repairs, fabrication and installation of necessary parts in said vessels in order to make them seaworthy and in good working operation which amounted to 84,522.70 pesos leaving a balance of 62,095.95 pesos. Pineda instituted a civil action before the Court of First Instance of Manila, seeking to recover from SIP, Gacet, Interocean and the Peoples Bank and Trust Company the principal sum of 62,095.92 pesos with interests thereon, which amount was allegedly the total unpaid balance of the cost of repairs, fabrication and installation of necessary parts carried out by the former on the a forenamed vessels. The trial court rendered a decision ordering SIP and BPI to pay Pineda jointly and severally the amount of 62,095.92 pesos with interest, while the complaint against Interocean and Gacet was dismissed. Upon appeal of SIP and BPI, the appellate court affirmed the trial. Hence, this petition. ISSUE: Whether or not the petitioner is liable for the cost of repairs undertaken by the respondent on the subject vessels based on a juridical relation of quasicontract. HELD: Yes. The petitioner is liable for the cost of repairs undertaken on the subject vessels. The repairs made on the vessels ultimately redounded to the benefit of the new owner for without said repairs, those vessels would not be seaworthy. Under Article 2142 of the Civil Code, such 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. When the parties executed the Deed of Confirmation of Obligation they intended to confirm and acknowledge the existing obligations. The primary Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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purpose of the contracts is the protection of the vessels. Among them are liens on the same under which the obligation to private respondent properly belongs. Petition denied and the decision appealed from is affirmed.
State Investment v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
50
State Investment House, Inc., Petitioner, versus Court of Appeals and Nora B. Moulic, Respondents. (G.R. No. 101163, January 11, 1993, 1st Division) BELLOSILLO, J: FACTS: Private respondent Nora Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be sold on commission, two post-dated Equitable Banking Corporation checks in the amount of 50,000.00 pesos each. the payee, negotiated the checks to petitioner State Investment House, Inc. (State). Moulic failed to sell the pieces of jewelry and returned them to the payee before maturity of the checks. The checks, however, could no longer be retrieved as they had already been negotiated. Before their maturity dates, Moulic withdrew her funds from the drawee bank and the checks which were dishonored for insufficiency of funds. On December 20, 1979, State allegedly notified Moulic of the dishonor of the checks and requested that it be paid in cash instead, although Moulic avers that no such notice was given to her. State sued Moulic to recover the value of the checks. In her Answer, Moulic contends that she incurred no obligation on the checks because the jewelry was never sold and the checks were negotiated without her knowledge and consent. She also instituted a Third-Party Complaint against Corazon Victoriano, who later assumed full responsibility for the checks. The trial court dismissed the Complaint as well as the Third-Party Complaint. State elevated the order of dismissal to the Court of Appeals, but the appellate court affirmed the trial court on the ground that the Notice of Dishonor to Moulic was made beyond the period prescribed by the Negotiable Instruments Law. Hence, this petition. ISSUE: Whether or not petitioner was a holder of the checks in due course and may enforce full payment of the checks. HELD: Yes. The petitioner was a holder of the checks in due course and may enforce full payment of the checks. A prima facie presumption exists that the holder of a negotiable instrument is a holder in due course. The burden of proving that State is not a holder in due course lies in the person who disputes the presumption. In this regard, Moulic failed. The evidence clearly shows that: (a) on their faces the post-dated checks were complete and regular; (b) petitioner bought these checks from the payee, Corazon Victoriano, before their due dates; (c) petitioner took these checks in good faith and for value, albeit at a discounted price; and, (d) petitioner was never informed nor made aware that these checks were merely issued to payee as security and not for value. The petitioner is indeed a holder in due course. As such, it holds the instruments free from any defect of title of prior parties, and from defenses available to prior parties among themselves; it may, therefore, enforce full payment of the checks. Allowing recovery on the checks would not constitute unjust enrichment on the part of the petitioner. Correspondingly, Moulic may not unilaterally discharge herself from her liability by the mere expediency of withdrawing her funds from the drawee bank.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
51
Petition granted. The decision appealed from is reversed and a new one entered declaring private respondent Nora Moulic liable to petitioner State Investment House, Inc.
People v. Nurfrasir Hashim, et al.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
52
The People of the Philippines, Plaintiff-Appellee, versus Nurfrasir Hashim y Saraban a.k.a “Franz/Frans,” Makdul Jamad y Bukin (Al) a.k.a. “Macky,” a certain “Tas,” and a certain “Jun,” Accused, Bernadette Pansacala a.k.a. “Neneng Awid,” Accused-Appellant. (G.R. No. 194255, June 13, 2012, 2nd Division) SERENO, J: FACTS: Accused-appellant encouraged and invited AAA and BBB to work abroad which they accepted. On their journey to Malaysia, they met the accused and they were brought to Golden Lotus Barber Salon where the latter were introduced to a certain person named Mommy Cindy, the alleged owner of the salon, and their purported manager Hako who was called Mommy Susan. Allegedly, BBB was forced on numerous occasions to have sexual intercourse with Franz at his bidding, even in the presence of other people. She followed his orders for fear that he would inflict physical harm on her. The complainants were forced to become sex workers to earn money and pay off the debts they incurred from their travel from Zamboanga City to Labuan, Malaysia. Thus, AAA and BBB worked as prostituted women. BBB had a customer who was a law enforcer at Kota Kinabalu, Malaysia. She sought his help for her return to the Philippines, and he agreed. The following day, the Golden Lotus was raided by the Immigration Officers of Kota Kinabalu, Malaysia, and the prostituted Filipino women, including AAA and BBB, were detained at the Police Department in Labuan until all the women were deported to the Philippines. The Regional Trial Court of Zamboanga City rendered a decision finding both accused Nurfrasir Hashim a.k.a ―Franz/Frans‖ and Bernadette Pansacala a.k.a ―Neneng Awid‖ guilty beyond reasonable doubt of the crime of Illegal Recruitment defined under Section 6 and penalized under Section 7(b) of Republic Act No. 8042 otherwise known as the ―Migrant Workers and Overseas Filipinos Act of 1995‖, as principals by direct participation, committed by a syndicate, against BBB and AAA, and sentences each of said accused to suffer the penalty of life imprisonment and to pay damages. On appeal, the Court of Appeals affirmed the conviction of the accused-appellant and her co-accused but modified the award of damages. Hence, this appeal. ISSUE: Whether or not the conviction of accused-appellant and co-accused in the criminal offense charged carries with it the civil liability to pay damages to the victims. HELD: Yes. The conviction of accused-appellant and co-accused in the criminal offense charged carries with it the civil liability to pay damages to the victims. In the case of People v. Lalli, the Court increased the amount of moral and exemplary damages having convicted the accused therein of the crime of trafficking in persons. The payment of 500,000.00 pesos as moral damages and 100,000.00 pesos as exemplary damages for the crime of Trafficking in Persons as a Prostitute finds basis in Article 2219 of the Civil Code, which states that moral damages may be recovered in analogous cases of seduction, abduction, rape, or other lascivious acts, to which the criminal case of Trafficking in Persons as a Prostitute fits. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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The appealed decision is affirmed with modifications on the award of damages.
Abellana v. People
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
54
Felixberto Abellana, Petitioner, versus People of the Philippines and Spouses Saapia Alonto and Diaga Alonto, Respondents. (G.R. No. 174654, August 17, 2011, 1st Division) DEL CASTILLO, J: FACTS: Petitioner extended a loan to private respondents spouses Diaga and Saapia Alonto (spouses Alonto), secured by a Deed of Real Estate Mortgage. Petitioner prepared a Deed of Absolute Sale conveying said lots to him. The Deed of Absolute Sale was signed by spouses Alonto in Manila. However, it was notarized in Cebu City allegedly without the spouses Alonto appearing before the notary public. Thereafter, petitioner caused the transfer of the titles to his name and sold the lots to third persons. On August 12, 1999, an Information was filed charging petitioner with Estafa through Falsification of Public Document. During arraignment, petitioner entered a plea of "not guilty". After the termination of the pre-trial conference, trial ensued. The Regional Trial Court found the petitioner guilty of Falsification of a Public Document by a private individual under Article 172(1) in relation to Article 171(2) of the Revised Penal Code and not Estafa through Falsification of Public Document as charged in the Information. On appeal, the Court of Appeals held that petitioner's conviction cannot be sustained because it infringed on his right to be informed of the nature and cause of the accusation against him. The Court of Appeals, however, found no reversible error on the civil liability of petitioner as determined by the trial court and thus sustained the same. Petitioner filed a motion for reconsideration which was denied. Hence, this petition. ISSUE: Whether or not the notwithstanding his acquittal.
petitioner
could
be
held
civilly
liable
HELD: No. The petitioner cannot be held civilly liable. In Banal v. Tadeo, Jr., the Court elucidated on the civil liability of the accused despite his exoneration in this wise: While an act or omission is felonious because it is punishable by law, it gives rise to civil liability not so much because it is a crime but because it caused damage to another. Viewing things pragmatically, we can readily see that what gives rise to the civil liability is really the obligation and moral duty of everyone to repair or make whole the damage caused to another by reason of his own act or omission, done intentionally or negligently, whether or not the same be punishable by law. Civil liability arises when one, by reason of his own act or omission, done intentionally or negligently, causes damage to another. Hence, for petitioner to be civilly liable to spouses Alonto, it must be proven that the acts he committed had caused damage to the spouses. Based on the records of the case, the acts allegedly committed by the petitioner did not cause any damage to spouses Alonto. The Supreme Court affirmed the decision of the Court of Appeals insofar as they set aside the conviction of the petitioner for the crime of falsification of public document. The portion which affirmed the imposition of civil liabilities on the petitioner, i.e., the restoration of ownership and possession, the payment of 1,103,000.00 pesos representing the value of the property, and the payment of damages is deleted for lack of factual and legal basis. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
55
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
56
People v. Malicsi Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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People of the Philippines, Appellee, versus Edwin Malicsi, Appellant. (G.R. No. 175833, January 29, 2008, 2nd Division) CARPIO, J: FACTS: In four separate Informations, the prosecution charged appellant with raping AAA. AAA testified that one evening when her father asked her to buy wine from a store, she chanced upon the accused-appellant on her way home. Appellant placed AAA on his lap, embraced her and succeeded in having carnal knowledge against her consent by threatening the victim. Dr. Dela Rosa testified that he examined AAA and executed a Medical Certificate finding that the victim lost her virginity and the hymenal lacerations were inflicted possibly by the insertion of a hard object. The defense presented appellant as its only witness. Appellant denied the accusations of rape and alleged that he and AAA were sweethearts and they mutually agreed to engage in sexual intercourse. Appellant claimed that AAA visits their house about thrice a week when his wife is not at home. Appellant then recounted the incidents of his sexual intercourse with AAA. The trial court rendered its decision, finding appellant guilty of four counts of qualified rape. The trial court sentenced appellant to suffer the penalty of death for each count of rape, and to pay AAA 300,000.00 pesos for all counts as civil indemnity and 200,000.00 as moral damages for all counts. On appeal, the Court of Appeals affirmed the trial court‘s decision with modification, finding appellant guilty of four counts of simple rape instead of qualified rape and reducing the penalty imposed to reclusion perpetua. Hence, this appeal. ISSUE: Whether or not the award of moral damages were properly granted to the victim upon conviction of the appellant. HELD: Yes. The award of moral damages were properly granted to the victim upon conviction of the appellant. The appellate court was correct in imposing the penalty of reclusion perpetua on appellant and it also correctly affirmed the award by the trial court of 200,000.00 pesos in moral damages because moral damages are automatically granted to the rape victim without presentation of further proof other than the commission of the crime. However, the Court reduced the award of civil indemnity from 300,000.00 pesos to 200,000.00 pesos in accordance with prevailing jurisprudence. Civil indemnity in the amount of 50,000.00 pesos for each count of simple rape is automatically granted once the fact of rape is established. The appealed decision is affirmed with modification that the award of civil indemnity is reduced to 200,000.00 pesos.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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People v. Sia People of the Philippines, Plaintiff-Appellee, versus Rosauro Sia y Dichoso, Johnny Balalio y Deza, Jimmy Ponce y Tol and John Doe and Pedro Munoz (at large), Accused-Appellants. (G.R. No. 137457, November 21, 2001, En Banc) YNARES-SANTIAGO, J: FACTS: Christian Bermudez was a taxicab driver whose service was engaged by accused-appellant Rosauro Sia. The former followed the latter‘s instructions and returned to the Sia residence. As soon as he alighted from the Tamaraw FX taxi he was driving, his hands were tied by Johnny Balalio and was handed to a certain Pedro and was taken to accused Rosauro. Christian was beaten to death and accused Jimmy Ponce saw Rosauro hand the carton-wrapped lifeless body of the victim inside the taxicab which was later on taken by the assailants. The victim‘s lifeless body, wrapped in a carton box, was recovered several days later in a fishpond in Meycauayan, Bulacan. For the felonies, the accused were indicted for violation of Republic Act 6539, otherwise known as the Anti-Carnapping Law, and Murder in two separate Informations. At the arraignment, only Johnny Balalio and Jimmy Ponce appeared and pleaded not guilty. The third accused, Rosauro Sia, escaped from police custody while on the way to the hospital for treatment. As a consequence, the two cases were subsequently consolidated and jointly tried against accused Johnny Balalio and Jimmy Ponce only. After trial, the Regional Trial Court rendered a judgment against both accused imposing upon them the supreme penalty of death and payment of damages. The cases of accused Rosauro Sia who escaped from custody before he was arraigned and as against Peter Doe who was never apprehended and whose identity has never been known were ordered to be archived, subject to activation when they are arrested and brought before the bar of justice. The case was subjected to automatic review by the Supreme Court on automatic review. ISSUE: Whether or not upon the conviction of the accused, the award of damages were correctly granted to the heirs of the victim. HELD: Yes. The award of damages were correctly granted to the heirs of the victim, however, the award for the burial and other expenses incurred in connection with the death of the victim were deleted. The Court finds no reason to reverse the HELD lower court‘s HELD insofar as the crimes were committed. The Court finds the amount of 50,000.00 pesos as death indemnity proper, in line with controlling policy. The award of civil indemnity may be granted without any need of proof other than the death of the victim. The victim‘s heirs are likewise entitled to moral damages of 50,000.00 pesos by controlling case law, taking into consideration the pain and anguish of the victim‘s family brought about by his death.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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However, the award of 200,000.00 pesos as burial and other expenses incurred in connection with the death of the victim must be deleted. The records are bereft of any receipt or voucher to justify such award. The decision of the trial court was affirmed.
People v. Doctolero
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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People of the Philippines, Plaintiff-Appellee, versus Carlos Doctolero, Sr., Accused-Appellant. (G.R. No. 131866, August 20, 2001, 2nd Division) BUENA, J: FACTS: Vicente Ganongan Jr. and Roderick Litorco went to their friends‘ boarding house on Honeymoon Road, Baguio City. Thereat, Vicente Ganongan, Roderick Litorco, Regie Daodaoan, Rex Tabanganay, Jeffrey Alimani and Florencio Dagson had a drinking spree in a nearby store. On their way home, they stopped as a gun was pointed at them b y a man who identified himself as a barangay kagawad. At this time, Carlos Doctolero Sr. was standing at the edge of Honeymoon road. He then put his arm over Daodaoan‘s shoulder. Daoadaoan shoved Doctolero‘s hand and retreated. Doctolero stepped back and fired twice at Daodaoan but missed. Tabanganay asked Daodaoan if he was hit and upon answering that he was not, Tabanganay shouted at his friends to run. When Ganongan turned around to run, Doctolero fired at him, hitting him twice. Oliver Alimani came to Ganongan‘s aid when the latter yelled that he was hit. Thereafter, they hailed a taxi and rushed Ganongan to Saint Louis University Hospital where he expired. In his defense, accused-appellant denied the accusation against him. The trial court rendered a decision convicting the accused-appellant of murder after appreciating the aggravating circumstance of treachery. He was sentenced to suffer the penalty of reclusion perpetua and was ordered to indemnify the heirs of Ganongan. Hence, this appeal. ISSUE: Whether or not the damages awarded to the heirs of the victim proper based on the conviction of the accused-appellant on the crime charged. HELD: No. The damages awarded to the heirs of the victim were not proper based on the conviction of the accused-appellant. Since treachery was not proven to be resent in this case, the Court deemed it proper to convict the accused of the crime of homicide instead of murder, thus damages were reduced to 112,413.40 pesos representing funeral expenses which were duly proven and covered by receipts. Expenses relating to the 9 t h day, 40 t h day and 1 st year anniversaries of death cannot be considered in the award of actual damages as these were incurred after a considerable lapse of time from the burial of the victim. With respect to the award of moral damages, the same was reduced to 50,000.00 pesos in accordance with existing jurisprudence. The decision appealed from is affirmed with modification.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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People v. Abulencia People of the Philippines, Plaintiff-Appellee, versus Rolly Abulencia y Coyos, Defendant-Appellant. (G.R. No. 138403. August 22, 2001, En Banc) PER CURIAM: FACTS: Reynaldo Garcia, Jr. met the defendant-appellant on August 4, 1998 and later, both engaged in a drinking spree. They slept on Garcia‘s house and upon waking up, the defendant-appellant left to buy in a nearby store tagging along the minor victim Rebelyn. Both of them never returned and on the evening of the same day, the defendant-appellant surrendered to Mayor Sevilleja reporting that he was with the victim when the latter allegedly fell from the bridge after he accidentally tripped the victim and he admitted that he also raped the latter in a tape interview by Dennis Mojares. The following morning, the victim was found dead and her body floating in a creek. Autopsy revealed that she was sexually abused and thereafter brutally killed. An information was filed against Rolly Abulencia for rape with homicide and he was thereafter convicted by the trial court of the crime charged sentenced to suffer the penalty of death and to indemnify the heirs of the victim. Hence, this appeal. ISSUE: Whether or not the civil liability imposed upon defendantappellant is reasonable based on the circumstances of the crime committed. HELD: No. The civil liability imposed upon the defendant-appellant was not reasonable based on the circumstances of the crime committed. The Court modified the decision on the civil aspect of the case. Although this matter has not been raised by the parties, especially the Solicitor General, it is a settled rule that in a criminal case, an appeal to the Supreme Court throws the whole case open for review, and it becomes the duty of the Court to correct such errors as may be found in the appealed judgment, whether they are made the subject of assignments of error or not. With regard to the civil indemnity, the trial court awarded only 75,000.00 pesos. Current jurisprudence has fixed at 100,000.00 pesos the civil indemnity in cases of rape with homicide, which is fully justified and properly commensurate with the seriousness of that special complex crime. The trial court did not award moral damages to the victim‘s family. Based on prevailing jurisprudence, however, moral damages may be awarded to the heirs of the victim without need for pleading or proof of its basis for their mental, physical and psychological sufferings are too obvious to still require their recital at the trial. Hence, moral damages in the amount of 50,000.00 pesos must be awarded. In People vs. Lagarto, the Court held that attendant circumstances may be considered to determine civil liability. Thus, in view of the evident cruelty inflicted upon Rebelyn, as shown by the multiple burns and contusions on her body, the Court grants the award of exemplary damages in the amount of 25,000.00 pesos. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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The decision appealed from is affirmed with modification insofar as the civil aspect is concerned.
Bermudez v. Melencio-Herrera
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
63
Reynaldo Bermudez, Sr., and, Adonita Yabut Bermudez, PetitionersAppellants, versus Hon. Judge A. Melencio-Herrera, Domingo Pontino y Tacorda and Cordova Ng Sun Kwan, Respondents-Appellees. (G.R. No. L-32055, February 26, 1988, 2nd Division) YAP, J: FACTS: A cargo truck, driven by Domingo Pontino and owned by Cordova Ng Sun Kwan, bumped a jeep on which Rogelio, a six-year old son of plaintiffsappellants, was riding. The boy sustained injuries which caused his death. As a result, a criminal case for Homicide through Reckless Imprudence was filed against Domingo Pontino by the Manila City Fiscal's Office. The plaintiffsappellants mader a reservation to file an independent civil action and thereafter filed a civil case for damages with the Court of First Instance of Manila. Finding that the plaintiffs instituted the action on the assumption that defendant Pontino's negligence in the accident constituted a quasi-delict, the trial court stated that plaintiffs had already elected to treat the accident as a crime by reserving in the criminal case their right to file a separate civil action. That being so, the trial court decided to order the dismissal of the complaint against defendant Cordova Ng Sun Kwan and to suspend the hearing of the case against Domingo Pontino until after the criminal case for Homicide Through Reckless Imprudence is finally terminated. From said order, plaintiffs filed the present appeal. ISSUE: Whether or not the present civil action is based on delict and cannot proceed independently of the criminal case. HELD: No. The present civil action is not based on delict but on quasi-delict, thus it can proceed independently of the criminal case. In cases of negligence, the injured party or his heirs has the choice between an action to enforce the civil liability arising from crime under Article 100 of the Revised Penal Code and an action for quasi-delict under Article 2176-2194 of the Civil Code. If a party chooses the latter, he may hold the employer solidarily liable for the negligent act of his employee, subject to the employer's defense of exercise of the diligence of a good father of the family. In the case at bar, the action filed by appellant was an action for damages based on quasi-delict. The fact that they reserved their right in the criminal case to file an independent civil action did not preclude them from choosing to file a civil action based on quasi-delict. Even without such a reservation, the Court allowed the injured p a r t y i n t h e c r i m i n a l c a s e w h i c h r e s u l t e d i n t h e a c q u i t t a l o f t h e a c c u s e d t o re cover damages based on quasi-delict. It does not follow that a person who is not criminally liable is also free from civil liability. While the guilt of the accused in a criminal prosecution must be established beyond reasonable doubt, only a preponderance of evidence is required in a civil action for damages under Article 29 of the Civil Code. The judgment of acquittal extinguishes the civil liability of the accused only when it includes a declaration that the facts from which the civil liability might arise did not exist. Petition granted and the appealed orders of the trial court were annulled.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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People v. Relova People of the Philippines, Petitioner, versus Hon. Benjamin Relova and Manuel Opulencia, Respondents. (G.R. No. L-45129, March 6, 1987, 1st Division) FELICIANO, J: FACTS: The members of the Batangas City Police together with personnel of the Batangas Electric Light System, equipped with a search warrant issued by a Judge of Batangas City, searched and examined the premises of the Opulencia Carpena Ice Plant and Cold Storage owned and operated by the private respondent Manuel Opulencia. The police discovered that electric wiring, devices and contraptions had been installed, without the necessary authority from the city government, and architecturally concealed inside the walls of the building owned by the private respondent. These devices and contraptions were allegedly designed purposely to lower the readings of the electric current consumption in the electric meter of the said plant. During the subsequent investigation, Manuel Opulencia admitted in a written statement that he had caused the installation of the electrical devices in order to lower the readings of his electric meter. An Information was filed against the private respondent for violation of C i t y Ordinance No. 1 of Batangas City which was dismissed based on prescription. The Acting City Fiscal of Batangas then filed before the Court of First Instance another Information against private respondent for Theft of electric power under Article 308 in relation to Article 309, paragraph (1), of the Revised Penal Code. Private respondent filed a M o t i o n t o Q u a s h a l l e g i n g t h a t h e h a d b e e n p r e v i o u s l y acquitted of the offense charged in the second information and that the filing thereof was violative of his constitutional right against double jeopardy. The respondent Judge granted said motion and ordered the dismissal of the case. Hence, this petition. ISSUES: Whether or not private respondent can still be held civilly liable after an acquittal from a city ordinance violation. HELD: Yes. The private respondent can still be held civilly liable after an acquittal from a city ordinance violation. The Supreme Court held that the accused was placed in double jeopardy; hence, he could not be tried again in a criminal case for violation of the Revised Penal Code after being acquitted from a violation of city ordinance based on the same act. The extinction of criminal liability whether by prescription or by the bar of double jeopardy does not carry with it the extinction of civil liability arising from the offense charged. In the present case, private respondent freely admitted during the police investigation having stolen electric current through the installation and u s e of unauthorized electrical c o n n e c t i o n s o r d e v i c e s . The related civil action which has not been waived expressly or impliedly should be r e m a n d e d t o t h e l o w e r c o u r t for proper determination. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Petition denied.
Manantan v. Court of Appeals Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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George Manantan, Petitioner, versus Court of Appeals, Spouses Marcelino Nicolas and Maria Nicolas, Respondents.(G.R. No. 107125, January 29, 2001, 2nd Division) QUISUMBING,J: FACTS: On June 1, 1983, the Provincial Fiscal of Isabela filed an information charging petitioner Manantan with reckless imprudence resulting to homicide, a l l e g e d l y c o m m i t t e d o n o r a b o u t t h e 2 5 th d a y o f S e p t e m b e r 1 9 8 2 , i n t h e municipality of Santiago, Isabela. The said accused being then the driver and person -in-charge of an automobile bearing Plate No. NGA-816 willfully and unlawfully drove and operated the same while along the Daang Maharlika of the said municipality, in a negligent manner causing the automobile to sideswipe a passenger jeepney, thereby causing the said automobile to turn turtle to the death Ruben Nicolas passenger of the said automobile. In its decision dated June 30, 1988, promulgated on August 4 , 1988, the trial court decided the criminal case in favor of Manantan. Subsequently, the private respondent spouses Nicolas filed their notice of appeal on the civil aspect of the trial court‘s judgment. The Nicolas spouses prayed that the decision appealed from be modified and that the appellee be ordered to pay indemnity and damages. In its decision, the Court of Appeals decided in favor of the pr ivate respondents. In finding petitioner civil liability, the court a quo noted that at the time the accident occurred, Manantan was in a state of intoxication, due to his having consume all in all a total amount of at least twelve bottles of beer between 9 a.m. to 11 p.m. The petitioner moved for reconsideration but the appellate court denied the motion. ISSUE: Whether or not the acquittal of the accused also extinguished his civil liability. HELD: NO. Our law recognizes two kinds of acquittal, with differ ent effects on the civil liability of the accused. First is an acquittal on the ground that the accused is not the author of the act or omission complained of as a felony. This instance closes the door to civil liability, for a person who has been found not to be the perpetrator of any act or omission cannot and can never be held liable for such act or omission. There being no delict, civil liability ex delicto is out of the question, and the civil action, if any, which will be instituted must be based on ground other than the delict complained of. The second instance is an acquittal based on reasonable doubt on the guilt of the accused. In this case, even if the guilt of the accused has not been satisfactorily established, he is not exempt from civil liability which may be proved by preponderance of evidence only. In the case at bar, the accused‘s acquittal is based on reasonable doubt. The decision of the trial court did not state in clear and equivocal terms that petitioner was not recklessly imprudent or negligent. Hence, impliedly, the trial court acquitted him on reasonable doubt. Since civil liability is not extinguished in Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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criminal cases if the accused acquittal is based on reasonable doubt, the decision of the Court of Appeals finding that the defendant is civilly liable for his negligent and reckless act of driving his car which was the proximate cause of the vehicular accident, and sentenced him to indemnify plaintiff-appellants in the amount of P74, 400.00 for the death of Ruben Nicolas.
People v. Bayotas
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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People of the Philippines, Plaintiff-appellee, versus Rogelio Bayotas Y Cordova, Accused-appellant. (236 SCRA 239, September 2, 1994, En Banc) ROMERO, J: FACTS: Rogelio Bayotas was charged with rape and eventually convicted on June19, 1991. While the appeal was pending, Bayotas died. The Supreme Court dismissed the criminal aspect of the appeal; however, it required the Solicitor -G e n e r a l t o c o m m e n t w i t h r e g a r d t o B a y o t a s ‘ c i v i l l i a b i l i t y a r i s i n g f r o m h i s commission of the offense charged. In his comment, the Solicitor-General expressed his view that the death of a c c u s e d - a p p e l l a n t d i d n o t e x t i n g u i s h h i s c i v i l l i a b i l i t y a s a r e s u l t o f h i s commission of the offense charged. This comment was opposed by the counsel of accused-appellant, arguing that the death of the accused while judgment of the conviction is pending appeal extinguishes both criminal and civil penalties, he cited in support and invoked the HELD of the Court of Appeals in People v. Castillo, which was held that the civil obligation in a criminal case takes root in the criminal responsibility and therefore civil liability is extinguished if accused should die before final judgment is rendered. ISSUE: Whether or not the death of the accused pending appeal of his conviction extinguishes his civil liability. HELD: Y e s . T h e d e a t h o f t h e a c c u s e d p e n d i n g a p p e a l o f h i s c o n v i c t i o n extinguishes his civil liability because tire liability is based solely on the criminal act committed. Corollarily, the claim for civil liability survives notwithstanding the death of the accused, if the same may also be predicted as one source of obligation other than delict. Moreover, when a defendant dies before judgment becomes executory, there cannot be any determination by final judgment whether or not the felony upon which the civil action might arise exists,' for the simple reason that `there is no party defendant.' The Rules of Court state that a judgment in a criminal case becomes final 'after the lapse of the period for perfecting an appeal or w h e n t h e s e n t e n c e h a s b e e n p a r t i a l l y o r t o t a l l y s a t i s f i e d o r s e r v e d , o r t h e defendant has expressly waived in writing his right to appeal. 'In addition, where the civil liability does not exist independently of the c r i m i n a l r e s p o n s i b i l i t y , t h e e x t i n c t i o n o f t h e l a t t e r b y d e a t h , i p s o f a c t o extinguishes the former, provided, of course, that death supervenes before final judgment. As in this case, the right to institute a separate civil action is not r e s e r v e d , t h e d e c i s i o n t o b e rendered must, of necessity, cover 'both the criminal and the civil aspects of the case.' Th e accused died before final judgment was rendered, thus, he is absolved of both his c r i m i n a l a n d c i v i l liabilities based solely on delict or the crime committed. Appeal dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Barredo v. Garcia Fausto Barredo, Petitioner, versus Severino Garcia and Timoteo Almario, Respondents. (73 PHIL 607, July 8, 1942, En Banc) BOCOBO, J: FACTS: O n M a y 3 , 1 9 3 6 , t h e r e w a s a h e a d - o n c o l l i s i o n b e t w e e n a t a x i o f t h e Malate Taxi driven by Fontanilla and a carretela guided by Dimapilis. The carretela was overturned and a passenger, 16 -yearold boy Garcia, suffered injuries from which resulted to his death. A criminal action was filed against Fontanilla, and he was convicted . The court in the criminal case granted the petition to reserve the civil action against Barredo, the proprietor of the Malate Ta x i a n d t h e employer of Fontanilla, making him primarily and directly responsible under culpa aquiliana. It was undisputed that F o n t a n i l l a ‘ s negligence was the cause of the accident as he was driving on the wrong side of the road at high speed, and there was no showing that Barredo exercised the diligence of a good father of a family. B a r r e d o ‘ s theory of defense is that Fontanilla ‘s negligence being punishable by the Revised Penal Code, that his liability as employer is only subsidiary liable but Fontanilla was sued for civil liability, hence, Barredo claims that he cannot be held liable. ISSUE: Whether or not complainant‘s liability as employer of Fontanilla was only subsidiary and not as primarily and directly responsible under Article 1903 of the Civil Code. HELD: N o , t h e S u p r e m e C o u r t r u l e d t h a t c o m p l a i n a n t ‘ s l i a b i l i t y i s n o t o n l y subsidiary but also primary liability. The Court affirmed the decision of the Court of Appeals which ruled that the liability sought to be imposed upon Barredo in t h i s a c t i o n i s n o t a c i v i l o b l i g a t i o n a r i s i n g f r o m a f e l o n y , b u t a n o b l i g a t i o n imposed in Article 1903 of the Civil Code by reason of his negligence in the selection or supervision of his servant or employee. QUASI-DELICT OR CULPA AQUILIANA is a separate legal institution under the Civil Code and is entirely distinct and independent from a delict or crime as punished under the Revised Penal Code (RPC). In this jurisdiction, the same negligent act causing damage may produce civil liability (subsidiary) arising froma crime under Art. 103 of the RPC; or create an action for the quasi delict or culpa aquiliana (primary) and the parties injured are free to choice which course to take. In the instant case, the negligent act of Fontanilla produced two liabilities of Barredo. First, a subsidiary one because of the civil liability of Fontanilla arising from the latter‘s criminal negligence; and second, Barredo‘s primary and direct responsibility arising from his presumed negligence as an employer in the selection of his employees or their supervision, under Art.1903 of the Civil Code. The parties instituted an action for damages under Art.1903 of the Civil C o d e . B a r r e d o w a s f o u n d g u i l t y o f n e g l i g e n c e f o r Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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c a r e l e s s l y e m p l o y i n g Fontanilla, who had been caught several times for violation of the Automobile L a w a n d s p e e d i n g v i o l a t i o n . Th u s , t h e p e t i t i o n i s d e n i e d . B a r r e d o m u s t indemnify plaintiffs under the provisions of Art. 1903 of the Civil Code.
Del Carmen, Jr. v. Geronimo Bacoy et.al
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Oscar Del Carmen, Jr., Petitioner, versus Geronimo Bacoy, Guardian and representing the children, namely:Mary Marjorie B. Monsalud, Metzie Ann B. Monsalud, Kareen B. Monsalud, Leonardo B. Monsalud, Jr., and Cristina B. Monsalud, Respondents. (G.R. No. 173870, April 25, 2012, 1st Division) DEL CASTILLO, J: FACTS: Sometime in 1993, Emilia Bacoy Monsalud (Emilia), along with her spouse Leonardo Monsalud, Sr. and their daughter Glenda Monsalud, were on their way home from a Christmas party they attended when they were run over by a Fuso passenger jeep bearing plate number UV-PEK-600 that was being driven by Allan Maglasang (Allan). The jeep was registered in the name of petitioner Oscar del Carmen, Jr. (Oscar Jr.) and used as a public utility vehicle plying the Molave, Zamboanga del Sur to Sominot, Zamboanga del Sur and vice versa route. Reckless Imprudence Resulting in Multiple Homicide was filed against Allan before the Regional Trial Court said court declared Allan guilty beyond reasonable doubt of the crime charged. During the pendency of said criminal case, Emilia‘s father, Geronimo Bacoy (Geronimo), in behalf of the six minor children of the Monsaluds, filed Civil Case which is an independent civil action for damages based on culpa aquiliana. Aside from Allan, also impleaded therein were his alleged employers, namely, the spouses Oscar Del Carmen, Sr. (Oscar Sr.) and Norma del Carmen (Spouses del Carmen) and the registered owner of the jeep, their son Oscar Jr. Geronimo prayed for the reimbursement of funeral and burial expenses, as well as the award of attorney‘s fees, moral and exemplary damages resulting from the death of the three victims, and loss of net income earnings of Emilia who was employed as a public school teacher at the time of her death. The RTC exculpated the spouses Del Carmen from civil liability for insufficiency of evidence. However, their son Oscar Jr. was held civilly liable in a subsidiary capacity anchoring their on the principle of res ipsa loquitur. Oscar Jr. moved for reconsideration contending that the provision on vicarious liability of the employer under Article 2180 of the Civil Code requires the existence of employer-employee relationship and that the employee was acting within the scope of his employment when the tort occurred. ISSUE: Whether or not the principle of ―Res Ipsa Loquitor is applicable in the instant case and that the employer can be subsidiarily liable. HELD: The court also declared the doctrine of res ipsa loquitur inapplicable since the property owner cannot be made responsible for the damages caused by his property by reason of the criminal acts of another. It then adjudged that only Allan should bear the consequences of his criminal acts. Furthermore, the court cited Article 103 of the Revised Penal Code which provides that for an employer to be subsidiarily liable for the criminal acts of his employee, the latter should have committed the same in the discharge of his duties. The court agreed with Oscar Jr. that this condition is wanting in Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Allan‘s case as he was not acting in the discharge of his duties as a conductor when he drove the jeep. WHEREFORE, premises considered, the MOTION FOR RECONSIDERATION is granted, and defendant OSCAR DEL CARMEN JR. is hereby absolved from all civil liability arising from the felonious acts of convicted accused ALLAN MAGLASANG.
Ludo and Luym Corp. v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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Ludo and Luym Corp., Petitioner, versus, Court of Appeals, Gabisan Shipping Lines, INC. and/or Anselmo Olasiman, Respondents. (1351 SCRA 35, February 1, 2001, 2nd Division) QUISUMBING, J: FACTS: Private respondent Anselmo Olasiman, as captain, was maneuvering the ship MV Miguela owned by respondent Gabisan Shipping lines, at the pier owned b y p e t i t i o n e r L u d o a n d L u y m C o r p o r a t i o n w h e n i t r a m m e d t h e p i l e c l u s t e r damaging it and deforming the cable wires wound around it. In an action for recovery of damages filed by Petitioner, the Regional Trial Court ruled against respondents for incompetence and negligence. In an appeal t h e C o u r t o f A p p e a l s r e v e r s e d t h e l o w e r c o u r t ‘ s d e c i s i o n , s a y i n g t h a t t h e petitioner‘s witness Naval was incompetent to testify on the negligence of the crew and that petitioner‘s evidence did not positively identify that MV Miguela caused the damage. Thus, petitioner filed this petition for review. ISSUE: Whether or not the private respondents are responsible for the damage done to the pier by the ship based on the doctrine of RES IPSA LOQUITOR HELD: The Supreme Court sustained the Regional Trial Court decision partly on the ground that the incompetence of eyewitness Naval was not an assigned error at the appellate court. The doctrine of RES IPSA LOQUITOR says that when the thing that causes the damage is in the control and management of the respondent, and in the ordinary course of things the accident does not happen if those who hav e the management use proper care, it affords reasonable evidence, in the absence of explanation, that the accident arose from want of care. The principle applies here. The MV Miguela was in the exclusive control of respondent Olasiman, and a s i d e f r o m p e t i t i o n e r ‘ s w i t n e s s t e s t i m o n y t h a t t h e v e s s e l r a m m e d t h e p i l e cluster, respondent did not show persuasively other possible causes of the damage. Therefore, respondents were responsible for the damage. Petition is granted and the decision of the Regional Trial Court reinstated.
Thermochem v. Naval
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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Thermochem Inc. and Jerome O. Castro, Petitioners, versus Leonora Naval and The Court of Appeals, Respondents. (G.R. No. 131541, October 20, 2000, 1st Division) YNARES-SANTIAGO, J: FACTS: On May 10, 1992, at around 12:00 o'clock midnight, Eduardo Edem was driving a "Luring Taxi" along Ortigas Avenue, near Rosario, Pasig, going towards Cainta. Prior to the collision, the taxicab was parked along the right side of O r t i g a s A v e n u e , n o t f a r f r o m t h e R o s a r i o B r i d g e , t o u n l o a d a p a s s e n g e r . Thereafter, the driver executed a U-turn to traverse the same road, going to the direction of EDSA. At this point, the Nissan Pathfinder traveling along the same road going to the direction of Cainta collided wit h the taxicab. The point of impact was so great that the taxicab was hit in the middle portion and was pushed sideward, causing the driver to lose control of the vehicle. The taxicab w a s t h e n d r a g g e d i n t o t h e n e a r b y Q u e s t i o n Ta i l o r i n g S h o p , t h u s , c a u s i n g damage to the said tailoring shop, and its driver, Eduardo Eden, sustained injuries as a result of the incident. Private respondent, as owner of the taxi, filed a damage suit against petitioner, Thermochem Incorporated, as the owner of the Nissan Pathfinder, and its driver, petitioner Jerome Castro. A f t e r t r i a l , t h e l o w e r c o u r t a d j u d g e d p e t i t i o n e r C a s t r o n e g l i g e n t a n d ordered petitioners, jointly and severally, to pay private respondent actual, compensatory and exemplary damages plus attorney's fees and costs of suit. On appeal, the Court of Appeals affirmed the judgment of the court a quo. Hence, this petition for review on certiorari. ISSUE: Whether or not the petitioners are liable based on quasi-delict. HELD: Yes. The Court held that the driver of the onc oming Nissan Path finder vehicle was liable and the driver of the U -turning taxicab was contributorily liable. From petitioner Castro's testimonial admissions, it is established that he was driving at a speed faster than 50 kilometers per hour. But as he allegedly stepped on the brake, it locked causing his Nissan Pathfinder to skid to the left and consequently hit the taxicab. The sudden malfunction of the vehicle's brake system is the usual excuse of drivers involved in collisions which are the result of speedy driving. Malfunction or loss of brake is not a fortuitous event. The owner and his driver are presumed to know about the conditions of the vehicle and is duty bound to take care thereof with the diligence of a good father of the family. A mechanically defective vehicle should avoid the streets. Moreover, the record shows that the Nissan Pathfinder was on the wrong lane when the collision occurred. This was a disregard of traffic safety rules. The law considers what would be reckless, blameworthy or negligent in a man of ordinary diligence and prudence and determines liability by that. As mentioned earlier, the driver of the taxi is contributorily liable. U-turns are not generally advisable particularly on major streets. The driver of the taxi ought to have known that vehicles coming from the Rosario bridge are on a downhill slope. Obviously, there was lack of foresight on his part, making him contributorily liable. Considering the contributory negligence of the driver of Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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p r i v a t e respondent's taxi, the award of P47, 850.00, for the repair of the taxi, should be reduced in half. All other awards for damages are deleted for lack of merit.
Philippine Hawk Corp. v. Lee
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
76
Philippine Hawk Corporation, Petitioner, versus Vivian Tan Lee, Respondent. (G.R. No. 166869, February 16, 2010, 3rd Division) PERALTA, J.: FACTS: On March 17, 1991, in Bgy. Buensoceso, Gumaca, Quezon, plaintiff Vivian Lee Tan and her husband Silvino Tan, while on board a motorcycle, driven by the latter, and a Metro Bus of the Philippine Hawk driven by Margarito Avila, were involved in an accident. As a result of the accident, Silvino Tan died on the spot while plaintiff Vivian Lee Tan suffered physical injuries which necessitated medical attention and hospitalization. The deceased Silvino Tan is survived by his wife, plaintiff Vivian Lee Tan and four children, three of whom are now residents of the United States. On June 18, 1992, respondent filed an Amended Complaint, [3] in her own behalf and in behalf of her children, in the civil case for damages against petitioner. Respondent sought the payment of indemnity for the death of Silvino Tan, moral and exemplary damages, funeral and interment expenses, medical and hospitalization expenses, the cost of the motorcycle‘s repair, attorney‘s fees, and other just and equitable reliefs but the petitioner denied liability for the vehicular accident, alleging that the immediate and proximate cause of the accident was the recklessness or lack of caution of Silvino Tan. Petitioner asserted that it exercised the diligence of a good father of the family in the selection and supervision of its employees, including Margarito Avila. The trial court rendered judgment against petitioner and defendant Margarito Avila, adjudging the latter guilty of simple negligence petitioner bus company liable for failing to exercise the diligence of a good father of the family in the selection and supervision of Avila, having failed to sufficiently inculcate in him discipline and correct behavior on the road. On appeal, the Court of Appeals affirmed the decision of the trial court with modification in the award of damages. Hence, this petition. ISSUE: Whether or not negligence may be attributed to petitioner‘s driver and that such negligence was the proximate cause of the accident, resulting in the death of Silvino Tan and causing physical injuries to respondent; and whether or not petitioner is liable to respondent for damages. HELD: To be negligent, a defendant must have acted or failed to act in such a way that an ordinary reasonable man would have realized that certain interests of certain persons were unreasonably subjected to a general but definite class of risks. In this case, the bus driver, who was driving on the right side of the road, already saw the motorcycle on the left side of the road before the collision. However, he did not take the necessary precaution to slow down, but drove on and bumped the motorcycle, and also the passenger jeep parked on the left side of the road, showing that the bus was negligent in veering to the left lane, causing it to hit the motorcycle and the passenger jeep. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
77
Whenever an employee‘s negligence causes damage or injury to another, there instantly arises a presumption that the employer failed to exercise the due diligence of a good father of the family in the selection or supervision of its employees. To avoid liability for a quasi-delict committed by his employee, an employer must overcome the presumption by presenting convincing proof that he exercised the care and diligence of a good father of a family in the selection and supervision of his employee. The Court upholds the finding of the trial court and the Court of Appeals that petitioner is liable to respondent, since it failed to exercise the diligence of a good father of the family in the selection and supervision of its bus driver, Margarito Avila, for having failed to sufficiently inculcate in him discipline and correct behavior on the road. Indeed, petitioner‘s tests were concentrated on the ability to drive and physical fitness to do so. It also did not know that Avila had been previously involved in sideswiping incidents. In fine, the Court of Appeals correctly awarded civil indemnity for the death of respondent‘s husband, temperate damages, and moral damages for the physical injuries sustained by respondent in addition to the damages granted by the trial court to respondent. The trial court overlooked awarding the additional damages, which were prayed for by respondent in her Amended Complaint. The appellate court is clothed with ample authority to review matters, even if they are not assigned as errors in the appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated August 17, 2004 is hereby AFFIRMED with MODIFICATION.
Dy Teban v. Ching Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
78
Dy Teban Trading Inc., Petitioner, versus Jose Ching and/or Liberty Forest, Inc. and Cresilito M. Limbaga, Respondent. (G.R. No. 161803, February 4, 2008, 3rd Division) REYES, R.T., J: FACTS: A Prime Mover Trailer suffered a tire blow out during the night of its travel at a national highway. The trailer was owned by the respondent Liberty Forest. The driver allegedly put earl warning devices but the only evidence being witnessed was a banana trunks and candles. Since the car was placed at the right wing of the road, thus it caused the swerving of a Nissan van owned by the petitioner when a passenger bus was coming in between the trailer. The Nissan van owner claimed for damages against the respondent. The trial court found that the proximate cause of the three –way accident is the negligence and carelessness of driver of the respondent. However, it reversed the decision of the trial court. ISSUE: Whether there was negligence on the part of the respondent. HELD: Yes. There was negligence on the part of the respondent when the latter failed to put and used an early warning device because it was found out that there was no early warning device being prescribed by law that was used by the driver in order to warn incoming vehicle. Fu rthermore, the proximate cause of the accident was due to the position of the trailer where it covered a cemented part of the road, thus confused and made trick way for other vehicles to pass by. Thus the respondent is declared liable due to violation of road rules and regulations.
Safeguard Security v. Tangco
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
79
Safeguard Security Agency, Inc. and Admer Pajarillo, Petitioners, versus Lauro Tangco, Vern Larry Tangco, Van Lauro Tangco, Von Larrie Tangco, Vien Lari Tangco and Vivien Lauriz Tangco, Respondents. (G.R. No. 165732, December 14, 2006, 1st Division) AUSTRIA-MARTINEZ, J: FACTS: The victim Evangeline Tangco was depositor of Ecology Bank. She was also a licensed-fire arm holder, thus during the incident, she was entering the bank to renew her time deposit and along with her was her firearm. Suddenly, the security guard of the bank, upon knowing that the victim carries a firearm, the security guard shot the victim causing the latter‘s instant death. The heirs of the victim filed a criminal case against security guard and an action against Safeguard Security for failure to observe diligence of a goof father implied upon the act of its agent. ISSUE: Whether Safeguard Security can be held liable for the acts of its agent. HELD: Yes. The law presumes that any injury committed either by fault or omission of an employee reflects the negligence of the employer. In quasi-delicts cases, in order to overcome this presumption, the employer must prove that there was no negligence on his part in the supervision of his employees. It w a s d e c l a r e d t h a t i n t h e s e l e c t i o n o f e m p l o y e e s a n d agents, employers are required to examine them as to their q u a l i f i c a t i o n s , experience and service records. Thus, due diligence on the supervision and operation of employees includes the formulation of suitable rules and regulations for the guidance of employees and the issuance of proper instructions intended for the protection of the public and persons with whom the employer has relations through his employees. Thus, in this case, Safeguard Security committed negligence in identifying the qualifications and ability of its agents.
Villanueva v. Domingo
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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Nostradamus Villanueva, Petitioner, versus Priscilla R. Domingo and Leandro Luis R. Domingo, Respondents. (G.R. No. 144274, September 20, 2004, 3rd Division) CORONA, J: FACTS: In 1991, a collision was made by a green Mitsubishi lancer owned by Ocfemia against a silver Mitsubishi lancer driven by Leandro Domingo and owned by petitioner Priscilla Domingo. The incident caused the car of D o m i n g o b u m p e d a n o t h e r t w o p a r k e d v e h i c l e s . A c h a r g e d w a s f i l e d against Ocfemia and the owner Villanueva. Villanueva claimed that he must not be held liable for the incident because he is no longer the owner of the car since it was already swapped to another car. However, the trial court ordered the petitioner to pay the damages incurred by the silver Mitsubishi lancer car. ISSUE: Whether the owner Villanueva be held liable for the mishap. HELD: Under the Motor Vehicle law, it was declared that the registered owner of any vehicle is primary land directly liable for any injury it incurs while it is being operated. Thus, even the petitioner claimed that he was no longer the present owner of the car, still the registry was under his name, thus it is presumed that he still possesses the car and that the damages caused by the car be charge against him being the registered owner. The primary function of Motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicle, responsibility therefore can be fixed on a definite individual, the registered owner.
Calalas v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
81
Vicente Calalas, Petitioner, versus Court Of Appeals, Eliza Jujeurche Sunga and Francisco Salva, Respondents. (G.R. No. 122039 May 31, 2000, 2nd Division) MENDOZA, J.: FACTS: Eliza Sunga was a passenger of a jeepney owned and operated by the petitioner Calalas. Private respondent Sunga sat in the rear protion of the jeepney where the conductor gave Sunga an extension seat. When the jeep stopped, Sunga gave way to a passenger going outside the jeep. However, an Isuzu Truck driven by Verene and owned by Salva, accidentally hit Sunga causing the latter to suffer physical injuries where the attending physician ordered a three months of rest. Sunga filed an action for damages against the petitioner for breach of contract of common carriage by the petitioner. On the other hand, the petitioner Calalas filed an action against Salva, being the owner of the truck. The lower court ruled in favor of ther petitioner, thus the truck owner is liable for the damage to the jeep of the petitioner. ISSUE: Whether or not the petitioner is liable for the injury suffered by Sunga. HELD: Yes. The petitioner is liable for the injury suffered by Sunga. Under Article 1756 of the New Civil Code, it provides that common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of proof. In this case, the law presumes that any injury suffered by a passenger of the jeep is deemed to be due to the negligence of the driver. This is a case on Culpa Contractual where there was pre-existing obligations and that the fault is incidental to the performance of the obligation. Thus, it was clearly observed that the petitioner has negligence in the conduct of his duty when he allowed Sunga to seat in the rear portion of the jeep which is prone to accident. Decision affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
82
Picart v. Smith Amado Picart, Plaintiff-appellant, versus Frank Smith, Jr., Defendantappellee, Alejo Mabanag for appellant, G. E. Campbell for appellee. (G.R. No. L-12219, March 15, 1918, En banc) STREET, J.: FACTS: The plaintiff, riding on his pony was half way across the Carlatan bridge when the defendant approached from the opposite direction in an automobile, going at the rate of about ten or twelve miles per hour. As the defendant neared the bridge he saw a horseman on it and blew his horn to give warning of his approach. He continued his course and after he had taken the bridge he gave two more successive blasts, as it appeared to him that the man on horseback before him was not observing the rule of the road. The plaintiff saw the automobile coming and heard the warning signals. However, thinking that he has no sufficient time to go to the other side of the road, he pulled the pony closely up against the railing on the right side of the bridge instead of going to the left. The defendant, instead of veering to the right while yet some distance away or slowing down, continued to approach directly toward the horse. When he had gotten quite near, there being then no possibility of the horse getting across to the other side, the defendant quickly turned his car sufficiently to the right to escape hitting the horse alongside of the railing where it as then standing; but in so doing the automobile passed in such close proximity to the animal that it became frightened and turned its body across the bridge with its head toward the railing. In so doing, it was struck on the hock of the left hind leg by the flange of the car and the limb was broken. The horse fell and its rider was thrown off with some violence. As a result of its injuries the horse died. The plaintiff received contusions which caused temporary unconsciousness and required medical attention for several days.
ISSUE: Whether or not the defendant is guilty of negligence.
HELD: Yes. The defendant is guilty of negligence.
As the defendant started across the bridge, he had the right to assume that the horse and the rider would pass over to the proper side; but as he moved toward the center of the bridge he clearly saw that this would not be done; and he must in a moment have perceived that it was too late for the horse to cross with safety in front of the moving vehicle. The control of the situation had then passed entirely to the defendant; and it was his duty either to bring his car to an immediate stop or, seeing that there were no other Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
83
persons on the bridge, to take the other side and pass sufficiently far away from the horse to avoid the danger of collision. Instead of doing this, the defendant ran straight on until he was almost upon the horse.
The plaintiff himself was not free from fault, for he was guilty of antecedent negligence in planting himself on the wrong side of the road. But it was the defendant who had the last clear chance to avoid the impending harm and when he failed to do so, he is deemed negligent, thus liable to pay damages in favor of the plaintiff.
Petition granted.
Durban apartments v. Pioneer Insurance
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
84
Durban Apartments Corporation, doing business under the name and style of City Garden Hotel, Petitioner, versus Pioneer Insurance and Surety Corporation, Respondent. (G.R. No. 179419, January 12, 2011, 2nd Division) NACHURA, J.: FACTS: On July 22, 2003, respondent Pioneer Insurance and Surety Corporation by right of subrogation, filed a complaint for Recovery of Damages against petitioner, Durban Apartments Corporation. On April 30, 2002, See arrived and checked in at the City Garden Hotel in Makati corner Kalayaan Avenues, Makati City before midnight, and its parking attendant, defendant Justimbaste got the key of Vitara from See to park it. On May 1, 2002, See was awakened in his room by a call from the Hotel Chief Security Officer who informed him that his Vitara was carnapped. The Vitara was lost due to the negligence of petitioner and defendant because it was discovered during the investigation that this was the second time that a similar incident of carnapping happened in the valet parking service of Durban Apartments and no necessary precautions were taken to prevent its repetition. Durban Apartments was wanting in due diligence in the selection and supervision of its employees. The petitioner failed and refused to pay its valid, just, and lawful claim despite written demands. The Regional Trial Court rendered a decision ordering petitioner Durban Apartments Corporation to pay respondent Pioneer Insurance and Surety Corporation the sum of P1,163,250.00 with legal interest until the obligation is fully paid and attorney‘s fees and litigation expenses amounting toP120,000.00. The petitioner appealed on the appellate court but it affirmed the trial court‘s decision. Hence, this petition.
ISSUE: Whether or not the petitioner is liable to respondent for the loss of See‘s vehicle.
HELD: Yes. The petitioner is liable to respondent for the loss of See‘s vehicle.
Article 1962, in relation to Article 1998, of the Civil Code defines a contract of deposit and a necessary deposit made by persons in hotels or inns: Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and returning the same. Art. 1998. The deposit of effects made by travelers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. Plainly, from the facts found by the lower courts, the insured See deposited his vehicle for safekeeping with petitioner, through the latter‘s employee, Justimbaste. In turn, Justimbaste issued a claim stub to See. Thus, the contract of deposit was perfected from See‘s delivery, when he handed over Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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to Justimbaste the keys to his vehicle, which Justimbaste received with the obligation of safely keeping and returning it. Ultimately, petitioner is liable for the loss of See‘s vehicle. Petition denied.
Lagon v. Hooven Comalco
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
86
Jose V. Lagon, Petitioner, versus Hooven Comalco Industries, Inc., Respondent. (G.R. No. 135657, January 17, 2001, 2nd Division) BELLOSILLO, J.: FACTS: Sometime in April 1981 Lagon, a businessman and HOOVEN entered
into two (2) contracts, denominated Proposal, whereby for a total consideration of P104,870.00 HOOVEN agreed to sell and install various aluminum materials in Lagon‘s commercial building in Tacurong, Sultan Kudarat. HOOVEN filed an action against Lagon claiming that the latter failed to pay his due despite HOOVEN‘s performance of its obligation. Lagon, in his answer, denied liability and averred that HOOVEN was the party guilty of breach of contract by failing to deliver and install some of the materials specified in the proposals; that as a consequence he was compelled to procure the undelivered materials from other sources; that as regards the materials duly delivered and installed by HOOVEN, they were fully paid.
ISSUE: Whether or not the petitioner is entitled to moral damages.
HELD: Yes. The petitioner is entitled to moral damages.
HOOVEN's bad faith lies not so much on its breach of contract - as there was no showing that its failure to comply with its part of the bargain was motivated by ill will or done with fraudulent intent - but rather on its appalling temerity to sue petitioner for payment of an alleged unpaid balance of the purchase price notwithstanding knowledge of its failure to make complete delivery and installation of all the materials under their contracts. Although petitioner was found to be liable to respondent to the extent of P6,377.66, petitioner's right to withhold full payment of the purchase price prior to the delivery and installation of all the merchandise cannot be denied since under the contracts the balance of the purchase price became due and demandable only upon the completion of the project. Consequently, the resulting social humiliation and damage to petitioner's reputation as a respected businessman in the community, occasioned by the filing of this suit provide sufficient grounds for the award of P50,000.00 as moral damages. On the part of Lagon, he is ordered by the court to pay HOOVEN the amount corresponding to the value of the materials admittedly delivered to him.
Decision is modified.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
87
Francisco v. Court of Appeals Spouses Lorenzo G. Francisco and Lorenza D. Francisco, Petitioners, versus Honorable Court of Appeals, and Bienvenido C. Mercado, respondents. (G.R. No. 118749, April 25, 2003, 1st Division) CARPIO, J.: FACTS: On 3 February 1984, the spouses Lorenzo and Lorenza Francisco and Engineer Bienvenido C. Mercado entered into a Contract of Development for the development into a subdivision of several parcels of land in Pampanga. Under the Contract, respondent agreed to undertake at his expense the development work for the Franda Village Subdivision. Respondent committed to complete the construction within 27 months. Respondent also advanced P200,000.00 for the initial expenses of the development work. In return, respondent would receive 50% of the total gross sales of the subdivision lots and other income of the subdivision. Respondent also enjoyed the exclusive and irrevocable authority to manage, control and supervise the sales of the lots within the subdivision. The Contract required respondent to submit to petitioners, within the first 15 days of every month, a report on payments collected from lot buyers with copies of all the contracts to sell. However, respondent failed to submit the monthly report. On 27 February 1987, respondent filed with the trial court an action to rescind the Contract with a prayer for damages. Petitioners countered that respondent breached the Contract by failing to finish the subdivision within the 27 months agreed upon, and therefore respondent was in delay.
ISSUE: Whether or not the respondent incurred the delay.
HELD: No. The respondent did not incur the delay.
It is the petitioners breached the contract by: (1) hiring Rosales to do development work on the subdivision within the 27-month period exclusively granted to respondent; (2) interfering with the latter's development work; and (3) stopping respondent from managing the sale of lots and collection of payments. Because petitioners were the first to breach the contract and even interfered with the development work, respondent did not incur delay even if he completed only 28% of the development work. Further, the petitioner extended the Contract up to July 1987. Since the Contract had not expired at the time respondent filed the action for rescission, petitioners' defense that respondent did not finish the development work on time was without basis. The law provides that delay may exist when the obligor fails to fulfill his obligation within the time expressly stipulated. In this case, the petitioner extended the period for respondent to finish the development work until 30 July 1987. Respondent did not incur delay since the period granted him to fulfill his obligation had not expired at the time respondent filed the action for rescission on 27 February 1987. Moreover, since petitioners stopped respondent from selling lots and collecting payments from lot buyers, which was the primary source of development funds, they in effect, rendered respondent incapable, or at least made it difficult for him, to develop the subdivision within the allotted period. In reciprocal obligations, neither Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
88
party incurs in delay if the other does not comply or is not ready to comply with what is incumbent upon him. It is only when one of the parties fulfills his obligation that delay by the other begins.
Decision affirmed.
Tanguilig v. Court of Appeals.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
89
Jacinto Tanguilig doing business under the name and style J.M.T. Engineering and General Merchandising, Petitioner, versus Court Of Appeals and Vicente Herce Jr., Respondents. (G.R. No. 117190 January 2, 1997, 1st Division) BELLOSILLO, J.: FACTS: Petitioner Jacinto M. Tanguilig proposed to respondent Vicente Herce Jr. to construct a windmill system for him. After some negotiations they agreed on the construction of the windmill for a consideration of P60,000.00. On 14 March 1988, due to the refusal and failure of respondent to pay the balance, petitioner filed a complaint to collect the amount. Respondent denied the claim saying that he had already paid this amount to the San Pedro General Merchandising Inc. (SPGMI) which constructed the deep well to which the windmill system was to be connected. According to respondent, since the deep well formed part of the system the payment he tendered to SPGMI should be credited to his account by petitioner. Moreover, assuming that he owed petitioner a balance of P15,000.00, this should be offset by the defects in the windmill system which caused the structure to collapse after a strong wind hit their place.
Petitioner denied that the construction of a deep well was included in the agreement to build the windmill system, for the contract price of P60,000.00 was solely for the windmill assembly and its installation. He also disowned any obligation to repair or reconstruct the system since its collapse was attributable to a typhoon, a force majeure, which relieved him of any liability.
ISSUE: Whether or not Tanguilig is liable to reconstruct the damaged windmill.
HELD: Yes. Tanguilig is liable to reconstruct the damaged windmill considering that its collapse is due to a typhoon.
The Supreme Court has consistently held that in order for a party to claim exemption from liability by reason of fortuitous event under Art. 1174 of the Civil Code four (4) requisites must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and, (d) the debtor must be free from any participation in or aggravation of the injury to the creditor. Petitioner failed to show that the collapse of the windmill was due solely to a fortuitous event. Petitioner merely stated that there was a "strong wind." But a strong wind in this case cannot be fortuitous. On the contrary, a strong wind should be present in places where windmills are constructed. Petitioner is ordered to "reconstruct subject defective windmill system, in accordance with the one-year guaranty".
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
90
Decision is modified.
Periquet v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
91
DR. FERNANDO PERIQUET, JR., Petitioner, versus HONORABLE FOURTH CIVIL CASES DIVISION OF THE INTERMEDIATE APPELLATE COURT and the HEIRS OF THE LATE FELIX R. FRANCISCO, Respondents. (G.R. No. L-69996, December 5, 1994, 1st Division) KAPUNAN, J.: FACTS: Spouses Fernando Periquet and Petra Francisco were left childless after the death of their only child, Elvira, so they took in a son out of wedlock of Marta Francisco-Reyes, sister of Petra. Though he was not legally adopted, the boy was given the name Fernando Periquet, Jr. and was reared to manhood by the spouses Periquet. On March 20, 1966, Fernando Periquet died. When Petra died, she was survived by her siblings, nieces and nephews and by the petitioner. But a few days before her death, Petra asked her lawyer to prepare her last will and testament. However, she died before she could sign it. In the said will, Petra left her estate to petitioner, Fernando Periquet, Jr. and provided for certain legacies to her other heirs. Felix Franciso, brother of Petra, assigned his hereditary rights to the petitioner. However, later on, he filed an action for annulment of the Assignment of Hereditary Rights claiming "gross misrepresentation and fraud," "grave abuse of confidence," "mistake and undue influence," and "lack of cause and/or consideration" in the execution of the challenged deed of assignment.
ISSUE: Whether or not the Assignment of Hereditary Rights is tainted with fraud.
HELD: No. The Assignment of Hereditary Rights is not tainted with fraud.
The kind of fraud that will vitiate a contract refers to those insidious words or machinations resorted to by one of the contracting parties to induce the other to enter into a contract which without them he would not have agreed to. In the case at bench, no such fraud was employed by herein petitioner. Resultantly, the assignment of hereditary rights executed by Felix Francisco in favor of herein petitioner is valid and effective.
Felix Francisco could not be considered to have been deceived into signing the subject deed of assignment for the following reasons: The assignment was executed and signed freely and voluntarily by Felix Francisco in order to honor, respect and give full effect to the last wishes of his deceased sister, Petra. The same was read by him and was further explained by Atty. Diosdado Guytingco. Furthermore, witnesses for petitioner, who also served as witnesses in the execution and signing of the deed of assignment, declared that Felix Francisco was neither forced nor intimidated to sign the assignment of hereditary rights.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
92
Legaspi Oil v. Court of Appeals Legaspi Oil Co., Inc., Petitioner, versus The Court Of Appeals and Bernard Oseraos, Respondent. (G.R. No. 96505 July 1, 1993, 1st Division) MELO, J.: FACTS: Bernard Oseraos had several transactions with Legaspi Oil Co. for the sale of copra to the latter. The price at which appellant sells the copra varies from time to time, depending on the prevailing market price when the contract is entered into. On February 16, 1976, appellant's agent Jose Llover signed contract No. 3804 for the sale of 100 tons of copra at P82.00 per 100 kilos with delivery terms of 20 days effective March 8, 1976. After the period to deliver had lapsed, appellant sold only 46,334 kilos of copra thus leaving a balance of 53,666 kilos. Accordingly, demands were made upon appellant to deliver the balance with a final warning that failure to deliver will mean cancellation of the contract, the balance to be purchased at open market and the price differential to be charged against appellant. On October 22, 1976, since there was still no compliance, appellee exercised its option under the contract and purchased the undelivered balance from the open market at the prevailing price of P168.00 per 100 kilos, or a price differential of P86.00 per 100 kilos, a net loss of P46,152.76 chargeable against appellant.
ISSUE: Whether or not the private respondent is guilty of breach of contract.
HELD: Yes. The private respondent is guilty of breach of contract
Private respondent is guilty of fraud in the performance of his obligation under the sales contract whereunder he bound himself to deliver to petitioner 100 metric tons of copra. However within the delivery period, Oseraos delivered only 46,334 kilograms of copra to petitioner. Petitioner made repeated demands upon private respondent to deliver the balance of 53,666 kilograms but private respondent ignored the same. Petitioner made a final demand with a warning that, should private respondent fail to complete delivery of the balance of 53,666 kilograms of copra, petitioner would purchase the balance at the open market and charge the price differential to private respondent. Still private respondent failed to fulfill his contractual obligation to deliver the remaining 53,666 kilograms of copra and since there was still no compliance by private respondent, petitioner exercised its right under the contract and purchased 53,666 kilograms of copra, the undelivered balance, at the open market at the then prevailing price of P168.00 per 100 kilograms, a price differential of P46,152.76.
The conduct of private respondent clearly manifests his deliberate fraudulent intent to evade his contractual obligation for the price of copra had in the meantime more than doubled from P82.00 to P168 per 100 kilograms. Under Article 1170 of the Civil Code of the Philippines, those who in the performance of their obligation are guilty of fraud, negligence, or delay, and those who in any manner contravene the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
93
tenor thereof, are liable for damages. Pursuant to said article, private respondent is liable for damages.
Petition granted.
Philippine Charter v. Central Colleges
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
94
Philippine Charter Insurance Corporation, Petitioner, versus. Central Colleges of the Philippines and Dynamic Planners and Construction Corporation, Respondents. (G.R. Nos. 180631-33, February 22, 2012, 3rd Division) MENDOZA, J.: FACTS: On May 16, 2000, Central Colleges of the Philippines (CCP), an educational institution, contracted the services of Dynamic Planners and Construction Corporation (DPCC) to be its general contractor for the construction of its five (5)-storey school building at No. 39 Aurora Boulevard, Quezon City, with a total contract price of P248,000,000.00. As embodied in a Contract Agreement, the construction of the entire building would be done in two phases with each phase valued at P124,000,000.00. To guarantee the fulfillment of the obligation, DPCC posted three (3) bonds, all issued by the Philippine Charter Insurance Corporation (PCIC). All the bonds were callable on demand and set to expire on October 30, 2003. Phase 1 of the project was completed without issue. The Phase 2 of the project, however, encountered numerous delays. All negotiations came to a dead end thus a complaint was filed in court. Philippine Charter Insurance Corporation and Dynamic Planners and Construction Corporation are ordered jointly and severally to pay Central Colleges of the Philippines the total amount of P13,924,351.47. PCIC moved for the reconsideration of the said decision, but the CA disposed of it with a denial in its November 19, 2007 Resolution. Hence, this petition. ISSUE: Whether or not Dynamic Planners and Construction Corporation incurred delay. HELD: Yes. DPCC incurred delay from the time CCP called its attention that it had breached the contract and extrajudicially demanded the fulfillment of its commitment against the bonds. The Court finds itself unable to agree. Article 1169 of the New Civil Code provides: Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. The civil law concept of delay or default commences from the time the obligor demands, judicially or extrajudicially, the fulfillment of the obligation from the obligee. In legal parlance, demand is the assertion of a legal or procedural right. Hence, DPCC incurred delay from the time CCP called its attention that it had breached the contract and extrajudicially demanded the fulfillment of its commitment against the bonds. It is the obligor‘s culpable delay, not merely the time element, which gives the obligee the right to seek the performance of the obligation. As such, CCP‘s cause of action accrued from the time that DPCC became in culpable delay as contemplated in the surety and performance bonds. Petition partly granted. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
95
Titan-Ikeda Construction v. Primetown Property Titan-Ikeda Construction & Development CORPORATION, Petitioner, versus Primetown Property Group, Inc., Respondent. (G.R. No. 158768, February 12, 2008, 1st Division) CORONA, J.: FACTS: In 1992, respondent Primetown Property Group, Inc. awarded the contract for the structural works of its 32-storey Makati Prime Tower (MPT) to petitioner TitanIkeda Construction and Development Corporation. In September 1995, respondent engaged the services of Integratech, Inc. (ITI), an engineering consultancy firm, to evaluate the progress of the project. In its report, ITI informed respondent that petitioner, at that point, had only accomplished 31.89% of the project (or was 11 months and six days behind schedule). Meanwhile, petitioner and respondent were discussing the possibility of the latter‘s takeover of the project‘s supervision. Despite ongoing negotiations, respondent did not obtain petitioner‘s consent in hiring ITI as the project‘s construction manager. Neither did it inform petitioner of ITI‘s September 7, 1995 report.
Subsequently, both parties agreed that Primetown will take over the project. Petitioner then demanded for the payment due him in relation to its partial performance of its obligation. For failure of Primetown to pay despite repeated demands, petitioner filed a case for specific performance against Primetown. Meanwhile, Primetown demanded reimbursement for the amount it spent in having the project completed.
ISSUE: Whether or not Titan-Ikeda incurred delay in the performance of its obligation.
HELD: No. Titan-Ikeda did not incur delay in the performance of its obligation.
It was found that because respondent modified the MPT's architectural design, petitioner had to adjust the scope of work. Moreover, respondent belatedly informed petitioner of those modifications. It also failed to deliver the concrete mix and rebars according to schedule. For this reason, petitioner was not responsible for the project's delay. Mora or delay is the failure to perform the obligation in due time because of dolo (malice) or culpa (negligence). A debtor is deemed to have violated his obligation to the creditor from the time the latter makes a demand. Once the creditor makes a demand, the debtor incurs mora or delay. Respondent never sent petitioner a written demand asking it to accelerate work on the project and reduce, if not eliminate, slippage. In view of the foregoing, we hold that petitioner did not incur delay in the performance of its obligation.
Petition granted. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
96
PNB Madecor vs. Uy PNB MADECOR, Petitioner, versus Gerardo C. Uy, Respondent. (G.R. No. 129598, August 15, 2001, 2nd Division) QUISUMBING, J: FACTS: Petitioner PNB Management and Development Corporation (PNB MADECOR) is indebted to Pantranco North Express Inc. (PNEI) for P7, 884,921.10 per a promissory note dated October 31, 1982 executed by its precursor National Real Estate Development Corporation (NAREDECO) in PNEI‘s favor. Said amount earns an 18% interest/year in case NAREDECO fails to pay the principal after notice; PNEI‘s receivables were thereafter conveyed to PNB in payment of PNEI‘s loan obligation to the latter, in accordance with a dacion en pago agreement executed between PNEI and PNB. Allegedly compensation took place between petitioner‘s debts to PNEI and the latter‘s obligation to it. Nevertheless, PNEI, through respondent, sued petitioner for the latter‘s debts. The Regional Trial Court rendered its judgment against PNEI which was affirmed by the Court of Appeals. ISSUE: Whether or not there was delay for the payment of the legal compensation. HELD: No. There was no delay in the payment of the legal compensation. Legal compensation could not have occurred in the case at bar due to the absence of one requisite: that both debts must be due and demandable. Petitioner‘s obligation to PNEI is payable on demand, and there being no demand made, it follows that the obligation is not yet due. Thus, this obligation may not be subject to compensation for lack of a requisite under the law. Without compensation having taking place, petitioner remains obligated to PNEI to the extent stated in the promissory note. This obligation may undoubtedly be garnished in respondent‘s favor to satisfy PNEI‘s judgment debt. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
97
Barzaga vs. Court of Appeals Ignacio Barzaga, Petitioner, versus Court of Appeals and Angelito Alviar, Respondents. (G.R. No. 115129, February 12, 1997, 1st Division) BELLOSILLO, J: FACTS: Petitioner‘s wife died and her wish is to be buried before Christmas. After her death on Dec 21, 1990, in fulfillment of her wishes, petitioner went to respondent‘s store to inquire the availability of materials to be used in building his wife‘s niche. Respondent‘s employee advised petitioner that to come back the following morning. That following morning, petitioner made a payment of P2,100 to secure the delivery of the materials. However, the materials were not delivered on time. Several times petitioner went to respondent‘s store to ask for the delivery. Later that day, the petitioner was forced to dismiss his laborer since there is nothing to work with for the materials did not arrive. Petitioner however purchased the materials from other stores. After his wife was buried, he sued respondent for damages because of delay. For his part, respondent offered a lame excuse of fortuitous event that the reason for delay is because the trucks tires were flat. ISSUE: Whether or not respondent is guilty of delay that will entitle petitioner for damages, although it was not specified in the invoice the exact time of delivery. HELD: Yes. Respondent is guilty of delay that will entitle petitioner for damages, although it was not specified in the invoice the exact time of delivery. The law expressly provides that those who in the performance of their obligation are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable for damages. The appellate court appears to have belittled petitioner‘s submission that under the prevailing circumstances time was of the essence in the delivery of the materials to the grave site. In their contract of purchase and sale, petitioner had already complied fully with what was required of him as purchaser, i.e., the payment of the purchase price of P2,110.00. It was incumbent upon respondent to immediately fulfill his obligation to deliver the goods otherwise delay would attach. Decision of the Court of Appeals reversed and set aside.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
98
Tanguilig v Court of Appeals Jacinto Tanguilig Doing Business Under The Name And Style J.M.T. Engineering And General Merchandising, Petitioner, versus Court Of Appeals And Vicente Herce Jr., Respondents. (G.R. No. 117190, January 2, 1997, 1st Division) BELLOSILLO, J: FACTS: Respondent Herce contracted petitioner Tanguilig to construct a windmill system for him, for consideration of 60,000.00. Pursuant to the agreement, respondent paid the down payment of 30,000.00 and installment of 15,000.00 leaving a 15,000.00 balance. Respondent refused to pay the balance because he had already paid this amount to SPGMI which constructed a deep well to which the windmill system was to be connected since the deep well, and assuming that he owed the 15,000.00 this should be offset by the defects in the windmill system which caused the structure to collapse after strong winds hit their place. According to petitioner, the 60,000.00 consideration is only for the construction of the windmill and the construction of the deep well was not part of it. The collapse of the windmill cannot be attributed to him as well, since he delivered it in good and working condition and respondent accepted it without protest. Respondent contested that the collapse is attributable to a typhoon, a force majeure that relieved him of liability. The Regional Trial Court ruled in favor of petitioner, but this decision was overturned by the Court of Appeals which ruled in favor of respondent. ISSUE: Whether or not the collapse of the windmill can be attributed to force majeure thus extinguishing the liability of petitioner. HELD: Yes. The collapse of the windmill can be attributed to force majeure thus extinguishing the liability of petitioner. In order for a party to claim exemption from liability by reason of fortuitous event under Art 1174 of the Civil Code the event should be the sole and proximate cause of the loss or destruction of the object of the contract. In Nakpil vs. Court of Appeals, the Supreme Court held that 4 requisites must concur that there must be a (a) the cause of the breach of the obligation must be independent of the will of debtor (b) the event must be either unforeseeable or unavoidable; (c) the event be such to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in or aggravation of the injury to the creditor. Petitioner merely stated that there was a strong wind, and a strong wind in this case is not fortuitous, it was neither unforeseeable nor unavoidable, places with strong winds are the perfect locations to put up a windmill, since it needs strong winds for it to work. Appealed decision modified.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
99
Tayag vs. Court of Appeals Corito Ocampo Tayag, Petitioner, versus Hon. Court Of Appeals And Emilie Dayrit Cuyugan, Respondent. (G.R. No. 95229, June 9, 1992, 1st Division) REGALADO, J: FACTS: Siblings Juan Galicia Sr. and Celerina Labuguin entered into a contract to sell a parcel of land in Nueva Ecija to a certain Albrigido Leyva: 3,000 upon agreement, 10,000 ten days after the agreement, 10,000 representing vendor‘s indebtedness to Phil Veterans Bank, and 27,000 payable within one year from execution of contract. Leyva only paid parts of the obligation. But even after the grace period for payment made in the contract and while litigation of such case, the petitioners still allowed Leyva to make payments. With regard to the obligation payable to the Phil Veterans bank by the vendee, as they deemed that it was not paid in full, such obligation they completed by adding extra amount to fulfill such obligation. This was fatal in their case as this is Leyva‘s argument that they constructively fulfilled the obligation which is rightfully due to him. Petitioners claim that they are only ―OBLIGEES‖ with regards to the contract, so the principle of constructive fulfillment cannot be invoked against them. Petitioners, being both creditor and debtor to private respondent, in accepting piecemeal payment even after the grace period, are barred to take action through estoppel. ISSUE: Whether or not there was constructive fulfillment in the part of the petitioners that shall make rise the obligation to deliver to Leyva the deed of sale. HELD: Yes. There was constructive fulfillment in the part of the petitioners that shall make rise the obligation to deliver to Leyva the deed of sale. In a contract of purchase, both parties are mutually obligors and also obligees, and any of the contracting parties may, upon non-fulfillment by the other privy of his part of the prestation, rescind the contract or seek fulfillment In short, it is puerile for petitioners to say that they are the only obligees under the contract since they are also bound as obligors to respect the stipulation in permitting private respondent to assume the loan with the Philippine Veterans Bank which petitioners impeded when they paid the balance of said loan. As vendors, they are supposed to execute the final deed of sale upon full payment of the balance as determined hereafter. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
100
Periquet v. Court of Appeals Dr. Fernando Periquet, Jr., Petitioner, versus Honorable Fourth Civil Cases Division Of The Intermediate Appellate Court And The Heirs Of The Late Felix R. Francisco, Respondents. (G.R. No. L-69996, December 5, 1994, 1st Division) KAPUNAN, J: FACTS: Petitioner Fernando Periquet Jr. is the adopted son of spouses Fernando Periquet and Petra Francisco. When the Fernando Sr. died, he left his estate to his wife. When Petra died, she left the estate to their adopted son, herein petitioner, with certain legacies to her siblings. Felix Francisco is one of the beneficiaries of the estate of Petra. After signing an Assignment of Hereditary Rights with petitioner as the assignee, which was approved by the trial court, Felix filed the instant action to annul the assignment. and to recover his one-fourth (1/4) share in the estate. The action for annulment was based on gross misrepresentation and fraud, grave abuse of confidence, mistake and undue influence, and lack of cause and/or consideration in the execution of the challenged deed of assignment. On appeal, the Intermediate Appellate Court modified the decision annulling the Assignment of Hereditary Rights. ISSUE: Whether or not the assignment is vitiated. HELD: No. The assignment is not vitiated. The kind of fraud that will vitiate a contract refers to those insidious words or machinations resorted to by one of the contracting parties to induce the other to enter into a contract which without them he would not have agreed to. It must have a determining influence on the consent of the victim. The will of the victim, in effect, is maliciously vitiated by means of a false appearance of reality. In the case at bench, no such fraud was employed by herein petitioner. Resultantly, the assignment of hereditary rights executed by Felix Francisco in favor of herein petitioner is valid and effective. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
101
Raquel-Santos vs. Court of Appeals Armand O. Raquel-Santos And Annalissa Mallari, Petitioners, Versus Court Of Appeals And Finvest Securities Co., Inc., Respondents. Philippine Stock Exchange, Inc., Petitioner, Versus Finvest Securities Co., Inc., Respondent. Finvest Securities Co., Inc., Petitioner, Versus Trans-Phil Marine Ent., Inc. And Roland H. Garcia, Respondents. (G.R. Nos. 174986, G.R. No. 175071, 181415, July 7, 2009, 3rd Division) NACHURA, J: FACTS: Petitioner Armand Raquel-Santos was Finvest‘s President and nominee to the PSE from February 20, 1990 to July 16, 1998. Annalissa Mallari (Mallari) was Finvest‘s Administrative Officer until December 31, 1998. In the course of its trading operations, Finvest incurred liabilities to PSE representing fines and penalties for non-payment of its clearing house obligations. PSE also received reports that Finvest was not meeting its obligations to its clients. Consequently, PSE indefinitely suspended Finvest from trading. The Securities and Exchange Commission (SEC) also suspended its license as broker. ISSUE: Whether or not Finvest can be deemed to have incurred in delay in the payment of its obligations to PSE. HELD: No. Finvest cannot be deemed to have incurred in delay in the payment of its obligations to PSE. In the present petition, PSE insists that Finvest‘s liability for fines, penalties and charges has been established, determined and substantiated, hence, liquidated. A debt is liquidated when the amount is known or is determinable by inspection of the terms and conditions of relevant documents. Under the attendant circumstances, it cannot be said that Finvest‘s debt is liquidated. At the time PSE left the negotiating table, the exact amount of Finvest‘s fines, penalties and charges was still in dispute and as yet undetermined. Consequently, Finvest cannot be deemed to have incurred in delay in the payment of its obligations to PSE. It cannot be made to pay an obligation the amount of which was not fully explained to it. The public sale of the pledged seat would, thus, be premature. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
102
RCBC vs. Court of Appeals Rizal Commercial Banking Corporation, Petitioner, versus Court Of Appeals and Felipe Lustre, Respondents. (G.R. No. 133107, March 25, 1999, 1st Division) KAPUNAN, J: FACTS: On March 10, 1993, private respondent Atty. Felipe Lustre purchased a Toyota Corolla from Toyota Shaw, Inc. for which he made a down payment of P164,620.00, the balance of the purchase price to be paid in 24 equal monthly installments. Private respondent thus issued 24 postdated checks for the amount of P14,976.00 each. The first was dated April 10, 1991; subsequent checks were dated every 10th day of each succeeding month. To secure the balance, private respondent executed a promissory note and a contract of chattel mortgage over the vehicle in favor of Toyota Shaw, Inc. The contract of chattel mortgage provided for an acceleration clause stating that should the mortgagor default in the payment of any installment, the whole amount remaining unpaid shall become due. In addition, the mortgagor shall be liable for 25% of the principal due as liquidated damages. On the theory that respondent defaulted in his payments, the check representing the payment for August 10, 1991 being unsigned, petitioner, in a letter dated January 21, 1993, demanded from private respondent the payment of the balance of the debt, including liquidated damages. The latter refused, prompting petitioner to file an action for replevin and damages before the Pasay City Regional Trial Court (RTC). Private respondent, in his Answer, interposed a counterclaim for damages. The trial court dismissed the complaint which was affirmed by the appellate court. ISSUE: Whether or not the default was a case of failure to pay. HELD: No. The default was not a case of failure to pay. In the case at bench, plaintiff-appellant's imputation of default to defendant-appellee rested solely on the fact that the 5th check issued by appellee was recalled for lack of signature. However, the check was recalled only after the amount covered thereby had been deducted from defendantappellee's account, as shown by the testimony of plaintiff's own witness Francisco Bulatao who was in charge of the preparation of the list and trial balances of bank customers. The "default" was therefore not a case of failure to pay, the check being sufficiently funded, and which amount was in fact already debitted [sic] from appellee's account by the appellant bank which subsequently re-credited the amount to defendant-appellee's account for lack of signature. All these actions RCBC did on its own without notifying defendant until sixteen (16) months later when it wrote its demand letter dated January 21, 1993. Decision affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
103
State Investment vs. Court of Appeals State Investment House, Inc., Petitioner, versus Court Of Appeals And Nora B. Moulic, Respondents. (G.R. No. 101163, January 11, 1993, 1st Division) BELLOSILLO, J: FACTS: Respondent Nora Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be sold on commission, 2 post-dated Equitable Banking Corporation. Thereafter, the payee negotiated the checks to the State Investment House Inc. (SIHI). Moulic failed to sell the pieces of jewelry, so she returned them to the payee before maturity of the checks. The checks, however, could no longer be retrieved as they had already been negotiated. Consequently, before their maturity dates, Moulic withdrew her funds from the drawee bank. Upon presentment for payment, the checks were dishonored for insufficiency of funds. SIHI allegedly notified Moulic of the dishonor of the checks and requested that it be paid in cash instead, although Moulic avers that no such notice was given her. SIHI sued to recover the value of the checks. Moulic contends that she incurred no obligation on the checks because the jewelry was never sold and the checks were negotiated without her knowledge and consent. She also instituted a Third-Party Complaint against Corazon Victoriano, who later assumed full responsibility for the checks. The trial court dismissed the Complaint as well as the Third-Party Complaint. SIHI elevated the order of dismissal to the Court of Appeals, but the appellate court affirmed the trial court on the ground that the Notice of Dishonor to Moulic was made beyond the period prescribed by the Negotiable Instruments Law and that even if SIHI did serve such notice on Moulic within the reglementary period it would be of no consequence as the checks should never have been presented for payment. SIHI filed the petition for review. ISSUE: Whether or not the alleged issuance of the post-dated checks as mere security is a ground for the discharge of the instrument. HELD: No. The alleged issuance of the post-dated checks as mere security is not a ground for the discharge of the instrument Section 119 of the Negotiable Instrument Law outlined the grounds in which an instrument is discharged. The grounds are (a) payment by or on behalf of the principal debtor; (b) payment by accommodated; (c) intentional cancellation of instrument by the holder; (d) any act which discharges a contract; (e) reacquisition of principal debtor in his own right. Section 119 of the NIL is exclusive to its enumerations. Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the discharge of the instrument. But, the intentional cancellation contemplated under paragraph (c) is that cancellation effected by destroying the instrument either by tearing it up, burning it, or writing the word "cancelled" on the instrument. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
104
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
105
BPI Investment vs. Court of Appeals BPI Investment Corporation, Petitioner, versus Hon. Court Of Appeals And ALS Management & Development Corporation, Respondents. (G.R. No. 133632, February 15, 2002, 2nd Division) QUISUMBING, J: FACTS: Frank Roa obtained a loan at 16 1/4% interest rate per annum from Ayala Investment and Development Corporation. For security, Roa's house and lot were mortgaged. Later, Roa sold the house and lot to ALS and Antonio Litonjua, who assumed Roa's debt to Ayala Investment. Ayala Investment, however, granted a new loan to be applied to Roa's debt, secured by the same property at a different interest rate of 20% per annum. When ALS and Litonjua failed to pay, BPIIC, successor to Ayala Investment, filed for foreclosure of mortgage. ISSUE: Whether or not a contract of loan is a consensual contract. HELD: No. A contract of loan is not a consensual contract. A loan contract is not a consensual contract but a real contract. It is perfected upon delivery of the object of the contract. Although a perfected consensual contract can give rise to an action for damages, it does not constitute a real contract which requires delivery for perfection. A perfected real contract gives rise only to obligations on the part of the borrower. In the present case, the loan contract was only perfected on the date of the second release of the loan. A contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the consideration for that of the other. It is a basic principle in reciprocal obligations that neither party incurs in delay, if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Only when a party has performed his part of the contract can he demand that the other party also fulfills his own obligation and if the latter fails, default sets in. Decision affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
106
Leano vs. Court of Appeals Carmelita Leaño, assisted by her husband Gregorio Cuachon, Petitioner, versus Court Of Appeals and Hermogenes Fernando, Respondents. (G.R. No. 129018, November 15, 2001, 1st Division) PARDO, J: FACTS: Hermogenes Fernando, as vendor and Carmelita Leaño, as vendee executed a contract to sell involving a piece of land. In the contract, Leaño bond herself to pay Fernando the sum of P107,750 as the total purchase price. Should the 90 days elapse from the expiration of the grace period, Respondent was authorized to declare the contract cancelled & to dispose of the land. Carmelita Leaño made several payments in lump sum. Thereafter she constructed a house. Last payment she made was on April 1989. The trial court rendered decision in an ejectment case filed by Fernando. Leaño filed with the trial court for specific performance with preliminary injunction and assailing that for being violative of her right to due process being contrary to R.A 6552 regarding protection to buyers of lots on installments. According to Trial Court, transaction was an absolute sale, making Leaño the owner upon actual & constructive delivery thereof. Fernando divested of ownership & cannot recover the same unless rescinded under Art. 1592. ISSUE: Whether or not petitioner is in delay. HELD: Yes. Petitioner is in delay. Leaño was in delay because under Art. 1169, provides that Reciprocal Obligation; Neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. Fernando performed his part by allowing Leaño to continue in possession & use of the property. Clearly, when Leaño did not pay the monthly amortization, she was in delay and liable for damages. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
107
Heirs of Bacus v. Court of Appeals HEIRS OF LUIS BACUS, namely: CLARA RESMA BACUS, ROQUE R. BACUS, SR., SATURNINO R. BACUS, PRISCILA VDA. DE CABANERO, CARMELITA B. SUQUIB, BERNARDITA B. CARDENAS, RAUL R. BACUS, MEDARDO R. BACUS, ANSELMA B. ALBAN, RICARDO R. BACUS, FELICISIMA B. JUDICO, and DOMINICIANA B. TANGAL, petitioners, vs. HON. COURT OF APPEALS and SPOUSES FAUSTINO DURAY and VICTORIANA DURAY, respondents., (G.R. No. 127695, 2001 Dec 3, 2nd Division) QUISUMBING, J.: FACTS: On 1984 Luis Bacus leased to Faustino Duray a parcel of agricultural land with total land area of 3,002 of square meters, in Cebu. The lease was for six years ending in 1990, the contract contained an option to buy clause. Under the said option, the lessee had the exclusive and irrevocable right to buy 2,000 square meters 5 years from a year after the effectivity of the contract, at P200 per square meter. That rate shall be proportionately adjusted depending on the peso rate against the US dollar, which at the time of the execution of the contract was 14 pesos. Close to the expiration of the contract Luis Bacus died on 1989, after Duray informed the heirs of Bacus that they are willing and ready to purchase the property under the option to buy clause. The heirs refused to sell, thus Duray filed a complaint for specific performance against the heirs of Bacus. He showed that he is ready and able to meet his obligations under the contract with Bacus. The RTC ruled in favor of the Durays and the CA later affirmed the decision. ISSUE: Whether or not Duray incur delay when they did not deliver the purchase price or consign it in court on or before the expiration of the contract. HELD: No. The obligation under option to buy is a reciprocal obligation. The performance of one obligation is conditioned on the simultaneous fulfillment of the other obligation. The payment of the purchase price by the creditor is contingent upon the execution and delivery of a deed of sale by the debtor. In this case, private respondent Duray opted to buy the property, their obligation was to advise petitioner of their decision & readiness to pay the price. They were not obliged to make actual payment. Only upon execution of deed of sale were they required to pay. Notice of the creditor‘s decision to exercise his option to buy need not be coupled with actual payment of the price, so long as this is delivered to the owner of the property upon performance of his part of the agreement. Consequently, since the obligation was not yet due, consignation in court of the purchase price was not yet required (Nietes vs CA, 46 SCRA 654). Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment. Consignation is not proper because the debt is not due and owing. Under Art. 1169, provides that reciprocal obligation, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Only from the moment one of the parties fulfills his obligation, does delay by the other begins. In this case, private respondent Duray already communicated their interest to buy before the contact expires & it was the petitioner who refused because they want the money first. Thus, as there was no compliance yet with what is Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
108
incumbent upon the petitioner, PR had not incurred delay when the cashier‘s check was issued even after the contract expired. Petition denied.
Integrated Packaging Corp. v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
109
INTEGRATED PACKAGING CORP., petitioner, vs. COURT OF APPEALS and FIL-ANCHOR PAPER CO., INC., respondents. (G.R. No. 115117 June 8, 2000 Second Division) QUISUMBING, J.: FACTS: Integrated Packaging Corp agreed to deliver to Fil-anchor paper co., Inc. 3,450 reams of printing paper. Materials were to be paid within 30-90 days. On June 7, 1978, Integrated entered into a contract with Philippine Appliance Corporation (Philacor) to print three volumes of "Philacor Cultural Books". July 30, 1979, only 1,097 out of the 3,450 had been delivered so it wrote to Fil-anchor that delay will prejudice them. Fil-anchor delivered amounting to P766,101.70 of printing paper. Integrated paid P97,200.00 which was applied to its back accounts covered by delivery invoices dated September 29-30, 1980 and October 1-2, 1980 Integrated entered into an additional printing contract with Philacor but it failed to comply so Philacor demanded compensation for the delay and damage it suffered on account of Integrated's failure Fil-anchor filed a collection suit of P766,101.70 against Integrated representing unpaid purchase price of printing paper bought on credit. By way of counterclaim, Fil-anchor alleged the delivery was short of 2,875 reams so it suffered actual damages and failed to realize expected profits and that complaint was prematurely filed. Integrated was ordered to pay Filanchor P27,222.60 as compensatory and actual damages after deducting P763,101.70 for the value of materials received, P100K as moral damages, P30K for attorney's fees and cost of suit. However, the counterclaim is also meritorious - Integrated could have sold books to Philacor and realized profit of P790,324.30 for which the award of moral damages was justified The court of Appeals reversed and set aside the judgment of the trial court ordered to pay Fil-anchor P763,101.70 for unpaid printing paper and deleted the award of P790,324.30 as compensatory damages as well as the award of moral damages and attorney's fees, for lack of factual and legal basis. ISSUE: Whether or not Integrated should be awarded compensatory and moral damages. HELD: YES. The suspension of its deliveries to Integrated whenever the latter failed to pay on time, as in this case, is legally justified under the second paragraph of Article 1583 of the Civil Code hence the Fil-anchor did not violate the order agreement. Fil-anchor is not a party to the agreement between Philacor neither is it a contract pour autrui so no direct bearing indemnification for damages comprehends not only the loss suffered, that is to say actual damages (damnum emergens), but also profits which the obligee failed to obtain, referred to as compensatory damages (lucrum cessans). However, to justify a grant of actual or compensatory damages, it is necessary to prove with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable by the injured party, the actual amount of loss. Trial court in arriving at the amount merely estimates or self-serving claim of unrealized profit prepared by Integrated. Deletion of the award of moral damages is proper, since private respondent could not be held liable for breach of contract. Moral damages may be awarded when in a breach of contract the defendant acted in bad faith, or was guilty of gross negligence Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
110
amounting to bad faith, or in wanton disregard of his contractual obligation. Finally, since the award of moral damages is eliminated, so must the award for attorney's fees be also deleted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
111
Laforteza v. Machuca ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, MICHAEL Z. LAFORTEZA, DENNIS Z. LAFORTEZA, and LEA Z. LAFORTEZA, petitioners, vs. ALONZO MACHUCA, respondent. G.R. No. 137552; 2000 Jun 16; 3rd Division Gonzaga-Reyes, J.: FACTS: Roberto Laforteza and Gonzalo Laforteza, Jr. were authorized to sell the subject property and sign any document for the settlement of the estate of the late Francisco Q. Laforteza by virtue of a Special Power of Attorney (SPA) executed in their favor by Michael, Dennis and Lea Laforteza. The SPA contained a provision that in any document or paper to exercise authority granted, the signature of both attorneys-in-fact must be affixed. Pursuant to such, the agents entered into a Contract to Sell subject property in favor of Alonzo Machuca. Said contract contained that a P30 000 earnest money should be paid and after which, 30 days will be allotted for the buyer to pay P600 000 prior conveyance of property. The earnest money was paid. Machuca asked for an extension of the 30 day period which was acceded to by Roberto. However, when Machuca notified that he's already ready to pay P600 000, Roberto told him that the subject property is no longer on sale and that their contract is rescinded for his failure to comply with the contractual obligations. Machuca then filed an action for specific performance with which he was favored. The Court of Appeals affirmed said decision. Hence, a petition for review was filed. ISSUE: Whether or not the petitioners may invoke rescission. HELD: No. The failure of the respondent to pay the balance of the purchase price was a breach of the contract and was a ground for rescission thereof. The extension of thirty (30) days allegedly granted to the respondent by Roberto Z. Laforteza (assisted by his counsel Attorney Romeo Gutierrez) was correctly found by the Court of Appeals to be ineffective inasmuch as the signature of Gonzalo Z. Laforteza did not appear thereon as required by the Special Powers of Attorney. Even assuming for the sake of argument that the petitioners were ready to comply with their obligation, we find that rescission of the contract will still not prosper. It is not disputed that the petitioners did not make a judicial or notarial demand for rescission. The November 20, 1989 letter of the petitioners informing the respondent of the automatic rescission of the agreement did not amount to a demand for rescission, as it was not notarized. It was also made five days after the respondent‘s attempt to make the payment of the purchase price. This offer to pay prior to the demand for rescission is sufficient to defeat the petitioners‘ right under article 1592 of the Civil Code. Besides, the Memorandum Agreement between the parties did not contain a clause expressly authorizing the automatic cancellation of the contract without court intervention in the event that the terms thereof were violated. A seller cannot unilaterally and extrajudicially rescind a contract of sale where there is no express stipulation authorizing him to extrajudicially rescind. Neither was there a judicial demand for the rescission thereof. Thus, when the respondent filed his complaint for specific performance, the agreement was still in force inasmuch as the contract was not yet rescinded. At any rate, considering that the six-month period was merely an approximation of the time it would take to Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
112
reconstitute the lost title and was not a condition imposed on the perfection of the contract and considering further that the delay in payment was only thirty days which was caused by the respondents justified but mistaken belief that an extension to pay was granted to him, we agree with the Court of Appeals that the delay of one month in payment was a mere casual breach that would not entitle the respondents to rescind the contract. Rescission of a contract will not be permitted for a slight or casual breach, but only such substantial and fundamental breach as would defeat the very object of the parties in making the agreement.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
113
Regala v. Carin RODOLFO REGALA, Petitioner, vs. FEDERICO P. CARIN, Respondent. (G.R. No. 188715 April 6, 2011 Third Division) CARPIO MORALES, J.: FACTS: Armando Regala appeals from the judgment in Criminal Case No. 7929 rendered by the Regional Trial Court of Masbate, Masbate, Branch 46, 5th Judicial Region, convicting him of the crime of Robbery with Rape. That on or about September 11, 1995, in the evening thereof, at Barangay Bangon, Municipality of Aroroy, Province of Masbate, Philippines, the said accused confederating together and helping one another, with intent to gain, violence and intimidation upon persons, did then and there wilfully, unlawfully and feloniously enter the kitchen of the house of Consuelo Arevalo and when inside, hogtied said Consuelo Arevalo and granddaughter Nerissa Regala (sic), take, steal, rob and carry away cash amount of P3,000.00 and two (2) gold rings worth P6,000.00, to the damage and prejudice of owner Consuelo Arevalo in the total amount of P9,000.00, Philippine Currency; and in pursuance of the commission of the crime of robbery against the will and consent of the granddaughter Nerissa Regala (sic) wilfully, unlawfully and feloniously accused Armando Regala y Abriol has for two times sexually abused and/or intercoursed with her, while hogtied on the bed and in the kitchen. Accused-appellant was apprehended by the police four days after the incident. He was identified at a police line-up by Nerissa and her grandmother. The defense presented accused-appellant who testified that on September 11, 1995, he was staying in the house of Antonio Ramilo at barangay Syndicate, Aroroy, Masbate. Ramilo was the manager in the gold panning business where accused-appellant was employed. Antonio Ramilo testified and corroborated his defense and stated that accused-appellant was in his house, which is about 5 kilometers away from Barangay Bangon. The trial court held that the defense of alibi cannot overcome the positive identification of the accused. The Court found accused Armando Regala y Abriol guilty beyond reasonable doubt of the crime of Robbery with Rape. ISSUE: Whether or not malice is an essential element for claim of moral damages. HELD: Malice or bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity; it is different from the negative idea of negligence in that malice or bad faith contemplates a state of mind affirmatively operating with furtive design or ill will.[27] While the Court harbors no doubt that the incidents which gave rise to this dispute have brought anxiety and anguish to respondent, it is unconvinced that the damage inflicted upon respondent‘s property was malicious or willful, an element crucial to merit an award of moral damages under Article 2220 of the Civil Code. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
114
In fine, an award of moral damages calls for the presentation of 1) evidence of besmirched reputation or physical, mental or psychological suffering sustained by the claimant; 2) a culpable act or omission factually established; 3) proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant; and 4) the proof that the act is predicated on any of the instances expressed or envisioned by Article 2219 and Article 2220 of the Civil Code.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
115
International Corporate Bank v. Gueco THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE PHILIPPINES), petitioner, vs. SPS. FRANCIS S. GUECO and MA. LUZ E. GUECO, respondents., (G.R. No. 141968, 2001 Feb 12, 1st Division) KAPUNAN, J.: FACTS: Respondent Gueco spouses obtained a loan from petitioner International Corporate Bank (now Union Bank of Philippines) to purchase a car – Nissan Sentra 1989 model. In consideration, spouses executed promissory note which were payable in monthly installment & chattel mortgage over the car. The spouses defaulted payment. Dr. Gueco had a meeting & the unpaid installment of P184k was reduced to P150k. However, the car was detained by the bank. When Dr. Gueco delivered the manger‘s check of P150k, the car was not released because of his refusal to sign the Joint Motion to Dismiss. The bank insisted that the JMD is a standard operating procedure to effect a compromise & to preclude future filing of claims or suits for damages. Gueco spouses filed an action against the bank for fraud, failing to inform them regarding JMD during the meeting & for not releasing the car if they do not sign the said motion. ISSUE: Whether or not the bank was guilty of fraud. HELD: No. Fraud has been defined as the deliberate intention to cause damage or prejudice. It is the voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which naturally and necessarily arise from such act or omission. the fraud referred to in Article 1170 of the Civil Code is the deliberate and intentional evasion of the normal fulfillment of obligation. We fail to see how the act of the petitioner bank in requiring the respondent to sign the joint motion to dismiss could constitute as fraud. The JMD cannot in any way have prejudiced Dr. Gueco. The motion to dismiss was in fact also for the benefit of Dr. Gueco, as the case filed by petitioner against it before the lower court would be dismissed with prejudice. The whole point of the parties entering into the compromise agreement was in order that Dr. Gueco would pay his outstanding account and in return petitioner would return the car and drop the case for money and replevin before the Metropolitan Trial Court. The joint motion to dismiss was but a natural consequence of the compromise agreement and simply stated that Dr. Gueco had fully settled his obligation, hence, the dismissal of the case. Petitioner‘s act of requiring Dr. Gueco to sign the joint motion to dismiss cannot be said to be a deliberate attempt on the part of petitioner to renege on the compromise agreement of the parties. The law presumes good faith. Dr. Gueco failed to present an iota of evidence to overcome this presumption. In fact, the act of petitioner bank in lowering the debt of Dr. Gueco from P184,000.00 to P150,000.00 is indicative of its good faith and sincere desire to settle the case. If respondent did suffer any damage, as a result of the withholding of his car by petitioner, he has only himself to blame. Necessarily, the claim for exemplary damages must fail. In no way, may the conduct of petitioner be characterized as ―wanton, fraudulent, reckless, oppressive or malevolent.‖ Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
116
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
117
Republic v. CTA REPUBLIC OF THE PHILIPPINES, represented by the COMMISSIONER OF CUSTOMS, petitioner, vs. THE COURT OF TAX APPEALS and AGFHA, INCORPORATED, respondents., G.R. No. 139050, 2001 Oct 2, 3rd Division) Vitug, J.: FACTS: A shipment of bales of textile cloth arrived at the Manila International Container Port (MICP) addressed to GQ Garments, Inc. The Clean Report of Findings (CRF) issued by the Societe Generale de Surveilance (SGS), however, mentioned AGFHA, Incorporated, to be the consignee of the shipment. Forthwith, the shipping agent, FIL-JAPAN, requested for an amendment of the Inward Foreign Manifest so as to correct the name of the consignee from that of GQ GARMENTS, Inc., (GQ) to that of AGFHA, Inc. (AGFHA). Subsequently, the Customs Intelligence Investigation Services (CIIS) put the items on hold on the ground that since GQ Garments, Inc. could not be found in the addressed stated, the same is alleged to be of a fictitious character. AGFHA filed a motion for intervention which was granted and a draft decision in favor of the same was resolved but was opposed by the CIIS insisting the fictitious character of GQ. Consequently, GQ and AGFHA filed a motion for reconsideration but was denied and the shipments were ordered forfeited. An appeal before the Office of the Commissioner of Custom was filed but was dismissed. They then filed a petition for review before the Court of Tax Appeals which was granted. Court of Appeals affirmed such decision. Hence, a petition for review was filed by the Petitioners. ISSUE: Whether or not consenting then forfeiture.
the
Respondent
Companies
committed
fraud
HELD: No. The requisites for the forfeiture of goods under Section 2530(f), in relation to (1) (3-5), of the Tariff and Customs Code are: (a) the wrongful making by the owner, importer, exporter or consignee of any declaration or affidavit, or the wrongful making or delivery by the same person of any invoice, letter or paper - all touching on the importation or exportation of merchandise; (b) the falsity of such declaration, affidavit, invoice, letter or paper; and (c) an intention on the part of the importer/consignee to evade the payment of the duties due. The Collector of Customs, Court of Tax Appeals and the Court of Appeals are unanimous in concluding that no fraud has been committed by private respondent in the importation of the bales of cloth. The records do appear to sustain this conclusion. Fraud must be proved to justify forfeiture.[8] It must be actual, amounting to intentional wrong-doing with the clear purpose of avoiding the tax.[9] Forfeiture is not favored in law nor in equity.[10] Mere negligence is not equivalent to the fraud contemplated by law.[11] What is here involved is an honest mistake, not even directly attributable to private respondent, which will not deprive the government of its right to collect the proper tax. The conclusion of the appellate court, being consistent with the evidence on record and not contrary to law and jurisprudence, hardly can be overturned by this Court. Petition denied. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Diaz v. Davao Light and Power Co. ANTONIO DIAZ, Petitioner, versus DAVAO LIGHT AND POWER CO., INC., MANUEL M. ORIG and ELISEO R. BRAGANZA, JR., Respondents., G.R. No. 160959, 2007 Apr 3, 3rd Division) CALLEJO, SR., J.: FACTS: The Davao Light and Power Co., Inc. (DLPC) supply electricity to Doña Segunda Hotel owned by Diaz Realty Inc. with which Antonio Diaz (Diaz) is the Vice-President. A notice of disconnection was sent by DLPC for non-payment of electric consumption of the hotel in the amount of P190,111.02 with a warning that if such will not be paid, services will be discontinued. Said letter was ignored which prompted DLPC to file a complaint for collection of sum of money. Meanwhile, National Food Authority (NFA) established its KADIWA store on a portion of the building of Diaz. DLPC connected service for the former's electric meter after a contract has been perfected between them pursuant to an application by KADIWA. Later on, KADIWA closed and it informed DLPC that the light and power connection rights of NFA/KADIWA would be transferred to Diaz and that the P1,020.00 deposit of NFA/KADIWA for the power connection had been refunded to it by Diaz. Then, Diaz requested that a new electrical connection for the building in his name be installed, separate from the one assigned to him by NFA pursuant to a new leased entered. Said request was denied on ground of the company's closed classification thereby allowing simulation with a reminder of payment of its dues. Diaz informed assumption of the KADIWA account but DLPC maintained its position and submits that it has no knowledge of the deposit of P1 020. However, Mendiola, who replaced the leased area of the KADIWA, and DLPC entered into another service contract. Petitions for injunctions were filed by Diaz against DLPC. Following such, DLPC filed a criminal action for theft of electricity. In defense, Diaz alleged the following: (1) that the complaint was intended to harass him; (2) he was entitled to electric service by virtue of his subrogation to the right of NFA/KADIWA; (3) the installation of Meter No. 86673509 was made with the knowledge and consent of DLPC; (4) there is a pending case between the parties regarding Meter Nos. 84738 and 86673509; and (5) the filing of the action is premature. ISSUE: Whether or not there is a case of malicious prosecution from the foregoing circumstances. HELD: No. Malicious prosecution has been defined as an action for damages brought by or against whom a criminal prosecution, civil suit or other legal proceeding has been instituted maliciously and without probable cause, after the termination of such prosecution, suit, or other proceeding in favor of the defendant therein. It is an established rule that in order for malicious prosecution to prosper, the following requisites must be proven by petitioner: (1) the fact of prosecution and the further fact that the defendant (respondent) was himself the prosecutor, and that the action finally terminated with an acquittal; (2) that in bringing the action, the prosecutor acted without probable cause; and (3) that the prosecutor was actuated or impelled by legal malice, that is, by improper or sinister motive. The foregoing are necessary to preserve a person‘s right to litigate which may be emasculated by the undue filing of malicious prosecution cases. From the foregoing requirements, it can be Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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inferred that malice and want of probable cause must both be clearly established to justify an award of damages based on malicious prosecution. While the institution of separate criminal actions under the provisions of P.D. 401, as amended by B.P. Blg. 876, and under the provisions of the Revised Penal Code on theft may refer to identical acts committed by petitioner, the prosecution thereof cannot be limited to one offense because a single criminal act may give rise to a multiplicity of offenses; and where there is variance or difference between the elements of an offense in one law and another law, as in the case at bar, there will be no double jeopardy because what the rule on double jeopardy prohibits refers to identity of elements in the two (2) offenses. Otherwise stated, prosecution for the same act is not prohibited; what is forbidden is prosecution for the same offense. Hence, no fault could be attributed to respondent DLPC when it instituted the two separate actions. Petition denied.
Yasona v. De Ramos
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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MS. VIOLETA YASOÑA, personally and as heir of deceased sister defendant PELAGIA YASOÑA and as attorney–in–fact of her brothers ALEJANDRO and EUSTAQUIO, both YASOÑA and sisters: TERESITA YASOÑA BALLESTERO and ERLINDA YASOÑA TUGADI, and mother AUREA VDA. DE YASOÑA, petitioners, vs. RODENCIO and JOVENCIO, both surnamed DE RAMOS, respondents. (G.R. No. 156339 October 6, 2004 Third Division) CORONA, J.: FACTS: In August 1993, Aurea filed an estafa complaint against brothers Jovencio and Rodencio de Ramos on the ground that she was deceived by them when she asked for their assistance in 1971 concerning her mortgaged property. Aurea in her complaint alleged that Rodencio asked her to sign a blank paper on the pretext that it would be used in the redemption of the mortgaged property. Aurea signed the blank paper without further inquiry because she trusted her nephew, Rodencio. Thereafter, they heard nothing from Rodencio and this prompted Nimpha Yasoña Bondoc to confront Rodencio but she was told that the title was still with the Register of Deeds. However, when Nimpha inquired from the Register of Deeds, she was shocked to find out that the lot had been divided into two, pursuant to a deed of sale apparently executed by Aurea in favor of Jovencio. Aurea averred that she never sold any portion of her property to Jovencio and never executed a deed of sale. Aurea was thus forced to seek the advice of Judge Enrique Almario, another relative, who suggested filing a complaint for estafa. On February 21, 1994, Assistant Provincial Prosecutor Rodrigo B. Zayen is dismissed the criminal complaint for estafa for lack of evidence. Jovencio and Rodencio filed a complaint for damages on the ground of malicious prosecution with the Regional Trial Court alleging that the filing of the estafa complaint against them was done with malice and it caused irreparable injury to their reputation, as Aure knew fully well that she had already sold half of the property to Jovencio. On October 5, 2000, the trial court rendered a decision in favor of Jovencio and Rodencio. Petitioner Violeta Yasoña, personally and on behalf of her brothers and sisters and mother Aurea, filed a petition for certiorari under Rule 65 with the Court of Appeals which dismissed the same on June 14, 2002 on the ground that petitioners availed of the wrong remedy. Their subsequent motion for reconsideration was likewise denied. ISSUE: Whether the filing of the criminal complaint for estafa by petitioners against respondents constituted malicious prosecution. HELD: The court held that "malicious prosecution is an action for damages
brought by one against whom a criminal prosecution, civil suit, or other legal proceeding has been instituted maliciously and without probable cause, after the termination of such prosecution, suit, or other proceeding in favor of the defendant therein." To constitute "malicious prosecution," there must be proof that the prosecution was prompted by a sinister design to vex or humiliate a person, and that it was initiated deliberately by the defendant knowing that his charges were false and groundless. Concededly, the mere act of submitting a case to the authorities for prosecution does not make one liable for malicious prosecution. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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In this case, however, there is reason to believe that a malicious intent was behind the filing of the complaint for estafa against respondents. The records show that the sale of the property was evidenced by a deed of sale duly notarized and registered with the local Register of Deeds. After the execution of the deed of sale, the property was surveyed and divided into two portions. Separate titles were then issued in the names of Aurea Yasoña (TCT No. 73252) and Jovencio de Ramos (TCT No. 73251). Since 1973, Jovencio had been paying therealty taxes of the portion registered in his name. In 1974, Aurea even requested Jovencio to use his portion as bond for the temporary release of her son who was charged with malicious mischief. Also, when Aurea borrowed money from the Rural Bank of Lumban in 1973and the PNB in 1979, only her portion covered by TCT No. 73252 was mortgaged. All these pieces of evidence indicate that Aurea had long acknowledged Jovencio‘s ownership of half of the property. Furthermore, it was only in 1993 when petitioners decided to file the estafa complaint against respondents. If petitioners had honestly believed that they still owned the entire property, it would not have taken them 22 years to question Jovencio‘s ownership of half of the property. The only conclusion that can be drawn from the circumstances is that Aurea knew all along that she was no longer the owner of Jovencio‘s portion after having sold it to him way back in 1971. Likewise, other than petitioners‘ bare allegations, no other evidence was presented by them to substantiate their claim. Malicious prosecution, both in criminal and civil cases, requires the elements of (1) malice and (2) absence of probable cause. These two elements are present in thepresent controversy. Petitioners were completely awarethat Jovencio was the rightful owner of the lot covered byTCT No. 73251, clearly signifying that they were impelledby malice and avarice in bringing the unfounded action.That there was no probable cause at all for the filing of the estafa case against respondents led to the dismissalof the charges filed by petitioners with the ProvincialProsecutor‘s Office in Siniloan, Laguna.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Yambao v. Zuniga CECILIA YAMBAO, petitioner, vs. MELCHORITA C. ZUÑIGA, LEOVIGILDO C. ZUÑIGA, REGINALDO C. ZUÑIGA, AND THE MINORS, HERMINIGILDO C. ZUÑIGA, JR., AND LOVELY EMILY C. ZUÑIGA – both represented by their legal guardian, the aforenamed MELCHORITA C. ZUÑIGA, respondents., (G.R. No. 146173, 2003 Dec 11, 2nd Division) QUISUMBING, J.: FACTS: Petitioner Cecilia Yambao is the owner of the bus driven by Ceferino Venturina which bumped a pedestrian in the person of Herminigildo Zuñiga. By virtue of such incident, Herminigildo died. Heirs of the deceased filed a Complaint against petitioner and her driver, Venturina, for damages alleging that Venturina drove the bus in a reckless, careless and imprudent manner, in violation of traffic rules and regulations, without due regard to public safety, thus resulting in the victim‘s premature death. Petitioner denied the allegations and shift blame to the Deceased theorizing that the latter was the one who bumped her bus. She further alleged that she was not liable for any damages because as an employer, she exercised the proper diligence of a good father of a family, both in the selection and supervision of her bus driver. The court favored the heirs which the Court of Appeals affirmed. Hence, a Petition for Review was filed. ISSUE: Whether a person is negligent or not is a question of fact. HELD: No. At the outset, we must state that the first issue raised by the petitioner is a factual one. Whether a person is negligent or not is a question of fact, which this Court cannot pass upon in a petition for review on certiorari, as our jurisdiction is limited to reviewing errors of law. The resolution of factual issues is the function of the trial court and its findings on these matters are, as a general rule, binding on this Court, more so where these have been affirmed by the Court of Appeals. We have carefully examined and weighed the petitioner‘s arguments on the first issue submitted, as well as the evidence on record, and find no cogent reason to disregard the cited general rule, much less to reverse the factual findings of the trial court as upheld by the court a quo. Hence, we sustain the trial court‘s finding, as affirmed by the Court of Appeals, that it was Venturina‘s reckless and imprudent driving of petitioner‘s bus, which is the proximate cause of the victim‘s death. when an employee, while performing his duties, causes damage to persons or property due to his own negligence, there arises the juris tantum presumption that the employer is negligent, either in the selection of the employee or in the supervision over him after the selection. For the employer to avoid the solidary liability for a tort committed by his employee, an employer must rebut the presumption by presenting adequate and convincing proof that in the selection and supervision of his employee, he or she exercises the care and diligence of a good father of a family. In the instant case, we find that petitioner has failed to rebut the presumption of negligence on her part. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Smith bell Corp v. Borja SMITH BELL DODWELL SHIPPING AGENCY CORPORATION, petitioner, vs. CATALINO BORJA and INTERNATIONAL TO WAGE AND TRANSPORT CORPORATION, respondents., (G.R. No. 143008, 2002 Jun 10, 3rd Division) PANGANIBAN, J.: 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 750metric 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 11o'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. ISSUE: Whether or not petitioner should be held liable for the injuries of Catalino Borja. 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; More so, when such findings affirm those of the trial court. 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. Petitioner's vessel was carrying chemical cargo-- alkyl benzene and methyl methacrylate monomer. 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 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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damages inflicted on the plaintiff. 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.
Ilusorio v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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RAMON K. ILUSORIO, Petitioner, versus HON. COURT OF APPEALS, and THE MANILA BANKING CORPORATION, Respondents. (G.R. No. 139130, November 27, 2002, 2nd Division) QUISUMBING, J.: FACTS: The petitioner is a prominent businessman who was the Managing Director of Multinational Investment Bancorporation and the Chairman and/or President of several other corporations. He was a depositor in good standing of respondent bank, the Manila Banking Corporation, under current Checking Account No. 06-09037-0. As he was then running about 20 corporations, and was going out of the country a number of times, petitioner entrusted to his secretary, Katherine E. Eugenio, his credit cards and his checkbook with blank checks. It was also Eugenio who verified and reconciled the statements of said checking account. For a material period of time, the secretary was able to encash and deposit in her personal account money from the account of petitioner. Upon knowledge of her acts, she was fired immediately and criminal actions were filed against her for estafa thru falsification before the Office of the Provincial Fiscal of Rizal. Thereafter, petitioner then requested the respondent bank to credit back and restore to its account the value of the checks which were wrongfully encashed but respondent bank refused. The RTC rendered a judgment dismissing the case filed due to lack of sufficient basis. The petitioner filed a petition for review to the Court of Appeals. However, the appellate court affirmed the judgment rendered by the RTC and held that petitioner‘s own negligence was the proximate cause of his loss. Hence, the present petition for review on certiorari. ISSUE: Whether or not petitioner has a cause of action against private respondent. HELD: No. The petitioner has a cause of action against private respondent. To be entitled to damages, petitioner has the burden of proving negligence on the part of the bank for failure to detect the discrepancy in the signatures on the checks. It is incumbent upon petitioner to establish the fact of forgery, by submitting his specimen signatures and comparing them with those on the questioned checks. The petitioner failed to submit additional specimen signatures as requested by the National Bureau of Investigation from which to draw a conclusive finding regarding forgery. The bank was not also remiss in performance of its duties, it practices due diligence in encashing checks. It was petitioner who was negligent in this case. He failed to examine his bank statements and this was the proximate cause of his own damage. Because of this negligence, he is precluded from setting up the defense of forgery with regard the checks. In the present case, it appears that petitioner accorded his secretary unusual degree of trust and unrestricted access to his credit cards, passbooks, check books, bank statements, including custody and possession of cancelled checks and reconciliation of accounts. Petition dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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NPC v. Court of Appeals National Power Corporation, Petitioner, versus Honorable Court of Appeals and Engineering Construction Incorporated, Respondents. (G.R. No. L-47379, May 16, 1988, 3rd Division) GUTIERREZ, JR., J.: FACTS: Plaintiff Engineering Construction, Inc., being a successful bidder, executed a contract in Manila with the National Waterworks and Sewerage Authority (NAWASA), whereby the former undertook to furnish all tools, labor, equipment, and materials (not furnished by Owner), and to construct the proposed 2nd lpo-Bicti Tunnel, Intake and Outlet Structures, and Appurtenant Structures, and Appurtenant Features, at Norzagaray, Bulacan, and to complete said works within eight hundred (800) calendar days from the date the Contractor receives the formal notice to proceed. The project involved two (2) major phases. By September 1967, the plaintiff corporation already had completed the first major phase of the work, namely, the tunnel excavation work. As soon as the plaintiff corporation had finished the tunnel excavation work at the Bicti site, all the equipment no longer needed there were transferred to the Ipo site where some projects were yet to be completed. The record shows that, typhoon 'Welming' hit Central Luzon, passing through defendant's Angat Hydro-electric Project and Dam at lpo, Norzagaray, Bulacan. Strong winds struck the project area, and heavy rains intermittently fell. Due to the heavy downpour, the water in the reservoir of the Angat Dam was rising perilously at the rate of sixty (60) centimeters per hour. To prevent an overflow of water from the dam, since the water level had reached the danger height of 212 meters above sea level, the defendant corporation caused the opening of the spillway gates." The RTC and Court of Appeals adjudged the National Power Corporation liable for damages against Engineering Construction, Inc. The appellate court, however, reduced the amount of damages awarded by the trial court. Hence, this present petition for review. ISSUE: Whether or not NPC performed negligently. HELD: Yes. NPC performed negligently. It is clear from the appellate court's decision that based on its findings of fact and that of the trial court's, petitioner NPC was undoubtedly negligent because it opened the spillway gates of the Angat Dam only at the height of typhoon "Welming" when it knew very well that it was safer to have opened the same gradually and earlier, as it was also undeniable that NPC knew of the coming typhoon at least four days before it actually struck. And even though the typhoon was an act of God or what we may call force majeure, NPC cannot escape liability because its negligence was the proximate cause of the loss and damage. Petition is dismissed. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Muaje-Tuazon v. Verchez Anabelle Muaje-Tuazon and Almer R. Abing, Petitioners, versus Wenphil Corporation, Elizabeth P. Orbita*, and Court of Appeals, Respondents. (G.R. No. 162447, December 27, 2006, 3rd Division) QUISUMBING, J.: FACTS: Petitioners Annabelle M. Tuazon and Almer R. Abing worked as branch managers of the Wendy's food chains in MCU Caloocan and Meycauayan, respectively, of respondent Wenphil Corporation. Wendy‘s had a promotion contest. The branch with the highest sales of "Biggie Size It" wins. The Meycauayan and MCU Caloocan branches won first and second places, respectively. Because of its success, respondent had a second run of the contest from April 26 to July 4, 1999. The Meycauayan branch won again. The MCU Caloocan branch failed to make it among the winners. Before the start of the third round from October 18, 1999 to January 16, 2000, Abing was assigned to the SM North Edsa Annex branch while Tuazon was assigned to the Meycauayan branch. Before the announcement of the third round winners, management received reports that as early as the first round of the contest, the Meycauayan, MCU Caloocan, Tandang Sora and Fairview branches cheated. An internal investigation ensued. On February 3, 2000, petitioners were summoned to the main office regarding the reported anomaly. Petitioners denied that there was cheating. Immediately thereafter, petitioners were notified, in writing, of hearings and of their immediate suspension. Thereafter, petitioners were dismissed. The Labor Arbiter ruled in favor of the petitioners. The judgment is hereby rendered finding the suspension and dismissal of complainants Almer R. Abing and Annabelle M. Tuazon illegal. Respondents appealed to the National Labor Relations Commission (NLRC), which affirmed with modification the decision of the Labor Arbiter. Denied reconsideration, respondents elevated the case to the Court of Appeals, which found substantial proof of petitioners' misconduct. It also ruled that respondent Wenphil sufficiently complied with the due process requirement. Hence, this present petition for review. ISSUE: Whether or not there is compliance with the due process requirement. HELD: Yes. There is compliance with the due process requirement. The records show that the petitioners were given written notices informing them that they were charged with serious misconduct and dishonesty in relation to the "Biggie Size It! Crew Challenge" program, and notifying them of the scheduled hearings on February 4 and 7, 2000. Although notices were given to them only on February 3, 2000, it will be noted that there were other investigations or hearings set after February 4 and 7 where they had the opportunity to explain their side after they were apprised of their alleged infractions. We note likewise that petitioners, thinking that their verbal explanations were sufficient, opted to forego a written explanation, and did not appear during the set hearing. These actions were choices that petitioners voluntarily made. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Petition is denied.
RCPI v. Verchez Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Radio Communications of the Philippines, Inc. (RCPI), Petitioner, versus Alfonso Verchez, Grace Verchez-Infante, Mardonio Infante, Zenaida Verchez-Catibog, And Fortunato Catibog, Respondents. (G.R. No. 164349, January 31, 2006, 3rd Division) CARPIO MORALES, J.: FACTS: Editha Hebron Verchez was confined due to an ailment. Grace Verchez-Infante (daughter) went to the Radio Communications of the Philippines, Inc. (RCPI) to send a telegram to her sister Zenaida VerchezCatibog who was residing at Quezon City reading: "Send check money Mommy is in hospital." Grace paid was issued a receipt. Three days after, no response received from her, Grace sent a letter to Zenaida, thru JRS Delivery Service, reprimanding her for not sending any financial aid. After Zenaida received Grace‘s letter, with her husband Fortunato Catibog, left for Sorsogon. On her arrival she disclaimed having received any telegram. Zenaida, and her husband, brought Editha to the Veterans Memorial Hospital. The telegram from RCPI was delivered to Zenaida 25 days later, Editha‘s husband Alfonso Verchez by letter demanded an explanation from the manager of the Service Quality Control Department of the RCPI, Mrs. Lorna D. Fabian, who replied, that due to the occurrence of radio link connecting the points of communication encountered radio noise and interferences such that subject telegram did not initially registered in the receiving teleprinter machine .Verchez‘s lawyer thereupon wrote RCPI‘s manager Fabian, by letter requesting for a conference but no representative of RCPI showed up at said date and time. On April 17, 1992, Editha died. Verchez, with his daughters Grace and Zenaida and spouses, filed a complaint against RCPI before the RTC for damages, the judgment of RTC rendered in favor of the plaintiffs and against the defendant, and on appeal, the Court of Appeals, affirmed the trial court‘s decision. Hence, RCPI‘s present petition for review on certiorari at the Supreme Court. ISSUE: Whether or not RCPI is liable for breach of contract. HELD: Yes. RCPI is liable for breach of contract. RCPI‘s liability is anchored on culpa contractual or breach of contract with regard to Grace and on tort with regard to her co-plaintiffs herein corespondents. Base on Article 1170 of the Civil Code providing that: ―Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.‖ In culpa contractual, the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach of contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. In the case at bar, RCPI bound itself to deliver the telegram within the shortest possible time. It took 25 days, however, for RCPI to deliver it. Petition is denied. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Victory Liner v Gammad, 444 S 355 Victory Liner, Petitioner, versus Rosalito Gammad, April Rossan P. Gammad, Roi Rozano P. Gammad and Diana Frances P. Gammad, Respondents (G.R. No. 159636, November 25, 2004, 1st Division) YNARES-SANTIAGO, J.: FACTS: Respondent Rosalito Gammad show that on March 14, 1996, his wife Marie Grace Pagulayan-Gammad, was on board an air-conditioned Victory Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus while running at a high speed fell on a ravine somewhere in Barangay Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and physical injuries to other passengers. Respondent heirs of the deceased filed a complaint for damages arising from culpa contractual against petitioner. In its answer, the petitioner claimed that the incident was purely accidental and that it has always exercised extraordinary diligence in its 50 years of operation. After several re-settings, pre-trial was set on April 10, 1997. For failure to appear on the said date, petitioner was declared as in default. However, on petitioner‘s motion to lift the order of default, the same was granted by the trial court. At the pre-trial, petitioner did not want to admit the proposed stipulation that the deceased was a passenger of the Victory Liner Bus which fell on the ravine and that she was issued Passenger Ticket No. 977785. Respondents, for their part, did not accept petitioner‘s proposal to pay P50,000.00. The trial court rendered its decision in favor of respondents. On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court with modification. Hence, this present petition for review on certiorari. ISSUE: Whether or not petitioner‘s counsel was guilty of gross negligence. HELD: Yes. The petitioner‘s counsel was guilty of gross negligence. It is settled that the negligence of counsel binds the client. This is based on the rule that any act performed by a counsel within the scope of his general or implied authority is regarded as an act of his client. Consequently, the mistake or negligence of counsel may result in the rendition of an unfavorable judgment against the client. However, the application of the general rule to a given case should be looked into and adopted according to the surrounding circumstances obtaining. Thus, exceptions to the foregoing have been recognized by the court in cases where reckless or gross negligence of counsel deprives the client of due process of law, or when its application will result in outright deprivation of the client‘s liberty or property or where the interests of justice so require, and accord relief to the client who suffered by reason of the lawyer‘s gross or palpable mistake or negligence. Petition is partially granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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FGU v. Sarmiento, 386 S 355 FGU Insurance Corporation, Petitioner, versus G.P. Sarmiento Trucking Corporation and Lambert M. Eroles, Respondents. (G.R. No. 141910, August 6, 2002, 1st Division) VITUG, J.: FACTS: G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles. While the truck was traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes. FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value of the covered cargoes: P204, 450.00. FGU, in turn, being the subrogee of the rights and interests of the insured sought reimbursement of the amount, from GPS. Since GPS failed to heed the claim, FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver with the Regional Trial Court, Branch 66, of Makati City. In its answer, respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in business as a common carrier. Respondents further claimed that the cause of damage was purely accidental. GPS, instead of submitting its evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to evidence on the ground that petitioner had failed to prove that it was a common carrier. The RTC and CA both ruled in favor of the respondent. Hence, this present petition for review. ISSUE: Whether or not the respondent be presumed to have been negligent when it undertook to transport the goods. HELD: Yes. The respondent acted negligently when it undertook to transport the goods. In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. Thus, FGU has a claim for the amount paid out. GPS recognizes the existence of a contract of carriage between it and petitioner‘s assured, and admits that the cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a situation, a default on, or failure of compliance with, the obligation in this case, the delivery of the goods in its custody to the place of destination gives rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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the burden being on him to establish otherwise. GPS has failed to do so. Petition is granted.
LRTA v. Natividad Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Light Rail Transit Authority & Rodolfo Roman, Petitioners, versus Marjorie Navidad, Heirs of the Late Nicanor Navidad & Prudent Security Agency, Respondents. (G.R. No. 145804 , February 6, 2003, 1st Division) VITUG, J.: FACTS: On 14 October 1993, about half an hour past 7:00 p.m., 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 Natividad. 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 Natividad later fell on the LRT tracks. At the exact moment that Natividad fell, an LRT train, operated by Rodolfo Roman, was coming in. Natividad was struck by the moving train, and he was killed instantaneously. The heirs of Nicanor filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent fotir the death of her husband. LRTA and Roman filed a counterclaim against Natividad and a cross-claim against Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection and supervision of its security guards. The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting evidence, filed a demurrer contending that Natividad had failed to prove that Escartin was negligent in his assigned task. On 11 August 1998, the trial court rendered its decision, ordering Prudent Security and Escartin to jointly and severally pay damages to Natividad The court also dismissed the complaint against LRTA and Rodolfo Roman for lack of merit, and the compulsory counterclaim of LRTA and Roman. Prudent appealed to the Court of Appeals. Thus, the appellate court promulgated its decision exonerating Prudent from any liability for the death of Nicanor Natividad and, instead, holding the LRTA and Roman jointly and severally liable. The appellate court modified the judgment ordering Roman and the LRTA solidarily liable to pay Natividad. The appellate court denied LRTA‘s and Roman‘s motion for reconsideration in its resolution of 10 October 2000. Hence, this appeal. ISSUE: Whether or not the liability of LRTA arises from the breach of contract due to failure to exercise diligence. HELD: Yes. The liability of LRTA arises from the breach of contract due to failure to exercise diligence. The foundation of LRTA‘s liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract by reason of its failure to exercise the high diligence required of the common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of an outsider or an independent firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under the contract of carriage. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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The decision of the appellate court is affirmed with modification.
Rodzssen v. Far East Bank, 357 S 618 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Rodzssen Supply Co. Inc., Petitioner, versus Far East Bank & Trust Co., Respondent. (G.R. No. 109087, May 9, 2001, 3rd Division) PANGANIBAN, J.: FACTS: On January 15, 1979, defendant Rodzssen Supply, Inc. opened with plaintiff Far East Bank and Trust Co. a 30-day domestic letter of credit, in the amount of P190,000.00 in favor of Ekman and Company, Inc. (Ekman) for the purchase from the latter of five units of hydraulic loaders, to expire on February 15, 1979. The three loaders were delivered to defendant for which plaintiff paid Ekman and which defendant paid plaintiff before expiry date of letter of credit. The remaining two loaders were delivered to defendant but the latter refused to pay. Ekman pressed payment to plaintiff. Plaintiff paid Ekman for the two loaders and later demanded from defendant such amount as it paid Ekman. Defendant refused payment contending that there was a breach of contract by plaintiff who in bad faith paid Ekman, knowing that the two units of hydraulic loaders had been delivered to defendant after the expiry date of subject. The RTC rendered judgment in favor of herein respondent, stating that upon delivery by Ekman of the loaders, Rodzssen became liable for the payment of the units. In the honest belief that it was still under obligation to, and upon presentation of necessary documents by Ekman, FEBTC was in good faith in paying Ekman. The RTC further noted that Rodzssen‘s offer to return the 2 units to FEBTC was made only 3 years after it received the goods and when FEBTC pressed for the payments. Hence, this present petition for review on certiorari. ISSUE: Whether or not both parties are mutually negligent. HELD: Yes. Both parties are mutually negligent. The Supreme Court agrees with the Court of Appeals that petitioner should pay respondent bank the amount the latter expended for the equipment belatedly delivered by Ekman and voluntarily received and kept by petitioner. Equitable considerations behoove us to allow recovery by respondent. True, it erred in paying Ekman, but petitioner itself was not without fault in the transaction. It must be noted that the latter had voluntarily received and kept the loaders since October 1979. FEBTC‘s right to seek recovery from petitioner is anchored not upon the inefficacious LC, but on Article 2142 of the Civil Code, which reads, ―Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasicontract to the end that no one shall be unjustly enriched or benefited at the expense of another.‖ When both parties to a transaction are mutually negligent in the performance of their obligations, the fault of one cancels the negligence of the other and, as in this case, their rights and obligations may be determined equitably under the law proscribing unjust enrichment. Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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UE v. Jader University of the East, Petitioner, versus. Romeo A. Jader, Respondent. (G.R. No. 132344, February 17, 2000, 1st Division) YNARES-SANTIAGO, J.: FACTS: Romeo Jader graduated at UE College of law from 1984-88. During his last year, 1st semester, he failed to take the regular final examination in Practical Court 1where he was given an incomplete grade remarks. He filed an application for removal of the incomplete grade given by Prof. Carlos Ortega on February 1, 1988 which was approved by Dean Celedonio Tiongson after the payment of required fees. He took the exam on March 28 and on May 30, the professor gave him a grade of 5. The commencement exercise of UE College of law was held April 16, 1988, 3PM. In the invitation, his name appeared. In preparation for the bar exam, he took a leave of absence from work from April 20- Sept 30, 1988. He had his pre-bar class review in FEU. Upon learning of such deficiency, he dropped his review classes and was not able to take the bar exam. Jader sued UE for damages resulting to moral shock, mental anguish, serious anxiety, besmirched reputation, wounded feelings, sleepless nights due to UE‘s negligence. ISSUE: Whether or not the petitioner is guilty of negligence. HELD: Yes. The petitioner is guilty of negligence. The Supreme Court held that petitioner was guilty of negligence and this liable to respondent for the latter‘s actual damages. Educational institutions are duty-bound to inform the students of their academic status and not wait for the latter to inquire from the former. However, respondent should not have been awarded moral damages though JADER suffered shock, trauma, and pain when he was informed that he could not graduate and will not be allowed to take the bar examinations as what CA held because it‘s also respondent‘s duty to verify for himself whether he has completed all necessary requirements to be eligible for the bar examinations. As a senior law student, he should have been responsible in ensuring that all his affairs specifically those in relation with his academic achievement are in order. Before taking the bar examinations, it doesn‘t only entail a mental preparation on the subjects but there are other prerequisites such as documentation and submission of requirements which prospective examinee must meet. The decision of the Court of Appeals is affirmed with modification.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Bayne Adjusters v. Court of Appeals Bayne Adjusters and Surveyors, Inc., Petitioner, versus Court of Appeals and Insurance Company of North America, Respondents. (G. R. No. 116332, January 25, 2000, 3rd Division) GONZAGA-REYES, J.: FACTS: Bayne Adjuster had a contract with consignee, Colgate-Palmolive
Philippines, to supervise the proper handling and discharge of their import liquid alkyl benzene(from Japan, totally amounting to USD 255,802.88) from the chemical tanker to a receiving barge until the cargo is pumped into consignee‘s shore tank. Such arrangement was insured by Col-Pal to Private Respondent , Insurance of NA, against all risks for its full value. June 27, 1987, 1020pm: the said pumping commenced. Due to a mechanical failure, pump broke down several times. June 29, 1987, 1pm: pump broke down again. At that time, petitioner‘s surveyor already left the premises without leaving any instruction with the barge foreman on what to do in the event that the pump becomes operational again. Later that say, consignee asked petitioner to send a surveyor to conduct tank sounding. Petitioner sent Amado Fontillas, a cargo surveyor, not a liquid bulk surveyor to check. Fontillas wanted to inform the bargemen and the assigned surveyor to resume pumping, but they were nowhere, so he left. Bargemen arrived in the evening, found the valves of the tank open and resumed pumping in absence of any instruction. The following morning, an undetermined amount of alkyl benzene was lost due to overflow. Consignee, surveyor and a marine surveyor had a conference to determine the amount of loss. A compromise quantity of 67.649MT was lost, amounting to PHP811,609,53. Private respondent instituted a collection suit as subrogee of consignee after their failure to extrajudicially settle with petitioners. The RTC and Court of Appeals ruled that Bayne must pay. Hence, this present petition for review. ISSUE: Whether or not Bayne‘s failure to supervise is the proximate cause of the loss, thus making them liable for damages. HELD: Yes. Bayne‘s failure to supervise is the proximate cause of the loss, thus making them liable for damages. According to the Standard Operating Procedure (SOP) for Handling Liquid Bulk Cargo, it is the duty of the surveyor that he closes the valves of the tank when pumping operations are suspended due to pump break down. The petitioner did not deny such failure. Their failure to comply is the proximate cause of the loss. This failure enabled bargemen , without any instruction or supervision, to resume pumping, leading to the overflow of liquid cargo from the tank. Negligence of the obligor in the performance of his obligation renders him liable for damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor consists of the failure to exercise due care and prudence in the performance of the obligation as the nature of the obligation demands. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Petition is dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Delsan v. C & A Construction Delsan Transport, Petitioner, versus C & A Construction, Respondents. (G.R. No. 156034, October 1, 2003, 1st Division) YNARES-SANTIAGO, J: FACTS: On October 9, 1994, M/V Delsan Express, a ship owned and operated by petitioner Delsan Transport Lines, Inc., anchored at the Navotas Fish Port for the purpose of installing a cargo pump and clearing the cargo oil tank. At around 12:00 midnight of October 20, 1994, Captain Demetrio T. Jusep of M/V Delsan Express received a report from his radio head operator in Japan that a typhoon was going to hit Manila in about eight (8) hours. At approximately 8:35 in the morning of October 21, 1994, Capt. Jusep tried to seek shelter at the North Harbor but could not enter the area because it was already congested. At 10:00 a.m., Capt. Jusep decided to drop anchor at the vicinity of Vitas mouth, 4 miles away from a Napocor power barge. At that time, the waves were already reaching 8 to 10 feet high. Capt. Jusep ordered his crew to go full ahead to counter the wind which was dragging the ship towards the Napocor power barge. To avoid collision, Capt. Jusep ordered a full stop of the vessel.[9] He succeeded in avoiding the power barge, but when the engine was re-started and the ship was maneuvered full astern, it hit the deflector wall constructed by respondent. Respondent demanded payment of the damage from petitioner but the latter refused to pay. The trial court ruled that petitioner was not guilty of negligence because it had taken all the necessary precautions to avoid the accident. Applying the "emergency rule", it absolved petitioner of liability because the latter had no opportunity to adequately weigh the best solution to a threatening situation. It further held that even if the maneuver chosen by petitioner was a wrong move, it cannot be held liable as the cause of the damage sustained by respondent was typhoon "Katring", which is an act of God. On appeal to the Court of Appeals, the decision of the trial court was reversed and set aside. It found Capt. Jusep guilty of negligence in deciding to transfer the vessel to the North Harbor only at 8:35 a.m. of October 21, 1994 and thus held petitioner liable for damages.
ISSUES:1. Whether or not Capt. Jusep was negligent; 2. If yes, whether or not petitioner is solidarily liable under for the quasi-delict committed by Capt. Jusep?
HELD: Yes. Article 2176 of the Civil Code provides that whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict. The test for Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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determining the existence of negligence in a particular case may be stated as follows: Did the defendant in doing the alleged negligent act use the reasonable care and caution which an ordinary prudent person would have used in the same situation? If not, then he is guilty of negligence. In the case at bar, the Court of Appeals was correct in holding that Capt. Jusep was negligent in deciding to transfer the vessel only at 8:35 in the morning of October 21, 1994. As early as 12:00 midnight of October 20, 1994, he received a report from his radio head operator in Japan that a typhoon was going to hit Manila after 8 hours. This, notwithstanding, he did nothing, until 8:35 in the morning of October 21, 1994, when he decided to seek shelter at the North Harbor, which unfortunately was already congested. The finding of negligence cannot be rebutted upon proof that the ship could not have sought refuge at the North Harbor even if the transfer was done earlier. It is not the speculative success or failure of a decision that determines the existence of negligence in the present case, but the failure to take immediate and appropriate action under the circumstances. Capt. Jusep, despite knowledge that the typhoon was to hit Manila in 8 hours, complacently waited for the lapse of more than 8 hours thinking that the typhoon might change direction. Furthermore, he did not transfer as soon as the sun rose because, according to him, it was not very cloudy and there was no weather disturbance yet. Yes. Anent the second issue, we find petitioner vicariously liable for the negligent act of Capt. Jusep. Under Article 2180 of the Civil Code an employer may be held solidarily liable for the negligent act of his employee. Thus Art. 2180. The obligation imposed in Article 2176 is demandable not only for one‘s own acts or omissions, but also for those of persons for whom one is responsible. Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. Whenever an employee‘s negligence causes damage or injury to another, there instantly arises a presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection (culpa in eligiendo) or supervision (culpa in vigilando) of its employees. To avoid liability for a quasidelict committed by his employee, an employer must overcome the presumption by presenting convincing proof that he exercised the care and diligence of a good father of a family in the selection and supervision of his employee. There is no question that petitioner, who is the owner/operator of M/V Delsan Express, is also the employer of Capt. Jusep who at the time of the incident acted within the scope of his duty. The defense raised by petitioner was that it exercised due diligence in the selection of Capt. Jusep because the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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latter is a licensed and competent Master Mariner. It should be stressed, however, that the required diligence of a good father of a family pertains not only to the selection, but also to the supervision of employees. It is not enough that the employees chosen be competent and qualified, inasmuch as the employer is still required to exercise due diligence in supervising its employees.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Philippine Commercial Bank v. Court of Appeals Philippine Commercial International Bank, Petitioner, versus Court of Appeals, Respondent. (G.R. No. 121413, January 29, 2001, 2nd Division) QUISUMBING, J:
FACTS: The plaintiff Ford drew and issued its Citibank Check No. SN-04867 in the amount of P4,746,114.41, in favor of the Commissioner of Internal Revenue as payment of plaintiff‘s percentage or manufacturer‘s sales taxes for the third quarter of 1977. The aforesaid check was deposited with the defendant IBAA (now PCIBank) and was subsequently cleared at the Central Bank. Upon presentment with the defendant Citibank, the proceeds of the check was paid to IBAA as collecting or depository bank. The proceeds of the same Citibank check of the plaintiff was never paid to or received by the payee thereof, the Commissioner of Internal Revenue. As a consequence, upon demand of the Bureau and/or Commissioner of Internal Revenue, the plaintiff was compelled to make a second payment to the Bureau of Internal Revenue of its percentage/manufacturers‘ sales taxes for the third quarter of 1977 and that said second payment of plaintiff in the amount of P4,746,114.41 was duly received by the Bureau of Internal Revenue. The Acting Commissioner of Internal Revenue addressed to the plaintiff that its check in the amount of P4,746,114.41 was not paid to the government or its authorized agent and instead encashed by unauthorized persons, hence, plaintiff has to pay the said amount within fifteen days from receipt of the letter. Upon advice of the plaintiff‘s lawyers, plaintiff paid to the Bureau of Internal Revenue, the amount of P4,746,114.41, representing payment of plaintiff‘s percentage tax for the third quarter of 1977. Plaintiff demanded defendant to reimburse him of the said amount paid for the second time to BIR but the latter refused.
ISSUE: Whether or not PCIB is liable to Ford Philippines the amount of several checks which were allegedly embezzled by a syndicate group.
HELD: Yes. Jurisprudence regarding the imputed negligence of employer in a master-servant relationship is instructive. Since a master may be held for his servant‘s wrongful act, the law imputes to the master the act of the servant, and if that act is negligent or wrongful and proximately results in injury to a third person, the negligence or wrongful conduct is the negligence or wrongful conduct of the master, for which he is liable. The general rule is that if the master is injured by the negligence of a third person and by the concurring Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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contributory negligence of his own servant or agent, the latter‘s negligence is imputed to his superior and will defeat the superior‘s action against the third person, assuming, of course that the contributory negligence was the proximate cause of the injury of which complaint is made. It appears that although the employees of Ford initiated the transactions attributable to an organized syndicate, in our view, their actions were not the proximate cause of encashing the checks payable to the CIR. The degree of Ford‘s negligence, if any, could not be characterized as the proximate cause of the injury to the parties. Citibank should have scrutinized Citibank Check before paying the amount of the proceeds thereof to the collecting bank of the BIR. One thing is clear from the record: the clearing stamps at the back of Citibank Check Nos. SN 10597 and 16508 do not bear any initials. Citibank failed to notice and verify the absence of the clearing stamps. Had this been duly examined, the switching of the worthless checks to Citibank Check Nos. 10597 and 16508 would have been discovered in time. For this reason, Citibank had indeed failed to perform what was incumbent upon it, which is to ensure that the amount of the checks should be paid only to its designated payee. The fact that the drawee bank did not discover the irregularity seasonably, in our view, constitutes negligence in carrying out the bank‘s duty to its depositors. The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. Citibank must likewise answer for the damages incurred by Ford on Citibank Checks because of the contractual relationship existing between the two. Citibank, as the drawee bank breached its contractual obligation with Ford and such degree of culpability contributed to the damage caused to the latter.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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SMC v. Court of Appeals San Miguel Corporation and Heirs of Ouana, Petitioners, versus Court of Appeals, Respondent. (G.R. No. 141716, July 4, 2002, 1st Division) YNARES-SANTIAGO, J: FACTS: San Miguel Corporation entered into a Time Charter Party Agreement with Julius Ouano, doing business under the name and style J. Ouano Marine Services. Under the terms of the agreement, SMC chartered the M/V Doña Roberta owned by Julius Ouano for a period of two years, from June 1, 1989 to May 31, 1991, for the purpose of transporting SMC‘s beverage products from its Mandaue City plant to various points in Visayas and Mindanao. On November 11, 1990, during the term of the charter, SMC issued sailing orders to the Master of the MN Doña Roberta, Captain Sabiniano Inguito, to sail for Opol, Cagayan Nov. 12, 1990. Meanwhile, at 4:00 a.m. of November 12, 1990, typhoon Ruping was spotted 570 kilometers eastsoutheast of Borongan, Samar, moving west-northwest at 22 kilometers per hour in the general direction of Eastern Visayas. The typhoon had maximum sustained winds of 240 kilometers per hour near the center with gustiness of up to 280 kilometers per hour. At 7:00 a.m., November 12, 1990, one hour after the M/V Doña Roberta departed from Mandaue City SMC Radio Operator Rogelio P. Moreno contacted Captain Inguito through the radio and advised him to take shelter. Captain Inguito replied that they will proceed since the typhoon was far away from them, and that the winds were in their favor. At 1:15 a.m., November 13, 1990, Captain Inguito called Moreno over the radio and requested him to contact Rico Ouano, son of Julius Ouano, because they needed a helicopter to rescue them. The vessel was about 20 miles west of Sulauan Point. Upon being told by SMC‘s radio operator, Rico Ouano turned on his radio and read the distress signal from Captain Ingiuto. When he talked to the captain, the latter requested for a helicopter to rescue them. Rico Ouano talked to the Chief Engineer who informed him that they can no longer stop the water from coming into the vessel because the crew members were feeling dizzy from the petroleum fumes. At 2:30 a.m. of November 13, 1990, the M/V Doña Roberta sank. Out of the 25 officers and crew on board the vessel, only five survived. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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ISSUE: Whether or nor Ouano is liable for the negligence of his employee.
Held: Yes. A charter party is a contract by virtue of which the owner or the agent of a vessel binds himself to transport merchandise or persons for a fixed price. It has also been defined as a contract by virtue of which the owner or the agent of the vessel leases for a certain price the whole or a portion of the vessel for the transportation of goods or persons from one port to another. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship. SC concur with the findings of the Court of Appeals that the charter party in these cases was a contract of affreightment, contrary to petitioner Ouano‘s protestation that it was a demise charter. It appearing that Ouano was the employer of the captain and crew of the M/V Doña Roberta during the term of the charter, he therefore had command and control over the vessel. His son, Rico Ouano, even testified that during the period that the vessel was under charter to SMC, the Captain thereof had control of the navigation of all voyages. Under the foregoing definitions, as well as the clear terms of the Charter Party Agreement between the parties, the charterer, SMC, should be free from liability for any loss or damage sustained during the voyage, unless it be shown that the same was due to its fault or negligence. The evidence does not show that SMC or its employees were amiss in their duties. The facts indubitably establish that SMC‘s Radio Operator, Rogelio P. Moreno, who was tasked to monitor every shipment of its cargo, contacted Captain Inguito as early as 7:00 a.m., one hour after the M/V Doña Roberta departed from Mandaue, and advised him to take shelter from typhoon Ruping. This advice was reiterated at 2:00 p.m. At that point, Moreno thought of calling Ouano‘s son, Rico, but failed to find him. At 4:00 p.m., Moreno again advised Captain Inguito to take shelter and stressed the danger of venturing into the open sea. The Captain insisted that he can handle the situation. In the assailed decision, the Court of Appeals found that the proximate cause of the sinking of the vessel was the negligence of Captain Sabiniano Inguito SC likewise agrees with the CA that Ouano is vicariously liable for the negligent acts of his employee, Captain Inguito. Under Articles 2176 and 2180 of the Civil Code, owners and managers are responsible for damages caused by the negligence of a servant or an employee, the master or employer is presumed to be negligent either in the selection or in the supervision of that Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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employee. This presumption may be overcome only by satisfactorily showing that the employer exercised the care and the diligence of a good father of a family in the selection and the supervision of its employee.39 Ouano miserably failed to overcome the presumption of his negligence. He failed to present proof that he exercised the due diligence of a bonus paterfamilias in the selection and supervision of the captain of the M/V Doña Roberta. Hence, he is vicariously liable for the loss of lives and property occasioned by the lack of care and negligence of his employee.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Heirs of Ochoa v. G & S Transport Corp. The Heirs of Jose Marcial Ochoa, Petitioner, versus G & S Transport Corporation, Respondent. (G.R. No. 170071, March 9, 2011, 1st Division) DEL CASTILLO, J: FACTS: On the night of March 10, 1995, Jose Marcial K. Ochoa died while on board an Avis taxicab owned and operated by G& S Transport Corporation, a common carrier. The death certificate issued by the Office of the Civil Registrar of Quezon Citycited the cause of his death as vehicular accident it was found that the death of Jose Marcial Ochoa was caused by negligence on the part of the taxicab driver employed by G & S Transport Corporation, Bibiano Padilla. However, the taxicab driver,Bibiano Padilla, was acquitted of the crime of reckless imprudence resulting in homicide. Regardless, the petitioners alleged that respondent, as a common carrier, was under legal obligation to observe and exercise extraordinary diligence in transporting its passengers to their destination safely and securely. The contract was entered the moment Ochoa entered the vehicle owned by the respondent. The failure of the respondent, as evidenced by the death of Ochoa, led the petitioners to aver that they, the respondents, are liable for having breached the contract of common carriage. The heirs thus prayed for G& S to pay them actual damages, moral damages, exemplary damages, and attorney‘s fees and expenses of litigation.
ISSUE: Whether or not the petitioner may proceed with the civil action given that there was already an acquittal in the related criminal case.
HELD: Yes. The Supreme Court declared the HELD of Cancio, Jr., v. Isip, which stated that in the instant case, it must be stressed that the action filed by petitioner is an independent civil action, which remains separate and distinct from any criminal prosecution based on the same act. Not being deemed instituted in the criminal action based on culpa criminal, a HELD on the culpability of the offender will have no bearing on said independent civil action based on an entirely different cause of action, i.e., culpa contractual. Considering Article 31 of the Civil Code, the petitioners‘ claim for damages is valid considering that the civil action, being based on an obligation, proceeded independently of the criminal proceedings and regardless of the result of the latter. Thus, the respondent is liable to pay the petitioners for damages because by not transporting Jose Marcial Ochoa safely to his destination the former breached its contract with the passenger.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Pacis v. Morales Alfredo P. Pacis and Cleopatra D. Pacis, Petitioners, versus Jerome Jovanne Morales, Respondent. (G.R. No. 169467, February 25, 2010, 2nd Division) CARPIO, J: FACTS: Petitioners Alfredo P. Pacis and Cleopatra D. Pacis filed with the trial
court a civil case for damages against respondent Jerome Jovanne Morales. Petitioners are the parents of Alfred Dennis Pacis,Jr. who died in a shooting incident inside the Gun Store in Baguio City. Alfred Dennis Pacis, then 17years old and a first year student at the BCF taking up BS Computer Science, died due to a gunshot wound in the head which he sustained while he was at the Gun store owned and operated by defendant Jerome Jovanne Morales. The bullet which killed Alfred Dennis Pacis was fired from a gun brought in by a customer of the gun store for repair. The gun was left by defendant Morales in a drawer of a table located inside the gun store. Defendant Morales was in Manila at the time. His employee Armando Jarnague, who was the regular caretaker of the gun store was also not around. He left earlier and requested sales agents Matibag and Herbolario to look after the gun store while he and defendant Morales were away. Jarnague entrusted to Matibag and Herbolario a bunch of keys used in the gun store which included the key to the drawer where the fatal gun was kept. It appears that Matibag and Herbolario later brought out the gun from the drawer and placed it on top of the table. The Alfred got hold of the same. Matibag asked Alfred to return the gun. The latter followed and handed the gun to Matibag. It went off, the bullet hitting the Alfred in the head. A criminal case for homicide was filed against Matibag, however, was acquitted of the charge against him because of the exempting circumstance of accident. By agreement of the parties, the evidence adduced in the criminal case for homicide against Matibag was reproduced and adopted by them as part of their evidence in the instant case. The trial court rendered its decision in favor of petitioners. Respondent appealed to the CA. The CA reversed the trial courts Decision and absolved respondent from civil liability under Article 2180 of the Civil Code. Petitioners filed a motion for reconsideration,which the Court of appeals denied. Hence, this petition. The trial court held respondent civilly liable for the death of Alfred under Article 2180 in relation to Article 2176 of the Civil Code.
ISSUE: Whether or not the Court of Appeals committed serious error in rendering the decision and resolution in questioning disregard of law and jurisprudence by reversing the order of the regional trial court (branch 59) of Baguio City notwithstanding clear, authentic records and testimonies presented during the trial which negate and contradict its findings.
HELD: Yes. In this case, instead of enforcing their claim for damages in the homicide case filed against Matibag, petitioners opted to file an independent Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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civil action for damages against respondent whom they alleged was Matibag‘s employer. Petitioners based their claim for damages under Articles 2176and 2180 of the Civil Code. Unlike the subsidiary liability of the employer under Article 102 of the Revised Penal Code, the liability of the employer, or any person for that matter, under Article 2176 of the Civil Code is primary and direct, based on a persons own negligence. Article 2176 states: Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called quasi-delict and is governed by the provisions of this Chapter. This case involves the accidental discharge of a firearm inside a gun store. Under PNP Circular No.9, entitled the Policy on Firearms and Ammunition Dealership/Repair, a person who is in the business of purchasing and selling of firearms and ammunition must maintain basic security and safety requirements of a gun dealer, otherwise his License to Operate Dealership will be suspended or canceled.
For failing to insure that the gun was not loaded, respondent himself was negligent. Furthermore, it was not shown in this case whether respondent had a License to Repair which authorizes him to repair defective firearms to restore its original composition or enhance or upgrade firearms. Clearly, respondent did not exercise the degree of care and diligence required of a good father of a family, much less the degree of care required of someone dealing with dangerous weapons, as would exempt him from liability in this case.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Philippine Hawk Corporation v. Lee Philippine Hawk Corporation, Petitioner, versus Vivian Lee, Respondent. (G.R. No. 166869, February 16, 2010, 3rd Division) PERALTA, J:
FACTS: On March 15, 2005, respondent Vivian Tan Lee filed before the RTC of Quezon City a Complaint against petitioner Philippine Hawk Corporation and defendant Margarito Avila for damages based on quasi-delict, arising from a vehicular accident that occurred on March 17, 1991 in Barangay Buensoceso, Gumaca, Quezon. The accident resulted in the death of respondent‘s husband, Silvino Tan, and caused respondent physical injuries. On June 18, 1992, respondent filed an Amended Complaint, in her own behalf and in behalf of her children, in the civil case for damages against petitioner. Respondent sought the payment of indemnity for the death of Silvino Tan, moral and exemplary damages, funeral and interment expenses, medical and hospitalization expenses, the cost of the motorcycle‘s repair, attorney‘s fees, and other just and equitable reliefs. The accident involved a motorcycle, a passenger jeep, and a bus with Body No. 119. The bus was owned by petitioner Philippine Hawk Corporation, and was then being driven by Margarito Avila. In its Answer, petitioner denied liability for the vehicular accident, alleging that the immediate and proximate cause of the accident was the recklessness or lack of caution of Silvino Tan. Petitioner asserted that it exercised the diligence of a good father of the family in the selection and supervision of its employees, including Margarito Avila. On March 25, 1993, the trial court issued a Pre-trial Order stating that the parties manifested that there was no possibility of amicable settlement between them. The trial court found that before the collision, the motorcycle was on the left side of the road, just as the passenger jeep was. Prior to the accident, the motorcycle was in a running position moving toward the right side of the highway. The trial court agreed with the bus driver that the motorcycle was moving ahead of the bus from the left side of the road toward the right side of the road, but disagreed that the motorcycle crossed the path of the bus while the bus was running on the right side of the road.
The trial court held that if the bus were on the right side of the highway, and Margarito Avila turned his bus to the right in an attempt to avoid hitting the motorcyle, then the bus would not have hit the passenger jeep, which was then parked on the left side of the road. The fact that the bus also hit the passenger jeep showed that the bus must have been running from the right lane to the left lane of the highway, which caused the collision with the motorcycle and the passenger jeep parked on the left side of the road. The trial court stated that since Avila saw the motorcycle before the collision, he should have stepped on the brakes and slowed down, but he just maintained his speed and veered to the left. The trial court found Margarito Avila guilty of simple negligence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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The trial court held petitioner bus company liable for failing to exercise the diligence of a good father of the family in the selection and supervision of Avila, having failed to sufficiently inculcate in him discipline and correct behavior on the road.
ISSUE: Whether or not negligence may be attributed to petitioner‘s driver, and whether negligence on his part was the proximate cause of the accident, resulting in the death of Silvino Tan and causing physical injuries to respondent.
HELD: Yes. The Court agrees with the bus driver Margarito that the motorcycle was moving ahead of the bus towards the right side from the left side of the road, but disagrees with him that it crossed the path of the bus while the bus was running on the right side of the highway.
If the bus were on the right side of the highway and Margarito turned his bus to the right in an attempt to avoid hitting it, then the bus would not have hit the passenger jeep vehicle which was then parked on the left side of the road. The fact that the bus hit the jeep too, shows that the bus must have been running to the left lane of the highway from right to the left, that the collision between it and the parked jeep and the moving rightways cycle became inevitable. Besides, Margarito said he saw the motorcycle before the collision ahead of the bus; that being so, an extra-cautious public utility driver should have stepped on his brakes and slowed down. Here, the bus never slowed down, it simply maintained its highway speed and veered to the left. This is negligence indeed.
Petitioner contends that the Court of Appeals was mistaken in stating that the bus driver saw respondent‘s motorcycle ―about 15 meters away‖ before the collision, because the said distance, as testified to by its witness Efren Delantar Ong, was Ong‘s distance from the bus, and not the distance of the bus from the motorcycle. Petitioner asserts that this mistaken assumption of the Court of Appeals made it conclude that the bus driver, Margarito Avila, had the last clear chance to avoid the accident, which was the basis for the conclusion that Avila was guilty of simple negligence.
A review of the records showed that it was petitioner‘s witness, Efren Delantar Ong, who was about 15 meters away from the bus when he saw the vehicular accident. Nevertheless, this fact does not affect the finding of the trial court that petitioner‘s bus driver, Margarito Avila, was guilty of simple negligence as affirmed by the appellate court. Foreseeability is the fundamental test of negligence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Mercury Drug Corp., v. Huang Mercury Drug Corporation, Petitioner, versus Huang, Respondent (G.R. No. 172122, June 22, 2007, 1st Division) PUNO, C.J: FACTS: Petitioner Mercury Drug is the registered owner of a six-wheeler 1990 Mitsubishi Truck. It has in its employ petitioner Rolando Del Rosario as driver. Respondent spouses Richard and Carmen Huang are the parents of respondent Stephen Huang and own the red 1991 Toyota Corolla. These two vehicles figured in a road accident. At the time of the accident, petitioner Del Rosario only had a Traffic Violation Receipt. A driver‘s license had been confiscated because he had been previously apprehended for reckless driving. Respondent Stephen Huang sustained massive injuries to his spinal cord, head, face and lung. He is paralyzed for life from his chest down and requires continuous medical and rehabilitation treatment. Respondent‘s fault petitioner Del Rosario for committing gross negligence and reckless imprudence while driving, and petitioner Mercury Drug for failing to exercise the diligence of a good father of a family in the selection and supervision of its driver. The trial court found Mercury Drug and Del Rosario jointly and severally liable to pay respondents. The Court of Appeals affirmed the said decision.
ISSUE: Whether or not petitioner Mercury Drug is liable for the negligence of its employee.
HELD: Yes. Article 2176 and 2180 of the Civil Code provide: ―Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damages done. Such fault or negligence, if there is no pre-existing contractual relationship between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.‖ ―The obligation imposed by article 2176 is demandable not only for one‘s own acts or omissions, but also for those of persons for whom one is responsible.‖ The liability of the employer under Article 2180 is direct and immediate. It is not conditioned on a prior recourse against the negligent employee, or a prior showing of insolvency of such employee. It is also joint and solidary with the employee. To be relieved f the liability, petitioner should show that it exercised the diligence of a good father of a family, both in the selection of the employee and in the supervision of the performance of his duties. In this case, the petitioner Mercury Drug does not provide for back-up driver for long trips. As the time of the accident, Del Rosario has been driving for more than thirteen hours, without any alternate. Moreover, Del Rosario took the driving test and psychological exam for the position of Delivery Man and not as Truck Man. With this, petitioner Mercury Drug is liable jointly and severally liable to pay the respondents.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Mendoza v. Soriano Flordeliza Mendoza, Petitioner, versus Mutya Soriano, Respondent. (G.R. No. 164012, June 8, 2007, 2nd Division) QUISUMBING, J:
FACTS: Sonny Soriano, while crossing Commonwealth Avenue near Luzon Avenue, was hit by a speeding Tamaraw FX driven by Lomer Macasasa. Soriano was thrown five meters away, while the vehicle stopped some 25 meters from the point of impact. Gerard Villaspin, one of Soriano‘s companions, asked Macasasa to bring Soriano to the hospital, but the first flee. Respondent‘s wife and daughter filed a complaint for damages against Macasasa and petitioner Flordeliza Mendoza, the registered owner of the vehicle. Petitioner Mendoza contends that she was not liable since as owner of the vehicle, she had exercised the diligence of a good father of a family over her employee. Macasas. The trial court dismissed the complaint against Macasasa and Mendoza. It found Soriano negligent for crossing not in the pedestrian overpass. The Court of Appeals, on the other hand, reversed the assailed decision of the lower court.
ISSUE: Whether or not petitioner is liable for damages.
HELD: Yes. While the appellate court agreed that Soriano was negligent, it also found Macasasa negligent for speeding, such that he was unable to avoid hitting the victim. It observed that Soriano‘s own negligence did not preclude recovery for damages from Macasasa‘s negligence. It further held that since petitioner failed to present evidenced to the contrary and conformably with Article 2180 of the Civil Code, the presumption of negligence of the employer in the selection and supervision of employees stood. The records show that Macasasa violated two traffic rules under the Land Transportation and Office Code. Under Article 2185 of the Civil Code, a person driving a motor vehicle is presumed negligent if at the time of the mishap, he was violating traffic regulations. Further, under Article 2180, employers are liable for the damages caused by their employees acting within the scope of their assigned tasks. The liability arises due to the presumed negligence of the employers in supervising their employees unless they prove that they observed all the diligence of a good father of a family to prevent the damage. In this case petitioner is held primarily and solidarily liable for the damages caused by Macasasa. However, Article 2179 states that ―when the plaintiff‘s own negligence was the immediate and proximate cause of his injury, he cannot recover damages. But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant‘s lack of due care, the plaintiff may recover damages, but the court shall mitigate the damages awarded. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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HELD that Soriano was guilty of contributory negligence for not using the pedestrian overpass, 20% reduction of the amount of the damages awarded was awarded to petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Cerezo v. Tuazon Hermana Cerezo, Petitioner, versus David Tuazon (G.R. No. 141538, March 23, 2004, 1st Division) CARPIO, J: FACTS: Country Bus Lines passenger bus collided with a tricycle. Tricycle driver Tuazon filed a complaint for damages against Mrs. Cerezo, as owner of the bus line, her husband Attorney Juan Cerezo, and bus driver Danilo A. Foronda. After considering Tuazon‘s testimonial and documentary evidence, the trial court ruled in Tuazon‘s favor. The trial court made no pronouncement on Foronda‘s liability because there was no service of summons on him. The trial court did not hold Atty. Cerezo liable as Tuazon failed to show that Mrs. Cerezo‘s business benefited the family, pursuant to Article 121(3) of the Family Code. The trial court held Mrs. Cerezo solely liable for the damages sustained by Tuazon arising from the negligence of Mrs. Cerezo‘s employee, pursuant to Article 2180 of the Civil Code.
ISSUE: Whether or not petitioner is solidarily liable.
HELD: Yes. Contrary to Mrs. Cerezo‘s assertion, Foronda is not an indispensable party to the case. An indispensable party is one whose interest is affected by the court‘s action in the litigation, and without whom no final resolution of the case is possible. However, Mrs. Cerezo‘s liability as an employer in an action for a quasi-delict is not only solidary, it is also primary and direct. Foronda is not an indispensable party to the final resolution of Tuazon‘s action for damages against Mrs. Cerezo. The responsibility of two or more persons who are liable for a quasi-delict is solidary. Where there is a solidary obligation on the part of debtors, as in this case, each debtor is liable for the entire obligation. Hence, each debtor is liable to pay for the entire obligation in full. There is no merger or renunciation of rights, but only mutual representation. Where the obligation of the parties is solidary, either of the parties is indispensable, and the other is not even a necessary party because complete relief is available from either. Therefore, jurisdiction over Foronda is not even necessary as Tuazon may collect damages from Mrs. Cerezo alone. Moreover, an employer‘s liability based on a quasi-delict is primary and direct, while the employer‘s liability based on a delict is merely subsidiary. The words ―primary and direct,‖ as contrasted with ―subsidiary,‖ refer to the remedy provided by law for enforcing the obligation rather than to the character and limits of the obligation. Although liability under Article 2180 originates from the negligent act of the employee, the aggrieved party may sue the employer directly. When an employee causes damage, the law presumes that the employer has himself committed an act of negligence in not preventing or avoiding the damage. This is the fault that the law condemns. While the employer is civilly liable in a subsidiary capacity for the employee‘s criminal negligence, the employer is also civilly liable directly and separately for his own civil negligence in failing to exercise due diligence in selecting and supervising his employee. The idea that the employer‘s liability is solely subsidiary is wrong. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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To hold the employer liable in a subsidiary capacity under a delict, the aggrieved party must initiate a criminal action where the employee‘s delict and corresponding primary liability are established. If the present action proceeds from a delict, then the trial court‘s jurisdiction over Foronda is necessary. However, the present action is clearly for the quasi-delict of Mrs. Cerezo and not for the delict of Foronda. Thus, the petition was denied ordering the defendant Hermana Cerezo to pay the plaintiff.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Filcar Transport Services v. Espinas Filcar Transport Services, Petitioner, versus Jose Espinas, Respondent. (G.R. No. 174156, June 20, 2012, 2nd Division) BRION, J.:
FACTS: On November 22, 1998, at around 6:30 p.m., respondent Jose A. Espinas was driving his car along Leon Guinto Street in Manila. Upon reaching the intersection of Leon Guinto and President Quirino Streets, Espinas stopped his car. When the signal light turned green, he proceeded to cross the intersection. He was already in the middle of the intersection when another car, traversing President Quirino Street and going to Roxas Boulevard, suddenly hit and bumped his car. As a result of the impact, Espinas‘ car turned clockwise. The other car escaped from the scene of the incident, but Espinas was able to get its plate number.
After verifying with the Land Transportation Office, Espinas learned that the owner of the other car, with plate number UCF-545, is Filcar.
Espinas sent several letters to Filcar and to its President and General Manager Carmen Flor, demanding payment for the damages sustained by his car. On May 31, 2001, Espinas filed a complaint for damages against Filcar and Carmen Flor before the Metropolitan Trial Court (MeTC) of Manila, and the case was raffled to Branch 13. In the complaint, Espinas demanded that Filcar and Carmen Flor pay the amount of P97,910.00, representing actual damages sustained by his car.
Filcar argued that while it is the registered owner of the car that hit and bumped Espinas‘ car, the car was assigned to its Corporate Secretary Atty. Candido Flor, the husband of Carmen Flor. Filcar further stated that when the incident happened, the car was being driven by Atty. Flor‘s personal driver, Timoteo Floresca.
Atty. Flor, for his part, alleged that when the incident occurred, he was attending a birthday celebration at a nearby hotel, and it was only later that night when he noticed a small dent on and the cracked signal light of the car. On seeing the dent and the crack, Atty. Flor allegedly asked Floresca what happened, and the driver replied that it was a result of a ―hit and run‖ while the car was parked in front of Bogota on Pedro Gil Avenue, Manila.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Filcar denied any liability to Espinas and claimed that the incident was not due to its fault or negligence since Floresca was not its employee but that of Atty. Flor. Filcar and Carmen Flor both said that they always exercised the due diligence required of a good father of a family in leasing or assigning their vehicles to third parties.
ISSUE: Whether or not Filcar, as registered owner of the motor vehicle which figured in an accident, may be held liable for the damages caused to Espinas.
HELD: Yes. The rationale for the rule that a registered owner is vicariously liable for damages caused by the operation of his motor vehicle is explained by the principle behind motor vehicle registration, which has been discussed by this Court in Erezo, and cited by the CA in its decision:
The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest of the determination of persons responsible for damages or injuries caused on public highways. [emphasis ours]
Thus, whether there is an employer-employee relationship between the registered owner and the driver is irrelevant in determining the liability of the registered owner who the law holds primarily and directly responsible for any accident, injury or death caused by the operation of the vehicle in the streets and highways.
As explained by this Court in Erezo, the general public policy involved in motor vehicle registration is the protection of innocent third persons who may have no means of identifying public road malefactors and, therefore, would find it difficult – if not impossible – to seek redress for damages they may sustain in accidents resulting in deaths, injuries and other damages; by fixing the person held primarily and directly liable for the damages sustained by victims of road mishaps, the law ensures that relief will always be available to them.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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To identify the person primarily and directly responsible for the damages would also prevent a situation where a registered owner of a motor vehicle can easily escape liability by passing on the blame to another who may have no means to answer for the damages caused, thereby defeating the claims of victims of road accidents. We take note that some motor vehicles running on our roads are driven not by their registered owners, but by employed drivers who, in most instances, do not have the financial means to pay for the damages caused in case of accidents.
These same principles apply by analogy to the case at bar. Filcar should not be permitted to evade its liability for damages by conveniently passing on the blame to another party; in this case, its Corporate Secretary, Atty. Flor and his alleged driver, Floresca. Following our reasoning in Equitable, the agreement between Filcar and Atty. Flor to assign the motor vehicle to the latter does not bind Espinas who was not a party to and has no knowledge of the agreement, and whose only recourse is to the motor vehicle registration.
Neither can Filcar use the defenses available under Article 2180 of the Civil Code - that the employee acts beyond the scope of his assigned task or that it exercised the due diligence of a good father of a family to prevent damage - because the motor vehicle registration law, to a certain extent, modified Article 2180 of the Civil Code by making these defenses unavailable to the registered owner of the motor vehicle. Thus, for as long as Filcar is the registered owner of the car involved in the vehicular accident, it could not escape primary liability for the damages caused to Espinas.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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FEB Leasing v. Sps. Baylon FEB LEASING AND FINANCE CORPORATION (now BPI LEASING CORPORATION), Petitioner, vs.SPOUSES SERGIO P. BAYLON and MARITESS VILLENA-BAYLON, BG HAULER, INC., and MANUEL Y. ESTILLOSO, Respondents. (G.R. No. 181398, June 29, 2011, 2nd Division) CARPIO, J.: FACTS: On 2 September 2000, an Isuzu oil tanker running along Del Monte Avenue in Quezon City hit Loretta V. Baylon, daughter of respondent spouses Sergio P. Baylon and MaritessVillena-Baylon. At the time of the accident, the oil tanker was registered in the name of petitioner FEB Leasing and Finance Corporation (petitioner). The oil tanker was leased to BG Hauler, Inc. and was being driven by the latter‘s driver, Manuel Y. Estilloso. The oil tanker was insured8 by FGU Insurance Corp. The accident took place at around 2:00 p.m. as the oil tanker was coming from Balintawak and heading towards Manila. Upon reaching the intersection of Bonifacio Street and Del Monte Avenue, the oil tanker turned left. While the driver of the oil tanker was executing a left turn side by side with another vehicle towards Del Monte Avenue, the oil tanker hit Loretta who was then crossing Del Monte Avenue coming from Mayon Street. Due to the strong impact, Loretta was violently thrown away about three to five meters from the point of impact. She fell to the ground unconscious. She was brought for treatment to the Chinese General Hospital where she remained in a coma until her death two days after. The spouses Baylon filed with the Regional Trial Court a Complaint for damages against petitioner, BG Hauler, the driver, and FGU Insurance. Petitioner filed its answer with compulsory counterclaim while FGU Insurance filed its answer with counterclaim. On the other hand, BG Hauler filed its answer with compulsory counterclaim and cross-claim against FGU Insurance. Petitioner claimed that the spouses Baylon had no cause of action against it because under its lease contract with BG Hauler, Petitioner was not liable for any loss, damage, or injury that the leased oil tanker might cause. Petitioner claimed that no employer-employee relationship existed between Petitioner and the driver. BG Hauler alleged that neither do the spouses Baylon have a cause of action against it since the oil tanker was not registered in its name. BG Hauler contended that the victim was guilty of contributory negligence in crossing the street. BG Hauler claimed that even if its driver was at fault, BG Hauler exercised the diligence of a good father of a family in the selection and supervision of its driver. BG Hauler also contended that FGU Insurance is obliged to assume all liabilities arising from the use of the insured oil tanker. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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FGU Insurance on the other hand, averred that the victim was guilty of contributory negligence. FGU Insurance concluded that the spouses Baylon could not expect to be paid the full amount of their claims. FGU Insurance pointed out that the insurance policy covering the oil tanker limited any claim to a maximum of P400,000.00. During trial, FGU Insurance moved that (1) it be allowed to deposit in court the amount of P450,000.00 in the joint names of the spouses Baylon, petitioner, and BG Hauler and (2) it be released from further participating in the proceedings. After the RTC granted the motion, FGU Insurance deposited in the Branch Clerk of Court a check in the names of the spouses Baylon, petitioner, and BG Hauler. The Regional Trial Court then released FGU Insurance from its contractual obligations under the insurance policy. The Regional Trial Court found that the death of Loretta was due to the negligent act of the driver. The RTC held that BG Hauler, as the employer, was solidarily liable with the driver. The RTC further held that petitioner, as the registered owner of the oil tanker, was also solidarily liable. Petitioner, BG Hauler, and the driver appealed the RTC Decision to the Court of Appeals. The Court of Appeals affirmed the decision of the Regional Trial Court. Two separate motions for reconsideration were filed by the petitioner but the same were denied by the court.
ISSUE: Whether or not the registered owner of a financially leased vehicle remains liable for loss, damage, or injury caused by the vehicle notwithstanding an exemption provision in the financial lease contract.
HELD: Yes.Under Section 5 of Republic Act No. 4136, as amended, all motor vehicles used or operated on or upon any highway of the Philippines must be registered with the Bureau of Land Transportation (now Land Transportation Office) for the current year. Furthermore, any encumbrances of motor vehicles must be recorded with the Land Transportation Office in order to be valid against third parties. In accordance with the law on compulsory motor vehicle registration, this Court has consistently ruled that, with respect to the public and third persons, the registered owner of a motor vehicle is directly and primarily responsible for the consequences of its operation regardless of who the actual vehicle owner might be. Well-settled is the rule that the registered owner of the vehicle is liable for quasi-delicts resulting from its use. Thus, even if the vehicle has already been sold, leased, or transferred to another person at the time the vehicle figured in an accident, the registered vehicle owner would still be liable for damages caused by the accident. The sale, transfer or lease of the vehicle, which is not registered with the Land Transportation Office, will not bind third Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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persons aggrieved in an accident involving the vehicle. The compulsory motor vehicle registration underscores the importance of registering the vehicle in the name of the actual owner. In this case, petitioner admits that it is the registered owner of the oil tanker that figured in an accident causing the death of Loretta. As the registered owner, it cannot escape liability for the loss arising out of negligence in the operation of the oil tanker. Its liability remains even if at the time of the accident, the oil tanker was leased to BG Hauler and was being driven by the latter‘s driver, and despite a provision in the lease contract exonerating the registered owner from liability. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Filipinas Synthetic v. De Los Santos FILIPINAS SYNTHETIC FIBER CORPORATION, Petitioner, vs. WILFREDO DE LOS SANTOS, BENITO JOSE DE LOS SANTOS, MARIA ELENA DE LOS SANTOS and CARMINA VDA. DE LOS SANTOS, Respondents. (G.R. No. 152033, March 16, 2011, 2nd Division) PERALTA, J.:
FACTS:On the night of September 30, 1984, Teresa Elena Legarda-de los Santos (Teresa Elena), the wife of respondent Wilfredo de los Santos (Wilfredo), performed at the Rizal Theater in Makati City, Metro Manila as a member of the cast for the musical play, Woman of the Year. On that same night, at the request of Wilfredo, his brother Armando de los Santos (Armando), husband of respondent CarminaVda. De los Santos went to the Rizal Theater to fetch Teresa Elena after the latter's performance. He drove a 1980 Mitsubishi Galant Sigma, a company car assigned to Wilfredo. Two other members of the cast of Woman of the Year, namely, Annabel Vilches (Annabel) and Jerome Macuja, joined Teresa Elena in the Galant Sigma. Around 11:30 p.m., while travelling along the Katipunan Road (White Plains), the Galant Sigma collided with the shuttle bus owned by petitioner and driven by Alfredo S. Mejia (Mejia), an employee of petitioner. The Galant Sigma was dragged about 12 meters from the point of impact, across the White Plains Road landing near the perimeter fence of Camp Aguinaldo, where the Galant Sigma burst into flames and burned to death beyond recognition all four occupants of the car. A criminal charge for reckless imprudence resulting in damage to property with multiple homicide was brought against Mejia, which was decided in favor of Mejia. The family of Annabel filed a civil case against Petitioner and Mejia before the Regional Trial Court of Quezon City. Wilfredo and Carmina, joined by their minor children, also filed separate actions for damages against petitioner and Mejia. The said cases were eventually consolidated. After trial on the merits, the Regional Trial Court decided in favor of the Respondents. After the denial of the motion for reconsideration, petitioner appealed to the Court Appeals, and the latter affirmed the decision of the Regional Trial Court. The subsequent motion for reconsideration was also denied. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Hence, the present petition.
ISSUE: Whether or Petitioner FILSYN exercised the due diligence of a good father of a family in the selection and supervision of its employees.
HELD: No. Under Article 2180 of the New Civil Code, when an injury is caused by the negligence of the employee, there instantly arises a presumption of law that there was negligence on the part of the master or employer either in the selection of the servant or employee, or in supervision over him after selection or both. The liability of the employer under Article 2180 is direct and immediate; it is not conditioned upon prior recourse against the negligent employee and a prior showing of the insolvency of such employee. Therefore, it is incumbent upon the private respondents (in this case, the petitioner) to prove that they exercised the diligence of a good father of a family in the selection and supervision of their employee. In the present case, Filsyn merely presented evidence on the alleged care it took in the selection or hiring of Mejia way back in 1974 or ten years before the fatal accident. Neither did Filsyn present any proof of the existence of the rules and regulations governing the conduct of its employees. It is significant to note that in employing Mejia, who is not a high school graduate, Filsyn waived its long-standing policy requirement of hiring only high school graduates. It insufficiently failed to explain the reason for such waiver other than their allegation of Mejia's maturity and skill for the job. Petition is DENIED.
Viron v. De Los Santos
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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VIRON TRANSPORTATION CO., INC., petitioner, vs. ALBERTO DELOS SANTOS y NATIVIDAD and RUDY SAMIDAN, respondents. (G.R. No. 138296. November 22, 2000, 3rd Division) GONZAGA-REYES, J.: FACTS:Defendant Alberto delos Santos was the driver of defendant Rudy Samidan of the latter‘s vehicle, a Forward Cargo Truck. At about 12:30 in the afternoon of August 16, 1993, he was driving said truck along the National Highway within the vicinity of Barangay Parsolingan, Gerona, Tarlac. The Viron bus, driven by Wilfredo Villanueva y Gaudia, tried to overtake his truck, and he swerved to the right shoulder of the highway, but as soon as he occupied the right lane of the road, the cargo truck which he was driving was hit by the Viron bus on its left front side, as the bus swerved to his lane to avoid an incoming bus on its opposite direction. With the driver of another truck dealing likewise in vegetables, Dulnuan, the two of them and the driver of the Viron bus proceeded to report the incident to the Gerona Police Station. A Vehicular Traffic Report was prepared by the police, with a Sketch of the relative positions of the circumstances leading to the vehicular collision. After trial, the lower court dismissed Petitioner‘s complaint and sustained the private Respondents‘ counterclaim for damages. Not satisfied therewith, petitioner appealed to the Court of Appeals which affirmed in toto the decision of the lower court. Its motion for reconsideration having been denied, petitioner brought the case to the Supreme Court. ISSUE:Whether or not the lower courts erred in finding the Petitioner liable for damages when the counterclaim failed to state a cause of action for there is no averment whatsoever therein that said petitioner failed to exercise due diligence of a good father of a family in the selection and supervision of its drivers or employees. HELD: No. The imputed error was without merit. Petitioner contends that private Respondents‘ counterclaim failed to state a cause of action for there is no averment therein that petitioner failed to exercise the diligence of a good father of a family in the selection and supervision of its drivers or employees. It is to be noted that petitioner Viron Transportation Co., Inc., as the registered owner of the bus involved in the subject vehicular accident originally brought the action for damages against private respondents. Private respondents as defendants in the court a quo denied any liability and filed instead a counterclaim for damages claiming that it was the driver of the bus who was at fault in the operation of the bus. We find that the counterclaim of private respondents alleges the ultimate facts constituting their cause of action. It is not necessary to state that petitioner was negligent in the supervision or selection of its employees, as its negligence is presumed by operation of law. The liability of the employer was explained in a case thus:
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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―As employers of the bus driver, the petitioner is, under Article 2180 of the Civil Code, directly and primary liable for the resulting damages. The presumption that they are negligent flows from the negligence of their employee. That presumption, however, is only juristantum, not juriset de jure. Their only possible defense is that they exercised all the diligence of a good father of a family to prevent the damage. Article 2180 states that, ―the obligation imposed by Article 2176 is demandable not only for one‘s own acts or omissions, but also for those of persons for whom one is responsible‖. Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. Petition is denied.
Mercury Drug v. Baking
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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MERCURY DRUG CORPORATION, Petitioner, vs. SEBASTIAN M. BAKING, Respondent. (G.R. No. 156037, May 28, 2007, 1st Division) SANDOVAL-GUTIERREZ, J.: FACTS:On November 25, 1993, Sebastian M. Baking, respondent, went to the clinic of Dr. Cesar Sy for a medical check-up. On the following day, after undergoing an ECG, blood, and hematology examinations and urinalysis, Dr. Sy found that respondent‘s blood sugar and triglyceride were above normal levels. Dr. Sy then gave respondent two medical prescriptions – Diamicron for his blood sugar and Benalize tablets for his triglyceride. Respondent then proceeded to petitioner Mercury Drug Corporation (Alabang Branch) to buy the prescribed medicines. However, the saleslady misread the prescription for Diamicron as a prescription for Dormicum. Thus, what was sold to respondent was Dormicum, a potent sleeping tablet. Unaware that what was given to him was the wrong medicine, respondent took one pill of Dormicum on three consecutive days. On the third day he took the medicine, respondent figured in a vehicular accident. The car he was driving collided with the car of one Josie Peralta. Respondent fell asleep while driving. He could not remember anything about the collision nor felt its impact. Suspecting that the tablet he took may have a bearing on his physical and mental state at the time of the collision, respondent returned to Dr. Sy‘s clinic. Upon being shown the medicine, Dr. Sy was shocked to find that what was sold to respondent was Dormicum, instead of the prescribed Diamicron. Thus, on April 14, 1994, respondent filed with the Regional Trial Court (RTC), of Quezon City a complaint for damages against petitioner. After hearing, the trial court rendered its decision in favor of respondent. On appeal, the Court of Appeals, in its Decision, affirmed in toto the Regional Trial Court judgment. Petitioner filed a motion for reconsideration but it was denied. Hence, this petition. ISSUE: Whether petitioner was negligent, and if so, whether such negligence was the proximate cause of respondent‘s accident. HELD: Yes, Proximate cause is defined as any cause that produces injury in a natural and continuous sequence, unbroken by any efficient intervening cause, such that the result would not have occurred otherwise. Proximate cause is determined from the facts of each case, upon a combined consideration of logic, common sense, policy, and precedent. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Here, the vehicular accident could not have occurred had petitioner‘s employee been careful in reading Dr. Sy‘s prescription. Without the potent effects of Dormicum, a sleeping tablet, it was unlikely that respondent would fall asleep while driving his car, resulting in a collision. Complementing Article 2176 is Article 2180 of the same Code which states: ART. 2180. The obligation imposed by Article 2176 is demandable not only for one‘s own acts or omissions, but also for those of persons for whom one is responsible. The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed the diligence of a good father of a family to prevent damage. It is thus clear that the employer of a negligent employee is liable for the damages caused by the latter. When an injury is caused by the negligence of an employee, there instantly arises a presumption of the law that there has been negligence on the part of the employer, either in the selection of his employee or in the supervision over him, after such selection. The presumption, however, may be rebutted by a clear showing on the part of the employer that he has exercised the care and diligence of a good father of a family in the selection and supervision of his employee.6 Here, petitioner's failure to prove that it exercised the due diligence of a good father of a family in the selection and supervision of its employee will make it solidarily liable for damages caused by the latter. Petition denied.
Safeguard Security v. Tangco
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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SAFEGUARD SECURITY AGENCY, INC., and ADMER PAJARILLO, petitioners, vs. LAURO TANGCO, VAL TANGCO, VERN LARRY TANGCO, VAN LAURO TANGCO, VON LARRIE TANGCO, VIEN LARI TANGCO and VIVIEN LAURIZ TANGCO, respondent. (G.R. No. 165732, December 14, 2006, 1st Division) AUSTRIA-MARTINEZ, J.: FACTS:On November 3, 1997, at about 2:50 p.m., Evangeline Tangco (Evangeline) went to Ecology Bank, Katipunan Branch, Quezon City, to renew her time deposit per advise of the bank's cashier as she would sign a specimen card. Evangeline, a duly licensed firearm holder with corresponding permit to carry the same outside her residence, approached security guard Pajarillo, who was stationed outside the bank, and pulled out her firearm from her bag to deposit the same for safekeeping. Suddenly, Pajarillo shot Evangeline with his service shotgun hitting her in the abdomen instantly causing her death. LauroTangco, Evangeline's husband, together with his six minor children (respondents) filed with the Regional Trial Court (RTC) of Quezon City, a criminal case of Homicide against Pajarillo. Respondents reserved their right to file a separate civil action in the said criminal case. The Regional Trial Court subsequently convicted Pajarillo of Homicide. On appeal to the Court of Appeals, the Regional Trial Court decision was affirmed with modification. Petitioners filed their Motion for Reconsideration which the CA denied. Hence this petition. ISSUE: Whether Safeguard should be held solidarily liable for the damages awarded to respondents.
HELD: Yes. The responsibility treated of in this Article 2176 shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. As the employer of Pajarillo, Safeguard is primarily and solidarily liable for the quasi-delict committed by the former. Safeguard is presumed to be negligent in the selection and supervision of his employee by operation of law. This presumption may be overcome only by satisfactorily showing that the employer exercised the care and the diligence of a good father of a family in the selection and the supervision of its employee. In the selection of prospective employees, employers are required to examine them as to their qualifications, experience, and service records.35 On the other hand, due diligence in the supervision of employees includes the formulation of suitable rules and regulations for the guidance of employees and the issuance of proper instructions intended for the protection of the public Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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and persons with whom the employer has relations through his or its employees and the imposition of necessary disciplinary measures upon employees in case of breach or as may be warranted to ensure the performance of acts indispensable to the business of and beneficial to their employer. To this, we add that actual implementation and monitoring of consistent compliance with said rules should be the constant concern of the employer, acting through dependable supervisors who should regularly report on their supervisory functions.36 To establish these factors in a trial involving the issue of vicarious liability, employers must submit concrete proof, including documentary evidence. It was found that Safeguard had exercised the diligence in the selection of Pajarillo since the record shows that Pajarillo underwent a psychological and neuro-psychiatric evaluation conducted by the St. Martin de Porres Center where no psychoses ideations were noted, submitted a certification on the Prelicensing training course for security guards, as well as police and NBI clearances. However this court ruled that Safeguard fell short of the diligence required in the supervision of its employee, particularly Pajarillo. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Pleyto v. Lomboy ERNESTO PLEYTO and PHILIPPINE RABBIT BUS LINES, INC., petitioners, vs. MARIA D. LOMBOY and CARMELA LOMBOY, respondents. (G.R. No. 148737, June 16,2004, 2nd Division) QUISUMBING, J.: FACTS:Petitioner Philippine Rabbit Bus Lines, Inc. (PRBL), with principal office at Tarlac City, Tarlac, is a public carrier, engaged in carrying passengers and goods for a fare. It serviced various routes in Central and Northern Luzon. Petitioner Ernesto Pleyto was a bus driver employed by PRBL at the time of the incident in question. Respondent Maria D. Lomboy of Calasiao, Pangasinan, is the surviving spouse of the late Ricardo Lomboy, who died in Pasolingan, Gerona, Tarlac, in a vehicular accident at around 11:30 a.m. of May 16, 1995. The accident was a head-on collision between the PRBL bus driven by petitioner Pleyto and the car where Ricardo was a passenger. Respondent Carmela Lomboy is the eldest daughter of Ricardo and Maria Lomboy. Carmela suffered injuries requiring hospitalization in the same accident which resulted in her father‘s death. On November 29, 1995, herein respondents, as pauper-litigants, filed an action for damages against PRBL and its driver, Pleyto, with the Regional Trial Court of Dagupan City. In their complaint, the Lomboys prayed that they be indemnified for the untimely death of Ricardo Lomboy, his lost earnings, the medical and hospitalization expenses of Carmela, and moral damages. The Regional Trial Court found Pleyto negligent and lacking in precaution when he overtook the tricycle with complete disregard of the approaching car in the other lane. Petitioners appealed the judgment of the trial court to the Court of Appeals. The appellate court, however, affirmed the decision of the trial court, with modification in the award of damages. it.
Petitioners then moved for reconsideration, but the appellate court denied Hence this petition.
ISSUE: Whether or not petitioner PRBL is liable for the negligence of driver Pleyto. HELD: Yes.Under Article 2180, when an injury is caused by the negligence of a servant or an employee, the master or employer is presumed to be negligent either in the selection or in the supervision of that employee. This presumption may be overcome only by satisfactorily showing that the employer exercised the care and the diligence of a good father of a family in the selection and the supervision of its employee. In fine, when the employee causes damage due to his own negligence while performing his own duties, there arises the juristantumpresumption that the employer is negligent, rebuttable only by proof of observance of the diligence of Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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a good father of a family. Thus, in the selection of prospective employees, employers are required to examine them as to their qualifications, experience and service records. With respect to the supervision of employees, employers must formulate standard operating procedures, monitor their implementation and impose disciplinary measures for breaches thereof. These facts must be shown by concrete proof, including documentary evidence. In the present case, petitioners presented several documents in evidence to show the various tests and pre-qualification requirements imposed upon petitioner Pleyto before his hiring as a driver by PRBL. However, no documentary evidence was presented to prove that petitioner PRBL exercised due diligence in the supervision of its employees, including Pleyto. Petition Denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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SYKL VS. BEGASA ERNESTO SYKI, petitioner, vs. SALVADOR BEGASA, respondent. (GR No. 149149, October 23, 2003, 3rd Division) CORONA, J.: FACTS:Respondent Salvador Begasa and his three companions flagged down a passenger jeepney driven by Joaquin Espina and owned by Aurora Pisuena. While respondent was boarding the passenger jeepney (his right foot already inside while his left foot still on the boarding step of the passenger jeepney), a truck driven by Elizalde Sablayan and owned by petitioner Ernesto Syki bumped the rear end of the passenger jeepney. Respondent fell and fractured his left thigh bone. Respondent filed a complaint for damages for breach of common carrier‘s contractual obligations and quasi-delict against Aurora Pisuena, the owner of the passenger jeepney;, herein petitioner Ernesto Syki, theowner of the truck;, and Elizalde Sablayan, the driver of the truck. After hearing, the trial court dismissed the complaint against Aurora Pisuena, the owner and operator of the passenger jeepney, but ordered petitioner Ernesto Syki and his truck driver, Elizalde Sablayan, to pay respondent Salvador Begasa, jointly and severally ISSUES: 1. Whether or not petitioner is liable for the act of his employee. 2. Whether he exercised the diligence of a good father of a family. HELD: 1. Article 2180 of the Civil Code provides: Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. From the above provision, when an injury is caused by the negligence of an employee, a legal presumption instantly arises that the employer was negligent, either or both, in the selection and/or supervision of his said employee duties. The said presumption may be rebutted only by a clear showing on the part of the employer that he had exercised the diligence of a good father of a family in the selection and supervision of his employee. If the employer successfully overcomes the legal presumption of negligence, he is relieved of liability. In other words, the burden of proof is on the employer.2. The question is: how does an employer prove that he had indeed exercised the diligence of a good father of a family in the selection and supervision of his employee. Making proof in its or his case, it is paramount that the best and most complete evidence is formally entered. In the case at bar, while there is no rule which requires that testimonial evidence, to hold sway, must be corroborated by documentary evidence, inasmuch as the witnesses‘ testimonies dwelt on mere generalities, we cannot consider the same as sufficiently persuasive proof that there was observance of due diligence in the selection and supervision of employees. Petitioner‘s attempt to prove its Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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―deligentissimipatrisfamilias‖ in the selection and supervision of employees through oral evidence must fail as it was unable to buttress the same with any other evidence, object or documentary, which might obviate the apparentbiased nature of the testimony. In the selection of prospective employees, employers are required to examine them as to their qualifications, experience, and service records. On the other hand, with respect to the supervision of employees, employers should formulate standard operating procedures, monitor their implementation, and impose disciplinary measures for breaches thereof. To establish these factors in a trial involving the issue of vicarious liability, employers must submit concrete proof, including documentary evidence. The employer must not merely present testimonial evidence to prove that he had observed the diligence of a good father of a family in the selection and supervision of his employee, but he must also support such testimonial evidence with concrete or documentary evidence. The reason for this is to obviate the biased nature of the employer‘s testimony or that of his witnesses. In this case, petitioner‘s evidence consisted entirely of testimonial evidence. He testified that before he hired ElizaldeSablayan, he requiredhim to submit a police clearance in order to determine if he was ever involved in any vehicular accident. He also required Sablayan to undergoa driving test with conducted by his mechanic, Esteban Jaca. Petitioner claimed that he, in fact, accompanied Sablayan during the driving test and that during the test, Sablayan was taught to read and understand traffic signs like ―Do Not Enter,‖ ―One Way,‖ ―Left Turn,‖ and ―Right Turn.‖ Petitioner‘s mechanic, Esteban Jaca, on the other hand, testified that Sablayan passed the driving test and had never figured in any vehicular accident except the one in question. He also testified that he maintained in good condition all the trucks of petitioner by checking the brakes, horns and tires thereof before leaving for providing hauling services.Petitioner, however, never presented the alleged police clearance given to him by Sablayan, nor the results of Sablayan‘s driving test. Petitioner also did not present records of the regular inspections that his mechanic allegedly conducted. In sum, the sole and proximate cause of the accident was the negligence of petitioner‘s driver who, as found by the lower courts, did not slow down even when he was already approaching a busy intersection within the city proper. The passenger jeepney had long stopped to pick up respondent and his three companions and, in fact, respondent was already partly inside the jeepney, when petitioner‘s driver bumped the rear end of rear-ended it. Since the negligence of petitioner‘s driver was the sole and proximate cause of the accident, in the present case, petitioner is liable, under Article 2180 of the Civil Code, to pay damages to respondent Begasa for the injuries sustained by latter. Petition is Denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Yambao v. Zuniga CECILIA YAMBAO, petitioner, vs. MELCHORITA C. ZUÑIGA, LEOVIGILDO C. ZUÑIGA, REGINALDO C. ZUÑIGA, AND THE MINORS, HERMINIGILDO C. ZUÑIGA, JR., AND LOVELY EMILY C. ZUÑIGA – both represented by their legal guardian, the aforenamed MELCHORITA C. ZUÑIGA, respondents. (G.R. No. 146173. December 11, 2003, 2nd Division) QUISUMBING, J.: FACTS:Petitioner Cecilia Yambao is the registered owner of ―Lady Cecil and Rome Trans‖ passenger bus, with a public transport franchise to ply the Novaliches-via Quirino-Alabang route. The respondents are the legal heirs of the late HerminigildoZuñiga. MelchoritaZuñiga is the surviving spouse, while Leovigildo, Reginaldo, Herminigildo, Jr., and Lovely Emily are their children. At around 3:30 p.m. of May 6, 1992, the bus owned by the petitioner was being driven by her driver, one Ceferino G. Venturina along the northbound lane of Epifaniodelos Santos Avenue (EDSA), within the vicinity of Bagong Barrio, Kalookan City. With Venturina was the bus conductor, Fernando Dumaliang. Suddenly, the bus bumped HerminigildoZuñiga, a pedestrian. Such was the force of the impact that the left side of the front windshield of the bus was cracked. Zuñiga was rushed to the Quezon City General Hospital where he was given medical attention, but due to the massive injuries sustained, he succumbed shortly thereafter. Private respondents, as heirs of the victim, filed a Complaint against petitioner and her driver, Venturina, for damagesat the Regional Trial Court of Malolos City. The complaint essentially alleged that Venturina drove the bus in a reckless, careless and imprudent manner, in violation of traffic rules and regulations, without due regard to public safety, thus resulting in the victim‘s premature death. The trial court rendered judgment in favor of the plaintiffs and against the defendants ordering the defendants jointly and severally, with Plaridel Surety & Insurance Co., and Times Surety & Insurance Co. Inc. to the extent of their respective liabilities under their respective insurance policies to pay the herein plaintiffs. Dissatisfied, Yambao filed an appeal with the Court of Appeals. On September 8, 2000, the Court of Appeals affirmed the decision of the Regional Trial Court. Yambao then duly moved for reconsideration, but her motion was denied for want of merit. Hence, this petition for review.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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ISSUE:Whether petitioner exercised the diligence of a good father of a family in the selection and supervision of her employees, thus absolving her from any liability. HELD:No.The ―diligence of a good father‖ means diligence in the selection and supervision of employees. Thus, when an employee, while performing his duties, causes damage to persons or property due to his own negligence, there arises the juristantum presumption that the employer is negligent, either in the selection of the employee or in the supervision over him after the selection. For the employer to avoid the solidary liability for a tort committed by his employee, an employer must rebut the presumption by presenting adequate and convincing proof that in the selection and supervision of his employee, he or she exercises the care and diligence of a good father of a family. In the instant case, we find that petitioner has failed to rebut the presumption of negligence on her part. Petitioner‘s claim that she exercised due diligence in the selection and supervision of her driver, Venturina, deserves but scant consideration. Her allegation that before she hired Venturina she required him to submit his driver‘s license and clearances is worthless, in view of her failure to offer in evidence certified true copies of said license and clearances. Bare allegations, unsubstantiated by evidence, are not equivalent to proof under the rules of evidence. Moreover, as the court a quo aptly observed, petitioner contradicts herself. She declared that Venturina applied with her sometime in January 1992 and she then required him to submit his license and clearances. However, the record likewise shows that she did admit that Venturina submitted the said requirements only on May 6, 1992, or on the very day of the fatal accident itself. In other words, petitioner‘s own admissions clearly and categorically show that she did not exercise due diligence in the selection of her bus driver. In any case, assuming arguendo that Venturina did submit his license and clearances when he applied with petitioner in January 1992, the latter still fails the test of due diligence in the selection of her bus driver. For an employer to have exercised the diligence of a good father of a family, he should not be satisfied with the applicant‘s mere possession of a professional driver‘s license; he must also carefully examine the applicant for employment as to his qualifications, his experience and record of service.Petitioner failed to present convincing proof that she went to this extent of verifying Venturina‘s qualifications, safety record, and driving history. The presumption juristantum that there was negligence in the selection of her bus driver, thus, remains unrebutted. Nor did petitioner show that she exercised due supervision over Venturina after his selection. For as pointed out by the Court of Appeals, petitioner did not present any proof that she drafted and implemented training programs and guidelines on road safety for her employees. In fact, the record is bare of any showing that petitioner required Venturina to attend periodic Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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seminars on road safety and traffic efficiency. Hence, petitioner cannot claim exemption from any liability arising from the recklessness or negligence of Venturina. In sum, petitioner‘s liability to private respondents for the negligent and imprudent acts of her driver, Venturina, under Article 2180 of the Civil Code is both manifest and clear. Petitioner, having failed to rebut the legal presumption of negligence in the selection and supervision of her driver, is responsible for damages, the basis of the liability being the relationship of pater familias or on the employer‘s own negligence. The instant petition is DENIED
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Mindanao Terminal v. Phoenix MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. Petitioner, vs. PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE & CO., INC., Respondent. (G.R. No. 162467, May 8, 2009, 2nd Division)
FACTS:Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao Terminal and Brokerage Service, Inc. (Mindanao Terminal), a stevedoring company, to load and stow a shipment of 146,288 cartons of fresh green Philippine bananas and 15,202 cartons of fresh pineapples belonging to Del Monte Fresh Produce International, Inc. (Del Monte Produce) into the cargo hold of the vessel M/V Mistrau. The vessel was docked at the port of Davao City and the goods were to be transported by it to the port of Inchon, Korea in favor of consignee Taegu Industries, Inc. Del Monte Produce insured the shipment under an "open cargo policy" with private respondent Phoenix Assurance Company of New York (Phoenix), a non-life insurance company, and private respondent McGee & Co. Inc. (McGee), the underwriting manager/agent of Phoenix. Mindanao Terminal loaded and stowed the cargoes aboard the M/V Mistrau. The vessel set sail from the port of Davao City and arrived at the port of Inchon, Korea. It was then discovered upon discharge that some of the cargo was in bad condition. The Marine Cargo Damage Surveyor of Incok Loss and Average Adjuster of Korea, through its representative Byeong Yong Ahn (Byeong), surveyed the extent of the damage of the shipment. In a survey report, it was stated that 16,069 cartons of the banana shipment and 2,185 cartons of the pineapple shipment were so damaged that they no longer had commercial value. Del Monte Produce filed a claim under the open cargo policy for the damages to its shipment. McGee‘s Marine Claims Insurance Adjuster evaluated the claim and recommended that payment in the amount of $210,266.43 be made. A check for the recommended amount was sent to Del Monte Produce; the latter then issued a subrogation receipt to Phoenix and McGee. Phoenix and McGee instituted an action for damages against Mindanao Terminal in the Regional Trial Court (RTC) of Davao City. After trial, the Regional Trial Court held that the only participation of Mindanao Terminal was to load the cargoes on board the M/V Mistrau under the direction and supervision of the ship‘s officers, who would not have accepted the cargoes on board the vessel and signed the foreman‘s report unless they were properly arranged and tightly secured to withstand voyage across the open seas. Accordingly, Mindanao Terminal cannot be held liable for whatever happened to the cargoes after it had loaded and stowed them. Moreover, citing the survey report, it was found by the Regional Trial Court that the cargoes were damaged on account of a typhoon which M/V Mistrau had encountered during the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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voyage. It was further held that Phoenix and McGee had no cause of action against Mindanao Terminal because the latter, whose services were contracted by Del Monte, a distinct corporation from Del Monte Produce, had no contract with the assured Del Monte Produce. The RTC dismissed the complaint and awarded the counterclaim of Mindanao Terminal in the amount of P83,945.80 as actual damages and P100,000.00 as attorney‘s fees.9 The actual damages were awarded as reimbursement for the expenses incurred by Mindanao Terminal‘s lawyer in attending the hearings in the case wherein he had to travel all the way from Metro Manila to Davao City. Phoenix and McGee appealed to the Court of Appeals. The appellate court reversed and set aside the decision of the Regional Trial Court. Mindanao Terminal filed a motion for reconsideration, which the Court of Appeals. Hence, the present petition for review. ISSUE:Whether or not petitioner Mindanao Terminal is liable to pay for damages.
HELD:No.It was established that Mindanao Terminal loaded and stowed the cargoes of Del Monte Produce aboard the M/V Mistrau in accordance with the stowage plan, a guide for the area assignments of the goods in the vessel‘s hold, prepared by Del Monte Produce and the officers of M/V Mistrau. The loading and stowing was done under the direction and supervision of the ship officers. The vessel‘s officer would order the closing of the hatches only if the loading was done correctly after a final inspection. The said ship officers would not have accepted the cargoes on board the vessel if they were not properly arranged and tightly secured to withstand the voyage in open seas. They would order the stevedore to rectify any error in its loading and stowing. A foreman‘s report, as proof of work done on board the vessel, was prepared by the checkers of Mindanao Terminal and concurred in by the Chief Officer of M/V Mistrau after they were satisfied that the cargoes were properly loaded. The petition is GRANTED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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YHT Realty v. CA YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA PAYAM, petitioners, versus THE COURT OF APPEALS and MAURICE McLOUGHLIN, respondents. (G.R. No. 126780, February 17, 2005, 2nd Division) TINGA, J.: FACTS: Private respondent McLoughlin, an Australian businessmanphilanthropist, used to stay at Sheraton Hotel during his trips to the Philippines prior to 1984 when he met Tan. Tan befriended McLoughlin by showing him around, introducing him to important people, accompanying him in visiting impoverished street children and assisting him in buying gifts for the children and in distributing the same to charitable institutions for poor children. Tan convinced McLoughlin to transfer from Sheraton Hotel to Tropicana owned by YHT Realty Corporation and where Lainez, Payam and Danilo Lopez were employed. Lopez served as manager of the hotel while Lainez and Payam had custody of the keys for the safety deposit boxes of Tropicana. Tan took care of McLoughlin's booking at the Tropicana where he started staying during his trips to the Philippines from December 1984 to September 1987. On 30 October 1987, McLoughlin arrived from Australia and registered with Tropicana. He rented a safety deposit box as it was his practice to rent a safety deposit box every time he registered at Tropicana in previous trips. As a tourist, McLoughlin was aware of the procedure observed by Tropicana relative to its safety deposit boxes. The safety deposit box could only be opened through the use of two keys, one of which is given to the registered guest, and the other remaining in the possession of the management of the hotel. When a registered guest wished to open his safety deposit box, he alone could personally request the management who then would assign one of its employees to accompany the guest and assist him in opening the safety deposit box with the two keys. On 12 December 1987, before leaving for a brief trip to Hongkong, McLoughlin opened his safety deposit box with his key and with the key of the management and took therefrom some of his money. When he arrived in Hongkong, he noticed that some of his money is missing which he took in the deposit bank but he assumed it due to bad accounting. When he returned again in Manila, he deposit again his money and took it when he when he went to Australia. He noticed again that some of his money is missing including jewelry. Upon returning to Manila, he registered again in the same hotel and deposited his belonging and inquired to the Hotel and Tan whether they found his money and jewelry which was missing but they said no one found such items. After few days of staying, he requested the petitioner to open his deposit box and again some of his money was missing. He confronted Tan and the latter admit stealing the money with the aid of the petitioners. He then complained to the management and consulted his lawyer regarding the matter. He then imposed that it should be paid by the management but the hotel refused. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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After investigation done by the police, the respondent sued the petitioner for reimbursement and damages which the lower court granted. So, this petition is. ISSUE: Whether or not the employee including the hotel will be liable in spite of written agreement that the employer should not be liable as stipulated in the safety deposit contract. HELD: Yes. The employee including the hotel who employed them should be solidarily liable as in accordance to the provision of Article 2180 of the Civil Code which state that the owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. The stipulation stating that, ―To release and hold free and blameless TROPICANA APARTMENT HOTEL from any liability arising from any loss in the contents and/or use of the said deposit box for any cause whatsoever, including but not limited to the presentation or use thereof by any other person should the key be lost.‖, is void. This is in accordance to Article 2003 of the Civil code which state that ―The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to 2001 is suppressed or diminished shall be void.‖ The Supreme Court then affirmed the decision of the lower court and ordered that the petitioners are jointly and severally liable with the loss of the money and the expenses of the respondent in connection with the case. Moral damage also was awarded because his reputation was tainted due to the filing of the case as he is a known philanthropist and businessman.
Ramos v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as natural guardians of the minors, ROMMEL RAMOS, ROY RODERICK RAMOS and RON RAYMOND RAMOS, petitioners, versus COURT OF APPEALS, DELOS SANTOS MEDICAL CENTER, DR. ORLINO HOSAKA and DRA. PERFECTA GUTIERREZ, respondents. (G.R. No. 124354 December 29, 1999 1st Division) (G.R. No. 124354 April 11, 2002 1st Division) KAPUNAN, J.: FACTS: Sometime in 1985, petitioner Erlinda Ramos, after seeking professional medical help, was advised to undergo an operation for the removal of a stone in her gall bladder (cholecystectomy). She was referred to Dr. Hosaka, a surgeon, who agreed to perform the operation on her. The operation was scheduled for June 17, 1985 at 9:00 in the morning at private respondent De Los Santos Medical Center (DLSMC). Since neither petitioner Erlinda nor her husband, petitioner Rogelio, knew of any anesthesiologist, Dr. Hosaka recommended to them the services of Dr. Gutierrez. Petitioner Erlinda was admitted to the DLSMC the day before the scheduled operation. By 7:30 in the morning of the following day, petitioner Erlinda was already being prepared for operation. Upon the request of petitioner Erlinda, her sister-in-law, Herminda Cruz, who was then Dean of the College of Nursing at the Capitol Medical Center, was allowed to accompany her inside the operating room. At around 9:30 in the morning, Dr. Hosaka had not yet arrived so Dr. Gutierrez tried to get in touch with him by phone. Thereafter, Dr. Gutierrez informed Cruz that the operation might be delayed due to the late arrival of Dr. Hosaka. In the meantime, the patient, petitioner Erlinda said to Cruz, "Mindy, inip na inip na ako, ikuha mo ako ng ibang Doctor." By 10:00 in the morning, when Dr. Hosaka was still not around, petitioner Rogelio already wanted to pull out his wife from the operating room. He met Dr. Garcia, who remarked that he was also tired of waiting for Dr. Hosaka. Dr. Hosaka finally arrived at the hospital at around 12:10 in the afternoon, or more than three (3) hours after the scheduled operation. Cruz, who was then still inside the operating room, heard about Dr. Hosaka‘s arrival. While she held the hand of Erlinda, Cruz saw Dr. Gutierrez trying to intubate the patient. Cruz heard Dr. Gutierrez utter: "ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan." Cruz noticed a bluish discoloration of Erlinda‘s nailbeds on her left hand. She (Cruz) then heard Dr. Hosaka instruct someone to call Dr. Calderon, another anesthesiologist. When he arrived, Dr. Calderon attempted to intubate the patient. The nailbeds of the patient remained bluish, thus, she was placed in a trendelenburg position – a position where the head of the patient is placed in a position lower than her feet. At this point, Cruz went out of the operating room to express her concern to petitioner Rogelio that Erlinda‘s operation was not going well. Cruz quickly rushed back to the operating room and saw that the patient was still in trendelenburg position. At almost 3:00 in the afternoon, she saw Erlinda being wheeled to the Intensive Care Unit (ICU). The doctors explained to petitioner Rogelio that his wife had bronchospasm. Erlinda stayed in the ICU for a month. She was released from the hospital only four months later or on November 15, 1985. Since the ill-fated operation, Erlinda remained in comatose condition until she died on August 3, 1999. Petitioners filed with the Regional Trial Court of Quezon City a civil case for damages against private respondents. After due trial, the court a Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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quo rendered judgment in favor of petitioners. Essentially, the trial court found that private respondents were negligent in the performance of their duties to Erlinda. On appeal by private respondents, the Court of Appeals reversed the trial court‘s decision and directed petitioners to pay their "unpaid medical bills" to private respondents. So, this petition is. ISSUE: Whether or not all respondents named herein in this petition should be liable jointly and severally. HELD: In the first decision of the Supreme Court they upheld the decision of the Regional Trial Court rendering all respondents liable for being negligence in their respective duties and responsibilities. In accordance to the principle of Res Ipsa Loquitor the Court did not give merit to the expert testimonies presented by respondent. This simply a recognition of the postulate that, as a matter of common knowledge and experience, the very nature of certain types of occurrences may justify an inference of negligence on the part of the person who controls the instrumentality causing the injury in the absence of some explanation by the defendant who is charged with negligence. Still, before resort to the doctrine may be allowed, the following requisites must be satisfactorily shown: 1. The accident is of a kind which ordinarily does not occur in the absence of someone's negligence; 2. It is caused by an instrumentality within the exclusive control of the defendant or defendants; and 3. The possibility of contributing conduct which would make the plaintiff responsible is eliminated. On the part of Dr. Perfecta Gutierrez, this Court finds that she omitted to exercise reasonable care in not only intubating the patient, but also in not repeating the administration of atropine (TSN, August 20, 1991, pp. 5-10), without due regard to the fact that the patient was inside the operating room for almost three (3) hours. For after she committed a mistake in intubating [the] patient, the patient's nailbed became bluish and the patient, thereafter, was placed in trendelenburg position, because of the decrease of blood supply to the patient's brain. The evidence further shows that the hapless patient suffered brain damage because of the absence of oxygen in her (patient's) brain for approximately four to five minutes which, in turn, caused the patient to become comatose. On the part of Dr. Orlino Hosaka, this Court finds that he is liable for the acts of Dr. Perfecta Gutierrez whom he had chosen to administer anesthesia on the patient as part of his obligation to provide the patient a good anesthesiologist', and for arriving for the scheduled operation almost three (3) hours late. On the part of DLSMC (the hospital), this Court finds that it is liable for the acts of negligence of the doctors in their "practice of medicine" in the operating room. Moreover, the hospital is liable for failing through its responsible officials, to cancel the scheduled operation after Dr. Hosaka inexcusably failed to arrive on time. However in the second decision of the Supreme Court, they absolve Delos Santos Medical Center base on the doctrine of Control Test. It has been consistently held that in determining whether an employer-employee relationship exists between the parties, the following elements must be present: (1) selection and engagement of services; (2) payment of wages; (3) the power to Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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hire and fire; and (4) the power to control not only the end to be achieved, but the means to be used in reaching such an end. DLSMC maintains that first, a hospital does not hire or engage the services of a consultant, but rather, accredits the latter and grants him or her the privilege of maintaining a clinic and/or admitting patients in the hospital upon a showing by the consultant that he or she possesses the necessary qualifications, such as accreditation by the appropriate board (diplomate), evidence of fellowship and references. Second, it is not the hospital but the patient who pays the consultant‘s fee for services rendered by the latter. Third, a hospital does not dismiss a consultant; instead, the latter may lose his or her accreditation or privileges granted by the hospital. Lastly, DLSMC argues that when a doctor refers a patient for admission in a hospital, it is the doctor who prescribes the treatment to be given to said patient. The hospital‘s obligation is limited to providing the patient with the preferred room accommodation, the nutritional diet and medications prescribed by the doctor, the equipment and facilities necessary for the treatment of the patient, as well as the services of the hospital staff who perform the ministerial tasks of ensuring that the doctor‘s orders are carried out strictly. Based on this, there is no employeremployee relationship which can make the hospital liable with the Doctors jointly and severally.
Reyes v. Sister of Mercy Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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LEAH ALESNA REYES, ROSE NAHDJA, JOHNNY, and minors LLOYD and KRISTINE, all surnamed REYES, represented by their mother, LEAH ALESNA REYES, petitioners, versus SISTERS OF MERCY HOSPITAL, SISTER ROSE PALACIO, DR. MARVIE BLANES, and DR. MARLYN RICO,respondents. (G.R. No. 130547 October 3, 2000 2nd Division) MENDOZA, J.: FACTS: Petitioner Leah Alesna Reyes is the wife of the late Jorge Reyes. The other petitioners, namely, Rose Nahdja, Johnny, Lloyd, and Kristine, all surnamed Reyes, were their children. Five days before his death on January 8, 1987, Jorge had been suffering from a recurring fever with chills. After he failed to get relief from some home medication he was taking, which consisted of analgesic, antipyretic, and antibiotics, he decided to see the doctor. On January 8, 1987, he was taken to the Mercy Community Clinic by his wife. He was attended to by respondent Dr. Marlyn Rico, resident physician and admitting physician on duty, who gave Jorge a physical examination and took his medical history. She noted that at the time of his admission, Jorge was conscious, ambulatory, oriented, coherent, and with respiratory distress. Typhoid fever was then prevalent in the locality, as the clinic had been getting from 15 to 20 cases of typhoid per month. Suspecting that Jorge could be suffering from this disease, Dr. Rico ordered a Widal Test, a standard test for typhoid fever, to be performed on Jorge. Blood count, routine urinalysis, stool examination, and malarial smear were also made. After about an hour, the medical technician submitted the results of the test from which Dr. Rico concluded that Jorge was positive for typhoid fever. As her shift was only up to 5:00 p.m., Dr. Rico indorsed Jorge to respondent Dr. Marvie Blanes. Dr. Marvie Blanes attended to Jorge at around six in the evening. She also took Jorge‘s history and gave him a physical examination. Like Dr. Rico, her impression was that Jorge had typhoid fever. Antibiotics being the accepted treatment for typhoid fever, she ordered that a compatibility test with the antibiotic chloromycetin be done on Jorge. Said test was administered by nurse Josephine Pagente who also gave the patient a dose of triglobe. As she did not observe any adverse reaction by the patient to chloromycetin, Dr. Blanes ordered the first five hundred milligrams of said antibiotic to be administered on Jorge at around 9:00 p.m. A second dose was administered on Jorge about three hours later just before midnight. At around 1:00 a.m. of January 9, 1987, Dr. Blanes was called as Jorge‘s temperature rose to 41°C. The patient also experienced chills and exhibited respiratory distress, nausea, vomiting, and convulsions. Dr. Blanes put him under oxygen, used a suction machine, and administered hydrocortisone, temporarily easing the patient‘s convulsions. When he regained consciousness, the patient was asked by Dr. Blanes whether he had a previous heart ailment or had suffered from chest pains in the past. Jorge replied he did not. After about 15 minutes, however, Jorge again started to vomit, showed restlessness, and his convulsions returned. Dr. Blanes re-applied the emergency measures taken before and, in addition, valium was administered. Jorge, however, did not respond to the treatment and slipped into cyanosis, a bluish or purplish discoloration of the skin or mucous membrane due to deficient oxygenation of the blood. At around 2:00 a.m., Jorge died. He was forty years old. The cause of his death was "Ventricular Arrythemia Secondary to Hyperpyrexia and typhoid fever." Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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After this the petitioner filed a case to the court and their principal contention was that Jorge did not die of typhoid fever. Instead, his death was due to the wrongful administration of chloromycetin. ISSUE: Whether or not the attending physician including the hospital will be liable base on the principle of Res Ipsa Loquitor. HELD: No. In the present case, there is no doubt that a physician-patient relationship existed between respondent doctors and Jorge Reyes. Respondents were thus duty-bound to use at least the same level of care that any reasonably competent doctor would use to treat a condition under the same circumstances. It is breach of this duty which constitutes actionable malpractice. As to this aspect of medical malpractice, the determination of the reasonable level of care and the breach thereof, expert testimony is essential because the causation cannot be establish merely relying on common knowledge. Therefore, the doctrine of Res Ipsa Loquitor cannot be applied here. Inasmuch as the causes of the injuries involved in malpractice actions are determinable only in the light of scientific knowledge, it has been recognized that expert testimony is usually necessary to support the conclusion as to causation. Dr. Rico was justified in recommending the administration of the drug chloromycetin, the drug of choice for typhoid fever. This was also well established in the evidence presented. Test was also duly done to determine if the victim is compatible with this kind of medicine. The burden of proving that Jorge Reyes was suffering from any other illness that had an adverse effect on the medicine rested with the petitioners. As they failed to present expert opinion on this, preponderant evidence to support their contention is clearly absent.
Nogales v. Capitol Medical Center
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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ROGELIO P. NOGALES, for himself and on behalf of the minors, ROGER ANTHONY, ANGELICA, NANCY, and MICHAEL CHRISTOPHER, all surnamed NOGALES, petitioners, versus CAPITOL MEDICAL CENTER, DR. OSCAR ESTRADA, DR. ELY VILLAFLOR, DR. ROSA UY, DR. JOEL ENRIQUEZ, DR. PERPETUA LACSON, DR. NOE ESPINOLA, and NURSE J. DUMLAO, respondents. (G.R. No. 142625 December 19, 2006 3rd Division) CARPIO, J.: FACTS: Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was then 37 years old, was under the exclusive prenatal care of Dr. Oscar Estrada. Around midnight of 25 May 1976, Corazon started to experience mild labor pains prompting Corazon and Rogelio Nogales ("Spouses Nogales") to see Dr. Estrada at his home. After examining Corazon, Dr. Estrada advised her immediate admission to the Capitol Medical Center ("CMC"). Corazon was then brought to the labor room of the CMC. Dr. Rosa Uy ("Dr. Uy"), who was then a resident physician of CMC, conducted an internal examination of Corazon. Dr. Uy then called up Dr. Estrada to notify him of her findings. Dr. Estrada ordered for 10 mg. of valium to be administered immediately by intramuscular injection. Dr. Estrada later ordered the start of intravenous administration of syntocinon admixed with dextrose, 5%, in lactated Ringers' solution, at the rate of eight to ten micro-drops per minute. At 6:13 a.m., Corazon started to experience convulsions. At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of magnesium sulfate. However, Dr. Ely Villaflor ("Dr. Villaflor"), who was assisting Dr. Estrada, administered only 2.5 grams of magnesium sulfate. At 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to extract Corazon's baby. At 6:27 a.m., Corazon began to manifest moderate vaginal bleeding which rapidly became profuse.afterwhich Corazon died. ISSUE: Whether CMC is vicariously liable for the negligence of Dr. Estrada. HELD: After a thorough examination of the voluminous records of this case, the Court finds no single evidence pointing to CMC's exercise of control over Dr. Estrada's treatment and management of Corazon's condition. It is undisputed that throughout Corazon's pregnancy, she was under the exclusive prenatal care of Dr. Estrada. At the time of Corazon's admission at CMC and during her delivery, it was Dr. Estrada, assisted by Dr. Villaflor, who attended to Corazon. There was no showing that CMC had a part in diagnosing Corazon's condition. While Dr. Estrada enjoyed staff privileges at CMC, such fact alone did not make him an employee of CMC.42 CMC merely allowed Dr. Estrada to use its facilities when Corazon was about to give birth, which CMC considered an emergency. Considering these circumstances, Dr. Estrada is not an employee of CMC, but an independent contractor. In general, a hospital is not liable for the negligence of an independent contractor-physician. There is, however, an exception to this principle. The hospital may be liable if the physician is the "ostensible" agent of the hospital. This exception is also known as the "doctrine of apparent authority." Under the doctrine of apparent authority a hospital can be held vicariously liable for the negligent acts of a physician providing care at the hospital, regardless of whether the physician is an independent contractor, unless the patient knows, or should have known, that the physician is an independent contractor. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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In the instant case, CMC impliedly held out Dr. Estrada as a member of its medical staff. Through CMC's acts, CMC clothed Dr. Estrada with apparent authority thereby leading the Spouses Nogales to believe that Dr. Estrada was an employee or agent of CMC. CMC cannot now repudiate such authority.
Professional Services v. Agana
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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PROFESSIONAL SERVICES, INC., Petitioner, versus NATIVIDAD and ENRIQUE AGANA, Respondents. (G.R. No. 126297 January 31, 2007 1st Division) SANDOVAL-GUTIERREZ, J.: FACTS: On April 4, 1984, Natividad Agana was rushed to the Medical City General Hospital (Medical City Hospital) because of difficulty of bowel movement and bloody anal discharge. After a series of medical examinations, Dr. Miguel Ampil, petitioner in G.R. No. 127590, diagnosed her to be suffering from "cancer of the sigmoid. On April 11, 1984, Dr. Ampil, assisted by the medical staff of the Medical City Hospital, performed an anterior resection surgery on Natividad. After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the operation and closed the incision. After a couple of days, Natividad complained of excruciating pain in her anal region. On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two weeks thereafter, her daughter found a piece of gauze protruding from her vagina. Upon being informed about it, Dr. Ampil proceeded to her house where he managed to extract by hand a piece of gauze measuring 1.5 inches in width. Dr. Ampils assurance did not come true. Instead, the pains intensified, prompting Natividad to seek treatment at the Polymedic General Hospital. Dr. Ramon Gutierrez detected the presence of another foreign object in her vagina -- a foul-smelling gauze measuring 1.5 inches in width which badly infected her vaginal vault. ISSUE: Whether or not Dr. Ampil is liable for negligence and malpractice and whether PSI may be held solidarily liable for the negligence of Dr. Ampil. HELD: First, it is not disputed that the surgeons used gauzes as sponges to control the bleeding of the patient during the surgical operation. Second, immediately after the operation, the nurses who assisted in the surgery noted in their report that the sponge count (was) lacking 2 that such anomaly was announced to surgeon and that a search was done but to no avail prompting Dr. Ampil to continue for closure. Third, after the operation, two (2) gauzes were extracted from the same spot of the body of Mrs. Agana where the surgery was performed. To put it simply, such act is considered so inconsistent with due care as to raise an inference of negligence. There are even legions of authorities to the effect that such act is negligence per se. This is a clear case of medical malpractice or more appropriately, medical negligence. Private hospitals, hire, fire and exercise real control over their attending and visiting consultant staff. While consultants are not, technically employees, the control exercised, the hiring, and the right to terminate consultants all fulfill the important hallmarks of an employer-employee relationship, with the exception of the payment of wages. In assessing whether such a relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing, the purpose of allocating responsibility in medical negligence cases, an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Professional Services v. CA PROFESSIONAL SERVICES, INC., petitioner, versus THE COURT OF APPEALS and NATIVIDAD and ENRIQUE AGANA, respondents, G.R. No. 126297 February 11, 2008 1st Division SANDOVAL-GUTIERREZ, J.: G.R. No. 126297 February 2, 2010 EN BANC CORONA, J.: FACTS: On April 4, 1984, Natividad Agana was admitted at the Medical City General Hospital (Medical City) because of difficulty of bowel movement and bloody anal discharge. Dr. Ampil diagnosed her to be suffering from "cancer of the sigmoid." Thus, on April 11, 1984, Dr. Ampil, assisted by the medical staff1 of Medical City, performed an anterior resection surgery upon her. During the surgery, he found that the malignancy in her sigmoid area had spread to her left ovary, necessitating the removal of certain portions of it. Thus, Dr. Ampil obtained the consent of Atty. Enrique Agana, Natividad‘s husband, to permit Dr. Juan Fuentesto perform hysterectomy upon Natividad. Dr. Fuentes performed and completed the hysterectomy. Afterwards, Dr. Ampil took over, completed the operation and closed the incision. However, the operation appeared to be flawed. In the corresponding Record of Operation dated April 11, 1984, the attending nurses entered these remarks: 1. sponge count lacking 2 2. announced to surgeon searched done but to no avail continue for closure. After a couple of days, Natividad complained of excruciating pain in her anal region. She consulted both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the natural consequence of the surgical operation performed upon her. Dr. Ampil recommended that Natividad consult an oncologist to treat the cancerous nodes which were not removed during the operation. On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek further treatment. After four (4) months of consultations and laboratory examinations, Natividad was told that she was free of cancer. Hence, she was advised to return to the Philippines. On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two (2) weeks thereafter, her daughter found a piece of gauze protruding from her vagina. Dr. Ampil was immediately informed. He proceeded to Natividad‘s house where he managed to extract by hand a piece of gauze measuring 1.5 inches in width. Dr. Ampil then assured Natividad that the pains would soon vanish. Despite Dr. Ampil‘s assurance, the pains intensified, prompting Natividad to seek treatment at the Polymedic General Hospital. While confined thereat, Dr. Ramon Gutierrez detected the presence of a foreign object in her vagina -- a foul-smelling gauze measuring 1.5 inches in width. The gauze had badly infected her vaginal vault. A recto-vaginal fistula had formed in her reproductive organ which forced stool to excrete through the vagina. Another surgical operation was needed to remedy the situation. Thus, in October 1984, Natividad underwent another surgery. ISSUE: Whether or not the petitioner here in the case and Doctor Ampil is jointly and severally liable of the obligation due to the respondent because of medical malpractice. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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HELD: Yes. The Supreme Court is firm in its decision on rendering them liable to the respondent as it prove that there are two motions for reconsideration but it never flip flop. It should be borne in mind that the corporate negligence ascribed to PSI is different from the medical negligence attributed to Dr. Ampil. The duties of the hospital are distinct from those of the doctor-consultant practicing within its premises in relation to the patient; hence, the failure of PSI to fulfill its duties as a hospital corporation gave rise to a direct liability to the Aganas distinct from that of Dr. Ampil. Clearly, PSI is estopped from passing the blame solely to Dr. Ampil. Its act of displaying his name and those of the other physicians in the public directory at the lobby of the hospital amounts to holding out to the public that it offers quality medical service through the listed physicians. This justifies Atty. Agana‘s belief that Dr. Ampil was a member of the hospital‘s staff. It must be stressed that under the doctrine of apparent authority, the question in every case is whether the principal has by his voluntary act placed the agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of the particular business, is justified in presuming that such agent has authority to perform the particular act in question. In these cases, the circumstances yield a positive answer to the question. The challenged Decision also anchors its HELD on the doctrine of corporate responsibility. The duty of providing quality medical service is no longer the sole prerogative and responsibility of the physician. This is because the modern hospital now tends to organize a highly-professional medical staff whose competence and performance need also to be monitored by the hospital commensurate with its inherent responsibility to provide quality medical care. Such responsibility includes the proper supervision of the members of its medical staff. Accordingly, the hospital has the duty to make a reasonable effort to monitor and oversee the treatment prescribed and administered by the physicians practicing in its premises. Unfortunately, PSI had been remiss in its duty. It did not conduct an immediate investigation on the reported missing gauzes to the great prejudice and agony of its patient.
Cantre v. Sps. Go Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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DR. MILAGROS L. CANTRE, Petitioner, versus SPS. JOHN DAVID Z. GO and NORA S. GO, Respondents. (G.R. No. 160889 April 27, 2007 2nd Division) QUISUMBING, J.: FACTS: Nora Go gave birth to her 4th child. Two hours later, she suffered profuse bleeding inside her womb due to some placenta parts which were not completely expelled after delivery. She then suffered hypovolemic shock, so her BP dropped to 40/0. Dr. Milagros Cantre, an Ob-Gyne specialist and Nora's attending physician, together with an assisting resident physician, performed various medical procedures to stop the bleeding and to restore Nora's BP. While Dr. Cantre was massaging Nora's uterus for it to contract and stop bleeding, she ordered a droplight to warm Nora and her baby. At that time, she was unconscious. While in the recovery room, Nora's husband John David noticed a fresh gaping wound (2 1/2 x 3 1/2 in) in the inner portion of her left arm near the armpit. When he asked the nurses about the cause of the injury, he was informed that it was due to a burn. John David filed a request for investigation. Dr. Cantre said that what caused the injury was the blood pressure cuff. John David brought Nora to the NBI for a physical examination. The medico-legal said that the injury appeared to be a burn and that a droplight when placed near the skin for about 10 minutes could cause such burn. He dismissed the likelihood that the wound was caused by a blood pressure cuff since the scar was not around the arm, but just on one side of the arm. Nora's injury was referred to a plastic surgeon for skin grafting. However, her arm would never be the same--the surgery left an unsightly scar, her movements are restricted, and the injured arm aches at the slightest touch. Sps. Go filed a complaint for damages against Dr. Cantre, the medical director, and the hospital. In the RTC, parties have rested their respective cases, but the court admitted additional exhibits [consist mostly of medical records produced by the hospital during trial pursuant to a subpoena duces tecum] offered by Sps. Go, which were not testified to by any witness. RTC ruled in favor of the spouses. CA affirmed RTC with modification (complaint dismissed with respect to the medical director and the hospital; only moral damages awarded). ISSUE: Whether or not Dr. Cantre is liable for the injury suffered by Nora Go. HELD: Yes. Dr. Cantre's counsel admitted the existence of the additional exhibits when they were formally offered for admission by the RTC. In any case, given the circumstances of this case, a HELD on Dr. Cantre's negligence may be made based on the res ipsa loquitur doctrine even in the absence of the additional exhibits. The Hippocratic Oath mandates physicians to give primordial consideration to their patients' well-being, and if a doctor fails to live up to this precept, he is accountable for his acts. This notwithstanding, courts face a unique restraint in adjudicating medical negligence cases because physicians are not guarantors of care, and they never set out to intentionally cause injury to their patients. HOWEVER, intent is immaterial in these cases because where negligence exists and is proven, it automatically gives the injured a right to reparation for the damage caused. Res ipsa loquitur x Medical negligence cases Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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In medical negligence cases, the doctrine of res ipsa loquitur allows the mere existence of an injury to justify a presumption of negligence on the part of the person who controls the instrument causing the injury, provided that the following requisites concur: 1. Accident is of a kind which ordinarily does not occur absent someone's negligence Wound not an ordinary occurrence in the act of delivering a baby; could not have happened unless negligence set in somewhere 2. Caused by an instrumentality within defendant's exclusive control It doesn't matter WON the injury was caused by the droplight or by the blood pressure cuff, since both are within the exclusive control of the physician in charge [Dr. Cantre] under the captain of the ship doctrine [surgeon in charge of an operation is held liable for his assistants' negligence during the time when they are under the surgeon's control]. 3. Possibility of contributing conduct which would make plaintiff responsible is eliminated Wound could only be caused by something external to and outside the control of Nora since she was unconscious while in hypervolemic shock. On Dr. Cantre's other arguments + what would have been her saving grace BP cuff defense does not afford her an escape. The medical practice is to deflate the cuff immediately after use, or else, it could cause an injury similar to what happened to Nora. If the wound was caused by the constant taking of BP, it must have been done so negligently as to inflict a gaping wound. The argument that the failed plastic surgery was a measure to prevent complication (and not intended as a cosmetic procedure) does not negate negligence on Dr. Cantre's part. Dr. Cantre has been Nora's ob-gyne for her past 3 deliveries, and this is the first time that Dr. Cantre is being held liable for damages due to negligence in the practice of her profession. She promptly took care of the wound before infection set in. Since Nora was in a critical condition at that time, saving her life became Dr. Cantre's elemental concern. Still, her good intentions characteristics do not justify negligence. NCC provisions applied NCC 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. [...] NCC 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act or omission. [200k moral damages awarded]
Dr. Rubi Li v. Sps Soliman Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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DR. RUBI LI, Petitioner, versus SPOUSES REYNALDO and LINA SOLIMAN, as parents/heirs of deceased Angelica Soliman, Respondents. G.R. No. 165279 June 7, 2011 EN BANC VILLARAMA, JR., J.: FACTS: This case involved the death of Angelica Soliman, respondents‘ 11-year old daughter. Previously, Angelica was diagnosed withosteosarcoma, osteoblastic type, a highly malignant cancer of the [thigh] bone. To remove the tumor, her right leg was amputated. And to eliminate any remaining cancer cells and minimize the chances of recurrence and prevent the disease from spreading to other parts of her body (metastasis), she subsequently underwent chemotherapy. The chemotherapy was administered by petitioner Dr. Rubi Li, an oncologist at St. Luke‘s Medical Center (SLMC) upon consent by her parents, herein respondents. Angelica died just eleven days after the administration of the first cycle of the chemotherapy regimen. The parents of the child thereafter sued the doctor for damages before the RTC, charging the latter (along with other doctors and the SLMC itself) with negligence in causing Angelica‘s untimely demise. It was specifically averred in the complaint that the doctor assured the parents that Angelica would recover in view of 95% chance of healing with chemotherapy (―Magiging normal na ang anak nyo basta ma-chemo. 95% ang healing”), and when asked regarding the side effects, petitioner mentioned only slight vomiting, hair loss and weakness (―Magsusuka ng kaunti. Malulugas ang buhok. Manghihina”). The parents thus claimed that they would not have given their consent to chemotherapy had the doctor not falsely assured them of its side effects. The trial court however dismissed the case. It found that the doctor was not liable for damages as she observed the best known procedures and employed her highest skill and knowledge in the administration of chemotherapy drugs on Angelica [though] despite all efforts said patient died. The parents appealed to the Court of Appeals (CA). While concurring with the trial court‘s finding that there was no negligence committed by the petitioner in the administration of chemotherapy treatment to Angelica, the CA found that the doctor failed to fully explain to the parents of the patient all the known side effects of chemotherapy. The CA thus adjudged the doctor liable for damages. ISSUE: Whether or not Dr. Rubi Li can be held liable [of failing] to fully disclose serious side effects of chemotherapy to the parents of her patient despite the absence of finding that she was negligent in administering the said treatment. HELD: No. The four essential elements that a plaintiff must prove in a medical
malpractice action based on the doctrine of informed consent, paraphrased as follows: (1) the physician‟s duty to disclose material risks; (2) the physician‟s failure to disclose, or inadequate disclosure, of those risks; (3) the patient‟s consent to the treatment she otherwise would not have consented to, which is a direct and proximate result of the physician‘s failure to disclose; and (4) plaintiff‟s injury as a consequence the proposed treatment. The gravamen in an informed consent case requires the plaintiff to point to significant undisclosed information relating to the treatment which would have altered her decision to undergo it. Applying the foregoing to this case, it was held that petitioner Dr. Rubi Li, an oncologist who performed chemotherapy on respondents‘ daughter, who was sick with malignant bone cancer, adequately disclosed material risks Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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inherent in the chemotherapy procedure performed with respondents‘ consent. When petitioner informed the respondents beforehand of the side effects of chemotherapy, which includes lowered counts of white and red blood cells, decrease in blood platelets, possible kidney or heart damage and skin darkening, there is reasonable expectation on the part of the doctor that the parents of the child understood very well that the severity of these side effects will not be the same for all patients undergoing the procedure. Thus, the Court REVERSED the CA and REINSTATED the decision of the RTC dismissing the case.
People v. Delos Santos
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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PEOPLE OF THE PHILIPPINES, plaintiff-appellee, versus GLENN DE LOS SANTOS, accused-appellant. G.R. No. 13158 March 27, 2001 EN BANC DAVIDE, JR., J.: FACTS: A Special Counter Insurgency Operation Unit Training of the Philippine National Police (PNP), was held at Camp Damilag, Manolo Fortich, Bukidnon, from September 1, 1995 to October 15, 1995. The last phase of the training was the 35 kilometer "endurance run" from said Camp to Camp Alagar, Cagayan de Oro City. The run which took place October 5, 1995 started at 2:20 a.m. The trainees were wearing black T-shirts, black short pants, and green and black combat shoes. While they were negotiating Maitum Highway, they saw an Isuzu Elf truck, driven by respondent Glenn delos Santos, coming at high speed towards them. The vehicle lights were in the high beam. At a distance of 100 meters, the rear security guards started waving their hands for the vehicle to take the other side of the road, but the vehicle just kept its speed, apparently ignoring their signals and coming closer and closer to them. As a result thereof, twelve (12) PNP trainees were killed on the spot, 11 others were seriously wounded while 10 (PO1) sustained minor injuries. ISSUE: Whether or not Glenn de los Santos is criminally liable, and consequently civilly liable for said acts. HELD: Glenn showed an inexcusable lack of precaution. Article 365 of the Revised Penal Code states that reckless imprudence consists in voluntarily, but without malice, doing or failing to do an act from which material damage results by reason of inexcusable lack of precaution on the part of the person performing or failing to perform such act, taking into consideration (1) his employment or occupation; (2) his degree of intelligence; (4) his physical condition; and (3) other circumstances regarding persons, time and place. Being then a young college graduate and an experienced driver, Glenn should have known to apply the brakes or swerve to a safe place immediately upon hearing the first bumping thuds to avoid further hitting the other trainees. By his own testimony, it was established that the road was slippery and slightly going downward; and, worse, the place of the incident was foggy and dark. He should have observed due care in accordance with the conduct of a reasonably prudent man, such as by slackening his speed, applying his brakes, or turning to the left side even if it would mean entering the opposite lane. It is highly probable that he was driving at high speed at the time. And even if he was driving within the speed limits, this did not mean that he was exercising due care under the existing circumstances and conditions at the time. Considering that the incident was not a product of a malicious intent but rather the result of a single act of reckless driving, Glenn is criminally liable therefore civilly liable as well.
L.G. Foods v. Agraviador Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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L.G. FOODS CORPORATION and VICTORINO GABOR, Vice-President and General Manager, petitioners, versus HON. PHILADELFA B. PAGAPONGAGRAVIADOR, in her capacity as Presiding Judge of Regional Trial Court, Branch 43, Bacolod City, and SPS. FLORENTINO and THERESA VALLEJERA, respondents. (G.R. No. 158995 September 26, 2006 2nd Division) GARCIA, J.: FACTS: On February 26, 1996, Charles Vallereja, a 7-year old son of the spouses Florentino Vallejera and Theresa Vallejera, was hit by a Ford Fiera van owned by the petitioners and driven at the time by their employee, Vincent Norman Yeneza y Ferrer. Charles died as a result of the accident. In time, an Information for Reckless Imprudence Resulting to Homicide was filed against the driver before the Municipal Trial Court in Cities (MTCC), Bacolod City, docketed as Criminal Case No. 67787, entitled People of the Philippines v. Vincent Norman Yeneza. Unfortunately, before the trial could be concluded, the accused driver committed suicide, evidently bothered by conscience and remorse. On account thereof, the MTCC, in its order of September 30, 1998, dismissed the criminal case. On June 23, 1999, in the RTC of Bacolod City, the spouses Vallejera filed a complaint for damages against the petitioners as employers of the deceased driver, basically alleging that as such employers, they failed to exercise due diligence in the selection and supervision of their employees. ISSUE: Whether or not the employer which is the petitioner here in the case is liable on the damages incurred by its employee. HELD: Yes. Under Article 2180 of the Civil Code, the liability of the employer is direct or immediate. It is not conditioned upon prior recourse against the negligent employee and a prior showing of insolvency of such employee. Here, the complaint sufficiently alleged that the death of the couple's minor son was caused by the negligent act of the petitioners' driver; and that the petitioners themselves were civilly liable for the negligence of their driver for failing "to exercise the necessary diligence required of a good father of the family in the selection and supervision of its employee, the driver, which diligence, if exercised, would have prevented said accident." Had the respondent spouses elected to sue the petitioners based on Article 103 of the Revised Penal Code, they would have alleged that the guilt of the driver had been proven beyond reasonable doubt; that such accused driver is insolvent; that it is the subsidiary liability of the defendant petitioners as employers to pay for the damage done by their employee (driver) based on the principle that every person criminally liable is also civilly liable. Since there was no conviction in the criminal case against the driver, precisely because death intervened prior to the termination of the criminal proceedings, the spouses' recourse was, therefore, to sue the petitioners for their direct and primary liability based on quasi-delict. The circumstance that no reservation to institute a separate civil action for damages was made when the criminal case was filed is of no moment for the simple reason that the criminal case was dismissed without any pronouncement having been made therein. In reality, therefor, it is as if there was no criminal case to speak of in the first place. And for the petitioners to insist for the conviction of their driver as a condition sine qua non to hold them liable for damages is to ask for the impossible. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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Magat v. Medialdea VICTORINO D. MAGAT, petitioner, versus HON. LEO D. MEDIALDEA and SANTIAGO A. GUERRERO, respondents. (G.R. No. L-37120 April 20, 1983 2nd Division) ESCOLIN, J.: FACTS: Defendant Santiago Guerrero entered into a contract with the U.S. Navy Exchange, Subic Bay, Philippines for the operation of a fleet of taxicabs. Guerrero and his aforesaid agent Isidro Aligada were able to import from Japan with the assistance of the plaintiff Magat and his Japanese business associates the necessary taximeters for Guerrero‘s taxicabs in partial fulfillment of commitments with the U.S. Navy Exchange, Subic Bay, Philippines. Guerrero and his agent have repeatedly assured Magat of his financial capabilities to pay for the goods ordered by him and in fact he accomplished the necessary application for a letter of credit with his banker, but he subsequently instructed his banker not to give due course to his application for a letter of credit and that for reasons only known to him, he failed and refused to open the necessary letter of credit to cover payment of the goods ordered by him. Meanwhile, Guerrero has been operating his taxicabs without the required radio transceivers and when the U.S. Navy Authorities were pressing defendant for compliance with his commitments with respect to the installations of radio transceivers on his taxicabs, he impliedly laid the blame for the delay upon Magat, thus destroying his reputation with the said Naval Authorities of Subic Bay, Philippines, with whom he transacts business. Victorino Magat filed a complaint for alleged breach of contract against Santiago Guerrero. ISSUE: Whether or not the complaint for breach of contract states a valid cause of action. HELD: Article 1170 of the Civil Code provides: ―those who in the performance of their obligation are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof are liable for damages. The phrase "in any manner contravene the tenor" of the obligation includes any ilicit act or omission which impairs the strict and faithful fulfillment of the obligation and every kind of defective performance. The damages which the obligor is liable for includes not only the value of the loss suffered by the obligee (daño emergente) but also the profits which the latter failed to obtain (lucro cesante). If the obligor acted in good faith, he shall be liable for those damages that are the natural and probable consequences of the breach of the obligation and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted; and in case of fraud, bad faith, malice or wanton attitude, he shall be liable for all damages which may be reasonably attributed to the non-performance of the obligation. In the case at bar, petitioner had fulfilled his part of the bargain while private respondent failed to comply with his correlative obligation by refusing to open a letter of credits to cover payment of the goods ordered by him, and that consequently, petitioner suffered not only loss of his expected profits, but moral and exemplary damages as well. Therefore he is liable for the damages he caused to the petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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Vda. De Mistica v. Naguiat FIDELA DEL CASTILLO Vda. DE MISTICA, petitioner, versus Spouses BERNARDINO NAGUIAT and MARIA PAULINA GERONANAGUIAT, respondents. (G.R. No. 137909 December 11, 2003 1st Division) PANGANIBAN, J.: FACTS: Eulalio Mistica, predecessor-in-interest of herein petitioner, is the owner of the parcel of land which was leased to respondent Bernardinio Naguiat sometime in 1970. On April 5, 1979 Mistica entered into a contract to sell with respondent over a portion of the aforementioned lot containing an area of 200 square meters. This agreement was reduced to writing in a document. Pursuant to said agreement, respondent gave a down payment of P2, 000. He made another partial payment of P1, 000 on February 8, 1980. He failed to make any payments thereafter. Mistica died sometime in October 1986. On December 4, 1991 petitioner filed a complaint for rescission alleging that the failure and refusal of respondent to pay the balance of the purchase price constitute a violation of the contract which established her to rescind the same. That respondent have been in possession of the subject matter, should be ordered to vacate and surrender possession of the same. The CA, Disallowing rescission, Held that respondents did not breach the Contract of Sale. It explained that the conclusion of the ten-year period was not a resolutory term, because the Contract had stipulated that payment -- with interest of 12 percent -- could still be made if respondents failed to pay within the period. According to the appellate court, petitioner did not disprove the allegation of respondents that they had tendered payment of the balance of the purchase price during her husband‘s funeral, which was well within the tenyear period. Moreover, rescission would be unjust to respondents, because they had already transferred the land title to their names. The proper recourse, the CA Held, was to order them to pay the balance of the purchase price, with 12 percent interest. ISSUE: Whether or not the Court of Appeals erred in the application of Article 1191 of the Civil Code, as it ruled that there is no breach of obligation inspite of the lapse of their stipulated period and the failure of the respondent to pay. HELD: No. The failure of respondent to pay the value of the purchase price within ten (10) years from execution of the deed did not amount to a substantial breach. The transaction between Eulalio Mistica and respondents, as evidenced by the Kasulatan, was clearly a Contract of Sale. A deed of sale is considered absolute in nature when there is neither a stipulation in the deed that title to the property sold is reserved to the seller until the full payment of the price; nor a stipulation giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. In a contract of sale, the remedy of an unpaid seller is either specific performance or rescission. Rescission, however, is allowed only where the breach is substantial and fundamental to the fulfillment of the obligation. In the present case, the failure of respondents to pay the balance of the purchase price within ten years from the execution of the Deed did not amount to a substantial breach. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Moreover, it is undisputed that during the ten year period, petitioner never made any demand for the balance of the purchase price. Petitioner even refused the payment tendered by respondents during her husband‘s funeral, thus showing she was not exactly blameless for the lapse of the ten year period.
Co v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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SPS. HENRY CO AND ELIZABETH CO AND MELODY CO, petitioners, versus COURT OF APPEALS AND MRS. ADORACION CUSTODIO, represented by her Attorney-in-fact, TRINIDAD KALAGAYAN, respondents. G.R. No. 112330 August 17, 1999 3rd Division GONZAGA-REYES, J.: FACTS: Sometime in October 9, 1984, Mrs. Adoracion Custodio entered into a verbal contract with spouses Henry and Elizabeth Co for the purchase of the spouses‘ house and lot and in consideration of the sum of $100,000.00. One week thereafter and shortly before Mrs. Custodio left for the United States, plaintiff paid to the defendant the amount of $1000.00 and P40,000.00 as earnest money, in order that the same may be reserved for her purchase. Said earnest money is to be deducted from the total purchase price of the property. The purchase price is payable in two payments; particularly, $40,000.00 on December 1984 and the balance of $60, 000.00 on January 5, 1985. On January 25, 1985, plaintiff paid to the defendant the sum of $30,000 as partial payment. Defendant‘s counsel Atty. Leopoldo Cotaco wrote a letter to plaintiff demanding that she pay the balance. Not having received any response thereto, said lawyer wrote another letter informing her that she lost her ―option to purchase‖ the property subject of the case. On September 5, 1986, Atty. Estrella O. Laysa, counsel of Custodio, wrote a letter to Atty. Leopoldo Cotaco informing him that Custodio ‗is now ready to pay the remaining balance to complete the sum of $100,000.00, the agreed amount as selling price‘ and on October 24, 1986, plaintiff filed the instant complaint.‖ The trial court ruled in favor of Custodio and ordered the spouses Co to refund the amount of $30,000.00. Not satisfied with the decision, the spouses Co appealed to the Court of Appeals, which affirmed the decision of the RTC. Hence, this appeal. ISSUE: Whether or not the Court of Appeals erred in ordering the spouses Co to return the $30,000.00 paid by Custodio pursuant to the ―option‖ granted to her over the property. HELD: An ‗option‘ is a contract granting a privilege to buy or sell within an agreed time and at a determined price. It is a separate and distinct contract from that which the parties may enter into upon the consummation of the option and it must be supported by consideration. However, the contract entered into by the Cos and Custodio reveal that what the parties entered into is a perfected contract of sale and not an option contract. A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. The elements of a valid contract of sale under Article 1458 of the Civil Code are: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. As evidenced by the March 15, 1985 letter, all three elements of a contract of sale are present in the transaction between the petitioners and respondent. Custodio‘s offer to purchase the Beata property, subject of the sale at a price of $100,000.00 was accepted by the Cos. Even the manner of payment of the price was set forth in the letter. Earnest money in the amounts of US$1,000.00 and P40,000.00 was Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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already received by the Cos. Under Article 1482 of the Civil Code, earnest money given in a sale transaction is considered part of the purchase price and proof of the perfection of the sale. Despite the fact that Custodio failed to pay the amounts of US$40,000.00 and US$60,000.00 on or before December 4, 1984 and January 5, 1985 respectively, the Cos did not sue for either specific performance or rescission of the contract. The Cos were of the mistaken belief that Custodio had lost her ―option‖ over the Beata property when she failed to pay the remaining balance of $70,000.00 pursuant to their August 8, 1986 letter. In the absence of an express stipulation authorizing the sellers to extrajudicially rescind the contract of sale, the Cos cannot unilaterally and extrajudicially rescind the contract of sale. Accordingly, Custodio acted well within her rights when she attempted to pay the remaining balance of $70,000.00 to complete the sum owed of $100,000.00 as the contract was still subsisting at that time. When the Cos refused to accept said payment and to deliver the Beata property, Custodio immediately sued for the rescission of the contract of sale and prayed for the return of the $30,000.00 she had initially paid. Under Article 1385 of the Civil Code, rescission creates the obligation to return the things, which were the object of the contract, but such rescission can only be carried out when the one who demands rescission can return whatever he may be obliged to restore. This principle has been applied to rescission of reciprocal obligations under Article 1191 of the Civil Code. The Court of Appeals therefore did not err in ordering the Cos to return the amount of $30,000.00 to Custodio after ordering the rescission of the contract of sale over the property.
Heirs of Quirong v. DBP Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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HEIRS OF SOFIA QUIRONG, Represented by ROMEO P. QUIRONG, Petitioners, versus DEVELOPMENT BANK OF THE PHILIPPINES, Respondent. (G.R. No. 173441 December 3, 2009 2nd Division) ABAD, J.: FACTS: When the late Emilio Dalope died, he left a 589-square meter untitled lot in Sta. Barbara, Pangasinan, to his wife, Felisa Dalope (Felisa) and their nine children, one of whom was Rosa Dalope-Funcion. To enable Rosa and her husband Antonio Funcion (the Funcions) get a loan from respondent Development Bank of the Philippines (DBP), Felisa sold the whole lot to the Funcions. With the deed of sale in their favor and the tax declaration transferred in their names, the Funcions mortgaged the lot with the DBP. On February 12, 1979, after the Funcions failed to pay their loan, the DBP foreclosed the mortgage on the lot and consolidated ownership in its name on June 17, 1981. Four years later or on September 20, 1983 the DBP conditionally sold the lot to Sofia Quirong for the price of P78,000.00. In their contract of sale, Sofia Quirong waived any warranty against eviction. The contract provided that the DBP did not guarantee possession of the property and that it would not be liable for any lien or encumbrance on the same. Quirong gave a down payment of P14,000.00. Two months after that sale or on November 28, 1983 Felisa and her eight children (collectively, the Dalopes) filed an action for partition and declaration of nullity of documents with damages against the DBP and the Funcions before the Regional Trial Court (RTC) of Dagupan City. On December 27, 1984, notwithstanding the suit, the DBP executed a deed of absolute sale of the subject lot in Sofia Quirong‘s favor. The deed of sale carried substantially the same waiver of warranty against eviction and of any adverse lien or encumbrance. On May 11, 1985, Sofia Quirong having since died, her heirs (petitioner Quirong heirs) filed an answer in intervention in Civil Case D-7159 in which they asked the RTC to award the lot to them and, should it instead be given to the Dalopes, to allow the Quirong heirs to recover the lot‘s value from the DBP. But, because the heirs failed to file a formal offer of evidence, the trial court did not rule on the merits of their claim to the lot and, alternatively, to relief from the DBP. On December 16, 1992 the RTC rendered a decision, declaring the DBP‘s sale to Sofia Quirong valid only with respect to the shares of Felisa and Rosa Funcion in the property. It declared Felisa‘s sale to the Funcions, the latter‘s mortgage to the DBP, and the latter‘s sale to Sofia Quirong void insofar as they prejudiced the shares of the eight other children of Emilio and Felisa who were each entitled to a tenth share in the subject lot. On June 10, 1998 the Quirong heirs filed the present action against the DBP before the RTC of Dagupan City, Branch 44, in Civil Case CV-98-02399-D for rescission of the contract of sale between Sofia Quirong, their predecessor, and the DBP and praying for the reimbursement of the price of P78,000.00 that she paid the bank plus damages. The heirs alleged that they were entitled to the rescission of the sale because the decision in Civil Case D-7159 stripped them of nearly the whole of the lot that Sofia Quirong, their predecessor, bought from the DBP. The DBP filed a motion to dismiss the action on ground of prescription and res judicata but the RTC denied their motion. On June 14, 2004, after hearing the case, the RTC rendered a decision, rescinding the sale between Sofia Quirong and the DBP and ordering the latter to return to the Quirong heirs the P78,000.00 Sofia Quirong paid the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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bank. On appeal by the DBP, the Court of Appeals (CA) reversed the RTC decision and dismissed the heirs‘ action on the ground of prescription. The CA concluded that, reckoned from the finality of the December 16, 1992 decision in Civil Case D-7159, the complaint filed on June 10, 1998 was already barred by the four-year prescriptive period under Article 1389 of the Civil Code. The Quirong heirs filed a motion for reconsideration of the decision but the appellate court denied it, thus, this petition. ISSUE: Whether or not the Quirong heirs‘ action for rescission of respondent DBP‘s sale of the subject property can be granted. HELD: No. Action for rescission, which is based on a subsequent economic loss suffered by the buyer, was precisely the action that the Quirong heirs took against the DBP. Consequently, it prescribed as Article 1389 provides in four years from the time the action accrued. Since it accrued on January 28, 1993 when the decision in Civil Case became final and executory and ousted the heirs from a substantial portion of the lot, the latter had only until January 28, 1997 within which to file their action for rescission. Given that they filed their action on June 10, 1998, they did so beyond the four-year period. The remedy of "rescission" is not confined to the rescissible contracts enumerated under Article 1381. Article 1191 of the Civil Code gives the injured party in reciprocal obligations, such as what contracts are about, the option to choose between fulfillment and "rescission." Arturo M. Tolentino, a well-known authority in civil law, is quick to note, however, that the equivalent of Article 1191 in the old code actually uses the term "resolution" rather than the present "rescission." The calibrated meanings of these terms are distinct. "Rescission" is a subsidiary action based on injury to the plaintiff‘s economic interests as described in Articles 1380 and 1381. "Resolution," the action referred to in Article 1191, on the other hand, is based on the defendant‘s breach of faith, a violation of the reciprocity between the parties. As an action based on the binding force of a written contract, therefore, rescission (resolution) under Article 1191 prescribes in 10 years. Ten years is the period of prescription of actions based on a written contract under Article 1144. The distinction makes sense. Article 1191 gives the injured party an option to choose between, first, fulfillment of the contract and, second, its rescission. An action to enforce a written contract (fulfillment) is definitely an "action upon a written contract," which prescribes in 10 years (Article 1144). It will not be logical to make the remedy of fulfillment prescribe in 10 years while the alternative remedy of rescission (or resolution) is made to prescribe after only four years as provided in Article 1389 when the injury from which the two kinds of actions derive is the same.
Heirs of Gaite v. The Plaza
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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HEIRS OF RAMON C. GAITE, CYNTHIA GOROSTIZA GAITE and RHOGEN BUILDERS, Petitioners, versus THE PLAZA, INC. and FGU INSURANCE CORPORATION, Respondents. (G.R. No. 177685 January 26, 2011 3rd Division) VILLARAMA, JR., J.: FACTS: On July 16, 1980, The Plaza, Inc. (The Plaza), a corporation engaged in the restaurant business, through its President, Jose C. Reyes, entered into a contract with Rhogen Builders (Rhogen), represented by Ramon C. Gaite, for the construction of a restaurant building in Greenbelt, Makati, Metro Manila for the price ofP7,600,000.00. On July 18, 1980, to secure Rhogen‘s compliance with its obligation under the contract, Gaite and FGU Insurance Corporation (FGU) executed a surety bond in the amount of P1,155,000.00 in favor of The Plaza. On July 28, 1980, The Plaza paid P1,155,000.00 less withholding taxes as down payment to Gaite. Thereafter, Rhogen commenced construction of the restaurant building. In a letter dated September 10, 1980, Engineer Angelito Z. Gonzales, the Acting Building Official of the Municipality of Makati, ordered Gaite to cease and desist from continuing with the construction of the building for violation of Sections 301 and 302 of the National Building Code (P.D. 1096) and its implementing rules and regulations. The letter was referred to The Plaza‘s Project Manager, Architect Roberto L. Tayzon. Gaite notified Reyes that he is suspending all construction works until Reyes and the Project Manager cooperate to resolve the issue he had raised to address the problem. This was followed by another letter dated November 18, 1980 in which Gaite expressed his sentiments on their aborted project and reiterated that they can still resolve the matter with cooperation from the side of The Plaza. In his reply-letter dated November 24, 1980, Reyes asserted that The Plaza is not the one to initiate a solution to the situation, especially after The Plaza already paid the agreed down payment of P1,155,000.00, which compensation so far exceeds the work completed by Rhogen before the municipal authorities stopped the construction for several violations. Reyes made it clear they have no obligation to help Rhogen get out of the situation arising from non-performance of its own contractual undertakings, and that The Plaza has its rights and remedies to protect its interest. On January 9, 1981, Gaite informed The Plaza that he is terminating their contract based on the Contractor‘s Right to Stop Work or Terminate Contracts as provided for in the General Conditions of the Contract. In his letter, Gaite accused Reyes of not cooperating with Rhogen in solving the problem concerning the revocation of the building permits, which he described as a "minor problem." Additionally, Gaite demanded the payment ofP63,058.50 from The Plaza representing the work that has already been completed by Rhogen. On January 13, 1981, The Plaza, through Reyes, countered that it will hold Gaite and Rhogen fully responsible for failure to comply with the terms of the contract and to deliver the finished structure on the stipulated date. Reyes argued that the down payment made by The Plaza was more than enough to cover Rhogen‘s expenses. On March 26, 1981, The Plaza filed Civil Case No. 40755 for breach of contract, sum of money and damages against Gaite and FGU in the Court of First Instance (CFI) of Rizal. The court granted the petition and uphold by CA with modification to award of damages. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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ISSUE: 1. Whether or not the rescission is valid. 2. Whether or not quantum meruit is to be appreciated here.
HELD: 1. Yes. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. Respondent The Plaza predicated its action on Article 1191 of the Civil Code, which provides for the remedy of "rescission" or more properly resolution, a principal action based on breach of faith by the other party who violates the reciprocity between them. The breach contemplated in the provision is the obligor‘s failure to comply with an existing obligation. Thus, the power to rescind is given only to the injured party. The injured party is the party who has faithfully fulfilled his obligation or is ready and willing to perform his obligation. The construction contract between Rhogen and The Plaza provides for reciprocal obligations whereby the latter‘s obligation to pay the contract price or progress billing is conditioned on the former‘s performance of its undertaking to complete the works within the stipulated period and in accordance with approved plans and other specifications by the owner. Pursuant to its contractual obligation, The Plaza furnished materials and paid the agreed down payment. It also exercised the option of furnishing and delivering construction materials at the jobsite pursuant to Article III of the Construction Contract. However, just two months after commencement of the project, construction works were ordered stopped by the local building official and the building permit subsequently revoked on account of several violations of the National Building Code and other regulations of the municipal authorities.
2. No. Under the principle of quantum meruit, a contractor is allowed to recover the reasonable value of the thing or services rendered despite the lack of a written contract, in order to avoid unjust enrichment. Quantum meruit means that in an action for work and labor, payment shall be made in such amount as the plaintiff reasonably deserves. To deny payment for a building almost completed and already occupied would be to permit unjust enrichment at the expense of the contractor. Rhogen failed to finish even a substantial portion of the works due to the stoppage order issued just two months from the start of construction. Despite the down payment received from The Plaza, Rhogen, upon evaluation of the Project Manager, was able to complete a meager percentage much lower than that claimed by it under the first progress billing between July and September 1980. Moreover, after it relinquished the project in January 1981, the site inspection appraisal jointly conducted by the Project Manager, Building Inspector Engr. Gregory and representatives from FGU and Rhogen, Rhogen Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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was found to have executed the works not in accordance with the approved plans or failed to seek prior approval of the Municipal Engineer. Article 1167 of the Civil Code is explicit on this point that if a person obliged to do something fails to do it, the same shall be executed at his cost. Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone.
Solar Harvest Incorporated vs. Davao Corrugated
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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SOLAR HARVEST, INC., Petitioner, versus DAVAO CORRUGATED CARTON CORPORATION, Respondent. (G.R. No. 176868 July 26, 2010 2nd Division) NACHURA, J.: FACTS: In the first quarter of 1998, Solar Harvest and Davao corrugated entered into an unwritten agreement. Solar Harvest placed orders for customized boxes for its business of exporting bananas at USD 1.1o each. Petitioner made a full payment of USD 40150. By January 3, 2001 petitioner had not received any of the ordered boxes. On February 19, 2001 Davao corrugated replied that as early as April 3, 1998, order/boxes are completed and Solar Harvest failed to pick them up from their warehouse within 30 days from completion as agreed upon. Respondent mentioned that petitioner even placed additional order of 24,000.00 boxes, out of which, 14,000 had already been manufactured without any advance payment from Solar Harvest. Davao Corrugated then demanded that Solar Harvest remove boxes from their warehouse, pay balance of USD 15,400.00 for the additional boxes and P132,000.00 as storage fee. On August 17, 2001 Solar Harvest filed complaint against Davao Corrugated for sum of money and damages claiming that the agreement was for the delivery of the boxes, which Davao Corrugated did not do. They further alleged that whenever repeated follow-up was made to Davao Corrugated, they would only see sample boxes and get promise of delivery. Due to Davao Corrugated‘s failure to deliver, Solar Harvest had to cancel the order and demanded payment and/or refund which Davao Corrugated refused to pay. Davao Corrugated counterclaimed that they had already completed production of the 36,500 boxes plus additional 14,000 boxes (which was part of the additional 24,000 order that is unpaid). The agreement was for Solar Harvest to pick up the boxes, which they did not do. They even averred that on October 8, 1998 Solar Harvest‘s representative Bobby Que even went to the warehouse to inspect and saw that indeed boxes were ready for pick up. On Febuary 20, 1999, Que visited the factory again and said that they ought to sell the boxes to recoup some of the costs fo the 14,000 additional orders because their transaction to ship the bananas did not materialize. Solar Harvest denies that they made the additional order. On March 20, 2004 the Regional Trial Court ruled in favour of Davao Corrugated. ISSUE: Whether or not Davao Corrugated was responsible for breach of contract as Solar Harvest had not yet demanded from it the delivery of the Boxes. HELD: No. The Court of Appeals held that it was unthinkable that for around two years petitioner merely followed up and did not demand the delivery of the boxes. Even assuming that the agreement is for delivery by Davao Corrugated, respondent would not be liable for breach of contract as petitioner had not yet demanded from it the delivery of the boxes. There is no error in the decision of the Regional Trial Court. Furthermore, the claim for reimbursement is actually one for rescission or resolution of contract under Article 1191 of the Civil Code. The right to rescind contracts arises once the party defaults in the performance of his obligation. Article 1191 should be taken in conjunction with Article 1169: Those obliged to deliver or to do something in delay from the time oblige judicially or extrajudicially demands form them the fulfilment of their obligation. However the demand from creditor shall not necessary that delay may exist: Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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1. When the obligation of the law expressly os declares, or 2. When form the nature and the circumstance of the obligation it appears that the designation of the time when the thing is to be delivered or the service to be rendered was a controlling motive for the establishment of the contract; or 3. When the demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, the general rule is that the fulfilment of the parties‘s respective obligations should be simultaneous. No demand is necessary once a party fulfils his obligation and the other party fails to do his, the latter automatically incurs delay. When dates are set, the default for each obligation is determined by the rules given in the first paragraph of the article. Thus even in reciprocal obligations, if the periods for the fulfilment of the obligation is fixed, demand from the obligee is still necessary before the obligor can be considered in default and before a cause of action for rescission will accrue. In the case of Solar Harvest, merely following up the order was not the same as demanding for the boxes. The Supreme Court held that Solar Harvests petition is denied and that Davao Corrugated did not commit breach of contract and may remove the boxes from their premises after petitioner is given a period of time to remove them from their warehouse as they deem proper. The court gave them 30 day to comply with this.
Reyes v. Tuparan
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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MILA A. REYES, Petitioner, versus VICTORIA T. TUPARAN, Respondent. (G.R. No. 188064 June 1, 2011 2nd Division) MENDOZA, J.: FACTS: On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with Damages against Victoria T. Tuparan (respondent) before the RTC. In her Complaint, petitioner alleged, among others, that she was the registered owner of a 1,274 square meter residential and commercial lot located in Karuhatan, Valenzuela City, and covered by TCT No. V-4130; that on that property, she put up a three-storey commercial building known as RBJ Building and a residential apartment building; that since 1990, she had been operating a drugstore and cosmetics store on the ground floor of RBJ Building where she also had been residing while the other areas of the buildings including the sidewalks were being leased and occupied by tenants and street vendors. In December 1989, respondent leased from petitioner a space on the ground floor of the RBJ Building for her pawnshop business for a monthly rental of ₱4,000.00. A close friendship developed between the two which led to the respondent investing thousands of pesos in petitioner‘s financing/lending business from February 7, 1990 to May 27, 1990, with interest at the rate of 6% a month. On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings Bank and Loan Bank, Inc. (FSL Bank) to secure a loan of ₱2,000,000.00 payable in installments. On November 15, 1990, petitioner‘s outstanding account on the mortgage reached ₱2,278,078.13. Petitioner then decided to sell her real properties for at least ₱6,500,000.00 so she could liquidate her bank loan and finance her businesses. As a gesture of friendship, respondent verbally offered to conditionally buy petitioner‘s real properties for ₱4,200,000.00 payable on installment basis without interest and to assume the bank loan. To induce the petitioner to accept her offer, respondent offered the following conditions/concessions. After petitioner‘s verbal acceptance of all the conditions/concessions, both parties worked together to obtain FSL Bank‘s approval for respondent to assume her (petitioner‘s) outstanding bank account. The assumption would be part of respondent‘s purchase price for petitioner‘s mortgaged real properties. FSL Bank approved their proposal on the condition that petitioner would sign or remain as co-maker for the mortgage obligation assumed by respondent. Respondent, however, defaulted in the payment of her obligations on their due dates. Instead of paying the amounts due in lump sum on their respective maturity dates, respondent paid petitioner in small amounts from time to time. To compensate for her delayed payments, respondent agreed to pay petitioner an interest of 6% a month. As of August 31, 1992, respondent had only paid ₱395,000.00, leaving a balance of ₱805,000.00 as principal on the unpaid installments and ₱466,893.25 as unpaid accumulated interest. ISSUE: Whether or not the rescission is tenable. HELD: No. The Court agrees with the HELD of the courts below that the subject Deed of Conditional Sale with Assumption of Mortgage entered into by and among the two parties and FSL Bank on November 26, 1990 is a contract to sell and not a contract of sale. The title and ownership of the subject properties remains with the petitioner until the respondent fully pays the balance of the purchase price and the assumed mortgage obligation. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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Thereafter, FSL Bank shall then issue the corresponding deed of cancellation of mortgage and the petitioner shall execute the corresponding deed of absolute sale in favor of the respondent. Accordingly, the petitioner‘s obligation to sell the subject properties becomes demandable only upon the happening of the positive suspensive condition, which is the respondent‘s full payment of the purchase price. Without respondent‘s full payment, there can be no breach of contract to speak of because petitioner has no obligation yet to turn over the title. Respondent‘s failure to pay in full the purchase price is not the breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that prevents the petitioner from being bound to convey title to the respondent. Thus, the Court fully agrees with the CA when it resolved: "Considering, however, that the Deed of Conditional Sale was not cancelled by Vendor Reyes (petitioner) and that out of the total purchase price of the subject property in the amount of ₱4,200,000.00, the remaining unpaid balance of Tuparan (respondent) is only ₱805,000.00, a substantial amount of the purchase price has already been paid. It is only right and just to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes." Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the reason that, considering the circumstances, there was only a slight or casual breach in the fulfillment of the obligation. Unless the parties stipulated it, rescission is allowed only when the breach of the contract is substantial and fundamental to the fulfillment of the obligation. Whether the breach is slight or substantial is largely determined by the attendant circumstances. On the issue of interest, petitioner failed to substantiate her claim that respondent made a personal commitment to pay a 6% monthly interest on the ₱805,000.00 from the date of delinquency, December 31, 1991. As can be gleaned from the contract, there was a stipulation stating that: "All the installments shall not bear interest." The CA was, however, correct in imposing interest at the rate of 6% per annum starting from the filing of the complaint on September 11, 1992.
G.G. Sportwear Mfg. Corp v. World Class Properties, Inc.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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G.G. SPORTSWEAR MFG. CORP., Petitioner, versus WORLD CLASS PROPERTIES, INC., Respondent. (G.R. No. 182720 March 2, 2010 2nd Division) BRION, J.: FACTS: World Class is the owner/developer of Global Business Tower (now Antel Global Corporate Center), an office condominium project located on Julia Vargas Avenue and Jade Drive, Ortigas Center, Pasig City slated for completion on December 15, 1998. GG Sportswear, a domestic corporation, offered to purchase the 38th floor penthouse unit and 16 parking slots for 32 cars in World Class's condominium project for the discounted, pre-selling price of P89,624,272.82. After GG Sportswear paid the P500,000.00 reservation fee, the parties, on May 15, 1996, signed a Reservation Agreement (Agreement) that provides for the schedule of payments, including the stipulated monthly installments on the down payment and the balance on the purchase price. Based on the Agreement, the contract to sell pertaining to the entire 38th floor Penthouse unit and the parking slots would be executed upon the payment of thirty percent (30%) of the total purchase price. It also stipulated that all its provisions would be deemed incorporated in the contract to sell and other documents to be executed by the parties thereafter. The Agreement also specified that the failure of the buyer to pay any of the installments on the stipulated date would give the developer the right either to: (1) charge 3% interest per month on all unpaid receivables, or (2) rescind and cancel the Agreement without the need of any court action and, upon cancellation, automatically forfeit the reservation fee and other payments made by the buyer. From May to December 1996, GG Sportswear timely paid the installments due; the eight monthly installment payments amounted to a total of P19,717,339.50, or 21% of the total contract price. In a letter dated January 30, 1997, GG Sportswear requested the return of the outstanding postdated checks it previously delivered to World Class because it (GG Sportswear) intended to replace these old checks with new ones from the corporation‘s new bank. World Class acceded, but suggested the execution of a new Reservation Agreement to reflect the arrangement involving the replacement checks, with the retention of the other terms and conditions of the old Agreement. GG Sportswear did not object to the execution of a new Reservation Agreement, but requested that World Class defer the deposit of the replacement checks for 90 days. World Class denied this request, contending that a deferment would delay the subsequent monthly installment payments. It likewise demanded that GG Sportswear immediately pay its overdue January 1997 installment to avoid the penalties provided in the Agreement. On March 5, 1997, GG Sportswear delivered the replacement checks and paid the January 1997 installment payment which had been delayed by two months. World Class in turn issued a second Reservation Agreement, which it transmitted to GG Sportswear for the latter‘s conformity. World Class also sent GG Sportswear a provisional Contract to Sell, which stated that the condominium project would be ready for turnover to the buyer not later than December 15, 1998. GG Sportswear did not sign the second Reservation Agreement. Instead, it sent a letter to World Class, requesting that its check dated April 24, 1997 be deposited on May 15, 1997 because it was experiencing financial difficulties. When World Class rejected GG Sportswear‘s request, GG Sportswear sent Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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another letter informing World Class that the second Reservation Agreement was incomplete because it did not expressly provide the time of completion of the condominium unit. World Class countered that the provisional Contract to Sell it previously submitted to GG Sportswear expressly provided for the completion date (December 15, 1998) and insisted that GG Sportswear pay its overdue account. So, this petition is. ISSUE: Whether or not rescission is tenable. HELD: No. There was no breach on the part of World Class to justify the rescission and refund. GG Sportswear likewise has no legal basis to demand either the rescission of the Agreement or the refund of payments it made to World Class under the Agreement. Unless the parties stipulated it, rescission is allowed only when the breach of the contract is substantial and fundamental to the fulfillment of the obligation. Whether the breach is slight or substantial is largely determined by the attendant circumstances. But this is not the real issue here because no breach was made by the respondent. Even if we apply Article 1191 of the Civil Code, which provides: “Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.” The court observe that GG Sportswear, not World Class, substantially breached its obligations under the Agreement when it was remiss in the timely payment of its obligations, such that its January 1997 installment was paid only in March 1997, or two months after due date. GG Sportswear did not pay the succeeding installment dated April 1997 (presumably for February 1997) until it had filed its complaint in June 1997. A substantial breach of a reciprocal obligation, like failure to pay the price in the manner prescribed by the contract, entitles the injured party to rescind the obligation. Under this contractual term, it was World Class, not GG Sportswear, which had the ground to demand the rescission of the Agreement, as well as the prerogative to secure the forfeiture of all the payments already made by GG Sportswear.
Movido v. Reyes Pastor
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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VALENTIN MOVIDO, substituted by MARGINITO MOVIDO, Petitioner, versus LUIS REYES PASTOR, Respondent. (G.R. No. 172279 February 11, 2010 3rd Division) CORONA, J.: FACTS: Respondent Luis Reyes Pastor filed a complaint for specific performance in the Regional Trial Court (RTC) of Imus, Cavite, praying that petitioner Valentin Movido be compelled to cause the survey of a parcel of land subject of their contract to sell. In his complaint, respondent alleged that he and petitioner executed a kasunduan sa bilihan ng lupa where the latter agreed to sell a parcel of land located in Paliparan, Dasmariñas, Cavite with an area of some 21,000 sq. m. out of the 22,731 sq. m. covered by Transfer Certificate of Title (TCT) No. 362995 at P400/sq. m. Respondent further alleged that another kasunduan was later executed supplementing the kasunduan sa bilihan ng lupa. It provided that, if a Napocor power line traversed the subject lot, the purchase price would be lowered toP200/sq. m. beyond the distance of 15 meters on both sides from the center of the power line while the portion within a distance of 15 meters on both sides from the center of the power line would not be paid. Respondent alleged that he already paid petitioner P5 million out of the original purchase price of P8.4 million stated in the kasunduan sa bilihan ng lupa. He was willing and ready to pay the balance of the purchase price but due to petitioner‘s refusal to have the property surveyed despite incessant demands, his unpaid balance could not be determined with certainty. ISSUE: Whether or not rescission is tenable. HELD: No. Rescission is only allowed when the breach is so substantial and fundamental as to defeat the object of the parties in entering into the contract. We find no such substantial or material breach. It is true that respondent failed to pay the 7th and 8th installments of the purchase price. However, considering the circumstances of the instant case, particularly the provisions of the kasunduan, respondent cannot be deemed to have committed a serious breach. In the first place, respondent was not in default as petitioner never made a demand for payment.1avvphi1 Moreover, the kasunduan sa bilihan ng lupa and the kasunduan should both be given effect rather than be declared conflicting, if there is a way of reconciling them. Petitioner and respondent would not have entered into either of the agreements if they did not intend to be bound or governed by them. Indeed, taken together, the two agreements actually constitute a single contract pertaining to the sale of a land to respondent by petitioner. Their stipulations must therefore be interpreted together, attributing to the doubtful ones that sense that may result from all of them taken jointly. Their proper construction must be one that gives effect to all and favour the efficacy of the contract.
Spouse Tongson v. Emergency Pawnshop Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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SPOUSES CARMEN S. TONGSON and JOSE C. TONGSON substituted by his children namely: JOSE TONGSON, JR., RAUL TONGSON, TITA TONGSON, GLORIA TONGSON ALMA TONGSON, Petitioners, versus EMERGENCY PAWNSHOP BULA, INC. and DANILO R. NAPALA, Respondents. (G.R. No. 167874 January 15, 2010 2nd Division) CARPIO, J.: FACTS: In May 1992, Napala offered to purchase from the Spouses Tongson their 364-square meter parcel of land, situated in Davao City and covered by Transfer Certificate of Title (TCT) No. 143020, for P3,000,000. Finding the offer acceptable, the Spouses Tongson executed with Napala a Memorandum of Agreement dated 8 May 1992. On 2 December 1992, respondents‘ lawyer Atty. Petronilo A. Raganas, Jr. prepared a Deed of Absolute Sale indicating the consideration as only P400,000. When Carmen Tongson "noticed that the consideration was very low, she [complained] and called the attention of Napala but the latter told her not to worry as he would be the one to pay for the taxes and she would receive the net amount of P3,000,000." To conform with the consideration stated in the Deed of Absolute Sale, the parties executed another Memorandum of Agreement, which allegedly replaced the first Memorandum of Agreement, showing that the selling price of the land was only P400,000. Upon signing the Deed of Absolute Sale, Napala paid P200,000 in cash to the Spouses Tongson and issued a postdated Philippine National Bank (PNB) check in the amount of P2,800,000, representing the remaining balance of the purchase price of the subject property. Thereafter, TCT No. 143020 was cancelled and TCT No. T-186128 was issued in the name of EPBI. When presented for payment, the PNB check was dishonored for the reason "Drawn Against Insufficient Funds." Despite the Spouses Tongson's repeated demands to either pay the full value of the check or to return the subject parcel of land, Napala failed to do either. Left with no other recourse, the Spouses Tongson filed with the Regional Trial Court, Branch 16, Davao City a Complaint for Annulment of Contract and Damages with a Prayer for the Issuance of a Temporary Restraining Order and a Writ of Preliminary Injunction. In their Answer, respondents countered that Napala had already delivered to the Spouses Tongson the amount ofP2,800,000 representing the face value of the PNB check, as evidenced by a receipt issued by the Spouses Tongson. Respondents pointed out that the Spouses Tongson never returned the PNB check claiming that it was misplaced. Respondents asserted that the payment they made rendered the filing of the complaint baseless. At the pre-trial, Napala admitted, among others, issuing the postdated PNB check in the sum of P2,800,000. The Spouses Tongson, on the other hand, admitted issuing a receipt which showed that they received the PNB check from Napala. Thereafter, trial ensued. ISSUE: Whether or not rescission is not tenable because the contract entered into is based on fraud employed. HELD: Yes. Indisputably, the Spouses Tongson as the sellers had already performed their obligation of executing the Deed of Sale, which led to the cancellation of their title in favor of EPBI. Respondents as the buyers, on the other hand, failed to perform their correlative obligation of paying the full amount of the contract price. While Napala paidP200,000 cash to the Spouses Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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Tongson as partial payment, Napala issued an insufficiently funded PNB check to pay the remaining balance of P2.8 million. Despite repeated demands and the filing of the complaint, Napala failed to pay the P2.8 million until the present. Clearly, respondents committed a substantial breach of their reciprocal obligation, entitling the Spouses Tongson to the rescission of the sales contract. The law grants this relief to the aggrieved party, thus: “Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.” “ART. 1385. Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.” While they did not file an action for the rescission of the sales contract, the Spouses Tongson specifically prayed in their complaint for the annulment of the sales contract, which one effect is rescission, for the immediate execution of a deed of reconveyance, and for the return of the subject property to them. The Spouses Tongson likewise prayed "for such other reliefs which may be deemed just and equitable in the premises." In view of such prayer, and considering respondents‘ substantial breach of their obligation under the sales contract, the rescission of the sales contract is but proper and justified. Accordingly, respondents must reconvey the subject property to the Spouses Tongson, who in turn shall refund the initial payment of P200,000 less the costs of suit.
Sanz Maceda v. DBO
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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BONIFACIO SANZ MACEDA, JR., Petitioner, versus DEVELOPMENT BANK OF THE PHILIPPINES, Respondent. (G.R. No. 174979 August 11, 2010 2nd Division) CARPIO, J.: FACTS: It appears that on July 28, 1976 plaintiff Bonifacio Maceda, Jr. (Maceda) obtained a loan from the defendant DBP in the amount of P7.3 million to finance the expansion of the Old Gran Hotel in Leyte. Upon approval of said loan, plaintiff Maceda executed a promissory note and a mortgage of real estate. Project cost of the New Gran Hotel wasP10.5M. DBP fixed a debtequity ratio of 70%-30%, corresponding to DBP and Maceda‘s respective infusion in the hotel project. Maceda‘s equity infusion was P2.93M, or 30% of P10.5M. The DBP Governor at that time, Recio Garcia, in-charge of loans for hotels, allegedly imposed the condition that DBP would choose the building contractor, namely, Moreman Builders Co. (Moreman). The contractor would directly receive the loan releases from DBP, after verification by DBP of the construction progress. The period of loan availment was 360 days from date of initial release of the loan. Similarly, suppliers of equipment and furnishings for the hotel were also to be paid directly by DBP. The construction deadline was set for December 22, 1977. Maceda filed a complaint for Rescission of the building contract with Damages against the contractor Moreman, before the then Manila Court of First Instance Branch 39, which was docketed as Civil Case No. 113498. In its decision dated November 28, 1978, the CFI rescinded the building contract, suspended the period of availment, allowed Maceda to himself take over construction, and directed DBP to release to Maceda the sum of P1.003M, which had previously been approved for release in January 1978. The DBP was further ordered to give plaintiff Maceda such other amounts still pending release. Moreman filed an appeal which was subsequently dismissed in 1990 by the Supreme Court. Entry of judgment on this case was issued on April 23, 1990. In the meantime, Maceda also instituted the case a quo for Specific Performance with Damages against defendant DBP before the Makati RTC in 1984. The Manila CFI‘s November 28, 1978 Decision and the factual findings therein contained became part of the evidence submitted before the Makati RTC. In essence, Maceda‘s complaint before the Makati RTC alleged that DBP conspired with the contractor, Moreman, by approving anomalous loan releases to the latter despite exaggerated charges and valuation made by said contractor on the hotel project. In effect, it was alleged that despite only a 15% accomplishment which should have cost only P700,000.00, the contractor, thru the active connivance of the DBP, was able to rake in a total ofP3,174,358.38 or 60% of the cost of the projected hotel building. When plaintiff Maceda himself tried to resume the completion and construction of the hotel project, after the building contract with Moreman was already rescinded by the CFI Manila, defendant allegedly blocked efforts of the plaintiff by delaying the release of funds from his loan with the DBP and imposing onerous conditions which made it difficult for plaintiff to pursue the construction of the New Gran Hotel. It was further alleged that due to such delays on the part of the DBP, the period of availment of the loan expired without the plaintiff‘s [sic] having availed of the total approved amount of their loan. The construction of the hotel was never finished. Worse, due to interests and penalties, the obligation of the plaintiff has ballooned to P11,817,365.90 as of January 31, 1984, not to mention the amount ofP810,702.68 supposedly representing Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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interests and charges for the period of February 1, 1978 to October 1979. Finally, DBP allegedly threatened to foreclose the mortgaged properties of the plaintiff. ISSUE: Whether or not the rescission is properly granted as the specific performance is impossible. HELD: Yes. The court finds credit in the finding that DBP actively connived with the contractor in the anomalous loan releases. DBP falsely argues that releases on the loan were coursed thru the plaintiff-appellant and the checks were drawn jointly in the names of Maceda and Moreman. As found by the RTC, the records show that checks were drawn only in the name of Moreman and plaintiff‘s conformity to fund releases were solicited by DBP after the fact of release, not before. Direct releases to the plaintiff, instead of Moreman, began only after Moreman was discharged as contractor. Further, it was agreed that payment to Moreman Builders would be assessed against actual construction of the project upon DBP‘s verification. Thus, DBP contributed in the swindling perpetrated by Moreman against the plaintiff because it improperly discharged its duty as verifier of the construction project. Under Article 1191 of the Civil Code, the aggrieved party has a choice between specific performance and rescission with damages in either case. However, we have ruled that if specific performance becomes impractical or impossible, the court may order rescission with damages to the injured party. After the lapse of more than 30 years, it is now impossible to implement the loan agreement as it was written, considering the absence of evidence as to the rising costs of construction, as well as the obvious changes in market conditions on the viability of the operations of the hotel. We deem it equitable and practicable to rescind the obligation of DBP to deliver the balance of the loan proceeds to Maceda. In exchange, we order DBP to pay Maceda the value of Maceda‘s cash equity of P6,153,398.05 by way of actual damages, plus the applicable interest rate. The present HELD comes within the purview of Maceda‘s and DBP‘s prayers for "other reliefs, just or equitable under the premises."
Raquel-Santos v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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ARMAND O. RAQUEL-SANTOS and ANNALISSA MALLARI, Petitioners, versus COURT OF APPEALS and FINVEST SECURITIES CO., INC., Respondents. (G.R. No. 174986 July 7, 2009 3rd Division) FINVEST SECURITIES CO., INC., Petitioner, versus TRANS-PHIL MARINE ENT., INC. and ROLAND H. GARCIA, Respondents. (G.R. No. 181415 July 7, 2009 3rd Division) NACHURA, J.: FACTS: This is a consolidated case decided by the Supreme Court. Finvest is a stock brokerage corporation duly organized under Philippine laws and is a member of the PSE with one membership seat pledged to the latter. Armand O. Raquel-Santos (Raquel-Santos) was Finvest‘s President and nominee to the PSE from February 20, 1990 to July 16, 1998. Annalissa Mallari (Mallari) was Finvest‘s Administrative Officer until December 31, 1998. In the course of its trading operations, Finvest incurred liabilities to PSE representing fines and penalties for non-payment of its clearing house obligations. PSE also received reports that Finvest was not meeting its obligations to its clients. Consequently, PSE indefinitely suspended Finvest from trading. The Securities and Exchange Commission (SEC) also suspended its license as broker. TMEI and Roland Garcia filed a complaint against Finvest with the SEC praying for the delivery of stock certificates and payment of dividends on the stocks they purchased. The Complaint alleged that, from February 4, 1997 to July 31, 1997, TMEI and Roland Garcia purchased shares of stock of Piltel Corporation through Finvest. In particular, TMEI purchased 63,720 shares for P1,122,863.13 while Garcia purchased 40,000 shares forP500,071.25. Finvest failed to deliver to them the stock certificates despite several demands. TMEI and Roland Garcia also claimed that they were entitled to the dividends declared by Piltel from the time they purchased the shares of stock. This happened because of Raquel-Santos and Mallari took undue advantage of their positions by diverting to their personal use and benefit the unaccounted stock certificates and sales proceeds. ISSUE: Whether or not the rescission is valid. FACTS: Yes. The CA was correct in applying Article 1191 of the Civil Code, which indicates the remedies of the injured party in case there is a breach of contract: ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the 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 impossible. Initially, respondents sought the fulfillment of Finvest‘s obligation to deliver the stock certificates, instead of a rescission. They changed their minds later and amended the prayer in their complaint and opted for a refund of the purchase price plus damages. The trial court allowed the amendment, there being no objection from Finvest. For a valid transfer of stocks, the requirements are as follows: (a) there must be delivery of the stock certificate; (b) the certificate must be endorsed by Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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the owner or his attorney-in-fact or other persons legally authorized to make the transfer; and (c) to be valid against third parties, the transfer must be recorded in the books of the corporation. Clearly, Finvest‘s failure to deliver the stock certificates representing the shares of stock purchased by TMEI and Garcia amounted to a substantial breach of their contract which gave rise to a right to rescind the sale.
Francisco v. DEAC Const. Inc. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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SPS. LINO FRANCISCO & GUIA FRANCISCO, petitioners, versus DEAC CONSTRUCTION, INC. and GEOMAR A. DADULA, respondents. (G.R. No. 171312 February 4, 2008 2nd Division) TINGA, J.: FACTS: Plaintiffs-appellees Lino Francisco and Guia Francisco obtained the services of defendant-appellant DEAC Construction, Inc. (DEAC) to construct a 3-storey residential building with mezzanine and roof deck on their lot located at 118 Pampanga Street, Gagalangin, Tondo, Manila for a contract price of P3,500,000.00. As agreed upon, a downpayment of P2,000,000.00 should be paid upon signing of the contract of construction, and the remaining balance of P1,500,000.00 was to be paid in two equal installments: the first installment ofP750,000.00 should be paid upon completion of the foundation structure and the ground floor, which amount would be used primarily for the construction of the second floor to the roof deck while the final amount of P750,000.00 should be paid upon completion of the second floor up to the roof deck structure to defray the expenses necessary for finishing and completion of the building. To undertake the said project, DEAC engaged the services of a sub-contractor, Vigor Construction and Development Corporation, but allegedly without the plaintiffs-appellees' knowledge and consent. On September 12, 1994, even prior to the execution of the contract, the plaintiffs-appellees had paid the downpayment of P2,000,000.00. The amount of P200,000.00 was again paid to DEAC on February 27, 1995 followed by the payment of P550,000.00 on April 2, 1995. Plaintiff-appellant Guia Francisco likewise paid the amount of P80,000.00 on June 5, 1995 for the requested "additional works" on the project. The construction of the residential building commenced in October 1994 although DEAC, upon which the obligation pertained, had not yet obtained the necessary building permit for the proposed construction. It was on this basis that the owner Lino Francisco was charged with violation of Section 301, Chapter 3 (Illegal Construction) of [P.D. No.] 1096 otherwise known as the National Building Code of the Philippines with the Metropolitan Trial Court of Manila, Branch 12. On March 7, 1995, the Office of the Building Official of the City of Manila finally issued the requisite Building Permit. Thus, the complaint against owner Lino Francisco was accordingly dismissed. As admitted by DEAC, the release of the said permit was withheld because of the erroneous designation of the location of the lot in one of the building plans. Thus, DEAC had to make the necessary adjustment. However, before the Office of the Building Official finally approved the amended building plan, it made some necessary corrections therein. And to facilitate the said approval and the subsequent release of the building permit, the signatures of plaintiff-appellee Guia Francisco in the said amended and corrected building plans were forged by DEAC's representative. But aside from [the] lack of building permit, the building inspector also observed, after periodic inspections of the construction site, that the contractor deviated, on some specifications, from the approved plans. Thus, on April 7, 1995, the Office of the Building Official of Manila issued another Notice of Violation against owner Lino Francisco, while at the same time calling the attention of the contractor, on account of deviations and violations. ISSUE: Whether or not rescission should be granted here in the case.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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HELD: Yes. Article 1191 of the Civil Code provides that the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The rescission referred to in this article, more appropriately referred to as resolution, is not predicated on injury to economic interests on the part of the party plaintiff, but of breach of faith by the defendant which is violative of the reciprocity between the parties. The right to rescind may be waived, expressly or impliedly. The petitioner maintain that they did not waive their right to demand rescission as a result of the disputed deviations and because of the fact that DEAC commenced construction without first securing a building permit as was incumbent upon it under their contract. In fact, apart from the present case, the Spouses Francisco filed a criminal suit against respondent Dadula taking him to task for these violations, of which the latter was found guilty. Respondents DEAC and Dadula, to whom the obligation of securing the building permit pertained, should obviously have ensured compliance with the requirements set forth by law. At the very least, good faith and fair dealing ordain that they inform the Spouses Francisco that the building permit had not yet been issued especially that they had already received a substantial amount of money from the latter and had already started the construction of the building. Given the fact that the construction in this case is already 75% complete, the trial court was correct in ordering partial rescission only of the undelivered or unfinished portion of the construction. Equitable considerations justify rescission of the portion of the obligation which had not been delivered.
Cannu V. Galang SPS. FELIPE AND LETICIA CANNU, petitioners, versus SPS. GIL AND FERNANDINA GALANG AND NATIONAL HOME MORTGAGE FINANCE CORPORATION,respondents. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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(G.R. No. 139523 May 26, 2005 2nd Division) CHICO-NAZARIO, J.: FACTS: Respondents-spouses Gil and Fernandina Galang obtained a loan from Fortune Savings & Loan Association for P173,800.00 to purchase a house and lot located at Pulang Lupa, Las Piñas, in the names of respondents-spouses. To secure payment, a real estate mortgage was constituted on the said house and lot in favor of Fortune Savings & Loan Association. In early 1990, NHMFC purchased the mortgage loan of respondents-spouses from Fortune Savings & Loan Association for P173,800.00. Petitioner Leticia Cannu agreed to buy the property for P120,000.00 and to assume the balance of the mortgage obligations with the NHMFC and with CERF Realty (the Developer of the property). A Deed of Sale with Assumption of Mortgage Obligation dated 20 August 1990 was made and entered into by and between spouses Fernandina and Gil Galang (vendors) and spouses Leticia and Felipe Cannu (vendees) over the house and lot and petitioners immediately took possession and occupied the house and lot. However, despite requests from Adelina R. Timbang and Fernandina Galang to pay the balance of P45,000.00 or in the alternative to vacate the property in question, petitioners refused to do so. Because the Cannus failed to fully comply with their obligations, respondent Fernandina Galang, on 21 May 1993, paid P233,957.64 as full payment of her remaining mortgage loan with NHMFC. From 1991 until the present, no other payments were made by plaintiffsappellants to defendants-appellees spouses Galang. Out of the P250,000.00 purchase price which was supposed to be paid on the day of the execution of contract in July, 1990 plaintiffs-appellants have paid, in the span of eight (8) years, from 1990 to present, the amount of only P75,000.00. Plaintiffsappellants should have paid the P250,000.00 at the time of the execution of contract in 1990. Eight (8) years have already lapsed and plaintiffs-appellants have not yet complied with their obligation. ISSUE: Whether or not the action for rescission will be granted due that there was a substantial breach of the obligation. HELD: Yes. Rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party that violates the reciprocity between them. Art. 1191 states that the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the 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 impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. Rescission will not be permitted for a slight or casual breach of the contract. Rescission may be had only for such breaches that are substantial and fundamental as to defeat the object of the parties in making the agreement. The question of whether a breach of contract is substantial depends upon the attending circumstances and not merely on the percentage of the amount not paid. Thus, the petitioners‘ failure to pay the remaining balance of P45,000.00 is substantial. Even assuming arguendo that only said amount was left out of the supposed consideration of P250,000.00, or eighteen Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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percent thereof, this percentage is still substantial. Their failure to fulfill their obligation gave the respondents-spouses Galang the right to rescission.
Villanueva v. Estate of Gonzaga
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
225
GENEROSO V. VILLANUEVA and RAUL C. VILLANUEVA, JR., Petitioners, versus ESTATE OF GERARDO L. GONZAGA/MA. VILLA GONZAGA, in her capacity as Administratrix, Respondents. (G.R. No. 157318 August 9, 2006 2nd Division) PUNO, J.: FACTS: On January 15, 1990, petitioners Generoso Villanueva and Raul Villanueva, Jr., business entrepreneurs engaged in the operation of transloading stations and sugar trading, and respondent Estate of Gerardo L. Gonzaga, represented by its Judicial Administratrix, respondent Ma. Villa J. Gonzaga, executed a MOA. As stipulated in the agreement, petitioners introduced improvements after paying P291,600.00 constituting sixty (60%) percent of the total purchase price of the lots. Petitioners then requested permission from respondent Administratrix to use the premises for the next milling season. Respondent refused on the ground that petitioners cannot use the premises until full payment of the purchase price. Petitioners informed respondent that their immediate use of the premises was absolutely necessary and that any delay will cause them substantial damages. Respondent remained firm in her refusal, and demanded that petitioners stop using the lots as a transloading station to service the Victorias Milling Company unless they pay the full purchase price. In a letter-reply dated April 5, 1991, petitioners assured respondent of their readiness to pay the balance but reminded respondent of her obligation to redeem the lots from mortgage with the Philippine National Bank (PNB). Petitioners gave respondent ten (10) days within which to do so. On April 10, 1991, respondent Administratrix wrote petitioners informing them that the PNB had agreed to release the lots from mortgage. She demanded payment of the balance of the purchase price. Enclosed with the demand letter was the PNB‘s letter of approval dated April 8, 1991. Petitioners demanded that respondent show the clean titles to the lots first before they pay the balance of the purchase price. Respondent merely reiterated the demand for payment. Petitioners stood pat on their demand. On May 28, 1991, respondent Administratrix executed a Deed of Rescission rescinding the MOA. In their Letter dated June 13, 1991, petitioners, through counsel, formally demanded the production of the titles to the lots before they pay the balance of the purchase price. The demand was ignored. Consequently, on June 19, 1991, petitioners filed a complaint against respondents for breach of contract, specific performance and damages before the RTC-Bacolod City. The trial court decided the case in favor of respondents. Petitioners filed a petition for review before the Court of Appeals. The Court of Appeals affirmed the trial court‘s decision but deleted the award for moral damages on the ground that petitioners were not guilty of bad faith in refusing to pay the balance of the purchase price. ISSUE: Whether or not there is legal, or even a factual, ground for the rescission of the Memorandum of Agreement. HELD: No. There is no legal basis for the rescission. The remedy of rescission under Art. 1191 of the Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them. The MOA between petitioners and respondents is a conditional contract to sell. Ownership over the lots is not to pass to the petitioners until full payment of the purchase price. Petitioners‘ obligation to pay, in turn, is conditioned upon the release of the lots from Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
226
mortgage with the PNB to be secured by the respondents. Although there was no express provision regarding reserved ownership until full payment of the purchase price, the intent of the parties in this regard is evident from the provision that a deed of absolute sale shall be executed only when the lots have been released from mortgage and the balance paid by petitioners. Since ownership has not been transferred, no further legal action need have been taken by the respondents, except an action to recover possession in case petitioners refuse to voluntarily surrender the lots. The records show that the lots were finally released from mortgage in July 1991. Petitioners have always expressed readiness to pay the balance of the purchase price once that is achieved. Hence, petitioners should be allowed to pay the balance now, if they so desire, since it is established that respondents‘ demand for them to pay in April 1991 was premature.
Paguyo v. Astorga
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
227
SPOUSES DOMINGO and LOURDES PAGUYO, Petitioners, versusPierre astorga and St. Andrew Realty, Inc., Respondent. G.R. No. 130982 September 16, 2005 CHICO-NAZARIO, J.: FACTS: Herein petitioners were the owners of a small five-storey building located at Makati City. This lot which the Paguyo building stands was the subject of a civil case, rendered a decision on January 20, 1998 approving a compromise agreement made between the Armases and the petitioners. In order for the petitioners to complete their title and ownership over the lots in question, there was an urgent need to make complete payment to the Armases. On November 29, 1998, in order to raise the much needed amount, petitioner Lourdes Paguyo entered into an agreement captioned as Receipt of Earnest Money with respondent Astoga, for the sale of the former‘s property consisting of the lot which was to be purchased from the Armases. However, contrary to their express representation with respect to the subject lot, petitioners failed to comply with their obligation to acquire the lot from the Armas family despite the full financial support of respondents. Due also to the urgent necessity of obtaining money to finance their construction business, petitioner proposed to respondent the separate sale of the building in question while she continued to work on the acquisition of the lot from the Armas family. Respondents agreed to petitioner‘s proposal to buy the building first, thus, the parties executed four documents. Thereafter, the respondents renamed the building into GINZA building and registered the same in the name of respondents St. Andrew Realty Inc. Pursuant to their agreement contained in the Mutual Undertaking, respondent company filed an ejectment case and obtained a favorable decision against petitioners The petitioners then filed a complaint for the rescission of the Receipt of Earnest Money with the undertaking to return the sum of P763, 890.50 and rescission of the other four documents they signed. ISSUE: Whether or not rescission is proper. HELD: Yes. The right to rescind a contract involving reciprocal obligations is provided for in Article 1191 of the Civil Code. Article 1191 states: The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the 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 impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. Moreover, Articles 1355 and 1470 of the Civil Code state: Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code, which would invalidate, or even affect, the Deed of Sale of the Building and the related documents. Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale. In sum, petitioners pray for rescission of the Deed of Sale of the building Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
228
and offer to repay the purchase price after their liquidity position would have improved and after respondents would have refurbished the building, updated the real property taxes, and turned the building into a profitable business venture. The court stated however that, it will not allow itself to be an instrument to the dissolution of contract validly entered into, for a party should not, after its opportunity to enjoy the benefits of an agreement, be allowed to later disown the arrangement when the terms thereof ultimately would prove to operate against its hopeful expectations.
Casino v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
229
BIENVENIDO M. CASIÑO, JR., Petitioners, versus THE COURT OF APPEALS and OCTAGON REALTY DEVELOPMENT CORPORATION, Respondent. G.R. No. 133803 September 16, 2005 3rd Division GARCIA, J.:
FACTS: Respondent alleges that on December 22, 1989, it entered into a contract with petitioner for the supply and installation by the latter of narra wood parquet to the Manila Luxury Condominium Project of which respondent is the developer. The contract stipulated that full delivery by petitioner of labor and material was in May 1990. Respondent paid to petitioner 40% of the total contract price; that after delivery only 26, 727.02 sq. ft. of wood parquet materials, petitioner incurred in delay in the delivery of the remainder of 34, 245.98 sq. ft.; that petitioner misrepresented to respondent that he is qualified to do the work contracted when in truth and in fact he was not and, furthermore, he lacked the necessary funds to execute the work. That in order to minimize loses, the respondent contracted the services of another to complete the unfinished work. The respondent in its complaint prays for rescission of contract. ISSUE: Whether or not the rescission of the contract by the private respondent is valid. HELD: Under the contract, petitioner and respondent had respective obligations, i.e., the former to supply and deliver the contracted volume of narra wood parquet materials and install the same at respondent‘s condominium project by May, 1990, and the latter, to pay for said materials in accordance with the terms of payment set out under the parties‘ agreement. But while respondent was able to fulfill that which is incumbent upon it by making a down payment representing 40% of the agreed price upon the signing of the contract and even paid the first billing of petitioner, the latter failed to comply with his contractual commitment. For, after delivering only less than one-half of the contracted materials, petitioner failed, by the end of the agreed period, to deliver and install the remainder despite demands for him to do so. Thus, it is petitioner who breached the contract. The petitioner therefore, has failed to comply with his prestations under his contract with respondent, the latter is vested by law with the right to rescind the parties‘ agreement, conformably with Article 1191 of the Civil Code. However, the right to rescind a contract for non-performance of its stipulations is not absolute. The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties in making the agreement. Contrary to petitioner‘s asseveration, the breach he committed cannot, by any measure, be considered as ―slight or casual‖. For petitioner‘s failure to make complete delivery and installation way beyond the time stipulated despite respondent‘s demands, is doubtless a substantial and fundamental breach, more so when viewed in the light of the large amount of money respondent had to pay another contractor to complete petitioner‘s unfinished work. Likewise, contrary to petitioner‘s claim, it cannot be said that he had no inkling whatsoever of respondent‘s recourse to rescission. Petitioner cannot feign ignorance of respondent‘s intention to rescind, fully aware, as he was, of his non-compliance with what was incumbent upon him, and not to mention Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
230
the several letters respondent sent to him demanding compliance with his obligation.
Carrascoso v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
231
FERNANDO CARRASCOSO, JR., Petitioner, versus THE HONORABLE COURT OF APPEALS, LAURO LEVISTE, as Director and Minority Stockholder and On Behalf of Other Stockholders of El Dorado Plantation, Inc. and EL DORADO PLANTATION, INC., represented by one of its minority stockholders, Lauro P. Leviste, Respondents G.R. No. 123672 December 14, 2005 3rd Division CARPIO MORALES, J.:
FACTS: El Dorado Plantation, Inc. was the registered owner of a parcel of land with an area of approximately 1,825 hectares covered by Transfer Certificate of Title (TCT) No. T-93 situated in Sablayan, Occidental Mindoro. On February 15, 1972, at a special meeting of El Dorado‘s Board of Directors, a Resolution was passed authorizing Feliciano Leviste, then President of El Dorado, to negotiate the sale of the property and sign all documents and contracts bearing thereon. On March 23, 1972, by a Deed of Sale of Real Property, El Dorado, through Feliciano Leviste, sold the property to Fernando O. Carrascoso, Jr. From the provisions of the Deed of Sale, Carrascoso was to pay the full amount of the purchase price on March 23, 1975. The 3-year period for Carrascoso to fully pay for the property on March 23, 1975 passed without him having complied therewith. Lauro Leviste (Lauro), a stockholder and member of the Board of Directors of El Dorado, through his counsel, Atty. Benjamin Aquino, by letter dated December 27, 1976, called the attention of the Board to Carrascoso‘s failure to pay the balance of the purchase price of the property amounting to P1,300,000.00. And Lauro‘s lawyer manifested that: Lauro‘s desire to rescind the sale was reiterated in two other letters addressed to the Board dated January 20, 1977 and March 3, 1977. Jose P. Leviste, as President of El Dorado, later sent a letter of February 21, 1977 to Carrascoso informing him that in view of his failure to pay the balance of the purchase price of the property, El Dorado was seeking the rescission of the March 23, 1972 Deed of Sale of Real Property. Lauro and El Dorado finally filed on March 15, 1977 a complaint for rescission of the March 23, 1972 Deed of Sale of Real Property between El Dorado and Carrascoso with damages before the Court of First Instance (CFI) of Occidental Mindoro, docketed as Civil Case No. R-226. Lauro and El Dorado also sought the cancellation of TCT No. T-6055 in the name of Carrascoso and the revival of TCT No. T-93 in the name of El Dorado, free from any liens and encumbrances. Furthermore, the two prayed for the issuance of an order for Carrascoso to: (1) reconvey the property to El Dorado upon return to him of P500,000.00, (2) secure a discharge of the real estate mortgage constituted on the property from HSB, (3) submit an accounting of the fruits of the property from March 23, 1972 up to the return of possession of the land to El Dorado, (4) turn over said fruits or the equivalent value thereof to El Dorado and (5) pay the amount of P100,000.00 for attorney‘s fees and other damages. Also on March 15, 1977, Lauro and El Dorado caused to be annotated on TCT No. T-6055 a Notice of Lis Pendens, inscribed as Entry No. 39737. In his Answer with Compulsory Counterclaim, Carrascoso alleged that: (1) he had not paid his remaining P1,300,000.00 obligation under the March 23, 1972 Deed of Sale of Real Property in view of the extensions of time to comply therewith granted him by El Dorado; (2) the complaint suffered from fatal defects, there being no showing of compliance with the condition precedent of exhaustion of intra-corporate remedies and the requirement that a Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
232
derivative suit instituted by a complaining stockholder be verified under oath; (3) El Dorado committed a gross misrepresentation when it warranted that the property was not being cultivated by any tenant to take it out of the coverage of the Land Reform Code; and (4) he suffered damages due to the premature filing of the complaint for which Lauro and El Dorado must be held liable. The Regional Trial Court dismissed the complaint on the ground of prematurity but on January 31, 1996, the appellate court reversed the decision of the trial court. ISSUE: Whether or not the Court of Appeals acted with grave abude of discretion and committed a mistake of law in not declaring that the action for rescission was prematurely filed. HELD: Art. 1191 of the Civil Code states that: The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the 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 impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. The right of rescission of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party who violates the reciprocity between them. A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the ownership of and deliver a determinate thing, and the buyer obligates itself to pay therefor a price certain in money or its equivalent. The non-payment of the price by the buyer is a resolutory condition which extinguishes the transaction that for a time existed, and discharges the obligations created thereunder. Such failure to pay the price in the manner prescribed by the contract of sale entitles the unpaid seller to sue for collection or to rescind the contract. In the case at bar, El Dorado already performed its obligation through the execution of the March 23, 1972 Deed of Sale of Real Property which effectively transferred ownership of the property to Carrascoso. The latter, on the other hand, failed to perform his correlative obligation of paying in full the contract price in the manner and within the period agreed upon. The terms of the Deed are clear and unequivocal: Carrascoso was to pay the balance of the purchase price of the property amounting to P1,300,000.00 plus interest thereon at the rate of 10% per annum within a period of three (3) years from the signing of the contract on March 23, 1972. When Jose Leviste Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
233
informed him that El Dorado was seeking rescission of the contract by letter of February 21, 1977, the period given to him within which to fully satisfy his obligation had long lapsed. The El Dorado Board Resolution and the Affidavit of Jose Leviste interposing no objection to Carrascoso‘s mortgaging of the property to any bank did not have the effect of suspending the period to fully pay the purchase price, as expressly stipulated in the Deed, pending full payment of any mortgage obligation of Carrascoso.
Goldenrod v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
234
GOLDENROD, INC., petitioner, versus COURT OF APPEALS, PIO BARRETO & SONS, INC., PIO BARRETO REALTY DEVELOPMENT, INC. and ANTHONY QUE, respondents. G.R. No. 126812 November 24, 1998 1st Division BELLOSILLO, J.: FACTS: Pio Barreto and Sons, Inc. owned forty-three (43) parcels of registered land with a total area of 18,500 square meters located at Carlos Palanca St., Quiapo, Manila, which were mortgaged with United Coconut Planters Bank (UCPB). In 1988, the obligation of the corporation with UCPB remained unpaid making foreclosure of the mortgage imminent. Goldenrod, Inc. offered to buy the property from BARRETO & SONS. On 25 May 1988, through its president, petitioner wrote respondent Anthony Que, President of respondent BARRETO & SONS, as follows: ……….we prefer that the lots be reconsolidated back to its mother titles. Enclosed is the earnest money of P1 million which shall form part of the purchase price. Payment of the agreed total consideration shall be effected in accordance with our offer as you have accepted and upon execution of the necessary documents of sale to be implemented after the said reconsolidation of the lots. Kindly acknowledge receipt of the earnest money. When the term of existence of BARRETO & SONS expired, all its assets and liabilities including the property located in Quiapo were transferred to Pio Barreto Realty Development, Inc. Petitioner's offer to buy the property resulted in its agreement with respondent BARRETO REALTY that petitioner would pay the following amounts: (a) P24.5 million representing the outstanding obligations of BARRETO REALTY with UCPB on 30 June 1988, the deadline set by the bank for payment; and, (b) P20 million which was the balance of the purchase price of the property to be paid in installments within a 3-year period with interest at 18% per annum. On 30 August 1988 Alicia P. Logarta, President of Logarta Realty and Development Corporation, which acted as agent and broker of petitioner, wrote private respondent Anthony Que informing him on behalf of petitioner that it could not go through with the purchase of the property due to circumstances beyond its fault. On 31 August 1988 respondent BARRETTO REALTY sold to Asiaworld Trade Center Phils., Inc., Lot 2, one of the two (2) consolidated lots, for the price of P23 million. On 13 October 1988 respondent BARRETTO REALTY executed a deed transferring by way of " dacion " the property reconsolidated as Lot 1 in favor of UCPB, which in turn sold the property to ASIAWORLD for P24 million. On 12 December 1988 Logarta again wrote respondent Que demanding the return of the earnest money to GOLDENROD. On 7 February 1989 petitioner through its lawyer reiterated its demand, but the same remained unheeded by private respondents. This prompted petitioner to file a complaint with the Regional Trial Court of Manila against private respondents for the return of the amount of P1 million and the payment of damages including lost interests or profits. On 15 March 1991 the trial court rendered a decision ordering private respondents jointly and severally to pay petitioner P1,000.000.00 with legal interest from 9 February 1989 until fully paid.The trial court found that there Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
235
was no written agreement between the parties concerning forfeiture of the earnest money if the sale did not push through. On appeal, the Court of Appeals reversed the trial court‘ decision and ordered the dismissal of the complaint; hence, this petition. ISSUE: Whether or not the Court of Appeals erred in disregarding the finding of the trial court that the earnest money given by petitioner to respondent BARRETTO REALTY should be returned to the former. HELD: Under Art. 1482 of the Civil Code, whenever earnest money is given in a contract of sale, it shall be considered as part of the purchase price and as proof of the perfection of the contract. Petitioner clearly stated without any objection from private respondents that the earnest money was intended to form part of the purchase price. It was an advance payment which must be deducted from the total price. Hence, the parties could not have intended that the earnest money or advance payment would be forfeited when the buyer should fail to pay the balance of the price, especially in the absence of a clear and express agreement thereon. In University of the Philippines v. de los Angeles , the right to rescind contracts is not absolute and is subject to scrutiny and review by the proper court. We held further, in the more recent case of Adelfa Properties, Inc. v. Court of Appeals , that rescission of reciprocal contracts may be extrajudicially rescinded unless successfully impugned in court. If the party does not oppose the declaration of rescission of the other party, specifying the grounds therefore, and it fails to reply or protest against it, its silence thereon suggests an admission of the veracity and validity of the rescinding party's claim. Private respondents did not interpose any objection to the rescission by petitioner of the agreement. As found by the Court of Appeals, private respondent BARRETTO REALTY even sold Lot 2 of the subject consolidated lots to another buyer, ASIAWORLD, one day after its President Anthony Que received the broker's letter rescinding the sale. Subsequently, on 13 October 1988 respondent BARRETO REALTY also conveyed ownership over Lot 1 to UCPB which, in turn, sold the same to ASIAWORLD. Art. 1385 of the Civil Code provides that rescission creates the obligation to return the things which were the object of the contract together with their fruits and interest. The vendor is therefore obliged to return the purchase price paid to him by the buyer if the latter rescinds the sale, or when the transaction was called off and the subject property had already been sold to a third person, as what obtained in this case. Therefore, by virtue of the extrajudicial rescission of the contract to sell by petitioner without opposition from private respondents who, in turn, sold the property to other persons, private respondent BARRETTO REALTY, as the vendor, had the obligation to return the earnest money of P1000,000.00 plus legal interest from the date it received notice of rescission from petitioner WHEREFORE, the Petition is GRANTED. The decision of the Court of Appeals is REVERSED and SET ASIDE. Private respondent Pio Barretto Realty Development, Inc., its successors and assigns are ordered to return to petitioner Goldenrod, Inc., the amount of P1,000,000.00 with legal interest thereon.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
236
Serrano v. CA SPOUSES ARTURO AND NICETA SERRANO, petitioners, versus COURT OF APPEALS AND HEIRS OF EMILIO S. GELI, respondents. (G.R. No. 133883. December 10, 2003 2nd Division) CALLEJO, SR., J.: FACTS: Petitioner spouses Arturo and Niceta Serrano are the owners of a parcel of land and the house constructed thereon located in Quezon City; and another parcel of land located again in Quezon City. The couple mortgaged said properties in favor of Government Service Insurance System (GSIS) for a security loan of P50,000.00 They were able to pay P18,000.00 on 1969. On the same year, the spouses Serrano as vendors and spouses Emilio and Evelyn Geli as vendees executed a deed of absolute sale with partial assumption of the mortgage for the price of P70, 000. Spouses Geli paid the amount of P38,000.00 and the balance of P32,000.00 to be paid to GSIS. Emilio Geli and his children, respondents herein, failed to settle the amount to the GSIS. Petitioners filed a complaint for the rescission of the deed of absolute sale with partial assumption of mortgage on September 6, 1984. The trial court rendered a decision ordering rescission of the deed. Emilio and petitioners appealed the decision to the Court of Appeals (CA). The GSIS foreclosed the mortgage during the pendency of the appeal. A certificate of sale over the property was Issued in favor of the GSIS it being the highest bidder. In 1987, Emilio paid the redemption price of P67, 701.84 to GSIS. Accordingly, the GSIS executed a deed of transfer and turned over to Emilio the transfer certificate title (TCT) without informing Serrano and the CA. In 1991, the CA dismissed Emilio and petitioners‘ appeal for failure to pay the requisite docket fees which became final and executory. ISSUE: Whether or not the trial court‘s judgment ordering the rescission of the deed of absolute sale with partial assumption of mortgage executed by petitioners and respondents is proper. HELD: The payment by Emilio of the redemption price to the GSIS was made pending appeal by the respondents from the trial court‘s order and concealed said payment to petitioners. The respondents‘ appealed the decision before the CA which was subsequently dismissed for failure to pay the requisite docket fees. Neither did respondents file any motion for reconsideration for the dismissal of the appeal. Consequently, the trial court‘s decision became final and executory. With the rescission of the deed of sale, the rights of Emilio Geli under said deed to redeem the property had been extinguished. The petitioners cannot even be compelled to subrogate the respondents to their right under the real estate mortgage over the property which the petitioners executed in favor of GSIS since the payment of the redemption price was made without the knowledge of the petitioners. The respondents, however, are entitled to be reimbursed by the petitioners to the extent that the latter were benefited.
Gil v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
237
PERLA PALMA GIL, VICENTE HIZON, JR., and ANGEL PALMA GIL, petitioners, versus HON. COURT OF APPEALS, HEIRS OF EMILIO MATULAC, CONSTANCIO MAGLANA, AGAPITO PACETES & The REGISTER OF DEEDS OF DAVAO CITY, respondents. (G.R. No. 127206. September 12, 2003 2nd Division) CALLEJO, SR., J.: FACTS: Concepcion Palma Gil, and her sister, Nieves Palma Gil, were the coowners of a parcel of commercial land with an area of 829 square meters, identified as Lot No. 59-C, covered by Transfer Certificate of Title (TCT) No. 432 located in Davao City. The spouses Angel and Nieves Villarica had constructed a two-storey commercial building on the property. On October 13, 1953, Concepcion filed a complaint against her sister Nieves with the then Court of First Instance of Davao City, for specific performance, to compel the defendant to cede and deliver to her an undivided portion of the said property with an area of 256.2 square meters. After due proceedings, the court rendered judgment in favor of Concepcion, ordering the defendant to deliver to the plaintiff an undivided portion of the said property with an area of 256.2 square meters. Nieves appealed to the Court of Appeals which affirmed the assailed decision. On motion of the Concepcion, the court Issued a writ of execution. Nieves, however, refused to execute the requisite deed in favor of her sister. The court Issued an order authorizing the sheriff to execute the requisite deed of transfer to the plaintiff over an undivided portion of the property with a total area of 256.2 square meters. The sheriff thereafter executed a Deed of Transfer to Concepcion over Lot 59-C-1 and Lot 59-C-2 with a total area of 256.2 square meters. On October 24, 1956, Concepcion executed a deed of absolute sale over Lot 59-C-1 in favor of Iluminada Pacetes. In the said deed, the area of Lot 59-C-1 appeared as ―256 square meters‖ although under the subdivision plan, the area of the property was only 218 square meters. The spouses Angel and Nieves Villarica filed a complaint against the sheriff and Concepcion with the Court of First Instance of Davao City for the nullification of the deed of transfer executed by the sheriff. ISSUE: Whether or not Iluminada Pacetes had the right to sell the two parcels of land to Maglana. HELD: Article 1191 in tandem with Article 1592 of the New Civil Code were central to the issues at bar. In reciprocal obligations, neither party incurred delay if the other does not comply in a proper manner with that which was incumbent upon him. From the moment one of the parties fulfills his obligation, delay in the other begins. Thus, reciprocal obligations should be performed simultaneously for the performance of one is conditioned and the simultaneous fulfillment of the other. The right of rescission of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party that violates the reciprocity between them. The consignation of the vendee of the purchase price of the property is sufficient to defeat the right of the petitioners to demand for the rescission of the said deed of absolute sale. The deed of absolute sale executed by Concepcion Gil in favor of Iluminada Pacetes is an executory contract and not an executed contra t is a settle matter. In a perfect contract of sale of realty, the right to rescind the said contract depends upon the fulfillment or non-fulfillment of the prescribed condition Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
238
The non-payment of the purchase price of property constitutes a very good reason to rescind a sale for it violates the very essence of the contract of sale and it is a resolutory condition for which the remedy is either rescission or specific performance under Article 1191 of the New Civil Code. The vendee is entitled to retain the purchase price or a part of the purchase price of realty if the vendor fails to perform any essential obligation of the contract. The decision of the Court of Appeals affirming the decision of the Regional Trial Court dismissing the complaint of the petitioners is affirmed.
Reyes v. Lim
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
239
DAVID REYES (Substituted by Victoria R. Fabella), petitioner, versus JOSE LIM, CHUY CHENG KENG and HARRISON LUMBER, INC., respondents. (G.R. No. 134241 August 11, 2003 1st Division) CARPIO, J.: FACTS: On November 7, 1994, petitioner David Reyes as seller, and Jose Lim as buyer, entered into a contract to sell a parcel of land located at Pasay City. Harrison Lumber Inc. occupied the property as lessee. The contract contained terms and conditions which are as follows: 1) the total consideration of property is P28M, 2) P10M to be paid upon the signing of the contract, the balance payable on March 8, 1995 upon vacation of tenants and occupants of the property and the execution of deed of absolute sale, 3) that in the event that the property is not vacated on the date stipulated, vendee shall withhold the balance and vendor agrees to pay a penalty of 4% of the downpayment (P10M) until its complete vacation. Lim paid the amount of P10M to Reyes as provided in the contract. On March 23, 1995, petitioner filled a complaint for annulment of contract and damages against respondents Lim, Chuy Cheng Keng and Harrison. The complaint alleged that Reyes informed Harrison to vacate property before the end of January and that failure to do so would make them liable for the penalty as provided in the contract. It was further alleged that Lim connived with Harrison not to vacate the property until the unpaid purchase price had been equaled by the accumulated penalty. On March 1, 1995, Lim denied connivance with Keng and Harrison to defraud Reyes. ISSUE: Whether or not the petitioner should deposit the P10 million down payment to the custody of the trial court as an effect of rescission of the Contract to Sell. HELD: The Supreme Court Held that an action for rescission could prosper only if the party demanding rescission can return whatever he may be obliged to restore should the court grant the rescission. The trial court in the exercise of its equity jurisdiction may validly order the deposit of P10 million down payment in court. The purpose of the exercise of equity jurisdiction in this case is to prevent unjust enrichment and to ensure restitution. Reyes is seeking rescission of the Contract to Sell. To subscribe top Reyes‘ contention will unjustly enrich Reyes at the expense of Lim. Reyes sold to Line One Foods Corporation the property. Reyes cannot claim ownership of the P10 million down payment because Reyes had already sold to another buyer the property for which Lim made the down payment. The Supreme Court find the equities weigh heavily in favor of Lim, who paid the P10 million down payment in good faith only to discover later that Reyes had subsequently sold the property to another buyer.
Ong v. Tui
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
240
ONG YONG, JUANITA TAN ONG, WILSON T. ONG, ANNA L. ONG, WILLIAM T. ONG, WILLIE T. ONG, And JULIE ONG ALONZO, petitioners, versus DAVID S. TIU, CELY Y. TIU, MOLY YU GAW, BELEN SEE YU, D. TERENCE Y. TIU, JOHN YU, LOURDES C. TIU, INTRALAND RESOURCES DEVELOPMENT CORP., MASAGANA TELAMART, INC., REGISTER OF DEEDS OF PASAY CITY, And the SECURITIES AND EXCHANGE COMMISSION, respondents. (G.R. No. 144476. February 1, 2002 2nd Division) BUENA, J.: FACTS: The Masagana Citimall, a commercial complex owned and managed by the First Landlink Asia Development Corporation (FLADC), was threatened with incompletion because of financial distress in the amount of P190M for being indebted to the Philippine National Bank (PNB). FLADC was then fully owned by the Tiu group. In order to recover, the Tius invited the Ongs to invest in FLADC. Hence the two groups executed a Presubscription Agreement. By the agreement, the parties agreed to maintain equal shareholdings in FLADC with the Ongs investing cash while the Tius contributing property. Specifically, the Ongs were to subscribe to 1 million shares of FLADC. Commensurate to their proposed subscriptions, the Ongs were to pay P100M in cash while the Tius were to contribute their properties namely; a four-storey building, a parcel of land valued at P30M, a parcel of land adjacent to said properties. Also for purposes of equality, among the agreements was that the positions of President and Secretary of FLADC shall be Held by the Ongs while the Vice President and the Treasurer shall be Held by the Tius. In order to liquidate the FLADC‘s loan from the PNB, the parties proposed payment of P100M to be invested by Ongs to FLADC. Intraland Resources and Development Corporation (Tius‘) executed of assignment over the 4-storey building in favor of FLADC. Masagana Telemart Inc. executed a deed of assignment over the said land properties in favor of FLADC and the title was transferred in the latter‘s name. The loan from the PNB was also settled but not in accord with the provisions of the agreement. The controversy arose when the Ongs refused to credit the number of FLADC shares in the name of Masagana Telemart commensurate to its property contributions and when the Ongs refused to credit the number of FLADC shares in favor of the Tius commensurate to their land property contribution and when the Tius were proscribed from assuming and performing their duties as Vice President and Treasurer. The Tius sought the Securities and Exchange Commission (SEC) confirmation of the rescission of the PreSubscription Agreement. The SEC confirmed the rescission of the said agreement. Both the Ong and the Tiu group appealed the order of the SEC to the SEC en banc. The SEC Issued an order confirming the first SEC order with modifications. The Ongs appealed to the Court of Appeals (CA). The CA affirmed the SEC en banc orders and confirmed the rescission of the Pre Subscription Agreement with modifications. ISSUE: Whether or not the decision of the CA confirming the rescission of the Pre Subscription Agreement entered into by the Tiu group and the Ong group is proper. HELD: The Court of Appeals did not err in HELD that the "Pre-Subscription Agreement" of the parties dated August 15, 1994 may be rescinded under Article 1191 of the New Civil Code. Reciprocity in a contract of sale, is the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
241
correlative duty of the obligation of the seller to deliver the property is the obligation of the buyer to pay the agreed price. In the case at bar, the correlative obligation of the Tius is to let the Ongs have and exercise the functions of the positions of President and Secretary and the obligation of the Ongs is to let the Tius have and exercise the functions of Vice-President and Treasurer. The Ongs allege that rescission is applicable only to reciprocal obligations and the "Pre-Subscription Agreement" does not provide for reciprocity, hence, the remedy of rescission is not available. The Ongs cited the case of Songcuan vs. IAC, to illustrate their point that "As in the Songcuan case, there are here two (2) separate and distinct obligations each independent of the other the obligation to subscribe to, and to pay, 50% of the increased capital stock of FLADC; and the obligation to install the Ongs and the Tius as members of the Board of Directors and to certain corporate positions, but only after the Ongs and the Tius have subscribed each to 50% of the increased capital stock of FLADC." In this petition, in lieu of Art. 1191, the Ongs invoke Articles 1156 and 1159 of the New Civil Code which state: "Art. 1156. An obligation is a juridical necessity to give, to do or not to do. "Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith." and that should there be any violation, those who failed to fulfill their obligations should be required to perform their obligations under the agreement.Contrary to the Ongs' assertion, the Songcuan case does not apply squarely to this case. In the Songcuan case, the Court ruled that Art. 1191 to rescind the right of the Alviars to repurchase does not apply because their corresponding obligations can hardly be called reciprocal because the obligation of the Alviars to lease to Songcuan the subject premise arises only after the latter had reconveyed the realties to them. On the other hand, in the instant case, the obligations of the two (2) groups to pay 50% of the increased capital stock of FLADC and to install them as members of the Board of Directors and to certain corporate positions are simultaneous and arise upon the execution of the presubscription agreement. The Ongs illustrate reciprocity in the following manner: In a contract of sale, the correlative duty of the obligation of the seller to deliver the property is the obligation of the buyer to pay the agreed price. In the case at bar, the correlative obligation of the Tius to let the Ongs have and exercise the functions of the positions of President and Secretary is the obligation of the Ongs to let the Tius have and exercise the functions of Vice-President and Treasurer.
Equatorial Realty v. Mayfair Theater
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
242
EQUATORIAL REALTY DEVELOPMENT, INC., petitioner, versus MAYFAIR THEATER, INC., respondent. (G.R. No. 133879 November 21, 2001 EN BANC) PANGANIBAN, J.: FACTS: Carmelo & Bauermann, Inc. used to own a parcel of land, together with two two-storey buildings constructed thereon. On June 1, 1967, Carmelo entered into a lease with Mayfair Theater, Inc. for a period of 20 years. The lease covered a portion of the second floor and mezzanine. Two years later, Mayfair entered into a second lease with Carmelo for the lease of another property, a part of the second floor and two spaces on the ground floor. The lease was also for a period of twenty years. Both leases contained a provision granting Mayfair a right of first refusal to purchase the said properties. However, on July 30, 1978, within the 20-year-lease term, the subject properties were sold by Carmelo to Equatorial Realty Development, Inc. for the sum of P11.3M without their first being offered to Mayfair. As a result, Mayfair filed a complaint for specific performance and damages. After trial, the court ruled in favor of Equatorial. On appeal, the Court of Appeals reversed and set aside the judgment of the lower court. On November 21, 1996, the Supreme Court denied Equatorial‘s petition for review and declared the contract between Carmelo and Equatorial rescinded. The decision became final and executory. On September 18, 1997, Equatorial filed an action for the collection of sum of money against Mayfair claiming payment of rentals or reasonable compensation for the defendant‘s use of the premises after its lease contracts had expired. The lower court debunked the claim of the petitioner for unpaid rentals, holding that the rescission of the Deed of Absolute Sale in the mother case did not confer on Equatorial any vested or residual proprietary rights, even in expectancy. ISSUE: Whether or not Equatorial may collect rentals or reasonable compensation for Mayfair‘s use of subject premises after its lease contracts had expired. HELD: Equatorial did not obtain right of ownership over the property when it entered into the Deed of Absolute Sale. Ownership of the property is acquired by buyer only upon the delivery of the thing to him. There is delivery if the thing sold is placed in the control and possession of the vendee. While the execution of a public instrument of sale is recognized by law as the equivalent of delivery of the thing sold, such constructive or symbolic delivery, being only presumptive, is deemed negated by the failure of the vendee to take actual possession of the property sold. Since Mayfair was in actual possession of the property by virtue of the lease contract with Carmelo, there was no consummation of the sale, and therefore, Equatorial did not get ownership right (real right). Further, the Deed of Absolute Sale entered into by Carmelo and Equatorial was a violation of the right of first refusal granted by Carmelo to Mayfair. The execution of the deed of absolute sale as a form of constructive delivery is a legal fiction. It holds true only if there is no legal impediment that may prevent the passing of the property from the vendor to the vendee. The right of first refusal Held by Mayfair was such legal impediment. Therefore, there was no transfer of ownership from Camelot to Equatorial. As a result, no rental can be collected by equatorial from Mayfair. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
243
Velarde v. CA Spouses MARIANO Z. VELARDE and AVELINA D. VELARDE, petitioners, versus COURT OF APPEALS, DAVID A. RAYMUNDO and GEORGE RAYMUNDO, respondents. (G.R. No. 108346 July 11, 2001 3rd Division) PANGANIBAN, J.: FACTS: David Raymundo (private respondent) is the absolute andregistered owner of a parcel of land, located at 1918 Kamias St., Dasmariñas Village Makati, together with the house and other improvements, which was under lease. It was negotiated by David‘s father with plaintiffs Avelina and Mariano Velarde (petitioners). A Deed of Sale with Assumption of Mortgage was executed in favor of the plaintiffs. Part of the consideration of the sale was the vendee‘s assumption to pay the mortgage obligations of the property sold in the amount of P 1,800,000.00 in favor of the Bank of the Philippine Islands. And while their application for the assumption of the mortgage obligations is not yet approved by the mortgagee bank, they have agreed to pay the mortgage obligations on the property with the bank in the name of Mr. David Raymundo. It was further stated that ―in the event Velardes violate any of the terms and conditions of the said Deed of Real Estate Mortgage, they agree that the downpayment P800,000.00, plus all the payments made with the BPI on the mortgage loan, shall be forfeited in Favor of Mr. Raymundo, as and by way of liquidated damages, w/out necessity of notice or any judicial declaration to that effect, and Mr. Raymundo shall resume total and complete ownership and possession of the property, and the same shall be deemed automatically cancelled‖, signed by the Velardes. Pursuant to said agreements, plaintiffs paid BPI the monthly interest loan for three months but stopped in paying the mortgage when informed that their application for the assumption of mortgage was not approved. The defendants through a counsel, wrote plaintiffs informing the latter that their non-payment to the mortgagee bank constituted non-performance of their obligation and the cancellation and rescission of the intended sale. And after two days, the plaintiffs responded and advised the vendor that he is willing to pay provided that Mr. Raymundo: (1) delivers actual possession of the property to them not later than January 15, 1987 for their occupancy (2) causes the release of title and mortgage from the BPI and make the title available and free from any liens and encumbrances (3) executes an absolute deed of sale in their favor free from any liens and encumbrances not later than Jan. 21, 1987. The RTC of Makati dismissed the complaint of the petitioners against Mr. Raymundo for specific performance, nullity of cancellation, writ of possession and damages. However, their Motion for Reconsideration was granted and the Court instructed petitioners to pay the balance of P 1.8 million to private respondent who, in turn were ordered to execute a deed of absolute sale and to surrender possession of the disputed property to petitioners. Upon the appeal of the private respondent to the CA, the court upheld the earlier decision of the RTC regarding the validity of the rescission made by private respondents. ISSUE: Whether the rescission of contract made by the private respondent is valid. HELD: There is a breach of contract because the petitioners did not merely stopped paying the mortgage obligations but they also failed to pay the balance Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
244
purchase price. Their conditional offer to Mr. Raymundo cannot take the place of actual payment as would discharge the obligation of the buyer under contract of sale. Mr. Raymundo‘s source of right to rescind the contract is Art. 1191 of the Civil Code predicated on a breach of faith by the other party who violates the reciprocity between them. Moreover, the new obligations as preconditions to the performance of the petitioners‘ own obligation were repudiation of an existing obligation, which was legally due and demandable under the contract of sale. The breach committed by the petitioners was the non-performance of a reciprocal obligation. The mutual restitution is required to bring back the parties to their original situation prior to the inception of the contract. The initial payment and the mortgage payments advanced by petitioners should be returned by private respondents, lest the latter unjustly enriched at the expense of the other. Rescission creates the obligation to return the obligation of contract. To rescind, is to declare a contract void at its inception and to put an end to it as though it never was. The decision of the CA is affirmed with modification that private respondents are ordered to return to petitioners, the amount they have received in advanced payment.
Asuncion v. Evangelista Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
245
ALEXANDER G. ASUNCION, petitioner, versus EDUARDO B. EVANGELISTA and COURT OF APPEALS, respondents. (G.R. No. 133491 October 13, 1999 1st Division) PUNO, J.: FACTS: Private respondent Evangelista was the majority stockholder of the Embassy Farm, Inc., with 90% of the shares in his name. He also served as its president and CEO. Its principal office was established at the piggery facility that has been existing on the landholdings of private respondents in Barangay Loma de Gato, Marilao, Bulacan, consisting about 104, 447 sq. m. In 1980, 1981, and 1982, private respondent obtained three personal loans in three different banks to provide himself working capital to run the farm and sustain its operations. His debt exposure totaled P3,056, 625.78. By June 24, 1984, private respondent‘s aggregate debt had ballooned to almost P6,000,000 in overdue principal payments, interests, penalties and other financial charges. On August 2, 1984, petitioner Asuncion and private respondent executed a Memorandum of Agreement. Among the terms and conditions contained in the agreement was the stipulation that petitioner has purchased private respondent‘s landholdings and shares of stock in Embassy Farms, Inc. for the price equivalent to private respondent‘s total outstanding loans which petitioner shall assume. For his part, private respondent was obligated to execute, sign and deliver any and all documents necessary for the transfer and conveyance of several parcels of land he owned and to cede, transfer and convey in a manner absolute and irrevocable any and all of his shares of stocks in the said corporation. As of August, 1985, the total amount paid by petitioner to private respondent was P3,194,941.88. However, the landholdings over the subject parcels of land and the shares of stock in the corporation remained is still in the name of private respondent. Petitioner demanded for the performance of obligation but private respondent resisted. Eventually, case was filed for rescission of the Memorandum of Agreement on April 10, 1986. On July, 1, 1994, the trial court rendered a decision in favor of private respondent holding that petitioner can not demand the delivery of the landholdings and the share of stock because he has not yet fully paid the whole loan of private respondent. The Court of Appeals affirmed it. ISSUE: Whether or not rescission is a valid legal recourse in the case at bar. HELD: Article 1191 of the Civil Code governs the situation where there is noncompliance by one party in case of reciprocal obligations. The Supreme Court found that private respondent failed to perform his substantial obligations under the MOA. Hence, petitioner sought the rescission of the agreement and ceased infusing capital into the piggery business of private respondent. He later justified his refusal to execute any deed of sale and deliver the certificates of stock by accusing petitioner of having failed to assume his debts. The Court holds that the respondent‘s insistence that petitioner execute a formal assumption of mortgage independent and separate from his own execution of a deed of cases is legally untenable, considering that a recorded real estate mortgage is a lien inseparable from the property mortgaged and until discharged, it follows the property. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
246
In fine, that the MOA entered into by petitioner and private respondent should indeed be rescinded. The respondent appellate court erred in assessing damages against petitioner for his refusal to fully pay private respondent‘s overdue loans. Such refusal was justified, considering that private respondent was the first to refuse to deliver to petitioner the lands and certificates of stock that were the consideration for the almost 6M in debt that petitioner was to assume and pay. The instant petition was granted. Decisions of the lower and appellate courts were reversed and set aside. The MOA entered into by the parties is declared rescinded.
Uy v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
247
WILLIAM UY and RODEL ROXAS, petitioners, versus COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY, respondents. (G.R. No. 120465 September 9, 1999 1st Division) KAPUNAN, J.: FACTS: Petitioners William Uy and Rodel Roxas are agents authorized to sell eight (8) parcels of land by the owners thereof. By virtue of such authority, petitioners offered to sell the lands, located in Tuba, Tadiangan, Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a housing project. On February 14, 1989, NHA approved the acquisition of the said parcels of land with an area of 31.8231 hectares at the cost of P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the eight parcels of lands, however, only five were paid for by the NHA because of the report it received from the Land Geosciences Bureau of the Department of Environment and Natural Resources that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing project. NHA eventually cancelled the sale over the remaining three (3) parcels of land. On March 9, 1992, petitioners filed a complaint for damages. After trial, the RTC of Quezon City rendered the cancellation of contract to be justified and awarded P1.255 million as damages in favor of petitioners. Upon appeal by petitioners, the Court of Appeals reversed the decision and entered a new one dismissing the complaint including the award of damages. The motion for reconsideration having been denied, petitioners seek relief from this court contending, inter alia, that the CA erred in declaring that NHA had any legal basis to rescind the subject sale. ISSUE: Whether or not the cancellation of the sale has sufficient justifiable basis. HELD: The cancellation of the sale was based on the negation of the cause arising from the realization that the land, which were the object of the sale, were not suitable for housing cause is the essential reason which moves the contracting parties to enter into a contract. The National Housing Authority would not have entered into the contract were the lands not suitable for housing. In other words, the quality of the land was an implied condition for the NHA to enter into the contract. NHA was justified in canceling the contract. Petitioners confuse the cancellation of the contract by the NHA as a rescission of the contract under Article 1191 of the Civil Code. The right to rescission is predicated on a breach of faith by the other party that violates the reciprocity between them. The power to rescind is given to the injured party. In this case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for the other parties to the contract, the vendors did not commit any breach, much less a substantial breach, of their obligation. The NHA did not suffer any injury. The cancellation was not therefore a rescission under Article 1191. Rather, it was based on the negation of the cause arising from the realization that the lands, which were the objects of the sale, were not suitable for housing.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
248
Tamayo et al. v. Abad Senora CONSTANCIA G. TAMAYO, JOCELYN G. TAMAYO, and ARAMIS G. TAMAYO, collectively known as HEIRS OF CIRILO TAMAYO, Petitioners, versus ROSALIA ABAD SEÑORA, ROAN ABAD SEÑORA, and JANETE ABAD SEÑORA, Respondents. (G.R. No. 176946 November 15, 2010 2nd Division) NACHURA, J.: FACTS: On September 28, 1995, at about 11:00 a.m., Antonieto M. Señora (Señora), then 43 years old and a police chief inspector of the Philippine National Police (PNP),4 was riding a motorcycle and crossing the intersection of Sucat Road towards Filipinas Avenue, when a tricycle allegedly bumped his motorcycle from behind. As a result, the motorcycle was pushed into the path of an Isuzu Elf Van (delivery van), which was cruising along Sucat Road and heading towards South Superhighway. The delivery van ran over Señora, while his motorcycle was thrown a few meters away. He was recovered underneath the delivery van and rushed to the Medical Center of Parañaque, where he was pronounced dead on arrival. The tricycle was driven by Leovino F. Amparo (Amparo), who testified that it was the delivery van that bumped Señora‘s motorcycle. He said that he did not see how the motorcycle could have been hit by his tricycle since he was looking at his right side, but when he heard a sound, he looked to his left and saw Señora already underneath the delivery van. He also said that when he was brought to the police station for investigation, he brought his tricycle to disprove the claim of the delivery van driver by showing that his tricycle sustained no damage. The delivery van, on the other hand, was driven by Elmer O. Polloso (Polloso) and registered in the name of Cirilo Tamayo (Cirilo). While trial was ongoing, Cirilo was suffering from lung cancer and was bedridden. His wife, petitioner Constancia, testified on his behalf. Constancia narrated that she and her husband were managing a single proprietorship known as Tamayo and Sons Ice Dealer. She testified that it was Cirilo who hired their drivers. She claimed that, as employer, her husband exercised the due diligence of a good father of a family in the selection, hiring, and supervision of his employees, including driver Polloso. Cirilo would tell their drivers not to drive fast and not to be too strict with customers. One of Cirilo‘s employees, Nora Pascual (Pascual), also testified. She alleged that she was working as auditor and checker for Tamayo and Sons Ice Dealer. She testified that she and another employee were with Polloso in the delivery van at the time of the incident. She narrated that, while they were traversing Sucat Road, she saw a motorcycle going towards Filipinas Avenue. Pascual said that, when they reached the intersection of Sucat Road and Filipinas Avenue, Polloso blew the horn. She then saw a tricycle bump the rear of the motorcycle. She said that Polloso stopped the delivery van. When they alighted, they saw the motorcycle already under the delivery van. Pascual further testified that Polloso was a careful driver who drove the truck slowly and followed traffic rules. She also said that Cirilo called for a meeting before the delivery trucks left and told his drivers to be careful in their driving and to be courteous to their customers. Leovino F. Amparo, Elmer O. Polloso and Cirilo Tamayo are found liable jointly and severally to plaintiffs and the court order them to indemnify the victim heirs. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
249
ISSUE: Whether or not lost of earning capacity of the victim should be included as part of civil indemnification. HELD: Yes. The award of damages for loss of earning capacity is concerned with the determination of losses or damages sustained by respondents, as dependents and intestate heirs of the deceased. This consists not of the full amount of his earnings, but of the support which they received or would have received from him had he not died as a consequence of the negligent act. Thus, the amount recoverable is not the loss of the victim‘s entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. The victim‘s heirs presented in evidence Señora‘s pay slip from the PNP, showing him to have had a gross monthly salary of P12,754.00. Meanwhile, the victim‘s net income was correctly pegged at 50% of his gross income in the absence of proof as regards the victim‘s living expenses. Deceased‘s net earning capacity should be computed in this method. The formula is: Net earning capacity = life expectancy x gross annual income less living expenses with life expectancy computed as 3/4 2/3 x (80 - age of deceased) and living expenses fixed at half of the victim‘s gross income. Thus, Señora‘s net earning capacity was computed to be P1,887,847.00.
Tan v. OMC Carriers
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
250
LETICIA TAN, MYRNA MEDINA, MARILOU SPOONER, ROSALINDA TAN, and MARY JANE TAN, MARY LYN TAN, CELEDONIO TAN, JR., MARY JOY TAN, and MARK ALLAN TAN, represented herein by their mother, LETICIA TAN, Petitioners, versus OMC CARRIERS, INC. and BONIFACIO ARAMBALA, Respondents. (G.R. No. 190521 January 12, 2011 3rd Division) BRION, J.: FACTS: On September 27, 1996, the petitioners filed a complaint for damages with the RTC against OMC and Bonifacio Arambala. The complaint states that on November 24, 1995, at around 6:15 a.m., Arambala was driving a truck with a trailer owned by OMC, along Meralco Road, Sucat, Muntinlupa City. When Arambala noticed that the truck had suddenly lost its brakes, he told his companion to jump out. Soon thereafter, he also jumped out and abandoned the truck. Driverless, the truck rammed into the house and tailoring shop owned by petitioner Leticia Tan and her husband Celedonio Tan, instantly killing Celedonio who was standing at the doorway of the house at the time. The petitioners alleged that the collision occurred due to OMC‘s gross negligence in not properly maintaining the truck, and to Arambala‘s recklessness when he abandoned the moving truck. Thus, they claimed that the respondents should be held jointly and severally liable for the actual damages that they suffered, which include the damage to their properties, the funeral expenses they incurred for Celedonio Tan‘s burial, as well as the loss of his earning capacity. The petitioners also asked for moral and exemplary damages, and attorney‘s fees. The respondents denied any liability for the collision, essentially claiming that the damage to the petitioners was caused by a fortuitous event, since the truck skidded due to the slippery condition of the road caused by spilled motor oil. ISSUE: Whether or not damages can be justly awarded in this case. HELD: Yes. As both the RTC and the CA found that the respondents‘ gross negligence led to the death of Celedonio Tan, as well as to the destruction of the petitioners‘ home and tailoring shop, we see no reason to disturb this factual finding. We, thus, concentrate on the sole issue of what damages the petitioners are entitled to. Respondents OMC Carriers, Inc. and Bonifacio Arambala are ordered to jointly and severally pay the petitioners the following: (1) P50,000.00 as indemnity for the death of Celedonio Tan; (2) P72,295.00 as actual damages for funeral expenses; (3) P200,000.00 as temperate damages for the damage done to petitioner Leticia‘s house, tailoring shop, household appliances and shop equipment; (4) P300,000.00 as damages for the loss of Celedonio Tan‘s earning capacity; (5) P500,000.00 as moral damages; (6) P200,000.00 as exemplary damages; and (7) 10% of the total amount as attorney‘s fees; and costs of suit. In addition, the total amount adjudged shall earn interest at the rate of 6% per annum from May 14, 2003, and at the rate of 12% per annum, from the finality of this Resolution on the balance and interest due, until fully paid. Death of person would automatically entitle heirs of decedent actual damages. The funeral expense also is fully proven. The temperate damages are Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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also awarded because actual cost of damages on properties and the exact earning capacity of the decedent cannot be determined. Exemplary damages also was awarded base on the nature of offense to avoid repetition. Attorney‘s fee is also proper in this case. Accordingly, legal interest at the rate of 6% per annum on the amounts awarded starts to run from May 14, 2003, when the trial court rendered judgment. From the time this judgment becomes final and executory, the interest rate shall be 12% per annum on the judgment amount and the interest earned up to that date, until the judgment is wholly satisfied.
Victory liner v. Heirs
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
252
VICTORY LINER, INC. petitioner, versus HEIRS OF ANDRES MALECDAN, respondents. (G. R. No. 154278 December 27, 2002 2nd Division) MENDOZA, J.: FACTS: Andres Malecdan was a 75 year-old farmer. On July 15, 1994, at around 7:00 p.m., while Andres was crossing the National Highway on his way home from the farm, a Dalin Liner bus on the southbound lane stopped to allow him and his carabao to pass. However, as Andres was crossing the highway, a bus of petitioner Victory Liner, driven by Ricardo C. Joson, Jr., bypassed the Dalin Bus. In so doing, respondent hit the old man and the carabao on which he was riding. As a result, Andres Malecdan was thrown off the carabao, while the beast toppled over. The Victory Liner bus sped past the old man, while the Dalin bus proceeded to its destination without helping him. The incident was witnessed by Andres Malecdan‘s neighbor, Virgilio Lorena, who was resting in a nearby waiting shed after working on his farm. Malecdan sustained a wound on his left shoulder, from which bone fragments protruded. He was taken by Lorena and another person to the district hospital where he died a few hours after arrival. The carabao also died soon afterwards. Lorena executed a sworn statement before the police authorities. Subsequently, a criminal complaint for reckless imprudence resulting in homicide and damage to property was filed against the Victory Liner bus driver Ricardo Joson, Jr. Private respondents brought the suit for damages in the RTC which found the driver guilty of gross negligence in the operation of his vehicle and Victory Liner, Inc. also guilty of gross negligence in the selection and supervision of Joson, Jr. Petitioner and its driver were Held liable jointly and severally for damages. On appeal, the decision was affirmed by the Court of Appeals, with the modification that the award of attorney‘s fees was fixed at P50,000.00. ISSUE: Whether or not the affirmation by the CA of granting the award of moral and exemplary damages and attorney‘s fees considering that there is no finding of bad faith and gross negligence on the part of the petitioner was not established. HELD: Article 2176 provides: ―Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.‖ Article 2180 provides for the solidary liability of an employer for the quasi-delict committed by an employee. The responsibility of employers for the negligence of their employees in the performance of their duties is primary and, therefore, the injured party may recover from the employers directly, regardless of the solvency of their employees. Employers may be relieved of responsibility for the negligent acts of their employees acting within the scope of their assigned task only if they can show that "they observed all the diligence of a good father of a family to prevent damage." For this purpose, they have the burden of proving that they have indeed exercised such diligence, both in the selection of the employee and in the supervision of the performance of his duties. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
253
In the selection of prospective employees, employers are required to examine them as to their qualifications, experience and service records. With respect to the supervision of employees, employers must formulate standard operating procedures, monitor their implementation and impose disciplinary measures for breaches thereof. These Facts must be shown by concrete proof, including documentary evidence. In the instant case, petitioner presented the results of Joson, Jr.‘s written examination, actual driving tests, x-ray examination, psychological examination, NBI clearance, physical examination, hematology examination, urinalysis, student driver training, shop training, birth certificate, high school diploma and reports from the General Maintenance Manager and the Personnel Manager showing that he had passed all the tests and training sessions and was ready to work as a professional driver. However, the trial court noted that petitioner did not present proof that Joson, Jr. had nine years of driving experience. Petitioner also presented testimonial evidence that drivers of the company were given seminars on driving safety at least twice a year. However, the trial court noted that there is no record of Joson, Jr. ever attending such a seminar. Petitioner likewise failed to establish the speed of its buses during its daily trips or to submit in evidence the trip tickets, speed meters and reports of field inspectors. The finding of the trial court that petitioner‘s bus was running at a very fast speed when it overtook the Dalin bus and hit the deceased was not disputed by petitioner. Thus it was Held that the trial court did not err in finding petitioner to be negligent in the supervision of its driver Joson, Jr.
GSIS v. Labung-Deang
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
254
Government Service Insurance System, Petitioner, versus Spouses Gonzalo and Matilde Labung-Deang, Respondents. (G.R. No. 135644, September 17, 2001, 1st Division) PARDO, J: FACTS: The respondents obtained a housing loan from the petitioner amounting to 8,500.00 pesos and due on December 23, 1979. The loan was secured by a real estate mortgage constituted over the spouses' property issued by the Register of Deeds of Pampanga. Respondents deposited the owner's duplicate copy of the title with the petitioner to comply with the requirement. Eleven (11) months before the maturity of the loan, respondents settled their debt with the petitioner and requested for the release of the owner's duplicate copy of the title since they intended to secure a loan from a private lender and use the land covered by it as collateral security for the said loan; that they would use the proceeds for the renovation of the spouses' residential house and for business. The owner's duplicate copy of the title could not be found despite diligent search and so the personnel of the petitioner were not able to release the same. Subsequently, petitioner commenced the reconstitution proceedings with the Court of First Instance of Pampanga for the issuance of a new owner's copy of the same. After the completion of judicial proceedings, petitioner secured and released the reconstituted copy of the owner's duplicate of title to the respondents. However, respondents filed a complaint against the petitioner for damages because of the consequences of undue delay as they were not able to secure a loan; the proceeds of which could have been used in defraying the estimated cost of the renovation of their residential house and which could have been invested in some profitable business undertaking. The lower court ruled in favor of the respondents. The petitioner appealed to the Court of Appeals which affirmed the appeal judgment. Hence, this petition. ISSUE: Whether or not the petitioner, as a government-owned and controlled corporation primarily performing governmental functions, is liable for damages to the respondents for the negligent act of its employees acting within the scope of their assigned duties. HELD: Yes. The petitioner is liable for damages to the respondents for the negligent act of its employees acting within the scope of their assigned duties. Since government owned and controlled corporations whose charters provide that they can sue and be sued have a legal personality separate and distinct from the government, petitioner is not covered by the exemption provided for in the Civil Code. The loss of the owner's duplicate copy of the title in the possession of petitioner as security for the mortgage without justifiable cause constitutes negligence on the part of the employee of petitioner who lost it, making the petitioner liable for damages. For insufficient reason and no legal basis found, moral damages and attorney‘s fees were removed. The Court granted only temperate damages considering that petitioner spent for the reconstitution of the owners' duplicate copy of the title. Petition denied. The decision appealed from is affirmed with modification. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
255
BPI Investment v. D.G. Carreon BPI Investment Corporation, Petitioner, versus D.G. Carreon Commercial Corporation, Daniel G. Carreon, Aurora J. Carreon, and Josefa M. Jeciel, Respondents. (G.R. No. 126542, November 29, 2001, 1st Division) PARDO, J: FACTS: D. G. Commercial Corporation (D.G.) placed with BPI Investments Corporation (BPI) 318,981.59 pesos in money market placement with a maturity term up to December 17, 1979, at a maturity value of 323,518.22 pesos. BPI Investments issued the corresponding sales order slip for straight sale and confirmation slip. D. G. did not make any money placement and Aurora Carreon instructed BPI to roll over the maturity value. According to petitioner, their bookkeeper made an error in posting ―12-17‖ on the sales order slip for ―12-12.‖ BPI Investments wrote respondent spouses Daniel and Aurora Carreon (spouses), demanding the return of the overpayment of 410,937.09 pesos. The spouses sent to BPI a proposed memorandum of agreement, to which BPI did not respond. BPI filed with the Court of First Instance of Rizal a complaint for recovery of a sum of money against D. G. with preliminary attachment. The trial court issued an order for preliminary attachment but was subsequently lifted. BPI moved for reconsideration, but the trial court denied. D. G. filed with the trial court a counterclaim asking for compensatory damages while spouses and asked Josefa Jeceil asked for moral damages; and all of them claimed for exemplary damages and attorney‘s fees. Both the complaint and counterclaim filed were dismissed. Both parties appealed to the appellate court affirming the dismissal of the complaint but reversing the dismissal of the counterclaim in favor of the respondents. Hence, this petition. ISSUE: Whether or not the petitioner is guilty of gross negligence making it liable for exemplary damages. HELD: No. The petitioner is not guilty of gross negligence in the handling of the money market placement of respondents, thus not liable to pay exemplary damages. Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them. However, while petitioner BPI Investments may not be guilty of gross negligence, it failed to prove by clear and convincing evidence that D. G. Carreon indeed received money in excess of what was due them. Exemplary damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated, or compensatory damages. They are recoverable if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. BPI did not act in such a manner. There is no doubt, however, that the damages sustained by respondents were due to petitioner‘s fault or negligence, short of gross negligence. Temperate or moderate damages may be recovered when the court finds that some pecuniary Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
256
loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. The Court deems it prudent to award reasonable temperate damages to respondents under the circumstances. The decision appealed from is affirmed with modification.
Khe Hong v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
257
Khe Hong Cheng, alias Felix Khe, Sandra Joy Khe and Ray Steven Khe, Petitioners, versus Court of Appeals, Hon. Teofilo Guadiz, and Philam Insurance Co., Inc., Respondents. (G.R. No. 144169, March 28, 2001, 1st Division) KAPUNAN, J: FACTS: The Philippine Agricultural Trading Corporation shipped on board a vessel owned by Khe Hong, 3400 bags of copra from Masbate to Zamboanga. The shipment was covered by a marine insurance policy by Philam Insurance Company Incorporated (Philam). However, the ship sank resulting to the loss of the shipment, which was paid by Philam in the amount of 354,000.00 pesos to the consignee. Having been subrogated into the rights of the consignee, Philam filed with the Regional Trial Court (RTC) of Makati an action to recover the sum of money paid to the consignee against Khe Hong. While the case was pending, Khe Hong executed deeds of donation of parcels of land in favor of his children, herein co-petitioners; and new transfer certificate of title were issued in their names. The RTC rendered a favorable judgment to Philam and after the decision became final, a writ of execution was issued. Despite earnest efforts of the sheriff, he could not find any property of Khe Hong that can be levied to satisfy the judgment because he had already conveyed his properties to his children. Philam filed for the rescission of the deeds of donation executed by Khe Hong in fraud of his creditor and for nullification of the titles issued in the names of his children with the RTC. Petitioners moved for the dismissal of the case, to which the RTC denied. On appeal by petitioners, the RTC‘s decision in favor of Philam was affirmed by the Court of Appeals. Hence, this petition. ISSUE: Whether or not the petitioner Khe Hong Cheng is guilty of executing the deeds of donation in fraud of his creditor, warranting the rescission of the same in an accion pauliana. HELD: Yes. Petitioner Khe Hong Cheng is guilty of executing the deeds of donation in fraud of his creditor, warranting the rescission of the same in an accion pauliana. An accion pauliana accrues only when the creditor discovers that he has no other legal remedy for the satisfaction of his claim against the debtor other than an accion pauliana. It presupposes the following: 1) A judgment; 2) the issuance by the trial court of a writ of execution for the satisfaction of the judgment; and 3) the failure of the sheriff to enforce and satisfy the judgment of the court. It requires that the creditor has exhausted the property of the debtor. Philam has a demandable credit prior to the alienation of Khe Hong‘s properties. Khe Hong‘s conveyance, of the properties to his children in order to avoid payment and to defraud Philam, warrants rescission of the same as all legal means have been exhausted, and it is the last resort to satisfy the trial court's judgment. Petition denied for lack of merit. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
258
Philippine Realty v. Ley Const. and Dev. Corp. Philippine Realty and Holdings Corporation, Petitioner, versus Ley Construction and Development Corporation, Respondent. (G.R. No. 165548, June 13, 2011, 3rd Division) SERENO, J: FACTS: Ley Construction and Development Corporation (LCDC) and Philippine Realty & Holdings Corporation (PRHC) entered into four major construction projects, as evidenced by four duly notarized construction agreements. LCDC committed itself to the construction of the buildings needed by PRHC, which in turn committed itself to pay the contract price agreed upon. In order to jumpstart the construction operations, LCDC was required to submit a performance bond as provided for in the construction agreements. As stated in these agreements, as soon as PRHC received the performance bond, it would deliver its initial payment to LCDC. The remaining balance was to be paid in monthly progress payments based on actual work completed. In practice, these monthly progress payments were used by LCDC to purchase the materials needed to continue the construction of the remaining parts of the building. In the course of the construction of the Tektite Building, it became evident to both parties that LCDC would not be able to finish the project within the agreed period. LCDC explained that the unanticipated delay in construction was due mainly to the sudden, unexpected hike in the prices of cement and other construction materials. It claimed that, without a corresponding increase in the fixed prices found in the agreements, it would be impossible for it to finish the construction of the Tektite Building. Consequently, it continued with the construction despite authorization of the other party. Seeking to recover the amount expended, LCDC filed a Complaint with Application for the Issuance of a Writ of Preliminary Attachment before the Regional Trial Court (RTC) of Makati City which rendered a favorable order to LCDC. On appeal, the Court of Appeals reversed the decision of the RTC. Hence, this petition. ISSUE: Whether or not respondent can be held liable for the delay caused by circumstances falling under force majeure. HELD: No. Respondent cannot be held liable for the delay caused by circumstances falling under force majeure. Under Article 1174 of the Civil Code the obligor is exempt from liability for a breach of an obligation due to an ―act of God‖ or force majeure. The shortage in supplies and cement may be characterized as force majeure. In the present case, hardware stores did not have enough cement available in their supplies or stocks at the time of the construction in the 1990s. Likewise, typhoons, power failures and interruptions of water supply all clearly fall under force majeure. Since LCDC could not possibly continue constructing the building under the circumstances prevailing, it cannot be held liable for any delay that resulted from the causes aforementioned. A perusal of the construction agreements shows that the parties never agreed to make LCDC liable even in cases of force majeure. The Court reversed the decision appealed from. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
259
Megaworld Globus Asia, Inc. v. Tanseco Megaworld Globus Asia, Inc., Petitioner, versus Mila S. Tanseco, Respondent. (G.R. No. 181206, October 9, 2009, 1st Division) CARPIO-MORALES, J: FACTS: Petitioner Megaworld Globus Asia, Inc. (Megaworld) and respondent Mila S. Tanseco (Tanseco) entered into a Contract to Buy and Sell a condominium unit at a pre-selling project. Tanseco paid the installments due, however leaving a balance pending delivery of the unit. Megaworld failed to deliver the unit within the stipulated period and three years thereafter, by notice of turnover, it informed Tanseco that the unit was ready for inspection preparatory to delivery. Tanseco replied through counsel, by letter, that in view of Megaworld‘s failure to deliver the unit on time, she was demanding the return of the total installment payment she had made, with interest at 12% per annum from the expiration of the six-month grace period. Tanseco pointed out that none of the excepted causes of delay existed, however her demands were unheeded. Tanseco then filed with the Housing and Land Use Regulatory Board‘s (HLURB) Expanded National Capital Region Field Office a complaint against Megaworld for rescission of contract, refund of payment, and damages. In its Answer, Megaworld attributed the delay to the 1997 Asian financial crisis which was beyond its control; and argued that default had not set in, Tanseco not having made any judicial or extrajudicial demand for delivery before receipt of the notice of turnover. The HLURB Arbiter dismissed Tanseco‘s complaint for lack of cause of action. On appeal by Tanseco, the HLURB Board of Commissioners sustained the HLURB Arbiter‘s Decision on the ground of laches for failure to demand rescission when the right thereto accrued. Tanseco‘s Motion for Reconsideration having been denied, she appealed to the Office of the President which dismissed the appeal for failure to show that the findings of the HLURB were tainted with grave abuse of discretion. Tanseco filed a Petition for Review with the Court of Appeals which granted the petition. Hence, Megaworld filed the present Petition for Review. ISSUE: Whether or not the petitioner cannot be held liable for breach of obligation in view of the happening of a fortuitous event. HELD: No. Petitioner is liable for breach of obligation stipulated in the contract between the parties. The Contract to Buy and Sell of the parties contains reciprocal obligations, i.e., to complete and deliver the condominium unit the period stipulated, and to pay the balance of the purchase price at or about the time of delivery on the part of Tanseco. Compliance by Megaworld with its obligation is determinative of compliance by Tanseco with her obligation to pay the balance of the purchase price. Megaworld having failed to comply with its obligation under the contract, it is liable therefor. The Court cannot generalize the 1997 Asian financial crisis to be unforeseeable and beyond the control of a business corporation. A real estate enterprise engaged in the pre-selling of condominium units is concededly a master in projections on commodities and currency movements, as well as Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
260
business risks. The fluctuating movement of the Philippine peso in the foreign exchange market is an everyday occurrence, hence, not an instance of caso fortuito. Megaworld‘s excuse for its delay does not thus lie.
Sicam v. Jorge
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
261
Roberto C. Sicam and Agencia de R.C. Sicam, Inc., Petitioners, versus Lulu V. Jorge and Cesar Jorge, Respondents. (G.R. No. 159617, August 8, 2007, 3rd Division) AUSTRIA-MARTINEZ, J: FACTS: To secure a loan, Respondent Lulu V. Jorge (Lulu) pawned several pieces of jewelry with Petitioner Agencia de R. C. Sicam (Sicam). On October 19, 1987, two armed men entered the pawnshop and took away whatever cash and jewelry were found inside the pawnshop vault. Sicam sent Lulu a letter informing her of the loss of her jewelry due to the robbery incident in the pawnshop. Lulu expressed disbelief stating that when the robbery happened, all jewelry pawned were deposited with Far East Bank near the pawnshop since it had been the practice that before they could withdraw, advance notice must be given to the pawnshop so it could withdraw the jewelry from the bank. Lulu then requested Sicam to prepare the pawned jewelry for withdrawal but the latter failed to return the jewelry. Lulu joined by her husband, Cesar Jorge, filed a complaint against Sicam with the Regional Trial Court (RTC) of Makati seeking indemnification for the loss of pawned jewelry and payment of damages. Petitioner is interposing the defense of caso fortuito on the robbery committed against the pawnshop and filed a Motion to Dismiss. The RTC held that petitioner Sicam could not be made personally liable for a claim arising out of a corporate transaction. Respondents appealed the RTC Decision and the appellate court found Petitioners liable applying the doctrine of piercing the veil of corporate entity. Hence, this petition. ISSUE: Whether or not petitioners cannot be held liable for the loss of the pawned articles due to a fortuitous event. HELD: No. Petitioners are liable for the loss of the pawned articles for being negligent in securing the pawnshop. Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is therefore, not enough that the event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not impossibility to foresee the same. Robbery per se is not a fortuitous event. Petitioners failed to exercise reasonable care and caution that an ordinarily prudent person would have used in the same situation. Petitioners were guilty of negligence in the operation of their pawnshop business. No sufficient precaution and vigilance were adopted by petitioners to protect the pawnshop from unlawful intrusion. There was no clear showing that there was any security guard at all and the vault was open at the time of robbery, a proof of failure of petitioner to observe the care, precaution and vigilance that the circumstances justly demanded. Also, the robbery in this case took place in 1987 when robbery was already prevalent and petitioners in fact had already foreseen it as they wanted to deposit the pawn with a nearby bank for safekeeping. The Court affirmed the decision appealed from. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
262
Huibonhoa v. Court of Appeals Florencia T. Huibonhoa, Petitioner, versus Court of Appeals, Spouses Rufina G. Lim and Anthony Lim, Loreta Gojocco Chua and Spouses Severino and Priscilla Gojocco, Respondents. (G.R. No. 95897, December 14, 1999, 3rd Division) PURISIMA, J: FACTS: Petitioner Florencia Huibonhoa (Huibonhoa) entered into a contract of lease with siblings Rufina Gojocco Lim, Severino Gojocco and Loreta Gojocco Chua stipulating that Huibonhoa would lease from them 3 commercial lots for a period of 15 years and renewable upon agreement of the parties. Based on the said contract, the lessors authorized Huibonhoa to construct a building that must be completed within 8 months from the date of the execution of the contract. During the construction of the building, former Senator Benigno Aquino, Jr. was assassinated. This incident affected adversely the construction of the building such that Huibonhoa failed to complete the same with the stipulated eight-month period. It was completed only seven months after the target date and failed to pay the rental despite demand by the creditor. Huibonhoa brought an action for reformation of contract alleging that by reason of mistake or accident, the lease contract failed to provide that should an unforeseen event dramatically increase the cost of construction, such as the assassination of Sen. Aquino, the monthly rental would be reduced and the term of the lease would be extended for such duration as may fair and equitable to both the lessors and the lessee. Subsequently, the lessors filed a complaint for ejectment against Huibonhoa and the trial court dismissed the complaint. On appeal, the Court of Appeals affirmed the decision of the trial court. Hence, this petition. ISSUE: Whether or not the assassination of former Senator Benigno Aquino, Jr. a fortuitous event which justified the adjustment of the terms of the contract of lease. HELD: No. The assassination of former Senator Benigno Aquino, Jr. is not a fortuitous event that will justify the adjustment of the terms of the contract of lease. A fortuitous event is that which could not be foreseen, or which even if foreseen, was inevitable. To exempt the obligor from liability for a breach of an obligation due to an ―act of God,‖ the following requisites must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor. For Huibonhoa to claim exemption from liability by reason of fortuitous event under Article 1174 of the Civil Code, she must prove that inflation was the sole and proximate cause of the loss or destruction of the contract. Having failed to do so, Huibonhoa‘s contention is untenable.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
263
The order of ejectment was upheld and the decision appealed from was set aside.
Ace Agro v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
264
Ace-Agro Development Corporation, Petitioner, versus Court of Appeals and Cosmos Bottling Corporation, Respondents. (G.R. No. 119729, January 21, 1997, 2nd Division) MENDOZA, J: FACTS: Private respondent Cosmos Bottling Corp. is engaged in the manufacture of soft drinks. Since 1979 petitioner Ace-Agro Development Corp. had been cleaning soft drink bottles and repairing wooden shells for Cosmos, rendering its services within the company premises in San Fernando, Pampanga. The parties entered into service contracts which they renewed every year. Private respondent had earlier contracted the services of Aren Enterprises in view of the fact that petitioner could handle only from 2,000 to 2,500 cases a day and could not cope with private respondent's daily production of 8,000 cases. Fire broke out in private respondent's plant, destroying, among other places, the area where petitioner did its work. As a result, petitioner's work was stopped. Petitioner asked private respondent to allow it to resume its service, but petitioner was advised that on account of the fire, which had practically burned all old soft drink bottles and wooden shells, private respondent was terminating their contract. Petitioner expressed surprise at the termination of the contract and requested private respondent to reconsider its decision and allow petitioner to resume its work. As it received no reply from private respondent, petitioner informed its employees of the termination of their employment and brought the case against private respondent for breach of contract and damages in the Regional Trial Court (RTC) of Malabon. In its decision, the RTC found private respondent guilty of breach of contract and ordered it to pay damages to petitioner. Private respondent appealed to the Court of Appeals, which reversed the trial court's decision and dismissed petitioner's complaint. Hence, this petition. ISSUE: Whether or not the happening of a fortuitous event or force majeure stops the running of the period stipulated in a contract. HELD: No. The stipulation that in the event of a fortuitous event or force majeure the contract shall be deemed suspended during said period does not mean that the happening of any of those events stops the running of the period the contract has been agreed upon to run. It only relieves the parties from the fulfillment of their respective obligations during that time. Both parties admitted that the April 25, 1990 fire was a force majeure or unforeseen event and that the same even burned practically all the softdrink bottles and wooden shells which are the objects of the agreement. However, the court says that there was no cause for terminating the contract but at most a temporary suspension of work. Thus, as a result of the fire, the obligation has not been extinguished. Petition denied and the decision appealed from is affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
265
Dioquino v. Laureano Pedro D. Dioquino, Plaintiff-Appellee, versus Federico Laureano, Aida De Laureano and Juanito Laureano, Defendants-Appellants. (G.R. No. L-25906, May 28, 1970, En Banc) FERNANDO, J: FACTS: Plaintiff Attorney Pedro Dioquino, went to an office in Masbate to
register his car. He met the defendant Federico Laureano, a patrol officer, who was waiting for a jeepney to take him to the office of the Provincial Commander in Masbate. Attorney Dioquino requested the defendant to introduce him to one of the clerks in the office, who could facilitate the registration of his car and the request was graciously attended to. The defendant rode on the car of plaintiff on his way to the Barracks in Masbate. While about to reach their destination, the car was stoned by some mischievous boys, and its windshield was broken. Defendant chased the boys and he was able to catch one of them. The boy was taken to the plaintiff and admitted having thrown the stone that broke the car's windshield. The plaintiff and the defendant together with the boy returned to the barracks and the father of the boy was called, but no satisfactory arrangements were made. Defendant refused to file any charges against the boy and his parents because he thought that the stone-throwing was merely accidental and that it is an event of force majeure. However, plaintiff held defendant accountable for the loss thus sustained, including in the action filed the wife, Aida de Laureano, and the father, Juanito Laureano before the trial court. Plaintiff prevailed in the lower court, the judgment however going only against the principal defendant, his spouse and his father being absolved of any responsibility. Nonetheless, all three of them appealed directly to the Supreme Court, raising questions of law. ISSUE: Whether or not the stone-throwing incident can be considered as a force majeure, thus respondent cannot be held liable. HELD: Yes. The stone-throwing incident can be considered as force majeure, thus respondent cannot be held liable. Under the Civil Code, the rule was well-settled that in the absence of a legal provision or an express covenant, no one should be held to account for fortuitous cases. If it could be shown that such indeed was the case, liability is ruled out. There is no requirement of diligence beyond what human care and foresight can provide. What happened in this case was clearly unforeseen. It was a fortuitous event resulting in a loss which must be borne by the owner of the car. It would be an affront, not only to the logic but to the realities of the situation, if in the light of what transpired, as found by the lower court, defendant Federico Laureano could be held as bound to assume a risk of this nature. There was no such obligation on his part. The decision appealed from is hereby reversed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
266
Bachelor Express v. Court of Appeals Bachelor Express, Inc. and Cresencio Rivera, Petitioners, versus The Honorable Court of Appeals, Ricardo Beter, Sergia Beter, Teofilo Rautraut and Zoetera Rautraut, Respondents. (G.R. No. 85691, July 31, 1990, 3rd Division) GUTIERREZ, JR., J: FACTS: A bus owned by Bachelor Express, Inc. and driven by Cresencio Rivera, came from Davao City on its way to Cagayan de Oro City passing Butuan City. While at Tabon-Tabon, Butuan City, the bus picked up a passenger. About 15 minutes later, a passenger at the rear portion suddenly stabbed a soldier which caused commotion and panic among the passengers. When the bus stopped, two passengers, Ornominio Beter and Narcisa Rautraut, were found lying down the road, the former already dead as a result of head injuries and the latter also suffering from severe injuries which caused her death later. It was found out that the victims jumped off the bus without the knowledge and consent of the driver or the conductor of the bus. The passenger-assailant alighted from the bus and ran toward the bushes but was killed by the police. The heirs of the two passengers filed a complaint for sum of money against Bachelor Express, its alleged owner Samson Yasay, and the driver Rivera. After due trial, the trial court issued an order dismissing the complaint. Upon appeal, the Court of Appeals reversed the trial court‘s decision. Hence, this petition. ISSUE: Whether or not the case at bar is within the context of force majeure. HELD: Yes. The case at bar is within the context of force majeure. The sudden act of the passenger who stabbed another passenger in the bus is within the context of force majeure. However, in order that a common carrier may be absolved from liability in case of force majeure, it is not enough that the accident was caused by force majeure. The common carrier must still prove that it was not negligent in causing the injuries resulting from such accident. It is clear that petitioner has failed to overcome the presumption of fault and negligence found in the law governing common carriers-the bus driver did not immediately stop the bus at the height of the commotion; the bus was speeding from a full stop; the victims fell from the bus door when it was opened or gave way while the bus was still running; the conductor panicked and blew his whistle after people had already fallen off the bus; and the bus was not properly equipped with doors in accordance with law. The argument that the petitioners are not insurers of their passengers deserves no merit in view of the failure of the petitioners to observe extraordinary diligence in transporting safely the passengers to their destination as warranted by law. Petition is dismissed and the decision appealed from is affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
267
Vasquez v. Court of Appeals Pedro Vasquez, Soledad Ortega, Cleto Bagaipo, Agustina Virtudes, Romeo Vasquez and Maximina Cainay, Petitioners, versus Court of Appeals and Filipinas Pioneer Lines, Inc., Respondents. (G.R. No. L-42926, September 13, 1985, 1st Division) MELENCIO-HERRERA, J: FACTS: MV Pioneer Cebu was owned and operated by the defendant and used in the transportation of goods and passengers in the interisland shipping. It had a passenger capacity of three hundred twenty-two including the crew. It undertook the said voyage on a special permit issued by the Collector of Customs inasmuch as, upon inspection, it was found to be without an emergency electrical power system. The special permit authorized the vessel to carry only two hundred sixty passengers due to the said deficiency and for lack of safety devices for 322 passengers. A headcount was made of the passengers on board, resulting on the tallying of 168 adults and 20 minors, although the passengers manifest only listed 106 passengers. It has been admitted, however, that the headcount is not reliable. When the vessel left Manila, its officers were already aware of the typhoon Klaring building up somewhere in Mindanao. There being no typhoon signals on the route from Manila to Cebu, and the vessel having been cleared by the Customs authorities, the MV Pioneer Cebu left on its voyage to Cebu despite the typhoon. When it left the Port of Manila, it had on board the spouses Alfonso Vasquez and Filipinas Bagaipo and a four-year old boy, Mario Marlon Vasquez. The MV Pioneer Cebu encountered typhoon 'Klaring' and struck a reef on the southern part of Malapascua Island, located somewhere north of the island of Cebu and subsequently sunk. Due to the loss of their children, petitioners sued for damages before the Court of First Instance of Manila. Respondent defended on the plea of force majeure and the extinction of its liability by the actual total loss of the vessel. The lower court held the respondent liable. On appeal, respondent Court reversed the aforementioned judgment and absolved private respondent from any and all liability. Hence, this Petition for Review on Certiorari, ISSUE: Whether or not the respondent would be exempt from liability due to its defense of fortuitous event. HELD: No. The respondent is not exempted from liability. To constitute a caso fortuito, the event must have been impossible to foresee, or if it could be foreseen, must have been impossible to avoid. There must be an entire exclusion of human agency from the cause of injury or loss. While the typhoon was an inevitable occurrence, yet, having been kept posted on the course of the typhoon by weather bulletins at intervals of six hours, the captain and crew were well aware of the risk they were taking as they hopped from island to island from Romblon up to Tanguingui. They held frequent conferences, and oblivious of the utmost diligence required of very cautious persons, they decided to take a calculated risk. In so doing, they failed to observe that extraordinary diligence required of them explicitly by law. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
268
The decision appealed is reversed and the judgment of the lower court is reinstated.
Yobido v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
269
Alberta Yobido and Cresencia Yobido, Petitioners, versus Court of Appeals, Leny Tumboy, Ardee Tumboy and Jasmin Tumboy, Respondents. (G.R. No. 113003, October 17, 1997, 3rd Division) ROMERO, J: FACTS: Spouses Tito and Leny Tumboy and their minor children named Ardee and Jasmin, boarded at a Yobido Liner bus bound for Davao City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus exploded. The bus fell into a ravine around three feet from the road and struck a tree. The incident resulted in the death of 28-year-old Tito Tumboy and physical injuries to other passengers. Hence, a complaint for breach of contract of carriage, damages and attorney's fees was filed by Leny and her children against Alberta Yobido, the owner of the bus, and Cresencio Yobido, its driver, before the Regional Trial Court of Davao City. When the defendants therein filed their answer to the complaint, they raised the affirmative defense of caso fortuito. The lower court rendered a decision dismissing the action for lack of merit. Dissatisfied, the plaintiffs appealed to the Court of Appeals, which reversed the lower court‘s decision. Hence, this petition. ISSUE: Whether or not the explosion of the front tire of the bus is considered to be a fortuitous event which would exempt the petitioner from liability. HELD: No. The explosion of the front tire of the bus is not considered a fortuitous event which would exempt the petitioner from liability. A fortuitous event is possessed of the following characteristics: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligations, must be independent of human will; (b) it must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obliger must be free from any participation in the aggravation of the injury resulting to the creditor. The explosion of the new tire may not be considered a fortuitous event because there are human factors involved in the situation. The fact that the tire was new did not imply that it was entirely free from manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that the tire bought and used in the vehicle is of a brand name noted for quality, resulting in the conclusion that it could not explode within five days' use. Be that as it may, it is settled that an accident caused either by defects in the automobile or through the negligence of its driver is not a caso fortuito that would exempt the carrier from liability for damages. The decision appealed from is affirmed with modification.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
270
Juntilla v. Fontanar Roberto Juntilla, Petitioner, versus Clemente Fontanar, Fernando Banzon and Berfol Camoro, Respondents. (G.R. No. L-45637, May 31, 1985, 1st Division) GUTIERREZ, JR., J: FACTS: The petitioner was a passenger of the public utility jeepney on the course of the trip from Danao City to Cebu City. The jeepney was driven by defendant Berfol Camoro. It was registered under the franchise of defendant Clemente Fontanar but was actually owned by defendant Fernando Banzon. When the jeepney reached Mandaue City, the right rear tire exploded causing the vehicle to turn turtle. In the process, the plaintiff who was sitting at the front seat was thrown out of the vehicle. Upon landing on the ground, the plaintiff momentarily lost consciousness. Upon his arrival in Danao City, he immediately entered the Danao City Hospital to attend to his injuries, and also requested his father-in-law to proceed immediately to the place of the accident and look for his lost wrist watch. In spite of the efforts of his father-in-law, the wrist watch could no longer be found. Petitioner filed a civil case for breach of contract with damages before the City Court of Cebu City, Branch I against Clemente Fontanar, Fernando Banzon and Berfol Camoro. The respondents filed their answer, alleging inter alia that the accident that caused losses to the petitioner was beyond the control of the respondents taking into account that the tire that exploded was newly bought and was only slightly used at the time it blew up. The City Court rendered judgment in favor of the petitioner. The respondents appealed to the Court of First Instance of Cebu, which reversed the judgment of the City Court upon a finding that the accident in question was due to a fortuitous event. Hence, this petition. ISSUE: Whether or not the incident in this case was due to a fortuitous event, absolving the respondents from any obligation. HELD: No. The incident was not due to a fortuitous event. In the case at bar, the cause of the unforeseen and unexpected occurrence was not independent of the human will. There are specific acts of negligence on the part of the respondents. The records show that the passenger jeepney turned turtle and jumped into a ditch immediately after its right rear tire exploded. The evidence shows that the passenger jeepney was running at a very fast speed before the accident. There is also evidence to show that the passenger jeepney was overloaded at the time of the accident. The petitioner stated that there were three passengers in the front seat and fourteen passengers in the rear. While it may be true that the tire that blew-up was still good because the grooves of the tire were still visible, this fact alone does not make the explosion of the tire a fortuitous event. No evidence was presented to show that the accident was due to adverse road conditions or that precautions were taken by the jeepney driver to compensate for any conditions liable to cause accidents. The accident was caused either through the negligence of the driver or because of mechanical defects in the tire. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
271
The decision appealed from is affirmed with modification.
Philamgen Insurance v. MGG Marine Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
272
The Philippine American General Insurance Co., Inc., Petitioner, versus MGG Marine Services, Inc. and Doroteo Gaerlan, Respondents. (G.R. No. 135645, March 8, 2002, 1st Division) KAPUNAN, J: FACTS: San Miguel Corporation insured several beer bottle cases with an aggregate value of P5, 836, 222.80 with petitioner Philippine American General Insurance Company. The cargo was loaded on board the M/V Peatheray Patrick-G to be transported from Mandaue City to Bislig, Surigao Del Sur. After having been cleared by the Coast Guard Station in Cebu the previous day, the vessel left the port of Mandaue City for Bislig, Surigao Del Sur. The weather was calm when the vessel started its voyage. The following day, M/V Peatheray Patrick-G listed and subsequently sunk off Cawit Point, Cortes, Surigao Del Sur. As a consequence thereof, the cargo belonging to San Miguel Corporation was lost. Subsequently, San Miguel Corporation claimed the amount of its loss from petitioner. Upon petitioner's request, , Mr. Eduardo Sayo, a surveyor from the Manila Adjusters and Surveyors Co., went to Taganauan Island, Cortes, Surigao Del Sur where the vessel was cast ashore, to investigate the circumstances surrounding the loss of the cargo. In his report, Mr. Sayo stated that the vessel was structurally sound and that he did not see any damage or crack thereon. He concluded that the proximate cause of the listing and subsequent sinking of the vessel was the shifting of ballast water from starboard to portside. The said shifting of ballast water allegedly affected the stability of the M/V Peatheray Patrick-G. Thereafter, petitioner paid San Miguel Corporation the full amount of P5, 836, 222.80 pursuant to the terms of their insurance contract. Petitioner as subrogee of San Miguel Corporation filed with the Regional Trial Court (RTC) of Makati City a case for collection against private respondents to recover the amount it paid to San Miguel Corporation for the loss of the latter's cargo. Meanwhile, the Board of Marine Inquiry conducted its own investigation of the sinking and rendered its decision exonerating the captain and crew of the ill-fated vessel for any administrative liability because the sinking was due to a fortuitous event. The RTC promulgated its decision finding respondents solidarily liable for the loss of San Miguel Corporation's cargo. Private respondents appealed to the Court of Appeals which reversed the HELD of the RTC. Hence, this petition. ISSUE: Whether or not the sinking of the M/V Peatherav Patrick-G was due to a fortuitous event. HELD: Yes. The sinking of the M/V Peatherav Patrick-G was due to a fortuitous event. Since the presence of strong winds and enormous waves at Cortes, Surigao del Sur was shown to be the proximate and only cause of the sinking of the M/V Peatheray Patrick-G and the loss of the cargo belonging to San Miguel Corporation, private respondents cannot be held liable for the said loss. It is a general rule that no obligee shall be held liable for the loss or destruction or the non-performance of a prestation due to events that are unforeseen or if foreseeable, are inevitable. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
273
Petition denied and the decision appealed from is affirmed.
Mindex v. Morillo
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
274
Mindex Resources Development, Petitioner, versus Ephraim Morillo, Respondent. (G.R. No. 138123, March 12, 2002, 3rd Division) PANGANIBAN, J: FACTS: A verbal agreement was entered into between Ephraim Morillo and Mindex Resources Corporation (MINDEX) for the lease of the former‘s 6 x 6 tenwheeler cargo truck for use in MINDEX‘s mining operations in Binaybay, Bigaan, San Teodoro, Oriental Mindoro, at the stipulated rental of P300.00 per hour for a minimum of eight (8) hours a day or a total of P2, 400.00 daily. MINDEX has been paying the rentals until April 10, 1991. Unknown to Morillo, on April 11, 1991, the truck was burned by unidentified persons while it was parked unattended at Sitio Aras, Bigaan, San Teodoro, Oriental Mindoro, due to mechanical trouble. Upon learning of the burning incident, Morillo offered to sell the truck to MINDEX but the latter refused. Instead, it replaced the vehicle‘s burned tires and had it towed to a shop for repair and overhauling. Both parties presented their proposals as a remedy for the said incident. The Regional Trial Court (RTC) found petitioner responsible for the destruction or loss of the leased 6 x 6. The appellate court sustained the RTC‘s finding that petitioner was not without fault for the loss and destruction of the truck and, thus, liable therefore. Petitioner claims that the burning of the truck was a fortuitous event. Hence, this petition. ISSUE: Whether or not a fortuitous event is involved in the damage dealt to the rented truck. HELD: No. A fortuitous event is not involved in the damage dealt to the rented truck. Both the RTC and the CA found petitioner negligent and thus liable for the loss or destruction of the leased truck. True, both parties may have suffered from the burning of the truck but as found by both lower courts, the negligence of petitioner makes it responsible for the loss. Well-settled is the rule that factual findings of the trial court, particularly when affirmed by the CA, are binding on the Supreme Court. Article 1667 of the Civil Code holds lessees responsible for the deterioration or loss of the thing leased, unless they prove that it took place without their fault. In order for a fortuitous event to exempt one from liability, it is necessary that one has committed no negligence or misconduct that may have occasioned the loss. An act of God cannot be invoked to protect a person who has failed to take steps to forestall the possible adverse consequences of such a loss. One‘s negligence may have concurred with an act of God in producing damage and injury to another; nonetheless, showing that the immediate or proximate cause of the damage or injury was a fortuitous event would not exempt one from liability. When the effect is found to be partly the result of a person‘s participation whether by active intervention, neglect or failure to act -- the whole occurrence is humanized and removed from the rules applicable to acts of God. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
275
Petition denied and the decision appealed from is affirmed with modification.
NAPOCOR v. Phillip Bros. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
276
National Power Corporation, Petitioner, versus Phillip Brothers Oceanic, Inc., Respondent. (G.R. No. 126204, November 20, 2001, 3rd Division) SANDOVAL-GUTIERREZ, J: FACTS: The National Power Corporation (NAPOCOR) issued invitations to bid for the supply and delivery of 120,000 metric tons of imported coal for its Batangas Coal-Fired Thermal Power Plant in Calaca, Batangas. The Phillip Brothers Oceanic, Inc. (PHIBRO) prequalified and was allowed to participate in the bidding. After the public bidding was conducted, PHIBRO‘s bid was accepted. PHIBRO informed NAPOCOR that industrial disputes might soon plague Australia, the shipment‘s point of origin, which could seriously hamper PHIBRO‘s ability to supply the needed coal. PHIBRO again apprised NAPOCOR of the situation in Australia, particularly informing the latter that the ship owners therein are not willing to load cargo unless a ―strike-free‖ clause is incorporated in the charter party or the contract of carriage. In order to hasten the transfer of coal, PHIBRO proposed to NAPOCOR that they equally share the burden of a ―strike-free‖ clause. NAPOCOR refused. PHIBRO received from NAPOCOR a confirmed and workable letter of credit. Instead of delivering the coal on or before the thirtieth day after receipt of the Letter of Credit, PHIBRO effected its first shipment only on November 17, 1987. NAPOCOR once more advertised for the delivery of coal to its Calaca thermal plant. PHIBRO participated anew in this subsequent bidding. NAPOCOR disapproved PHIBRO‘s application for pre-qualification to bid for not meeting the minimum requirements. Upon further inquiry, PHIBRO found that the real reason for the disapproval was its purported failure to satisfy NAPOCOR‘s demand for damages due to the delay in the delivery of the first coal shipment. This prompted PHIBRO to file an action for damages with application for injunction against NAPOCOR with the Regional Trial Court (RTC), Makati City. The trial court rendered a decision in favor of PHIBRO. Unsatisfied, NAPOCOR, through the Solicitor General, elevated the case to the Court of Appeals (CA). The Court of Appeals rendered a Decision affirming in toto the Decision of the Regional Trial Court. Hence, this petition. ISSUE: Whether or not PHIBRO‘s delay in the delivery of imported coal was due to a fortuitous event. HELD: Yes. PHIBRO‘s delay in the delivery of imported coal was due to a fortuitous event. It is worthy to note that PHIBRO and NAPOCOR explicitly agreed in Section XVII of the Bidding Terms and Specifications that neither seller (PHIBRO) nor buyer (NAPOCOR) shall be liable for any delay in or failure of the performance of its obligations, other than the payment of money due, if any such delay or failure is due to Force Majeure. Specifically, they defined force majeure as any disabling cause beyond the control of and without fault or negligence of the party, which causes may include but are not restricted to Acts of God or of the public enemy; acts of the Government in either its sovereign or contractual capacity; governmental restrictions; strikes, fires, floods, wars, typhoons, storms, epidemics and quarantine restrictions. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
277
The decision appealed from is affirmed with modification.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
278
Ong Genato v. Bayhon, et al. William Ong Genato, Petitioner, versus Benjamin Bayhon, Melanie Bayhon, Benjamin Bayhon, Jr., Brenda Bayhon, Alina Bayhon-Campos, Irene Bayhon-Tolosa, and the minor Gino Bayhon, as represented by his natural mother as guardian ad litem, Jesusita Bayhon, Respondents. (G.R. No. 171035, August 24, 2009, 1st Division) PUNO, J: FACTS: Respondent Benjamin Bayhon obtained from the petitioner a loan amounting to PhP 1,000,000.00; that to cover the loan, he executed a Deed of Real Estate Mortgage over the property covered by Transfer Certificate of Title (TCT) No. 38052; that, however, the execution of the Deed of Real Estate Mortgage was conditioned upon the personal assurance of the petitioner that the said instrument is only a private memorandum of indebtedness and that it would neither be notarized nor enforced according to its tenor. He filed a separate proceeding for the reconstitution of TCT No. 38052 before the trial court. Petitioner William Ong Genato filed an Answer in Intervention in the said proceeding and attached a copy of an alleged dacion en pago covering said lot. Respondent assailed the dacion en pago as a forgery alleging that neither he nor his wife, who had died 3 years earlier, had executed it. Respondents filed an action before the Regional Trial Court of Quezon City, seeking the declaration of nullity of a dacion en pago allegedly executed by respondent in favor of petitioner William Ong Genato. Petitioner filed an action for specific performance, before the trial court against respondent for failure to pay the loan. The two cases were consolidated. With respect to the dacion en pago, the trial court held that the parties have novated the agreement. The trial court likewise concluded that the lot could not have been validly mortgaged by the respondent alone; the deed of mortgage was not enforceable and only served as evidence of the obligation of the respondent. Respondents appealed before the Court of Appeals which held that the real estate mortgage and the dacion en pago were both void. While the case was on appeal, the respondent died. Hence, this petition. ISSUE: Whether or not the loan contracted by respondent must first be satisfied before any portion of the inheritance may be transmitted to his heirs. HELD: Yes. The loan contracted by respondent must first be satisfied before any portion of the inheritance may be transmitted to his heirs. As a general rule, obligations derived from a contract are transmissible. Article 1311 of the Civil Code provides: Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. While the deceased respondent may no longer be compelled to pay the loan, the debt subsists against his estate. No property or portion of the inheritance may be transmitted to his heirs unless the debt has first been satisfied. Petitioner‘s remedy lies in filing a claim against the estate of the deceased respondent. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
279
The decision appealed from is affirmed with modification.
Union Bank v. Santibanez
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
280
Union Bank of the Philippines, Petitioner, versus Edmund Santibanez and Florence Santibanez Ariola, Respondents. (G.R. No. 149926, February 23, 2005, 2nd Division) CALLEJO, SR., J: FACTS: Efraim Santibañez (Efraim) secured loans from First Countryside Credit Corp. (FCCC) for the purchase of tractors. These loans were evidenced by promissory notes signed by Efraim and her son Eduard. Efraim died leaving holographic will. Subsequently, testate proceeding, the surviving heirs Edmund and his sister Florence Santibañez Ariola, executed a joint Agreement wherein they agreed to divide themselves and take possession of the three tractors. Each of them to assume the indebtedness of their late father to FCCC corresponding the tractor respectively taken by them. A deed of Assignment with assumption of liabilities was executed by and between FCCC and Union Savings and Mortgage Bank, wherein FCCC as assignor, assigned all its assets and liabilities to Union Savings and Mortgage Bank. Petitioner filed a complaint for sum of money against Efraim, Edmund and Florence, before the RTC of Makati City. Summonses were issued against both, but the one intended for Edmund was not served since he was in United States an there was no information on his address or date of his return to the Philippines. Accordingly, the complaint was narrowed down to respondent Florence. The trial court dismissed the complaint, holding that the claim of the petitioner should have been filed with probate court before which testate estate of the late Efraim. On appeal, the Court of Appeals sustained the trial court. Hence, this petition. ISSUE: Whether or not the heirs‘ assumption of the indebtedness of the deceased is binding. HELD: No. The heirs‘ assumption of the indebtedness is not binding. The assumption of liability was conditioned upon the happening of an event, that is, that each heir shall take possession and use of their respective share under the agreement. It was made dependent on the validity of the partition, and that they were to assume the indebtedness corresponding to the chattel that they were each to receive. The partition being invalid, the heirs in effect did not receive any such tractor. It follows then that the assumption of liability cannot be given any force and effect. Florence S. Ariola could not be held accountable for any liability incurred by her late father. The documentary evidence presented, particularly the promissory notes and the continuing guaranty agreement, were executed and signed only by the late Efraim Santibañez and his son Edmund. As the petitioner failed to file its money claim with the probate court, at most, it may only go after Edmund as co-maker of the decedent under the said promissory notes and continuing guaranty, of course, subject to any defenses Edmund may have as against the petitioner. The decision appealed from is affirmed. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
281
San Agustin v. Court of Appeals Jesus San Agustin, Petitioner, versus The Honorable Court of Appeals and Maximo Menez, Jr., Respondents. (G.R. No. 121940, December 4, 2001, 2nd Division) QUISUMBING, J: FACTS: The Government Service Insurance System (GSIS) sold to a certain Macaria Vda. de Caiquep, a parcel of residential land with an area of 168 square meters as part of the Government Service and Insurance System Low Cost Housing Project. The sale is evidenced by a Deed of Absolute Sale subject to the condition that any violation of which shall entitle the vendor to cancel. The purpose of the sale be to aid the vendee in acquiring a lot for himself/themselves and not to provide him/them with a means for speculation or profit by a future assignment of his/their right herein acquired or the resale of the lot through rent, lease or subletting to others of the lot and subject of this deed. Sometime in 1979, for being suspected as a subversive, an Arrest, Search and Seizure Order (ASSO) was issued against private respondent. When he was released, he discovered that the subject Transfer Certificate of Title (TCT) was missing. He filed a petition for the issuance of the owners duplicate copy of the TCT to replace the lost one. Trial ensued and it went uncontested leaving the court to grant his petition. Petitioner received a copy of the decision. He claimed this was the first time he became aware of the case of her aunt, Macaria Vda. de Caiquep who, according to him, died sometime in 1974. Claiming that he was the present occupant of the property and the heir of Macaria, he filed his Motion to Reopen Reconstitution Proceedings; however, the trial court issued an order denying said motion. Petitioner filed an appeal with the Court of Appeals, which was denied. Hence, this petition. ISSUE: Whether the petitioner have an interest in the property. HELD: No. Petitioner does not have an interest in the property. The petitioner does not appear to have an interest in the property based on the memorandum of encumbrances annotated at the back of the title. His claim that he is an heir (nephew) of the original owner of the lot covered by the disputed lot and the present occupant thereof is not annotated in the said memorandum of encumbrances. Neither was his claim entered on the Certificate of Titles in the name of their original/former owners on file with the Register of Deeds. Also, private respondent's compliance of the RTC‘s order of publication of the petition in a newspaper of general circulation is sufficient notice of the petition to the public at large. The GSIS has not filed any action for the annulment of the deed of sale, nor for the forfeiture of the lot in question. Therefore, the contract of sale remains valid between the parties, unless and until annulled in the proper suit filed by the rightful party and remains binding upon all heirs and their predecessors in interest. Petition is denied and the decision appealed from is affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
282
Project Builders, Inc. v. Court of Appeals Project Builders, Inc., Galicano A. Calapatia, Jr., and Leandro Enriquez, Petitioners, versus The Court of Appeals and Industrial Finance Corporation, Respondents. (G.R. No. 99433, June 19, 2001, 3rd Division) VITUG, J: FACTS: Plaintiff and Project Builders, Inc. (PBI) entered into an agreement whereby it was agreed that plaintiff would provide a maximum amount of P2,000,000.00 against which said defendant would discount and assign to plaintiff on a ‗with recourse non-collection basis‘ its accounts receivable under the contracts to sell specified in said agreement. And on June 15, 1976, the same parties entered into an agreement whereby it was agreed that PBI‘s credit line with plaintiff be increased to P5,000,000.00. It was stipulated that the credit line of P5,000,000.00 granted includes the amount already assigned/discounted. The discounts were on different date accounts receivables with different maturity dates from different condominium-unit buyers. And each time a certain account receivable was discounted, the covering Contract to Sell was assigned by defendant to plaintiff. The total amount of receivables discounted by defendant PBI is P7,986,815.38 and consists of twenty accounts. Of such receivables amounting to P7,986,815.38 plaintiff released to defendant PBI the amount of P4,549,132.72 and the difference of P3,437,682.66 represents the discounting fee or finance fee. To secure compliance, defendants executed a Deed of Real Estate Mortgage in favor of plaintiff. When defendants allegedly defaulted in the payment of the subject account, plaintiff foreclosed the mortgage and plaintiff was the highest bidder in the amount of P3,500,000.00. The foreclosed property was redeemed a year later, but after application of the redemption payment, plaintiff claims that there is still a deficiency in the amount of P1,323,053.08. The trial court dismissed the complaint. The Court of Appeals however overturned the judgment of the trial court. Hence, this petition. ISSUE: Whether or not the assignment of credit is valid. HELD: Yes. The assignment of credit is valid. An assignment of credit is an act of transferring, either onerously or gratuitously, the right of an assignor to an assignee who would then be capable of proceeding against the debtor for enforcement or satisfaction of the credit. The transfer of rights takes place upon perfection of the contract, and ownership of the right, including all appurtenant accessory rights, is thereupon acquired by the assignee. In the case, the assignment, was with recourse, and default in the payment of installments had been duly established when petitioner corporation foreclosed on the mortgaged parcels of land. The resort to foreclosure of the mortgaged properties did not preclude private respondent from collecting interest from the assigned Contracts to Sell from the time of foreclosure to the redemption of the foreclosed property. The imposition of interest was a mere Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
283
enforcement or exercise of the right to the ownership of the credit or receivables which the parties stipulated in the 1976 financing agreement. Petition is denied and the decision of the trial court is affirmed.
Hong Kong and Shanghai Bank v. Sps. Broqueza
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
284
Hong Kong and Shanghai Banking Corp., Ltd. Staff Retirement Plan, Petitioner, versus Spouses Bienvenido and Editha Broqueza, Respondents. (G.R. No. 178610, November 17, 2010, 2nd Division) CARPIO, J: FACTS: Petitioners Fe Gerong and Editha Broqueza are employees of Hongkong and Shanghai Banking Corporation (HSBC). They are also members of respondent Hongkong Shanghai Banking Corporation, Ltd. Staff Retirement Plan (HSBCL-SRP). The HSBCL-SRP is a retirement plan established by HSBC through its Board of Trustees for the benefit of the employees. Petitioner Editha Broqueza obtained a car loan in the amount of Php175,000.00. She again applied and was granted an appliance loan in the amount of Php24,000.00. On the other hand, petitioner Gerong applied and was granted an emergency loan in the amount of Php35,780.00.These loans are paid through automatic salary deduction. Meanwhile, a labor dispute arose between HSBC and its employees. Majority of HSBC‘s employees were terminated, among whom are petitioners Editha Broqueza and Fe Gerong. The employees then filed an illegal dismissal case before the National Labor Relations Commission (NLRC) against HSBC. Because of their dismissal, petitioners were not able to pay the monthly amortizations of their respective loans. Thus, respondent HSBCL-SRP considered the accounts of petitioners delinquent. Demands to pay the respective obligations were made upon petitioners, but they failed to pay. HSBCL-SRP, acting through its Board of Trustees and represented by Alejandro L. Custodio, filed civil case against the spouses Broqueza and a civil case Gerong. Both suits were civil actions for recovery and collection of sums of money. The Metropolitan Trial Court (MeTC) promulgated its decision in favor of HSBCL-SRP. Gerong and the spouses Broqueza filed a joint appeal of the MeTC‘s decision before the Regional Trial Court (RTC). The RTC affirmed the MeTC‘s decision in toto. Gerong and the spouses Broqueza then filed a Petition for Review before the Court of Appeals (CA). The CA reversed the RTC decision. Hence, this petition. ISSUE: Whether or not the HSBCL-SRP has the right to demand immediate payment since the Promissory Notes do not contain a period. HELD: Yes. The HSBCL-SRP has the right to demand immediate payment since the Promissory Notes do not contain a period. Article 1179 of the Civil Code applies. Article 1179 provides: Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. The spouses Broqueza‘s obligation to pay HSBCL-SRP is a pure obligation. The fact that HSBCL-SRP was content with the prior monthly check-off from Editha Broqueza‘s salary is of no moment. Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP made a demand to enforce a pure obligation. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
285
Petition granted. The decision appealed from is reversed and set aside.
DBP v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
286
Development Bank of the Philippines, Petitioner, versus Court of Appeals and Lydia Cuba, Respondents. (G.R. No. 118342, January 5, 1998, 1st Division) DAVIDE, JR., J: FACTS: Private respondents were the original owners of a parcel of land which they mortgaged to petitioner bank and were subsequently foreclosed for the former‘s default on their obligation. A Transfer Certificate of Title was eventually issued in petitioner‘s name being the sole bidder in the auction sale conducted during the foreclosure of said land. Petitioner and private respondents entered into a Deed of Conditional Sale wherein petitioner agreed to reconvey the foreclosed property to private respondents under the condition that petitioner shall deliver to private respondents, their heirs, administrators and assigns a good and sufficient deed of conveyance covering the property, subject matter of the said deed of conditional sale, upon completion of payment by said private respondents. Petitioner then informed private respondents that the prestation to execute and deliver a deed of conveyance in their favor had become legally impossible in view of Sec.6 of Republic Act 6657 (Comprehensive Agrarian Reform Law) and Sec.1 of Executive Order 407. The former law annulling all sales, dispositions, leases, management contracts or transfers of possession of private lands executed by the original landowner in violation of the retention limits provided thereof upon its effectivity while the latter law requires all government instrumentalities to immediately execute deeds of transfer in favor of the Republic of the Philippines as represented by the Department of Agrarian Reform and to surrender to the latter department all landholdings suitable for agriculture. Aggrieved, private respondents filed a complaint for specific performance with damages against petitioner before the trial court. Judgment was rendered in favor of the private respondents. Upon appeal, the Court of Appeals reversed the trial court‘s decision. Hence, this petition. ISSUE: Whether or not said laws had rendered legally impossible compliance by petitioner with its obligation to execute a deed of conveyance of the subject land in favor of private respondents. HELD: No. The laws mentioned in this case did not render it legally impossible for petitioner to comply with its obligation. It is a rule that if the obligation depends upon a suspensive condition, the demandability as well as the acquisition of effectivity of the rights arising from the obligation is suspended pending the happening or fulfillment of the fact or event which constitutes the condition. Once the event which constitutes the condition is fulfilled resulting in the effectivity of the obligation, its effects retroact to the moment when the essential elements which gave birth to the obligation have taken place. Applying this precept to the case, the full payment by the appellees on April 6, 1990 retroacts to the time the contract of conditional sale was executed on April 6, 1984. From that time, all elements of the contract were present and the contract of sale was perfected. Said sale does not come under the coverage of Republic Act No. 6657 and Executive Order No. 407. Republic Act No. 6657 refers to the original owners of said agricultural lands and petitioner is not as such. The decision appealed from is reversed. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
287
Tomimbang v. Tomimbang Maria Soledad Tomimbang, Petitioner, versus Atty. Jose Tomimbang, Respondent. (G.R. No. 165116, August 4, 2009, 3rd Division) PERALTA, J: FACTS: Petitioner and respondent are siblings. Their parents donated to petitioner an eight-door apartment located, with the condition that during the parents' lifetime, they shall retain control over the property and petitioner shall be the administrator thereof. Petitioner failed to obtain a loan from PAG-IBIG Fund, hence, respondent offered to extend a credit line to petitioner on the following conditions: (1) petitioner shall keep a record of all the advances; (2) petitioner shall start paying the loan upon the completion of the renovation; (3) upon completion of the renovation, a loan and mortgage agreement based on the amount of the advances made shall be executed by petitioner and respondent; and (4) the loan agreement shall contain comfortable terms and conditions which petitioner could have obtained from PAG-IBIG. Respondent and petitioner entered into a new agreement whereby petitioner was to start making monthly payments on her loan. Upon respondent's demand, petitioner turned over to respondent all the records of the cash advances for the renovations. Petitioner however discontinued the renovations and her whereabouts could not be located. Respondent filed a complaint demanding the former to pay the loan plus interest. The trial court and the Court of Appeals rendered judgment in favor of the plaintiff. Hence, this petition. ISSUE: Whether or not petitioner‘s obligation is due and demandable. HELD: Yes. The petitioner‘s obligation is due and demandable. The evidence on record clearly shows that after renovation of seven out of the eight apartment units had been completed, petitioner and respondent agreed that the former shall already start making monthly payments on the loan even if renovation on the last unit was still pending. She agreed and complied with respondent's demand for her to begin paying her loan, since she believed this was in accordance with her commitment to pay whenever she was able. By her very own admission and partial performance of her obligation, there can be no other conclusion but that under the novated agreement, petitioner's obligation is already due and demandable. Evidently, by virtue of the subsequent agreement, the parties mutually dispensed with the condition that petitioner shall only begin paying after the completion of all renovations. There was, in effect, a partial novation, of petitioner's obligation. As can be gleaned from the foregoing, the aforementioned four essential elements and the requirement that there be total incompatibility between the old and new obligation, apply only to extinctive novation. In partial novation, only the terms and conditions of the obligation are altered, thus, the main obligation is not changed and it remains in force. Her partial performance of her obligation is unmistakable proof that indeed the original agreement between her and respondent had been novated by the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
288
deletion of the condition that payments shall be made only after completion of renovations. The decision appealed from is affirmed with modification.
Gonzales v. Heirs
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
289
Feliz L. Gonzales, Petitioner, versus The Heirs of Thomas and Paula Cruz, herein represented by Elena C. Talens, Respondents. (G.R. No. 131784, September 16, 1999, 3rd Division) PANGANIBAN, J: FACTS: Paula Año Cruz together with the heirs of Thomas and Paula Cruz, entered into a Contract of Lease/Purchase with the defendant, Felix L. Gonzales, of a half-portion of a parcel of land containing an area 12 hectares, more or less, and an accretion of two hectares in Rizal. The defendant Gonzales paid the annual rental on the property in accordance with the provisions of the Contract of Lease/Purchase and thereafter took possession of the property, installing thereon the defendant Jesus Sambrano as his caretaker. The defendant Gonzales did not, however, exercise his option to purchase the property immediately after the expiration of the one-year lease. He remained in possession of the property without paying the purchase price provided for in the Contract of Lease/Purchase and without paying any further rentals thereon. A letter was sent by one of the plaintiffs-heirs to the defendant Gonzales informing him of the lessors' decision to rescind the Contract due to a breach thereof committed by the defendant and asked him to vacate the premises within 10 days. The defendant Gonzales refused to vacate the property and continued possession thereof. The plaintiffs filed a complaint for recovery of possession of the property. The trial court ruled that the plaintiffs could not validly rescind the contract and thereafter take possession of the land in question. On appeal, the Court of Appeals reversed the trial court‘s decision. Hence, this petition. ISSUE: Whether or not the condition of the contract is a precedent before the defendant is to pay the down payment HELD: Yes. The condition of the contract is a precedent before the defendant is to pay the down payment When the obligation assumed by a party to a contract is expressly subjected to a condition, the obligation cannot be enforced against him unless the condition is complied with. The contract clearly indicates that the lessorsplaintiffs shall obtain a Transfer Certificate of Title in the name of the lessee within 4 years before a new contract is to be entered into under the same terms and conditions as the original Contract of Lease/Purchase. Thus, before a deed of Sale can be entered into between the plaintiffs and the defendant, the plaintiffs have to obtain the Transfer Certificate of Title in favor of the defendant. The failure of the plaintiffs to secure the Transfer Certificate of Title, as provided for in the contract, does not entitle them to rescind the contract. The failure to secure the Transfer Certificate of Title in favor of the defendant entitles not the plaintiffs but, rather, the defendant to either rescind or to ask for specific performances. Petitioner should first purchase the property before respondents could be obliged to transfer the TCT to his name. Verily, the petitioner's obligation to purchase has not yet ripened and cannot be enforced until and unless respondents can prove their title to the property subject of the Contract. Petition granted and the decision appealed from is reversed and set aside. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
290
Insular Life v. Young Insular Life Assurance Company, Ltd., Insular Savings Bank and Jacinto D. Jimenez, Petitioners, versus Robert Young, Gabriel Lao II, Arthur Tan, Lope Juban, Jr., Maria Lourdes Ongpin, Antonio Ongpin, Elsie Dizon, Yolanda Bayer, Cecilia Viray, Manuel Viray, Jose Vito Borromeo, Respondents. (G.R. No. 140964, January 16, 2002, 3rd Division) SANDOVAL-GUTIERREZ, J: FACTS: Respondent Robert Young obtained a short term loan of 170,000,000.00 pesos from interbank to finance the purchase 45% equity in Insular Savings Bank. He did this under the assumption that Araneta would purchase 99.82% of the banks outsanding capital stock and consolidate all shares in Young‘s name. However, Araneta backed and Young was left with a massive debt. Young entered into a Memorandum of Agreement (MOA) where Insular Life and its Pension Fund whereby Insular Life would purchase shares of stock if Young would abide by certain conditions: one of them being to infuse additional capital of 50,000,000.00 pesos into the Bank. It was discovered that Young was pilfering funds from the bank through check kiting operations and he tendered his resignation. He also defaulted on his obligations. His shares of stock were purchased by Insular Life in a public auction. The shares were then consolidated in its name. Young filed a case for annulment of notarial sale, specific performance and damages. The case was dismissed by the trial court. On appeal, the Court of Appeals (CA) considered the MOA as a contract of sale. Hence, this petition. ISSUE: Whether or not Insular Life is bound to comply with its obligations in favor of Young. HELD: No. Insular Life is bound to comply with its obligations in favor of Robert Young. The provisions of the MOA negate the existence of a perfected contract of sale. The MOA is merely a contract to sell since the parties therein specifically undertook to enter into a contract of sale if the stipulated conditions are met and the representation and warranties given by Young prove to be true. Here, the MOA provides that Young shall infuse additional capital of 50,000,000.00 pesos into the Bank. Young failed to infuse the required additional capital. Moreover, the due diligence audit shows that Young was involved in fraudulent schemes like check kiting. Since no sale transpired between the parties, the CA erred in concluding that Insular Life purchased 55% of the total shares of the Bank under the MOA. It would be unfair on the part of Robert Young to demand compliance by Insular Life of its obligations when he himself was remiss in his own. aside.
Petition granted and the decision appealed from is reversed and set
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
291
Direct Funders v. Lavina Direct Funders Holdings Corporation, Petitioner, versus Judge Celso D. Lavina and Kambiak Y. Chan, Jr., Respondents. (G.R. No. 141851, January 16, 2002, 1st Division) PARDO, J: FACTS: It is alleged by the petitioner that the respondent Judge issued the writ of preliminary injunction, despite clear and express prayer in the Amended Complaint that private respondent Kambiak Y. Chan, Jr. (Chan) sought the issuance of a writ of preliminary mandatory injunction. During the hearing for the issuance of temporary restraining order, it was made clear to the respondent Judge that the property in question was occupied by the petitioner by virtue of a writ of possession issued by the Regional Trial Court in a petition for the issuance of writ of possession thereof. Despite the lawful order of a coordinate and co-equal court, the respondent Judge issued the questioned orders to restore possession to private respondent Chan, alleging an obviously grave abuse of discretion, tantamount to lack of jurisdiction. The respondent Judge issued the questioned order granting the issuance of a writ of preliminary injunction who subsequently denied the petitioner‘s motion to dismiss and supplemental motion to dismiss and the very urgent motion for reconsideration. The motion for inhibition and the motion to dissolve the writ of preliminary injunction were also denied Petitioner filed with the Court of Appeals a petition for certiorari and prohibition assailing the trial court‘s issuance of a writ of preliminary injunction. The Court of Appeals promulgated a decision dismissing the petition HELD that the trial court had jurisdiction to issue the injunction that did not interfere with the writ of possession of a coordinate court. Hence, this appeal. ISSUE: Whether or not the conditional sale agreement is consummated and effectual. HELD: No. The conditional sale agreement is consummated and effectual. The conditional sale agreement was the only document that the respondent presented during the summary hearing of the application for a temporary restraining order before the Regional Trial Court. The conditional sale agreement is officious and ineffectual. First, it was not consummated. Second, it was not registered and duly annotated on the Transfer Certificate of Title (TCT) covering the subject property. Third, it was executed about eight years after the execution of the real estate mortgage over the subject property. The mortgagee did not give its consent to the change of debtor. It is a fundamental axiom in the law on contracts that a person not a party to an agreement cannot be affected thereby. Worse, not only was the conditional sale agreement executed without the consent of the mortgagee-creditor, United Savings Bank, the same was also a material breach of the stipulations of the real estate mortgage over the subject property. The petitioner as opposed to Chan bears a TCT, deeds of assignment, and certificates of sale in its favor showing that it has a better right to possession of the disputed land. The decision appealed from is reversed. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
292
Vda. De Mistica v. Naguiat Fidela Del Castillo Vda. De Mistica, Petitioner, versus Spouses Bernardino Naguiat and Maria Paulina Gerona-Naguiat, Respondents. (G.R. No. 137909, December 11, 2003, 1st Division) PANGANIBAN, J: FACTS: Eulalio Mistica, predecessor-in-interest of herein petitioner, entered into a contract to sell with respondent Bernardino Naguiat over a lot. Pursuant to said agreement, respondent gave a downpayment of 2,000.00 pesos. He made another partial payment of 1,000.00 pesos on February 7, 1980. He failed to make any payments thereafter. Eulalio Mistica died sometime in October 1986. Petitioner filed a complaint for rescission alleging that the failure and refusal of respondents to pay the balance of the purchase price constitutes a violation of the contract which entitles her to rescind the same. In their answer and amended answer, respondents contended that the contract cannot be rescinded on the ground that it clearly stipulates that in case of failure to pay the balance as stipulated, a yearly interest of 12% is to be paid. After the presentation of the evidence, the trial court rendered a decision dismissing the complaint for lack of merit. Upon appeal, The Court of Appeals held that respondents did not breach the Contract of Sale and disallowed the rescission. Hence, this petition. ISSUE: Whether or not petitioner entitled to rescission of contract. HELD: No. The petitioner is not entitled to rescission of contract. The transaction between Eulalio Mistica and respondents, as evidenced by the Kasulatan, was clearly a Contract of Sale. A deed of sale is considered absolute in nature when there is neither a stipulation in the deed that title to the property sold is reserved to the seller until the full payment of the price; nor a stipulation giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. In a contract of sale, the remedy of an unpaid seller is either specific performance or rescission. Rescission, however, is allowed only where the breach is substantial and fundamental to the fulfillment of the obligation. In the present case, the failure of respondents to pay the balance of the purchase price within ten years from the execution of the Deed did not amount to a substantial breach. Moreover, it is undisputed that during the ten year period, petitioner never made any demand for the balance of the purchase price. Petitioner even refused the payment tendered by respondents during her husband‘s funeral, thus showing she was not exactly blameless for the lapse of the ten year period. The decision appealed from is affirmed with modification.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
293
Hermosa v. Longara Luz Hermosa, as Administratrix of the Intestate Estate of Fernando Hermosa, Sr., and Fernando Hermosa, Jr., Petitioners, versus Epifanio M. Longara, Respondents. (G.R. No. L- 5267, October 27, 1953, En Banc) LABRADOR, J: FACTS: The claims by Epifanio M. Longara against the testate estate of Fernando Hermosa, Sr. are of three kinds, namely, 2,341.41 pesos representing credit advances made to the intestate from 1932 to 1944, 12,924.12 pesos made to his son Francisco Hermosa, and 3,772.00 pesos made to his grandson, Fernando Hermosa, Jr. from 1945 to 1947, after the death of the intestate, which occurred in December, 1944. The claimant presented evidence and the Court of Appeals found, in accordance therewith, that the intestate had asked for the said credit advances for himself and for the members of his family on condition that their payment should be made by Fernando Hermosa, Sr. as soon as he receive funds derived from the sale of his property in Spain. Claimant had testified without opposition that the credit advances were to be payable as soon as Fernando Hermosa, Sr.'s property in Spain was sold and he receive money derived from the sale. The Court of Appeals held that payment of the advances did not become due until the administratrix received the sum of 20,000.00 pesos from the buyer of the property. Upon authorization of the probate court in October, 1947, and the same was paid for subsequently. Hence, this appeal. ISSUE: Whether or not the condition of the obligation is a potestative condition, hence void and unenforceable. HELD: No. The condition of the obligation is a potestative condition, hence void and unenforceable. A careful consideration of the condition upon which payment of the sums advanced was made to depend, "as soon as he (intestate) receive funds derived from the sale of his property in Spain," discloses the fact that the condition in question does not depend exclusively upon the will of the debtor, but also upon other circumstances beyond his power or control. Circumstances show that the intestate had already decided to sell his house lest he meant to fool his creditors. But in addition of the sale to him (the intestate-vendor), there were still other conditions that had no concur to effect the sale, mainly that of the presence of a buyer, ready, able and willing to purchase the property under the conditions demanded by the intestate. It is evident, therefore, that the condition of the obligation was not a purely protestative one, depending exclusively upon the will of the intestate, but a mixed one, depending partly upon the will of intestate and partly upon chance. The decision appealed from is affirmed with modification.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
294
Trillana v. Quezon Colleges Nazario Trillana, Administrator-Appellee, versus Quezon College, Inc., Claimant-Appellant. (G.R. No. L-5003, June 27, 1953, En Banc) PARAS, J: FACTS: On June 1, 1948, Damasa Crisostomo applied for 200 shares of stock worth PhP100.00 each at Quezon Colleges, Inc. Within her letter of application, she stipulated, ―You will find (Babayaran kong lahat pagkatapos na ako ay makapag-pahuli ng isda) pesos as my initial payment and the balance payable in accordance with law and the rules and regulations of the Quezon College.‖ Damasa Crisostomo died on October 26, 1948. As no payment appears to have been made on the subscription mentioned in the foregoing letter, the Quezon College, Inc. presented a claim before the Court of First Instance of Bulacan in her testate proceeding, for the collection of the sum of 20,000.00 pesos representing the value of the subscription to the capital stock of the Quezon College, Inc. This claim was opposed by the administrator of the estate, and the Court of First Instance of Bulacan, after hearing issued an order dismissing the claim of the Quezon College, Inc. on the ground that the subscription in question was neither registered in nor authorized by the Securities and Exchange Commission. From this order the Quezon College, Inc. has appealed. ISSUE: Whether or not the condition in the obligation is a potestative condition, thus invalid. HELD: Yes. The condition in the obligation is a potestative condition, thus invalid. There is nothing in the record to show that the Quezon College, Inc. accepted the term of payment suggested by Damasa Crisostomo, or that if there was any acceptance the same came to her knowledge during her lifetime. As the application of Damasa Crisostomo is obviously at variance with the terms evidenced in the form letter issued by the Quezon College, Inc., there was absolute necessity on the part of the College to express its agreement to Damasa's offer in order to bind the latter. Conversely, said acceptance was essential, because it would be unfair to immediately obligate the Quezon College, Inc. under Damasa's promise to pay the price of the subscription after she had caused fish to be caught. Thus, it cannot be said that the letter ripened into a contract. Indeed, the need for express acceptance on the part of the Quezon College, Inc. becomes the more imperative, in view of the proposal of Damasa Crisostomo to pay the value of the subscription after she has harvested fish, a condition obviously dependent upon her sole will and, therefore, facultative in nature, rendering the obligation void. Under the Civil Code it is provided that if the fulfillment of the condition should depend upon the exclusive will of the debtor, the conditional obligation shall be void. The appealed order is affirmed. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
295
Visayan Sawmill v. Court of Appeals Visayan Sawmill Company, Inc., and Ang Tay, Petitioners, versus The Honorable Court of Appeals and RJH Trading, represented by Ramon Hibionada, Proprietor-Respondents. (G.R. No. 83851, March 3, 1993, En Banc) DAVIDE, JR., J: FACTS: herein plaintiff-appellee and defendants appellants entered into a sale involving scrap iron, subject to the condition that plaintiff appellee will open a letter of credit in the amount of P250,00.00 in favor of defendant-appellant corporation on or before May 15, 1983. On May 24, 1983, plaintiff-appellee informed defendans-appellants by telegram that the letter of credit was opened May 12, 1983 at the BPI main office in Ayala, but that transmittal was delayed. On May 26, 1983, defendants-appellants received a letter advice from the Dumaguete City Branch of BPI dated May 26, 1983, that a domestic letter of credit had been opened in favor of Visayan Sawmill Company. Plaintiffs then demanded that defendants comply with the deed of sale. On July 20, 1983 Defendant Corporation informed plaintiff‘s lawyer that it is unwilling to continue with the sale due to plaintiff‘s failure to comply with the essential preconditions of the contract. Private respondent prayed for judgment ordering the petitioner corporation to comply with the contract by delivering to him the scrap iron subject thereof. The lower courts ruled in favor of respondent. Hence, this petition. ISSUE: Whether or not petitioner can be compelled by specific performance to comply with its prestation. HELD: No. Petitioner can be compelled by specific performance to comply with its prestation. The petitioner corporation‘s obligation to sell is unequivocally subject to a positive suspensive condition. The failure of the private respondent to comply with the positive suspensive condition cannot even be considered a breach – casual or serious but simply an event that prevented the obligation of Petitioner Corporation to convey title from acquiring binding force. The letter of credit in favor of petitioner was indisputably not in accordance with the stipulation in the contract signed by the parties on at three counts: (1) it was not opened, made or indorsed by the private respondent, but by a corporation which is not a party to the contract; (2) it was not opened with the bank agreed upon and; (3) it is not irrevocable and unconditional, for it is without recourse, it is set to expire on a specific date and it stipulates certain conditions with respect to shipment. In this case, the obligation of petitioner to sell did not arise; it therefore cannot be compelled by specific performance to comply with its prestation. Petition granted and the decision appealed from is reversed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
296
Leano v. Court of Appeals Carmelita Leano, assisted by her husband Gregorio Cuachon, Petitioner, versus Court of Appeals and Hermogenes Fernando, Respondents. (G.R. No. 129018, November 15, 2001, 1st Division) PARDO, J: FACTS: On November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leaño, as vendee executed a contract to sell involving a piece of land. In the contract, Carmelita Leaño bound herself to pay Hermogenes Fernando the sum of PhP107,750.00 as the total purchase price of the lot. The contract also provided for a grace period of one month within which to make payments, together with the one corresponding to the month of grace. Should the month of grace expire without the installments for both months having been satisfied, an interest of 18% per annum will be charged on the unpaid installments. Should a period of ninety days elapse from the expiration of the grace period without the overdue and unpaid installment paid with proper interests, Fernando, as vendor, was authorized to declare the contract cancelled. The defendant later filed an ejectment case for failure of petitioner to pay within the terms of contract. ISSUE: Whether or not the transaction between the parties was a conditional sale. HELD: Yes. The transaction between the parties was a conditional sale not an absolute sale. The intention of the parties was to reserve the ownership of the land in the seller until the buyer has paid the total purchase price. The ownership of the lot was not transferred to Carmelita Leaño. In a contract to sell real property on installments, the full payment of the purchase price is a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring any obligatory force. In the case at bar, petitioner‘s non-payment of the installments after April 1, 1989, prevented the obligation of respondent to convey the property from arising. In fact, it brought into effect the provision on cancellation. However, in view of RA No. 6552, that the default committed by petitioner in respect of the obligation could be compensated by the interest and surcharges imposed upon her under the contract in question. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
297
De Leon v. Ong Raymundo S. De Leon, Petitioner, versus Benita T. Ong, Respondents. (G.R. No. 170405, February 2, 2010, 3rd Division) CORONA, J:
FACTS: Petitioner Raymundo S. de Leon sold three parcels of land with improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association, Incorporated (RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of mortgage. Pursuant to this deed, respondent gave petitioner 415,500.00 pesos as partial payment. Petitioner, on the other hand, handed the keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept payment from respondent and release the certificates of title. Thereafter, respondent undertook repairs and made improvements on the properties. Respondent likewise informed RSLAI of her agreement with petitioner for her to assume petitioner‘s outstanding loan. RSLAI required her to undergo credit investigation. Subsequently, respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10, 1993 and changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquire about the credit investigation. However, she was informed that petitioner had already paid the amount due and had taken back the certificates of title. Respondent persistently contacted petitioner but her efforts proved futile. Respondent filed a complaint for specific performance, declaration of nullity of the second sale and damages6 against petitioner and Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal. Because respondent was a licensed real estate broker, the RTC concluded that she knew that the validity of the sale was subject to a condition. The perfection of a contract of sale depended on RSLAI‘s approval of the assumption of mortgage. Since RSLAI did not allow respondent to assume petitioner‘s obligation, the RTC held that the sale was never perfected. The RTC dismissed the complaint for lack of cause of action. Aggrieved, respondent appealed to the Court of Appeals (CA) which found that the contract executed by the parties did not impose any condition on the sale and held that the parties entered into a contract of sale. Hence, this petition. ISSUE: Whether or not the transaction is a contract of sale. HELD: Yes. The transaction entered into was a contract of sale. In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. Should the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or have the contract judicially resolved and set aside. Petitioner executed a notarized deed of absolute sale in favor of respondent. Moreover, not only did petitioner turn over the keys to the properties to respondent, he also authorized RSLAI to receive payment from respondent and release his certificates of title to her. The totality of petitioner‘s Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
298
acts clearly indicates that he had unqualifiedly delivered and transferred ownership of the properties to respondent. The decision appealed from is affirmed with modification.
Heirs of Sandejas v. Lina Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
299
Heirs of Spouses Remedios Sandejas and Eliodoro Sandejas, Sr., Petitioners, versus Alex A. Lina, Respondents. (G.R. No. 141634, February 5, 2001, 3rd Division) PANGANIBAN, J: FACTS: Eliodoro Sendejas, Sr., served as administrator of the estate of Remedios R. Sandejas. Eliodoro, in his capacity as seller, bound and obligated himself, administrators, and assigns, to sell forever and absolutely and in their entirety parcels of lands which formed part of the estate of the late Remedios to one Mr. Alex A. Lina for the consideration of P1 Million. Eliodoro died and Mr. Alex Lina served as temporary administrator of the estate until he was replaced by the heir of Eliodoro, Sixto Sandejas. Mr. Lina filed an Omnibus motion to approve the deed of conditional sale executed between Plaintiff-in-Intervention Alex A. Lina and Eliodoro Sandejas, Sr. on June 7, 1982. The administrator Sixto filed a motion to dismiss which was denied. Hence, this petition. ISSUE: Whether or not the agreement between Eliodoro, Sr. and respondent is subject to a suspensive condition. HELD: Yes. The agreement between Eliodoro, Sr. and respondent is subject to a suspensive condition, the procurement of a court approval, not full payment. In a contract to sell, the payment of the purchase price is a positive suspensive condition. The vendor‘s obligation to convey the title does not become effective in case of failure to pay. There was no reservation of ownership in the agreement. In accordance with paragraph 1 of the Receipt, petitioners were supposed to deed the disputed lots over to respondent. This they could do upon the court‘s approval, even before full payment. Hence, their contract was a conditional sale, rather than a contract to sell as determined by the CA. Because petitioners did not consent to the sale of their ideal shares in the disputed lots, the CA correctly limited the scope of the Receipt to the proindiviso share of Eliodoro, Sr. Thus, it correctly modified the intestate court‘s HELD by excluding their shares from the ambit of the transaction. The petition was partially granted. The appealed decision and resolution are affirmed with modification.
CIR v. Primetown
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
300
Commissioner of Internal Revenue and Arturo Parcero, Petitioners, versus Primetown Property Group, Inc., Respondents. (G.R. No. 162155, August 28, 2007, 1st Division) CORONA, J: FACTS: Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for the refund or credit of income tax respondent paid in 1997. According to Yap, because respondent suffered losses, it was not liable for income taxes. Nevertheless, respondent paid its quarterly corporate income tax and remitted creditable withholding tax from real estate sales to the BIR in the total amount of P26,318,398.32. Therefore, respondent was entitled to tax refund or tax credit. On May 13, 1999, revenue officer Elizabeth Y. Santos required respondent to submit additional documents to support its claim. Respondent complied but its claim was not acted upon. Thus, on April 14, 2000, it filed a petition for review in the Court of Tax Appeals (CTA). On December 15, 2000, the CTA dismissed the petition as it was filed beyond the two-year prescriptive period for filing a judicial claim for tax refund or tax credit. Respondents now assail that decision for dismissal of the CTA. ISSUE: Whether or not the period for the filing of the action has already expired. HELD: No. The period for the filing of the action has not yet expired. Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987 deal with the same subject matter — the computation of legal periods. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or a leap year. Under the Administrative Code of 1987, however, a year is composed of 12 calendar months. Needless to state, under the Administrative Code of 1987, the number of days is irrelevant. There obviously exists a manifest incompatibility in the manner of computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law, governs the computation of legal periods. Following this formula, respondent‘s petition (filed on April 14, 2000) was filed on the last day of the 24th calendar month from the day respondent filed its final adjusted return. Hence, it was filed within the reglementary period. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
301
NAMARCO v. Tecson National Marketing Corporation, Plaintiff-Appellant, versus Miguel Tecson, et al., Defendants; Miguel Tecson, Defendant-Appellee; The Insurance Commissioner, Petitioner. (G.R. No. L-29131, August 27, 1969, En Banc) CONCEPCION, C. J: FACTS: The instant case stemmed from Price Stabilization Corporation vs. Tecson. Said case became final and executory on December 21, 1955. National Marketing Corporation, as successor to Price Stabilization Corporation, filed a motion for revival of judgment on December 21, 1965. Defendant Tecson moved for the dismissal of the case on the ground of prescription, the prescriptive period being ten (10) years. On a previous court case, the CFI rendered judgment: (a) Ordering the defendants Miguel D. Tecson and Alto Surety Insurance Co., Inc. to pay jointly and severally plaintiff PRATRA the sum of P7,200.00 plus 7% interest from May 25, 1960 until the amount is fully paid, plus P500.00 for attorney's fees, and plus costs; (b) ordering defendant Miguel D. Tecson to indemnify his co-defendant Alto Surety & Insurance Co., Inc. on the cross-claim for all the amounts it would be made to pay in this decision, in case defendant Alto Surety & Insurance Co., Inc. pay the amount adjudged to plaintiff in this decision. From the date of such payment defendant Miguel D. Tecson would pay the Alto Surety & Insurance Co., Inc., interest at 12% per annum until Miguel D. Tecson has fully reimbursed plaintiff of the said amount. Defendant Miguel Tecson seeks the dismissal of the complaint on the ground of lack of jurisdiction and prescription. This case was filed exactly on December 21, 1965 but more than ten years have passed a year is a period of 365 days (Art. 13, CCP). Plaintiff forgot that 1960, 1964 were both leap years so that when this present case was filed it was filed two days too late. ISSUE: Whether or not a month shall be counted as 30 days. HELD: Yes. A month shall be counted as 30 days, except when it it specifically named, that it shall be computed as to how many days it actually consists. In People vs. Del Rosario, with the approval of the Civil Code of the Philippines, the Court have reverted to the provisions of the Spanish Civil Code in accordance with which a month is to be considered as the regular 30-day month and not the solar or civil month, with the particularity that, whereas the Spanish Code merely mentioned months, days or nights, ours has added thereto the term years and explicitly ordains that it shall be understood that years are of three hundred sixty-five days. The very conclusion thus reached by appellant shows that its theory contravenes the explicit provision of Art. 13 limiting the connotation of each year, as the term were used in our laws, to 365 days. The action to enforce a judgment which became final on December 21, 1955 prescribes in 10 years. Since the Civil Code computes years in terms of 365 days each, the action has prescribed on December 19, 1955, since the two intervening leap years added Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
302
two more days to the computation. It is not the calendar year that is considered. The decision appealed from was affirmed.
Berg v. Magdalena Estates
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
303
Ernest Berg, Plaintiff-Appellee, versus Magdalena Estate, Inc., DefendantAppellant. (G.R. No. L-3784, October 17, 1952, En Banc) BAUTISTA ANGELO, J: FACTS: The complaint avers that plaintiff and defendant are co-owners of said property, the former being the owner of one-third interest and the latter of the remaining two-thirds. The division is asked because plaintiff and defendant are unable to agree upon the management of the property and upon the partition thereof. Plaintiff and defendant were co owners pro indiviso of the property known as Crystal Arcade in the proportion of one-third interest belonging to the former and two-thirds to the latter. In the deed of sale executed by the parties on said date, they stipulated that, should either of them decide to sell his or her share, the other party will have an irrevocable option to purchase it at the seller's price. Then a disagreement ensued between the parties as to what really occurred concerning the deal. Defendant claims that on September 22, 1943, it sold to plaintiff onethird of the property in litigation subject to the express condition that should either vendor or vendee decide to sell his or its undivided share, the party selling would grant to the other part first an irrevocable option to purchase the same at the seller's price. It avers that on January 1946 plaintiff fixed the sum of P200,000 as the price of said share and offered to sell it to defendant, which offer was accepted, and for the payment of said price plaintiff gave defendant a period of time which, including the extensions granted, would expire on May 31, 1947. Defendant claims that, in spite of the acceptance of the offer, plaintiff refused to accept the payment of the price, and for this refusal defendant suffered damages in the amount of P100,000. For these reasons, defendant asks for specific performance. The lower court found for the plaintiff holding that no agreement has been reached between the parties relative to the purchase and sale of the property in question. Hence, this appeal. ISSUE: Whether or not the contract was with a term. HELD: No. The contract was without a term. The clause on which defendant relies for the enforcement of its right to buy the property, it would seem that it is not a term, but a condition. Considering the first alternative, that is, until defendant shall have obtained a loan from the National City Bank of New York, it is clear that the granting of such loans is not definite and cannot be held to come within the terms "day certain" provided for in the Civil code, for it may or it may not happen. As a matter of fact, the loan did not materialize. And if we consider that the period given was until such time as defendant could raise money from other sources, we also find it to be indefinite and contingent and so it is also a condition and not a term within the meaning of the law. In any event it is apparent that the fulfillment of the condition contained in this second alternative is made to depend upon the defendant's exclusive will, and viewed in this light, we are of the opinion that plaintiff's obligation to sell did not arise, for, under Article 1115 of the old Civil Code, when the fulfillment of the condition depends upon the exclusive will of the debtor the conditional obligation shall be void. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
304
The decision appealed from is affirmed.
Lirag v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
305
Lirag Textile Mills Inc. and Felix Lirag, Petitioners, versus Court of Appeals and Cristan Alcantara, Respondents. (G.R. No. L-6515, October 18, 1954, 1st Division) ESGUERRA, J: FACTS: Petitioners Lirag Textile Mills, Inc. and Felix K. Lirag seek a review by certiorari of the decision of the respondent Court of Appeals in favor of respondent. Respondent Court of Appeals affirmed the decision of the lower court, principally its conclusion that the trial court did not commit any error in its evaluation of the evidence when it found that it was not true that petitioner Lirag Textile Mills suffered pecuniary loss and in market opportunities which it used as a justification to terminate the services of plaintiff Alcantara; that it was not also true that the latter suffered from lack of skill; that, therefore, there was a violation of the written contract of employment executed by and between petitioners and private respondent Alcantara; that petitioner Lirag was responsible for inducing private respondent Alcantara to leave his employment with the Philippine Chamber of Industries where he was holding a permanent position and to accept employment with petitioner Lirag Textile Mills; and that appellee Alcantara was correctly awarded moral damages and attorney's fees. ISSUE: Whether or not the petitioners are liable to pay respondent back salaries. HELD: Yes. The petitioners are liable to pay respondent back salaries. As could be clearly seen from the stipulation of facts between the parties in and as a fact recognized by both the trial court and the respondent Appellate Court, the contract of employment was for an indefinite period as it shall continue without ending, subject to a resolutory period, unless sooner terminated by reason of voluntary resignation or by virtue of a valid cause or causes. There is an indefinite period of time for employment agreed upon by and between petitioners and the private respondent, subject only to the resolutory period agreed upon which may end the indeterminate period of employment, namely voluntary resignation on the part of private respondent Alcantara or termination of employment at the option of petitioner Lirag Textile Mills, but for a valid cause or causes. The measure of an employer's liability provided for in Republic Act 1052 as amended, is solely intended for contracts of employment without a stipulated period. It cannot possibly apply as a limitation to an employer's liability in cases where the employer commits a breach of contract by violating an indefinite period of employment expressly agreed upon through his wrongful act of terminating said employment without any valid cause or causes, which act may even amount to bad faith on the employer's part. Petitioner Lirag Textile Mills, Inc. violated the contract of employment with private respondent Alcantara when the former terminated his services without a valid cause. The act was attended with bad faith and deceit because said petitioner made false allegations of a supposed valid cause. The decision appealed from is affirmed. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
306
Daguhoy v. Ponce Daguhoy Enterprises, Inc., Plaintiff-Appellee, versus Rita L. Ponce and Domingo Ponce, Defendants-Appellants. (G.R. No. L-6515, October 18, 1954, En Banc) MONTEMAYOR, J: FACTS: Rita L. Ponce, executed in favor of plaintiff Daguhoy Enterprises a deed of mortgage over a parcel of land including the improvements thereon, situated in Manila, to secure the payment of a loan of PhP5,000.00 granted to her by said corporation, payable within six years with interest at 12 per cent per annum. Rita and her husband Domnigo attempted to register the deeds in the office of the register of deeds, but the register noted defects and deficiencies and advised the couple to cure such and furnish the necessary data. Instead of compliance, the couple withdrew the deeds and mortgaged the same in favor of the Rehabilitation Finance Corporation (RFC) to secure a loan. Potenciano Gapol, a majority stockholder in the corporation, discovered the withdrawal of the deeds from the office of the register of deeds, and filed a case in court to collect the amount of the loan. The Daguhoy Enterprises, Inc., filed in the Court of First Instance of the City a civil case against Rita L. Ponce and her husband Domingo Ponce, for the collection of a loan of 6,190.00 pesos with interest at 12 per cent per annum from June 24, 1950, plus 2,500.00 pesos as attorney's fees and 34.00 pesos as expenses of litigation. Defendant filed an answer admitting practically all the allegations of the complaint, set up affirmative defenses, and a counterclaim asking for the cancellation of the mortgage which secured the payment of the loan of 6,190.00 pesos. They also filed a petition for the inclusion of Potenciano Gapol as a third party litigant, at the same time filing a third party complaint against him asking for damages in the amount of 25,000.00 pesos. The plaintiff corporation answered the counterclaim and opposed the petition for the inclusion of a third party litigant. Thereafter, Plaintiff Corporation filed a motion for judgment on the pleadings which petition was opposed by the defendants. Defendants are appealing from the adverse decision rendered by the lower court. ISSUE: Whether or not the loans immediately demandable despite the six year installment for payments. HELD: Yes. The loans immediately demandable despite the six year installment for payments. Although the original loan including the increase was payable within six years from June 1950, and so did not become due and payable until 1956, it was held that under Article 1198 of the new Civil Code, the debtor lost the benefit of the period by reason of her failure to give the security in the form of the two deeds of mortgage and register them including defendants‘ act in withdrawing said two deeds from the office of the register of deeds and then mortgaging the same property in favor of the RFC; and so the obligation became pure and without any condition and consequently, the loan became due and immediately demandable. The decision appealed from is affirmed with modification. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
307
Victoria Planters v. Victoria Milling Victorias Planters Association, Inc., North Negros Planters Association, Inc., Fernando Gonzaga, Jose Gaston and Cesar Lopez, on their ow behalf and on behalf of other sugar cane planters in Manapla, Cadiz and Victorias Districts, Petitioners-Appellees, versus Victorias Milling Co., Inc., Respondent-Appellant. (G.R. No. L-6648, July 25, 1995, En Banc) PADILLA, J: FACTS: From 1917 to 1934, the sugar cane planters Manapla and Cadiz, Negros Occidental, executed identical milling contracts, under which the sugar central "North Negros Sugar Co. Inc." would mill the sugar produced by the sugar cane planters of the Manapla and Cadiz districts. Beginning with the year 1948, and in the following years, when the planters-members of the North Negros Planters Association, Inc. considered that the stipulated 30-year period of their milling contracts executed in the year 1918 had already expired and terminated in the crop year 1947-1948, and the planters-members of the Victorias Planters Association, Inc. likewise considered the stipulated 30-year period of their milling contracts, as having likewise expired and terminated in the crop year 1948-1949, under the pertinent provisions of the standard milling contract. Notwithstanding the repeated representations made by the herein petitioners with the respondent corporation, the herein respondent has refused and still refuses to accede to the same, contending that under the provisions of the milling contract. A complaint was filed and the trial court rendered judgment in favor of the petitioners and against the respondent and declares that the milling contracts expired and terminated upon the lapse of the therein stipulated 30-year period. From this judgment the respondent corporation has appealed. ISSUE: Whether or not the milling contracts expired and terminated upon the lapse of the therein stipulated 30-year period. HELD: Yes. The milling contracts expired and terminated upon the lapse of the therein stipulated 30-year period. The fact that the contracts make reference to "first milling" does not make the period of thirty (30) years one of thirty (30) milling years. The term first milling used in the contracts under consideration was for the purpose of reckoning the thirty-year period stipulated therein. At most on the last year of the thirty-year period stipulated in the contracts the delivery of sugar cane could be extended up to a time when all the amount of sugar cane raised and harvested should have been delivered to the appellant's mill as agreed upon. Further, the parties stipulated that in the event of flood, typhoon, earthquake, or other force majeure, war, insurrection, civil commotion, organized strike, etc., the contract shall be deemed suspended during said period, does not mean that the happening of any of those events stops the running of the period agreed upon. It only relieves the parties from the fulfillment of their respective obligations during that time, the planters from delivering sugar cane and the central from milling it. The judgment appealed from is affirmed. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
308
Jespajo v. CA Jespajo Realty Corporation, Petitioner, versus Honorable Court of Appeals, Tan Te Gutierrez and Co Tong, Respondents. (G.R. No. 113626, September 27, 2002, 2nd Division) AUSTRIA-MARTINEZ, J: FACTS: The subject of this controversy is an apartment building located at 619 Asuncion Street, Binondo, Manila and owned by Jespajo Realty Corporation. On February 1, 1985, said corporation, represented by its President, Jesus L. Uy, entered into separate contracts of lease with Tan Te Gutierrez and Co Tong.xxx Pursuant to the contract; Tan Te occupied room No. 217 of the subject building at a monthly rent of P847.00 while Co Teng occupied the Penthouse at a monthly rent of P910.00. Since the effectivity of the lease agreement on February 1985, the lessees religiously paid their respective monthly rentals together with the 20% yearly increased (sic) in the monthly rentals as stipulated in the contract. The lessor corporation sent a written notice to the lessees informing them of the formers‘ intention to increase the monthly rentals on the occupied premises to P3,500.00 monthly effective February 1, 1990. The lessees through its counsel in a letter dated March 10, 1990 manifested their opposition alleging that the same is in contravention of the terms of the contract of lease as agreed upon. Due to the opposition and the failure of the lessees to pay the increased monthly rentals in the amount of P3,500.00, the lessor through its counsel in a letter dated April 10,1990 demanded that the lessees vacate the premises and pay the amount of P7,000.00 corresponding to the months of February and March, 1990. ISSUE: Whether or not a contract of lease entered into stipulated for an indefinite period and shall continue for as long as the lessee is paying the rent, is terminable alone by the lessor. HELD: No. A contract of lease entered into stipulated for an indefinite period and shall continue for as long as the lessee is paying the rent, is interminable by the lessor alone. The lease contract between petitioner and respondents is with a period subject to a resolutory condition. The wording of the agreement is unequivocal: The lease period shall continue for an indefinite period provided the lessee is up-to-date in the payment of his monthly rentals. The condition imposed in order that the contract shall remain effective is that the lessee is up-to-date in his monthly payments. It is undisputed that the lessees Gutierrez and Co Tong religiously paid their rent at the increasing rate of 20% annually. The agreement between the lessor and the lessees are therefore still subsisting, with the original terms and conditions agreed upon, when the petitioner unilaterally increased the rental payment to more than 20% or P3,500.00 a month. Lastly, after having the lessees believe that their lease contract is one with an indefinite period subject only to prompt payment of the monthly rentals by the lessees, we agree with private respondents that the lessor is estopped from claiming otherwise. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
309
Petition denied and the decision appealed from is affirmed.
Borromeo v. Court of Appeals Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
310
Pilar N. Borromeo, Maria B. Putong, Federico V. Borromeo, Jose Borromeo, Consuelo B. Morales and Canuto V. Borromeo, Jr., petitioners, versus Court of Appeals and Jose A. Villamor (deceased), suctituted by Felisa Villamor, Rosario V. Liao Lamco, Manuel Villamore, Amparo V. Cotton, Miguel Villamor and Carmencita Villamor, repondents. (47 SCRA 65 or G.R. No. L-43429, September 28, 1972, En Banc) Fernando, J.: FACTS: Before the year 1933, Jose A. Villamor was a distributor of lumber belonging to Mr. Miller who was the agent of the Insular Lumber Company in Cebu City. Defendant being a friend and former classmate of plaintiff, Borromeo, used to borrow from the latter certain amounts from time to time. On one occasion with some pressing obligation to settle with Mr. Miller, defendant borrowed from plaintiff a large sum of money for which he mortgaged his land and house in Cebu City. Mr. Miller filed civil action against the defendant and attached his properties including those mortgaged to plaintiff, inasmuch as the deed of mortgage in favor of plaintiff could not be registered because it was not properly drawn up. Plaintiff then pressed the defendant for the settlement of his obligation, but defendant instead offered to execute a document promising to pay his indebtedness even after the lapse of ten (10) years. Liquidation was made and defendant was found to be indebted to plaintiff in the sum of P7,220, for which defendant signed a promissory note on November 29, 1933 with interest at the rate of 12% per annum, agreeing topay-―as soon as I have money .‖ The note further stipulates that defendant ―hereby relinquish, renounce, or otherwise waive my rights to the prescriptions established by our Code of Civil Procedure for the collection or recovery of the above sum of P7,220.‖ ISSUE: Whether or not prescription extinguished the obligation. HELD: NO. The obligation in this case is one which is subject to a potestative condition, one which is dependent solely on the will of the debtor. The statement ―as soon as I have money‖ is the condition which is dependent on the debtor‘s will. Although this condition is void, it has been relied upon by the creditor resulting to the delayed filing of the action. Prescription in this case cannot be applied strictly for it will result to grave injustice on the part of the creditor. For as was also made clear therein, there had been since then verbal requests on the part of the creditor made to the debtor for the settlement of the loan. Furthermore, plaintiff did not file any complaint against the defendant within ten (10) years from the execution of the document as there was no property registered in defendant‘s name who furthermore assured him that he could collect even after the lapse of ten years. The debtor is therefore liable for the amount of the obligation plus interests.
Gonzales v. Jose
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
311
Banito Gonzalez, plaintiff-appellee, versus Florentino De Jose, defendantappellant. (PHIL 369 or G.R. No. L-43429, October 24, 1938, En Banc) Imperial, J.: FACTS: Defendant Florentino de Jose executed two (2) promissory notes on June22, 1922 and September 13, 1922 in favor of plaintiff Benito Gonzales. The two (2) promissory notes were both worded as follows: ―I promise to pay Mr. Benito Gonzalez the sum of P (amount) as soon as possible.‖ Defendant appealed from the decision of the Court of First Instance of Manila ordering him to pay the plaintiff the sum of P547.95 within thirty (30) days from the date of notification of said decision, plus the costs. The defendant interposed the defense of prescription because the action was not filed by the plaintiff within the prescriptive period prescribed by law. ISSUE: Whether or not the action has already prescribed. HELD: NO. The words ―as soon as possible‖ in the promissory notes denote that such is an obligation subject to a potestative condition. Article 1128 of the Civil Code provides: ―If the obligation does not specify a term, but it is to be inferred from its nature and circumstances that it was intended to grant the debtor time for its performance, the period of the term shall be fixed by the court‖. The action to ask the court to fix the period has already prescribed in accordance with section 43 (1) of the Code of Civil Procedure. This period of prescription is ten (10) years, which has already elapsed from the execution of the promissory notes until the filing of the action on June 1, 1934. The actionwhich should be brought in accordance with Article 1128 is different from theaction for the recovery of the amount of the notes, although the effects of bothare the same, being, like other civil actions, subject to the rules of prescription.
Baluyut v. Poblete
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
312
Guillermina Baluyut, petitioner, versus Eulogio Poblete, Salud Poblete and The Hon. Court of Appeals, respondents. (GR No. 144435, February 6, 2007, Tird Division) Austria-Maritnez, J.: FACTS: On July 20, 1981, Guillermina Baluyut, mortgaged her house to secure a loan in the amount of PhP850, 000.00 from the spouses Eulogio and Salud Poblete. The load was set to mature in one month. After a month had passed, she was unable to pay her indebtedness which led the spouses to extrajudicially foreclose the mortgage. The property was then sold on Auction to the Poblete spouses who asked Baluyut to vacate the premises. Baluyut instead filed an action for annulment of mortgage. His claim was rejected by the RTC and the CA. Petitioner claims that based on the testimony of Atty. Edwina Mendoza that the maturity of the loan which she incurred is only for one year. ISSUE: Is petitioner‘s contention tenable? HELD: Evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict or defeat the operation of a valid contract. In the instant case, aside from the testimony of Atty. Mendoza, no other evidence was presented to prove that the real date of maturity is one year. The terms that were thusly reduced to writing is deemed to contain all the terms agreed upon and no evidence of such terms can be admitted other than the contents of the agreement itself. The promissory note is the law between petitioner and private respondents and it clearly states that the loan shall mature in one month from date of the said Promissory Note.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
313
Malayan Realty v. Uy
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
314
Malayan Realty, Inc. represented by Alberto C. Dy., petitioner versus Uy Han Yong, respondent. (GR No. 163763, November 10, 2006, Third Division) Carpio Morales, J.: FACTS: Malayan Realty, Inc. (Malayan), is the owner of an apartment unit known as 3013 Interior No. 90 (the property), located at Nagtahan Street, Sampaloc, Manila. In 1958, Malayan entered into a verbal lease contract with Uy Han Yong (Uy) over the property at a monthly rental of P262.00. The monthly rental was increased yearly starting 1989, and by 2001, the monthly rental was P4,671.65.On July 17, 2001, Malayan sent Uy a written notice informing him that the lease contract would no longer be renewed or extended upon its expiration on August 31, 2001, and asking him to vacate and turn over the possession of the property within five days from August 31, 2001, or on September 5, 2001. Despite Uy‘s receipt of the notice on June 18,2001, he refused to vacate the property, prompting Malayan to file before the Metropolitan Trial Court (MeTC) of Manila a complaint for ejectment, docketed as Civil Case No. 171256, and was raffled to Branch 3 thereof. The Court ruled in favor of Uy and granted an extension period of five years. ISSUE: Is respondent Uy entitled to a grant of extension by the Court? HELD: The 2nd paragraph of Article 1687 provides that in the event that the lessee has occupied the leased premises for over a year, the courts may fix a longer term for the lease. The power of the courts to establish a grace period is potestative or discretionary, depending on the particular circumstances of the case. Thus, a longer term may be granted where equities come into play, and may be denied where none appears, always with due deference to the parties‘ freedom to contract. In the present case, respondent has remained in possession of the property from the time the complaint for ejectment was filed on September 18, 2001 up to the present time. Effectively, respondent‘s lease has been extended for more than five years, which time is, under the circumstances, deemed sufficient as an extension and for him to find another place to stay.
Kasapian ng Manggagawa ng Coca-cola v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
315
Kasapian ng Manggagawa sa Coca-cola (KASAMA-CCO)-CFW LOCAL 245, petitioner, versus The Hon. Court of Appelas and Coca-cola Bottlers‟ Phils., Inc., respondents. (GR No. 159828, April 19, 2006, First Division) Chico-Nazario, J.: FACTS: On June 1998, a Collective Bargaining Agreement which was in effect between petitioner union and private respondent company expired. With the intervention of the NCMB Administrator, on December 26, 1998, both parties executed and signed a MOA providing for salary increases and other economic and non-economic benefits. As part of the MOA, 61employees were regularized. Consequently, petitioner demanded the payment and benefits of the newly regularized employees retroactive to December 1, 1998. Petitioner then demanded renegotiation of the CBA which private respondent refused. On December 9, 1999, despite the pendency of petitioner‘s complaint before the NLRC, private respondent closed its Manila and Antipolo plants resulting in the termination of employment of 646 employees. The affected employees were considered on paid leave from December 9, 1999 to February 29, 2009 and were paid their corresponding salaries. The Petitioners amended their complaint to include union busting, illegal dismissal, etc. ISSUE: Is the closure of the Manila and Antipolo plants valid? HELD: Under Article 280 of the Labor Code, all those who have been with the company for one year by said date must automatically be considered regular employees by operation of law. The 61 employees all qualify as regular employees by this provision. The characterization of the employee‘s services as no longer necessary or sustainable, and therefore properly terminable, is an exercise of business judgment on the part of the employer. The wisdom or soundness of such characterizing or decision is not subject to discretionary re view on the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or merely arbitrary and malicious action is not shown. As found by the NLRC, the private respondent‘s decision to close the plant was a result of a study conducted which established that the most prudent course of action for the private respondent was to stop operations in said plants and transfer production to other more modern and technologically advanced plants of private respondent.
Santos vs. Santos
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
316
Santos Ventura Hocorma Foundation, Inc., petitioner, versus Ernesto V. Santos and Riverland, Inc., respondents (2000G.R. No. 153004 or 441 SCRA 472, November 4, First Division) Quisumbing, J.: FACTS: Ernesto V. Santos and Santos Ventura Hocorma Foundation, Inc. (SVHFI) were the plaintiff and defendant, respectively, in several civil cases filed indifferent courts in the Philippines. On October 26, 1990, the parties executed a Compromise Agreement which amicably ended all their pending litigations. The pertinent portions of the Agreement read as follows:1.Defendant Foundation shall pay Plaintiff Santos P14.5 Million in the following manner: a) P1.5 Million immediately upon the execution of this agreement; and, b) the balance of P13 Million shall be paid, whether in one lump sum or in installments, at the discretion of the Foundation, within a period of not more than two (2)years from the execution of this agreement; provided, however, that in the event that the Foundation does not pay the whole or any part of such balance, the same shall be paid with the corresponding portion of the land or real properties subject of the aforesaid cases and previously covered by the notices of lis pendens, under such terms and conditions as to area, valuation, and location mutually acceptable to both parties; but in no case shall the payment of such balance be later than two (2) years from the date of this agreement; otherwise, payment of any unpaid portion shall only be in the form of land aforesaid; 2. Immediately upon the execution of this agreement (and [the] receipt of the P1.5 Million), plaintiff Santos shall cause the dismissal with prejudice of Civil Cases Nos. 88-743, 1413OR, TC-1024, 45366 and 18166 and voluntarily withdraw the appeals in Civil Cases Nos. 4968 (C.A.-G.R. No. 26598) and 88-45366 (C.A.-G.R. No. 24304) respectively and for the immediate lifting of the aforesaid various notices of lis pendens on the real properties aforementioned (by signing herein attached corresponding documents, for such lifting); provided, however, that in the event that defendant Foundation shall sell or dispose of any of the lands previously subject of lis pendens, the proceeds of any such sale, or any part thereof as may be required, shall be partially devoted to the payment of the Foundation‘s obligations under this agreement as may still be subsisting and payable at the time of any such sale or sales;XXX5. Failure of compliance of any of the foregoing terms and conditions by either or both parties to this agreement shall ipso facto and ipso jure automatically entitle the aggrieved party to a writ of execution for the enforcement of this agreement. In compliance with the Compromise Agreement, respondent Santos moved for the dismissal of the aforesaid civil cases. He also caused the lifting of the notices of lis pendens on the real properties involved. For its part, petitioner SVHFI, paid P1.5 million to respondent Santos, leaving a balance of P13 million. Subsequently, petitioner SVHFI sold to Development Exchange Livelihood Corporation two real properties, which were previously subjects of lis pendens. Discovering the disposition made by the petitioner, respondent Santos sent a letter to the petitioner demanding the payment of the remaining P13 million, which was ignored by the latter. Meanwhile, on September 30, 1991, the Regional Trial Court of Makati City, Branch 62, issued a Decision approving the compromise agreement. On October 28, 1992, respondent Santos sent another letter to petitioner inquiring when it would pay the balance of P13 million. There was no response from petitioner. Consequently, respondent Santos applied with the Regional Trial Court of Makati City, Branch 62, for the issuance of a writ of execution of its compromise judgment dated September 30, 1991. The RTC granted the writ. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
317
Thus, on March 10, 1993, the Sheriff levied on the real properties of petitioner, which were formerly subjects of the lis pendens. Petitioner, however, filed numerous motions to block the enforcement of the said writ. The challenge of the execution of the aforesaid compromise judgment even reached the Supreme Court. All these efforts, however, were futile. On November 22, 1994, petitioner‘s real properties located in Mabalacat, Pampanga were auctioned. In the said auction, Riverland, Inc. was the highest bidder for P12 million and it was issued a Certificate of Sale covering the real properties subject of the auction sale. Subsequently, another auction sale was held on February 8, 1995, for the sale of real properties of petitioner in Bacolod City. Again, Riverland, Inc. was the highest bidder. The Certificates of Sale issued for both properties provided for the right of redemption within one yearfrom the date of registration of the said properties. On June 2, 1995, Santos and Riverland Inc. filed a Complaint for Declaratory Relief and Damages alleging that there was delay on the part of petitioner in paying the balance of P13 million. They further alleged that under the Compromise Agreement, the obligation became due on October 26, 1992, but payment of the remaining P12 million was effected only on November 22, 1994. Thus, respondents prayed that petitioner be ordered to pay legal interest on the obligation, penalty, attorney‘s fees and costs of litigation. Furthermore, they prayed that the aforesaid sales be declared final and not subject to legal redemption. In its Answer, petitioner countered that respondents have no cause of action against it since it had fully paid its obligation to the latter. It further claimed that the alleged delay in the payment of the balance was due to its valid exercise of its rights to protect its interests as provided under the Rules. Petitioner counterclaimed for attorney‘s fees and exemplary damages. On October 4, 1996, the trial court rendered a Decision dismissing herein respondents‘ complaint and ordering them to pay attorney‘s fees and exemplary damages to petitioner. Respondents then appealed to the Court of Appeals. The appellate court reversed the HELD of the trial court. ISSUE: Whether or not the Court of Appeals was correct in its decision, reversing the trial court‘s decision, regarding the legal interest of herein respondents on aforementioned properties. HELD: The Supreme Court held the decision of the Court of Appeals correct. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. It is an agreement between two or more persons, who, for preventing or putting an end to a lawsuit, adjust their difficulties by mutual consent in the manner which they agree on, and which every one of them prefers in the hope of gaining, balanced by the danger of losing. The general rule is that a compromise has upon the parties the effect and authority of res judicata, with respect to the matter definitely stated therein, or which by implication from its terms should be deemed to have been included therein. This holds true even if the agreement has not been judicially approved. In the case at bar, the Compromise Agreement was entered into by the parties on October 26, 1990. It was judicially approved on September 30, 1991. Applying existing jurisprudence, the compromise agreement as a consensual contract became binding between the parties upon its execution and not upon its court approval. From the time a compromise is validly entered into, it becomes the source of the rights and obligations of the parties thereto. The purpose of the compromise is precisely to replace and terminate controverted claims. In accordance with the compromise Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
318
agreement, the respondents asked for the dismissal of the pending civil cases. The petitioner, on the other hand, paid the initial P1.5 million upon the execution of the agreement. This act of the petitioner showed that it acknowledges that the agreement was immediately executory and enforceable upon its execution. As to the remaining P13 million, the terms and conditions of the compromise agreement are clear and unambiguous. The two-year period must be counted from October 26, 1990, the date of execution of the compromise agreement, and not on the judicial approval of the compromise agreement on September 30, 1991. When respondents wrote a demand letter to petitioner on October 28, 1992, the obligation was already due and demandable. When the petitioner failed to pay its due obligation after the demand was made, it incurred delay. Article 1169 of the New Civil Code provides: Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. Delay as used in this article is synonymous to default or mora, which means delay in the fulfillment of obligations. It is the nonfulfillment of the obligation with respect to time. In order for the debtor to be in default, it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extrajudicially. In the case at bar, the obligation was already due and demandable after the lapse of the two-year period from the execution of the contract. The two-year period ended on October 26, 1992. When the respondents gave a demand letter on October 28, 1992, to the petitioner, the obligation was already due and demandable. Furthermore, the obligation is liquidated because the debtor knows precisely how much he owes and when he should pay the amount due. The second requisite is also present. Petitioner delayed in the performance. It was able to fully settle its outstanding balance only on February8, 1995, which is more than two years after the extra-judicial demand. Moreover, it filed several motions and elevated adverse resolutions to the appellate court to hinder the execution of a final and executory judgment, and further delay the fulfillment of its obligation. Third, the demand letter sent to the petitioner on October 28, 1992, was in accordance with an extra-judicial demand contemplated by law. Verily, the petitioner is liable for damages for the delay in the performance of its obligation. This is provided for in Article 1170 of the New Civil Code. When the debtor knows the amount and period when he is to pay, interest as damages is generally allowed as a matter of right. The complaining party has been deprived of funds to which he is entitled by virtue of their compromise agreement. The goal of compensation requires that the complainant be compensated for the loss of use of those funds. This compensation is in the form of interest. In the absence of agreement, the legal rate of interest shall prevail. The legal interest for loan as forbearance of money is 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
Melotindos v. Tobias
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
319
Manuel D. Melotindos, petitioner, versus Melecio Tobias, represented by Josefina Pineda, respondent. (G.R. No. 146658 or 391 SCRA 299, October 28, 2002, Second Division) Bellosillo, J.: FACTS: Eighty-seven-year old petitioner, Atty. Manuel D. Melontindos, was the lessee of the ground floor of a house in Malate, Manila. He had been renting the place since 1983 on a month-to-month basis from its owner, respondent Melecio Tobias, who was then residing in Canada. Sometime in the last quarter of 1995, owing to his sickly mother who needed constant medical attention and filial care, respondent demanded from petitioner either to pay an increased rate of monthly rentals or else to vacate the place so he and his mother could use the house during her regular medical check-up in Manila. For two (2) years nothing came out of the demand to vacate, hence, in 1997 respondent insisted upon raising the rental fee once again. On 1 June 1998 respondent asked petitioner to restore the premises to him for some essential repairs of its dilapidated structure. This time he did not offer petitioner anymore the option to pay higher rentals. The renovation of the house was commenced but had to stop midway because petitioner refused to vacate the portion he was occupying and worse he neglected to pay for the lease for four (4) months from May to August 1998. Hence for the second time, or on 19 October 1998, respondent demanded the payment of the rental arrears as well as the restoration of the house to him. On 3 February 1999, since petitioner was insisting on keeping possession of the house but did not pay the rental for January 1999, although he had settled the arrears of four (4) months, respondent was compelled to file a complaint for ejectment. The MeTC of Manila decided the ejectment complaint in favor of respondent and ordered petitioner to vacate the leased premises and to pay rental arrears in the amount of P60, 000.00 as of December 1998 and P6,000.00 for every month thereafter until he finally restored possession thereof to respondent plus attorney‘s fees of P15,000.00 and the costs of suit. The RTC of Manila upheld in toto the MeTC Decision and denied the subsequent motion for reconsideration for failure to set the date of hearing thereof not later than ten (10) days from its filing. Petitioner‘s recourse to the Court of Appeals by petition for review was also unsuccessful since the assailed Decision was affirmed in its entirety as the ensuing motion for reconsideration thereof was denied for late filling, i.e., the motion was filed only on 30 October 2000 beyond the fifteen (15) – day period from his receipt of the CA Decision on 9 October 2000 as shown by the registry return receipt. ISSUE: Whether or not the lower courts erred in their HELDs. HELD: It is not only the evidence on record but petitioner‘s pleadings themselvesthat confirm his default in paying the rental fees for more than three (3) monthsin 1999 and 1998 prior to the filing of the ejectment complaint. There is alsosufficient basis for the courts a quo to conclude that respondent desperatelyneeded the property in good faith for his own family and for the repair andrenovation of the house standing thereon. These facts represent legal groundsto eject a tenant. The Petition for Review is DENIED for lack of merit. LL and Co. v. Huang
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
320
LL and Company Development and Agro-Industrial Corp., petitioner, versus Huang Chao Chun and Yang Tung Fa, respondents. (G.R. No. 142378 or 378 SCRA 612, Mar 7, 2000, Third Division) Panganiban, J.: FACTS: The case originated from an unlawful detainer case filed by petitioner before the trial court alleging that respondents Huang Chao Chun and Yang TungFa violated their amended lease contract over a 1,112 square meter lot it owns, when they did not pay the monthly rentals thereon in the total amount of P4,322,900.00. It also alleged that the amended lease contract already expired on September 16, 1996 but respondents refused to surrender possession thereof plus the improvements made thereon, and pay the rental arrearages despite repeated demands. The parties entered into the amended lease contract sometime in August 1991. The same amended the lease contract previously entered into by the parties on August 8, 1991.Respondent were joined by the Tsai Chun International Resources Inc. in their answer to the Complaint, wherein they alleged that the actual lessee is the corporation. Respondents and the corporation denied petitioner‘s allegations. The MTC dismissed the case. The MTC ruled that the lessees could extend the contract entered into by the parties unilaterally for another five years for reasons of justice and equity. It also ruled that the corporation‘s failure to pay the monthly rentals as they fell due was justified by the fact that petitioner refused to honor the basis of the rental increase as stated in their Lease Agreement. This was affirmed by the RTC. It also held that the parties had a reciprocal obligation: unless and until petitioner presented ―the increased realty tax,‖ private respondents were not under any obligation to pay the increased monthly rental. The decision was likewise affirmed by the Court of Appeals. ISSUE: Whether or not the court could still extend the term of the lease, after its expiration. HELD: In general, the power of the courts to fix a longer term for a lease is discretionary. Such power is to be exercised only in accordance with the particular circumstances of a case: a longer term to be granted where equities demanding extension come into play; to be denied where none appear - always with due deference to the parties‘ freedom to contract. Thus, courts are not bound to extend the lease. Article 1675 of the Civil Code excludes cases falling under Article 1673from those under Article 1687. Article 1673 provides among others, that the lessor may judicially eject the lessee upon the expiration of ―the period agreed upon or that, which is fixed for the duration of the leases.‖ Where no period has been fixed by the parties, the courts, pursuant to Article 1687, have the potestative authority to set a longer period of lease. In the case, the Contract of Lease provided for a fixed period of five (5) years -- ―specifically‖ from September 16, 1991 to September 15, 1996.Because the lease period was for a determinate time, it ceased, by express provision of Article 1669 of the Civil Code, ―on the day fixed, without need of a demand.‖ Here, the five-year period expired on September 15, 1996, whereas the Complaint for ejectment was filed on October 6, 1996. Because there was no longer any lease that could be extended, the MeTC, in effect, made a new contract for the parties, a power it did not have. As stated in Bacolod-Murcia Milling v. Banco Nacional Filipino, ―It is not the province of the court to alter a contract by construction or to make a new contract for the parties; its duty is confined to the interpretation of the one which they have made for themselves, without regard to its wisdom or Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
321
folly, as the court cannot supply material stipulations or read into contract words which it does not contain.‖ Furthermore, the extension of a lease contract must be made before the term of the agreement expires, not after. Upon the lapse of the stipulated period, courts cannot belatedly extend or make a new lease for the parties, even on the basis of equity. Because the Lease Contract ended on September15, 1996, without the parties reaching any agreement for renewal, respondent scan be ejected from the premises. On the other hand, respondents and the lower courts argue that the Contract of Lease provided for an automatic renewal of the lease period. Citing Koh v. Ongsiaco and Cruz v. Alberto, the MeTC -- upheld by the RTC and the CA-- ruled that the stipulation in the Contract of Lease providing an option to renew should be construed in favor of and for the benefit of the lessee. This HELD has however, been expressly reversed in Fernandez v. CA and was recently reiterated in Heirs of Amando Dalisay v. Court of Appeals. Thus, pursuant to Fernandez, Dalisay and Article 1196 of the Civil Code, the period of the lease contract is deemed to have been set for the benefit of both parties. Its renewal may be authorized only upon their mutual agreement or at their joint will. Its continuance, effectivity or fulfillment cannot be made to depend exclusively upon the free and uncontrolled choice of just one party. While the lessee has the option to continue or to stop paying the rentals, the lessor cannot be completely deprived of any say on the matter. Absent any contrary stipulation in a reciprocal contract, the period of lease is deemed to be for the benefit of both parties. In the instant case, there was nothing in the aforesaid stipulation or in the actuation of the parties that showed that they intended an automatic renewal or extension of the term of the contract. First, demonstrating petitioner‘s disinterest in renewing the contract was its letter dated August 23, 1996, demanding that respondents vacate the premises for failure to pay rentals since1993. As a rule, the owner-lessor has the prerogative to terminate the lease upon its expiration. Second, in the present case, the disagreement of the parties over the increased rental rate and private respondents‘ failure to pay it precluded the possibility of a mutual renewal. Third, the fact that the lessor allowed the lessee to introduce improvements on the property was indicative, not of the former‘s intention to extend the contract automatically, but merely of its obedience to its express terms allowing the improvements. After all, at the expiration of the lease, those improvements were to ―become its property.‖As to the contention that it is not fair to eject respondents from the premises after only five years, considering the value of the improvements they introduced therein, suffice it to say that they did so with the knowledge of the risk -- the contract had plainly provided for a five-year lease period. Parties are free to enter into any contractual stipulation, provided it is not illegal or contrary to public morals. When such agreement, freely and voluntarily entered into, turns out to be disadvantageous to a party, the courts cannot rescue it without crossing the constitutional right to contract. They are not authorized to extricate parties from the necessary consequences of their acts, and the fact that the contractual stipulations may turn out to be financially disadvantageous will not relieve the latter of their obligations. Petition granted. Decision set aside. Respondents ordered to vacate the premises, to restore peaceful possession thereof to petitioner, and to pay accrued rentals.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
322
Brent School v. Zamora Brent School, Inc., and Rev. Gabriel Demache, petitiponers versus Ronaldo Zamora, the Presidential Assistant for Legal Affairs, Office of the President, and Doroteo R. Alegre, respondents. (181 SCRA 702 or G.R. No. L-48494, February 5, 1990, En Banc) Narvasa, J.: FACTS: The root of the controversy at bar is an employment contract in virtue of which Doroteo R. Alegre as engaged as athletic director by Brent School, Inc. at a yearly compensation of P20,000. The contract fixed a specific term for its existence, five (5) years, i.e., from July 18, 1971, the date of execution of the agreement, to July 17, 1976. Subsequent subsidiary agreements dated March15, 1973, August 28, 1973, and September 14, 1974 reiterated the same terms and conditions, including the expiry date, as those contained in the original contract. Some three (3) months before the expiration of the stipulated period, or more precisely on April 20, 1976, Alegre was given a copy of the report filed by Brent School with the Department of Labor advising of the termination of his services effective on July 16, 1976. Alegre objected to this termination of his employment contending that since his services were necessary and desirable in the usual business of his employer, and his employment had lasted for five (5) years, he had acquired the status of a regular employee and could not be removed except for valid cause. ISSUE: Whether or not Alegre‘s contention is tenable. HELD: NO. The provisions of the Labor Code recognize the existence and legality of term employments. The case at bar is one which involves term employment. Therefore, Alegre‘s employment was terminated upon the expiration of his last contract with Brent School on July 16, 1976 without the necessity of any notice. The advance written advice given the Department of Labor with copy to said petitioner was a mere reminder of the impending expiration of his contract, not a letter of termination, nor an application for clearance to terminate which needed the approval of the Department of Labor to make the termination of his services effective. In any case, such clearance should properly have been given, not denied.
Lim v. People Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
323
Lourdes Valerio Lim, petitioner, versus People of the Philippines, respondent. (G.R. No. L-34338 or 133 SCRA 333, November 21, 1984, First Division) Relova, J.: FACTS: On January 10, 1966, Lim (Appellant) went to the house of Maria Ayrosoand proposed to sell Ayroso's tobacco. Ayroso agreed to the proposition of theappellant to sell her tobacco consisting of 615 kilos at P1.30 a kilo. Theappellant was to receive the over price for which she could sell the tobacco.Of the total value of P799.50, the appellant had paid to Ayroso onlyP240.00, and this was paid on three different times. Demands for the paymentof the balance of the value of the tobacco were made upon the appellant byAyroso, and particularly by her sister, Salud Bantug. Salud Bantug furthertestified that she had gone to the house of the appellant several times, but theappellant often eluded her; and that the 'camarin' of the appellant was empty.Although the appellant denied that demands for payment were made upon her, it is a fact that on October 19, 1966, she wrote a letter to Salud Bantug statingthat she could not pay in full the amount of P799.50 because it is also hard todemand payment from her ―suki‖ in the market of Cabanatuan. Pursuant to thisletter, the appellant sent a money order for P100.00 on October 24, 1967, andanother for P50.00 on March 8, 1967; and she paid P90.00 on April 18, 1967 or a total of P240.00. As no further amount was paid, the complainant filed acomplaint against the appellant for estafa. ISSUE: Whether or not the Article 1197 of the Civil Code can be applied in thiscase HELD: NO. It is clear in the agreement that the proceeds of the sale of thetobacco should be turned over to the complainant as soon as the same was sold, or, that the obligation was immediately demandable as soon as the tobacco wasdisposed of. Hence, Article 1197 of the New Civil Code, which provides that thecourts may fix the duration of the obligation if it does not fix a period, does notapply.Anent the argument that petitioner was not an agent because theagreement does not say that she would be paid the commission if the goodswere sold, the fact that appellant received the tobacco to be sold at P1.30 perkilo and the proceeds to be given to complainant as soon as it was sold, strongly negates transfer of ownership of the goods to the petitioner. The agreement constituted her as an agent with the obligation to return the tobacco if the same was not sold.
Pacific Banking v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
324
Pacific Banking Corp. and Chester G. Babst, petitioners, versus Court of Appeals, Joseph C. Hart and Eleanor Hart, respondents. (G. R. No. 45656 or 173 SCRA 102, May 5, 1989, Third Division) Gutierrez, Jr., J.: FACTS: On April 15, 1955, private respondents Joseph and Eleanor Hartdiscovered an area consisting of 480 hectares of tidewater land in Tambac, Gulf of Lingayen which had great potential for the cultivation of fish and saltmaking. They organized Insular Farms, Inc., applied for and after eleven months, obtained a lease from the Department of Agriculture for a period of 25 years, renewable for another 25 years. Joseph Hart approached businessman John Clarkin, then President of Pepsi-Cola Bottling Co. in Manila, for financialassiatance. On July 15, 1956, Joseph Hart and Clarkin signed a Memorandum of Agreement. Due to financial difficulties, Insular Farms, Inc. borrowed fromPacific Banking Corporation sometime in July 1956. On July 31, 1956, InsularFarms, Inc. executed a Promissory Note of P250, 000 to the bank payable on orbefore July 1957. Such note provided that upon default in the payment of anyinstallment when due, all other installments shall become due and payable. Thisloan was effected and the money released without any security except for theContinuing Guaranty, executed on July 18, 1956, of John Clarkin, who ownedseven and half percent of the capital stock of the bank and his wife Helen.Unfortunately, the business floundered; nevertheless, petitioner Pacific Banking Corporation and its then Executive Vice President, petitioner Chester Babst, didnot demand payment for the initial July 1957 installment nor of the entireobligation, but instead opted for more collateral in addition to the guaranty of Clarkin. As the business further deteriorated, Hart agreed to Clarkin‘s proposalthat all Insular Farms shares of stocks be pledged to petitioner bank in lieu of additional collateral and to insure and extension of the period to pay the July1957 installment. On March 3, 1958, Pacific Farms, Inc. was organized toengage in the same business as Insular Farms, Inc. The next day, PacificBanking Corporation, through petitioner Chester Babst wrote Insular Farms, Inc.giving the latter 48 hours to pay its entire obligation.On March 7, 1958, Hart received a notice that the pledged shared of stocks of Insular Farms, Inc. would be sold at public auction on March 10, 1958to satisfy Insular Farms‘ obligation. Hart filed a complaint for reconveyance anddamages with prayer for a writ of preliminary injunction and the Court of FirstInstance granted the writ. However, upon petitions for dissolution of preliminaryinjunction filed by the petitioners PBC and Babst, the court lifted the writ of preliminary injunction. On March 20, 1958, respondent Hart received a noticefrom PBC signed by Babst that the shares of stocks on Insular Farms Inc. will besold at public auction on March 21, 1958. On March 21, 1958, PBC sold the 1,000 shares of stocks of Insular Farms to Pacific Farms. The latter then sold itsshares of stocks to its own stockholders, who constituted themselves asstockholders of Insular Farms and then resold back to Pacific Farms Inc. all of Insular Farms assets except for a certificate of public convenience to operate anice plant. On September 28, 1959, Hart filed another case for recovery of sum of money comprising his investments and earnings. The trial court rendered a decision ordering Pacific Farms Inc. to pay Joseph Hart for unpaid salaries and for loans made by private respondents to Insular Farms, Inc. the private respondents, dissatisfied with the decision, appealed to the Court of Appeals. The appellate court modified the lowercourt‘s decision, directing Pacific Banking Corporation to pay Joseph HartP100,000.00, subject to reimbursement from Babst. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
325
ISSUES: Whether or not the sale by the petitioner bank of the shares of stocks of private respondent on March 21, 1958 is valid since the shares of stocks hadbeen pledged to insure an extension of the period to pay the July installment.Whether or not the Court may fix a period in the parties‘ agreement toextend the payment of the loan, including the installment which was due on orbefore July 1957 it being imprecise. HELD: The Supreme Court held that since there was an agreement to extend indefinitely the payment of the installment of P50,000.00 in July 1957 asprovided in the promissory note, consequently, petitioner Pacific Banking Corporation was precluded form enforcing the payment of the said installment of July 1957, before the expiration of the indefinite period of extension, which period had to be fixed by the court as provided in Article 1197 of the Civil Code.Hence, the disputed foreclosure and subsequent sale was premature. Wherefore, the petition is dismissed. YES. In case the period of extension is not precise, the provisions of Article 1197 of the Civil Code should apply. The pledge executed as collateral security no longer contained a provision on installment due on or before July1957. The pledge constituted on February 19, 1958 on the shares of stocks of Insular was sufficient consideration for the extension, considering that pledgewas additional collateral required by the Pacific in addition to the continuingguaranty of Carkin. Even the ledge did not provide for dates of payment of installments; or any fixed date for maturity of the whole indebtedness.Accordingly, the date of maturity of the indebtedness should be as may bedetermined by the court under Article 1197 of the Civil Code.
Agoncillo v. Javier
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
326
Felipe Agoncillo, and his wife, Marcela Marino, plaintiff-appellees, versus Crisanto Javier, administrator of the estate of the late Anastacio Alano, Florencio Alano and Jose Alano, defendant-appellants. (G.R. No. L-12611 or 38 PHIL124, August 7, 1918, En Banc) Fisher, J.: FACTS: On February 27 1904, Anastasio Alano, Jlose Alano and Florencio Alanoexecuted in favor of the plaintiff, Dra. Marcela Marino a document stipulatingthat the Alanos as testamentary heirs of deceased Rev. Anastacio Cruz, wouldpay the sum of P2,730.50 within one (1) year with interest of 12 percent perannum representing the amount of debt incurred by Cruz. Moreover, theagreement provided that the Alanos are to convey the house and lot bequeathedto them by Cruz in the event of failure to pay the debt in money at its maturity.No part of interest or principal due has been paid except the sum of P200paid in 1908 by Anastacio Alano. In 1912, Anastasio died intestate. On August8, 1914, CFI of Batangas appointed Crisanto Javier as administrator of Anastasio‘s estate. On March 17, 1916, the plaintiffs filed the complaint againstFlorencio, Jose and Crisanto praying that unless defendants pay the debt for therecovery of which the action was brought, they be required to convey toplaintiffs the house and lot described in the agreement, that the property beappraised and if its value is found to be less than the amount of the debt, withaccrued interest at the stipulation rate, judgment be rendered in favor of theplaintiffs for the balance. ISSUE: Whether or not the agreement that the defendant-appellant, at thematurity of the debt, will pay the sum of the money lent by the appellees or willtransfer the rights to the ownership and possession of the house and lotbequeathed to the former by the testator in favor of the appellees, is valid. HELD: YES, this stipulation is valid because it is simply an alternative obligation, which is expressly allowed by law. The agreement to convey the house and loton an appraised value in the event of failure to pay the debt in money at itsmaturity is valid. It is simply an undertaking that if debt is not paid in money, itwill be paid in another way. The agreement is not open to the objection that theagreement is pacto comisorio. It is not an attempt to permit the creditor todeclare the forfeiture of the security upon the failure of the debtor to pay at itsmaturity. It is simply provided that if the debt is not paid in money, it shall bepaid by the transfer of the property at a valuation. Such an agreement unrecorded, creates no right in rem, but as between the parties, it is perfectlyvalid and specific performance by its terms may be enforced unless preventedby the creation of superior rights in favor of third persons. The contract is not susceptible of the interpretation that the title to thehouse and lot in question was to be transferred to the creditor ipso facto upon the mere failure of the debtors to pay the debt at its maturity. The obligationsassumed by the debtors were in the alternative, and they had the right to electwhich they would perform. The conduct of parties shows that it was not theirunderstanding that the right to discharge the obligation by the payment of themoney was lost to the debtors by their failure to pay the debt at its maturity. The plaintiff accepted the payment from Anastacio in 1908, several years afterthe debt matured.It is quite clear therefore that under the terms of the contract, and theparties themselves have interpreted it, the liability of the defendant as to theconveyance of the house and lot is subsidiary and Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
327
conditional, being dependentupon their failure to pay the debt in money. It must follow therefore that if theaction to recover the debt was prescribed, the action to compel a conveyance of the house and lot is likewise barred, as the agreement to make such conveyancewas not an independent principal undertaking, but merely a subsidiaryalternative pact relating to the method by which the debt must be paid.
Ong Guan v. Century
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
328
Ong Guan Cuan and The Bank of The Philippine Islands, Plaintiffappellees, versus Century Insurance Company, LTD., defendant-appelant. (G.R. No. L-22738 or 46 SCRA 592, December 2, 1924, En Banc) Villamor (Ignacio), J.: FACTS: A building of plaintiff Ong Guan Cuan was insured with defendant CenturyInsurance Company (Century) against fire for P30,000 as well as themerchandise therein for P15,000. On February 28 1923, the building and themerchandise were burned while the policies issued were in force. Under theconditions of the policies, the defendant may at its option reinstate or replacethe destroyed property instead of paying for the amount of the loss and that it isnot bound to reinstate exactly or completely the damaged property. Century proposed reconstruction of the house destroyed but plaintiff denied that the new house which will be constructed would be smaller and of materials of lower kind than those employed in the construction of the housewhich was destroyed. Plaintiff filed a complaint compelling defendant to pay thesum of P45,000, the value of the insurance of the building and the merchandise.On April 19, 1924, the CFI of Iloilo City rendered judgment in favor of theplaintiff.Hence the defendant appealed from the judgment and prayed that it bepermitted to rebuild the house as provided in the conditions of the insurancepolicies. ISSUE: Whether or not defendant Century may be allowed to rebuild the house asits option instead of payment of the insured value as stipulated in the insurancepolicies. HELD: NO. The conditions in the insurance policies that the parties entered intoallowed Century to either pay the insured value of the house, or rebuild itmaking the obligation of the company an alternative one. In alternativeobligations, the debtor, Century, must notify the creditor of his election statingwhich of the two prestations it is disposed to fulfill. The objective is to give thecreditor opportunity to give consent or deny the election of the debtor. Onlyafter said notice shall election take legal effect when consented by the creditor (Article 120 Civil Code) or if impugned by the latter when declared proper by acompetent court. In the instant case, appellant company did not give formalnotice of its election to rebuild the house and the proposed reconstruction of thehouse was rejected by the creditor.In alternative obligations, the value of the prestations must be equivalentor similar in value to each other. The proposed rebuilding of the house by the insurance company would be of lesser value than the other prestation. Thepetitioner would build a smaller house and of materials of lower kind than thoseemployed in the construction of the burned house. The other prestation ispayment of the amount of P45,000 corresponding to the value of the burnedbuilding (P30, 000) and the value of the merchandise burned (P15,000). Therefore, the only recourse of the insurer is to pay the stipulated value of theinsurance policy.
Legarda v. Miailhe
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
329
Clara Tambunting De Legarda, Et. Al., plaintiff-appellants, versus Victoria Desbarats Miailhe, substituting William J.B. Burke, defendant-appellee. (G.R. No. L-3435 or 88 S 637, April 28, 1951, En Banc) Bautista Angelo, J.: FACTS: On June 3, 1944, plaintiffs filed a complaint against the originaldefendant William J.B. Burke, alleging defendant‘s unjustified refusal toaccept payment in discharge of a mortgage indebtedness in his favor, andpraying that the latter be order (1) to receive the sum of P75, 920.83; (2) to execute the corresponding deed of release of mortgage, and; (3) to paydamages in the sum of P1,000. The Court then decided in favor of plaintiff Legarda. After the war and the subsequent defeat of the Japaneseoccupants, defendant filed a case in court claiming that plaintiff Clara deLegarda violated her agreement with defendant, by forcing to depositworthless Japanese military notes when they originally agreed that theinterest was to be condoned until after the occupation and that paymentwas rendered either in Philippine or English currency. Defendant was latersubstituted upon death by his heir Miailhe and the Courts judged indefendant‘s favor. Plaintiff now assails said decision. ISSUE: Is the tender of payment by plaintiff valid? HELD: On February 17, 1943, the only currency available was the Philippine currency, or the Japanese Military notes, because all other currencies, including the English, were outlawed by a proclamation issued by the Japanese Imperial Commander on January 3, 1942. The right toelection ceased to exist on the date of plaintiff‘s payment because it had become legally impossible. And this is so because in alternativeobligations there is no right to choose undertakings that are impossible orillegal. In other words, the obligation on the part of the debtor to pay the mortgage indebtedness has since then ceased to be alternative. It appears therefore, that the tender of payment in Japanese Military noteswas a valid tender because it was the only currency permissible at thetime and its payment was tantamount to payment in Philippine currency. However, payment with the clerk of court did not have any legal effect because it was made in certified check, and a check does not meetthe requirements of legal tender. Therefore, her consignation did not havethe effect of relieving her from her obligation of the defendant.
Reyes v. Martinez
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
330
Estanislao Reyes, plaintiff-appellant, versus Sebastiana Martinez, et. Al., defendant-appellants. (55 Phil 493, December 29, 1930, En Banc) Avancena, J.: FACTS: Estanislao Reyes filed an action before the Court of First Instance of Laguna against the Martinez heirs upon four several causes of action in whichthe plaintiff seeks to recover five parcels of land, containing proximately onethousand coconut trees, and to obtain a declaration of ownership in his favor asagainst the defendants with respect to said parcels; to recover from thedefendants the sum of P9,377.50, being the alleged proceeds of some coconuttrees; to recover from the defendants the sum of P43,000, as alleged value of the proceeds of the lands involved in the receivership in the case of Martinez vs.Grano, to which the plaintiff supposes himself to be entitled, but which havegone, so he claims, to the benefit of the defendants in said receivership andlastly, to recover the sum of the P10,000 from the defendants as damages resulting from their improper meddling in the administration of the receiver ship property. The plaintiff has been laboring along for several years in an unsuccessfullegal battle with the defendants, springing from his claim to be the owner of theproperty involved in the receivership. This cause of action is founded upon thecontract and the claim put forth by the plaintiff is to have the five parcelsadjudge to him in lieu of another parcel formerly supposed to contain onethousand trees between him and certain of the Martinez heirs. By this contract,Reyes was to be given the parcel described in clause 8, but in a proviso to saidclause, the parties contracting with Reyes agreed to assure to him certain otherland containing an equivalent number of trees in case he should so elect. Thelitigation shows that the plaintiff elected to take and hold the parcel described inclause 8, and his right thereto has all along been recognized in the dispositionsmade by the court with respect to said land. Thus, Reyes must be taken to have elected to take that particular parcel and he is now estopped from asserting acontrary election to take the five parcels of land described in his complaint.However, the title of the parcel is in the heirs of Inocente Martinez and itdoes not appear that they have transferred said title to Reyes. ISSUE: Whether or not Reyes is entitled to the damages against the party‘ssignatory to the contract of March 5, 1921 for the value of the said property. HELD: Yes. The claim of the defendants to the interest of P8,000 from July 31,1926 cannot be conceded as the judgment itself bears interest at the lawful ratefrom the date the same was rendered. The Martinez heirs are ordered toprocure the sufficient deed conveying to appellant Estanislao Reyes the parcelsof land mentioned in paragraph 8 of the contract. The judgment against Reyesin favor of the Martinez heirs is enjoined.
Quizana v. Redugerio
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
331
Martina Quizana, plaintiff-appellee, versus Gaudencio Redugerio and Josefa Postrado, defendant-appellants. (94 PHIL. 922, May 7, 1954, en banc) Labrador, J.: FACTS: This is an appeal to the Court from a decision rendered by the Court of theFirst Instance of Marinduque, wherein the defendant Gaudencio Redugerio wasto pay the plaintiff Martina Quizana the sum of P550 with the interest from thetime of the filing of the complaint and from an order of the same court denying amotion of the defendant for the reconsideration of the judgment on the groundthat they were deprived of their day in court. There were actionable documents attached to the complaint signed by thedefendant-appellant spouses Redugerio and Pastrado on October 4, 1948 andcontaining the provision that Quizana is to be paid on January 1949 and in caseof failure, they will mortgage the coconut plantation in Sta. Cruz, Marinduque. The defendants admitted that they offered the transfer of possession but was eventually refused by the petitioner.So eventually, the defendants appealed in the CFI which set the hearing on August 16, 1951.However, the counsel for defendants presented an ―urgent motion for continuance‖ for the date of hearing coincides with his appearance in two (2) criminal cases previously set for trial before hearing on the aforesaid date. The motion was not acted upon until the day of the trial. The CFI denied the motion for continuance, and in the absence of defendants, rendered its questioned decision. ISSUE: Whether or not the trial court was correct in ignoring the 2nd part of thewritten obligation and solely basing its decision on the last part of the 1stpart; i.e., that payment should have been made on January 21, 1949. HELD: YES, the acceptance of plaintiff of the written obligation without objectionand protest and the fact that he kept and based his action therein, are concreteand positive proof that he agreed and consented to all the terms, including theparagraph on the constitution of the mortgage.Article 1206 provides: When only one prestation has been agreed uponbut the obligation may render substitution, the obligation is facultativeobligation. The defendantappellant shall present a duly executed deed of mortgageover the property in the written obligation, with a period of payment to beagreed upon by the parties with the approval of the court.
Marsman v. Philippine Geoanalytics
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
332
Marsman Drysdale Land Inc., petitioner versus Philippine Geoanalytics Inc. and Gotesco Inc., respondents. (G.R. No. 183374, June 29, 2010, 3rd Division) Carpio Morales, J.: FACTS: On February 12, 1997, Marsman Drysdale Land, Inc. (Marsman Drysdale) and Gotesco Properties, Inc. (Gotesco) entered into a Joint Venture Agreement (JVA) for the construction and development of an office building on a land owned by Marsman Drysdale in Makati City. For this purpose, [Marsman Drysdale] shall deliver the Property in a buildable condition within ninety (90) days from signing of this Agreement barring any unforeseen circumstances over which [Marsman Drysdale] has no control. Buildable condition shall mean that the old building/structure which stands on the Property is demolished and taken to ground level. A joint account shall be opened and maintained by both Parties for handling of said balance, among other Project concerns. Via Technical Services Contract (TSC) dated July 14, 1997, the joint venture engaged the services of Philippine Geoanalytics, Inc. (PGI) to provide subsurface soil exploration, laboratory testing, seismic study and geotechnical engineering for the project. PGI, was, however, able to drill only four of five boreholes needed to conduct its subsurface soil exploration and laboratory testing, justifying its failure to drill the remaining borehole to the failure on the part of the joint venture partners to clear the area where the drilling was to be made. PGI was able to complete its seismic study though. PGI then billed the joint venture on November 24, 1997 for P284,553.50 representing the cost of partial subsurface soil exploration; and on January 15, 1998 for P250,800 representing the cost of the completed seismic study. Despite repeated demands from PGI, the joint venture failed to pay its obligations.Meanwhile, due to unfavorable economic conditions at the time, the joint venture was cut short and the planned building project was eventually shelved. PGI subsequently filed on November 11, 1999 a complaint for collection of sum of money and damages at the Regional Trial Court (RTC) of Quezon City against Marsman Drysdale and Gotesco. In its Answer with Counterclaim and Cross-claim, Marsman Drysdale passed the responsibility of paying PGI to Gotesco which, under the JVA, was solely liable for the monetary expenses of the project. By Decision of June 2, 2004, Branch 226 of the Quezon City RTC rendered judgment in favor of PGI. Marsman Drysdale moved for partial reconsideration, contending that it should not have been held jointly liable with Gotesco on PGI‘s claim as well as on the awards of exemplary damages and attorney‘s fees. The motion was, by Resolution of October 28, 2005, denied. Both Marsman Drysdale and Gotesco appealed to the Court of Appeals which, by Decision of January 28, 2008, affirmed with modification the decision of the trial court. ISSUE: Whether or not Marsman Drysdale and Gotesco are jointly liable to PGI. HELD: PGI executed a technical service contract with the joint venture and was never a party to the JVA. While the JVA clearly spelled out, inter alia, the capital contributions of Marsman Drysdale (land) and Gotesco (cash) as well as the funding and financing mechanism for the project, the same cannot be used to defeat the lawful claim of PGI against the two joint venturers-partners. The Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
333
TSC clearly listed the joint venturers Marsman Drysdale and Gotesco as the beneficial owner of the project, and all billing invoices indicated the consortium therein as the client. The only time that the JVA may be made to apply in the present petitions is when the liability of the joint venturers to each other would set in. In the absence of stipulation, the share of each in the profits and losses shall be in proportion to what he may have contributed, but the industrial partner shall not be liable for the losses. As for the profits, the industrial partner shall receive such share as may be just and equitable under the circumstances. If besides his services he has contributed capital, he shall also receive a share in the profits in proportion to his capital. In the JVA, Marsman Drysdale and Gotesco agreed on a 50-50 ratio on the proceeds of the project. They did not provide for the splitting of losses, however. Applying the abovequoted provision of Article 1797 then, the same ratio applies in splitting the P535,353.50 obligation-loss of the joint venture. The appellate court‘s decision must be modified, however. Marsman Drysdale and Gotesco being jointly liable, there is no need for Gotesco to reimburse Marsman Drysdale for ―50% of the aggregate sum due‖ to PGI. Allowing Marsman Drysdale to recover from Gotesco what it paid to PGI would not only be contrary to the law on partnership on division of losses but would partake of a clear case of unjust enrichment at Gotesco‘s expense. The grant by the lower courts of Marsman Drysdale cross-claim against Gotesco was thus erroneous. Marsman Drysdale‘s supplication for the award of attorney‘s fees in its favor must be denied. It cannot claim that it was compelled to litigate or that the civil action or proceeding against it was clearly unfounded, for the JVA provided that, in the event a party advances funds for the project, the joint venture shall repay the advancing party. Marsman Drysdale was thus not precluded from advancing funds to pay for PGI‘s contracted services to abate any legal action against the joint venture itself. It was in fact hardline insistence on Gotesco having sole responsibility to pay for the obligation, despite the fact that PGI‘s services redounded to the benefit of the joint venture, that spawned the legal action against it and Gotesco. Finally, an interest of 12% per annum on the outstanding obligation must be imposed from the time of demand as the delay in payment makes the obligation one of forbearance of money, conformably with this Court‘s HELD in Eastern Shipping Lines, Inc. v. Court of Appeals. Marsman Drysdale and Gotesco should bear legal interest on their respective obligations.
Alipio v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
334
Purita Alipio, petitioner, versus Court of Appeals and Romeo G. Jaring, represented by his Atoorney-in-Fact Ramon G. Jaring, respondents. (341 SCRA 441, September 29, 2000, Second Division) Mendoza, J.: FACTS: Respondent Romeo Jaring was the lessee of a 14.5 hectares fishpond inBarilto, Bataan. The lease was for a period of five (5) years ending September12, 1990. On June 19, he subleased the fishpond for the remaining period of hislease to the spouses Placido and Purita Alipio and the spouses Bienvenido andRemedons Manuel. The stipulated amount of the rent was P 485,600.00 payablein two (2) installments of P300,00.00 and P185,600 with second installment falling due on June 30, 1989. Each of the four sublease parties signed thecontract. The first installment was duly paid, but the second installment the sublessees only satisfied a portion thereof, leaving an unpaid of P50,600.00.Despite due demand, the lessees failed to comply with their obligation so that onOctober 13,1989 private respondent sued Alipio and Manuel spouses for thecollection of the said amount before the RTC, and in the alternative, he prayedfor the rescission of the sublease contract should the defendant failed to pay thebalance.Petitioner Purita moved to dismiss the case on the ground that herhusband had passed away on December 1988. She based her action on Rule 3Section 31 of 1964 Rules of Court. ISSUE: Whether or not a creditor can sue the surviving spouses for the collectionof debt which is owned by the conjugal partnership of gains, and not in aproceeding for the settlement of the estate of the decedent. HELD: NO, creditor cannot sue the surviving spouse of a decedent in an ordinaryproceeding for the collection of the sum of money chargeable against theconjugal partnership and that the proper remedy is for him to file a claim in thesettlement of the estate of the decedent.Article 161(1) states that: All debts and obligation contracted by thehusband for the benefits of the conjugal partnership, and those contracted by the wife, also for the same purpose, in the cases where she may legally bind the partnership. When petitioner‘s husband died, their conjugal partnership was automatically dissolved and debts chargeable against it are to be paid in the settlement of estate proceeding in accordance with Rule 73 Section 2: When marriage dissolved by death of the husband or wife, the community property shall be inventoried, administered and liquidated, and the debts thereof paid inthe testate or intestate proceeding of the deceased spouse. If both spouses havedied, the conjugal partnership shall be liquidated in the testate or intestate proceeding of either.
PH Credit Corp. v. Court of Appeals Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
335
PH Credit Corp., petitioner, versus Court of Appelas and Carlos M. Farrales, respondents. (370 SCRA 441, 2001 November 22, Third Division) Panganiban, J.: FACTS: I. CA-G.R. SP NO. 23324PH Credit Corp., filed a case against Pacific Lloyd Corp., Carlos Farrales, Thomas H. Van Sebille and Federico C. Lim, for sum of money. After service of summons upon the defendants, they failed to file their answer within thereglementary period, hence they were declared in default. Judgment is renderedin favor of plaintiff PH Credit Corporation. After the aforesaid decision has become final and executory, a Writ of Execution was issued and consequently implemented by the assigned Deputy Sheriff. Personal and real properties of defendant Carlos M. Farrales were levied and sold at public auction wherein PH Credit Corp. was the highest bidder. Motion for the issuance of a writ of possession was filed and the same wasgranted. Petitioner claims that she, as a third-party claimant with the courtbelow, filed an ‗Urgent Motion for Reconsideration and/or to suspend the Orderdated October 12, 1990‘, but without acting there [on], respondent Judge issued the writ of possession on October 26, 1990. She claims that the actuations of respondent Judge were tainted with grave abuse of discretion. Respondent Judgeissued an order considering the assailed Order as well as the writ of possessionas ‗of no force and effect‘ thus the issue here has become moot and academic.II. CA-G.R. SP NO. 25714Petitioner claims that the respondent Judge‘s Order dated January 31, 1991 was tainted with grave abuse of discretion based on the following grounds:―1. Respondent Judge refused to consider as ―waived‖ private respondent‘sobjection that his obligation in the January 31, 1984 decision was merely jointand not solidary with the defendants therein. According to petitioner, privaterespondent assailed the levy on execution twice in 1984 and once in 1985 butnot once did the latter even mention therein that his obligation was joint forfailure of the dispositive portion of the decision to indicate that it was solidary. Thus, private respondent must be deemed to have waived that objection, petitioner concludes. ―2. The redemption period after the auction sale of the properties had longlapsed so much [so] that the purchaser therein became the absolute ownerthereof. Thus, respondent Judge allegedly abused his discretion in setting asidethe auction sale after the redemption period had expired.―3. Respondent Judge erred in applying the presumption of a joint obligation inthe face of the conclusion of fact and law contained in the decision showing thatthe obligation is solidary.‖ The Court of Appeals affirmed the trial court‘s HELD declaring null andvoid (a) the auction sale of Respondent Ferrales‘ real property and (b) the Writ of Possession issued in consequence thereof. It held that, pursuant to the January31, 1984 Decision of the trial court, the liability of Farrales was merely joint andnot solidary. Consequently, there was no legal basis for levying and sellingFarrales‘ real and personal properties in order to satisfy the whole obligation. ISSUE: Whether or not the Court of Appeals erred when it disregarded the body of the decision and concluded that the obligation was merely a joint obligation dueto the failure of the dispositive portion of the decision dated 31 January 1984 tostate that the obligation was joint and solidary. HELD: No. A solidary obligation is one in which each of the debtors is liable forthe entire obligation, and each of the creditors is entitled to demand Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
336
thesatisfaction of the whole obligation from any or all of the debtors. On the otherhand, a joint obligation is one in which each debtors is liable only for aproportionate part of the debt, and the creditor is entitled to demand only aproportionate part of the credit from each debtor. The well-entrenched rule isthat solidary obligations cannot be inferred lightly. They must be positively andclearly expressed. A liability is solidary ―only when the obligation expressly sostates, when the law so provides or when the nature of the obligation sorequires.‖In the dispositive portion of the January 31, 1984 Decision of the trialcourt, the word solidary neither appears nor can it be inferred therefrom. Thefallo merely stated that the following respondents were liable: Pacific LloydCorporation, Thomas H. Van Sebille, Carlos M. Farrales and Federico C. Lim.Under the circumstances, the liability is joint, as provided by the Civil Code,which we quote:― Art. 1208. If from the law, or the nature or the wording of theobligations to which the preceding article refers[,] the contrary does not appear,the credit or debt shall be presumed to be divided into as many equal shares asthere are creditors or debtors x x x.‖ Hence the execution must conform withthat which is ordained or decreed in the dispositive portion of the decision.Petitioner maintains that the Court of Appeals improperly and incorrectlydisregarded the body of the trial court‘s Decision, which clearly stated as follows:―To support the Promissory Note, a Continuing Suretyship Agreement wasexecuted by the defendants, Federico C. Lim, Carlos M. Farrales and Thomas H.Van Sebille, in favor of the plaintiff corporation, to the effect that if Pacific LloydCorporation cannot pay the amount loaned by plaintiff to said corporation, thenFederico C. Lim, Carlos M. Farrales and Thomas H. Van Sebille will holdthemselves jointly and severally together with defendant Pacific LloydCorporation to answer for the payment of said obligation.‖ The only exception when the body of a decision prevails over the fallo iswhen the inevitable conclusion from the former is that there was a glaring errorin the latter, in which case the body of the decision will prevail. In this instance,there was no clear declaration in the body of the January 31, 1984 Decision towarrant a conclusion that there was an error in the fallo. Nowhere in the formercan have we found a definite declaration of the trial court that, indeed, respondent‘sliability was solidary. If petitioner had doubted this point, it should have filed amotion for reconsideration before the finality of the Decision of the trial court.
CDCP VS ESTRELLA Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
337
Construction Development Corp. of the Philippines, petitioner, versus Rebecca G. Estrella, Rachel E. Fletcher, Philippine Phoenix Surety & Insurance, Inc., Batangas Laguna Tayabas Bus Co., and Wilfredo Datingguinoo, respondents. (GR No. 147791, September 8, 2006, First Division) Ynares-Santiago, J.: FACTS: On December 29, 1978, respondents Rebecca G. Estrella and hergranddaughter, Rachel E. Fletcher, boarded in San Pablo City, a BLTB busbound for Pasay City. However, they never reached their destinationbecause their bus was rammed from behind by a tractor-truck of CDCP in the South Expressway. The strong impact pushed forward their seats andpinned their knees to the seats in front of them. They regained consciousness only when rescuers created a hole in the bus and extricated their legs from under the seats. They suffered physical injuriesas a result. Thereafter, respondents filed a Complaint for damages against CDCP, BLTB, Espiridion Payunan, Jr. and Wilfredo Datinguinoo before theRegional Trial Court of Manila, Branch 13. ISSUE: Are the accused jointly or solidarily liable? HELD: The case filed by respondents against petitioner is an actionfor culpa aquiliana or quasi delict under Article 2176 of the Civil Code. Theliability for the negligent conduct of the subordinate is direct and primary, but is subject to the defense of due diligence in the selection andsupervision of the employee. In the instant case, the trial court found thatpetitioner failed to prove that it exercised the diligence of a good father of a family in the selection and supervision of Payunan, Jr.It is well-settled in Fabre, Jr. v. Court of Appeals, that theowner of the other vehicle which collided with a common carrier is solidarily liable to the injured passenger of the same. The Peitition wasthusly DENIED.
Republic Glass Corp. v. Qua
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
338
Republic Glass Corp. and Gervel, Inc., petitioners, versus Lawrence Qua, respondent. (G.R. No. 14413, July 30, 2004, First Division) Carpio, J.: FACTS: Petitioners and respondent were stockholders of Ladtek, Inc., whichobtained loans from Metrobank and PDCP where they stood as sureties.Among themselves they executed Agreements for Contribution, Indemnityand Pledge of shares of Stocks, stating that in case of default in thepayment of loans, the parties would reimburse each other theproportionate share of any sum that any might pay to creditors. Ladtekdefaulted on its loan obligations, hence Metrobank filed a collection case.During the pendency thereof, RGC and Gervel paid Metrobank where awaiver and quitclaim in favor of the two was executed. Upon Qua‘srefusal to reimburse, RGC and Gervel foreclosed the pledged shares of stocks owned by Qua at a public auction. On appeal, the CA issued theassailed decision and held that there was an implied novation of theagreement and that the payment did not extinguish the entire obligationand did not benefit Qua. Hence, the petition, where the petitioners claimthe following: (1) Qua is estopped from claiming that the payment madewas not for the entire obligation, due to his judicial admissions; (2)payment of the entire obligation is a condition sine qua non for thedemand of reimbursement under the indemnity agreements; and (3)there is no novation in the instant case. ISSUES: (1) Whether payment of the entire obligation is an essential condition for reimbursement; and (2) Whether there was no novation. HELD: The petition is denied. Although the Agreement does not state thatpayment of the entire obligation is an essential condition forreimbursement, RGC and Gervel cannot automatically claim for indemnityfrom Qua because Qua himself is liable directly to Metrobank and PDCP. The elements of novation are not established in the instant case.Contrary to RGC and Gervel‘s claim, payment of any amount will notautomatically result in reimbursement. If a solidary debtor pays theobligation in part, he can recover reimbursement from the co-debtors onlyin so far as his payment exceeded his share in the obligation. This isprecisely because if a solidary debtor pays an amount equal to hisproportionate share in the obligation, then he in effects pays only what isdue from him. If the debtor pays less than his share in the obligation, hecannot demand reimbursement because his payment is less than hisactual debt.
Industrial Management v. NLRC
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
339
Industrial Management International Development Corp. (INIMACO), petitioner, versus National Labor Relations Commission (4th Division) Cebu City, and Enrique Sulit, Socorro Mahinay, Esmeraldo Pegarido, Tita Bacusmo, Gino Niere, Virginia Bacus, Roberto Nemenzo, Dario Go, and Roberto Alegarbes, respondents. (331 SCRA 640 May 11, 2000, Second Division) Carpio, J.: FACTS: In September 1984, private respondents Enrique Sulit, Socorro Mahinay,Esmeralco Pegarido, Tita Bacusimo, Nierre, Virginia Bagus, Nemenzo, Dariogoand Roberto filed a complaint with the DOLE, Regional Arbitration Branch No.111in Cebu City against Filipinas Carbon Mining Corp, Genardo Sicaty, Gonzales,Dhin Gin, Lo Kuan Chin petitioner Industrial Management Development Corporation for payment of separation pay and unpaid wages. Labor Arbiter judgment-ordering Filipinas, Gonzales, Lo Kuan Chin to pay complainant Enrique Sulit total amount of P82,800.00. On September 3, 1987 petitioner filed a motion to quash alias writ of execution and set aside decision alleging among that the alias writ of executionaltered and charged the tenor of the decision by charging the liability of thereinrespondent from joint to solidary by the insertion of the words ‗and/or‘ betweenGonzales and Filipinas. ISSUE: Whether or not the petitioner‘s liability pursuant to the decision of thelabor arbiter dated March 10, 1987 is solidary. HELD: NO, the liability pursuant to the decision of the labor arbiter dated March10, 1987 should be as it is hereby, considered joint and petitioner‘s paymentwhich has been accepted considered as full satisfaction of its liability, withoutthe prejudice to the enforcement of the awards against the other fiverespondents in the said case.A solidary or joint and several obligations is one in which each debtor isliable for the entire obligation and each creditor is entitled to demand theobligation. In a joint obligation each obligor answers only a part of the wholeliability and to each obligation belong only a part of the correlative rights. There is solidary liability only when the obligation expressly so states,when the law so provides or when the nature of the obligation so required.When it is not provided in a judgment that the defendant are liable to pay jointlyand severally a certain sum of money, none of them may be compelled to satisfyin full said judgment.
Metro Manila Transit Corp. v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
340
Metro Manila Transit Corporation, petitioner, versus The Court of Appeals and Nenita Custodio, respondents. (G.R. No. 104408, Jun 21, 1993, 2nd Division) Regalado, J.: FACTS: Plaintiff-appellant Nenita Custodio boarded as a passenger of a publicutility jeepney, then driven by defendant Agudo Calebag and owned by his co-defendant Victorino Lamayo, bound for her work at Dynetics Incorporated located in Bicutan, Taguig, Metro Manila, where she then worked as a machine operator. While the passenger jeepney was travelling at along DBP Avenue, Bicutan, Taguig, Metro Manila another fast moving vehicle, a Metro Manila Transit Corp. (MMTC) bus driven by defendant Godofredo C. Leonardo bound forits terminal at Bicutan. As both vehicles approached the intersection of DBP Avenue and Honeydew Road they failed to slow down and slacken their speed; neither did they blow their horns to warn approaching vehicles. As aconsequence, a collision between them occurred. The collision impact causedplaintiff-appellant Nenita Custodio to hit the front windshield of the passenger jeepney and was thrown out therefrom, falling onto the pavement unconscious with serious physical injuries. She was brought to the Medical City Hospitalwhere she regained consciousness only after 1 week. Thereat, she was confinedfor 24 days, and as a consequence, she was unable to work for three and onehalf months 3 1/2. Defendants denied all the material allegations in thecomplaint and pointed an accusing finger at each other as being the party atfault for the negligence in the failure to exercise due diligence in the selectionand supervision of their respective employees.By order of the trial court, defendant Calebag was declared in default forfailure to file an answer. Trial ensued after no amicable settlements were made. The trial court found both drivers of the colliding vehicles concurrently negligent for nonobservance of appropriate traffic rules and regulations and for failure totake the usual precautions when approaching an intersection. As joint tortfeasors, both drivers, as well as defendant Lamayo, were held solidarily liablefor damages sustained by plaintiff Custodio. Plaintiff's motion to have that portion of the trial court's decision absolvingMMTC from liability reconsidered having been denied for lack of merit, an appealwas filed by her with respondent appellate court. After consideration of the appropriate pleadings on appeal and finding the appeal meritorious, the Court of Appeals modified the trial court's decision by holding MMTC solidarily liable withthe other defendants for the damages awarded by the trial court because of their concurrent negligence, hence, this appeal. ISSUE: Whether or not the appellate court erred in holding that MMTC should besolidary liable with the other defendants. HELD: No, the appellate court did not err in its decision. Whether or not thediligence of a good father of a family has been observed by petitioner is a matterof proof which under the circumstances in the case at bar has not been clearly established. It is not felt by the Court that there is enough evidence on recordas would overturn the presumption of negligence, and for failure to submit allevidence within its control, assuming the putative existence thereof; petitionerMMTC must suffer the consequences of its own inaction and indifference. The mere formulation of various company policies on safety without showing that they were being complied with is not sufficient to exempt petitioner from liability arising from negligence of its employees. It is incumbent uponpetitioner to show that in recruiting and employing the erring Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
341
driver therecruitment procedures and company policies on efficiency and safety werefollowed. As joint tortfeasors, all defendants, including MMTC will be solidarily liable for damages awarded by the trial court. Decision affirmed.
Inciong v.Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
342
Baldomero Inciong, jr., petitioner, versus Court of Appeals and Philippine Bank of Communications, respondents (G.R. No. 96405, June 26, 1996, 2nd Division) Romero, J.: FACTS: Petitioner, together with Gregorio Pantanosas Jr., and Rene Naybe, hadtheir obligations arouse from the signing of a promissory note amounting to P50, 000 holding themselves jointly and severally liable to private respondent Philippine Bank of Communications, Cagayan de Oro City branch. The promissory note was due on May 5, 1983. The promissors failed to fulfill their obligations despite demand by thebank. As a consequence, an action to collect was filed with the court but wasdismissed due to failure to prosecute. Said dismissal was reconsidered by thetrial court and later ordered the sheriff to serve the summons. On January 27,1987, the lower court dismissed the case against defendant Pantanosas asprayed for by the private respondent herein. Meanwhile, only the summonsaddressed to petitioner was served as the sheriff learned that defendant Naybehad gone to Saudi Arabia.Petitioner argued that said promissory note has vitiated his consentthrough fraud and deceit which was later corroborated by Pantanosas for he onlysigned for the amount of P5,000 on one of the copies of the promissory note,and not the alleged amount, to buy chainsaw. He also claimed that since theliabilities of Pantanosas and Naybe, his co-promissors, had extinguished, hisshould also be extinguished, as provided for by Article 2080 of the Civil Code onguarantors. The Regional Trial Court and the Court of Appeals rejected hispetitions and so a petition for review on certiorari was filed with the SupremeCourt. ISSUE: Whether or not the petitioner is solidary co-maker of the promissory notein issue and not merely a guarantor. HELD: The Supreme Court held that the petitioner signed the promissory note asa solidary co-maker and not as a guarantor. A solidary or joint and several obligations are one in which each debtor is liable for the entire obligation, and eachcreditor is entitled to demand the whole obligation. On the other hand, Article 2047 of the Civil Code states: ―By guaranty a person, called the guarantor, binds himself to the creditor tofulfill the obligation of the principal debtor in case the latter should fail to do so.‖ If a person binds himself solidarily with the principal debtor, the provisionsof Section 4, Chapter 3, Title I of this Book shall be observed. In such a case thecontract is called a suretyship. While a guarantor may bind himself solidarilywith the principal debtor, the liability of a guarantor is different from that of asolidary debtor. Thus, Tolentino explains: ―A guarantor who binds himself in solidum with the principal debtor under theprovisions of the second paragraph does not become a solidary co-debtor to allintents and purposes. There is a difference between a solidary co-debtor and afiador in solidum (surety). The latter, outside of the liability he assumes to paythe debt before the property of the principal debtor has been exhausted, retainsall the other rights, actions and benefits which pertain to him by reason of thefiansa; while a solidary co-debtor has no other rights than those bestowed uponhim in Section 4, Chapter 3, Title I, Book IV of the Civil Code.‖Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on joint andseveral obligations. Under Art. 1207 thereof, when there are two or moredebtors in one and the same obligation, the presumption is that the obligation is joint so that each of the debtors is liable only for a proportionatepart of the debt. There is a solidary Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
343
liability only when the obligation expresslyso states, when the law so provides or when the nature of the obligation sorequires.Because the promissory note involved in this case expressly states thatthe three signatories therein are jointly and severally liable, any one, some or allof them may be proceeded against for the entire obligation. The choice is left tothe solidary creditor to determine against whom he will enforce collection. Consequently, the dismissal of the case against Judge Pontanosas may not bedeemed as having discharged petitioner from liability as well. As regardsNaybe, suffice it to say that the court never acquired jurisdiction over him.Petitioner, therefore, may only have recourse against his co-makers, as providedby law.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
344
Philippine Blooming Mills v. Court of Appeals Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
345
Philippine Blooming Mills, Inc., and Alfredo Ching, petitioners versus Court of Appeals and Traders Royal Bank, respondents. (413 SCRA 445 October 15, 2003, 1st Division) Carpio, J.: FACTS: Alfredo Ching (Ching) was the Senior Vice President of Philippine BloomingMills, Inc. (PBM). In his personal capacity and not as a corporate officer, Chingsigned a Deed of Suretyship dated 21 July 1977 binding himself solidarily liabletogether with the debtor PBM.On March 24 and August 6 1980, Traders Royal Bank (TRB) granted PBM letters of Credit on application of Ching in his capacity as Senior vice Presidentof PBM. Ching later accomplished and delivered to TRB trust receipts, whichacknowledged receipt in trust for TRB of the merchandise subject of the lettersof credit. Under the trust receipts, PBM had the right to sell the merchandise forcash with the obligation to turn over the entire proceeds of the sale to TRB aspayment of PBM‘s indebtedness. Ching further executed an Undertaking for each trust receipt, whichuniformly granted the TRB the right to take possession of the goods at any timeto protect the TRB‘s interests.On 27 April 1981, PBM obtained a P3, 500,000 trust loan from TRB. Chingsigned as co-maker in the notarized Promissory Note evidencing said loan.PBM defaulted in its payment of the two (2) trust receipts as well as thetrust loan.On 1 April 1982, PBM and Ching filed a petition for suspension of payments with the Securities and Exchange Commission (SEC). The petition sought to suspend payment of PBM‘s obligations and prayed that the SEC allowPBM to continue its normal business operations free from the interference of itscreditors. One of the listed creditors of PBM was TRB.On 9 July 1982; the SEC placed all of PBM‘s assets, liabilities, and obligations under the rehabilitation receivership of Kalaw, Escaler andAssociates. On 13 May 1983, ten months after the SEC placed PBM underrehabilitation receivership, TRB filed with the trial court a complaint for collection against PBM and Ching. TRB asked the trial court to order defendants to pay solidarily the indebtedness of PBM.On 25 May 1983, TRB moved to withdraw the complaint against PBM on the ground that the SEC had already placed PBM under receivership. The trial court thus dismissed the complaint against PBM. On 23 July 1983, PBM and Ching also moved to dismiss the complaint onthe ground that the trial court had no jurisdiction over the subject matter of thecase. PBM and Ching invoked the assumption of jurisdiction by the SEC over allof PBM‘s assets and liabilities. The trial court denied the motion to dismiss with respect to Ching and affirmed its dismissal of the case with respect to PBM. The trial court stressedthat TRB was holding Ching liable under the Deed of Suretyship. As Ching‘sobligation was solidary, the trial court ruled that TRB could proceed against Ching as surety upon default of the principal debtor PBM.Upon the trial court‘s denial of his Motion for Reconsideration, Ching fileda Petition for Certiorari and Prohibition before the Court of Appeals. Theappellate court granted Ching‘s petition and ordered the dismissal of the case. The appellate court ruled that SEC assumed jurisdiction over Ching and PBM tothe exclusion of courts or tribunals of coordinate rank. TRB assailed the Court of Appeal‘s decision before the Supreme Court. In Traders Royal Bank v. Court of Appeals, the highest tribunal upheld the TRB andruled that Ching was merely a nominal party in the SEC case. Creditors may sueindividual sureties of debtor corporations, like Ching, in a separate proceeding before regular courts despite the pendency of a case before the SEC involvingthe debtor corporation.In his Answer dated 6 November 1989, Ching denied liability as surety andaccommodation co-maker of PBM. He claimed that Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
346
the SEC had already issued adecision approving a revised rehabilitation plan for PBM‘s creditors. He further claimed that even as a surety, he has the right to the defenses personal to PBM. Thus, his liability as surety would attach only if, after the rehabilitation of payments scheduled under the rehabilitation plan, there would remain a balanceof PBM‘s debt to TRB. The trial court ruled that Ching is liable to TB under the Deed of Suretyship. On appeal, the Court of Appeals affirmed the decision of the lowercourt. The Court of Appeals denied Ching‘s Motion for Reconsideration for lack of merit. ISSUES: Whether or not Ching is liable for obligations PBM contracted after theexecution of the Deed of Suretyship. Whether or not Ching‘s liability is limited to the amount stated in PBM‘s rehabilitation plan. HELD: Ching is liable for credit obligations contracted by PBM against TRB beforeand after the execution of the 21 July 1977 Deed of Suretyship. This is evidentfrom the tenor of the deed itself, referring to amounts PBM ―may now beindebted or may hereafter become indebted‖ to TRB. The law expressly allows asuretyship for ―future debts‖ as provided for in Article 2053 of the Civil Code.Under the Civil Code, a guaranty may be given to secure even future debts; theamount of which may not be known at the time the guaranty is executed. Acontinuing guaranty is one which is not limited to a single transaction, but whichcontemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked.Anent the second issue, in granting the loan to PBM, TRB required Ching‘ssurety precisely to insure full recovery of the loan in case PBM becomesinsolvent or fails to pay in full. Ching cannot invoke Article 1222 of the CivilCode. Thus, Ching cannot use PBM‘s failure to pay in full as justification for hisown reduced liability to TRB. TRB, as creditor, has the right under the surety toproceed against Ching for the entire amount of PBM‘s loan. This is clear fromArticle 1216 of the Civil Code, which states that: ―the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously.The demand made against one of them shall not be an obstacle to those whichmay subsequently be directed against the others, so long as the debt has not been fully collected.‖
Queensland-Tokyo v. George
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
347
Queensland-Tokyo Commodities, Inc., Romero Y Lau and Charlie Collado, peitioners, versus Thomas George, respondent. (G.R. No. 172727, September 8, 2010, 2nd Division) Carpio, J.: FACTS: Sometime in 1992, Benjamin Shia, a market analyst and trader of Queensland, was introduced to petitioner Jefferson Lim by Marissa Bontia, one of his employees. Marissa‘s father was a former employee of Lim‘s father. Shia suggested that Lim invest in the Foreign Exchange Market, trading U.S. dollar against the Japanese yen, British pound, Deutsche Mark and Swiss Franc. Before investing, Lim requested Shia for proof that the foreign exchange was really lucrative. They conducted mock tradings without money involved. As the mock trading showed profitability, Lim decided to invest with a marginal deposit of US$5,000 in manager‘s check. The marginal deposit represented the advance capital for his future tradings. It was made to apply to any authorized future transactions, and answered for any trading account against which the deposit was made, for any loss of whatever nature, and for all obligations, which the investor would incur with the broker. Petitioner Lim was then allowed to trade with respondent company which was coursed through Shia by virtue of blank order forms all signed by Lim. Respondent furnished Lim with the daily market report and statements of transactions as evidenced by the receiving forms, some of which were received by Lim. Meanwhile, on October 22, 1992, respondent learned that it would take seventeen (17) days to clear the manager‘s check given by petitioner. Shia returned the check to petitioner who informed Shia that petitioner would rather replace the manager‘s check with a traveler‘s check. Shia noticed that the traveler‘s check was not indorsed but Lim told Shia that Queensland could sign the endorsee portion. Because Shia trusted the latter‘s good credit rating, and out of ignorance, he brought the check back to the office unsigned. Inasmuch as that was a busy Friday, the check was kept in the drawer of respondent‘s consultant. Later, the traveler‘s check was deposited with Citibank. On October 27, 1992, Citibank informed respondent that the traveler‘s check could not be cleared unless it was duly signed by Lim, the original purchaser of the traveler‘s check. A Miss Arajo, from the accounting staff of Queensland, returned the check to Lim for his signature, but the latter, aware of his P44,465 loss, demanded for a liquidation of his account and said he would get back what was left of his investment. ISSUE: Whether or not the CA erred in reversing the decision of the RTC which dismissed the respondent‘s complaint. HELD: The essential elements of estoppel are: (1) conduct of a party amounting to false representation or concealment of material facts or at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at least expectation, that this conduct shall be acted upon by, or at least influence, the other party; and (3) knowledge, actual or constructive, of the real facts. ere, it is uncontested that petitioner had in fact signed the Customer‘s Agreement in the morning of October 22, 1992, knowing fully well the nature of the contract he was entering into. The Customer‘s Agreement was duly notarized and as a public document it is evidence of the fact, which gave rise to its execution and of the date of the latter. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
348
Next, petitioner paid his investment deposit to respondent in the form of a manager‘s check in the amount of US$5,000 as evidenced by PCI Bank Manager‘s Check No. 69007, dated October 22, 1992. All these are indicia that petitioner treated the Customer‘s Agreement as a valid and binding contract.
Shrimp Specialist, Inc., v. Fuji Triumph Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
349
Shrimp Specialist, Inc., petitioner, versus Fuji Triumph Agri-Industrial Corp., respondent. (G.R. No. 168256 December 7, 2009, 2nd Division) Carpio, J.: FACTS: Shrimp Specialists and Fuji entered into a Distributorship Agreement, under which Fuji agreed to supply prawn feeds on credit basis to Shrimp Specialists. The prawn feeds would be used in prawn farms under Shrimp Specialists‘ technical supervision and management. In 1987, Shrimp Specialists began purchasing prawn feeds from Fuji and paid for them in the regular course of business. From 3 June 1989 to 24 July 1989, Fuji delivered prawn feeds, and Shrimp Specialists issued 9 postdated checks as payment. Shrimp Specialists alleges that it issued a stop-payment order for the checks because it discovered that earlier deliveries were contaminated with aflatoxin. Shrimp Specialists claims that it verbally informed Fuji about the contamination and Fuji promised to send stocks of better quality. Shrimp Specialists states that it continued to purchase prawn feeds from Fuji, but the stocks were still contaminated with aflatoxin. Fuji denies that the feeds were contaminated. Fuji asserts that Shrimp Specialists requested to put on hold the deposit of the checks due to insufficient funds. Fuji adds that when the checks were presented for payment, the drawee bank dishonored all the checks due to a stop-payment order. In January 1990, Ervin Lim, Fuji‘s Vice-President and owner, and Edward Lim, Shrimp Specialists‘ Finance Officer, met in Ozamiz City to discuss the unpaid deliveries. After the meeting, both agreed that Shrimp Specialists would issue another set of checks to cover the ones issued earlier. This agreement was reduced into writing and signed by both parties on behalf of their corporations. On 26 October 1990, Fuji filed a civil complaint for sum of money against Shrimp Specialists and Eugene Lim. On 15 April 1997, the Regional Trial Court of Quezon City (trial court), Branch 76, rendered a decision finding Shrimp Specialists and Eugene Lim solidarily liable to pay P767,427 representing the deliveries made from June to July 1989 plus interests. Fuji was also awarded P30,000 as reasonable attorney‘s fees and the cost of the suit. Shrimp Specialists and Eugene Lim elevated the case to the CA. On 28 June 2005, the CA rendered a decision modifying the trial court‘s decision. The CA affirmed the trial court‘s decision to hold Shrimp Specialists liable to pay Fuji P767, 427 for the prawn feeds delivered plus interests, P30,000 as attorney‘s fees and cost of suit. However, the CA absolved Eugene Lim from any liability. ISSUE: The trial court held that Eugene Lim is solidarily liable with Shrimp Specialists. HELD: Shrimp Specialists asserts that Fuji has not presented any evidence to show that Eugene Lim acted in bad faith. Fuji also failed to present any evidence to prove that Eugene Lim had maliciously and deliberately caused Shrimp Specialists to default on its obligation without any valid reason. Hence, Eugene Lim cannot be made personally liable for the obligations of Shrimp Specialists. A corporation is vested by law with a personality separate and distinct from the people comprising it. Ownership by a single or small group of Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
350
stockholders of nearly all of the capital stock of the corporation is not by itself a sufficient ground to disregard the separate corporate personality. Thus, obligations incurred by corporate officers, acting as corporate agents, are direct accountabilities of the corporation they represent. In Uy v. Villanueva, the Court explained: The general rule is that obligations incurred by the corporation, acting through its directors, officers, and employees, are its sole liabilities. In this case, none of these exceptional circumstances is present. In its decision, the trial court failed to provide a clear ground why Eugene Lim was held solidarily liable with Shrimp Specialists. The trial court merely stated that Eugene Lim signed on behalf of the Shrimp Specialists as President without explaining the need to disregard the separate corporate personality. The CA correctly ruled that the evidence to hold Eugene Lim solidarily liable should be more than just signing on behalf of the corporation because artificial entities can only act through natural persons. Thus, the CA was correct in dismissing the case against Eugene Lim.
Asset Builders v. Stronghold
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
351
Asset Builders Corp., petitioner, versus Stronghold Insurance Company, Inc., respondent. (G.R. No 187116, Ocotber 10, 2010, 2nd Division) Mendoza, J.: FACTS: On April 28, 2006, Asset Builders Corporation (ABC) entered into an agreement with Lucky Star Drilling & Construction Corporation (Lucky Star) as part of the completion of its project to construct the ACG Commercial Complex on ―NHA Avenue corner Olalia Street, Barangay Dela Paz, Antipolo City.‖ As can be gleaned from the ―Purchase Order,‖ Lucky Star was to supply labor, materials, tools, and equipment including technical supervision to drill one (1) exploratory production well on the project site. The total contract price for the said project was P1, 150,000.00. To guarantee faithful compliance with their agreement, Lucky Star engaged respondent Stronghold which issued two (2) bonds in favor of petitioner. The first, SURETY BOND G.R. No. 141558, dated May 9, 2006, covers the sum of P575, 000.00 or the required downpayment for the drilling work. On May 20, 2006, ABC paid Lucky Star P575, 000.00 (with 2% withholding tax) as advance payment, representing 50% of the contract price. Lucky Star, thereafter, commenced the drilling work. By July 18, 2006, just a few days before the agreed completion date of 60 calendar days, Lucky Star managed to accomplish only ten (10) % of the drilling work. On the same date, petitioner sent a demand letter to Lucky Star for the immediate completion of the drilling workwith a threat to cancel the agreement and forfeit the bonds should it still fail to complete said project within the agreed period. On August 3, 2006, ABC sent a Notice of Rescission of Contract with Demand for Damages to Lucky Star. On August 16, 2006, ABC sent a Notice of Claim for payment to Stronghold to make good its obligation under its bonds. Despite notice, ABC did not receive any reply either from Lucky Star or Stronghold, prompting it to file its Complaint for Rescission with Damages against both before the RTC on November 21, 2006. In its ―Answer (with Compulsory Counterclaim and Cross-Claim),‖ dated January 24, 2007, Stronghold denied any liability arguing that ABC had not shown any proof that it made an advance payment of 50% of the contract price of the project. It further averred that ABC‘s rescission of its contract with Lucky Star virtually revoked the claims against the two bonds and absolved them from further liability. Lucky Star, on the other hand, failed to file a responsive pleading within the prescribed period and, thus, was declared in default by the RTC in its Order dated August 24, 2007. On February 27, 2009, the RTC rendered the assailed decision ordering Lucky Star to pay ABC but absolving Stronghold from liability. Hence, this petition. ISSUE: Whether or not respondent insurance company, as surety, can be held liable under its bonds. HELD: Respondent, along with its principal, Lucky Star, bound itself to the petitioner when it executed in its favor surety and performance bonds. The contents of the said contracts clearly establish that the parties entered into a surety agreement as defined under Article 2047 of the New Civil Code. Thus: Art. 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
352
If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In such case the contract is called a suretyship. As provided in Article 2047, the surety undertakes to be bound solidarily with the principal obligor. That undertaking makes a surety agreement an ancillary contract as it presupposes the existence of a principal contract. Although the contract of a surety is in essence secondary only to a valid principal obligation, the surety becomes liable for the debt or duty of another although it possesses no direct or personal interest over the obligations nor does it receive any benefit therefrom. Let it be stressed that notwithstanding the fact that the surety contract is secondary to the principal obligation, the surety assumes liability as a regular party to the undertaking. Suretyship, in essence, contains two types of relationship – the principal relationship between the obligee (petitioner) and the obligor (Lucky Star), and the accessory surety relationship between the principal (Lucky Star) and the surety (respondent). In this arrangement, the obligee accepts the surety‘s solidary undertaking to pay if the obligor does not pay. Such acceptance, however, does not change in any material way the obligee‘s relationship with the principal obligor. Neither does it make the surety an active party to the principal obligee-obligor relationship. Thus, the acceptance does not give the surety the right to intervene in the principal contract. The surety‘s role arises only upon the obligor‘s default, at which time, it can be directly held liable by the obligee for payment as a solidary obligor. In the case at bench, when Lucky Star failed to finish the drilling work within the agreed time frame despite petitioner‘s demand for completion, it was already in delay. Due to this default, Lucky Star‘s liability attached and, as a necessary consequence, respondent‘s liability under the surety agreement arose. Undeniably, when Lucky Star reneged on its undertaking with the petitioner and further failed to return the P575,000.00 downpayment that was already advanced to it, respondent, as surety, became solidarily bound with Lucky Star for the repayment of the said amount to petitioner. The clause, ―this bond is callable on demand,‖ strongly speaks of respondent‘s primary and direct responsibility to the petitioner. In fine, respondent should be answerable to petitioner on account of Lucky Star‘s non-performance of its obligation as guaranteed by the performance bond.
Eparwa Secutrity v. Liceo de Cagayan
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
353
Eparwa Security and Janitorial Services, Inc., petitioner, versus Liceo Cagayan University, respondent. (508 SCRA 373, November 28, 2006, 3rd Division) Carpio, J.: FACTS: On 1 December 1997, Eparwa and LDCU, through their representatives, entered into a Contract for Security Services. The pertinent portion of the contract provides that: For and in consideration of this security, protective and safety services, [LDCU] agrees to pay [Eparwa] FIVE THOUSAND PESOS ONLY (P5,000.00), Philippine Currency per guard a month payable within fifteen (15) days after [Eparwa] presents its service invoice. [Eparwa] shall furnish [LDCU] a monthly copy of SSS contribution of guards and monthly payroll of each guard assigned at [LDCU‘s] premises on a monthly basis. On 21 December 1998, 11 security guards (―security guards‖) whom Eparwa assigned to LDCU from 1 December 1997 to 30 November 1998 filed a complaint before the National Labor Relations Commission‘s (NLRC) Regional Arbitration Branch No. 10 in Cagayan de Oro City. Docketed as NLRC-RABX Case No. 10-01-00102-99, the complaint was filed against both Eparwa and LDCU for underpayment of salary, legal holiday pay, 13th month pay, rest day, service incentive leave, night shift differential, overtime pay, and payment for attorney‘s fees. LDCU made a cross-claim and prayed that Eparwa should reimburse LDCU for any payment to the security guards. In its decision dated 18 August 1999, the Labor Arbiter found that the security guards are entitled to wage differentials and premium for holiday and rest day work. The Labor Arbiter held Eparwa and LDCU solidarily liable pursuant to Article 109 of the Labor Code. LDCU filed an appeal before the NLRC. LDCU agreed with the Labor Arbiter‘s decision on the security guards‘ entitlement to salary differential but challenged the propriety of the amount of the award. LDCU alleged that security guards not similarly situated were granted uniform monetary awards and that the decision did not include the basis of the computation of the amount of the award. Eparwa also filed an appeal before the NLRC. For its part, Eparwa questioned its liability for the security guards‘ claims and the awarded cross-claim amounts. The NLRC found that the security guards are entitled to wage differentials and premium for holiday and rest day work. Although the NLRC held Eparwa and LDCU solidarily liable for the wage differentials and premium for holiday and rest day work, the NLRC did not require Eparwa to reimburse LDCU for its payments to the security guards. The NLRC also ordered the recomputation of the monetary awards according to the dates actually worked by each security guard. Eparwa and LDCU again filed separate motions for partial reconsideration of the 19 January 2000 NLRC Resolution. LDCU questioned the NLRC‘s deletion of LDCU‘s entitlement to reimbursement by Eparwa. Eparwa, on the other hand, prayed that LDCU be made to reimburse Eparwa for whatever amount it may pay to the security guards. In its Resolution dated 14 March 2000, the NLRC declared that although Eparwa and LDCU are solidarily liable to the security guards for the monetary award, LDCU alone is ultimately liable. LDCU filed a petition for certiorari before the appellate court assailing the NLRC‘s decision. LDCU took issue with the NLRC‘s order that LDCU should reimburse Eparwa. LDCU stated that this Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
354
would free Eparwa from any liability for payment of the security guards‘ money claims. In its Decision promulgated on 20 April 2001, the appellate court granted LDCU‘s petition and reinstated the Labor Arbiter‘s decision. The appellate court also allowed LDCU to claim reimbursement from Eparwa. Eparwa filed a motion for reconsideration of the appellate court‘s decision. Eparwa stressed that jurisprudence is consistent in HELD that the ultimate liability for the payment of the monetary award rests with LDCU alone. The appellate court denied Eparwa‘s motion for reconsideration for lack of merit. Hence, this petition. ISSUE: Is LDCU alone ultimately liable to the security guards for the wage differentials and premium for holiday and rest day pay? HELD: The petition has merit. Eparwa and LDCU‘s Solidary Liability and LDCU‘s Ultimate Liability LDCU‘s ultimate liability comes into play because of the expiration of the Contract for Security Services. There is no privity of contract between the security guards and LDCU, but LDCU‘s liability to the security guards remains because of Articles 106, 107 and 109 of the Labor Code. Eparwa is already precluded from asking LDCU for an adjustment in the contract price because of the expiration of the contract, but Eparwa‘s liability to the security guards remains because of their employer-employee relationship. In lieu of an adjustment in the contract price, Eparwa may claim reimbursement from LDCU for any payment it maymake to the security guards. However, LDCU cannot claim anyreimbursement from Eparwa for any payment it may make to the securityguards. Hence, the petition is granted.
Carlos Dimayuga v.PCIB Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
355
Carlos Dimayuga, petitioner, versus Philippine Commercial & Industrial Bank and Court of Appeals, respondents. (G.R. No. 42542, August 5, 1999, 3rd Division) Bidin, J.: FACTS: Petitioner is the defendant-appellant in a case for collection of sum of money against whom the decision was rendered by the trial court on May 28,1974. Plaintiff, who is now the respondent in the instant petition, is a bankinginstitution and is the creditor of petitioner.On February 6, 1962, petitioner borrowed from the plaintiff the sum of P10,000.00 as evidenced by a promissory note executed and signed by Pedro Tanjuatco and Carlos Dimayuga. The indebtedness was to be paid on May 7,1962 with interest at the rate of 10% per annum in case of non-payment atmaturity as evidenced by and in accordance with the terms and conditions of thepromissory note executed jointly and severally by defendants. Carlos Dimayugabound himself to pay jointly and severally with Pedro Tanjuatco interest at therate of 10% per annum on the said amount of P10,000.00 until fully paid.Moreover, both undertook to "jointly and severally authorize the respondent Philippine Commercial and Industrial Bank, at its option to apply to the paymentof this note any and all funds, securities or other real or personal property of value which hands (sic) on deposit or otherwise belonging to anyone or all of us."Upon the default of the promissors to pay, bank filed a complaint for thecollection of a sum of money. Defendant Carlos Dimayuga, now petitioner, however, had remitted to the respondent the P4,000.00 by way of partialpayments made from August 1, 1969 to May 7, 1970 as evidenced bycorresponding receipts thereto. These payments were nevertheless applied topast interests, charges and partly on the principal. The trial court held the defendants jointly and severally liable to pay theplaintiff the sum of P9,139.60 with interest at 10% per annum until fully paidplus P913.96 as attorneys' fees and costs against defendants. Petitioner thenfiled a motion alleging that since Pedro Tanjuatco died on December 23, 1973,the money claim of the respondents should be dismissed and prosecuted againstthe estate of the late Pedro Tanjuatco as provided in Sec. 5, Rule 86, New Rulesof Court. The trial court denied the motion for lack of merit. On appeal, theCourt of Appeals dismissed the appeal for failure of the Record on Appeal toshow on its face that the appeal was timely perfected. ISSUE: Whether or not the money claim of PCIB should be dismissed andprosecuted against the estate of the late Tanjuatco. HELD: From the evidence presented, there can be no dispute that CarlosDimayuga bound himself jointly and severally with Pedro C. Tanjuatco, nowdeceased, to pay the obligation with PCIB in the amount of P10,000.00 plus 10%interest per annum. In addition, as above stated, in case of nonpayment, theyundertook among others to jointly and severally authorize respondent bank, atits option to apply to the payment of this note, any and all funds, securities, realor personal properties, etc. belonging to anyone or all of them. Otherwisestated, the promissory note in question provides in unmistakable language thatthe obligation of petitioner Dimayuga is joint and several with Pedro C. Tanjuatco.It is well settled under the law and jurisprudence that when the obligationis solidary, the creditor may bring his action in toto against the debtors obligatedin solidum. As expressly allowed by Article 1216 of the Civil Code, the creditormay proceed against any one of the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
356
solidary debtors or some or all of themsimultaneously. "Hence, there is nothing improper in the creditor's filing of anaction against the surviving solidary debtors alone, instead of instituting aproceeding for the settlement of the estate of the deceased debtor wherein his claim could be filed." The notice is undoubtedly left to the solidary creditor todetermine against whom he will enforce collection.Court of Appeals decision reversed and set aside. Trial court decision affirmed.
Cerna v. Court of Appeals Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
357
Paula de la Cerna, et. Al., petitioners, versus Mnaul Rebaca Potot, et. Al., and The Honorable Court of the Philippines, respondents. (220 SCRA 517, March 30, 1993, En Banc) Reyes, J.B.L., J.: FACTS: Celerino Delgado and Conrad Leviste entered into a loan agreement on orabout October 16, 1972, which was evidenced by a promissory note. On thesame date, Delgado executed a chattel mortgage over a jeep owned by him.And acting as the attorney-in-fact of herein petitioner, Manolo P. Cerna (petitioner), he also mortgaged a ―Taunus‖ car owned by the latter. The period lapsed without Delgado paying the loan. This prompted Leviste to file a collection suit against Delgado and petitioner as solidarydebtors. Petitioner filed a motion to dismiss. The grounds cited in the Motionwere lack of cause of action and the death of Delgado. Anent the latter, petitioner claimed that the claim should be filed in the proceedings for thesettlement of the estate of Delgado as the action did not survive Delgado‘sdeath. Moreover, he also stated that since Leviste already opted to collect onthe note, he could no longer foreclose the mortgage. The trial court denied themotion to dismiss. The petitioner then filed a special civil action for certiorari, mandamus, and prohibition with preliminary injunction on the ground that the respondent judge committed grave abuse of discretion. However, the Court of Appealsdenied the petition because herein petitioner failed to prove the death of Delgado and the consequent settlement of the latter‘s estate.On February 18, 1977, petitioner filed his second motion to dismiss. Thetrial court again denied the said motion. Petitioner filed a motion to reconsiderthe said order but this was denied. Then, petitioner filed another petition forcertiorari and prohibition with the Court of Appeals. The respondent court dismissed the petition. The respondent court hold petitioner and Delgado were solidary debtors. ISSUE: Whether or not petitioner is a co-debtor of Delgado; hence, liable to paythe loan contracted by Delgado. HELD: NO, petitioner is not a co-debtor of Delgado. Nowhere did it appear in thepromissory note that petitioner was a co-debtor. Article 1311 of the Civil Code isclear that ―contracts take effect only between the parties…‖ Moreover, Article1207 of the Civil Code states that ―there is solidary liability only when theobligation expressly so states, or when the law or nature of the obligation sorequires.‖ It was clear that petitioner had no part in the contract. It was Delgado alone who signed the said agreement. Thus, nowhere could it be seenfrom the agreement that petitioner was solidarily bound with Delgado for thepayment of the loan. There is also no legal provision nor jurisprudence in our jurisdiction whichmakes a third person who secures the fulfillment of another‘s obligation by mortgaging his own property solidarily bound with the principal obligor. Achattel mortgage may be an ―accessory contract‖ to a contract of loan, but thatfact alone does not make a third-party mortgagor solidarily bound with theprincipal debtor in the fulfilling of the principal obligation that is, to pay the loan. The signatory of the principal contract remains to be primarily bound. It is onlyupon the default of the latter that the creditor may have recourse on the mortgagors by foreclosing the mortgaged properties in lieu of an action forrecovery of the amount of the loan. And the liability of the third-partymortgagors extends only to the property mortgaged. Should there be any deficiency, the creditor has recourse on the principal debtor. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
358
Nazareno v. Court of Appeals Natividad P. Nazareno, Maximino P. Nazareno, Jr., petitioners, versus Court of appeals, Estate of Maximino A. Nazareno, Sr., Romeo P. Nazareno and Eliza Nazareno, respondents. (G.R. No. 138842 or 343 SCRA 637, October 18, 2000, 2nd Division) Mendoza, J.: FACTS: Maximino Nazareno, Sr. and Aurea Poblete were husband and wife. Aurea died on April 15, 1970, while Maximino, Sr. died on December 18, 1980. They had five children, namely, Natividad, Romeo, Jose, Pacifico, and Maximino, Jr. Natividad and Maximino, Jr. are the petitioners in this case, while the estate of Maximino, Sr., Romeo, and his wife Eliza Nazareno are the respondents. Duringtheir marriage, Maximino Nazareno, Sr. and Aurea Poblete acquired properties in Quezon City and in the Province of Cavite. Upon the reorganization of the courtsin 1983, the case was transferred to the RTC of Naic, Cavite. Romeo was appointed administrator of his father‘s estate. In the course of the intestateproceedings, Romeo discovered that his parents had executed several deeds of sale conveying a number of real properties in favor of his sister, Natividad. Oneof the deeds involved six lots in Quezon City which were allegedly sold byMaximino, Sr., with the consent of Aurea, to Natividad on January 29, 1970 forthe total amount of P47,800.00.Among the lots covered by the above Deed of Sale is Lot 3-B which isregistered under TCT No. 140946. This lot had been occupied by Romeo, hiswife Eliza, and by Maximino, Jr. since 1969. Unknown to Romeo, Natividad soldLot 3-B on July 31, 1982 to Maximino, Jr., for which reason the latter was issued TCT No. 293701 by the Register of Deeds of Quezon City. When Romeo found out about the sale to Maximino, Jr., he and his wife Eliza locked Maximino, Jr. out of the house. On August 4, 1983, Maximino, Jr. brought an action for recovery of possession and damages with prayer for writs of preliminary injunction andmandatory injunction with the RTC of Quezon City. On December 12, 1986, thetrial court ruled in favor of Maximino, Jr. In CA-G.R. CV No. 12932, the CA affirmed the decision of the trial court. On June 15, 1988, Romeo in turn filed on behalf of the estate of Maximino, Sr., the present case for annulment of sale withdamages against Natividad and Maximino, Jr. The case was filed in the RTC of Quezon City. Romeo sought the declaration of nullity of the sale made on January 29, 1970 to Natividad and that made on July 31, 1982 to Maximino, Jr. onthe ground that both sales were void for lack of consideration. On March 1,1990, Natividad and Maximino, Jr. filed a third-party complaint against thespouses Romeo and Eliza. They alleged that Lot 3, which was included in theDeed of Absolute Sale of January 29, 1970 to Natividad, had been surreptitiously appropriated by Romeo by securing for himself a new title in his name. They alleged that Lot 3 is being leased by the spouses Romeo and Eliza to third persons.In the trial court, it rendered a decision declaring the nullity of the Deed of Sale dated January 29, 1970 except as to lots 3, 3-b, 13 and 14 which hadpassed on to third persons. On motion for reconsideration, the trial court modified its decision. On appeal to the Court of Appelas, the decision of the trialcourt was modified in the sense that the titles to Lot 3 (in the name of Romeo Nazareno) and Lot 3-B ( in the name of Maximino Nazareno, Jr.), as well as toLots 10 and 11 were cancelled and ordered restored to the estate of Maximino,Sr.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
359
ISSUE: Whether or not the the Deed of Absolute Sale on January 29, 1970 is an indivisible contract founded on an indivisible obligation HELD: An obligation is indivisible when it cannot be validly performed in parts, whatever may be the nature of the thing which is the object thereof. Theindivisibility refers to the prestation and not to the object thereof. In the presentcase, the Deed of Sale of January 29, 1970 supposedly conveyed the six lots toNatividad. The obligation is clearly indivisible because the performance of thecontract cannot be done in parts; otherwise the value of what is transferred isdiminished. Petitioners are therefore mistaken in basing the indivisibility of acontract on the number of obligors. The decision of the Court of Appeals is AFFIRMED.
Alonzo v. San Juan Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
360
Aurelio P. Alonzo and Teresita A. Sison, petitiners, versus Jaime and Perlita San Juan, respondents. (G.R. No. 137549 or451 SCRA 45, February 11, 2005, 2nd Division) Chico-Nazario, J.: FACTS: Petitioners Alonzo and Sison alleged that they are the registered ownersof a parcel of land located at Lot 3, Block 11, M. Agoncillo St., Novaliches, Quezon City, evidenced by TCT No. 152153. At around June 1996, petitionersdiscovered that a portion on the left side of the parcel of land was occupied bythe respondents San Juan, without their knowledge or consent. A demand letterwas sent to the respondents requiring them to vacate the said premises, butthey refused to comply. Petitioners then filed a complaint against the respondents. During the pendency of the case, the parties agreed to enter intoa Compromise Agreement which the trial court approved in a judgment bycompromise dated May 7, 1997. In the Compromise Agreement, it was expressly stipulated that should any two of the installments of the purchase price be not paid by the respondents, the said agreement shall be considered null and void. Alleging that the respondents failed to abide by the provisions of the Compromise Agreement by their failure to pay the amounts due thereon, petitioners then filed an Amended Motion for Execution. Petitioners alleged thatthe respondents failed to pay the installments for July 31, 1997 and August 31,1997 on their due dates, thus the Compromise Agreement submitted by theparties became null and void. With this, the trial court found no reason to directthe issuance of the writ of execution and denied the petitioners‘ Amended Motion for Execution. Petitioners filed their motion for reconsideration to which the respondents opposed. The trial court likewise denied the petitioners‘ motion for reconsideration. ISSUE: Whether or not the petitioners have a right to enforce the provision on Compromise Agreement by asking for the issuance of a writ of execution because of the failure of the respondents to pay. HELD: The Supreme Court held that the items 11 and 12 of the Compromise Agreement provided, in clear terms, that in case of failure to pay on the part of the respondents, they shall vacate and surrender possession of the land that they are occupying and the petitioners shall be entitled to obtain immediately from the trial court the corresponding writ of execution for the ejectment of the respondents. This provision must be upheld, because the Agreement supplanted the complaint itself. When the parties entered into a Compromise Agreement, the original action for recovery of possession was set aside and the action waschanged to a monetary obligation. Once approved judicially, the Compromise Agreement cannot and must not be disturbed except for vices of consent orforgery. For failure of the respondents to abide by the judicial compromise, petitioners are vested with the absolute right under the law and the agreementto enforce it by asking for the issuance of the writ of execution. Doctrinally, a Compromise Agreement is immediately final and executory. Petitioners‘ courseof action, asking for the issuance of a writ of execution was in accordance withthe very stipulation in the agreement that the lower court could not change. Hence, the petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
361
David v. Court of Appeals Jesus T. David, petitioner, versus The court of Appeals, Hon. Edgardo P. Cruz, Melchor P. Pena and Valentin Afable, Jr., respondents. (G.R. No. 115821, October 13, 1999, 2nd Division) Quisumbing, J.: FACTS: The RTC of Manila, Branch 27, with Judge Ricardo Diaz, then presiding, issued a writ of attachment over real properties covered by TCT Nos. 80718 and10281 of private respondents. In his decision Judge Diaz ordered privaterespondent Afable to pay petitioner until fully paid. Respondent Afable appealed to the Court of Appeals and then to the Supreme Court. In both instances, thedecision of the lower court was affirmed. Entries of judgment were made andthe record of the case was remanded to Branch 27 presided at that time byrespondent Judge Cruz. Petitioners elevated said orders to the Court of Appealsin a petition for certiorari, prohibition and mandamus. However, respondent appellate court dismissed the petiton. ISSUE: Whether or not respondent appellate court erred in affirming therespondent Judge‘s order for the payment of simple interest only rather than the compounded interest. HELD: Petitioner insists that in computing the interest due should be computedat 6% on the principal sum pursuant to Article 2209 and then interest on thelegal interest should also be computed in accordance with the language of article 2212 of the Civil Code. In view of this means Compound interest.In cases where no interest had been stipulated by the parties, no accruedconventional interest could further earn interest upon judicial demand. The instant petition is denied. The decision of the Court of Appeals is affirmed.
RP v. Thi Thu Thuy
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
362
Republic of the Philippines, represented by the Chief of the Philippine National Police, petitioner, versus Thi Thu Thuy T. De Guzman, respondent. (G.R. No. 175021, June 15, 2011, 1st Division) Leonardo-De Castro, J.: FACTS: Respondent is the proprietress of Montaguz General Merchandise (MGM), a contractor accredited by the PNP for the supply of office and construction materials and equipment, and for the delivery of various services such as printing and rental, repair of various equipment, and renovation of buildings, facilities, vehicles, tires, and spare parts. On December 8, 1995, the PNP Engineering Services (PNPES), released a Requisition and Issue Voucher for the acquisition of various building materials amounting to Two Million Two Hundred Eighty-Eight Thousand Five Hundred Sixty-Two Pesos and Sixty Centavos (P2,288,562.60) for the construction of a four-storey condominium building with roof deck at Camp Crame, Quezon City. On November 5, 1997, the respondent, through counsel, sent a letter dated October 20, 1997[18] to the PNP, demanding the payment of P2,288,562.60 for the construction materials MGM procured for the PNP under their December 1995 Contract. On November 17, 1997, the PNP, through its Officer-in-Charge, replied to respondent‘s counsel, informing her of the payment made to MGM via Land Bank of the Philippines (LBP) Check No. 0000530631, as evidenced by Receipt No. 001, issued by the respondent to the PNP on April 23, 1996. On November 26, 1997, respondent, through counsel, responded by reiterating her demand and denying having ever received the LBP check, personally or through an authorized person. She also claimed that Receipt No. 001, a copy of which was attached to the PNP‘s November 17, 1997 letter, could not support the PNP‘s claim of payment as the aforesaid receipt belonged to Montaguz Builders, her other company, which was also doing business with the PNP, and not to MGM, with which the contract was made. On May 5, 1999, respondent filed a Complaint for Sum of Money against the petitioner, represented by the Chief of the PNP, before the RTC. The petitioner filed a Motion to Dismiss on July 5, 1999, on the ground that the claim or demand set forth in respondent‘s complaint had already been paid or extinguished, as evidenced by LBP Check No. 0000530631 dated April 18, 1996, issued by the PNP to MGM, and Receipt No. 001, which the respondent correspondingly issued to the PNP. The petitioner also argued that aside from the fact that the respondent, in her October 20, 1997 letter, demanded the incorrect amount since it included the withholding tax paid to the BIR, her delay in making such demand ―[did] not speak well of the worthiness of the cause she espouse.‖ Respondent opposed petitioner‘s motion to dismiss in her July 12, 1999 Opposition and September 10, 1999 Supplemental Opposition to Motion to Dismiss. After conducting hearings on the Motion to Dismiss, the RTC issued an Order on May 4, 2001, denying the petitioner‘s motion for lack of merit. The petitioner thereafter filed its Answer, wherein it restated the same allegations in its Motion to Dismiss. With the issue then confined to whether respondent was paid or not, the RTC proceeded with the trial.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
363
On April 29, 2003, petitioner presented Ms. Jesusa Magtira, who was then the ―check releaser‖ of the PNP, to prove that the respondent received the LBP check due to MGM, and that respondent herself gave the check to Cruz. On September 8, 2003, the RTC rendered its Decision in favor of respondent and against petitioner. The RTC declared that while Cruz‘s testimony seemed to offer a plausible explanation on how and why the LBP check ended up with him, the petitioner, already admitted in its Answer, and Pre-trial Brief, that MGM, did in fact deliver the construction materials worth P2,288,562.60 to the PNP. The RTC also pointed out the fact that the petitioner made the same admissions in open court to expedite the trial, leaving only one issue to be resolved: whether the respondent had been paid or not. Since this was the only issue, the RTC said that it had no choice but to go back to the documents and the ―documentary evidence clearly indicates that the check subject of this case was never received by [respondent].‖ In addition, the PNP‘s own Warrant Register showed that it was Edgardo Cruz who received the LBP check, and Receipt No. 001 submitted by the petitioner to support its claim was not issued by MGM, but by Montaguz Builders, a different entity. Finally, the RTC held that Cruz‘s testimony, which appeared to be an afterthought to cover up the PNP‘s blunder, were irreconcilable with the petitioner‘s earlier declarations and admissions, hence, not credit-worthy. The petitioner appealed this decision to the Court of Appeals, which affirmed with modification the RTC‘s HELD on September 27, 2006. The Court of Appeals, in deciding against the petitioner, held that the petitioner‘s admissions and declarations, made in various stages of the proceedings are express admissions, which cannot be overcome by allegations of respondent‘s implied admissions. The petitioner is now before this Court, praying for the reversal of the lower courts‘ decisions on the ground that ―the Court of Appeals committed a serious error in law by affirming the decision of the trial court.‖ ISSUE: Whether or not the contract executed with the respondent is actually a fictitious contract to conceal the fact that only one contractor will be supplying all the materials and labor for the PNP condominium project. HELD: Both the RTC and the Court of Appeals upheld the validity of the contract between the petitioner and the respondent on the strength of the documentary evidence presented and offered in Court and on petitioner‘s own stipulations and admissions during various stages of the proceedings. It is worthy to note that while this petition was filed under Rule 45 of the Rules of Court, the assertions and arguments advanced herein are those that will necessarily require this Court to re-evaluate the evidence on record. This Court has, on many occasions, distinguished between a question of law and a question of fact. We held that when there is doubt as to what the law is on a certain state of facts, then it is a question of law; but when the doubt arises as to the truth or falsity of the alleged facts, then it is a question of fact.[58] ―Simply put, when there is no dispute as to fact, the question of whether or not the conclusion drawn therefrom is correct, is a question of law.‖ The petitioner admitted to the existence and validity of the Contract of Agreement executed between the PNP and MGM, as represented by the respondent, on December 11, 1995. It likewise admitted that respondent delivered the construction materials subject of the Contract, not once, but several times during the course of the proceedings. The only matter petitioner Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
364
assailed was respondent‘s allegation that she had not yet been paid. If Cruz‘s testimony were true, the petitioner should have put respondent in her place the moment she sent a letter to the PNP, demanding payment for the construction materials she had allegedly delivered. Instead, the petitioner replied that it had already paid respondent as evidenced by the LBP check and the receipt she supposedly issued. This line of defense continued on, with the petitioner assailing only the respondent‘s claim of nonpayment, and not the rest of respondent‘s claims, in its motion to dismiss, its answer, its pre-trial brief, and even in open court during the respondent‘s testimony. Petitioner‘s admissions were proven to have been made in various stages of the proceedings, and since the petitioner has not shown us that they were made through palpable mistake, they are conclusive as to the petitioner. The RTC and the Court of Appeals correctly ruled that the petitioner‘s obligation has not been extinguished. The petitioner‘s obligation consists of payment of a sum of money. In order for petitioner‘s payment to be effective in extinguishing its obligation, it must be made to the proper person. Payment made by the debtor to the person of the creditor or to one authorized by him or by the law to receive it extinguishes the obligation. When payment is made to the wrong party, however, the obligation is not extinguished as to the creditor who is without fault or negligence even if the debtor acted in utmost good faith and by mistake as to the person of the creditor or through error induced by fraud of a third person. In general, a payment in order to be effective to discharge an obligation, must be made to the proper person. Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to receive the particular payment. Payment made to one having apparent authority to receive the money will, as a rule, be treated as though actual authority had been given for its receipt. Likewise, if payment is made to one who by law is authorized to act for the creditor, it will work a discharge. The receipt of money due on a judgment by an officer authorized by law to accept it will, therefore, satisfy the debt.
Marques v. Far East Bank
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
365
Arturo L. Marquez, petitioner, versus Far East Bank, respondent. (G.R. No 147964, January 20, 2004, 1st Division) Pannganiban, J.: FACTS: On 13 March 1989, respondent Arturo Marquez entered into a Contract to Sell with Transamerican Sales and Exposition (‗TSE‘), through the latter‘s Owner/General Manager Engr. Jesus Garcia, involving a 52.5 sq. m. lot in Diliman, Quezon City with a three-storey townhouse unit denominated as Unit No. 10 to be constructed thereon for a total consideration of P800,000.00. The parcel of land in question is a portion of that property covered by TCT No. 156254 (now TCT No. 383697). On 22 May 1989, TSE obtained a loan from petitioner FEBTC in the amount of P7,650,000.00 and mortgaged the property covered by TCT No. 156254. For failure of TSE to pay its obligation, petitioner FEBTC extra judicially foreclosed the real estate mortgage and became the highest bidder (P15.7 million) in the auction sale conducted for the purpose. Respondent had already paid a total of P600,000.00 when he stopped payment because the construction of his townhouse unit slackened. He discovered later on that this was due to the foreclosure. Consequently, [respondent] instituted a case with the Office of Appeals, Adjudication and Legal Affairs (‗OAALA‘) of the Housing and Land Use Regulatory Board (‗HLURB‘) on 29 January 1991 entitled ‗Arturo Marquez vs. Transamerican Sales, et al‘ docketed as HLRB Case No. REM-012991-4712 to compel TSE to complete the construction of the townhouse and to prevent the enforceability of the extra-judicial foreclosure made by petitioner FEBTC and to have the mortgage between TSE and petitioner FEBTC declared invalid, said mortgage having been entered into by the parties in violation of section 18 of P.D. 957. The OAALA ruled in favor of the respondent via a Decision dated 11 November 1991, the case was decided in favor of the respondent and was affirmed by the CA. Hence, this Petition. ISSUE: Whether or not the mortgage contract void insofar as third persons are concerned. HELD: No mortgage on any unit or lot shall be made by the owner or developer without prior written approval of the Authority. Such approval shall not be granted unless it is shown that the proceeds of the mortgage loan shall be used for the development of the condominium or subdivision project and effective measures have been provided to ensure such utilization. The loan value of each lot or unit covered by the mortgage shall be determined and the buyer thereof, if any, shall be notified before the release of the loan. The buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtedness secured by the particular lot or unit being paid for, with a view to enabling said buyer to obtain title over the lot or unit promptly after full payment thereof.‖ Petitioner cannot claim to be a mortgagee in good faith. Indeed it was negligent, as found by the Office of the President and by the CA. Petitioner should not have relied only on the representation of the mortgagor that the latter had secured all requisite permits and licenses from the government agencies concerned. The former should have required the submission of certified true copies of those documents and verified their authenticity through its own independent effort. Having been negligent in finding out what respondent‘s rights were over the lot, petitioner must be deemed to possess constructive knowledge of those rights. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
366
Prisma Construction v. Menchavez Prisma Construction & Development Corp. and Rogelio S. Pantaleon, petitioners, versus Arthur F. Menchavez, respondent. (G.R. No. 160545, March 9, 2010, 2nd Division) Brion, J.: FACTS: On December 8, 1993, Pantaleon, the President and Chairman of the Board of PRISMA, obtained a P1,000,000.00 loan from the respondent, with a monthly interest of P40,000.00 payable for six months, or a total obligation of P1,240,000.00 to be paid within six (6) months, under a stipulated schedule of payments. As of January 4, 1997, the petitioners had already paid a total of P1,108,772.00. However, the respondent found that the petitioners still had an outstanding balance of P1,364,151.00 as of January 4, 1997, to which it applied a 4% monthly interest. Thus, on August 28, 1997, the respondent filed a complaint for sum of money with the RTC to enforce the unpaid balance, plus 4% monthly interest, P30,000.00 in attorney‘s fees, P1,000.00 per court appearance and costs of suit. In their Answer dated October 6, 1998, the petitioners admitted the loan of P1,240,000.00, but denied the stipulation on the 4% monthly interest, arguing that the interest was not provided in the promissory note. Pantaleon also denied that he made himself personally liable and that he made representations that the loan would be repaid within six (6) months. The RTC rendered a Decision on October 27, 2000 finding that the respondent issued a check for P1,000,000.00 in favor of the petitioners for a loan that would earn an interest of 4% or P40,000.00 per month, or a total of P240,000.00 for a 6-month period. It noted that the petitioners made several payments amounting to P1,228,772.00, but they were still indebted to the respondent for P3,526,117.00 as of February 11, 1999 after considering the 4% monthly interest. Thus, the RTC ordered the petitioners to jointly and severally pay the respondent the amount of P3,526,117.00 plus 4% per month interest from February 11, 1999 until fully paid. The petitioners elevated the case to the CA insisting that there was no express stipulation on the 4% monthly interest. CA modified the RTC Decision by imposing a 12% per annum interest, computed from the filing of the complaint until finality of judgment, and thereafter, 12% from finality until fully paid. After the CA's denial of their motion for reconsideration, the petitioners filed the present petition for review on certiorari. ISSUE: Whether the parties agreed to the 4% monthly interest on the loan. If so, does the rate of interest apply to the 6-month payment period only or until full payment of the loan. HELD: The petition is meritorious. Interest due should be stipulated in writing; otherwise, 12% per annum. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. When the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulations governs. In such cases, courts have no authority to alter the contract by construction or to make a new contract for the parties; a court's duty is confined to the interpretation of the contract the parties made for themselves without regard to its wisdom or folly, as the court cannot supply material stipulations or read into the contract words the contract does not contain. It is Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
367
only when the contract is vague and ambiguous that courts are permitted to resort to the interpretation of its terms to determine the parties‘ intent. In the present case, the respondent issued a check for P1,000,000.00. In turn, Pantaleon, in his personal capacity and as authorized by the Board, executed the promissory note quoted above. Thus, the P1,000,000.00 loan shall be payable within six (6) months, or from January 8, 1994 up to June 8, 1994. During this period, the loan shall earn an interest of P40,000.00 per month, for a total obligation of P1,240,000.00 for the six-month period. We note that this agreed sum can be computed at 4% interest per month, but no such rate of interest was stipulated in the promissory note; rather a fixed sum equivalent to this rate was agreed upon. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.‖
Macalalag v. People Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
368
Theresa Macalalag, petitioner, versus People of the Philippines, respondent. (G.R. No. 164358, December 20, 2006, First Division) Chico-Nazario, J.: FACTS: On two separate occasions, particularly on 30 July 1995 and 16October 1995, petitioner Theresa Macalalag obtained loans from GraceEstrella (Estrella), each in the amount of P100,000.00, each bearing aninterest of 10% per month. Macalalag consistently paid the interests.Finding the interest rates so burdensome, Macalalag requested Estrellafor a reduction of the same to which the latter agreed. On 16 April 1996and 1 May 1996, Macalalag executed Acknowledgment/Affirmation Receipts promising to pay Estrella the face value of the loans in the totalamount of P200,000.00 within two months from the date of its executionplus 6% interest per month for each loan. Under the twoAcknowledgment/Affirmation Receipts, she further obligated herself topay for the two (2) loans the total sum of P100,000.00 as liquidateddamages and attorney's fees in the total sum of P40,000.00 as stipulatedby the parties the moment she breaches the terms and conditionsthereof.As security for the payment of the aforesaid loans, Macalalag issuedtwo Philippine National Bank (PNB) Checks on 30 June 1996, each in theamount of P100,000.00, in favor of Estrella. However, the said checkswere dishonored for the reason that the account against which the samewas drawn was already closed. Estrella sent a notice of dishonor anddemand to make good the said checks to Macalalag, but the latter failedto do so. Hence, Estrella filed two criminal complaints for Violation of Batas Pambansa Blg. 22 before the Municipal Trial Court in Cities (MTCC)of Bacolod City.The MTCC found the accused Theresa Macalalag guiltybeyond reasonable doubt of the crime charged and is likewise ordered topay as civil indemnity the total amount of P200,000.00 with interest at thelegal rate from the time of the filing of the informations until the amountis fully paid; less whatever amount was thus far paid and validly deductedfrom the principal sum originally claimed. On appealed, the Court of Appeals, affirmed the RTC and the MTCC decisions with modification tothe effect that accused was convicted only of one (1) count of Violation of Batas Pambansa Blg. 22. ISSUE: Whether petitioner`s payments over and above the value of thesaid checks would free her from criminal liability. HELD: The Court argued that, ―Even if we agree with petitioner Macalalagthat the interests on her loans should not be imputed to the face value of the checks she issued, petitioner Macalalag is still liable for Violation of Batas Pambansa Blg. 22. Petitioner Macalalag herself declares that beforethe institution of the two cases against her, she has made a total paymentof P156,000.00; Applying this amount to the first check (No. C-889835), what will be left is P56,000.00, an amount insufficient to cover herobligation with respect to the second check. As stated above, whenEstrella presented the checks for payment; the same were dishonored onthe ground that they were drawn against a closed account. Despite noticeof dishonor, petitioner Macalalag failed to pay the full face value of thesecond check issued.Only a full payment of the face value of the second check at the time of its presentment or during the fiveday grace period15 could haveexonerated her from criminal liability. A contrary interpretation woulddefeat the purpose of Batas Pambansa Blg. 22, that of safeguarding theinterest of the banking system and the legitimate public Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
369
checking accountuser,16 as the drawer could very well have himself exonerated by themere expediency of paying a minimal fraction of the face value of thecheck. Hence, the Petition is denied.
Tan v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
370
Antonio Tan, petitioner, versus Court of Appelas and the Cultural Center of the Philippines, respondents. (367 SCRA 571 or GR NO. 116285, October 19, 2001, 2nd Division) De Leon, Jr., J.: FACTS: On May 14, 1978, petitioner Antonio Tan obtained two loans in the totalamount of four million pesos from respondent Cultural Center of the Philippines (CCP), evidenced by 2 promissory notes with maturity dates on May 14, 1979 and July 6, 1979, respectively. Petitioner defaulted but later he had the loansrestructured by respondent CCP. Petitioner accordingly executed a promissorynote on August 31, 1979 in the amount of P3,411,421.32 payable in five (5)installments. Petitioner however, failed to pay any of the supposed installmentsand again offered another mode of paying restructured loan which respondentCCP refused to consent.On May 30, 1984, respondent wrote petitioner demanding the fullpayment, within ten (10) days, from receipt of the letter, of the latter‘srestructured loan which as of April 30, 1984 amounted to P6, 088,735. OnAugust 29, 1984, respondent CCP filed with the RTC of Manila a complaint for acollection of a sum of money. Eventually, petitioner was ordered to pay saidamount, with 25% thereof as attorney‘s fees and P500, 000.00 as exemplarydamages. On appeal, the Court of Appeals, reduced the attorney‘s fees to 5%of the principal amount to be collected from petitioner and deleted theexemplary damages.Still unsatisfied with the decision, petitioner seeks for the deletion of theattorney‘s fees and the reduction of the penalties. ISSUE: Whether or not interests and penalties may be both awarded. HELD: YES. Article 1226 of the New Civil Code provides that in obligations with apenal clause, the penalty shall substitute the indemnity for damages and thepayment of interests in case of non-compliance, if there is no stipulation to thecontrary. Nevertheless, damages shall be paid if the obligor refuses to pay thepenalty or is guilty of fraud in the fulfillment of the obligation. The penalty maybe enforced only when it is demandable in accordance with the provisions.In the case at bar, the promissory note expressly provides for theimposition of both interest and penalties in case of default on the part of thepetitioner in the payment of the subject restructured loan. Since the said stipulation has the force of law between the parties and does not appear to be inequitable or unjust, it must be respected.
Eastern Shipping v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
371
Eastern Shipping Lines Inc., petitioner, versus Hon. Court of Appeals and Mercantile Insurance Company, Inc., respondents. (G.R. No. 97412, July 12, 1994, En Banc) Vitug, J.: FACTS: On December 4, 1981, two fiber drums of riboflavin were shippedfrom Yokohama, Japan for delivery vessel `SS EASTERN COMET' owned bydefendant Eastern Shipping Lines under Bill of Lading No. YMA-8 (Theshipment was insured under plaintiff's Marine Insurance Policy No.81/01177 for P36,382,466.38.Upon arrival of the shipment in Manila on December 12, 1981, itwas discharged unto the custody of defendant Metro Port Services, Inc. The latter excepted to one drum, said to be in bad order, which damagewas unknown to plaintiff. On January 7, 1982 defendant Allied Brokerage Corporation received the shipment from defendant Metro Port Service, Inc., one drum opened and without. On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries of the shipment to theconsignees' warehouse. The latter excepted to one drum which containedspillages, while the rest of the contents was adulterated/fake Plaintiff contended that due to the losses/damage sustained by said drum, theconsignee suffered losses totaling P19,032.95, due to the fault andnegligence of defendants. Claims were presented against defendants whofailed and refused to pay the same "As a consequence of the lossessustained, plaintiff was compelled to pay the consignee P19,032.95 underthe aforestated marine insurance policy, so that it became subrogated toall the rights of action of said consignee against defendants. ISSUE: a.)Whether the payment of legal interest on an award for loss ordamage is to be computed from the time the complaint is filed or form thedate the decision appealed from is rendered; and b)Whether theapplicable rate of interest is twelve percent or six percent. HELD: When an obligation, regardless of its source, i.e., law, contracts, quasicontracts, delicts or quasi-delicts is breached, the contravenor canbe held liable for damages. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: When the obligation is breached, and it consists in the payment of asum of money, i.e., a loan or forbearance of money, the interest dueshould be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judiciallydemanded. In the absence of stipulation, the rate of interest shall be 12%per annum to be computed from default, i.e., from judicial or extrajudicialdemand under and subject to the provisions of Article 1169 23 of the CivilCode.2. When a obligation, not constituting a loan or forbearance of money, isbreached, an interest on the amount of damages awarded may beimposed at the discretion of the court at the rate of 6% per annum. Nointerest, however, shall be adjudged on unliquidated claims or damagesexcept when or until the demand can be established with reasonablecertainty. Accordingly, where the demand is established with reasonablecertainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certaintycannot be so reasonably established at the time the demand is made, theinterest shall begin to run only from the date of the judgment of the courtis made (at which time the quantification of damages may be deemed tohave been Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
372
reasonably ascertained).3. When the judgment of the court awarding a sum of money becomesfinal and executory, the rate of legal interest, whether the case falls underparagraph 1 or paragraph 2, above, shall be 12% per annum from suchfinality until its satisfaction, this interim period being deemed to be bythen an equivalent to a forbearance of credit.
PCI vs Ng Shueng Ngor Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
373
Equitable PCI Bank, Aimee Yu and Bejan Lionel Apas, Petitioners, versus Ng Shueng Ngor doing business under the name and style "KEN MARKETING," Ken Appliance Division, Inc. and Benjamin E. Go, Respondents. (G.R. No. 171545, December 19, 2007, 1st Division) CORONA, J: FACTS: On October 7, 2001, respondents Ng Shueng Ngor (Ngor) and Benjamin Go (Go) filed an action for amendment and/or reformation of documents and contracts against Equitable Bank and its employees. They claimed that they were induced by the bank to avail of its peso and dollar credit facilities by offering low interests so they accepted and signed Equitable Bank‘s proposal. They alleged that they were unaware that the documents contained escalation clauses granting Equitable Bank authority to increase interest without their consent. These were rebutted by the bank.
The Regional Trial Court ordered the use of the 1996 dollar exchange rate in computing respondent‘s dollar-denominated loans. The Court of Appeals granted the bank‘s application for injunction but the properties were sold to public auction.
ISSUE: Whether or not there was an extraordinary deflation.
HELD: No. There was no extraordinary deflation.
Extraordinary inflation exists when there is an unusual decrease in the purchasing power of currency and such decrease could not be reasonably foreseen or was beyond the contemplation of the parties at the time of the obligation. Deflation is an inverse situation.
Despite the devaluation of the peso, Bangko Sentral ng Pilipinas never declared a situation of extraordinary inflation. Respondents should pay their dollar denominated loans at the exchange rate fixed by the Bangko Sentral on the date of maturity.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
374
NSBC v. PNB New Sampaguita Builders Construction, Inc (NSBCI) and Spouses Eduardo R. Dee and Arcelita M. Dee, Petitioners versus Philippine National Bank, Respondents. (G.R. No. 148753, July 30, 2004, 3rd Division) PANGANIBAN, J:
FACTS: On February 11, 1989, Board Resolution No. 05, Series of 1989 was approved by Petitioner New Sampaguita Builders Construction, Inc (NSBCI) authorizing the company to apply for or secure a commercial loan with the Philippine National Bank (PNB), under such terms agreed by the Bank and the NSBCI, using or mortgaging the real estate properties registered in the name of its President and Chairman of the Board Petitioner Eduardo R. Dee as collateral; and authorizing petitioner-spouses to secure the loan and to sign any and all documents which may be required by PNB, and that petitioner-spouses shall act as sureties or co-obligors who shall be jointly and severally liable with NSBCI for the payment of any obligations. Later on, Petitioner NSBCI failed to comply with its obligations under the promissory notes.
On June 18, 1991, NSBCI sent a letter to the Branch Manager of the PNB Dagupan Branch requesting for a 90-day extension for the payment of interests. Petitioner Eduardo Dee later tendered four post-dated checks. Upon presentment, however, the checks were dishonored by the drawee bank. PNB wrote the petitioner informing him that unless the dishonored checks were made good, PNB shall refer the matter to its legal counsel for legal action. Petitioners nevertheless failed to pay their loan obligations within the time frame given them and as a result, PNB filed with the Provincial Sheriff of Pangasinan at Lingayen a Petition for Sale. The sheriff foreclosed the real estate mortgage and sold at public auction the mortgaged properties of petitioner-spouses, with respondent PNB being declared the highest bidder for the amount of P10,334,000.00. PNB informed Petitioner NSBCI that the proceeds of the sale conducted on February 26, 1992 were not sufficient to cover its total claim amounting to P12,506,476.43 and thus demanded from the latter the deficiency of P2,172,476.43 plus interest and other charges until the amount was fully paid. Petitioners refused to pay the above deficiency claim which compelled PNB to institute the instant complaint for the collection of its deficiency claim.
ISSUE: Whether or not the escalation clause is valid.
HELD: Yes. The escalation clause is valid.
Although escalation clauses are valid in maintaining fiscal stability and retaining the value of money on long-term contracts, giving respondent an unbridled right to adjust the interest independently and upwardly would completely take away from petitioners the ―right to assent to an important modification in their agreement‖ Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
375
and would also negate the element of mutuality in their contracts. The clause cited earlier made the fulfillment of the contracts ―dependent exclusively upon the uncontrolled will‖ of respondent and was therefore void. Besides, the pro forma promissory notes have the character of a contract d‘adhésion, ―where the parties do not bargain on equal footing, the weaker party‘s the debtor‘s participation being reduced to the alternative ‗to take it or leave it.‘‖
Petition partly granted.
Polotan v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
376
Rodelo G. Polotan, Sr., Petitioner, versus HON. Court Of Appeals (Eleventh Division), Regional Trial Court in Makati City (Branch 132), and Security Diners International Corporation, Respondents. (G.R. No. 119379, September 25, 1998, 3rd Division) ROMERO, J:
FACTS: Private respondent Security Diners International Corporation (Diners Club), a credit card company, extends credit accommodations to its cardholders for the purchase of goods and other services from member establishments. Said goods and services are reimbursed later on by cardholders upon proper billing. Petitioner Rodelo G. Polotan, Sr. applied for membership and credit accommodations with Diners Club in October 1985. The application form contained terms and conditions governing the use and availment of the Diners Club card, among which is for the cardholder to pay all charges made through the use of said card within the period indicated in the statement of account and any remaining unpaid balance to earn 3% interest per annum plus prime rate of Security Bank & Trust Company. Notably, in the application form submitted by petitioner, Ofricano Canlas obligated himself to pay jointly and severally with petitioner the latter‘s obligation to private respondent.
Upon acceptance of his application, petitioner was issued Diners Club card No. 3651-212766-3005. As of May 8, 1987, petitioner incurred credit charges plus appropriate interest and service charges in the aggregate amount of P33,819.84 which had become due and demandable. Demands for payment made against petitioner proved futile. Hence, private respondent filed a complaint for Collection of Sum of Money against petitioner before the lower court.
ISSUE: Whether or not the subject contract is one-sided in that the contract allows for the escalation of interests, but does not provide for a downward adjustment of the same in violation of Central Bank Circular 905.
HELD: No. The subject contract is not one-sided that it allows for the escalation of interest.
The claim is without basis. First, by signing the contract, petitioner and private respondent agreed upon the rate as stipulated in the subject contract. Such is now allowed by C.B. Circular 905. Second, petitioner failed to cite any particular provision of said Circular which was allegedly violated by the subject contract.
Be that as it may, there is nothing inherently wrong with escalation clauses. Escalation clauses are valid stipulations in commercial contracts to maintain fiscal stability and to retain the value of money in long term contracts.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
377
Escalation clauses are not basically wrong or legally objectionable as long as they are not solely potestative but based on reasonable and valid grounds. Obviously, the fluctuation in the market rates is beyond the control of private respondent.
Petition denied.
NSBC v. PNB
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
378
New Sampaguita Builders Construction, Inc (NSBCI) and Spouses Eduardo R. Dee and Arcelita M. Dee, Petitioners versus Philippine National Bank, Respondents. (G.R. No. 148753, July 30, 2004, 3rd Division) PANGANIBAN, J:
FACTS: On February 11, 1989, Board Resolution No. 05, Series of 1989 was approved by Petitioner New Sampaguita Builders Construction, Inc (NSBCI) authorizing the company to apply for or secure a commercial loan with the Philippine National Bank (PNB), under such terms agreed by the Bank and the NSBCI, using or mortgaging the real estate properties registered in the name of its President and Chairman of the Board Petitioner Eduardo R. Dee as collateral; and authorizing petitioner-spouses to secure the loan and to sign any and all documents which may be required by PNB, and that petitioner-spouses shall act as sureties or co-obligors who shall be jointly and severally liable with NSBCI for the payment of any obligations. Later on, Petitioner NSBCI failed to comply with its obligations under the promissory notes.
On June 18, 1991, NSBCI sent a letter to the Branch Manager of the PNB Dagupan Branch requesting for a 90-day extension for the payment of interests. Petitioner Eduardo Dee later tendered four post-dated checks. Upon presentment, however, the checks were dishonored by the drawee bank. PNB wrote the petitioner informing him that unless the dishonored checks were made good, PNB shall refer the matter to its legal counsel for legal action. Petitioners nevertheless failed to pay their loan obligations within the time frame given them and as a result, PNB filed with the Provincial Sheriff of Pangasinan at Lingayen a Petition for Sale. The sheriff foreclosed the real estate mortgage and sold at public auction the mortgaged properties of petitioner-spouses, with respondent PNB being declared the highest bidder for the amount of P10,334,000.00. PNB informed Petitioner NSBCI that the proceeds of the sale conducted on February 26, 1992 were not sufficient to cover its total claim amounting to P12,506,476.43 and thus demanded from the latter the deficiency of P2,172,476.43 plus interest and other charges until the amount was fully paid. Petitioners refused to pay the above deficiency claim which compelled PNB to institute the instant complaint for the collection of its deficiency claim.
ISSUE: Whether or not the escalation clause is valid.
HELD: Yes. The escalation clause is valid.
Although escalation clauses are valid in maintaining fiscal stability and retaining the value of money on long-term contracts, giving respondent an unbridled right to adjust the interest independently and upwardly would completely take away from petitioners the ―right to assent to an important modification in their agreement‖ and would also negate the element of mutuality in their contracts. The clause cited earlier made the fulfillment of the contracts ―dependent exclusively upon the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
379
uncontrolled will‖ of respondent and was therefore void. Besides, the pro forma promissory notes have the character of a contract d‘adhésion, ―where the parties do not bargain on equal footing, the weaker party‘s the debtor‘s participation being reduced to the alternative ‗to take it or leave it.‘‖
Petition partly granted.
Estores v. Sps Supangan Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
380
Hermojina Estores, Petitioner, versus Spouses Arturo and Laura Supangan, Respondents. (G.R. No. 175139, April 18, 2012, 1st Division) DEL CASTILLO, J: FACTS: On October 3, 1993, petitioner Hermojina Estores and respondent-spouses Arturo and Laura Supangan entered into a Conditional Deed of Sale 5 whereby petitioner offered to sell, and respondent-spouses offered to buy, a parcel of land located at Naic, Cavite for the sum of P4.7 million.
After almost seven years from the time of the execution of the contract and notwithstanding payment of P3.5 million on the part of respondent-spouses, petitioner still failed to comply with her obligation as expressly provided in the contract. Hence, in a letter, respondent-spouses demanded the return of the amount of P3.5 million within 15 days from receipt of the letter. When petitioner still failed to return the amount despite demand, respondent-spouses were constrained to file a complaint for sum of money before the Regional Trial Court of Malabon against herein petitioner as well as Roberto U. Arias (Arias) who allegedly acted as petitioner‘s agent.
On May 7, 2004, the Regional Trial Court rendered its decision finding respondent-spouses entitled to interest but only at the rate of 6% per annum and not 12% as prayed by them. It also found respondent-spouses entitled to attorney‘s fees as they were compelled to litigate to protect their interest. Aggrieved, petitioner and Arias filed their notice of appeal in the Court of Appeals but it affirmed the lower court‘s decision. Hence, this petition.
ISSUE: Whether or not the imposition of interest and attorney‘s fees is proper.
HELD: Yes. The imposition of interest and attorney‘s fees is proper.
The Court sustained the HELD of both the Regional Trial Court and the Court of appeals that it is proper to impose interest notwithstanding the absence of stipulation in the contract. Article 2210 of the Civil Code expressly provides that "interest may, in the discretion of the court, be allowed upon damages awarded for breach of contract." In this case, there is no question that petitioner is legally obligated to return the P3.5 million because of her failure to fulfill the obligation under the Conditional Deed of Sale, despite demand. She has in fact admitted that the conditions were not fulfilled and that she was willing to return the full amount of P3.5 million but has not actually done so. Petitioner enjoyed the use of the money from the time it was given to her until now. Thus, she is already in default of her obligation from the date of demand. The interest at the rate of 12% is applicable in the instant case. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
381
Petition denied.
Hung v. BPI Card
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
382
Benny Y. Hung, Petitioner, versus Bank of the Philippine Islands Card Finance Corp., Respondent. (G.R. No. 182398, July 20, 2010, 1st Division) PEREZ, J: FACTS: Guess? Footwear and BPI Express Card Corporation entered into two merchant agreements, whereby Guess? Footwear agreed to honor validly issued Bank of the Philippine Islands (BPI) Express Credit Cards presented by cardholders in the purchase of its goods and services. In the first agreement, petitioner Benny Hung signed as owner and manager of Guess? Footwear. He signed the second agreement as president of Guess? Footwear which he also referred to as B & R Sportswear Enterprises. Respondent BPI mistakenly credited, through 352 checks, P3,480,427.23 to the account of Guess? Footwear. When informed of the overpayments, petitioner Benny Hung transferred P963,604.03 from the bank account of B & R Sportswear Enterprises to BPI‘s account as partial payment. In a letter, BPI demanded the balance payment amounting to P2,516,826.68, but Guess? Footwear failed to pay. BPI filed a collection suit before the Regional Trial Court of Makati City.
On 24 June 2002, the trial court rendered a decision ordering defendant B & R Sportswear Distributor, Inc., to pay the plaintiff (BPI) P2,516,826.68 with 6% interest from 4 October 1999. The trial Court ruled that the overpayment ofP3,480,427.43 was proven by checks credited to the account of Guess? Footwear and the P963,604.03 partial payment proved that defendant ought to pay P2,516,826.68 more. The Court of Appeals affirmed the order and dismissed petitioner‘s appeal. ISSUE: Whether or not the obligation arose from a loan or forbearance of money. HELD: No. The obligation did not arise from a loan or forbearance of money.
When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. Since this case before us involves an obligation not arising from a loan or forbearance of money, the applicable interest rate is 6% per annum. The legal interest rate of 6% shall be computed from 4 October 1999, the date the letter of demand was presumably received by the defendant. And in accordance with the aforesaid decision, the rate of 12% per annum shall be charged on the total amount outstanding, from the time the judgment becomes final and executory until its satisfaction. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
383
Petition denied.
Marques v. Far East Bank
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
384
Jose Marques and Maxilite Technologies, Inc., Petitioners, versus Far East Bank and Trust Company, Far East Bank Insurance Brokers, Inc., and Makati Insurance Company, Respondents. (G.R. No. 171379, January 10, 2011, 2nd Division) CARPIO, J: FACTS: Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in the importation and trading of equipment for energy-efficiency systems. Jose N. Marques (Marques) is the President and controlling stockholder of Maxilite. Far East Bank and Trust Co. (FEBTC) is a local bank which handled the financing and related requirements of Marques and Maxilite. Far East Bank Insurance Brokers, Inc. (FEBIBI) is a local insurance brokerage corporation while Makati Insurance Company is a local insurance company. Both companies are subsidiaries of FEBTC. Maxilite and Marques entered into a trust receipt transaction with FEBTC, in the sum of US$80,765.00, for the shipment of various high-technology equipment from the United States, with the merchandise serving as collateral. Maxilite paid the premiums for these policies through debit arrangement. FEBTC would debit Maxilite‘s account for the premium payments, as reflected in statements of accounts sent by FEBTC to Maxilite. Finding that Maxilite failed to pay the insurance premium but later one settled the matter. On March 9, 1995, a fire gutted the Aboitiz Sea Transport Building along M.J. Cuenco Avenue, Cebu City, where Maxilite‘s office and warehouse were located. As a result, Maxilite suffered losses amounting to at least P2.1 million, which Maxilite claimed against the fire insurance policy with Makati Insurance Company. Makati Insurance Company denied the fire loss claim on the ground of non-payment of premium. Maxilite and Marques sued FEBTC, FEBIBI, and Makati Insurance Company. The Regional trial Court and Court of Appeals ruled in favor of Maxilite. ISSUE: Whether or not FEBTC, FEBIBI and Makati Insurance Company are jointly and severally liable to pay respondents the full coverage of the subject insurance policy. HELD: No. FEBTC, FEBIBI and Makati Insurance Company are not jointly and severally liable to pay respondents the full coverage of the subject insurance policy. FEBTC is solely liable for the payment of the face value of the insurance policy and the monetary awards stated in the Court of Appeals‘ decision. Suffice it to state that FEBTC, FEBIBI, and Makati Insurance Company are independent and separate juridical entities, even if FEBIBI and Makati Insurance Company are subsidiaries of FEBTC. Absent any showing of its illegitimate or illegal functions, a subsidiary‘s separate existence shall be respected, and the liability of the parent corporation as well as the subsidiary shall be confined to those arising in their respective business. Besides, the records are bereft of any evidence warranting the piercing of corporate veil in order to treat FEBTC, FEBIBI, and Makati Insurance Company as a single entity. Likewise, there is no evidence showing FEBIBI‘s and Makati Insurance Company‘s negligence as regards the non-payment of the insurance premium. Decision affirmed with modifications. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
385
Land Bank v. Ong Land Bank of the Philippines, Petitioner, versus Alfredo Ong, Respondent. (G.R. No. 190755, November 24, 2010, 1st Division) VELASCO, JR., J: FACTS: Spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi City in the amount of PhP16 million. Under the loan agreement, PhP 6 million of the loan would be short-term and would mature on February 28, 1997, while the balance of PhP 10 million would be payable in seven years. The Notice of Loan Approval dated February 22, 1996 contained an acceleration clause wherein any default in payment of amortizations or other charges would accelerate the maturity of the loan. Subsequently, however, the Spouses Sy found they could no longer pay their loan. They sold three of their mortgaged parcels of land for PhP 150,000 to Angelina Gloria Ong, Evangeline‘s mother, under a Deed of Sale with Assumption of Mortgage.
Evangeline‘s father, petitioner Alfredo Ong, later went to Land Bank to inform it about the sale and assumption of mortgage. Atty. Edna Hingco, the Legazpi City Land Bank Branch Head, told Alfredo and his counsel Atty. Ireneo de Lumen that there was nothing wrong with the agreement with the Spouses Sy but provided them with requirements for the assumption of mortgage. They were also told that Alfredo should pay part of the principal which was computed at PhP 750,000 and to update due or accrued interests on the promissory notes so that Atty. Hingco could easily approve the assumption of mortgage. Two weeks later, Alfredo issued a check for PhP 750,000 and personally gave it to Atty. Hingco. He also submitted the other documents required by Land Bank, such as financial statements. Atty. Hingco then informed Alfredo that the certificate of title of the Spouses Sy would be transferred in his name but this never materialized. No notice of transfer was sent to him. On December 12, 1997, Alfredo initiated an action for recovery of sum of money with damages against Land Bank as Alfredo‘s payment was not returned by Land Bank. The Regional Trial Court held that that under the principle of equity and justice, the bank should return the amount Alfredo had paid with interest at 12% per annum computed from the filing of the complaint. The trial court further held that Alfredo was entitled to attorney‘s fees and litigation expenses for being compelled to litigate. The Court of Appeals affirmed the trial court‘s decision.
ISSUE: Whether or not Alfredo‘s payment to Land Bank constitutes as forbearance of money.
HELD: No. Alfredo‘s payment to Land Bank does not constitute as forbearance of money.
Forbearance of money refers to the contractual obligation of the lender or creditor to desist for a fixed period from requiring the borrower or debtor to repay the loan or debt then due and for which 12% per annum is imposed as interest in the absence of a stipulated rate. In the instant case, Alfredo‘s conditional payment to Land Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
386
Bank does not constitute forbearance of money, since there was no agreement or obligation for Alfredo to pay Land Bank the amount of PhP 750,000, and the obligation of Land Bank to return what Alfredo has conditionally paid is still in dispute and has not yet been determined. Thus, it cannot be said that Land Bank‘s alleged obligation has become a forbearance of money.
Appeal denied.
RGM Industries v. United Pacific
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
387
RGM INDUSTRIES, INC., Petitioner, versus United Pacific Capital Corporation, Respondent. (G.R. No. 194781, June 27, 2012, 2nd Division) REYES, J: FACTS: The respondent is a domestic corporation engaged in the business of lending and financing. The loan amount was sourced from individual funders on the basis of a direct-match facility for which a series of promissory notes were issued by the petitioner for the payment of the loan. The petitioner failed to satisfy the said promissory notes as they fell due and the loan had to be assumed in full by the respondent which thereby stepped into the shoes of the individual funders. Consequently, the petitioner issued in favor of the respondent a consolidated promissory note in the principal amount of P27,852,075.98 for a term of fourteen days and maturing on April 28, 1998. The stipulated interest on the consolidated promissory note was 32% per annum. In case of default, a penalty charge was imposed in an amount equivalent to 8% per month of the outstanding amount due and unpaid computed from the date of default. The petitioner failed to satisfy the consolidated promissory note, the principal balance of P27,668,167.87. The respondent thus sent demand letters to the petitioner but the latter failed to pay. The respondent filed the herein complaint for collection of sum of money against the petitioner. The Regional Trial Court ruled in favor of the respondent while the Court of Appeals affirmed the trials court‘s decision but modified the interest rates and penalty charges imposed. ISSUE: Whether or not the modified interest rates and penalty charges decreed by the CA are exorbitant.
HELD: No. The modified interest rates and penalty charges decreed by the Court of Appeals are not exorbitant.
As found by the Court of Appeals, the payments made by the petitioner before the complaint was filed were duly deducted from the outstanding balance; while the payments made during the pendency of the case were applied to the due and outstanding penalty charges.
The Supreme Court affirms the interest rate decreed by the Court of Appeals. Stipulated interest rates are illegal if they are unconscionable and courts are allowed to temper interest rates when necessary. In exercising this vested power to determine what is iniquitous and unconscionable, the Court must consider the circumstances of each case. What may be iniquitous and unconscionable in one case, may be just in another.
Petition partly granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
388
Prisma Industries v. United Pacific Prisma Construction & Development Corporation and Rogelio S. Pantaleon, Petitioners, versus Arthur F. Menchavez, Respondent. (G.R. No. 160545, March 9, 2010, 2nd Division) BRION, J: FACTS: On December 8, 1993, Pantaleon, the President and Chairman of the Board of PRISMA, obtained a P1,000,000.00 loan from the respondent, with a monthly interest of P40,000.00 payable for six months, or a total obligation of P1,240,000.00 to be paid within six months. To secure the payment of the loan, Pantaleon issued a promissory note. As of January 4, 1997, the petitioners had already paid a total of P1,108,772.00. However, the respondent found that the petitioners still had an outstanding balance of P1,364,151.00 as of January 4, 1997, to which it applied a 4% monthly interest. Thus, on August 28, 1997, the respondent filed a complaint for sum of money with the Regional Trial Court to enforce the unpaid balance, plus 4% monthly interest, P30,000.00 in attorney‘s fees, P1,000.00 per court appearance and costs of suit.
ISSUE: Whether the parties agreed to the 4% monthly interest on the loan.
HELD: No. The parties did not agree to the 4% monthly interest on the loan.
In the present case, the respondent issued a check for P1,000,000.00. In turn, Pantaleon, in his personal capacity and as authorized by the Board, executed the promissory note quoted above. Thus, the P1,000,000.00 loan shall be payable within six (6) months, or from January 8, 1994 up to June 8, 1994. During this period, the loan shall earn an interest of P40,000.00 per month, for a total obligation of P1,240,000.00 for the six-month period. We note that this agreed sum can be computed at 4% interest per month, but no such rate of interest was stipulated in the promissory note; rather a fixed sum equivalent to this rate was agreed upon.
Article 1956 of the Civil Code specifically mandates that "no interest shall be due unless it has been expressly stipulated in writing." Under this provision, the payment of interest in loans or forbearance of money is allowed only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for the payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of interest at a stipulated rate. Thus, we held in Tan v. Valdehueza and Ching v. Nicdao that collection of interest without any stipulation in writing is prohibited by law.
In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
389
Decision reversed and set aside.
Maceda, Jr. v. DBO
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
390
Bonifacio Sanz Maceda, Jr., Petitioner, versus Development Bank of the Philippines, Respondent. (G.R. No. 174979, August 11, 2010, 2nd Division) CARPIO, J: FACTS: On July 28, 1976 plaintiff Bonifacio Maceda, Jr. (Maceda) obtained a loan from the defendant Development Bank of the Philippines (DBP) in the amount of P7.3 million to finance the expansion of the Old Grand Hotel in Leyte. Upon approval of said loan, plaintiff Maceda executed a promissory note and a mortgage of real estate. Project cost of the New Gran Hotel wasP10.5M. DBP fixed a debt-equity ratio of 70%30%, corresponding to DBP and Maceda‘s respective infusion in the hotel project. Maceda‘s equity infusion was P2.93M, or 30% of P10.5M. The DBP Governor at that time, Recio Garcia, in-charge of loans for hotels, allegedly imposed the condition that DBP would choose the building contractor, namely, Moreman Builders Co. (Moreman). The contractor would directly receive the loan releases from DBP, after verification by DBP of the construction progress. The period of loan availment was 360 days from date of initial release of the loan. Similarly, suppliers of equipment and furnishings for the hotel were also to be paid directly by DBP.
Maceda filed a complaint for rescission of the building contract with damages against the contractor Moreman, before the then Manila Court of First Instance (CFI). In its decision, the CFI rescinded the building contract, suspended the period of availment, allowed Maceda to himself take over construction, and directed DBP to release to Maceda the sum of P1.003M. The DBP was further ordered to give plaintiff Maceda such other amounts still pending release. Moreman filed an appeal which was subsequently dismissed in 1990 by the Supreme Court. In the meantime, Maceda also instituted the case for Specific Performance with Damages against defendant DBP before the Makati Regional Trial Court. ISSUE: Whether or not the damages awarded in favor of Maceda are unreasonable and excessive.
HELD: No. The damages awarded in favor of Maceda are not unreasonable and excessive.
Under Article 1191 of the Civil Code, the aggrieved party has a choice between specific performance and rescission with damages in either case. However, we have ruled that if specific performance becomes impractical or impossible, the court may order rescission with damages to the injured party. After the lapse of more than 30 years, it is now impossible to implement the loan agreement as it was written, considering the absence of evidence as to the rising costs of construction, as well as the obvious changes in market conditions on the viability of the operations of the hotel. We deem it equitable and practicable to rescind the obligation of DBP to deliver the balance of the loan proceeds to Maceda. In exchange, we order DBP to pay Maceda the value of Maceda‘s cash equity of P6,153,398.05 by way of actual damages, plus the applicable interest rate. The trial court also awarded the following amounts: P700,000 as moral damages; P150,000 as exemplary damages; P500,000 as temperate damages; and P100,000 as attorney‘s fees. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
391
We find these amounts appropriate under the circumstances, and not unconscionable or exorbitant. Petition granted.
PNB v. Encina Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
392
Philippine Nantional Bank, Petitioner, versus Spouses Wilfredo and Estela Encina, Respondents. (G.R. No. 174055, February 12, 2008, 2nd Division) TINGA, J: FACTS: On September 13, 1995, as additional capital for their metal craft business, plaintiffs-appellants ENCINA obtained a P500,000.00 loan with defendant-appellee PNB, secured by a promissory note, a real estate mortgage, and a credit agreement, on parcels of land located at Occidental Mindoro. Thereafter, plaintiffs-appellants obtained an additional P200,000.00 and P400,000.00 loan from PNB. It subsequently granted a P1,250,000.00 all purpose credit facility to plaintiffs-appellants ENCINA.
On the maturity date of the P1,250,000.00 loan obligation, plaintiffsappellants ENCINA failed to pay, prompting PNB to demand from plaintiffsappellants in letters. Demands from PNB were left unheeded, prompting PNB to file a petition for sale of the mortgaged properties with defendant-appellee ExOfficio Sheriff of the Regional Trial Court of San Jose, Occidental Mindoro. The foreclosure sale was conducted on November 15, 1999 with PNB as the highest bidder. On November 15, 2001, a contract of lease was executed between defendant-appellee PNB and plaintiffs-appellants ENCINA over the subject properties, pursuant to a request made by ENCINA that they be allowed by defendant-appellee PNB to lease the subject premises for a monthly rental ofP7,500.00. Finally, on July 18, 2002, plaintiffs-appellants ENCINA sued defendantsappellees in an action for the nullification of foreclosure sale and damages, that the extra-judicial foreclosure sale of their properties was null and void; that for being in violation of the Usury Law, the loan contracts and all accessory contracts pertaining thereto were null and void. ISSUE: Whether or not there is a violation of the Usury Law?
HELD: No. There is not Violation of the Usury Law.
As borne by the records, the Encina spouses never challenged the validity of their loan and the accessory contracts with PNB on the ground that they violated the principle of mutuality of contracts in view of the provision therein that the interest rate shall be set by management. Their only contention concerning the interest rate was that the charges imposed by the bank violated the Usury Law. This was the essence of the second cause of action alleged in the complaint.
It should be definitively ruled in this regard that the Usury Law had been rendered legally ineffective by Resolution No. 224 dated December 3, 1982 of the Monetary Board of the Central Bank, and later by Central Bank Circular No. 905 which took effect on January 1, 1983 and removed the ceiling on interest rates for secured and unsecured loans regardless of maturity. The effect of these circulars is to allow the parties to agree on any interest that may be charged on a loan. The virtual Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
393
repeal of the Usury Law is within the range of judicial notice which courts are bound to take into account. After all, the fundamental tenet is that the law is deemed part of the contract. Thus, the trial court was correct in HELD that the second cause of action was without basis.
Petition partly granted.
Imperial v. Jaucian
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
394
Restituta M. Imperial, Petitioner, versus Alex A. Jaucian, Respondent. (G.R. No. 149004, April 14, 2004, 1st Division) PANGANIBAN, J: FACTS: The present controversy arose from a case for collection of money, filed by Alex A. Jaucian against Restituta Imperial, on October 26, 1989. The complaint alleges, inter alia, that defendant obtained from plaintiff six separate loans for which the former executed in favor of the latter six separate promissory notes and issued several checks as guarantee for payment. When the said loans became overdue and unpaid, especially when the defendant‘s checks were dishonored, plaintiff made repeated oral and written demands for payment.
The loans were covered by six separate promissory notes executed by defendant. The face value of each promissory notes is bigger than the amount released to defendant because said face value already included the interest from date of note to date of maturity. Said promissory notes indicate the interest of 16% per month, date of issue, due date, the corresponding guarantee checks issued by defendant, penalties and attorney‘s fees. The trial court‘s clear and detailed computation of petitioner‘s outstanding obligation to respondent was affirmed by the Court of Appeals for being convincing and satisfactory. However, the Court held that without judicial inquiry, it was improper for the Regional Trial Court to rule on the constitutionality of Section 1, Central Bank Circular No. 905, Series of 1982.
ISSUE: Whether or not the penalties charged per month is in the guise of hidden interest.
HELD: Yes. The penalties charged per month was in the guise of hidden interest.
Article 1229 of the Civil Code states that the judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable. In exercising this power to determine what is iniquitous and unconscionable, courts must consider the circumstances of each case. What may be iniquitous and unconscionable in one may be totally just and equitable in another. In the present case, iniquitous and unconscionable was the parties‘ stipulated penalty charge of 5 percent per month or 60 percent per annum, in addition to regular interests and attorney‘s fees. Also, there was partial performance by petitioner when she remitted P116,540 as partial payment of her principal obligation of P320,000. Under the circumstances, the trial court was justified in reducing the stipulated penalty charge to the more equitable rate of 14 percent per annum. Nevertheless, it appears that petitioner‘s failure to comply fully with her obligation was not motivated by ill will or malice. The twenty-nine partial payments she made were a manifestation of her good faith. Again, Article 1229 of the Civil Code specifically empowers the judge to reduce the civil penalty equitably, when the principal obligation has been partly or irregularly complied with. Upon this Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
395
premise, we hold that the RTC‘s reduction of attorney‘s fees -- from 25 percent to 10 percent of the total amount due and payable -- is reasonable.
Petition denied.
Pabugais v. Sahijwani Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
396
TEDDY G. PABUGAIS, Petitioner versus DAVE P. SAHIJWANI, Respondent. (G.R. No. 156846, February 23, 2004, 1st Division) YNARES-SANTIAGO, J: FACTS: On December 3, 1993, petitioner Teddy G. Pabugais, in consideration of the amount of P15,487,500.00, agreed to sell to respondent Dave P. Sahijwani a lot containing 1,239 square meters located at Jacaranda Street, North Forbes Park, Makati, Metro Manila. Respondent paid petitioner the amount of P600,000.00 as option/reservation fee and the balance of P14,887,500.00 to be paid within 60 days from the execution of the contract. The parties further agreed that failure on the part of respondent to pay the balance of the purchase price entitles petitioner to forfeit the P600,000.00 option/reservation fee; while non-delivery by the latter of the necessary documents obliges him to return to respondent the said option/reservation fee with interest at 18% per annum.
Petitioner failed to deliver the required documents. In compliance with their agreement, he returned to respondent the latter‘s P600,000.00 option/reservation fee by way of Far East Bank & Trust Company Check, which was, however, it was dishonored. On August 11, 1994, petitioner wrote a letter to respondent saying that he is consigning the amount tendered with the Regional Trial Court of Makati City. On August 15, 1994, petitioner filed a complaint for consignation.
On November 29, 1996, the trial court rendered a decision declaring the consignation invalid for failure to prove that petitioner tendered payment to respondent and that the latter refused to receive the same. Petitioner appealed the decision to the Court of Appeals. Petitioner‘s motion to withdraw the amount consigned was denied by the Court of Appeals and the decision of the trial court was affirmed. On a motion for reconsideration, the Court of Appeals declared the consignation as valid in an Amended Decision dated January 16, 2003. It held that the validity of the consignation had the effect of extinguishing petitioner‘s obligation to return the option/reservation fee to respondent. Hence, petitioner can no longer withdraw the same.
ISSUE: Whether or not the amount consigned with the trial court can be withdrawn by the petitioner.
HELD: No. The amount consigned with the trial court can no longer be withdrawn by petitioner.
Respondent‘s prayer in his answer that the amount consigned be awarded to him is equivalent to an acceptance of the consignation, which has the effect of extinguishing petitioner‘s obligation.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
397
Moreover, petitioner failed to manifest his intention to comply with the ―Agreement And Undertaking‖ by delivering the necessary documents and the lot subject of the sale to respondent in exchange for the amount deposited. Withdrawal of the money consigned would enrich petitioner and unjustly prejudice respondent.
Petition denied.
Lo v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
398
Antonio Lo, Petitioner, versus The Hon. Court of Appeals and National Onions Growers Cooperative Marketing Association, Inc., Respondents. (G.R. No. 141434, September 23, 2003, 3rd Division) CORONA, J: FACTS: Antonio Lo acquired two parcels of land with an office constructed thereon in an auction sale on November 9, 1995 from the Land Bank of the Philippines. At variance, private respondent National Onion Growers Cooperative Marketing Association, Inc. was the occupant of the parcels of land under a subsisting contract of lease with Land Bank. The lease was valid until December 31, 1995.
Upon the expiration of the lease contract, Lo demanded that private respondent vacate the leased premises and surrender its possession to him. The agricultural cooperative refused on the ground of a contest against petitioner‘s acquisition of the parcels of land in an action for annulment of sale, redemption and damages.
On February 23, 1996, petitioner filed an action for ejectment and subsequently asked for imposition of the contractually stipulated penalty of P5, 000 per day of delay in surrendering the possession of the property. Thereafter, the trial court decided the case in favor of petitioner. Private respondent was ordered to vacate the leased premises. On appeal to the Regional Trial Court, the trial court‘s decision was affirmed in toto. The agricultural cooperative then elevated the case to the Court of Appeals that affirmed the lower court‘s decision but modified that the penalty to be imposed must be reduced to P1, 000. Unsatisfied with the decision of the court, Lo filed the instant petition for review.
ISSUE: Whether or not the Court of Appeals has the authority to reduce the penalty awarded by the trial court, the same having been stipulated by the parties in their contract of lease.
HELD: Yes. The Court of Appeals has the authority to reduce the penalty awarded by the trial court, the same having been stipulated by the parties in their contract of lease.
While courts are not at liberty to ignore the freedom of the parties to agree on such terms and conditions as they see fit as long as they are not contrary to law, morals, good customs, public order or public policy, courts may equitably reduce a stipulated penalty if it is iniquitous or unconscionable, or if the principal obligation has been partly or irregularly complied with. This power of the courts is explicitly sanctioned by Article 1229 of the Civil Code which provides that the judge shall equitably reduce the penalty when the principal obligation has been partly or
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
399
irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by courts if it is iniquitous or unconscionable.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
400
Ligutan v. Court of Appeals
Tolomeo Ligutan and Leonidas De La Llana, Petitioners, v. Hon. Court of Appeals and Security Bank and Trust Company, Respondents. (G.R. No. 138677, February 12, 2002, 3rd Division) VITUG, J: FACTS: Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained on May 11, 1981 a loan in the amount of P120, 000.00 from respondent Security Bank and Trust Company. Petitioners executed a promissory note binding themselves, jointly and severally, to pay the sum borrowed with an interest of 15.189% per annum upon maturity and to pay a penalty of 5% every month on the outstanding principal and interest in case of default. In addition, petitioners agreed to pay 10% of the total amount due by way of attorney‘s fees if the matter were indorsed to a lawyer for collection or if a suit were instituted to enforce payment. The obligation matured on September 8, 1981; the bank, however, granted an extension but only until December 29, 1981.
When petitioners defaulted on their obligation, the bank filed a complaint for recovery of the due amount. On September 5, 1988, the trial court ruled in favor of the bank. It ordered the petitioners to pay, jointly and severally, the sum of P114, 416.00 with interest thereon at the rate of 15.189% per annum, 2% service charge and 5% per month penalty charge, commencing on May 20, 1982 until fully paid.
The Court of Appeals affirmed it but deleted the 2% service charge. Not fully satisfied with the decision, both parties moved for reconsideration. Petitioners prayed for the reduction of the 5% penalty for being unconscionable. The bank, on the other hand, asked that the payment of interest and penalty be commenced not from the date of filing of complaint but from the time of default as so stipulated in the contract of the parties.
ISSUE: Whether or not the penalty is reasonable and not iniquitous.
HELD: No. The penalty is not unreasonable.
The Court held that the question of whether a penalty is reasonable or iniquitous can be partly subjective and partly objective. Its resolution would depend on such factors as, but not necessarily confide to, the type, extent and purpose of the penalty, the nature of the obligation, the mode of breach and its consequences, the supervening realities, the standing and relationship of the parties, and the like, the application of which, by and large, is addressed to the sound discretion of the court. The stipulated penalty might even be deleted such as when there has been substantial Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
401
performance in good faith by the obligor, when the penalty clause itself suffers from fatal infirmity, and when exceptional circumstances so exist as to warrant it.
In the case at bar, given the circumstances, not to mention the repeated acts of breach by petitioners of their contractual obligation, this Court sees no cogent ground to HELD of the appellate court.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
402
Pascual v. Ramos Spouses Silvestre and Celia Pascual, Petitioners, v. Rodrigo V. Ramos, Respondent. (G.R. No. 144712, July 4, 2002, 1st Division) DAVIDE, JR., C.J.: FACTS: Ramos alleged that on June 3, 1987, for and in consideration of P150,000, the Spouses Pascual executed in his favor a Deed of Absolute Sale with Right to Repurchase over 2 parcels of land and the improvements thereon located in Bambang, Bulacan, Bulacan. This document was annotated at the back of the title. The Pascuals did not exercise their right to repurchase the property within the stipulated one-year period; hence, Ramos prayed that the title or ownership over the subject parcels of land and improvements thereon be consolidated in his favor.
In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale with Right to Repurchase for a consideration of P150, 000 but averred that what the parties had actually agreed upon and entered into was a real estate mortgage. They further alleged that there was no agreement limiting the period within which to exercise the right to repurchase and that they had even overpaid Ramos. The trial court found that the transaction between the parties was actually a loan in the amount of P150, 000.00, the payment of which was secured by a mortgage of the property. It also found that the Pascuals had made payments in the total sum of P344,000.00, and that with interest at 7% per annum, they had overpaid the loan by P141,500.00. Accordingly, the trial court ruled in favor of the defendants.
ISSUE: Whether or not the stipulated interest is valid.
HELD: Yes. The stipulated interest is valid.
After the trial court sustained petitioners‘ claim that their agreement with Ramos was actually a loan with real estate mortgage, the Pascuals should not be allowed to turn their back on the stipulation in that agreement to pay interest at the rate of 7% per month. The Pascuals should accept not only the favorable aspect of the court‘s declaration that the document is actually an equitable mortgage but also the necessary consequence of such declaration, that is, that interest on the loan as stipulated by the parties in that same document should be paid. Besides, when Ramos moved for a reconsideration of the decision of the trial court pointing out that the interest rate to be used should be 7% per month, the Pascuals never lifted a finger to oppose the claim. It was only in their motion for the reconsideration of the decision of the Court of Appeals that the Pascuals made an issue of the interest rate and prayed for its reduction to 12% per annum. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
403
The interest rate of 7% per month was voluntarily agreed upon by Ramos and the Pascuals. There is nothing from the records and, in fact, there is no allegation showing that petitioners were victims of fraud when they entered into the agreement with Ramos. Neither is there a showing that in their contractual relations with Ramos, the Pascuals were at a disadvantage on account of their moral dependence, ignorance, mental weakness, tender age or other handicap, which would entitle them to the vigilant protection of the courts as mandated by Article 24 of the Civil Code.
Petition denied.
First Metro Investment v. Este Del Sol
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
404
First Metro Investment Corporation, Petitioner, versus Este Del Sol Mountain Reserve, Inc., Valentin S. Daez, Jr., Manuel Q. Salientes, Ma. Rocio A. De Vega, Alexander G. Asuncion, Alberto M. Ladores, Vicente M. De Vera, Jr., and Felipe B. Sese, Respondents. (G.R. No. 141811, November 15, 2001, 2nd Division) DE LEON, JR., J: FACTS: Petitioner First Metro granted respondent Este Del Sol a loan of P7,385,500.00 to finance the construction and development of respondent‘s Mountain Reserve. The loan was payable on 36 consecutive monthly amortizations and the interest on the loan was egged at 16% per annum based on the diminishing balance. In case of deposit, a 20% one time penalty on the amount due and such mount shall bear interest at the highest rate permitted by law plus liquidated damages at the rate of 2% per month and attorney‘s fees equivalent to 25% of the sum sought to be received. In accordance with the terms of the loan agreement, respondents Este Del Sol executed several documents as security for payment. Moreover, it executed as provided for by the loan agreement, an Underwriting Agreement whereby Forts Metro shall underwrite on a best efforts basis the public offering of one hundred twenty thousand common shares of Este Del Sol. In addition, the Underwriting Agreement provided that for supervising the public offering of the shares, Este Del Sol shall pay First Metro an annual supervision fee of P 200,000.00 per annum and a consultancy fee of P 332,500.00 per annum for a period of four (4) consecutive years. Simultaneous with the execution of and in accordance with the terms of the Underwriting Agreement, a consultancy Agreement was also executed whereby Este Del Sol engaged the services of petitioner First Metro for a fee as consultant to render general consultancy services.
Since Este Del Sol failed to meet the schedule of repayment it appeared to have incurred a total obligation of P 12,679,630.98. Thus First Metro caused the extra judicial foreclosure of the real estate mortgage where First Metro was the highest bidder. However, there remained a balance of P 6,863,297.73 Hence, First Metro instituted an instant collection suit against respondent, including those other respondents who have securities of the loan of respondent Este Del Sol by virtue of their continuing surety agreements.
ISSUE: Whether or not the underwriting and consultancy agreements are mere subterfuges to camouflage the usurious interest charged by First Metro.
HELD: No. The underwriting and consultancy agreements are not mere subterfuges to camouflage the usurious interest charged by First Metro.
The form of the contract entered into between the petitioner and respondent is not conclusive for the law will not permit a usurious loan to hide itself behind a legal form. An apparently legal loan is usurious when it is intended that additional compensation for the loan providing for payment by the borrower for the leaders Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
405
services which of little value or which are not in fact to be rendered. Here, the loan Underwriting and Consultancy Agreement are not separate and independent transactions rather they were executed and delivered contemporaneous by and executed by First Metro as essential conditions for the grant of the loan. However, in usurious loans, the entire obligation does not become void because the unpaid principal debt still stands and remains.
Petition denied.
Domel Trading v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
406
Domel Trading Corporation, Petitioner, versus Honorable Court of Appeals and NDC-NACIDA Raw Materials, Corporation, Respondents, (G.R. No. 84813 September 22, 1999, 1st Division) YNARES-SANTIAGO, J: FACTS: On June 3, 1981, private respondent NDC-NACIDA Raw Materials Corporation (NNRMC) ordered from petitioner Domel Trading Corporation (DOMEL) 22,000 bundles of buri midribs at P16.00 per bundle to be delivered within 30 working days from the date of the opening of a letter of credit. On June 4, 1981, private respondent again ordered 300,000 pieces of rattan poles at P9.65 per piece for a total price of P2,895,000.00, also to be delivered within 60 days from the date of the opening of a letter of credit. The specifications and provisions of both transactions, which served as their agreement, were printed in two separate purchase orders.
In accordance with their agreement, NNRMC, on July 9, 1981, opened a letter of credit with Philippine National Bank (PNB) in favor of DOMEL in the amount of P1,997,000.00 to cover its order for 206,943 pieces of rattan poles. On July 13, 1981, NNRMC opened another letter of credit in favor of DOMEL in the amount of P1,236,000.00 to cover the price of 93,057 pieces of rattan poles and 22,000 bundles of buri midribs.
In violation of their agreement, DOMEL failed to deliver the buri midribs and rattan poles within the stipulated period. Thus, on September 23, 1981, DOMEL and NNRMC agreed to restructure the latter‘s purchase orders in a Memorandum of Agreement. Under the agreement, NNRMC extended the expiry date of its two letters of credit to November 5, 1981. It also reduced the quantity of the rattan poles from 300,000 to only 100,000 pieces while the quantity of buri midribs remained at 22,000 bundles. Further, DOMEL undertook to deliver the goods on or before October 31, 1981. However, no deliveries were again made on the said date. Consequently, demands were made by NNRMC on January 19, 1982 for the payment of damages, which demands were ignored by DOMEL. Hence, NNRMC filed a complaint for damages before the Regional Trial Court of Pasig. After trial, judgment was rendered in favor of plaintiff and against defendant.
ISSUE: Whether or not the penalty clause is iniquitous and unconscionable.
HELD: Yes. The penalty clause us iniquitous and unconscionable.
The amount of P2,000.00 as penalty for every day of delay is excessive and unconscionable. In determining whether a penalty clause is ―iniquitous and unconscionable,‖ a court may very well take into account the actual damages sustained by a creditor who was compelled to sue the defaulting debtor, which actual damages would include the interest and penalties the creditor may have had to pay on Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
407
its own from its funding source. In this case, NNRMC was only able to prove that it incurred the amounts of P5,995.83 as opening charges on the two Letters of Credit and an additional P1,911.85 as amendment charges on the same Letters of Credit. Other than that, NNRMC failed to prove it had suffered actual damages resulting from the non-delivery of the specified buri midribs and rattan poles. In fact, what it allegedly suffered are what it calls ―Foregone Interest Income‖ and ―Foregone Profit‖ from the two Letters of Credit. Such could not be considered as actual damages.
Decision affirmed in toto.
Medel v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
408
Leticia Y. Medel, Dr. Rafael Medel and Servando Franco, Petitioners, versus Court of Appeals, Spouses Veronica R. Gonzales and Danilo G. Gonzales, Jr. doing lending business under the trade name and style "GONZALES CREDIT ENTERPRISES", Respondents. (G.R. No. 131622, November 27, 1998, 3rd Division) PARDO, J: FACTS: The Medel spouses obtained several loans of which they were unable to pay in full. On July 23, 1986, Servando and Leticia with the latter's husband, Dr. Rafael Medel, consolidated all their previous unpaid loans totaling P440,000.00, and sought from Veronica another loan in the amount of P60,000.00, bringing their indebtedness to a total of P500,000.00, payable on August 23, 1986. They executed a promissory note indicating payment for the balance.
On maturity of the loan, the borrowers failed to pay the indebtedness of P500,000.00, plus interests and penalties, evidenced by the above-quoted promissory note. On February 20, 1990, Veronica R. Gonzales, joined by her husband Danilo G. Gonzales, filed with the Regional Trial Court of Bulacan, Branch 16, at Malolos, Bulacan, a complaint for collection of the full amount of the loan including interests and other charges. ISSUE: Whether or not the stipulated interest rate is excessive, iniquitous and unconscionable. HELD: Yes, the stipulated rate of interest per month is excessive, iniquitous and unconscionable. Basically, the issue revolves on the validity of the interest rate stipulated upon. Thus, the question presented is whether or not the stipulated rate of interest at 5.5% per month on the loan in the sum of P500,000.00, that plaintiffs extended to the defendants is usurious. In other words, is the Usury Law still effective, or has it been repealed by Central Bank Circular No. 905, adopted on December 22, 1982, pursuant to its powers under P.D. No. 116, as amended by P.D. No. 1684? We agree with petitioners that the stipulated rate of interest at 5.5% per month on the P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. However, we cannot consider the rate "usurious" because this Court has consistently held that Circular No. 905 of the Central Bank, adopted on December 22, 1982, has expressly removed the interest ceilings prescribed by the Usury Law and that the Usury Law is now "legally inexistent". Nevertheless, we find the interest at 5.5% per month, or 66% per annum, stipulated upon by the parties in the promissory note iniquitous or unconscionable, and, hence, contrary to morals ("contra bonos mores"), if not against the law. The stipulation is void. The courts shall reduce equitably liquidated damages, whether intended as an indemnity or a penalty if they are iniquitous or unconscionable. Consequently, the Court of Appeals erred in upholding the stipulation of the parties. Rather, we agree with the trial court that, under the circumstances, interest at 12% per annum, and an additional 1% a month penalty charge as liquidated damages may be more reasonable.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
409
Decision reversed and set aside.
Reformina v. Tomol
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
410
Pacita F. Reformina and Heirs of Francisco Reformina, Petitioners, versus The Honorable Valeriano P. Tomol, Jr., as Judge of the Court of First Instance, Branch XI, Cebu City, Shell Refining Company (PHILS.), Inc., and Michael, Inc., Respondents. (G.R. No. L-59096 October 11, 1985, En Banc) CUEVAS, J: FACTS: An action for Recovery of Damages for Injury to Person and Loss of Property was filed. The Regional Trial Court rendered judgment in favor of the plaintiffs and against the defendants, ordering the latter to pay jointly and severally the former. On appeal, the decision was modified. In the computation of the legal interest decreed sought to be executed, petitioners claimed that it should be at 12% per annum invoking Central bank Circular. The respondents, however, insist that said legal interest should be at the rate of 6% per annum pursuant to Article 2209 of the New Civil code
ISSUE: Whether or not the judgment covers all kinds of monetary judgment.
HELD: No. The judgment covers all kinds of monetary judgment.
The judgments spoken of and referred to are Judgments in litigations involving loans or forbearance of any money, goods or credits. Any other kind of monetary judgment which has nothing to do with, nor involving loans or forbearance of any money, goods or credits does not fall within the coverage of the said law for it is not within the ambit of the authority granted to the Central Bank. The Monetary Board may not tread on forbidden grounds. It cannot rewrite other laws. That function is vested solely with the legislative authority. It is axiomatic in legal hermeneutics that statutes should be construed as a whole and not as a series of disconnected articles and phrases. In the absence of a clear contrary intention, words and phrases in statutes should not be interpreted in isolation from one another. A word or phrase in a statute is always used in association with other words or phrases and its meaning may thus be modified or restricted by the latter.
Petition dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
411
Lo v. KJH Sonny Lo, Petitioner, versus KJS Eco-Formwork System Phil., Inc., Respondent. (G.R. No. 149420, October 8, 2003, 1st Division) YNARES-SANTIAGO, J: FACTS: KJS Eco-Formwork System Phil. (KJS) is engaged in the sale of steel scaffoldings while Sonny Lo (Lo) is a building contractor. On February 22, 1990, petitioner ordered scaffolding equipments from respondent worth P540,425.80. He paid a down payment in the amount of P150,000. The balance was made payable in 10 monthly installments. Respondent delivered the equipments. Petitioner was able to pay the first two monthly installments. His business suffered financial difficulties and he was unable to settle his obligations despite demands.
On October 11, 1990, the parties executed a deed of assignment whereby petitioner assigned to respondent his receivables from Jonero Realty. However, Jonero refused to honor the deed of assignment because it claimed that petitioner was indebted to it. Petitioner refused to pay claiming that his obligation had been extinguished when they executed the deed of assignment. The Regional Trial Court dismissed the complaint on the ground that the assignment of credit extinguished the obligation. Court of Appeals reversed the decision and ordered Lo to pay the plaintiff KJS with legal interests of 6% per annum until fully paid.
ISSUE: Whether or not the deed of assignment extinguished the obligation.
HELD: Yes, the deed of assignment extinguished the obligation.
An assignment of credit, by virtue of which the owner of the credit, the assignor, by a legal cause, such as sale, dacion en pago, exchange or donation and without the consent of the debtor transfers his credit and accessory rights to another, the assignee, who acquires the power to enforce it against the debtor. Petitioner, as assignor, is bound to warrant the existence and legality of the credit at the time of the sale or assignment. When Jonero claimed that it was no longer indebted to petitioner since the latter had also as unpaid obligation to it, it essentially meant that its obligation to the petitioner has been extinguished by compensation. Petitioner was found in breach of his obligation under the Deed of assignment.
Decision affirmed with modification.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
412
PNB v. Court of Appeals Philippine National Bank, Petitioner, versus Court of Appeals and Loreto Tan, Respondents. (G.R. No. 108630, April 2, 1996, 2nd Division) ROMERO, J: FACTS: Private respondent Loreto Tan (Tan) is the owner of a parcel of land abutting the national highway. Expropriation proceedings were instituted by the government. Tan filed a motion requesting the issuance of an order for the release to him of the expropriation price of P32,480.00. Philippine National Bank (PNB) was required by the trial court to release to Tan the amount and deposited it by the government.
Petitioner, through its assistant manager Tagamolila, issued a check and delivered the same to Sonia Gonzaga on the strength of the Special Power of Attorney, without Tan‘s knowledge, consent and authority. The Regional Trial Court ordered petitioner and Tagamolila to pay private respondent jointly and severally the amount worth legal interests, damages and attorney‘s fees. The Court of Appeals affirmed the decision.
ISSUE: Whether or not the Special Power of Attorney authorized Sonia Gonzaga to receive payment intended for private respondent.
HELD: No. The Special Power of Attorney did not authorized Sonia Gonzaga to receive payment intended for private respondent.
Contrary to petitioner's contention that all that is needed to be proved is the existence of the SPA, it is also necessary for evidence to be presented regarding the nature and extent of the alleged powers and authority granted to Sonia Gonzaga; more specifically, to determine whether the document indeed authorized her to receive payment intended for private respondent. However, no such evidence was ever presented.
There is no question that no payment had ever been made to private respondent as to the check was never delivered to him. Under Article 1233 of the Civil Code, a debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be. The burden of proof of sad payment lies with the debtor. The decision of the Court of Appeals is affirmed with the modification that the award by the Regional Trial Court of P5,000 as attorney‘s fees is reinstated.
Decision affirmed with modifications. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
413
Cathay Pacific Airways v. Vazquez Cathay Pacific Airways, LTD., Petitioner, versus Spouses Daniel Vazquez and Maria Luisa Madrigal Vazquez, Respondents. (G.R. No. 150843, March 14, 2003, 1st Division) DAVIDE, JR., C.J.: FACTS: Cathay is a common carrier engaged in transporting passenger and goods by air. Spouses Vazquez are Gold Card Members of its Marc Polo Club. The Spouses, with two friends and a maid went to Hong Kong for business. Spouses have the Business class boarding passes and economy class for the maid. When boarding, the ground stewardess declared a seat change from Business Class to First Class for the Vazquez. The Spouses refused but after insistence by the stewardess, the spouses gave in. When they arrived in Manila, spouses demanded to be indemnified in the amount of one million ―for the humiliation and embarrassment‖ caused by the employee.
The Regional Trial Court ruled for the Vazquez ordering Cathay Airways to pay the spouses, stating further that there was a breach of contract not because of overbooking but because the latter pushed through with the upgrading despite objections of the spouses.
ISSUE: Whether or not an involuntary upgrading of an airline‘s accommodation at no extra costs caused a breach of contract of carriage.
HELD: Yes. An involuntary upgrading of an airline‘s accommodation at no extra costs caused a breach of contract of carriage.
The Vazquezes are aware of the privileges, but such privileges may be waived. Spouses should have been consulted first. It should not have been imposed on them over their vehement objection. By insisting of the upgrade, Pacific Airways breached its contract of carriage with the Vazquezes. Nominal damages are adjudicated in order that the right of the plaintiff, which have been violated may be vindicated or recognized and not for indemnifying the plaintiff for any loss suffered by him.
Petition is partly granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
414
Citibank v. Sabeniano Citibank, N.A. (Formerly First National City Bank) and Investor‟s Finance Corporation, doing business under the name and style of FNCB Finance, Petitioners, versus Modesta R. Sabeniano, Respondent. (G.R. No. 156132, February 6, 2007, 3rd Division) CHICO-NAZARIO, J: FACTS: Petitioner Citibank is a banking corporation duly authorized under the laws of the United States of America to do commercial banking activities n the Philippines. Sabeniano was a client of both Petitioners Citibank and First National City Bank (FNCB) Finance. Respondent filed a complaint against petitioners claiming to have substantial deposits, the proceeds of which were supposedly deposited automatically and directly to respondent‘s account with the petitioner Citibank and that allegedly petitioner refused to despite repeated demands. Petitioner alleged that respondent obtained several loans from the former and in default, Citibank exercised its right to set-off respondent‘s outstanding loans with her deposits and money.
The Regional Trial Court declared the act illegal, null and void and ordered the petitioner to refund the amount plus interest, ordering Sabeniano, on the other hand to pay Citibank her indebtedness. The Court of Appeals affirmed the decision entirely in favor of the respondent.
ISSUE: Whether or not petitioner may exercise its right to set-off respondent‘s loans with her deposits and money in Citibank-Geneva.
HELD: No. The petitioner cannot exercise its right to set-off respondent‘s loans with her deposits and money in Citibank-Geneva.
The Court maintains its original position in the Decision that the offsetting or compensation of respondent‘s loans with Citibank-Manila using her dollar accounts with Citibank-Geneva cannot be effected. The parties cannot be considered principal creditor of the other. As for the dollar accounts, respondent was the creditor and Citibank-Geneva was the debtor; and as for the outstanding loans, petitioner Citibank, particularly Citibank-Manila, was the creditor and respondent was the debtor. Since legal compensation was not possible, petitioner Citibank could only use respondent‘s dollar accounts with Citibank-Geneva to liquidate her loans if she had expressly authorized it to do so by contract. Respondent cannot be deemed to have authorized the use of her dollar deposits with Citibank-Geneva to liquidate her loans with petitioner Citibank when she signed the promissory notes for her loans which all contained the provision. Motion denied. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
415
Telengton Bros. v. US Lines Telengtan Brothers & Sons, Inc., Petitioner, versus United States Lines, Inc. and the Court of Appelas, Respondents. (G.R. No. 132284, February 28, 2006, 2nd Division) GARCIA, J: FACTS: Petitioner Telengtan Brothers and Sons is a domestic corporation while United States Lines is a foreign corporation engaged in overseas shipping. It was made applicable that consignees who fail to take delivery of their containerized cargo within the 10-day free period are liable to pay demurrage charges.
On June 22, 1981, United States Lines filed a suit against petitioner seeking payment of demurrage charges plus interest and damages. Petitioner incurred P94,000 which the latter refused to pay despite repeated demands. Petitioner disclaims liability alleging that it has never entered into a contract nor signed an agreement to be bound by it.
The Regional Trial Court ruled that petitioner is liable to respondent and all be computed as of the date of payment in accordance with Article 1250 of the Civil Code. The Court of Appeals affirmed the decision.
ISSUE: Whether the re-computation of the judgment award is in accordance with Article 1250 of the Civil Code.
HELD: No. The re-computation of the judgment award is not in accordance with Article 1250 of the Civil Code.
The Supreme Court found as erroneous the trial court‘s decision as affirmed by the Court of Appeals. The Court holds that there has been no extraordinary inflation within the meaning of Article 1250 of the Civil Code. Accordingly, there is no plausible reason for ordering the payment of an obligation in an amount different from what has been agreed upon because of the purported supervention of extraordinary inflation.
In other words, an agreement is needed for the effects of an extraordinary inflation to be taken into account to alter the value of the currency at the time of the establishment of the obligation which, as a rule, is always the determinative element, to be varied by agreement that would find reason only in the supervention of extraordinary inflation or deflation.
Decision affirmed with modifications. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
416
C.F. Sharp v. Northwest Airlines C.F. Sharp & Co., Inc., Petitioner, versus Northwest Airlines, Inc., Respondent. (G.R. No. 133498, April 18, 2002, 1st Division) YNARES-SANTIAGO, J: FACTS: On May 9, 1974, respondent Northwest Airlines, through its Japan Branch, entered into an International Passenger Sales Agency Agreement with petitioner, authorizing the latter to sell its air transport tickets. Petitioner failed to remit the proceeds of the ticket sales, for which reason, respondent filed a collection suit against petitioner before the Tokyo District Court which rendered judgment on January 29, 1981, ordering petitioner to pay respondent the amount of "83,158,195 Yen and damages for the delay at the rate of 6% per annum from August 28, 1980 up to and until payment is completed." Unable to execute the decision in Japan, respondent filed a case to enforce said foreign judgment with the Regional Trial Court of Manila, Branch 54. However, the case was dismissed on the ground of failure of the Japanese Court to acquire jurisdiction over the person of the petitioner. Respondent appealed to the Court of Appeals, which affirmed the decision of the trial court. Respondent filed a petition for review with the Supreme Court. ISSUE: Whether or not the Court of Appeals applied the correct legal rate of interest to which respondent is lawfully entitled.
HELD: No. The Court of Appeals did not apply the correct legal rate of interest to which respondent is lawfully entitled.
In the case at bar, the Court of Appeal‘s failure to apply the correct legal rate of interest, to which respondent is lawfully entitled, amounts to a "plain error." In Eastern Shipping Lines, Inc. v. Court of Appeals, it was held that absent any stipulation, the legal rate of interest in obligations which consists in the payment of a sum of money, as in the present case, is 12% per annum. As stated in the decision of the Court, which is final and executory, petitioner is liable to pay respondent the amount adjudged in the foreign judgment, with "interest thereon at the legal rate 12% per annum from the filing of the complaint therein on August 28, 1980 until the said foreign judgment is fully satisfied." Since petitioner already made partial payments, his obligation was reduced to 61,734,633 Yen.
Thus, petitioner should pay respondent the amount of 61,734,633 Yen plus "damages for the delay at the rate of 6% per annum from August 28, 1980 up to and until payment is completed," with interest thereon at the rate of 12% per annum from the filing of the complaint on August 28, 1980, until fully satisfied.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
417
Padilla v. Paredes Albert R. Padilla, Petitioner, versus Spouses Floresco Paredes and Adelina Paredes, and The Honorable Court of Appeals, Respondents. (G.R. No. 124874, March 17, 2000, 2nd Division) QUISUMBING, J: FACTS: On October 20, 1988, petitioner Albert R. Padilla and private respondents Floresco and Adelina Paredes entered into a contract to sell involving a parcel of land in San Juan, La Union. At that time, the land was untitled although private respondents were paying taxes thereon. Under the contract, petitioner undertook to secure title to the property in private respondents' names. Of the P312,840.00 purchase price, petitioner was to pay a down payment of P50,000.00 upon signing of the contract, and the balance was to be paid within ten days from the issuance of a court order directing issuance of a decree of registration for the property. On December 27, 1989, the court ordered the issuance of a decree of land registration for the subject property. Petitioner made several payments to private respondents, some even before the court issued an order for the issuance of a decree of registration. Still, petitioner failed to pay the full purchase price even after the expiration of the period set. In a letter dated February 14, 1990, private respondents, through counsel, demanded payment of the remaining balance, with interest and attorney's fees, within five days from receipt of the letter. On February 28, 1990, petitioner made a payment of P100,000.00 to private respondents, still insufficient to cover the full purchase price. On May 14, 1990, petitioner instituted an action for specific performance against private respondents, alleging that he had already substantially complied with his obligation under the contract to sell. After trial, the lower court ruled in favor of petitioner, saying that even if petitioner indeed breached the contract to sell, it was only a casual and slight breach that did not warrant rescission of the contract. The Court of Appeals, however, reversed the HELD of the trial court and confirmed private respondents' rescission of the contract to sell. ISSUE: Whether or not the private respondents are entitled to rescind the contract to sell the land to petitioner.
HELD: Yes. The private respondents are entitled to rescind the contract to sell the land to petitioner.
The Supreme Court sustained the HELD of the Court of Appeals that private respondent may validly rescind the contract to sell, however, the reason for this is not that respondents have the power to rescind but because their obligation there under did not arise. The Court of Appeals is correct in ordering the return to petitioner of the amounts received from him by private respondents, on the precept that no one shall be unjustly enriched himself at the expense of another.
Petition denied. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
418
Tibajia v. Court of Appeals Norberto Tibajia, JR. and Carmen Tibajia, Petitioners, versus The Honorable Court of Appeals and Eden Tan, Respondents. (G.R. No. 100290, June 4, 1993, 2nd Division) PADILLA, J: FACTS: A suit for collection of a sum of money was filed by Eden Tan against the Norberto and Carmon Tibajia. A writ of attachment was issued by the trial court on 17 August 1987 and on 17 September 1987, the Deputy Sheriff filed a return stating that a deposit made by the Tibajia spouses in the Regional Trial Court of Kalookan City in the amount of P442,750.00 in another case, had been garnished by him. On 10 March 1988, the Regional Trial Court, Branch 151 of Pasig, Metro Manila rendered its decision in favor of the plaintiff Eden Tan, ordering the Tibajia spouses to pay her an amount in excess of Three Hundred P300,000.00. On appeal, the Court of Appeals modified the decision by reducing the award of moral and exemplary damages. The decision having become final, Eden Tan filed the corresponding motion for execution and thereafter, the garnished funds which by then were on deposit with the cashier of the Regional Trial Court of Pasig, Metro Manila, were levied upon.
On 14 December 1990, the Tibajia spouses delivered to Deputy Sheriff Eduardo Bolima the total money judgment. Private respondent, Eden Tan, refused to accept the payment made by the Tibajia spouses and instead insisted that the garnished funds deposited with the cashier of the Regional Trial Court of Pasig, Metro Manila be withdrawn to satisfy the judgment obligation. On 15 January 1991, defendant spouses (petitioners) filed a motion to lift the writ of execution on the ground that the judgment debt had already been paid. On 29 January 1991, the motion was denied by the trial court on the ground that payment in cashier's check is not payment in legal tender and that payment was made by a third party other than the defendant. A motion for reconsideration was denied on 8 February 1991. Thereafter, the spouses Tibajia filed a petition for certiorari, prohibition and injunction in the Court of Appeals. The appellate court dismissed the petition on 24 April 1991 holding that payment by cashier's check is not payment in legal tender as required by Republic Act No. 529. The motion for reconsideration was denied on 27 May 1991.
ISSUE: Whether or not payment by means of check is considered payment in legal tender.
HELD: No. The payment by means of check is considered payment in legal tender.
The HELD applies the statutory provisions which lay down the rule that a check is not legal tender and that a creditor may validly refuse payment by check, whether it be a manager‘s check, cashier‘s or personal check. The decision of the Court of Appeals is affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
419
Petition denied.
DBP v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
420
Development Bank of the Philippines and Privatization and Management Office (formerly Asset Privatization Trust), Petitioners, versus Hon. Court of Appeals, Philippine United Foundry and Machinery Corp. and Philippine Iron Manufacturing Co., Inc., Respondents. (G.R. No. 138703, June 30, 2006, 2nd Division) AZCUNA, J: FACTS: In March 1968, Development Bank of the Philippines (DBP) granted to private respondents an industrial loan in the amount of P2,500,000 – P500,000 in cash and P2,000,000 in DBP Progress Bank. It was evidenced by a promissory note and secured by a mortgage executed by respondents over their present and future properties. Another loan was granted by DBP in the form of a 5-year revolving guarantee to P1,700,000.
In 1975, the outstanding accounts with DBP were restructured in view of failure to pay. Amounting to P4,655,992.35 were consolidated into a single account. On the other hand, all accrued interest and charges due amounting to P3,074,672.21 were denominated as ―Notes Taken for Interests‖ and evidenced by a separate promissory note. For failure to comply with its obligation, DBP initiated foreclosure proceedings upon its computation that respondent‘s loans were arrears by P62,954,473.68. Respondents contended that the collection was unconscionable if not unlawful or usurious. The Regional Trial Court, as affirmed by the Court of Appeals, ruled in favor of the respondents.
ISSUE: Whether or not the prestation to collect by the DBP is unconscionable or usurious.
HELD: Yes. The prestation to collect by the DBP is unconscionable and usurious.
Due to the variable factors mentioned above, it cannot be determined whether DBP did in fact apply an interest rate higher than what is prescribed under the law. It appears on the records, however, that DBP attempted to explain how it arrived at the amount stated in the Statement of Account it submitted in support of its claim but was not allowed by the trial court to do so citing the rule that the best evidence of the same is the document itself. DBP should have been given the opportunity to explain its entries in the Statement of Account in order to place the figures that were cited in the proper context. Assuming the interest applied to the principal obligation did, in fact, exceed 12%, in addition to the other penalties stipulated in the note, this should be stricken out for being usurious.
Petition is partly granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
421
Vitarich vs. Losin Vitarich Corporation, Petitioner, versus Chona Losin, Respondent. (G.R. No. 181560, November 15, 2010, 2nd Division) MENDOZA, J: FACTS: Respondent Chona Losin (Losin) was in the fastfood and catering services business named Glamours Chicken House. Since 1993, Vitarich Corp (Vitarich), particularly its Davao Branch, had been her supplier of poultry meat. In the months of July to November 1996, Losin‘s orders of dressed chicken and other meat products allegedly amounted to P921,083.10. During this said period, Losin‘s poultry meat needs for her business were serviced by Rodrigo Directo (Directo) and Allan Rosa (Rosa), both salesmen and authorized collectors of Vitarich, and Arnold Baybay (Baybay), a supervisor of said corporation.
On August 24, 1996, Directo‘s services were terminated by Vitarich without Losin‘s knowledge. He left without turning over some supporting invoices covering the orders of Losin. Rosa and Baybay, on the other hand, resigned on November 30, 1996 and December 30, 1996, respectively. Just like Directo, they did not also turn over pertinent invoices covering Losin‘s account. On February 12, 1997, demand letters were sent to Losin covering her alleged unpaid account amounting to P921,083.10. It appears that Losin had issued three (3) checks amounting to P288,463.30 which were dishonored either for reasons - Drawn Against Insufficient Funds (DAIF) or Stop Payment.
On March 2, 1998, Vitarich filed a complaint for Sum of Money against Losin, Directo, Rosa, and Baybay before the Regional Trial Court. The Regional Trial Court rendered its decision in favor of Vitarich, however the Court of Appeals rendered the assailed decision in favor of Losin.
ISSUE: Whether or not there is already payment on the part of Losin.
HELD: No. There was no payment on the part of Losin
As a general rule, one who pleads payment has the burden of proving it. The burden rests on the debtor to prove payment, rather than on the creditor to prove nonpayment. The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment. True, the law requires in civil cases that the party who alleges a fact has the burden of proving it. Section 1, Rule 131 of the Rules of Court provides that the burden of proof is the duty of a party to prove the truth of his claim or defense, or any fact in issue by the amount of evidence required by law. In this case, however, the burden of proof is on Losin because she alleges an affirmative defense, namely, payment. Losin failed to discharge that burden. After examination of the evidence presented, this Court is of the opinion that Losin failed to present a single Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
422
official receipt to prove payment. This is contrary to the well-settled rule that a receipt, which is a written and signed acknowledgment that money and goods have been delivered, is the best evidence of the fact of payment although not exclusive. All she presented were copies of the list of checks allegedly issued to Vitarich through its agent Director, a Statement of Payments Made to Vitarich, and apparently copies of the pertinent history of her checking account with Rizal Commercial Banking Corporation (RCBC).
Appeal granted.
Metrobank vs. Cabilzo
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
423
Metropolitan Bank and Trust Company, Petitioners, versus Renato D. Cabilzo, Respondent. (G.R. No. 154469, December 6, 2006, 1st Division) CHICO-NAZARIO, J: FACTS: On November 12, 1994, Renato Cabilzo (Cabilzo) issued a Metrobank check, payable to ―CASH‖ and postdated on 24 November 1994 in the amount of P1, 000.00. The check was drawn against Cabilzo‘s Account with Metrobank Pasong Tamo Branch and was paid by Cabilzo to a certain Mr. Marquez, as his sales commission. Subsequently, the check was presented to Westmont Bank for payment. Westmont Bank, in turn, indorsed the check to Metrobank for appropriate clearing. After the entries thereon were examined, including the availability of funds and the authenticity of the signature of the drawer, Metrobank cleared the check for encashment in accordance with the Philippine Clearing House Corporation (PCHC) Rules. On November 16, 1994, Cabilzo‘s representative was at Metrobank Pasong Tamo Branch to make some transaction when he was asked by bank personnel if Cabilzo had issued a check in the amount of P91, 000.00 to which the former replied in the negative. On the afternoon of the same date, Cabilzo himself called Metrobank to reiterate that he did not issue a check in the amount of P91, 000.00 and requested that the questioned check be returned to him for verification, to which Metrobank complied. Upon receipt of the check, Cabilzo discovered that Metrobank Check which he issued in the amount of P1, 000.00 was altered to P91, 000.00 and the date November 24 1994 was changed to November 14,1994. Hence, Cabilzo demanded that Metrobank re-credit the amount of P91, 000.00 to his account. Metrobank, however, refused reasoning that it has to refer the matter first to its Legal Division for appropriate action. Repeated verbal demands followed but Metrobank still failed to re-credit the amount of P91, 000.00 to Cabilzo‘s account. On 30 June 1995, Cabilzo, thru counsel, finally sent a letterdemand to Metrobank for the payment of P90, 000.00, after deducting the original value of the check in the amount of P1, 000.00. Such written demand notwithstanding, Metrobank still failed or refused to comply with its obligation. Consequently, Cabilzo instituted a civil action for damages against Metrobank.
ISSUE: Whether or not equitable estoppel can be appreciated in favor of petitioner.
HELD: Yes. The equitable estoppel can be appreciated in favor of petitioner.
Metrobank cannot lightly impute that Cabilzo was negligent and is therefore prevented from asserting his rights under the doctrine of equitable estoppel when the facts on record are bare of evidence to support such conclusion. The doctrine of equitable estoppel states that when one of the two innocent persons, each guiltless of any intentional or moral wrong, must suffer a loss, it must be borne by the one whose erroneous conduct, either by omission or commission, was the cause of injury. Metrobank‘s reliance on this dictum is misplaced. For one, Metrobank‘s representation that it is an innocent party is flimsy and evidently, misleading. At the same time, Metrobank cannot asseverate that Cabilzo was negligent and this negligence was the proximate cause of the loss in the absence of even a scintilla proof Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
424
to buttress such claim. Negligence is not presumed but must be proven by the one who alleges it, which petitioner failed to.
Petition denied.
Almeda v. Bathala Marketing
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
425
Eufemia Almeda and Romel Almeda, Petitioners, versus Bathala Marketing Industries, Inc., Respondent. (G.R. No. 150806, January 28, 2008, 3rd Division) NACHURA, J: FACTS: In May 1997, respondent Bathala Marketing, renewed its Contract of Lease with Ponciano Almeda. Under the contract, Ponciano agreed to lease a porton of Almeda Compound for a monthly rental of P1,107,348.69 for four years. On January 26, 1998, petitioner informed respondent that its monthly rental be increased by 73% pursuant to the condition No. 7 of the contract and Article 1250. Respondent refused the demand and insisted that there was no extraordinary inflation to warrant such application. Respondent refused to pay the Value Added Tax (VAT) and adjusted rentals as demanded by the petitioners but continually paid the stipulated amount.
The Regional Trial Court ruled in favor of the respondent and declared that plaintiff is not liable for the payment of VAT and the adjustment rental, there being no extraordinary inflation or devaluation. The Court of Appeals affirmed the decision deleting the amounts representing 10% VAT and rental adjustment.
ISSUE: Whether or not the amount of rentals due the petitioners should be adjusted by reason of extraordinary inflation or devaluation.
HELD: No. The amount of rentals due the petitioners should not be adjusted by reason of extraordinary inflation or devaluation.
Petitioners are stopped from shifting to respondent the burden of paying the VAT. The sixth Condition states that respondent can only be held liable for new taxes imposed after the effectivity of the contract of lease, after 1977, VAT cannot be considered a ―new tax‖. Neither can petitioners legitimately demand rental adjustment because of extraordinary inflation or devaluation. Absent an official pronouncement or declaration by competent authorities of its existence, its effects are not to be applied.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
426
PCI vs Ng Shueng Ngor Equitable PCI Bank, Aimee Yu and Bejan Lionel Apas, Petitioners, versus Ng Shueng Ngor doing business under the name and style "KEN MARKETING," Ken Appliance Division, Inc. and Benjamin E. Go, Respondents. (G.R. No. 171545, December 19, 2007, 1st Division) CORONA, J: FACTS: On October 7, 2001, respondents Ng Shueng Ngor (Ngor) and Benjamin Go (Go) filed an action for amendment and/or reformation of documents and contracts against Equitable Bank and its employees. They claimed that they were induced by the bank to avail of its peso and dollar credit facilities by offering low interests so they accepted and signed Equitable Bank‘s proposal. They alleged that they were unaware that the documents contained escalation clauses granting Equitable Bank authority to increase interest without their consent. These were rebutted by the bank.
The Regional Trial Court ordered the use of the 1996 dollar exchange rate in computing respondent‘s dollar-denominated loans. The Court of Appeals granted the bank‘s application for injunction but the properties were sold to public auction.
ISSUE: Whether or not there was an extraordinary deflation.
HELD: No. There was no extraordinary deflation.
Extraordinary inflation exists when there is an unusual decrease in the purchasing power of currency and such decrease could not be reasonably foreseen or was beyond the contemplation of the parties at the time of the obligation. Deflation is an inverse situation.
Despite the devaluation of the peso, Bangko Sentral ng Pilipinas never declared a situation of extraordinary inflation. Respondents should pay their dollar denominated loans at the exchange rate fixed by the Bangko Sentral on the date of maturity.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
427
Palanca v. Guides Simplicio A. Palanca, Petitioner, versus Ulyssis Guides joined by her husband Lorenzo Guides, Respondent. (G.R. No. 146365, February 28, 2005, 2nd Division) TINGA, J: FACTS: In August 1983, petitioner Simplicio Palanca (Palanca) executed a contract to sell a parcel of land on installment with Jopson for P11,250. Jopson paid petitioner P1,650 as downpayment, leaving a balance of P9600. In December 1983, Jopson assigned ad transferred all her rights and interests over the property to respondent Guides. Believing that she had fully paid the purchase prize, respondent found out when she verified with the Register of Deeds that the property in question was not in the name of the petitioner and it was in the name of a certain Carissa T. de Leon. Respondent went to petitioner‘s office to secure the title to the lot, but petitioner informed her that she could not as she still had unpaid accounts. Thereafter, respondent, through a lawyer, sent a letter to petitioner demanding compliance with his obligation and the release of the title in her name. As petitioner did not heed her demands, respondent, joined by her husband, filed a Complaint for specific performance with damages on 16 December 1987. Petitioner sought the dismissal of the complaint on the ground of respondent‘s alleged failure to comply with the mandatory requirement of Presidential Decree (P.D.) No. 1508. Petitioner stated that she refused to execute the document of sale in favor of the respondent since the latter failed with the said obligation- that he was not paid the complete amount in the contract. The Regional Trial Court ruled in favor of the plaintiff and against Palanca, ordering him to execute a Deed of Absolute Sale, reimburse plaintiff the amount paid n excess and for damages. ISSUE: Whether or not the petitioner‘s claim of unpaid charges from the respondent is proper.
HELD: No. The petitioner‘s claim of unpaid charges from the respondent was not proper.
Petitioner was deemed to have waived his right to present evidence and thus was unable to adduce evidence of such inflation or fluctuation. Even if there were such, petitioner did not make a demand on respondent for the satisfaction of the claim.
When petitioner accepted respondent‘s installment payments despite the alleged charges, and without any showing that he protested the irregularity of such payment, nor demanded the payment of the alleged charges, respondent‘s liability, if any for said charges is deemed fully satisfied.
Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
428
PCIB v. Court of Appeals Philippine Commercial International Bank, Petitioner, versus Court of Appeals, Atlas Consolidated Mining & Development Corporation, Respondents. (G.R. No. 121989, January 31, 2006, 3rd Division) TINGA, J: FACTS: Philippine Commercial International Bank (PCIB) and Manila Banking Corporation (MBC) were joint bidders in a foreclosure sale held of assorted mining machinery and equipment previously mortgaged to them by Philippine Iron Mines. Atlas Consolidated Mining & Development Corporation (Atlas) agreed to purchase some of these properties and the sale was evidenced by a Deed of Sale with a down payment of P12,000,000 and the balance of P18,000,000 payable in 6 monthly installments. In compliance with the contract, Atlas issued Hong Kong and Shanghai Bank check amounting to P12,000,000.
Atlas paid to National Mines and Allied Workers Union (NAMAWU) the amount of P4,298,307.77 in compliance with the writ of garnishment issued against Atlas to satisfy the judgment in favor of NAMAWU. Atlas alleged that there was overpayment, hence the suit against PCIB to obtain reimbursement. PCIB contended that Atlas still owed P908,398.75 because NAMAWU had been partially paid in the amount of P601,260.00. The Regional Trial Court ruled against Atlas to pay P908,398.75 to PCIB. However, the Court of Appeals reversed the decision.
ISSUE: Whether Atlas had complied with its obligation to PCIB.
HELD: No. Atlas did not comply with its obligation
While the original amount sought to be garnished was P4,298,307.77, the partial payment of P601,260.00 naturally reduced it to P3,697,047.77. Clearly, Atlas overpaid NAMAWU. It will be recalled that upon receipt of the writ of garnishment, Atlas immediately paid NAMAWU, without making any investigation or consultation with PCIB. Article 1236 of the Civil Code applies in this instance. It provides that whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. PCIB is the debtor in this case, it having purchased along with MBC legally garnished properties, while Atlas is the third person who paid the obligation of the debtor without the latter‘s knowledge and consent. Since Atlas readily paid NAMAWU without the knowledge and consent of PCIB, Atlas may only recover from PCIB or, more precisely charge to PCIB, only the amount of payment which has benefited the latter. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
429
Petition is partly granted.
Lagon v. Hooven Comalco
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
430
Jose V. Lagon, Petitioner, versus Hooven Comalco Industries, Inc., Respondent. (G.R. No. 135657, January 17, 2001, 2nd Division) BELLOSILLO, J: FACTS: Petitioner Jose Lagon (Lagon) is the owner of a commercial building while respondent is a domestic corporation known to be the biggest manufacturer and installer of aluminum materials in the country. Parties entered into two contracts whereby for a total consideration of P104,870. Hooven Comalco Industries (Hooven) agreed to sell and install various aluminum materials in Lagon‘s building. Upon execution of contracts, Lagon paid Hooven P48,000 in advance.
On February 24, 1987, Hooven commenced an action for sum of money. It was alleged that materials were delivered and installed but P69,329 remained unpaid even after the completion of the project and despite repeated demands. The Regional Trial Court held partly on the basis of the ocular inspection finding that the total actual deliveries cost P87,140 deducting there from P48,000. The Court of Appeals set aside the decision and held in favor of Hooven.
ISSUE: Whether or not all the materials specified in the contracts had been delivered and installed by respondent in petitioner‘s commercial building.
HELD: No. Not all of the materials specified in the contracts had been delivered and installed by respondent in petitioner‘s commercial building.
Essentially, respondent has the burden of establishing its affirmative allegations of complete delivery and installation of the materials, and petitioner's failure to pay therefor. In this regard, its evidence on its discharge of that duty is grossly anemic. We emphasize that litigations cannot be properly resolved by suppositions, deductions, or even presumptions, with no basis in evidence, for the truth must have to be determined by the hard rules of admissibility and proof.
Decision modified.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
431
BPI v. Court of Appeals Bank of the Philippine Islands (successor-in- interest of COMMERCIAL AND TRUST CO.), Petitioner, versus Hon. Court of Appeals, Eastern Plywood Corp. and Benigno D. Lim, Respondents. (G.R. No. 104612 May 10, 1994, 1st Division) DAVIDE, JR., J: FACTS: Private respondent, Eastern Plywood Corporation (Eastern) and Benigno D. Lim (Lim), an officer and stock holder of Eastern held at least one joint bank account with the Commercial Bank and Trust Co. (CBTC), the predecessor-in – interest of the petitioner Bank of the Philippine Islands (BPI). In March 1975, checking account with Lim in the amount of P120,000 was opened by Mariano Velasco (Velasco) with funds withdrawn from the account of Eastern and Lim. Velasco died and at the time of his death, the outstanding balance of the account stood at P662,522.87. Thereafter, Eastern obtained a loan of P73,000 from CBTC in addition, Eastern and Lim and CBTC signed another document entitled ― Holdout agreement‖.
In the settlement proceeding of Velasco‘s estate, the whole balance of P331,261.44 in the joint account of Velasco and Lim was claimed as part of Velasco‘s estate. The interstate court granted the urgent motion of heirs of Velasco to withdraw the deposit and authorize them to divide among themselves the amount. BPI filed a complaint against Lim and Eastern demanding payment of promissory note for P73,000. The Regional Trial Court ruled that the promissory note is subject to the holdout agreement. The Court of Appeals affirmed the division.
ISSUE: Whether or not BPI is still liable to the private respondent on the account subject to the holdout agreement after it is withdrawn by the heirs of Velasco.
HELD: Yes. BPI is still liable to the private respondent on the account subject to the holdout agreement after it is withdrawn by the heirs of Velasco.
The account was proved to belong to Eastern even if it was in the names of Lim and Velasco. As the real creditor of the bank, Eastern has the right to withdraw it or demand payment thereof. BPI cannot be relieved of its duty to pay Eastern simply because it already allowed the heirs of Velasco to withdraw the whole balance of the account. Payment made by the debtor to the wrong party does not extinguish the obligation as to the creditor who is without fault or negligence.
Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
432
Republic v. Thi Thu Thuy De Guzman Republic of the Philippines, represented by the Chief of the Philippine National Police, Petitioner, versus Thi Thu Thuy T. De Guzman, Respondent. (G.R. No. 175021, June 15, 2011, 1st Division) LEONARDO-DE CASTRO, J: FACTS: On December 8, 1995, the PNP Engineering Services (PNP), released a Requisition and Issue Voucher for the acquisition of various building materials amounting to P2,288,562.60 for the construction of a four-storey condominium building with roof deck at Camp Crame, Quezon City. Respondent averred that on December 11, 1995, Montaguz General Merchandise (MGM) and petitioner, represented by the PNP, through its chief, executed a Contract of Agreement (the Contract) wherein MGM, for the price of P2,288,562.60, undertook to procure and deliver to the PNP the construction materials itemized in the purchase order attached to the Contract. Respondent claimed that after the PNP Chief approved the Contract and purchase order, MGM, proceeded with the delivery of the construction materials, as evidenced by Delivery Receipts and the "Report of Public Property Purchase" issued by the PNP‘s Receiving and Accounting Officers. Respondent asseverated that following the PNP‘s inspection of the delivered materials on March 4, 1996, the PNP issued two Disbursement Vouchers. The respondent sent a letter dated to the PNP, demanding the payment of P2,288,562.60 for the construction materials MGM procured for the PNP under their December 1995 Contract. The PNP, replied to respondent‘s counsel, informing her of the payment made to MGM via Land Bank of the Philippines (LBP). Respondent denied having ever received the LBP check. On May 5, 1999, respondent filed a Complaint for Sum of Money against the petitioner.
ISSUE: Whether or not there is already extinguishment of obligation.
HELD: No. The obligation is not yet extinguished In general, a payment in order to be effective to discharge an obligation must be made to the proper person. Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to receive the particular payment. Payment made to one having apparent authority to receive the money will, as a rule, be treated as though actual authority had been given for its receipt. Likewise, if payment is made to one who by law is authorized to act for the creditor, it will work a discharge. The receipt of money due on a judgment by an officer authorized by law to accept it will, therefore, satisfy the debt.
The respondent was able to establish that the LBP check was not received by her or by her authorized personnel. The PNP‘s own records show that it was claimed and signed for by Cruz, who is openly known as being connected to Highland Enterprises, another contractor. Hence, absent any showing that the respondent agreed to the payment of the contract price to another person, or that she authorized Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
433
Cruz to claim the check on her behalf, the payment, to be effective must be made to her.
Petition denied.
Audion Electric v. NLRC
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
434
Audio Electric Co., Inc., Petitioner, versus National Labor Relations Commissions and Nicolas Madolid, Respondents. (G.R. No. 106648, June 17, 1999, 3rd Division) GONZAGA-REYES, J: FACTS: Complainant Nicolas Madolid was employed by respondent Audion Electric Company on June 30, 1976 as fabricator and continuously rendered service assigned in different offices or projects as helper electrician, stockman and timekeeper. He had rendered 13 years of continuous, loyal and dedicated service with a clean record. On August 3, complainant was surprised to receive a letter informing him that he will be considered terminated after the turnover of materials, including respondents, tools and equipment not later than August 15, 1989. Complainant claims that he was dismissed without justifiable cause and due process and that his dismissed was done in bad faith which renders the dismissal illegal. For this reason, he claims that he is entitled to reinstatement with full backwages. He also claims that he is entitled to moral and exemplary damages. He includes payment of his overtime pay, project allowance, minimum wage increase adjustment, proportionate 13th month pay and attorney's fees. On November 15, 1990, Labor Arbiter Cresencio R. Iniego rendered a decision in favor of complainant. Petitioner appealed to the National Labor Relations Commission (NLRC) which rendered the questioned Resolution dated March 24, 1992 dismissing the appeal. The motion for reconsideration filed by petitioner was denied by the NLRC in its Order dated July 31, 1992. ISSUE: Whether the respondent NLRC committed grave abuse of discretion when it ruled that private respondent was a regular employee and not a project employee.
HELD: No. The respondent NLRC did not commit grave abuse of discretion when it ruled that private respondent was a regular employee and not a project employee.
Private respondent‘s employment status was established by the certification of employment issued by the petitioner. The rule is that findings of facts of the NLRC affirming those of the Labor Arbiter are entitled to a great weight and will not be disturbed if they were supported by substantial evidence. There was no grave abuse of discretion committed by NLRC in finding that respondent was not a project employee. Decision of NLRC is affirmed with modification deleting the awards of damages and attorney‘s fees.
Resolutions are affirmed with modifications.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
435
Land Bank of the Philippines v. Ong LAND BANK OF THE PHILIPPINES, Petitioner, versus ALFREDO ONG, Respondent. (G.R. No. 190755, November 24, 2010, 1st Division) VELASCO, JR., J: FACTS: Spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi City in the amount of PhP16 million. The loan was secured by three (3) residential lots, five (5) cargo trucks, and a warehouse. Under the loan agreement, PhP6 million of the loan would be short-term and would mature on February 28, 1997, while the balance of PhP 10 million would be payable in seven (7) years. The Notice of Loan Approval dated February 22, 1996 contained an acceleration clause wherein any default in payment of amortizations or other charges would accelerate the maturity of the loan. Subsequently, however, the Spouses Sy found they could no longer pay their loan. They sold three (3) of their mortgaged parcels of land for PhP 150,000 to Angelina Gloria Ong, Evangeline‘s mother, under a Deed of Sale with Assumption of Mortgage. Evangeline‘s father, petitioner Alfredo Ong, later went to Land Bank to inform it about the sale and assumption of mortgage. Atty. Edna Hingco, the Legazpi City Land Bank Branch Head, told Alfredo and his counsel Atty. Ireneo de Lumen that there was nothing wrong with the agreement with the Spouses Sy but provided them with requirements for the assumption of mortgage. They were also told that Alfredo should pay part of the principal which was computed at PhP 750,000 and to update due or accrued interests on the promissory notes so that Atty. Hingco could easily approve the assumption of mortgage. Two weeks later, Alfredo issued a check for PhP 750,000 and personally gave it to Atty. Hingco. On December 12, 1997, Alfredo initiated an action for recovery of sum of money with damages against Land Bank in Civil Case No. T-1941, as Alfredo‘s payment was not returned by Land Bank. The RTC held that that under the principle of equity and justice, the bank should return the amount Alfredo had paid with interest at 12% per annum computed from the filing of the complaint. The Regional Trial Court (RTC) further held that Alfredo was entitled to attorney‘s fees and litigation expenses for being compelled to litigate. The Court of Appeals affirmed the RTC Decision. ISSUE: Whether or not Art. 1236 of the Civil Code should apply in the instant case. HELD: Yes. Art. 1236 of the Civil Code should apply in the instant case. The Court agrees with Land Bank on this point as to the first part of paragraph 1 of Art. 1236. Land Bank was not bound to accept Alfredo‘s payment, since as far as the former was concerned, he did not have an interest in the payment of the loan of the Spouses Sy. It is clear from the records that Land Bank required Alfredo to make payment before his assumption of mortgage would be approved. He was informed that the certificate of title would be transferred accordingly. He, thus, made payment not as a debtor but as a prospective mortgagor. Alfredo, as a third person, did not, therefore, have an interest in the fulfilment of the obligation of the Spouses Sy, since his interest hinged on Land Bank‘s approval of his application, which was denied. The circumstances of the instant case show that the second paragraph of Art. 1236 does not apply. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
436
Appeal denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
437
Binalbagan v. CA BINALBAGAN TECH. INC., and HERMILO J. NAVA, petitioners, versus THE COURT OF APPEALS, MAGDALENA L. PUENTEVELLA, ANGELINA P. ECHAUS, ROMULO L. PUENTEVELLA, RENATO L. PUENTEVELLA, NOLI L. PUENTEVELLA and NELIA LOURDES P. JACINTO, respondents. (G.R. No. 100594, March 10, 1993, 3rd Division) MELO, J: FACTS: On May 11, 1967, private respondents, through Angelina P. Echaus, in her capacity as Judicial Administrator of the intestate estate of Luis B. Puentevella, executed a Contract to Sell and a Deed of Sale of forty-two subdivision lots within the Phib-Khik Subdivision of the Puentevella family, conveying and transferring said lots to petitioner Binalbagan Tech., Inc. (hereinafter referred to as Binalbagan). In turn Binalbagan, through its president, petitioner Hermilo J. Nava (hereinafter referred to as Nava), executed an Acknowledgment of Debt with Mortgage Agreement, mortgaging said lots in favor of the estate of Puentevella. It appears that there was a pending case, Civil Case No. 7435 of Regional Trial Court stationed at Himamaylan, Negros Occidental. In this pending case the intestate estate of the late Luis B. Puentevella, thru Judicial Administratrix, Angelina L. Puentevella sold said aforementioned lots to Raul Javellana with the condition that the vendee-promisee would not transfer his rights to said lots without the express consent of Puentevella and that in case of the cancellation of the contract by reason of the violation of any of the terms thereof, all payments therefor made and all improvements introduced on the property shall pertain to the promissor and shall be considered as rentals for the use and occupation thereof. The trial court rendered a decision in favor of the petitioner because of prescription. Nonetheless, the Court of Appeals reversed said decision. ISSUE: Whether or not the petition is with merit. HELD: No. The petition is without merit. A party to a contract cannot demand performance of the other party's obligations unless he is in a position to comply with his own obligations. Similarly, the right to rescind a contract can be demanded only if a party thereto is ready, willing and able to comply with his own obligations there under (Art. 1191, Civil Code). The prescriptive period within which to institute an action upon a written contract is ten years (Art. 1144, Civil Code). The cause of action of private respondent Echaus is based on the deed of sale afore-mentioned. The deed of sale whereby private respondent Echaus transferred ownership of the subdivision lots was executed on May 11, 1967. She filed Civil Case No. 1354 for recovery of title and damages only on October 8, 1982. From May 11, 1967 to October 8, 1982, more than fifteen (15) years elapsed. Seemingly, the 10year prescriptive period had expired before she brought her action to recover title Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
438
Lorenzo Shipping v. BJ Marthel LORENZO SHIPPING CORP., Petitioner, versus BJ MARTHEL INTERNATIONAL, INC., Respondent. (G.R. No. 145483, November 19, 2004, 2nd Division) CHICO-NAZARIO, J: FACTS: Petitioner Lorenzo Shipping is engaged in coastwise shipping and owns the cargo M/V Dadiangas Express. BJ Marthel is engaged in trading, marketing an dselling various industrial commodities. Lorenzo Shipping ordered for the second time cylinder lines from the respondent stating the term of payment to be 25% upon delivery, the balance payable in 5 bi-monthly equal installments, no again stating the date of the cylinder‘s delivery. It was allegedly paid through post dated checks but the same was dishonored due to insufficiency of funds. Despite due demands by the respondent, petitioner falied contending that time was of the essence in the delivery of the cylinders and that there was a delay since the respondent committed said items ― within two months after receipt of fir order‖. The Regional Trial Court held respondents bound to the quotation with respect to the term of payment, which was reversed by the Court of appeals ordering appellee to pay appellant P954,000 plus interest. There was no delay since there was no demand. ISSUE: Whether or not respondent incurred delay in performing its obligation under the contract of sale HELD: No. Respondent did not incur delay in performing its obligation under the contract of sale. By accepting the cylinders when they were delivered to the warehouse, petitioner waived the claimed delay in the delivery of said items. Supreme Court held that time was not of the essence. There having been no failure on the part of the respondent to perform its obligations, the power to rescind the contract is unavailing to the petitioner. Petition is denied. Court of appeals decision is affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
439
Luzon Development Bank v. Enriquez LUZON DEVELOPMENT BANK, Petitioner, versus ANGELES CATHERINE ENRIQUEZ, Respondent. x-----------------------------------------------------x DELTA DEVELOPMENT and MANAGEMENT SERVICES, INC., Petitioner, versus ANGELES CATHERINE ENRIQUEZ and LUZON DEVELOPMENT BANK, Respondents. (G.R. No. 168646-66, January 12, 2011, 1st Division) DEL CASTILLO, J: FACTS: On July 3, 1995, De Leon (owner of Delta) and his spouse obtained a P4 million loan from the BANK for the express purpose of developing Delta Homes I. To secure the loan, the spouses De Leon executed in favor of the BANK a real estate mortgage (REM) on several of their properties, including Lot 4. Subsequently, this REM was amended10 by increasing the amount of the secured loan from P4 million to P8 million. Both the REM and the amendment were annotated on TCT No. T-637183. Sometime in 1997, DELTA executed a Contract to Sell with respondent Angeles Catherine Enriquez (Enriquez) over the house and lot in Lot 4 with the condition that upon full payment of the total consideration the Owner shall execute a final deed of sale in favor of the Vendee/s. When DELTA defaulted on its loan obligation, the BANK, instead of foreclosing the REM, agreed to a dation in payment or a dacion en pago. Enriquez filed a complaint against DELTA and the BANK before Office of the HLURB19 alleging that DELTA violated the terms of its License to Sell. The HLURB Arbiter Atty. Raymundo A. Foronda upheld the validity of the purchase price, but ordered DELTA to accept payment of the balance of P108,013.36 from Enriquez, and (upon such payment) to deliver to Enriquez the title to the house and lot free from liens and encumbrances. DELTA appealed the arbiter‘s Decision to the HLURB Board of Commissioners. The Commission ordered [Enriquez] to pay [DELTA] the amount due from the time she suspended payment up to filing of the complaint with 12% interest thereon per annum; thereafter the provisions of the Contract to Sell shall apply until full payment is made. The OP adopted by reference the findings of fact and conclusions of law of the HLURB Decisions, which it affirmed in toto. The CA ruled against the validity of the dacion en pago executed in favor of the BANK on the ground that DELTA had earlier relinquished its ownership over Lot 4 in favor of Enriquez via the Contract to Sell. ISSUE: Whether or not the dacion en pago extinguished the loan obligation, such that Delta has no more obligations to the Bank. HELD: The violation of Section 18 renders the mortgage executed by DELTA void therefore the 8 million loans are unsecured. Since the Contract to sell did not transfer ownership of Lot 4 to Enriquez, said ownership remained with DELTA. DELTA could then validly transfer such ownership (as it did) to another person (the BANK). However, the transferee BANK is bound by the Contract to Sell and has to respect Enriquez‘s rights thereunder. BANK is also not entitled to payment of the equivalent value of the lot 4 from DELTA when this court ruled in favor of ENRIQUEZ over lot 4. Like in all contracts, the intention of the parties to the dation in payment is paramount and controlling. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
440
Appealed decision affirmed
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
441
Estanislao v. East-West Bank Corp. SPS. RAFAEL P. ESTANISLAO and ZENAIDA ESTANISLAO, Petitioners, versus EAST WEST BANKING CORPORATION, Respondent. (G.R. No. 178537, February 11, 2008, 3rd Division) YNARES-SANTIAGO, J: FACTS: On July 24,1997, petitioner obtained a loan from the respondent in the amount of P3,925,000 evidenced by a promissory note and secured by two deeds of chattel mortgage covering two dump trucks and a bull dozer . Petitioner defaulted entire obligation became due and demandable. A deed of assignment was drafted by the respondent on October 6, 2000 and March 8, 2001 respectively. Petitioners completed the delivery of heavy equipment mentioned in the deed of assignment to respondent which accepted the same without protest or objection. Respondent manifested to admit an amended complaint for the seizure and delivery of two more heavy equipments which are covered under the second deed of the chattel mortgage. The Regional Trial Court ruled that the deed of assignment and the petitioner‘s delivery of the heavy equipment effectively extinguished the petitioner‘s obligation and respondent as stopped. CA reversed the decision ordering the petitioner the outstanding debt of P4,275,919.69 plus interests. ISSUE: Whether or not the Deed of Assignment operate to extinguish petitioner‘s debt to the respondent such that the replevin suit could no longer prosper. HELD: Yes. The Deed of Assignment operate to extinguish petitioner‘s debt to the respondent such that the replevin suit could no longer prosper. The deed of assignment was a perfected agreement which extinguished petitioner‘s total outstanding obligation to the respondent. The nature of the assignment was a dacion en pago whereby property is alienated to the creditor in the satisfaction of a debt in money. Since the agreement was consummated by the delivery of the last unit of heavy equipment under the deed, petitioner‘s are deemed to have been released from all their obligations from the respondents. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
442
Aquintey v. Tibong AGRIFINA AQUINTEY, Petitioner, versus SPOUSES FELICIDAD AND RICO TIBONG, Respondents. (G.R. No. 166704, December 20, 2006, 1st Division) CALLEJO, SR., J: FACTS: On May 6, 1999, petitioner Aquintey filed before Regional Trial Court Baguio, a complaint for sum of money and damages against respondents. Agrifina alleged that Felicidad secured loans from her on several occasions at monthly interest rates of 6% to 7%. Despite demands, spouses Tibong failed to pay their outstanding loans of P773,000,00 exclusive of interests. However, spouses Tiong alleged that they had executed deeds of assignment in favor of Agrifina amounting to P546,459 and that their debtors had executed promissory notes in favor of Agrifina. Spouses insisted that by virtue of these documents, Agrifina became the new collector of their debts. Agrifina was able to collect the total amount of P301,000 from Felicdad‘s debtors. She tried to collect the balance of Felicidad and when the latter reneged on her promise, Agrifina filed a complaint in the office of the barangay for the collection of P773,000.00. There was no settlement. The Regional Trial Court favored Agrifina. The Court of Appeals affirmed the decision with modification ordering defendant to pay the balance of total indebtedness in the amount of P51,341,00 plus 6% per month. ISSUE: Whether or not the deed of assignment in favor of petitioner has the effect of payment of the original obligation that would partially extinguish the same HELD: Yes. The deed of assignment in favor of petitioner has the effect of payment of the original obligation that would partially extinguish the same. Substitution of the person of the debtor may be affected by delegacion. Meaning, the debtor offers, the creditor accepts a third person who consent of the substitution and assumes the obligation. It is necessary that the old debtor be released from the obligation and the third person or new debtor takes his place in the relation. Without such release, there is no novation. Court of Appeals correctly found that the respondent‘s obligation to pay the balance of their account with petitioner was extinguished pro tanto by the deeds of credit. Court of Appeals decision is affirmed with the modification that the principal amount of the respondents is P33,841. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
443
Vda de Jayme v. CA MAMERTA VDA. DE JAYME, and her children and/or heirs of the late GRACIANO JAYME, namely: WILFREDO, MARCIAL, MANUEL, ANTONIO, all surnamed JAYME; the heirs of DOMINADOR JAYME, namely: SUPREMA (surviving spouse) and his children, namely: ARMANDO, NICANOR, ZENAIDA, CATHERINE, ROSALINE, DORIS, VICKY and MARILYN, all surnamed JAYME; and the heirs of the late NILIE JAYME SANCHEZ, namely, INOCENCIO SANCHEZ (surviving spouse) and her children: ELSA, CONCEPCION, CLEOFE, ALEJANDRO, EFREN and MACRINA, all surnamed SANCHEZ; and FLORA JAYME RAVANES, assisted by her husband, CESAR RAVANES, Petitioners, versus HON. COURT OF APPEALS, SIXTEENTH DIVISION, CEBU ASIANCARS INC., GEORGE NERI, CONNIE NERI, WILLIAM LEONG KOC LEE, EDUARD JAMES LEE, ROBERTO UY KIM, AND CHARLES UY KIM;[1] METROPOLITAN BANK AND TRUST COMPANY, RENE NATIVIDAD AND/OR JOHN DOE in substitution of MAXIMO PEREZ, sued in his capacity as City Sheriff of Mandaue City, Respondents. (G.R. No. 128669, October 4, 2002, 2nd Division) QUISUMBING, J: FACTS: On January 8, 1973, the spouses Graciano and Mamerta Jayme entered into a Contract of Lease with George Neri covering one-half of Lot 2700 owned and registered to the former. The lease was for twenty (20) years. The terms and conditions of the lease contract stipulated that Cebu Asiancars Inc. may use the leased premises as a collateral to secure payment of a loan which Asiancars may obtain from any bank, provided that the proceeds of the loan shall be used solely for the construction of a building which, upon the termination of the lease or the voluntary surrender of the leased premises before the expiration of the contract, shall automatically become the property of the Jayme spouses (the lessors). In October 1977, Asiancars obtained a loan of P6,000,000 from the Metropolitan Bank and Trust Company (MBTC). The entire Lot 2700 was offered as one of several properties given as collateral for the loan. Meeting financial difficulties and incurring an outstanding balance on the loan, MBTC extrajudicially foreclosed the mortgage. A public auction was held on February 4, 1981. MBTC was the highest bidder for P1,067,344.35. The trial court ruled that the REM is valid and binding upon the Jaymes. The Court of Appeals affirmed with modifications. Both the trial and appellate courts found that no fraud attended the execution of the deed of mortgage. The Motion for Reconsideration was denied. ISSUE: Whether or not the dacion en pago by Asiancars in favor of MBTC is valid and binding despite the stipulation in the lease contract that ownership of the building will vest on the Jaymes at the termination of the lease. HELD: YES. The alienation of the building by Asiancars in favor of MBTC for the partial satisfaction of its indebtedness is valid. The ownership of the building had been effectively in the name of the lessee-mortgagor (Asiancars), though with the provision that said ownership be transferred to the Jaymes upon termination of the lease or the voluntary surrender of the premises. The lease was constituted on January 8, 1973 and was to expire 20 years thereafter, or on January 8, 1993. The alienation via dacion en pago was made by Asiancars to MBTC on December 18, 1980, during the subsistence of the lease. At this point, the mortgagor, Asiancars, Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
444
could validly exercise rights of ownership, including the right to alienate it, as it did to MBTC. Assailed decision affirmed.
Caltex v IAC
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
445
CALTEX PHILIPPINES, INC., Petitioner, versus THE INTERMEDIATE APPELLATE COURT and HERBERT MANZANA, Respondents. (G.R. No. 74730, August 25, 1989, 1st Division) MEDIALDEA, J: FACTS: On January 12, 1975, Asia Pacific entered into an agreement with Caltex whereby petitioner agreed to supply private respondent‘s aviation fuel for 2 years. As of June 30, 1980, asia Pacific had an outstanding obligation n the total amount of P 4,072,682.13. Caltex executed a Ded of Assignment wherein it assigned to petitioner its receivables from the National treasury of the Philippines. Pursuant to the Deed of assignment, National Treasury warrant the amount of P5,475,294 representing the refund. Caltex refused to return the excess amount of P510,550.63 because it represented the interest and service charges and the rate of 18% per annum on the unpaid and overdue account of respondent. The Regional Trial Court dismissed the case. The Intermediate Appellate Court reversed the decision and ordered petitioner to return the amount of P510,550.63 to private respondent. ISSUE: Whether or not the Deed of Assignment entered into by the parties constituted dacion en pago, such that the obligation is totally extinguished, hence, no interest and service charges could anymore be imposed. HELD: No. The Deed of Assignment entered into by the parties does not constitute dacion en pago The Deed of Assignment executed by the parties is not a dation in payment in payment and did not totally extinguish respondent‘s obligation. It is clear that in this case, dation in payment does not necessarily mean total extinguishment of the obligation. The obligation is totally extinguished only when the parties, by agreement, express or implied, or by their silence, consider the thing a equivalent to the obligation. Decision of Intermediate Appellate Court set aside.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
446
Lo v. Court of Appeals ANTONIO LO, Petitioner, versus THE HON. COURT OF APPEALS AND NATIONAL ONIONS GROWERS COOPERATIVE MARKETING ASSOCIATION, INC., Respondents. (G.R. No. 141434, September 23, 2003, 3rd Division) CORONA, J: FACTS: At the core of the present controversy are two parcels of land measuring a total of 2,147 square meters, with an office building constructed thereon. Petitioner acquired the subject parcels of land in an auction sale on November 9, 1995 for P20,170,000 from the Land Bank of the Philippines (Land Bank). Private respondent National Onion Growers Cooperative Marketing Association, Inc., an agricultural cooperative, was the occupant of the disputed parcels of land under a subsisting contract of lease with Land Bank. The lease was valid until December 31, 1995. Upon the expiration of the lease contract, petitioner demanded that private respondent vacate the leased premises and surrender its possession to him. Private respondent refused on the ground that it was, at the time, contesting petitioner‘s acquisition of the parcels of land in question in an action for annulment of sale, redemption and damages. Petitioner filed an action for ejectment before the MTC. He asked, inter alia, for the imposition of the contractually stipulated penalty of P5,000 per day of delay in surrendering the possession of the property to him. On September 3, 1996, the trial court decided the case in favor of petitioner. On appeal to the RTC, the MTC decision was affirmed in toto. The CA rendered its assailed decision affirming the decision of the trial court, with the modification that the penalty imposed upon private respondent for the delay in turning over the leased property to petitioner was reduced from P 5,000 to P 1000 per day. ISSUE: Whether or not the Court of Appeals erred in reducing the penalty awarded by the trial court, the same having been stipulated by the parties. HELD: No. the Court of Appeals did not err in reducing the penalty awarded by the trial court, the same having been stipulated by the parties. Generally, courts are not at liberty to ignore the freedom of the parties to agree on such terms and conditions as they see fit as long as they are not contrary to law, morals, good customs, public order or public policy. Nevertheless, courts may equitably reduce a stipulated penalty in the contract if it is iniquitous or unconscionable, or if the principal obligation has been partly or irregularly complied with. This power of the courts is explicitly sanctioned by Article 1229 of the Civil Code which provides: Article 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable. The question of whether a penalty is reasonable or iniquitous is addressed to the sound discretion of the court and depends on several factors, including, but not limited to, the following: the type, extent and purpose of the penalty, the nature of the obligation, the mode of breach and its consequences, the supervening realities, the standing and relationship of the parties. In this case, the stipulated penalty was reduced by the appellate court for being unconscionable and iniquitous. Petition denied; CA decision affirmed. Petition dismissed. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
447
ASI Corp. v. Evangelista ASJ CORPORATION and ANTONIO SAN JUAN, petitioners, versus SPS. EFREN & MAURA EVANGELISTA, Respondents. (G.R. No. 158086, February 14, 2008, 2nd Division) QUISUMBING, J: FACTS: Private respondent Evangelista contracted Petitioner ASJ Corporation for the incubation and hatching of eggs and by products owned by Evangelista Spouses. The contract includes the scheduled payments of the service of ASJ Corporation that the amount of installment shall be paid after the delivery of the chicks. However, the ASJ Corporation detained the chicks because Evangelista Spouses failed to pay the installment on time. ISSUE: Whether or not the detention of the alleged chicks valid and recognized under the law. HELD: No. The detention of the alleged chicks is not valid and not recognized under the law. ASJ Corporation must give due to the Evangelista Spouses in paying the installment, thus, it must not delay the delivery of the chicks. Thus, under the law, they are obliged to pay damages with each other for the breach of the obligation. Therefore, in a contract of service, each party must be in good faith in the performance of their obligation, thus when the petitioner had detained the hatched eggs of the respondents spouses, it is an implication of putting prejudice to the business of the spouses due to the delay of paying installment to the petitioner. Petition partly granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
448
Paculdo v. Regalado NEREO J. PACULDO, Petitioner, versus BONIFACIO C. REGALADO, Respondent. (G.R. No. 123855, November 20, 2000, 1st Division) PARDO, J: FACTS: On December 27, 1990, petitioner Paculdo and respondent Regalado entered into a contract of lease over a parcel of land for 25 years. For the first 5 years, Paculdo would pay monthly rental of P450,000 payable within 5 days of each month, with 2% penalty for very month of delay. Aside from the above lease, petitioner leased 11 other property from respondent. Petitioner failed to pay. Without the knowledge of petitioner, respondent ortgaged the land subject of the lease contract including the improvements to Monte de Piedad. On August 12, 1995, and on subsequent dates thereafter, respondent refused to accept petitioner‘s daily rental payments. Petitioner filed an action for injunction to enjoin respondent from disturbing his possession while respondent filed a complaint for ejectment attaching the demand letters. The Municipal Trial Court held in favor of the plaintiff which was affirmed by the Regional Trial Court. The Court of Appeals found that the petitioner impliedly consented to respondent‘s application of payment to his obligations, thus, dismissed the petition for lack of merit. ISSUE: Whether or not petitioner was truly in arrears in the payment of rentals on the subject property at the time of the filing of the complaint of ejectment. HELD: No. The petitioner was not in arrears in the payment of rentals on the subject property at the time of the filing of the complaint for ejectment. The lease over the Fairview wet market property is the most onerous among all the obligations of petitioner to respondent. It was established that the wet market is a going concern and that petitioner has invested about P35,000,000 in form of improvements, over the property. Hence, petitioner would stand to lose more if the lease would not proceed. CA decision was based on a misapprehension of the facts and the law on the application of payment. Hence, the ejectment case must be dismissed. CA decision is set aside. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
449
CBC v. Court of Appeals CHINA BANKING CORPORATION, ATTYS. REYNALDO M. CABUSORA and RENATO C. TAGUIAM, Petitioners, versus COURT OF APPEALS, HON. PEDRO T. SANTIAGO, SPS. SO CHING and CRISTINA SO, and NATIVE WEST INTERNATIONAL TRADING CORP., Respondents. (G.R. No. 121158, December 5, 1996, 3rd Division) FRANCISCO, J: FACTS: China Banking Corporation extended several loans to Native West and so Ching, Native West‘s President. Native west executed a promissory note in favor of China Bank. So Ching, with the marital consent of his wife additionally executed two real estate mortgages over their properties. The promissory notes matured and despite due demands, neither private respondents paid. China Bank filed petition for the extrajudicial foreclosure of the mortgaged properties. Upon receipt of the foreclosure, private respondents filed a complaint before RTC for accounting with damages and with temporary restraining order. ISSUE: Whether or not the subject additional mortgaged properties of the spouses are not included in the notice of foreclosure HELD: It is well-settled that mortgages given to secure future advancements or loans are valid and legal contracts, and that the amounts named as considerations in said contracts do not limit the amount for which the mortgage may stand as security if from the four corners of the instrument the intent to secure future and their indebtedness can be gathered. Supreme Court found that petitioners are entitled to foreclose the mortgages. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
450
Mobil v. Court of Appeals MOBIL OIL PHILIPPINES, INC., and CALTEX (PHILS.), INC., Petitioners, versus HON. COURT OF APPEALS and CONTINENTAL CEMENT CORPORATION, Respondents. (G.R. No. 103052, May 23, 1997, 1st Division) VITUG, J: FACTS: In May 1982, petitioner Mobil Oil entered into a supply agreement with private respondent Continental Cement, under which the former would supply the latter‘s industrial fuel oil or bunker fuel oil requirements. MOP extended to CCC an unsecured credit line of P2,000,000 against which CCC‘s purchases of oil could initially be charged. MOP made a total of 67 deliveries of BFO, each delivery consisting of 20,000 liters to CCC‘s factory. CCC discovered that, the supposed BFO was in fact, pure water. A joint undertaking was initiated. On August 23, 1983, Caltex informed CCC that it would be the new owner of Mop effective September 1, 1983 and that Caltex would assume all rights and obligations of MOP under all its existing contracts. CA upheld the findings of the trial court that the water-contaminated BFO delivered by MOP caused damages to CCC‘s rotary kin. ISSUE: Whether or not petitioners can be held liable for the contaminated BO delivered on the ground that CFS, as carrier-hauler, was an agent of Mobil. HELD: The Court of Appeals correctly ruled that MOP could be held liable for the acts of CFS. The hauling contract executed by and between MOP and CFS laid out the responsibilities of CFS. The presumption LAID DOWN IN Article 1523 of the Civil Code is not applicable. Decision of the Court of Appeals in affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
451
Dalton v. FGR Realty and Development Corp. SOLEDAD DALTON, Petitioner, versus FGR REALTY AND DEVELOPMENT CORPORATION, FELIX NG, (G.R. No. 172577, January 19, 2011, 2nd Division) CARPIO, J: FACTS: Flora R. Dayrit (Dayrit) owned a 1,811-square meter parcel of land located at the corner of Rama Avenue which Dalton leased portions of the property. In June 1985, Dayrit sold the property to respondent FGR Realty and Development Corporation (FGR). In August 1985, Dayrit and FGR stopped accepting rental payments because they wanted to terminate the lease agreements with Dalton and Sasam, et al. Soledad Dalton built a house which she initially used as a dwelling and store space. She vacated the premises when her children got married. She transferred her residence near F. Ramos Public Market, Cebu City. She constructed the 20 feet by 20 feet floor area house sometime in 1973. The last monthly rental was P69.00. When defendants refused to accept rent al and demanded vacation of the premises, she consignated [sic] her monthly rentals in court. The Regional Trial Court dismissed the 11 September 1985 complaint and ordered Dalton to vacate the property ISSUE: Whether or not the consignation was void. HELD: No. The consignation was valid. Compliance with the requisites of a valid consignation is mandatory. Failure to comply strictly with any of the requisites will render the consignation void. Substantial compliance is not enough. The requisites of a valid consignation: (1) a debt due; (2) the creditor to whom tender of payment was made refused without just cause to accept the payment, or the creditor was absent, unknown or incapacitated, or several persons claimed the same right to collect, or the title of the obligation was lost; (3) the person interested in the performance of the obligation was given notice before consignation was made; (4) the amount was placed at the disposal of the court; and (5) the person interested in the performance of the obligation was given notice after the consignation was made. Substantial compliance is not enough for that would render only a directory construction to the law. The use of the words "shall" and "must" which are imperative, operating to impose a duty which may be enforced, positively indicate that all the essential requisites of a valid consignation must be complied with. The Civil Code Articles expressly and explicitly direct what must be essentially done in order that consignation shall be valid and effectual. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
452
Benos v. Lawilao SPS. JAIME BENOS and MARINA BENOS, Petitioners, versus SPS. GREGORIO LAWILAO and JANICE GAIL LAWILAO, Respondents. (G.R. No. 172259, December 5, 2006, 1st Division) YNARES-SANTIAGO, J: FACTS: On February 11,1999, petitioner-spouses Benos and respondent Lawilao executed a Pacto de Retro Sale where Benos sold their lot and the building erected thereon for P300,000, one-half of which to be paid in cash to the Benos and the other half to be paid to the bank to pay off the loans of the Benos which was secured by the same lot and building. Under the contract, Benos could redeem the property within 18 months from the date of execution by returning the contract price, otherwise, the sale would become irrevocable. After paying the P150,000, Lawilao took possession of the property, restructured it twicw, eventually the loan become due and demandable. On August 14, 2000, a son of Benos and Lawilao paid the bankl but the bank refused. Lawilao filed for consignation against the bank and deposited the amount of P159,000.00. The Regional Trial Court declared Lawilao of the ownership of the subject property, which was affirmed by the Court of Appeals. ISSUE: Whether or not the contract of Pacto de Retro Sale be rescinded by the petitioner. HELD: In the instant case, records show that Lawilao filed the petition for consignation against the bank in Civil Case without notifying the Benos. Hence, Lawilao failed to prove their offer to pay the balance, even before the filing of the consignation case. Lawilao never notified the Benos. Thus, as far as the Benos are concerned, there was no full and complete payment of the contract price which gives them the right to rescind. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
453
People‟s Industrial v. Court of Appeals PEOPLE‟S INDUSTRIAL AND COMMERCIAL CORPORATION, Petitioner, versus COURT OF APPEALS AND MAR-ICK INVESTMENT CORPORATION, Respondents. (G.R. No. 112733, October 24, 1997, 3rd Division) ROMERO, J: FACTS: Private respondent is the registered owner of Mar-ick Subdivision which entered into 6 agreements with petitioner, whereby to sell 6 subdivision lots. Except for lot no. 8. All the lots measure 240 sq each. Lot nos. 3,4,5,6 and 7 similarly stipulate that petitioner agreed to pay for each lot P7,333.20, P480 as down payment. The balance shall be payable n 120 equal monthly installments of P57.11 every 30th of the month, for 10 years. With lot no. 8, they agreed to the purchase price of P7,730 with a down payment of P506 and equal installments of P60.20. Petitioner failed to perform its obligation. After series of negotiations, the parties agreed to enter into a new contract to sell 8 lots. Checks issued in favor of the private respondent were received but not encashed. Private respondent filed a suit against the petitioner. The Regional Trial Court directed petitioner to return the lots, which was affirmed in toto by the Court of Appeals. ISSUE: Whether or not there was a perfected and enforceable contracts of sale on October 11,1983 which modified the earlier contracts to sell which had not been validly rescinded. HELD: It is apropos to stress that the agreements are contracts to sell and not contract of sale, hence, rescission either by judicial action or notarial act is not applicable. Private respondent‘s act of cancelling the contract to sell was not done arbitrarily. Because the contracts to sell had long been cancelled when private respondent fled the accion publiciana de possession, there was no more installment buyer and seller relationship to speak of. It had been reduced to a mere case of an owner claiming possession of its property that had long been illegally withheld from it by another. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
454
Eternal Gardens v. Court of Appeals ETERNAL GARDENS MEMORIAL PARK CORPORATION, Petitioner, versus COURT OF APPEALS and SPS. LILIA SEVILLA and JOSE SEELIN, Respondents. (G.R. No. 123698, August 5, 1998, 2nd Division) MARTINEZ, A.M., J: FACTS: Petitioner Eternal Gardens and private NPUM entered into a Land Development Agreement. Under the agreement, EG was to develop a parcel of land owned by NPUM into a memorial park. The P1.5 million initial installment mentioned in the Deed of Absolute Sale, shall be deducted out of the proceeds from the First Party‘s 40% at the end of the 5th year. Subsequent payment should be changed against what is due to the first Party under the Land Development agreement. Later, 2 claimants of the land surfaced but were dismissed. The case was remanded to the Court of Appeals (CA) for proper determination and dispositions. CA required EG to produce documents necessary for accounting but failed to do so, hence, the right is waived. CA directed EG to pay private respondent the amounts of P167,065,195.00 as principal and P167,235,451.00 interest. ISSUE: Whether or not the petitioner is liable for interest despite the land dispute HELD: Even during the pendency of the land dispute cases, EG was required to deposit the accruing interests with a reputable commercial bank ― to avoid possible wastage of funds‖ when the case was given due course. Yet, EG hedged in depository the amounts due and made obvious attempts to stay payment by filing sundry motions and pleadings. CA correctly held EG liable for interest of 12%. It is tantamount to a forbearance of money. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
455
Rayos v. Reyes SPOUSES TEOFILO and SIMEONA RAYOS, and GEORGE RAYOS, Petitioners, versus DONATO REYES, SATURNINO REYES, TOMASA R. BUSTAMANTE and TORIBIA R. CAMELO, Respondents. (G.R. No. 150913, February 20, 2003, 2nd Division) BELLOSILLO, J: FACTS: Three parcels were formerly owned by the spouses Francisco and Asuncion Tazal who on 1 September 1957 sold them for P724.00 to respondents‘ predecessor-in-interest, one Mamerto Reyes, with right to repurchase within two (2) years from date thereof by paying to the vendee the purchase price and all expenses incident to their reconveyance. After the sale the vendee a retro took physical possession of the properties and paid the taxes thereon. The otherwise inconsequential sale became controversial when two (2) of the three (3) parcels were again sold on 24 December 1958 by Francisco Tazal for P420.00 in favor of petitioners‘ predecessor-in-interest Blas Rayos without first availing of his right to repurchase the properties. ISSUE: Whether or not there was a valid consignation and tender of payment made in the instant case. HELD: In order that consignation may be effective the debtor must show that (a) there was a debt due; (b) the consignation of the obligation had been made because the creditor to whom a valid tender of payment was made refused to accept it; (c) previous notice of the consignation had been given to the person interested in the performance of the obligation; (d) the amount due was placed at the disposal of the court; and, (e) after the consignation had been made the person interested was notified thereof. In the instant case, petitioners failed, first, to offer a valid and unconditional tender of payment; second, to notify respondents of the intention to deposit the amount with the court; and third, to show the acceptance by the creditor of the amount deposited as full settlement of the obligation, or in the alternative, a declaration by the court of the validity of the consignation. The failure of petitioners to comply with any of these requirements rendered the consignation ineffective. Consignation and tender of payment must not be encumbered by conditions if they are to produce the intended result of fulfilling the obligation. In the instant case, the tender of payment of P724.00 was conditional and void as it was predicated upon the argument of Francisco Tazal that he was paying a debt which he could do at any time allegedly because the 1 September 1957 transaction was a contract of equitable mortgage and not a deed of sale with right to repurchase Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
456
Cebu International v. Court of Appeals CEBU INTERNATIONAL FINANCE CORPORATION, Petitioner, versus COURT OF APPEALS, VICENTE ALEGRE, Respondents. (G.R. No. 123031, October 12, 1999, 2nd Division) QUISUMBING, J: FACTS: On April 25, 1991, private respondent, Vicente Alegre, invested with CIFC, P500,000.00 pesos, in cash. Petitioner issued a promissory note to mature on May 27, 1991. The note for P516,238.67 covered private respondent's placement plus interest at twenty and a half percent for thirty-two days. On May 27, 1991, CIFC issued BPI Check No. 513397 P514,390.94 in favor of the private respondent as proceeds of his matured investment plus interest. The CHECK was drawn from petitioner's current account number 0011-0803-59, maintained with BPI, main branch at Makati City. On June 17, 1991, private respondent's wife deposited the CHECK with RCBC, in Puerto Princesa, Palawan. BPI dishonored the CHECK with the annotation, that the "Check (is) Subject of an Investigation." BPI took custody of the CHECK pending an investigation of several counterfeit checks drawn against CIFC's aforestated checking account. BPI used the check to trace the perpetrators of the forgery. Immediately, private respondent notified CIFC of the dishonored CHECK and demanded, on several occasions, that he be paid in cash. CIFC refused the request, and instead instructed private respondent to wait for its ongoing bank reconciliation with BPI. ISSUE: Whether or not there was valid tender of payment in the instant case. HELD: A check is not a legal tender, and therefore cannot constitute valid tender of payment. "Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
457
De Mesa v. Court of Appeals DOLORES LIGAYA DE MESA, Petitioner, versus THE COURT OF APPEALS, OSSA HOUSE, INC. AND DEVELOPMENT BANK OF THE PHILIPPINES, Respondents. (G.R. No. 106467-68, October 19, 1999, 3rd Division) PURISIMA, J: FACTS: Petitioner Dolores Ligaya de Mesa owns several parcels of land in Makati, Pasay City, Cavite, and General Santos City3 I. Two (2) parcels of land situated in Makati, Metro Manila, with TCT no. (232345) S-60337 containing an area of 188 square meters and TCT No. (232344) S-50336 containing an area of 236 square meters. Two parcels of land situated in Makan, General Santos City, with TCT No. T-11067 containing an area of 837 square meters. which were mortgaged to the Development Bank of the Philippines (DBP) as security for a loan she obtained from the bank. Failing to pay her mortgage debt, all her mortgaged properties were foreclosed and sold at public auction held on different days. On April 30, 1977, the Makar property was sold and the corresponding certificate of sale inscribed on March 10, 1978. On August 25, 1977, the Naic, Cavite property was sold and the certificate of sale registered on the same day. On August 30, 1977, the two (2) parcels of land in Makati were sold at public auction and the certificate of sale was inscribed on November 25, 1977. And on January 12, 1978, the three (3) parcels of land in Pasay City were also sold and the certificate of sale was recorded on the same date. In all the said auction sales, DBP was the winning bidder. ISSUE: Whether or not the Court can supplant its own reading of an ambiguous contract for the actual intention of the contracting parties as testified to in open court and under oath. HELD: Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. When the words of a contract are plain and readily understood, there is no room for construction. As the agreement of the parties are reduced to writing, such agreement is considered as containing all its terms and there can be, between the parties and their successors-in-interest, no evidence of the terms of the written agreement other than the contents of the writing. In the case under consideration, the terms of the "Deed of Sale with Assumption of Mortgage Debt" are clear and leave no doubt as to what were sold thereunder. The contract under scrutiny is so explicit and unambiguous that it does not justify any attempt to read into it any supposed intention of the parties, as the said contract is to be understood literally, just as they appear on its face. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
458
Occena v. Court of Appeals JESUS V. OCCENA and EFIGENIA C. OCCENA, Petitioners, versus HON. RAMON V. JABSON, Presiding Judge of the Court Of First Instance of Rizal, Branch XXVI; COURT OF APPEALS and TROPICAL HOMES, INC., respondents. (G.R. No. L-44349, October 29, 1976, 1st Division) TEEHANKEE, J.: FACTS: Private respondent Tropical Homes, Inc had a subdivision contract with petitioners who are the owners of the land subject of subdivision development by private respondent. The contract stipulated that the petitioners‘ fixed and sole share and participation is the land which is equivalent to forty percent of all cash receipts from the sale of the subdivision lots. When the development costs increased to such level not anticipated during the signing of the contract and which threatened the financial viability of the project as assessed by the private respondent, respondent filed at the lower court a complaint for the modification of the terms and conditions of the contract by fixing the proper shares that should pertain to the parties therein out of the gross proceeds from the sales of the subdivision lots. Petitioners moved for the dismissal of the complaint for lack of cause of action. The lower court denied the motion for dismissal which was upheld by the CA based on the civil code provision that ―when the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part‖. Insisting that the worldwide increase in prices cited by private respondent does not constitute a sufficient cause of action for the modification of the terms and conditions of the contract, petitioners filed the instant petition. ISSUE: Whether or not private respondent may demand modification of the terms of the contract on the ground that the prestation has manifestly come beyond the contemplation of the parties. HELD: If the prayer of the private respondent is to be released from its contractual obligations on account of the fact that the prestation has become beyond the contemplation of the parties, then private respondent can rely on said provision of the civil code. But the prayer of the private respondent was for the modification of their valid contract. The above-cited civil code provision does not grant the court the power to remake, modify, or revise the contract or to fix the division of the shares between the parties as contractually stipulated with the force of law between the parties. Therefore, private respondent‘s complaint for modification of its contract with petitioner must be dismissed. The decision of respondent court is reversed. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
459
Ortigas v. Feati Bank ORTIGAS & CO., LIMITED PARTNERSHIP, Plaintiff-appellant, versus FEATI BANK AND TRUST CO., Defendant-appellee. (G.R. No. L-24670, December 14, 1979, En Banc) SANTOS, J: FACTS: On March 4, 1952, Ortigas sold Lot 5 and 6, Block 31 of the Highway Hills Subdivision at Mandaluyong to Augusto Padilla y Angeles and Natividad Angeles. The latter transferred their rights in favour of Emma Chavez, upon completion of payment a deed was executed with stipulations, one of which is that the use of the lots are to be exclusive for residential purposes only. This was annotated in the Transfer Certificate of Titles No. 101509 and 101511. Feati then acquired Lot 5 directly from Emma Chavez and Lot 6 from Republic Flour Mills. On May 5, 1963, Feati started construction of a building on both lots to be devoted for banking purposes but could also be for residential use. Ortigas sent a written demand to stop construction but Feati continued contending that the building was being constructed according to the zoning regulations as stated in Municipal Resolution 27 declaring the area along the West part of EDSA to be a commercial and industrial zone. Civil case No. 7706 was made and decided in favour of Feati. ISSUE: Whether or not Resolution number 27 declaring Lot 5 and 6 to be part of an industrial and commercial zone is valid considering the contract stipulation in the Transfer Certificate of Titles. HELD: Resolution No. 27 prevails over the contract stipulations. Section 3 of RA 2264 of the Local Autonomy Act empowers a Municipal Council to adopt zoning and subdivision ordinances or regulations for the Municipality. Section 12 or RA 2264 states that implied power of the municipality should be ―liberally construed in it‘s favour‖, ―to give more power to the local government in promoting economic conditions, social welfare, and material progress in the community‖. This is found in the General Welfare Clause of the said act. Although non-impairment of contracts is constitutionally guaranteed, it is not absolute since it has to be reconciled with the legitimate exercise of police power, e.g. the power to promote health, morals, peace, education, good order or safety and general welfare of the people. Resolution No. 27 was obviously passed in exercise of police power to safeguard health, safety, peace and order and the general welfare of the people in the locality as it would not be a conducive residential area considering the amount of traffic, pollution, and noise which results in the surrounding industrial and commercial establishments. Decision dismissing the complaint affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
460
So v. Food Fest Land, Inc. DANIEL T. SO, Petitioner, versus FOOD FEST LAND, INC., Respondent (G.R. No. 183628, April 7, 2010, 1st Division) FOOD FEST LAND, INC., Petitioner, versus DANIEL T. SO, Respondent (G.R. No. 183670, April 7, 2010, 1st Division) CARPIO MORALES, J: FACTS: Food Fest Land Inc. (Food Fest) entered into a September 14, 1999 Contract of Lease1 with Daniel T. So (So) over a commercial space in San Antonio Village, Makati City for a period of three years (1999-2002) on which Food Fest intended to operate a Kentucky Fried Chicken carry out branch. Before forging the lease contract, the parties entered into a preliminary agreement dated July 1, 1999, the pertinent portion of which states that the lease shall not become binding upon us unless and until the government agencies concerned shall authorize, permit or license us to open and maintain our business at the proposed Lease Premises. While Food Fest was able to secure the necessary licenses and permits for the year 1999, it failed to commence business operations. For the year 2000, Food Fest‘s application for renewal of barangay business clearance was "held in abeyance until further study of [its] kitchen facilities." As the barangay business clearance is a prerequisite to the processing of other permits, licenses and authority by the city government, Food Fest was unable to operate. Fearing further business losses, Food Fest, by its claim, communicated its intent to terminate the lease contract to So who, however, did not accede and instead offered to help Food Fest secure authorization from the barangay. On April 26, 2001, So filed a complaint for ejectment and damages against Food Fest before the Metropolitan Trial Court (MeTC) of Makati City. The MeTC, by Decision of July 4, 2005,7 rendered judgment in favor of So.The Regional Trial Court (RTC), by Decision of November 30, 2006,9 reversed the MeTC Decision. Court of Appeals however, declared that Food Fest‘s obligation to pay rent was not extinguished upon its failure to secure permits to operate. ISSUE: Whether or not the principle of rebus sic stantibus is applicable to the instant case. HELD: No. The principle of rebus sic stantibus is not applicable to the instant case. As for Food Fest‘s invocation of the principle of rebus sic stantibus as enunciated in Article 1267 of the Civil Code to render the lease contract functus officio, and consequently release it from responsibility to pay rentals, the Court is not persuaded. This article, which enunciates the doctrine of unforeseen events, is not, however, an absolute application of the principle of rebus sic stantibus, which would endanger the security of contractual relations. The parties to the contract must be presumed to have assumed the risks of unfavorable developments. It is, therefore, only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor.19 Food Fest was able to secure the permits, licenses and authority to operate when the lease contract was executed. Its failure to renew these permits, licenses and authority for the succeeding year, does not, however, Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
461
suffice to declare the lease functus officio, nor can it be construed as an unforeseen event to warrant the application of Article 1267. Decision affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
462
Magat v. Court of Appeals VICTORINO MAGAT, JR. substituted by heirs, OLIVIA D. MAGAT, and minors MA. DULCE MAGAT, MA. MAGNOLIA MAGAT, RONALD MAGAT and DENNIS MAGAT, Petitioners, versus COURT OF APPEALS and SANTIAGO A. GUERRERO, Respondents. (G.R. No. 124221, August 4, 2000, 1st Division) PARDO, J: FACTS: Basilisa Comerciante is a mother of five children. One of them, Leonardo died during World War II. Basilisa later bought a parcel of land which is the subject of the document entitled ―Kasulatan sa Kaloobpala‖ executed in favor of the four children. Later, Basilisa executed a deed of absolute sale in favor of herein petitioner and as a result, a transfer certificate of title was issued in favor of Apolinaria. The respondents filed a petition for the annulment of such deed. The trial court dismissed the complaint and ruled that the donation made in favor of respondents was a donation mortis causa and as such was void for having been executed without the formalities of will. Hence the subsequent sale was valid. The Court of Appeals reversed such decision. ISSUE: Whether or not the donation made is a mortis causa or an inter vivos donation. HELD: The donation is a conveyance inter vivos. Whether the donation is mortis causa or inter vivos depends on whether the donor intended to transfer ownership over the properties upon the execution of the deed. The characteristics of a donation mortis causa are the following: (1) It conveys no title or ownership to the transferee before the death of the transferor; or what amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive; (2) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed; and (3) That the transfer should be void if the transferor should survive the transferee. The express irrevocability of the donation is the distinctive standard that identifies that document as an inter vivos. The provisions which state the same will only take effect upon the death of the donor and that there is a prohibition to alienate, encumber, sell or dispose the same should be harmonized with its express irrevocability. Such are only necessary assurances that during the donor‘s lifetime, the latter would still enjoy the right of possession over the property; but his naked title of ownership has been passed on to the donees; and that upon the donor‘s death, the donees would get all the rights of ownership over the same including the right to use and possess the same. Furthermore, it also appeared that the prohibition to alienate the property is couched in general terms that even the donor is deemed included in such prohibition. The prohibition on the donor to alienate the property during her lifetime is a proof that naked ownership has been transferred to the donees. Decision affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
463
PNCC v. Court of Appeals PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioner, versus COURT OF APPEALS, MA. TERESA S. RAYMUNDO-ABARRA, JOSE S. RAYMUNDO, ANTONIO S. RAYMUNDO, RENE S. RAYMUNDO, and AMADOR S. RAYMUNDO, Respondents. (G.R. No. 116896, May 5, 1997, 3rd Division) DAVIDE, JR., J: FACTS: On 18 November 1985, private respondents and petitioner entered into a contract of lease of a parcel of land owned by the former. The terms and conditions of said contract of lease are as follows: a) the lease shall be for a period of five (5) years which begins upon the issuance of permit by the Ministry of Human Settlement and renewable at the option of the lessee under the terms and conditions, b) the monthly rent is P20, 000.00 which shall be increased yearly by 5% based on the monthly rate, c) the rent shall be paid yearly in advance, and d) the property shall be used as premises of a rock crushing plan. On January 7, 1986, petitioner obtained permit from the Ministry which was to be valid for two (2) years unless revoked by the Ministry. Later, respondent requested the payment of the first annual rental. But petitioner alleged that the payment of rental should commence on the date of the issuance of the industrial clearance not on the date of signing of the contract. It then expressed its intention to terminate the contract and decided to cancel the project due to financial and technical difficulties. However, petitioner refused to accede to respondent‘s request and reiterated their demand for the payment of the first annual rental. But the petitioner argued that it was only obligated to pay P20, 000.00 as rental for one month prompting private respondent to file an action against the petitioner for specific performance with damages before the RTC of Pasig. The trial court rendered decision in favor of private respondent. Petitioner then appealed the decision of the trial court to the Court of Appeals but the later affirmed the decision of the trial court and denied the motion for reconsideration. ISSUE: Whether or not petitioner can avail of the benefit of Article 1267 of the New Civil Code. HELD: No. Petitioner cannot avail of the benefit of Article 1267 of the New Civil Code. The petitioner cannot take refuge of the said article. Article 1267 of the New Civil Code provides that when the service has become so difficult as to manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. This article, which enunciates the doctrine of unforeseen events, is not, however an absolute application of the principle of rebus sic stantibus, which would endanger the security of contractual relations. The principle of rebus sic stantibus neither fits in with the facts of the case. Under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist, the contract also ceases to exist. In this case, petitioner averred that three (3) abrupt change in the political climate of the country after the EDSA Revolution and its poor financial condition rendered the performance of the lease contract impractical and inimical to the corporate survival of the petitioner. However, as held in Central Bank v. CA, mere pecuniary inability to fulfill an engagement does not Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
464
discharge a contractual obligation, nor does it constitute a defense of an action for specific performance. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
465
NATELCO v. Court of Appeals NAGA TELEPHONE CO., INC. (NATELCO) AND LUCIANO M. MAGGAY, Petitioners, versus THE COURT OF APPEALS AND CAMARINES SUR II ELECTRIC COOPERATIVE, INC. (CASURECO II), Respondents. (G.R. No. 107112 February 24, 1994, 2nd Division) NOCON, J: FACTS: Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering local as well as long distance service in Naga City while private respondent Camarines Sur II Electric Cooperative, Inc. (CASURECO II) is a private corporation established for the purpose of operating an electric power service in the same city. On November 1, 1977, the parties entered into a contract (Exh. "A") for the use by petitioners in the operation of its telephone service the electric light posts of private respondent in Naga City. In consideration therefor, petitioners agreed to install, free of charge, ten (10) telephone connections for the use by private respondent After the contract had been enforced for over ten (10) years, private respondent filed on January 2, 1989 with the Regional Trial Court of Naga City (Br. 28) C.C. No. 89-1642 against petitioners for reformation of the contract with damages, on the ground that it is too one-sided in favor of petitioners; that it is not in conformity with the guidelines of the National Electrification Administration (NEA) which direct that the reasonable compensation for the use of the posts is P10.00 per post, per month; that after eleven (11) years of petitioners' use of the posts, the telephone cables strung by them thereon have become much heavier with the increase in the volume of their subscribers, worsened by the fact that their linemen bore holes through the posts at which points those posts were broken during typhoons. ISUUE: Whether or not respondent court erred in making a contract for the parties by invoking Article 1267 of the New Civil Code. HELD: Article 1267 speaks of "service" which has become so difficult. Taking into consideration the rationale behind this provision, 9 the term "service" should be understood as referring to the "performance" of the obligation. In the present case, the obligation of private respondent consists in allowing petitioners to use its posts in Naga City, which is the service contemplated in said article. Furthermore, a bare reading of this article reveals that it is not a requirement thereunder that the contract be for future service with future unusual change. According to Senator Arturo M. Tolentino, 10 Article 1267 states in our law the doctrine of unforseen events. This is said to be based on the discredited theory of rebus sic stantibus in public international law; under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist the contract also ceases to exist. Considering practical needs and the demands of equity and good faith, the disappearance of the basis of a contract gives rise to a right to relief in favor of the party prejudiced. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
466
Reyna v. COA RUBEN REYNA and LLOYD SORIA, Petitioners, versus COMMISSION ON AUDIT, Respondent. (G.R. No. 167219, February 8, 2011, En Banc) PERALTA, J: FACTS: The Land Bank of the Philippines (Land Bank) was engaged in a cattlefinancing program wherein loans were granted to various cooperatives. Pursuant thereto, Land Bank's Ipil, Zamboanga del Sur Branch (Ipil Branch) went into a massive information campaign offering the program to cooperatives.Cooperatives who wish to avail of a loan under the program must fill up a Credit Facility Proposal (CFP) which will be reviewed by the Ipil Branch. The Ipil Branch approved the applications of four cooperatives.One of the conditions stipulated in the CFP is that prior to the release of the loan, a Memorandum of Agreement (MOA) between the supplier of the cattle, Remad Livestock Corporation (REMAD), and the cooperative, shall have been signed. As alleged by petitioners, the terms of the CFP allowed for pre-payments or advancement of the payments prior to the delivery of the cattle by the supplier REMAD but such was not stipulated in the contracts. Three checks were issued by the Ipil Branch to REMAD to serve as advanced payment for the cattle. REMAD, however, failed to supply the cattle on the dates agreed upon. In post audit, the Land Bank Auditor disallowed the amount of P3,115,000.00 under CSB No. 95-005 dated December 27, 1996 and Notices of Disallowance Nos. 96-014 to 96-019 in view of the non-delivery of the cattle. Also made as the basis of the disallowance was the fact that advanced payment was made in violation of bank policies and COA rules and regulations. Petitioners were made liable for the amount ISSUE: Whether or not the writing off of a loan is considered as condonation HELD: The Court rules that writing-off a loan does not equate to a condonation or release of a debt by the creditor. As an accounting strategy, the use of write-off is a task that can help a company maintain a more accurate inventory of the worth of its current assets. In general banking practice, the write-off method is used when an account is determined to be uncollectible and an uncollectible expense is recorded in the books of account. If in the future, the debt appears to be collectible, as when the debtor becomes solvent, then the books will be adjusted to reflect the amount to be collected as an asset. In turn, income will be credited by the same amount of increase in the accounts receivable. Write-off is not one of the legal grounds for extinguishing an obligation under the Civil Code. It is not a compromise of liability. Neither is it a condonation, since in condonation gratuity on the part of the obligee and acceptance by the obligor are required. In making the write-off, only the creditor takes action by removing the uncollectible account from its books even without the approval or participation of the debtor. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
467
Trans Pacific v. Court of Appeals TRANS-PACIFIC INDUSTRIAL SUPPLIES, INC., Petitioner, versus The COURT OF APPEALS and ASSOCIATED BANK, Respondents. (G.R. No. 109172, August 19, 1994, 3rd Division) BIDIN, J: FACTS: Sometime in 1979, petitioner applied for and was granted several financial accommodations amounting to P1,300,000.00 by respondent Associated Bank. The loans were evidence and secured by four (4) promissory notes, a real estate mortgage covering three parcels of land and a chattel mortgage over petitioner's stock and inventories. Unable to settle its obligation in full, petitioner requested for, and was granted by respondent bank, a restructuring of the remaining indebtedness which then amounted to P1,057,500.00, as all the previous payments made were applied to penalties and interests. The mortgaged parcels of land were substituted by another mortgage covering two other parcels of land and a chattel mortgage on petitioner's stock inventory. The released parcels of land were then sold and the proceeds amounting to P1,386,614.20, according to petitioner, were turned over to the bank and applied to Trans-Pacific's restructured loan. Subsequently, respondent bank returned the duplicate original copies of the three promissory notes to Trans-Pacific with the word "PAID" stamped thereon. Despite the return of the notes, or on December 12, 1985, Associated Bank demanded from Trans-Pacific payment of the amount of P492,100.00 representing accrued interest on PN No. TL-9077-82. According to the bank, the promissory notes were erroneously released. ISSUE: Whether or not petitioner has indeed paid in full its obligation to respondent bank. HELD: Art. 1271. The delivery of a private document evidencing a credit, made voluntarily by the creditor to the debtor, implies the renunciation of the action which the former had against the latter." The surrender and return to plaintiffs of the promissory notes evidencing the consolidated obligation as restructured, produces a legal presumption that Associated had thereby renounced its actionable claim against plaintiffs (Art. 1271, NCC). The presumption is fortified by a showing that said promissory notes all bear the stamp "PAID", and has not been otherwise overcome. Upon a clear perception that Associated's record keeping has been less than exemplary . . . , a proffer of bank copies of the promissory notes without the "PAID" stamps thereon does not impress the Court as sufficient to overcome presumed remission of the obligation vis-a-vis the return of said promissory notes. Indeed, applicable law is supportive of a finding that in interest bearing obligations-as is the case here, payment of principal (sic) shall not be deemed to have been made until the interests have been covered (Art. 1253, NCC). Conversely, competent showing that the principal has been paid, militates against postured entitlement to unpaid interests. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
468
Dalupan v. Harden FRANCISCO DALUPAN, Plaintiff-appellant, versus FRED M. HARDEN, Defendant-appellant. (G.R. No. L-3975, November 27, 1951, En Banc) BAUTISTA ANGELO, J: FACTS: The case is an appeal taken from an order of the First Instance of Manila dated May 19, 1950, setting aside the writs of execution and garnishment issued to the sheriff of Manila commanding him to levy on two (2) checks, one for P9,028.50, and another for P24,546.00, payable to Fred M. Harden which were then in possession of the receiver appointed in case involving the liquidation of the conjugal partnership of the spouses Fred M. Harden and Esperanza P. de Harden. On August 26, 1948, plaintiff filed an action against the defendant for the collection of P113,837.17, with interest thereon from the filing of the complaint, which represents 50 per cent of the reduction plaintiff was able to secure from the Collector of Internal Revenue in the amount of unpaid taxes claimed to be due from the defendant. Defendant acknowledged this claim and prayed that judgment be rendered accordingly. In the meantime, the receiver in the liquidation case No. R-59634 and the wife of the defendant, Esperanza P. de Harden, filed an answer in intervention claiming that the amount sought by the plaintiff was exorbitant and prayed that it be reduced to 10 per cent of the rebate. By reason of the acquiescence of the defendant to the claim on one hand, and the opposition of the receiver and of the wife on the other, an amicable settlement was concluded by the plaintiff and the intervenor whereby it was agreed that the sum of P22,767.43 be paid to the plaintiff from the funds under the control of the receiver "and the balance of P91,069.74 shall be charged exclusively against the defendant Fred M. Harden from whatever share he may still have in the conjugal partnership between him and Esperanza P. de Harden. ISSUE: Whether or not the proffer made by the plaintiff to the defendant is binding. HELD: YES, the proffer made by the plaintiff to the defendant is binding. Examining the terms the court finds that the stipulation limits the right of the plaintiff to ask for the execution of the judgment to whatever share Fred M. Harden may still have in the conjugal partnership between him and his wife after the final liquidation and partition thereof. The execution of the judgment is premised upon a condition precedent, which is the final liquidation and partition of the conjugal partnership. Note that the condition does not refer to the liquidation of a particular property of the partnership. It refers to the overall and final liquidation of the partnership. Such being the stipulation of the parties which was sanctioned and embodied by the Court in its decision, it is clear that the writ of execution asked for by the plaintiff on the two checks is premature. Order affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
469
Lopez Vito v. Tambunting LEONIDES LOPEZ LISO, Plaintiff-appellee, versus MANUEL TAMBUNTING, Defendant-appellant. (G.R. No. L-9806, January 19, 1916, En banc) ARAULLO, J: FACTS: These proceedings were brought to recover from the defendant the sum of P2,000, amount of the fees, which, according to the complaint, are owing for professional medical services rendered by the plaintiff to a daughter of the defendant from March 10 to July 15, 1913, which fees the defendant refused to pay, notwithstanding the demands therefor made upon him by the plaintiff. The defendant denied the allegations of the complaint, and furthermore alleged that the obligation which the plaintiff endeavored to compel him to fulfill was already extinguished. ISSUE: Whether or not implied condonation can be legally pressumed in the instant case HELD: It is true that number 8 of section 334 of the Code of Civil Procedure provides as a legal presumption "that an obligation delivered up to the debtor has been paid." Article 1188 of the Civil Code also provides that the voluntary surrender by a creditor to his debtor, of a private instrument proving a credit, implies the renunciation of the right of action against the debtor; and article 1189 prescribes that whenever the private instrument which evidences the debt is in the possession of the debtor, it will be presumed that the creditor delivered it of his own free will, unless the contrary is proven. But the legal presumption established by the foregoing provisions of law cannot stand if sufficient proof is adduced against it. In the case at bar the trial court correctly held that there was sufficient evidence to the contrary, in view of the preponderance thereof in favor of the plaintiff and of the circumstances connected with the defendant's possession of said receipt Exhibit 1. Furthermore, in order that such a presumption may be taken into account, it is necessary, as stated in the laws cited, that the evidence of the obligation be delivered up to the debtor and that the delivery of the instrument proving the credit be made voluntarily by the creditor to the debtor. In the present case, it cannot be said that these circumstances concurred, inasmuch as when the plaintiff sent the receipt to the defendant for the purpose of collecting his fee, it was not his intention that that document should remain in the possession of the defendant if the latter did not forthwith pay the amount specified therein. Judgment appealed from affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
470
Estate of Mota v. Serra TESTATE ESTATE OF LAZARO MOTA, deceased, ET AL., Plaintiffsappellants, versus SALVADOR SERRA, Defendant-appellee. (G.R. No. L-22825, February 14, 1925, En Banc) VILLAMOR, J: FACTS: On February 1, 1919, plaintiffs and defendant entered into a contract of partnership, marked Exhibit A, for the construction and exploitation of a railroad line from the "San Isidro" and "Palma" centrals to the place known as "Nandong". The original capital stipulated was P150,000. It was covenanted that the parties should pay this amount in equal parts and the plaintiffs were entrusted with the administration of the partnership. January 29, 1920, the defendant entered into a contract of sale with Venancio Concepcion, Phil. C. Whitaker, and Eusebio R. de Luzuriaga, whereby he sold to the latter the estate and central known as "Palma" with its running business, as well as all the improvements, machineries and buildings, real and personal properties, rights, choses in action and interests, including the sugar plantation of the harvest year of 1920 to 1921, covering all the property of the vendor. Before the delivery to the purchasers of the hacienda thus sold, Eusebio R. de Luzuriaga renounced all his rights under the contract of January 29, 1920, in favor of Messrs. Venancio Concepcion and Phil. C. Whitaker. Afterwards, on January 8, 1921, Venancio Concepcion and Phil. C. Whitaker bought from the plaintiffs the one half of the railroad line pertaining to the latter executing therefor the document Exhibit 5. The price of this sale was P237,722.15, excluding any amount which the defendant might be owing to the plaintiffs. ISSUE: Whether or not there was confusion of the rights of the creditor and debtor HELD: The purchasers, Phil. C. Whitaker and Venancio Concepcion, to secure the payment of the price, executed a mortgage in favor of the plaintiffs on the same rights and titles that they had bought and also upon what they had purchased from Mr. Salvador Serra. In other words, Phil C. Whitaker and Venancio Concepcion mortgaged unto the plaintiffs what they had bought from the plaintiffs and also what they had bought from Salvador Serra. If Messrs. Phil. C. Whitaker and Venancio Concepcion had purchased something from Mr. Salvador Serra, the herein defendant, regarding the railroad line, it was undoubtedly the one-half thereof pertaining to Mr. Salvador Serra. This clearly shows that the rights and titles transferred by the plaintiffs to Phil. C. Whitatker and Venancio Concepcion were only those they had over the other half of the railroad line. Therefore, as already stated, since there was no novation of the contract between the plaintiffs and the defendant, as regards the obligation of the latter to pay the former one-half of the cost of the construction of the said railroad line, and since the plaintiffs did not include in the sale, evidenced by Exhibit 5, the credit that they had against the defendant, the allegation that the obligation of the defendant became extinguished by the merger of the rights of creditor and debtor by the purchase of Messrs. Phil. C. Whitaker and Venancio Concepcion is wholly untenable. Judgment appealed from reversed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
471
Yek Ton Lin v. Yusingco THE YEK TONG FIRE and MARINE INSURANCE CO., LTD., Plaintiffappellant, versus PELAGIO YUSINGCO, ET AL., Defendants. VICENTE MADRIGAL, Appellant. (G.R. No. L-43608, July 20, 1937, En Banc) DIAZ, J: FACTS: Defendant Pelagio Yusingco was the owner of the steamship Yusingco and, as such, he executed, on November 19, 1927, a power of attorney in favor of Yu Seguioc to administer, lease, mortgage and sell his properties, including his vessels or steamship. Yu Seguioc mortgaged to the plaintiff Yek Tong Lin Fire & Marine Insurance Co., Ltd., with the approval of the Bureau of Customs, the steamship Yusingco belonging to the defendant. One year and some months later, the steamship Yusingco needed some repairs which were made by the Earnshaw Docks & Honolulu Iron Works. The repairs were made upon the guaranty of the defendant and appellant Vicente Madrigal at a cost of P8,244.66. When neither A. Yusingco Hermanos nor Pelagio Yusingco could pay said sum to the Earnshaw Docks & Honolulu Iron Works, the defendant and appellant Vicente Madrigal had to make payment thereof with the stipulated interest thereon, which was at the rate of 9 per cent per annum, on March 9, 1932, because he was bound thereto by reason of the bond filed by him, the payment then made by him having amounted to P8,777.60. When said defendant discovered that he was not to be reimbursed for the repairs made on the steamship Yusingco, he brought an action against his codefendant Pelagio Yusingco and A. Yusingco Hermanos to compel them to reimburse, thereby giving rise to civil case No. 41654 of the Court of First Instance of Manila, entitled "Vicente Madrigal, plaintiff, vs. Pelagio Yusingco and A. Yusingco Hermanos, defendants" which resulted in a judgment favorable to him and adverse to the Yusingcos. ISSUE: Whether or not obligations were extinguished by reason of the merger of the rights of the debtor and creditor. HELD: After the steamship Yusingco had been sold by virtue of the judicial writ issued in civil case No. 41654 for the execution of the judgment rendered in favor of Vicente Madrigal, the only right left to the plaintiff was to collect its mortgage credit from the purchaser thereof at public auction, inasmuch as the rule is that a mortgage directly and immediately subjects the property on which it is imposed, whoever its possessor may be, to the fulfillment of the obligation for the security of which it was created (article 1876, Civil code); but it so happens that it cannot take such steps now because it was the purchaser of the steamship Yusingco at public auction, and it was so with full knowledge that it had a mortgage credit on said vessel. Obligations are extinguished by the merger of the rights of the creditor and debtor (articles 1156 and 1192, Civil Code). Appealed judgment reversed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
472
EGV Realty v. Court of Appeals E.G.V. REALTY DEVELOPMENT CORPORATION and CRISTINA CONDOMINIUM CORPORATION, Petitioners, versus COURT OF APPEALS and UNISHPERE INTERNATIONAL, INC. Respondents. (G.R. No,120236. July 20, 1999, 1st Division) KAPUNAN, J: FACTS:Petitioner E.G.V. Realty Development Corporation is the owner/developer of a seven-storey condominium building known as Cristina Condominium. Cristina Condominium Corporation holds title to all common areas of Cristina Condominium and is in charge of managing, maintaining and administering the condominium‘s common areas and providing for the building‘s security. Respondent Unisphere International, Inc. (hereinafter referred to as Unisphere) is the owner/occupant of Unit 301 of said condominium. On November 28, 1981, respondent Unisphere‘s Unit 301 was allegedly robbed of various items valued at P6,165.00. The incident was reported to petitioner CCC. On July 25, 1982, another robbery allegedly occurred at Unit 301 where the items carted away were valued at P6,130.00, bringing the total value of items lost to P12,295.00. This incident was likewise reported to petitioner CCC. On October 5, 1982, respondent Unisphere demanded compensation and reimbursement from petitioner CCC for the losses incurred as a result of the robbery. On January 28, 1987, petitioners E.G.V. Realty and CCC jointly filed a petition with the Securities and Exchange Commission (SEC) for the collection of the unpaid monthly dues in the amount of P13,142.67 against respondent Unisphere. ISSUE: Whether or not set-off or compensation has taken place in the instant case. HELD: Compensation or offset under the New Civil Code takes place only when two persons or entities in their own rights, are creditors and debtors of each other. (Art. 1278). A distinction must be made between a debt and a mere claim. A debt is an amount actually ascertained. It is a claim which has been formally passed upon by the courts or quasi-judicial bodies to which it can in law be submitted and has been declared to be a debt. A claim, on the other hand, is a debt in embryo. It is mere evidence of a debt and must pass thru the process prescribed by law before it develops into what is properly called a debt. Absent, however, any such categorical admission by an obligor or final adjudication, no compensation or off-set can take place. Unless admitted by a debtor himself, the conclusion that he is in truth indebted to another cannot be definitely and finally pronounced, no matter how convinced he may be from the examination of the pertinent records of the validity of that conclusion the indebtedness must be one that is admitted by the alleged debtor or pronounced by final judgment of a competent court or in this case by the Commission. There can be no doubt that Unisphere is indebted to the Corporation for its unpaid monthly dues in the amount of P13,142.67. This is admitted. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
473
Aerospace Chemical v. Court of Appeals AEROSPACE CHEMICAL INDUSTRIES, INC., Petitioner, versus COURT OF APPEALS, PHILIPPINE PHOSPHATE FERTILIZER, CORP., Respondents. (G.R. No. 108129, September 23, 1999, 2nd Division) QUISUMBING, J: FACTS: On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace) purchased five hundred (500) metric tons of sulfuric acid from private respondent Philippine Phosphate Fertilizer Corporation (Philphos). Initially set beginning July 1986, the agreement provided that the buyer shall pay its purchases in equivalent Philippine currency value, five days prior to the shipment date. Petitioner as buyer committed to secure the means of transport to pick-up the purchases from private respondent's loadports. Per agreement, one hundred metric tons (100 MT) of sulfuric acid should be taken from Basay, Negros Oriental storage tank, while the remaining four hundred metric tons (400 MT) should be retrieved from Sangi, Cebu. On December 18, 1986, M/T Sultan Kayumanggi docked at Sangi, Cebu, but withdrew only 157.51 MT of sulfuric acid. Again, the vessel tilted. Further loading was aborted. Two survey reports conducted by the Societe Generale de Surveillance (SGS) Far East Limited, dated December 17, 1986 and January 2, 1987, attested to these occurrences. Later, on a date not specified in the record, M/T Sultan Kayumanggi sank with a total of 227.51 MT of sulfuric acid on board. Petitioner chartered another vessel, M/T Don Victor, with a capacity of approximately 500 MT.6 [TSN, September 1, 1989, pp. 28-29.] On January 26 and March 20, 1987, Melecio Hernandez, acting for the petitioner, addressed letters to private respondent, concerning additional orders of sulfuric acid to replace its sunken purchases. ISSUE: Whether or not expenses for the storage and preservation of the purchased fungible goods, namely sulfuric acid, be on seller's account pursuant to Article 1504 of the Civil Code HELD: Petitioner tries to exempt itself from paying rental expenses and other damages by arguing that expenses for the preservation of fungible goods must be assumed by the seller. Rental expenses of storing sulfuric acid should be at private respondent's account until ownership is transferred, according to petitioner. However, the general rule that before delivery, the risk of loss is borne by the seller who is still the owner, is not applicable in this case because petitioner had incurred delay in the performance of its obligation. Article 1504 of the Civil Code clearly states: "Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not, except that: (2) Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party at fault." On this score, the Court quoted with approval the findings of the appellate court, thus: The defendant [herein private respondent] was not remiss in reminding the plaintiff that it would have to bear the said expenses for failure to lift the commodity for an unreasonable length of time. But even assuming that the plaintiff did not consent to be so bound, the provisions of Civil Code come in to make it liable for the damages sought by the defendant. Petition denied. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
474
Apodaca v. NLRC ERNESTO M. APODACA, Petitioner, versus NATIONAL LABOR RELATIONS COMMISSION, JOSE M. MIRASOL and INTRANS PHILS., INC., Respondents. (G.R. No. 80039, April 18, 1989, 1st Division) GANCAYCO, J: FACTS: Petitioner was employed in respondent corporation. On August 28, 1985, respondent Jose M. Mirasol persuaded petitioner to subscribe to P1,500 shares of respondent corporation it P100.00 per share or a total of P150,000.00. He made an initial payment of P37,500.00. On September 1, 1975, petitioner was appointed President and General Manager of the respondent corporation. However, on January 2, 1986, he resigned. On December 19, 1986, petitioner instituted with the NLRC a complaint against private respondents for the payment of his unpaid wages, his cost of living allowance, the balance of his gasoline and representation expenses and his bonus compensation for 1986. Petitioner and private respondents submitted their position papers to the labor arbiter. Private respondents admitted that there is due to petitioner the amount of P17,060.07 but this was applied to the unpaid balance of his subscript in the amount of P95,439.93. Petitioner questioned the set-off alleging that there was no call or notice for the payment of unpaid subscription and that, accordingly, the alleged obligation is not enforceable. ISSUE: Whether or not the National Labor Relations Commission (NLRC) has jurisdiction to resolve a claim for non-payment of stock subscriptions to a corporation. HELD: Firstly, the NLRC has no jurisdiction to determine such intra-corporate dispute between the stockholder and the corporation as in the matter of unpaid subscriptions. This controversy is within the exclusive jurisdiction of the Securities and Exchange Commission. Secondly, assuming arguendo that the NLRC may exercise jurisdiction over the said subject matter under the circumstances of this case, the unpaid subscriptions are not due and payable until a call is made by the corporation for payment. Private respondents have not presented a resolution of the board of directors of respondent corporation calling for the payment of the unpaid subscriptions. It does not even appear that a notice of such call has been sent to petitioner by the respondent corporation. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
475
Sps Chung v. Ulanday Construction SPOUSES VICTORIANO CHUNG and DEBBIE CHUNG, Petitioners, versus ULANDAY CONSTRUCTION, INC.,* Respondent. (G.R. No. 156038, October 11, 2010, 3rd Division) BRION, J: FACTS: In February 1985, the petitioners contracted with respondent Ulanday Construction, Inc. to construct, within a 150-day period,the concrete structural shell of the formers two-storey residential house in Urdaneta Village, Makati City at the contract price of P3, 291,142.00. The contract stipulated among others that the petitioners shall pay a P987,342.60 downpayment, with the balance to be paid in progress payments based on actual work completed; (c) the Construction Manager or Architect shall check the respondent‘s request for progress payment and endorse it to the petitioners for payment within 3 days from receipt, (d) the petitioners shall pay the respondents within 7 days from receipt of the Construction Manager‘s or Architect‘s certificate; (e) the respondent cannot change or alter the plans, specifications, and works without the petitioners‘ prior written approval. Respondent gave 12 progress billings but the petitioners were only able to pay 7 of them. On their part, the respondent effected 19 change orders without the consent of the petitioners amounting to P912, 885.91. Respondents demanded the remaining balance from the petitioners which the petitioners denied asserting that the respondents violated the contract. ISSUE: Whether or not the petitioners are liable for the remaining balance HELD: In contractual relations, the law allows the parties leeway and considers their agreement as the law between them.Contract stipulations that are not contrary to law, morals, good customs, public order or public policy shall be binding and should be complied with in good faith. No party is permitted to change his mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party. In the present case, we find that both parties failed to comply strictly with their contractual stipulations on the progress billings and change orders that caused the delays in the completion of the project. Under the circumstances, fairness and reason dictate that we simply order the set-off of the petitioners‘ contractual liabilities totaling P575,922.13 against the repair cost for the defective gutter, pegged at P717,524.00, leaving the amount of P141,601.87 still due from the respondent. Support in law for this HELD for partial legal compensation proceeds from Articles 1278, 1279, 1281, and 1283 of the Civil Code. In short, both parties are creditors and debtors of each other, although in different amounts that are already due and demandable. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
476
Insular Investment v. Capital One INSULAR INVESTMENT and TRUST CORPORATION, Petitioner versus CAPITAL ONE EQUITIES CORP. (now known as CAPITAL ONE HOLDINGS CORP.) and PLANTERS DEVELOPMENT BANK, Respondents. (G.R. No. 183308, April 25, 2012, 3rd Division) MENDOZA, J: FACTS: Petitioner Insular Investment and Trust Corporation (IITC) and respondents Capital One Equities Corporation (COEC) and Planters Development Bank (PDB) are regularly engaged in the trading, sale and purchase of Philippine treasury bills. On various dates in 1994, IITC purchased from COEC treasury bills with an aggregate face value of P260,683,392.51 (the IITC T-Bills), as evidenced by the confirmations of purchase issued by IITC. The purchase price for the said treasury bills were fully paid by IITC to COEC which was able to deliver P121,050,000.00 worth of treasury bills to IITC. On May 2, 1994, PDB issued confirmations of sale in favor of IITC for the sale of treasury bills and IITC, in turn, issued confirmations of purchase in favor of PDB over treasury bills with a total face value of P186,790,000.00. On May 10, 1994, COEC wrote a letter to IITC demanding the physical delivery of the treasury bills which the former purchased from the latter on May 2, 1994. Despite repeated demands, however, PDB failed to deliver the balance of P136,790,000.00 worth of treasury bills which IITC purchased from PDB allegedly for COEC. ISSUE: Whether or not the Regional Trial Court correctly ruled that COEC may validly set-off its claims for undelivered treasury bills against that of IITC‘s claims. HELD: Yes. The Regional Trial Court correctly ruled that COEC may validly setoff its claims for undelivered treasury bills against that of IITC‘s claims. The Court finds in favor of respondent, COEC, when it pointed out that it has already unquestionably proven that IITC acted as a principal, and not as a conduit, in the sale of treasury bills to COEC. Furthermore, it asserts that the treasury bills in question are generic in nature because the confirmations of sale and purchase do not mention specific treasury bills with serial numbers. The securities were sold as indeterminate objects which have a monetary equivalent, as acknowledged by the parties in the Tripartite Agreement. As such, because both IITC and COEC are principal creditors of the other over debts which consist of consumable things or a sum of money, the RTC correctly ruled that COEC may validly set-off its claims for undelivered treasury bills against that of IITC‘s claims. Petition partially granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
477
Lao, et al. v. Special Plans Inc. SELWIN LAO and EDGAR MANANSALA, Petitioners versus SPECIAL PLANS, INC., Respondent (GR No. 164729; June 29, 2010, 1st Division) DEL CASTILLO, J: FACTS: Petitioners Selwyn F. Lao and Edgar Manansala (Manansala), together with Benjamin Jim (Jim), entered into a Contract of Lease with respondent Special Plans, Inc. (SPI) for the period January 16, 1993 to January 15, 1995 over SPI‘s building at No. 354 Quezon Avenue, Quezon City. Petitioners intended to use the premises for their karaoke and restaurant business known as ―Saporro Restaurant‖. Upon expiration of the lease contract, it was renewed for a period of eight months at a monthly rate of P23, 000.00. On June 3, 1996, SPI sent a Demand Letter to the petitioners asking for full payment of rentals in arrears.Receiving no payment, SPI filed on July 23, 1996 a Complaint for sum of money with the MeTC of Quezon City, claiming unpaid rentals of P118, 000.00 covering the period March 16, 1996 to August 16, 1996. Petitioners answered faulting SPI for making them believe that it owns the leased property and that SPI did not deliver the leased premises in a condition fit for petitioners‘ intended use. Thus, petitioners claimed that they were constrained to incur expenses for necessary repairs as well as expenses for the repair of structural defects, which SPI failed and refused to reimburse. Petitioners prayed that the complaint be dismissed and judgment on their counterclaims be rendered ordering SPI to pay them the sum of P422, 920.40 as actual damages, as well as moral damages, attorney‘s fees and exemplary damages. ISSUE: Whether or not the cost of repairs incurred by the petitioners should be compensated against the unpaid rentals. HELD: Petitioners failed to properly discharge their burden to show that the debts are liquidated and demandable. Consequently, legal compensation is inapplicable. The petitioners attempted to prove that they spent for the repair of the roofing, ceiling and flooring, as well as for waterproofing. However, they failed to appreciate that, as per their lease contract, only structural repairs are for the account of the lessor, herein respondent SPI. In which case, they overlooked the need to establish that aforesaid repairs are structural in nature, in the context of their earlier agreement. It would have been an altogether different matter if the lessor was informed of the said structural repairs and he implicitly or expressly consented and agreed to take responsibility for the said expenses. Such want of evidence on this respect is fatal to this appeal. Consequently, their claim remains unliquidated and, legal compensation is inapplicable. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
478
United Planters Sugar v. Court of Appeals UNITED PLANTERS SUGAR MILLING CO., INC. (UPSUMCO), Petitioner, versus THE HONORABLE COURT OF APPEALS, PHILIPPINE NATIONAL BANK (PNB) and ASSET PRIVATIZATION TRUST (APT), AS TRUSTEE OF THE REPUBLIC OF THE PHILIPPINES Respondents. (G.R. No. 126890, March 9, 2010, En Banc) PERALTA, J: FACTS: In 1987, the Republic of the Philippines lost around 1.5 Billion Pesos after it had waived its right to collect on an outstanding indebtedness from petitioner, by virtue of a so-called ―friendly foreclosure agreement‖ that ultimately was friendly only to petitioner. Petitioner United Planters Sugar Milling Co. (UPSUMCO) was engaged in the business of milling sugar. In 1974, as UPSUMCO commenced operations, it obtained a set of loans from respondent Philippine National Bank (PNB). The loans were secured over two parcels of land where the milling plant stood and chattel mortgages over the machineries and equipment. On 27 February 1987, through a Deed of Transfer, PNB assigned to the Government its ―rights, titles and interests‖ over UPSUMCO, among several other assets.[6] The Deed of Transfer acknowledged that said assignment was being undertaken ―in compliance with Presidential Proclamation No. 50.‖ The Government subsequently transferred these ―rights, titles and interests‖ over UPSUMCO to the respondent Asset and Privatization Trust (APT). ISSUE: Whether or not there was compensation in the present case. HELD: The right of PNB to set-off payments from UPSUMCO arose out of conventional compensation rather than legal compensation, even though all of the requisites for legal compensation were present as between those two parties. The determinative factor is the mutual agreement between PNB and UPSUMCO to set-off payments. Even without an express agreement stipulating compensation, PNB and UPSUMCO would have been entitled to set-off of payments, as the legal requisites for compensation under Article 1279 were present. As soon as PNB assigned its credit to APT, the mutual creditor-debtor relation between PNB and UPSUMCO ceased to exist. However, PNB and UPSUMCO had agreed to a conventional compensation, a relationship which does not require the presence of all the requisites under Article 1279. And PNB too had assigned all its rights as creditor to APT, including its rights under conventional compensation. The absence of the mutual creditor-debtor relation between the new creditor APT and UPSUMCO cannot negate the conventional compensation. Accordingly, APT, as the assignee of credit of PNB, had the right to set-off the outstanding obligations of UPSUMCO on the basis of conventional compensation before the condonation took effect on 3 September 1987. Motion denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
479
PNB Management v. R&R Metal PNB MANAGEMENT and DEVELOPMENT CORP. (PNB MADECOR), Petitioner, versus R&R METAL CASTING and FABRICATING, INC., Respondent. (G.R. No. 132245. January 2, 2002, 2nd Division) QUISUMBING, J: FACTS: It appears that on November 19, 1993, respondent R&R Metal Casting and Fabricating, Inc. (R&R) obtained a judgment in its favor against Pantranco North Express, Inc. (PNEI). PNEI was ordered to pay respondent P213,050 plus interest as actual damages, P50,000 as exemplary damages, 25 percent of the total amount payable as attorney‘s fees, and the costs of suit. However, the writ of execution was returned unsatisfied since the sheriff did not find any property of PNEI recorded at the Registries of Deeds of the different cities of Metro Manila. Neither did the sheriff receive a reply to the notice of garnishment he sent to PNB-Escolta.On March 27, 1995, respondent filed with the trial court a motion for the issuance of subpoenae duces tecum and ad testificandum requiring petitioner PNB Management and Development Corp. (PNB MADECOR) to produce and testify on certain documents pertaining to transactions between petitioner and PNEI from 1981 to 1995. ISSUE: Whether or not legal compensation have occured in the instant case. HELD: Legal compensation could not have occurred because of the absence of one requisite in this case: that both debts must be due and demandable. Petitioner‘s obligation to PNEI appears to be payable on demand, following the above observation made by the CA and the assertion made by petitioner. Petitioner is obligated to pay the amount stated in the promissory note upon receipt of a notice to pay from PNEI. If petitioner fails to pay after such notice, the obligation will earn an interest of 18 percent per annum. Since petitioner‘s obligation to PNEI is payable on demand, and there being no demand made, it follows that the obligation is not yet due. Therefore, this obligation may not be subject to compensation for lack of a requisite under the law. Without compensation having taken place, petitioner remains obligated to PNEI to the extent stated in the promissory note. This obligation may undoubtedly be garnished in favor of respondent to satisfy PNEI‘s judgment debt. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
480
Silahis Marketing Corp. v. IAC SILAHIS MARKETING CORPORATION, Petitioner, versus INTERMEDIATE APPELLATE COURT and GREGORIO DE LEON, doing business under the name and style of "MARK INDUSTRIAL SALES", Respondents. (G.R.No. 74027, December 7, 1989, 3rd Division) FERNAN, J.:
FACTS:Petitioner Silahis Marketing Corporation seeks in this petition for review on certiorari a reversal of the decision of the then Intermediate Appellate Court (IAC) in AC-G.R. CV No. 67162 entitled "De Leon, etc. v. Silahis Marketing Corporation", disallowing petitioner's counterclaim for commission to partially offset the claim against it of private respondent Gregorio de Leon for the purchase price of certain merchandise. A review of the record shows that on various dates in October, November and December, 1975, Gregorio de Leon doing business under the name and style of Mark Industrial Sales sold and delivered to Silahis Marketing Corporation various items of merchandise covered by several invoices in the aggregate amount of P22,213.75 payable within thirty (30) days from date of the covering invoices.Allegedly due to Silahis' failure to pay its account upon maturity despite repeated demands, de Leon filed before the then Court of First Instance of Manila a complaint for the collection of the said accounts including accrued interest thereon in the amount of P661.03 and attorney's fees of P5,000.00 plus costs of litigation.
ISSUE: Whether or not private respondent is liable to the petitioner for the commission or margin for the direct sale which the former concluded and consummated with Dole Philippines, Incorporated without coursing the same through herein petitioner.
HELD: No. Private respondent is not liable to the petitioner for the commission or margin for the direct sale which the former concluded and consummated with Dole Philippines, Incorporated without coursing the same through herein petitioner. It must be remembered that compensation takes place when two persons, in their own right, are creditors and debtors to each other. Article 1279 of the Civil Code provides that: "In order that compensation may be proper, it is necessary: [1] that each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; [2] that both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; [3] that the two debts be due; [4] that they be liquidated and demandable; [5] that over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor." When all the requisites mentioned in Art. 1279 of the Civil Code are present, compensation takes effect by operation of law, even without the consent or knowledge of the creditors and debtors. 5 Article 1279 requires, among others, that in order that legal compensation shall take place, "the two debts be due" and "they be liquidated and demandable." Compensation is not proper where the claim of the person asserting Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
481
the set-off against the other is not clear nor liquidated; compensation cannot extend to unliquidated, disputed claim existing from breach of contract. Undoubtedly, petitioner admits the validity of its outstanding accounts with private respondent in the amount of P22,213.75 as contained in its answer. But whether private respondent is liable to pay the petitioner a 20% margin or commission on the subject sale to Dole Philippines, Inc. is vigorously disputed. This circumstance prevents legal compensation from taking place.
The Decision of the Appellate Court is Affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
482
Francia v. IAC ENGRACIO FRANCIA, Petitioner, versus INTERMEDIATE APPELLATE COURT and HO FERNANDEZ, Respondents. (G.R.No. 67649, June 28, 1998, 3rd Division) GONZALES, JR., J.:
FACTS: Engracio Francia is the registered owner of a residential lot and a two-story house built upon it situated at Barrio San Isidro, now District of Sta. Clara, Pasay City, Metro Manila. On October 15, 1977, a 125 square meter portion of Francia's property was expropriated by the Republic of the Philippines for the sum of P4,116.00 representing the estimated amount equivalent to the assessed value of the aforesaid portion.Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, on December 5, 1977, his property was sold at public auction by the City Treasurer of Pasay City pursuant to Section 73 of Presidential Decree No. 464 known as the Real Property Tax Code in order to satisfy a tax delinquency of P2,400.00. Ho Fernandez was the highest bidder for the property. Francia was not present during the auction sale since he was in Iligan City at that time helping his uncle ship bananas. On March 3, 1979, Francia received a notice of hearing of LRC Case No. 1593-P "In re: Petition for Entry of New Certificate of Title" filed by Ho Fernandez, seeking the cancellation of TCT No. 4739 (37795) and the issuance in his name of a new certificate of title. On March 20, 1979, Francia filed a complaint to annul the auction sale. He later amended his complaint on January 24, 1980.
ISSUE: Whether or not Francia‘s tax delinquency of P2,400.00 has been extinguished by legal compensation.
HELD: No. Francia‘s tax delinquency of P2,400.00 has not been extinguished by legal compensation. There is no legal basis for the contention. By legal compensation, obligations of persons, who in their own right are reciprocally debtors and creditors of each other, are extinguished (Art. 1278, Civil Code). The circumstances of the case do not satisfy the requirements provided by Article 1279, to wit: "(1) that each one of the obligors be bound principally and that he be at the same time a principal creditor of the other; We have consistently ruled that there can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government. A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the remedy in an action or any indebtedness of the state or municipality to one who is liable to the state or municipality for taxes. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
483
Neither are they a proper subject of recoupment since they do not arise out of the contract or transaction sued on. "The general rule based on grounds of public policy is well-settled that no set-off admissible against demands for taxes levied for general or local governmental purposes. The reason on which the general rule is based, is that taxes are not in the nature of contracts between the party and party but grow out of duty to, and are the positive acts of the government to the making and enforcing of which, the personal consent of individual taxpayers is not required.
Petition is dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
484
Trinidad v. Acapulco HERMENEGILDO M. TRINIDAD, Petitioner, versus ESTRELLA ACAPULCO, Respondent (G.R.No. 147477, June 27, 2006, 1st Division) AUSTRIA-MARTINEZ, J.:
FACTS:On May 6, 1991, respondent Estrella Acapulco filed a Complaint before the RTC seeking the nullification of a sale she made in favor of petitioner Hermenegildo M. Trinidad. She alleged: Sometime in February 1991, a certain Primitivo Cañete requested her to sell a Mercedes Benz for P580,000.00. Cañete also said that if respondent herself will buy the car, Cañete was willing to sell it for P500,000.00. Petitioner borrowed the car from respondent for two days but instead of returning the car as promised, petitioner told respondent to buy the car from Cañete for P500,000.00 and that petitioner would pay respondent after petitioner returns from Davao. Following petitioner‘s instructions, respondent requested Cañete to execute a deed of sale covering the car in respondent‘s favor for P500,000.00 for which respondent issued three checks in favor of Cañete. Respondent thereafter executed a deed of sale in favor of petitioner even though petitioner did not pay her any consideration for the sale. When petitioner returned from Davao, he refused to pay respondent the amount of P500,000.00 saying that said amount would just be deducted from whatever outstanding obligation respondent had with petitioner. Due to petitioner‘s failure to pay respondent, the checks that respondent issued in favor of Cañete bounced, thus criminal charges were filed against her. Respondent then prayed that the deed of sale between her and petitioner be declared null and void; that the car be returned to her; and that petitioner be ordered to pay damages.
ISSUE:Whether or not petitioner‘s claim for legal compensation was already too late
HELD: No. Petitioner‘s claim for legal compensation was not too late. The court ruled in favor of the petitioner. Compensation takes effect by operation of law even without the consent or knowledge of the parties concerned when all the requisites mentioned in Article 1279 of the Civil Code are present. This is in consonance with Article 1290 of the Civil Code which provides that: Article 1290. When all the requisites mentioned in article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation. Since it takes place ipso jure, when used as a defense, it retroacts to the date when all its requisites are fulfilled. Petitioner‘s stance is that legal compensation has taken place and operates even against the will of the parties because: (a) respondent and petitioner were personally both creditor and debtor of each other; (b) the monetary obligation of respondent was P566,000.00 and that of the petitioner was P500,000.00 showing that both indebtedness were monetary obligations the amount of which were also both known and liquidated; (c) both monetary obligations had become due and Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
485
demandable—petitioner‘s obligation as shown in the deed of sale and respondent‘s indebtedness as shown in the dishonored checks; and (d) neither of the debts or obligations are subject of a controversy commenced by a third person.
Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
486
Heirs of Franco v. Sps. Gonzales HEIRS OF SERVANDO FRANCO, Petitioners, versus SPOUSES VERONICA AND DANILO GONZALES, Respondents. (G.R. No. 159709, June 27, 2012, 1st Division) BERSAMIN, J.: FACTS: On November 7, 1985, Servando Franco and Leticia Medel (hereafter Servando and Leticia) obtained a loan from Veronica R. Gonzales (hereafter Veronica), who was engaged in the money lending business under the name ―Gonzales Credit Enterprises‖, in the amount of P50,000.00, payable in two months. Veronica gave only the amount of P47,000.00, to the borrowers, as she retained P3,000.00, as advance interest for one month at 6% per month. Servado and Leticia executed a promissory note for P50,000.00, to evidence the loan, payable on January 7, 1986. On November 19, 1985, Servando and Leticia obtained from Veronica another loan in the amount of P90,000.00, payable in two months, at 6% interest per month. They executed a promissory note to evidence the loan, maturing on January 19, 1986. They received only P84,000.00, out of the proceeds of the loan. On maturity of the two promissory notes, the borrowers failed to pay the indebtedness. On June 11, 1986, Servando and Leticia secured from Veronica still another loan in the amount of P300,000.00, maturing in one month, secured by a real estate mortgage over a property belonging to Leticia Makalintal Yaptinchay, who issued a special power of attorney in favor of Leticia Medel, authorizing her to execute the mortgage. Servando and Leticia executed a promissory note in favor of Veronica to pay the sum of P300,000.00, after a month, or on July 11, 1986. However, only the sum of P275,000.00, was given to them out of the proceeds of the loan. Like the previous loans, Servando and Medel failed to pay the third loan on maturity.
ISSUE: Whether or not there was a novation of the August 23, 1986 promissory note when respondent Veronica Gonzales issued the February 5, 1992 receipt.
HELD: No. There was no novation of the August 23, 1986 promissory note when respondent Veronica Gonzales issued the February 5, 1992 receipt. A novation arises when there is a substitution of an obligation by a subsequent one that extinguishes the first, either by changing the object or the principal conditions, or by substituting the person of the debtor, or by subrogating a third person in the rights of the creditor. For a valid novation to take place, there must be, therefore: (a) a previous valid obligation; (b) an agreement of the parties to make a new contract; (c) an extinguishment of the old contract; and (d) a valid new contract. In short, the new obligation extinguishes the prior agreement only when the substitution is unequivocally declared, or the old and the new obligations are incompatible on every point. A compromise of a final judgment operates as a novation of the judgment obligation upon compliance with either of these two conditions. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
487
To be clear, novation is not presumed. This means that the parties to a contract should expressly agree to abrogate the old contract in favor of a new one. In the absence of the express agreement, the old and the new obligations must be incompatible on every point. The issuance of the receipt created no new obligation. Instead, the respondents only thereby recognized the original obligation by stating in the receipt that the P400,000.00 was ―partial payment of loan‖ and by referring to ―the promissory note subject of the case in imposing the interest.‖ The loan mentioned in the
receipt was
still the
same loan involving
the P500,000.00
extended
to
Servando. Advertence to the interest stipulated in the promissory note indicated that the contract still subsisted, not replaced and extinguished, as the petitioners claim. The Court AFFIRMS the decision of the Court of Appeals promulgated on March 19, 2003.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
488
Hernandez-Nievera v. Hernandez CAROLINA HERNANDEZ-NIEVERA, DEMETRIO P. HERNANDEZ, JR., and MARGARITA H. MALVAR, Petitioners, versus WILFREDO HERNANDEZ, HOME INSURANCE AND GUARANTY CORPORATION, PROJECT MOVERS REALTY AND DEVELOPMENT CORPORATION, MARIO P. VILLAMOR and LAND BANK OF THE PHILIPPINES, Respondents. (GR No. 171165, February 14, 2011, 2nd Division) PERALTA, J.: FACTS:Project Movers Realty & Development Corporation (PMRDC) is a duly organized domestic corporation engaged in real estate development. It entered into a Memorandum of Agreement (MOA) whereby it was given the option to buy pieces of land owned by petitioners Carolina Hernandez-Nievera, Margarita H. Malvar and Demetrio P. Hernandez, Jr. Demetrio, under authority of a Special Power of Attorney to Sell or Mortgage, signed the MOA also in behalf of Carolina and Margarita. In the aggregate, the realty measured 4,580,451 square meters and was segregated by agreement into Area I and Area II. On March 23, 1998, the PMRDC entered with LBP and Demetrio - the latter purportedly acting under authority of the same special power of attorney as in the MOA - into a Deed of Assignment and Conveyance (DAC). PMRDC delivered to petitioners certain checks representing the money, the same however allegedly bounced. Hence, on January 8, 1999, petitioners demanded the return of the corresponding TCTs over the land but PMRDC said that the TCTs could no longer be delivered back to petitioners as the covered properties had already been conveyed and assigned to the Asset Pool pursuant to the March 23, 1998 DAC. Petitioner contended that Demetrio could not have entered into the said agreement as his power of attorney was limited only to selling or mortgaging the properties and not conveying the same to the Asset Pool. ISSUE:Whether or not the novation of the MOA is valid. HELD: No. The novation of the MOA is invalid. Thus, it becomes clear that Demetrio's special power of attorney to sell is sufficient to enable him to make a binding commitment under the DAC in behalf of Carolina and Margarita. In particular, it does include the authority to extinguish PMRDC's obligation under the MOA to deliver option money and agree to a more flexible term by agreeing instead to receive shares of stock in lieu thereof and in consideration of the assignment and conveyance of the properties to the Asset Pool. Indeed, the terms of his special power of attorney allow much leeway to accommodate not only the terms of the MOA but also those of the subsequent agreement in the DAC which, in this case, necessarily and consequently has resulted in a novation of PMRDC's integral obligations. There are two ways which could indicate, in fine, the presence of novation and thereby produce the effect of extinguishing an obligation by another which substitutes the same. The first is when novation has been explicitly stated and declared in unequivocal terms. The second is when the old and the new obligations are incompatible on every point. The test of incompatibility is whether the two obligations can stand together, each one having its independent existence. If they cannot, they are incompatible, and the latter obligation novates the first. Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
489
St. James College of Paranaque v. Equitable PCI ST. JAMES COLLEGE OF PARAÑAQUE; JAIME T. TORRES, represented by his legal representative, JAMES KENLEY M. TORRES; and MYRNA M. TORRES, Petitioners, versus EQUITABLE PCI BANK, Respondent. (GR No. 179441, August 9, 2010, 1st Division) VELASCO, JR., J.; FACTS:Petitioners-spouses owned and operated St. James College of Paranaque. Sometime in 1995, the Philippine Commercial and International Bank (PCIB), respondent, granted the Torres spouses and/or St. James College a credit line facility of up to 25,000,000 secured by a real estate mortgage over a parcel of land in Paranaque. Petitioners had defaulted in the payment of the loan obtained from the secured credit accommodation, their total unpaid loan obligation, as of September 2001, stood at 18,300,000. Respondent proposed a payment scheme to pay annually which the petitioners agreed upon but failed to comply with. Respondent then demanded full settlement of the loan. Petitioners contended that the the full amount is still not due owing to the implied novation of the terms of payment previously agreed upon. As petitioners assert in this regard that the acceptance by respondent, particularly of the June 23, 2003 PhP 2,521,609.62 payment, without any objection on the new terms set forth in their June 23, 2003 complementing covering letter, novated the terms of payment of the 18,300,000 secured loan. ISSUE: Whether or not there was novation of contract HELD: No. There was no novation of contract. As a civil law concept, novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which terminates it, either by changing its objects or principal conditions, or by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor. Novation may be extinctive or modificatory. It is extinctive when an old obligation is terminated by the creation of a new one that takes the place of the former; it is merely modificatory when the old obligation subsists to the extent that it remains compatible with the amendatory agreement. Novation may either be express, when the new obligation declares in unequivocal terms that the old obligation is extinguished, or implied, when the new obligation is on every point incompatible with the old one. The test of incompatibility lies on whether the two obligations can stand together, each one with its own independent existence. For novation, as a mode of extinguishing or modifying an obligation, to apply, the following requisites must concur: 1) There must be a previous valid obligation. 2) The parties concerned must agree to a new contract. 3) The old contract must be extinguished. 4) There must be a valid new contract. Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
490
Tomimbang v. Tomimbang MARIA SOLEDAD TOMIMBANG, Petitioner, versus ATTY. JOSE TOMIMBANG, Respondent. (GR No. 165116, August 4, 2009, 3rd Division) PERALTA, J.; FACTS:Petitioner and respondent are siblings. Their parents donated to petitioner an eight-door apartment located at 149 Santolan Road, Murphy, Quezon City. Petitioner failed to obtain a loan from PAG-IBIG Fund, hence, respondent offered to extend a credit line to petitioner on the following conditions: (1) petitioner shall keep a record of all the advances; (2) petitioner shall start paying the loan upon the completion of the renovation; (3) upon completion of the renovation, a loan and mortgage agreement based on the amount of the advances made shall be executed by petitioner and respondent; and (4) the loan agreement shall contain comfortable terms and conditions which petitioner could have obtained from PAG-IBIG. A conflict between the siblings ensued leading to a new agreement whereby petitioner was to start making monthly payments on her loan. Upon respondent's demand, petitioner turned over to respondent all the records of the cash advances for the renovations. Subsequently, or from June to October of 1997, petitioner made monthly payments of P18, 700.00, or a total ofP93, 500.00. Petitioner never denied the fact that she started making such monthly payments. Thereafter, the petitioner can no longer be found and also stopped making the monthly payments. Thus, a complaint was filed against the petitioner demanding payment of the loan plus interest. Petitioner contended that the loan is not yet due and demandable as the renovation of the apartment is not yet completed. ISSUE: Whether or not the loan is already due and demandable. HELD: Yes. The loan is already due and demandable. The loan is already due and demandable due to the subsequent agreement entered in to by the parties. Article 1291 of the Civil Code provides, thus: Art. 1291. Obligations may be modified by: (1) Changing their object or principal conditions; (2) Substituting the person of the debtor; (3) Subrogating a third person in the rights of the creditor. The petitioner admitted that she started to comply with the demand of the respondent to pay on a monthly basis. Her partial performance of her obligation is unmistakable proof that indeed the original agreement between her and respondent had been novated by the deletion of the condition that payments shall be made only after completion of renovations. Hence, by her very own admission and partial performance of her obligation, there can be no other conclusion but that under the novated agreement, petitioner's obligation is already due and demandable. Petition is affirmed with modification.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
491
Mindanao Savings and Loan Association, Inc. v. Willkom MINDANAO SAVINGS AND LOAN ASSOCIATION, INC., represented by its Liquidator, THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner, versus EDWARD WILLKOM; GILDA GO; REMEDIOS UY; MALAYO BANTUAS, in his capacity as the Deputy Sheriff of Regional Trial Court, Branch 3, Iligan City; and the REGISTER OF DEEDS of Cagayan de Oro City, Respondent. (GR No. 178618, October 11, 2010, 2nd Division) NACHURA, J.; FACTS:The First Iligan Savings and Loan Association, Inc. (FISLAI) and the Davao Savings and Loan Association, Inc. (DSLAI) banks that entered into a merger, with DSLAI as the surviving corporation. The articles of merger were not registered with the SEC but when DSLAI changed its corporate name to MSLAI the amendment was approved by the SEC.Meanwhile, the Board of Directors of FISLAI passed a resolution, assigning its assets in favor of DSLAI which in turn assumed the former‘s liabilities.The business of MSLAI, however, failed was ordered its closure and placed under receivership. Prior to the closure of MSLAI, Uy filed an action for collection of sum of money against FISLAI. The RTC issued a summary decision in favor of Uy, directing defendants therein (which included FISLAI) to pay the former the sum of P136, 801.70. Therafter,sheriff Bantuas levied on six (6) parcels of land owned by FISLAI and Willkom was the highest bidder. New certificates of title covering the subject properties were issued in favor of Willkom who sold one of the subject parcels of land to Go. MSLAI, represented by PDIC, filed a complaint forAnnulment of Sheriff’s Sale, Cancellation of Title and Reconveyance of Properties against respondents. Therespondents averred that MSLAI had no cause of action against them or the right to recover the subject properties because MSLAI is a separate and distinct entity from FISLAI as the merger did not take effect. ISSUE: Whether or not there was novation of the obligation by substituting the person of the debtor HELD: No. There was no novation of the obligation by substituting the person of the debtor. It is a rule that novation by substitution of debtor must always be made with the consent of the creditor. Article 1293 of the Civil Code is explicit, thus: Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him the rights mentioned in Articles 1236 and 1237. In this case, there was no showing that Uy, the creditor, gave her consent to the agreement that DSLAI (now MSLAI) would assume the liabilities of FISLAI. Such agreement cannot prejudice Uy. Thus, the assets that FISLAI transferred to DSLAI remained subject to execution to satisfy the judgment claim of Uy against FISLAI. The subsequent sale of the properties by Uy to Willkom, and of one of the properties by Willkom to Go, cannot, therefore, be questioned by MSLAI. The consent of the creditor to a novation by change of debtor is as indispensable as the creditor‘s consent in conventional subrogation in order that a novation shall legally take place. Since novation implies a waiver of the right which the creditor had before the novation, such waiver must be express.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
492
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
493
Aquintey v. Sps. Tibong AGRIFINA AQUINTEY, Petitioner, versus SPOUSES FELICIDAD AND RICO TIBONG, Respondents. (G.R. No. 166704, December 20, 2006, 1st Division) CALLEJO, SR., J.;
FACTS:On May 6, 1999, petitioner Aquintey filed before RTC Baguio, a complaint for sum of money and damages against respondents. Agrifina alleged that Felicidad secured loans from her on several occasions at monthly interest rates of 6% to 7%. Despite demands, spouses Tibong failed to pay their outstanding loans of P773,000,00 exclusive of interests. However, spouses Tiong alleged that they had executed deeds of assignment in favor of Agrifina amounting to P546,459 and that their debtors had executed promissory notes in favor of Agrifina. Spouses insisted that by virtue of these documents, Agrifina became the new collector of their debts. Agrifina was able to collect the total amount of P301,000 from Felicdad‘s debtors. She tried to collect the balance of Felicidad and when the latter reneged on her promise, Agrifina filed a complaint in the office of the barangay for the collection of P773,000.00. There was no settlement. RTC favored Agrifina. Court of Appeals affirmed the decision with modification ordering defendant to pay the balance of total indebtedness in the amount of P51,341,00 plus 6% per month.
ISSUE: Whether or not there is valid novation in the instant case.
HELD: Yes. There is valid novation in the instant case. Novation which consists in substituting a new debtor in the place of the original one may be made even without the knowledge or against the will of the latter but not without the consent of the creditor. Substitution of the person of the debtor may be effected by delegacion, meaning, the debtor offers, and the creditor, accepts a third person who consents to the substitution and assumes the obligation. Thus, the consent of those three persons is necessary. In this kind of novation, it is not enough to extend the juridical relation to a third person; it is necessary that the old debtor be released from the obligation, and the third person or new debtor take his place in the relation. Without such release, there is no novation; the third person who has assumed the obligation of the debtor merely becomes a co-debtor or a surety. If there is no agreement as to solidarity, the first and the new debtor are considered obligated jointly.
In the case at bar, the court found that respondents‘ obligation to pay the balance of their account with petitioner was extinguished, pro tanto, by the deeds of assignment of credit executed by respondent Felicidad in favor of petitioner. As gleaned from the deeds executed by respondent Felicidad relative to the accounts of Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
494
her other debtors, petitioner was authorized to collect the amounts of P6,000.00 from Cabang, and P63,600.00 from Cirilo. They obliged themselves to pay petitioner. Respondent Felicidad, likewise,unequivocably declared that Cabang and Cirilo no longer had any obligation to her.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
495
Loadmasters Customs Services, Inc. v. Glodel Brokerage Corp. LOADMASTERS CUSTOMS SERVICES, INC., Petitioner, versus GLODEL BROKERAGE CORPORATION and R&B INSURANCE CORPORATION, Respondents. (G.R. No. 179446, January 10, 2011, 2nd Division)
MENDOZA, J.: FACTS: On August 28, 2001, R&B Insurance issued Marine Policy No. MN 00105/2001 in favor of Columbia to insure the shipment of 132 bundles of electric copper cathodes against All Risks. On August 28, 2001, the cargoes were shipped on board the vessel "Richard Rey" from Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date. Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pier and the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the services of Loadmasters for the use of its delivery trucks to transport the cargoes to Columbia‘s warehouses/plants in Bulacan and Valenzuela City. The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by its employed drivers and accompanied by its employed truck helpers. Of the six (6) trucks route to Balagtas, Bulacan, only five (5) reached the destination. One (1) truck, loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo. Later on, the said truck, was recovered but without the copper cathodes. Because of this incident, Columbia filed with R&B Insurance a claim for insurance indemnity in the amount ofP1,903,335.39. After the investigation, R&B Insurance paid Columbia the amount ofP1,896,789.62 as insurance indemnity. R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel before the Regional Trial Court, Branch 14, Manila (RTC), It sought reimbursement of the amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had been subrogated "to the right of the consignee to recover from the party/parties who may be held legally liable for the loss." On November 19, 2003, the RTC rendered a decision holding Glodel liable for damages for the loss of the subject cargo and dismissing Loadmasters‘ counterclaim for damages and attorney‘s fees against R&B Insurance. ISSUE: Whether or not Loadmasters and Glodel are common carriers to determine their liability for the loss of the subject cargo. HELD: Yes. Loadmasters and Glodel are common carriers to determine their liability for the loss of the subject cargo. Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations engaged in the business of carrying or transporting passenger or goods, or both by land, water or air for compensation, offering their services to the public. Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business and for reasons of public policy, to observe the extraordinary diligence in the vigilance over the goods transported by them according to all the circumstances of such case, as required by Article 1733 of the Civil Code. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
496
Loadmasters should be made answerable for the damages caused by its employees who acted within the scope of their assigned task of delivering the goods safely to the warehouse. Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure that Loadmasters would fully comply with the undertaking to safely transport the subject cargo to the designated destination. Glodel should, therefore, be held liable with Loadmasters. The petition is partially granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
497
Metropolitan Bank v. Rural Bank of Gerona METROPOLITAN BANK AND TRUST COMPANY, Petitioner, versus RURAL BANK OF GERONA, INC. Respondent. (G.R. No. 159097, July 5, 2010, 3rd Division) BRION, J.: FACTS: RBG is a rural banking corporation organized under Philippine laws and located in Gerona, Tarlac. In the 1970s, the Central Bank and the RBG entered into an agreement providing that RBG shall facilitate the loan applications of farmersborrowers under the Central Bank-International Bank for Reconstruction and Development‘s (IBRD‘s) 4th Rural Credit Project. The agreement required RBG to open a separate bank account where the IBRD loan proceeds shall be deposited. The RBG accordingly opened a special savings account with Metrobank‘s Tarlac Branch. As the depository bank of RBG, Metrobank was designated to receive the credit advice released by the Central Bank representing the proceeds of the IBRD loan of the farmers-borrowers; Metrobank, in turn, credited the proceeds to RBG‘s special savings account for the latter‘s release to the farmers-borrowers. On September 27, 1978, the Central Bank released a credit advice in Metrobank‘s favor and accordingly credited Metrobank‘s demand deposit account in the amount of P178,652.00, for the account of RBG. The amount, which was credited to RBG‘s special savings account represented the approved loan application of farmerborrower Dominador de Jesus. RBG withdrew the P178,652.00 from its account. On the same date, the Central Bank approved the loan application of another farmer-borrower, Basilio Panopio, for P189,052.00, and credited the amount to Metrobank‘s demand deposit account. Metrobank, in turn, credited RBG‘s special savings account. Metrobank claims that the RBG also withdrew the entire credited amount from its account. On October 3, 1978, the Central Bank approved Ponciano Lagman‘s loan application for P220,000.00. As with the two other IBRD loans, the amount was credited to Metrobank‘s demand deposit account, which amount Metrobank later credited in favor of RBG‘s special savings account. Of the P220,000.00, RBG only withdrew P75,375.00. On November 3, 1978, more than a month after RBG had made the above withdrawals from its account with Metrobank, the Central Bank issued debit advices, reversing all the approved IBRD loans.6 The Central Bank implemented the reversal by debiting from Metrobank‘s demand deposit account the amount corresponding to all three IBRD loans. ISSUE: Whether or not the farmers-borrowers to whom credits have been extended, are primarily liable for the payment of the borrowed amounts. HELD: Yes. The farmers-borrowers to whom credits have been extended, are primarily liable for the payment of the borrowed amounts. The Terms and Conditions of the IBRD 4th Rural Credit Project (Project Terms and Conditions) executed by the Central Bank and the RBG shows that the farmersborrowers to whom credits have been extended, are primarily liable for the payment of the borrowed amounts. The loans were extended through the RBG which also took care of the collection and of the remittance of the collection to the Central Bank. RBG, however, was not a mere conduit and collector. While the farmers-borrowers were the principal debtors, RBG assumed liability under the Project Terms and Conditions by solidarily binding itself with the principal debtors to fulfill the obligation.1awphi Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
498
Swagman Hotels and Travel, Inc. v. Court of Appeals SWAGMAN HOTELS AND TRAVEL, INC., Petitioners, versus HON. COURT OF APPEALS, and NEAL B. CHRISTIAN, Respondents. (G.R.No. 161135, April 8, 2005, 1st Division) DAVIDE, JR., J.;
FACTS:Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc., through Atty. Leonor L. Infante and Rodney David Hegerty, its president and vicepresident, respectively, obtained from private respondent Neal B. Christian loans evidenced by three promissory notes dated 7 August 1996, 14 March 1997, and 14 July 1997. Each of the promissory notes is in the amount of US$50,000 payable after three years from its date with an interest of 15% per annum payable every three months. In a letter dated 16 December 1998, Christian informed the petitioner corporation that he was terminating the loans and demanded from the latter payment in the total amount of US$150,000 plus unpaid interests in the total amount of US$13,500. On 2 February 1999, private respondent Christian filed with the Regional Trial Court of Baguio City, Branch 59, a complaint for a sum of money and damages against the petitioner corporation, Hegerty, and Atty. Infante. The petitioner corporation, together with its president and vice-president, filed an Answer raising as defenses lack of cause of action and novation of the principal obligations. According to them, Christian had no cause of action because the three promissory notes were not yet due and demandable.
ISSUE: Whether or not there is a valid novation, may the original terms of contract which has been novated still prevail.
HELD: Yes. There is a valid novation, the original terms of contract which has been novated may still prevail. The receipts, as well as private respondent‘s summary of payments, lend credence to petitioner‘s claim that the payments were for the principal loans and that the interests on the three consolidated loans were waived by the private respondent during the undisputed renegotiation of the loans on account of the business reverses suffered by the petitioner at the time. There was therefore a novation of the terms of the three promissory notes in that the interest was waived and the principal was payable in monthly installments of US$750. Alterations of the terms and conditions of the obligation would generally result only in modificatory novation unless such terms and conditions are considered to be the essence of the obligation itself.[25] The resulting novation in this case was, therefore, of the modificatory type, not the extinctive type, since the obligation to pay a sum of money remains in force.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
499
Thus, since the petitioner did not renege on its obligation to pay the monthly installments conformably with their new agreement and even continued paying during the pendency of the case, the private respondent had no cause of action to file the complaint. It is only upon petitioner‘s default in the payment of the monthly amortizations that a cause of action would arise and give the private respondent a right to maintain an action against the petitioner.
Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
500
Yuseco v. Court of Appeals AZOLLA FARMS and FRANCISCO R. YUSECO, Petitioners, versus COURT OF APPEALS and SAVINGS BANK OF MANILA, Respondents. (G.R.No. 138085, November 11, 2004, 2nd Division) AUSTRIA-MARTINEZ, J.;
FACTS:Petitioner Francis R. Yuseco, Jr., is the Chairman, President and Chief Operating Officer of petitioner Azolla Farms International Philippines. In 1982, Azolla Farms undertook to participate in the National Azolla Production Program wherein it will purchase all the Azolla produced by the Azolla beneficiaries in the amount not exceeding the peso value of all the inputs provided to them. The project also involves the then Ministry of Agriculture, the Kilusang Kabuhayan at Kaunlaran, and the Kiwanis. To finance its participation, petitioners applied for a loan with Credit Manila, Inc., which the latter endorsed to its sister company, respondent Savings Bank of Manila (Savings Bank). The Board of Directors of Azolla Farms, meanwhile, passed a board resolution on August 31, 1982, authorizing Yuseco to borrow from Savings Bank in an amount not exceeding P2,200,000.00. The loan having been approved, Yuseco executed a promissory note on September 13, 1982, promising to pay Savings Bank the sum of P1,400,000.00 on or before September 13, 1983. the Azolla Farms project collapsed. Blaming Savings Bank, petitioners Yuseco and Azolla Farms filed on October 3, 1983 with the Regional Trial Court of Manila (Branch 25), a complaint for damages. In essence, their complaint alleges that Savings Bank unjustifiably refused to promptly release the remaining P300,000.00 which impaired the timetable of the project and inevitably affected the viability of the project resulting in its collapse, and resulted in their failure to pay off the loan. Thus, petitioners pray for P1,000,000.00 as actual damages, among others.
ISSUE: Whether or not the trial court erred in admitting petitioners‘ amended complaint.
HELD: No. The trial court did not err in admitting petitioners‘ amended complaint. SEC. 5. Amendment to conform to or authorize presentation of evidence .—When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects, as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
501
that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense upon the merits. As can be gleaned from the records, it was petitioners‘ belief that respondent‘s evidence justified the amendment of their complaint. The trial court agreed thereto and admitted the amended complaint. On this score, it should be noted that courts are given the discretion to allow amendments of pleadings to conform to the evidence presented during the trial.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
502
California bus lines, inc. V. State investment house, Inc. CALIFORNIA BUS LINES, INC., Petitioner, versus STATE INVESTMENT HOUSE, INC., Respondent. (G.R.No. 147950, December 11, 2003, 2nd Division) QUISUMBING, J.;
FACTS:Sometime in 1979, Delta Motors Corporation—M.A.N. Division (Delta) applied for financial assistance from respondent State Investment House, Inc. SIHI agreed to extend a credit line to Delta for P25,000,000.00 in three separate credit agreements dated May 11, June 19, and August 22, 1979. Delta eventually became indebted to SIHI to the tune of P24,010,269.32 From April 1979 to May 1980, petitioner California Bus Lines, Inc. (hereafter CBLI), purchased on installment basis 35 units of M.A.N. Diesel Buses and two (2) units of M.A.N. Diesel Conversion Engines from Delta. To secure the payment of the purchase price of the 35 buses, CBLI and its president, Mr. Dionisio O. Llamas, executed sixteen (16) promissory notes in favor of Delta on January 23 and April 25, 1980.[5] In each promissory note, CBLI promised to pay Delta or order, P2,314,000 payable in 60 monthly installments starting August 31, 1980, with interest at 14% per annum. CBLI further promised to pay the holder of the said notes 25% of the amount due on the same as attorney‘s fees and expenses of collection, whether actually incurred or not, in case of judicial proceedings to enforce collection. In addition to the notes, CBLI executed chattel mortgages over the 35 buses in Delta‘s favor. When CBLI defaulted on all payments due, it entered into a restructuring agreement with Delta on October 7, 1981, to cover its overdue obligations under the promissory notes.CBLI continued having trouble meeting its obligations to Delta. This prompted Delta to threaten CBLI with the enforcement of the management takeover clause.
ISSUE:Whether or not the Restructuring Agreement dated October 7, 1981, between petitioner CBLI and Delta Motors, Corp. novated the five promissory notes Delta Motors, Corp. assigned to respondent SIHI.
HELD: No. The Restructuring Agreement dated October 7, 1981, between petitioner CBLI and Delta Motors, Corp. did not novate the five promissory notes Delta Motors, Corp. assigned to respondent SIHI. Novation has been defined as the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which terminates the first, either by changing the object or principal conditions, or by substituting the person of the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
503
debtor, or subrogating a third person in the rights of the creditor.For novation to take place, four essential requisites have to be met, namely, (1) a previous valid obligation; (2) an agreement of all parties concerned to a new contract; (3) the extinguishment of the old obligation; and (4) the birth of a valid new obligation.
In this case, the attendant facts do not make out a case of novation. The restructuring agreement between Delta and CBLI executed on October 7, 1981, shows that the parties did not expressly stipulate that the restructuring agreement novated the promissory notes. Absent an unequivocal declaration of extinguishment of the pre-existing obligation, only a showing of complete incompatibility between the old and the new obligation would sustain a finding of novation by implication.
The Decision of the Court of Appeals is affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
504
Ocampo-Paule v. Court of Appeals GLORIA OCAMPO-PAULE, Petitioner, versus HONORABLE COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, Respondents. (G.R.No. 145872, February 4, 2002, 1st Division) KAPUNAN, J.;
FACTS:During the period August, 1991 to April, 1993, petitioner received from private complainant Felicitas M. Calilung several pieces of jewelry with a total value of One hundred Sixty Three Thousand One hundred Sixty Seven Pesos and Ninety Five Centavos (P163,167.95). The agreement between private complainant and petitioner was that the latter would sell the same and thereafter turn over and account for the proceeds of the sale, or otherwise return to private complainant the unsold pieces of jewelry within two months from receipt thereof. Since private complainant and petitioner are relatives, the former no longer required petitioner to issue a receipt acknowledging her receipt of the jewelry.When petitioner failed to remit the proceeds of the sale of the jewelry or to return the unsold pieces to private complainant, the latter sent petitioner a demand letter. Notwithstanding receipt of the demand letter, petitioner failed to turn over the proceeds of the sale or to return the unsold pieces of jewelry. Private complainant was constrained to refer the matter to the barangay captain of Sta. Monica, Lubao, Pampanga.
ISSUE:Whether or not there was a novation of petitioner‘s criminal liability when she and private complainant executed the Kasunduan sa Bayaran.
HELD: No. There was no novation of petitioner‘s criminal liability when she and private complainant executed the Kasunduan sa Bayaran. It is well-settled that the following requisites must be present for novation to take place: (1) a previous valid obligation; (2) agreement of all the parties to the new contract; (3) extinguishment of the old contract; and (4) validity of the new one. Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive when an old obligation is terminated by the creation of a new obligation that takes the place of the former; it is merely modificatory when the old obligation subsists to the extent it remains compatible with the amendatory agreement. The execution of the Kasunduan sa Bayaran does not constitute a novation of the original agreement between petitioner and private complainant. Said Kasunduan did not change the object or principal conditions of the contract between them. The change in manner of payment of petitioner‘s obligation did not render the Kasunduan incompatible with the original agreement, and hence, did not extinguish petitioner‘s Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
505
liability to remit the proceeds of the sale of the jewelry or to return the same to private complainant. An obligation to pay a sum of money is not novated, in a new instrument wherein the old is ratified, by changing only the terms of payment and adding other obligations not incompatible with the old one, or wherein the old contract is merely supplemented by the new one. In any case, novation is not one of the grounds prescribed by the Revised Penal Code for the extinguishment of criminal liability.
Petition is denied.
Reyes v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
506
SPOUSES ARSENIO R. REYES and NIEVES S. REYES, Petitioners, versus COURT OF APPEALS and PABLO V. REYES, Respondents. (G.R.NO. 147758, June 26, 2002, 2nd Division) BELLOSILLO, J.;
FACTS:This petition arose from a civil case for collection of a sum of money with preliminary attachment filed by respondent Pablo V. Reyes against his first cousin petitioner Arsenio R. Reyes and spouse Nieves S. Reyes. According to private respondent, petitioner-spouses borrowed from him P600,000.00 with interest at five percent (5%) per month, which totalled P1,726,250.00 at the time of filing of the Complaint. The loan was to be used supposedly to buy a lot in Parañaque. It was evidenced by an acknowledgment receipt dated 15 July 1990 signed by the petitionerspouses Arsenio R. Reyes and Nieves S. Reyes and witness Romeo Rueda. In their Answer petitioners admitted their loan from respondent but averred that there was a novation so that the amount loaned was actually converted into respondent's contribution to a partnership formed between them on 23 March 1990.
ISSUE:Whether or not there was novation in the instant case.
HELD: No. There was no novation in the instant case. For novation to take place, the following requisites must concur: (a) there must be a previous valid obligation; (b) there must be an agreement of the parties concerned to a new contract; (c) there must be the extinguishment of the old contract; and, (d) there must be the validity of the new contract. In the case at bar, the third requisite is not present. The parties did agree that the amount loaned would be converted into respondent's contribution to the partnership, but this conversion did not extinguish the loan obligation. The date when the acknowledgment receipt/promissory note was made negates the claim that the loan agreement was extinguished through novation since the note was made while the partnership was in existence. Significantly, novation is never presumed. It must appear by express agreement of the parties, or by their acts that are too clear and unequivocal to be mistaken for anything else. An obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified by changing only the terms of payment and adding other obligations not incompatible with the old one, or wherein the old contract is merely supplemented by the new one.
The Decision of the Court of Appeals is modified.
Sps. Bautista v. Pilar Development Corp.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
507
SPOUSES FLORANTE and LAARNI BAUTISTA, Petitioners, versus PILAR DEVELOPMENT CORPORATION, Respondent. (G.R.NO. 135046, August 17, 1999, 1st Division) PUNO, J.;
FACTS:In 1978, petitioner spouses Florante and Laarni Bautista purchased a house and lot in Pilar Village, Las Pinas, Metro Manila. To partially finance the purchase, they obtained from the Apex Mortgage & Loan Corporation a loan in the amount of P100,180.00. They executed a promissory note on December 22, 1978 obligating themselves, jointly and severally, to pay the "principal sum of P100,180.00 with interest rate of 12% and service charge of 3%" for a period of 240 months, or twenty years, from date, in monthly installments of P1,378.83. Late payments were to be charged a penalty of one and one-half per cent (1 1/2%) of the amount due. In the same promissory note, petitioners authorized Apex to "increase the rate of interest and/or service charges" without notice to them in the event that a law, Presidential Decree or any Central Bank regulation should be enacted increasing the lawful rate of interest and service charges on the loan. Payment of the promissory note was secured by a second mortgage on the house and lot purchased by petitioners.Petitioner spouses failed to pay several installments. On September 20, 1982, they executed another promissory note in favor of Apex. This note was in the amount of P142,326.43 at the increased interest rate of twenty-one per cent (21%) per annum with no provision for service charge but with penalty charge of 1 1/2% for late payments.
ISSUE: Whether or not there was valid novation in the case at bar.
HELD: Yes. There was a valid novation in the case at bar. Novation has four (4) essential requisites: (1) the existence of a previous valid obligation; (2) the agreement of all parties to the new contract; (3) the extinguishment of the old contract; and (4) the validity of the new one. In the instant case, all four requisites have been complied with. The first promissory note was a valid and subsisting contract when petitioner spouses and Apex executed the second promissory note. The second promissory note absorbed the unpaid principal and interest of P142,326.43 in the first note which amount became the principal debt therein, payable at a higher interest rate of 21% per annum. Thus, the terms of the second promissory note provided for a higher principal, a higher interest rate, and a higher monthly amortization, all to be paid within a shorter period of 16.33 years. These changes are substantial and constitute the principal conditions of the obligation. Both parties voluntarily accepted the terms of the second note; and also in the same note, they unequivocally stipulated to extinguish the first note. Clearly, there was animus novandi, an express intention to novate. The first promissory note was cancelled and replaced by the second note. This second note became the new contract governing the parties' obligations.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
508
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
509
Evadel Realty and Development Corp. v. Sps. Soriano EVADEL REALTY and DEVELOPMENT CORPORATION, Petitioners, versus SPOUSES ANTERO AND VIRGINIA SORIANO, Respondents. (G.R.No. 144291, April 20, 2001, 1st Division) KAPUNAN, J.:
FACTS:On April 12, 1996, the spouses Antero and Virginia Soriano (respondent spouses), as sellers, entered into a "Contract to Sell " with Evadel Realty and Development Corporation (petitioner), as buyer, over a parcel of land denominated as Lot 5536-C of the Subdivision Plan of Lot 5536 covered by Transfer Certificate of Title No. 125062 which was part of a huge tract of land known as the Imus Estate. Upon payment of the first installment, petitioner introduced improvements thereon and fenced off the property with concrete walls. Later, respondent spouses discovered that the area fenced off by petitioner exceeded the area subject of the contract to sell by 2,450 square meters. Upon verification by representatives of both parties, the area encroached upon was denominated as Lot 5536-D-1 of the subdivision plan of Lot 5536-D of Psd-04-092419 and was later on segregated from the mother title and issued a new transfer certificate of title, TCT No. 769166, in the name of respondent spouses. Respondent spouses successively sent demand letters to petitioner on February 14, March 7, and April 24, 1997, to vacate the encroached area. Petitioner admitted receiving the demand letters but refused to vacate the said area.
ISSUE: Whether or not there was novation of contract.
HELD: No. There was no novation of contract. Petitioner's claim that there was a novation of contract because there was a "second" agreement between the parties due to the encroachment made by the national road on the property subject of the contract by 1,647 square meters, is unavailing. Novation, one of the modes of extinguishing an obligation, requires the concurrence of the following: (1) there is a valid previous obligation; (2) the parties concerned agree to a new contract; (3) the old contract is extinguished; and (4) there is valid new contract. Novation may be express or implied. In order that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms (express novation) or that the old and the new obligations be on every point incompatible with each other (implied novation). In the instant case, there was no express novation because the "second" agreement was not even put in writing. Neither was there implied novation since it was not shown that the two agreements were materially and substantially incompatible with each other. We quote with approval the following findings of the trial court: Since the alleged agreement between the plaintiffs [herein respondents] and defendant [herein petitioner] is not in writing and the alleged agreement pertains to the novation of the conditions of the contract to sell of the parcel of land subject of the instant litigation, ipso facto, novation is not applicable in this case since, as stated above, novation must be clearly proven by the proponent thereof and the defendant in this case is clearly barred by the Statute of Frauds from proving its claim. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
510
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
511
Villeza v. German Management and Services, Inc. ERNESTO VILLEZA, Petitioner, versus GERMAN MANAGEMENT AND SERVICES, INC., DOMINGO RENE JOSE, PIO DIOKNO, SESINANDO FAJARDO, BAYANI OLIPINO, ROLANDO ROMILO and JOHN DOES, Respondents. (G.R. No. 182937, August 8, 2010, 2nd Division) MENDOZA, J.: FACTS: This petition sprouted from an earlier Supreme Court HELD in German Management v. Court of Appeals, G.R. Nos. 72616-76217, September 14, 1989, which has already become final and executory. The decision, however, remains unenforced due to the prevailing party‘s own inaction. This petition, therefore, is the struggle of a victor trying to retrieve the prize once won. It appears that German Management v. Court of Appeals stemmed from a forcible entry case instituted by petitioner Ernesto Villeza against respondent German Management, the authorized developer of the landowners, before the Metropolitan Trial Court of Antipolo City. The Decision of this Court favoring the petitioner became final and executory on October 5, 1989. Petitioner may validly claim ownership based on the muniments of title it presented, such evidence does not responsively address the issue of prior actual possession raised in a forcible entry case. It must be stated that regardless of the actual condition of the title to the property, the party in peaceable quiet possession shall not be turned out by a strong hand, violence or terror. Thus, a party who can prove prior possession, can recover such possession even against the owner himself. Whatever may be the character of his prior possession if he has in his favor priority in time, he has the security that entitles him to remain on the property until he is lawfully ejected by a person having a better right by accion publiciana or accion reinvindicatoria. ISSUE: Whether or not the interruption or suspension granted by the MeTC must be considered in computing the period because it has the effect of tolling or stopping the counting of the period for execution. HELD: Yes. The interruption or suspension granted by the MeTC must be considered in computing the period because it has the effect of tolling or stopping the counting of the period for execution. Sec. 6. Execution by motion or by independent action. –A final and executory judgment or order may be executed on motion within five (5) years from the date of its entry. After the lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by action. The revived judgment may also be enforced by motion within five (5) years from the date of its entry and thereafter by action before it is barred by the statute of limitations. The rules are clear. Once a judgment becomes final and executory, the prevailing party can have it executed as a matter of right by mere motion within five years from the date of entry of judgment. If the prevailing party fails to have the decision enforced by a motion after the lapse of five years, the said judgment is reduced to a right of action which must be enforced by the institution of a complaint in a regular court within ten years from the time the judgment becomes final. When petitioner Villeza filed the complaint for revival of judgment on October 3, 2000, it had already been eleven (11) years from the finality of the judgment he sought to revive. Clearly, the statute of limitations had set in. The May 9, 2008 Decision of the Court of Appeals in CA-GR No. SP No. 84035 is AFFIRMED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
512
Insurance of the Philippine Islands Corp. v. Sps. Gregorio INSURANCE OF THE PHILIPPINE ISLANDS CORPORATION, Petitioner, versus SPOUSES VIDAL S. GREGORIO and JULITA GREGORIO, Respondents. (G.R. No. 174104, February 14, 2011, 2nd Division) PERALTA, J.: FACTS: Respondent spouses Vidal S. Gregorio and Julita Gregorio obtained loan from petitioner Insurance of the Philippine Islands Corporation. As a security, the s p o u s e s e x e c u t e d a R e a l E s t a t e M o r t g a g e o f a p a r c e l o f l a n d i n R i z a l . A g a i n , they obtained another loan along with a security of another parcel of land in the same property in Rizal. For the third time, a loan was obtained and this time two parcels of land was executed as mortgage. Th e G r e g o r i o s p o u s e s f a i l e d t o p e r f o r m t h e i r o b l i g a t i o n t o p a y . H e n c e , their mortgaged properties were extrajudicially foreclosed. In the extrajudicial foreclosure sale, Insurance of the Philippine Islands was the highest bidder. The latter assumed ownership because the Gregorio spouses were n o t a b l e t o redeem their properties. Then the peti tioner Corpora tion filed a Complaint against the s p o u s e s because they found out while processing the documents for the application and confirmation of its title over the foreclosed properties that the parcels of land w e r e a l r e a d y r e g i s t e r e d u n d e r t h e n a m e s o f t h i r d p e r s o n s a n d t h e T r a n s f e r C e r t i f i c a t e s o f Ti t l e w e r e a l s o i s s u e d t o t h e r m . T h e y alleged that the Grego rio spouses committed fraud in obtaini ng loans from them by misrepresenting ownership over the foreclosed properties. On the other ha nd, the spouses argue tha t petitio ner‘s cause of action and rig ht of action a re already barred by prescription a nd laches. ISSUE: Whether or not the Court of Appeals erred in HELD that petitioner's right to any relief under the law has already prescribed or is barred by laches. HELD: No. The Court of Appeals did not err in HELD that petitioner's right to any relief under the law has already prescribed or is barred by laches. Under the provisions of Article 1146 of the Civil Code, actions upon an injury to the rights of the plaintiff o r u p o n a q u a s i - d e l i c t m u s t b e i n s t i t u t e d w i t h i n f o u r y e a r s f r o m t h e t i m e t h e cause of action accrued. T h e C o u r t f i n d s n o e r r o r i n t h e H E L D o f t h e C A t h a t I n s u r a n c e o f t h e Philippine Island's cause of action accrued at the time it discovered the alleged fraud committed by the Gregorio spouses. It is at this point that the four -year prescriptive period should be counted. However, the Court does not agree with the CA in its HELD that the discovery of the fraud should be reckoned from the time of registration of the titles covering the subject properties. Neither may the principle of laches apply in the present case. The essence of laches or ―stale demands‖ is the failure or neglect for an unreasonable and unexplained length of time to do that which, by exercising d u e d i l i g e n c e , c o u l d o r s h o u l d h a v e b e e n d o n e e a r l i e r , t h u s , g i v i n g r i s e t o a presumption that the party entitled to assert it either has abandoned or declined t o a s s e r t i t . I t i s n o t c o n c e r n e d w i t h m e r e l a p s e o f t i m e ; t h e f a c t o f d e l a y , standing alone, being insufficient to constitute laches. I n a d d i t i o n , i t i s a r u l e o f e q u i t y a n d a p p l i e d n o t t o p e n a l i z e n e g l e c t o r sleeping on one's rights, but rather to avoid recognizing a right when to do so would result in a clearly unfair situation.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
513
Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
514
Mariano v. Petron Corp. ROMEO D. MARIANO, Petitioner, versus PETRON CORPORATION, Respondent. (G.R. No. 169438, January 21, 2010, 2nd Division) CARPIO, J.: FACTS: On 5 November 1968, Pacita V. Aure, Nicomedes Aure Bundac, and Zeny Abundo (Aure Group), owners of a 2,064 square meter parcel of land in Tagaytay City (Property), leased the Property to ESSO Standard Eastern, Inc., (ESSO Eastern), a foreign corporation doing business in the country through its subsidiary ESSO Standard Philippines, Inc. (ESSO Philippines). The lease period is 90 years and the rent is payable monthly for the first 10 years, and annually for the remaining period. The lease contract (Contract) contained an assignment veto clause barring the parties from assigning the lease without prior consent of the other. Excluded from the prohibition were certain corporations to whom ESSO Eastern may unilaterally assign its leasehold right. ESSO Eastern sold ESSO Philippines to the Philippine National Oil Corporation (PNOC). Apparently, the Aure Group was not informed of the sale. ESSO Philippines, whose corporate name was successively changed to Petrophil Corporation then to Petron Corporation (Petron), took possession of the Property. Petitioner Romeo D. Mariano (petitioner) bought the Property from the Aure Group and obtained title to the Property issued in his name bearing an annotation of ESSO Eastern‘s lease. He sent to Petron a notice to vacate the Property. Petitioner informed Petron that Presidential Decree No. 471 (PD 471), dated 24 May 1974, reduced the Contract‘s duration from 90 to 25 years, ending on 13 November 1993. Despite receiving the notice to vacate on 21 December 1998, Petron remained on the Property. Petitioner sued Petron in the Regional Trial Court of Tagaytay City, Branch 18, (trial court) to rescind the Contract and recover possession of the Property. Aside from invoking PD 471, petitioner alternatively theorized that the Contract was terminated on 23 December 1977 when ESSO Eastern sold ESSO Philippines to PNOC, thus assigning to PNOC its lease on the Property, without seeking the Aure Group‘s prior consent. ISSUE: Whether or not the Contract subsists between petitioner and Petron. HELD: Yes. The Contract subsists between petitioner and Petron. PNOC‘s buy-out of ESSO Philippines was total and unconditional, leaving no residual rights to ESSO Eastern. Logically, this change of ownership carried with it the transfer to PNOC of any proprietary interest ESSO Eastern may hold through ESSO Philippines, including ESSO Eastern‘s lease over the Property. Petron‘s objection to this conclusion, sustained by the Court of Appeals, is rooted on its reliance on its separate corporate personality and on the unstated assumption that ESSO Philippines (not ESSO Eastern) initially held the leasehold right over the Property. Petron is wrong on both counts. The facts compel the conclusion that ESSO Philippines was a mere branch of ESSO Eastern in the execution and breach of the Contract. First, by ESSO Eastern‘s admission in the Contract, it is "a foreign corporation organized under the laws of the State of Delaware, U.S.A., duly licensed to transact business in the Philippines, and doing business therein under the business name and style of ‗Esso Standard Philippines‘ x x x". In effect, ESSO Eastern was ESSO Philippines for all of ESSO Eastern‘s Philippine business. Second, the Contract was executed by ESSO Eastern, not ESSO Philippines, as lessee, with the Aure Group as lessor. ESSO Eastern leased the Property for the use of ESSO Philippines, acting as ESSO Eastern‘s Philippine branch. Consistent with such status, ESSO Philippines took possession of the Property after the execution of the Contract. Thus, for purposes of the Contract, ESSO Philippines was a mere alter ego of ESSO Eastern. Petition is denied. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
515
Sps. Bernales v. Heirs of Sambaan SPOUSES PATRICIO and MYRNA BERNALES, Petitioners, versus HEIRS OF JULIAN SAMBAAN, namely: EMMA S. FELICILDA, ANITA S. SAMBAAN, VIOLETA S. DADSANAN, ABSALON S. SAMBAAN, AGUSTINE S. SAMBAAN, EDITHA S. MANGUIRAN, GRACE S. NITCHA, CLODUALDO S. SAMBAAN, GINA S. SAMBAAN and FE S. YAP, Respondents. (G.R. No. 163271, January 15, 2010, 2nd Division) DEL CASTILLO, J.: FACTS: Spouses Julian and Guillerma Sambaan were the registered owner of a property located in Bulua, Cagayan de oro City. The respondents and the petitioner Myrna Bernales are the children of Julian and Guillerma. Myrna, who is the eldest of the siblings, is the present owner and possessor of the property in question. Julian died in an ambush in 1975. Before he died, he requested that the property in question be redeemed from Myrna and her husband Patricio Bernales. Thus, in 1982 one of Julian‘s siblings offered to redeem the property but the petitioners refused because they were allegedly using the property as tethering place for their cattle. In January 1991, respondents received an information that the subject property was already transferred to Myrna Bernales. The Deed of Absolute Sale dated December 7, 1970 bore the forged signatures of their parents, Julian and Guillerma. On April 1993, the respondents, together with their mother Guillerma, filed a complaint for Annulment of Deed of Absolute Sale and cancellation of TCT No. T14204 alleging that their parent‘s signatures were forged. The trial court rendered a decision on August 2, 2001 cancelling the TCT and ordering another title to be issued in the name of the late Julian Sambaan. Petitioners went to the CA and appealed the decision. The CA affirmed the decision of the lower court. A motion for reconsideration of the decision was, likewise, denied in 2004. ISSUE: Whether or not the Deed of Absolute Sale is authentic as to prove the ownership of the petitioners over the subject property. HELD: No. The Deed of Absolute Sale is not authentic as to prove the ownership of the petitioners over the subject property. It is a question of fact rather than of law. Well-settled is the rule that the Supreme Court is not a trier of facts. Factual findings of the lower courts are entitled to great weight and respect on appeal, and in fact accorded finality when supported by substantial evidence on the record. Substantial evidence is more than a mere scintilla of evidence. It is that amount of relevant evidence that a reasonable mind might accept as adequate to support a conclusion, even if other minds, equally reasonable, might conceivably opine otherwise. But to erase any doubt on the correctness of the assailed HELD, we have carefully perused the records and, nonetheless, arrived at the same conclusion. We find that there is substantial evidence on record to support the Court of Appeals and trial court‘s conclusion that the signatures of Julian and Guillerma in the Deed of Absolute Sale were forged. Conclusions and findings of fact by the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons because the trial court is in a better position to examine real evidence, as well as to observe the demeanor of the witnesses while testifying in the case. The fact that the CA adopted the findings of fact of the trial court makes the same binding upon this court. With the presentation of the forged deed, even if accompanied by the owner‘s duplicate certificate of title, the registered owner did not thereby lose his title, and neither does the assignee in the forged deed acquire any right or title to the said property. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
516
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
517
B & I Realty Co. v. Caspe B & I REALTY CO., INC., Petitioner, versus TEODORO CASPE and PURIFICACION AGUILAR CASPE, Respondents. (G.R. No. 146972, January 29, 2008, 1st Division) CORONA, J.: FACTS:Consorcia L. Venegas was the owner of a parcel of land located in Barrio Bagong-Ilog in Pasig, Rizal and covered by TCT No. 247434. She delivered said title to, and executed a simulated deed of sale in favor of, Datuin for purposes of obtaining a loan with the RCBC. Datuin claimed that he had connections with the management of RCBC and offered his assistance to Venegas in obtaining a loan from the bank. He issued a receipt to the Venegases, acknowledging that the lot was to be used as a collateral for bank financing and that the deed of sale was executed only as a device to obtain the loan. However, Datuin prepared a deed of absolute sale and, through forgery, made it appear that the spouses Venegas executed the document in his favor. Venegas learned of Datuin's fraudulent scheme when she sold the lot to herein respondents for P160,000 in a deed of conditional sale. She, along with her husband, instituted a complaint against Datuin in the then Court of First Instance CFI of Rizal, Branch 11, docketed as Civil Case No. 188893, for recovery of property and nullification of TCT No. 377734, with damages. However, when the case was called for pre-trial, the Venegases' counsel failed to appear and the complaint was eventually dismissed without prejudice.
ISSUE: Whether or not filing of Civil Case No. 36852 by the Venegases had the effect of interrupting the prescriptive period for the filing of the complaint for judicial foreclosure of mortgage.
HELD: No. The filing of Civil Case No. 36852 by the Venegases does not have the effect of interrupting the prescriptive period for the filing of the complaint for judicial foreclosure of mortgage. We agree with the CA's HELD that Civil Case No. 36852 did not have the effect of interrupting the prescription of the action for foreclosure of mortgage as it was not an action for foreclosure but one for annulment of title and nullification of the deed of mortgage and the deed of sale. It was not at all the action contemplated in Article 1155 of the Civil Code which explicitly provides that the prescription of an action is interrupted only when the action itself is filed in court. Petitioner could have protected its right over the property by filing a cross-claim for judicial foreclosure of mortgage against respondents in Civil Case No. 36852. The filing of a cross-claim would have been proper there. All the issues pertaining to the mortgage validity of the mortgage and the propriety of foreclosure would have been passed upon concurrently and not on a piecemeal basis. This should be the case as the issue of foreclosure of the subject mortgage was connected with, or dependent on, the subject of annulment of mortgage in Civil Case No. 36852. The actuations clearly manifested that petitioner knew its rights under the law but chose to sleep on the same.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
518
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
519
Mesina v. Garcia MELANIE M. MESINA, DANILO M. MESINA, and SIMEON M. MESINA, Petitioners, versus GLORIA C. GARCIA, Respondent. (G.R. No. 168035, November 30, 2006, 1st Division) CHICO-NAZARIO, J.: FACTS: Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, enstered into a Contract to Sell over a lot consisting of 235 square meters, situated at Diversion Road, Sangitan, Cabanatuan City, covered and embraced by TCT No. T31643 in the name of Felicisima Mesina which title was eventually cancelled and TCT No. T-78881 was issued in the name of herein petitioners. The Contract to Sell provides that the cost of the lot is P70.00 per square meter for a total amount of P16,450.00; payable within a period not to exceed 7 years at an interest rate of 12% per annum, in successive monthly installments of P260.85 per month, starting May 1977. Thereafter, the succeeding monthly installments are to be paid within the first week of every month, at the residence of the vendor at Quezon City, with all unpaid monthly installments earning an interest of 1% per month. Instituting this case at bar, respondent asserts that despite the full payment made on 7 February 1984 for the consideration of the subject lot, petitioners refused to issue the necessary Deed of Sale to effect the transfer of the property to her.
ISSUE: Whether or not respondent‘s cause of action had already prescribed.
HELD: Yes. Respondent‘s cause of action had already prescribed.
Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted when an action has been filed in court; when there is a written extrajudicial demand made by the creditors; and when there is any written acknowledgment of the debt by the debtor. The records reveal that starting 19 April 1986 until 2 January 1997 respondent continuously demanded from the petitioners the execution of the said Deed of Absolute Sale but the latter conjured many reasons and excuses not to execute the same. Respondent even filed a Complaint before the Housing and Land Use Regulatory Board way back in June, 1986, to enforce her rights and to compel the mother of herein petitioners, who was still alive at that time, to execute the necessary Deed of Absolute Sale for the transfer of title in her name. On 2 January 1997, respondent, through her counsel, sent a final demand letter to the petitioners for the execution of the Deed of Absolute Sale, but still to no avail. Consequently, because of utter frustration of the respondent, she finally lodged a formal Complaint for Specific Performance with Damages before the trial court on 20 January 1997. Hence, from the series of written extrajudicial demands made by respondent to have the execution of the Deed of Absolute Sale in her favor, the prescriptive period of 10 years has been interrupted. Therefore, it cannot be said that the cause of action of the respondent has already been prescribed. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
520
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
521
Heirs of Gaudiane v. Court of Appeals HEIRS OF JUANA GAUDIANE, namely: DATIVA M. PASTOR, MARIA M. ALCORIZA, BEATRIZ M. PATROCIÑO, SOLOMON I. MARIÑO, BENJAMIN I. MARIÑO, LILI MARIÑO, VERONICA I. MARIÑO, SEVERINA MARIÑO VDA. DE ISO, ROSITA ISO, AGRIPINO ISO, ELIZABETH ISO, VIRGINIA ISO, LEOPOLDO ISO, NAPOLEON ISO, Petitioners, versus COURT OF APPEALS and THE HEIRS OF FELIX GAUDIANE, namely: ARNULFO GAUDIANE, GEORGE GAUDIANE, RODOLFO GAUDIANE, RAYMUNDO GAUDIANE, SANDRA GAUDIANE, CEFERINA GAUDIANE, JONNA GAUDIANE, MILLARD GAUDIANE, GLORIA TORRES-GAUDIANE, WILFREDO GAUDIANE, ROLANDO GAUDIANE, ANTONIO GAUDIANE, KATHRYN GAUDIANE, PRISCILLA GAUDIANE, CATALINA PACIOS, DONATELLA PACIOS, REMEDIOS PACIOS, GUALBERTO GAUDIANE, VICTOR GAUDIANE, LORNA GAUDIANE, DOLORES GAUDIANE, Respondents. (G.R.No. 119879, March 11, 2004, 3rd Division) CORONA, J.:
FACTS: The lot in controversy is Lot 4389 located at Dumaguete City and covered by Original Certificate of Title No. 2986-A (OCT 2986-A) in the names of co-owners Felix and Juana Gaudiane. Felix died in 1943 while his sister Juana died in 1939. Herein respondents are the descendants of Felix while petitioners are the descendants of Juana. On November 4, 1927, Felix executed a document entitled Escritura de Compra-Venta (Escritura, for brevity) whereby he sold to his sister Juana his one-half share in Lot No. 4156 covered by Transfer Certificate of Title No. 3317-A. Petitioners‘ predecessors-in-interest, Geronimo and Ines Iso (the Isos), believed that the sale by Felix to their mother Juana in 1927 included not only Lot 4156 but also Lot 4389. In 1974, they filed a pleading in the trial court seeking to direct the Register of Deeds of Dumaguete City to cancel OCT 2986-A covering Lot 4389 and to issue a new title in favor of the Isos. This was later withdrawn after respondents‘ predecessors-in-interest, Procopio Gaudiane and Segundo Gaudiane, opposed it on the ground that the Isos falsified their copy of the Escritura by erasing ―Lot 4156‖ and intercalating in its place ―Lot 4389.‖
ISSUE: Whether the court gravely erred in not giving due course to the claim of petitioners and legal effect of prescription and laches adverted by defendantsappellants in their answer and affirmative defenses proven during the hearing by documentary and testimonial evidence.
HELD: No. The court did not gravely err in not giving due course to the claim of petitioners and legal effect of prescription and laches adverted by defendantsappellants in their answer and affirmative defenses proven during the hearing by documentary and testimonial evidence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
522
As a general rule, ownership over titled property cannot be lost through prescription.[12] Petitioners, however, invoke our HELD in Tambot vs. Court of Appeals[13] which held that titled property may be acquired through prescription by a person who possessed the same for 36 years without any objection from the registered owner who was obviously guilty of laches. Petitioners‘ claim is already rendered moot by our HELD barring petitioners from raising the defense of exclusive ownership due to res judicata. Even assuming arguendo that petitioners are not so barred, their contention is erroneous. As correctly observed by the appellate court. As explained earlier, only Lot No. 4156 was sold. It was through this misrepresentation that appellees‘ predecessor-in-interest succeeded in withholding possession of appellees‘ share in Lot No. 4389. Appellees cannot, by their own fraudulent act, benefit therefrom by alleging prescription and laches.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
523
Laureano v. Court of Appeals MENANDRO B. LAUREANO, Petitioner, versus. COURT OF APPEALS AND SINGAPORE AIRLINES LIMITED, Respondents. (G.R.No. 114776, February 2, 2000, 2nd Division) QUISUMBING, J.: FACTS:Petitioner was employed in the singapore airlines limited as the pilot captain of B-707. Sometime in 1982, defendant, hit by a recession, initiated cost-cutting measures. Seventeen expatriate captains in the Airbus fleet were found in excess of the defendant's requirement. Consequently, defendant informed its expatriate pilots including plaintiff of the situation and advised them to take advance leaves. Realizing that the recession would not be for a short time, defendant decided to terminate its excess personnel. It did not, however, immediately terminate it's A-300 pilots. It reviewed their qualifications for possible promotion to the B-747 fleet. Among the 17 excess Airbus pilots reviewed, twelve were found qualified. Unfortunately, plaintiff was not one of the twelve. Aggrieved, plaintiff on June 29, 1983, instituted a case for illegal dismissal before the Labor Arbiter. Defendant moved to dismiss on jurisdictional grounds. Before said motion was resolved, the complaint was withdrawn.
ISSUE : Whether or not the action has already prescribed.
HELD: Yes. The action has already prescribed. Article 291. Money claims. - All money claims arising from employee-employer relations accruing during the effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued; otherwise they shall be forever barred. It should be noted further that Article 291 of the Labor Code is a special law applicable to money claims arising from employer-employee relations; thus, it necessarily prevails over Article 1144 of the Civil Code, a general law. Basic is the rule in statutory construction that 'where two statutes are of equal theoretical application to a particular case, the one designed therefore should prevail.' In the instant case, the action for damages due to illegal termination was filed by plaintiff-appellee only on January 8, 1987 or more than four (4) years after the effectivity date of his dismissal on November 1, 1982. Clearly, plaintiff-appellee's action has already prescribed.
Petition is dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
524
Banco Filipino v. Court of Appeals BANCO FILIPINO SAVINGS and MORTGAGE BANK, Petitioner, versus COURT OF APPEALS, HON. EDGAR D. GUSTILO, Presiding Judge, Branch 28, Regional Trial Court, Iloilo City, TALA REALTY SERVICES CORPORATION, NANCY L. TY, PEDRO B. AGUIRRE, REMEDIOS A. DUPASQUIER, PILAR D. ONGKING, ELIZABETH H. PALMA, DOLLY W. LIM, RUBENCITO M. DEL MUNDO, ADD INTERNATIONAL SERVICES, INC., Respondents. (G.R. No. 132703, June 23, 2000, 2nd Division) DE LEON, JR., J.: FACTS: Elsa Arcilla and her husband, Calvin Arcilla secured on three occasions, loans from the Banco Filipino Savings and Mortgage bank in the amount of Php.107,946.00 as evidenced by the ―Promissory Note‖ executed by the spouses in favor of the said bank. To secure payment of said loans, the spouses executed ―Real Estate Mortgages‖ in favor of the appellants (Banco Filipino) over their parcels of land. The appellee spouses failed to pay their monthly amortization to appellant. On September 2, 1985 the appellee‘s filed a complaint for ―Annulment of the Loan Contracts, Foreclosure Sale with Prohibitory and Injunction‖ which was granted by the RTC. Petitioners appealed to the Court of Appeals, but the CA affirmed the decision of the RTC. ISSUE: Whether or not the CA erred when it held that the cause of action of the private respondents accrued on October 30, 1978 and the filing of their complaint for annulment of their contracts in 1085 was not yet barred by the prescription. HELD: No. The Court of Appeals did not err when it held that the cause of action of the private respondents accrued on October 30, 1978 and the filing of their complaint for annulment of their contracts in 1085 was not yet barred by the prescription. The court held that the petition is unmeritorious. Petitioner‘s claim that the action of the private respondents have prescribed is bereft of merit. Under Article 1150 of the Civil Code, the time for prescription of all kinds of action where there is no special provision which ordains otherwise shall be counted from the day they may be brought. Thus the period of prescription of any cause of action is reckoned only from the date of the cause of action accrued. The period should not be made to retroact to the date of the execution of the contract, but from the date they received the statement of account showing the increased rate of interest, for it was only from the moment that they discovered the petitioner‘s unilateral increase thereof. Petition is dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
525
Vda. De Delgado v. Court of Appeals MARIA ALVAREZ VDA. DE DELGADO, CATALINA C. DELGADO, NATIVIDAD D. CLUTARIO, ANTONIA DELGADO, FLORINTINO DELGADO, PACIENCIA D. CAZORLA, GLORIA D. SOTIANGCO, JOSE DELGADO, JR., MARLENE D. SENNER, JOEL DELGADO, MARISSA DELGADO, JESUS DELGADO, JANICE DELGADO, VICTORINO DELGADO, and JUAN DELGADO, Petitioners, versus HON. COURT OF APPEALS and REPUBLIC OF THE PHILIPPINES, Respondents. (G.R. No. 125728, August 28, 2001, 2nd Division) QUISUMBING, J.: FACTS: Carlos Delgado was the absolute owner of a parcel of land with an area of 692,549 square meter situated in the Municipality of Catarman Samar. Carlos Delgado granted and conveyed by way of donation with quitclaim all rights, title, interest claim and demand over a portion of land with an area of 165,000 square meter in favor of the Commonwealth of the Philippines. The acceptance was then made to President Quezon in his capacity as Commander-in-Chief. The Deed of Donation was executed with a condition that the said land will be used for the formation of the National Defense of the Philippines. The said parcel of land then covered by the Torrens System of the Philippines and was registered in the name of Commonwealth of the Philippines for a period of 40 years. The land was registered under TCT 0-2539-160 in favor of the Commonwealth however without any annotation. Upon declaration of independence, the Commonwealth was replaced by Republic of the Philippines which took over the subject land and turned over to Civil Aeronautics Administration, later named Bureau of Air Transportation Office. The said agency utilizes the said land a domestic airport. Jose Delgado filed a petition for reconveyance for a violation of the condition. The RTC ruled in favor of the plaintiff Delgado. But the CA reversed the said decision because of prescription. The petitioner filed only before 24 years o discovery which the law only requires 10 years of filing. ISSUE: Whether or not the petitioner‘s action for reconveyance is already barred by prescription. HELD: Yes. The petitioner‘s action for reconveyance is already barred by prescription. The Supreme Court denied the petition and affirmed the decision of the Court of Appeals because the time of filing has been prescribed. Under Article 1144 of the Civil Code on Prescription based on written contracts, the filing of action for reconveyance is within 10 years from the time the condition in the Deed of Donation was violated. The petitioner herein filed only 24 years in the first action and 43 years in the second filing of the 2nd action. The action for reconveyance on the alleged excess of 33, 607 square meter mistakenly included in the title was also prescribed Article 1456 of the Civil Code states, if property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefits of the person from whom the property comes, if within 10 years such action for reconveyance has not been executed. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
526
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
527
Maestrado v. Court of Appeals JOSEFA CH. MAESTRADO, as substituted by her daughter LOURDES MAESTRADO-LAVIÑA and CARMEN CH. ABAYA, Petitioners, versus THE HONORABLE COURT OF APPEALS, Ninth Division and JESUS C. ROA, JR., RAMON P. CHAVES and NATIVIDAD S. SANTOS, Respondents. (G.R. No. 133345, March 9, 2000, 2nd Division) DE LEON, JR. J.: FACTS:These consolidated cases involve Lot No. 5872 and the rights of the contending parties thereto. The lot has an area of 57.601 sq.m. and is registered in the name of the deceased spouses Ramon and Rosario Chaves. The spouses died intestate in 1943 and 1944, respectively. They were survived by six heirs. To settle the estate of said spouse, Angel Chaves, one of the heirs, initiated intestate proceedings and was appointed administrator of said estates in the process. An inventory of the estates was made and thereafter, the heirs agreed on a project partition. The court approved the partition but a copy of said decision was missing. Nonetheless, the estate was divided among the heirs. Subsequently, in 1956, the partition case effected and the respective shares of the heirs were delivered to them. Significantly, Lot No.5872 was not included in a number of documents. Parties offered different explanations as to the omission of said lot in the documents. Petitioners maintain the existence of an oral partition agreement entered into by all heirs after the death of their parents. To set things right, petitioners then prepared a quitclaim to confirm the alleged oral agreement. Respondents dispute voluntariness of their consent to the quitclaims. Six years after the execution of the quitclaims, respondents discovered that indeed subject lot was still a common property in the name of the deceased spouses. Eventually, an action for Quieting of Title was filed by petitioners on December 22, 1983. The trial court considered Lot No. 5872 as still a common property and therefore must be divided into six parts, there being six heirs. Petitioners appealed to the Court of Appeals which sustained the decision of the trial court. ISSUE: Whether or not the action for quieting of title had already prescribed. HELD: No. The action for quieting of title did not prescribe. The Supreme Court ruled that an action for quieting of title is imprescriptible especially if the plaintiff is in possession of the property being litigated. One who is in actual possession of a land, claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before making steps to vindicate his right because his undisturbed possession gives him a continuing right to seek the aid of the courts to ascertain the nature of the adverse claim and its effect on his title. Moreover, the Court held that laches is inapplicable in this case. This is because, as mentioned earlier, petitioners‘ possession of the subject lot has rendered their right to bring an action for quieting of title imprescriptible.
Petitions are granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
528
F.A.T. Kee Computer System v. Online Networks International F.A.T. KEE COMPUTER SYSTEMS, INC., Petitioner, versus ONLINE NETWORKS INTERNATIONAL, INC., Respondent. (G.R. No. 171238, February 2, 2011, 1st Division) LEONARDO–DE CASTRO, J.: FACTS: Petitioner F.A.T. Kee Computer Systems, Inc. is engaged in the business of selling computer equipment and in the rendering of maintenance services for its sold units. On the other hand, ONLINE is engaged in bu s i n e s s o f s e l l i n g computer units, parts, and software. In its complaint, it was alleged that ONLINE sold computer printers to FATKEE which was evidenced by invoice receipts containing a stipulation that an ―interest of 28% per annum is to be charged on all accounts overdue ‖ and ―an additional sum equal to 25% of the amount will be charged b y v e n d o r f o r attorney‘s fees plus cost of collection in case of suit.‖ It was also said that the president of FAT KEE, President Frederick Huang, Jr., made an offer to pay the a m o u n t w h i c h w a s o r i g i n a l l y i n U S d o l l a r s i n t o P h i l i p p i n e l e g a l t e n d e r w h i c h ONLINE accepted. After payments made in March to May 1998, ONLINE decided to stop the application of interest in view of its good relationship with FAT KEE.FAT KEE continued to pay; however, a balance remained according to ONLINE‘s computations. Despite the repeated demands of ONLINE, FAT KEE failed to pay the remaining balance without a valid reason.FAT KEE answered the complaint stating that they were never informed of O N L I N E ‘ s a g r e e m e n t t o i t s o f f e r o f p a y i n g U S d o l l a r s . I t a l s o a l l e g e d t h a t t h e invoice receipts were unilaterally prepared by ONLINE. Furthermore, FAT KEE stated that the payments tendered were in Philippine peso, in accordance with the Statement of Account, and that these were accepted by ONLINE. They said they already had paid the total amount of the debt. According to the testimony of Huang, he said that t h e r e w a s n o agreement between FAT KEE and ONLINE for the payment in US dollars. There was neither an agreement to a specific exchange rate. ISSUE: Whether or not O N L I N E w a s e s t o p p e d b y t h e D e c e m b e r S t a t e m e n t o f Account. HELD: No. FAT KEE cannot invoke estoppel against ONLINE for the latter‘s issuance of the SOA on December 9, 1997. In the instant case, we find that FAT KEE cannot invoke estoppel against ONLINE for the latter‘s issuance of the SOA on December 9, 1997. The testimonial evidence of both ONLINE and FAT KEE establish that, during the meeting, the parties tried but failed to reach an agreement as regards the payment of FAT KEE‘s outstanding obligation and the exchange rate to be applied thereto. By their act of submitting their respective proposals and counter-proposals on the mode of payment and the exchange rate, FAT KEE and ONLINE demonstrated that it was not their intention to be further bound by the SOA, especially with respect to the exchange rate to be used. Moreover, FATKEE only started making payments visà-vis the subject invoice receipts on March 17, 1998, or two months after the aforementioned meeting. At this point, Mijares v. Court of Appeals is instructive in declaring that: One who claims the benefit of an estoppel on the ground that he has been misled by the representations of another must not have been misled through his own want of reasonable care and circumspection. A lack of diligence by a party claiming an estoppels is generally fatal. If the party conducts himself with careless indifference to means of information reasonably at hand, or ignores highly suspicious circumstances, he may not invoke the doctrine of estoppel. Good faith is generally regarded as requiring the exercise of reasonable diligence to learn the truth, and accordingly estoppel is denied where the party claiming it was put on inquiry as to the truth and had available Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
529
means for ascertaining it, at least where actual fraud has not been practiced on the party claiming the estoppel. Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
530
Tanay Recreation Center v. Fausto TANAY RECREATION CENTER AND DEVELOPMENT CORP., Petitioners, versus CATALINA MATIENZO FAUSTO* and ANUNCIACION FAUSTO PACUNAYEN, Respondents. (G.R. No. 140182, April 12, 2005, 2nd Division) AUSTRIA-MARTINEZ, J.: FACTS:Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee of a 3,090-square meter property located in Sitio Gayas, Tanay, Rizal, owned by Catalina Matienzo Fausto, under a Contract of Lease. On this property stands the Tanay Coliseum Cockpit operated by petitioner. The lease contract provided for a 20year term, subject to renewal within sixty days prior to its expiration. The contract also provided that should Fausto decide to sell the property, petitioner shall have the ―priority right‖ to purchase the same. On June 17, 1991, petitioner wrote Fausto informing her of its intention to renew the lease. However, it was Fausto‘s daughter, respondent Anunciacion F. Pacunayen, who replied, asking that petitioner remove the improvements built thereon, as she is now the absolute owner of the property. It appears that Fausto had earlier sold the property to Pacunayen and title has already been transferred in her name. Petitioner filed an Amended Complaint for Annulment of Deed of Sale, Specific Performance with Damages, and Injunction In her Answer, respondent claimed that petitioner is estopped from assailing the validity of the deed of sale as the latter acknowledged her ownership when it merely asked for a renewal of the lease. According to respondent, when they met to discuss the matter, petitioner did not demand for the exercise of its option to purchase the property, and it even asked for grace period to vacate the premises.
ISSUE: Whether or not the contention in this case refers to petitioner‘s priority right to purchase, also referred to as the right of first refusal.
HELD: No. Petitioner‘s priority right to purchase, does not refer to as the right of first refusal. When a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it. The lessee has a right that the lessor's first offer shall be in his favor. Petitioner‘s right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the whole contract. The consideration for the lease includes the consideration for the right of first refusal and is built into the reciprocal obligations of the parties. It was erroneous for the CA to rule that the right of first refusal does not apply when the property is sold to Fausto‘s relative. When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon. As such, there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement, except when it fails to express the true intent and agreement of the parties. In this case, the wording of the stipulation giving petitioner the right of first refusal is plain and unambiguous, and Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
531
leaves no room for interpretation. It simply means that should Fausto decide to sell the leased property during the term of the lease, such sale should first be offered to petitioner. The stipulation does not provide for the qualification that such right may be exercised only when the sale is made to strangers or persons other than Fausto‘s kin. Thus, under the terms of petitioner‘s right of first refusal, Fausto has the legal duty to petitioner not to sell the property to anybody, even her relatives, at any price until after she has made an offer to sell to petitioner at a certain price and said offer was rejected by petitioner.
Petition is partially granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
532
Mendoza v. Court of Appeals GENEROSO MENDOZA, substituted by his wife and administratrix DIEGA DE LEON VDA. DE MENDOZA, Petitioner, versus THE HON. COURT OF APPEALS, DANIEL GOLE CRUZ and DOLORES MENDOZA, Respondents. (G.R. No. L-36637, February 18, 2005, 2nd Division) SANTOS, J.: FACTS: Manotok was the administrator of a parcel of land which it leased to Benjamin Mendoza; that the contract of lease expired on December 31, 1988; that even after the expiration of the lease contract, Benjamin Mendoza, and after his demise, his son, Romeo, continued to occupy the premises and thus incurred a total of P44,011.25 as unpaid rentals from January 1, 1989 to July 31, 1996; that on July 16, 1996, Manotok made a demand on Benjamin Mendoza to pay the rental arrears and to vacate the premises within fifteen (15) days from receipt of the demand letter; that despite receipt of the letter and after the expiration of the 15-day period, the Mendozas refused to vacate the property and to pay the rentals. The complaint prayed that the court order Mendoza and those claiming rights under him to vacate the premises and deliver possession thereof to Manotok, and to pay the unpaid rentals from January 1, 1989 to July 31, 1996 plus P875.75 per month starting August 1, 1996, subject to such increase allowed by law, until he finally vacates the premise. ISSUE: Whether or not the Honorable Court of Appeals committed error in giving efficacy to a lease contract signed in 1988 when the alleged signatory was already dead since 1986. HELD: No. The Honorable Court of Appeals did not commit error in giving efficacy to a lease contract signed in 1988 when the alleged signatory was already dead since 1986. This is a case for unlawful detainer. It appears that respondent corporation leased the property subject of this case to petitioner‘s father. After expiration of the lease, petitioner continued to occupy the property but failed to pay the rentals. On July 16, 1996, respondent corporation made a demand on petitioner to vacate the premises and to pay their arrears. An action for unlawful detainer may be filed when possession by a landlord, vendor, vendee or other person of any land or building is unlawfully withheld after the expiration or termination of the right to hold possession by virtue of a contract, express or implied. The only issue to be resolved in an unlawful detainer case is physical or material possession of the property involved, independent of any claim of ownership by any of the parties involved. In the case at bar, petitioner lost his right to possess the property upon demand by respondent corporation to vacate the rented lot. Petitioner cannot now refute the existence of the lease contract because of his prior admissions in his pleadings regarding his status as tenant on the subject property. The decision of the Court of Appeals dated February 17, 1973 is hereby affirmed with costs against petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
533
Lim v. Queensland Tokyo Commodities JEFFERSON LIM, Petitioner, versus QUEENSLAND TOKYO COMMODITIES, INC., Respondent. (G.R. No. 136031, January 4, 2002, 2nd Division) QUISUMBING, J.: FACTS: Sometime in 1992, Benjamin Shia, a market analyst and trader of Queensland, was introduced to petitioner Jefferson Lim by Marissa Bontia, one of his employees. Marissa‘s father was a former employee of Lim‘s father. Shia suggested that Lim invest in the Foreign Exchange Market, trading U.S. dollar against the Japanese yen, British pound, Deutsche Mark and Swiss Franc. Before investing, Lim requested Shia for proof that the foreign exchange was really lucrative. They conducted mock tradings without money involved. As the mock trading showed profitability, Lim decided to invest with a marginal deposit of US$5,000 in manager‘s check. The marginal deposit represented the advance capital for his future tradings. It was made to apply to any authorized future transactions, and answered for any trading account against which the deposit was made, for any loss of whatever nature, and for all obligations, which the investor would incur with the broker. Petitioner Lim was then allowed to trade with respondent company which was coursed through Shia by virtue of blank order forms all signed by Lim. Respondent furnished Lim with the daily market report and statements of transactions as evidenced by the receiving forms, some of which were received by Lim. Meanwhile, on October 22, 1992, respondent learned that it would take seventeen (17) days to clear the manager‘s check given by petitioner. Shia returned the check to petitioner who informed Shia that petitioner would rather replace the manager‘s check with a traveler‘s check. Shia noticed that the traveler‘s check was not indorsed but Lim told Shia that Queensland could sign the endorsee portion. Because Shia trusted the latter‘s good credit rating, and out of ignorance, he brought the check back to the office unsigned. Inasmuch as that was a busy Friday, the check was kept in the drawer of respondent‘s consultant. Later, the traveler‘s check was deposited with Citibank. On October 27, 1992, Citibank informed respondent that the traveler‘s check could not be cleared unless it was duly signed by Lim, the original purchaser of the traveler‘s check. A Miss Arajo, from the accounting staff of Queensland, returned the check to Lim for his signature, but the latter, aware of his P44,465 loss, demanded for a liquidation of his account and said he would get back what was left of his investment. ISSUE: Whether or not the CA erred in reversing the decision of the RTC which dismissed the respondent‘s complaint.
HELD: No. The Court of Appeals did not err in reversing the decision of the RTC which dismissed the respondent‘s complaint. The essential elements of estoppel are: (1) conduct of a party amounting to false representation or concealment of material facts or at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
534
those which the party subsequently attempts to assert; (2) intent, or at least expectation, that this conduct shall be acted upon by, or at least influence, the other party; and (3) knowledge, actual or constructive, of the real facts. ere, it is uncontested that petitioner had in fact signed the Customer‘s Agreement in the morning of October 22, 1992, knowing fully well the nature of the contract he was entering into. The Customer‘s Agreement was duly notarized and as a public document it is evidence of the fact, which gave rise to its execution and of the date of the latter. Next, petitioner paid his investment deposit to respondent in the form of a manager‘s check in the amount of US$5,000 as evidenced by PCI Bank Manager‘s Check No. 69007, dated October 22, 1992. All these are indicia that petitioner treated the Customer‘s Agreement as a valid and binding contract. Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
535
Placewell International v. Camote PLACEWELL INTERNATIONAL SERVICES CORPORATION, Petitioner, versus IRENEO B. CAMOTE, Respondent. (G.R. No. 169973, June 26, 2006, 1st Division) YNARES-SANTIAGO, J.: FACTS:Petitioner Placewell International Services Corporation (PISC) deployed respondent Ireneo B. Camote to work as building carpenter for SAAD Trading and Contracting Co. (SAAD) at the Kingdom of Saudi Arabia (KSA) for a contract duration of two years, with a corresponding salary of US$370.00 per month. At the job site, respondent was allegedly found incompetent by his foreign employer; thus the latter decided to terminate his services. However, respondent pleaded for his retention and consented to accept a lower salary of SR 800.00 per month. Thus, SAAD retained respondent until his return to the Philippines two years after.
On November 27, 2001, respondent filed a sworn Complaint for monetary claims against petitioner alleging that when he arrived at the job site, he and his fellow Filipino workers were required to sign another employment contract written in Arabic under the constraints of losing their jobs if they refused; that for the entire duration of the new contract, he received only SR 590.00 per month; that he was not given his overtime pay despite rendering nine hours of work every day; that he and his coworkers sought assistance from the Philippine Embassy but they did not succeed in pursuing their cause of action because of difficulties in communication.
ISSUE: Whether or not there is estoppel by laches.
HELD: No. There is no estoppels by laches. R.A. No. 8042 explicitly prohibits the substitution or alteration to the prejudice of the worker, of employment contracts already approved and verified by the Department of Labor and Employment (DOLE) from the time of actual signing thereof by the parties up to and including the period of the expiration of the same without the approval of the DOLE. The subsequently executed side agreement of an overseas contract worker with her foreign employer which reduced her salary below the amount approved by the POEA is void because it is against our existing laws, morals and public policy. The said side agreement cannot supersede her standard employment contract approved by the POEA. Petitioner‘s contention that respondent is guilty of laches is without basis. Laches has been defined as the failure of or neglect for an unreasonable and unexplained length of time to do that which by exercising due diligence, could or should have been done earlier, or to assert a right within reasonable time, warranting a presumption that the party entitled thereto has either abandoned it or declined to assert it. Thus, the doctrine of laches presumes that the party guilty of negligence had the opportunity to do what should have been done, but failed to do so. Conversely, if the said party did not have the occasion to assert the right, then, he can not be adjudged guilty of laches. Laches is not concerned with the mere lapse of time; rather, Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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the party must have been afforded an opportunity to pursue his claim in order that the delay may sufficiently constitute laches. In the instant case, respondent filed his claim within the three-year prescriptive period for the filing of money claims set forth in Article 291 of the Labor Code from the time the cause of action accrued. Thus, we find that the doctrine of laches finds no application in this case. Petition is partly granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
537
Heirs of Ragua v. Court of Appeals HEIRS OF EULALIO RAGUA, namely, DOMINGO, MARCIANA, MIGUEL, FRANCISCO, VALERIANA, JUANA, and REMEDIOS, all surnamed RAGUA; DANILO and CARLOS, both surnamed LARA, Petitioners, versus COURT OF APPEALS, REPUBLIC OF THE PHILIPPINES, NATIONAL HOUSING AUTHORITY, PHILIPPINE AMERICAN LIFE INSURANCE CO., INC., J.M. TUASON & CO., INC. and HEIRS OF D. TUASON, INC., Respondents. (G.R. Nos. 88521-22, January 31, 2000, 1st Division) PARDO, J.:
FACTS:These consolidated cases involve a prime lot consisting of 4,399,322 square meters, known as the Diliman Estate, situated in Quezon City. On this 439 hectares of prime land now stand the following: the Quezon City Hall, Philippine Science High School, Quezon Memorial Circle, Visayas Avenue, Ninoy Aquino Parks and Wildlife, portions of UP Village and East Triangle, the entire Project 6 and Vasha Village, Veterans Memorial Hospital and golf course, Department of Agriculture, Department of Environment and Natural Resources, Sugar Regulatory Administration, Philippine Tobacco Administration, Land Registration Authority, Philcoa Building, Bureau of Telecommunications, Agricultural Training Institute building, Pagasa Village, San Francisco School, Quezon City Hospital, portions of Project 7, Mindanao Avenue subdivision, part of Bago Bantay resettlement project, SM City North EDSA, part of Phil-Am Life Homes compound and four-fifths of North Triangle. This large estate was the subject of a petition for judicial reconstitution originally filed by Eulalio Ragua in 1964, which gave rise to protracted legal battles between the affected parties, lasting more than thirty-five (35) years.
ISSUE: Whether or not estoppel by laches exists on the part of petitioner.
HELD: Yes. Estoppel by laches exists on the part of petitioner. Petitioners filed the petition for reconstitution of OCT 632 nineteen (19) years after the title was allegedly lost or destroyed. We thus consider petitioners guilty of laches. Laches is negligence or omission to assert a right within a reasonable time, warranting the presumption that the party entitled to assert it either has abandoned or declined to assert it. Petitioners were not parties in the case before the trial court for the judicial reconstitution of OCT 632. It was Eulalio Ragua, later succeeded by his heirs, who filed the petition for reconstitution. Not being parties to the petition, petitioners have no personality to file the motion for execution of judgment. In any event, the decision cannot be executed as timely appeals therefrom were taken by the parties. In a petition for judicial reconstitution of title, the Register of Deeds is merely a nominal party. In fact, it is not even required to implead him. In the instant cases, the Republic of the Philippines together with other intervenors and oppositors, interposed appeals to the Court of Appeals within the prescribed period. There is no merit to petitioners' argument that the Court of Appeals' decision in CA-G.R. CV No. 20701 is legally incompatible with its decision in CA-G.R. CV Nos. 00705-00706. CA-G.R. CV No. 20701 confirmed the legal rights of petitioners over the parcels of land ceded to them by virtue of the deeds of assignments executed by Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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Eulalio Ragua. The decision of the Court of Appeals in CA-G.R. CV No. 20701 did not involve the validity of the Ragua title.
Petitions are denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
539
Metrobank v. Court of Appeals METROPOLITAN BANK & TRUST COMPANY, Petitioner, versus COURT OF APPEALS and G.T.P. DEVELOPMENT CORPORATION, Respondents. (G.R. No. 122899, June 8, 2000, 2nd Division) BUENA, J.: FACTS:Mr. Chia offered the subject property for sale to private respondent G.T.P. Development Corporation (hereafter, GTP), with assumption of the mortgage indebtedness in favor of petitioner METROBANK secured by the subject property. Pending negotiations for the proposed sale, Atty. Bernardo Atienza, acting in behalf of respondent GTP, went to METROBANK to inquire on Mr. Chia's remaining balance on the real estate mortgage. METROBANK obliged with a statement of account of Mr. Chia amounting to about P115,000.00 as of August ,1980. The deed of sale and the memorandum of agreement between Mr. Chia and respondent GTP were eventually executed and signed. Atty. Atienza went to METROBANK Quiapo Branch and paid one hundred sixteen thousand four hundred sixteen pesos and seventy-one centavos (P116,416.71) for which METROBANK issued an official receipt acknowledging payment. This notwithstanding, petitioner METROBANK refused to release the real estate mortgage on the subject property despite repeated requests from Atty. Atienza, thus prompting respondent GTP to file an action for specific performance against petitioner METROBANK and Mr. Chia. ISSUE: Whether or not the CA erred in reversing the decision of the lower court. HELD: No. The Court of Appeals did not err in reversing the decision of the lower court. The Court found no compelling reasons to disturb the assailed decision. All things studiedly viewed in proper perspective, the Court are of the opinion, and so rule, that whatever debts or loans mortgagor Chia contracted with Metrobank after September 4, 1980, without the conformity of plaintiff-appellee, could not be adjudged as part of the mortgage debt the latter so assumed. We are persuaded that the contrary HELD on this point in Our October 24, 1994 decision would be unfair and unjust to plaintiffappellee because, before buying subject property and assuming the mortgage debt thereon, the latter inquired from Metrobank about the exact amount of the mortgage debt involved. Petitioner METROBANK is estopped from refusing the discharge of the real estate mortgage on the claim that the subject property still secures "other unliquidated past due loans." petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
540
Sps. Del Ocampo v. Court of Appeals SPOUSES MANUEL and SALVACION DEL CAMPO, Petitioners, versus HON. COURT OF APPEALS and HEIRS OF JOSE REGALADO, SR., Respondents. (G.R. No. 108228, February 1, 2001, 2nd Division) QUISUMBING, J.: FACTS: Salome, Consorcia, Alfredo, Maria, Rosalia, Jose, Quirico and Julita, all surnamed Bornales, were the original co-owners of the lot in question. On July 14, 1940, Salome sold part of her 4/16 share to Soledad Daynolo. Thereafter, Soledad Daynolo immediately took possession of the land described above and built a house thereon. A few years later, Soledad and her husband, Simplicio Distajo, mortgaged the subject portion of the lot as security for a debt to Jose Regalado, Sr. This transaction was evidenced by a Deed of Mortgage. On April 14, 1948, three of the eight co-owners of Lot 162, specifically, Salome, Consorcia and Alfredo, sold 24,993 square meters of said lot to Jose Regalado, Sr. On May 4, 1951, Simplicio Distajo, heir of Soledad Daynolo who had since died, paid the mortgage debt and redeemed the mortgaged portion of Lot 162 from Jose Regalado, Sr. The latter, in turn, executed a Deed of Discharge of Mortgage in favor of Soledad‘s heirs, namely: Simplicio Distajo, Rafael Distajo and Teresita Distajo-Regalado. On same date, the said heirs sold the redeemed portion of Lot 162 for P1,500.00 to herein petitioners, the spouses Manuel Del Campo and Salvacion Quiachon.
ISSUE: Whether or not the sale of the subject portion constitutes a sale of a concrete or definite portion of land owned in common does not absolutely deprive herein petitioners of any right or title thereto. HELD: No. The sale of the subject portion constitutes a sale of a concrete or definite portion of land owned in common does not absolutely deprive herein petitioners of any right or title thereto. There can be no doubt that the transaction entered into by Salome and Soledad could be legally recognized in its entirety since the object of the sale did not even exceed the ideal shares held by the former in the co-ownership. As a matter of fact, the deed of sale executed between the parties expressly stipulated that the portion of Lot 162 sold to Soledad would be taken from Salome‘s 4/16 undivided interest in said lot, which the latter could validly transfer in whole or in part even without the consent of the other co-owners. Salome‘s right to sell part of her undivided interest in the coowned property is absolute in accordance with the well-settled doctrine that a coowner has full ownership of his pro-indiviso share and has the right to alienate, assign or mortgage it, and substitute another person in its enjoyment. Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
541
Cuenco v. Vda. De Manguerra MIGUEL CUENCO, Substituted by MARIETTA C. CUYEGKENG, Petitioner, versus CONCEPCION CUENCO Vda. DE MANGUERRA, Respondent. (G.R. No. 149844, October 13, 2004, 3rd Division) PANGANIBAN, J.: FACTS:On September 19, 1970, the [respondent] filed the initiatory complaint herein for specific performance against her uncle [Petitioner] Miguel Cuenco which averred, inter alia that her father, the late Don Mariano Jesus Cuenco (who became Senator) and said [petitioner] formed the ‗Cuenco and Cuenco Law Offices‘; that on or around August 4, 1931, the Cuenco and Cuenco Law Offices served as lawyers in two (2) cases entitled ‗Valeriano Solon versus Zoilo Solon‘ (Civil Case 9037) and ‗Valeriano Solon versus Apolonia Solon‘ (Civil Case 9040) involving a dispute among relatives over ownership of lot 903 of the Banilad Estate which is near the Cebu Provincial Capitol; that records of said cases indicate the name of the [petitioner] alone as counsel of record, but in truth and in fact, the real lawyer behind the success of said cases was the influential Don Mariano Jesus Cuenco; that after winning said cases, the awardees of Lot 903 subdivided said lot into three (3) parts as follows:
Lot 903-A: 5,000 [square meters]: Mariano Cuenco‘s attorney‘s fees Lot 903-B: 5,000 [square meters]: Miguel Cuenco‘s attorney‘s fees Lot 903-C: 54,000 [square meters]: Solon‘s retention
Petitioner later claimed the property after the death of his brother.
ISSUES: Whether or not the laches barred the right of action of respondent.
HELD: Yes. The laches barred the right of action of respondent. From the time Lot 903-A was subdivided and Mariano‘s six children -- including Concepcion -- took possession as owners of their respective portions, no whimper of protest from petitioner was heard until 1963. By his acts as well as by his omissions, Miguel led Mariano and the latter‘s heirs, including Concepcion, to believe that Petitioner Cuenco respected the ownership rights of respondent over Lot 903-A-6. That Mariano acted and relied on Miguel‘s tacit recognition of his ownership thereof is evident from his will, executed in 1963. Indeed, as early as 1947, long before Mariano made his will in 1963, Lot 903-A -- situated along Juana Osmeña Extension, Kamputhaw, Cebu City, near the Cebu Provincial Capitol -- had been subdivided and distributed to his six children in his first marriage. Having induced him and his heirs to believe that Lot 903-A-6 had already been distributed to Concepcion as her own, petitioner is estopped from asserting the contrary and claiming ownership thereof. The principle of estoppel in pais applies when -- by one‘s acts, representations, admissions, or silence when there is a need to speak out -- one, intentionally or through culpable negligence, induces another to believe certain facts to exist; and the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
542
latter rightfully relies and acts on such belief, so as to be prejudiced if the former is permitted to deny the existence of those facts. Petitioner claims that respondent‘s action is already barred by laches. Laches is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to it has either abandoned or declined to assert it.[40] In the present case, respondent has persistently asserted her right to Lot 903A-6 against petitioner. Concepcion was in possession as owner of the property from 1949 to 1969. When Miguel took steps to have it separately titled in his name, despite the fact that she had the owner‘s duplicate copy of TCT No. RT-6999 -- the title covering the entire Lot 903-A -- she had her adverse claim annotated on the title in 1967. When petitioner ousted her from her possession of the lot by tearing down her wire fence in 1969, she commenced the present action on September 19, 1970, to protect and assert her rights to the property. We find that she cannot be held guilty of laches, as she did not sleep on her rights.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
543
Laurel v. Desierto SALVADOR H. LAUREL, Petitioner, versus HON. ANIANO A. DESIERTO, in his capacity as Ombudsman, Respondent. (G.R. No. 145368, July 1, 2002, 1st Division) KAPUNAN, J.: FACTS: On June 13, 1991, President Corazon C. Aquino issued Administrative Order No. 223 "constituting a Committee for the preparation of the National Centennial Celebration in 1998." The Committee was mandated "to take charge of the nationwide preparations for the National Celebration of the Philippine Centennial of the Declaration of Philippine Independence and the Inauguration of the Malolos Congress." Subsequently, President Fidel V. Ramos issued Executive Order No. 128, "reconstituting the Committee for the preparation of the National Centennial Celebrations in 1988." It renamed the Committee as the "National Centennial Commission." Appointed to chair the reconstituted Commission was Vice-President Salvador H. Laurel. Presidents Diosdado M. Macapagal and Corazon C. Aquino were named Honorary Chairpersons. Petitioner Salvador H. Laurel moves for a reconsideration of this Court‘s decision declaring him, as Chair of the National Centennial Commission (NCC), a public officer. Petitioner also prays that the case be referred to the Court En Banc. On November 14, 2000, the Evaluation and Preliminary Investigation Bureau issued a resolution finding "probable cause to indict respondents SALVADOR H. LAUREL and TEODORO Q. PEÑA before the Sandiganbayan for conspiring to violate Section 3(e) of Republic Act No. 3019, in relation to Republic Act No. 1594." The resolution also directed that an information for violation of the said law be filed against Laurel and Peña. Ombudsman Aniano A. Desierto approved the resolution with respect to Laurel but dismissed the charge against Peña.
ISSUE: Whether or not Laurel is a public officer as Chair of the NCC.
HELD: Yes. Laurel is a public officer as Chair of the NCC. The issue in this case is whether petitioner, as Chair of the NCC, is a public officer under the jurisdiction of the Ombudsman. Assuming, as petitioner proposes, that the designation of other members to the NCC runs counter to the Constitution, it does not make petitioner, as NCC Chair, less a public officer. Such ―serious constitutional repercussions‖ do not reduce the force of the rationale behind this Court‘s decision. Second, petitioner invokes estoppel. He claims that the official acts of the President, the Senate President, the Speaker of the House of Representatives, and the Supreme Court, in designating Cabinet members, Senators, Congressmen and Justices to the NCC, led him to believe that the NCC is not a public office. The contention has no merit. In estoppel, the party representing material facts must have the intention that the other party would act upon the representation. It is preposterous to suppose that the President, the Senate President, the Speaker and the Supreme Court, by the designation of such officials to the NCC, intended to mislead petitioner just so he would accept the position of NCC Chair. Estoppel must be unequivocal and intentional. Moreover, petitioner himself admits that the principle of estoppel does not operate against the Government in the exercise of its sovereign Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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powers. Third, as ground for the referral of the case to the Court En Banc, petitioner submits that our decision in this case modified or reversed doctrines rendered by this Court, which can only be done by the Court En Banc.It is argued that by designating three of its then incumbent members to the NCC, the Court took the position that the NCC was not a public office. The argument is a bit of a stretch. Section 4 (3), Article VIII of the Constitution provides that ―no doctrine or principle of law laid down by the court in a decision rendered en banc or in division may be modified or reversed except by the court sitting en banc.‖ In designating three of its incumbent members to the NCC, the Court did not render a ―decision,‖ in the context of said constitutional provision, which contemplates an actual case. Much less did the Court, by such designation, articulate any ―doctrine or principle of law.‖ Invoking the same provision, petitioner asserts that the decision in this case reversed or modified Macalino vs. Sandiganbayan, holding that the Assistant Manager of the Treasury Division and the Head of the Loans Administration & Insurance Section of the Philippine National Construction Corporation (PNCC) is not a public officer under Republic Act No. 3019. This contention also has no merit. The rationale for the HELD in Macalino is that ―the PNCC has no original charter as it was incorporated under the general law on corporations.‖ However, as we pointed out in our decision, a conclusion that EXPOCORP is a government-owned or controlled corporation would not alter the outcome of this case because petitioner‘s position and functions as Chief Executive Officer of EXPOCORP are by virtue of his being Chairman of the NCC. The other issues raised by petitioner are mere reiterations of his earlier arguments. The Court, however, remains unswayed thereby.
Petition is dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
545
Hanopo v. Shoemart Incorporated SPOUSES MANUEL R. HANOPOL and BEATRIZ T. HANOPOL, Petitioners, versus SHOEMART INCORPORATED, Represented by Executive Vice President, SENEN T. MENDIOLA, Respondent. (G.R. No. 137774, October 4, 2002, 2nd Division) AUSTRIA-MARTINEZ, J.: FACTS: Shoemart, Inc., is a corporation duly organized and existing under the laws of the Philippines engaged in the operation of department stores. On December 4, 1985, Shoemart, through its Executive Vice-President, Senen T. Mendiola, and spouses Manuel R. Hanopol and Beatriz T. Hanopol executed a Contract of Purchase on Credit. Under the terms of the contract, Shoemart extended credit accommodations, in the amount of Three Hundred Thousand Pesos (P300,000.00), for purchases on credit made by holders of SM Credit Card issued by spouses Hanopol for one year, renewable yearly thereafter. Spouses Hanopol were given a five percent (5%) discount on all purchases made by their cardholders, deductible from the semi-monthly payments to be made to Shoemart by spouses Hanopol. For failure of spouses Hanopol to pay the principal amount of One Hundred Twenty-Four Thousand Five Hundred Seventy-One Pesos and Eighty-Nine Centavos (P124,571.89) as of October 6, 1987, Shoemart instituted extrajudicial foreclosure proceedings against the mortgaged properties. Spouses Hanopol alleged that Shoemart breached the contract when the latter failed to furnish the former with the requisite documents by which the former‘s liability shall be determined, namely: charge invoices, purchase booklets and purchase journal, as provided in their contract; that without the requisite documents, spouses Hanopol had no way of knowing that, in fact, they had already paid, even overpaid, whatever they owed to Shoemart; that despite said breach, Shoemart even had the audacity to apply for extrajudicial foreclosure with the Sheriff.
ISSUE: Whether or not Shoemart acted with manifest bad faith in pursuing with the foreclosure and auction sale of the property of spouses Hanopol, and, accordingly, should be held liable for damages. HELD: No. Shoemart did not act with manifest bad faith in pursuing with the foreclosure and auction sale of the property of spouses Hanopol, and, accordingly, should be held liable for damages. All the three (3) elements for litis pendentia as a ground for dismissal of an action are present, namely: (a) identity of parties, or at least such parties who represent the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity, with respect to the two (2) preceding particulars in the two (2) cases, in such that any judgment that may be rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other. In the case at bench, the parties are the same; the relief sought in the case before the Court of Appeals and the trial court are the same, that is, to permanently enjoin the foreclosure of the real estate mortgage executed by spouses Hanopol in Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
546
favor of Shoemart; and, both are premised on the same facts. The judgment of the Court of Appeals would constitute a bar to the suit before the trial court. Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
547
Terminal Facilities v. PPA TERMINAL FACILITIES AND SERVICES CORPORATION, Petitioner, versus PHILIPPINE PORTS AUTHORITY and PORT MANAGER, and PORT DISTRICT OFFICER OF DAVAO CITY, Respondents. (G.R. No. 135639, February 27, 2002, 2nd Division) DE LEON, JR., J.:
FACTS: Before us are two (2) consolidated petitions for review, one filed by the Terminal Facilities and Services Corporation (TEFASCO) and the other by the Philippine Ports Authority (PPA). TEFASCO is a domestic corporation organized and existing under the laws of the Philippines with principal place of business at Barrio Ilang, Davao City. It is engaged in the business of providing port and terminal facilities as well as arrastre, stevedoring and other port-related services at its own private port at Barrio Ilang. Sometime in 1975 TEFASCO submitted to PPA a proposal for the construction of a specialized terminal complex with port facilities and a provision for port services in Davao City. To ease the acute congestion in the government ports at Sasa and Sta. Ana, Davao City, PPA welcomed the proposal and organized an interagency committee to study the plan. The committee recommended approval. On April 21, 1976 the PPA Board of Directors passed Resolution No. 7 accepting and approving TEFASCO's project proposal. Long after TEFASCO broke round with massive infrastructure work, the PPA Board curiously passed on October 1, 1976 Resolution No. 50 under which TEFASCO, without asking for one, was compelled to submit an application for construction permit. Without the consent of TEFASCO, the application imposed additional significant conditions. The series of PPA impositions did not stop there. Two (2) years after the completion of the port facilities and the commencement of TEFASCO's port operations, or on June 10, 1978, PPA again issued to TEFASCO another permit, under which more onerous conditions were foisted on TEFASCO's port operations. In the purported permit appeared for the first time the contentious provisions for ten percent (10%) government share out of arrastre and stevedoring gross income and one hundred percent (100%) wharfage and berthing charges. On February 10, 1984 TEFASCO and PPA executed a Memorandum of Agreement (MOA) providing among others for (a) acknowledgment of TEFASCO's arrears in government share at Three Million Eight Hundred Seven Thousand Five Hundred Sixty-Three Pesos and Seventy-Five Centavos (P3,807,563.75) payable monthly, with default penalized by automatic withdrawal of its commercial private port permit and permit to operate cargo handling services; (b) reduction of government share from ten percent (10%) to six percent (6%) on all cargo handling and related revenue (or arrastre and stevedoring gross income); (c) opening of its pier facilities to all commercial and thirdparty cargoes and vessels for a period coterminous with its foreshore lease contract with the National Government; and, (d) tenure of five (5) years extendible by five (5) more years for TEFASCO's permit to operate cargo handling in its private port facilities. In return PPA promised to issue the necessary permits for TEFASCO's port activities. TEFASCO complied with the MOA and paid the accrued and current government share. On August 30, 1988 TEFASCO sued PPA and PPA Port Manager, and Port Officer in Davao City for refund of government share it had paid and for damages as a result of alleged illegal exaction from its clients of one hundred percent (100%) berthing and wharfage fees. The complaint also sought to nullify the February 10, Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
548
1984 MOA and all other PPA issuances modifying the terms and conditions of the April 21, 1976 Resolution No. 7 above-mentioned. PPA appealed the decision of the trial court to the Court of Appeals. The appellate court in its original decision recognized the validity of the impositions and reversed in toto the decision of the trial court. TEFASCO moved for reconsideration which the Court of Appeals found partly meritorious. Thus the Court of Appeals in its Amended Decision partially affirmed the RTC decision only in the sense that PPA was directed to pay TEFASCO (1) the amounts of Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos (P15,810,032.07) representing fifty percent (50%) wharfage fees and Three Million Nine Hundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six Centavos (P3,961,964.06) representing thirty percent (30%) berthing fees which TEFASCO could have earned as private port usage fee from 1977 to 1991. The Court of Appeals held that the one hundred percent (100%) berthing and wharfage fees were unenforceable because they had not been approved by the President under P.D. No. 857, and discriminatory since much lower rates were charged in other private ports as shown by PPA issuances effective 1995 to 1997. Both PPA and TEFASCO were unsatisfied with this disposition hence these petitions. ISSUE: Whether or not the collection by PPA of one hundred percent (100%) wharfage fees and berthing charges; (c) the propriety of the award of fifty percent (50%) wharfage fees and thirty percent (30%) berthing charges as actual damages in favor of TEFASCO for the period from 1977 to 1991 is valid. HELD: The imposition by PPA of ten percent (10%), later reduced to six percent (6%), government share out of arrastre and stevedoring gross income of TEFASCO is void. This exaction was never mentioned in the contract, much less is it a binding prestation, between TEFASCO and PPA. What was clearly stated in the terms and conditions appended to PPA Resolution No. 7 was for TEFASCO to pay and/or secure from the proper authorities "all fees and/or permits pertinent to the construction and operation of the proposed project." The government share demanded and collected from the gross income of TEFASCO from its arrastre and stevedoring activities in TEFASCO's wholly owned port is certainly not a fee or in any event a proper condition in a regulatory permit. Rather it is an onerous "contractual stipulation" which finds no root or basis or reference even in the contract aforementioned.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
549
Mendoza v. Court of Appeals DANILO D. MENDOZA, also doing business under the name and style of ATLANTIC EXCHANGE PHILIPPINES, Petitioner, vs. COURT OF APPEALS, PHILIPPINE NATIONAL BANK, FERNANDO MARAMAG, JR., RICARDO G. DECEPIDA and BAYANI A. BAUTISTA,Respondents. (G.R. No. 116710. June 25, 2001, 2nd Division) DE LEON, JR., J.:
FACTS: Petitioner Danilo D. Mendoza is engaged in the domestic and international trading of raw materials and chemicals. He operates under the business name Atlantic Exchange Philippines (Atlantic), a single proprietorship registered with the Department of Trade and Industry (DTI). Sometime in 1978 he was granted by respondent Philippine National Bank (PNB) a Five Hundred Thousand Pesos (P500,000.00) credit line and a One Million Pesos (P1,000,000.00) Letter of Credit/Trust Receipt (LC/TR) line. As security for the credit accommodations and for those which may thereinafter be granted, petitioner mortgaged to respondent PNB the following: 1) three (3) parcels of land with improvements in F. Pasco Avenue, Santolan, Pasig; 2) his house and lot in Quezon City; and 3) several pieces of machinery and equipment in his Pasig cocochemical plant. Petitioner executed in favor of respondent PNB three (3) promissory notes covering the Five Hundred Thousand Pesos (P500,000.00) credit line, one dated March 8, 1979 for Three Hundred Ten Thousand Pesos (P310,000.00); another dated March 30, 1979 for Forty Thousand Pesos (P40,000.00); and the last dated September 27, 1979 for One Hundred Fifty Thousand Pesos (P150,000.00). Petitioner made use of his LC/TR line to purchase raw materials from foreign importers. He signed a total of eleven (11) documents denominated as "Application and Agreement for Commercial Letter of Credit," on various dates In a letter dated January 3, 1980 and signed by Branch Manager Fil S. Carreon Jr., respondent PNB advised petitioner Mendoza that effective December 1, 1979, the bank raised its interest rates to 14% per annum, in line with Central Bank's Monetary Board Resolution No. 2126 dated November 29, 1979. On March 9, 1981, he wrote a letter to respondent PNB requesting for the restructuring of his past due accounts into a five-year term loan and for an additional LC/TR line of Two Million Pesos (P2,000,000.00). According to the letter, because of the shut-down of his end-user companies and the huge amount spent for the expansion of his business, petitioner failed to pay to respondent bank his LC/TR accounts as they became due and demandable. Ceferino D. Cura, Branch Manager of PNB Mandaluyong replied on behalf of the respondent bank and required petitioner to submit the following documents before the bank would act on his request: 1) Audited Financial Statements for 1979 and 1980; 2) Projected cash flow (cash in - cash out) for five (5) years detailed yearly; and 3) List of Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
550
additional machinery and equipment and proof of ownership thereof. Cura also suggested that petitioner reduce his total loan obligations to Three Million Pesos (P3,000,000.00). On September 25, 1981, petitioner sent another letter addressed to PNB VicePresident Jose Salvador, regarding his request for restructuring of his loans. He offered respondent PNB the following proposals: 1) the disposal of some of the mortgaged properties, more particularly, his house and lot and a vacant lot in order to pay the overdue trust receipts; 2) capitalization and conversion of the balance into a 5year term loan payable semi-annually or on annual installments; 3) a new Two Million Pesos (P2,000,000.00) LC/TR line in order to enable Atlantic Exchange Philippines to operate at full capacity; 4) assignment of all his receivables to PNB from all domestic and export sales generated by the LC/TR line; and 5) maintenance of the existing Five Hundred Thousand Pesos (P500,000.00) credit line. The petitioner testified that respondent PNB Mandaluyong Branch found his proposal favorable and recommended the implementation of the agreement. However, Fernando Maramag, PNB Executive Vice-President, disapproved the proposed release of the mortgaged properties and reduced the proposed new LC/TR line to One Million Pesos (P1,000,000.00). Petitioner claimed he was forced to agree to these changes and that he was required to submit a new formal proposal and to sign two (2) blank promissory notes. In a letter dated July 2, 1982, petitioner offered the following revised proposals to respondent bank: 1) the restructuring of past due accounts including interests and penalties into a 5-year term loan, payable semi-annually with one year grace period on the principal; 2) payment of Four Hundred Thousand Pesos (P400,000.00) upon the approval of the proposal; 3) reduction of penalty from 3% to 1%; 4) capitalization of the interest component with interest rate at 16% per annum; 5) establishment of a One Million Pesos (P1,000,000.00) LC/TR line against the mortgaged properties; 6) assignment of all his export proceeds to respondent bank to guarantee payment of his Petitioner failed to pay the subject two (2) Promissory Notes Nos. 127/82 and 128/82 as they fell due. Respondent PNB extra-judicially foreclosed the real and chattel mortgages, and the mortgaged properties were sold at public auction to respondent PNB, as highest bidder, for a total of Three Million Seven Hundred Ninety Eight Thousand Seven Hundred Nineteen Pesos and Fifty Centavos (P3,798,719.50). The petitioner filed a complaint for specific performance, nullification of the extra-judicial foreclosure and damages against respondents PNB. He alleged that the Extrajudicial Foreclosure Sale of the mortgaged properties was null and void since his loans were restructured to a five-year term loan; hence, it was not yet due and demandable. On March 16, 1992, the trial court rendered judgment in favor of the petitioner and ordered the nullification of the extrajudicial foreclosure of the real estate mortgage, the Sheriff‘s sale of the mortgaged real properties by virtue of consolidation thereof and the cancellation of the new titles issued to PNB; that PNB vacate the subject premises in Pasig and turn the same over to the petitioner; and also the nullification of the extrajudicial foreclosure and sheriff's sale of the mortgaged chattels, and that the chattels be returned to petitioner Mendoza if they were removed from his Pasig premises or be paid for if they were lost or rendered unserviceable. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
551
The trial court decided for the petitioner. Upon appeal, the Court of Appeals reversed the decision of the trial court and dismissed the complaint. ISSUE: Whether or not respondent promised to be bound by the proposal of the petitioner for a five-year restructuring of his overdue loan. HELD:No. Respondent Court of Appeals held that there is no evidence of a promise from respondent PNB, admittedly a banking corporation, that it had accepted the proposals of the petitioner to have a five-year restructuring of his overdue loan obligations. It found and held, on the basis of the evidence adduced, that "appellee's (Mendoza) communications were mere proposals while the bank's responses were not categorical that the appellee's request had been favorably accepted by the bank." Nowhere in those letters presented by the petitioner is there a categorical statement that respondent PNB had approved the petitioner‘s proposed five-year restructuring plan. It is stretching the imagination to construe them as evidence that his proposed five-year restructuring plan has been approved by the respondent PNB which is admittedly a banking corporation. Only an absolute and unqualified acceptance of a definite offer manifests the consent necessary to perfect a contract. If anything, those correspondences only prove that the parties had not gone beyond the preparation stage, which is the period from the start of the negotiations until the moment just before the agreement of the parties. The doctrine of promissory estoppel is an exception to the general rule that a promise of future conduct does not constitute an estoppel. In some jurisdictions, in order to make out a claim of promissory estoppel, a party bears the burden of establishing the following elements: (1) a promise reasonably expected to induce action or forebearance; (2) such promise did in fact induce such action or forebearance, and (3) the party suffered detriment as a result. It is clear from the forgoing that the doctrine of promissory estoppel presupposes the existence of a promise on the part of one against whom estoppel is claimed. The promise must be plain and unambiguous and sufficiently specific so that the Judiciary can understand the obligation assumed and enforce the promise according to its terms. For petitioner to claim that respondent PNB is estopped to deny the five-year restructuring plan, he must first prove that respondent PNB had promised to approve the plan in exchange for the submission of the proposal. As discussed earlier, no such promise was proven, therefore, the doctrine does not apply to the case at bar. A cause of action for promissory estoppel does not lie where an alleged oral promise was conditional, so that reliance upon it was not reasonable. It does not operate to create liability where it does not otherwise exist.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
552
Marques v. Far East Bank FAR EAST BANK AND TRUST COMPANY and MAKATI INSURANCE COMPANY,Petitioners, versus JOSE MARQUES and MAXILITE TECHNOLOGIES, INC.,Respondents (G.R. No. 171419, January 10, 2011, 1 st Division) CARPIO, J.,
FACTS: Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in the importation and trading of equipment for energy-efficiency systems. Jose N. Marques (Marques) is the President and controlling stockholder of Maxilite. Far East Bank and Trust Co. (FEBTC) is a local bank which handled the financing and related requirements of Marques and Maxilite. Marques and Maxilite maintained accounts with FEBTC. Accordingly, FEBTC financed Maxilite‘s capital and operational requirements through loans secured with properties of Marques under the latter‘s name. Far East Bank Insurance Brokers, Inc. (FEBIBI) is a local insurance brokerage corporation while Makati Insurance Company is a local insurance company. Both companies are subsidiaries of FEBTC. On 17 June 1993, Maxilite and Marques entered into a trust receipt transaction with FEBTC, in the sum of US$80,765.00, for the shipment of various high-technology equipment from the United States, with the merchandise serving as collateral. The foregoing importation was covered by a trust receipt document signed by Marques on behalf of Maxilite. Sometime in August 1993, FEBIBI, upon the advice of FEBTC, facilitated the procurement and processing from Makati Insurance Company of four separate and independent fire insurance policies over the trust receipted merchandise.Maxilite paid the premiums for these policies through debit arrangement. FEBTC would debit Maxilite‘s account for the premium payments, as reflected in statements of accounts sent by FEBTC to Maxilite. On 9 March 1995, a fire gutted the Aboitiz Sea Transport Building along M.J. Cuenco Avenue, Cebu City, where Maxilite‘s office and warehouse were located. As a result, Maxilite suffered losses amounting to at least P2.1 million, which Maxilite claimed against the fire insurance policy with Makati Insurance Company. Makati Insurance Company denied the fire loss claim on the ground of non-payment of premium. FEBTC and FEBIBI disclaimed any responsibility for the denial of the claim.Maxilite and Marques sued FEBTC, FEBIBI, and Makati Insurance Company.
ISSUE: Whether or not FEBTC is estopped from claiming that the insurance premium has been unpaid.
HELD: Both trial and appellate courts basically agree that FEBTC is estopped from claiming that the insurance premium has been unpaid. That FEBTC induced Maxilite and Marques to believe that the insurance premium has in fact been debited from Maxilite‘s account is grounded on the the following facts: (1) FEBTC represented and committed to handle Maxilite‘s financing and capital requirements, including the related transactions such as the insurance of the trust receipted merchandise; (2) prior to the subject Insurance Policy No. 1024439, the premiums for the three Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
553
separate fire insurance policies had been paid through automatic debit arrangement; (3) FEBIBI sent FEBTC, not Maxilite nor Marques, written reminders dated 19 October 1994, 24 January 1995, and 6 March 1995 to debit Maxilite‘s account, establishing FEBTC‘s obligation to automatically debit Maxilite‘s account for the premium amount; (4) there was no written demand from FEBTC or Makati Insurance Company for Maxilite or Marques to pay the insurance premium; (5) the subject insurance policy was released to Maxilite on 19 August 1994; and (6) the subject insurance policy remained uncancelled despite the alleged non-payment of the premium, making it appear that the insurance policy remained in force and binding.
Roblett Construction v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts ROBLETT INDUSTRIAL CONSTRUCTION COURT OF APPEALS and CORPORATION, Respondents.
554
CORPORATION, Petitioner, versus CONTRACTORS EQUIPMENT
(G.R. No. 116682. January 2, 1997, 1st Division)
FACTS: On 23 September 1986 respondent Contractors Equipment Corporation (CEC) instituted an action for a sum of money against petitioner Roblett Industrial Construction Corporation (RICC) before the Regional Trial Court of Makati alleging that in 1985 it leased to the latter various construction equipment which it used in its projects. As a result RICC incurred unpaid accounts amounting to P342,909.38.On 19 December 1985 RICC through its Assistant Vice President for Finance Candelario S. Aller Jr. entered into an Agreement with CEC where it confirmed petitioner's account. As an off-setting arrangement respondent received from petitioner construction materials worth P115,000.00 thus reducing petitioner's balance to P227,909.38. A day before the execution of their Agreement, or on 18 December 1985, RICC paid CEC P10,000.00 in postdated checks which when deposited were dishonored. As a consequence the latter debited the amount to petitioner's account of P227,909.38 thus increasing its balance to P237,909.38. On 24 July 1986 Mariano R. Manaligod, Jr., General Manager of CEC, sent a letter of demand to petitioner through its Vice President for Finance regarding the latter's overdue account of P237,909.38 and sought settlement thereof on or before 31 July 1986. In reply, petitioner requested for thirty (30) days to have enough time to look for funds to substantially settle its account.Traversing the allegations of respondent, Candelario S. Aller Jr. declared that he signed the Agreement with the real intention of having proof of payment. In fact Baltazar Banlot, Vice President for Finance of petitioner, claimed that after deliberation and audit it appeared that petitioner overpaid respondent by P12,000.00 on the basis of the latter's Equipment Daily Time Reports for 2 May to 14 June 1985 which reflected a total obligation of only P103,000.00. He claimed however that the Agreement was not approved by the Board and that he did not authorize Aller Jr. to sign thereon.On rebuttal, Manaligod Jr. declared that petitioner had received a statement of account covering the period from 28 March to 12 July 1985 in the amount of P376,350.18 which it never questioned. From this amount P3,440.80, based on respondent's account with petitioner and P30,000.00, representing payments made by the latter, were deducted thus leaving a balance of P342,909.38 as mentioned in the Agreement. On 19 December 1990 the trial court rendered judgment ordering petitioner to pay respondent ISSUE: Whether or not the agreement between the parties is binding upon them. HELD: Yes. It must be emphasized that the same agreement was used by plaintiff as the basis for claiming defendant's obligation of P237,909.38 and also used by defendant as the same basis for its alleged payment in full of its obligation to plaintiff. But while plaintiff treats the entire agreement as valid, defendant wants the court to treat that portion which treats of the offsetting of P115,000.00 as valid, whereas it considers the other terms and conditions as "onerous, illegal and want of prior consent and Board approval." This Court cannot agree to defendant's contention. It must be stressed that defendant's answer was not made under oath, and therefore, the genuineness and due execution of the agreement which was the basis for plaintiff's claim is deemed admitted (Section 8, Rule 8, Rules of Court). Such admission, under the principle of estoppel, is rendered conclusive upon defendant and Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
555
cannot be denied or disproved as against plaintiff (Art. 1431, Civil Code). Either the agreement is valid or void. It must be treated as a whole and not to be divided into parts and consider only those provisions which favor one party (in this case the defendant). Contracts must bind both contracting parties, its validity or compliance cannot be left to the will of one of them (Art. 1308, New Civil Code).
Simedarby v. Goodyear
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts SIME DARBY PILIPINAS, INC., Petitioner, PHILIPPINES, INC., Respondent (GR No. 182148, June 8, 2011, 2nd Division) MENDOZA, J.:
versus
556
GOODYEAR
FACTS: Macgraphics leased a billboard to Sime Darby to bare its name and logo at a monthly rental of P120, 000.00 for four years and was set to expire on March 30, 1998. Sime Darby paid Macgraphics a total of P1.2 million representing the ten-month deposit which the latter would apply to the last ten months of the lease. Thereafter, Sime Darby was bought by Goodyear for a total of P1.65 billion including the assignment of the receivables in connection with its billboard advertising. Sime Darby then notified Macgraphics of the assignment of the Magallanes billboard in favor of Goodyear. Macgraphics then sent a letter to Sime Darby, dated July 11, 1996, informing the latter that it could not give its consent to the assignment of lease to Goodyear and advised Goodyear that any advertising service it intended to get from them would have to wait until after the expiration or valid pre-termination of the lease then existing with Sime Darby. Goodyear demanded partial rescission of deed and the refund of P1, 239,000.00value of Sime Darby's leasehold rights over the Magallanes billboard. Sime Darby refused and a complaint was filed by Goodyear. ISSUE: Whether or not the doctrine of laches can be applied in the present case HELD:The Court finds that the doctrine of laches cannot be applied in this case. Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting the presumption that the party entitled to assert it either has abandoned or declined to assert it. There is no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances, with the question of laches addressed to the sound discretion of the court. Because laches is an equitable doctrine, its application is controlled by equitable considerations and should not be used to defeat justice or to perpetuate fraud or injustice. From the records, it appears that Macgraphics first learned of the assignment when Sime Darby sent its letter-notice dated May 3, 1996. From the letters sent by Macgraphics to Goodyear, it is apparent that Macgraphics had to study and determine both the legal and practical implications of entertaining Goodyear as a client. After review, Macgraphics found that consenting to the assignment would entail the commitment of manpower and resources that it did not foresee at the inception of the lease. It thereafter communicated its non-conformity to the assignment. To the mind of the Court, there was never a delay.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
557
Far East Bank v. Borja Far East Bank and Trust Company (Now Bank of the Philippine Islands) and Rolando Borja, Deputy Sherrif, Petitioners, versus Sps. Ernesto and Leonor C. Cayetano, Respondents. (G.R. No. 179909, January 25, 2010, 1st Division) VILLARAMA, JR., J.:
FACTS: The principal executed a special power of attorney in favor of her daughter authorizing her to contract a loan from a bank and to mortgage the principal‘s two lots. The principal also executed an affidavit of non-tenancy for the approval of the loan. The bank granted a loan secured by two promissory notes and a real estate mortgage over the principal‘s two lots. The mortgage document was signed by the agent and her husband as mortgagors in their individual capacities, without stating that the agent was executing the mortgage contract for and in behalf of the principal. The bank foreclosed the mortgage due to non-payment of the loan. A notice of public auction sale was sent to principal. The latter‘s lawyer responded with a letter to the bank requesting that the public auction be postponed. The letter went unheeded and the public auction was held as scheduled wherein the mortgaged properties were sold to the bank. Subsequently, the bank consolidated its title and obtained new titles in its name after the redemption period lapsed without the principal taking any action. Around five years later, the principal filed a complaint for annulment of mortgage and extrajudicial foreclosure of the properties with damages with the regional trial court (RTC) of Naga City. The principal sought nullification of the real estate mortgage and extrajudicial foreclosure sale, as well as the cancellation of the bank‘s title over the properties.
ISSUE: Whether or not the principal can be bound by the real estate mortgage executed by the agent.
HELD: The RTC rendered judgment in favor of the principal, holding that the principal cannot be bound by the real estate mortgage executed by the agent unless it is shown that the same was made and signed in the name of the principal; hence, the mortgage will bind the agent only. The Court of Appeals (CA) affirmed the RTC‘s HELD. It held that it must be shown that the real estate mortgage was executed by the agent on behalf of the principal, otherwise the agent may be deemed to have acted on his own and the mortgage is void. However, the CA further declared that the principal loan agreement was not affected, which had become an unsecured credit. The Supreme Court held that the principal is not bound by the real estate mortgage executed by the authorized agent in her own name without indicating the principal. It is not sufficient for the principal to have authorized the agent through a special power of attorney to execute the mortgage on behalf of the principal; the mortgage contract itself must clealy state that the agent was executing the mortgage contract for and on behalf of the principal. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
558
Kings Properties Corporation, Inc. v. Galido KINGS PROPERTIES CORPORATION, Petitioner, versus CANUTO A. GALIDO,Respondent. (G.R. No. 170023, November 27, 2009, 2nd Division CARPIO, J.:
FACTS: Kings Properties Corporation (petitioner) filed this Petition for Review on Certiorari assailing the Court of Appeals‘ Decision[2] dated 20 December 2004 in CAG.R. CV No. 68828 as well as the Resolution[3] dated 10 October 2005 denying the Motion for Reconsideration. In the assailed decision, the Court of Appeals reversed the Regional Trial Court‘s Decision dated 4 July 2000. This case involves an action for cancellation of certificates of title, registration of deed of sale and issuance of certificates of title filed by Canuto A. Galido before Branch 71 of the Regional Trial Court of Antipolo City (trial court). On 18 April 1966, the heirs of Domingo Eniceo, namely Rufina Eniceo and Maria Eniceo, were awarded with Homestead Patent No. 112947 consisting of four parcels of land located in San Isidro, Antipolo, Rizal and particularly described as follows; Lot No. 1 containing an area of 96,297 square meters; Lot No. 3 containing an area of 25,170 square meters; Lot No. 4 containing an area of 26,812 square meters; and Lot No. 5 containing an area of 603 square meters. The Antipolo property with a total area of 14.8882 hectares was registered under Original Certificate of Title (OCT) No. 535. Subsequently a deed of sale covering the Antipolo property was executed between Rufina Eniceo and Maria Eniceo as vendors and respondent as vendee. They sold the Antipolo property to respondent for P250,000. A certain Carmen Aldana delivered the owner‘s duplicate copy of OCT No. 535 to respondent.Petitioner alleges that when Maria Eniceo died in June 1975, Rufina Eniceo and the heirs of Maria Eniceo, who continued to occupy the Antipolo property as owners, thought that the owner‘s duplicate copy of OCT No. 535 was lost. On 5 April 1988, the Eniceo heirs registered with the Registry of Deeds of Marikina City a Notice of Loss dated 2 April 1988 of the owner‘s copy of OCT No. 535. The Eniceo heirs also filed a petition for the issuance of a new owner‘s duplicate copy of OCT No. 535 with Branch 72 of the Regional Trial Court of Antipolo, Rizal. The RTC rendered a decision finding that the certified true copy of OCT No. 535 contained no annotation in favor of any person, corporation or entity. The RTC ordered the Registry of Deeds to issue a second owner‘s copy of OCT No. 535 in favor of the Eniceo heirs and declared the original owner‘s copy of OCT NO. 535 cancelled and considered of no further value. Thus the Registry of Deeds issued a second owner‘s copy of OCT No. 535 in favor of the Eniceo heirs. Petitioner states that as early as 1991, respondent knew of the RTC decision in LRC Case No. 584-A because respondent filed a criminal case against Rufina Eniceo and Leonila Bolinas for giving false testimony upon a material fact during the trial of LRC Case No. 584-A. Petitioner alleges that sometime in February 1995, Bolinas came to the office of Alberto Tronio Jr. , petitioner‘s general Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
559
manager, and offered to sell the Antipolo property. Tronio ascertained that OCT No. 535 was clean and had no lien and encumbrances. After the necessary verification, petitioner decided to buy the Antipolo property. On 14 March 1995, respondent caused the annotation of his adverse claim in OCT No. 535. On 20 March 1995, the Eniceo heirs executed a deed of absolute sale in favor of petitioner covering lots 3 and 4 of the Antipolo property for P500,000. On the same date, Transfer Certificate of Title (TCT) Nos. 277747 and 277120 were issued. TCT No. 277747 covering lots 1 and 5 of the Antipolo property was registered in the names of Rufina Eniceo, Ambrosio Eniceo, Rodolfo Calove, Fernando Calove and Leonila Calove Bolinas. TCT No. 277120 covering lots 3 and 4 of the Antipolo property was registered in the name of petitioner. On 5 April 1995, the Eniceo heirs executed another deed of sale in favor of petitioner covering lots 1 and 5 of the Antipolo property for P1,000,000. TCT No. 278588 was issued in the name of petitioner and TCT No. 277120 was cancelled. On 17 August 1995, the Secretary of the Department of Environment and Natural Resources (DENR Secretary) approved the deed of sale between the Eniceo heirs and respondent. On 16 January 1996, respondent filed a civil complaint with the trial court against the Eniceo heirs and petitioner. Respondent prayed for the cancellation of the certificates of title issued in favor of petitioner, and the registration of the deed of sale and issuance of a new transfer certificate of title in favor of respondent. The trial court rendered its decision dismissing the case for lack of legal and factual basis. Respondent appealed to the Court of Appeals. On 20 December 2004, the CA rendered a decision reversing the trial court‘s decision. Aggrieved by the CA‘s decision and resolution, petitioner elevated the case before the High Court.
ISSUES: Whether the adverse claim of respondent over the Antipolo property should be barred by laches Whether the deed of sale delivered to respondent should be presumed an equitable mortgage pursuant to Article 1602(2) and 1604 of the Civil Code.
HELD:The contract between the Eniceo heirs and respondent executed was a perfected contract of sale. A contract is perfected once there is consent of the contracting parties on the object certain and on the cause of the obligation. In the present case, the object of the sale is the Antipolo property and the price certain is P250,000. The contract of sale has also been consummated because the vendors and vendee have performed their respective obligations under the contract. In a contract of sale, the seller obligates himself to transfer the ownership of the determinate thing sold, and to deliver the same to the buyer, who obligates himself to pay a price certain to the seller. The execution of the notarized deed of sale and the delivery of the owner‘s duplicate copy of OCT No. 535 to respondent is tantamount to a constructive delivery of the object of the sale. The Eniceo heirs also claimed in their answer that the deed of sale is fake and spurious. However, as correctly held by the CA, forgery can never be presumed. The party alleging forgery is mandated to prove it with clear and convincing evidence. Whoever alleges forgery has the burden of proving it. In this case, petitioner and the Eniceo heirs failed to discharge this burden. Petitioner contends that respondent is guilty of laches because he slept on his rights by failing to register the sale of the Antipolo property at the earliest possible time. Petitioner claims that despite respondent‘s knowledge of the subsequent sale in Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
560
1991, respondent still failed to have the deed of sale registered with the Registry of Deeds. The essence of laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, through due diligence, could have been done earlier, thus giving rise to a presumption that the party entitled to assert it had either abandoned or declined to assert it. Respondent discovered in 1991 that a new owner‘s copy of OCT No. 535 was issued to the Eniceo heirs. Respondent filed a criminal case against the Eniceo heirs for false testimony. When respondent learned that the Eniceo heirs were planning to sell the Antipolo property, respondent caused the annotation of an adverse claim. On 16 January 1996, when respondent learned that OCT No. 535 was cancelled and new TCTs were issued, respondent filed a civil complaint with the trial court against the Eniceo heirs and petitioner. Respondent‘s actions negate petitioner‘s argument that respondent is guilty of laches. True, unrecorded sales of land brought under Presidential Decree No. 1529 or the Property Registration Decree (PD 1529) are effective between and binding only upon the immediate parties. The registration required in Section 51 of PD 1529 is intended to protect innocent third persons, that is, persons who, without knowledge of the sale and in good faith, acquire rights to the property. Petitioner, however, is not an innocent purchaser for value. Hence the petition was denied.
Metrobank v. Cabilzo
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
561
METROPOLITAN BANK AND TRUST COMPANY, Petitioners, versus RENATO D. CABILZO, Respondent. (G.R. No. 154469, December 6, 2006, 1st Division) CHICO-NAZARIO, J.:
FACTS: On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988, payable to ―CASH‖ and postdated on 24 November 1994 in the amount of One Thousand Pesos (P1, 000.00). The check was drawn against Cabilzo‘s Account with Metrobank Pasong Tamo Branch under Current Account No. 618044873-3 and was paid by Cabilzo to a certain Mr. Marquez, as his sales commission. Subsequently, the check was presented to Westmont Bank for payment. Westmont Bank, in turn, indorsed the check to Metrobank for appropriate clearing. After the entries thereon were examined, including the availability of funds and the authenticity of the signature of the drawer, Metrobank cleared the check for encashment in accordance with the Philippine Clearing House Corporation (PCHC) Rules.
On 16 November 1994, Cabilzo‘s representative was at Metrobank Pasong Tamo Branch to make some transaction when he was asked by bank personnel if Cabilzo had issued a check in the amount of P91, 000.00 to which the former replied in the negative. On the afternoon of the same date, Cabilzo himself called Metrobank to reiterate that he did not issue a check in the amount of P91, 000.00 and requested that the questioned check be returned to him for verification, to which Metrobank complied. Upon receipt of the check, Cabilzo discovered that Metrobank Check No. 985988 which he issued on 12 November 1994 in the amount of P1, 000.00 was altered to P91, 000.00 and the date 24 November 1994 was changed to 14 November 1994.Hence, Cabilzo demanded that Metrobank re-credit the amount of P91, 000.00 to his account. Metrobank, however, refused reasoning that it has to refer the matter first to its Legal Division for appropriate action. Repeated verbal demands followed but Metrobank still failed to re-credit the amount of P91, 000.00 to Cabilzo‘s account
On 30 June 1995, Cabilzo, thru counsel, finally sent a letter-demand to Metrobank for the payment of P90, 000.00, after deducting the original value of the check in the amount of P1, 000.00. Such written demand notwithstanding, Metrobank still failed or refused to comply with its obligation. Consequently, Cabilzo instituted a civil action for damages against Metrobank before the RTC of Manila, Branch 13. In his Complaint docketed as Civil Case No. 95-75651, Renato D. Cabilzo v. Metropolitan Bank and Trust Company, Cabilzo prayed that in addition to his claim for reimbursement, actual and moral damages plus costs of the suit be awarded in his favor.
ISSUE: Whether equitable estoppel can be appreciated in favor of petitioner
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
562
HELD: The degree of diligence required of a reasonable man in the exercise of his tasks and the performance of his duties has been faithfully complied with by Cabilzo. In fact, he was wary enough that he filled with asterisks the spaces between and after the amounts, not only those stated in words, but also those in numerical figures, in order to prevent any fraudulent insertion, but unfortunately, the check was still successfully altered, indorsed by the collecting bank, and cleared by the drawee bank, and encashed by the perpetrator of the fraud, to the damage and prejudice of Cabilzo.
Metrobank cannot lightly impute that Cabilzo was negligent and is therefore prevented from asserting his rights under the doctrine of equitable estoppel when the facts on record are bare of evidence to support such conclusion. The doctrine of equitable estoppel states that when one of the two innocent persons, each guiltless of any intentional or moral wrong, must suffer a loss, it must be borne by the one whose erroneous conduct, either by omission or commission, was the cause of injury. Metrobank‘s reliance on this dictum is misplaced. For one, Metrobank‘s representation that it is an innocent party is flimsy and evidently, misleading. At the same time, Metrobank cannot asseverate that Cabilzo was negligent and this negligence was the proximate cause of the loss in the absence of even a scintilla proof to buttress such claim. Negligence is not presumed but must be proven by the one who alleges it, which petitioner failed to.
Mesina v. Garcia
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
563
MELANIE M. MESINA, DANILO M. MESINA, and SIMEON M. MESINA, Petitioner, versus GLORIA C. GARCIA, Respondent. (G.R. No. 168035, November 30, 2006, 1st Division) CHICO-NAZARIO, J.:
FACTS: Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, enstered into a Contract to Sell over a lot consisting of 235 square meters, situated at Diversion Road, Sangitan, Cabanatuan City, covered and embraced by TCT No. T31643 in the name of Felicisima Mesina which title was eventually cancelled and TCT No. T-78881 was issued in the name of herein petitioners. The Contract to Sell provides that the cost of the lot is P70.00 per square meter for a total amount of P16,450.00; payable within a period not to exceed 7 years at an interest rate of 12% per annum, in successive monthly installments of P260.85 per month, starting May 1977. Thereafter, the succeeding monthly installments are to be paid within the first week of every month, at the residence of the vendor at Quezon City, with all unpaid monthly installments earning an interest of 1% per month. Instituting this case at bar, respondent asserts that despite the full payment made on 7 February 1984 for the consideration of the subject lot, petitioners refused to issue the necessary Deed of Sale to effect the transfer of the property to her.
ISSUE: Whether or not respondent‘s cause of action had already prescribed.
HELD: Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted when an action has been filed in court; when there is a written extrajudicial demand made by the creditors; and when there is any written acknowledgment of the debt by the debtor.
The records reveal that starting 19 April 1986 until 2 January 1997 respondent continuously demanded from the petitioners the execution of the said Deed of Absolute Sale but the latter conjured many reasons and excuses not to execute the same. Respondent even filed a Complaint before the Housing and Land Use Regulatory Board way back in June, 1986, to enforce her rights and to compel the mother of herein petitioners, who was still alive at that time, to execute the necessary Deed of Absolute Sale for the transfer of title in her name. On 2 January 1997, respondent, through her counsel, sent a final demand letter to the petitioners for the execution of the Deed of Absolute Sale, but still to no avail. Consequently, because of utter frustration of the respondent, she finally lodged a formal Complaint for Specific Performance with Damages before the trial court on 20 January 1997.
Hence, from the series of written extrajudicial demands made by respondent to have the execution of the Deed of Absolute Sale in her favor, the prescriptive period of 10 years has been interrupted. Therefore, it cannot be said that the cause of action of the respondent has already been prescribed. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
564
Pahamotang v. PNB JOSEPHINE PAHAMOTANG and ELEANOR PAHAMOTANG-BASA, Petitioners, versus THE PHILIPPINE NATIONAL BANK (PNB) and the HEIRS OF ARTURO ARGUNA, Respondents. (G.R. No. 156403, March 21, 2005, 3rd Division) GARCIA, J.:
FACTS: On July 1, 1972, Melitona Pahamotang died. She was survived by her husband Agustin Pahamotang, and their eight (8) children, namely: Ana, Genoveva, Isabelita, Corazon, Susana, Concepcion and herein petitioners Josephine and Eleonor, all surnamed Pahamotang. On September 15, 1972, Agustin filed with the then Court of First Instance of Davao City a petition for issuance of letters administration over the estate of his deceased wife. The petition, docketed as Special Case No. 1792, was raffled to Branch VI of said court, hereinafter referred to as the intestate court. In his petition, Agustin identified petitioners Josephine and Eleonor as among the heirs of his deceased spouse. It appears that Agustin was appointed petitioners' judicial guardian in an earlier case - Special Civil Case No. 1785 – also of the CFI of Davao City, Branch VI. On December 7, 1972, the intestate court issued an order granting Agustin‘s petition.
The late Agustin then executed several mortgages and later sale of the properties with the PNB and Arguna respectively. The heirs later questioned the validity of the transactions prejudicial to them. The trial court declared the real estate mortgage and the sale void but both were valid with respect to the other parties. The decision was reversed by the Court of Appeals; to the appellate court, petitioners committed a fatal error of mounting a collateral attack on the foregoing orders instead of initiating a direct action to annul them.
ISSUE: Whether the Court of Appeals erred in reversing the decision of the trial court
HELD: In the present case, the appellate court erred in appreciating laches against petitioners. The element of delay in questioning the subject orders of the intestate court is sorely lacking. Petitioners were totally unaware of the plan of Agustin to mortgage and sell the estate properties. There is no indication that mortgagor PNB and vendee Arguna had notified petitioners of the contracts they had executed with Agustin. Although petitioners finally obtained knowledge of the subject petitions filed by their father, and eventually challenged the July 18, 1973, October 19, 1974, February 25, 1980 and January 7, 1981 orders of the intestate court, it is not clear from the challenged decision of the appellate court when they (petitioners) actually learned of the existence of said orders of the intestate court. Absent any indication of the point in time when petitioners acquired knowledge of those orders, their alleged delay in impugning the validity thereof certainly cannot be established. And the Court of Appeals cannot simply impute laches against them. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
565
Shopper's Paradise v. Roque SHOPPER‟S PARADISE REALTY & DEVELOPMENT CORPORATION, Petitioner, versus EFREN P. ROQUE, Respondent. (G.R. No. 148775, January 13, 2004, 3rd Division) VITUG, J.: FACTS: On 23 December 1993, petitioner Shopper's Paradise Realty & Development Corporation, represented its president, Veredigno Atienza, entered into a twenty-five year lease with Dr. Felipe C. Roque, now deceased, over a parcel of land, Petitioner issued to Dr. Roque a check for P250,000.00 by way of "reservation payment." Simultaneously, petitioner and Dr. Roque likewise entered into a memorandum of agreement for the construction, development and operation of a commercial building complex on the property. Conformably with the agreement, petitioner issued a check for another P250,000.00 "downpayment" to Dr. Roque. The annotations, however, were never made because of the untimely demise of Dr. Felipe C. Roque. The death of Dr. Roque on 10 February 1994 constrained petitioner to deal with respondent Efren P. Roque, one of the surviving children of the late Dr. Roque, but the negotiations broke down due to some disagreements. In a letter, dated 3 November 1994, respondent advised petitioner "to desist from any attempt to enforce the aforementioned contract of lease and memorandum of agreement". On 15 February 1995, respondent filed a case for annulment of the contract of lease and the memorandum of agreement, with a prayer for the issuance of a preliminary injunction. Efren P. Roque alleged that he had long been the absolute owner of the subject property by virtue of a deed of donation inter vivos executed in his favor by his parents, Dr. Felipe Roque and Elisa Roque, on 26 December 1978, and that the late Dr. Felipe Roque had no authority to enter into the assailed agreements with petitioner. The donation was made in a public instrument duly acknowledged by the donor-spouses before a notary public and duly accepted on the same day by respondent before the notary public in the same instrument of donation. The title to the property, however, remained in the name of Dr. Felipe C. Roque, and it was only transferred to and in the name of respondent sixteen years later, or on 11 May 1994, while he resided in the United States of America, delegated to his father the mere administration of the property. Respondent came to know of the assailed contracts with petitioner only after retiring to the Philippines upon the death of his father. On 9 August 1996, the trial court dismissed the complaint of respondent; it explained: Ordinarily, a deed of donation need not be registered in order to be valid between the parties. Registration, however, is important in binding third persons. Thus, when Felipe Roque entered into a lease contract with defendant corporation, plaintiff Efren Roque (could) no longer assert the unregistered deed of donation and say that his father, Felipe, was no longer the owner of the subject property at the time the lease on the subject property was agreed upon. "The registration of the Deed of Donation after the execution of the lease contract did not affect the latter unless he had knowledge thereof at the time of the registration which plaintiff had not been able to establish. Plaintiff knew very well of the existence of the lease. He, in fact, met with the officers of the defendant corporation at least once before he caused the registration of the deed of donation in his favor and although the lease itself was not registered, it Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
566
remains valid considering that no third person is involved. Plaintiff cannot be the third person because he is the successor-in-interest of his father, Felipe Roque, the lessor, and it is a rule that contracts take effect not only between the parties themselves but also between their assigns and heirs (Article 1311, Civil Code) and therefore, the lease contract together with the memorandum of agreement would be conclusive on plaintiff Efren Roque. He is bound by the contract even if he did not participate therein. Moreover, the agreements have been perfected and partially executed by the receipt of his father of the downpayment and deposit totaling to P500,000.00." The trial court ordered respondent to surrender TCT No. 109754 to the Register of Deeds of Quezon City for the annotation of the questioned Contract of Lease and Memorandum of Agreement. On appeal, the Court of Appeals reversed the decision of the trial court and held to be invalid the Contract of Lease and Memorandum of Agreement. While it shared the view expressed by the trial court that a deed of donation would have to be registered in order to bind third persons, the appellate court, however, concluded that petitioner was not a lessee in good faith having had prior knowledge of the donation in favor of respondent, and that such actual knowledge had the effect of registration insofar as petitioner was concerned. The appellate court based its findings largely on the testimony of Veredigno Atienza during cross-examination. ISSUE: Whether or not the respondent is barred by laches and estoppel from denying the contracts. HELD: The Court cannot accept petitioner's argument that respondent is guilty of laches. Laches, in its real sense, is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned or declined to assert it. Respondent learned of the contracts only in February 1994 after the death of his father, and in the same year, during November, he assailed the validity of the agreements. Hardly, could respondent then be said to have neglected to assert his case for an unreasonable length of time. Neither is respondent estopped from repudiating the contracts. The essential elements of estoppel in pais, in relation to the party sought to be estopped, are: 1) a clear conduct amounting to false representation or concealment of material facts or, at least, calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; 2) an intent or, at least, an expectation, that this conduct shall influence, or be acted upon by, the other party; and 3) the knowledge, actual or constructive, by him of the real facts. With respect to the party claiming the estoppel, the conditions he must satisfy are: 1) lack of knowledge or of the means of knowledge of the truth as to the facts in question; 2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and 3) action or inaction based thereon of such character as to change his position or status calculated to cause him injury or prejudice. 12 It has not been shown that respondent intended to conceal the actual facts concerning the property; more importantly, petitioner has been shown not to be totally unaware of the real ownership of the subject property. Altogether, there is no cogent reason to reverse the Court of Appeals in its assailed decision. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
567
Meatmasters v. Lelis Integrated MEATMASTERS INTERNATIONAL CORPORATION, Petitioner, versus LELIS INTEGRATED DEVELOPMENT CORPORATION, Respondent. (G.R. No. 163022. February 28, 2005, 1st Division) YNARES-SANTIAGO, J.:
FACTS: On November 11, 1993, petitioner Meatmasters International Corporation engaged the services of respondent Lelis Integrated Development Corporation to undertake the construction of a slaughterhouse and meat cutting and packing plant. The Construction Agreement provided that the construction of petitioner‘s slaughterhouse should be completed by March 10, 1994. Respondent failed to finish the construction of the said facility within the stipulated period, hence, petitioner filed a complaint for rescission of contract and damages on August 9, 1996 before the Regional Trial Court. On November 23, 1998, the trial court rendered decision RESCINDING the Construction Agreement between plaintiff Meatmaster Int‘l. Corp. and defendant Lelis Integrated Dev‘t. Corp. with both parties shouldering their own respective damage. A copy of the decision was received by the respondent on December 9, 1998. A motion for reconsideration was filed by respondent on December 22, 1998, but the same was denied. A copy of the resolution denying the motion for reconsideration was received on March 25, 1999. Respondent filed its notice of appeal on March 29, 1999. Initially, the trial court dismissed the appeal for failure of the respondent to pay the requisite docket fees within the reglementary period. Upon motion by the respondent however, the trial court reconsidered and gave due course to the notice of appeal because respondent paid the docket fees. In a motion to dismiss filed before the appellate court, the petitioner alleged that respondent‘s appeal suffers from jurisdictional infirmity because of late payment of docket fees. CA set aside the decision of the trial court and directed petitioner to pay respondent the amount of P1,863,081.53. Petitioner‘s motion for reconsideration was denied Hence, the instant petition. ISSUE: Whether or not the Court of Appeals erred in entertaining the appeal of respondent despite the finality of the trial court‘s decision. HELD: Yes. It is well-established that the payment of docket fees within the prescribed period is mandatory for the perfection of an appeal. This is so because a court acquires jurisdiction over the subject matter of the action only upon the payment of the correct amount of docket fees regardless of the actual date of filing of the case in court. The payment of the full amount of the docket fee is a sine qua non requirement for the perfection of an appeal. The court acquires jurisdiction over the case only upon the payment of the prescribed docket fees.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
568
In the case at bar, the respondent seasonably filed the notice of appeal but it paid the docket fees one (1) month after the lapse of the appeal period. As admitted by the respondent, the last day for filing the notice of appeal was on March 29, 1999, but it paid the docket fees only on April 30, 1999 because of oversight. Obviously, at the time the said docket fees were paid, the decision appealed from has long attained finality and no longer appealable. Respondent‘s contention that the petitioner is now estopped from raising the issue of late payment of the docket fee because of his failure to assail promptly the trial court‘s order approving the notice of appeal and accepting the appeal fee, is untenable. Estoppel by laches arises from the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned or declined to assert it. In the case at bar, petitioner raised at the first instance the non-payment of the docket fee in its motion for reconsideration before the trial court. Petitioner reiterated its objection in the motion to dismiss before the appellate court and finally, in the instant petition. Plainly, petitioner cannot be faulted for being remiss in asserting its rights considering that it vigorously registered a persistent and consistent objection to the Court of Appeals‘ assumption of jurisdiction at all stages of the proceedings.
Larena v. Mapili
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
569
AQUILA LARENA joined by her husband, CANDIDO MERCADERA, Petitioners, versus FRUCTUOSA MAPILI, JOSE MAPILI and ROSELA VENELES, Respondents. (G.R. No. 146341. August 7, 2003, 3rd Division) PANGANIBAN, J.:
FACTS: Hipolito Mapili during his lifetime owned a parcel of unregistered land declared for taxation purposes in his name. The property had descended by succession from Hipolito to his only son Magno and on to the latter‘s own widow and children. These heirs, the herein respondents, took possession of the property up to the outbreak of World War II when they evacuated to the hinterlands. On the other hand, petitioner Aquilina Larena took possession of the property in the1970‘s alleging that she had purchased it from her aunt (Filomena Larena) on February 17, 1968. Filomena Larena in turn claimed to have bought it from Hipolito on October 28, 1949, as evidence by the Affidavit of Transfer of Real Property executed on the same date. The Regional Trial Court, however, declared the said affidavit as spurious because Hipolito was already dead when the alleged transfer was made to Filomena Larena. On appeal, the Court of Appeals declared that respondents had never lost their right to the land in question as they were the heirs to whom the property had descended upon the death of the original claimant and possessor. ISSUE: Whether or not Filomena Larena acquired the subject property by means of sale, prescription, and/or laches. HELD: No, Filomena did not acquire said property by means of sale, prescription and/or laches. First, the tax declarations are not a conclusive evidence of ownership, but a proof that the holder has a claim of title over the property. It is good indicia of possession in the concept of owner. It may strengthen Aquilina‘s bona fide claim of acquisition of ownership. However, petitioners failed to present the evidence needed to tack the date of possession on the property in question. Second, acquisitive prescription is a mode of acquiring ownership by a possessor through the requisite lapse of time. Since the claims of purchase were unsubstantiated, petitioners‘ acts of possessory character have been merely tolerated by the owner. Hence, it did not constitute possession. Moreover, there is lack of just title on the part of Aquilina and therefore, ordinary acquisitive prescription of ten (10) years as provided under Article 1134 of the Civil Code cannot be applied. Under Article 1137 of the Civil Code, the lapse of time required for extra-ordinary acquisitive prescription is thirty (30) years, and records show that the lapse of time was only twenty-seven (27) years—a period that was short of three (3) years, when the complaint was filed. Finally, laches is a failure or neglect for an unreasonable and unexplained length of time to do that which could or should have been done earlier through the exercise of due diligence. The filing by respondents of the complaint in 1977 completely negates the decision that the latter were negligent in asserting their claim. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
570
Santos v. Santos LEOUEL SANTOS, Petitioner, versus THE HONORABLE COURT OF APPEALS AND JULIA ROSARIO BEDIASANTOS, Respondents. (G.R. No. 112019, January 4, 1995, 1st Division) VITUG, J.:
FACTS: Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of private respondents Calixto, Alberto, Antonio, all surnamed Santos and Rosa SantosCarreon. The spouses Jesus and Rosalia were the parents of the respondents and the husband of the petitioner. The spouses owned a parcel of registered land with a fourdoor apartment administered by Rosalia who rented them out. On January 19, 1959, the spouses executed a deed of sale of the properties in favor of their children Salvador and Rosa. Rosa in turn sold her share to Salvador on November 20, 1973, which resulted in the issuance of new TCT. Despite the transfer of the property to Salvador, Rosalia continued to lease and receive rentals from the apartment units. On January 9, 1985, Salvador died, followed by Rosalia who died the following month. Shortly after, petitioner Zenaida, claiming to be Salvador‘s heir, demanded the rent from Antonio Hombrebueno, a tenant of Rosalia. When the latter refused to pay, Zenaida filed an ejectment suit against him with the Metropolitan Trial Court of Manila, which eventually decided in Zenaida‘s favor. On January 5, 1989, private respondent instituted an action for reconveyance of property with preliminary injunction against petitioner in the Regional Trial Court of Manila, where they alleged that the two deeds of sale were simulated for lack of consideration. The petitioner on the other hand denied the material allegations in the complaint and that she further alleged that the respondents‘ right to reconveyance was already barred by prescription and laches considering the fact that from the date of sale from Rosa to Salvador up to his death, more or less twelve (12) years had lapsed, and from his death up to the filing of the case for reconveyance, four (4) years has elapsed. In other words, it took respondents about sixteen (16) years to file the case. Moreover, petitioner argues that an action to annul a contract for lack of consideration prescribes in ten (10) years and even assuming that the cause of action has not prescribed, respondents are guilty of laches for their inaction for a long period of time. The trial court decided in favor of private respondents in as much as the deeds of sale were fictitious, the action to assail the same does not prescribe.Upon appeal, the Court of Appeals affirmed the trial court‘s decision. It held that the subject deeds of sale did not confer upon Salvador the ownership over the subject property, because even after the sale, the original vendors remained in dominion, control, and possession thereof. ISSUE: Whether or not the cause of action of the respondents had prescribed and/or barred by laches. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
571
HELD: No, the cause of action by the respondents had not prescribed nor is it barred by laches. First, the right to file an action for the reconveyance of the subject property to the estate of Rosalia has not prescribed since deeds of sale were simulated and fictitious. The complaint amounts to a declaration of nullity of a void contract, which is imprescriptible. Hence, respondents‘ cause of action has not prescribed. Second, neither is their action barred by laches. The elements of laches are: 1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which the complainant seeks a remedy; 2) delay in asserting the complainant‘s rights, the complainant having knowledge or notice of the defendant‘s conduct as having been afforded an opportunity to institute a suit; 3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right in which he bases his suit; and 4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred. These elements must all be proved positively. The lapse of four (4) years is not an unreasonable delay sufficient to bar respondent‘s action. Moreover, the fourth (4 th) element is lacking in this case. The concept of laches is not concerned with the lapse of time but only with the effect of unreasonable lapse. The alleged sixteen (16) years of respondents‘ inaction has no adverse effect on the petitioner to make respondents guilty of laches.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
572
Villanueva- Mijares v. CA JOSEFINA VILLANUEVA-MIJARES, WALDETRUDES VILLANUEVA-NOLASCO, GODOFREDO VILLANUEVA, EDUARDO VILLANUEVA, GERMELINA VILLANUEVAFULGENCIO, MILAGROS VILLANUEVA-ARQUISOLA, and CONCEPCION MACAHILAS VDA. DE VILLANUEVA,Petitioners, versus THE COURT OF APPEALS, PROCERFINA VILLANUEVA, PROSPERIDAD VILLANUEVA, RAMON VILLANUEVA, ROSA VILLANUEVA, VIRGINIA NEPOMUCENO, PAULA NEPOMUCENO, TARCELA NEPOMUCENO, MERCEDES VILLANUEVA, ADELAIDA VILLANUEVA, APARICION VILLANUEVA, JOSEFINA VILLANUEVA, BETTY VILLANUEVA, BOBBY VILLANUEVA, MERLINDA VILLANUEVA, MORBINA VILLANUEVA, FLORITA VILLANUEVA, DIONISIO VILLANUEVA, and EDITA VILLANUEVA, Respondents. (G.R. No. 108921. April 12, 2000, 2nd Division) QUISUMBING, J.:
FACTS: Felipe Villanueva left a 15,336-square-meter parcel of land in Kalibo, Capiz to his eight children: Simplicio, Benito, Leon, Eustaquio, Camila, Fausta and Pedro. In 1952, Pedro declared under his name 1/6 portion of the property (1,905 sq. m.). He held the remaining properties in trust for his co-heirs who demanded the subdivision of the property but to no avail. After Leon‘s death in 1972, private respondents discovered that the shares of Simplicio, Nicolasa, Fausta and Maria Baltazar had been purchased by Leon through a deed of sale dated August 25, 1946 but registered only in 1971. In July 1970, Leon also sold and partitioned the property in favor of petitioners, his children, who thereafter secured separate and independent titles over their respective pro- indiviso shares. Private respondents, who are also descendants of Felipe, filed an action for partition with annulment of documents and/or reconveyance and damages against petitioners. They contended that Leon fraudulently obtained the sale in his favor through machinations and false pretenses. The RTC declared that private respondents‘ action had been barred by res judicata and that petitioners are the ―legal owners of the property in question in accordance with the individual titles issued to them. ISSUE: Whether or not laches apply against the minor‘s property that was held in trust. HELD: No. At the time of the signing of the Deed of Sale of August 26,1948, private respondents Procerfina, Prosperedad, Ramon and Rosa were minors. They could not be faulted for their failure to file a case to recover their inheritance from their uncle Leon, since up to the age of majority, they believed and considered Leon their co-heir administrator. It was only in 1975, not in 1948, that they became aware of the actionable betrayal by their uncle. Upon learning of their uncle‘s actions, they filed for recovery. Hence, the doctrine of stale demands formulated in Tijam cannot be applied here. They did not sleep on their rights, contrary to petitioner‘s assertion. Furthermore, when Felipe Villanueva died, an implied trust was created by operation of law between Felipe‘s children and Leon, their uncle, as far as the 1/6 share of Felipe. Leon‘s fraudulent titling of Felipe‘s 1/6 share was a betrayal of that implied trust. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
573
Garcia v. Villar PABLO P. GARCIA, Petitioner, versus YOLANDA VALDEZ VILLAR, Respondent. (G.R. No. 158891, June 27, 2012, 1st Division) LEONARDO-DE CASTRO, J.: FACTS: Lourdes V. Galas (Galas) was the original owner of a piece of property (subject property) located at Malindang St., Quezon City. On July 6, 1993, Galas, with her daughter, Ophelia G. Pingol (Pingol), as co-maker, mortgaged the subject property to Yolanda Valdez Villar (Villar) as security for a loan.On October 10, 1994, Galas, again with Pingol as her co-maker, mortgaged the same subject property to Pablo P. Garcia (Garcia) to secure her loan of One Million Eight Hundred Thousand Pesos (P1,800,000.00). On November 21, 1996, Galas sold the subject property to Villar. On October 27, 1999, Garcia filed a Petition for Mandamus with Damages against Villar. Garcia subsequently amended his petition to a Complaint for Foreclosure of Real Estate Mortgage with Damages. Garcia alleged that when Villar purchased the subject property, she acted in bad faith and with malice as she knowingly and willfully disregarded the provisions on laws on judicial and extrajudicial foreclosure of mortgaged property. Garcia further claimed that when Villar purchased the subject property, Galas was relieved of her contractual obligation and the characters of creditor and debtor were merged in the person of Villar. Therefore, Garcia argued, he, as the second mortgagee, was subrogated to Villar‘s original status as first mortgagee, which is the creditor with the right to foreclose. Garcia further asserted that he had demanded payment from Villar, whose refusal compelled him to incur expenses in filing an action in court. ISSUE: Whether or not Garcia‘s demand upon Villar is proper to either pay Galas‘s debt of P1,800,000.00, or to judicially foreclose the subject property to satisfy the aforesaid debt HELD: Villar‘s purchase of the subject property did not violate the prohibition on pactum commissorium. The power of attorney provision above did not provide that the ownership over the subject property would automatically pass to Villar upon Galas‘s failure to pay the loan on time. What it granted was the mere appointment of Villar as attorney-in-fact, with authority to sell or otherwise dispose of the subject property, and to apply the proceeds to the payment of the loan.This provision is customary in mortgage contracts, and is in conformity with Article 2087 of the Civil Code, which reads:Art. 2087. It is also of the essence of these contracts that when the principal obligation becomes due, the things in which the pledge or mortgage consists may be alienated for the payment to the creditor.Galas‘s decision to eventually sell the subject property to Villar for an additional P1,500,000.00 was well within the scope of her rights as the owner of the subject property. The subject property was transferred to Villar by virtue of another and separate contract, which is the Deed of Sale. Garcia never alleged that the transfer of the subject property to Villar was automatic upon Galas‘s failure to discharge her debt, or that the sale was simulated to cover up such automatic transfer. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
574
Sps. Edralin v. Phil. Veterans Bank SPOUSES FERNANDO AND ANGELINA EDRALIN, PETITIONERS, versus PHILIPPINE VETERANS BANK, RESPONDENT. (G.R. No. 168523, March 09, 2011, 1st Division) DEL CASTILLO, J.:
FACTS: Respondent Philippine Veterans Bank is a commercial banking institution created under Republic Act (RA) No. 3518, as amended by RA No. 7169. On February 5, 1976, Veterans Bank granted petitioner spouses Fernando and Angelina Edralin a loan in the amount of Two Hundred Seventy Thousand Pesos (P270,000.00). As security thereof, petitioners executed a Real Estate Mortgage in favor of Veterans Bank over a real property situated in the Municipality of Parañaque and registered in the name of petitioner Fernando Edralin. The mortgaged property is more particularly described in Transfer Certificate of Title (TCT) No. 204889. The REM was registered with the Registry of Deeds of the Province of Rizal. The REM and its subsequent amendments were all duly annotated at the back of TCT No. 204889. The Edralins failed to pay their obligation to Veterans Bank. Thus, on June 28, 1983, Veterans Bank filed a Petition for Extrajudicial Foreclosure of the REM with the Office of the Clerk of Court and Ex-Officio Sheriff of Rizal. In due course it was foreclosed and a sale was held in which the Ex-Officio Sheriff of Rizal sold the mortgaged property at public auction. Veterans Bank emerged as the highest bidder at the said foreclosure sale and was issued the corresponding Certificate of Sale. The said Certificate of Sale was registered with the Registry of Deeds of the Province of Rizal and annotated at the back of TCT No. 204889 under Entry No. 83-62953/T-No. 43153-A. Upon the Edralins‘ failure to redeem the property during the one-year period provided under Act No. 3135, Veterans Bank acquired absolute ownership of the subject property. Consequently, Veterans Bank caused the consolidation of ownership of the subject property in its name on January 19, 1994. Subsequently the Register of Deeds of Parañaque, Metro Manila cancelled TCT No. 204889 under the name of Fernando Edralin and replaced it with a new transfer certificate of title, TCT No. 78332, in the name of Veterans Bank. Despite the foregoing, the Edralins failed to vacate and surrender possession of the subject property to Veterans Bank. Thus, on May 24, 1996, Veterans Bank filed an Ex-Parte Petition for the Issuance of a Writ of Possession, docketed as Land Registration Case No. 06-060 before Branch 274 of the Regional Trial Court (RTC) of Parañaque City. The same, however, was dismissed for Veterans Bank‘s failure to prosecute. Veterans Bank again filed an Ex-Parte Petition for Issuance of Writ of Possession, this time docketed as Land Registration Case No. 03-0121, before the RTC of Parañaque City. Veterans Bank divulged in its Certification against Forum-Shopping that the earlier case, LRC No. 96-060, involving the same subject matter and parties, was dismissed. The Edralins moved to dismiss the petition on the ground that the dismissal of LRC No. 96-060 constituted res judicata. The trial court denied the motion to dismiss explaining that the ground of failure to present evidence is not a determination of the merits of the case hence does not constitute res judicata on the petition for issuance of a writ of possession. The appellate court ruled in favor of Veterans Bank hence the petition. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
575
ISSUE: Whether the consolidation of ownership of the extrajudicially foreclosed property through a Deed of Sale is in accordance with law.
HELD: Petitioners assail the CA's HELD that the issuance of a writ of possession does not prescribe.[48] They maintain that Articles 1139, 1149, and 1150 of the Civil Code regarding prescriptive periods cover all kinds of action, which necessarily include the issuance of a writ of possession. Petitioners posit that, for purposes of the latter, it is the five-year prescriptive period provided in Article 1149 of the Civil Code which applies because Act No. 3135 itself did not provide for its prescriptive period. Thus, Veterans Bank had only five years from September 12, 1983, the date when the Certificate of Sale was issued in its favor, to move for the issuance of a writ of possession. Respondent argues that jurisprudence has consistently held that a registered owner of the land, such as the buyer in an auction sale, is entitled to a writ of possession at any time after the consolidation of ownership.
The Court could not accept petitioners' contention. We have held before that the purchaser's right "to request for the issuance of the writ of possession of the land never prescribes. "The right to possess a property merely follows the right of ownership," and it would be illogical to hold that a person having ownership of a parcel of land is barred from seeking possession thereof. Moreover, the provisions cited by petitioners refer to prescription of actions. An action is "defined as an ordinary suit in a court of justice, by which one party prosecutes another for the enforcement or protection of a right, or the prevention or redress of a wrong." On the other hand "a petition for the issuance of the writ, under Section 7 of Act No. 3135, as amended, is not an ordinary action filed in court, by which one party `sues another for the enforcement or protection of a right, or prevention or redress of a wrong.' It is in the nature of an ex parte motion [in] which the court hears only one side. It is taken or granted at the instance and for the benefit of one party, and without notice to or consent by any party adversely affected. Accordingly, upon the filing of a proper motion by the purchaser in a foreclosure sale, and the approval of the corresponding bond, the writ of possession issues as a matter of course and the trial court has no discretion on this matter."Hence the Petition was denied for lack of merit. The CA Decision dated June 10, 2005 in CA-G.R. SP No. 89248 was affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
576
University Physicians‟ Services v. Marian Clinics University Physicians‟ Services, Inc., Petitioner, versus Marian Clinics and Dr. Mabanta, Respondents. (G.R. No. 152303, September 1, 2010, 1st Division) LEONARDO-DE CASTRO, J.:
FACTS: On May 31, 1973, Marian Clinics, Inc. (MCI) and University Physicians‘ Services, Incorporated (UPSI) entered into a Lease Agreement whereby the former leased to the latter the Marian General Hospital (MGH) and four schools for a period of ten (10) years, from June 1, 1973 to May 31, 1983. The land, buildings, facilities, fixtures and equipment appurtenant thereto, including the Soledad Building, were included in the lease, for which a monthly rental of P70,000 was agreed upon.
On October 7, 1975, UPSI filed a complaint for specific performance against MCI, alleging that (1) MCI failed to deliver Certificates of Occupancy on certain buildings, and (2) there were some defective electrical installations that caused the issuance of a Condemned Installation Notice by the Office of the City Electrician of the City of Manila. UPSI prayed for the delivery of the Certificates of Occupancy of the buildings leased, for the correction of the defects in the electrical installations thereon, and damages. The City Court rendered its Decision in Civil Case No. 006665-CV, dismissing the unlawful detainer case on the finding that (1) UPSI‘s suspension of rental payments was justified; and (2) there was no ground to cause the rescission of the lease and warrant the ejectment of UPSI
On November 29, 1990, UPSI appealed the above Order to the Court of Appeals, claiming that said Order varies the term of the IAC judgment, arguing that said judgment did not order the replacement of the leased properties lost or deteriorated and/or to pay their value if replacement cannot be made. UPSI further claims that the Court erred in giving MCI the discretion to determine the circumstances when replacement or payment of value shall be made.
ISSUE: Whether or not Article 1667 of the Civil Code is applicable. HELD: UPSI further argues that Article 1667 of the Civil Code is not applicable considering that the inventories of the leased properties which it was obligated to return was not yet established. UPSI also asserts that the order for the replacement of the subject fixtures had been rendered moot as it had already been extinguished by thedacion en pago dated September 1, 1980 with the DBP, by the deed of conditional Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
577
sale executed by the DBP in favor of UPSI, and by UPSI‘s payment in full. As regards Article 1667 of the Civil Code, we hold that the applicability thereof, or of the provision of the lease contract holding UPSI liable in case of loss or deterioration of the subject properties, are not dependent on the presence, at the moment, of inventories. The execution court may conduct hearings to determine the existence of such an inventory and, if found that such is unavailable, further hearings may be conducted to reconstruct the same and determine the value of the properties that should be returned or replaced, if necessary.
Martin, et al. v. DBS Bank Philippines, Inc., et al.,
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
578
Felicidad T. Martin, Melissa M. Isidro, Petitioners, versus DBS Bank Philippines Inc., Respondent (G.R. No. 174632, June 16, 2010, 2nd Division) ABAD, J.:
FACTS: Felicidad T. Martin, Melissa M. Isidro, Grace M. David, Caroline M. Garcia, Victoria M. Roldan, and Benjamin T. Martin, Jr., as lessors, entered into a lease contract with the DBS Bank Philippines, Inc., covering a commercial warehouse and lots that DBS was to use for office, warehouse, and parking yard for repossessed vehicles. The lease was for five years, from March 1, 1997 to March 1, 2002, at a monthly rent of P300,000.00 for the first year, P330,000.00 for the second year, P363,000.00 for the third year, P399,300.00 for the fourth year, and P439,230.00 for the final year, all net of withholding taxes. DBS paid a deposit of P1,200,000.00 and advance rentals of P600,000.00. On May 25 and August 13, 1997 heavy rains flooded the leased property and submerged into water the DBS offices there along with its 326 repossessed vehicles. As a result, on February 11, 1998 DBS wrote the Martins demanding that they take appropriate steps to make the leased premises suitable as a parking yard for its vehicles. DBS suggested the improvement of the drainage system or the raising of the property‘s ground level. In response, the Martins filled the property‘s grounds with soil and rocks. But DBS lamented that the property remained unsuitable for its use since the Martins did not level the grounds. Worse, portions of the perimeter fence collapsed because of the excessive amount of soil and rock that were haphazardly dumped on it. In June 1998, DBS vacated the property but continued paying the monthly rents. On September 11, 1998, however, it made a final demand on the Martins to restore the leased premises to tenantable condition on or before September 30, 1998, otherwise, it would rescind the lease contract. On September 24, 1998 the Martins contracted the services of Altitude Systems & Technologies Co. for the reconstruction of the perimeter fence on the property. On October 13, 1998 DBS demanded the rescission of the lease contract and the return of its deposit. At that point, DBS had already paid the monthly rents from March 1997 to September 1998. The Martins refused, however, to comply with DBS‘ demand. On July 7, 1999 DBS filed a complaint against the Martins for rescission of the contract of lease with damages before the Regional Trial Court of Makati City, Branch 141, in Civil Case 99-1266. Claiming that the leased premises had become untenantable, DBS demanded rescission of the lease contract as well as the return of its deposit of P1,200,000.00. The Makati City RTC rendered a decision, dismissing the complaint against the Martins. The trial court found that, although the floods submerged DBS‘ vehicles, the leased premises remained tenantable and undamaged. Moreover, the Martins had begun the repairs that DBS requested but were not given sufficient time to complete the same. It held that DBS unjustifiably abandoned the leased premises and breached the lease contract. Thus, the trial court ordered its deposit of P1,200,000.00 deducted from the unpaid rents due the Martins and ordered DBS to pay them the remaining P15,198,360.00 in unpaid rents. On appeal to the Court of Appeals, the court rendered judgment reversing and setting aside the RTC decision. The CA found that floods rendered the leased premises untenantable and that the RTC should have ordered the rescission of the lease Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
579
contract especially since the contract provided for such remedy. The CA ordered the Martins to apply the deposit of P1,200,000.00 to the rents due up to July 7, 1999 when DBS filed the complaint and exercised its option to rescind the lease. The CA ordered the Martins to return the remaining balance of the deposit to DBS. With the denial of their separate motions for reconsideration DBS and the Martins filed their respective petitions for review before this Court in G.R. 174632 and 174804. The Court eventually consolidated the two cases.
ISSUE: Whether or not the CA erred in holding that DBS is entitled to the rescission of the lease contract only from July 7, 1999 when it filed its action for rescission, entitling the Martins to collect rents until that time.
HELD: Unless the terms of a contract are against the law, morals, good customs, and public policy, such contract is law between the parties and its terms bind them. In Felsan Realty & Development Corporation v. Commonwealth of Australia,13 the Court regarded as valid and binding a provision in the lease contract that allowed the lessee to pre-terminate the same when fire damaged the leased building, rendering it uninhabitable or unsuitable for living. Here, paragraph VIII14 of the lease contract between DBS and the Martins permitted rescission by either party should the leased property become untenantable because of natural causes. Thus In case of damage to the leased premises or any portion thereof by reason of fault or negligence attributable to the lessee, its agents, employees, customers, or guests, the lessee shall be responsible for undertaking such repair or reconstruction. In case of damage due to fire, earthquake, lightning, typhoon, flood, or other natural causes, without fault or negligence attributable to the lessee, its agents, employees, customers or guests, the lessor shall be responsible for undertaking such repair or reconstruction. In the latter case, if the leased premises become untenantable, either party may demand for the rescission of this contract and in such case, the deposit referred to in paragraph III shall be returned to the lessee immediately. The Martins claim that DBS cannot invoke the above since they undertook the repair and reconstruction of the leased premises, incurring P1.6 million in expenses. The Martins point out that the option to rescind was available only if they failed to do the repair work and reconstruction. But, under their agreement, the remedy of rescission would become unavailable to DBS only if the Martins, as lessors, made the required repair and reconstruction after the damages by natural cause occurred, which meant putting the premises after the floods in such condition as would enable DBS to resume its use of the same for the purposes contemplated in the agreement, namely, as office, warehouse, and parking space for DBS‘ repossessed vehicles. Here, it is undisputed that the floods of May 25 and August 13, 1997 submerged the DBS offices and its 326 repossessed vehicles. The floods rendered the place unsuitable for its intended uses. And, while the Martins did some repairs, they did not restore the place to meet DBS‘ needs. The photographs16 taken of the place show that the Martins filled the grounds with soil and rocks to raise the elevation but did not level and compact the same so they could accommodate the repossessed vehicles. Moreover, the heaviness of the filling materials caused portions of the perimeter walls to collapse or lean dangerously.17 Indeed, the Office of the City Engineer advised DBS that unless those walls were immediately demolished or rehabilitated, they would endanger passersby Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
580
Undeniably, the DBS suffered considerable damages when flood waters deluged its offices and 326 repossessed vehicles. Notably, DBS vacated the leased premises in June of 1998, without rescinding the lease agreement, evidently to allow for unhindered repair of the grounds. In fact, DBS continued to pay the monthly rents until September 1998, showing how DBS leaned back to enable the Martins to finish the repair and rehabilitation of the place. 19 The Martins provided basis for rescission by DBS when they failed to do so. Hence the Court denied the petition and affirmed with mocifications the April 26, 2006 decision of the Court of Appeals in CA-G.R. CV 76210 in that Felicidad T. Martin, Melissa M. Isidro, Grace M. David, Caroline M. Garcia, Victoria M. Roldan, and Benjamin T. Martin, Jr. are ORDERED to return the full deposit of P1,200,000.00 to DBS Bank Philippines, Inc. (formerly known as Bank of Southeast Asia, now merged with and into BPI Family Bank) with interest of 12% per annum to be computed from the finality of this decision until the amount is fully paid.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
581
Heirs of Zabala, et al. v. CA HEIRS OF ALFREDO ZABALA, represented by MENEGILDA ZABALA, ROLANDO ZABALA, MANUEL ZABALA, MARILYN ZABALA, and ADELINA ZABALA, Petitioners, versus HON. COURT OF APPEALS, VICENTE T. MANUEL AND/OR HEIRS OF VICENTE T. MANUEL, Respondents. (G.R. No. 189602, May 6, 2010, 3rd Division) NACHURA, J.:
FACTS: On April 1, 2002, respondent Vicente T. Manuel filed a Complaint for ejectment with damages against Alfredo Zabala before the Municipal Trial Court in Cities of Balanga, Bataan. Respondent alleged that he was in actual and peaceful possession of a fishpond (Lot No. 1483) located in Ibayo, Balanga City. On October 15, 2001, Zabala allegedly entered the fishpond without authority, and dumped soil into the fishpond without an Environment Compliance Certificate. Zabala continued such action until the time of the filing of the Complaint, killing the crabs and the bangus that respondent was raising in the fishpond. Thus, respondent asked that Zabala be restrained from touching and destroying the fishpond; that Zabala be ejected therefrom permanently; and for actual and moral damages and attorney‘s fees. Zabala promptly moved for the dismissal of the Complaint for non-compliance with the requirement under the Local Government Code to bring the matter first to barangay conciliation before filing an action in court. Respondent subsequently filed a Motion for Judgment on the ground of petitioner‘s failure to file a responsive pleading or answer. The MTCC, in an Order dated May 27, 2003, granted Zabala‘s motion and dismissed the Complaint, holding that respondent indeed violated the requirement of barangay conciliation. Respondent then appealed the HELD to the Balanga, Bataan Regional Trial Court. In a decision dated March 30, 2004,[5] the RTC reversed the MTCC‘s May 27, 2003 Order and rendered judgment directing Zabala, his heirs or subalterns to immediately vacate Lot No. 1483 and restore respondent to his peaceful possession thereof. The RTC also directed Zabala to pay respondent actual damages, moral damages, and attorney‘s fees. The RTC found that Zabala did not, in fact, file an answer to the Complaint. Zabala then filed a Petition for Review before the Court of Appeal. The CA promulgated a Decision upholding the RTC‘s reversal of the MTCC‘s Order. The CA held that, based on the allegations in the Complaint, the requirement for prior conciliation proceedings under the Local Government Code was inapplicable to the suit before the MTCC, the action being one for ejectment and damages, with application for a writ of preliminary injunction, even without the use of those actual terms in the Complaint. However, the CA granted Zabala‘s prayer for the deletion of the awards for actual and moral damages, and for attorney‘s fees. Zabala filed a Motion for Reconsideration, which the CA denied. Zabala‘s heirs filed this Verified Petition for Certiorari. They prayed for the annulment of the CA‘s December 19, 2008 Decision and August 26, 2009 Resolution, and for the reinstatement of the MTCC‘s May 27, 2003 Order. In the alternative, they prayed that the Court remand the records to the MTCC, so that they could file their Answer, and that due proceedings be undertaken before judgment. In a Resolution dated November 18, 2009, respondents were required to file their Comment on the Petition. Subsequently a Compromise Agreement was entered into by the parties. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
582
ISSUE: Whether or not the case must prosper and continue considering the present circumstances
HELD : No. The Court ruled that Under Article 2028 of the Civil Code, a compromise agreement is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. Compromise is a form of amicable settlement that is not only allowed, but also encouraged in civil cases. Contracting parties may establish such stipulations, clauses, terms, and conditions as they deem convenient, provided that these are not contrary to law, morals, good customs, public order, or public policy. Thus, finding the above Compromise Agreement to have been validly executed and not contrary to law, morals, good customs, public order, or public policy, we approve the same. Thus the Compromise Agreement was and judgment is hereby rendered in accordance therewith. By virtue of such approval, this case was deemed terminated.
Duncan v. Glaxo
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
583
DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, Petitioners, versus GLAXO WELLCOME PHILIPPINES, INC.,Respondent. (G.R. No. 162994, September 17, 2004, 2nd Division) TINGA, J.:
FACTS: Tecson was hired by Glaxo as a medical representative on Oct. 24, 1995. Contract of employment signed by Tecson stipulates, among others, that he agrees to study and abide by the existing company rules; to disclose to management any existing future relationship by consanguinity or affinity with co-employees or employees with competing drug companies and should management find that such relationship poses a prossible conflict of interest, to resign from the company. Company's Code of Employee Conduct provides the same with stipulation that management may transfer the employee to another department in a noncounterchecking position or preparation for employment outside of the company after 6 months.
Tecson was initially assigned to market Glaxo's products in the Camarines SurCamarines Norte area and entered into a romantic relationship with Betsy, an employee of Astra, Glaxo's competition. Before getting married, Tecson's District Manager reminded him several times of the conflict of interest but marriage took place in Sept. 1998. In Jan. 1999, Tecson's superiors informed him of conflict of intrest. Tecson asked for time to comply with the condition (that either he or Betsy resign from their respective positions). Unable to comply with condition, Glaxo transferred Tecson to the Butuan-Surigao City-Agusan del Sur sales area. After his request against transfer was denied, Tecson brought the matter to Glaxo's Grievance Committee and while pending, he continued to act as medical representative in the Camarines SurCamarines Norte sales area. On Nov. 15, 2000, the National Conciliation and Mediation Board ruled that Glaxo's policy was valid...
ISSUE: Whether or not the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company is valid
HELD: Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies, and other confidential programs and information from competitors. The prohibition against pesonal or marital relationships with employees of competitor companies upon Glaxo's employees is reasonable under the circumstances because relationships of that nature might compromise the interests of the company. That Glaxo possesses the right to protect its economic interest cannot be denied. It is the settled principle that the commands of the equal protection clause are addressed only to the state or those acting under color of its authority. Corollarily, it has been held in a long array of US Supreme Court decisions that the equal protection clause erects to shield against merely privately conduct, however, discriminatory or wrongful. The company actually enforced the policy after repeated requests to the employee to comply with the policy. Indeed the application of the policy Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
584
was made in an impartial and even-handed manner, with due regard for the lot of the employee.
Star Paper v. Simbol
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
585
STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, Petitioners, versus RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents. (G.R. No. 164774, April 12, 2006, 2nd Division) PUNO, J.:
FACTS: Petitioner was the employer of the respondents. Under the policy of Star Paper the employees are:1. New applicants will not be allowed to be hired if in case he/she has a relative, up to the 3rd degree of relationship, already employed by the company.2. In case of two of our employees (singles, one male and another female) developed a friendly relationship during the course of their employment and then decided to get married, one of them should resign to preserve the policy stated above.
Respondents Comia and Simbol both got married to their fellow employees. Estrella on the other hand had a relationship with a co-employee resulting to her pregnancy on the belief that such was separated. The respondents allege that they were forced to resign as a result of the implementation of the said assailed company policy.
The Labor Arbiter and the NLRC ruled in favor of petitioner. The decision was appealed to the Court of Appeals which reversed the decision.
ISSUE: Whether the prohibition to marry in the contract of employment is valid.
HELD: It is significant to note that in the case at bar, respondents were hired after they were found fit for the job, but were asked to resign when they married a coemployee. Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its business operations. Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia, then a Production Helper in the Selecting Department, who married Howard Comia, then a helper in the cuttermachine. The policy is premised on the mere fear that employees married to each other will be less efficient. If we uphold the questioned rule without valid justification, the employer can create policies based on an unproven presumption of a perceived danger at the expense of an employee‘s right to security of tenure. Petitioners contend that their policy will apply only when one employee marries a co-employee, but they are free to marry persons other than co-employees. The questioned policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a legitimate business Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
586
concern in imposing the questioned policy cannot prejudice the employee‘s right to be free from arbitrary discrimination based upon stereotypes of married persons working together in one company. Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast and extensive that we cannot prudently draw inferences from the legislature‘s silence that married persons are not protected under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for failure of petitioners to present undisputed proof of a reasonable business necessity, we rule that the questioned policy is an invalid exercise of management prerogative. Corollary, the issue as to whether respondents Simbol and Comia resigned voluntarily has become moot and academic. In the case of Estrella, the petitioner failed to adduce proof to justify her dismissal. Hence, the Court ruled that it was illegal.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
587
Tiu v. Platinum Plans DAISY B. TIU, Petitioner, versus PLATINUM PLANS PHIL., INC., Respondent. (G.R. No. 163512, February 28, 2007, 2nd Division)
FACTS: Respondent Platinum Plans Philippines, Inc. is a domestic corporation engaged in the pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division Marketing Director. On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-President and Territorial Operations Head in charge of its Hong Kong and Asean operations. The parties executed a contract of employment valid for five years.On September 16, 1995, petitioner stopped reporting for work. In November 1995, she became the Vice-President for Sales of Professional Pension Plans, Inc., a corporation engaged also in the pre-need industry.
Consequently, respondent sued petitioner for damages before the RTC of Pasig City, Branch 261. Respondent alleged, among others, that petitioner‘s employment with Professional Pension Plans, Inc. violated the non-involvement clause in her contract of employment. In upholding the validity of the non-involvement clause, the trial court ruled that a contract in restraint of trade is valid provided that there is a limitation upon either time or place. In the case of the pre-need industry, the trial court found the two-year restriction to be valid and reasonable. On appeal, the Court of Appeals affirmed the trial court‘s HELD. It reasoned that petitioner entered into the contract on her own will and volition. Thus, she bound herself to fulfill not only what was expressly stipulated in the contract, but also all its consequences that were not against good faith, usage, and law. The appellate court also ruled that the stipulation prohibiting non-employment for two years was valid and enforceable considering the nature of respondent‘s business.
ISSUE: Whether the Court of Appeals erred in sustaining the validity of the noninvolvement clause
HELD: In this case, the non-involvement clause has a time limit: two years from the time petitioner‘s employment with respondent ends. It is also limited as to trade, since it only prohibits petitioner from engaging in any pre-need business akin to respondent‘s. More significantly, since petitioner was the Senior Assistant VicePresident and Territorial Operations Head in charge of respondent‘s Hongkong and Asean operations, she had been privy to confidential and highly sensitive marketing strategies of respondent‘s business. To allow her to engage in a rival business soon after she leaves would make respondent‘s trade secrets vulnerable especially in a highly competitive marketing environment. In sum, The Court finds the noninvolvement clause not contrary to public welfare and not greater than is necessary to afford a fair and reasonable protection to respondent. Hence the restraint is valid and such stipulation prevails. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
588
Avon Cosmetics v. Luna AVON COSMETICS, INCORPORATED and JOSE MARIE FRANCO, Petitioners, versus LETICIA H. LUNA, Respondent. (G.R. No. 153674, December 20, 2006, 1st Division) CHICO-NAZARIO, J.:
FACTS: The present petition stemmed from a complaint[3] dated 1 December 1988, filed by herein respondent Luna alleging, inter alia¸ that she began working for Beautifont, Inc. in 1972, first as a franchise dealer and then a year later, as a Supervisor. Sometime in 1978, Avon Cosmetics, Inc. (Avon), herein petitioner, acquired and took over the management and operations of Beautifont, Inc. Nonetheless, respondent Luna continued working for said successor company. Aside from her work as a supervisor, respondent Luna also acted as a make-up artist of petitioner Avon‘s Theatrical Promotion‘s Group, for which she received a per diem for each theatrical performance. The contract was that:The Company agrees:1) To allow the Supervisor to purchase at wholesale the products of the Company.The Supervisor agrees:1) To purchase products from the Company exclusively for resale and to be responsible for obtaining all permits and licenses required to sell the products on retail. The Company and the Supervisor mutually agree:1) That this agreement in no way makes the Supervisor an employee or agent of the Company, therefore, the Supervisor has no authority to bind the Company in any contracts with other parties. 2) That the Supervisor is an independent retailer/dealer insofar as the Company is concerned, and shall have the sole discretion to determine where and how products purchased from the Company will be sold. However, the Supervisor shall not sell such products to stores, supermarkets or to any entity or person who sells things at a fixed place of business. 3) That this agreement supersedes any agreement/s between the Company and the Supervisor. 4) That the Supervisor shall sell or offer to sell, display or promote only and exclusively products sold by the Company. 5) Either party may terminate this agreement at will, with or without cause, at any time upon notice to the other.
Later, respondent Luna entered into the sales force of Sandre Philippines which caused her termination for the alleged violation of the terms of the contract. The trial court ruled in favor of Luna that the contract was contrary to public policy thus the dismissal was not proper. The Court of Appeals affirmed the decision, hence this petition.
ISSUE: Whether the Court of Appeals erred in HELD that the Supervisor‘s Agreement was invalid for being contrary to public policy.
Whether there was subversion of the autonomy of contracts by the lower courts.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
589
HELD: Agreements in violation of orden público must be considered as those which conflict with law, whether properly, strictly and wholly a public law (derecho) or whether a law of the person, but law which in certain respects affects the interest of society. Plainly put, public policy is that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public good. As applied to contracts, in the absence of express legislation or constitutional prohibition, a court, in order to declare a contract void as against public policy, must find that the contract as to the consideration or thing to be done, has a tendency to injure the public, is against the public good, or contravenes some established interests of society, or is inconsistent with sound policy and good morals, or tends clearly to undermine the security of individual rights, whether of personal liability or of private property.
From another perspective, the main objection to exclusive dealing is its tendency to foreclose existing competitors or new entrants from competition in the covered portion of the relevant market during the term of the agreement. Only those arrangements whose probable effect is to foreclose competition in a substantial share of the line of commerce affected can be considered as void for being against public policy. The foreclosure effect, if any, depends on the market share involved. The relevant market for this purpose includes the full range of selling opportunities reasonably open to rivals, namely, all the product and geographic sales they may readily compete for, using easily convertible plants and marketing organizations.
Applying the preceding principles to the case at bar, there is nothing invalid or contrary to public policy either in the objectives sought to be attained by paragraph 5, i.e., the exclusivity clause, in prohibiting respondent Luna, and all other Avon supervisors, from selling products other than those manufactured by petitioner Avon.
Having held that the ―exclusivity clause‖ as embodied in paragraph 5 of the Supervisor‘s Agreement is valid and not against public policy, we now pass to a consideration of respondent Luna‘s objections to the validity of her termination as provided for under paragraph 6 of the Supervisor‘s Agreement giving petitioner Avon the right to terminate or cancel such contract. The paragraph 6 or the ―termination clause‖ therein expressly provides that:The Company and the Supervisor mutually agree:6) Either party may terminate this agreement at will, with or without cause, at any time upon notice to the other. In the case at bar, the termination clause of the Supervisor‘s Agreement clearly provides for two ways of terminating and/or canceling the contract. One mode does not exclude the other. The contract provided that it can be terminated or cancelled for cause, it also stated that it can be terminated without cause, both at any time and after written notice. Thus, whether or not the termination or cancellation of the Supervisor‘s Agreement was ―for cause,‖ is immaterial. The only requirement is that of notice to the other party. When petitioner Avon chose to terminate the contract, for cause, respondent Luna was duly notified thereof.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
590
Worth stressing is that the right to unilaterally terminate or cancel the Supervisor‘s Agreement with or without cause is equally available to respondent Luna, subject to the same notice requirement. Obviously, no advantage is taken against each other by the contracting parties.
Del Castillo v. Richmond
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
591
ALFONSO DEL CASTILLO, Plaintiff-Appellant, versus SHANNON RICHMOND, Defendant-Appellee. (G.R. No. L-21127, February 9, 1924, 1st Division) JOHNSON, J.:
FACTS: The plaintiff alleges that the provisions and conditions contained in the third paragraph of their contract constitute an illegal and unreasonable restriction upon his liberty to contract, are contrary to public policy, and are unnecessary in order to constitute a just and reasonable protection to the defendant; and asked that the same be declared null and void and of no effect. The defendant interposed a general and special defense. In his special defense he alleges that during the time the plaintiff was in the defendant's employ he obtained knowledge of his trade and professional secrets and came to know and became acquainted and established friendly relations with his customers so that to now annul the contract and permit plaintiff to establish a competing drugstore in the town of Legaspi, as plaintiff has announced his intention to do, would be extremely prejudicial to defendant's interest." The defendant further, in an amended answer, alleges that this action not having been brought within four years from the time the contract referred to in the complaint was executed, the same has prescribed.
ISSUE: Whether the contract is valid and the autonomy of contracts be upheld
HELD: Considering the nature of the business in which the defendant is engaged, in relation with the limitation placed upon the plaintiff both as to time and place, The Court is of the opinion, and so decide, that such limitation is legal and reasonable and not contrary to public policy, otherwise, the autonomy of the contract will be subverted.
Arwood v. DM Consunji Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
592
ARWOOD INDUSTRIES, INC., Petitioner, vs. D.M. CONSUNJI, INC., Respondent. (G.R. No. 142277, December 11, 2002, 3rd Division) CORONA, J .: FACTS: Petitioner and respondent, as owner and contractor, respectively, entered into a civil, structural and architectural works Agreement dated February 6, 1989 for the construction of petitioners Westwood condominium at No. 23 Eisenhower St., Greenhills, San Juan, Metro Manila. The contract price for the condominium project aggregated P20, 800,000.00. Despite the completion of the condominium project, the amount of P962, 434.78 remain unpaid by petitioner. Repeated demands by respondent for petitioner to pay went unheeded. Thus on August 13, 1993, respondent as plaintiff in a civil case filed its complaint for the recovery of the balance of the contract price and for damages against petitioner. Respondent specifically prayed for the payment of the: (a) amount of P962, 434.78 with interest of 2% per month or a fraction thereof, from November 1990 up to the time of payment; (b) the amount of P250,000 as Attorneys fees and litigation expenses; (c) amount of P150,000.00 as exemplary damages; and (d)cost of suit. On appeal, the Court of Appeals affirmed the lower court‘s decision with modification ISSUE: Whether or not the imposition of two percent interest on the amount adjudged is proper. HELD: Yes. It must be noted that the agreement provided the contractor, respondent in this case, two (2) options in case of delay in monthly payments, to wit: a) suspend works on the project until payment is remitted by the owner or continue the work but the owner shall be required to pay interest at a rate of two (2) percent per month or a fraction thereof. Evidently, respondent chose the latter option, as the condominium project was in fact already completed. Since the agreement stands as the law between the parties, the court cannot ignore the existence of such provision providing for a penalty for every months delay.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
593
v. Rural Bank of Pamplona SPOUSES BENEDICT and MARICEL DY TECKLO, Petitioners, versusRURAL BANK OF PAMPLONA, INC. represented by its President/Manager, JUAN Respondent. (G.R. No. 142277, December 11, 2002, 3rd Division) CARPIO, J.:
FACTS: On 20 January 1994, spouses Roberto and Maria Antonette Co obtained from respondent Rural Bank of Pamplona, Inc. a P100,000.00 loan due in three months or on 20 April 1994. The loan was secured by a real estate mortgage on a 262-square meter residential lot owned by spouses Co located in San Felipe, Naga City and covered by Transfer Certificate of Title (TCT) No. 24196. Petitioners, spouses Benedict and Maricel Dy Tecklo, meanwhile instituted an action for collection of sum of money against spouses Co. When the two loans remained unpaid after becoming due and demandable, respondent bank instituted extrajudicial foreclosure proceedings. In its 5 September 1994 petition for extrajudicial foreclosure, respondent bank sought the satisfaction solely of the first loan although the second loan had also become due. At the public auction scheduled on 19 December 1994, respondent bank offered the winning bid of P142,000.00, which did not include the second loan. The provisional certificate of sale to respondent bank was annotated on the TCT of the mortgaged property as Entry No. 60794. Petitioners then exercised the right of redemption as successors-in-interest of the judgment debtor. Stepping into the shoes of spouses Co, petitioners tendered on 9 August 1995 the amount of P155,769.50, based on the computation made by the Office of the Provincial Sheriff.
ISSUE: Whether or not the redemption amount includes the second loan in the amount of P150,000.00 even if it was not included in respondent bank‘s application for extrajudicial foreclosure.
HELD:
Petitioners pointed out that the second loan was not annotated as an
additional loan on the TCT of the mortgaged property. Petitioners argued that the second loan was just a private contract between respondent bank and spouses Co, which could not bind third parties unless duly registered. Petitioners stressed that respondent bank‘s application for extrajudicial foreclosure referred solely to the first loan.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
594
Respondent bank insisted that the mortgage secured not only the first loan but also future loans spouses Co might obtain from respondent bank. According to respondent bank, this was specifically provided in the mortgage contract. Respondent bank contended that petitioners, as redemptioner by virtue of the preliminary attachment they obtained against spouses Co, should assume all the debts secured by the mortgaged property. In order to effect redemption, the judgment debtor or his successor -in-interest need only pay the purchaser at the public auction sale the redemption amount composed of (1) the price which the purchaser at the public auction sale paid for the property and (2) the amount of any assessment or taxes which the purchaser may have paid on the property after the purchase, plus the applicable interest. Respondent bank‘s demand that the second loan be added to the actual amount paid for the property at the public auction sale finds no basis in law or jurisprudence.
Banate v. Phil. Countryside
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
595
VIOLETA TUDTUD BANATE, MARY MELGRID M. CORTEL, BONIFACIO CORTEL, ROSENDO MAGLASANG, and PATROCINIA MONILAR, Petitioners,versus PHILIPPINE COUNTRYSIDE RURAL BANK (LILOAN, CEBU), INC. and TEOFILO SOON, JR., Respondents. (G.R. No. 163825, July 13, 2010, 3rd Division) BRION, J.:
FACTS: On July 22, 1997, petitioner spouses Rosendo Maglasang and Patrocinia Monilar
(spouses
Maglasang)
obtained
a
loan
(subject
loan)
from
PCRB
forP1,070,000.00. The subject loan was evidenced by a promissory note and was payable on January 18, 1998. To secure the payment of the subject loan, the spouses Maglasang executed, in favor of PCRB a real estate mortgage over their property, Lot 12868-H-3-C, [6] including the house constructed thereon (collectively referred to as subject properties), owned by petitioners Mary Melgrid and Bonifacio Cortel (spouses Cortel), the spouses Maglasang‘s daughter and son-in-law, respectively. Aside from the subject loan, the spouses Maglasang obtained two other loans from PCRB which were covered by separate promissory notes [7] and secured by mortgages on their other properties.
Sometime in November 1997 (before the subject loan became due), the spouses Maglasang and the spouses Cortel asked PCRB‘s permission to sell the subject properties. They likewise requested that the subject properties be released from the mortgage since the two other loans were adequately secured by the other mortgages. The spouses Maglasang and the spouses Cortel claimed that the PCRB, acting through its Branch Manager, Pancrasio Mondigo, verbally agreed to their request but required first the full payment of the subject loan. The spouses Maglasang and the spouses Cortel
thereafter
sold
to
petitioner
Violeta
Banate
the
subject
properties
for P1,750,000.00. The spouses Magsalang and the spouses Cortel used the amount to pay the subject loan with PCRB. After settling the subject loan, PCRB gave the owner‘s duplicate certificate of title of Lot 12868-H-3-C to Banate, who was able to secure a new title in her name. The title, however, carried the mortgage lien in favor of PCRB, prompting the petitioners to request from PCRB a Deed of Release of Mortgage. As PCRB refused to comply with the petitioners‘ request, the petitioners instituted an action for specific performance before the RTC to compel PCRB to execute the release deed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
596
The petitioners additionally sought payment of damages from PCRB, which, they
claimed,
caused
the
publication
of
a
news
report
stating
that
they
―surreptitiously‖ caused the transfer of ownership of Lot 12868-H-3-C. The petitioners considered the news report false and malicious, as PCRB knew of the sale of the subject properties and, in fact, consented thereto.
On appeal, the CA reversed the RTC‘s decision. The CA did not consider as valid the petitioners‘ new agreement with Mondigo, which would novate the original mortgage contract containing the cross-collateral stipulation. It ruled that Mondigo cannot orally amend the mortgage contract between PCRB, and the spouses Maglasang and the spouses Cortel; therefore, the claimed commitment allowing the release of the mortgage on the subject properties cannot bind PCRB. Since the crosscollateral stipulation in the mortgage contract (requiring full settlement of all three loans before the release of any of the mortgages) is clear, the parties must faithfully comply with its terms. The CA did not consider as material the release of the owner‘s duplicate copy of the title, as it was done merely to allow the annotation of the sale of the subject properties to Banate.[11]
Dismayed with the reversal by the CA of the RTC‘s HELD, the petitioners filed the present appeal by certiorari, claiming that the CA HELD is not in accord with established jurisprudence.
ISSUE: Whether the purported agreement between the petitioners and Mondigo novated the mortgage contract over the subject properties and is thus binding upon PCRB.
HELD: We find the petitioners‘ argument unpersuasive. Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive when an old obligation is terminated by the creation of a new obligation that takes the place of the former; it is merely modificatory when the old obligation subsists to the extent that it remains Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
597
compatible with the amendatory agreement. An extinctive novation results either by changing the object or principal conditions (objective or real), or by substituting the person of the debtor or subrogating a third person in the rights of the creditor (subjective or personal). Under this mode, novation would have dual functions – one to extinguish an existing obligation, the other to substitute a new one in its place – requiring a conflux of four essential requisites: (1) a previous valid obligation; (2) an agreement of all parties concerned to a new contract; (3) the extinguishment of the old obligation; and (4) the birth of a valid new obligation. The second requisite is lacking in this case. Novation presupposes not only the extinguishment or modification of an existing obligation but, more importantly, the creation of a valid new obligation. For the consequent creation of a new contractual obligation, consent of both parties is, thus, required. As a general rule, no form of words or writing is necessary to give effect to a novation. Nevertheless, where either or both parties involved are juridical entities, proof that the second contract was executed by persons with the proper authority to bind their respective principals is necessary.
Pascual v. Ramos
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
598
SPOUSES SILVESTRE and CELIA PASCUAL, Petitioners, versus RODRIGO V. RAMOS, Respondent. (G.R. No. 144712. July 4, 2002, 1st Division) DAVIDE, JR., C.J.:
FACTS: Ramos alleged that on 3 June 1987, for and in consideration of P150,000, the Spouses Pascual executed in his favor a Deed of Absolute Sale with Right to Repurchase over two parcels of land and the improvements thereon located in Bambang, Bulacan, Bulacan. This document was annotated at the back of the title. The Pascuals did not exercise their right to repurchase the property within the stipulated one-year period; hence, Ramos prayed that the title or ownership over the subject parcels of land and improvements thereon be consolidated in his favor. In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale with Right to Repurchase for a consideration of P150, 000 but averred that what the parties had actually agreed upon and entered into was a real estate mortgage. They further alleged that there was no agreement limiting the period within which to exercise the right to repurchase and that they had even overpaid Ramos. The trial court found that the transaction between the parties was actually a loan in the amount of P150,000, the payment of which was secured by a mortgage of the property covered by TCT No. 305626. It also found that the Pascuals had made payments in the total sum of P344,000, and that with interest at 7% per annum, they had overpaid the loan by P141,500. Accordingly, in its Decision of 15 March 1995 the trial court ruled in favor of the defendants. The Pascuals interposed the following defenses: (a) the trial court had no jurisdiction over the subject or nature of the petition; (b) Ramos had no legal capacity to sue; (c) the cause of action, if any, was barred by the statute of limitations; (d) the petition stated no cause of action; (e) the claim or demand set forth in Ramos‘s pleading had been paid, waived, abandoned, or otherwise extinguished; and (f) Ramos has not complied with the required confrontation and conciliation before the barangay. The Court of Appeals affirmed in toto the trial court‘s Orders of 5 June 1995 and 7 September 1995. ISSUE: Whether or not the contract entered into is a contract of loan. HELD: The Pascuals are actually raising as issue the validity of the stipulated interest rate. It must be stressed that they never raised as a defense or as basis for their counterclaim the nullity of the stipulated interest. While overpayment was alleged in the Answer, no ultimate facts which constituted the basis of the overpayment was alleged. In their pre-trial brief, the Pascuals made a long list of issues, but not one of them touched on the validity of the stipulated interest rate. Their own evidence clearly shows that they have agreed on, and have in fact paid interest at, the rate of 7% per month. After the trial court sustained petitioners‘ claim that their agreement with RAMOS was actually a loan with real estate mortgage, the Pascuals should not be allowed to turn their back on the stipulation in that agreement to pay interest at the rate of 7% per month. The Pascuals should accept not only the favorable aspect of the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
599
court‘s declaration that the document is actually an equitable mortgage but also the necessary consequence of such declaration, that is, that interest on the loan as stipulated by the parties in that same document should be paid. Besides, when Ramos moved for a reconsideration of the 15 March 1995 Decision of the trial court pointing out that the interest rate to be used should be 7% per month, the Pascuals never lifted a finger to oppose the claim. Admittedly, in their Motion for Reconsideration of the Order of 5 June 1995, the Pascuals argued that the interest rate, whether it be 5% or 7%, is exorbitant, unconscionable, unreasonable, usurious and inequitable. However, in their Appellants‘ Brief, the only argument raised by the Pascuals was that Ramos‘s petition did not contain a prayer for general relief and, hence, the trial court had no basis for ordering them to pay Ramos P511,000 representing the principal and unpaid interest. It was only in their motion for the reconsideration of the decision of the Court of Appeals that the Pascuals made an issue of the interest rate and prayed for its reduction to 12% per annum. It is a basic principle in civil law that parties are bound by the stipulations in the contracts voluntarily entered into by them. Parties are free to stipulate terms and conditions which they deem convenient provided they are not contrary to law, morals, good customs, public order, or public policy. The interest rate of 7% per month was voluntarily agreed upon by Ramos and the Pascuals. There is nothing from the records and, in fact, there is no allegation showing that petitioners were victims of fraud when they entered into the agreement with Ramos. Neither is there a showing that in their contractual relations with Ramos, the Pascuals were at a disadvantage on account of their moral dependence, ignorance, mental weakness, tender age or other handicap, which would entitle them to the vigilant protection of the courts as mandated by Article 24 of the Civil Code.
Chua Tee Dee v. CA Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
600
CHUA TEE DEE, doing business under the name and style of PIONEER ENTERPRISES, Petitioner versus COURT OF APPEALS and J.C. AGRICOM DEVELOPMENT CORPORATION, INC., Respondents. (G.R. No. 135721, May 27, 2004, 2nd Division) CALLEJO, SR., J.:
FACTS: On May 22, 1985, Agricom and Dee entered into a 15-year lease contract over the rubber plantation owned by the former. Among the stipulations in the contract was the payment of deposit in the amount of P135,000.00 and payment of back rentals in case of non-payment of rentals for three months. The contract also stipulated that Agricom had the duty to maintain Dee in the quiet peaceful possession and enjoyment of the leased premises. However, sometime in 1986, a labor case for illegal dismissal and unfair labor practice was filed against Agricom, Amado Dee (Chua Tee Dee‘s husband) and Pioneer. This case arose from the fact that some of the plantation laborers were dismissed from work due to the contract of lease with Dee. The labor case dragged on for a number of years. In addition, Dee also complained of being pestered by some individuals who claimed portions of the plantation as their own property. Later on, Pioneer defaulted in its monthly payments, prompting Agricom to file a complaint for sum of money. In its Answer, Dee asserted that Agricom committed breach of contract for its failure to maintain her in peaceful possession and enjoyment of the leased premises. The breach, in turn, entitled her to suspend payment of rentals. While the case was pending, Dee extended a personal loan of P30,000 to Lillian Carreido. When judgment was finally rendered, the complaint was dismissed and the lease contract terminated, the court stating that it was Agricom‘s duty as lessor to maintain the lessee in peaceful possession and enjoyment of the leased premises. Upon motion for recommendation, the lower court reversed its own HELD, ordering Dee to pay Agricom back rentals and rentals for the first three years of the lease already paid for. The CA affirmed the order. ISSUE: Whether or not CA committed grave abuse of discretion in upholding the validity of the lease contract and holding Dee liable for back rentals, including rentals already paid for.
HELD: The Supreme Court ruled partly in favor of Dee. On the issue of suspension of payment of rentals, Dee anchors her argument on Art. 1658, NCC, which entitles the lessee to suspend payment of rent in case the lessor fails to make the necessary repairs or to maintain the lessee in peaceful and adequate enjoyment of the property leased. Dee asserted that she was harassed by squatters and several claimants of the leased premises. The duty ―to maintain the lessee in the peaceful and adequate enjoyment of the lease for the duration of the contract‖ is merely a warranty that the lessee shall not be disturbed in his legal, and not physical, possession. In the present case, however, petitioner had not been disturbed in her legal possession of the property. As to the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
601
claims of loss due to the labor dispute, the Supreme Court agreed with the CA that Dee failed to prove this. During the period of pendency of the labor case, Dee regularly paid the monthly rentals. It was only after the labor case has been resolved that she started to fail to pay her rentals, strongly indicating that the labor case has not dampened her peaceful and adequate possession of the leased premises. The Supreme Court, however, ruled that Dee should not be made to pay rentals for the first three years of the lease, since those rentals were already paid for. Moreover, the personal loan extended by Dee to Lillian Carriedo should not be charged against Agricom. While it is true that the petitioner and Carriedo had agreed that the personal loan of the latter shall be ―chargeable against Agricom‘s account,‖ the private respondent is not privy to the agreement; nor did it agree to pay the said loan. It must be stressed that the private respondent has a personality separate and distinct from its stockholders.
GQ Garments v. Miranda
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
602
G.Q. GARMENTS, INC., Petitioner, vs. ANGEL MIRANDA, FLORENDA MIRANDA and EXECUTIVE MACHINERIES and EQUIPMENT CORPORATION,Respondents. (G.R. No. 161722, July 20, 2006, 1st Division) CALLEJO, SR., J.: FACTS: Angel Miranda is the registered owner of a 9,646 square meters parcel of land located at Niog, Bacoor, Cavite ("Property"). The property was covered by Transfer Certificate of Title (TCT) No. T-606793 of the Registry of Deeds of Cavite. In 1984, Angelito Miranda, the son of Angel Miranda, established the Executive Machineries and Equipment Corporation (EMECO), a domestic corporation engaged primarily in the manufacture and fabrication of rubber rollers. Angelito owned 80% of the stocks of the corporation, while his wife Florenda owned 10%. That year, Angel entered into a verbal contract of lease over the Property with EMECO, and allowed it to build a factory thereon. The agreement was on a month-to-month basis, at the rate of P8,000 per month. EMECO constructed its factory on the property. At the outset, EMECO paid the monthly rentals. However, after Angelito died on June 21, 1988, EMECO failed to pay the rentals but still continued possessing the leased premises. On November 19, 1989, the factory of EMECO was totally razed by fire. In a letter to EMECO dated June 3, 1991, Angel demanded the payment of accrued rentals in the amount of P280,000.00 as of May 1991. EMECO was also informed that the oral contract of lease would be terminated effective June 30, 1991. However, EMECO failed to pay the accrued rentals and to vacate the property. Another demand letter dated September 27, 1991 was sent to EMECO. It vacated the leased premises, but the accrued rentals remained unpaid. Sometime in November 1991, Florenda arrived at the office of petitioner and offered to sublease the property to Wilson Kho, the Officer-in Charge of the corporation. Florenda showed Kho a purported copy of a contract of lease4 over the said property allegedly executed by Angel in favor of EMECO. After visiting and viewing the property, Kho agreed to rent the area upon the condition that its true and registered owner would personally sign the lease contract in his presence. When Florenda failed to present Angel for said purpose, Kho turned down her proposal. Later, Kho was able to locate Angel at Noveleta, Cavite and offered, in behalf of petitioner, to lease the property, as to which Angel agreed. On December 23, 1991, Angel and the corporation, represented by its Executive Vice-President, Davy John Barlin, executed a contract of lease5 over the subject property. The lease was for a period of 15 years, commencing on February 1, 1992 until January 31, 2007 for a monthly rental of P30,000.00. Petitioner paid P90,000.00 representing two months deposit and advance rental for one month. As lessee, it was authorized to introduce improvements, structures, and buildings on the property as it may deem necessary and for the purpose for which it was leased. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
603
Consequently, petitioner secured the following documents: mayor's permit, sanitary permit, business sticker, and an application for municipal license. Thereafter, it moved into the property with its equipment, machinery, appliances, supplies, and other construction materials. The construction of a building and factory in the leased premises commenced. However, on January 27, 1992, Florenda, together with several armed men who identified themselves as policemen, forcibly evicted petitioner from the leased premises, claiming that she was the owner and that the place was already covered by another existing contract of lease. During the encounter, Florenda and her men took some equipment, machinery and other properties belonging to petitioner, thereby causing loss and damage to said properties. In the meantime, Angel secured a copy of the purported contract of lease he allegedly executed in favor of EMECO. On March 12, 1992, he forthwith filed a complaint for declaration of nullity of the contract of lease before the Regional Trial Court (RTC) of Makati, Branch 66, docketed as Civil Case No. 92-699. Angel alleged therein that his signature as lessor in the purported contract was a forgery. He prayed that judgment be rendered in his favor declaring the said contract null and void. Meanwhile, petitioner sought the help of the Philippine National Police (PNP). General Gerardo N. Flores, Deputy Director General and Chief Directorial Staff, issued a Memorandum6 to Superintendent Wenceslao A. Soberano, Provincial Director of the Cavite PNP Provincial Command, ordering the latter to prevent his men from interfering with the pending civil case. Petitioner subsequently regained possession over the leased premises. However, Florenda and her group were undaunted. They went back to the place and ousted the guards and other personnel manning the corporation's office, and even removed their equipment, and ransacked anew their raw materials, electric wire and other valuables inside. On April 20, 1992, petitioner instituted an action for damages and recovery of possession of the property before the RTC of Cavite City, Branch 17, with Angel, EMECO and Florenda, as alternative defendants. The appellate court absolved Angel of any liability due to the absence of evidence showing that he had participated, directly or indirectly, in the looting of GQ Garment's properties and in forcibly ejecting the latter from the premises in question. While under Article 1654, paragraph 3, of the New Civil Code, a lessor is obliged to maintain the lessee in peaceful and adequate enjoyment of the lease for the entire duration of the contract, the law, however, does not apply to him since the unlawful acts were caused by a third person or an intruder. Under Article 1664, he is not obliged to answer for a mere act of trespass which a third person may cause on the use of the thing leased, but the lessee shall have a direct action against the intruder.
ISSUE: Whether or not respondent Angel Miranda should likewise be held liable for damages to the petitioner.
HELD: The duty of the lessor to maintain the lessee in the peaceful and adequate enjoyment of the leased property for the entire duration of the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
604
contract is merely a warranty that the lessee shall not be disturbed in having legal and not physical possession of the property. In this case, the trespass perpetrated by respondent Florenda Miranda and her confederates was merely trespass in fact. They forcibly entered the property and caused damage to the equipment and building of petitioner, because the latter refused to enter into a contract of lease with EMECO over the property upon respondent Florenda Miranda's failure to present respondent Angel Miranda to sign the contract of lease. It turned out that respondent Florenda Miranda attempted to hoodwink petitioner and forged respondent Angel Miranda's signature on the contract of lease she showed to petitioner. It appears that respondent Florenda Miranda tried to coerce the petitioner into executing a contract of lease with EMECO over the property, only to be rebuffed by the petitioner.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
605
Bercero v. Capitol Development PEDRO T. BERCERO, Petitioner, versus CAPITOL DEVELOPMENT CORPORATION,Respondent. (G.R. No. 154765, March 29, 2007, 1st Division) AUSTRIA-MARTINEZ, J.: FACTS: On January 31, 1983, Capitol Development Corporation (respondent) leased its commercial building and lot located at 1194 EDSA, Quezon City to R.C. Nicolas Merchandising, Inc., (R.C. Nicolas) for a 10-year period or until January 31, 1993 with the option for the latter to make additional improvements in the property to suit its business and to sublease portions thereof to third parties. R.C. Nicolas converted the space into a bowling and billiards center and subleased separate portions thereof to Midland Commercial Corporation, Jerry Yu, Romeo Tolentino, Julio Acuin, Nicanor Bas, and Pedro T. Bercero (petitioner). Petitioner‘s sublease contract with R.C. Nicolas was for a threeyear period or until August 16, 1988. Meanwhile, for failure to pay rent, respondent filed an ejectment case against R.C. Nicolas before the Metropolitan Trial Court. Respondent also impleaded the sub-lessees of R.C. Nicolas as parties-defendants. During the pendency of Civil Case No. 52933, several sub-lessees including petitioner, entered into a compromise settlement with respondent. In the compromise settlement, the sub-lessees recognized respondent as the lawful and absolute owner of the property and that the contract between respondent and R.C. Nicolas had been lawfully terminated because of the latter‘s nonpayment of rent; and that the sub-lessees voluntarily surrendered possession of the premises to respondent; that the sub-lessees directly executed lease contracts with respondent considering the termination of leasehold rights of R.C. Nicolas. Petitioner entered into a lease contract with respondent for a three-year period, from August 16, 1988 to August 31, 1991. On October 21, 1988, respondent and petitioner, as well as several other sublessees of R.C. Nicolas, filed a Joint Manifestation and Motion in Civil Case No. 52933, manifesting to the MeTC-Branch 41 that they entered into a compromise settlement and moved that the names of the sub-lessees as parties-defendants be dropped and excluded. On November 14, 1988, R.C. Nicolas filed a complaint for ejectment and collection of unpaid rentals against petitioner before the Metropolitan Trial Court, rendered a Decision in favor of R.C. Nicolas and ordered the eviction of petitioner from the leased premises. ISSUE: Whether or not the principle of estoppel shall be applied to petitioner
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
606
HELD: Void are all contracts in which the cause or object does not exist at the time of the transaction. In the present case, the lease contract between petitioner and respondent is void for having an inexistent cause - respondent did not have the right to lease the property to petitioner considering that its lease contract with R.C. Nicolas was still valid and subsisting, albeit pending litigation. Having granted to R.C. Nicolas the right to use and enjoy its property from 1983 to 1993, respondent could not grant that same right to petitioner in 1988. When petitioner entered into a lease contract with respondent, the latter was still obliged to maintain R.C. Nicolas‘s peaceful and adequate possession and enjoyment of its lease for the 10-year duration of the contract. Respondent‘s unilateral rescission of its lease contract with R.C. Nicolas, without waiting for the final outcome of the ejectment case it filed against the latter, is unlawful. A lease is a reciprocal contract and its continuance, effectivity or fulfillment cannot be made to depend exclusively upon the free and uncontrolled choice of just one party to a lease contract. Thus, the lease contract entered into between petitioner and respondent, during the pendency of the lease contract with R.C. Nicolas, is void.
Hemedes v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
607
MAXIMA HEMEDES, Petitioner, versus THE HONORABLE COURT OF APPEALS, DOMINIUM REALTY AND CONSTRUCTION CORPORATION, ENRIQUE D. HEMEDES, and R & B INSURANCE CORPORATION, Respondents. (G.R. No. 107132, October 8, 1999, 3rd Division) GONZAGA_REYES, J.: FACTS: Jose Hemedes executed a document entitled ―Donation Inter Vivos With Resolutory Conditions‖ conveying ownership a parcel of land, together with all its improvements, in favor of his third wife, Justa Kauapin, subject to the resolutory condition that upon the latter‘s death or remarriage, the title to the property donated shall revert to any of the children, or heirs, of the DONOR expressly designated by the DONEE. Pursuant to said condition, Justa Kausapin executed a ―Deed of Conveyance of Unregistered Real Property by Reversion‖ conveying to Maxima Hemedes the subject property. Maxima Hemedes and her husband Raul Rodriguez constituted a real estate mortgage over the subject property in favor of R & B Insurance to serve as security for a loan which they obtained. R & B Insurance extrajudicially foreclosed the mortgage since Maxima Hemedes failed to pay the loan even. The land was sold at a public auction with R & B Insurance as the highest bidder. A new title was subsequently issued in favor the R&B. The annotation of usufruct in favor of Justa Kausapin was maintained in the new title. Despite the earlier conveyance of the subject land in favor of Maxima Hemedes, Justa Kausapin executed a ―Kasunduan‖ whereby she transferred the same land to her stepson Enrique D. Hemedes, pursuant to the resolutory condition in the deed of donation executed in her favor by her late husband Jose Hemedes. Enrique D. Hemedes obtained two declarations of real property, when the assessed value of the property was raised. Also, he has been paying the realty taxes on the property from the time Justa Kausapin conveyed the property to him. In the cadastral survey, the property was assigned in the name of Enrique Hemedes. Enrique Hemedes is also the named owner of the property in the records of the Ministry of Agrarian Reform office at Calamba, Laguna. Enriques D. Hemedes sold the property to Dominium Realty and Construction Corporation (Dominium). Dominium leased the property to its sister corporation Asia Brewery, Inc. (Asia Brewery) who made constructions therein. Upon learning of Asia Brewery‘s constructions, R & B Insurance sent it a letter informing the former of its Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
608
ownership of the property. A conference was held between R & B Insurance and Asia Brewery but they failed to arrive at an amicable settlement. Maxima Hemedes also wrote a letter addressed to Asia Brewery asserting that she is the rightful owner of the subject property and denying the execution of any real estate mortgage in favor of R&B. Dominium and Enrique D. Hemedes filed a complaint with the CFI for the annulment of TCT issued in favor of R & B Insurance and/or the reconveyance to Dominium of the subject property alleging that Dominion was the absolute owner of the land. The trial court ruled in favor of Dominium and Enrique Hemedes. ISSUE: Whether or not the donation in favor of Enrique Hemedes was valid. HELD: NO. Enrique D. Hemedes and his transferee, Dominium, did not acquire any rights over the subject property. Justa Kausapin sought to transfer to her stepson exactly what she had earlier transferred to Maxima Hemedes – the ownership of the subject property pursuant to the first condition stipulated in the deed of donation executed by her husband. Thus, the donation in favor of Enrique D. Hemedes is null and void for the purported object thereof did not exist at the time of the transfer, having already been transferred to his sister. Similarly, the sale of the subject property by Enrique D. Hemedes to Dominium is also a nullity for the latter cannot acquire more rights than its predecessorin-interest and is definitely not an innocent purchaser for value since Enrique D. Hemedes did not present any certificate of title upon which it relied. The declarations of real property by Enrique D. Hemedes, his payment of realty taxes, and his being designated as owner of the subject property in the cadastral survey of Cabuyao, Laguna and in the records of the Ministry of Agrarian Reform office in Calamba, Laguna cannot defeat a certificate of title, which is an absolute and indefeasible evidence of ownership of the property in favor of the person whose name appears therein. Particularly, with regard to tax declarations and tax receipts, this Court has held on several occasions that the same do not by themselves conclusively prove title to land.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
609
PUP v. Golden Horizon POLYTECHNIC UNIVERSITY OF THE PHILIPPINES,Petitioner, versus GOLDEN HORIZON REALTY CORPORATION,Respondent. (G.R. No. 183612, March 15, 2010, 1st Division) VILLARAMA, JR., J.:
FACTS: Petitioner National Development Company (NDC) is a government- owned and controlled corporation, created under Commonwealth Act No. 182, as amended by Com. Act No. 311 and Presidential Decree (P.D.) No. 668. Petitioner Polytechnic University of the Philippines (PUP) is a public, non-sectarian, non-profit educational institution created in 1978 by virtue of P.D. No. 1341. In the early sixties, NDC had in its disposal a ten -hectare property located along Pureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC Compound and covered by Transfer Certificate of Title Nos. 92885, 110301 and 145470.On September 7, 1977, NDC entered into a Contract of Lease (C-33-77) with Golden Horizon Realty Corporation (GHRC) over a portion of the property, with an area of 2,407 square meters for a period of ten years, renewable for another ten years with mutual consent of the parties.On May 4, 1978, a second Contract of Lease (C-12-78) was executed between NDC and GHRC covering 3,222.80 square meters, also renewable upon mutual consent after the expiration of the ten (10)-year lease period. In addition, GHRC as lessee was granted the "option to purchase the area leased, the price to be negotiated and determined at the time the option to purchase is exercised." Under the lease agreements, GHRC was obliged to construct at its own expense buildings of strong material at no less than the stipulated cost, and other improvements which shall automatically belong to the NDC as lessor upon the expiration of the lease period. Accordingly, GHRC introduced permanent improvements and structures as required by the terms of the contract. After the completion of the industrial complex project, for which GHRC spent P5 million, it was leased to various manufacturers, industrialists and other businessmen thereby generating hundreds of jobs. On June 13, 1988, before the expiration of the ten (10)-year period under the second lease contract, GHRC wrote a letter to NDC indicating its exercise of the option to renew the lease for another ten years. As no response was received from NDC, GHRC sent another letter on August 12, 1988, reiterating its desire to renew the contract and also requesting for priority to negotiate for its purchase should NDC opt to sell the leased premises. NDC still did not reply but continued to accept rental payments from GHRC and allowed the latter to remain in possession of the property. Sometime after September 1988, GHRC discovered that NDC had decided to secretly dispose the property to a third party. On October 21, 1988, GHRC filed in the RTC a complaint for specific performance, damages with preliminary injunction and temporary restraining order. On February 20, 1989, the RTC issued a writ of preliminary injunction enjoining NDC and its attorneys, representatives, agents and any other persons assisting it from proceeding with the sale and disposition of the leased premises. On February 23, 1989, PUP filed a motion to intervene as party defendant, claiming that as a purchaser pendente lite of a property subject of litigation it is entitled to intervene in the proceedings. The RTC granted the said motion and directed PUP to file its Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
610
Answer-in-Intervention.PUP also demanded that GHRC vacate the premises, insisting that the latter‘s lease contract had already expired. Its demand letter unheeded by GHRC, PUP filed an ejectment case (Civil Case No. 134416) before the Metropolitan Trial Court (MeTC) of Manila on January 14, 1991. Due to this development, GHRC filed an Amended and/or Supplemental Complaint to include as additional defendants PUP, Honorable Executive Secretary Oscar Orbos and Judge Ernesto A. Reyes of the Manila MeTC, and to enjoin the aforementioned defendants from prosecuting Civil Case No. 134416 for ejectment. A temporary restraining order was subsequently issued by the RTC enjoining PUP from prosecuting and Judge Francisco Brillantes, Jr. from proceeding with the ejectment case. On November 14, 2001, this Court rendered a decision in G.R. Nos. 143513 (Polytechnic University of the Philippines v. Court of Appeals) and 143590 (National Development Corporation v. Firestone Ceramics, Inc.),15 which declared that the sale to PUP by NDC of the portion leased by Firestone pursuant to Memorandum Order No. 214 violated the right of first refusal granted to Firestone under its third lease contract with NDC.
ISSUE: Whether or not our HELD in Polytechnic University of the Philippines v. Court of Appeals applies in this case involving another lessee of NDC who claimed that the option to purchase the portion leased to it was similarly violated by the sale of the NDC Compound in favor of PUP pursuant to Memorandum Order No. 214.
HELD: The CA was correct in declaring that there exists no justifiable reason not to apply the same rationale in Polytechnic University of the Philippines v. Court of Appeals in the case of respondent who was similarly prejudiced by petitioner NDC‘s sale of the property to PUP, as to entitle the respondent to exercise its option to purchase until October 1988 inasmuch as the May 4, 1978 contract embodied the option to renew the lease for another ten (10) years upon mutual consent and giving respondent the option to purchase the leased premises for a price to be negotiated and determined at the time such option was exercised by respondent. It is to be noted that Memorandum Order No. 214 itself declared that the transfer is "subject to such liens/leases existing on the subject property." The option in this case was incorporated in the contracts of lease by NDC for the benefit of firestone which, in view of the total amount of its investments in the property, wanted to be assured that it would be given the first opportunity to buy the property at a price for which it would be offered. Consistent with their agreement, it was then implicit for NDC to have first offered the leased premises of 2.60 hectares to FIRESTONE prior to the sale in favor of PUP. Only if FIRESTONE failed to exercise its right of first priority could NDC lawfully sell the property to petitioner PUP. In the light of the foregoing, the Court held that respondent, which did not offer any amount to petitioner NDC, and neither disputed the P1,500.00 per square meter actual value of NDC‘s property at that time it was sold to PUP at P554.74 per square meter, as duly considered by this Court in the Firestone case, should be bound by such determination. Accordingly, the price at which the leased premises should be Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
611
sold to respondent in the exercise of its right of first refusal under the lease contract with petitioner NDC, which was pegged by the RTC at P554.74 per square meter, should be adjusted to P1,500.00 per square meter, which more accurately reflects its true value at that time of the sale in favor of petitioner PUP. Indeed, basic is the rule that a party to a contract cannot unilaterally withdraw a right of first refusal that stands upon valuable consideration.40 We have categorically ruled that it is not correct to say that there is no consideration for the grant of the right of first refusal if such grant is embodied in the same contract of lease. Since the stipulation forms part of the entire lease contract, the consideration for the lease includes the consideration for the grant of the right of first refusal. In entering into the contract, the lessee is in effect stating that it consents to lease the premises and to pay the price agreed upon provided the lessor also consents that, should it sell the leased property, then, the lessee shall be given the right to match the offered purchase price and to buy the property at that price. We have further stressed that not even the avowed public welfare or the constitutional priority accorded to education, invoked by petitioner PUP in the Firestone case, would serve as license for us, and any party for that matter, to destroy the sanctity of binding obligations. While education may be prioritized for legislative and budgetary purposes, it is doubtful if such importance can be used to confiscate private property such as the right of first refusal granted to a lessee of petitioner NDC.42 Clearly, no reversible error was committed by the CA in sustaining respondent‘s contractual right of first refusal and ordering the reconveyance of the leased portion of petitioner NDC‘s property in its favor. Hence the petition was denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
612
Villegas v. CA JOSELITO VILLEGAS and DOMINGA VILLEGAS, Petitioners, versus COURT OF APPEALS, Respondent (G.R. No. 129977, February 1, 2001, 1st Division) VILLARAMA, JR., J.: FACTS: Before September 6, 1973, Lot B-3-A, with an area of 4 hectares was registered under TCT No. 68641 in the names of Ciriaco D. Andres and Henson Caigas. This land was also declared for real estate taxation under Tax Declaration No. C2-4442. On September 6, 1973, Andres and Caigas, with the consent of their respective spouses, Anita Barrientos and Consolacion Tobias, sold the land to Fortune Tobacco Corporation for P60,000.00. Simultaneously, they executed a joint affidavit declaring that they had no tenants on said lot. On the same date, the sale was registered in the Office of the Register of Deeds of Isabela. TCT No. 68641 was cancelled and TCT No. T-68737 was issued in Fortune‘s name. On August 6, 1976, Andres and Caigas executed a Deed of Reconveyance of the same lot in favor of Filomena Domingo, the mother of Joselito Villegas, defendant in the case before the trial court. Although no title was mentioned in this deed, Domingo succeeded in registering this document in the Office of the Register of Deeds on August 6, 1976, causing the latter to issue TCT No. T-91864 in her name. It appears in this title that the same was a transfer from TCT No. T-68641. On April 13, 1981, Domingo declared the lot for real estate taxation under Tax Declaration No. 10-5633. On December 4, 1976, the Office of the Register of Deeds of Isabela was burned together with all titles in the office. On December 17, 1976, the original of TCT No. T-91864 was administratively reconstituted by the Register of Deeds. On June 2, 1979, a Deed of Absolute Sale of a portion of 20,000 square meters of Lot B-3-A was executed by Filomena Domingo in favor of Villegas for a consideration of P1,000.00. This document was registered on June 3, 1981 and as a result TCT No. T-131807 was issued by the Register of Deeds to Villegas. On the same date, the technical description of Lot B-3-A2 was registered and TCT No. T-131808 was issued in the name of Domingo. On January 22, 1991, this document was registered and TCT No. 154962 was issued to the defendant, Joselito Villegas. On April 10, 1991, the trial court upon a petition filed by Fortune ordered the reconstitution of the original of TCT No. T-68737. After trial on the merits, the trial court rendered its assailed decision in favor of Fortune Tobacco, declaring it to be entitled to the property. Petitioners thus appealed this decision to the Court of Appeals, which affirmed the trial court‘s decision. ISSUE: Whether or not the Court of Appeals was correct in affirming the trial court‘s decision. HELD: Even if Fortune had validly acquired the subject property, it would still be barred from asserting title because of laches. The failure or neglect, for an unreasonable length of time to do that which by exercising due diligence could or should have been done earlier constitutes laches. It is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it has either abandoned it or declined to assert it. While it is by express provision of law that no title to registered land in derogation of that of the registered owner shall be acquired by prescription or adverse possession, it is likewise an
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
613
enshrined rule that even a registered owner may be barred from recovering possession of property by virtue of laches.
Equatorial Realty v. Carmelo
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
614
EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC, Petitioners versus MAYFAIR THEATER, INC, Respondent. (G.R. No. 106063, November 21, 1996, 1 st Division) VILLARAMA, JR., J.: FACTS: Carmelo owned a parcel of land, together with two 2-storey buildings constructed thereon. On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the latter‘s lease of a portion of Carmelo‘s property. Two years later, on March 31, 1969, Mayfair entered into a second contract of lease with Carmelo for the lease of another portion of Carmelo‘s property. Both contracts of lease provide identically worded paragraph 8, which reads: ‗That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to purchase the same. In the event, however, that the leased premises is sold to someone other than the LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of Sale thereof that the purchaser shall recognize this lease and be bound by all the terms and conditions thereof. Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through a telephone conversation that Carmelo was desirous of selling the entire Claro M. Recto property. Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to buy the whole property for US Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the property for Six to Seven Million Pesos. Under your company‘s two lease contracts with our client, it is uniformly provided: ‗8. That if the LESSOR should desire to sell the leased premises the LESSEE shall be given 30-days exclusive option to purchase the same. In the event, however, that the leased premises is sold to someone other than the LESSEE, the LESSOR is bound and obligated, as it here binds and obligates itself, to stipulate in the Deed of Sale thereof that the purchaser shall recognize this lease and be bound by all the terms and conditions hereof. Carmelo did not reply to this letter. On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express interest in acquiring not only the leased premises but ‗the entire building and other improvements if the price is reasonable. However, both Carmelo and Equatorial questioned the authenticity of the second letter. Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and building, which included the leased premises housing the ‗Maxim‘ and ‗Miramar‘ theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum of P11,300,000.00. In September 1978, Mayfair instituted the action a quo for specific performance and annulment of the sale of the leased premises to Equatorial. It dismissed the complaint with costs against the plaintiff. The Court of Appeals reversed the decision of the trial court. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
615
ISSUE: Whether or not the decision of the Court of Appeals‘ decision was correct. HELD: The Court agrees with the Court of Appeals that the aforecited contractual stipulation provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option contract. It is a contract of a right of first refusal. As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our characterization of an option contract as one necessarily involving the choice granted to another for a distinct and separate consideration as to whether or not to purchase a determinate thing at a predetermined fixed price. Further, what Carmelo and Mayfair agreed to, by executing the two lease contracts, was that Mayfair will have the right of first refusal in the event Carmelo sells the leased premises. It is undisputed that Carmelo did recognize this right of Mayfair, for it informed the latter of its intention to sell the said property in 1974. There was an exchange of letters evidencing the offer and counter-offers made by both parties. Carmelo, however, did not pursue the exercise to its logical end. While it initially recognized Mayfair‘s right of first refusal, Carmelo violated such right when without affording its negotiations with Mayfair the full process to ripen to at least an interface of a definite offer and a possible corresponding acceptance within the ―30-day exclusive option‖ time granted Mayfair, Carmelo abandoned negotiations, kept a low profile for some time, and then sold, without prior notice to Mayfair, the entire Claro M. Recto property to Equatorial. Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in question rescissible. We agree with respondent Appellate Court that the records bear out the fact that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good faith, and, therefore, rescission lies.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
616
PUP v. CA POLYTECHNIC UNIVERSITY OF THE PHILIPPINES, Petitioner versus COURT OF APPEALS and FIRESTONE CERAMICS, INC., Respondents. (G.R. No. 143513, November 14, 2001, 1 st Division) VILLARAMA, JR., J.:
FACTS: In the early sixties, petitioner National Development Corporation (NDC), had in its disposal a ten-hectare property located along Pureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC compound and covered by Transfer Certificates of Title Nos. 92885, 110301 and 145470. Private respondent Firestone Ceramics Inc. manifested its desire to lease a portion of the property for its ceramic manufacturing business. NDC and FIRESTONE entered into a contract of lease denominated as Contract No. C-30-65 covering a portion of the property measured at 2.90118 hectares for use as a manufacturing plant for a term of ten years, renewable for another ten years under the same terms and conditions. In consequence of the agreement, FIRESTONE constructed on the leased premises several warehouses and other improvements needed for the fabrication of ceramic products. Three and a half years later, FIRESTONE entered into a second contract of lease with NDC over the latter's four-unit pre-fabricated reparation steel warehouse stored in Daliao, Davao. FIRESTONE agreed to ship the warehouse to Manila for eventual assembly within the NDC compound. The second contract, denominated as Contract No. C-26-68, was for similar use as a ceramic manufacturing plant and was agreed expressly to be "coextensive with the lease of LESSEE with LESSOR on the 2.60 hectare-lot. The parties signed a similar contract concerning a six-unit pre-fabricated steel warehouse which, as agreed upon by the parties, would expire on 2 December 1978. Prior to the expiration of the aforementioned contract, FIRESTONE wrote NDC requesting for an extension of their lease agreement. Consequently, the Board of Directors of NDC adopted the Resolution extending the term of the lease, subject to several conditions among which was that in the event NDC "with the approval of higher authorities, decide to dispose and sell these properties including the lot, priority should be given to the LESSEE". In pursuance of the resolution, the parties entered into a new agreement for a ten-year lease of the property, renewable for another ten years, expressly granting FIRESTONE the first option to purchase the leased premises in the event that it decided "to dispose and sell these properties including the lot‖. The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE, cognizant of the impending expiration of their lease agreement with NDC, informed the latter through several letters and telephone calls that it was renewing its lease over the property. While its letter of 17 March 1988 was answered by Antonio A. Henson, General Manager of NDC, who promised immediate action on the matter, the rest of its communications remained unacknowledged. FIRESTONE's predicament worsened when rumors of NDC's supposed plans to dispose of the subject property in favor of petitioner Polytechnic University of the Philippines came to its knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the property in the exercise of its contractual right of first refusal. Apprehensive that its interest in the property would be disregarded, FIRESTONE instituted an action for specific performance to compel NDC to sell the leased property in its favor. Following the denial of its petition, FIRESTONE amended its complaint to include PUP and Executive Secretary Catalino Macaraeg, Jr., as party-defendants, and sought the annulment of Memorandum Order No. 214. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
617
After trial, judgment was rendered declaring the contracts of lease executed between FIRESTONE and NDC covering the 2.60-hectare property and the warehouses constructed thereon valid and existing until 2 June 1999. The Court of Appeals affirmed the decision of the trial court ordering the sale of the property in favor of FIRESTONE. ISSUE: Whether or not the Court of Appeals decided a question of substance in a way definitely not in accord with law or jurisprudence. HELD: The courts a quo did not hypothesize, much less conjure, the sale of the disputed property by NDC in favor of petitioner PUP. Aside from the fact that the intention of NDC and PUP to enter into a contract of sale was clearly expressed in the Memorandum Order No. 214, a close perusal of the circumstances of this case strengthens the theory that the conveyance of the property from NDC to PUP was one of absolute sale, for a valuable consideration, and not a mere paper transfer as argued by petitioners. A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates himself to transfer the ownership of and to deliver a determinate thing to the other or others who shall pay therefore a sum certain in money or its equivalent. It is therefore a general requisite for the existence of a valid and enforceable contract of sale that it be mutually obligatory, i.e., there should be a concurrence of the promise of the vendor to sell a determinate thing and the promise of the vendee to receive and pay for the property so delivered and transferred. The Civil Code provision is, in effect, a "catch-all" provision which effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is ceded for a consideration. Contrary to what petitioners PUP and NDC propose, there is not just one party involved in the questioned transaction. Petitioners NDC and PUP have their respective charters and therefore each possesses a separate and distinct individual personality.
Litonjua v. L and R
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
618
SPS. LITONJUA, Petitioners, versus L & R CORPORATION, Respondent. (G.R. No. 130722, December 9, 1999, 1 st Division) VILLARAMA, JR., J.: FACTS: This stems from loans obtained by the spouses Litonjua from L&R Corporation in the aggregate sum of P400,000.00; P200,000.00 of which was obtained on August 6, 1974 and the remaining P200,000.00 obtained on March 27, 1978. The loans were secured by a mortgage constituted by the spouses upon their two parcels of land and the improvements thereon The mortgage was duly registered with the Register of Deeds. Spouses Litonjua sold to Philippine White House Auto Supply, Inc. (PWHAS) the parcels of land they had previously mortgaged to L & R Corporation for the sum of P430,000.00. Meanwhile, with the spouses Litonjua having defaulted in the payment of their loans, L & R Corporation initiated extrajudicial foreclosure proceedings with the Ex-Oficio Sheriff of Quezon City. The mortgaged properties were sold at public auction to L & R Corporation as the only bidder for the amount of P221,624.58. The Deputy Sheriff informed L & R Corporation of the payment by PWHAS of the full redemption price and advised it that it can claim the payment upon surrender of its owner‘s duplicate certificates of title. The spouses Litonjua presented for registration the Certificate of Redemption issued in their favor to the Register of Deeds of Quezon City. The Certificate also informed L & R Corporation of the fact of redemption and directed the latter to surrender the owner‘s duplicate certificates of title within five days. On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copy furnished to the Register of Deeds, stating: (1) that the sale of the mortgaged properties to PWHAS was without its consent, in contravention of paragraphs 8 and 9 of their Deed of Real Estate Mortgage; and (2) that it was not the spouses Litonjua, but PWHAS, who was seeking to redeem the foreclosed properties, when under Articles 1236 and 1237 of the New Civil Code, the latter had no legal personality or capacity to redeem the same. On the other hand, the spouses Litonjua asked the Register of Deeds to annotate their Certificate of Redemption as an adverse claim on the titles of the subject properties on account of the refusal of L & R Corporation to surrender the owner‘s duplicate copies of the titles to the subject properties. With the refusal of the Register of Deeds to annotate their Certificate of Redemption, the Litonjua spouses filed a Petition on July 17, 1981 against L & R Corporation for the surrender of the owner‘s duplicate of Transfer Certificates of Title No. 197232 and 197233 before the then CFI. While the said case was pending, L & R Corporation executed an Affidavit of Consolidation of Ownership. The Register of Deeds cancelled Transfer Certificates of Title No. 197232 and 197233 and in lieu thereof, issued Transfer Certificates of Title No. 280054 and 28055 in favor of L & R Corporation, free of any lien or encumbrance. A complaint for Quieting of Title, Annulment of Title and Damages with preliminary injunction was filed by the spouses Litonjua and PWHAS against herein respondents before the then CFI.
ISSUE: Whether or not the Court of Appeals erred in its decision. HELD: In the case at bar, PWHAS cannot claim ignorance of the right of first refusal granted to L & R Corporation over the subject properties since the Deed of Real Estate Mortgage containing such a provision was duly registered with the Register of Deeds. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
619
As such, PWHAS is presumed to have been notified thereof by registration, which equates to notice to the whole world. Thus, the Decision appealed from was affirmed with the following modifications.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
620
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
621
Josefa v Zhandong
VICENTE JOSEFA, petitioner, vs. ZHANDONG TRADING CORPORATION, respondent. (G.R. No. 150903, December 8, 2003, 3rd Division) SANDOVAL-GUTIERREZ, J.: FACTS: On June 6, 1996, Zhandong Trading Corporation,respondent, filed with the Regional Trial Court a complaint for sum of money against Vicente Josefa, petitioner, Tan Y. Ching (also known as Antonio Tan) and Evelyn Chua (Tan‘s mother). The complaint allegesthat respondent Zhandong is engaged in the importation and sale of hardboards/staple boards and other merchandise. In the course of its business, its president, Eleanor Chy, met Tan, who referred petitioner Vicente Josefa, as a client, to Chy. Relying on Tan‘s assurance that petitioner is ―a good customer‖ and owns a construction supply store, respondent, on various dates in February, March and April, 1996, sold and delivered to said petitioner a total of 313 crates of boards, valued at P4,558,100.00 payable within sixty (60) days from date of delivery. However, petitioner, instead of paying respondent, remitted his payments to Tan. In turn, Tan delivered various checks to respondent, which accepted them upon Tan‘s declaration that they came from petitioner. A number of the checks bounced. When respondent confronted Tan, the latter issued his own checks and those of his mother, Evelyn Chua. Later, without any valid reason, Tan stopped payment by checks. Those issued by his mother bounced. This prompted respondent to send petitioner and Tan a demand letter but they ignored it. Consequently, respondent suffered damages and was constrained to file the instant complaint with the assistance of counsel for a fee. After hearing, the trial court rendered its Decision ordering defendant Vicente Josefa to pay to the plaintiff the amount of P4,558,100.00 representing the value of 47,980 pieces of hardboards at P95.00 per piece, with interest at 12% per annum from the filing of the complaint until fully paid;to pay to the plaintiff the amount of P200,000.00 as attorney‘s fees plus P100,000.00 as litigation expenses; Ordering defendant Tan Y Ching, aka Tony Tan, to reimburse to co-defendant Vicente Josefa the amount of P4,474,200.00 which Josefa paid to Tan with interest at the legal rate from the date Josefa paid the amount to Tan until fully paid. The court also dismissed the counterclaims of defendants Tan and Josefa for lack of merit. On appeal, the Court of Appeals affirmed the trial court‘s Decision. Petitioner filed a motion for reconsideration but was denied. Hence, this petition. ISSUE:Whether or not petitioner is liable to pay the respondent. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
622
HELD: No. Since petitioner had fully paid Tan for all the hardboards, respondent Zhandong has no right to demand payments from him. To be sure, he cannot be made responsible for Tan‘s failure to pay respondent for the subject hardboards. Contracts take effect only between the parties, their successors in interest, heirs and assigns.When there is no privity of contract, there is likewise no obligation or liability to speak about and thus no cause of action arises. Clearly, petitioner, not being privy to the transaction between respondent and Tan, should not be made to answer for the latter‘s default. Actually, what appears to have transpired was that Tan ordered 313 crates of hardboards from respondent with instructions to deliver them to petitioner‘s establishment; that petitioner paid Tan the corresponding amounts; that in turn, Tan paid respondent with checks which were eventually dishonored; that Chy went to Tan‘s house to protest; that Tan replaced these checks with his personal checks and those of his mother; and that after these checks bounced, respondent realized that it could not collect from Tan, hence, it turned to petitioner to recover the amounts. As explained earlier, petitioner has no liability to respondent. Consequently, the latter‘s complaint against him cannot, in any way, prosper and must accordingly be dismissed. Since petitioner was able to prove that he paid Tan the amount of P4,474,200.00 for the hardboards, then respondent Zhandong should collect the amount from the latter. The petition is GRANTED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
623
Saludo v. Security Bank
ANICETO G. SALUDO, JR., Petitioner, -versus- SECURITY BANK CORPORATION, Respondent. (G.R. No. 184041, October 13, 2010, 1st Division) PEREZ, J.: FACTS: On 30 May 1996, Booklight was extended an omnibus line credit facility by SBC in the amount of P10,000,000.00. Said loan was covered by a Credit Agreement and a Continuing Suretyship with petitioner as surety, to secure full payment and performance of the obligations arising from the credit accommodation. Booklight drew several availments of the approved credit facility from 1996 to 1997 and faithfully complied with the terms of the loan. On 30 October 1997, SBC approved the renewal of credit facility of Booklight in the amount of P10,000,000.00 under the prevailing security lending rate.From August 3 to 14, 1998, Booklight executed nine (9) promissory notesin favor of SBC in the aggregate amount of P9,652,725.00. For failure to settle the loans upon maturity, demands were made on Booklight and petitioner for the payment of the obligation but the duo failed to pay. As of 15 May 2000, the obligation of Booklight stood atP10,487,875.41, inclusive of interest past due and penalty. On 16 June 2000, SBC filed against Booklight and herein petitioner an action for collection of sum of money with the RTC. Booklight initially filed a motion to dismiss, which was later on denied for lack of merit. On 7 March 2005, Booklight was declared in default. Consequently, SBC presented its evidence ex-parte. The case against petitioner, however, proceeded and the latter was able to present evidence on his behalf. After trial, the RTC ruled that petitioner is jointly and solidarily liable with Booklight under the Continuing Suretyship Agreement. The Court of Appeals affirmed in toto the HELD of the RTC.Petitioner filed a motion for reconsideration but it was denied by the Court of Appeals on 7 August 2008. Hence, the instant petition. ISSUE: Whether or not petitioner should be held solidarily liable for the second credit facility extended to Booklight. HELD: Yes. There is no novation to speak of. It is the first credit facility that expired and not the Credit Agreement. There was a second loan pursuant to the same credit agreement. The terms and conditions under Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
624
the Credit Agreement continue to apply and the Continuing Suretyship continues to guarantee the Credit Agreement. The lameness of petitioner‘s stand is pointed up by his attempt to escape from liability by labelling the Continuing Suretyship as a contract of adhesion. A contract of adhesion is defined as one in which one of the parties imposes a ready-made form of contract, which the other party may accept or reject, but which the latter cannot modify. One party prepares the stipulation in the contract, while the other party merely affixes his signature or his ‗adhesion‘ thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain on equal footing. A contract of adhesion presupposes that the party adhering to the contract is a weaker party. That cannot be said of petitioner. He is a lawyer. He is deemed knowledgeable of the legal implications of the contract that he is signing. It must be borne in mind, however, that contracts of adhesion are not invalid per se. Contracts of adhesion, where one party imposes a ready-made form of contract on the other, are not entirely prohibited. The one who adheres to the contract is, in reality, free to reject it entirely; if he adheres, he gives his consent. The petition is DENIED
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
625
PCI v. Ng Sheung Ngor
EQUITABLE PCI BANK,AIMEE YU and BEJAN LIONEL APAS, Petitioners, NG SHEUNG NGORdoing business under the name and style “KEN MARKETING,” KEN APPLIANCE DIVISION, INC. and BENJAMIN E. GO, Respondents G.R. No. 171545, December 19, 2007, 1st Division) CORONA, J.: FACTS: On October 7, 2001, respondents Ng Sheung Ngor, Ken Appliance Division, Inc. and Benjamin E. Go filed an action for annulment and/or reformation of documents and contracts against petitioner Equitable PCI Bank and its employees, Aimee Yu and Bejan Lionel Apas, in the Regional Trial Court. They claimed that Equitable induced them to avail of its peso and dollar credit facilities by offering low interest ratesso they accepted Equitable's proposal and signed the bank's pre-printed promissory notes on various dates beginning 1996. They, however, were unaware that the documents contained identical escalation clauses granting Equitable authority to increase interest rates without their consent. Equitableasserted that respondents knowingly accepted all the terms and conditions contained in the promissory notes.In fact, they continuously availed of and benefited from Equitable's credit facilities for five years. After trial, the RTC upheld the validity of the promissory notes. It found that, in 2001 alone, Equitable restructured respondents' loans amounting to US$228,200 and P1,000,000. The trial court, however, invalidated the escalation clause contained therein because it violated the principle of mutuality of contracts. Nevertheless, it took judicial notice of the steep depreciation of the peso during the intervening period and declared the existence of extraordinary deflation. Consequently, the RTC ordered the use of the 1996 dollar exchange rate in computing respondents' dollar-denominated loans. Lastly, because the business reputation of respondents was (allegedly) severely damaged when Equitable froze their accounts, the trial court awarded moral and exemplary damages to them. Equitable and respondents filed their respective notices of appeal. In the March 1, 2004 order of the RTC, both notices were denied due course because Equitable and respondents ―failed to submit proof that they paid their respective appeal fees.‖
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
626
Equitable moved for the reconsideration of the March 1, 2004 order of the RTC on the ground that it did in fact pay the appeal fees. Respondents, on the other hand, prayed for the issuance of a writ of execution. On March 24, 2004, the RTC issued an omnibus order denying Equitable's motion for reconsideration for lack of merit and ordered the issuance of a writ of execution in favor of respondents. According to the RTC, because respondents did not move for the reconsideration of the previous order (denying due course to the parties‘ notices of appeal), the February 5, 2004 decision became final and executory as to both parties and a writ of execution against Equitable was in order. A writ of execution was thereafter issuedand three real properties of Equitable were levied upon. On March 26, 2004, Equitable filed a petition for relief in the RTC from the March 1, 2004 order. It, however, withdrew that petition on March 30, 2004and instead filed a petition for certiorari with an application for an injunction in the CA to enjoin the implementation and execution of the March 24, 2004 omnibus order. On June 16, 2004, the CA granted Equitable's application for injunction. A writ of preliminary injunction was correspondingly issued. Notwithstanding the writ of injunction, the properties of Equitable previously levied upon were sold in a public auction on July 1, 2004. Respondents were the highest bidders and certificates of sale were issued to them. On August 10, 2004, Equitable moved to annul the July 1, 2004 auction sale and to cite the sheriffs who conducted the sale in contempt for proceeding with the auction despite the injunction order of the CA. On October 28, 2005, the CA dismissed the petition for certiorari. It found Equitable guilty of forum shopping because the bank filed its petition for certiorari in the CA several hours before withdrawing its petition for relief in the RTC. Moreover, Equitable failed to disclose, both in the statement of material dates and certificate of non-forum shopping (attached to its petition for certiorari in the CA), that it had a pending petition for relief in the RTC. Equitable moved for reconsideration but it was denied. Thus, this petition. ISSUES: 1. Whether or not the promissory notes are valid. 2. Whether or not the escalation clause violated the principle of mutuality of contract. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
627
HELD: 1.YES.The RTC upheld the validity of the promissory notes despite respondents‘ assertion that those documents were contracts of adhesion. A contract of adhesion is a contract whereby almost all of its provisions are drafted by one party. The participation of the other party is limited to affixing his signature or his ―adhesion‖ to the contract. For this reason, contracts of adhesion are strictly construed against the party who drafted it. It is erroneous, however, to conclude that contracts of adhesion are invalid per se. They are, on the contrary, as binding as ordinary contracts. A party is in reality free to accept or reject it. A contract of adhesion becomes void only when the dominant party takes advantage of the weakness of the other party, completely depriving the latter of the opportunity to bargain on equal footing. That was not the case here. As the trial court noted, if the terms and conditions offered by Equitable had been truly prejudicial to respondents, they would have walked out and negotiated with another bank at the first available instance. But they did not. Instead, they continuously availed of Equitable's credit facilities for five long years. While the RTC categorically found that respondents had outstanding dollar- and peso-denominated loans with Equitable, it, however, failed to ascertain the total amount due (principal, interest and penalties, if any) as of July 9, 2001. The trial court did not explain how it arrived at the amounts of US$228,200 and P1,000,000.[62] In Metro Manila Transit Corporation v. D.M. Consunji, we reiterated that this Court is not a trier of facts and it shall pass upon them only for compelling reasons which unfortunately are not present in this case.Hence, we ordered the partial remand of the case for the sole purpose of determining the amount of actual damages. 2. YES.Escalation clauses are not void per se. However, one ―which grants the creditor an unbridled right to adjust the interest independently and upwardly, completely depriving the debtor of the right to assent to an important modification in the agreement‖ is void. Clauses of that nature violate the principle of mutuality of contracts. Article 1308 of the Civil Code holds that a contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. For this reason, we have consistently held that a valid escalation clause provides: 1.
that the rate of interest will only be increased if the applicable maximum rate of interest is increased by law or by the Monetary Board; and Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
2.
628
that the stipulated rate of interest will be reduced if the applicable maximum rate of interest is reduced by law or by the Monetary Board (de-escalation clause).
Equitable dictated the interest rates if the term (or period for repayment) of the loan was extended. Respondents had no choice but to accept them. This was a violation of Article 1308 of the Civil Code. Furthermore, the assailed escalation clause did not contain the necessary provisions for validity, that is, it neither provided that the rate of interest would be increased only if allowed by law or the Monetary Board, nor allowed de-escalation. For these reasons, the escalation clause was void. With regard to the proper rate of interest, in New Sampaguita Builders v. Philippine National Bank we held that, because the escalation clause was annulled, the principal amount of the loan was subject to the original or stipulated rate of interest. Upon maturity, the amount due was subject to legal interest at the rate of 12% per annum. Consequently, respondents should pay Equitable the interest rates of 12.66% p.a. for their dollar-denominated loans and 20% p.a. for their peso-denominated loans from January 10, 2001 to July 9, 2001. Thereafter, Equitable was entitled to legal interest of 12% p.a. on all amounts due. The petition is GRANTED.
Dio v. St. Ferdinand Memorial
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
629
TERESITA DIO, Petitioner, vs. ST. FERDINAND MEMORIAL PARK, INC. and MILDRED F. TANTOCO, Respondents. (G.R. No. 169578, November 30, 2006, 1st Division) CALLEJO, SR., J.: FACTS: On December 11, 1973, Teresita Dio agreed to buy, on installment basis, a memorial lot from the St. Ferdinand Memorial Park, Inc. (SFMPI) in Lucena City. The 36-square-meter memorial lot is particularly described as Block 2, Section F, Lot 15. The purchase was evidenced by a Pre-Need Purchase Agreementdated December 11, 1973 and denominated as Contract No. 384. She obliged herself to abide by all such rules and regulations governing the SFMPI dated May 25, 1972. SFMPI issued a Deed of Sale and Certificate of Perpetual Care dated April 1, 1974 denominated as Contract No. 284. The ownership of Dio over the property was made subject to the rules and regulations of SFMPI, as well as the government, including all amendments, additions and modifications that may later be adopted. All these were encompassed in Rule 69 of the Rules and Regulation. Meanwhile, the mortal remains of Dio‘s husband and father were interred in the lot at her own expense, without the knowledge and intervention of SFMPI. She engaged the services of a private contractor for the fabrication of niches and improvements on her lot. In August 1974, the remains of Dio‘s daughter were likewise interred in the niche constructed on the lot, again without the knowledge and intervention of SFMPI. In 1986, Dio decided to build a mausoleum on the lot. In September that year, she caused the preparation of a design-plan for the construction of a mausoleum and the bidding out of the project. In the early part of October 1986, Dio informed SFMPI, through its president and controlling stockholder, Mildred F. Tantoco, that she was planning to build a mausoleum on her lot and sought the approval thereof. Dio even showed to Tantoco the plans and project specifications accomplished by her private contractor at an estimated cost of P60,000.00. The plans and specifications were approved, but Tantoco insisted that the mausoleum be built by it or its agents at a minimum cost of P100,000.00 as provided in Rule 69 of the Rules and Regulations the SFMPI. The total amount excluded certain specific designs in the approved plan which if included would cost Dio much more. In a letterdated October 13, 1986, Dio, through counsel, demanded that she be allowed to construct the mausoleum within 10 days, otherwise, she would be impelled to file the necessary action/s against SFMPI and Tantoco.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
630
On October 17, 1986, SFMPI wrote Dio informing her that under Rule 69 of SFMPI Rules and Regulations, she was prohibited from engaging an outside contractor for the construction of buildings, improvements and memorials. A lot owner was only allowed to submit a preferred design as long as it is in accordance with park standards. On December 23, 1986, Dio filed a Complaint for Injunction with Damagesagainst SFMPI and Tantoco before the RTC of Lucena City. She averred that she was not aware of Rule 69 of the SFMPI Rules and Regulations; the amount of P100,000.00 as construction cost of the mausoleum was unconscionable and oppressive. She prayed that, after trial, judgment be rendered in her favor, granting a final injunction perpetually restraining defendants from enforcing the invalid Rule 69 of SFMPI‘s ―Rules for Memorial Work in the Mausoleum of the Park‖ or from refusing or preventing the construction of any improvement upon her property in the park. The court issued a cease and desist order against defendants. On August 3, 1995, the trial court rendered judgment in favor of defendants. On appeal, the CA affirmed the decision of the trial court. The appellate court ratiocinated that when the parties executed the Pre-Need Purchase Agreement, Dio agreed to be bound not only by the existing rules and regulations for the use and governance of the cemetery, but also future ones. Aggrieved, Dio, now petitioner, filed the present petition for review on certiorari. ISSUE: 1. Whether or not petitioner had knowledge of Rule 69 of SFMPI Rules and Regulations for memorial works in the mausoleum areas of the park when the Pre-Need Purchase Agreement and the Deed of Sale was executed; 2. Whether the said rule is valid and binding upon petitioner. HELD: 1. YES. Under the Pre-Need Purchase Agreement executed by petitioner and respondents, the parties covenanted that upon the completion of all payments by the purchaser, the seller would convey to the purchaser a certificate of ownership to the aforesaid interment property for the interment of human remains only. The certificate of SFMPI now existing or which may hereafter be adopted for the government of said cemetery and said certificate shall be in the form used by the seller, a copy of which petitioner acknowledged she had examined and approved. Petitioner agreed to abide by all such rules and regulations governing SFMPI, among them Rule 69 which prevents lot owners from ―contract[ing] other contractors for the construction of the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
631
said buildings and memorial‖ but gives the owners free rein ―to give their own design for the mausoleum to be constructed, as long as it is in accordance with the park standards.‖ Under the Deed of Sale and Certificate of Perpetual Care, petitioner agreed to be bound not only by the existing rules but also by future rules and regulations that may be adopted by respondent SFMPI. Thus, when petitioner executed the Pre-Need Purchase Agreement and conformed to the Deed of Sale, it was with full knowledge of the terms and conditions thereof, including the rules and regulations issued by respondent SFMPI. Hence, petitioner is precluded from asserting that she had no knowledge of said rules and regulations, and that she never consented to comply with them. More importantly, petitioner cannot feign ignorance of said rules. In law, whatever fairly puts a person on inquiry is sufficient notice, where the means of knowledge are at hand, which if pursued by the proper inquiry, the full truth might have been ascertained. 2. YES. Petitioner is obliged to abide by the terms and conditions of the Pre-Need Purchase Agreement and the Deed of Sale, as well as said rules and regulations which formed integral parts of said deeds. Basic is the principle that contracts, once perfected, bind both contracting parties. The parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided these are not contrary to law, morals, good customs, public order, or public policy. It follows that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. The petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
632
PILTEL v. Tecson
PILIPINO TELEPHONE CORPORATION, petitioner, vs. DELFINO TECSON, respondent. (G. R. No. 156966, May 7, 2004, 3rd Division) VITUG, J.: FACTS:On various dates in 1996, Delfino C. Tecson applied for six (6) cellular phone subscriptions with petitioner Pilipino Telephone Corporation (PILTEL), a company engaged in the telecommunications business, which applications were each approved and covered, respectively, by six mobiline service agreements. On 05 April 2001, respondent filed with the Regional Trial Court of Iligan City, Lanao Del Norte, a complaint against petitioner for a "Sum of Money and Damages." Petitioner moved for the dismissal of the complaint on the ground of improper venue, citing a common provision in the mobiline service agreements to the effect that: "Venue of all suits arising from this Agreement or any other suit directly or indirectly arising from the relationship between PILTEL and subscriber shall be in the proper courts of Makati, Metro Manila. Subscriber hereby expressly waives any other venues." The Regional Trial Court of Iligan City, Lanao del Norte, denied petitioner‘s motion to dismiss and required it to file an answer within 15 days from receipt thereof. Petitioner PILTEL filed a motion for the reconsideration, through registered mail, of the order of the trial court. In its subsequent order, the trial court denied the motion for reconsideration. Petitioner filed a petition for certiorari before the Court of Appeals. The Court of Appeals, in its decision, saw no merit in the petition and affirmed the assailed orders of the trial court. Petitioner moved for reconsideration, but the appellate courtdenied the motion. ISSUE: Whether or not the contract is valid and binding. HELD:YES.Section 4, Rule 4, of the Revised Rules of Civil Procedure allows the parties to agree and stipulate in writing, before the filing of an action, on the exclusive venue of any litigation between them. Such an agreement would be valid and binding provided that the stipulation on the chosen venue is exclusive in nature or in intent, that it is expressed in writing by the parties thereto, and that it is entered into before the filing of the suit. The provision contained in paragraph 22 of the "Mobile Service Agreement," a standard contract made out by petitioner PILTEL to its subscribers, apparently accepted and signed by respondent, states that the venue of all suits arising from the agreement, or any other suit directly or indirectly arising from the relationship between PILTEL and subscriber, "shall be in the proper courts of Makati, Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
633
Metro Manila." The added stipulation that the subscriber "expressly waives any other venue" should indicate, clearly enough, the intent of the parties to consider the venue stipulation as being preclusive in character. The appellate court, however, would appear to anchor its decision on the thesis that the subscription agreement, being a mere contract of adhesion, does not bind respondent on the venue stipulation. Indeed, the contract herein involved is a contract of adhesion. But such an agreement is not per se inefficacious. The rule instead is that, should there be ambiguities in a contract of adhesion, such ambiguities are to be construed against the party that prepared it. If, however, the stipulations are not obscure, but are clear and leave no doubt on the intention of the parties, the literal meaning of its stipulations must be held controlling. A contract of adhesion is just as binding as ordinary contracts. It is true that this Court has, on occasion, struck down such contracts as being assailable when the weaker party is left with no choice by the dominant bargaining party and is thus completely deprived of an opportunity to bargain effectively. Nevertheless, contracts of adhesion are not prohibited even as the courts remain careful in scrutinizing the factual circumstances underlying each case to determine the respective claims of contending parties on their efficacy. In the case at bar, respondent secured six (6) subscription contracts for cellular phones on various dates. It would be difficult to assume that, during each of those times, respondent had no sufficient opportunity to read and go over the terms and conditions embodied in the agreements. Respondent continued, in fact, to acquire in the pursuit of his business subsequent subscriptions and remained a subscriber of petitioner for quite sometime. The instant petition is GRANTED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
634
PAL v. CA
PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS and GILDA C. MEJIA, respondents. (G.R. No. 119706, March 14, 1996, 2nd Division) REGALADO, J.: FACTS:On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine Airlines, one (1) unit microwave oven, with a gross weight of 33 kilograms from San Francisco, U.S.A. to Manila, Philippines. Upon arrival, however, of said article in Manila, Philippines, plaintiff discovered that its front glass door was broken and the damage rendered it unserviceable. Demands both oral and written were made by plaintiff against the defendant for the reimbursement of the value of the damaged microwave oven, and transportation charges paid by plaintiff to defendant company. But these demands fell on deaf ears. On September 25, 1990, plaintiff Gilda C. Mejia filed the instant action for damages against defendant in the lower court. The damaged oven is still with defendant. Plaintiff is engaged in (the) catering and restaurant business. Hence, the necessity of the oven. Plaintiff suffered sleepless nights when defendant refused to pay her (for) the broken oven and claims P10,000.00 moral damages, P20,000.00 exemplary damages, P10,000.00 attorney's fees plus P300.00 per court appearance and P15,000.00 monthly loss of income in her business beginning February, 1990. As stated at the outset, respondent Court of Appeals similarly ruled in favor of private respondent by affirming in full the trial court's judgment, with costs against petitioner.
ISSUE: Whether or not the air waybill is a contract of adhesion. HELD: YES. The Air Waybill is a contract of adhesion considering that all the provisions thereof are prepared and drafted only by the carrier. The only participation left of the other party is to affix his signature thereto. A review of jurisprudence on the matter reveals the consistent holding of the Court that contracts of adhesion are not invalid per se and that it has on numerous occasions upheld the binding effect thereof. As explained in Ong Yiu vs. Court of Appeals, et al. Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation. It is what is known as a contract of "adhesion," in regards which it has been said that contracts of adhesion wherein one party imposes a ready-made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
635
free to reject it entirely; if he adheres, he gives his consent, a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence. Thus, there can be no further question as to the validity of the terms of the air waybill, even if the same constitutes a contract of adhesion. Whether or not the provisions thereof particularly on the limited liability of the carrier are binding on private respondent in this instance must be determined from the facts and circumstances involved vis-a-vis the nature of the provisions sought to be enforced, taking care that equity and fair play should characterize the transaction under review.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
636
Ermitano v. CA
SPOUSES LUIS M. ERMITAÑO and MANUELITA C. ERMITAÑO, petitioners, vs. THE COURT OF APPEALS AND BPI EXPRESS CARD CORP., respondents. (G.R. No. 127246, April 21, 1999, 2 nd division) QUISUMBING, J FACTS:Petitioner Luis Ermitaño applied for a credit card from private respondent BPI Express Card Corp. (BECC) on October 8, 1986 with his wife, Manuelita, as extension cardholder. The spouses were given credit cards with a credit limit of P10,000.00. They often exceeded this credit limit without protest from BECC. On August 29, 1989, Manuelita's bag was snatched from her as she was shopping at the Greenbelt Mall in Makati, Metro Manila. Among the items inside the bag was her BECC credit card. That same night she informed, by telephone, BECC of the loss. The call was received by BECC offices through a certain Gina Banzon. This was followed by a letter dated August 30, 1989. She also surrendered Luis' credit card and requested for replacement cards. In her letter, Manuelita stated that she "shall not be responsible for any and all charges incurred [through the use of the lost card] after August 29, 1989. However, when Luis received his monthly billing statement from BECC dated September 20, 1989, the charges included amounts for purchases made on August 30, 1989 through Manuelita's lost card. Two purchases were made, one amounting to P2,350.05 and the other, P607.50. Manuelita received a billing statement dated October 20, 1989 which required her to immediately pay the total amount of P3,197.70 covering the same (unauthorized) purchases. Manuelita again wrote BECC disclaiming responsibility for those charges, which were made after she had served BECC with notice of the loss of her card. Despite the spouses' refusal to pay and the fact that they repeatedly exceeded their monthly credit limit, BECC sent them a notice stating that their cards had been renewed until March 1991. Notwithstanding this, however, BECC continued to include in the spouses' billing statements those purchases made through Manuelita's lost card. Luis protested this billing in his letter dated June 20, 1990. However, BECC, in a letter dated July 13, 1990, pointed out to Luis the following stipulation in their contract: In the event the card is lost or stolen, the cardholder agrees to immediately report its loss or theft in writing to BECC . . . purchases made/incurred arising from the use of the lost/stolen card shall be for the exclusive account of the cardholder and the cardholder continues to be liable for the purchases made through the use of the lost/stolen BPI Express Card until after such notice has been given to BECC and the latter has communicated such loss/theft to its member establishments. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
637
Pursuant to this stipulation, BECC held Luis liable for the amount of P3,197.70 incurred through the use of his wife's lost card, exclusive of interest and penalty charges. In his reply, Luis stressed that the contract BECC was referring to was a contract of adhesion and warned that if BECC insisted on charging him and his wife for the unauthorized purchases, they will sue BECC for damages. This warning notwithstanding, BECC continued to bill the spouses for said purchases. On April 10, 1991, Luis used his credit card to purchase gasoline at a Caltex station. The latter, however, dishonored his card. In reply to Luis' demand for an explanation, BECC wrote that it transferred the balance of his old credit card to his new one, including the unauthorized charges. Consequently, his outstanding balance exceeded his credit limit of P10,00000. He was informed that his credit card had not been cancelled but, since he exceeded his credit limit, he could not avail of his credit privileges. Once more, Luis pointed out that notice of the lost card was given to BECC before the purchases were made. Subsequently, BECC cancelled the spouses' credit cards and advised them to settle the account immediately or risk being sued for collection of said account. Constrained, petitioners sued BECC for damages. The trial court ruled in their favor, stating that there was a waiver on the part of BECC in enforcing the spouses' liability. But, on appeal this decision was reversed. The Court of Appeals stated that the spouses should be bound by the contract, even though it was one of adhesion. Hence, this recourse by petitioners.
ISSUE: Whether or not the respondents are liable for damages. HELD: YES. The contract between the parties in this case is indeed a contract of adhesion, so-called because its terms are prepared by only one party while the other party merely affixes his signature signifying his adhesion thereto. Such contracts are not void in themselves. They are as binding as ordinary contracts. Parties who enter into such contracts are free to reject the stipulations entirely. This Court, however, will not hesitate to rule out blind adherence to such contracts if they prove to be too one-sided under the attendant facts and circumstances. In this case, the cardholder, Manuelita, has complied with what was required of her under the contract with BECC. She immediately notified BECC of the loss of her card on the same day it was lost and, the following day, she sent a written notice of the loss to BECC. That she Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
638
gave such notices to BECC is admitted by BECC in the letter sent to Luis by Roberto L. Maniquiz, head of BECC's Collection Department. Having thus performed her part of the notification procedure, it was reasonable for Manuelita — and Luis, for that matter — to expect that BECC would perform its part of the procedure, which is to forthwith notify its member-establishments. It is not unreasonable to assume that BECC would do this immediately, precisely to avoid any unauthorized charges. Clearly, what happened in this case was that BECC failed to notify promptly the establishment in which the unauthorized purchases were made with the use of Manuelita's lost card. Thus, Manuelita was being liable for those purchases, even if there is no showing that Manuelita herself had signed for said purchases, and after notice by her concerning her card's loss was already given to BECC. The cardholder was no longer in control of the procedure after it has notified BECC of the card's loss or theft. It was already BECC's responsibility to inform its member-establishments of the loss or theft of the card at the soonest possible time. We note that BECC is not a neophyte financial institution, unaware of the intricacies and risks of providing credit privileges to a large number of people. It should have anticipated an occurrence such as the one in this case and devised effective ways and means to prevent it, or otherwise insure itself against such risk. Prompt notice by the cardholder to the credit card company of the loss or theft of his card should be enough to relieve the former of any liability occasioned by the unauthorized use of his lost or stolen card. The questioned stipulation in this case, which still requires the cardholder to wait until the credit card company has notified all its member-establishments, puts the cardholder at the mercy of the credit card company which may delay indefinitely the notification of its members to minimize if not to eliminate the possibility of incurring any loss from unauthorized purchases. Or, as in this case, the credit card company may for some reason fail to promptly notify its members through absolutely no fault of the cardholder. To require the cardholder to still pay for unauthorized purchases after he has given prompt notice of the loss or theft of his card to the credit card company would simply be unfair and unjust. The Court cannot give its assent to such a stipulation which could clearly run against public policy. The Decision of the Regional Trial Court is reinstated.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
639
Uniwide v. Titan-Ikeda
UNIWIDE SALES REALTY AND RESOURCES CORPORATION, petitioner, vs. TITAN-IKEDA CONSTRUCTION AND DEVELOPMENT CORPORATION, respondent. (G.R. No. 126619, December 20, 2006, 3rd Division) TINGA, J.: FACTS:The case originated from an action for a sum of money filed by Titan-Ikeda Construction and Development Corporation against Uniwide Sales Realty and Resources Corporation with the Regional Trial Court arising from Uniwide's non-payment of certain claims billed by Titan after completion of three projects covered by agreements they entered into with each other. Upon Uniwide's motion to dismiss/suspend proceedings and Titan's open court manifestation agreeing to the suspension, Civil Case No. 98-0814 was suspended for it to undergo arbitration. Titan's complaint was thus re-filed with the CIAC. Before the CIAC, Uniwide filed an answer which was later amended and reamended, denying the material allegations of the complaint, with counterclaims for refund of overpayments, actual and exemplary damages, and attorney's fees. The agreements between Titan and Uniwide are briefly described below. The first agreement (Project 1) was a written "Construction Contract" entered into by Titan and Uniwide sometime in May 1991 whereby Titan undertook to construct Uniwide's Warehouse Club and Administration Building in Libis, Quezon City for a fee of P120,936,591.50, payable in monthly progress billings to be certified to by Uniwide's representative. The parties stipulated that the building shall be completed not later than 30 November 1991. As found by the CIAC, the building was eventually finished on 15 February 19928 and turned over to Uniwide. Sometime in July 1992, Titan and Uniwide entered into the second agreement (Project 2) whereby the former agreed to construct an additional floor and to renovate the latter's warehouse located at the EDSA Central Market Area in Mandaluyong City. There was no written contract executed between the parties for this project. Construction was allegedly to be on the basis of drawings and specifications provided by Uniwide's structural engineers. The parties proceeded on the basis of a cost estimate of P21,301,075.77 inclusive of Titan's 20% mark-up. Titan conceded in its complaint to having received P15,000,000.00 of this amount. This project was completed in the latter part of October 1992 and turned over to Uniwide. The parties executed the third agreement (Project 3) in May 1992. In a written "Construction Contract," Titan undertook to construct the Uniwide Sales Department Store Building in Kalookan City for the price ofP118,000,000.00 payable in progress billings to be certified to by Uniwide's representative.It was stipulated that the project shall be Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
640
completed not later than 28 February 1993. The project was completed and turned over to Uniwide in June 1993. Uniwide asserted in its petition that: (a) it overpaid Titan for unauthorized additional works in Project 1 and Project 3; (b) it is not liable to pay the Value-Added Tax (VAT) for Project 1; (c) it is entitled to liquidated damages for the delay incurred in constructing Project 1 and Project 3; and (d) it should not have been found liable for deficiencies in the defectively constructed Project 2. The Arbitral Tribunal conducted a preliminary conference with the parties and thereafter issued a Terms of Reference (TOR) which was signed by the parties. The tribunal also conducted an ocular inspection, hearings, and received the evidence of the parties consisting of affidavits which were subject to cross-examination. On 17 April 1995, after the parties submitted their respective memoranda, the Arbitral Tribunal promulgated a Decision rendering that: (as to project 1) Uniwide is absolved of any liability for the claims made by Titan on this Project; as to project 2, Uniwide is absolved of any liability for VAT payment on this project, the same being for the account of the Titan. On the other hand, Titan is absolved of any liability on the counterclaim for defective construction of this project; Uniwide is held liable for the unpaid balance in the amount of P6,301,075.77 which is ordered to be paid to the Titan with 12% interest per annum commencing from 19 December 1992 until the date of payment; as to project 3, Uniwide is held liable for the unpaid balance in the amount of P5,158,364.63 which is ordered to be paid to the Titan with 12% interest per annum commencing from 08 September 1993 until the date of payment. Lastly, Uniwide is held liable to pay in full the VAT on this project, in such amount as may be computed by the Bureau of Internal Revenue to be paid directly thereto. Uniwide filed a motion for reconsideration which was denied by the CIAC. Uniwide accordingly filed a petition for review with the Court of Appeals, which rendered its decision. Uniwide's motion for reconsideration was likewise denied by the Court of Appeals. Hence this petition.
ISSUES: (1) Whether or not Uniwide is entitled to a return of the amount it allegedly paid by mistake to Titan for additional works done on Project 1; (2) Whether or not Uniwide is liable for the payment of the ValueAdded Tax (VAT) on Project 1; (3) Whether or not Uniwide is entitled to liquidated damages for Projects 1 and 3; and
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
641
HELDS: (1) NO. Yet even conceding that the additional works on Project 1 were not authorized or committed into writing, the undisputed fact remains that Uniwide paid for these additional works. Thus, to claim a refund of payments made under the principle of solutio indebiti, Uniwide must be able to establish that these payments were made through mistake. Again, this is a factual matter that would have acquired a mantle of invulnerability had it been determined by both the CIAC and the Court of Appeals. However, both bodies failed to arrive at such a conclusion. Moreover, Uniwide is unable to direct the attention of the Court to any pertinent part of the record that would indeed establish that the payments were made by reason of mistake. (2) Yes. Uniwide claims that the VAT was already included in the contract price for Project 1. Citing Sections 99 and 102 of the National Internal Revenue Code, Uniwide asserts that VAT, being an indirect tax, may be shifted to the buyer by including it in the cash or selling price and it is entirely up to the buyer to agree or not to agree to absorb the VAT.Thus, Uniwide concludes, if there is no provision in the contract as to who should pay the VAT, it is presumed that it would be the seller. The contract for Project 1 is silent on which party should shoulder the VAT while the contract for Project 3 contained a provision to the effect that Uniwide is the party responsible for the payment of the VAT. Thus, when Uniwide paid the amount of P2,400,000.00 as billed by Titan for VAT, it assumed that it was the VAT for Project 3. However, the CIAC and the Court of Appeals found that the same was for Project 1. Thus the amount of P2,400,000.00which was paid by Uniwide is the VAT for Project 1. This conclusion was drawn from an Order of Paymentwherein Titan billed Uniwide the amount of P2,400,000.00 as "Value Added Tax based on P60,000,000.00 Contract," computed on the basis of 4% of P60,000,000.00. Said document which was approved by the President of Uniwide expressly indicated that the project involved was the "UNIWIDE SALES WAREHOUSE CLUB & ADMIN BLDG." located at "90 E. RODRIGUEZ JR. AVE., LIBIS," The reduced base for the computation of the tax, according to the Court of Appeals, was an indication that the parties agreed to pass the VAT for Project 1 to Uniwide but based on a lower contract price. (3) No. The Rule of Procedure Governing Construction Arbitration promulgated by the CIAC contains no provision on the application of the Rules of Court to arbitration proceedings, even in a suppletory capacity. Hypothetically admitting that there is such a provision, suppletory application is made only if it would not contravene a specific provision in the arbitration rules and the spirit thereof. The Tribunal holds that such importation of the Rules of Court provision on amendment to conform to evidence would contravene the spirit, if not the letter of the CIAC rules. This is for the reason that the formulation of the Terms of Reference is done with the active participation of the parties and their Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
642
counsel themselves. The TOR is further required to be signed by all the parties, their respective counsel and all the members of the Arbitral Tribunal. Unless the issues thus carefully formulated in the Terms of Reference were expressly showed to be amended, issues outside thereof may not be resolved. As already noted in the Decision, "no attempt was ever made by the Uniwide to modify the TOR in order to accommodate the issues related to its belated counterclaim" on this issue. Arbitration has been defined as "an arrangement for taking and abiding by the judgment of selected persons in some disputed matter, instead of carrying it to established tribunals of justice, and is intended to avoid the formalities, the delay, the expense and vexation of ordinary litigation."Voluntary arbitration, on the other hand, involves the reference of a dispute to an impartial body, the members of which are chosen by the parties themselves, which parties freely consent in advance to abide by the arbitral award issued after proceedings where both parties had the opportunity to be heard. The basic objective is to provide a speedy and inexpensive method of settling disputes by allowing the parties to avoid the formalities, delay, expense and aggravation which commonly accompany ordinary litigation, especially litigation which goes through the entire hierarchy of courts.As an arbitration body, the CIAC can only resolve issues brought before it by the parties through the TOR which functions similarly as a pre-trial brief. Thus, if Uniwide's claim for liquidated damages was not raised as an issue in the TOR or in any modified or amended version of it, the CIAC cannot make a HELD on it. The Rules of Court cannot be used to contravene the spirit of the CIAC rules, whose policy and objective is to "provide a fair and expeditious settlement of construction disputes through a non-judicial process which ensures harmonious and friendly relations between or among the parties." Thus it must further be shown that delay was attributable to the contractor if not otherwise justifiable. Contrarily, Uniwide's belated claim constitutes an admission that the delay was justified and implies a waiver of its right to such damages. The petition is DENIED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
643
Heirs of Salas v. Laperal
HEIRS OF AUGUSTO L. SALAS, JR., namely: TERESITA D. SALAS for herself and as legal guardian of the minor FABRICE CYRILL D. SALAS, MA. CRISTINA S. LESACA, and KARINA TERESA D. SALAS, petitioners, vs. LAPERAL REALTY CORPORATION, ROCKWAY REAL ESTATE CORPORATION, SOUTH RIDGE VILLAGE, INC., MAHARAMI DEVELOPMENT CORPORATION, Spouses THELMA D. ABRAJANO and GREGORIO ABRAJANO, OSCAR DACILLO, Spouses VIRGINIA D. LAVA and RODEL LAVA, EDUARDO A. VACUNA, FLORANTE DE LA CRUZ, JESUS VICENTE B. CAPELLAN, and the REGISTER OF DEEDS FOR LIPA CITY, respondents. (G.R. No. 135362, December 13, 1999, 2nd division) DE LEON, JR., J.: FACTS: Salas, Jr. was the registered owner of a vast tract of land in Lipa City, Batangas spanning 1,484,354 square meters. On May 15, 1987, he entered into an Owner-Contractor Agreement with respondent Laperal Realty Corporation to render and provide complete (horizontal) construction services on his land. On September 23, 1988, Salas, Jr. executed a Special Power of Attorney in favor of respondent Laperal Realty to exercise general control, supervision and management of the sale of his land, for cash or on installment basis. On June 10, 1989, Salas, Jr. left his home in the morning for a business trip to Nueva Ecija. He never returned. On August 6, 1996, Teresita Diaz Salas filed with the Regional Trial Court of Makati City a verified petition for the declaration of presumptive death of her husband, Salas, Jr., who had then been missing for more than seven (7) years. It was granted on December 12, 1996. Meantime, respondent Laperal Realty subdivided the land of Salas, Jr. and sold subdivided portions thereof to respondents Rockway Real Estate Corporation and South Ridge Village, Inc. on February 22, 1990; to respondent spouses Abrajano and Lava and Oscar Dacillo on June 27, 1991; and to respondents Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capalan on June 4, 1996 (all of whom are hereinafter referred to as respondent lot buyers). On February 3, 1998, petitioners as heirs of Salas, Jr. filed in the Regional Trial Court of Lipa City a Complaint for declaration of nullity of sale, reconveyance, cancellation of contract, accounting and damages against herein respondents. On April 24, 1998, respondent Laperal Realty filed a Motion to Dismiss on the ground that petitioners failed to submit their grievance to arbitration as required under Article VI of the Agreement. On August 9, 1998, the trial court issued the herein assailed Order dismissing petitioners' Complaint for non-compliance with the foregoing arbitration clause. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
644
Hence this petition. ISSUE:Whether or not rescission is the proper remedy. HELD:No. For while rescission, as a general rule, is an arbitrable issue, they impleaded in the suit for rescission the respondent lot buyers who are neither parties to the Agreement nor the latter's assigns or heirs. Consequently, the right to arbitrate as provided in Article VI of the Agreement was never vested in respondent lot buyers. Respondent Laperal Realty, as a contracting party to the Agreement, has the right to compel petitioners to first arbitrate before seeking judicial relief. However, to split the proceedings into arbitration for respondent Laperal Realty and trial for the respondent lot buyers, or to hold trial in abeyance pending arbitration between petitioners and respondent Laperal Realty, would in effect result in multiplicity of suits, duplicitous procedure and unnecessary delay. On the other hand, it would be in the interest of justice if the trial court hears the complaint against all herein respondents and adjudicates petitioners' rights as against theirs in a single and complete proceeding. The instant petition is GRANTED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
645
Medrano v. CA
BIENVENIDO R. MEDRANO and IBAAN RURAL BANK, petitioners, vs. COURT OF APPEALS, PACITA G. BORBON, JOSEFINA E. ANTONIO and ESTELA A. FLOR, respondents. (G.R. No. 150678, February 18, 2005, 2 nd Division) CALLEJO, SR., J.: FACTS:Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank, a bank owned by the Medrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law, to look for a buyer of a foreclosed asset of the bank, a 17-hectare mango plantation priced at P2,200,000.00, located in Ibaan, Batangas. Mr. Dominador Lee, a businessman from Makati City, was a client of respondent Mrs. Pacita G. Borbon, a licensed real estate broker. The two met through a previous transaction where Lee responded to an ad in a newspaper put up by Borbon for an 8-hectare property in Lubo, Batangas, planted with atis trees. Lee expressed that he preferred a land with mango trees instead. Borbon promised to get back to him as soon as she would be able to find a property according to his specifications. Borbon relayed to her business associates and friends that she had a ready buyer for a mango orchard. Flor then advised her that her cousin-in-law owned a mango plantation which was up for sale. She told Flor to confer with Medrano and to give them a written authority to negotiate the sale of the property. Thus, on September 3, 1986, Medrano issued the Letter of Authority to respondents. The letter served as the authority of the latter to negotiate with any prospective buyer for the sale of a certain real estate property more specifically a mango plantation. Medrano also promised to pay the respondents for their labor and effort in finding a purchaser thereof, a commission of 5% of the total purchase price to be agreed upon by the buyer and seller. The respondents arranged for an ocular inspection of the property together with Lee which never materialized – the first time was due to inclement weather; the next time, no car was available for the tripping to Batangas. Lee then called up Borbon and told her that he was on his way to Lipa City to inspect another property, and might as well also take a look at the property Borbon was offering. Since Lee was in a hurry, the respondents could no longer accompany him at the time. Thus, he asked for the exact address of the property and the directions on how to reach the lot in Ibaan from Lipa City. Thereupon, Lee was instructed to get in touch with Medrano‘s daughter and also an officer of the bank, Mrs. Teresa Ganzon, regarding the property. Two days after the visit, respondent Josefina Antonio called Lee to inquire about the result of his ocular inspection. Lee told her that the mango trees "looked sick" so he was bringing an agriculturist to the property. Three weeks thereafter, Antonio called Lee again to make a Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
646
follow-up of the latter‘s visit to Ibaan. Lee informed her that he already purchased the property and had made a down payment of P1,000,000.00. The remaining balance of P1,200,000.00 was to be paid upon the approval of the incorporation papers of the corporation he was organizing by the Securities and Exchange Commission. According to Antonio, Lee asked her if they had already received their commission. She answered "no," and Lee expressed surprise over this. A Deed of Sale was eventually executed on November 6, 1986 between the bank, represented by its President/General Manager Teresa M. Ganzon (as Vendor) and KGB Farms, Inc., represented by Dominador Lee (as Vendee), for the purchase price of P1,200,000.00. Since the sale of the property was consummated, the respondents asked from the petitioners their commission, or 5% of the purchase price. The petitioners refused to pay and offered a measly sum of P5,000.00 each. Hence, the respondents were constrained to file an action against herein petitioners. After the case was submitted for decision, Medrano died, but no substitution of party was made at this time. The trial court rendered a Decision in favor of the respondents. The petitioners were ordered to pay, jointly and severally, the 5% broker‘s commission to herein respondents. The trial court found that the letter of authority was valid and binding as against Medrano and the Ibaan Rural bank. Medrano signed the said letter for and in behalf of the bank, and as owner of the property, promising to pay the respondents a 5% commission for their efforts in looking for a purchaser of the property. He is, therefore, estopped from denying liability on the basis of the letter of authority he issued in favor of the respondents. The trial court further stated that the sale of the property could not have been possible without the representation and intervention of the respondents. As such, they are entitled to the broker‘s commission of 5% of the selling price of P1,200,000.00 as evidenced by the deed of sale. On October 10, 1994, the heirs of Bienvenido Medrano filed a Motion for Reconsideration praying that the late Bienvenido Medrano be substituted by his heirs. The trial court denied the motion for reconsideration. Hence, the heirs of Medrano also filed their notice of appeal. On appeal, the petitioners reiterated their stance that the letter of authority was not binding and enforceable, as the same was signed by Medrano, who was not actually the owner of the property. They refused to give the respondents any commission, since the latter did not perform any act to consummate the sale. On May 3, 2001, the CA promulgated the assailed decision affirming the finding of the trial court that the letter of authority was Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
647
valid and binding. Applying the principle of agency, the appellate court ruled that Bienvenido Medrano constituted the respondents as his agents, granting them authority to represent and act on behalf of the former in the sale of the 17-hectare mango plantation. Undaunted by the CA‘s unfavorable decision, the petitioners filed the instant petition. ISSUE:Whether or not the Letter of Authority is valid and binding upon the heirs of Medrano. HELD:Yes. The letter of authority must be read as a whole and not in its truncated parts. Certainly, it was not the intention of Medrano to expect the respondents to do just that (to negotiate) when he issued the letter of authority. The clear intention is to reward the respondents for procuring a buyer for the property. Before negotiating a sale, a broker must first and foremost bring in a prospective buyer. It has been held that a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made. The essential feature of a broker‘s conventional employment is merely to procure a purchaser for a property ready, able, and willing to buy at the price and on the terms mutually agreed upon by the owner and the purchaser. And it is not a prerequisite to the right to compensation that the broker conduct the negotiations between the parties after they have been brought into contact with each other through his efforts. The case of Macondray v. Sellner is quite instructive: The business of a real estate broker or agent, generally, is only to find a purchaser, and the settled rule as stated by the courts is that, in the absence of an express contract between the broker and his principal, the implication generally is that the broker becomes entitled to the usual commissions whenever he brings to his principal a party who is able and willing to take the property and enter into a valid contract upon the terms then named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly. Notably, there are cases where the right of the brokers to recover commissions were upheld where they actually took no part in the negotiations, never saw the customer, and even some in which they did nothing except advertise the property, as long as it can be shown that they were the efficient cause of the sale. In the case at bar, the role of the respondents in the transaction is undisputed. Whether or not they participated in the negotiations of the sale is of no moment. Armed with an authority to procure a purchaser and with a license to act as broker, we see no reason why the respondents cannot recover compensation for their efforts when, in fact, they are the procuring cause of the sale. Medrano‘s obligation to pay the respondents commission for their labor and effort in finding a purchaser or a buyer for the described parcel Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
648
of land is unquestionable. In the absence of fraud, irregularity or illegality in its execution, such letter-authority serves as a contract, and is considered as the law between the parties. The petition is DENIED due course.
Tan v. Gullas Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
649
MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAÑA, petitioners, vs. EDUARDO R. GULLAS and NORMA S. GULLAS, respondents. (G.R. No. 143978 , December 3, 2002, 1 st Division) YNARES-SANTIAGO, J.: FACTS: Private respondents, Spouses Eduardo R. Gullas and Norma S. Gullas, were the registered owners of a parcel of land in the Municipality of Minglanilla, Province of Cebu, measuring 104,114 square meters with Transfer Certificate of Title No. 31465. On June 29, 1992, they executed a special power of attorney authorizing petitioners Manuel B. Tan, a licensed real estate broker, and his associates Gregg M. Tecson and Alexander Saldaña, to negotiate for the sale of the land at Five Hundred Fifty Pesos (P550.00) per square meter, at a commission of 3% of the gross price. The power of attorney was non-exclusive and effective for one month from June 29, 1992.7 On the same date, petitioner Tan contacted Engineer Edsel Ledesma, construction manager of the Sisters of Mary of Banneaux, Inc., a religious organization interested in acquiring a property in the Minglanilla area. In the morning of July 1, 1992, petitioner Tan visited the property with Engineer Ledesma. Thereafter, the two men accompanied Sisters Michaela Kim and Azucena Gaviola, representing the Sisters of Mary, to see private respondent Eduardo Gullas in his office at the University of Visayas. The Sisters, who had already seen and inspected the land, found the same suitable for their purpose and expressed their desire to buy it. However, they requested that the selling price be reduced to Five Hundred Thirty Pesos (P530.00) per square meter instead of Five Hundred Fifty Pesos (P550.00) per square meter. Private respondent Eduardo Gullas referred the prospective buyers to his wife. It was the first time that the buyers came to know that private respondent Eduardo Gullas was the owner of the property. On July 3, 1992, private respondents agreed to sell the property to the Sisters of Mary, and subsequently executed a special power of attorney in favor of Eufemia Cañete, giving her the special authority to sell, transfer and convey the land at a fixed price of Two Hundred Pesos (P200.00) per square meter. On July 17, 1992, attorney-in-fact Eufemia Cañete executed a deed of sale in favor of the Sisters of Mary for the price of Twenty Million Eight Hundred Twenty Two Thousand Eight Hundred Pesos (P20,822.800.00), or at the rate of Two Hundred Pesos (P200.00) per square meter. The buyers subsequently paid the corresponding taxes. Thereafter, the Register of Deeds of Cebu Province issued TCT No. 75981 in the name of the Sisters of Mary of Banneaux, Inc.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
650
Earlier, on July 3, 1992, in the afternoon, petitioners went to see private respondent Eduardo Gullas to claim their commission, but the latter told them that he and his wife have already agreed to sell the property to the Sisters of Mary. Private respondents refused to pay the broker‘s fee and alleged that another group of agents was responsible for the sale of land to the Sisters of Mary. On August 28, 1992, petitioners filed a complaint against the defendants for recovery of their broker‘s fee in the sum of One Million Six Hundred Fifty Five Thousand Four Hundred Twelve and 60/100 Pesos (P1,655,412.60), as well as moral and exemplary damages and attorney‘s fees. They alleged that they were the efficient procuring cause in bringing about the sale of the property to the Sisters of Mary, but that their efforts in consummating the sale were frustrated by the private respondents who, in evident bad faith, malice and in order to evade payment of broker‘s fee, dealt directly with the buyer whom petitioners introduced to them. They further pointed out that the deed of sale was undervalued obviously to evade payment of the correct amount of capital gains tax, documentary stamps and other internal revenue taxes. After trial, the lower court rendered judgment in favor of petitioners. Both parties appealed to the Court of Appeals. The Court of Appeals reversed and set aside the lower court‘s decision and rendered another judgment dismissing the complaint. Hence, this appeal. ISSUE:Whether or not the petitioners are entitled to the brokerage commission. HELD:Yes. Indeed, it is readily apparent that private respondents are trying to evade payment of the commission which rightfully belongs to petitioners as brokers with respect to the sale. There was no dispute as to the role that petitioners played in the transaction. At the very least, petitioners set the sale in motion. They were not able to participate in its consummation only because they were prevented from doing so by the acts of the private respondents. In the case of Alfred Hahn v. Court of Appeals and Bayerische Motoren Werke Aktiengesellschaft (BMW) the Court ruled that, "An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made‖. Clearly, therefore, petitioners, as brokers, should be entitled to the commission whether or not the sale of the property subject matter of the contract was concluded through their efforts. The petition is GRANTED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
651
Gozun v. Mercado
JESUS M. GOZUN, petitioner, vs. JOSE TEOFILO T. MERCADO a.k.a. „DON PEPITO MERCADO, respondent. (G.R. No. 167812, December 19, 2006, 3 rd Division) CARPIO MORALES, J.: FACTS:In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga. Upon respondent‘s request, petitioner, owner of JMG Publishing House, a printing shop located in San Fernando, Pampanga, submitted to respondent draft samples and price quotation of campaign materials. By petitioner‘s claim, respondent‘s wife had told him that respondent already approved his price quotation and that he could start printing the campaign materials, hence, he did print campaign materials like posters bearing respondent‘s photograph, leaflets containing the slate of party candidates, sample ballots, poll watcher identification cards, and stickers. Given the urgency and limited time to do the job order, petitioner availed of the services and facilities of Metro Angeles Printing and of St. Joseph Printing Press, owned by his daughter Jennifer Gozun and mother Epifania Macalino Gozun, respectively. Petitioner delivered the campaign materials to respondent‘s headquarters along Gapan-Olongapo Road in San Fernando, Pampanga. Meanwhile, on March 31, 1995, respondent‘s sister-in-law, Lilian Soriano obtained from petitioner "cash advance" of P253,000 allegedly for the allowances of poll watchers who were attending a seminar and for other related expenses. Lilian acknowledged on petitioner‘s 1995 diary receipt of the amount. Petitioner later sent respondent a Statement of Account in the total amount of P2,177,906 itemized as follows:P640,310 for JMG Publishing House; P837,696 for Metro Angeles Printing; P446,900 for St. Joseph Printing Press; and P253,000, the "cash advance" obtained by Lilian. On August 11, 1995, respondent‘s wife partially paid P1,000,000 to petitioner who issued a receipt therefor. Despite repeated demands and respondent‘s promise to pay, respondent failed to settle the balance of his account to petitioner. Petitioner and respondent being compadres, they having been principal sponsors at the weddings of their respective daughters, waited for more than three (3) years for respondent to honor his promise but to no avail, compelling petitioner to endorse the matter to his counsel who sent respondent a demand letter. Respondent, however, failed to heed the demand.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
652
Petitioner thus filed with the Regional Trial Court a complaint against respondent to collect the remaining amount of P1,177,906 plus "inflationary adjustment" and attorney‘s fees. The trial court rendered judgment in favor of petitioner. The Court ordered respondent to pay the plaintiff the sum of P1,177,906.00 plus 12% interest per annum from the filing of this complaint until fully paid;To pay the sum of P50,000.00 as attorney‘s fees and the costs of suit.Also as earlier adverted to, the Court of Appeals reversed the trial court‘s decision and dismissed the complaint for lack of cause of action. Hence, the present petition. ISSUE: Whether or not Lilian R. Soriano was authorized by the respondent to receive the cash advance from the petitioner in the amount of P253,000.00. HELD:No.Nowhere in the note can it be inferred that defendant-appellant was connected with the said transaction. Under Article 1317 of the New Civil Code, a person cannot be bound by contracts he did not authorize to be entered into his behalf. It bears noting that Lilian signed in the receipt in her name alone, without indicating therein that she was acting for and in behalf of respondent. She thus bound herself in her personal capacity and not as an agent of respondent or anyone for that matter. It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in fact authorized to make the mortgage, if he has not acted in the name of the principal. The decision of the Regional Trial Court is reinstated.
Sta. Lucia Realty vs. Sps. Buenaventura
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
653
STA. LUCIA REALTY & DEVELOPMENT, INC., Petitioner, vs. SPOUSES FRANCISCO & EMELIA* BUENAVENTURA, as represented by RICARDO SEGISMUNDO,Respondents. (G.R. No. 177113, October 2, 2009, 3rd Division) YNARES-SANTIAGO, J.: FACTS:On January 16, 1996, respondent-spouses Francisco Segismundo and Emilia Buenaventura, represented by Ricardo Segismundo, filed before the Housing and Land Use Regulatory Board (HLRUB) a Complaint against petitioner Sta. Lucia Realty & Development, Inc. for Specific Performance, Damages and Attorney‘s Fees.Respondents alleged that they bought a lot known as Lot 3, Block 4, Phase II at Greenwood Executive Village, Cainta, Rizal from Loida Gonzales Alfonso on August 16, 1989; that the said lot is part of a subdivision project owned and being developed by petitioner; that in the course of the construction of their house, respondents discovered that their lot had been subdivided and occupied by Marilou Panlaque and Ma. Veronica Banez ; and that like respondents, the two occupants were also issued a construction permit by petitioner. Respondents thus demanded from petitioner the rightful possession of their lot; but to no avail. On June 16, 1998, the HLURB‘s Arbiterfor the National Capital Region (NCR) Field Office issued a Decision directing respondent Sta. Lucia Realty and Development Corporation, Inc. to cause to be vacated complainant‘s lot; In the alternative, the aforesaid respondent is ordered to reimburse the complainant the current market value of the subdivision lot which shall in no case be less than P4,500.00 per square meter, the prevailing price in the area; The HLURB Arbiter found that while RCD Realty Corporation constructed a residential building on the wrong lot, such construction was allowed by petitioner as evidenced by the permit it issued. As the owner-developer of the subdivision project, petitioner knew the location of all lots therein and was tasked to properly enforce the restrictions it caused to be annotated on their corresponding certificates of title. The HLURB Arbiter thus concluded that it was petitioner‘s neglect that ultimately led to the instant dispute. On June 24, 1999, the HLURB Board of Commissioners affirmed the Decision of the HLURB Arbiter with modification that the market value of the subject lot be reduced from P4,500.00 to P3,200.00 per square meter, plus 12% interest per annum from the time of the filing of the complaint. On July 18, 2003, the Office of the President issued a Decision affirming the Decision of the HLURB Board of Commissioners. Subsequently, it issued a Resolution dated November 28, 2003 denying petitioner‘s Motion for Reconsideration. On December 21, 2006, the Court of Appeals affirmed the Decision of the Office of the President. The appellate court found that it was petitioner who caused the confusion in the identity of the lots by its issuance of a construction permit to RCD Realty Corporation; that petitioner was remiss and negligent in complying with its obligations Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
654
towards its buyers, their heirs, assignees, and/or successors-in-interest when it failed to deliver the property described in respondents‘ title. On March 21, 2007, the Court of Appeals denied petitioner‘s Motion for Reconsideration. Hence, this Petition for Review on Certiorari. ISSUE: Whether or notPetitioner has no privity of contract with respondents as it did not directly sell the subject property to them. HELD: No.Petitioner originally sold the subject lot to Alfonso, and the latter subsequently sold the same to herein respondents. As assignees or successors-in-interest of Alfonso to Lot 3, Block 4, Phase II in petitioner‘s subdivision project, respondents succeed to what rights the former had; and what is valid and binding against Alfonso is also valid and binding as against them. In effect, respondents stepped into the shoes of Alfonso and such transfer of rights also vests upon them the power to claim ownership and the authority to demand to build a residential house on the lot to the same extent as Alfonso could have enforced them against petitioner. Article 1311 of the New Civil Code states that, "contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law." In this case, the rights and obligations between petitioner and Alfonso are transmissible. There was no mention of a contractual stipulation or provision of law that makes the rights and obligations under the original sales contract for Lot 3, Block 4, Phase II intransmissible. Hence, Alfonso can transfer her ownership over the said lot to respondents and petitioner is bound to honor its corresponding obligations to the transferee or new lot owner in its subdivision project. Having transferred all rights and obligations over Lot 3, Block 4, Phase II to respondents, Alfonso could no longer be considered as an indispensable party. An indispensable party is one who has such an interest in the controversy or subject matter that a final adjudication cannot be made in his absence, without injuring or affecting that interest. Contrary to petitioner‘s claim, Alfonso no longer has an interest on the subject matter or the present controversy, having already sold her rights and interests on Lot 3, Block 4, Phase II to herein respondents. Petitioner was remiss and negligent in the performance of its obligations towards its buyers, their heirs, assignees, and/or successorsin-interest; and that it was petitioner‘s negligence which caused the confusion on the identity of the lot, which likewise resulted to the erroneous construction done by RCD Realty Corporation. Petitioner cannot pass the blame to RCD Realty Corporation because it is undisputed that it issued a construction permit for Lot 3, Block 4, Phase II – the property of respondents. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
655
The Petition is PARTIALLY GRANTED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
656
Chan v. Maceda Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
657
JOSEPH CHAN, WILSON CHAN and LILY CHAN, petitioners, vs. BONIFACIO S. MACEDA, JR., respondent. (G.R. No. 142591 , April 30, 2003, 3rd Division) SANDOVAL-GUTIERREZ, J.: FACTS:On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent, obtained a P7.3 million loan from the Development Bank of the Philippines for the construction of his New Gran Hotel Project in Tacloban City. Thereafter, on September 29, 1976, respondent entered into a building construction contract with Moreman Builders Co., Inc. They agreed that the construction would be finished not later than December 22, 1977. Respondent purchased various construction materials and equipment in Manila. Moreman, in turn, deposited them in the warehouse of Wilson and Lily Chan, herein petitioners. The deposit was free of charge. Unfortunately, Moreman failed to finish the construction of the hotel at the stipulated time. Hence, on February 1, 1978, respondent filed with the then Court of First Instance (CFI, now Regional Trial Court), an action for rescission and damages against Moreman. On November 28, 1978, the CFI rendered its Decision rescinding the contract between Moreman and respondent and awarding to the latter P445,000.00 as actual, moral and liquidated damages; P20,000.00 representing the increase in the construction materials; and P35,000.00 as attorney's fees. Moreman interposed an appeal to the Court of Appeals but the same was dismissed on March 7, 1989 for being dilatory. He elevated the case to this Court via a petition for review on certiorari. In a Decision dated February 21, 1990, the Court denied the petition. On April 23, 1990, an Entry of Judgment was issued. Meanwhile, during the pendency of the case, respondent ordered petitioners to return to him the construction materials and equipment which Moreman deposited in their warehouse. Petitioners, however, told them that Moreman withdrew those construction materials in 1977. Hence, on December 11, 1985, respondent filed with the Regional Trial Court an action for damages with an application for a writ of preliminary attachment against petitioners.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
658
In the meantime, on October 30, 1986, respondent was appointed Judge of the Regional Trial Court, Branch 12, San Jose Antique. On August 25, 1989, or after almost four (4) years, the trial court dismissed respondent's complaint for his failure to prosecute and for lack of interest." On September 6, 1994, or five years thereafter, respondent filed a motion for reconsideration, but the same was denied because of the failure of respondent and his counsel to appear on the scheduled hearing. On October 14, 1994, respondent filed a second motion for reconsideration. This time, the motion was granted and the case was ordered reinstated on January 10, 1995, or ten (10) years from the time the action was originally filed. Thereafter, summons, together with the copies of the complaint and its annexes, were served on petitioners. On March 2, 1995, counsel for petitioners filed a motion to dismiss on several grounds. Respondent, on the other hand, moved to declare petitioners in default on the ground that their motion to dismiss was filed out of time and that it did not contain any notice of hearing. On April 27, 1995, the trial court issued an order declaring petitioners in default. Petitioners filed with the Court of Appeals a petition for certiorari to annul the trial court's order of default, but the same was dismissed. The case reached this Court, and in a Resolution dated October 25, 1995, the Court affirmed the assailed order of the Court of Appeals. On November 29, 1995, the corresponding Entry of Judgment was issued. Thus, upon the return of the records to the RTC, respondent was allowed to present his evidence ex-parte. On December 26, 1996, the trial court rendered a decision ordering defendants to jointly and severally pay plaintiff. Petitioners then elevated the case to the Court of Appeals. On June 17, 1999, the Appellate Court affirmed in toto the trial court's judgment. Hence, this petition for review on certiorari.
ISSUE: (1) Has respondent presented proof that the construction materials and equipment were actually in petitioners' warehouse when he asked that the same be turned over to him? Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
659
(2) If so, does respondent have the right to demand the release of the said materials and equipment or claim for damages?
HELD: (1)No. Under Article 1311 of the Civil Code, contracts are binding upon the parties (and their assigns and heirs) who execute them. When there is no privity of contract, there is likewise no obligation or liability to speak about and thus no cause of action arises. Specifically, in an action against the depositary, the burden is on the plaintiff to prove the bailment or deposit and the performance of conditions precedent to the right of action. A depositary is obliged to return the thing to the depositor, or to his heirs or successors, or to the person who may have been designated in the contract. In the present case, the record is bereft of any contract of deposit, oral or written, between petitioners and respondent. If at all, it was only between petitioners and Moreman. And granting arguendo that there was indeed a contract of deposit between petitioners and Moreman, it is still incumbent upon respondent to prove its existence and that it was executed in his favor. However, respondent miserably failed to do so. The only pieces of evidence respondent presented to prove the contract of deposit were the delivery receipts. Significantly, they areunsigned and not duly received or authenticated by either Moreman, petitioners or respondent or any of their authorized representatives. Hence, those delivery receipts have no probative value at all. While our laws grant a person the remedial right to prosecute or institute a civil action against another for the enforcement or protection of a right, or the prevention or redress of a wrong, every cause of action ex-contractu must be founded upon a contract, oral or written, express or implied. Moreover, respondent also failed to prove that there were construction materials and equipment in petitioners' warehouse at the time he made a demand for their return. (2) No. Petitioners are still not liable because, as expressly provided for in Article 2199 of the Civil Code, actual or compensatory damages cannot be presumed, but must be proved with reasonable degree of certainty. A court cannot rely on speculations, conjectures, or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have been suffered by the injured party and on the best obtainable evidence of the actual amount thereof. It must point out
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
660
specific facts which could afford a basis for measuring whatever compensatory or actual damages are borne. Considering our findings that there was no contract of deposit between petitioners and respondent or Moreman and that actually there were no more construction materials or equipment in petitioners' warehouse when respondent made a demand for their return, the Court holds that he has no right whatsoever to claim for damages. The petition is GRANTED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
661
Baluyot vs. CA
TIMOTEO BALUYOT, JAIME BENITO, BENIGNO EUGENIO, ROLANDO GONZALES, FORTUNATO FULGENCIO and CRUZ-NA-LIGAS HOMESITE ASSOCIATION, INC., petitioners, vs. THE HONORABLE COURT OF APPEALS, THE QUEZON CITY GOVERNMENT and UNIVERSITY OF THE PHILIPPINES, respondents. (G.R. No. 122947, July 22, 1999, 2nd Division) MENDOZA, J.: FACTS:Petitioners Timoteo Baluyot, Jaime Benito, Benigno Eugenio, Rolando Gonzales, and Fortunato Fulgencio are residents of Barangay Cruz-na-Ligas, Diliman, Quezon City. The Cruz-na-Ligas Homesite Association, Inc. is a non-stock corporation of which petitioners and other residents of Barangay Cruz-na-Ligas are members. On March 13, 1992, petitioners filed a complaint for specific performance and damages against, private respondent University of the Philippines before the Regional Trial Court. The complaint was later on amended to include private respondent Quezon City government as defendant. However, the Regional Trial Court denied the application. Petitioners moved for a reconsideration of the above order. Without resolving petitioners' motion, the trial court ordered petitioners to amend their complaint to implead respondent Quezon City government as defendant. On July 27, 1992, respondent city government filed its Answer to the Amended Complaint with Cross-Claim. However, on November 29, 1993, it moved to withdraw its cross-claim against UP on the ground that, after conferring with university officials, the city government had recognized "the propriety, validity and legality of the revocation of the Deed of Donation." The motion was granted by the trial court. On the same day, a Joint Motion to Dismiss was filed by UP and the Quezon City government on the ground that the complaint fails to state a cause of action. Petitioners opposed the motion. On April 26, 1995, the trial court denied respondents' motion to dismiss on the ground that "a perusal of [petitioners'] amended complaint shows that it necessarily alleges facts entitling petitioners to acquire ownership over the land in question, by reason of laches, which cannot be disposed of and resolved at this stage without a trial on the merits." The trial court, however, reiterated its HELD that petitioners did not have a cause of action for specific performance on the ground that the deed of donation had already been revoked as stated in its order denying injunction.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
662
On August 14, 1995, respondents filed a petition for certiorari with the Court of Appeals. The appellate court rendered a decision setting aside the trial court's order and ordering the dismissal of the case. Hence, this petition for review on certiorari. ISSUE:Whether or not the complaint states a cause of action. HELD:Yes. A cause of action exists if the following elements are present, namely: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the obligations of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages. All the elements of a cause of action were contained in the amended complaint of petitioners. While, admittedly, petitioners were not parties to the deed of donation, they anchor their right to seek its enforcement upon their allegation that they are intended beneficiaries of the donation to the Quezon City government. Art. 1311, second paragraph, of the Civil Code provides: If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obliger before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. Under this provision of the Civil Code, the following requisites must be present in order to have a stipulation pour autrui: (1) there must be a stipulation in favor of a third person; (2) the stipulation must be a part, not the whole of the contract; (3) the contracting parties must have clearly and deliberately conferred a favor upon a third person, not a mere incidental benefit or interest; (4) the third person must have communicated his acceptance to the obliger before its revocation; and (5) neither of the contracting parties bears the legal representation or authorization of the third party. The allegations in the amended complaint are sufficient to bring petitioners' action within the purview of the second paragraph of Art. 1311 on stipulations pour autrui. The decision of the Court of Appeals is REVERSED and the case is REMANDED to the Regional Trial Court.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
663
Cuyco v Cuyco SPOUSES ADELINA S. CUYCO and FELICIANO U. CUYCO, Petitioners, vs. SPOUSES RENATO CUYCO and FILIPINA CUYCO,Respondents. (G.R. No. 168736, April 19, 2006, 1st Division) YNARES-SANTIAGO, J.: FACTS: Petitioners, spouses Adelina and Feliciano Cuyco, obtained a loan in the amount of P1,500,000.00 from respondents, spouses Renato and Filipina Cuyco, payable within one year at 18% interest per annum, and secured by a Real Estate Mortgage over a parcel of land with improvements thereon situated in Cubao, Quezon City covered by TCT No. RT-43723 (188321). Subsequently, petitioners obtained additional loans from the respondents in the aggregate amount of P1,250,000.00, broken down as follows: (1) P150,000.00 on May 30, 1992; (2) P150,000.00 on July 1, 1992; (3) P500,000.00 on September 5, 1992; (4) P200,000.00 on October 29, 1992; and (5) P250,000.00 on January 13, 1993.Petitioners made payments amounting to P291,700.00, but failed to settle their outstanding loan obligations. Thus, on September 10, 1997, respondents filed a complaint for foreclosure of mortgage with the RTC of Quezon City, which was docketed as Civil Case No. Q-97-32130. They alleged that petitioners‘ loans were secured by the real estate mortgage; that as of August 31, 1997, their indebtedness amounted to P6,967,241.14, inclusive of the 18% interest compounded monthly; and that petitioners‘ refusal to settle the same entitles the respondents to foreclose the real estate mortgage. ISSUE: Whether or not the contract established a right in this case. HELD: As a general rule, a mortgage liability is usually limited to the amount mentioned in the contract. However, the amounts named as consideration in a contract of mortgage do not limit the amount for which the mortgage may stand as security if from the four corners of the instrument the intent to secure future and other indebtedness can be gathered. This stipulation is valid and binding between the parties and is known in American Jurisprudence as the ―blanket mortgage clause,‖ also known as a ―dragnet clause.‖ A ―dragnet clause‖ operates as a convenience and accommodation to the borrowers as it makes available additional funds without their having to execute additional security documents, thereby saving time, travel, loan closing costs, costs of extra legal services, recording fees, et cetera. While a real estate mortgage may exceptionally secure future loans or advancements, these future debts must be sufficiently described in the mortgage contract. An obligation is not secured by a mortgage unless it comes fairly within the terms of the mortgage contract.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
664
Go, doing business under the name and style of “ACG Express Liner” v Cordero
ALLAN C. GO, doing business under the name and style "ACG Express Liner," Petitioner, vs. MORTIMER F. CORDERO, Respondent. (G.R. No. 164703, May 4, 2010, 1st Division) MORTIMER F. CORDERO, Petitioner, vs. ALLAN C. GO, doing business under the name and style "ACG Express Liner," FELIPE M. LANDICHO and VINCENT D. TECSON, Respondents. G.R. No. 164747 VILLARAMA, JR., J.: FACTS: Sometime in 1996, Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation (Pamana), ventured into the business of marketing inter-island passenger vessels. After contacting various overseas fast ferry manufacturers from all over the world, he came to meet Tony Robinson, an Australian national based in Brisbane, Australia, who is the Managing Director of Aluminium Fast Ferries Australia (AFFA). Between June and August 1997, Robinson signed documents appointing Cordero as the exclusive distributor of AFFA catamaran and other fast ferry vessels in the Philippines. As such exclusive distributor, Cordero offered for sale to prospective buyers the 25-meter Aluminium Passenger catamaran known as the SEACAT 25. After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan C. Go who is the owner/operator of ACG Express Liner of Cebu City, a single proprietorship, Cordero was able to close a deal for the purchase of two (2) SEACAT 25 as evidenced by the Memorandum of Agreement dated August 7, 1997. Accordingly, the parties executed Shipbuilding Contract No. 7825 for one (1) high-speed catamaran (SEACAT 25) for the price of US$1,465,512.00. Per agreement between Robinson and Cordero, the latter shall receive commissions totalling US$328,742.00, or 22.43% of the purchase price, from the sale of each vessel. Cordero made two (2) trips to the AFFA Shipyard in Brisbane, Australia, and on one (1) occasion even accompanied Go and his family and Landicho, to monitor the progress of the building of the vessel. He shouldered all the expenses for airfare, food, hotel accommodations, transportation and entertainment during these trips. He also spent for long distance telephone calls to communicate regularly with Robinson, Go, Tecson and Landicho. However, Cordero later discovered that Go was dealing directly with Robinson when he was informed by Dennis Padua of Wartsila Philippines that Go was canvassing for a second catamaran engine from their Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
665
company which provided the ship engine for the first SEACAT 25. Padua told Cordero that Go instructed him to fax the requested quotation of the second engine to the Park Royal Hotel in Brisbane where Go was then staying. Cordero tried to contact Go and Landicho to confirm the matter but they were nowhere to be found, while Robinson refused to answer his calls. Cordero immediately flew to Brisbane to clarify matters with Robinson, only to find out that Go and Landicho were already there in Brisbane negotiating for the sale of the second SEACAT 25. Despite repeated follow-up calls, no explanation was given by Robinson, Go, Landicho and Tecson who even made Cordero believe there would be no further sale between AFFA and ACG Express Liner. On August 21, 1998, Cordero instituted Civil Case No. 98-35332 seeking to hold Robinson, Go, Tecson and Landicho liable jointly and solidarily for conniving and conspiring together in violating his exclusive distributorship in bad faith and wanton disregard of his rights, thus depriving him of his due commissions (balance of unpaid commission from the sale of the first vessel in the amount of US$31,522.01 and unpaid commission for the sale of the second vessel in the amount of US$328,742.00) and causing him actual, moral and exemplary damages, including P800,000.00 representing expenses for airplane travel to Australia, telecommunications bills and entertainment, on account of AFFA‘s untimely cancellation of the exclusive distributorship agreement. Cordero also prayed for the award of moral and exemplary damages, as well as attorney‘s fees and litigation expenses. Robinson filed a motion to dismiss grounded on lack of jurisdiction over his person and failure to state a cause of action, asserting that there was no act committed in violation of the distributorship agreement. Said motion was denied by the trial court on December 20, 1999. Robinson was likewise declared in default for failure to file his answer within the period granted by the trial court. As for Go and Tecson, their motion to dismiss based on failure to state a cause of action was likewise denied by the trial court on February 26, 1999. Subsequently, they filed their Answer denying that they have anything to do with the termination by AFFA of Cordero‘s authority as exclusive distributor in the Philippines. On the contrary, they averred it was Cordero who stopped communicating with Go in connection with the purchase of the first vessel from AFFA and was not doing his part in making progress status reports and airing the client‘s grievances to his principal, AFFA, such that Go engaged the services of Landicho to fly to Australia and attend to the documents needed for shipment of the vessel to the Philippines. As to the inquiry for the Philippine price for a Wartsila ship engine for AFFA‘s other on-going vessel construction, this was merely requested by Robinson but which Cordero misinterpreted as indication that Go was buying a second vessel. Moreover, Landicho and Tecson had no transaction whatsoever with Cordero who had no document to show any such shipbuilding contract. As to the supposed meeting to settle their dispute, this was due to the malicious demand of Cordero to be given Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
666
US$3,000,000 as otherwise he will expose in the media the alleged undervaluation of the vessel with the BOC. In any case, Cordero no longer had cause of action for his commission for the sale of the second vessel under the memorandum of agreement dated August 7, 1997 considering the termination of his authority by AFFA‘s lawyers on June 26, 1998. On May 31, 2000, the trial court rendered its judgment in favor of Plaintiff and against defendants Allan C. Go, Tony Robinson, Felipe Landicho, and Vincent Tecson. On January 29, 2001, the CA rendered judgment granting the petition for certiorari in CA-G.R. SP No. 60354 and setting aside the trial court‘s orders of execution pending appeal. The case before the Supreme Court is a consolidation of the petitions for review under Rule 45 separately filed by Go (G.R. No. 164703) and Cordero (G.R. No. 164747). ISSUE: (1) Whether petitioner Cordero has the legal personality to sue the respondents for breach of contract; and (2) whether the respondents may be held liable for damages to Cordero for his unpaid commissions and termination of his exclusive distributorship appointment by the principal, AFFA. HELD: While it is true that a third person cannot possibly be sued for breach of contract because only parties can breach contractual provisions, a contracting party may sue a third person not for breach but for inducing another to commit such breach. Article 1314 of the Civil Code provides: Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. The elements of tort interference are: (1) existence of a valid contract; (2) knowledge on the part of the third person of the existence of a contract; and (3) interference of the third person is without legal justification. The presence of the first and second elements is not disputed. Through the letters issued by Robinson attesting that Cordero is the exclusive distributor of AFFA in the Philippines, respondents were clearly aware of the contract between Cordero and AFFA represented by Robinson. In fact, evidence on record showed that respondents initially dealt with and recognized Cordero as such exclusive dealer of AFFA high-speed catamaran vessels in the Philippines. In that capacity as exclusive distributor, petitioner Go entered into the Memorandum of Agreement and Shipbuilding Contract No. 7825 with Cordero in behalf of AFFA. The rule is that the defendant found guilty of interference with contractual relations cannot be held liable for more than the amount for which the party who was inducted to break the contract can be held liable. Respondents Go, Landicho and Tecson were therefore correctly Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
667
held liable for the balance of petitioner Cordero‘s commission from the sale of the first SEACAT 25, in the amount of US$31,522.09 or its peso equivalent, which AFFA/Robinson did not pay in violation of the exclusive distributorship agreement, with interest at the rate of 6% per annum from June 24, 1998 until the same is fully paid. Respondents having acted in bad faith, moral damages may be recovered under Article 2219 of the Civil Code.
Tayag vs. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
668
HERMINIO TAYAG, petitioner, vs. AMANCIA LACSON, ROSENDO LACSON, ANTONIO LACSON, JUAN LACSON, TEODISIA LACSONESPINOSA and THE COURT OF APPEALS, respondents. (G.R. No. 134971,March 25, 2004, 2nd Division) CALLEJO, SR., J.: FACTS:Respondents were the registered owners of three parcels of tenanted agricultural land, covered by Transfer Certificates of Titles, registered in the Register of Deeds. The properties were administered by Renato Espinosa. On March 17, 1996, a group of original farmers/tillers, individually executed in favor of the petitioner separate Deeds of Assignment in which the assignees assigned to the petitioner their respective rights as tenants/tillers of the landholdings possessed and tilled by them for and in consideration of P50.00 per square meter. The price was payable "when the legal impediments to the sale of the property to the petitioner no longer existed." The petitioner was also granted the exclusive right to buy the property if the respondents would sell such land. The petitioner called a meeting in order to work out the implementation of their separate agreements. However, the defendants-tenants, through Joven Mariano, gave a notice of their collective decision to sell all their rights and interests, as tenants/lessees, over the landholding to the respondents. The petitioner then filed a complaint against the defendants asking the court to fix a period to which the agreed amounts under the Deed of Assignment be paid. The petitioner also prayed for a writ of preliminary injunction against the defendants and the respondents therein. Petitioner claims that the defendant – tenants were merely sub-tenants over the land and had no right to deal with the Lacsons or with any third persons while their contracts are subsisting. ISSUE:Whether or not the tenants are allowed to sell their rights over the land to the Lacsons HELD:The petitioner failed to establish the essential requisites for the issuance of a writ of preliminary injunction. The trial court cannot enjoin the respondents, at the instance of the petitioner, from selling, disposing of and encumbering their property. As the registered owners of the property, the respondents have the right to enjoy and dispose of their property without any other limitations than those established by law, in accordance with Article 428 of the Civil Code. Under Article 1306 of the New Civil Code, the respondents may enter into contracts covering their property with another under such terms and conditions as they may deem beneficial provided they are not contrary to law, morals, good conduct, public order or public policy. The respondents cannot be enjoined from selling or encumbering their property simply and merely because they had executed Deeds of Assignment in favor of the petitioner, obliging themselves to assign and transfer their rights or interests as agricultural farmers/laborers/subPic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
669
tenants over the landholding, and granting the petitioner the exclusive right to buy the property subject to the occurrence of certain conditions. The respondents were not parties to the said deeds. There is no evidence that the respondents agreed, expressly or impliedly, to the said deeds or to the terms and conditions set forth therein. Indeed, they assailed the validity of the said deeds on their claim that the same were contrary to the letter and spirit of P.D. No. 27 and Rep. Act No. 6657. The petitioner even admitted when he testified that he did not know any of the respondents, and that he had not met any of them before he filed his complaint in the RTC. IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals nullifying the Orders of the RTC is AFFIRMED. The writ of injunction issued by the Court of Appeals permanently enjoining the RTC from further proceeding is hereby LIFTED and SET ASIDE. The Regional Trial Court is ORDERED to continue with the proceedings as provided for by the Rules of Court, as amended.
So vs. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
670
SO PING BUN, petitioner, vs. COURT OF APPEALS, TEK HUA ENTERPRISES CORP. and MANUEL C. TIONG, respondents. (G.R. No. 120554 September 21, 1999, 2nd Division) QUISUMBING, J.: FACTS:In 1963, Tek Hua Trading Co., through its managing partner, So Pek Giok, entered into lease agreements with lessor Dee C. Chuan and Sons Inc (DCCSI). Subjects of four (4) lease contracts were premises located at Nos. 930, 930- Int., 924-B and 924-C, Soler Street, Binondo, Manila. Tek Hua used the areas to store its textiles. The contracts each had a one year term. They provided that should the lessee continue to occupy the premises after the term, the lease shall be on a month to month basis. When the contracts expired, the parties did not renew the contracts, but Tek Hua continued to occupy the premises in 1976 Tek Hua Trading Corp. was dissolved. Later, the original members of Tek Hua Trading Co., including Manuel C.Tiong, formed Tek Hua Enterprising Corp., herein respondent corporation. So Pek Giok, managing partner of Tek Hua Trading, died in 1986. So Pek Giok‘s grandson, petitioner So Ping Bun, occupied the warehouse for his own textile business, Trendsetter Marketing. On August 1, 1989, lessor DCCSI sent letters addressed to Tek Hua enterprises, informing the latter of the 25% increase in rent effective September 1, 1989. The rent increase was later on reduced to 20% effective January 1, 1990, upon other lessees‘ demand. Again on December 1, 1990, the lessor implemented a 30% rent increase. Enclosed in these letters were new lease contracts for signing. DCCSI warned that failure of the lessee to accomplish the contracts shall be deemed as lack of interest on the lessee‘s part, and agreement to the termination of the lese. Private respondents did not answer any of these letters. Still, the lease contracts were not rescinded. On March 1, 1991, private respondent Tiong sent a letter to petitioner asking Mr. So Ping Bun to vacate the premise because he used a warehouse. Petitioner refused to vacate. On March 4, 1992, petitioner requested formal contracts of lease with DCCSI in favor Trendsetter Marketing. So Ping Bun claimed that after the death of his grandfather, So Pek Giok, he had been occupying the premises for his textile business and religiously paid rent. DCCSI acceded to petitioner‘s request. The lease contracts in favor of Trendsetter were executed. ISSUE:Whether the appellate court erred in affirming the trial court‘s decision finding So Ping Bun guilty of tortuous interference of contact. HELD:In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease the warehouse to his enterprise at the expense of respondent corporation. Though petitioner took interest in the property of respondent corporation and benefited from it, nothing on record imputes deliberate wrongful motives or malice on him. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
671
A duty which the law of torts is concerned with is respect for the property of others, and cause of action ex delicto may be predicated upon an unlawful interference by one person of the enjoyment by the other of his private property. This may pertain to a situation where a third person induces a party to renege on or violate his undertaking under a contract. In the case before us, petitioner‘s Trendsetter Marketing asked DCCSI to execute lease contracts in its favor, and as a result petitioner deprived respondent corporation of the latter‘s property right. Clearly, and as correctly viewed by the appellate court, the three elements of tort interference above mentioned are present in the instant case. Authorities debate on whether interference may be justified where the defendant acts for the sole purpose of furthering his own financial or economic interest. One view is that, as a general rule, justification for interfering with the business relations of another exist where the actor‘s motive is to benefit himself. Such justification does not exist where his sole motive is to cause harm to the other. Added to this, some authorities believe that it is not necessary that the interferer‘s interest outweigh that of the party whose rights are invaded, and that an individual acts under an economic interest that is substantial, not merely I de minimis for he acts in self protection. Moreover, justification for protecting ones financial position should not be made to depend on a comparison of his economic interest in the subject matter with that of others. It is sufficient if the impetus of his conduct lies in a proper business interest rather than in wrongful motives. As early as Gilchrist vs. Cuddy we held that where there was no malice in the interference of a contract, and the impulse behind one‘s conduct lies in a proper business interest rather than in wrongful motives, a party cannot be a malicious interferer. Where the alleged interferer is financially interested and such interest motivates his conduct it cannot be said that he is an officious or malicious intermeddler. The petition is DENIED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
672
International Freeport v. Danzas
INTERNATIONAL FREEPORT TRADERS, INC., Petitioner, vs. DANZAS INTERCONTINENTAL, INC.,Respondent. (G.R. No. 181833 , January 26, 2011, 2nd Division) ABAD, J.: FACTS: In March 1997 petitioner International Freeport Traders, Inc. (IFTI) ordered a shipment of Toblerone chocolates and assorted confectioneries from Jacobs Suchard Tobler Ltd. of Switzerland through its Philippine agent, Colombo Merchants Phils., Inc., under the delivery term "F.O.B. Ex-Works." To ship the goods, Jacobs dealt with Danmar Lines of Switzerland (Danmar) which issued to Jacobs negotiable house bills of lading1 signed by its agent, respondent Danzas Intercontinental, Inc..The bills of lading stated that the terms were "F.O.B." and "freight payable at destination," with Jacobs as the shipper, China Banking Corporation as the consignee, and IFTI as the party to be notified of the shipment. The shipment was to be delivered at the Clark Special Economic Zone with Manila as the port of discharge. The goods were also covered by Letters of Credit MK-97/0467 and MK-97/0468 under a "freight collect" arrangement. Since Danmar did not have its own vessel, it contracted Orient Overseas Container Line (OOCL) to ship the goods from Switzerland. OOCL issued a non-negotiable master bill of lading,2 stating that the freight was prepaid with Danmar as the shipper and Danzas as the consignee and party to be notified. The shipment was to be delivered at Angeles City in Pampanga. Danmar paid OOCL an arbitrary fee of US$425.00 to process the release of the goods from the port and ship the same to Clark in Angeles City. The fee was to cover brokerage, trucking, wharfage, arrastre, and processing expenses. The goods were loaded on board the OOCL vessel on April 20, 1997 and arrived at the port of Manila on May 14, 1997. Upon learning from Danmar that the goods had been shipped, Danzas immediately informed IFTI of its arrival. IFTI prepared the import permit needed for the clearing and release of the goods from the Bureau of Customs and advised Danzas on May 20, 1997 to pick up the document. Danzas got the import permit on May 26, 1997. At the same time, it asked IFTI to 1) surrender the original bills of lading to secure the release of the goods, and 2) submit a bank guarantee inasmuch as the shipment was consigned to China Banking Corporation to assure Danzas that it will be compensated for freight and other charges. But IFTI did not provide Danzas a bank guarantee, claiming that letters of credit already covered the shipment. IFTI insisted that Danzas should already endorse the import permit and bills of lading to OOCL since the latter had been paid an arbitrary fee. But Danzas did not do this. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
673
Because IFTI did not provide Danzas with the original bills of lading and the bank guarantee, the latter withheld the processing of the release of the goods. Danzas reiterated to IFTI that it could secure the release of the goods only if IFTI submitted a bank guarantee. Ultimately, IFTI yielded to the request and applied for a bank guarantee which was approved on May 23, 1997. It claimed to have advised Danzas on even date of its availability for pick up but Danzas secured it only on June 6, 1997. In a letter dated June 6, 1997, Danzas told IFTI that the issuance of a promissory note would assure the delivery of the goods to Clark. On June 10, 1997 IFTI faxed a letter to Danzas, stating that Edwin Mabazza of OOCL confirmed that it had been paid an arbitrary fee. IFTI maintained, however, that it was not in a position to decide whether Danzas was to be liable for the charges. Nonetheless, IFTI issued a promissory note and requested that the goods be released to avoid any further charges. Minutes later, IFTI faxed another letter reiterating its request that the goods be released pending payment of whatever charges Danzas had incurred for the release and delivery of the goods to Clark. IFTI promised to pay Danzas any charges within five days upon delivery of the goods as soon as the investigation as to which company will shoulder the expenses is settled. On June 13, 1997 Danzas secured the release of the goods and delivered the same to IFTI at Clark on June 16, 1997. IFTI faxed a letter to Danzas, confirming the delivery. IFTI also said that Danzas‘ General Manager and OOCL‘s Mabazza visited IFTI‘s office to settle the charges on the goods. Danzas agreed to charge IFTI only the electric charges and storage fees totaling P56,000.00 (or roughly US$2,210.00) from the original billing of about US$7,000.00. In turn, IFTI agreed to give Danzas another opportunity to service its account and requested it to disregard IFTI‘s June 10, 1997 fax letter where it said that it would no longer employ Danzas for its future shipments for Subic and Clark. On January 19, 1998, however, Danzas wrote IFTI, demanding payment of P181,809.45 for its handling of the shipment. IFTI ignored the demand. On March 26, 1998 Danzas filed separate complaints for sum of money against IFTI and OOCL before the Metropolitan Trial Court (MeTC) of Parañaque City, Branch 78. The court subsequently dismissed the complaint against OOCL after it settled the case amicably. In the main, Danzas claimed that IFTI engaged its services for P181,809.45 to process the release of the goods from the port and deliver it to IFTI at Clark but the latter reneged on its obligation, compelling Danzas to file the suit. IFTI countered that it had no liability to Danzas since IFTI was not privy to the hiring of Danzas. Following normal procedure, IFTI coursed the import permit to Danzas since it was the party that issued the house bills of lading. IFTI added that under arbitrary shipments, imported goods are allowed to stay free of charge in the port for three working days and in the storage for five to six calendar days. Storage fees, electricity charges, and demurrage become due only after such period. In this case, Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
674
IFTI informed Danzas on May 20, 1997 to pick up the import permit but Danzas picked it up only on May 26, 1997. And instead of endorsing it with the bills of lading to OOCL, Danzas itself processed the release of the goods. Since Danzas failed to process the release or transshipment of the goods within the three-day period, then it should shoulder all the charges from May 20, 1997 to June 13, 1999. On January 2, 2002, the MeTC rendered a decision in favor of Danzas and ordered IFTI to pay (1) P181,809.45 plus legal interest to be computed from March 26, 1998 until fully paid; (2) P25,000.00 as attorney‘s fees; and (3) the costs of suit. On appeal, however, the Regional Trial Court dismissed the complaint. Danzas elevated the case to the Court of Appeals which reversed the RTC decision. The CA ruled that IFTI‘s fax letters dated June 10, 1997 showed the parties engaged in negotiation stage. When IFTI heeded Danzas‘ request for a bank guarantee, its action brought about a perfected contract of lease of service. The bank guarantee, procured by IFTI, contained all the requisites of a perfected contract. The cause of the contract was the release of the goods from the port and its delivery at Clark; the consideration was the compensation for the release and delivery of the goods to IFTI. ISSUES: 1. Whether or not a contract of lease of service exists between IFTI and Danzas; and 2. Whether or not IFTI is liable to Danzas for the costs of the delay in the release of the goods from the port. HELD: 1. The facts show the existence of several contracts: one between IFTI and Jacobs, another between Jacobs and Danmar, and still another between Danmar and OOCL. IFTI bought chocolates and confectioneries from Jacobs; Jacobs got Danmar to deliver the goods to its destination; Danmar got OOCL to carry the goods for it by ship to Manila. For this purpose, Danmar paid OOCL an arbitrary fee to process the release of the goods from the port of Manila and deliver the same to Clark. In all these transactions, Danzas acted as an agent of Danmar who signed the house bills of lading in favor of Jacobs. In short, the combined services of different carriers were used for the delivery of the goods: Danmar, as the initial carrier, assumed the responsibility of conveyance when it received the goods for transportation; OOCL, as the forwarding carrier, had the duty to deliver the goods to Danzas which was designated as the consignee in the master bill of lading; and Danzas, being the agent of Danmar, assumed the responsibility for delivering the goods from Manila to IFTI at Clark.6 Evidently, although Danmar intended the arbitrary fee that it paid OOCL to cover the latter‘s delivery of the goods all the way to Danzas, the latter had no notion of and was not a party to such Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
675
arrangement. Since the last leg of the delivery of the goods to IFTI at Clark devolved on Danzas, the latter insisted that it was entitled to collect a separate fee following the terms of the sale and the house bills of lading . At first, IFTI did not want to pay more but when Danzas would not move the goods until it was assured that it would be paid, IFTI eventually negotiated with Danzas for its services. IFTI prepared the import permit and advised Danzas to pick up the document. But Danzas told IFTI that it also needed the house bills of lading and the bank guarantee. If IFTI believed that it was OOCL‘s responsibility to deliver the goods at its doorsteps, then it should not have asked Danzas to pick up the import permit and submit to it the bank guarantee and promissory note that it required. IFTI should have instead addressed its demand to OOCL for the delivery of the goods. What is clear to the Court is that, by acceding to all the documentary requirements that Danzas imposed on it, IFTI voluntarily accepted its services. The bank guarantee IFTI gave Danzas assured the latter that it would eventually be paid all freight and other charges arising from the release and delivery of the goods to it. Another indication that IFTI recognized its contract with Danzas is when IFTI requested Danzas to have the goods released pending payment of whatever expenses the latter would incur in obtaining the release and delivery of the goods at Clark. It also admitted that it initially settled with Danzas‘ General Manager and OOCL‘s Mabazza the issue regarding the charges on the goods after Danzas agreed to bill IFTI for the electric charges and storage fees totaling P56,000.00. Certainly, this concession indicated that their earlier agreement did not push through. Every contract has the elements of (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. A contract is perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. Generally, contracts undergo three distinct stages: (1) preparation or negotiation; (2) perfection; and (3) consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. The perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract. The last stage is the consummation of the contract where the parties fulfill or perform the terms they agreed on, culminating in its extinguishment. Here, there is no other conclusion than that the parties entered into a contract of lease of service for the clearing and delivery of the imported goods. 2. There is no dispute that under arbitrary shipments, imported goods are allowed to stay, free of charge, in the port for three working days, and in the storage for five to six calendar days. Beyond this period, storage fees, electric charges, and the demurrage are due. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
676
Since the goods arrived at the Port of Manila on May 14, 1997, they could remain there until May 20, 1997 free of charge. The fact that IFTI had the import permit ready by May 20, 1997 was immaterial since it had not yet given the bank guarantee required of it. The Court is not convinced that IFTI had the bank guarantee ready as early as May 23, 1997 for, if that were the case, surely it did not make sense for it not to hand over such document to Danzas when the latter claimed the import permit on May 26, 1997. Since the delay in the processing of the release of the goods was due to IFTI‘s fault, the CA rightly adjudged it liable for electric charges, demurrage, and storage fees of P122,191.75 from May 20, 1997 to June 13, 1999. The petition is denied.
Rockland V Mid-Pasig Development
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
677
ROCKLAND CONSTRUCTIONCOMPANY, INC., Petitioner, vs. MID PASIG LAND DEVELOPMENT CORPORATION, Respondent (G.R. No. 164587, February 4, 2008, 2 nd Division) QUISUMBING, J.: FACTS:Rockland Construction Company, Inc. in a letter dated March 1, 2000, offered to lease from Mid-Pasig Land Development Corporation the latter‘s 3.1-hectare property in Pasig City. This property is covered by Transfer Certificate of Title Nos. 469702 and 337158 under the control of the Presidential Commission on Good Government. Upon instruction of Mid-Pasig to address the offer to the PCGG, Rockland wrote the PCGG on April 15, 2000. The letter, addressed to PCGG Chairman Magdangal Elma, included Rockland‘ proposed terms and conditions for the lease. This letter was also received by Mid-Pasig on April 18, 2000, but MidPasig made no response. Again, in another letter dated June 8, 2000 addressed to the Chairman of Mid-Pasig, Mr. Ronaldo Salonga, Rockland sent a Metropolitan Bank and Trust Company Check No. 2930050168 for P1 million as a sign of its good faith and readiness to enter into the lease agreement under the certain terms and conditions stipulated in the letter. Mid-Pasig received this letter on July 28, 2000. In a subsequent follow-up letterdated February 2, 2001, Rockland then said that it presumed that Mid-Pasig had accepted its offer because the P1 million check it issued had been credited to Mid-Pasig‘s account on December 5, 2000. Mid-Pasig, however, denied it accepted Rockland‘s offer and claimed that no check was attached to the said letter. It also vehemently denied receiving the P1 million check, much less depositing it in its account. In its letter dated February 6, 2001, Mid-Pasig replied to Rockland that it was only upon receipt of the latter‘s February 2 letter that the former came to know where the check came from and what it was for. Nevertheless, it categorically informed Rockland that it could not entertain the latter‘s lease application. Mid-Pasig reiterated its refusal of Rockland‘s offer in a letter dated February 13, 2001. Rockland then filed an action for specific performance. Rockland sought to compel Mid-Pasig to execute in Rockland‘s favor, a contract of lease over a 3.1-hectare portion of Mid-Pasig‘s property in Pasig City. ISSUES: Was there a perfected contract of lease? Had estoppel in pais set in? HELD:A close review of the events in this case, in the light of the parties‘ evidence, shows that there was no perfected contract of lease between the parties. Mid-Pasig was not aware that Rockland deposited the P1 million check in its account. It only learned of Rockland‘s check when it Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
678
received Rockland‘s February 2, 2001 letter. Mid-Pasig, upon investigation, also learned that the check was deposited at the Philippine National Bank San Juan Branch, instead of PNB Ortigas Branch where Mid-Pasig maintains its account. Immediately, Mid-Pasig wrote Rockland on February 6, 2001 rejecting the offer, and proposed that Rockland apply the P1 million to its other existing lease instead. These circumstances clearly show that there was no concurrence of Rockland‘s offer and Mid-Pasig‘s acceptance. Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based on the grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak against his own act, representations, or commitments to the injury of one to whom they were directed and who reasonably relied thereon. Since estoppel is based on equity and justice, it is essential that before a person can be barred from asserting a fact contrary to his act or conduct, it must be shown that such act or conduct has been intended and would unjustly cause harm to those who are misled if the principle were not applied against him. Hence, the petition was denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
679
MMDA v. JANCOM METROPOLITAN MANILA DEVELOPMENT AUTHORITY, petitioner, vs. JANCOM ENVIRONMENTAL CORPORATION and JANCOM INTERNATIONAL DEVELOPMENT PROJECTS PTY. LIMITED OF AUSTRALIA, respondents. (G.R. No. 147465. January 30, 2002, 3rd Division) MELO, J.:
FACTS: The Philippine Government under the Ramos Administration, and through the Metro Manila Development Authority (MMDA) Chairman, and the Cabinet Officer for Regional Development-National Capital Region (CORD-NCR), entered into a contract with respondent JANCOM, on waste-to-energy projects for the waste disposal sites in San Mateo, Rizal and Carmona, Cavite under the build-operate-transfer (BOT) scheme. However, before President Ramos could have signed the said contract, there was a change in the Administration and EXECOM. Said change caused the passage of the law, the Clean Air Act, prohibiting the incineration of garbage and thus, against the contents of said contract. The Philippine Government, through the MMDA Chairman, declared said contract inexistent for several reasons. Herein respondent filed a suit against petitioner. The Regional Trial Court ruled in favor of the respondent. Instead of filing an appeal to the decision, petitioner filed a writ of certiorari on the Court of Appeals, which the latter granted. The Regional Trial Court declared its decision final and executory, for which the petitioner appealed to the CA, which the CA denied such appeal and affirming RTC‘s decision. ISSUE: Whether or not a valid contract is existing between herein petitioner and respondent. HELD: Under Article 1305 of the Civil Code, ―a contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.‖ A contract undergoes three distinct stages- preparation or negotiation, its perfection, and finally, its consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. The perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract. The last stage is the consummation of the contract wherein the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof. Article 1315 of the Civil Code, provides that a contract is perfected by mere consent. Consent, on the other hand, is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. In the case at bar, the signing and execution of the contract by the parties clearly show that, as between the parties, there was a concurrence of offer and acceptance with respect to the material details of the contract, thereby giving rise to the perfection of Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
680
the contract. The execution and signing of the contract is not disputed by the parties. As the Court of Appeals aptly held: Contrary to petitioners‘ insistence that there was no perfected contract, the meeting of the offer and acceptance upon the thing and the cause, which are to constitute the contract (Arts. 1315 and 1319, New Civil Code), is borne out by the records. Admittedly, when petitioners accepted private respondents‘ bid proposal (offer), there was, in effect, a meeting of the minds upon the object (waste management project) and the cause (BOT scheme). Hence, the perfection of the contract. In City of Cebu vs. Heirs of Candido Rubi, the Supreme Court held that ―the effect of an unqualified acceptance of the offer or proposal of the bidder is to perfect a contract, upon notice of the award to the bidder. In fact, in asserting that there is no valid and binding contract between the parties, MMDA can only allege that there was no valid notice of award; that the contract does not bear the signature of the President of the Philippines; and that the conditions precedent specified in the contract were not complied with. In asserting that the notice of award to JANCOM is not a proper notice of award, MMDA points to the Implementing Rules and Regulations of Republic Act No. 6957, otherwise known as the BOT Law, which require that i) prior to the notice of award, an Investment Coordinating Committee clearance must first be obtained; and ii) the notice of award indicate the time within which the awardee shall submit the prescribed performance security, proof of commitment of equity contributions and indications of financing resources. Admittedly, the notice of award has not complied with these requirements. However, the defect was cured by the subsequent execution of the contract entered into and signed by authorized representatives of the parties; hence, it may not be gainsaid that there is a perfected contract existing between the parties giving to them certain rights and obligations (conditions precedents) in accordance with the terms and conditions thereof. We borrow the words of the Court of Appeals: Petitioners belabor the point that there was no valid notice of award as to constitute acceptance of private respondent‘s offer. They maintain that former MMDA Chairman Oreta‘s letter to JANCOM EC dated February 27, 1997 cannot be considered as a valid notice of award as it does not comply with the rules implementing Rep. Act No. 6957, as amended. The argument is untenable.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
681
Rockland V Mid-Pasig Development
ROCKLAND CONSTRUCTIONCOMPANY, INC., Petitioner, vs. MID PASIG LAND DEVELOPMENT CORPORATION, Respondent (G.R. No. 164587, February 4, 2008, 2nd Division) QUISUMBING, J.: FACTS: Rockland Construction Company, Inc. in a letter dated March 1, 2000, offered to lease from Mid-Pasig Land Development Corporation the latter‘s 3.1-hectare property in Pasig City. This property is covered by Transfer Certificate of Title Nos. 469702 and 337158 under the control of the Presidential Commission on Good Government. Upon instruction of Mid-Pasig to address the offer to the PCGG, Rockland wrote the PCGG on April 15, 2000. The letter, addressed to PCGG Chairman Magdangal Elma, included Rockland‘ proposed terms and conditions for the lease. This letter was also received by Mid-Pasig on April 18, 2000, but MidPasig made no response. Again, in another letter dated June 8, 2000 addressed to the Chairman of Mid-Pasig, Mr. Ronaldo Salonga, Rockland sent a Metropolitan Bank and Trust Company Check No. 2930050168 for P1 million as a sign of its good faith and readiness to enter into the lease agreement under the certain terms and conditions stipulated in the letter. Mid-Pasig received this letter on July 28, 2000. In a subsequent follow-up letterdated February 2, 2001, Rockland then said that it presumed that Mid-Pasig had accepted its offer because the P1 million check it issued had been credited to Mid-Pasig‘s account on December 5, 2000. Mid-Pasig, however, denied it accepted Rockland‘s offer and claimed that no check was attached to the said letter. It also vehemently denied receiving the P1 million check, much less depositing it in its account. In its letter dated February 6, 2001, Mid-Pasig replied to Rockland that it was only upon receipt of the latter‘s February 2 letter that the former came to know where the check came from and what it was for. Nevertheless, it categorically informed Rockland that it could not entertain the latter‘s lease application. Mid-Pasig reiterated its refusal of Rockland‘s offer in a letter dated February 13, 2001. Rockland then filed an action for specific performance. Rockland sought to compel Mid-Pasig to execute in Rockland‘s favor, a contract of lease over a 3.1-hectare portion of Mid-Pasig‘s property in Pasig City. ISSUES: Was there a perfected contract of lease? Had estoppel in pais set in? HELD: A close review of the events in this case, in the light of the parties‘ evidence, shows that there was no perfected contract of lease between the parties. Mid-Pasig was not aware that Rockland deposited the P1 Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
682
million check in its account. It only learned of Rockland‘s check when it received Rockland‘s February 2, 2001 letter. Mid-Pasig, upon investigation, also learned that the check was deposited at the Philippine National Bank San Juan Branch, instead of PNB Ortigas Branch where Mid-Pasig maintains its account. Immediately, Mid-Pasig wrote Rockland on February 6, 2001 rejecting the offer, and proposed that Rockland apply the P1 million to its other existing lease instead. These circumstances clearly show that there was no concurrence of Rockland‘s offer and Mid-Pasig‘s acceptance. Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based on the grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak against his own act, representations, or commitments to the injury of one to whom they were directed and who reasonably relied thereon. Since estoppel is based on equity and justice, it is essential that before a person can be barred from asserting a fact contrary to his act or conduct, it must be shown that such act or conduct has been intended and would unjustly cause harm to those who are misled if the principle were not applied against him. Hence, the petition was denied.
Manila Metal v. PNB
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
683
MANILA METAL CONTAINER CORPORATION,Petitioner, REYNALDO C. TOLENTINO, Intervenor, vs. PHILIPPINE NATIONAL BANK, Respondent, DMCI-PROJECT DEVELOPERS, INC., Intervenor. (G.R. No. 166862, December 20, 2006, 1 st Division) CALLEJO, SR., J.: FACTS: Manila Metal Corp. executed a real estate mortgage (TCT. 32098) as a security for its loan from PNB amounting to 900,000 php, later on 1,000,000 php and 653,000 php. Aug. 5, 1982: PNB filed a petition for extrajudicial foreclosure for the property to be sold at a public auction 911,532.21 php (outstanding as of June 30) + interest + attorney's fees. Sept. 2, 1982: PNB won the public auction at 1,000,000 php; Feb. 17, 1983: Certificate of Sale was issued and registered at the Registry of Deeds and was annotated at the dorsal portion of the title (Redeemable until Feb 17,1983); Petitioner requested 1 year extension until Feb 17,1984 but was rejected by PNB saying it is their policy not to accept partial redemption; Jun. 1,1984: Since petitioner failed to redeem, TCT. 32098 was cancelled and a new title was issued in favor of PNB Meanwhile, Special Assets Management Department (SAMD) had prepared a statement of account as of Jun 25,1984 amounting to 1,574,560.47 php. Petitioner deposited 725,000 php as deposit to repurchase and was issued an O.R. PNB management rejected the recommendation of SAMD and demanded that petitioner pay the markt value of 2,660,000 php. On Jun 24, 1984: PNB informed petitioner that its B.O.D had agreed to accept its offer to purchase but at 1,931,389.53 less the 725,000 php. PNB President did not conform to the letter but merely indicated that he has received it. Petitioner rejected this since PNB has already accepted its downpayment so it can no longer increase the price. PNB also rejected petitioners payment for the balance. Petitioner filed a complaint against PNB for Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages. CA affirmed RTC: Favored PNB and demanded that it refund the 725,000 php (no sale because no meeting of the minds in terms of price). Lot was later transferred to its PNB President Bayani Gabriel Petitioner filed a petition for certiorari ISSUE: (1) Whether or not the statement of account by SAMD is only a recommendation subject to the approval of the BOD - YES (2) Whether or not there was a contract of sale - NO (3) Whether or not earnest money establishes a contract of sale NO Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
684
HELD: Denied. Costs Against Petitioner. (1).YES . Art. 1318 of NCC: no contract unless the following requisites concur: Consent of the contracting parties; Object certain which is the subject matter of the contract; Cause of the obligation which is established. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale. When there is merely an offer by one party without acceptance of the other, there is no contract. (2) NO. Section 23 of the Corporation Code: corporate powers of all corporations shall be exercised by the board of directors. Just as a natural person may authorize another to do certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with the performance of authorized duties of such director, are held not binding on the corporation. a corporation can only execute its powers and transact its business through its: Board of Directors officers and agents when authorized by: a board resolution;or its by-laws. (3) NO. ART. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. The deposit of P725,000 was accepted by PNB on the condition that the purchase price is still subject to the approval of the PNB Board. Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
685
Montecillo v. Reynes
RIDO MONTECILLO, petitioner, vs. IGNACIA REYNES and SPOUSES REDEMPTOR and ELISA ABUCAY, respondents. (G.R. No. 138018 , July 26, 2002, 3rd Division) CARPIO, J.: FACTS:Respondents Ignacia Reynes and spouses Abucay filed on June 20, 1984 a complaint for Declaration of Nullity and Quieting of Title against petitioner Rico Montecillo. Reynes asserted that she is the owner of a lot situated in Mabolo, Cebu City. In 1981 Reynes sold 185 square meters of the Mabolo Lot to the Abucay Spouses who built a residential house on the lot they bought. Reynes alleged further that she signed a Deed of Sale of the Mabolo Lot in favor of Montecillo. Reynes, being illiterate signed by affixing her thumb-mark on the document. Montecillo promised to pay the agreed P47,000.00 purchase price within one month from the signing of the Deed of Sale. And that Montecillo failed to pay the purchase price after the lapse of the one-month period, prompting Reynes to demand from Montecillo the return of the Deed of Sale. Since Montecillo refused to return the Deed of Sale, Reynes executed a document unilaterally revoking the sale and gave a copy of the document to Montecillo. Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferring to the Abucay Spouses the entire Mabolo Lot, at the same time confirming the previous sale in 1981 of a 185 square meter portion of the lot. Reynes and the Abucay Spouses alleged that they received information that the Register of Deeds of Cebu City issued a Certificate of Title in the name of Montecillo for the Mabolo Lot. They argued that ―for lack for consideration there (was no meeting of the minds) between Reynes and Montecillo. Thus, the trial court should declare null and void ab initio Monticello‘s Deed of sale, and order the cancellation of certificates of title No. 90805 in the name of Montecillo. In his Answer, Montecillo a bank executive claimed he was a buyer in good faith and had actually paid the P47,000.00 consideration stated on his Deed of Sale. Montecillo however admitted he still owned Reynes a balance of P10,000.00. He also alleged that he paid P50,000.00 for the release of the chattel mortgage which he argued constituted a lien on the Mabolo Lot. He further alleged that he paid for the real property tax as well as the capital gains tax on the sale of the Mabolo Lot. In their reply, Reynes and the Abucay Spouses contended that Montecillo did not have authority to discharge the chattel mortgage especially after Reynes revoked Montecillo‘s Deed of Sale and gave the mortgagee a copy of the document of revocation. Reynes and the Abucay Spouses claimed that Montecillo secured the release of the chattel mortgage through machination. They further asserted that Montecillo took advantage of the real property taxes paid by the Abucay Spouses Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
686
and surreptitiously caused the transfer of the title to the Mabolo Lot in his name. During pre-trial Montecillo claimed that the consideration for the sale of the Mabolo Lot was the amount he paid to Cebu Iced and Cold Storage Corporation for the mortgage debt of Bienvenido Jayag. Montecillo argued that the release of the mortgage was necessary since the mortgage constituted a lien on the Mabolo Lot. Reynes, however stated that she had nothing to do with Jayag‘s mortgage debt except that the house mortgaged by Jayag stood on a portion of the Mabolo Lot. Reynes further stated that the payment by Montecillo to release the mortgage on Jayag‘s house is a matter between Montecillo and Jayag. The mortgage on the house being a chattel mortgage could not be interpreted in any way as an encumbrance on the Mabolo Lot. Reynes further claimed that the mortgage debt had long prescribed since the P47,000.00 mortgage debt was due for payment on January 30,1967. ISSUE:Whether or not there was a valid consent in the case at bar to have a valid contract. HELD:One of the three essential requisites of a valid contract is consent of the parties on the object and cause of the contract. In a contract of sale, the parities must agree not only on the price, but also on the manner of payment of the price. An agreement on the price but a disagreement on the manner of its payment will not result in consent, thus preventing the existence of a valid contract for a lack of consent. This lack of consent is separate and distinct for lack of consideration where the contract states that the price has been paid when in fact it has never been paid. Reynes expected Montecillo to pay him directly the P47, 000.00 purchase price within one month after the signing of the Deed of Sale. On the other hand, Montecillo thought that his agreement with Reynes required him to pay the P47,000.00-purchase price to Cebu Ice Storage to settle Jayag‘s mortgage debt. Montecillo also acknowledged a balance of P10, 000.00 in favor of Reynes although this amount is not stated in Montecillo‘s Deed of Sale. Thus, there was no consent or meeting of the minds, between Reynes and Montecillo on the manner of payment. This prevented the existence of a valid contract because of lack of consent. In summary, Montecillo‘s Deed of Sale is null and void ab initio not only for lack of consideration, but also for lack of consent. The cancellation of TCT No. 90805 in the name of Montecillo is in order as there was no valid contract transferring ownership of the Mabolo Lot from Reynes to Montecillo.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
687
Soler v CA
JASMIN SOLER, petitioner, vs. COURT OF APPEALS, COMMERCIAL BANK OF MANILA, and NIDA LOPEZ, respondents. (G.R. No. 123892 , May 21, 2001, 1 st Division) PARDO, J.: Facts:Petitioner is a professional interior designer. In November 1986, her friend Rosario Pardo asked her to talk to Nida Lopez, who was manager of the COMBANK Ermita Branch for they were planning to renovate the branch offices. Even prior to November 1986, petitioner and Nida Lopez knew each other because of Rosario Pardo, the latter‘s sister. During their meeting, petitioner was hesitant to accept the job because of her many out of town commitments, and also considering that Ms. Lopez was asking that the designs be submitted by December 1986, which was such a short notice. Ms. Lopez insisted, however, because she really wanted petitioner to do the design for renovation. Petitioner acceded to the request. Ms. Lopez assured her that she would be compensated for her services. Petitioner even told Ms. Lopez that her professional fee was P10,000.00, to which Ms. Lopez acceded. During the November 1986 meeting between petitioner and Ms. Lopez, there were discussions as to what was to be renovated. Ms. Lopez again assured petitioner that the bank would pay her fees. After a few days, petitioner requested for the blueprint of the building so that the proper design, plans and specifications could be given to Ms. Lopez in time for the board meeting in December 1986. Petitioner then asked her draftsman Jackie Barcelon to go to the jobsite to make the proper measurements using the blue print. Petitioner also did her research on the designs and individual drawings of what the bank wanted. Petitioner hired Engineer Ortanez to make the electrical layout, architects Frison Cruz and De Mesa to do the drafting. For the services rendered by these individuals, petitioner paid their professional fees. Petitioner also contacted the suppliers of the wallpaper and the sash makers for their quotation. So come December 1986, the lay out and the design were submitted to Ms. Lopez. She even told petitioner that she liked the designs. Subsequently, petitioner repeatedly demanded payment for her services but Ms. Lopez just ignored the demands. In February 1987, by chance petitioner and Ms. Lopez saw each other in a concert at the Cultural Center of the Philippines. Petitioner inquired about the payment for her services, Ms. Lopez curtly replied that she was not entitled to it because her designs did not conform to the bank‘s policy of having a standard design, and that there was no agreement between her and the bank. Petitioner, through her lawyers, who wrote Ms. Lopez, demanding payment for her professional fees in the amount of P10,000.00 which Ms. Lopez ignored. The lawyers wrote Ms. Lopez once again demanding the return of the blueprint copies petitioner submitted which Ms. Lopez refused to return. The petitioner then filed at the trial court a complaint Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
688
against COMBANK and Ms. Lopez for collection of professional fees and damages. In its answer, COMBANK stated that there was no contract between COMBANK and petitioner; that Ms. Lopez merely invited petitioner to participate in a bid for the renovation of the COMBANK Ermita Branch; that any proposal was still subject to the approval of the COMBANK‘s head office. The trial court rendered judgment in favor of plaintiff. On appeal, the Court of Appeals reversed the decision. Hence, this petition. ISSUE:Whether or not the Court of Appeals erred in HELD that there was no contract between petitioner and respondents, in the absence of the element of consent. HELD:A contract is a meeting of the minds between two persons whereby one binds himself to give something or to render some service to bind himself to give something to render some service to another for consideration. There is no contract unless the following requisites concur: 1. Consent of the contracting parties; 2. Object certain which is the subject matter of the contract; and 3. Cause of the obligation which is established. In the case at bar, there was a perfected oral contract. When Ms. Lopez and petitioner met in November 1986, and discussed the details of the work, the first stage of the contract commenced. When they agreed to the payment of the P10,000.00 as professional fees of petitioner and that she should give the designs before the December 1986 board meeting of the bank, the second stage of the contract proceeded, and when finally petitioner gave the designs to Ms. Lopez, the contract was consummated. Petitioner believed that once she submitted the designs she would be paid her professional fees. Ms. Lopez assured petitioner that she would be paid. It is familiar doctrine that if a corporation knowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent‘s authority. Also, petitioner may be paid on the basis of quantum meruit. "It is essential for the proper operation of the principle that there is an acceptance of the benefits by one sought to be charged for the services rendered under circumstances as reasonably to notify him that the lawyer performing the task was expecting to be paid compensation therefor. The doctrine of quantum meruit is a device to prevent undue enrichment based on the equitable postulate that it is unjust for a person to retain benefit without paying for it." The designs petitioner submitted to Ms. Lopez were not returned. Ms. Lopez, an officer of the bank as branch manager used such designs for presentation to the board of the bank. Thus, the designs were in fact Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
689
useful to Ms. Lopez for she did not appear to the board without any designs at the time of the deadline set by the board. Decision reversed and set aside. Decision of the trial court affirmed.
Palattao vs. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
690
YOLANDA PALATTAO, petitioner, vs. THE COURT OF APPEALS, HON. ANTONIO J. FINEZA, as Presiding Judge of the Regional Trial Court of Caloocan City, Branch 131 and MARCELO CO, respondents. (G.R. No. 131726, May 7, 2002, 1st Division) YNARES-SANTIAGO, J.: FACTS: Petitioner Yolanda Palattao entered into a lease contract whereby she leased to private respondent a house and a 490-squaremeter lot located in 101 Caimito Road, Caloocan City, covered by a Transfer Certificate of Title and registered in the name of petitioner. The duration of the lease contract was for three years, commencing from January 1, 1991, to December 31, 1993, renewable at the option of the parties. The agreed monthly rental was P7,500.00 for the first year; P 8,000.00 for the second year: and P8,500.l00 for the third year. The contract gave respondent lessee the first option to purchase the leased property. During the last year of the contract, the parties began negotiations for the sale of the leased premises to private respondent. In a letter, petitioner offered to sell to private respondents 413.28 square meters of the leased lot at P 7,800.00 per square meter, or for the total amount of P3,223,548.00. Private respondents replied on April 15, 1993 wherein he informed petitioner that he ―shall definitely exercise his option to buy‖ the leased property. Private respondent, however, manifested his desire to buy the whole 490-square meters inquired from petitioner the reason why only 413.28 square meters of the leased lot were being offered for sale. In a letter dated November 6, 1993, petitioner made a final offer to sell the lot at P7,500.00 per square meter with a down payment of 50% upon the signing of the contract of conditional sale, the balance payable in one year with a monthly lease/interest payment P 14,000.00 which must be paid on or before the fifth day every month that the balance is still outstanding. Private respondents accepted petitioners offer and reiterated his request for respondent accepted petitioner‘s offers and reiterated his request for clarification as to the size of the lot for sale. Petitioner acknowledged private respondent‘s acceptance of the offer in his letter dated November 10, 1993. Petitioner gave private respondent on or before November 24, 1993, within which to pay the 50% downpayment in cash or manager‘s check. Petitioner stressed that failure to pay the downpayment on the stipulated period will enable petitioner to freely sell her property to others. Petitioner likewise notified private respondent, that she is no longer renewing the lease agreement upon its expiration on December 31, 1993. Private respondent did not accept the terms proposed by petitioner. Neither were there any documents of sale nor payment by private respondent of the required downpayment. Private respondent wrote a letter to petitioner on November 29, 1993 manifesting his intention to exercise his option to renew their lease contract for another three years, starting January 1, 1994 to December 31, 1996. This was rejected by petitioner, reiterating that she was no longer renewing the lease. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
691
Petitioner demanded that private respondent vacate the premises, but the latter refused. Hence, private respondent filed with the Regional Trial Court a case for specified performance seeking to compel petitioner to sell to him the leased property. Private respondent further prayed for the issuance of a writ preliminary injunction to prevent petitioner from filing an ejectment case upon the expiration of the lease contract on December 31, 1993. During the proceedings in the specific performance case, the parties agreed to maintain the status quo. After they failed to reach an amicable settlement, petitioner filed the instant ejectment case before the Metropolitan Trial Court. In his answer, private respondent alleged that he refused to vacate the leased premises because there was a perfected contract of sale of the leased property between him and petitioner. Private respondent argued that he did not abandon his option to buy the leased property and that his proposal to renew the lease was but an alternative proposal to the sale. He further contended that the filing of the ejectment case violated their agreement to maintain the status quo. ISSUE:Whether or not there was a valid consent in the case at bar. HELD:There was no valid consent in the case at bar. Contracts that are consensual in nature, like a contract of sale, are perfected upon mere meeting of the minds. Once there is concurrence between the offer and the acceptance upon the subject matter, consideration, and terns of payment, a contract is produced. The offer must be certain. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional, and without variance of any sort from the proposal. A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer and is a rejection of the original offer. Consequently, when something is desired which is not exactly is proposed in the offer, such acceptance is not sufficient to generate consent because any modification or variation from the terms of the offer annuals the offer. In the case at bar, while it is true that private respondent informed petitioner that he is accepting the latter‘s offer to sell the leased property, it appears that they did not reach an agreement as to the extent of the lot subject of the proposed sale. Letters reveal that private respondent did not give his consent to buy only 413.28 square meters of the leased lot, as he desired to purchase the whole 490 square-meter- leased premises which, however, was not what was exactly proposed in petitioner‘s offer. Clearly, therefore, private respondent‘s acceptance of petitioner‘s offer was not absolute, and will consequently not generate consent that would perfect a contract.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
692
ABS-CBN v. CA
ABS-CBN BROADCASTING CORPORATION, petitioner, vs. HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP, VIVA PRODUCTION, INC., and VICENTE DEL ROSARIO, respondents. (G.R. No. 128690, January 21, 1999, 1st Division) DAVIDE, JR., CJ.: FACTS:In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement whereby Viva gave ABS-CBN an exclusive right to exhibit some Viva films. Viva, through defendant Del Rosario, offered ABS-CBN, through its vice-president Charo Santos-Concio, a list of three film packages (36 title) from which ABS-CBN may exercise its right of first refusal under the afore-said agreement. ABS-CBN, however through Mrs. Concio, "can tick off only ten titles" (from the list) "we can purchase" and therefore did not accept said list. The titles ticked off by Mrs. Concio are not the subject of the case at bar except the film "Maging Sino Ka Man." On February 27, 1992, defendant Del Rosario approached ABSCBN‘s Ms. Concio, with a list consisting of 52 original movie titles (i.e., not yet aired on television) including the 14 titles subject of the present case, as well as 104 re-runs (previously aired on television) from which ABS-CBN may choose another 52 titles, as a total of 156 titles, proposing to sell to ABS-CBN airing rights over this package of 52 originals and 52 re-runs for P60,000,000.00 of which P30,000,000.00 will be in cash and P30,000,000.00 worth of television spots. On April 2, 1992, defendant Del Rosario and ABS-CBN‘s general manager, Eugenio Lopez III discussed the package proposal of VIVA. Mr. Lopez testified that he and Mr. Del Rosario allegedly agreed that ABSCBN was granted exclusive film rights to fourteen (14) films for a total consideration of P36 million; that he allegedly put this agreement as to the price and number of films in a "napkin" and signed it and gave it to Mr. Del Rosario. On the other hand, Del Rosario denied having made any agreement with Lopez regarding the 14 Viva films; denied the existence of a napkin in which Lopez wrote something; and insisted that what he and Lopez discussed at the lunch meeting was Viva‘s film package offer of 104 films (52 originals and 52 re-runs) for a total price of P60 million. Del Rosario and Mr. Graciano Gozon of RBS Senior vice-president for Finance discussed the terms and conditions of Viva‘s offer to sell the 104 films, after the rejection of the same package by ABS-CBN. On the following day, Del Rosario received a draft contract from Ms. Concio which contains a counter-proposal of ABS-CBN on the offer made by VIVA including the right of first refusal to 1992 Viva Films. However, the proposal was rejected by the Board of Directors of VIVA and such was relayed to Ms. Concio.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
693
On April 29, 1992, after the rejection of ABS-CBN and following several negotiations and meetings defendant Del Rosario and Viva‘s President Teresita Cruz, in consideration of P60 million, signed a letter of agreement dated April 24, 1992, granting RBS the exclusive right to air 104 Viva-produced and/or acquired films including the fourteen films subject of the present case. On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific performance with a prayer for a writ of preliminary injunction and/or temporary restraining order against private respondents Republic Broadcasting System (now GMA Network Inc.) On 28 May 1992, the RTC issued a temporary restraining order. The RTC then rendered decision in favor of RBS and against ABSCBN. On appeal, the same decision was affirmed. Hence, this decision. ISSUE:Whether or not there exists a perfected contract between ABSCBN and VIVA. HELD:A contract is a meeting of minds between two persons whereby one binds himself to give something or render some service to another [Art. 1305, Civil Code.] for a consideration. There is no contract unless the following requisites concur: consent of the contracting parties; object certain which is the subject of the contract; and cause of the obligation, which is established. [Art. 1318, Civil Code.] A contract undergoes three stages: (a) preparation, conception, or generation, which is the period of negotiation and bargaining rending at the moment of agreement of the parties; (b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and (c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract. In the present case, when Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN on 2 April 1992 to discuss the package of films, said package of 104 VIVA films was VIVA‘s offer to ABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN, sent through Ms. Concio, counterproposal in the form a draft contract proposing exhibition of 53 films for a consideration of P35 million. This counter-proposal could be nothing less than the counter-offer of Mr. Lopez during his conference with Del Rosario at Tamarind Grill Restaurant. Clearly, there was no acceptance of VIVA‘s offer, for it was met by a counter-offer which substantially varied the terms of the offer. Furthermore, ABS-CBN made no acceptance of VIVA‘s offer hence, they underwent period of bargaining. ABS-CBN then formalized its counter-proposals or counter-offer in a draft contract. VIVA through its Board of Directors, rejected such counter-offer. Even if it be conceded Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
694
arguendo that Del Rosario had accepted the counter-offer, the acceptance did not bind VIVA, as there was no proof whatsoever that Del Rosario had the specific authority to do so. The instant petition was GRANTED.
Limson v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
695
LOURDES ONG LIMSON, petitioner, vs. COURT OF APPEALS, SPOUSES LORENZO DE VERA and ASUNCION SANTOS-DE VERA, TOMAS CUENCA, JR. and SUNVAR REALTY DEVELOPMENT CORPORATION, respondents. (G.R. No. 135929, April 20, 2001, 2 nd Division) BELLOSILLO, J.:
FACTS:In July 1978, respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera, through their agent Marcosa Sanchez, offered to sell to petitioner Lourdes Ong Limson a parcel of land. The respondent spouses were the owners of the subject property. On July 31, 1978, she agreed to but the property at the price of P34. 00 per square meter and gave P20, 000.00 as ―earnest money‖. The respondent spouses signed a receipt thereafter and gave her a 10-day option period to purchase the property. Respondent spouses informed petitioner that the subject property was mortgaged to Emilio Ramos and Isidro Ramos. Petitioner was asked to pay the balance of the purchase price to enable the respondent spouses to settle their obligation with the Ramoses. Petitioner agreed to meet respondent spouses and the Ramoses on August 5, 1978, to consummate the transaction; however, the respondent spouses and the Ramoses did not appear, same with their second meeting. On August 23, 1978, petitioner allegedly gave respondent spouses three checks for the settlement the back taxes of property. On September 5, 1978, the agent of the respondent spouses informed petitioner that the property was the subject of a negotiation for the sale to respondent Sunvar Realty Development Corporation. Petitioner alleged that it was only on September 15, 1978, that TCT No. S-72946 covering the property was issued to respondent spouses. On the same day, petitioner filed and Affidavit of Adverse Claim with the Office of the Registry of Deeds of Makati, Metro Manila. The Deed of Sale between respondent spouses and respondent Sunvar was executed on September 15, 1978 and TCT No. S-72377 was issued in favor of Sunvar on September 26, 1978 with the Adverse Claim of petitioner annotated thereon. Respondent spouses and Sunvar filed their Answers and Answers to Cross-Claim, respectively. On appeal, the Court of Appeals completely reversed the decision of the trial court and ordered the Register of Deeds of Makati City to lift the Adverse Claim and ordered petitioner to pay respondent Sunvar and respondent spouses exemplary and nominal damages and attorney‘s fees. Hence, this petition.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
696
ISSUE:Whether or not the agreement between petitioner and respondent spouses was a mere option or a contract to sell. HELD:The Supreme Court held that the agreement between the parties was a contract of option and not a contract to sell. An option is continuing offer or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a time certain, or under, or in compliance with, certain terms and conditions, or which gives the owner of the property the right to sell or demand a sale. It is also sometimes called an ―unaccepted offer‖. An option is not of itself a purchase, but merely secures the privilege to buy. It is not a sale of property but a sale of the right to purchase. Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside from the consideration for the offer.
Villanueva v. PNB
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
697
REYNALDO VILLANUEVA, petitioner, vs. PHILIPPINE NATIONAL BANK (PNB), respondent. (G.R. No. 154493 , December 6, 2006, 1 st Division) AUSTRIA-MARTINEZ, J.: FACTS:PNB published an invitation to bid two lands in General Santos City: Lot 17, which costs P1,409,000.00, and Lot 19, which costs P2,268,000.00. Reynaldo Villanueva offered to purchase Lot Nos. 17 and 19 for P3,677,000.00. He also manifested that he was depositing P400,000.00to show his good faith but with the understanding that said amount may be treated as part of the payment of the purchase price only when his offer is accepted by PNB. Guevara, the vice-president informed Villanueva that only Lot No. 19 is available and that the asking price therefor is P2,883,300.00. PNB also stated that if quoted price is acceptable to Villanueva, then the latter must submit a revised offer to purchase. And Sale shall be subject to its Board of Director‘s approval and to other terms and conditions imposed by the Bank on sale of acquired assets. Villanueva accepted the counter-offer, but he provided also that he will pay it through downpayment of P600,000.00 and the balance payable in two (2) years at quarterly amortizations. He then proceeded to pay for the same. However, Guevara wrote Villanueva that upon orders of the PNB Board of Directors to conduct another appraisal and public bidding of Lot No. 19, they are deferring negotiations with him over said property and returning his deposit of P580,000.00. Undaunted, Villanueva attempted to deliver postdated checks covering the balance of the purchase price but PNB refused the same. Villanueva then filed a case of specific performance against PNB, claiming that there was already an agreement between them. ISSUE:Whether or not there is already a meeting of the minds between Villanueva and PNB. HELD:No, the acceptance allegedly made by Villanueva constituted a counter-offer. RATIO:Contracts of sale are perfected by mutual consent whereby the seller obligates himself, for a price certain, to deliver and transfer ownership of a specified thing or right to the buyer over which the latter agrees. Mutual consent being a state of mind, its existence may only be inferred from the confluence of two acts of the parties: an offer certain as Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
698
to the object of the contract and its consideration, and an acceptance of the offer which is absolute in that it refers to the exact object and consideration embodied in said offer. Anything short of that level of mutuality produces not a contract but a mere counter-offer awaiting acceptance. In this case, indeed Villanueva accepted the counter-offer made by PNB wherein he the bank only Lot 19 is available and that the price was increased. However, he qualified the acceptance by determining the terms of the payment. The qualification turned the acceptance into a counter-offer, thus it is not yet binding among the parties.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
699
Catalan v. Basa
CORAZON CATALAN, LIBRADA CATALAN-LIM, EULOGIO CATALAN, MILA CATALAN-MILAN, ZENAIDA CATALAN, ALEX CATALAN, DAISY CATALAN, FLORIDA CATALAN and GEMMA CATALAN, Heirs of the late FELICIANO CATALAN, Petitioners, vs.JOSE BASA, MANUEL BASA, LAURETA BASA, DELIA BASA, JESUS BASA and ROSALINDA BASA, Heirs of the late MERCEDES CATALAN, Respondents. (G.R. No. 159567, July 31, 2007, 1 st Division) PUNO, C.J.: FACTS:On October 20, 1948, FELICIANO CATALAN was discharged from active military service. The Board of Medical Officers of the Department of Veteran Affairs found that he was unfit to render military service due to his "schizophrenic reaction, catatonic type, which incapacitates him because of flattening of mood and affect, preoccupation with worries, withdrawal, and sparce and pointless speech." On September 28, 1949, Feliciano married Corazon Cerezo. On June 16, 1951, a document was executed, titled "Absolute Deed of Donation," wherein Feliciano allegedly donated to his sister MERCEDES CATALAN one-half of the real property described. The donation was registered with the Register of Deeds. The Bureau of Internal Revenue then cancelled Tax Declaration No. 2876, and, in lieu thereof, issued Tax Declaration No. 180804 to Mercedes for the 400.50 square meters donated to her. The remaining half of the property remained in Feliciano‘s name under Tax Declaration No. 18081. On December 11, 1953, People‘s Bank and Trust Company filed Special Proceedings No. 45636 before the Court of First Instance of Pangasinan to declare Feliciano incompetent. On December 22, 1953, the trial court issued its Order for Adjudication of Incompetency for Appointing Guardian for the Estate and Fixing Allowance of Feliciano. The following day, the trial court appointed People‘s Bank and Trust Company as Feliciano‘s guardian. People‘s Bank and Trust Company has been subsequently renamed, and is presently known as the Bank of the Philippine Islands (BPI). On November 22, 1978, Feliciano and Corazon Cerezo donated Lots 1 and 3 of their property, registered under Original Certificate of Title No. 18920, to their son Eulogio Catalan. On March 26, 1979, Mercedes sold the property in issue in favor of her children Delia and Jesus Basa. The Deed of Absolute Sale was registered with the Register of Deeds of Pangasinan on February 20, Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
700
1992, and Tax Declaration No. 12911 was issued in the name of respondents. On June 24, 1983, Feliciano and Corazon Cerezo donated Lot 2 of the aforementioned property registered under OCT No. 18920 to their children Alex Catalan, Librada Catalan and Zenaida Catalan. On February 14, 1983, Feliciano and Corazon Cerezo donated Lot 4 (Plan Psu-215956) of the same OCT No. 18920 to Eulogio and Florida Catalan.12 On April 1, 1997, BPI, acting as Feliciano‘s guardian, filed a case for Declaration of Nullity of Documents, Recovery of Possession and Ownership, as well as damages against the herein respondents. BPI alleged that the Deed of Absolute Donation to Mercedes was void ab initio, as Feliciano never donated the property to Mercedes. In addition, BPI averred that even if Feliciano had truly intended to give the property to her, the donation would still be void, as he was not of sound mind and was therefore incapable of giving valid consent. Thus, it claimed that if the Deed of Absolute Donation was void ab initio, the subsequent Deed of Absolute Sale to Delia and Jesus Basa should likewise be nullified, for Mercedes Catalan had no right to sell the property to anyone. BPI raised doubts about the authenticity of the deed of sale, saying that its registration long after the death of Mercedes Catalan indicated fraud. Thus, BPI sought remuneration for incurred damages and litigation expenses. On August 14, 1997, Feliciano passed away. The original complaint was amended to substitute his heirs in lieu of BPI as complainants. On December 7, 1999, the trial court dismissed the plaintiff‘s complaint and declared that the defendants Jesus Basa and Delia Basa are the lawful owners of the land in question which is now declared in their names under Tax Declaration No. 12911. Petitioners appealed before the Court of Appeals which affirmed the decision of the RTC. The appellate court held that the Regional Trial Court did not commit a reversible error in disposing that plaintiffappellants failed to prove the insanity or mental incapacity of late Feliciano Catalan at the precise moment when the property in dispute was donated. Thus, all the elements for validity of contracts having been present in the 1951 donation coupled with compliance with certain solemnities required by the Civil Code in donation inter vivos of real property under Article 749. Thus, petitioners filed the present appeal. ISSUE: Whether or not the contract is valid. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
701
HELD:Yes. A donation is an act of liberality whereby a person disposes gratuitously a thing or right in favor of another, who accepts it. Like any other contract, an agreement of the parties is essential. Consent in contracts presupposes the following requisites: (1) it should be intelligent or with an exact notion of the matter to which it refers; (2) it should be free; and (3) it should be spontaneous. The parties' intention must be clear and the attendance of a vice of consent, like any contract, renders the donation voidable. In order for donation of property to be valid, what is crucial is the donor‘s capacity to give consent at the time of the donation. Certainly, there lies no doubt in the fact that insanity impinges on consent freely given. However, the burden of proving such incapacity rests upon the person who alleges it; if no sufficient proof to this effect is presented, capacity will be presumed. A thorough perusal of the records of the case at bar indubitably shows that the evidence presented by the petitioners was insufficient to overcome the presumption that Feliciano was competent when he donated the property in question to Mercedes. Petitioners make much ado of the fact that, as early as 1948, Feliciano had been found to be suffering from schizophrenia by the Board of Medical Officers of the Department of Veteran Affairs. By itself, however, the allegation cannot prove the incompetence of Feliciano. The petition is DENIED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
702
Domingo v. CA
EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL CAPALUNGAN, petitioners, vs. HON. COURT OF APPEALS, FELIPE C. RIGONAN and CONCEPCION R. RIGONAN, respondents. EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL CAPALUNGAN, petitioners, vs.HON.COURT OF APPEALS, THE DIRECTOR OF LANDS, and FELIPE C. RIGONAN and CONCEPCION R. RIGONAN, respondents. (G.R. No. 127540, October 17, 2001, 2nd Division) QUISUMBNG, J.: FACTS: Paulina Rigonan owned three parcels of land including the house and warehouse on one parcel. She allegedly sold them to private respondents, the spouses Felipe and Concepcion Rigonan, who claim to be her relatives. In 1966, petitioners who claim to be her closest surviving relatives, allegedly took possession of the properties by means of stealth, force and intimidation, and refused to vacate the same. According to defendants, the alleged deed of absolute sale was void for being spurious as well as lacking consideration. They said that Paulina Rigonan did not sell her properties to anyone. As her nearest surviving kin within the fifth degree of consanguinity, they inherited the three lots and the permanent improvements thereon when Paulina died. They said they had been in possession of the contested properties for more than 10 years. ISSUE:Whether or not the alleged Deed of Sale executed by Paulina Rigonan in favor of the private respondents is valid. HELD:Consideration is the why of a contract, the essential reason which moves the contracting parties to enter into the contract. The Court had seen no apparent and compelling reason for her to sell the subject 9 parcels of land with a house and warehouse at a meager price of P850 only. On record, there is unrebutted testimony that Paulina as landowner was financially well off. She loaned money to several people. Undisputably, the P850.00 consideration for the nine (9) parcels of land including the house and bodega is grossly and shockingly inadequate, and the sale is null and void ab initio. Private respondents presented only a carbon copy of this deed. When the Register of Deeds was subpoenaed to produce the deed, no original typewritten deed but only a carbon copy was presented to the trial court. None of the witnesses directly testified to prove positively and convincingly Paulina‘s execution of the original deed of sale. The carbon copy did not bear her signature, but only her alleged thumbprint. Juan Franco testified during the direct examination that he was an Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
703
instrumental witness to the deed. However, when cross-examined and shown a copy of the subject deed, he retracted and said that said deed of sale was not the document he signed as witness.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
704
Mendozana v. Ozamiz
MARIO J. MENDEZONA and TERESITA M. MENDEZONA, LUIS J. MENDEZONA and MARICAR L. MENDEZONA and TERESITA ADAD VDA. DE MENDEZONA, petitioners, vs.JULIO H. OZAMIZ, ROBERTO J. MONTALVAN, JOSE MA. OZAMIZ, CARMEN H. OZAMIZ, PAZ O. MONTALVAN, MA. TERESA O.F. ZARRAGA, CARLOS O. FORTICH, JOSE LUIS O. ROS, PAULITA O. RODRIGUEZ, and LOURDES O. LON, respondents. [G.R. No. 143370. February 6, 2002, 2nd Division] DE LEON, JR., J.: FACTS:The Mendezonas own a parcel of land in Lahug, Cebu City, which they acquired through sale from Carmen Ozamiz. However, such sale was being sought to be nullified by the heirs of Ozamiz, claiming that Carmen no longer have in possession her mental faculties when the sale was made. They claim that her advanced age (86) made her incapacitated, and as such, her properties were placed in administration. ISSUE:Whether or not the sale between the Mendezonas and Carmen is valid. HELD:Yes, because the Heirs of Carmen failed to fully substantiate their claim of her mental incapacity.It has been held that a person is not incapacitated to contract merely because of advanced years or by reason of physical infirmities. Only when such age or infirmities impair her mental faculties to such extent as to prevent her from properly, intelligently, and fairly protecting her property rights, is she considered incapacitated. The respondents utterly failed to show adequate proof that at the time of the sale on April 28, 1989 Carmen Ozamiz had allegedly lost control of her mental faculties. Also, the Court noted that the heirs only sought the nullification of one document, while they did not dare touch other transactions made by Carmen during the time of her alleged incapacity.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
705
Lim v. CA
MARIANO T. LIM, JAIME T. LIM, JOSE T. LIM, JOVITA T. LIM, ANACORITA T. LIM, ANTONIETTA T. LIM, RUBEN T. LIM, BENJAMIN T. LIM, ET AL., petitioners, vs. COURT OF APPEALS, LORENZO O. TAN and HERMOGENES O. TAN, respondents. (G.R. No. L-55201, February 3, 1994, 2nd division) PUNO, J.: FACTS: The deceased spouses Tan Quico and Josefa Oraa, who both died intestate left 96 hectares of land. The late spouses were survived by four children; Cresencia, Lorenzo, Hermogenes and Elias. Elias died on May 2, 1935. Cresencia died on December 20, 1967. She was survived by her husband, Lim Chay Sing, and children, Mariano, Jaime, Jose Jovita, Anacoreta, Antonietta, Ruben, Benjamin and Rogelio who are now the petitioners in the case at bench. Cresencia only reached the second grade of elementary school. She could not read or write in English. On the other hand, Lorenzo is a lawyer and a CPA. Heirs of Cresencia alleged that since the demise of the spouses Tan Quico and Josefa Oraa, the subject properties had been administered by respondent Lorenzo. They claimed that before her death, Cresencia had demanded their partition from Lorenzo. After Cresencia‘s death, they likewise clamored for their partition. Their effort proved fruitless. Lorenzo and Hermogenes‘ unyielding stance against partition is based on various contentions. They cited as evidence the ―Deed of Confirmation of Extra Judicial Settlement of the Estate of Tan Quico and Josefa Oraa‖ and a receipt of payment. Principally, they urge that the properties had already been partitioned, albeit, orally; and during her lifetime, the late Cresencia had sold and conveyed all her interests in said properties to respondent Lorenzo. ISSUE: Whether or not Cresencia indeed sold her share of the land to Lorenzo. HELD: No, because Lorenzo failed to prove that he clearly adduced to Cresencia the contents of the contract.First the SC ruled that despite the insistence that the lands were partitioned among the siblings in 1930, the failure to transfer the titles to them after a long period of time defeats this claim. In effect, there could have been no partition of the lands. Also, considering that Cresencia is an illiterate, the one executing the contract must prove that everything was made to let the other party understand the contract. When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
706
In this case, Lorenzo failed to prove that he sufficiently made Cresencia the contents of the contract. With his educational background as lawyer and CPA, he could have easily induced Cresencia to fraudulently sign the Deed.
Ruiz v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
707
SPOUSES LORENZO G. FRANCISCO and LORENZA D. FRANCISCO, petitioners, vs. HONORABLE COURT OF APPEALS, and BIENVENIDO C. MERCADO, respondents. (G.R. No. 118749, April 25, 2003, 1st Division) CARPIO, J.: FACTS: On 3 February 1984, the spouses Francisco and Engineer Bienvenido C. Mercado entered into a Contract of Development for the development into a subdivision of several parcels of land in Pampanga. Under the Contract, respondent agreed to undertake at his expense the development work for the Franda Village Subdivision. Respondent committed to complete the construction within 27 months. Respondent also advanced P200,000.00 for the initial expenses of the development work. In return, respondent would receive 50% of the total gross sales of the subdivision lots and other income of the subdivision. Respondent also enjoyed the exclusive and irrevocable authority to manage, control and supervise the sales of the lots within the subdivision. The Contract required respondent to submit to petitioners, within the first 15 days of every month, a report on payments collected from lot buyers with copies of all the contracts to sell. However, respondent failed to submit the monthly report. From 16 October 1985 to sometime in March 1986, within the 27month period granted to respondent, petitioners also contracted a certain Nicasio Rosales, Sr. to undertake the partial development of the subdivision. On 16 July 1986, Rosales submitted his accomplishment report. On the same day, petitioners demanded that respondent submit within 15 days an accounting of his operation of the subdivision from the beginning of the project up to 15 July 1986. Petitioners also requested for copies of contracts to sell, receipts of collections and receipts of disbursements for development expenses. On 5 August 1986, respondent secured from the Human Settlements Regulatory Commission ("HSRC") an extension of time to finish the subdivision development until 30 July 1987. On 8 August 1986, petitioners instructed respondent to stop selling subdivision lots and collecting payments from lot buyers. Petitioners also demanded the turnover to them of all official receipts in the name of Franda Village Subdivision. Nonetheless, respondent continued to collect payments from lot buyers until September 1986. On 18 September 1986, petitioners wrote respondent that their accountant was not satisfied with respondent's report which did not include the necessary supporting documents. Petitioners required respondent to submit a proper statement of collections with supporting receipts and documents, and reiterated that respondent should stop selling subdivision lots and collecting payments from lot buyers. For the first time, petitioners also alleged that respondent violated certain Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
708
provisions of the Contract. Petitioners mentioned the complaint of lot buyers that respondent was not developing the subdivision within the agreed period. Another complaint was that respondent issued two kinds of receipts, one in the name of B. C. Mercado and the other in the name of Franda Subdivision. On 7 October 1986, petitioners informed the HSRC of the lot buyers' complaints that respondent completed only 5% of the development work and that he was issuing two kinds of receipts. Petitioners also claimed that respondent was in serious violation of the Contract because he did not properly remit to petitioners the proceeds from the lot sales. In a letter dated 25 November 1986, respondent requested petitioners to provide him with the format of the statement of collections they wanted or, alternatively, to send an accountant to audit his records. He assured them that he could account for all the proceeds from the lot sales. He countered that he could have finished the development of the subdivision on time had petitioners not hampered him with their verbal demands to stop the development and "fill up" the lots first. Respondent suggested that he and petitioners settle their differences either by mutually canceling the Contract and giving to each party its corresponding share, or by continuing with the arrangement. In the meantime, respondent informed petitioners that he would continue the operation of the subdivision in accordance with the Contract. On 20 January 1987, petitioners granted respondent an authority to resume the sale of subdivision lots and the collection of payments subject to the following conditions: (1) all collections shall be deposited in a joint account with China Banking Corporation, San Fernando, Pampanga branch; (2) withdrawals shall be limited to 50% of the total collections or to respondent's share, which can only be used for development expenses, and any withdrawal shall be subject to the approval of petitioners; (3) only Franda Village Subdivision receipts, duly countersigned by petitioners, shall be used; (4) collections shall be subject to a weekly or monthly audit; and (5) any violation of these conditions shall result in the automatic cancellation of the authority. On 28 January 1987, respondent informed HSRC that he had stopped development work on the subdivision because the conditional authority issued by petitioners violated the Contract. Specifically, respondent referred to the following provisions of the Contract that the conditional authority contravened: (1) his exclusive and irrevocable right to manage, control, and supervise the sale of lots; (2) his authority to issue receipts as the developer without the participation of the landowners; and (3) his right to withdraw his 50% share without the approval of the landowners. Respondent attributed the delay in the development of the subdivision to petitioners who contracted the services of another person during the effectivity of the Contract. Petitioners also Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
709
stopped respondent, without justification, from selling the lots and collecting payments from lot buyers. On 27 February 1987, respondent filed with the trial court an action to rescind the Contract with a prayer for damages. Petitioners countered that respondent breached the Contract by failing to finish the subdivision within the 27 months agreed upon, and therefore respondent was in delay. Petitioners also alleged that respondent sold one subdivision lot to two different buyers. Subsequently, petitioners obtained permission from the Housing and Land Use Regulatory Board to takeover the development of the subdivision. After trial on the merits, the trial court ruled that petitioners breached the Contract by: (1) hiring Rosales to do development work on the subdivision within the 27-month period exclusively granted to respondent; (2) interfering with the latter's development work; and (3) stopping respondent from managing the sale of lots and collection of payments. Because petitioners were the first to breach the Contract and even interfered with the development work, the trial court declared that respondent did not incur delay even if he completed only 28% of the development work. Further, the HSRC extended the Contract up to July 1987. Since the Contract had not expired at the time respondent filed the action for rescission, petitioners' defense that respondent did not finish the development work on time was without basis. The trial court also found that respondent did not fail to pay the 50% share of petitioners from the proceeds of the lot sales. The trial court viewed respondent's failure to submit the required report as only a slight infraction not warranting petitioners' interference with respondent's right to sell the lots and collect payments from sales pursuant to Article X (3) of the Contract. The trial court noted that petitioners had tolerated the non-submission of the monthly report until petitioners made the demand for accounting on 16 July 1986, which respondent readily complied. The trial court stressed that respondent's right under the Contract to sell lots and collect payments was exclusive and irrevocable. The trial court decreed the rescission of the Contract and awarded damages to respondent. On appeal ,the Court of Appeals adopted the findings of fact of the trial court. Declaring that there was no reversible error, the appellate court in its Decision affirmed the HELD of the trial court in toto. Petitioners filed a motion for reconsideration, which the Court of Appeals denied in its Resolution of 17 January 1995. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
710
Hence this petition. ISSUE: Whether or not Private respondent was entitled to the rescission of the contract of development and damages because of intervention of Nicasio Rosales, Sr. In the development of the subdivision during the existence of the contract. HELD: The Supreme Court found no reversible error in the HELD of the trial and appellate courts that respondent's non-submission of the monthly report was merely a slight infraction of the Contract. Respondent's failure to submit the monthly report cannot serve as sufficient basis for the cancellation of the Contract. The cancellation of a contract will not be permitted for a slight or casual breach. Only a substantial and fundamental breach, which defeats the very object of the parties in making the contract, will justify a cancellation. In the instant case, the development work continued for more than two years despite the lack of a monthly report. Petitioners further contend that, considering respondent's nonsubmission of collection reports, they were merely enforcing their rights under Article X (3) of the Contract33 in demanding that respondent stop selling the subdivision lots and collecting payments from lot buyers. Whether petitioners could have justifiably invoked Article X (3) of the Contract based on respondent's failure to submit the required reports is beside the point. It is clear from the records that petitioners did not seek to stop respondent's activities due to the latter's failure to submit the required reports. The non-submission of the required reports was never mentioned in any of petitioners' letters. Indeed, petitioners' letter of 8 August 1986, which first instructed respondent to stop selling the lots and collecting payments, did not mention any violation at all, while the subsequent letters referred only to the complaints of lot buyers. Article X (3) of the Contract required the "innocent party" to serve a written notice of "a violation of the terms and conditions of this contract." Absent such written notice, this provision cannot be invoked, much less enforced. The Decision of the Court of Appeals in upholding the Decision of the Regional Trial Court of San Fernando, Pampanga is AFFIRMED, with the MODIFICATION that the award of attorney's fees, temperate and exemplary damages is DELETED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
711
Dela Cruz v. Sison
EPIFANIA DELA CRUZ, substituted by LAUREANA V. ALBERTO, petitioner, vs. SPS. EDUARDO C. SISON and EUFEMIA S. SISON, respondents. (G.R. No. 163770 , February 17, 2005, 1st Division) YNARES-SANTIAGO, J.: Facts:Epifania Dela Cruz alleged that in 1992, she discovered that her rice land in has been transferred and registered in the name of her nephew, Eduardo C. Sison, without her knowledge and consent, purportedly on the strength of a Deed of Sale she executed. Epifania then filed a complaint praying to declare the deed of sale null and void. She alleged that Eduardo tricked her into signing the Deed of Sale, by inserting the deed among the documents she signed pertaining to the transfer of her residential land, house and camarin, in favor of Demetrio, her foster child and the brother of Eduardo. Respondents, spouses Eduardo and Eufemia Sison denied that they employed fraud or trickery in the execution of the Deed of Sale. They claimed that they purchased the property from Epifania for P20 000 and that the deed was duly notarized, complied with all requisites for its registration, as evidenced by the Investigation Report by the Department of Agrarian Reform, Affidavit of Seller/Transferor, Affidavit of Buyer/Transferee, Certification issued by the Provincial Agrarian Reform Officer, Letter for the Secretary of Agrarian Reform, Certificate Authorizing Payment of Capital Gains Tax, and the payment of the registration fees. Some of these documents even bore the signature of Epifania which only proves that she agreed to the transfer of the property. Issue: 1.) Whether fraud attended the execution of a contract 2.) Whether the deed of absolute sale is valid. HELD: 1.) A comparison of the deed of sale in favor of Demetrio and the deed of sale in favor Eduardo, draws out the conclusion that there was no trickery employed. One can readily see that the first deed of sale is in all significant respects different from the second deed of sale. A casual perusal, even by someone as old as Epifania, would enable one to easily spot the differences. Epifania could not have failed to miss them. The Court is bound by the appellate court‘s findings, unless they are contrary to those of the trial court, in which case we may wade into the factual dispute to settle it with finality.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
712
2.) After a careful perusal of the records, we sustain the Court of Appeals‘ HELD that the Deed of Absolute Sale dated November 24, 1989 is valid. There being no evidence adduced to support her bare allegations, thus, Epifania failed to satisfactorily establish her inability to read and understand the English language. Although Epifania was 79 years old at the time of the execution of the assailed contract, her age did not impair her mental faculties as to prevent her from properly and intelligently protecting her rights. Even at 83 years, she exhibited mental astuteness when she testified in court. It is, therefore, inconceivable for her to sign the assailed documents without ascertaining their contents, especially if, as she alleges, she did not direct Eduardo to prepare the same.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
713
Rural Bank of Sta. Maria v. CA
RURAL BANK OF STA. MARIA, PANGASINAN, petitioner vs. THE HON ORABLE COURT OF APPEALS, ROSARIO R. RAYANDAYAN, CARMEN R. ARCEÑO, respondents. (G.R. No. 110672. September 14, 1999, 3rd Division) GONZAGA_REYES, J.: FACTS: A Deed of Absolute Sale with Assumption of Mortgage was executed between Manuel Behis as vendor/assignor and Rayandayan and Arceño as vendees/assignees for the sum of P250,000.00. On the same day, Rayandayan and Arceño together with Manuel Behis executed another Agreement embodying the real consideration of the sale of the land in the sum of P2,400,000.00. Thereafter, Rayandayan and Arceño negotiated with the principal stockholder of the bank, Engr. Edilberto Natividad in Manila, for the assumption of the indebtedness of Manuel Behis and the subsequent release of the mortgage on the property by the bank. Rayandayan and Arceño did not show to the bank the Agreement with Manuel Behis providing for the real consideration of P2,400,000.00 for the sale of the property to the former. Subsequently, the bank consented to the substitution of plaintiffs as mortgage debtors in place of Manuel Behis in a Memorandum of Agreement between private respondents and the bank with restructured and liberalized terms for the payment of the mortgage debt. Instead of the bank foreclosing immediately for non-payment of the delinquent account, petitioner bank agreed to receive only a partial payment of P143,000.00 by installment on specified dates. After payment thereof, the bank agreed to release the mortgage of Manuel Behis; to give its consent to the transfer of title to the private respondents; and to the payment of the balance of P200,000.00 under new terms with anew mortgage to be executed by the private respondents over the same land. However, petitioner bank did not comply with the MOA with respondents because of a supervening event namely the protest made by Cristina Behis, wife of Manual Behis, alleging that she did not consent to the negotiation made as regards the Deed of absolute sale with Assumption of Mortgage by her husband with the respondents and that her signature was forged by respondents. The petitioner bank then told respondents to settle the matter with Mrs. Behis. At that point, petitioner bank cancelled its MOA with respondents because: first, the latter failed to settlethe protest of Mrs. Behis; and, secondly, the terms of the Memorandum of Agreement have not been fully complied with as the payments were not made on time on the dates fixed therein; and third, their consent to the Memorandum of Agreement was secured by the plaintiffs thru fraud as the Bank was not shown the Agreement containing the real consideration of P2,400.000.00 of the sale Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
714
of the land of Manuel Behis to plaintiffs.Thereafter, the petitioner bank returned the initial payment of P143,000.00 to respondents. In the mean time, petitioner entered into an agreement with Halsema Bank that the latter would assume the mortgage of Manuel Behis in consideration of P521,765.45.Thereafter, respondents brought the matter before the RTC which ruled that the MOA is valid. The case was elevated to the CA on certiorari. The respondent Court affirmed the validity of the MOA dismissing the claim of the respondent that their consent to the agreement made with respondents to assume the mortgage of Manuel Behis, and awarding the respondents for damages. Hence this present appeal. Issues :Whether or not respondents are guilty of fraud (which would make the contract between respondents andpetitioner viod) when it did not show or it concealed from the petitioner the Agreement (betweenrespondents and Manuel Behis) the consideration of P2.4, and rather what was only shown was the firstagreement with regard to the Deed of Sale with Assumption of Mortgage?
Held:No. This brings us to the first issue raised by petitioner bank that the Memorandum of Agreement is voidable on the ground that its consent to enter said agreement was vitiated by fraud because private respondents withheld from petitioner bank the material information that the real consideration for the sale with assumption of mortgage of the property by Manuel Behis to Rayandayan and Arceño isP2,400,000.00, and not P250,000.00 as represented to petitioner bank. According to petitioner bank, had it known of the real consideration for the sale, i.e. P2.4 million, it would not have consented into enteringthe Memorandum of Agreement with Rayandayan and Arceño as it was put in the dark as to the real capacity and financial standing of private respondents to assume the mortgage from Manuel Behis. Petitioner bank pointed out that it would not have assented to the agreement, as it could not expect the private respondents to pay the bank the approximately P343,000.00 mortgage debt when private respondents have to pay at the same time P2,400,000.00 to Manuel Behis on the sale of the land. The kind of fraud that will vitiate a contract refers to those insidious words or machinations resorted to by one of the contracting parties to induce the other to enter into a contract which without them he would not have agreed to. Simply stated, the fraud must be the determining cause of the contract, or must have caused the consent to be given. It is believed that the non-disclosure to the bank of the purchase price of the sale of the land between private respondents and Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
715
Manuel Behis cannot be the ―fraud‖ contemplated by Article 1338 of the Civil Code. From the sole reason submitted by the petitioner bank that it was kept in the dark as to the financial capacity of private respondents, we cannot see how the omission or concealment of the real purchase price could have induced the bank into giving its consent to the agreement; or that the bank would not have otherwise given its consent had it known of the real purchase price. The deceit which voids the contract exists where the party who obtains the consent does so by means of concealing or omitting to state material facts, with intent to deceive, by reason of which omission or concealment the other party was induced to give a consent which he would not otherwise have given (Tolentino, Commentaries and Jurisprudence on the Civil Code, Vol. IV, p. 480). In thiscase, the consideration for the sale with assumption of mortgage was not the inducement to defendant bank to give a consent which it would not otherwise have given. Consequently, not all the elements of fraud vitiating consent for purposes of annulling a contract concur, to wit: (a) It was employed by a contracting party upon the other; (b) It induced the other party to enter into the contract; (c) It was serious; and; (d) It resulted in damages and injury to the party seeking annulment. Petitioner bank has not sufficiently shown that it was induced to enter into the agreement by the non-disclosure of the purchase price, and that the same resulted in damages to the bank. Indeed, the general rule is that whosoever alleges fraud or mistake in any transaction must substantiate his allegation, since it is presumed that a person takes ordinary care for his concerns and that private transactions have been fair and regular. Petitioner bank‘s allegation of fraud and deceit have not been established sufficiently and competently to rebut the presumption of regularity and due execution of the. agreement The petition is DENIED.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
716
Carabeo v. Sps. Dingco
DOMINGO CARABEO, Petitioner, vs. SPOUSES NORBERTO and SUSAN DINGCO, Respondents. (G.R. No. 190823 , April 4, 2011, 3rd Division) CARPIO MORALES, J.: FACTS: On July 10, 1990, Domingo Carabeo entered into a contract denominated as "Kasunduan sa Bilihan ng Karapatan sa Lupa" with Spouses Norberto and Susan Dingco whereby petitioner agreed to sell his rights over a 648 square meter parcel of unregistered land situated in Purok III, Tugatog, Orani, Bataan to respondents for P38,000. Respondents tendered their initial payment of P10,000 upon signing of the contract, the remaining balance to be paid on September 1990. Respondents were later to claim that when they were about to hand in the balance of the purchase price, petitioner requested them to keep it first as he was yet to settle an on-going "squabble" over the land. Nevertheless, respondents gave petitioner small sums of money from time to time which totaled P9,100, on petitioner‘s request according to them; due to respondents‘ inability to pay the amount of the remaining balance in full, according to petitioner. By respondents‘ claim, despite the alleged problem over the land, they insisted on petitioner‘s acceptance of the remaining balance of P18,900 but petitioner remained firm in his refusal, proffering as reason therefor that he would register the land first. Sometime in 1994, respondents learned that the alleged problem over the land had been settled and that petitioner had caused its registration in his name on December 21, 1993 under Transfer Certificate of Title No. 161806. They thereupon offered to pay the balance but petitioner declined, drawing them to file a complaint before the Katarungan Pambarangay. No settlement was reached, however, hence, respondent filed a complaint for specific performance before the Regional Trial Court. Petitioner countered in his Answer to the Complaint that the sale was void for lack of object certain, the kasunduan not having specified the metes and bounds of the land. In any event, petitioner alleged that if the validity of the kasunduan is upheld, respondents‘ failure to comply with their reciprocal obligation to pay the balance of the purchase price would render the action premature. For, contrary to respondents‘ claim, petitioner maintained that they failed to pay the balance of P28,000 on September 1990 to thus constrain him to accept installment payments totaling P9,100.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
717
After the case was submitted for decision or on January 31, 2001,2 petitioner passed away. The records do not show that petitioner‘s counsel informed Branch 1 of the Bataan RTC, where the complaint was lodged, of his death and that proper substitution was effected in accordance with Section 16, Rule 3, Rules of Court. The trial court ruled in favor of respondents, ordering the defendant to sell his right over 648 square meters of land pursuant to the contract dated July 10, 1990 by executing a Deed of Sale thereof after the payment of P18,900 by the plaintiffs. Petitioner‘s counsel filed a Notice of Appeal on March 20, 2001. By the herein challenged Decision, the Court of Appeals affirmed that of the trial court. Petitioner‘s motion for reconsideration having been denied by Resolution of January 8, 2010, the present petition for review was filed by Antonio Carabeo, petitioner‘s son. ISSUE: Whether or not the object of the sale is determinate. HELD: Yes. That the kasunduan did not specify the technical boundaries of the property did not render the sale a nullity. The requirement that a sale must have for its object a determinate thing is satisfied as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties.9 As the above-quoted portion of the kasunduan shows, there is no doubt that the object of the sale is determinate. The petition is DENIED.
Melliza v. City of Iloilo
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
718
PIO SIAN MELLIZA, petitioner, versus CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE COURT APPEALS, respondents. (G.R. No. L-24732 April 30, 1968 EN BANC) BENGZON, J.P., J.: FACTS: Juliana Melliza during her lifetime owned three parcels of residential land in Iloilo City. On 1932, she donated to the then Municipality of Iloilo a certain lot to serve as site for the municipal hall. The donation was however revoked by the parties for the reason that area was found inadequate to meet the requirements of the development plan. Subsequently the said lot was divided into several divisions. Sometime in 1938, Juliana Melliza sold her remaining interest on the said lot to Remedios San Villanueva. Remedios in turn transferred the rights to said portion of land to Pio Sian Melliza. The transfer Certificate of title in Melliza‘s name bears on annotation stating that a portion of said lot belongs to the Municipality of Iloilo. Later the City of Iloilo, which succeeds to the Municipality of Iloilo, donated the city hall sit to the University of the Philippines, Iloilo Branch. On 1952, the University of the Philippines enclosed the site donated with a wire fence. Pio Sian Melliza then filed action in the Court of First Instance of Iloilo against Iloilo City and the University of the Philippines for recovery of the parcel of land or of its value specifically LOT 1214-B. Petitioner contends that LOT 1214-B was not included in those lots which were sold by Juliana Melliza to the then municipality of Iloilo and to say he would render the Deed of Sale invalid because the law requires as an essential element of sale, determinate object.
ISSUE: Whether or not IF Lot 1214 – B is included in the Deed of Sale, it would render the contract invalid because the object would allegedly not be determinate as required by law.
RULLING: No. The requirement of the law specifically Article 1460 of the Civil Code that the sale must have for its object a determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is able of being determinate without the necessity of a new or further agreement between the parties.
The specific mention of some of the lots plus the statement that the lots object of the sale are the ones needed for city hall site sufficient provides a basis, as of the time, of the execution of the contract, for rendering determinate said lots without the need of a new further agreement of the parties. The Arellano plan was in existence as early as 1928. As stated, the previous donation of land for city hall site on November 27, 1931 was revoked on March 6, 1932 for being inadequate in area under said Arellano plan. Appellant claims that although said plan existed, its metes and bounds were not fixed until 1935, and thus it could not be a basis for determining the lots sold on November 15, 1932. Appellant however fails to consider that the area needed under that plan for city hall site was then already known; that the specific mention of some of the lots covered by the sale in effect fixed the corresponding location of the city hall site under the plan; that, therefore, considering the said lots specifically mentioned in the public instrument and the projected city hall site, with its Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
719
area, as then shown in the Arellano plan it could be determined which, and how much of the portions of land contiguous to those specifically named, were needed for the construction of the city hall site.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
720
Catindig v. Vda. De Meneses Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
721
MANUEL CATINDIG, represented by his legal representative EMILIANO CATINDIG-RODRIGO, Petitioner, versus AURORA IRENE VDA. DE MENESES, Respondent. (G.R. No. 165851 February 2, 2011 2nd Division) SILVINO ROXAS, SR., represented by FELICISIMA VILLAFUERTE ROXAS, Petitioner, versus COURT OF APPEALS and AURORA IRENE VDA. DE MENESES Respondents. (G.R. No. 168875 February 2, 2011 2nd Division) PERALTA, J.: FACTS: The property subject of this controversy pertains to a parcel of land situated in Malolos, Bulacan, with an area of 49,139 square meters, titled in the name of the late Rosendo Meneses, Sr., under Transfer Certificate of Title (TCT) No. T-1749 (hereinafter referred to as the Masusuwi Fishpond). Respondent Aurora Irene C. Vda. de Meneses is the surviving spouse of the registered owner, Rosendo Meneses, Sr.. She was issued Letters of Administration over the estate of her late husband in Special Proceedings Case pending before the then Court of First Instance of the City of Manila, Branch 22. On May 17, 1995, respondent, in her capacity as administratrix of her husband's estate, filed a Complaint for Recovery of Possession, Sum of Money and Damages against petitioners Manuel Catindig and Silvino Roxas, Sr. before the Regional Trial Court of Malolos, Bulacan, to recover possession over the Masusuwi Fishpond. Respondent alleged that in September 1975, petitioner Catindig, the first cousin of her husband, deprived her of the possession over the Masusuwi Fishpond, through fraud, undue influence and intimidation. Since then, petitioner Catindig unlawfully leased the property to petitioner Roxas. Respondent verbally demanded that petitioners vacate the Masusuwi Fishpond, but all were futile, thus, forcing respondent to send demand letters to petitioners Roxas and Catindig. However, petitioners still ignored said demands. Hence, respondent filed a suit against the petitioners to recover the property and demanded payment of unearned income, damages, attorney's fees and costs of suit. In his Answer, petitioner Catindig maintained that he bought the Masusuwi Fishpond from respondent and her children in January 1978, as evidenced by a Deed of Absolute Sale. Catindig further argued that even assuming that respondent was indeed divested of her possession of the Masusuwi Fishpond by fraud, her cause of action had already prescribed considering the lapse of about 20 years from 1975, which was allegedly the year when she was fraudulently deprived of her possession over the property. Petitioner Roxas, on the other hand, asserted in his own Answer that respondent has no cause of action against him, because Catindig is the lawful owner of the Masusuwi Fishpond, to whom he had paid his rentals in advance until the year 2001. ISSUE: Whether or not the cause or consideration in the case exist. HELD: No. There is no consideration exist here as there is no contract of sale exist. The deed of sale is not merely voidable, but void for being simulated. Hence, she could not have filed an action for annulment of contract under Articles 1390 and 1391 of the Civil Code, because this remedy applies to voidable contracts. Instead, respondent filed an action for recovery of possession of the Masusuwi Fishpond. The Court finds that there exists no Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
722
reason for it to disturb the trial court's finding that the deed of sale was simulated. The trial court's discussion on the said issue is hereby quoted: After evaluating the evidence, both testimonial and documentary, presented by the parties, this court is convinced that the Deed of Absolute Sale relied upon by the defendants [petitioners herein] is simulated and fictitious and has no consideration. As registered owners of the lots in question, the private respondents have a right to eject any person illegally occupying their property. This right is imprescriptible. Even if it be supposed that they were aware of the petitioners' occupation of the property, and regardless of the length of that possession, the lawful owners have a right to demand the return of their property at any time as long as the possession was unauthorized or merely tolerated, if at all. This right is never barred by laches.
Orduna, et al. v. Fuentabella
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
723
ANTHONY ORDUÑA, DENNIS ORDUÑA, and ANTONITA ORDUÑA, Petitioners, versus EDUARDO J. FUENTEBELLA, MARCOS S. CID, BENJAMIN F. CID, BERNARD G. BANTA, and ARMANDO GABRIEL, JR., Respondents. (G.R. No. 176841 June 29, 2010 1st Division) VELASCO, JR., J.: FACTS: Sometime in 1996 or thereabouts, Gabriel Sr. sold the subject lot with an area of 74 square meters located at Fairview Subdivision, Baguio City, to petitioner Antonita Orduña (Antonita), but no formal deed was executed to document the sale. The contract price was apparently payable in installments as Antonita remitted from time to time and Gabriel Sr. accepted partial payments. One of the Orduñas would later testify that Gabriel Sr. agreed to execute a final deed of sale upon full payment of the purchase price. As early as 1979, however, Antonita and her sons, Dennis and Anthony Orduña, were already occupying the subject lot on the basis of some arrangement undisclosed in the records and even constructed their house thereon. They also paid real property taxes for the house and declared it for tax purposes, as evidenced by Tax Declaration in which they place the assessed value of the structure at PhP 20,090. After the death of Gabriel Sr., his son and namesake, respondent Gabriel Jr., secured TCT No. T-71499 over the subject lot and continued accepting payments from the petitioners. On December 12, 1996, Gabriel Jr. wrote Antonita authorizing her to fence off the said lot and to construct a road in the adjacent lot. On December 13, 1996, Gabriel Jr. acknowledged receipt of a PhP 40,000 payment from petitioners. Through a letter dated May 1, 1997, Gabriel Jr. acknowledged that petitioner had so far made an aggregate payment of PhP 65,000, leaving an outstanding balance of PhP 60,000. A receipt Gabriel Jr. issued dated November 24, 1997 reflected a PhP 10,000 payment. Subsequently, Bernard sold to the Cids the subject lot for PhP 80,000. Armed with a Deed of Absolute Sale of a Registered Land dated January 19, 2000, the Cids were able to cancel TCT No. T-72782 and secure TCT No. 72783 covering the subject lot. Cids subsequently sold it to Eduardo J. Fuentebella (Eduardo), instrumental witnesses of the first transaction aboved.. Sometime in May 2000, or shortly after his purchase of the subject lot, Eduardo, through his lawyer, sent a letter addressed to the residence of Gabriel Jr. demanding that all persons residing on or physically occupying the subject lot vacate the premises or face the prospect of being ejected. Learning of Eduardo‘s threat, petitioners went to the residence of Gabriel Jr. at No. 34 Dominican Hill, Baguio City. There, they met Gabriel Jr.‘s estranged wife, Teresita, who informed them about her having filed an affidavitcomplaint against her husband and the Cids for falsification of public documents on March 30, 2000. According to Teresita, her signature on the June 30, 1999 Gabriel Jr.–Bernard deed of sale was a forgery. Teresita further informed the petitioners of her intent to honor the aforementioned 1996 verbal agreement between Gabriel Sr. and Antonita and the partial payments they gave her father-in-law and her husband for the subject lot. On July 3, 2001, petitioners, joined by Teresita, filed a Complaint for Annulment of Title, Reconveyance with Damages against the respondents before the RTC, docketed as Civil Case No. 4984-R, specifically praying that TCT No. T-3276 dated May 16, 2000 in the name of Eduardo be annulled. Corollary to this prayer, petitioners pleaded that Gabriel Jr.‘s title to the lot be reinstated and that petitioners be declared as entitled to acquire Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
724
ownership of the same upon payment of the remaining balance of the purchase price therefor agreed upon by Gabriel Sr. and Antonita. ISSUE: Whether or not there is an adequate consideration. HELD: Yes. The Court to be sure takes stock of the fact that the contracting parties to the 1995 or 1996 sale agreed to a purchase price of PhP 125,000 payable on installments. But the original lot owner, Gabriel Sr., died before full payment can be effected. Nevertheless, petitioners continued remitting payments to Gabriel, Jr., who sold the subject lot to Bernard on June 30, 1999. Gabriel, Jr., as may be noted, parted with the property only for PhP 50,000. On the other hand, Bernard sold it for PhP 80,000 to Marcos and Benjamin. From the foregoing price figures, what is abundantly clear is that what Antonita agreed to pay Gabriel, Sr., albeit in installment, was very much more than what his son, for the same lot, received from his buyer and the latter‘s buyer later. The Court, therefore, cannot see its way clear as to how the RTC arrived at its simplistic conclusion about the transaction between Gabriel Sr. and Antonita being without "adequate consideration." It is undisputed on the facts that there is a Contract to Sale between the original owner of the land and the petitioners. This must be given favourably effect unless other circumstance in accordance to the law warrant otherwise. Where the land sold is in the possession of a person other than the vendor, the purchaser must go beyond the certificates of title and make inquiries concerning the rights of the actual possessor. And where, as in the instant case, Gabriel Jr. and the subsequent vendors were not in possession of the property, the prospective vendees are obliged to investigate the rights of the one in possession. Evidently, Bernard, Marcos and Benjamin, and Eduardo did not investigate the rights over the subject lot of the petitioners who, during the period material to this case, were in actual possession thereof. Bernard, et al. are, thus, not purchasers in good faith and, as such, cannot be accorded the protection extended by the law to such purchasers. Moreover, not being purchasers in good faith, their having registered the sale, will not, as against the petitioners, carry the day for any of them under Art. 1544 of the Civil Code prescribing rules on preference in case of double sales of immovable property. Occeñav. Esponilla laid down the following rules in the application of Art. 1544: (1) knowledge by the first buyer of the second sale cannot defeat the first buyer‘s rights except when the second buyer first register in good faith the second sale; and (2) knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register, since such knowledge taints his registration with bad faith. Upon the facts obtaining in this case, the act of registration by any of the three respondent-purchasers was not coupled with good faith. At the minimum, each was aware or is at least presumed to be aware of facts which should put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. The petitioner contract with the Gabriel Sr. should be enforce and accordingly ordered them to pay the balance and for Gabriel Jr. to execute a Absulote Deed of Sale in favor the petitioner for the transfer of land unto them. Brobio Mangahas v. Brobio
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
725
CARMELA BROBIO MANGAHAS, Petitioner, versus EUFROCINA A. BROBIO, Respondent. (G.R. No. 183852 October 20, 2010 2nd Division) NACHURA, J.: FACTS: On January 10, 2002, Pacifico S. Brobio (Pacifico) died intestate, leaving three parcels of land. He was survived by his wife, respondent Eufrocina A. Brobio, and four legitimate and three illegitimate children; petitioner Carmela Brobio Mangahas is one of the illegitimate children. On May 12, 2002, the heirs of the deceased executed a Deed of Extrajudicial Settlement of Estate of the Late Pacifico Brobio with Waiver. In the Deed, petitioner and Pacifico‘s other children, in consideration of their love and affection for respondent and the sum of P150,000.00, waived and ceded their respective shares over the three parcels of land in favor of respondent. According to petitioner, respondent promised to give her an additional amount for her share in her father‘s estate. Thus, after the signing of the Deed, petitioner demanded from respondent the promised additional amount, but respondent refused to pay, claiming that she had no more money. A year later, while processing her tax obligations with the Bureau of Internal Revenue (BIR), respondent was required to submit an original copy of the Deed. Left with no more original copy of the Deed, respondent summoned petitioner to her office on May 31, 2003 and asked her to countersign a copy of the Deed. Petitioner refused to countersign the document, demanding that respondent first give her the additional amount that she promised. Considering the value of the three parcels of land (which she claimed to be worth P20M), petitioner asked for P1M, but respondent begged her to lower the amount. Petitioner agreed to lower it to P600,000.00. Because respondent did not have the money at that time and petitioner refused to countersign the Deed without any assurance that the amount would be paid, respondent executed a promissory note. When the promissory note become due despite demand, the respondent fail to comply with it that lead the petitioner to file a claim suit in the court. ISSUE: Whether or not the contract is supported by a valid and adequate consideration. HELD: Yes. A contract is presumed to be supported by cause or consideration. The presumption that a contract has sufficient consideration cannot be overthrown by a mere assertion that it has no consideration. To overcome the presumption, the alleged lack of consideration must be shown by preponderance of evidence. The burden to prove lack of consideration rests upon whoever alleges it, which, in the present case, is respondent. Respondent failed to prove that the promissory note was not supported by any consideration. From her testimony and her assertions in the pleadings, it is clear that the promissory note was issued for a cause or consideration, which, at the very least, was petitioner‘s signature on the document. It may very well be argued that if such was the consideration, it was inadequate. Nonetheless, even if the consideration is inadequate, the contract would not be invalidated, unless there has been fraud, mistake, or undue influence. As previously stated, none of these grounds had been proven present in this case.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
726
Golden Apple Realty v. Sierra Grande Realty GOLDEN APPLE REALTY AND DEVELOPMENT CORPORATION AND ROSVIBON REALTY CORPORATION,Petitioners, versus SIERRA GRANDE REALTY CORPORATION, MANPHIL INVESTMENT CORPORATION, RENAN V. SANTOS AND PATRICIO MAMARIL, Respondents. (G.R. No. 119857 July 28, 2010 2nd Division) PERALTA, J.: FACTS: On December 1, 1981, Hayari Trading Corporation (Hayari), through a Loan Agreement, borrowed from Manphil Investment Corporation (Manphil) the amount of Two Million Five Hundred Thousand Pesos (P2,500,000.00) for the benefit of Filipinas Textile Mills, Inc. (Filtex). Thereafter, Bernardino Villanueva suggested that the Roberts property be subdivided to make it easier for Sierra Grande to sell the same. On June 22, 1985, as suggested, the Board of Directors of Sierra Grande, composed of brothers and sisters Robert Villanueva, Daniel Villanueva, Terry Villanueva Yu, Susan Villanueva and Eden Villanueva, passed a resolution authorizing General Manager Bernardino Villanueva, brother of their deceased father, to hire a geodetic engineer and cause the subdivision plan to be approved by the Land Registration Commission, and to sell the subdivided lots after approval of the subdivision plan, if found to be necessary and for which the corporation may need to carry its purpose. Eventually, on June 22, 1985, Bernardino Villanueva executed a Contract to Sell the Roberts property with Golden Apple Realty and Development, Inc. (Golden Apple), majority of its stocks are owned by Elmer Tan, a first cousin of the Villanueva brothers and sisters, and Rosvibon Realty Corporation (Rosvibon), majority of its stocks are owned by Rosita So, another sister of the father of the Villanueva brothers and sisters, for the amount ofP441,032.00. The amount of P10,000.00 of the purchase price will have to be paid to the vendor upon the signing of the contract and the balance to be paid to the mortgagee Manphil, on or before October 31, 1987. On July 26, 1985, Sierra Grande, through Bernardino Villanueva, finally executed a Deed of Sale of Lots 1, 2 and 3, with a total land area of 1,402 square meters, to Golden Apple, for P382,080.00 and another Deed of Sale of Lot 4, with a total land area of 499 sq. m., to Rosvibon for P119,760.00. Meanwhile, Sierra Grande's Board, on August 29, 1985, passed a resolution revoking the authority of Bernardo Villanueva to sell the Roberts property. Hayari President Yu Han Yat, Jr., husband of Sierra Grande director Terry Villanueva Yu, advised Manphil, through a letter dated August 30, 1985, that all dealings with respect to its loan or credit facility with Manphil shall be coursed through or effected with the express knowledge, representation or consent of the President of Hayari. Thereafter, a resolution notarized on September 3, 1985 was passed by the directors of Sierra Grande revoking the authority previously granted to Bernardino Villanueva to negotiate and contract the sale of the Roberts property and any other property, in behalf of the corporation and place on notice all prospective buyers or vendees not to negotiate or contract with any party other than the duly authorized officer or officers of the corporation who are expressly empowered to enter into such transaction and who can exhibit a formal board resolution duly certified by the board secretary and signed by the majority of the board of directors who are also the majority stockholders representing at least 2/3 of the capital stock . Nevertheless, on September 16, 1985, Elmer Tan, on behalf of the buyer corporations, paid to Manphil for Hayari's account an amortization Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
727
of P57,819.72, for the principal sum due on July 27, 1985; P42,192.30, for Int.-CBP; P27,329.05, for interest; and P3,423.40, as penalties. Sometime in January 1986, Sierra Grande learned that Bernardino Villanueva tried to secure the duplicate original title of the subject parcel of land from Manphil claiming to be the President of Hayari. As a result, on November 20, 1986, Sierra Grande, through Susan Villanueva Tan, the Corporate Secretary, wrote Manphil stating that Bernardino Villanueva was not in any way connected officially with Sierra Grande and was not authorized to deal in any way with the Roberts property nor borrow the transfer certificate title to the same property. Susan Tan also wrote the Bangko Sentral ng Pilipinas (BSP), as the subject property was already on receivership, informing the latter of the following: that Hayari had not made any request to borrow any duplicate original title; that Bernardino Villanueva was not connected in any way with Hayari; that Bernardino Villanueva had no authority to borrow any duplicate original title; and that whatever authorization Bernardo Villanueva had in dealing with the Roberts property had been withdrawn and abrogated under a board resolution. The letter also requested that even if payments were made on the loan of Hayari by a third party, the subject duplicate original title must not be released without the express consent of Hayari. However, on October 20, 1988, Manphil allowed Elmer Tan to pre-terminate Hayari's obligation after making total payments to Manphil in the amount of P3,134,921.00. Hence, Golden Apple and Rosvibon, on November 28, 1988, filed with the Regional Trial Court of Pasay City, a Complaint against Sierra Grande and Manphil for specific performance and damages. ISSUE: Whether or not the cause or consideration paid in the sale is sufficient. HELD: No. It must be noted that the property in question, subject of the Contract to Sell for the sum of P441,032.00, is a land with a contained area of, more or less, One Thousand Nine Hundred and One (1,901) sq. m. with a twostorey residential building located in Pasay City. In claiming that the said price of the property is not inadequate, petitioners stated that the payment of Elmer Tan to pre-terminate Hayari's obligation amounting to Three Million One Hundred Thirty-Four Thousand Nine Hundred Twenty-One Pesos (P3,134,921.00) as part of the consideration paid for the property should be included. However, as correctly argued by respondent Sierra Grande, the amortizations paid by Elmer Tan to Manphil was for a loan incurred by Hayari and not by respondent Sierra Grande; thus, any payment of the amortizations on the loan of Hayari cannot be considered as part of the consideration for the sale of the land owned by respondent Sierra Grande. It is then safe to declare that respondent Sierra Grande did not benefit from the loan or from its pretermination. Moreover, the records are bereft of any evidence to support the claim of petitioners that the sum of money paid by Elmer Tan, on behalf of Hayari, was part of the consideration for the same property. What only appears is that the only consideration paid for the sale of the Roberts property was the sum contained in the Contract to Sell, which was P441,032.00 which, considering the size and location of the property, is inadequate. What prompted Elmer Tan to pay the total amount of P3,134,921.00 cannot be gleaned from the records, except that it was for the loan incurred by Hayari, which is an independent juridical entity, separate and distinct from Sierra Grande. Hence, the CA did not commit any error in declaring that there was an insufficiency of Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
728
consideration or price as the same is shown on the very face of the Contract to Sell. Anent the contention of petitioners that inadequacy of price does not invalidate a contract, the said rule is not without an exception. As provided in the Civil Code: Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. The CA was clear as to its main reason for invalidating the contracts in question – there was fraud. The inadequacy of price was merely one of the circumstances upon which the CA was able to find the existence of fraud and not the main cause for the invalidation of the subject contracts.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
729
Askay v. Cosalan Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
730
ASKAY, plaintiff-appellant, versus FERNANDO A. COSALAN, defendantappellee. (G.R. No. 21943 September 15, 1924 EN BANC) MALCOLM, J.: FACTS: The plaintiff in this case is Askay, an illiterate Igorrote between 70 and 80 years of age, residing in the municipal district of Tublay, Province of Benguet, who at various times has been the owner of mining property. The defendant is Fernando A. Cosalan, the nephew by marriage of Askay, and municipal president of Tublay, who likewise has been interested along with his uncle in mining enterprises About 1907, Askay obtained title to the Pet Kel Mineral Claim located in Tublay, Benguet. On November 23, 1914, if we are to accept defendant's Exhibit 1, Askay sold this claim to Cosalan. Nine years later, in 1923, Askay instituted action in the Court of First Instance of Benguet to have the sale of the Pet Kel Mineral Claim declared null, to secure possession of the mineral claim, and to obtain damages from the defendant in the amount of P10,500.00. Judgment was rendered dismissing the complaint and absolving the defendant from the same, with costs against the plaintiff. On being informed of the judgment of the trial court, plaintiff attacked it on two grounds: The first, jurisdictional, and the second, formal. Both motions were denied and an appeal was perfected. ISSUE: Whether or not the plaintiff has established his cause of action by a preponderance of the evidence. HELD: Plaintiff contends that the sale of the Pet Kel Mineral Claim was accomplished through fraud and deceit on the part of the defendant. Plaintiff may be right but in our judgment he has failed to establish his claim. Fraud must be both alleged and proved. One fact exists in plaintiffs favor, and this is the age and ignorance of the plaintiff who could be easily by the defendant, a man of greater intelligence. Another fact is the inadequacy of the consideration for the transfer which, according to the conveyance, consisted of P1 and other valuable consideration, and which, according to the oral testimony, in reality consisted of P107 in cash, a bill-fold, one sheet, one cow, and two carabaos. Gross inadequacy naturally suggest fraud is some evidence thereof, so that it may be sufficient to show it when taken in connection with other circumstances, such as ignorance or the fact that one of the parties has an advantage over the other. But the fact that the bargain was a hard one, coupled with mere inadequacy of price when both parties are in a position to form an independent judgment concerning the transaction, is not a sufficient ground for the cancellation of a contract. Against the plaintiff and in favor of the defendant, the Court had the document itself executed in the presence of witnesses and before a notary public and filed with the mining recorder. The notary public, Nicanor Sison, and one of the attesting witnesses, Apolonio Ramos, testified to the effect that in the presence of the plaintiff and the defendant and of the notary public and the subscribing witnesses, the deed of sale was interpreted to the plaintiff and that thereupon he placed his thumb mark on the document. Two finger print experts, Dr. Charles S. Banks and A. Simkus, have declared in depositions that the thumb mark on exhibit is that of Askay. No less than four other witnesses testified that at various times Askay had admitted to them that he had sold the Pet Kel Mine to Fernando A. Cosalan. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
731
Heirs of Balite v. Lim HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE; Namely, ANTONIO T. BALITE, FLOR T. BALITE-ZAMAR, VISITACION T. BALITE-DIFUNTORUM, PEDRO T. BALITE, PABLO T. BALITE, GASPAR T. BALITE, CRISTETA T. BALITE and AURELIO T. BALITE JR., All Represented by GASPAR T. BALITE,petitioners, versus RODRIGO N. LIM, respondent. (G.R. No. 152168 December 10, 2004 3rd Division) PANGANIBAN, J.: FACTS: The spouses Aurelio and Esperanza Balite were the owners of a parcel of land at Catarman, Northern Samar. When Aurelio died intestate, his wife Esperanza and their children inherited the subject property and became coowners thereof. In the meantime, Esperanza became ill and was in dire need of money for her hospital expenses. She, through her daughter, Cristeta, offered to sell to Rodrigo Lim, her undivided share for the price of P1,000,000.00. Esperaza and Rodrigo agreed that under the Deed of Absolute Sale, it will be made to appear that the purchase price of the property would be P150,000.00 although the actual price agreed upon by them for the property was P1,000,000.00. On April 16, 1996, Esperanza executed a Deed of Absolute Sale in favor of Rodrigo. They also executed on the same day a Joint Affidavit under which they declared that the real price of the property was P1,000,000.00 payable to Esperanza by installments. Only Esperanza and two of her children Antonio and Cristeta knew about the said transaction. When the rest of the children knew of the sale, they wrote to the Register of Deeds saying that their mother did not inform them of the sale of a portion of the said property nor did they give consent thereto. Nonetheless, Rodrigo made partial payments to Antonio who is authorized by his mother through a Special Power of Attorney. On October 23, 1996, Esperanza signed a letter addressed to Rodrigo informing the latter that her children did not agree to the sale of the property to him and that she was withdrawing all her commitments until the validity of the sale is finally resolved. On October 31, 1996, Esperanza died intestate and was survived by her children. Meanwhile, Rodrigo caused to be published in the Samar Reporter the Deed of Absolute Sale. On June 27, 1997, petitioners filed a complaint against Rodrigo with the Regional Trial Court for the annulment of sale, quieting of title, injunction and damages. Subsequently, Rodrigo secured a loan from the Rizal Commercial Banking Corporation in the amount of P2,000,000.00 and executed a Real Estate Mortgage over the property as security thereof. On motion of the petitioners, they were granted leave to file an amended complaint impleading the bank as additional party defendant. On March 30, 1998, the court Issued an order rejecting the amended complaint of the petitioners. Likewise, the trial court dismissed the complaint. It Held that pursuant to Article 493 of the Civil Code, a co-owner is not invalidated by the absence of the consent of the other co-owners. Hence, the sale by Esperanza of the property was valid; the excess from her undivided share should be taken from the undivided shares of Cristeta and Antonio, who expressly agreed to and benefit from the sale. The Court of Appeals likewise Held that the sale was valid and binding insofar as Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
732
Esperanza Balite‘s undivided share of the property was concerned. It affirmed the trial court‘s HELD that the lack of consent of the co-owners did not nullify the sale.
ISSUE: Whether or not the Deed of Absolute Sale is null and void on the ground that it is falsified; it has an unlawful cause; and it is contrary to law and/or public policy.
HELD: The contract is an example of a simulated contract. Article 1345 of the Civil Code provides that the simulation of a contract may either be absolute or relative. In absolute simulation, there is a colorable contract but without any substance, because the parties have no intention to be bound by it. An absolutely simulated contract is void, and the parties may recover from each other what they may have given under the ―contract‖. On the other hand, if the parties state a false cause is relatively simulated. Here, the parties‘ real agreement binds them. In the present case, the parties intended to be bound by the Contract, even if it did not reflect the actual purchase price of the property. The letter of Esperanza to respondent and petitioner‘s admission that there was partial payment made on the basis of the Absolute Sale reveals that the parties intended the agreement to produce legal effect. Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and enforceable. All the essential requisites prescribed by law for the validity and perfection of contracts is present. However, the parties shall be bound by their real agreement for a consideration of P1,000,000 as reflected by their Joint Affidavit. The petition is DENIED and the assailed decision AFFIRMED.
Suntay v. CA
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
733
RAFAEL G. SUNTAY, substituted by his heirs, namely: ROSARIO, RAFAEL, JR., APOLINARIO, RAYMUND, MARIA VICTORIA, MARIA ROSARIO and MARIA LOURDES, all surnamed SUNTAY, petitioners, versus THE HON. COURT OF APPEALS and FEDERICO C. SUNTAY, respondents. (G.R. No. 114950 December 19, 1995 1st Division) HERMOSISIMA, JR., J.: FACTS: Petitioners and private respondent were buyers of condominium units from Bayfront Development Corporation . Petitioners paid in advance the full amount for their units. Bayfront, however, failed to deliver them despite the due date stated in their contract to sell. Failing to get a reimbursement from Bayfront, petitioners filed an action against it in the Housing and Land Use Regulatory Board for violation of PD 957 and PD 1344, rescission of contract, sum of money and damages. The case, was decided in favor of petitioners. Bayfront‘s titled properties, including the subject condominium Unit G and two parking slots in its name with Condominium Certificate of Title were levied on by the sheriffs of the Regional Trial Court of Manila. At the subsequent public auction of Bayfront‘s properties, petitioners were the highest bidders.The sheriff‘s final deed of sale was executed on April 16, 1996. On the other hand, private respondent Eugenia Gocolay, chairperson and president of Keyser Mercantile Co., Inc. (Keyser), claims that she entered into a contract to sell with Bayfront for the purchase on installment basis of the same Unit G, among others. She completed her payments in 1991 but Bayfront executed the deed of absolute sale and delivered CCT No. 15802 only on November 9, 1995. Gocolay was about to transfer CCT No. 15802 to Keyser when she discovered the annotations of notice of levy and certificate of sale at the back of the said title. She was nevertheless Issued CCT No. 26474 in the name of Keyser on March 12, 1996 with the annotations in favor of petitioners being carried over. Gocolay filed before the Expanded National Capital Regional Field Office of the HLURB a complaint for annulment of auction sale and cancellation of notice of levy from her title. ISSUE: Whether or not the HLURB, a quasi-judicial agency, have jurisdiction over an action seeking the annulment of an auction sale, cancellation of notice of levy and damages with prayer for the issuance of a preliminary injunction and/or temporary restraining order. HELD: The HLURB had no jurisdiction over the spouses Suntay. Section 1 of PD 1344 states the jurisdiction of the HLURB: SECTION 1. In the exercise of its function to regulate the real estate trade and business and in addition to its power provided for in Presidential Decree No. 957, the [HLURB] shall have exclusive jurisdiction to hear and decide cases of the following nature: A. Unsound real estate business practices; B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyers against the project owner, developer, dealer, broker or salesman; and C. Cases involving specific performance of contractual and statutory obligation filed by buyers of subdivision Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
734
lot/condominium units against the owner, developer, dealer, broker or salesman. Petitioners were condominium buyers, not project/condominium owners, developers, dealers, brokers or salesmen against whom a case cognizable by the HLURB could be brought. Obviously the cause of action (unsound business practice) could not have referred to them since they were mere buyers of a condominium unit, but only to Bayfront as developer of the project. It was therefore error for Gocolay to include petitioners in HLRB Case No. REM032196-9152 and for the HLURB to take cognizance of the complaint. The HLURB had no jurisdiction over the Issue of ownership, possession or interest in the disputed condominium unit. BP 129 vests jurisdiction over these matters on the RTC which exercises exclusive original jurisdiction: (1) in all civil actions in which the subject of the litigation is incapable of pecuniary estimation; (2) in all civil actions which involve the titles to, or possession of, real property, or any interest therein… except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts; (3) in all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising jurisdiction of any court, tribunal, person or body exercising judicial or quasi-judicial functions. The decision in HLRB Case No. REM-032196-9152 was in effect a determination of the ownership of the condominium unit because it directed the annulment of the execution sale in HLRB Case No. REM-102193-5625 on which petitioner‘s title was based. This was clearly incorrect.
Uy v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
735
WILLIAM UY and RODEL ROXAS, petitioners, versus COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY, respondents. (G.R. No. 120465 September 9, 1999 1st Division) KAPUNAN, J.: FACTS: Petitioners William Uy and Rodel Roxas are agents authorized to sell eight (8) parcels of land by the owners thereof. By virtue of such authority, petitioners offered to sell the lands, located in Tuba, Tadiangan, Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a housing project. On February 14, 1989, NHA approved the acquisition of the said parcels of land with an area of 31.8231 hectares at the cost of P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the eight parcels of lands, however, only five were paid for by the NHA because of the report it received from the Land Geosciences Bureau of the Department of Environment and Natural Resources that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing project. NHA eventually cancelled the sale over the remaining three (3) parcels of land. On March 9, 1992, petitioners filed a complaint for damages. After trial, the RTC of Quezon City rendered the cancellation of contract to be justified and awarded P1.255 million as damages in favor of petitioners. Upon appeal by petitioners, the Court of Appeals reversed the decision and entered a new one dismissing the complaint including the award of damages. The motion for reconsideration having been denied, petitioners seek relief from this court contending, inter alia, that the CA erred in declaring that NHA had any legal basis to rescind the subject sale. ISSUE: Whether or not a party‘s entry into a contract affects the validity of the contract. HELD: Petitioners confuse the cancellation of the contract by the NHA as a rescission of the contract under Article 1191 of the Civil Code. The right to rescission is predicated on a breach of faith by the other party that violates the reciprocity between them. The power to rescind is given to the injured party. In this case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for the other parties to the contract, the vendors did not commit any breach, much less a substantial breach, of their obligation. The NHA did not suffer any injury. The cancellation was not therefore a rescission under Article 1191. Rather, it was based on the negation of the cause arising from the realization that the lands, which were the objects of the sale, were not suitable for housing. As a general rule, a party‘s motives for entering into a contract do not affect the contract. However, when the motive predetermines the cause, the motive may be regarded as the cause. As Held in Liguez v. CA, ... It is well to note, however, that Manresa himself, while maintaining the distinction and upholding the imperatives of the motives of the parties to determine the validity of the contract, expressly excepts from the rule those contracts that are conditioned upon the attainment of the motives of either party. The same view is Held by the Supreme Court of Spain, in its decisions of February 4, 1941 and December 4, 1946, holding that the motive may be regarded as cause when it predetermined the purpose of the contract. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
736
Pentacapital v. Makilito Mahinay PENTACAPITAL INVESTMENT CORPORATION, Petitioner, versus MAKILITO B. MAHINAY, Respondent. (G.R. No. 171736 July 5, 2010 2nd Division) NACHURA, J.: FACTS: Petitioner filed a complaint for a sum of money against respondent Makilito Mahinay based on two separate loans obtained by the latter, amounting to P1,520,000.00 and P416,800.00, or a total amount of P1,936,800.00. These loans were evidenced by two promissory notes5 dated February 23, 1996. Despite repeated demands, respondent failed to pay the loans, hence, the complaint. In his Answer with Compulsory Counterclaim, respondent claimed that petitioner had no cause of action because the promissory notes on which its complaint was based were subject to a condition that did not occur. While admitting that he indeed signed the promissory notes, he insisted that he never took out a loan and that the notes were not intended to be evidences of indebtedness. Respondent explained that he was the counsel of Ciudad Real Development Inc. (CRDI). In 1994, Pentacapital Realty Corporation (Pentacapital Realty) offered to buy parcels of land known as the Molino Properties, owned by CRDI, located in Molino, Bacoor, Cavite. The Molino Properties, with a total area of 127,708 square meters, were sold at P400.00 per sq m. As the Molino Properties were the subject of a pending case, Pentacapital Realty paid only the down payment amounting to P12,000,000.00. CRDI allegedly instructed Pentacapital Realty to pay the former‘s creditors, including respondent who thus received a check worth P1,715,156.90. It was further agreed that the balance would be payable upon the submission of an Entry of Judgment showing that the case involving the Molino Properties had been decided in favor of CRDI. Respondent, Pentacapital Realty and CRDI allegedly agreed that respondent had a charging lien equivalent to 20% of the total consideration of the sale in the amount of P10,277,040.00. Pending the submission of the Entry of Judgment and as a sign of good faith, respondent purportedly returned the P1,715,156.90 check to Pentacapital Realty. However, the Molino Properties continued to be haunted by the seemingly interminable court actions initiated by different parties which thus prevented respondent from collecting his commission. ISSUE: Whether or not respondent is bound by the promissory notes. HELD: Yes. This emanates for the purpose of payment for an onerous contract which is the commission of the respondent if the sale become perfect. It must be established that all the elements of a contract of loan are present. Like any other contract, a contract of loan is subject to the rules governing the requisites and validity of contracts in general. It is elementary in this jurisdiction that what determines the validity of a contract, in general, is the presence of the following elements: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
737
In this case, respondent denied liability on the ground that the promissory notes lacked consideration as he did not receive the proceeds of the loan. Under Article 1354 of the Civil Code, it is presumed that consideration exists and is lawful unless the debtor proves the contrary. Moreover, under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1) private transactions have been fair and regular; (2) the ordinary course of business has been followed; and (3) there was sufficient consideration for a contract. A presumption may operate against an adversary who has not introduced proof to rebut it. The effect of a legal presumption upon a burden of proof is to create the necessity of presenting evidence to meet the legal presumption or the prima facie case created thereby, and which, if no proof to the contrary is presented and offered, will prevail. The burden of proof remains where it is, but by the presumption, the one who has that burden is relieved for the time being from introducing evidence in support of the averment, because the presumption stands in the place of evidence unless rebutted. In the present case, as proof of his claim of lack of consideration, respondent denied under oath that he owed petitioner a single centavo. He added that he did not apply for a loan and that when he signed the promissory notes, they were all blank forms and all the blank spaces were to be filled up only if the sale transaction over the subject properties would not push through because of a possible adverse decision in the civil cases involving them (the properties). He thus posits that since the sale pushed through, the promissory notes did not become effective. Respondent‘s liability is not negated by the fact that he has uncollected commissions from the sale of the Molino properties. As the records of the case show, at the time of the execution of the promissory notes, the Molino properties were subject of various court actions commenced by different parties. Thus, the sale of the properties and, consequently, the payment of respondent‘s commissions were put on hold. The non-payment of his commissions could very well be the reason why he obtained a loan from petitioner.
Heirs of Gaite v. The Plaza
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
738
HEIRS OF RAMON C. GAITE, CYNTHIA GOROSTIZA GAITE and RHOGEN BUILDERS, Petitioners, versus THE PLAZA, INC. and FGU INSURANCE CORPORATION, Respondents. (G.R. No. 177685 January 26, 2011 3rd Division) VILLARAMA, JR., J.: FACTS: On July 16, 1980, The Plaza, Inc. (The Plaza), a corporation engaged in the restaurant business, through its President, Jose C. Reyes, entered into a contract with Rhogen Builders (Rhogen), represented by Ramon C. Gaite, for the construction of a restaurant building in Greenbelt, Makati, Metro Manila for the price ofP7,600,000.00. On July 18, 1980, to secure Rhogen‘s compliance with its obligation under the contract, Gaite and FGU Insurance Corporation (FGU) executed a surety bond in the amount of P1,155,000.00 in favor of The Plaza. On July 28, 1980, The Plaza paid P1,155,000.00 less withholding taxes as down payment to Gaite. Thereafter, Rhogen commenced construction of the restaurant building. In a letter dated September 10, 1980, Engineer Angelito Z. Gonzales, the Acting Building Official of the Municipality of Makati, ordered Gaite to cease and desist from continuing with the construction of the building for violation of Sections 301 and 302 of the National Building Code (P.D. 1096) and its implementing rules and regulations. The letter was referred to The Plaza‘s Project Manager, Architect Roberto L. Tayzon. Gaite notified Reyes that he is suspending all construction works until Reyes and the Project Manager cooperate to resolve the issue he had raised to address the problem. This was followed by another letter dated November 18, 1980 in which Gaite expressed his sentiments on their aborted project and reiterated that they can still resolve the matter with cooperation from the side of The Plaza. In his reply-letter dated November 24, 1980, Reyes asserted that The Plaza is not the one to initiate a solution to the situation, especially after The Plaza already paid the agreed down payment of P1,155,000.00, which compensation so far exceeds the work completed by Rhogen before the municipal authorities stopped the construction for several violations. Reyes made it clear they have no obligation to help Rhogen get out of the situation arising from non-performance of its own contractual undertakings, and that The Plaza has its rights and remedies to protect its interest. On January 9, 1981, Gaite informed The Plaza that he is terminating their contract based on the Contractor‘s Right to Stop Work or Terminate Contracts as provided for in the General Conditions of the Contract. In his letter, Gaite accused Reyes of not cooperating with Rhogen in solving the problem concerning the revocation of the building permits, which he described as a "minor problem." Additionally, Gaite demanded the payment ofP63,058.50 from The Plaza representing the work that has already been completed by Rhogen. On January 13, 1981, The Plaza, through Reyes, countered that it will hold Gaite and Rhogen fully responsible for failure to comply with the terms of the contract and to deliver the finished structure on the stipulated date. Reyes argued that the down payment made by The Plaza was more than enough to cover Rhogen‘s expenses. On March 26, 1981, The Plaza filed Civil Case No. 40755 for breach of contract, sum of money and damages against Gaite and FGU in the Court of First Instance (CFI) of Rizal. The court granted the petition and uphold by CA with modification to award of damages. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
739
ISSUE: 3. Whether or not the petitioner will be liable base on damages incurred by the respondent. 4. Whether or not quantum meruit is to be appreciated here.
HELD: 3. Yes. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. Respondent The Plaza predicated its action on Article 1191 of the Civil Code, which provides for the remedy of "rescission" or more properly resolution, a principal action based on breach of faith by the other party who violates the reciprocity between them. The breach contemplated in the provision is the obligor‘s failure to comply with an existing obligation. Thus, the power to rescind is given only to the injured party. The injured party is the party who has faithfully fulfilled his obligation or is ready and willing to perform his obligation. The construction contract between Rhogen and The Plaza provides for reciprocal obligations whereby the latter‘s obligation to pay the contract price or progress billing is conditioned on the former‘s performance of its undertaking to complete the works within the stipulated period and in accordance with approved plans and other specifications by the owner. Pursuant to its contractual obligation, The Plaza furnished materials and paid the agreed down payment. It also exercised the option of furnishing and delivering construction materials at the jobsite pursuant to Article III of the Construction Contract. However, just two months after commencement of the project, construction works were ordered stopped by the local building official and the building permit subsequently revoked on account of several violations of the National Building Code and other regulations of the municipal authorities.
4. No. Under the principle of quantum meruit, a contractor is allowed to recover the reasonable value of the thing or services rendered despite the lack of a written contract, in order to avoid unjust enrichment. Quantum meruit means that in an action for work and labor, payment shall be made in such amount as the plaintiff reasonably deserves. To deny payment for a building almost completed and already occupied would be to permit unjust enrichment at the expense of the contractor. Rhogen failed to finish even a substantial portion of the works due to the stoppage order issued just two months from the start of construction. Despite the down payment received from The Plaza, Rhogen, upon evaluation of the Project Manager, was able to complete a meager percentage much lower than that claimed by it under the first progress billing between July and September 1980. Moreover, after it relinquished the project in January 1981, the site inspection appraisal jointly conducted by the Project Manager, Building Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
740
Inspector Engr. Gregory and representatives from FGU and Rhogen, Rhogen was found to have executed the works not in accordance with the approved plans or failed to seek prior approval of the Municipal Engineer. Article 1167 of the Civil Code is explicit on this point that if a person obliged to do something fails to do it, the same shall be executed at his cost. Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone.
Catly v. Navarro, et al.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
741
Hicoblino Catly (Deceased), Substituted by his wife, Lourdes Catly, Petitioner, versus William Navarro, Isagani Navarro, Belen Dolleton, Florentino Arciaga, Bartolome Patuga, Dionisio Ignacio, Bernardino Argana, Erlinda Argana-Dela Cruz, and Ayala Land, Inc., Respondents. (G.R. No. 167239, May 5, 2010, 3rd Division) PERALTA, J: FACTS: This case involves Lot No. 9 which has 1,007 square meter parcel of land located at Kinasang-an, Pardo, Cebu City and fronting the Cebu provincial highway. The lot originally belonged to Pastor Pacres who left it intestate to his heirs Margarita, Simplicia, Rodrigo, Francisco, Mario and Vearanda. On the same year, the heirs leased "the ground floor of the ancestral home together with a lot area of 300 square meters including the area occupied by the house" to respondent Hilario Ramirez, who immediately took possession thereof. Subsequently in 1974, four of the Pacres sibling namely, Rodrigo, Francisco, Simplicia and Margarita sold their shares in the ancestral home and the lot on which it stood to Ramirez. The deeds of sale described the subjects thereof as part and portion of the 300 square meters actually in possession and enjoyment by vendee and her spouse, Hilario Ramirez, by virtue of a contract of lease in their favor. Mario, petitioners' predecessor-in-interest, filed an ejectment suit against Ramirez' successor-in-interest Vicentuan. Mario claimed sole ownership of the lot occupied by Ramirez/Vicentuan by virtue of the oral partition. He argued that Ramirez/Vicentuan should pay rentals to him for occupying the front lot and should transfer to the rear of Lot No. 9 where the lots of Ramirez's vendors are located. The trial court ruled in favor of respondents. The appellate court sustained the HELD of the trial court. Hence this petition. ISSUE: Whether or not petitioners were able to prove the existence of the alleged oral agreements such as the partition and the additional obligations of surveying and titling HELD: No. Petitioners were able to prove the existence of the alleged oral agreements such as the partition and the additional obligations of surveying and titling. The court find no compelling reason to deviate from the foregoing rule and disturb the trial and appellate courts' factual finding that the existence of an oral partition was not proven. Our examination of the records indicates that, contrary to petitioners' contention, the lower courts' conclusion was justified. Petitioners' only piece of evidence to prove the alleged oral partition was the joint affidavit supposedly executed by some of the Pacres siblings and their heirs in 1993, to the effect that such an oral partition had previously been agreed upon. Petitioners did not adequately explain why the affidavit was executed only in 1993, several years after respondents Ygoa and Ramirez took possession of the front portions of Lot No. 9. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
742
Liguez v. CA Conchita Liguez, Petitioner, versus Court of Appeals, Maria Ngo Vda. De Lopez, et.al., Respondents. (G.R. No. L-11240, December 18, 1957, En Banc) REYES, J.B.L., J: FACTS: Conchita Liguez filed a complaint against the widow and heirs of the late Salvador P. Lopez to recover a parcel of 51.84 hectares of land. Plaintiff averred to be its legal owner, pursuant to a deed of donation of said land, executed in her favor by the late owner, Salvador P. Lopez. The defense interposed that the donation was null and void for having an illicit cause or consideration, which was plaintiff's entering into marital relations with Salvador P. Lopez, a married man; and that the property had been adjudicated to the appellees as heirs of Lopez by the court. The Court of Appeals held that the deed of donation was inoperative, and null and void (1) because the husband, Lopez, had no right to donate conjugal property to the plaintiff appellant; and (2) because the donation was tainted with illegal causa or consideration (illicit sexual relation), of which donor and donee were participants. Appellant vigorously contends that the Court of First Instance as well as the Court of Appeals erred in holding the donation void for having an illicit cause or consideration. It is argued that under Article 1274 of the Civil Code of 1889 which was the governing law in 1943, when the donation was executed, in contracts of pure beneficence the consideration is the liberality of the donor, and that liberality per se can never be illegal, since it is neither against law or morals or public policy. Hence, this petition. ISSUE: Whether or not the deed of donation made by Lopez in favor of Liguez was valid. HELD: No. The deed of donation made by Lopez in favor of Liguez was valid. Under Article 1274, liberality of the donor is deemed causa only in those contracts that are of "pure" beneficence; that is to say, contracts designed solely and exclusively to procure the welfare of the beneficiary, without any intent of producing any satisfaction for the donor; contracts, in other words, in which the idea of self-interest is totally absent on the part of the transferor. Appellees, as successors of the late donor, being thus precluded from pleading the defense of immorality or illegal causa of the donation, the total or partial ineffectiveness of the same must be decided by different legal principles. In this regard, the Court of Appeals correctly held that Lopez could not donate the entirety of the property in litigation, to the prejudice of his wife Maria Ngo, because said property was conjugal in character, and the right of the husband to donate community property is strictly limited by law. Appellant Conchita Liguez was declared by the Supreme Court entitled to so much of the donated property as may be found, upon proper liquidation, not to prejudice the share of the widow Maria Ngo in the conjugal partnership with Salvador P. Lopez or the legitimes of the forced heirs of the latter. The decision appealed from is reversed and set aside. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
743
Philbank v. Lui She Philippine Banking Corporation, representing the estate of Justina Santos y Canon Faustino, deceased, Plaintiff-Appellee, versus Lui She in her own behalf and as administratrix of the estate of Wong Heng, deceased, Defendant-Appellant. (G.R. No. L-17587, September 12, 1967, En Banc) CASTRO, J: FACTS: Justina Santos who inherited parcels of land in Manila executed a contract of lease in favor of Wong, covering a portion already leased to him and another portion of the property. The lease was for 50 years, although the lessee was give the right to withdraw at anytime from the agreement with a stipulated monthly rental. She executed another contract giving Wong the option to buy the leased premises for P120,000 payable within 10 years at monthly installment of P1,000. The option was conditioned on his obtaining Philippine citizenship, which was then pending. His application for naturalization was withdrawn when it was discovered that he was a resident of Rizal. Justina Santos executed two other contracts one extending the term to 99 years and the term fixing the term of the option of 50 years. In the two wills, she bade her legatees to respect the contract she had entered into with Wong, but it appears to have a change of heart in a codicil. Claiming that the various contracts were made because of her machinations and inducements practiced by him, she now directed her executor to secure the annulment of the contracts. The complaint alleged that Wong obtained the contracts through fraud. Wong denied having taken advantage of her trust in order to secure the execution of the contracts on question. He insisted that the various contracts were freely and voluntarily entered into by the parties. The lower court declared all the contracts null and void with the exception of the first, which is the contract of lease. Hence, this appeal. ISSUE: Whether or not the contracts entered into by the parties are void. HELD: Yes. The contracts entered into by the parties are void. The Court held the lease and the rest of the contracts were obtained with the consent of Justina freely given and voluntarily, hence the claim that the consent was vitiated due to fraud or machination is bereft of merit. However the contacts are not necessarily valid because the Constitution provides that aliens are not allowed to own lands in the Philippines. The illicit purpose then becomes the illegal causa, rendering the contracts void. Taken singly, the contracts show nothing that is necessarily illegal, but considered collectively, they reveal an insidious pattern to subvert by indirection what the Constitution directly prohibits. To be sure, a lease to an alien for a reasonable period is valid, so is an option giving an alien the right to buy real property on condition that he is granted Philippine citizenship. Article 1416 of the Civil Code provides an exception to the pari de licto, that when the agreement is not illegal per se but is merely prohibited, and the prohibition of the law is designed for the protection of the plaintiff, he may recover what he has paid or delivered. The contracts in question are annulled and set aside. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
744
Londres v. CA Sonia Londres, Armando Fuentes, Chi-chita Fuentes Quintia, Roberto Fuentes, Leopoldo Fuentes, Oscar Fuentes, and Marilou Fuentes Esplana, Petitioners, versus Court of Appeals, Department of Public Works and Highways, Department of Transportation and Communications, Elena Alovera Santos and Consolacion Alivio Alovera, Respondents. (G.R. No. 136427, December 17, 2002, 1st Division) CARPIO, J: FACTS: The present case stemmed from a battle of ownership over Lots 1320 and 1333 both located in Barrio Baybay, Roxas City, Capiz. Paulina originally owned these two parcels of land. After Paulina‘s death, ownership of the lots passed to her daughter, Filomena. The surviving children of Filomena, namely, Sonia Fuentes Londres, Armando V. Fuentes, Chi-Chita Fuentes Quintia, Roberto V. Fuentes, Leopoldo V. Fuentes and Marilou Fuentes Esplana, herein petitioners, now claim ownership over Lots 1320 and 1333. On the other hand, private respondents Consolacion and Elena anchor their right of ownership over Lots 1320 and 1333 on the Absolute Sale executed by Filomena on April 24, 1959. Filomena sold the two lots in favor of Consolacion and her husband, Julian. Elena is the daughter of Consolacion and Julian. Petitioners filed a complaint for the declaration of nullity of contract, damages and just compensation. Petitioners sought to nullify the Absolute Sale conveying Lots 1320 and 1333 and to recover just compensation from public respondents DPWH and DOTC. Private respondents maintained that they are the legal owners of Lots 1333 and 1320. Julian purchased the lots from Filomena in good faith and for a valid consideration. Private respondents filed a counterclaim with damages. The trial court issued its decision upholding the validity of the Absolute Sale. This was affirmed by the Court of Appeals. Hence, this petition. ISSUE: Whether or not the notarized copy of the absolute sale should prevail. HELD: No. The notarized copy of the absolute sale should not prevail. A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. Being consensual, a contract of sale has the force of law between the contracting parties and they are expected to abide in good faith with their respective contractual commitments. Article 1358 of the Civil Code, which requires certain contracts to be embodied in a public instrument, is only for convenience, and registration of the instrument is needed only to adversely affect third parties. Formal requirements are, therefore, for the purpose of binding or informing third parties. Non-compliance with formal requirements does not adversely affect the validity of the contract or the contractual rights and obligations of the parties. Decision affirmed with the modification that the cross-claim against public respondents is dismissed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
745
Sps. Vega v. SSS Spouses Antonio and Leticia Vega, Petitioner, versus Social Security System and Pilar Development Corporation, Respondents. (G.R. No. 181672, September 20, 2010, 2nd Division) ABAD, J: FACTS: Magdalena V. Reyes (Reyes) owned a piece of titled land in Pilar Village, Las Piñas City. On August 17, 1979 she got a housing loan from respondent Social Security System (SSS) for which she mortgaged her land. In late 1979, however, she asked the petitioner spouses Antonio and Leticia Vega (the Vegas) to assume the loan and buy her house and lot since she wanted to emigrate. Upon inquiry with the SSS, an employee there told the Vegas that the SSS did not approve of members transferring their mortgaged homes. The Vegas could, however, simply make a private arrangement with Reyes provided they paid the monthly amortizations on time. This practice, said the SSS employee, was commonplace. Armed with this information, the Vegas agreed for Reyes to execute in their favor a deed of assignment of real property with assumption of mortgage and paid Reyes P20,000.00 after she undertook to update the amortizations before leaving the country. The Vegas then took possession of the house in January 1981. But Reyes did not readily execute the deed of assignment. She left the country and gave her sister, Julieta Reyes Ofilada (Ofilada), a special power of attorney to convey ownership of the property. Sometime between 1983 and 1984, Ofilada finally executed the deed promised by her sister to the Vegas. Ofilada kept the original and gave the Vegas two copies. The latter gave one copy to the Home Development Mortgage Fund and kept the other. Unfortunately, a storm in 1984 resulted in a flood that destroyed the copy left with them. Vegas filed an action for consignation, damages, and injunction with application for preliminary injunction and temporary restraining order against the SSS and the trial court ruled in favor of Vegas. The SSS appealed to the Court of Appeals which reversed the trial court‘s decision. Hence, this petition. ISSUE: Whether or not the Spouses Vegas presented adequate proof of Reyes‘ sale of the subject property to them. HELD: Yes. Spouses Vegas presented adequate proof of Reyes‘ sale of the subject property to them. In this case, not only did the Vegas prove the loss of the deed of assignment in their favor and what the same contained, they offered strong corroboration of the fact of Reyes‘ sale of the property to them. They took possession of the house and lot after they bought it. Indeed, they lived on it and held it in the concept of an owner for 13 years before PDC came into the picture. They also paid all the amortizations to the SSS with Antonio Vega‘s personal check, even those that Reyes promised to settle but did not. And when the SSS wanted to foreclose the property, the Vegas sent a manager‘s check to it for the balance of the loan. Neither Reyes nor any of her relatives came forward to claim the property. The Vegas amply proved the sale to them. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
746
Petition granted.
Balatbat v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
747
Clara M. Balatbat, Petitioner, versus Court of Appeals and Spouses Jose Repuyan and Aurora Repuyan, Respondents. (G.R. No. 109410, August 28, 1996, 2nd Division) TORRES, JR., J: FACTS: The lot in question covered by Transfer Certificate of Title No. 51330 was acquired by plaintiff Aurelio Roque and Maria Mesina during their conjugal union and the house constructed thereon was likewise built during their marital union. Out of their union, plaintiff and Maria Mesina had four children. When Maria Mesina died on August 28, 1966, the only conjugal properties left are the house and lot above stated of which plaintiff herein, as the legal spouse, is entitled to one-half share pro-indiviso thereof. With respect to the one-half share pro-indiviso now forming the estate of Maria Mesina, plaintiff and the four children, the defendants here, are each entitled to one-fifth (1/5) share pro-indiviso. Aurelio Roque then entered into a contract of Absolute Sale with the spouses Aurora and Jose Repuyan. However, on August 20, 1980, Aurelio filed a complaint for Rescission of Contract against Spouses Repuyan for the latter‘s failure to pay the balance of the purchase price. A deed of absolute sale was then executed on February 4, 1982 between Aurelio S. Roque, Corazon Roque, Feliciano Roque, Severa Roque and Osmundo Roque and Clara Balatbat, married to Alejandro Balatbat. On April 14, 1982, Clara Balatbat filed a motion for the issuance of a writ of possession which was granted by the trial court on September 14, 1982 "subject, however, to valid rights and interest of third persons over the same portion thereof, other than vendor or any other person or persons privy to or claiming any rights or interests under it." The corresponding writ of possession was issued on September 20, 1982. The lower court then rendered judgment in favor of the Spouses Repuyan and declared the Deed of Absolute Sale as valid. On appeal by petitioner Balatbat, the Court of Appeals affirmed the lower court‘s decision. Hence, this petition. ISSUE: Whether or not the delivery of the owner‘s certificate of title to spouses Repuyan by Aurelio Roque is for validity or enforceability. HELD: Yes. The delivery of the owner‘s certificate of title to spouses Repuyan by Aurelio Roque is for validity or enforceability. The provision of Article 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument. The Supreme Court found that the sale between Aurelio and the Spouses Repuyan is not merely for the reason that there was no delivery of the subject property and that consideration/price was not fully paid but the sale as consummated, hence, valid and enforceable. Petition dismissed for lack of merit.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
748
Universal Robina v. Heirs of Teves Universal Robina Sugar Milling Corporation, Petitioner, versus Heirs of Angel Teves, Respondents. (G.R. No. 128574, September 18, 2002, 3rd Division) SANDOVAL-GUTIERREZ, J:
FACTS: Andres Abanto (Abanto) owned two parcels of land situated in Campuyo, Manjuyod, Negros Oriental. One lot is registered in his name and the other lot is unregistered. When he died, his heirs executed an Extrajudicial Settlement of the Estate of the Deceased and Simultaneous Sale. In this document, Abanto's heirs adjudicated unto themselves the two lots and sold the unregistered lot to the United Planters Sugar Milling Company, Inc. (UPSUMCO), and the registered lot to Angel M. Teves (Teves), for a total sum of P115,000.00. The sale was not registered. Years later, UPSUMCO‘s properties were acquired by the Philippine National Bank (PNB). Later, PNB transferred the same properties to the Asset Privatization Trust (APT) which, in turn, sold the same to the Universal Robina Sugar Milling Corporation (URSUMCO). URSUMCO then took possession of UPSUMCO‘s properties, including Teves' lot. Upon learning of the acquisition of his lot, Teves formally asked the corporation to turn over to him possession thereof or the corresponding rentals. He stated in his demand letters that he merely allowed UPSUMCO to use his property until its corporate dissolution; and that it was not mortgaged by UPSUMCO with the PNB and, therefore, not included among the foreclosed properties acquired by URSUMCO. URSUMCO refused to heed Teves' demand, claiming that it acquired the right to occupy the property. Teves filed a complaint for recovery of possession of real property with damages against URSUMCO. However, on September 4, 1992, Teves died and was substituted by his heirs. The trial court held that URSUMCO has no personality to question the validity of the sale of the property between the heirs of Andres Abanto and Angel Teves since it is not a party thereto. On appeal by URSUMCO, the Court of Appeals affirmed the trial court‘s decision. Hence, the instant petition for review on certiorari. ISSUE: Whether or not the contract of sale is valid. HELD: Yes. The contract of sale is valid. The absolute ownership over the registered land was indeed transferred to Teves is further shown by his acts subsequent to the execution of the contract. That the contract of sale was not registered does not affect its validity. Being consensual in nature, it is binding between the parties, the Abanto heirs and Teves. Formalities intended for greater efficacy or convenience or to bind third persons, if not done, would not adversely affect the validity or enforceability of the contract between the contracting parties themselves. Thus, by virtue of the valid sale, Angel Teves stepped into the shoes of the heirs of Andres Abanto and acquired all their rights to the property. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
749
Petition denied.
Sarming v. Dy
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
750
Rita Sarming, Rufino Sarming, Manuel Sarming, Leonora Vda. De Loy, Erlinda Sarming, Nicandra Sarming, Mansueta Sarming, Arturo Corsame, Fely Corsame, Federico Corsame, Isabelita Corsame, Norma Corsame, Cesar Corsame, Rudy Corsame, Roberta Corsame, Artemio Corsame, Elpidio Corsame, Enriquita Corsame and Guadalupe Corsame Tan, Petitioner, versus Cresencio Dy, Ludivina Dy-Chan, Trinidad Flores, Luisa Flores, Saturnina Organista, Remedios Organista, Ofelia Organista, Lydia Organista, Zosimo Organista, Domisiano Flores, Florita Flores, Eduardo Flores, Benigna Flores, Angelina Flores, Marcial Flores, and Mario Flores, Respondents. (G.R. No. 133643, June 6, 2002, 2nd Division) QUISUMBING, J: FACTS: A controversy arose regarding the sale of Lot 4163 which was halfowned by the original defendant, Silveria Flores (Silveria), although it was solely registered under her name. The other half was originally owned by Silveria‘s brother, Jose. On January 1956, the heirs of Jose entered into a contract with plaintiff Alejandra Delfino (Delfino), for the sale of their one-half share of Lot 4163 after offering the same to their co-owner, Silveria, who declined for lack of money. Silveria did not object to the sale of said portion to Alejandra. Atty. Deogracias Pinili (Pinili), Alejandra‘s lawyer then prepared the document of sale. In the preparation of the document however, OCT no. 4918A, covering Lot 5734, and not the correct title covering Lot 4163 was the one delivered to Pinili. Unaware of the mistake committed, Alejandra immediately took possession of Lot 4163 and introduced improvements on the lot. Two years later, when Alejandra Delfino purchased the adjoining portion of the lot she had been occupying, she discovered that what was designated in the deed, Lot 5734, was the wrong lot. However, despite repeated demands, Silveria did not do so, prompting Alejandra and the vendors to file a complaint against Silveria for reformation of the deed of sale with damages before the Regional Trial Court. The trial court ruled in favor of herein respondents. Petitioners appealed the decision to the Court of Appeals, which affirmed the HELD of the trial court. Hence, this petition. ISSUE: Whether or not reformation is proper in this case. HELD: Yes. The reformation is proper in the case at bar. Reformation is that remedy in equity by means of which a written instrument is made or construed so as to express or inform to the real intention of the parties. An action for reformation of instrument under this provision of law may prosper only upon the concurrence of the following requisites: (1) there must have been a meeting of the minds of the parties to the contract; (2) the instrument does not express the true intention of the parties; and (3) the failure of the instrument to express the true intention of the parties is due to mistake, fraud, inequitable conduct or accident. All of these requisites are present in this case. The decision appealed from is affirmed with modification. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
751
Cebu v. Court of Appeals Cebu Contractors Consortium Co., Petitioner, versus Court of Appeals and Makati Leasing and Finance Corporation, Respondents. (G.R. No. 107199, July 22, 2003, 1st Division) AZCUNA, J: FACTS: Makati Leasing and Finance Corporation (MLFC) alleges that a lease agreement relating to various equipments was entered into between MLFC, as lessor, and Cebu Contractors Consortium Co. (CCCC), as lessee. The terms and conditions of the lease were defined in said agreement and in two lease schedules of payment. To secure the lease rentals, a chattel mortgage, and a subsequent amendment thereto, were executed in favor of MLFC over other various equipment owned by CCCC. CCCC began defaulting on the lease rentals, prompting MLFC to send demand letters. When the demand letters were not heeded, MLFC filed a complaint for the payment of the rentals due and prayed that a writ of replevin be issued in order to obtain possession of the equipment leased and to foreclose on the equipment mortgaged. CCC‘s position is that it is no longer indebted to MLFC because the total amounts collected by the latter from the Ministry of Public Highways, by virtue of the deed of assignment, and from the proceeds of the foreclosed chattels were more than enough to cover CCC‘s liabilities. CCC submits that in any event, the deed of assignment itself already freed CCC from its obligation to MLFC. The trial court rendered decision upholding the lease agreement and finding CCC liable to MLFC in lease rentals. On appeal, the appellate court affirmed the trial court‘s decision. Hence, this petition. ISSUE: Whether or not the right of action for reformation accrued from the date of execution of the contract. HELD: Yes. The right of action for reformation accrued from the date of execution of the contract. MLFC‘s own evidence discloses that it offers two types of financing lease: a direct lease and a sale- lease back. The client sells to MLFC equipment that it owns, which will be leased back to him. The transaction between CCC and MLFC involved the second type of financing lease.CCC argues that the sale and lease back scheme is nothing more than an equitable mortgage and consequently, asks for its reformation. The right of action for reformation accrued from the date of execution of the contract of lease in 1976. This was properly exercised by CCC when it filed its answer with counterclaim to MLFC‘s complaint in 1978 and asked for the reformation of the lease contract. The decision appealed from is affirmed.
ADR Shipping v. Gallardo
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
752
ADR Shipping Servicess, Inc., petitioner, versus Marcelino Gallardo and Court of Appeals, respondents. (G.R. No. 134873, September 17, 2002, 2nd Division) De Leon, J.: FACTS: Petitioner ADR Shipping Services, Inc. entered into a contract with private respondent Gallardo for the use of the former‘s vessel MV Pacific Breeze to transport logs to Taiwan. The logs were the subject of a sales agreement between private respondent as seller being a timber concessionaire and log dealer, and Sty wood Philippines, as buyer. Private respondent paid an advance charter fee of P242,000 representing ten percent of the agreed charter fee. Under the charter agreement, the boat should be ready to load by February 5,1988. The boat failed to arrive on time, prompting private respondent to notify petitioner of its cancellation of the charter contract and the withdrawal of the advance payment deposited to the account of ADR shipping. ADR Shipping refused to return the advance payment to Gallardo claiming that the agreement on the date of February 5, 1988 was just the ―reference commencing date‖ and the true loading date was February 16, 1988. This prompted the latter to file a case for sum of money and damages. The Regional Trial Court ordered ADR Shipping to pay Gallardo the advance payment with 6 percent interest per annum and attorney‘s fees. The decision of the trial court was affirmed by the Court of Appeals. Hence, this petition. ISSUE: Whether or not private respondent is entitled to the refund of the advance payment representing his deposit for the charter of the ship provided by petitioner. HELD: Yes. Private respondent is entitled to the refund of the advance payment it made to petitioner. There was ambiguity in the interpretation of the contract provisions as to the date of the loading of the ship. Ambiguities in a contract are interpreted strictly, albeit not unreasonably, against the drafter thereof when justified in light of the operative facts and surrounding circumstances. In this case, ambiguity must be construed strictly against ADR which drafted and caused the inclusion of the ambiguous provisions. The charter agreement explicitly states that February 5, 1988 is the intended date when the ship is expected ready to load while February 16, 1988 is merely the canceling date. Considering that the subject contract contains the foregoing express provisions, the parties have no other recourse but to apply the literal meaning of the stipulations. The cardinal rule is that when the terms of the contract are clear, leaving no doubt as to the intention of the parties, the literal meaning of its stipulations is controlling. Pursuant to the provision of Art 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 is incumbent upon him, and the injured party may rescind the obligation, with payment of damages. In this case the private respondent is entitled to the return of his down payment, subject to a legal interest of 6 percent per annum, and to the payment of damages. Movido v. Pastor
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
753
Valentin Movido, substituted by Marginito Movido, petitioner, versus Luis Reyes Pastor, respondent. (G.R. No. 172279, February 11, 2010, 3rd Division) Corona, J.: FACTS: Respondent Luis Reyes Pastor filed a complaint for specific performance in the Regional Trial Court (RTC) of Imus, Cavite, praying that petitioner Valentin Movido be compelled to cause the survey of a parcel of land subject of their contract to sell. In his complaint, respondent alleged that he and petitioner executed a ―kasunduan sa bilihan ng lupa‖ where the latter agreed to sell a parcel of land located in Paliparan, Dasmariñas, Cavite with an area of some 21,000 sq. m. out of the 22,731 sq. m. covered by Transfer Certificate of Title (TCT) No. 362995 at P400/sq. m. Respondent further alleged that another kasunduan was later executed supplementing the kasunduan sa bilihan ng lupa. It provided that, if a Napocor power line traversed the subject lot, the purchase price would be lowered to P200/sq. m. beyond the distance of 15 meters on both sides from the center of the power line while the portion within a distance of 15 meters on both sides from the center of the power line would not be paid Respondent likewise claimed that petitioner undertook to cause the survey of the property in order to determine the portion affected by the Napocor power line. Lastly, respondent alleged that he already paid petitioner P5 million out of the original purchase price of P8.4 million stated in the kasunduan sa bilihan ng lupa. He was willing and ready to pay the balance of the purchase price but due to petitioner‘s refusal to have the property surveyed despite incessant demands, his unpaid balance could not be determined with certainty. In his answer, petitioner alleged that the original negotiation for the sale of his property involved the entire area of 22,731 sq. m. However, as respondent was not sure whether a Napocor power line traversed the property, they then executed the kasunduan. After respondent personally inspected the property, a final agreement—the kasunduan sa bilihan ng lupa—was executed where the area to be sold was 21,000 sq. m. for P400/sq. m. for a total sum of P8.4 million. The final agreement also listed a schedule of payments of the purchase price and included a penalty clause in case of default. Petitioner also charged respondent with delay in paying several installments due and did not pay the 7th installment in the amount of P1 million. This was allegedly a material breach because they agreed that the survey of the property would only be done after respondent would have paid the 7th installment. Due to respondent‘s failure to fulfill his obligations, petitioner claimed that he had no choice except to rescind the kasunduan sa bilihan ng lupa. He, however, was willing to reimburse 50% of whatever respondent had paid him so far. After hearing, the RTC ruled in favor of petitioner and held that the kasunduan preceded the kasunduan sa bilihan ng lupa. Thus, the RTC dismissed the complaint of respondent for lack of merit and/or cause of action. On appeal, the Court of Appeals (CA) reversed the RTC and held that the kasunduan sa bilihan ng lupa was the first document executed by the parties, not the kasunduan. Marginito Movido‘s motion for reconsideration did not have its desired result. Hence, this petition for review on certiorari. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
754
ISSUE: Whether or not there is impropriety of Rescission. HELD: Rescission is only allowed when the breach is so substantial and fundamental as to defeat the object of the parties in entering into the contract. We find no such substantial or material breach. It is true that respondent failed to pay the 7th and 8th installments of the purchase price. However, considering the circumstances of the instant case, particularly the provisions of the kasunduan, respondent cannot be deemed to have committed a serious breach. In the first place, respondent was not in default as petitioner never made a demand for payment. Moreover, the kasunduan sa bilihan ng lupa and the kasunduan should both be given effect rather than be declared conflicting, if there is a way of reconciling them. Petitioner and respondent would not have entered into either of the agreements if they did not intend to be bound or governed by them. Indeed, taken together, the two agreements actually constitute a single contract pertaining to the sale of a land to respondent by petitioner. Their stipulations must therefore be interpreted together, attributing to the doubtful ones that sense that may result from all of them taken jointly. Their proper construction must be one that gives effect to all. In this connection, the kasunduan sa bilihan ng lupa contains the general terms and conditions of the agreement of the parties. On the other hand, the kasunduan refers to a particular or specific matter, i.e., that portion of the land that is traversed by a Napocor power line. As the kasunduan pertains to a special area of the agreement, it constitutes an exception to the general provisions of the kasunduan sa bilihan ng lupa, particularly on the purchase price for that portion. Specialibus derogat generalibus. Under both the kasunduan sa bilihan ng lupa and the kasunduan, petitioner undertook to cause the survey of the property in order to determine the portion excluded from the sale, as well as the portion traversed by the Napocor power line. Despite repeated demands by respondent, however, petitioner failed to perform his obligation. Thus, considering that there was a breach on the part of petitioner (and no material breach on the part of respondent), he cannot properly invoke his right to rescind the contract.
TSPIC Corp. v. TSPIC Employees Union
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
755
TSPIC Corp., petitioner, versus TSPIC Employees Union (FFW) representing Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguuir, Jerico Alipit, Glen Batula, Ser John Hernandez, Rachel Novillas, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricirs Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Camullo, Marie Ann Delos Santos, Juanita Yana and Suzette Dulay, respondents. (G.R. No. 163419, February 13, 2008, 2nd Division) Velasco, J.: FACTS: TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve the communication, automotive, data processing, and aerospace industries. TSPIC Employees Union (Union), on the other hand, is the registered bargaining agent of the rank-and-file employees of TSPIC. TSPIC and the Union entered into a Collective Bargaining Agreement. As a result all the regular rank-and-file employees of TSPIC received a 10% increase in their salary. A wage order was issued by the National Capital Region which raised the daily minimum wage from PhP 223.50 to PhP 250, hence, the wages of 17 probationary employees were increased to PhP 250.00. TSPIC implemented the new wage rates as mandated by the CBA. As a result several employees received fewer wage. A few weeks after the salary increase for the year 2001 became effective, TSPIC notified some of their employees were overpaid and the overpayment would be deducted from their salaries in a staggered basis. ISSUE: Whether or not deduction of the alleged overpayment from the salaries of the affected members of the Union constitute diminution of benefits in violation of law. HELD: The deduction of the alleged overpayment from the salaries of the respondents is a valid act. The CBA provided in its provision in the computation for the increase in TSPIC‘s employees, hence, the intention therein must be pursued basing on the principle that littera necat spiritus vivificate. The fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply with its provisions. Therefore, the error found by TSPIC in pursuance to the terms in the CBA must be sustained. The Court also agrees that TSPIC in charging the over payments made to the respondents through staggered deductions from their salaries does not constitute diminution of benefits. Any amount given to the employees in excess of what they were entitled to, as computed above, may be legally deducted by TSPIC from the employees‘ salaries because on the first place that excess was not vested in them legally as aright because that will amount to unjust enrichment.
Estanislao v. East-West Banking Corp.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
756
SPS. Rafael P. Estanislao ans Zenaida Estanislao, petitioners, versus EastWest Banking Corporation, respondent. (G.R. No. 178537, February 11, 2008, 3rd Division) Reyes, J.: FACTS: Spouses Rafael and Zenaida Estanislao obtained a loan from East West Banking Corporation evidenced by a promissory note and secured by two deeds of chattel mortgage of two dump trucks and a bulldozer for the first and bulldozer and a wheel loader for the other. Spouses defaulted in the amortizations and the entire obligation became due and demandable. The bank filed a suit for replevin with damages but subsequently, the bank moved for suspension of the proceedings on account of an earnest attempt to arrive at an amicable settlement of the case. Both parties executed a Deed of Assignment, drafted by the bank, where it provides that the two dump trucks and the bulldozer shall be transferred, assigned and conveyed for the full payment of the debt. But the bank, for an unknown reason failed to sign on the deed, but it accepted the three heavy vehicles freely and voluntarily upon delivery made by the petitioner. After some time, the bank file a petition in court praying for the delivery of the other heavy vehicles mortgaged in the second chattel mortgage. The regional trial court dismissed the complaint for lack of merit but it was reversed and set aside by the court of appeals. ISSUE: Whether or not the Deed of Assignment, unsigned by private respondent, extinguishes the whole and full obligation of the petitioner. HELD: The deed of assignment was a perfected agreement which extinguished petitioner‘s total outstanding obligation to the respondent. The deed explicitly provides that the assignor (petitioners), in full payment of its obligation, shall deliver the three units of heavy equipment to the assignee (respondent), which accepts the assignment in full payment of the above-mentioned debt. This could only mean that should petitioners complete the delivery of the three units of heavy equipment covered by the deed, respondent‘s credit would have been satisfied in full, and petitioner‘s aggregate indebtedness would then be considered to have been paid in full as well. The nature of the assignment was a dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money. Such transaction is governed by the law on sales. Even if we were to consider the agreement as a compromise agreement, there was no need for respondent‘s signature on the same, because with the delivery of the heavy equipment which the latter accepted, the agreement was consummated. Respondent‘s approval may be inferred from its unqualified acceptance of the heavy equipment.
Aquintey v. Tibong
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
757
Agrifina Aquintey, petitioner, versus Spouses Felicidad and Rico Tibong, respondents. (G.R. No. 166704 December 20, 2006, 1st Division) Callejo, Sr., J.: FACTS: On May 6, 1999, petitioner Agrifina Aquintey filed before the RTC of Baguio City, a complaint for sum of money and damages against the respondents, spouses Felicidad and Rico Tibong. Agrifina alleged that Felicidad had secured loans from her on several occasions, at monthly interest rates of 6% to 7%. Despite demands, the spouses Tibong failed to pay their outstanding loan, amounting to P773, 000.00 exclusive of interests. In their Answer with Counterclaim, spouses Tibong admitted that they had secured loans from Agrifina. The proceeds of the loan were then re-lent to other borrowers at higher interest rates. They, likewise, alleged that they had executed deeds of assignment in favor of Agrifina, and that their debtors had executed promissory notes in Agrifina‘s favor. According to the spouses Tibong, this resulted in a novation of the original obligation to Agrifina. They insisted that by virtue of these documents, Agrifina became the new collector of their debtors; and the obligation to pay the balance of their loans had been extinguished. ISSUE: Whether or not there is valid novation in the instant case? HELD: Novation which consists in substituting a new debtor in the place of the original one may be made even without the knowledge or against the will of the latter but not without the consent of the creditor. Substitution of the person of the debtor may be effected by delegacion, meaning, the debtor offers, and the creditor, accepts a third person who consents to the substitution and assumes the obligation. Thus, the consent of those three persons is necessary. In this kind of novation, it is not enough to extend the juridical relation to a third person; it is necessary that the old debtor be released from the obligation, and the third person or new debtor take his place in the relation. Without such release, there is no novation; the third person who has assumed the obligation of the debtor merely becomes a co-debtor or a surety. If there is no agreement as to solidarity, the first and the new debtor are considered obligated jointly. In the case at bar, the court found that respondents‘ obligation to pay the balance of their account with petitioner was extinguished, protanto, by the deeds of assignment of credit executed by respondent Felicidad in favor of petitioner. As gleaned from the deeds executed by respondent Felicidad relative to the accounts of her other debtors, petitioner was authorized to collect the amounts of P6,000.00 from Cabang, and P63,600.00 from Cirilo. They obliged themselves to pay petitioner. Respondent Felicidad, likewise, unequivocably declared that Cabang and Cirilo no longer had any obligation to her.
Cruz vs. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
758
Adoracion E. Cruz, Thelma Debbie E. Cruz, Gerry E. Cruz and Nerissa Cruz-Tamayo, petitioners, versus The Honorable Court of Appeals, Summit Financing Corp., Victor S. Sta. Ana, Maximo C. Contreras, Ramon G. Manalastas, and Vicente Torres, respondents. (456 SCRA 165, April 15, 2005, 2nd Division) Tinga, J.: FACTS: Herein petitioner is the mother of her co petitioners Thelma Cruz, Gerry Cruz and Nerissa Cruz-Tamayo, as well as Arnel Cruz, who was one of the defendants in Civil Case No. 49466. Petitioners files said case on February 11,1983 against Arnel Cruz and herein private respondents Summit Financing Corporation (―Summit‖), Victor S. Sta. Ana and Maximo C. Contreras, the last two in their capacity as deputy sheriff and ex-officio sheriff of Rizal, respectively, and Ramon G. Manalastas in his capacity as Acting Register of Deeds of Rizal. The Complaint alleged that petitioners and Arnel Cruz were coowners of a parcel of land situated in Taytay, Rizal. Yet the property, which was then covered by Transfer Certificate of Title (TCT) No. 495225, was registered only in the name of Arnel Cruz. According to petitioners, the property was among the properties they and Arnel Cruz inherited upon the death of Delfin Cruz, husband of Adoracion Cruz. On August 22, 1977, petitioners and Arnel Cruz executed a Deed of Partial Partition, distributing to each of them their shares consisting of several lots previously held by them in common. Among the properties adjudicated to defendant Cruz was the parcel of land covered at the time by TCT No. 495225. It is the subject of this case. Subsequently, the same parties to the Deed of Partition agreed in writing to share equally in the proceeds of the sale of the properties although they have been subdivided and individually titled in the names of the former co-owners pursuant to the Deed of Partition. This arrangement was embodied in a Memorandum of Agreement executed on August 23, 1977 or a day after the partition. The tenor of the Memorandum of Agreement was annotated at the back of the TCT No. 495225 on September 1, 1977.Sometime in January 1983, petitioner Thelma Cruz discovered that TCT No. 514477 was issued on October 18, 1982 in the name of Summit. Upon investigation, petitioners learned that Arnel Cruz had executed a Special Power of Attorney on May 16, 1980 in favor of one Nelson Tamayo, husband of petitioner Nerissa Cruz Tamayo, authorizing him to obtain a loan in the amount of One Hundred Four Thousand Pesos from respondent Summit, to be secured by a real estate mortgage on the subject parcel of land. Since the loan remained outstanding on maturity, Summit instituted extrajudicial foreclosure proceedings, and at the foreclosure sale, it was declared the highest bidder. Consequently, Sheriff Sta. Ana issued a Certificate of Sale to respondent Summit which more than a year later consolidated its ownership of the foreclosed property. Upon presentation of the affidavit of consolidation of ownership, the Acting Register of Deeds of Rizal cancelled TCT No. 495225 and issued and in lieu thereof, TCT No. 514477 in the name of respondent Summit. In their complaint before the RTC, petitioners asserted that they co-owned the properties with Arnel Cruz, as evidenced by the Memorandum of Agreement. Hence, they argued that the mortgage was void since they did not consent to it. ISSUE: Whether or not the real estate mortgage on the property then covered by TCT No. 495225 is valid and whether the mortgaged property was the exclusive property of Arnel Cruz when it was mortgaged.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
759
HELD: A reading of the provisions of the Deed of Partition, no other meaning can be gathered other than that petitioners and Arnel Cruz had put an end to the co-ownership. In the aforesaid deed, the shares of petitioners and Arnel Cruz‘s in the mass of co-owned properties were concretely determined and distributed to each of them. In particular, to Arnel Cruz was assigned the disputed property. There is nothing from the words of said deed which expressly or impliedly stated that petitioners and Arnel Cruz intended to remain as co-owners with respect to the disputed property or to any of the properties for that matter. Petitioners do not question the validity or efficacy of the Deed of Partial Partition. In fact, they admitted its existence in their pleadings and submitted it as a part of their evidence. Thus, the deed is accorded its legal dire effect. Since a partition legally made confers upon each heir their exclusive ownership of the property adjudicated to him, it follows that Arnel Cruz acquired absolute ownership over the specific parcels of land assigned to him in the Deed of Partial Partition, including the property subject of this case. As the absolute owner thereof then, Arnel Cruz had the right to enjoy and dispose of the property, as well as the right to constitute a real estate mortgage over the same without securing the consent of the petitioners. On the other hand, there is absolutely nothing in the Memorandum of Agreement which diminishes the right of Arnel Cruz to alienate or encumber the properties allotted to him in the deed of partition. As correctly held by the Court of Appeals, the parties only bound themselves to share in the proceeds of the sale of the properties. The agreement does not direct reconveyance of the properties to reinstate the common ownership of the properties. Moreover, to ascertain the intent of the parties in a contractual relationship, it is imperative that the various stipulations provided for in the contracts be construed together, consistent with the parties contemporaneous and subsequent acts as regards the execution of the contract. Subsequent to the execution of the Deed of Partition and Memorandum of Agreement, the properties were titled individually in the names of the co-owners to which they were respectively adjudicated, to the exclusion of the other co-owners. Petitioners Adoracion Cruz and Thelma Cruz separately sold the properties distributed to them as absolute owners thereof. Being clear manifestations of sole and exclusive dominion over the properties affected, the acts signify total incongruence with the state of co-ownership claimed by the petitioners. The real estate mortgage on the disputed property is valid and does not contravene the agreement of the parties.
Gonzales v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
760
Napoleon H. Gonzales, petitioner, versus Hon. Court of Appeals and Spouses Gabriel and Luzviminda Caballero, respondents. (354 SCRA 8, March 8, 2001, 2nd Division) Quisumbing, J.: FACTS: Private respondents, Mr. and Mrs. Gabriel Caballero, are the registered owners of two parcels of land situated in Cubao, Quezon City described in Transfer Certificate for Title No. 247309 (Lot 1) and TCT No. 247310 (Lot 2). The spouses‘ residence stood in Lot 2.Sometime in 1979, they obtained a loan from the Cavite Development Bank in the amount of P225,000.00. The two lots were mortgaged to secure their loan. The loan matured in 1984. To pay the loan they offered Lot 1 for sale. The offer was advertised in the Bulletin Today. However, offers to purchase from prospective buyers did not materialize. On October 24, 1985, a certain Mrs. Lagrimas approached the spouses offering to broker the sale to an interested buyer. Initially, the spouses told the broker that they were selling only to direct buyers. Nonetheless, Mrs. Lagrimas brought to the spouses her buyer, herein petitioner Napoleon H. Gonzales, whoturned out to be Mrs. Lagrimas‘ relative. Petitioner offered to buy the vacant lot for P470, 000.00. Initially, respondents refused to reduce their asking price. Petitioner bargained for a lower price with the suggestion that on paper the price will be markedly lower so the spouses would pay lower capital gains tax. Petitioner assured the spouses this could be done since he had connections with the Bureau of Internal Revenue. The spouses agreed to sell at P470.000.00. Petitioners paid the bankP375, 000.00, to be deducted from the purchase price. After the mortgage was cancelled and upon release of the two titles, Gonzales asked for the deeds of sale of the two lots and delivery of the titles to him. Defendants signed the deed of sale covering only Lot 1 but refused to deliver its title until petitioner paid the remaining balance of P70,000.00 This prompted petitioner to file a complaint for specific performance and damages. ISSUE: Whether or not the sale involved only Lot 1 and not both Lots. HELD: YES. Principally, the issue here is whether the contract of sale between the parties involved Lot 1 and 2 as claimed by petitioner or only Lot 1 as private respondents contend. In a case where we have to judge conflicting claims on the intent of the parties, as in this instance, judicial determination of the parties‘ intention is mandated. Contemporaneous and subsequent acts of the parties material to the case are to be considered. Petitioner admits he himself caused the preparation of the deed of sale presented before the lower court. Yet he could not explain why I referred only to the sale of Lot 1 and not to the two lots, if the intention of the parties was really to cover the sale of two lots. As the courts a quo observed, even if it were true that two lots were mortgaged and were about to be foreclosed, the ads private respondents placed in the Bulletin Today offered only Lot 1 and was strong indication that they did not intend to sell Lot 2. The 501 sq.m. Lot was offered forP1,150.00 per sq.m. It alone would have fetched P576, 150.00. The loan still to be paid the bank was only P375, 000.00 which was what petitioner actually paid the bank. As the trial court observed, it was incomprehensible why the spouses would part with two lots, one with a 2-storey house, and both situated at a prime commercial district for less than the price of one lot. Contrary to what petitionerwould make us believe, the sale of Lot 1 valued at P576,150.00 for P470,000.00, with Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
761
petitioner assuming the bank loan of P375,000.00 as well as payment of the capital gains tax, appears more plausible.
Almira v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
762
Juana Almira, Renato Garcia, Rogelio Garcia, Rodolfo Garcia, Rosita Garcia, Rhodora Garcia, Rosalinda Garcia, Rolando Garcia and Rafael Garcia represented in this suit by Edgardo Alvarez, petitioners, versus Court of Appeals and Federico Briones, respondents. (399 SCRA 351, March 20, 2003, 1st Division) Azcuna, J.: FACTS: Petitioners are the wife and the children of the late Julio Garcia who inherited from his mother, Ma. Alibudbud, a portion of a 90,655 square meter property denominated as lot 1642 of the Sta. Rosa Estate in Brgy. Caingin Sta.Rosa Laguna. The lot was co-owned and registered in the names of three persons with the following shares: Vicente de Guzman (1/2), Enrique Hemedes(1/4) and Francisco Alibudbud, the father of Ma. Alibudbud (1/4). Although there was no separate title in the name of Julio Garcia, there were tax declaration in his name to the intent of his grandfather‘s share covering the area of 21460square meter. On July 5, 1984, petitioner as heirs of Julio Garcia, and respondent Federico Brines entered a Kasunduan ng Pagbibilihan (Kasunduan for Brevity)over the 21460 square meter portion for the sum of P150.000.00. Respondent paid P65, 000.00 upon execution of the contract while the balance of P85,000.00 was made payable within six (6) months from the date of the execution of the instrument. The time of the execution of the kasunduan, petitionersallegedly informed respondent that TCT No. RT-1076 was in the possession of their cousin, Conchila Alibudbud, who having bought Vicente de Guzman‘s ½shares, owned the bigger portion of lot 1642. This standing notwithstanding, respondent willingly entered into the Kasunduan provided that the full payment of the purchase price will be made upon delivery to him of the title. Respondent took possession of the property subject of the Kasunduan and made various payments to petitioiners amounting to P58500.00. However upon failure of petitioner to deliver to him a separate title to the property in the name of Julio Garcia he refused to make further payments, prompting petitioner to file a civil action before the RTC for a rescission of the Kasunduan, return by respondent to petitioner of the possession of the subject parcel of land, and payment by respondent of damages in favor of petitioners. ISSUE: Whether or not the petitioner may rescind the Kasunduan pursuant to Article 1191 of the Civil Code for the failure of respondent to give full payment of the balance of the purchase price. HELD: NO, the rights of the parties are governed by the terms and the nature of the contract they entered. Hence, although the nature of the Kasunduan was never places in dispute by both parties, it is necessary to ascertain whether the Kasunduan is a contract to sell or a contract of Sale. Although both parties haveconsistency referred to the Kasunduan as a contract to Sell, a careful reading of the provision of the Kasunduan reveals that it is a contract of Sale. A deed of sale is absolute in nature in the absence of any stipulation reserving title to the vendor until full payment of the purchase price. The delivery of a separation title in the name of Julio Garcia was a condition imposed on respondent‘s obligation to pay the balance of the purchase price. It was not a condition imposed in the perfection of the contract of Sale. The rescission will not prosper since the power to rescind is only given to the injured party. The injured party is the party who has faithfully fulfilled his obligation. In the case at bar, the petitioners were not ready, willing and able to comply with their Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
763
obligation to deliver a separate title in the name of Julio Garcia to respondent therefore, they are not in a position to ask for rescission. Failure to comply with a condition imposed on the performance of an obligation gives the other party the option either to refuse to proceed with the sale or to waive the condition under Art 1545 of the civil code. Hence it is the respondent who has the option.
Philbank v. Lim
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
764
Philippine Bank of Communications, petitioner, versus Elena Lim, Ramon Calderon and Tri-oro International Trading & Manufacturing Corporation, respondents. (G.R. NO. 158138, April 12, 2005, 3rd Division) Panganiban, J.: FACTS: On September 3, 1999, petitioner filed a complaint against respondentsfo0r the collection of a deficiency amounting to P4, 014,297.23 exclusive of interest. Petitioner alleged that respondents obtained a loan from it and executed a continuing surety agreement dated November 16, 1995 in favor of petitioner for all loans, credits, etc., that were extended or may be extended in the future to respondents. Petitioner granted a renewal of said loan upon respondent‘s request, the most recent being on January 21, 1998 as evidenced by a promissory note renewal BD-Variable No. 8298021001 on the amount of P3, 000,000.00. It was expressly stipulated therein that the venue for any legal action that may arise out of said promissory note shall be Makati City ―to the exclusion of all other courts.‖ Respondent allegedly failed to pay said obligation upon maturity. Thus petitioner foreclosed the real estate mortgage executed by the respondents valued at P1, 081,600.00 leaving a deficiency balance of P4, 014,297.23 as of August 31, 1999.Respondents moved to dismiss the complaint on the ground of improper venue, invoking the stipulation contained in the last paragraph of the promissory note with respect to the restriction/exclusive venue. The trial court denied said motion asseverating that petitioners had separate causes of action arising from the promissory note and the continuing surety agreement. Thus, under Rule 4, Section 2 of the 1997 Rules of Civil Procedure, as amended, venue was properly laid in Manila. The trial court supported its order with cases where venue was held to be permissive. A motion for reconsideration of said order was likewise denied. ISSUE: Whether or not the ―complementary-contracts-construed together‖ principle is applicable in the case at bar. HELD: According to this principle, an accessory contract must be read in its entirety and together with the principal agreement. This principle is used in construing contractual stipulations in order to arrive at their true meaning; certain stipulations cannot be segregated and then made to control. This nosegregation principle is based on Article 1374 of the Civil Code. The aforementioned doctrine is applicable to the present case. In capable of standing by itself, the surety agreement can be enforced only in conjuction with the promissory note. The latter documents the debt that is sought to be collected in the action against the sureties. The factual milieu of the present case shows that the surety agreement was entered into to facilitate existing and future loan agreements. Petitioner approved the loan covered by the promissory note, partly because of the surety agreement that assured the payment of the principal obligation. The circumstances that relate to the issuance of the promissory note and the surety agreement are so intertwined that neither one could be separated from the other. It makes no sense to argue that the parties to the surety agreement were not bound by the stipulations in the promissory note. Notably, the promissory note was a contract of adhesion that petitioner required the principal debtor to execute as a condition of the approval of the loan. It was made in the form and language prepared by the bank. By inserting the provision of that Makati City would be the ―venue for any legal action that may arise out of the promissory note,‖ petitioner also restricted the venue of Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
765
actions against the sureties. The legal action against the sureties arose not only from the security agreement but also from the promissory note.
Rigor v. Consolidated Leasing
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
766
Spouses Efren N. Rigor and Zosima D. Rigor, for themselves and as owners of Chiara Construction, petitioners, versus Consolidated Orix Leasing and Finance Corporation,respondent. 387 SCRA 437, August 20, 2000, 3rd Division) Carpio, J.: FACTS: Petitioners obtained a loan from private respondent Consolidated Orix Leasing and Finance Corporation in the amount of P1, 630,320.00. Petitioners executed a promissory note on July 31, 1996 promising to pay the loan in 24equal monthly installments of P67, 930.00 every fifth day of the month commencing on September 5, 1996. The promissory note also provides that default in paying any installment renders the entire unpaid amount due and payable. To secure payment of the loan, petitioners executed in favor of private respondent a deed of chattel mortgage over two dump trucks. Petitioners failed to pay several installments despite demand from private respondent. On January 5, 1998, private respondent sought to foreclose the chattel mortgage by filing a complaint for Replevin with Damages against petitioners before the Regional Trial Court of Dagupan City. After service of summons, petitioners moved to dismiss the complaint on the ground of improper venue based on a provision in the promissory note which states that, x x x all legal actions arising out of this note or in connection with the chattels subject hereof shall only be brought in or submitted to the proper court in Makati City, Philippines. Private respondent opposed the motion to dismiss and argued that venue was properly laid in Dagupan City where it has a branch office based on a provision in the deed of chattel mortgage which states that, x x x in case of litigation arising out of the transaction that gave rise to this contract, complete jurisdiction is given the proper court of the city of Makati or any proper court within the province of Rizal, or any court in the city, or province where the holder/mortgagee has a branch office, waiving for this purpose any proper venue. After a further exchange of pleadings, the Dagupan trial court denied petitioners‘ motion to dismiss Not satisfied with the orders, petitioners filed a petition for certiorari before the Court of Appeals imputing grave abuse of discretion by the Dagupan trial court in denying the motion to dismiss which was denied. ISSUE: Whether or not venue was properly laid under the provisions of the chattel mortgage contract in the light of Article 1374 of the Civil Code. HELD: Yes. Art. 1374 provides that the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. Applying the doctrine to the instant case, we cannot sustain petitioners‘ contentions. The promissory note and the deed of chattel mortgage must be construed together. Private respondent explained that its older standard promissory notes confined venue in Makati City where it had its main office. After it opened a branch office in Dagupan City, private respondent made corrections in the deed of chattel mortgage, but due to oversight, failed to make the corresponding corrections in the promissory notes. Petitioners affixed their signatures in both contracts. The presumption is applied that a person takes ordinary care of his concerns. It is presumed that petitioners did not sign the deed of chattel mortgage without informing themselves of its contents. As aptly stated in a case, they being of age and businessmen of experience, it must be presumed that they acted with due care and have signed the documents in question with full knowledge of their import Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
767
and the obligation they were assuming thereby. In any event, petitioners did not contest the deed of chattel mortgage under Section 8, Rule 8 of the Revised Rules of Civil Procedure. As held in Velasquez, this omission effectively eliminated any defense relating to the authenticity and due execution of the deed, e.g. that the document was spurious, counterfeit, or of different import on its face as the one executed by the parties; or that the signatures appearing thereon were forgeries; or that the signatures were unauthorized. Clearly, the Court of Appeals did not err in HELD that venue was properly laid in Dagupan City as provided in the deed of chattel mortgage. The Court holds that private respondent is not barred from filing its case against petitioners in Dagupan City where private respondent has a branch office as provided for in the deed of chattel mortgage. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
768
Heirs of Quiring v. DBP
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
769
Heirs of Sofia Quirong, Represented by Romeo P. Quirong, Petitioners, versus Development Bank of the Philippines, Respondent. (G.R. No. 173441, December 3, 2009, 2nd Division) ABAD, J: FACTS: When the late Emilio Dalope died, he left a 589-square meter untitled lot in Sta. Barbara, Pangasinan, to his wife, Felisa Dalope and their nine children, one of whom was Rosa Dalope-Funcion. To enable Rosa and her husband Antonio Funcion get a loan from respondent Development Bank of the Philippines (DBP), Felisa sold the whole lot to the Funcions. With the deed of sale in their favor and the tax declaration transferred in their names, the Funcions mortgaged the lot with the DBP. After the Funcions failed to pay their loan, the DBP foreclosed the mortgage on the lot and consolidated ownership in its name. Four years later the DBP conditionally sold the lot to Sofia Quirong for the price of P78,000.00. In their contract of sale, Sofia Quirong waived any warranty against eviction. The contract provided that the DBP did not guarantee possession of the property and that it would not be liable for any lien or encumbrance on the same. Quirong gave a down payment of P14,000.00. Two months after that sale or Felisa and her eight children filed an action for partition and declaration of nullity of documents with damages against the DBP and the Funcions before the Regional Trial Court (RTC) of Dagupan City. The trial court rendered a decision, declaring the DBP's sale to Sofia Quirong valid only with respect to the shares of Felisa and Rosa Funcion in the property. The DBP resisted the writ by motion to quash, claiming that the decision could not be enforced because it failed to state by metes and bounds the particular portions of the lot that would be assigned to the different parties in the case. The trial court denied the DBP's motion. The Court of Appeals reversed the trial court‘s decision and dismissed the heirs' action on the ground of prescription. Hence, this petition. ISSUE: Whether or not the Quirong heirs' action for rescission of respondent DBP's sale of the subject property to Sofia Quirong was already barred by prescription. HELD: Yes. The Quirong heirs' action for rescission of respondent DBP's sale of the subject property to Sofia Quirong was already barred by prescription. The court finds that the incident did not affect the finality of the decision, the prescriptive period remained to be reckoned from January 28, 1993, the date of such finality. The remedy of "rescission" is not confined to the rescissible contracts enumerated under Article 1381. Article 1191 of the Civil Code gives the injured party in reciprocal obligations, such as what contracts are about, the option to choose between fulfillment and "rescission." "Rescission" is a subsidiary action based on injury to the plaintiff's economic interests as described in Articles 1380 and 1381. As an action based on the binding force of a written contract, therefore, rescission (resolution) under Article 1191 prescribes in 10 years. Ten years is the period of prescription of actions based on a written contract under Article 1144. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
770
Lee v. Bangkok Bank Samuel U. Lee and Pauline Lee and Asiatrust Development Bank, Inc., Petitioners, versus Bangkok Bank Public Company, Limited, Respondent. (G.R. No. 173349, February 9, 2011, 1st Division) VELASCO, JR., J: FACTS: Midas Diversified Export Corporation (MDEC) and Manila Home Textile, Inc. (MHI) entered into two separate Credit Line Agreements (CLAs) with Respondent Bangkok Bank Public Company, Limited (Bangkok Bank). MDEC and MHI are owned and controlled by the Lee family: Thelma U. Lee, Maybelle L. Lim, Daniel U. Lee and Samuel U. Lee (Samuel). Both corporations have interlocking directors and management led by the Lee family; and engaged in the manufacturing and export of garments, ladies' bags and apparel. MDEC was likewise granted a loan facility by Asiatrust Development Bank, Inc. (Asiatrust). This facility had an available credit line of PhP 40,000,000 for letters of credit, advances on bills and export packing; and a separate credit line of USD 2,000,000 for bills purchase. In the meantime, Samuel bought several parcels of land in Cupang, Antipolo, and later entered into a joint venture with Louisville Realty and Development Corporation to develop the properties into a residential subdivision, called Louisville Subdivision. MDEC and MHI initially had made payments with their CLAs until they defaulted and incurred aggregate obligations to Bangkok Bank in the amount of USD 1,998,554.60 for MDEC and USD 800,000 for MHI. Similarly, the Lee corporations defaulted in their obligations with other creditors. MDEC, MHI, and three other corporations owned by the Lee family filed before the Securities and Exchange Commission (SEC) a Consolidated Petition for the Declaration of a State of Suspension of Payments and for Appointment of a Management Committee/Rehabilitation Receiver. ISSUE: Whether or not the Real Estate Mortgage executed over the subject Antipolo properties and the foreclosure sale were committed in fraud and as a consequence of such fraud can be rescinded. HELD: No. The Real Estate Mortgage executed over the subject Antipolo properties and the foreclosure sale was not committed in fraud and cannot be rescinded. No deception could have been used by the spouses Lee in including in the list of properties, which they submitted to the SEC, the subject Antipolo properties. First, it is undisputed that the list of properties submitted by the Lee corporations to the SEC clearly indicated that the subject Antipolo properties have already been earmarked, or have already been serving as security, for its loan obligations with Asiatrust. Second, MDEC, through its counsel, truly believed in good faith that the inclusion of the spouses Lee‘s private properties in the list submitted to the SEC is valid and regular. As can be seen in the letter sent by the counsel of the Midas Group of Companies to the Office of the Clerk of Court and Ex-Officio Sheriff of the Antipolo RTC on April 4, 1998, at the time when the subject Antipolo properties were being foreclosed by Asiatrust, its counsel vigorously countered the actions of Asiatrust and stated that the subject Antipolo properties cannot be foreclosed pursuant to the SEC Suspension Order. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
771
Petition granted.
Equatorial Realty v. Mayfair Theater
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
772
Equatorial Realty Development, Inc., Petitioner, versus Mayfair Theater, Inc., Respondent. (G.R. No. 136221, June 25, 2001, 1st Division) PARDO, J: FACTS: Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together with two two-storey buildings constructed thereon. On June 1, 1967, Carmelo entered into a lease with Mayfair Theater, Inc. (Mayfair) for a period of 20 years. The lease covered a portion of the second floor and mezzanine. Two years later, Mayfair entered into a second lease with Carmelo for the lease of another property, a part of the second floor and two spaces on the ground floor. The lease was also for a period of 20 years. However, on July 30, 1978, within the 20-year-lease term, Carmelo sold the subject properties to Equatorial Realty Development, Inc. (Equatorial) for the sum of P11.3M without their first being offered to Mayfair. As a result, Mayfair filed a complaint for specific performance and damages. After trial, the court ruled in favor of Equatorial. On appeal, the Court of Appeals (CA) reversed and set aside the judgment of the lower court. The Supreme Court denied Equatorial‘s petition for review and declared the contract between Carmelo and Equatorial rescinded. The decision became final and executory and Mayfair filed a motion for its execution, which the court granted. However, Carmelo could no longer be located thus Mayfair deposited with the court its payment to Carmelo. On September 18, 1997, Equatorial filed an action for the collection of sum of money against Mayfair claiming payment of rentals or reasonable compensation for the defendant‘s use of the premises after its lease contracts had expired. The lower court debunked the claim of the petitioner for unpaid rentals, holding that the rescission of the Deed of Absolute Sale in the mother case did not confer on Equatorial any vested or residual proprietary rights, even in expectancy.
ISSUE: Whether or not Equatorial may collect rentals or reasonable compensation for Mayfair‘s use of subject premises after its lease contracts had expired.
HELD: No. Equitorial may not collect rentals or reasonable compensation for Mayfair‘s use of the subject premises after its lease contracts had expired.
Rent is a civil fruit that belongs to the owner of the property producing it by right of accession. Consequently and ordinarily, the rentals that fell due from the time of the perfection of the sale to petitioner until its rescission by final judgment should belong to the owner of the property during that period. Petitioner never took actual control and possession of the property sold, in view of the respondent‘s timely objection to the sale and continued actual possession of the property. The objection took the form of a court action impugning the sale that was rescinded by a judgment rendered by the Court in the mother case. It has been held that the execution of a contract of sale as a form of constructive delivery is a legal fiction. It holds true only when there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. When there is such impediment, fiction yields to reality; the delivery has not been effected. Hence, respondent‘s opposition to the transfer of property by way of sale to Equatorial was a legally sufficient Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
773
impediment that effectively prevented the passing of the property into the latter‘s hands.
The Court remanded the case to the trial court.
Siguan v. Lim
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
774
Maria Antonia Siguan, Petitioner, versus Rosa Lim, Linde Lim, Ingrid Lim and Neil Lim, Respondents. (G.R. No. 134685, November 19, 1999, 1st Division) DAVIDE, JR., C.J.: FACTS: Rosa Lim (Lim) issued two Metrobank checks in the sums of P300,000 and P241,668, respectively, payable to "cash." Upon presentment by petitioner with the drawee bank, the checks were dishonored for the reason "account closed." Demands to make good the checks proved futile. As a consequence, a criminal case for violation of Batas Pambansa were filed by petitioner against Lim. The court a quo convicted Lim as charged. It also appears that on July 31, 1990, Lim was convicted of estafa by the Regional Trial Court of Quezon City. This decision was affirmed by the Court of Appeals. On appeal, however, the Supreme Court, in a decision promulgated on 7 April 1997, acquitted Lim but held her civilly liable in the amount of P169,000, as actual damages, plus legal interest. Meanwhile, on 2 July 1991, a Deed of Donation conveying parcels of land and purportedly executed by Lim on August 10, 1989 in favor of her children, Linde, Ingrid and Neil, was registered with the Office of the Register of Deeds of Cebu City. New transfer certificates of title were thereafter issued in the names of the donees. On June 23, 1993, petitioner filed an accion pauliana against Lim and her children before the Regional Trial Court of Cebu City to rescind the questioned Deed of Donation and to declare as null and void the new transfer certificates of title issued for the lots covered by the questioned Deed. The trial court ordered the rescission of the questioned deed of donation; declared null and void the transfer certificates of title issued in the names of private respondents Linde, Ingrid and Neil Lim; ordered the Register of Deeds of Cebu City to cancel said titles and to reinstate the previous titles in the name of Rosa Lim; and directed the LIMs to pay the petitioner, jointly and severally, the sum of P10,000 as moral damages; P10,000 as attorney's fees; and P5,000 as expenses of litigation.
ISSUE: Whether or not the deed of donation is valid.
HELD: Yes. The deed of donation is valid.
In the instant case, the alleged debt of Lim in favor of petitioner was incurred in August 1990, while the deed of donation was purportedly executed on August 10, 1989. The Supreme Court is not convinced with the allegation of the petitioner that the questioned deed was antedated to make it appear that it was made prior to petitioner's credit. Notably, that deed is a public document, it having been acknowledged before a notary public. As such, it is evidence of the fact which gave rise to its execution and of its date, pursuant to Section 23, Rule 132 of the Rules of Court.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
775
In the present case, the fact that the questioned Deed was registered only on July 2, 1991 is not enough to overcome the presumption as to the truthfulness of the statement of the date in the questioned deed, which is August 10, 1989. Petitioner's claim against Lim was constituted only in August 1990, or a year after the questioned alienation. Petition dismissed.
Khe Hong v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
776
Khe Hong Cheng, alias Felix Khe, Sandra Joy Khe and Ray Steven Khe, Petitioners, v. Court Of Appeals, Hon. Teofilo Guadiz, RTC 147, Makati City and Philam Insurance Co., Inc., Respondents. (G.R. No. 144169, March 28, 2000, 1st Division) KAPUNAN, J:
FACTS: Petitioner Khe Hong Chang alias Felix Khe is the owner of the vessel which said vessel shipped 3,400 bags of copra at Masbate owned by the Philippine Agricultural Trading Corporation. The shipment of copra was covered by an insurance issued by American Home Insurance Company. The vessel sank while at sea which resulted to the loss of bags of copra. The insurer paid the amount of Php 345,000.00 to the consignee. The American Home filed a case for the recovery of the money paid to the consignee, based on breach of contract of carriage. During the pendency of the case, petitioner executed deed of donation in favor of his children. The trial court rendered its decision in favor of the plaintiff however when the Sheriff executed the writ of execution they found out that petitioner no longer had any property and that he conveyed the subject properties to his children. Respondent Philam filed a complaint for the rescission of the deeds of donation executed by petitioner Khe Hong Cheng in favor of his children and for the nullification of their titles. Respondent Philam alleged, inter alia, that petitioner Khe Hong Cheng executed the aforesaid deeds in fraud of his creditors, including respondent Philam. The Regional Trial Court rendered its decision in favor of Philam. The Court of Appeals affirmed the decision of the Regional Trial Court. ISSUE: Whether or not the action for rescission has prescribed.
HELD: No. The action for rescission has not yet prescribed.
Article 1389 of the Civil Code simply provides that, "The action to claim rescission must be commenced within four years." Since this provision of law is silent as to when the prescriptive period would commence, the general rule, from the moment the cause of action accrues, therefore, applies. Art. 1150. The time for prescription for all kinds of actions, when there is no special provision which ordains otherwise, shall be counted from the day they may be brought.‖ Article 1383 of the Civil Code provides as follows: Art. 1383. An action for rescission is subsidiary; it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. It is thus apparent that an action to rescind or an accion pauliana must be of last resort, availed of only after all other legal remedies have been exhausted and have been proven futile. As mentioned earlier, respondent Philam only learned about the unlawful conveyances made by petitioner Khe Hong Cheng in January 1997 when its counsel accompanied the sheriff to Butuan City to attach the properties of petitioner Khe Hong Cheng. There they found that he no longer had any properties in his name. It was only then that respondent Philam's action for rescission of the deeds of donation accrued because then it could be said that respondent Philam had exhausted all legal means to satisfy the trial court's judgment in its favor. Since respondent Philam filed its complaint for accion pauliana against petitioners on February 25, 1997, barely a month Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
777
from its discovery that petitioner Khe Hong Cheng had no other property to satisfy the judgment award against him, its action for rescission of the subject deeds clearly had not yet prescribed. Petition denied.
Suntay v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
778
Rafael G. Suntay, substituted by his heirs, namely: Rosario, Rafael, Jr., Apolinario, Raymund, Maria Victoria, Maria Rosario and Maria Lourdes, all surnamed Suntay, Petitioners, versus The Hon. Court of Appeals and Federico C. Suntay, Respondents. (G.R. No. 114950 December 19, 1995, 1st Division) HERMOSISIMA, JR., J:
FACTS: Federico Suntay was the registered owner of a parcel of land in dispute. He applied as a miller contractor of the National Rice and Corn Corporation (NARIC) but the same was disapproved by NARIC because he was tied up with several unpaid loans. For purposes of circumvention, he asked his nephew-lawyer, Rafael to prepare an absolute deed of sale of the said land in dispute in consideration of Php 20,000.00 in favor of Rafael. Less than three months after his conveyance, the same parcel of land was sold back to Federico for the same consideration. However on the second sale there was irregularity because it appears that said land was not sold but was mortgaged in favor of the Hagonoy Rural Bank. Moreover, after the execution of the deed, Federico remained in possession of the property sold. Federico requested Rafael to deliver his copy of TCT no. T-36714 so that Federico could have the counter deed of sale in his favor registered on his name but Rafael refuses. Federico filed a complaint for reconveyance and damages against Rafael. The trial court rendered its decision that Rafael is the owner of the property in dispute but not to the extent of ordering Federico to pay back rentals for the use of the property. The Court of Appeals rendered its decision in favor of Federico.
ISSUE: Whether or not said second deed of absolute sale is null and void.
HELD: Yes. The said second deed of absolute sale is null and void. The cumulative effect of the evidence on record as chronicled aforesaid identified badges of simulation proving that the sale by Federico to his deceased nephew of his land and rice mill, was not intended to have any legal effect between them. Though the notarization of the deed of sale in question vests in its favor the presumption of regularity, it is neither the intention nor the function of the notary public to validate and make binding an instrument never, in the first place, intended to have any binding legal effect upon the parties thereto. The intention of the parties still and always is the primary consideration in determining the true nature of a contract.
The Supreme Court hold that the deed of sale executed by Federico in favor of his now deceased nephew, Rafael, is absolutely simulated and fictitious and, hence, null and void, said parties having entered into a sale transaction to which they did not intend to be legally bound. As no property was validly conveyed under the deed, the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
779
second deed of sale executed by the late Rafael in favor of his uncle, should be considered ineffective and unavailing.
The Amended Decision by the Court of Appeals is affirmed in toto.
Brobio Mangahas v. Brobio
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
780
Carmela Brobio Mangahas, Petitioner, versus Eufrocina A. Brobio, Respondent. (G.R. No. 183852, October 20, 2010, 2nd Division) NACHURA, J: FACTS: On January 10, 2002, Pacifico S. Brobio died intestate, leaving three parcels of land. He was survived by his wife, respondent Eufrocina A. Brobio, and four legitimate and three illegitimate children; petitioner Carmela Brobio Mangahas is one of the illegitimate children. On May 12, 2002, the heirs of the deceased executed a Deed of Extrajudicial Settlement of Estate of the Late Pacifico Brobio with Waiver. According to petitioner, respondent promised to give her an additional amount for her share in her father‘s estate. Thus, after the signing of the Deed, petitioner demanded from respondent the promised additional amount, but respondent refused to pay, claiming that she had no more money. A year later, while processing her tax obligations with the Bureau of Internal Revenue (BIR), respondent was required to submit an original copy of the Deed. Left with no more original copy of the Deed, respondent summoned petitioner to her office and asked her to countersign a copy of the Deed. Petitioner refused to countersign the document, demanding that respondent first give her the additional amount that she promised. Considering the value of the three parcels of land (which she claimed to be worth P20M), petitioner asked for P1M, but respondent begged her to lower the amount. Petitioner agreed to lower it to P600,000.00. Because respondent did not have the money at that time and petitioner refused to countersign the Deed without any assurance that the amount would be paid, respondent executed a promissory note. Petitioner agreed to sign the Deed when respondent signed the promissory note. When the promissory note fell due, respondent failed and refused to pay despite demand. Petitioner made several more demands upon respondent but the latter kept on insisting that she had no money. On January 28, 2004, petitioner filed a Complaint for Specific Performance with damages against respondent. ISSUE: Whether or not the promissory note was attended with intimidation. HELD: No. The Promissory note was not attended with intimidation. The Supreme Court ruled that contracts are voidable where consent thereto is given through mistake, violence, intimidation, undue influence, or fraud. It is alleged that mistake, violence, fraud, or intimidation attended the execution of the promissory note. Still, respondent insists that she was "forced" into signing the promissory note because petitioner would not sign the document required by the BIR. The fact that respondent may have felt compelled, under the circumstances, to execute the promissory note will not negate the voluntariness of the act. As rightly observed by the trial court, the execution of the promissory note in the amount of P600,000.00 was, in fact, the product of a negotiation between the parties. Respondent herself testified that she bargained with petitioner to lower the amount. The decision of the Court of Appeals is reversed and set aside. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
781
Hernandez v. Hernandez Cornelia M. Hernandez, Petitioner, versus Cecilio F. Hernandez, Respondent. (G.R. No. 158576, March 9, 2011, 1st Division) PEREZ, J: FACTS: The Department of Public Works and Highways (DPWH), offered to purchase a portion of a parcel of land in Sto. Tomas, Batangas, for use in the expansion of the South Luzon Expressway. The land is pro-indiviso owned by Cornelia M. Hernandez petitioner herein, Atty. Jose M. Hernandez, deceased father of respondent Cecilio F. Hernandez represented by Paciencia Hernandez and Mena Hernandez. The initial purchase price that was offered by the government was allegedly at P35.00 per square meter for 14,643 square meters of the aforementioned land. The Hernandez family rejected the offer. After a series of negotiations with the DPWH, the last offer stood at P70.00 per square meter. They still did not accept the offer and the government was forced to file an expropriation case. On October 18, 1996, Cornelia, and her other co-owners who were also signatories of the letter, executed an irrevocable Special Power of Attorney (SPA) appointing Cecilio Hernandez as their "true and lawful attorney" with respect to the expropriation of the subject property. The SPA stated that the authority shall be irrevocable and continue to be binding all throughout the negotiation. It further stated that the authority shall bind all successors and assigns in regard to any negotiation with the government until its consummation and binding transfer of a portion to be sold to that entity with Cecilio as the sole signatory in regard to the rights and interests of the signatories therein. There was no mention of the compensation scheme for Cecilio, the attorney-in-fact. Cecilio, despite the service of summons and copy of the complaint failed to file an answer. The trial court explained further that Cecilio was present in the address supplied by the petitioner but refused to receive the copy. ISSUE: Whether or not the quitclaim document is null and void
HELD: Yes. The quitclaim document is null and void.
Cornelia received was a receipt and quitclaim document that was ready for signing. As testified to by Cornelia, due to her frail condition and urgent need of money in order to buy medicines, she nevertheless signed the quitclaim in Cornelio‘s favor. Quitclaims are also contracts and can be voided if there was fraud or intimidation that leads to lack of consent. The facts show that a simple accounting of the proceeds of the just compensation will be enough to satisfy the curiosity of Cornelia. However, Cecilio did not disclose the truth and instead of coming up with the request of his aunt, he made a contract intended to bar Cornelia from recovering any further sum of money from the sale of her property. The preparation by Cecilio of the receipt and quitclaim document which he asked Cornelia to sign, indicate that even Cecilio doubted that he could validly claim 83.07% of the price of Cornelia‘s land on the basis of the 11 November 1993 agreement. Based on the attending circumstances, the receipt and quitclaim document is an act of fraud perpetuated by Cecilio. Very clearly, both the service contract of 11 November 1993 letter- agreement, and the later Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
782
receipt and quitclaim document, the first vitiated by mistake and the second being fraudulent, are void. The decision of the Court of Appeals is reversed and set aside.
Fuentes, et al v. Roca
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
783
Manuel O. Fuentes and Leticia L. Fuentes, Petitioners, versus Conrado G. Roca, Annabelle R. Joson, Rose Marie R. Cristobal and Pilar Malcampo, Respondents. (G.R. No. 178902, April 21, 2010, En Banc) ABAD, J: FACTS: On October 11, 1982, Sabina Taroza sold to her own son Tarciano T. Roca her titled of 358 square meters lot located at Canelar, Zamboanga under a Deed of Absolute Sale. Six years later, Tarciano T. Roca offered to sell the lot to petitioners Manuel and Leticia Fuentes. The agreement required the Fuentes spouses to pay Tarciano a down payment of P60,000.00 for the transfer of the lot‘s title to him. And, within six months, Tarciano was to clear the lot of structures and occupants and secure the consent of his estranged wife, Rosario Gabriel Roca (Rosario), to the sale. Upon Tarciano‘s compliance with these conditions, the Fuentes spouses were to take possession of the lot and pay him an additional P140,000.00 or P160,000.00, depending on whether or not he succeeded in demolishing the house standing on it. If Tarciano was unable to comply with these conditions, the Fuentes spouses would become owners of the lot without any further formality and payment. On January 11, 1989 a document of Absolute Deed of Sale as issued to the Fuentes. One year after, Tarciano T. Roca died, which was followed by his wife nine months after. The children of Roca filed for an action of annulment of sale and reconveynace of the land against the Fuentes on the ground that Tarciano's wife didn't gave her consent and that her signature on the affidavit of consent had been forged. Spouses Fuentes denied such allegations and claim that the forgery case is personal to Rosario and she alone could claim it. Besides the four-year prescriptive period for nullifying the sale on the ground of fraud had already elapsed. The Regional Trial Court ruled in favor of the Fuentes, however the Court of Appeals reversed the decision of the Regional Trial Court. ISSUE : Whether or not the sale of conjugal was void. HELD: Yes. The sale of conjugal land was void The sale was void from the beginning. Consequently, the land remained the property of Tarciano and Rosario despite that sale. When the two died, they passed on the ownership of the property to their heirs, namely, the Rocas. As lawful owners, the Rocas had the right, under Article 429 of the Civil Code, to exclude any person from its enjoyment and disposal. In fairness to the Fuentes spouses, however, they should be entitled, among other things, to recover from Tarciano‘s heirs, the Rocas, the P200,000.00 that they paid him, with legal interest until fully paid, chargeable against his estate. Further, the Fuentes spouses appear to have acted in good faith in entering the land and building improvements on it. The Fuentes spouses had no way of knowing that Rosario did not come to Zamboanga to give her consent. There is no evidence that they had a premonition that the requirement of consent presented some difficulty. Indeed, they willingly made a 30 percent down payment on the selling price months earlier on the assurance that it was forthcoming. Petition denied. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
784
Associated Bank v. Sps. Montano ASSOCIATED BANK, Petitioner versus SPOUSES JUSTINIANO S. MONTANO, SR., AND LIGAYA MONTANO and TRES CRUCES AGROINDUSTRIAL CORPORATION, Respondents. (G.R.NO. 166383, October 16, 2009, 3rd Division) NACHURA, J: FACTS: In 1964 spouse Monatano owned 3 parcels of land situated in Tanza, Cavite hich was utilized as an integrated farm and a stud farm used for raising horses. Respondent Monatano went on self exile in USA to avoid the harrasment of Pres. Marcos during the Martial Law regime, upon which they transfered said properties to Tres Cruces Agro- Industrial Corporation(TCAIC) in exchange for shares of stocks in the company with a 98% control over TCAIC. After a year, the TCAIC sold the properties to Inetrenational Country Club Incorporation (ICCI)for 6,000,000.09 php, thus the title of properties were now transfered to the ICCI. The ICCI then mortgaged the parcels of land to the Citizens bank and Trust corporation now Associated Bank for an amount of 2,000,000.00 php. The mortgaged become mature but remain unpaid thereby promting the Associated Bank to forclosed the mortgaged and put in in a public auction. Associated Bank as the higgest bidder then buy the property with an amount of 5,7000,000.00 php. Meanwhile, the Montano returned to the country and after discovering the transfer of the properties the Montano immediately took physical possession of the same and began cultivating it. They also filed for a petition of reconveyance and pray for the declaration of nullity upon transfer of CTC. On the other hand, the associated bank filed its Motion for Preliminary Hearing on the affirmative defense and motion to dismiss for the complaint stated no cause of action, and that the case was already barred by the statute of limitations. ISSUES: Whether or not the complaint for reconveynace should be dismissed. HELD: It is true that the action for reconveyance of property resulting from fraud may be barred by the statute of limitations which requires that the action shall be filed within 4 years from discovery of fraud, but be it noted that the basis of reconveyance by the respondent is threat, duress and intimidation. As provided in Art. 1391 of the civil code an action for annulment for it shall be brought within four years, thus when Marcos ouster from power on February 21, 1986 and since the respondents filed its complaint for reconveynace on September 15, 1989 the four years prescriptive period was not prescribed. The SC denied for the dismissal of reconveyance and remitted the case to the RTC for trial with cost against the petitioner. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
785
Miailhe v. Court of Appeals WILLIAM ALAIN MIAILHE, Petitioner, versus COURT OF APPEALS and REPUBLIC OF THE PHILIPPINES, Respondents. (G.R. No. 108991, March 20, 2001, 3rd Division) PANGANIBAN, J: FACTS: Petitioner, William Alain Miailhe, on his own behalf and on behalf of Victoria Desbarats-Miailhe, Monique Miailhe-Sichere and Elaine MiailheLencquesaing filed a Complaint for Annulment of Sale, Reconveyance and Damages against [Respondent] Republic of the Philippines and defendant Development Bank of the Philippines. The petitioner alleged that DBP forged, threatened and intimidated petitioner to sell the property to DBP for the grossly low price. The RTC and CA rendered their decision in favor of DBP and that the action is already prescribed. ISSUE: Whether or not extrajudicial demands did not interrupt prescription. HELD: In the present case, there is as yet no obligation in existence. Respondent has no obligation to reconvey the subject lots because of the existing Contract of Sale. Although allegedly voidable, it is binding unless annulled by a proper action in court. Not being a determinate conduct that can be extrajudically demanded, it cannot be considered as an obligation either. Since Article 1390 of the Civil Code states that voidable "contracts are binding, unless they are annulled by a proper action in court," it is clear that the defendants were not obligated to accede to any extrajudicial demand to annul the Contract of Sale. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
786
First Philippine Holdings v. Trans Middle East FIRST PHILIPPINE HOLDINGS CORPORATION, Petitioner versus TRANS MIDDLE EAST (PHILS.) EQUITIES INC., Respondent. (G.R. NO. 179505, December 4, 2009, 3rd Division) CHICO-NAZARIO, J: FACTS: FHPC formerly known as Meralco Securities Corporation incorporated on 30 June 1961 by Filipino Entreprenuers led by Eugenio Lopez Sr. sold its 6,299,179.00 php shares of common stock in Philippine Commercial International Bank (PCIB), now Equitable PCIB to TMEE. Such shares according to the FHPC were obtained by the TMEE through fraud, acts contrary to Law, Morals, Good Customs and Public Policy and such acquisition is either voidable, void or unenforceable. FHPC filed then its motion for leave to intervene and admit complaint in intervention and was granted by the court. On the other hand, TMEE filed its motion to dismiss the complaint-in-intervention by the FHPC on the ground that the action of FHPC has already prescribed under Article 1391 of the Civil Code. Since the action was filed only on 28 December 1988 and the sale was 24 May 1984 the action was already 7 months late from the date of prescription. ISSUE: Whether or not the sale of property is void and the prescriptive period had elapsed. HELD: No. The sale of property is valid and the prescriptive period has not elapsed. The Court found that the sale is not void for a suit for the annulment of voidabale contract on account of fraud shall be filed within four years from the discovery of the same, here, from the time the questioned sale transaction on May 24, 1984 took place, FHPC didn't deny that it had actual knowledge of the same. Simply, petitioner was fully aware of the sale of the PCIB shares to TMEE and espite full knowledge petitioners did not question the said sale from its inception and sometime thereafter. it was only four years and seven months had elapsed following the knowledge or discovery of the alleged fraudulent sale that the petitioner assailed the same, by then it was too late for the petitioners to beset same transaction, since the prescriptive period had already come into play. The Court therefore denied the instant petition and affirmed the resolution of the SB with cost against the petitioner. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
787
Sanchez v. Mapalad Realty MANUEL LUIS SANCHEZ Petitioner, versus MAPALAD REALTY CORPORATION, Respondent. (G.R. No. 148516, December 27, 2007, 3rd Division) REYES, J: FACTS: Respondent Mapalad was the registered owner of four (4) parcels of land located along Roxas Boulevard, Baclaran, Parañaque The PCGG issued writs of sequestration for Mapalad and all its properties. Josef, Vice president/treasurer and General Manager of Mapalad discovered that the 4 TCTs were missing, however the four missing tcts turned out to be in possession of Nordelak Development Corporation. Nordelak came into possession of the 4 TCTs by deed of sale purportedly executed by Miguel Magsaysay in his capacity as President and Board Chairman of Mapalad. Mapalad filed an action for annulment of deed of sale and reconveyance of title with damages against Nordelak. The Regional Trial Court ruled in favor of Nordelak. The Court of Appeals reversed the decision of trial court. ISSUE: Whether or not there was a valid sale between Mapalad and Nordelak. HELD: In the present case, consent was purportedly given by Miguel Magsaysay, the person who signed for and in behalf of Mapalad in the deed of absolute sale dated November 2, 1989. However, as he categorically stated on the witness stand during trial, he was no longer connected with Mapalad on the said date because he already divested all his interests in said corporation as early as 1982. Even assuming, for the sake of argument, that the signatures purporting to be his were genuine, it would still be voidable for lack of authority resulting in his incapacity to give consent for and in behalf of the corporation. Lack of consideration makes a contract of sale fictitious. A fictitious sale is void ab initio. The alleged deed of absolute sale dated November 2, 1989 notwithstanding, the contract of sale between Mapalad and Nordelak is not only voidable on account of lack of valid consent on the part of the purported seller, but also void ab initio for being fictitious on account of lack of consideration. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
788
Oesmer v. PDC RIZALINO, substituted by his heirs, JOSEFINA, ROLANDO and FERNANDO, ERNESTO, LEONORA, BIBIANO, JR., LIBRADO and ENRIQUETA, all surnamed OESMER, Petitioners, versus PARAISO DEVELOPMENT CORPORATION, Respondent. (G.R. No. 157493, February 5, 2007, 3rd Division) CHICO-NAZARIO, J: FACTS: Petitioner Ernesto to meet with a certain Sotero Lee, President of respondent Paraiso Development Corporation, at Otani Hotel in Manila. The said meeting was for the purpose of brokering the sale of petitioners‘ properties to respondent corporation. A Contract to Sell was drafted. A check in the amount of P100,000.00, payable to Ernesto, was given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed the said Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign the document. However petitioners informed respondent corporation about their intention to rescind the Contract to Sell and to return the amount of Php 100,000.00. respondent did not respond to the aforesaid letter. Petitioners, therefore, filed a complaint for Declaration of Nullity or for Annulment of Option Agreement or Contract to Sell with damages. The Regional Trial Court (RTC) rendered its decision in favor to respondent. The Court of Appeals affirmed the decision of RTC with modification. ISSUE: Whether or not Contract to Sell is void considering that one of the heirs did not sign it as to indicate its consent to be bound by its terms. HELD: It is well-settled that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror. From that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. To produce a contract, the acceptance must not qualify the terms of the offer. However, the acceptance may be express or implied. For a contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror. In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale to the respondent of their shares in the subject parcels of land by affixing their signatures on the said contract. Such signatures show their acceptance of what has been stipulated in the Contract to Sell and such acceptance was made known to respondent corporation when the duplicate copy of the Contract to Sell was returned to the latter bearing petitioners‘ signatures. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
789
Vda. De Ape v. Court of Appeals PERPETUA VDA. DE APE, Petitioner, versus THE HONORABLE COURT OF APPEALS and GENOROSA CAWIT VDA. DE LUMAYNO, Respondents. (G.R. No. 133638, April 15, 2005, 2nd Division) CHICO-NAZARIO, J: FACTS: Cleopas Ape died in 1950 and left a parcel of land (Lot 2319) to his 11 children. The children never formally divided the property amongst themselves except through hantal-hantal whereby each just occupied a certain portion and developed each. On the other hand, the spouses Lumayno were interested in the land so they started buying the portion of land that each of the heirs occupied. On 11 Apr 1973, one of the children, Fortunato, entered into a contract of sale with Lumayno. In exchange of his lot, Lumayno agreed to pay P5,000.00. She paid in advance P30.00. Fortunato was given a receipt prepared by Lumayno‘s son in law (Andres Flores). Flores also acted as witness. Lumayno also executed sales transactions with Fortunato‘s siblings separately. In 1973, Lumayno compelled Fortunato to make the the delivery to her of the registrable deed of sale over Fortunato‘s portion of the Lot No. 2319. Fortunato assailed the validity of the contract of sale. He also invoked his right to redeem (as a co-owner) the portions of land sold by his siblings to Lumayno. Fortunato died during the pendency of the case. ISSUE: Whether or not there was a valid contract of sale. HELD: No. Fortunato was a ―no read no write‖ person. It was incumbent for the the other party to prove that details of the contract was fully explained to Fortunato before Fortunato signed the receipt. A contract of sale is a consensual contract, thus, it is perfected by mere consent of the parties. It is born from the moment there is a meeting of minds upon the thing which is the object of the sale and upon the price. Upon its perfection, the parties may reciprocally demand performance, that is, the vendee may compel the transfer of the ownership and to deliver the object of the sale while the vendor may demand the vendee to pay the thing sold. For there to be a perfected contract of sale, however, the following elements must be present: consent, object, and price in money or its equivalent. For consent to be valid, it must meet the following requisites: (a) it should be intelligent, or with an exact notion of the matter to which it refers; (b) it should be free and (c) it should be spontaneous. Intelligence in consent is vitiated by error; freedom by violence, intimidation or undue influence; spontaneity by fraud. Lumayno claimed that she explained fully the receipt to Fortunato, but Flores‘ testimony belies it. Flores said there was another witness but the other was a maid who was also lacked education. Further, Flores himself was not aware that the receipt was ―to transfer the ownership of Fortunato‘s land to her mom-in-law‖. It only occurred to him to explain the details of the receipt but he never did. Decision reversed and set aside.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
790
Francisco v. Herrera JULIAN FRANCISCO (Substituted by his Heirs, namely: CARLOS ALTEA FRANCISCO; the heirs of late ARCADIO FRANCISCO, namely: CONCHITA SALANGSANG-FRANCISCO (surviving spouse), and his children namely: TEODULO S. FRANCISCO, EMILIANO S. FRANCISCO, MARIA THERESA S. FRANCISCO, PAULINA S. FRANCISCO, THOMAS S. FRANCISCO; PEDRO ALTEA FRANCISCO; CARINA FRANCISCO-ALCANTARA; EFREN ALTEA FRANCISCO; DOMINGA LEA FRANCISCO-REGONDON; BENEDICTO ALTEA FRANCISCO and ANTONIO ALTEA FRANCISCO), Petitioner, versus PASTOR HERRERA, Respondent. (G.R. No. 139982, November 21, 2002, 2nd Division) QUISUMBING, J: FACTS: Petitioner bought 2 parcels of land from Eligio Herrera Sr. The children of Eligio, Sr. conteneded that the contract price for the two parcels of land was grossly inadequate so they tried to negotiate with petitioner. However petitioner refused. The children of Herrera filed a complaint for annulment of sale. The Regional Trial Court (RTC) rendered its decision in favor of the children and the Court of Appeals affirmed the decision of RTC. ISSUE: Whether or not said contract is void. HELD: In the present case, it was established that the vendor Eligio, Sr. entered into an agreement with petitioner, but that the former‘s capacity to consent was vitiated by senile dementia. Hence, we must rule that the assailed contracts are not void or inexistent per se; rather, these are contracts that are valid and binding unless annulled through a proper action filed in court seasonably. An annullable contract may be rendered perfectly valid by ratification, which can be express or implied. Implied ratification may take the form of accepting and retaining the benefits of a contract. As found by the trial court and the Court of Appeals, upon learning of the sale, respondent negotiated for the increase of the purchase price while receiving the installment payments. It was only when respondent failed to convince petitioner to increase the price that the former instituted the complaint for reconveyance of the properties. Clearly, respondent was agreeable to the contracts, only he wanted to get more. Further, there is no showing that respondent returned the payments or made an offer to do so. This bolsters the view that indeed there was ratification. One cannot negotiate for an increase in the price in one breath and in the same breath contend that the contract of sale is void. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
791
Braganza v. Villa Abrille ROSARIO L. DE BRAGANZA, ET AL., Petitioners, versus FERNANDO F. DE VILLA ABRILLE, Respondent. (G.R. No. L-12471, April 13, 1959, En Banc) BENGZON, J: FACTS: Rosario Braganza and her sons loaned from De Villa Abrille P70,000 in Japanese war notes and in consideration thereof, promised in writing to pay him P10,00 + 2% per annum in legal currency of the Philippines 2 years after the cessation of the war. Because they have no paid, Abrille is sued them in March 1949. The Manila court of first instance and Court of Appeals held the family solidarily liable to pay according to the contract they signed. The family petitioned to review the decision of the CA whereby they were ordered to solidarily pay De Villa Abrille P10,000 + 2% interest, praying for consideration of the minority of the Braganza sons when they signed the contract. ISSUE: Whether or not the boys, who were 16 and 18 respectively, are to be bound by the contract of loan they have signed. HELD: The Court found that Rosario will still be liable to pay her share in the contract because they minority of her sons does not release her from liability. She is ordered to pay 1/3 of P10,000 + 2% interest. However with her sons, the SC reversed the decision of the CA which found them similarly liable due to their failure to disclose their minority. The SC sustained previous sources in Jurisprudence – ―in order to hold the infant liable, the fraud must be actual and not constructive. It has been held that his mere silence when making a contract as to his age does not constitute a fraud which can be made the basis of an action of deceit.‖ The boys, though not bound by the provisions of the contract, are still liable to pay the actual amount they have profited from the loan. Art. 1340 states that even if the written contract is unenforceable because of their nonage, they shall make restitution to the extent that they may have profited by the money received. In this case, 2/3 of P70,00, which is P46,666.66, which when converted to Philippine money is equivalent to P1,166.67. Wherefore, as the share of these minors was 2/3 of P70,000 of P46,666.66, they should now return P1,166.67.3 Their promise to pay P10,000 in Philippine currency, (Exhibit A) cannot be enforced, as already stated, since they were minors incapable of binding themselves. Their liability, to repeat, is presently declared without regard of said Exhibit A, but solely in pursuance of Article 1304 of the Civil Code. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
792
Katipunan v. Katipunan MIGUEL KATIPUNAN, INOCENCIO VALDEZ, EDGARDO BALGUMA and LEOPOLDO BALGUMA, JR., Petitioners, versus BRAULIO KATIPUNAN, JR., Respondent. (G.R. No. 132415, January 30, 2002, 3rd Division) SANDOVAL-GUTIERREZ, J: FACTS: Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter lot and a five-door apartment constructed thereon located at 385-F Matienza St., San Miguel, Manila. Petitioner Miguel Katipunan, entered into a Deed of Absolute Sale4 with brothers Edgardo Balguma and Leopoldo Balguma, Jr. (co-petitioners), represented by their father Atty. Leopoldo Balguma, Sr., involving the subject property for a consideration of P187,000.00. Respondent filed a complaint for annulment of the Deed of Absolute Sale. He contended that the said contract was obtained through insidious words and machinations. The Regional Trial Court (RTC) dismissed the complaint. The Court of Appeals (CA) reversed the decision of RTC. ISSUE: Whether or not CA ered when it overturned the factual findings of the trial court which are amply supported by the evidence on record. HELD: The circumstances surrounding the execution of the contract manifest a vitiated consent on the part of respondent. Undue influence was exerted upon him by his brother Miguel and Inocencio Valdez (petitioners) and Atty. Balguma. It was his brother Miguel who negotiated with Atty. Balguma. However, they did not explain to him the nature and contents of the document. Worse, they deprived him of a reasonable freedom of choice. It bears stressing that he reached only grade three. Thus, it was impossible for him to understand the contents of the contract written in English and embellished in legal jargon. A contract where one of the parties is incapable of giving consent or where consent is vitiated by mistake, fraud, or intimidation is not void ab initio but only voidable and is binding upon the parties unless annulled by proper Court action. Since the Deed of Absolute Sale between respondent and the Balguma brothers is voidable and hereby annulled, then the restitution of the property and its fruits to respondent is just and proper. Petitioners should turn over to respondent all the amounts they received starting January, 1986 up to the time the property shall have been returned to the latter. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
793
Jumalon v. Court of Appeals NILO R. JUMALON, Petitioner, versus COURT OF APPEALS, HON. RUBEN D. TORRES, in his capacity as Executive Secretary, HOUSING AND LAND USE REGULATORY BOARD, and MA. ASUNCION DE LEON, Respondents. (G.R. No. 127767, January 30, 2002, 1st Division) PARDO, J: FACTS: Complainant De Leon and herein petitioner, Nilo R. Jumalon, executed a conditional sales agreement whereby the former purchased from the latter a house and lot. Jumalon executed in favor of De Leon a Deed of Absolute Sale. De Leon learned regarding the danger posed by the wires over the property. Also, De Leon was informed by HLURB Enforcement Center, that construction of houses and buildings of whatever nature are strictly prohibited within the right-of –way of the transmission line. De Leon filed a case for declaration of nullity or annulment of sale of real property which was subsequently dismissed. De Leon then, filed a complaint before the HLURB seeking the rescission of the conditional sales agreement and the Absolute Deed of Sale. HLURB arbiter rendered judgment in favor of De Leon. The Board of Commissioners of HLURB affirmed the decision of arbiter. The CA affirmed the appealed decision. ISSUE: Whether or not the Court of Appeals erred in affirming the decision of Executive Secretary Ruben D. Torres and the HLURB declaring the rescission of the contract of sale of a house and lot between the petitioner and private respondent HELD: The Court agreed with the Court of Appeals that respondent de Leon was entitled to annul the sale. There was fraud in the sale of the subject house. It is not safely habitable. It is built in a subdivision area where there is an existing 30-meter right of way of the Manila Electric Company (Meralco) with high-tension wires over the property, posing a danger to life and property. The construction of houses underneath the high tension wires is prohibited as hazardous to life and property because the line carries 115,000 volts of electricity, generates tremendous static electricity and produces electric sparks whenever it rained. Petition denied.
Cabales v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
794
NELSON CABALES and RITO CABALES, Petitioners, versus COURT OF APPEALS, JESUS FELIANO and ANUNCIACION FELIANO, Respondents. (G.R. No. 162421, August 31, 2007, 1st Division) PUNO, C.J.: FACTS: Saturnina and her children Bonifacio, Albino, Francisco, Leonara, Alberto and petitioner Rito inherited a parcel of land. They sold such property to Dr. Cayetano Corrompido with a right to repurchase within 8 years. Alberto secured a note from Dr. Corrompido in the amount of Php 300.00. Alberto died leaving a wife and son, petitioner Nelson. Within the 8-year redemption period, Bonifacio and Albino tendered their payment to Dr. Corrompido. But Dr. Corrompido only released the document of sale with pacto de retro after Saturnina paid the share of her deceased son, Alberto, plus the note. Saturnina and her children executed an affidavit to the effect that petitioner Nelson would only receive the amount of Php 176.34 from respondents-spouses when he reaches the age if 21 considering that Saturnina paid Dr. Corrompido Php 966.66 for the obligation of petitioner Nelson‘s late father Alberto.
ISSUE: Whether or not the sale entered into is valid and binding.
HELD: No. The sale entered into is not valid and not binding. The legal guardian only has the plenary power of administration of the minor‘s property. It does not include the power to alienation which needs judicial authority. Thus when Saturnina, as legal guardian of petitioner Rito, sold the latter‘s pro indiviso share in subject land, she did not have the legal authority to do so. The contarct of sale as to the pro indiviso share of Petitioner Rito was unenforceable. However when he acknowledged receipt of the proceeds of the sale on July24, 1986, petitioner Rito effectively ratified it. This act of ratification rendered the sale valid and binding as to him.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
795
VDA. DE OUANO v. RP ANUNCIACION VDA. DE OUANO, MARIO P. OUANO, LETICIA OUANO ARNAIZ, and CIELO OUANO MARTINEZ, Petitioners, versus THE REPUBLIC OF THE PHILIPPINES, THE MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY, and THE REGISTER OF DEEDS FOR THE CITY OF CEBU, Respondents. (G.R. NO. 168770, FEBRUARY 9, 2011, 1st Division) VELASCO, JR., J.: FACTS: In 1949, the National Airport Corporation (NAC), MCIAA‘s predecessor agency pursued a program to expand the Lahug Airport in Cebu City. As an assurance from the government, there is a promise of reconveyance or repurchase of said property so long as Lahug ceases its operation or transfer its operation to Mactan – Cebu Airport. Some owners refused to sell, and that the Civil Aeronautics Administration filed a complaint for the expropriation of said properties for the expansion of the Lahug Airport. The trial court then declared said properties to be used upon the expansion of said projects and order for just compensation to the land owners, at the same time directed the latter to transfer certificate or ownership or title in the name of the plaintiff. At the end of 1991, Lahug Airport completely ceased its operation while the Mactan-Cebu airport opened to accommodate incoming and outgoing commercial flights. This then prompted the land owners to demand for the reconveynace of said properties being expropriated by the trial court under the power of eminent domain. Hence these two consolidated cases arise. In G.R. No. 168812 MCIAA is hereby ordered by court to reconvey said properties to the land owners plus attorney‘s fee and cost of suit, while in G.R. No. 168770, the RTC ruled in favor of the petitioners Oaunos and against the MCIAA for the reconveynace of their properties but was appealed by the latter and the earlier decision was reversed, the case went up to the CA but the CA affirmed the reversed decision of the RTC. ISSUE: Whether or not the testimonials of the petitioners proving the promises, assurances and representations by the airport officials and lawyers are inadmissible under the Statue of Frauds. HELD: Yes. The testimonials of the petitioners proving the promises, assurances and representations by the airport officials and lawyers are admissible under the Statue of Frauds. The SC ruled that since the respondent didn‘t object during trial to the admissibility of petitioner‘s testimonial evidenc under the Statute of Frauds, it means then that they have waived their objection and are now barred from raising the same. In any event, the Statute of Frauds is not applicable herein. Consequently, petitioners‘ pieces of evidence are admissible and should be duly given weight and credence, since the records tend to support that the MCIAA did not as the Ouanos and Inocians posit, object the introduction of parole evidence to prove its commitment to allow the fromer landowners to repurchase their properties upon the occurrence of certain events. Petition is granted. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
796
SHOEMAKER v. LA TONDEÑA HARRY IVES SHOEMAKER, Petitioner, versus LA TONDEÑA, INC., Respondent. (G.R. No. L-45667, May 9, 1939, En Banc) VILLA-REAL, J.: FACTS: Defendant company, La tondena, Inc. entered into a written contract of lease of services with plaintiff Harry Ives Shoemaker for a period of 5 years, with a compensation consisting of 8% of the net earnings of defendant. That during each year that the contract was in force, plaintiff would receive monthly during the period of the contract of the sum of Php 1,500.00 or Php 18,000.00 per annum as minimum compensation if 8% of the net earnings of the aforementioned alleged business would not reach the amount. The defendant company alleged that there were changes in the contract in which both the parties agreed upon. Plaintiff filed a complaint against defendant company. The defendant interposed a demurrer based on the ground that the facts therein alleged do not constitute a cause of action, since it is not averred that the alleged mutual agreement modifying the contract of lease of services, has been put in writing, whereas it states that its terms and conditions may only be modified upon the written consent of both parties.
ISSUE: Whether or not the court a quo erred in sustaining the demurrer interposed by the defendant company to the second amended complaint filed by plaintiff, on the ground that the facts alleged therein do not constitute a couse of action.
HELD: No. The court a quo did not err in sustaining the demurrer interposed by the defendant company to the second amended complaint filed by plaintiff, on the ground that the facts alleged therein do not constitute a couse of action. When in an oral contract which by its terms, is not to be performed within 1 year from the execution thereof, one of the contracting parties has complied within the year with the obligations imposed on him said contract, the other party cannot avoid the fulfillment of what is incumbent on him under the same contract by invoking the statute of frauds because the latter aims to prevent and not to protect fraud.
The order appealed from is reversed and it is ordered that case be remanded to the court of origin so that the same may overrule the demurrer interposed by the defendant company, La Tondeña, Inc., and the latter may be required to answer the second amended complaint, with costs against the appellee. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
797
PNB v. PHILIPPINE VEGETABLE OIL CO., INC., THE PHILIPPINE NATIONAL BANK, plaintiff-appellee, versus THE PHILIPPINE VEGETABLE OIL CO., INC., defendant-appellee. PHIL. C. WHITAKER, intevenor-appellant. (49 Phil 897, January 14, 1927, En Banc) MALCOLM, J.: FACTS: This appeal involves the legal right of the PNB to obtain a judgement against Vegetable Oil Co., Inc., for Php 15,812,454 and to foreclose a mortgage on the property of the PVOC for Php 17,000,000.00 and the legal right of the Phil C. Whitaker as intervenor to obtain a judgement declaring the mortgage which the PNB seeks to foreclose to be without force and effect, requiring an accouting from the PNB of the sales of the property and assets of the Vegetable Co. and ordering the PVOC and the PNB to pay him the sum of Php 4,424,418.37 In 1920, the Vegetable Oil Company, found itself in financial straits. It was in debt to the extent of approximately Php 30,000,000.00. The PNB was the largest creditor. The VOC owed the bank Php 17,000,000.00. The PNB was securedly principally by a real and chattel mortgage in favor of the bank on its vessels Tankerville and H.S. Everett to guarantee the payment of sums not exceed Php 4,000,000.00
ISSUE: Whether or not the plaintiff had failed to comply with the contract, that it was alleged to have celebrated with the defendant and the intervenor, that it would furnish funds to the defendant so that it could continue operating its factory.
HELD: Yes. The plaintiff failed to comply with the contract, that it was alleged to have celebrated with the defendant and the intervenor, that it would furnish funds to the defendant so that it could continue operating its factory. In the present instance, it is found that the Board of Directors of the PNB had not consented to an agreement for practically unlimited backing of the V corporation and had not ratified any promise to trhat effect made by its general manager. All the evidence, documentary and oral, pertinent to the issue considered and found to disclose no binding promise, tacit, or express made by the PNB to continue indefinitely the operation of the V corporation. Accordingly, intervenor Whitaker is not entitled to recover damages from the bank.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
798
The case will be remanded to the lower court for the entry of judgment and further proceedings as herein indicated. Judgment affirmed in part and reversed in part, without special finding as to costs in either instance.
VDA. DE OUANO v. RP
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
799
ANUNCIACION VDA. DE OUANO, MARIO P. OUANO, LETICIA OUANO ARNAIZ, and CIELO OUANO MARTINEZ, Petitioners, versus THE REPUBLIC OF THE PHILIPPINES, THE MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY, and THE REGISTER OF DEEDS FOR THE CITY OF CEBU, Respondents. (G.R. NO. 168770, FEBRUARY 9, 2011, 1st Division) VELASCO, JR., J.: FACTS: In 1949, the National Airport Corporation (NAC), MCIAA‘s predecessor agency pursued a program to expand the Lahug Airport in Cebu City. As an assurance from the government, there is a promise of reconveyance or repurchase of said property so long as Lahug ceases its operation or transfer its operation to Mactan – Cebu Airport. Some owners refused to sell, and that the Civil Aeronautics Administration filed a complaint for the expropriation of said properties for the expansion of the Lahug Airport. The trial court then declared said properties to be used upon the expansion of said projects and order for just compensation to the land owners, at the same time directed the latter to transfer certificate or ownership or title in the name of the plaintiff. At the end of 1991, Lahug Airport completely ceased its operation while the Mactan-Cebu airport opened to accommodate incoming and outgoing commercial flights. This then prompted the land owners to demand for the reconveynace of said properties being expropriated by the trial court under the power of eminent domain. Hence these two consolidated cases arise. In G.R. No. 168812 MCIAA is hereby ordered by court to reconvey said properties to the land owners plus attorney‘s fee and cost of suit, while in G.R. No. 168770, the RTC ruled in favor of the petitioners Oaunos and against the MCIAA for the reconveynace of their properties but was appealed by the latter and the earlier decision was reversed, the case went up to the CA but the CA affirmed the reversed decision of the RTC. ISSUE: Whether or not the testimonials of the petitioners proving the promises, assurances and representations by the airport officials and lawyers are inadmissible under the Statue of Frauds. HELD: No.The testimonials of the petitioners proving the promises, assurances and representations by the airport officials and lawyers are admissible under the Statue of Frauds. The SC ruled that since the respondent didn‘t object during trial to the admissibility of petitioner‘s testimonial evidenc under the Statute of Frauds, it means then that they have waived their objection and are now barred from raising the same. In any event, the Statute of Frauds is not applicable herein. Consequently, petitioners‘ pieces of evidence are admissible and should be duly given weight and credence, since the records tend to support that the MCIAA did not as the Ouanos and Inocians posit, object the introduction of parole evidence to prove its commitment to allow the fromer landowners to repurchase their properties upon the occurrence of certain events. Petition is granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
800
THE MUNICIPALITY OF HAGONOY, BULACAN v. DUMDUM, JR. THE MUNICIPALITY OF HAGONOY, BULACAN, represented by the HON. FELIX V. OPLE, Municipal Mayor, and FELIX V. OPLE, in his personal capacity, Petitioners, versus HON. SIMEON P. DUMDUM, JR., in his capacity as the Presiding Judge of the REGIONAL TRIAL COURT, BRANCH 7, CEBU CITY; HON. CLERK OF COURT & EX-OFFICIO SHERIFF of the REGIONAL TRIAL COURT of CEBU CITY; HON. CLERK OF COURT & EXOFFICIO SHERIFF of the REGIONAL TRIAL COURT of BULACAN and his DEPUTIES; and EMILY ROSE GO KO LIM CHAO, doing business under the name and style KD SURPLUS, Respondents. (G.R. NO. 168289, MARCH 22, 2010, 3rd Division) PERALTA, J.: FACTS: Private respondent, Emily Rose Go Ko Lim Chao, who is engaged in buy and sell business of surplus business, equipment machineries, spare parts and related supplies filed a complaint for collection of sum of money, including damages against the petitioners, Municipality of Hagonoy, Bulacan and its ormer chief executive, Mayor Felix V. Ople in his official and personal capacity. The private respondent claimed that because of Ople‘s earnest representation that funds had already been allowed for the project, she agreed to deliver from her personal principal business in Cebu City twenty-one motor vehicles whose valued totaled to 5,820,000.00 php but the petitioners here instead filed a motion to dismiss on the ground that the claim on which the action had been brought was unenforceable under the statute of frauds, pointing out that there was no written contract or document that would evince the supposed agreement they entered into with the respondent. The petitioners also filed for Motion to Dissolve and /or Discharge the Writ of Preliminary Attachment already issued by the court invoking immunity of the State from suit, unenforceability of contract, and failure to substantiate the allegation of fraud. But the trial court denied all the petitions of the petitioners; hence the petitioners brought this case to CA believing that the trial court committed grave abuse of discretion upon issuing two orders . ISSUE: Whether or not complaint is unenforceable under the Statutes of Fraud. HELD: No. The complaint is enforceable under the Statutes of Fraud. The SC held that Statute of frauds is descriptive of statutes that require certain classes of contracts to be in writing, and that do not deprive the parties of the right to contract with respect to the matters therein involved, but merely regulate the formalities of the contract necessary to render its enforceability. In other words, the Statute of fraud only lays down the method by which the enumerated contracts maybe proved. It does not also declare any contract invalid because they are not reduced into writing inasmuch as, by law, contracts are obligatory in whatever form they may have been entered into provided that all their essential requisites for validity are present. Thus the claim of the respondent is well-substantiated. The petition is hereby granted in part, but affirmed the decision of CA in CA-G.R. NO. 81888 is affirmed as it was held by the Regional Trial Court. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
801
Sps. Tan v. Villapaz SPOUSES ANTONIO and LOLITA TAN, Petitioners, versus CARMELITO VILLAPAZ, Respondent. (475 SCRA 720, November 22, 2005, 3rd Division) CARPIO MORALES, J.: FACTS: Respondent Carmelito Villapaz issued a Philippine Bank of Communications (PBCom) crossed check in the amount of P250,000.00, payable to the order of petitioner Tony Tan. The Malita, Davao del Sur Police issued an invitation-request to petitioner Antonio Tan inviting him to appear before the Deputy Chief of Police Office on June 27, 1994 at 9:00 o‘clock in the morning ―in connection with the request of [herein respondent] Carmelito Villapaz, for conference of vital importance.‖ The invitation-request was received by petitioner Antonio Tan on June 22, 1994 but on the advice of his lawyer, he did not show up at the Malita, Davao del Sur Police Office. Respondent filed a Complaint for sum of money against petitioners-spouses, alleging that, , his issuance of the February 6, 1992 PBCom crossed check which loan was to be settled interest-free in six (6) months; on the maturity date of the loan or on August 6, 1992, petitioner Antonio Tan failed to settle the same, and despite repeated demands, petitioners never did. Petitioners alleged that they never received from respondent any demand for payment, be it verbal or written, respecting the alleged loan; since the alleged loan was one with a period — payable in six months, it should have been expressly stipulated upon in writing by the parties but it was not.
ISSUE:Whether or not Honorable Court of Appeals erred in concluding that the transaction in dispute was a contract of loan and not a mere matter of check encashment as found by the trial court.
HELD: No. The Honorable Court of Appeals did not err in concluding that the transaction in dispute was a contract of loan and not a mere matter of check encashment as found by the trial court. At all events, a check, the entries of which are no doubt in writing, could prove a loan transaction.
That petitioner Antonio Tan had, on February 6, 1992, an outstanding balance of more than P950,000.00 in his account at PBCom Monteverde Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
802
branch where he was later to deposit respondent‘s check did not rule out petitioners‘ securing a loan. It is pure naivete to believe that if a businessman has such an outstanding balance in his bank account, he would have no need to borrow a lesser amount.
In fine, as petitioners‘ side of the case is incredible as it is inconsistent with the principles by which men similarly situated are governed, whereas respondent‘s claim that the proceeds of the check, which were admittedly received by petitioners, represented a loan extended to petitioner Antonio Tan is credible, the preponderance of evidence inclines on respondent.
Petition is denied.
Sps. David v. Tiongson
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
803
SPOUSES VENANCIO DAVID and PATRICIA MIRANDA DAVID and FLORENCIA VENTURA VDA. DE BASCO, Petitioners, versus ALEJANDRO and GUADALUPE TIONGSON, Respondents. (G.R. No. 108169, August 25, 1999, 1st Division) PARDO, J.: FACTS:Three sets of plaintiffs, namely spouses Ventura, spouses David and Vda. De Basco, filed a complaint for specific performance with damges, against private respondents spouses Tiongson, alleging that the latter sold to them lots located in Pampanga. The parties expressly agredd that in case of payment has been fully paid respondents would execute an individual deed of absolute sale in plaintiffs flavor. The respondents demanded the executuion of a deed of sale and issuance of certificate of titile but the respondents refused to issue the same. The trial court rendered its decision in favor of the respondents. However the CA ruled that contract of sale was not been perfrected between spouses David and/or Vda. De Basco and respondents. As with regard to the spouses Ventura, the CA affirmed the RTC.
ISSUE:Whether or not contract of sale has not been perfected but petitioners and respondents.
HELD: No. The contract of sale has been perfected but petitioners and respondents. The SC ruled that there was a perfected contact. However, the statute of frauds is inapplicable. The rule is settled that the statute of frauds applies only to executor and not to completed, executed or partially executed contract. In the case of spouses David, the payment made rendered the sales contract beyong the ambit of the statutre of frauds/ The CA erred in concluding that there was no perfected contract of sale. However, in view of the stipulation of the parties that the deed of sale and corresponding certificate of title would be issued after full payment, then, they ad entered into a contract to sell and not a contract of sale.
The Decision of the Court of Appeals in CA — G.R. CV No. 24667.REVERSE and SET ASIDE.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
804
Cordial v. Miranda GENARO CORDIAL, Petitioner, versus DAVID MIRANDA, Respondent. (G.R. No. 135495, December 14, 2000, 3rd Division) PANGANIBAN, J.:
FACTS: David Miranda, a businessman from Angeles City, was engaged in rattan business since 1980. He buys large quantities of rattan poles from suppliers coming from Palawan, Isabela, Ilocos Sur, Baler, Quezon and Cagayan de Oro City. Among his many regular suppliers, of particular interest in this case, were Roberto Savilla. Her Villanueva, Roberto Savilla. Her Villanueva, Roberto Santiago, and in 1990 one Gener Buelva. Gener Buelva was an employee of one Mike Samaya, who was also a supplier of rattan to Respondent Miranda. Gener Buelva, wanting to become an independent rattan supplier in January 1990, was recommended by his employer Samaya to Respondent Miranda who readily accepted him, thus, started such business relationship. In the business relations between Buelva and Miranda, the former was given cash advances by the latter, to buy rattan in Palawan, shipping said purchased rattan by boat to Manila, paid ex-Manila, after liquidating cash advances. Buelva also paid forest royalties to the concessionaire, thru Roberto Savilla. The business transactions, however, did not last long because Buelva then in Manila met an accident and died on June 19, 1990. They agreed that Cordial will be his supplier of rattan poles. Cordial shipped rattan poles as to the agreed number of pieces and sizes however Miranda refused to pay the cost of the rattan poles delivered. Miranda alleged that there exist no privity of contract between Miranda and Cordial. Cordial filed a complaint againt Miranda. The RTC rendered its decision in favor of the petitioner. The CA reversed the decision of the RTC.
ISSUE: Whether or not Statute of Frauds applies in this case.
HELD: No. The Statute of Frauds does not apply in this case. The CA and respondent Miranda stress the absence of a ―written memorandum of the alleged contract between the parties‖. Respondent implicity agrues that the alleged contract is unenforceable under the Statute of Frauds however, the statute of frauds applies only to executor and not to completed, executed, or partially executed contracts. Thus, were one party has performed one‘s obligation, oral evidence will be admitted to prove the agreement. In the present case, it has already been established that petitioner had delivered the rattan poles to respondent. The contract was partially executed, the Statute of Frauds does not apply.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
805
Petition is granted.
Villanueva-Mijares v. Court of Appeals
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
806
JOSEFINA VILLANUEVA-MIJARES, WALDETRUDES VILLANUEVANOLASCO, GODOFREDO VILLANUEVA, EDUARDO VILLANUEVA, GERMELINA VILLANUEVA-FULGENCIO, MILAGROS VILLANUEVAARQUISOLA, and CONCEPCION MACAHILAS VDA. DE VILLANUEVA, Petitioners, versus THE COURT OF APPEALS, PROCERFINA VILLANUEVA, PROSPERIDAD VILLANUEVA, RAMON VILLANUEVA, ROSA VILLANUEVA, VIRGINIA NEPOMUCENO, PAULA NEPOMUCENO, TARCELA NEPOMUCENO, MERCEDES VILLANUEVA, ADELAIDA VILLANUEVA, APARICION VILLANUEVA, JOSEFINA VILLANUEVA, BETTY VILLANUEVA, BOBBY VILLANUEVA, MERLINDA VILLANUEVA, MORBINA VILLANUEVA, FLORITA VILLANUEVA, DIONISION VILLANUEVA, and EDITHA VILLANUEVA, Respondents. (G.R. No. 108921, April 12, 2000, 3rd Division) QUISUMBING, J.:
FACTS: Petitioners Josefina Villanueva-Mijares, Waldetrudes VillanuevaNolasco, Godofredo Villanueva, Eduardo Villanueva, Germelina VillanuevaFulgencio, and Milagros Villanueva-Arquisola are the legitimate children of the late Leon Villanueva. Petitioner Concepcion Macahilas vda. de Villanueva is his widow. Leon was one of eight (8) children of Felipe Villanueva, predecessor-ininterest of the parties in the present case. During the lifetime, Felipe, owned real property, a parcel of land situated at Estancia, Kalibo, Capiz. Upong Felipe‘s death, ownership of the land was passed on to his children. Pedro, on of the children, got his share. The remaining undivided portion of the land was held in trust by leon. His co-heirs made several seasonable and lawful demands upon him to subdivide the partition the property, but no subdivision took place. After the death of Leon, private respondents discovered that the shares of four of the heirs of Felipe was purchased by Leon as evidenced by Deed of Sale but registered only in 1971. It also came to light that Leon had, sometime in July 1970, executed a sale and partition of the property in favor of his own children, herein petitioners. By virtue of such Deed of Partition, private respondents had succeeded in obtaining Original Certificate of Title (OCT) No. C-256. On April 25, 1975, petitioners managed to secure separate and independent titles over their pro-indiviso shares in their respective names.
ISSUE: Whether or not the appellate court erred in declaring the Deed of Sale unenforceable against the private respondent fro being unauthorized contract.
HELD: No. The appellate court did not err in declaring the Deed of Sale unenforceable against the private respondent fro being unauthorized contract. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
807
The court has ruled that the nullity of the unenforceable contract is of a permanent nature and it will exist as long the unenforceable contract is not duly ratifired. The mere lapse of time cannot igve efficacy to such a contract. The defect is such that it cannot be cured except by the subsequent ratification of the unenforceable contract by the person in whose name the contract was executed. In the instant case, there is no showing of any express or implied ratification of the assailed Deed of Sale by the private respondents Procerfina, Ramon,. Prosperidad, and Rosa. Thus, the said Deed of Sale must remain unenforceable as to them.
Petition is denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
808
Rosencor v. Inquing Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
809
ROSENCOR DEVELOPMENT CORPORATION and RENE JOAQUIN, Petitioners, vs.PATERNO INQUING, IRENE GUILLERMO, FEDERICO BANTUGAN, FERNANDO MAGBANUA and LIZZA TIANGCO, Respondents. (G.R. No. 140479, March 8, 2000, 3rd Division)
GONZAGA-REYES, J.:
FACTS: Plaintiffs and plaintiffs-intervenors averred that they are the lessess since 1971 of a two-story residential apartment and owned by spouses Faustino and Cresencia Tiangco. The lease was nocovered by any contract. The lesses were renting the premises then for Php 150.00 a month and were allegedly verbally granted by the lessors the pre-emptive right to purchase the property if ever they decide to sell the same. Upon the death of the spouses Tiangco, the management of the property was adjudicated to their heirs who were represented by Eufrocina deLeon. The lessees received a letter from de Leon advising them that the heirs of the late spouses have already sold the property to Resencor.
The lessees filed an action f\before th RTC praying for the following: a) rescission of the Deed of Absolute Sale between de Leon and Rocencor, b) the defendants Rosencor/Rene Joaquin be ordered to reconvey the property to de Leon, c) de Leon be ordered to reimburse the plaintiffs for the repair of the property or apply the said amount as part of the purchase of the property. The RTC dismissed the complaint while the Ca reversed the decision of the RTC.
ISSUE: Whether or not a right of first refusal is indeed covered by the provisions of the NCC on the Statute of Frauds.
HELD: A right of first refusal is not among those listed as unenforceable under the statute of frauds. Furthermore, the application of Article 1403, par. 2(e) of the NCC, presupposes the existence of a perfected, albeit unwritten, contract of sale. A right of first refusal, such as the one involved in the instant case, is not by any means a perfected contract of sale of real property. At best, it is a contractual grant, not of the sale of the real property involed byt of the right of first refusal over the property sought to be sold. It is thus evident that the statute of frauds does not contemplate cases involving a right of right of first refusal. As such, a right of first refusal need not be written to be enforceable and may be proven by oral evidence.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
810
Firme v. UKAL SPOUSES CONSTANTE FIRME AND AZUCENA E. FIRME, Petitioners, vs.UKAL ENTERPRISES AND DEVELOPMENT CORPORATION, Respondent. (G.R. No. 146608, October 23, 2003, 1st Division) CARPIO, J.:
FACTS: Petitioner Spouses Firme are the registered owner of a parcel of land located on Dahlia Avenue, Fairview Park, Quezon City. Bukal Enterprises filed a complaint for specific performance and damges with the trial court, aleeging that the Spouses Firme reneged on their agreement to sell the property. The complaint asked the trial court to order the Spouses Firme to execute the deed of sale and to delover the title of the property to Bukal Enterpises upon payment of the agreed purchase price. The RTC rendered its decision against Bukal. The CA reversed and set aside the decision of the RTC.
ISSUE: Whether or not Statute of Frauds is applicable.
HELD: The CA held that partial performance of the contract of sale takes the oral contract out of the scope of Statute of Frauds. This conclusion arose from the appellate court‘s erronoues finding that there was a perfected contract of sale. The recors shoe that there was no perfected contract of sale. There is therefore no basis for the application of the Stature of Frauds. The application of the Statute of Frauds presupposes the existence of a perfected contract.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
811
Heirs of M. Doronio v. Heirs of F. Doronio HEIRS OF M. DORONIO, Petitioners vs. HEIR OF F. DORONIO, Respondent. (G.R. No. 169454, December 27, 2007, 3rd Division) REYES, R.T., J.: FACTS: Petitioners are the heirs of Maralino Doronio, while respondents are the heirs of Fortunato Doronio. The property in dispute is one of a private deed of donation propter nuptias who was executed by Spouses Simeon Doronio and Cornelia Gante in facor of Maralino Doronio and his wife Veronica Pico. The heirs of Fortuanto Doronio contended that only the half of the property was actually incorporated in the deed of donation because it stated that Fortunato is the owner of the adjacent property. Eager to obtain the entire property, the heirs of Marcelino filed a petition ―For the Registration of a Private Deed of Donation‖. The RTC granted the petition. The heirs of Fortunato files a pleading in the form of petition. In the petition, they prayed that an order be issued declaring null and void the registration of the private deed of donation. The RTC ruled in favor of the heirs of Marcelino. The CA reversed the decision of RTC>
ISSUE: Whether or not the donation propter nuptias is valid.
HELD: Article 633 of the OCC provides that figts of real property , in order to be valid, must appear in a public document. It is settled that a donation of real estate propter nuptias is void unless made by public instrument. In the instant case, the donation propter nuptias did not become valid. Neither did it create any right because it was not made in a public instrument. Hence, it conveyed no title to the land in question to petitioner‘s predecessors.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
812
Gurrea v. Suplico NATIVIDAD ARIAGA VDA. DE GURREA, CARLOS GURREA, JULIETA GURREA, TERESA GURREA-RODRIGUEZ, RICARDO GURREA, Jr., MA. VICTORIA GURREACANDEL, and RAMONA GURREA-MONTINOLA, Petitioners, vs ENRIQUE SUPLICO, Respondent (G.R. No. 144320, April 26, 2006, 1st Division) REYES, R.T., J.:
FACTS: The petition arose from a complaint for anuulment of tilte with prayer for preliminary injunction filed with the court of First Instance by Rosalina Gurrea in her capacity as attorney-in-fact of the heirs of Ricardo Gurrea. The complaint was filed against Atty. Enrique Suplico. Atty. Suplico alleged that the property in dispurte was for the payment of his services rendered to the late Ricardo Gurrrea which the offered to him as payment.
ISSUE: Whether or not petitioner‘s are entitled to the cancellation of respondent attorney‘s title over the subject property and the reconveyance thereof to the herein petitioners or to be the estate of the Late Ricardo.
HELD: Having been established that the subject property was still the object of litigation at the time the subject deed of Transfer of Rights and Interest was executed, the assignment of rights and interest over the subject property in favor of respondent is null and void for being violative of the provisions of Article 1491 of the Civil Code which expressly prohibits lawyers from acquiring property or rights which may be the object of any litigation in which they may take part by virtue of their profession. It follows that respondent‘s title over the subject property should be cancelled and the property reconveyed to the estate of Ricardo, the same to be distributed to the latter?s heirs. This is without prejudice, however, to respondent?s right to claim his attorney?s fees from the estate of Ricardo, it being undisputed that he rendered legal services for the latter.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
813
Frenzel v. Catito ALFRED FRITZ FRENZEL, Petitioner, vs.EDERLINA P. CATITO, Respondent. (G.R. No. 143958, July 11, 2003, 1st Division) REYES, R.T., J.:
FACTS: Alfred Frenzel and Ederlina Catito had an amorous relationship which started in King‘s Cross, a night spot in Sydney. During their relationship Alfred bought properties in the Philippines in the name of Ederlina. Their relationship started to deteriorate when the husband of Ederlina threatened Ederlina that he would file a bigamy case against her for having an illicit affair with Alfred, who was also married. Alfred filed a complaint against Ederlina for specific performance, declaration of real and personal properties, sum of money and damages.
ISSUE: Whether or not acquisition of a parcel of land is valid.
HELD: The sales of three parcels of land in favor of the petitioner who is a foreigner is illegal per se. The transactions are void ab initio because they were entered into in violation of the Constitution. Thus, to allow the petitioner to recover the properties or the money used in the purchase of the parcels of land would be subversive of public policy. An action for recovery of what has been paid without just cause has been designated as an accion in rem verso. This provision does not apply if, as in this case, the action is proscribed by the Constitution or by the application of the pari delicto doctrine. 68 It may be unfair and unjust to bar the petitioner from filing an accion in rem verso over the subject properties, or from recovering the money he paid for the said properties, but, as Lord Mansfield stated in the early case of Holman vs. Johnson:69 "The objection that a contract is immoral or illegal as between the plaintiff and the defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff."
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
814
La Buga'al-Blaan v. Ramos LA BUGA‟AL-BLAAN, Petitioners vs RAMOS, Respondent (G.R. No. 127882, December 1, 2004, 1st Division) PANGANIBAN, J.:
FACTS: The Petition for Prohibition and Mandamus before the Court challenges the constitutionality of (1) Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its Implementing Rules and Regulations (DENR Administrative Order No. [DAO] 9640); and (3) the FTAA dated March 30, 1995, executed by the government with Western Mining Corporation (Philippines), Inc. (WMCP). On January 27, 2004, the Court en banc promulgated its Decision granting the Petition and declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the entire FTAA executed between the government and WMCP, mainly on the finding that FTAAs are service contracts prohibited by the 1987 Constitution.
ISSUE: Whether or nor it is a void contract.
HELD: Section 7.9 of the WMCP FTAA has effectively given away the State's share without anything in exchange. Moreover, it constitutes unjust enrichment on the part of the local and foreign stockholders in WMCP, because by the mere act of divestment, the local and foreign stockholders get a windfall, as their share in the net mining revenues of WMCP is automatically increased, without having to pay anything for it.Being grossly disadvantageous to government and detrimental to the Filipino people, as well as violative of public policy, Section 7.9 must therefore be stricken off as invalid. Section 7.8(e) of the WMCP FTAA likewise is invalid, since by allowing the sums spent by government for the benefit of the contractor to be deductible from the State's share in net mining revenues, it results in benefiting the contractor twice over. This constitutes unjust enrichment on the part of the contractor, at the expense of government. For being grossly disadvantageous and prejudicial to government and contrary to public policy, Section 7.8(e) must also be declared without effect. It may likewise be stricken off without affecting the rest of the FTAA.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
815
Agan v. PIATCO AGAN, Petitioner vs. PIATCO, Respondent) (G.R. No. 155001, May 5, 2003, 1st Division) PUNO, J.:
FACTS: Asia‘s Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal to the Philippine Government through the Department of Transportation and Communication (DOTC) and Manila International Airport Authority (MIAA) for the construction and development of the NAIA IPT III under a build-operate-and-transfer arrangement pursuant to R.A. No. 6957, as amended by R.A. No. 7718 (BOT Law). The DOTC issued the notice of award for the NAIA IPT III project to the Paircargo Consortium, which later organized into herein respondent PIATCO. Various petitions were filed before this Court to annul the 1997 Concession Agreement, the ARCA and the Supplements and to prohibit the public respondents DOTC and MIAA from implementing them. In a decision dated May 5, 2003, this Court granted the said petitions and declared the 1997 Concession Agreement, the ARCA and the Supplements null and void. Respondent PIATCO, respondent-Congressmen and respondents-intervenors now seek the reversal of the May 5, 2003 decision and pray that the petitions be dismissed.
ISSUE: Whether or not the contract is valid.
HELD: Section 19, Article XII of the 1987 Constitution mandates that the State prohibit or regulate monopolies when public interest so requires. Monopolies are not per se prohibited. Given its susceptibility to abuse, however, the State has the bounden duty to regulate monopolies to protect public interest. Such regulation may be called for, especially in sensitive areas such as the operation of the country‘s premier international airport, considering the public interest at stake. By virtue of the PIATCO contracts, NAIA IPT III would be the only international passenger airport operating in the Island of Luzon, with the exception of those already operating in Subic Bay Freeport Special Economic Zone ("SBFSEZ"), Clark Special Economic Zone ("CSEZ") and in Laoag City. Undeniably, the contracts would create a monopoly in the operation of an international commercial passenger airport at the NAIA in favor of PIATCO.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
816
COMELEC v. Quijano-Padilla COMMISSION ON ELECTIONS, Petitioner, vs. JUDGE MA. LUISA QUIJANOPADILLA, Respondents. (G. R. No. 151992, September 18, 2002) SANDOVAL-GUTIERREZ, J.:
FACTS: The Philippine Congress passed Republic Act No. 8189, otherwise known as the "Voter's Registration Act of 1996," providing for the modernization and computerization of the voters' registration list and the appropriate of funds therefor "in order to establish a clean, complete, permanent and updated list of voters." The COMELEC issued invitations to pre-qualify and bid for the supply and installations of information technology equipment and ancillary services for its VRIS Project. Private respondent Photokina Marketing Corporation (PHOTOKINA) won the bid however the budget appropriated by the Congress for the COMELEC‘s modernization project was only 1B which was not sufficient to PHOTOKINA bid in the amount of 6.588B. Senator Edgardo J. Angara directed the creation of a technical working group to ―assist the COMELEC in evaluating all programs for the modernization of the COMELEC which will also consider the PHOTOKINA contract as an alternative program and various competing programs for the purpose.‖ PHOTOKINA filed a petition for mandamus, prohibition and damages (with prayer for temporary restraining order, preliminary prohibitory injunction and preliminary mandatory injunction) against the COMELEC and all its Commissioners. Judge Luisa Quijano-Padilla rendered her decision in favor of PHOTOKINA.
ISSUE: May a successful bidder compel a government agency to formalize a contract with it notwithstanding that its bid exceeds the amount appropriated by Congress for the project?
HELD: The SC cannot accede to PHOTOKINA's contention that there is already a perfected contract. While we held in Metropolitan Manila Development Authority vs. Jancom Environmental Corporation[50] that "the effect of an unqualified acceptance of the offer or proposal of the bidder is to perfect a contract, upon notice of the award to the bidder," however, such statement would be inconsequential in a government where the acceptance referred to is yet to meet certain conditions. To hold otherwise is to allow a public officer to execute a binding contract that would obligate the government in an amount in excess of the appropriations for the purpose for which the contract was attempted to be made. In the case at bar, there seems to be an oversight of the legal requirements as early as the bidding stage. The first step of a Bids and Awards Committee (BAC) is to determine whether the bids comply with the requirements. The BAC shall rate a bid "passed" only if it complies with all the requirements and the submitted price does not exceed the approved budget for the contract.‖ Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
817
The SC ruled that PHOTOKINA, though the winning bidder, cannot compel the COMELEC to formalize the contract. Since PHOTOKINA‘s bid is beyond the amount appropriated by Congress for the VRIS Project, the proposed contract is not binding upon the COMELEC and is considered void; and that in issuing the questioned preliminary writs of mandatory and prohibitory injunction and in not dismissing Special Civil Action No. Q-01-45405, respondent judge acted with grave abuse of discretion. Petitioners cannot be compelled by a writ of mandamus to discharge a duty that involves the exercise of judgment and discretion, especially where disbursement of public funds is concerned.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
818
Jaworski v. PAGCOR SENATOR ROBERT S. JAWORSKI, Petitioner, vs.PHILIPPINE AMUSEMENT AND GAMING CORPORATION and SPORTS AND GAMES ENTERTAINMENT CORPORATION, Respondents. (G.R. No. 144463, January 14, 2004, 1 st Division) SANDOVAL-GUTIERREZ, J.:
FACTS: PAGCOR‘s board of directors approved an instrument denominated as "Grant of Authority and Agreement for the Operation of Sports Betting and Internet Gaming", which granted SAGE the authority to operate and maintain Sports Betting station in PAGCOR?s casino locations, and Internet Gaming facilities to service local and international bettors, provided that to the satisfaction of PAGCOR, appropriate safeguards and procedures are established to ensure the integrity and fairness of the games. Petitioner, in his capacity as member of the Senate and Chairman of the Senate Committee on Games, Amusement and Sports, files the instant petition, praying that the grant of authority by PAGCOR in favor of SAGE be nullified.
ISSUE:Whether not not respondent PAGCOR‘s legislative franchise includes to operate Internet gambling.
HELD: While PAGCOR is allowed under its charter to enter into operator?s and/or management contracts, it is not allowed under the same charter to relinquish or share its franchise, much less grant a veritable franchise to another entity such as SAGE. PAGCOR can not delegate its power in view of the legal principle of delegata potestas delegare non potest, inasmuch as there is nothing in the charter to show that it has been expressly authorized to do so. In Lim v. Pacquing,10 the Court clarified that "since ADC has no franchise from Congress to operate the jai-alai, it may not so operate even if it has a license or permit from the City Mayor to operate the jai-alai in the City of Manila." By the same token, SAGE has to obtain a separate legislative franchise and not "ride on" PAGCOR?s franchise if it were to legally operate on-line Internet gambling.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
819
Oesmer v. PDC RIZALINO, substituted by his heirs, JOSEFINA, ROLANDO and FERNANDO, ERNESTO, LEONORA, BIBIANO, JR., LIBRADO and ENRIQUETA, all surnamed OESMER, Petitioners, vs. PARAISO DEVELOPMENT CORPORATION, Respondent. (G.R. No. 157493, February 5, 2007, 1st Division) SANDOVAL-GUTIERREZ, J.:
FACTS: Petitioner Ernesto to meet with a certain Sotero Lee, President of respondent Paraiso Development Corporation, at Otani Hotel in Manila. The said meeting was for the purpose of brokering the sale of petitioners‘ properties to respondent corporation. A Contract to Sell was drafted. A check in the amount of P100,000.00, payable to Ernesto, was given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed the said Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign the document. However petitioners informed respondent corporation about their intention to rescind the Contract to Sell and to return the amount of Php 100,000.00. respondent did not respond to the aforesaid letter. Petitioners, therefore, filed a complaint for Declaration of Nullity or for Annulment of Option Agreement or Contract to Sell with damages. The RTC rendered its decision in favor to respondent. CA affirmed the decision of RTC with modification.
ISSUE: Whether or not Contract to Sell is void considering that on of the heirs did not sign it as to indicate its consent to be bound by its terms.
HELD: It is well-settled that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror. From that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. To produce a contract, the acceptance must not qualify the terms of the offer. However, the acceptance may be express or implied. For a contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror. In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale to the respondent of their shares in the subject parcels of land by affixing their signatures on the said contract. Such signatures show their acceptance of what has been stipulated in the Contract to Sell and such acceptance was made known to respondent corporation when the duplicate copy of the Contract to Sell was returned to the latter bearing petitioners‘ signatures
Heirs of Balite v. Lim
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
820
HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE; Namely, ANTONIO T. BALITE, FLOR T. BALITE-ZAMAR, VISITACION T. BALITE-DIFUNTORUM, PEDRO T. BALITE, PABLO T. BALITE, GASPAR T. BALITE, CRISTETA T. BALITE and AURELIO T. BALITE JR., All Represented by GASPAR T. BALITE, petitioners, vs.RODRIGO N. LIM, respondent. (G.R. No. 152168 , December 10, 2004, 3 rd Division) PANGANIBAN, J.:
FACTS:The spouses Aurelio and Esperanza Balite were the owners of a parcel of land, located at Poblacion Catarman, Northern Samar, with an area of seventeen thousand five hundred fifty-one (17,551) square meters, and covered by Original Certificate of Title No. 10824. When Aurelio died intestate in 1985, his wife, Esperanza Balite, and their children, [petitioners] Antonio Balite, Flor Balite-Zamar, Visitacion Balite-Difuntorum, Pedro Balite, Pablo Balite, Gaspar Balite, Cristeta (Tita) Balite and Aurelio Balite, Jr., inherited the subject property and became co-owners thereof, with Esperanza inheriting an undivided share of 9,751 square meters. In the meantime, Esperanza became ill and was in dire need of money for her hospital expenses . She, through her daughter, Cristeta, offered to sell to Rodrigo Lim, her undivided share for the price of P1,000,000.00. Esperanza and Rodrigo agreed that, under the "Deed of Absolute Sale", to be executed by Esperanza over the property, it will be made to appear that the purchase price of the property would be P150,000.00, although the actual price agreed upon by them for the property was P1,000,000.00. On April 16, 1996, Esperanza executed a "Deed of Absolute Sale" in favor of Rodrigo N. Lim over a portion of the property with an area of 10,000 square meters, for the price of P150,000.00. They also executed, on the same day, a "Joint Affidavit" under which they declared that the real price of the property was P1,000,000.00, payable to Esperanza by installments, as follows: 1. P30,000.00 – upon signing today of the document of sale. 2. P170,000.00 – payable upon completion of the actual relocation survey of the land sold by a Geodetic Engineer. 3. P200,000.00 – payable on or before May 15, 1996. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
821
4. P200,000.00 – payable on or before July 15, 1996. 5. P200,000.00 – payable on or before September 15, 1996. 6. P200,000.00 – payable on or before December 15, 1996. Only Esperanza and two of her children, namely, Antonio and Cristeta, knew about the said transaction. Geodetic Engineer Bonifacio G. Tasic conducted a subdivision survey of the property and prepared a "Sketch Plan" showing a portion of the property, identified as Lot 243 with an area of 10,000 square meters, under the name Rodrigo N. Lim. "The "Sketch Plan" was signed by Rodrigo and Esperanza. Thereafter, Rodrigo took actual possession of the property and introduced improvements thereon. He remitted to Esperanza and Cristeta sums of money in partial payments of the property for which he signed Receipts. Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. learned of the sale, and on August 21, 1996, they wrote a letter to the Register of Deeds (RD), saying that they were not informed of the sale of a portion of the said property by their mother nor did they give their consent thereto, and requested the [RD] to hold in abeyance any processal or approval of any application for registration of title of ownership in the name of the buyer of said lot, which has not yet been partitioned judicially or extrajudicially, until the issue of the legality/validity of the above sale has been cleared." On August 24, 1996, Antonio received from Rodrigo, the amount of P30,000.00 in partial payment of the property and signed a Receipt for the said amount, declaring therein that "the remaining balance of P350,000.00 shall personally and directly be released to my mother, Esperanza Balite, only. However, Rodrigo drew and issued RCBC Check No. 309171, dated August 26, 1996, payable to the order of Antonio Balite in the amount of P30,000.00 in partial payment of the property. On October 1, 1996, Esperanza executed a "Special Power of Attorney" appointing her son, Antonio, to collect and receive, from Rodrigo, the balance of the purchase price of the property and to sign the appropriate documents therefor. On October 23, 1996, Esperanza signed a letter addressed to Rodrigo informing the latter that her children did not agree to the sale of the property to him and that she was withdrawing all her commitments until the validity of the sale is finally resolved.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
822
On October 31, 1996, Esperanza died intestate and was survived by her aforenamed children.
Meanwhile, Rodrigo caused to be published, in the Samar Reporter, on November 14, 21 and 28, 1996, the aforesaid "Deed of Absolute Sale". Earlier, on November 21, 1996, Antonio received the amount ofP10,000.00 from Rodrigo for the payment of the estate tax due from the estate of Esperanza. Also, the capital gains tax, in the amount of P14,506.25, based on the purchase price of P150,000.00 appearing on the "Deed of Absolute Sale", was paid to the Bureau of Internal Revenue which issued a "Certification" of said payments, on March 5, 1997, authorizing the registration of the "Deed of Absolute Sale" . However, the [RD] refused to issue a title over the property to and under the name of Rodrigo unless and until the owner‘s duplicate of OCT No. 10824 was presented to it. Rodrigo filed a "Petition for Mandamus" against the RD with the Regional Trial Court .On June 13, 1997, the court issued an Order to the RD to cancel OCT No. 10824 and to issue a certificate of title over Lot 243 under the name of Rodrigo. On June 27, 1997, petitioners filed a complaint against Rodrigo with the RTC for Annulment of Sale, Quieting of Title, Injunction and Damages. The [petitioners] had a "Notice of Lis Pendens", dated June 23, 1997, annotated, on June 27, 1997, at the dorsal portion of OCT No. 10824. In the meantime, the RD cancelled, on July 10, 1997, OCT No. 10824 and issued Transfer Certificate of Title No. 6683 to and under the name of Rodrigo over Lot 243. The "Notice of Lis Pendens was carried over in TCT No. 6683. Subsequently, Rodrigo secured a loan from the Rizal Commercial Banking Corporation in the amount of P2,000,000.00 and executed a "Real Estate Mortgage" over the subject]property as security therefor. On motion of the petitioners, they were granted leave to file an "Amended Complaint" impleading the bank as additional]partydefendant. On November 26, 1997, petitioners filed their "Amended Complaint". The respondent opposed the "Amended Complaint" contending that it was improper for [petitioners] to join, in their complaint, an ordinary Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
823
civil action for the nullification of the "Real Estate Mortgage" executed by the respondent in favor of the Bank as the action of the petitioners before the court was a special civil action.
On March 30, 1998, the court issued an Order rejecting the "Amended Complaint" of the petitioners on the grounds that: (a) the Bank cannot be impleaded as party-defendant under Rule 63, Section 1 of the 1997 Rules of Civil Procedure; (b) the "Amended Complaint" constituted a collateral attack on TCT No. 6683. The petitioners did not file any motion for the reconsideration of the order of the court." The trial court dismissed the Complaint and ordered the cancellation of the lis pendens annotated at the back of TCT No. 6683. It held that a co-owner has the right to sell his/her undivided share. The sale made by a co-owner is not invalidated by the absence of the consent of the other co-owners. Hence, the sale by Esperanza of the 10,000square-meter portion of the property was valid; the excess from her undivided share should be taken from the undivided shares of Cristeta and Antonio, who expressly agreed to and benefited from the sale. On appeal, the CA held that the sale was valid and binding insofar as Esperanza Balite‘s undivided share of the property was concerned. It affirmed the trial court‘s HELD that the lack of consent of the co-owners did not nullify the sale. The buyer, respondent herein, became a coowner of the property to the extent of the pro indiviso share of the vendor, subject to the portion that may be allotted to him upon the termination of the co-ownership. The appellate court disagreed with the averment of petitioners that the registration of the sale and the issuance of TCT No. 6683 was ineffective and that they became the owners of the share of Esperanza upon the latter‘s death. Hence, this Petition. ISSUES: Whether or not the Deed of Absolute Sale is valid, and HELD:Yes. In the present case, the parties intended to be bound by the Contract, even if it did not reflect the actual purchase price of the property. That the parties intended the agreement to produce legal effect is revealed by the letter of Esperanza Balite to respondent dated October 23, 1996 and petitioners‘ admission that there was a partial payment of P320,000 made on the basis of the Deed of Absolute Sale. There was an intention to transfer the ownership of over 10,000 square meters of the property . Clear from the letter is the fact that the objections of her Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts children prompted transaction.
Esperanza
to
unilaterally
withdraw
from
824
the
Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and enforceable. All the essential requisites prescribed by law for the validity and perfection of contracts are present. However, the parties shall be bound by their real agreement for a consideration of P1,000,000 as reflected in their Joint Affidavit. The juridical nature of the Contract remained the same. What was concealed was merely the actual price. Where the essential requisites are present and the simulation refers only to the content or terms of the contract, the agreement is absolutely binding and enforceable between the parties and their successors in interest. The Petition is DENIED.
Pineda v. CA Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
825
ALEJANDRIA PINEDA and SPOUSES ADEODATO DUQUE, JR., and EVANGELINE MARY JANE DUQUE, petitioners, vs. COURT OF APPEALS and SPOUSES NELSON BAÑEZ and MERCEDES BAÑEZ, respondents. [G. R. No. 127094. February 6, 2002, 1st Division] PARDO, J.: FACTS:Appellees Nelson Bañez and Mercedes Bañez are the original owners of a parcel of land together with its improvements located Quezon City while Ms. Alejandria Pineda is the owner of a house located at Los Angeles, California. On January 11, 1983, the appellees and Alejandria Pineda, together with the latter‘s spouse Alfredo Caldona, executed an ‗Agreement to Exchange Real Properties‘. In the agreement, the parties agreed to: 1) exchange their respective properties; 2) Pineda to pay an earnest money in the total amount of $12,000.00 on or before the first week of February 1983; and 3) to consummate the exchange of properties not later than June 1983. It appears that the parties undertook to clear the mortgages over their respective properties. At the time of the execution of the exchange agreement, the White Plains property was mortgaged with the Government Service Insurance System (GSIS) while the California property had a total mortgage obligation of $84,000.00 . In the meantime, the appellees were allowed to occupy or lease to a tenant Pineda‘s California property and Pineda was authorized to occupy appellees‘ White Plains property. Pursuant to the exchange agreement, Alejandria Pineda paid the appellees the total amount of $12,000.00 broken down as follows: 1) $5,000.00, on January 1983; 2) $4,000.00 on April 1983; 3) $3,000.00 on January 1985. On December 18, 1984, unknown to the appellees, Alejandria Pineda and the appellants Adeodato C. Duque, Jr. and Evangeline Mary Jane Duque executed an ‗Agreement to Sell‘ over the White Plains property whereby Pineda sold the property to the appellants for the amount of P1,600,000.00 . The contract provides that: 1) upon signing of the agreement, the purchaser shall pay P450,000.00 and the seller shall cause the release of the property from any encumbrance and deliver to the purchaser the title to the property; 2) balance shall be paid by the purchaser to the seller on or before the end of January 1985; 3) upon full payment, the seller shall deliver to the purchaser a deed of absolute sale duly signed by its registered owner, the appellees. On the same date, Pineda, out of Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
826
the downpayment received from the appellants, paid the appellees‘ mortgage obligation with the GSIS in the sum of P112,690.75 Pineda then requested the appellees for a written authority for the release of the title from the GSIS. On January 1, 1985, the appellees gave Pineda the aforementioned authority with the understanding that Pineda will personally deliver the title to the appellees. The record shows that pursuant to the agreement to sell the following payments were made by the appellants to Pineda: 1) $25,000.00 on December 26, 1984; 2) $10,000.00 on January 18, 1985; 3) P50,000.00 on January 24, 1985; 4) $500.00 on February 1, 1985; and 5) $330 on February 7, 1985 . The appellants physically occupied the premises on June or July 1985. Upon their return to the Philippines sometime in March 1985, the appellees discovered that the appellants were occupying the White Plains property. They talked with appellant Atty. Adeodato Duque who showed interest in buying the property and the latter mentioned that they gave money to Mrs. Pineda to facilitate the redemption of her property in the U.S.Appellees alleged that they confronted Pineda on their title to the property but the latter replied that she gave the title to the appellants. They did not insist on its return from the appellants as the latter were interested in buying the property. A series of communications ensued between the representatives of the appellees and Ms. Pineda with regards to the status of the exchange agreement which resulted in its rescission for failure of Pineda to clear her mortgage obligation of the California property. Negotiations for the purchase of the property were held between the appellants and the appellees but the same failed which resulted in the appellees demanding for the appellants to vacate the property. On September 3, 1987, the present complaint was filed before the court a quo. On February 17, 1992, the trial court rendered a decision declaring plaintiffs spouses Nelson S. Bañez and Mercedes Bañez the absolute owners in fee simple title of the house and lot in question located at 32 Sarangaya St., White Plains, Quezon City. In time, petitioners appealed the decision to the Court of Appeals. On September 18, 1992, respondents Nelson and Mercedes Bañez filed with the Court of Appeals a motion for execution pending appeal.On April 27, 1993, the Court of Appeals denied the motion for lack of merit. On May 20, 1996, the Court of Appeals affirmed the RTC‘s decision with the modification that rental payments should commence on January 1986 (not August 1985) and appellants are liable for attorney‘s fees only in the sum of P50,000.00.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
827
On June 26, 1996, petitioners filed a motion for reconsideration of the above quoted decision. On November 7, 1996, the Court of Appeals denied the motion. Hence, this appeal. ISSUE: Whether or not petitioners validly acquired the subject property. HELD:No. It appears that the Bañez spouses were the original owners of the parcel of land and improvements located at 32 Sarangaya St., White Plains, Quezon City. On January 11, 1983, the Bañez spouses and petitioner Pineda executed an agreement to exchange real properties. However, the exchange did not materialize. Petitioner Pineda‘s ―sale‖ of the property to petitioners Duque was not authorized by the real owners of the land, respondent Bañez. The Civil Code provides that in a sale of a parcel of land or any interest therein made through an agent, a special power of attorney is essential.This authority must be in writing, otherwise the sale shall be void. In his testimony, petitioner Adeodato Duque confirmed that at the time he ―purchased‖ respondents‘ property from Pineda, the latter had no Special Power of Authority to sell the property. A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired for a valuable consideration. Without an authority in writing, petitioner Pineda could not validly sell the subject property to petitioners Duque. Hence, any ―sale‖ in favor of petitioners Duque is void. Further, Article 1318 of the Civil Code lists the requisites of a valid and perfected contract, namely: ―(1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; (3) cause of the obligation which is established.‖Pineda was not authorized to enter into a contract to sell the property. As the consent of the real owner of the property was not obtained, no contract was perfected. Consequently, petitioner Duque failed to validly acquire the subject property. The petition is denied.
Cruz v. Bancom
EDILBERTO CRUZ and SIMPLICIO CRUZ, petitioners, vs. BANCOM FINANCE CORPORATION (NOW UNION BANK OF THE PHILIPPINES), respondent. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
828
[G.R. No. 147788. March 19, 2002, 3rd division] PANGANIBAN, J.: FACTS:Brothers Rev. Fr. Edilberto Cruz and Simplicio Cruz, plaintiffs herein, were the registered owners of a 339,335 square meter or 33.9335 hectare parcel of agricultural land together with improvements located in Angat, Bulacan.Sometime in May 1978, defendant Norma Sulit, after being introduced by Candelaria Sanchez to Fr. Cruz, offered to purchase the land. Plaintiffs‘ asking price for the land was P700,000.00, but Norma only had P25,000.00 which Fr. Cruz accepted as earnest money with the agreement that titles would be transferred to Norma upon payment of the balance of P675,000.00. Norma failed to pay the balance and proposed to Fr. Cruz to transfer the property to her but the latter refused, obviously because he had no reason to trust Norma. But capitalizing on the close relationship of Candelaria Sanchez with the plaintiffs, Norma succeeded in having the plaintiffs execute a document of sale of the land in favor of Candelaria who would then obtain a bank loan in her name using the plaintiffs‘ land as collateral. On the same day, Candelaria executed another Deed of Absolute Sale over the land in favor of Norma. In both documents, it appeared that the consideration for the sale of the land was only P150,000.00. Pursuant to the sale, Norma was able to effect the transfer of the title to the land in her name under TCT No. T-248262. Aside from the P150,000.00, Candelaria undertook to pay the plaintiffs the amount of P655,000.00 representing the balance of the actual price of the land. In a Special Agreement dated September 1, 1978, Norma assumed Candelaria‘s obligation, stipulating to pay the plaintiffs the said amount within six months on pain of fine or penalty in case of non-fulfillment. Unknown to the plaintiffs, Norma managed to obtain a loan from Bancom in the amount of P569,000.00 secured by a mortgage over the land now titled in her name. On account of Norma‘s failure to pay the amount stipulated in the Special Agreement and her subsequent disappearance from her usual address, plaintiffs were prompted to file the herein complaint for the reconveyance of the land. Norma filed an Answer on February 11, 1980 but failed to appear in court and was eventually declared in default. On May 20, 1980, Bancom filed a motion for leave to intervene which was granted by the trial court. In its Answer in Intervention, Bancom claimed priority as mortgagee in good faith; and that its contract of mortgage with Norma had been executed before the annotation of plaintiffs‘ interest in the title. Meanwhile in the middle of 1980, Norma defaulted in her payment to the Bank and her mortgage was foreclosed. At the subsequent auction sale, Bancom was declared the highest bidder and was issued the corresponding certificate of sale over the land. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
829
On January 25, 1996, the trial court rendered the herein assailed Decision in favor of the plaintiffs. It ruled that the contract of sale between plaintiffs and Candelaria was absolutely simulated. Consequently, the second contract of sale, that is, between Candelaria and Norma, produced no legal effect. As for Bancom, the trial court held that the Bank was not a mortgagee in good faith thus it can not claim priority of rights over plaintiffs‘ property. In reversing the RTC, the CA held that the Deeds of Sale were valid and binding, not simulated. Thus, the Contract of Mortgage between Sulit and respondent was likewise valid. Petitioners, the CA ruled, intended to be bound by the Contracts of Sale and Mortgage, because they ―did not seek to annul the same but instead executed a special agreement to enforce payment of the balance of the price in the amount of P665,000.00. Furthermore, it upheld respondent as a ―mortgagee in good faith;‖ ergo, it had a preferential right to the land. Hence, this Petition. ISSUES: (1) Whether or not the Deeds of Sale and Mortgage are valid. (2) Whether or not the mortgagee acted in good faith. HELD: (1) No. As a general rule, when the terms of a contract are clear and unambiguous about the intention of the contracting parties, the literal meaning of its stipulations shall control. But if the words appear to contravene the evident intention of the parties, the latter shall prevail over the former. The real nature of a contract may be determined from the express terms of the agreement, as well as from the contemporaneous and subsequent acts of the parties thereto. On the other hand, simulation takes place when the parties do not really want the contract they have executed to produce the legal effects expressed by its wordings. Simulation or vices of declaration may be either absolute or relative. Article 1345 of the Civil Code distinguishes an absolute simulation from a relative one while Article 1346 discusses their effects, as follows: Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter when the parties conceal their true agreement. Art. 1346. An absolutely simulated contract is void. A relative simulation, when it does not prejudice a third person and is not intended Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
830
for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their agreement.‖ Clearly, the Deeds of Sale were executed merely to facilitate the use of the property as collateral to secure a loan from a bank. Being merely a subterfuge, these agreements could not have been the source of any consideration for the supposed sales.Indeed, the execution of the two documents on the same day sustains the position of petitioners that the Contracts of Sale were absolutely simulated, and that they received no consideration therefor. The failure of Sulit to take possession of the property purportedly sold to her was a clear badge of simulation that rendered the whole transaction void and without force and effect, pursuant to Article 1409 of the Civil Code.The fact that she was able to secure a Certificate of Title to the subject property in her name did not vest her with ownership over it.A simulated deed of sale has no legal effect; consequently any transfer certificate of title (TCT) issued in consequence thereof should be cancelled. A simulated contract is not a recognized mode of acquiring ownership. (2) No. As a general rule, every person dealing with registered land may safely rely on the correctness of the certificate of title and is no longer required to look behind the certificate in order to determine the actual owner. To do so would be contrary to the evident purpose of Section 39 of Act 496 which we quote hereunder: Sec. 39. Every person receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land who takes a certificate of title for value in good faith shall hold the same free of all encumbrances except those noted on said certificate, and any of the following encumbrances which may be subsisting, namely: “First. Liens, claims, or rights arising or existing under the laws or Constitution of the United States or of the Philippine Islands which the statutes of the Philippine Islands cannot require to appear of record in the Registry. “Second. Taxes within two years after the same became due and payable. “Third. Any public highway, way, private way established by law, or any Government irrigation canal or lateral thereof, where the certificate of title does not state that the boundaries of such highway, way, or irrigation canal or lateral thereof, have been determined. But if there are easements or other rights appurtenant to a parcel of registered land which for any reason have failed to be registered, such easements or rights shall remain so appurtenant notwithstanding such failure, and shall be held to pass with the land until cut off or extinguished by the registration of the servient estate, or in any other manner.‖ Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
831
This rule is, however, subject to the right of a person deprived of land through fraud to bring an action for reconveyance, provided the rights of innocent purchasers for value and in good faith are not prejudiced. An innocent purchaser for value or any equivalent phrase shall be deemed, under Section 38 of the same Act, to include an innocent lessee, mortgagee or any other encumbrancer for value. Respondent, however, is not an ordinary mortgagee; it is a mortgageebank. As such, unlike private individuals, it is expected to exercise greater care and prudence in its dealings, including those involving registered lands. A banking institution is expected to exercise due diligence before entering into a mortgage contract.The ascertainment of the status or condition of a property offered to it as security for a loan must be a standard and indispensable part of its operations. The evidence before us indicates that respondent bank was not a mortgagee in good faith. First, at the time the property was mortgaged to it, it failed to conduct an ocular inspection.Judicial notice is taken of the standard practice for banks before they approve a loan.
Cuaton v. Salud
MANSUETO CUATON, petitioner, vs. REBECCA SALUD and COURT OF APPEALS (Special Fourteenth Division), respondents. (G.R. No. 158382, January 27, 2004, 1st Division) YNARES-SANTIAGO, J.: Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
832
FACTS:On January 5, 1993, respondent Rebecca Salud, joined by her husband Rolando Salud, instituted a suit for foreclosure of real estate mortgage with damages against petitioner Mansueto Cuaton and his mother, Conchita Cuaton, with the Regional Trial Court of General Santos City.The trial court rendered a decision declaring the mortgage constituted on October 31, 1991 as void, because it was executed by Mansueto Cuaton in favor of Rebecca Salud without expressly stating that he was merely acting as a representative of Conchita Cuaton, in whose name the mortgaged lot was titled. The court ordered petitioner to pay Rebecca Salud, inter alia, the loan secured by the mortgage in the amount of One Million Pesos plus a total P610,000.00 representing interests of 10% and 8% per month for the period February 1992 to August 1992. Both parties filed their respective notices of appeal. On August 31, 2001, the Court of Appeals rendered the assailed decision affirming the judgment of the trial court. Petitioner filed a motion for partial reconsideration of the trial court‘s decision with respect to the award of interest in the amount of P610,000.00, arguing that the same was iniquitous and exorbitant. This was denied by the Court of Appeals on May 7, 2003. Hence, the instant petition. ISSUE:Whether the 8% and 10% monthly interest rates imposed on the one-million-peso loan obligation of petitioner to respondent Rebecca Salud are valid. HELD:.In Ruiz v. Court of Appeals, we declared that the Usury Law was suspended by Central Bank Circular No. 905, s. 1982, effective on January 1, 1983, and that parties to a loan agreement have been given wide latitude to agree on any interest rate. However, nothing in the said Circular grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. The stipulated interest rates are illegal if they are unconscionable. Thus, in Medel v. Court of Appeals,10 and Spouses Solangon v. Salazar, the Court annulled a stipulated 5.5% per month or 66% per annum interest on a P500,000.00 loan and a 6% per month or 72% per annum interest on a P60,000.00 loan, respectively, for being excessive, iniquitous, unconscionable and exorbitant. In both cases, the interest rates were reduced to 12% per annum.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
833
In the present case, the 10% and 8% interest rates per month on the one-million-peso loan of petitioner are even higher than those previously invalidated by the Court in the above cases. Accordingly, the reduction of said rates to 12% per annum is fair and reasonable. Stipulations authorizing iniquitous or unconscionable interests are contrary to morals (‗contra bonos mores‘), if not against the law. Under Article 1409 of the Civil Code, these contracts are inexistent and void from the beginning. They cannot be ratified nor the right to set up their illegality as a defense be waived. The instant petition is GRANTED.
Infotech v. COMELEC
INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINES, MA. CORAZON M. AKOL, MIGUEL UY, EDUARDO H. LOPEZ, AUGUSTO C. LAGMAN, REX C. DRILON, MIGUEL HILADO, LEY Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
834
SALCEDO, and MANUEL ALCUAZ JR., petitioners, vs.COMMISSION ON ELECTIONS; COMELEC CHAIRMAN BENJAMIN ABALOS SR.; COMELEC BIDDING and AWARD COMMITTEE CHAIRMAN EDUARDO D. MEJOS and MEMBERS GIDEON DE GUZMAN, JOSE F. BALBUENA, LAMBERTO P. LLAMAS, and BARTOLOME SINOCRUZ JR.; MEGA PACIFIC eSOLUTIONS, INC.; and MEGA PACIFIC CONSORTIUM, respondents. (G.R. No. 159139 ,January 13, 2004, EN BANC) PANGANIBAN, J.: FACTS:On June 7, 1995, Congress passed Republic Act 8046, which authorized Comelec to conduct a nationwide demonstration of a computerized election system and allowed the poll body to pilot-test the system in the March 1996 elections in the Autonomous Region in Muslim Mindanao (ARMM). On December 22, 1997, Congress enacted Republic Act 84366 authorizing Comelec to use an automated election system (AES) for the process of voting, counting votes and canvassing/consolidating the results of the national and local elections. It also mandated the poll body to acquire automated counting machines (ACMs), computer equipment, devices and materials; and to adopt new electoral forms and printing materials. Initially intending to implement the automation during the May 11, 1998 presidential elections, Comelec -- in its Resolution No. 2985 dated February 9, 19987 -- eventually decided against full national implementation and limited the automation to the Autonomous Region in Muslim Mindanao (ARMM). However, due to the failure of the machines to read correctly some automated ballots in one town, the poll body later ordered their manual count for the entire Province of Sulu. In the May 2001 elections, the counting and canvassing of votes for both national and local positions were also done manually, as no additional ACMs had been acquired for that electoral exercise allegedly because of time constraints. On October 29, 2002, Comelec adopted in its Resolution 02-0170 a modernization program for the 2004 elections. It resolved to conduct biddings for the three (3) phases of its Automated Election System; namely, Phase I - Voter Registration and Validation System; Phase II Automated Counting and Canvassing System; and Phase III - Electronic Transmission. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
835
On January 24, 2003, President Gloria Macapagal-Arroyo issued Executive Order No. 172, which allocated the sum of P2.5 billion to fund the AES for the May 10, 2004 elections. Upon the request of Comelec, she authorized the release of an additional P500 million. On January 28, 2003, the Commission issued an "Invitation to Apply for Eligibility and to Bid. On February 17, 2003, the poll body released the Request for Proposal (RFP) to procure the election automation machines. The Bids and Awards Committee (BAC) of Comelec convened a pre-bid conference on February 18, 2003 and gave prospective bidders until March 10, 2003 to submit their respective bids. Among others, the RFP provided that bids from manufacturers, suppliers and/or distributors forming themselves into a joint venture may be entertained, provided that the Philippine ownership thereof shall be at least 60 percent.Joint venture is defined in the RFP as "a group of two or more manufacturers, suppliers and/or distributors that intend to be jointly and severally responsible or liable for a particular contract. Basically, the public bidding was to be conducted under a twoenvelope/two stage system. The bidder‘s first envelope or the Eligibility Envelope should establish the bidder‘s eligibility to bid and its qualifications to perform the acts if accepted. On the other hand, the second envelope would be the Bid Envelope itself. Out of the 57 bidders, the BAC found MPC and the Total Information Management Corporation (TIMC) eligible. For technical evaluation, they were referred to the BAC‘s Technical Working Group (TWG) and the Department of Science and Technology (DOST). In its Report on the Evaluation of the Technical Proposals on Phase II, DOST said that both MPC and TIMC had obtained a number of failed marks in the technical evaluation. Notwithstanding these failures, Comelec en banc, on April 15, 2003, promulgated Resolution No. 6074 awarding the project to MPC. The Commission publicized this Resolution and the award of the project to MPC on May 16, 2003. On May 29, 2003, five individuals and entities (including the herein Petitioners Information Technology Foundation of the Philippines, represented by its president, Alfredo M. Torres; and Ma. Corazon Akol) wrote a letter to Comelec Chairman Benjamin Abalos Sr. They protested the award of the Contract to Respondent MPC "due to glaring irregularities in the manner in which the bidding process had been conducted." Citing therein the noncompliance with eligibility as well as Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
836
technical and procedural requirements (many of which have been discussed at length in the Petition), they sought a re-bidding. In a letter-reply dated June 6, 2003, the Comelec chairman -speaking through Atty. Jaime Paz, his head executive assistant -rejected the protest and declared that the award "would stand up to the strictest scrutiny." Hence, the present Petition. ISSUE:Whether or not the contract is valid. HELD: Instead of one multilateral agreement executed by, and effective and binding on, all the five "consortium members" -- as earlier claimed by Commissioner Tuason in open court -- it turns out that what was actually executed were four (4) separate and distinct bilateral Agreements.42 Obviously, Comelec was furnished copies of these Agreements only after the bidding process had been terminated, as these were not included in the Eligibility Documents. These Agreements are as follows: · A Memorandum of Agreement between MPEI and SK C&C · A Memorandum of Agreement between MPEI and WeSolv · A "Teaming Agreement" between MPEI and Election.com Ltd. · A "Teaming Agreement" between MPEI and ePLDT In sum, each of the four different and separate bilateral Agreements is valid and binding only between MPEI and the other contracting party, leaving the other "consortium" members total strangers thereto. Under this setup, MPEI dealt separately with each of the "members," and the latter in turn had nothing to do with one another, each dealing only with MPEI. Respondents assert that these four Agreements were sufficient for the purpose of enabling the corporations to still qualify (even at that late stage) as a consortium or joint venture, since the first two Agreements had allegedly set forth the joint and several undertakings among the parties, whereas the latter two clarified the parties‘ respective roles with regard to the Project, with MPEI being the independent contractor and Election.com and ePLDT the subcontractors. Additionally, the use of the phrase "particular contract" in the Comelec‘s Request for Proposal (RFP), in connection with the joint and several liabilities of companies in a joint venture, is taken by them to mean that all the members of the joint venture need not be solidarily Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
837
liable for the entire project or joint venture, because it is sufficient that the lead company and the member in charge of a particular contract or aspect of the joint venture agree to be solidarily liable. At this point, it must be stressed most vigorously that the submission of the four bilateral Agreements to Comelec after the end of the bidding process did nothing to eliminate the grave abuse of discretion it had already committed on April 15, 2003. The Petition is GRANTED. nThe Court hereby declares NULL and VOID Comelec Resolution No. 6074 awarding the contract for Phase II of the AES to Mega Pacific Consortium (MPC). Also declared null and void is the subject Contract executed between Comelec and Mega Pacific eSolutions (MPEI). Comelec is furtherORDERED to refrain from implementing any other contract or agreement entered into with regard to this project.
Pabugais v. Sahijwan
TEDDY G. PABUGAIS, petitioner vs. DAVE P. SAHIJWANI, respondent. (G.R. No. 156846, February 23, 2004, 1st Division) YNARES-SANTIAGO, J.: Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
838
FACTS:Pursuant to an "Agreement And Undertaking" dated December 3, 1993, petitioner Teddy G. Pabugais, in consideration of the amount of Fifteen Million Four Hundred Eighty Seven Thousand Five Hundred Pesos (P15,487,500.00), agreed to sell to respondent Dave P. Sahijwani a lot containing 1,239 square meters located at Jacaranda Street, North Forbes Park, Makati, Metro Manila. Respondent paid petitioner the amount of P600,000.00 as option/reservation fee and the balance of P14,887,500.00 to be paid within 60 days from the execution of the contract, simultaneous with delivery of the owner‘s duplicate Transfer Certificate of Title in respondent‘s name the Deed of Absolute Sale; the Certificate of Non-Tax Delinquency on real estate taxes and Clearance on Payment of Association Dues. The parties further agreed that failure on the part of respondent to pay the balance of the purchase price entitles petitioner to forfeit the P600,000.00 option/reservation fee; while nondelivery by the latter of the necessary documents obliges him to return to respondent the said option/reservation fee with interest at 18% per annum, thus : 5. DEFAULT – In case the FIRST PARTY [herein respondent] fails to pay the balance of the purchase price within the stipulated due date, the sum of P600,000.00 shall be deemed forfeited, on the other hand, should the SECOND PARTY [herein petitioner] fail to deliver within the stipulated period the documents hereby undertaken, the SECOND PARTY shall return the sum of P600,000.00 with interest at 18% per annum. Petitioner failed to deliver the required documents. In compliance with their agreement, he returned to respondent the latter‘s P600,000.00 option/reservation fee by way of Far East Bank & Trust Company Check No. 25AO54252P, which was, however, dishonored. What transpired thereafter is disputed by both parties. Petitioner claimed that he twice tendered to respondent, through his counsel, the amount of P672,900.00 (representing the P600,000.00 option/reservation fee plus 18% interest per annum computed from December 3, 1993 to August 3, 1994) in the form of Far East Bank & Trust Company Manager‘s Check No. 088498, dated August 3, 1994, but said counsel refused to accept the same. His first attempt to tender payment was allegedly made on August 3, 1994 through his messenger;6 while the second one was on August 8, 1994, when he sent via DHL Worldwide Services, the manager‘s check attached to a letter dated August 5, 1994. On August 11, 1994, petitioner wrote a letter to respondent saying that he is consigning the amount tendered with the Regional Trial Court of Makati City. On August 15, 1994, petitioner filed a complaint for consignation. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
839
Respondent‘s counsel, on the other hand, admitted that his office received petitioner‘s letter dated August 5, 1994, but claimed that no check was appended thereto. He averred that there was no valid tender of payment because no check was tendered and the computation of the amount to be tendered was insufficient, because petitioner verbally promised to pay 3% monthly interest and 25% attorney‘s fees as penalty for default, in addition to the interest of 18% per annum on the P600,000.00 option/reservation fee. On November 29, 1996, the trial court rendered a decision declaring the consignation invalid for failure to prove that petitioner tendered payment to respondent and that the latter refused to receive the same. It further held that even assuming that respondent refused the tender, the same is justified because the manager‘s check allegedly offered by petitioner was not legal tender, hence, there was no valid tender of payment. The trial court ordered petitioner to pay respondent the amount of P600,000.00 with interest of 18% per annum from December 3, 1993 until fully paid, plus moral damages and attorney‘s fees. Petitioner appealed the decision to the Court of Appeals. Meanwhile, his counsel, Atty. Wilhelmina V. Joven, died and she was substituted by Atty. Salvador P. De Guzman, Jr. On December 20, 2001, petitioner executed a "Deed of Assignment" assigning in favor of Atty. De Guzman, Jr., part of the P672,900.00 consigned with the trial court as partial payment of the latter‘s attorney‘s fees. Thereafter, on January 7, 2002, petitioner filed an Ex Parte Motion to Withdraw Consigned Money.This was followed by a "Motion to Intervene" filed by Atty. De Guzman, Jr., praying that the amount consigned be released to him by virtue of the Deed of Assignment. Petitioner‘s motion to withdraw the amount consigned was denied by the Court of Appeals and the decision of the trial court was affirmed with modification as to the amount of moral damages and attorney‘s fees. On a motion for reconsideration, the Court of Appeals declared the consignation as valid in an Amended Decision dated January 16, 2003. It held that the validity of the consignation had the effect of extinguishing petitioner‘s obligation to return the option/reservation fee to respondent. Hence, petitioner can no longer withdraw the same. Unfazed, petitioner filed the instant petition for review contending, inter alia, that he can withdraw the amount deposited with the trial court as a matter of right because at the time he moved for the withdrawal Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
840
thereof, the Court of Appeals has yet to rule on the consignation‘s validity and the respondent had not yet accepted the same.
ISSUES: (1) Was there a valid consignation? (2) Can petitioner withdraw the amount consigned as a matter of right? HELD: YES. Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment. In order that consignation may be effective, the debtor must show that: (1) there was a debt due; (2) the consignation of the obligation had been made because the creditor to whom tender of payment was made refused to accept it, or because he was absent or incapacitated, or because several persons claimed to be entitled to receive the amount due or because the title to the obligation has been lost; (3) previous notice of the consignation had been given to the person interested in the performance of the obligation; (4) the amount due was placed at the disposal of the court; and (5) after the consignation had been made the person interested was notified thereof. Failure in any of these requirements is enough ground to render a consignation ineffective. The issues to be resolved in the instant case concerns one of the important requisites of consignation, i.e, the existence of a valid tender of payment. As testified by the counsel for respondent, the reasons why his client did not accept petitioner‘s tender of payment were – (1) the check mentioned in the August 5, 1994 letter of petitioner manifesting that he is settling the obligation was not attached to the said letter; and (2) the amount tendered was insufficient to cover the obligation. It is obvious that the reason for respondent‘s non-acceptance of the tender of payment was the alleged insufficiency thereof – and not because the said check was not tendered to respondent, or because it was in the form of manager‘s check. While it is true that in general, a manager‘s check is not legal tender, the creditor has the option of refusing or accepting it. Payment in check by the debtor may be acceptable as valid, if no prompt objection to said payment is made. Consequently, petitioner‘s tender of payment in the form of manager‘s check is valid. There being a valid tender of payment in an amount sufficient to extinguish the obligation, the consignation is valid. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
841
(2) NO. The amount consigned with the trial court can no longer be withdrawn by petitioner because respondent‘s prayer in his answer that the amount consigned be awarded to him is equivalent to an acceptance of the consignation, which has the effect of extinguishing petitioner‘s obligation. Moreover, petitioner failed to manifest his intention to comply with the "Agreement And Undertaking" by delivering the necessary documents and the lot subject of the sale to respondent in exchange for the amount deposited. Withdrawal of the money consigned would enrich petitioner and unjustly prejudice respondent. The withdrawal of the amount deposited in order to pay attorney‘s fees to petitioner‘s counsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil Code which forbids lawyers from acquiring by assignment, property and rights which are the object of any litigation in which they may take part by virtue of their profession. The instant petition for review is DENIED.
Liguez v. CA
CONCHITA LIGUEZ, petitioner, vs. THE HONORABLE COURT OF APPEALS, MARIA NGO VDA. DE LOPEZ, ET AL., respondents. (G.R. No. L-11240, December 18, 1957, EN BANC) REYES, J.B.L., J.: Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
842
FACTS: Petitioner-appellant Conchita Liguez filed a complaint against the widow and heirs of the late Salvador P. Lopez to recover a parcel of land. Liguez averred to be its legal owner, pursuant to a deed of donation of said land, executed in her favor by the late owner, Salvador P. Lopez. The defense interposed was that the donation was null and void for having an illicit causa or consideration, which was the plaintiff‘s entering into marital relations with Salvador P. Lopez, a married man; and that the property had been adjudicated to the appellees as heirs of Lopez by the court of First Instance.
ISSUE: WON the motive may be regarded predetermines the purpose of the contract.
as
causa
when
it
HELD: Yes. In the present case, it is scarcely disputable that Lopez would not have conveyed the property in question had he known that appellant would refuse to cohabit with him; so that the cohabitation was an implied condition to the donation, and being unlawful, necessarily tainted the donation itself.
Philbank v. Lui She
PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINIA SANTOS Y CANON FAUSTINO, deceased, plaintiff-appellant, vs. LUI SHE, in her own behalf and as administratrix of the intestate estate of Wong Heng, deceased,defendant-appellant. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
843
(G.R. No. L-17587 ,December 18, 1967, EN BANC) CASTRO, J.: FACTS: Justina Santos y Canon Faustino and her sister Lorenza were the owners in common of a piece of land in Manila. The sisters lived in one of the houses, while Wong Heng, a Chinese, lived with his family in the restaurant. Wong had been a long-time lessee of a portion of the property, having a monthly rental of P2,620. On September 22, 1957 Justina Santos became the owner of the entire property as her sister died with no other heir. Then already well advanced in years, being at the time 90 years old, blind, crippled and an invalid, she was left with no other relative to live with, but she was taken cared of by Wong. "In grateful acknowledgment of the personal services of the Lessee to her," Justina Santos executed on November 15, 1957, a contract of lease in favor of Wong, covering the portion then already leased to him and another portion fronting Florentino Torres street. The lease was for 50 years, although the lessee was given the right to withdraw at any time from the agreement; the monthly rental was P3,120. Ten days later (November 25), the contract was amended so as to make it cover the entire property, including the portion on which the house of Justina Santos stood, at an additional monthly rental of P360. On December 21 she executed contract giving Wong the option to buy the leased premises for P120,000, payable within ten years at a monthly installment of P1,000. The option was conditioned on his obtaining Philippine citizenship,a petition for which was then pending in the Court of First Instance of Rizal. On November 18, 1958 she executed two other contracts, one extending the term of the lease to 99 years, and another fixing the term of the option at 50 years. Both contracts are written in Tagalog. In two wills executed on August 24 and 29, 1959, she bade her legatees to respect the contracts she had entered into with Wong, but in a codicil of a later date (November 4, 1959) she appears to have a change of heart. Claiming that the various contracts were made by her because of machinations and inducements practised by him, she now directed her executor to secure the annulment of the contracts. Both parties however died, Wong Heng on October 21, 1962 and Justina Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
844
Santos on December 28, 1964. Wong was substituted by his wife, Lui She, the other defendant in this case, While Justina Santos was substituted by the Philippine Banking Corporation. Justina Santos maintained — now reiterated by the Philippine Banking Corporation — that the lease contract should have been annulled along with the four other contracts because it lacks mutuality, among others Paragraph 5 of the lease contract states that "The lessee may at any time withdraw from this agreement." It is claimed that this stipulation offends article 1308 of the Civil Code which provides that "the contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them."
ISSUES: 1. Was the insertion in the contract of a resolutory condition, permitting the cancellation of the contract by one of the parties, valid? 2. Was the contract between Wong (Lui She) and Justina Santos (Phil. Banking) enforceable?
HELD: 1. Yes. In the early case of Taylor vs. Uy Tiong Piao, the Supreme Court said: Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment to the insertion in a contract for personal service of a resolutory condition permitting the cancellation of the contract by one of the parties. Such a stipulation, as can be readily seen, does not make either the validity or the fulfillment of the contract dependent upon the will of the party to whom is conceded the privilege of cancellation; for where the contracting parties have agreed that such option shall exist, the exercise of the option is as much in the fulfillment of the contract as any other act which may have been the subject of agreement. Indeed, the cancellation of a contract in accordance with conditions agreed upon beforehand is fulfillment Further, in the case at bar, the right of the lessee to continue the lease or to terminate it was so circumscribed by the term of the contract that it cannot be said that the continuance of the lease depends upon his will. At any rate, even if no term had been fixed in the agreement, this case would at most justify the fixing of a period but not the annulment of the contract. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
2. No. The However, to so was an condition
845
contract of lease, as in this case, cannot be sustained. be sure, a lease to an alien for a reasonable period was valid, option giving an alien the right to buy real property on that he is granted Philippine citizenship.
But if an alien was given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it became clear that the arrangement was a virtual transfer of ownership whereby the owner divested himself in stages not only of the right to enjoy the land (jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right to dispose of it (jus disponendi) — rights the sum total of which make up ownership. It was just as if today the possession is transferred, tomorrow, the use, the next day, the disposition, and so on, until ultimately all the rights of which ownership is made up are consolidated in an alien. And yet this was just exactly what the parties in this case did within this pace of one year, with the result that Justina Santos' ownership of her property was reduced to a hollow concept. If this can be done, then the Constitutional ban against alien landholding in the Philippines, is indeed in grave peril. The contracts in question are annulled and set aside; the land subjectmatter of the contracts was ordered returned to the estate of Justina Santos as represented by the Philippine Banking Corporation.
Vigilar v. Aquino
GREGORIO R. VIGILAR, SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH), DPWH UNDERSECRETARIES TEODORO E. ENCARNACION AND EDMUNDO E. ENCARNACION AND EDMUNDO V. MIR, DPWH ASSISTANT Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
846
SECRETARY JOEL L. ALTEA, DPWH REGIONAL DIRECTOR VICENTE B. LOPEZ, DPWH DISTRICT ENGINEER ANGELITO M. TWAÑO, FELIX A. DESIERTO OF THE TECHNICAL WORKING GROUP VALIDATION AND AUDITING TEAM, AND LEONARDO ALVARO, ROMEO N. SUPAN, VICTORINO C. SANTOS OF THE DPWH PAMPANGA 2NDENGINEERING DISTRICT, Petitioners, - versus - ARNULFO D. AQUINO, Respondent. (G.R. No. 180388, January 18, 2011, EN BANC) SERENO, J.: FACTS: On 19 June 1992, petitioner Angelito M. Twaño, then Officer-inCharge (OIC)-District Engineer of the Department of Public Works and Highways (DPWH) 2nd Engineering District of Pampanga sent an Invitation to Bid to respondent Arnulfo D. Aquino, the owner of A.D. Aquino Construction and Supplies. The bidding was for the construction of a dike by bulldozing a part of the Porac River at Barangay AscomoPulungmasle, Guagua, Pampanga. Subsequently, on 7 July 1992, the project was awarded to respondent, and a ―Contract of Agreement‖ was thereafter executed between him and concerned petitioners for the amount of PhP1,873,790.69, to cover the project cost. By 9 July 1992, the project was duly completed by respondent, who was then issued a Certificate of Project Completion dated 16 July 1992. The certificate was signed by Romeo M. Yumul, the Project Engineer; as well as petitioner Romeo N. Supan, Chief of the Construction Section, and by petitioner Twaño. Respondent Aquino, however, claimed that PhP1,262,696.20 was still due him, but petitioners refused to pay the amount. He thus filed a Complaint for the collection of sum of money with damages before the Regional Trial Court of Guagua, Pampanga. The complaint was docketed as Civil Case No. 3137. Petitioners, for their part, set up the defense that the Complaint was a suit against the state; that respondent failed to exhaust administrative remedies; and that the ―Contract of Agreement‖ covering the project was void for violating Presidential Decree No. 1445, absent the proper appropriation and the Certificate of Availability of Funds. On 28 November 2003, the lower court ruled in favor of respondent. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
847
On appeal, the Court of Appeals reversed and set aside the Decision of the lower court and disposed that the ―CONTRACT AGREEMENT‖ entered into between the plaintiff-appellee‘s construction company, which he represented, and the government, through the Department of Public Works and Highway (DPWH) – Pampanga, is declared null and void ab initio. Dissatisfied with the Decision of the Court of Appeals, petitioners are now before this Court, seeking a reversal of the appellate court‘s Decision and a dismissal of the Complaint. ISSUE: whether or not the court of appeals erred in ordering the coa to allow payment to respondent on a quantum meruit basis despite the latter‘s failure to comply with the requirements of presidential decree no. 1445. HELD: In ordering the payment of the obligation due respondent on a quantum meruit basis, the Court of Appeals correctly relied on Royal Trust Corporation v. COA, Eslao v. COA, Melchor v. COA, EPG Construction Company v. Vigilar, and Department of Health v. C.V. Canchela & Associates, Architects. All these cases involved government projects undertaken in violation of the relevant laws, rules and regulations covering public bidding, budget appropriations, and release of funds for the projects. Consistently in these cases, this Court has held that the contracts were void for failing to meet the requirements mandated by law; public interest and equity, however, dictate that the contractor should be compensated for services rendered and work done. Specifically, C.V. Canchela & Associates is similar to the case at bar, in that the contracts involved in both cases failed to comply with the relevant provisions of Presidential Decree No. 1445 and the Revised Administrative Code of 1987. Nevertheless, ―(t)he illegality of the subject Agreements proceeds, it bears emphasis, from an express declaration or prohibition by law, not from any intrinsic illegality. As such, the Agreements are not illegal per se, and the party claiming there under may recover what had been paid or delivered.‖ Neither can petitioners escape the obligation to compensate respondent for services rendered and work done by invoking the state‘s immunity from suit. This Court has long established in Ministerio v. CFI of Cebu, and recently reiterated in Heirs of Pidacan v. ATO, that the doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice to a citizen. The Petition is DENIED for lack of merit.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
848
EPG Construction v. Vigilar
EPG CONSTRUCTION CO., CIPER ELECTRICAL & ENGINEERING, SEPTA CONSTRUCTION CO., PHIL. PLUMBING CO., HOME CONSTRUCTION INC., WORLD BUILDERS CO., GLASS WORLD INC., PERFORMANCE BUILDERS DEV'T. CO., DE LEON-ARANETA CONST. CO., J.D. MACAPAGAL CONST. CO., All represented by their Atty. IN FACT, MARCELO D, FORONDA, petitioners, vs.HON. GREGORIO R. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
849
VIGILAR, In His Capacity as Secretary of Public Works and Highways, respondent. (G.R. No. 131544 , March 16, 2001, 2nd Division) BUENA, J.: Facts:In 1983, the Ministry of Human Settlement entered into a Memorandum of Agreement (MOA) with the Ministry of Public Works and Highways, where the latter undertook to develop a housing project by the ministry and on the site construct thereon 145 housing units. By virtue of the MOA, the Ministry of Public Works and Highways forged individual contracts with herein petitioners EPG Construction Co., Ciper Electrical and Engineering, Septa Construction Co., Phil. Plumbing Co., Home Construction Inc., World Builders Inc., Glass World Inc., Performance Builders Development Co. and De Leon Araneta Construction Co., for the construction of the housing units. Under the contracts, the scope of construction and funding therefor covered only around ―2/3 of each housing unit.‖ After complying with the terms of said contracts, and by reason of the verbal request and assurance of then DPWH Undersecretary Aber Canlas that additional funds would be available and forthcoming, petitioners agreed to undertake and perform ―additional constructions‖ for the completion of the housing units, despite the absence of appropriations and written contracts to cover subsequent expenses for the ―additional constructions.‖ Petitioners received payment for what was originally stipulated. However, petitioners demanded payment for the unpaid balance of P5,918,315.63 constituting payment for the additional constructions which petitioners argued formed an implied contract. They claimed that payment should be based on the principle of quantum meruit. DPWH Secretary Gregorio Vigilar denied the subject money claims prompting herein petitioners to file before the Regional Trial Court of Quezon City, Branch 226, a Petition for Mandamus praying for payment. Issue:Are petitioners entitled to payment? HELD:Although the Court agreed with respondent‘s postulation that the ―implied contracts‖, which covered the additional constructions, are void, in view of violation of applicable laws, auditing rules and lack of legal requirements, it nonetheless find the instant petition laden with merit and uphold, in the interest of substantial justice, petitioners-contractors‘ right to be compensated for the "additional constructions" on the public works housing project, applying the principle of quantum meruit. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
850
To begin with, petitioners-contractors assented and agreed to undertake additional constructions for the completion of the housing units, believing in good faith and in the interest of the government and, in effect, the public in general, that appropriations to cover the additional constructions and completion of the public works housing project would be available and forthcoming. On this particular score, the records reveal that the verbal request and assurance of then DPWH Undersecretary Canlas led petitioners-contractors to undertake the completion of the government housing project, despite the absence of covering appropriations, written contracts, and certification of availability of funds, as mandated by law and pertinent auditing rules and issuances. To put it differently, the ―implied contracts,‖ declared void in this case, covered only the completion and final phase of construction of the housing units, which structures, concededly, were already existing, albeit not yet finished in their entirety at the time the ―implied contracts‖ were entered into between the government and the contractors.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
851
Go Chan v. Young Gochan vs. Young GR 131889, 12 March 2001 FACTS: Felix Gochan and Sons Realty Corporation (Gochan Realty) was registered with the SEC on June 1951, with Felix Gochan, Sr., Maria Pan Nuy Go Tiong, Pedro Gochan, Tomasa Gochan, Esteban Gochan and Crispo Gochan as its incorporators. Felix Gochan Sr.'s daughter, Alice inherited 50 shares of stock in Gochan Realty from the former. Alice died in 1955, leaving the 50 shares to her husband, John Young, Sr. In 1962, the Regional Trial Court of Cebu adjudicated 6/14 of these shares to her children, Richard Young, David Young, Jane Young Llaban, John Young Jr., Mary Young Hsu and Alexander Thomas Young (the Youngs). Having earned dividends, these stocks numbered 179 by 20 September 1979. 5 days later (25 September), at which time all the children had reached the age of majority, their father John Sr., requested Gochan Realty to partition the shares of his late wife by cancelling the stock certificates in his name and issuing in lieu thereof, new stock certificates in the names of the Youngs. On 17 October 1979, Gochan Realty refused, citing as reason, the right of first refusal granted to the remaining stockholders by the Articles of Incorporation. In 1990, John, Sr. died, leaving the shares to the Youngs. On 8 February 1994, Cecilia Gochan Uy and Miguel Uy filed a complaint with the SEC for issuance of shares of stock to the rightful owners, nullification of shares of stock, reconveyance of property impressed with trust, accounting, removal of officers and directors and damages against Virginia Gochan, et. al. (Gochans) A Notice of Lis Pendens was annotated to the real properties of the corporation. On 16 March 1994, the Gochans moved to dismiss the complaint alleging that: (1) the SEC had no jurisdiction over the nature of the action; (2) the the Youngs were not the real parties-in-interest and had no capacity to sue; and (3) the Youngs' causes of action were barred by the Statute of Limitations. The motion was opposed by the Youngs. On 29 March 1994, the Gochans filed a Motion for cancellation of Notice of Lis Pendens. The Youngs opposed the said motion. On 9 December 1994, the SEC, through its Hearing Officer, granted the motion to dismiss and ordered the cancellation of the notice of lis pendens annotated upon the titles of the corporate lands; holding that the Youngs never been stockholders of record of FGSRC to confer them with the legal capacity to bring and maintain their action, and thus, the case cannot be considered as an intra-corporate controversy within the jurisdiction of the SEC; and that on the allegation that the Youngs brought the action as a derivative suit on their own behalf and on behalf of Gochan Realty, rhe failure to comply with the jurisdictional requirement on derivative action necessarily result in the dismissal of the complaint. The Youngs filed a Petition for Review with the Court of Appeals. On 28 February 1996, the Court of Appeals ruled that the SEC had no jurisdiction over the case as far as the heirs of Alice Gochan were concerned, because they were not yet stockholders of the corporation. On the other hand, it upheld the capacity of Cecilia Gochan Uy and her spouse Miguel Uy. It also held that the Intestate Estate of John Young Sr. was an Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
852
indispensable party. The appellate court further ruled that the cancellation of the notice of lis pendens on the titles of the corporate real estate was not justified. Moreover, it declared that the Youngs' Motion for Reconsideration before the SEC was not pro forma; thus, its filing tolled the appeal period. The Gochans moved for reconsideration but were denied in a Resolution dated 18 December 1997. The Gochans filed the Petition for Review on Certiorari.
ISSUE: Whether the action filed by the Spouses Uy was not a derivative suit, because the spouses and not the corporation were the injured parties.
HELD: The following portions of the Complaint shows allegations of injury to the corporation itself, to wit: "That on information and belief, in further pursuance of the said conspiracy and for the fraudulent purpose of depressing the value of the stock of the Corporation and to induce the minority stockholders to sell their shares of stock for an inadequate consideration as aforesaid, respondent Esteban T. Gochan . . ., in violation of their duties as directors and officers of the Corporation . . ., unlawfully and fraudulently appropriated [for] themselves the funds of the Corporation by drawing excessive amounts in the form of salaries and cash advances . . . and by otherwise charging their purely personal expenses to the Corporation"; and "That the payment of P1,200,000.00 by the Corporation to complainant Cecilia Gochan Uy for her shares of stock constituted an unlawful, premature and partial liquidation and distribution of assets to a stockholder, resulting in the impairment of the capital of the Corporation and prevented it from otherwise utilizing said amount for its regular and lawful business, to the damage and prejudice of the Corporation, its creditors, and of complainants as minority stockholders." As early as 1911, the Court has recognized the right of a single stockholder to file derivative suits. "Where corporate directors have committed a breach of trust either by their frauds, ultra vires acts, or negligence, and the corporation is unable or unwilling to institute suit to remedy the wrong, a single stockholder may institute that suit, suing on behalf of himself and other stockholders and for the benefit of the corporation, to bring about a redress of the wrong done directly to the corporation and indirectly to the stockholders." Herein, the Complaint alleges all the components of a derivative suit. The allegations of injury to the Spouses Uy can coexist with those pertaining to the corporation. The personal injury suffered by the spouses cannot disqualify them from filing a derivative suit on behalf of the corporation. It merely gives rise to an additional cause of action for damages against the erring directors. This cause of action is also included in the Complaint filed before the SEC. The Spouses Uy have the capacity to file a derivative suit in behalf of and for the benefit of the corporation. The reason is that the allegations of the Complaint make them out as stockholders at the time the questioned transaction occurred, as well as at the time the action was filed and during the pendency of the action. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
853
Francisco v. Herrera JULIAN FRANCISCO (Substituted by his Heirs, namely: CARLOS ALTEA FRANCISCO; the heirs of late ARCADIO FRANCISCO, namely: CONCHITA SALANGSANG-FRANCISCO (surviving spouse), and his children namely: TEODULO S. FRANCISCO, EMILIANO S. FRANCISCO, MARIA THERESA S. FRANCISCO, PAULINA S. FRANCISCO, THOMAS S. FRANCISCO; PEDRO ALTEA FRANCISCO; CARINA FRANCISCO-ALCANTARA; EFREN ALTEA FRANCISCO; DOMINGA LEA FRANCISCO-REGONDON; BENEDICTO ALTEA FRANCISCO and ANTONIO ALTEA FRANCISCO), petitioner, vs. PASTOR HERRERA, respondent., G.R. No. 139982, 2002 Nov 21, 2nd Division) QUISUMBING, J.: FACTS: Eligio Herrera, Sr., the father of respondent, was the owner of two parcels of land. Petitioner bought from said landowner the first parcel for the price of P1,000,000, paid in installments, and the second parcel of land for P750,000. Contending that the contract price for the two parcels of land was grossly inadequate, the children of Eligio, Sr., tried to negotiate with petitioner to increase the purchase price. When petitioner refused, herein respondent then filed a complaint for annulment of sale. Trial court ruled in favor of respondents, which was affirmed by the Court of Appeals. Hence, a petition for review was filed.
ISSUE: Whether or not the contract is prohibited and, thus, is void.
HELD: A void or inexistent contract is one which has no force and effect from the very beginning. Hence, it is as if it has never been entered into and cannot be validated either by the passage of time or by ratification. There are two types of void contracts: (1) those where one of the essential requisites of a valid contract as provided for by Article 1318[10] of the Civil Code is totally wanting; and (2) those declared to be so under Article 1409[11] of the Civil Code. By contrast, a voidable or annullable contract is one in which the essential requisites for validity under Article 1318 are present, but vitiated by want of capacity, error, violence, intimidation, undue influence, or deceit. Article 1318 of the Civil Code states that no contract exists unless there is a concurrence of consent of the parties, object certain as subject matter, and cause of the obligation established. Article 1327 provides that insane or demented persons cannot give consent to a contract. But, if an insane or demented person does enter into a contract, the legal effect is that the contract is voidable or annullable as specifically provided in Article 1390. In the present case, it was established that the vendor Eligio, Sr. entered into an agreement with petitioner, but that the former‘s capacity to consent was vitiated by senile dementia. Hence, we must rule that the assailed contracts are not void or inexistent per se; rather, these are contracts that are Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
854
valid and binding unless annulled through a proper action filed in court seasonably. Implied ratification may take the form of accepting and retaining the benefits of a contract.[13] This is what happened in this case. Respondent‘s contention that he merely received payments on behalf of his father merely to avoid their misuse and that he did not intend to concur with the contracts is unconvincing. If he was not agreeable with the contracts, he could have prevented petitioner from delivering the payments, or if this was impossible, he could have immediately instituted the action for reconveyance and have the payments consigned with the court. None of these happened. As found by the trial court and the Court of Appeals, upon learning of the sale, respondent negotiated for the increase of the purchase price while receiving the installment payments. It was only when respondent failed to convince petitioner to increase the price that the former instituted the complaint for reconveyance of the properties. Clearly, respondent was agreeable to the contracts, only he wanted to get more. Further, there is no showing that respondent returned the payments or made an offer to do so. This bolsters the view that indeed there was ratification. One cannot negotiate for an increase in the price in one breath and in the same breath contend that the contract of sale is void. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
855
Mendezona v. Ozamiz MARIO J. MENDEZONA and TERESITA M. MENDEZONA, LUIS J. MENDEZONA and MARICAR L. MENDEZONA and TERESITA ADAD VDA. DE MENDEZONA, petitioners, versus, JULIO H. OZAMIZ, ROBERTO J. MONTALVAN, JOSE MA. OZAMIZ, CARMEN H. OZAMIZ, PAZ O. MONTALVAN, MA. TERESA O.F. ZARRAGA, CARLOS O. FORTICH, JOSE LUIS O. ROS, PAULITA O. RODRIGUEZ, and LOURDES O. LON, respondents. (G.R. No. 143370, 2002 February 6, 2ND Division) DE LEON, JR., J.: FACTS: Carmen Ozamiz sold to her nephews, Mario, Antonio and Luis Mendezona three parcels of residential land in Cebu City, per a Deed of Absolute Sale in 1989 for a consideration of P1,040,000.00, where a partition agreement was entered into by the three vendees, where the usufructuary rights was reserved to the vendor Carmen Ozamiz during her lifetime. The transfer was duly authorized by the Bureau of Internal Revenue for the Register of Deeds to transfer the property to the vendees. It appears that on January 15, 1991, the respondents instituted the petition for guardianship with the Regional Trial Court of Oroquieta City, alleging therein that Carmen Ozamiz, then 86 years old, after an illness in July 1987, had become disoriented and could not recognize most of her friends; that she could no longer take care of herself nor manage her properties by reason of her failing health, weak mind and absent-mindedness. Thus, Paz O. Montalvan was designated as guardian over the person of Carmen Ozamiz while petitioner Mario J. Mendezona, respondents Roberto J. Montalvan and Julio H. Ozamiz were designated as joint guardians over the properties of the said ward. Inventories and Accounts, listing therein Carmen Ozamiz‘s properties, cash, shares of stock, vehicles and fixed assets, including a 10,396 square meter property known as the Lahug property was filed by Roberto Montalvan and Julio Osamis. Said Lahug property is the same property covered by the Deed of Absolute Sale executed by Carmen Ozamiz in favor of the petitioners. This caused the inscription on the titles of petitioners a notice of lis pendens giving rise to the suit. Carmen Ozamiz granted Mario Mendezona a General Power of Attorney on August 11, 1990 to relate to the administration of the property. The Regional trial court favored the petitioners, thus, declaring the Deed of Sale valid. Court of Appeals reversed RTC decision, hence, this petition. ISSUE: Whether or not the deed of sale contracted by Carmen Ozamis is valid. HELD: Yes, the Supreme Court held that the contract entered into by Carmen Ozamis is valid for the reason that there are nine other important documents that were, signed by Carmen Ozamiz either before or after April 28, 1989 which is contrary to their assertion of complete incapacity of Carmen Ozamiz to handle her affairs since 1987. Moreover, a person is presumed to be of sound mind at any particular time and the condition is presumed to continue to exist, in the absence of proof to the contrary. Competency and freedom from undue influence, shown to have existed in the other acts done or contracts executed, are presumed to continue until the contrary is shown, wherefore, the RTC decision is reinstated. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
856
Manzanilla v. Court of Appeals SPOUSES CELEDONIO MANZANILLA and DOLORES FUERTE, and INES CARPIO, petitioners, vs. HON. COURT OF APPEALS and JUSTINA CAMPO, respondents., G.R. No. 75342, 1990 Mar 15, 1st Division) MEDIALDEA, J.: FACTS: Spouses Celedonio and Dolores Manzanilla (spouses Manzanilla) sold on installment an undivided one-half portion of their residential house and lot. At the time of the sale, the said property was mortgaged to the Government Service Insurance System (GSIS), which fact was known to the vendees, spouses Magdaleno and Justina Campo. The Campo spouses took possession of the premises upon payment of the first installment on April 17, 1963 and up to the present. Some payments were made to petitioners while some were made directly to GSIS. The GSIS filed its application to foreclose the mortgage on the property for failure of the Manzanilla spouses to pay their monthly amortizations. The property was sold at public auction where GSIS was the highest bidder. Two months before the expiration of the period to the Manzanilla spouses executed a Deed of Absolute Sale the undivided one half portion of their property in favor of the Campo spouses. Upon the expiration of the period to redeem without the Manzanilla spouses exercising their right of redemption, title to the property was consolidated in favor of the GSIS and a new title (TCT No. 135031) issued in its name. The Manzanilla spouses made representations and succeeded in reacquiring the property from the GSIS. Upon full payment of the purchase price, an Absolute Deed of Sale was executed by GSIS in favor of the Manzanilla spouses. Upon registration thereof, a new certificate of title (TCT No.-188293) in the name of the Manzanilla spouses was issued by the Register of Deeds of Quezon City. Manzanilla spouses mortgaged the property to the Biñan Rural Bank. petitioner Ines Carpio purchased the property from the Manzanilla spouses and agreed to assume the mortgage in favor of Biñan Rural Bank. private respondent Justina Campo registered her adverse claim over TCT No. 188293 with the Register of Deeds of Quezon City. petitioner Ines Carpio filed an ejectment case against private respondent Justina Campo. On the other hand, private respondent Justina Campo (already a widow) filed a complaint for quieting of title against the Manzanilla spouses and Ines Carpio. Trial court ruled in favor of private respondent, which the Court of Appeals affirmed. Hence, petition for review was filed. ISSUE: Whether or not petitioners Manzanillas are under any legal duty to reconvey the undivided one-half portion of the property to private respondent Justina Campo. HELD: If it were true that petitioners deliberately allowed the loan to lapse and the mortgage to be foreclosed, We do not see how these circumstances can be utilized by them to their advantage. There was no guarantee that petitioners would be able to redeem the property in the event the mortgage thereon was foreclosed as in fact they failed to redeem because they had no money. On the other hand, had they opted to eventually exercise their right of redemption after foreclosure, they would be under a legal duty to convey one-half portion thereof sold to the Campo spouses because by then, title to the property would still be in their name. Either way, petitioners were bound to lose either the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
857
entire property in case of failure to redeem or the one-half portion thereof sold to private respondent in the case of redemption. Further, should petitioners let the period of redemption lapse without exercising the right of redemption, as what happened in this case, there was no guarantee that the same could be reacquired by them from GSIS nor would GSIS be under any legal duty to resell the property to them. There may be a moral duty on the part of petitioners to convey the onehalf portion of the property previously sold to private respondents. However, they are under no legal obligation to do so. Hence, the action to quiet title filed by private respondent must fail. Justice is done according to law. As a rule, equity follows the law. There may be a moral obligation, often regarded as an equitable consideration (meaning compassion), but if there is no enforceable legal duty, the action must fail although the disadvantaged party deserves commiseration or sympathy. There was neither mistake nor fraud on the part of petitioners when the subject property was re-acquired from the GSIS. The fact that they previously sold one-half portion thereof has no more significance in this re-acquisition. Private respondent's right over the one-half portion was obliterated when absolute ownership and title passed on to the GSIS after the foreclosure sale. The property as held by GSIS had a clean title. The property that was passed on to petitioners retained that quality of title. As regards the rights of private respondent Ines Carpio, she is a buyer in good faith and for value. There was no showing that at the time of the sale to her of the subject property, she knew of any lien on the property except the mortgage in favor of the Biñan Rural Bank. No other lien was annotated on the certificate of title. She is also not required by law to go beyond what appears on the face of the title. When there is nothing on the certificate of title to indicate any cloud or vice in the ownership of the property or any encumbrances thereon, the purchaser is not required to explore further than what the Torrens Title upon its face indicates in quest for any hidden defect or inchoate right thereof. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
858
Rural Bank of Paranaque v. Remolado RURAL BANK OF PARAÑAQUE, INC., petitioner, vs. ISIDRA REMOLADO and COURT OF APPEALS, respondents., G.R. No. L-62051, 1985 Mar 18, 2nd Division) AQUINO, J.: FACTS: Isidra Remolado owned a lot with a bungalow which she mortgaged to the Rural Bank of Parañaque, Inc. as security for a loan of P15,000. She paid the loan. She mortgaged it again to the bank. She eventually secured loans totaling P18,000. The loans become overdue. The bank foreclosed the mortgage and bought the property at the foreclosure sale for P22,192.70. 14 days before the expiration of the one-year redemption period, the bank gave her a statement showing that she should pay P25,491.96 for the redemption of the property on August 23. No redemption was made on that date. Bank consolidated its ownership over the property. Remolado's title was cancelled. A new title was issued to the bank. The bank gave Remolado 37 days, within which to repurchase (not redeem since the period of redemption had expired) the property. The bank did not specify the price. Remolado and her daughter, Patrocinio Gomez, promised to pay the bank P33,000 on October 31 for the repurchase of the property. Contrary to her promise, Remolado did not repurchase the property. Five days later, Remolado and her daughter delivered P33,000 cash to the bank's assistant manager as repurchase price. The amount was returned to them the next day. The assistant manager had no intention of receiving the money. It was just left with her by Remolado. At that time, the bank was no longer willing to allow the repurchase. Remolado filed an action to compel the bank to reconvey the property to her for P25,491.96 plus interest and other charges and to pay P35,000 as damages. The repurchase price was not consigned. A notice of lis pendens was registered. the bank sold the property to Pilar Aysip for P50,000. A new title was issued to Aysip with an annotation of lis pendens. The trial court ordered the bank to return the property to Remolado upon payment of the redemption price of P25,491.96 plus interest and other bank charges and to pay her P15,000 as damages. The Appellate Court affirmed the judgment. Hence, appeal was filed. ISSUE: Whether or not the bank is in good faith. HELD: Justice is done according to law. As a rule, equity follows the law. There may be a moral obligation, often regarded as an equitable consideration (meaning compassion), but if there is no enforceable legal duty, the action must fail although the disadvantaged party deserves commiseration or sympathy. The choice between what is legally just and what is morally just, when these two options do not coincide, is explained by Justice Moreland in Vales vs. Villa, 35 Phil. 769, 788 where he said: "Courts operate not because one person has been defeated or overcome by another, but because he has been defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and lose Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
859
money by them - indeed, all they have in the world; but not for that alone can the law intervene and restore. There must be, in addition, a violation of law, the commission of what the law knows as an actionable wrong before the courts are authorized to lay hold of the situation and remedy it." In the instant case, the bank acted within its legal rights when it refused to give Remolado any extension to repurchase after October 31, 1973. It had given her about two years to liquidate her obligation. She failed to do so. Petition granted; judgment reversed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
860
Republic v. Cojuangco REPUBLIC OF THE PHILIPPINES, Petitioner, - versus SANDIGANBAYAN (FIRST DIVISION), EDUARDO M. COJUANGCO, JR., AGRICULTURAL CONSULTANCY SERVICES, INC., ARCHIPELAGO REALTY CORP., BALETE RANCH, INC., BLACK STALLION RANCH, INC., CHRISTENSEN PLANTATION COMPANY, DISCOVERY REALTY CORP., DREAM PASTURES, INC., ECHO RANCH, INC., FAR EAST RANCH, INC., FILSOV SHIPPING COMPANY, INC., FIRST UNITED TRANSPORT, INC., HABAGAT REALTY DEVELOPMENT, INC., KALAWAKAN RESORTS, INC., KAUNLARAN AGRICULTURAL CORP., LABAYUG AIR TERMINALS, INC., LANDAIR INTERNATIONAL MARKETING CORP., LHL CATTLE CORP., LUCENA OIL FACTORY, INC., MEADOW LARK PLANTATIONS, INC., METROPLEX COMMODITIES, INC., MISTY MOUNTAIN AGRICULTURAL CORP., NORTHEAST CONTRACT TRADERS, INC., NORTHERN CARRIERS CORP., OCEANSIDE MARITIME ENTERPRISES, INC., ORO VERDE SERVICES, INC., PASTORAL FARMS, INC., PCY OIL MANUFACTURING CORP., PHILIPPINE TECHNOLOGIES, INC., PRIMAVERA FARMS, INC., PUNONG-BAYAN HOUSING DEVELOPMENT CORP., PURA ELECTRIC COMPANY, INC., RADIO AUDIENCE DEVELOPERS INTEGRATED ORGANIZATION, INC., RADYO PILIPINO CORP., RANCHO GRANDE, INC., REDDEE DEVELOPERS, INC., SAN ESTEBAN DEVELOPMENT CORP., SILVER LEAF PLANTATIONS, INC., SOUTHERN SERVICE TRADERS, INC., SOUTHERN STAR CATTLE CORP., SPADE ONE RESORTS CORP., UNEXPLORED LAND DEVELOPERS, INC., VERDANT PLANTATIONS, INC., VESTA AGRICULTURAL CORP. AND WINGS RESORTS CORP., Respondents. x--------------------------x REPUBLIC OF THE PHILIPPINES, Petitioner, - versus SANDIGANBAYAN (FIRST DIVISION), EDUARDO M. COJUANGCO, JR., MEADOW LARK PLANTATIONS, INC., SILVER LEAF PLANTATIONS, INC., PRIMAVERA FARMS, INC., PASTORAL FARMS, INC., BLACK STALLION RANCH, INC., MISTY MOUNTAINS AGRICULTURAL CORP., ARCHIPELAGO REALTY CORP., AGRICULTURAL CONSULTANCY SERVICES, INC., SOUTHERN STAR CATTLE CORP., LHL CATTLE CORP., RANCHO GRANDE, INC., DREAM PASTURES, INC., FAR EAST RANCH, INC., ECHO RANCH, INC., LAND AIR INTERNATIONAL MARKETING CORP., REDDEE Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
861
DEVELOPERS, INC., PCY OIL MANUFACTURING CORP., LUCENA OIL FACTORY, INC., METROPLEX COMMODITIES, INC., VESTA AGRICULTURAL CORP., VERDANT PLANTATIONS, INC., KAUNLARAN AGRICULTURAL CORP., ECJ & SONS AGRICULTURAL ENTERPRISES, INC., RADYO PILIPINO CORP., DISCOVERY REALTY CORP., FIRST UNITED TRANSPORT, INC., RADIO AUDIENCE DEVELOPERS INTEGRATED ORGANIZATION, INC., ARCHIPELAGO FINANCE AND LEASING CORP., SAN ESTEBAN DEVELOPMENT CORP., CHRISTENSEN PLANTATION COMPANY, NORTHERN CARRIERS CORP., VENTURE SECURITIES, INC., BALETE RANCH, INC., ORO VERDE SERVICES, INC., and KALAWAKAN RESORTS, INC., Respondents. x--------------------------x REPUBLIC OF THE PHILIPPINES, Petitioner, - versus EDUARDO M. COJUANGCO, JR., FERDINAND E. MARCOS, IMELDA R. MARCOS, EDGARDO J. ANGARA,* JOSE C. CONCEPCION, AVELINO V. CRUZ, EDUARDO U. ESCUETA, PARAJA G. HAYUDINI, JUAN PONCE ENRILE, TEODORO D. REGALA, DANILO URSUA, ROGELIO A. VINLUAN, AGRICULTURAL CONSULTANCY SERVICES, INC., ANGLO VENTURES, INC., ARCHIPELAGO REALTY CORP., AP HOLDINGS, INC., ARC INVESTMENT, INC., ASC INVESTMENT, INC., AUTONOMOUS DEVELOPMENT CORP., BALETE RANCH, INC., BLACK STALLION RANCH, INC., CAGAYAN DE ORO OIL COMPANY, INC., CHRISTENSEN PLANTATION COMPANY, COCOA INVESTORS, INC., DAVAO AGRICULTURAL AVIATION, INC., DISCOVERY REALTY CORP., DREAM PASTURES, INC., ECHO RANCH, INC., ECJ & SONS AGRI. ENT., INC., FAR EAST RANCH, INC., FILSOV SHIPPING COMPANY, INC., FIRST MERIDIAN DEVELOPMENT, INC., FIRST UNITED TRANSPORT, INC., GRANEXPORT MANUFACTURING CORP., HABAGAT REALTY DEVELOPMENT, INC., HYCO AGRICULTURAL, INC., ILIGAN COCONUT INDUSTRIES, INC., KALAWAKAN RESORTS, INC., KAUNLARAN AGRICULTURAL CORP., LABAYOG AIR TERMINALS, INC., LANDAIR INTERNATIONAL MARKETING CORP., LEGASPI OIL COMPANY, LHL CATTLE CORP., LUCENA OIL FACTORY, INC., MEADOW LARK PLANTATIONS, INC., METROPLEX COMMODITIES, INC., MISTY MOUNTAIN AGRICULTURAL CORP., NORTHEAST CONTRACT TRADERS, INC., NORTHERN CARRIERS CORP., OCEANSIDE MARITIME ENTERPRISES, INC., ORO VERDE SERVICES, INC., PASTORAL FARMS, INC., PCY OIL MANUFACTURING CORP., PHILIPPINE RADIO CORP., INC., PHILIPPINE TECHNOLOGIES, INC., PRIMAVERA FARMS, INC., PUNONGBAYAN HOUSING DEVELOPMENT CORP., PURA ELECTRIC COMPANY, INC., RADIO AUDIENCE DEVELOPERS INTEGRATED ORGANIZATION, INC., RADYO PILIPINO CORP., RANCHO GRANDE, INC., RANDY ALLIED VENTURES, INC., REDDEE DEVELOPERS, INC., ROCKSTEEL RESOURCES, INC., ROXAS SHARES, INC., SAN ESTEBAN DEVELOPMENT CORP., SAN MIGUEL CORPORATION OFFICERS, INC., SAN PABLO MANUFACTURING Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
862
CORP., SOUTHERN LUZON OIL MILLS, INC., SILVER LEAF PLANTATIONS, INC., SORIANO SHARES, INC., SOUTHERN SERVICE TRADERS, INC., SOUTHERN STAR CATTLE CORP., SPADE 1 RESORTS CORP., TAGUM AGRICULTURAL DEVELOPMENT CORP., TEDEUM RESOURCES, INC., THILAGRO EDIBLE OIL MILLS, INC., TODA HOLDINGS, INC., UNEXPLORED LAND DEVELOPERS, INC., VALHALLA PROPERTIES, INC., VENTURES SECURITIES, INC., VERDANT PLANTATIONS, INC., VESTA AGRICULTURAL CORP. and WINGS RESORTS CORP., Respondents. x------------------------x JOVITO R. SALONGA, WIGBERTO E. TAÑADA, OSCAR F. SANTOS, VIRGILIO M. DAVID, ROMEO C. ROYANDAYAN for himself and for SURIGAO DEL SUR FEDERATION OF AGRICULTURAL COOPERATIVES (SUFAC), MORO FARMERS ASSOCIATION OF ZAMBOANGA DEL SUR (MOFAZS) and COCONUT FARMERS OF SOUTHERN LEYTE COOPERATIVE (COFA-SL); PHILIPPINE RURAL RECONSTRUCTION MOVEMENT (PRRM), represented by CONRADO S. NAVARRO; COCONUT INDUSTRY REFORM MOVEMENT, INC. (COIR) represented by JOSE MARIE T. FAUSTINO; VICENTE FABE for himself and for PAMBANSANG KILUSAN NG MGA SAMAHAN NG MAGSASAKA (PAKISAMA); NONITO CLEMENTE for himself and for the NAGKAKAISANG UGNAYAN NG MGA MALILIIT NA MAGSASAKA AT MANGGAGAWA SA NIYUGAN (NIUGAN); DIONELO M. SUANTE, SR. for himself and for KALIPUNAN NG MALILIIT NA MAGNINIYOG NG PILIPINAS (KAMMPIL), INC., Petitioners-Intervenors. G.R. No. 166859; G.R. No. 169203; G.R. No. 180702 April 12, 2011 BERSAMIN, J.: FACTS: These cases are consolidated complaints. For over two decades, the issue of whether the sequestered sizable block of shares representing 20% of the outstanding capital stock of San Miguel Corporation (SMC) at the time of acquisition belonged to their registered owners or to the coconut farmers has remained unresolved. Through this decision, the Court aims to finally resolve the issue and terminate the uncertainty that has plagued that sizable block of shares since then. Allegedly, Cojuangco purchased a block of 33,000,000 shares of SMC stock through the 14 holding companies owned by the CIIF Oil Mills. For this reason, the block of 33,133,266 shares of SMC stock shall be referred to as the CIIF block of shares. Several parties intervene. Several motions and amendments took place. Consequently, on March 1, 2001, the Sandiganbayan issued a writ of preliminary injunction to enjoin the PCGG from voting the sequestered shares of stock of the UCPB. ISSUE: Whether or not there exists a trust relationship. HELD: The conditions for the application of Articles 1455 and 1456 of the Civil Code (like the trustee using trust funds to purchase, or a person acquiring property through mistake or fraud), and Section 31 of the Corporation Code (like a director or trustee willfully and knowingly voting for or assenting to patently unlawful acts of the corporation, among others) require factual Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
863
foundations to be first laid out in appropriate judicial proceedings. Hence, concluding that Cojuangco breached fiduciary duties as an officer and member of the Board of Directors of the UCPB without competent evidence thereon would be unwarranted and unreasonable. Thus, the Sandiganbayan could not fairly find that Cojuangco had committed breach of any fiduciary duties as an officer and member of the Board of Directors of the UCPB. For one, the Amended Complaint contained no clear factual allegation on which to predicate the application of Articles 1455 and 1456 of the Civil Code, and Section 31 of the Corporation Code. Although the trust relationship supposedly arose from Cojuangco‘s being an officer and member of the Board of Directors of the UCPB, the link between this alleged fact and the borrowings or advances was not established. Nor was there evidence on the loans or borrowings, their amounts, the approving authority, etc. As trial court, the Sandiganbayan could not presume his breach of fiduciary duties without evidence showing so, for fraud or breach of trust is never presumed, but must be alleged andproved.[128] The thrust of the Republic that the funds were borrowed or lent might even preclude any consequent trust implication. In a contract of loan, one of the parties (creditor) delivers money or other consumable thing to another (debtor) on the condition that the same amount of the same kind and quality shall be paid.[129] Owing to the consumable nature of the thing loaned, the resulting duty of the borrower in a contract of loan is to pay, not to return, to the creditor or lender the very thing loaned. This explains why the ownership of the thing loaned is transferred to the debtor upon perfection of the contract.[130] Ownership of the thing loaned having transferred, the debtor enjoys all the rights conferred to an owner of property, including the right to use and enjoy (jus utendi), to consume the thing by its use (jus abutendi), and to dispose (jus disponendi), subject to such limitations as may be provided by law.[131] Evidently, the resulting relationship between a creditor and debtor in a contract of loan cannot be characterized as fiduciary.[132] To say that a relationship is fiduciary when existing laws do not provide for such requires evidence that confidence is reposed by one party in another who exercises dominion and influence. Absent any special facts and circumstances proving a higher degree of responsibility, any dealings between a lender and borrower are not fiduciary in nature.[133] This explains why, for example, a trust receipt transaction is not classified as a simple loan and is characterized as fiduciary, because the Trust Receipts Law (P.D. No. 115) punishes the dishonesty and abuse of confidence in the handling of money or goods to the prejudice of another regardless of whether the latter is the owner.[134] Based on the foregoing, a debtor can appropriate the thing loaned without any responsibility or duty to his creditor to return the very thing that was loaned or to report how the proceeds were used. Nor can he be compelled to return the proceeds and fruits of the loan, for there is nothing under our laws that compel a debtor in a contract of loan to do so. As owner, the debtor can dispose of the thing borrowed and his act will not be considered misappropriation of the thing.[135] The only liability on his part is to pay the loan together with the interest that is either stipulated or provided under existing laws. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
864
Ringor v. Ringor ROSPERO RINGOR, SATURNINO RINGOR, ANDRES RINGOR, substituted by SHAKUNTALA DEBIE, CLARO ALEJO, GERONIMA and SANDIE LOUR, all surnamed RINGOR, RAYMUNDA RINGOR, LUISA R. RIMANDO, EMILIANA R. TIU and HEIRS OF JOSE M. RINGOR, INC., Petitioners, vs. CONCORDIA, FELIPA, EMETERIA, all surnamed RINGOR, MARCELINA RINGOR, in behalf of her deceased father, AGAPITO RINGOR, AVELINA, CRESENCIA, and FELIMON, all surnamed ALMASEN, in behalf of their deceased mother, ESPIRITA RINGOR, and TEOFILO M. ABALOS, in behalf of his deceased mother, GENOVEVA RINGOR, Respondents., G.R. No. 147863, 2004 Aug 13, 1st Division) QUISUMBING, J.: FACTS: Jacobo Ringor owns a parcel of land in Pangasinan. He had three wives. He had Juan and Catalina as his children with his first wife and did not have any child with his other wives. Catalina predeceased his father and left Juan as his lone heir. Juan got married and had 7 children. Later on, Jacobo applied for the registration of his lands under the Torrens system. He filed three land registration cases alone, with his son Juan, or his grandson Jose, applying jointly with him. Subsequently, in a Compraventa dated November 3, 1928, Jacobo allegedly sold and transferred to Jose his one-half (½) undivided interest in Parcel 1 covered by OCT No. 25885. Jacobo‘s thumbmark appeared on the Compraventa.[16] These lands are now covered by TCT No. 15916, in the name of petitioner corporation, Heirs of Jose M. Ringor, Inc., organized after the initiation of the instant case.[17] By another Compraventa also dated November 3, 1928, the three-fourths (¾) undivided interests of Jacobo in Parcels 2 and 3 covered by OCT No. 25886 were likewise sold and transferred to Jose. The Compraventas were duly registered sometime in 1940. The OCTs were cancelled and new TCTs were issued in the name of Jose. Jacobo allegedly sold to Jose for P800 all the lands declared to him in Expediente 4449. This case involves partition of estate whereby a lot of heirs are claiming share over the estate. ISSUE: Whether or not a valid express trust was established by Jacobo Ringor. HELD: Express trusts, sometimes referred to as direct trusts, are intentionally created by the direct and positive acts of the settlor or the trustor - by some writing, deed, or will, or oral declaration. It is created not necessarily by some written words, but by the direct and positive acts of the parties. No particular words are required, it being sufficient that a trust was clearly intended. Unless required by a statutory provision, such as the Statute of Frauds, a writing is not a requisite for the creation of a trust. Such a statute providing that no instruments concerning lands shall be "created" or declared unless by written instruments signed by the party creating the trust, or by his attorney, is not to be construed as precluding a creation of a trust by oral agreement, but merely as rendering such a trust unenforceable. Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust exists. It is not error for the court to rely on parol evidence, - - i.e., the oral testimonies of witnesses Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also relied on to arrive at the conclusion that an express trust exists. What is crucial is the intention to create a trust. While oftentimes the intention is manifested by the trustor in express or explicit language, such intention may Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
865
be manifested by inference from what the trustor has said or done, from the nature of the transaction, or from the circumstances surrounding the creation of the purported trust. However, an inference of the intention to create a trust, made from language, conduct or circumstances, must be made with reasonable certainty. It cannot rest on vague, uncertain or indefinite declarations. An inference of intention to create a trust, predicated only on circumstances, can be made only where they admit of no other interpretation. In the present case, credible witnesses testified that (1) the lands subject of Expedientes 241 and 4449 were made and transferred in the name of Jose merely for convenience since Juan predeceased Jacobo; (2) despite the Compraventas, transferring all the lands in Jose‘s name, Jacobo continued to perform all the acts of ownership including possession, use and administration of the lands; (3) Jacobo did not want to partition the lands because he was still using them; (4) when Jacobo died, Jose took over the administration of the lands and conscientiously and unfailingly gave his siblings their share in the produce of the lands, in recognition of their share as co-owners; and (5) Jose did not repudiate the claim of his siblings and only explained upon their expression of the desire for partitioning, that it was not going to be an easy task. From all these premises and the fact that Jose did not repudiate the claim of his co-heirs, it can be concluded that as far as the lands covered by Expediente Nos. 241 and 4449 are concerned, when Jacobo transferred these lands to Jose, in what the lower court said were simulated or falsified sales, Jacobo‘s intention impressed upon the titles of Jose a trust in favor of the true party-beneficiaries, including herein respondents.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
866
Salvador v. Court of Appeals REMEDIOS G. SALVADOR and GRACIA G. SALVADOR, petitioners, Vs. COURT OF APPEALS, ALBERTO and ELPIA YABO, FRANCISCA YABO, et al., respondents. G.R. No. 109910 April 5, 1995 FIRST DIVISION DAVIDE, JR., J.: FACTS: Alipio Yabo was the owner of Lot No. 6080 and Lot No. 6180. Title thereto devolved upon his nine children, namely, Victoriano, Procopio, Lope, Jose, Pelagia, Baseliza, Francisca, Maria, and Gaudencia, upon his death sometime before or during the second world war. Pastor Makibalo, who is the husband of Maria Yabo, one of Alipio's children, filed against the spouses Alberto and Elpia Yabo for "Quieting of Title, Annulment of Documents, and Damages alleging that he owned a total of eight shares of the subject lots, having purchased the shares of seven of Alipio's children and inherited the share of his wife, Maria, and that except for the portion corresponding to Gaudencia's share which he did not buy, he occupied, cultivated, and possessed continuously, openly, peacefully, and exclusively the two parcels of land. The grandchildren and great-grandchildren of the late Alipio Yabo 2 lodged with the same court a complaint for partition and quieting of title with damages, against Pastor Makibalo, Enecia Cristal, and the spouses Eulogio and Remedies Salvador alleging that Lot No. 6080 and Lot No. 6180 are the common property of the heirs of Alipio Yabo, namely, the plaintiffs, defendant Enecia Cristal, Maria Yabo and Jose Yabo, whose share had been sold to Alberto Yabo; that after Alipio's death, the spouses Pastor and Maria Makibalo, Enecia Cristal and Jose Yabo became the de facto administrators of the said properties; and that much to their surprise, they discovered that the Salvador spouses, who were strangers to the family, have been harvesting coconuts from the lots, which act as a cloud on the plaintiffs' title over the lots. ISSUE: Whether or not there exists a trust relationship. HELD: The Supreme Court held that held that the possession of a co-owner is like that of a trustee and shall not be regarded as adverse to the other coowners but in fact as beneficial to all of them. Acts which may be considered adverse to strangers may not be considered adverse insofar as co-owners are concerned. A mere silent possession by a co-owner, his receipt of rents, fruits or profits from the property, the erection of buildings and fences and the planting of trees thereon, and the payment of land taxes, cannot serve as proof of exclusive ownership, if it is not borne out by clear and convincing evidence that he exercised acts of possession which unequivocably constituted an ouster or deprivation of the rights of the other co-owners. Thus, in order that a co-owner's possession may be deemed adverse to the cestui que trust or the other co-owners, the following elements must concur: (1) that he has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust or the other co-owners; (2) that such positive acts of repudiation have been made known to the cestui que trust or the other co-owners; and (3) that the evidence thereon must be clear and convincing.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
867
Huang v. Court of Appeals SPOUSES RICARDO AND MILAGROS HUANG, petitioners, vs. COURT OF APPEALS, JUDGE PEDRO N. LAGGUI, Presiding Judge, RTC, Makati, Br. 60, and SPOUSES DOLORES AND ANICETO SANDOVAL, respondents., G.R. No. 108525, 1994 Sep 13, 1st Division) BELLOSILLO, J.: FACTS: Dolores Sandoval express her want to buy two (2) lots in Dasmariñas Village, Makati, but was advised by petitioner Milagros Huang, wife of her brother, petitioner Ricardo Huang, that the policy of the subdivision owner forbade the acquisition of two (2) lots by a single individual. Consequently, Dolores purchased Lot 21 and registered it in her name. She also purchased the adjacent lot, Lot 20, but heeding the advice of Milagros, the deed of sale was placed in the name of Ricardo and registered in his name under TCT No. 204783. Thereafter, Dolores constructed a residential house on Lot 21. Ricardo also requested her permission to construct a small residential house on Lot 20 to which she agreed inasmuch as she was then the one paying for apartment rentals of the Huang spouses. She also allowed Ricardo to mortgage Lot 20 to the Social Security System to secure the payment of his loan of P19,200.00 to be spent in putting up the house. However, she actually financed the construction of the house, the swimming pool and the fence thereon on the understanding that the Huang spouses would merely hold title in trust for her beneficial interest. To protect her rights and interests as the lawful owner of Lot 20 and its improvements, Dolores requested the Huangs to execute in her favor a deed of absolute sale with assumption of mortgage over the property. The latter obliged. Huang spouses leased the house to Deltron-Sprague Electronics Corporation for its various executives as official quarters without first securing the permission of Dolores. Dolores tolerated the lease of the property as she did not need it at that time. But, after sometime, the lessees started prohibiting the Sandoval family from using the swimming pool and the Huangs then began challenging the Sandovals' ownership of the property. Dolores lodged a complaint before the Office of the Barangay Captain praying that the spouses Ricardo and Milagros Huang be made to execute the necessary request to the SSS for the approval of the deed of sale with assumption of mortgage, as well as for the release in her favor of the owner's duplicate certificate of title in its possession so that the deed could be duly annotated on the title and/or a new certificate of title issued in her name. But no amicable settlement was reached, so that on 16 December 1980 the Lupong Tagapayapa issued a certification that the controversy was ripe for judicial action. Ricardo and Milagros Huang filed a complaint against the spouses Dolores and Aniceto Sandoval seeking the nullity of the deed of sale with assumption of mortgage and/or quieting of title to Lot 20. Meanwhile, Dolores paid the balance of Ricardo's loan to the SSS and requested the release to her of TCT No. 204783 and the real estate mortgage thereon. The complaint of the Huang spouses was dismissed. Ricardo, Milagros or the SSS who has custody of the owner's copy of TCT No. 204783 was ordered to surrender it to the Registry of Deeds of Rizal within ten (10) days from the finality of the decision, otherwise, for failure to do so, the title shall be deemed annulled. Court of Appeals affirmed the decision of the trial court. Hence, petition for review was filed. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
868
ISSUE: Whether or not trust exist between the parties. HELD: Trust is a fiduciary relationship with respect to property which involves the existence of equitable duties imposed upon the holder of the title to the property to deal with it for the benefit of another. A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards property for the benefit of another person is known as the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary or cestui que trust. Trust is either express or implied. Express trust is created by the intention of the trustor or of the parties. Implied trust comes into being by operation of law. The latter kind is either constructive or resulting trust. A constructive trust is imposed where a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it. The duty to convey the property arises because it was acquired through fraud, duress, undue influence or mistake, or through breach of a fiduciary duty, or through the wrongful disposition of another's property. On the other hand, a resulting trust arises where a person makes or causes to be made a disposition of property under circumstances which raise an inference that he does not intend that the person taking or holding the property should have the beneficial interest in the property. It is founded on the presumed intention of the parties, and as a general rule, it arises where, and only where such may be reasonably presumed to be the intention of the parties, as determined from the facts and circumstances existing at the time of the transaction out of which it is sought to be established. In the present case, Dolores provided the money for the purchase of Lot 20 but the corresponding deed of sale and transfer certificate of title were placed in the name of Ricardo Huang because she was advised that the subdivision owner prohibited the acquisition of two (2) lots by a single individual. Guided by the foregoing definitions, we are in conformity with the common finding of the trial court and respondent court that a resulting trust was created. Ricardo became the trustee of Lot 20 and its improvements for the benefit of Dolores as owner. The pertinent law is Art. 1448 of the New Civil Code which provides that there is an implied trust when property is sold and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. A resulting trust arises because of the presumption that he who pays for a thing intends a beneficial interest therein for himself. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
869
Vda. De Esconde v. Court of Appeals CATALINA BUAN VDA. DE ESCONDE, CONSTANCIA ESCONDE VDA. DE PERALTA, ELENITA ESCONDE and BENJAMIN ESCONDE, petitioners, vs. HONORABLE COURT OF APPEALS and PEDRO ESCONDE, respondents., G.R. No. 103635, 1996 Feb 1, 2nd Division) ROMERO, J.: FACTS: Petitioners Constancia, Benjamin and Elenita, and private respondent Pedro, are the children of the late Eulogio Esconde and petitioner Catalina Buan. Eulogio Esconde was one of the children 3 and heirs of Andres Esconde. Andres is the brother of Estanislao Esconde, the original owner of the disputed lot who died without issue on April 1942. Survived by his only brother, Andres, Estanislao left an estate consisting of four (4) parcels of land. Eulogio died and was survived by petitioners and private respondent. At that time, Lazara and Ciriaca, Eulogio's sisters, had already died without having partitioned the estate of the late Estanislao Esconde. The heirs of Lazara, Ciriaca and Eulogio executed a deed of extrajudicial partition, 4 with the heirs of Lazara identified therein as the Party of the First Part, that of Ciriaca, the Party of the Second Part and that of Eulogio, the Party of the Third Part. Since the children of Eulogio, with the exception of Constancia, were then all minors, they were represented by their mother and judicial guardian, petitioner Catalina Buan vda. de Esconde who renounced and waived her usufructuary rights over the parcels of land in favor of her children in the same deed. Pursuant to the same deed, transfer certificates of title were issued to the new owners of the properties. 6 Transfer Certificate of Title No. 394 for Lot No. 1700 was issued on February 11, 1947 in the name of private respondent but Catalina kept it in her possession until she delivered it to him in 1949 when private respondent got married. Meanwhile, Benjamin constructed the family home on Lot No. 1698-B 7 which is adjacent to Lot No. 1700. A portion of the house occupied an area of twenty (20) square meters, more or less, of Lot No. 1700. Benjamin also built a concrete fence and a common gate enclosing the two (2) lots, as well as an artesian well within Lot No. 1700. Sometime in December, 1982, Benjamin discovered that Lot No. 1700 was registered in the name of his brother, private respondent. Believing that the lot was co-owned by all the children of Eulogio Esconde, Benjamin demanded his share of the lot from private respondent. 8 However, private respondent asserted exclusive ownership thereof pursuant to the deed of extrajudicial partition and, in 1985 constructed a "buho" fence to segregate Lot No. 1700 from Lot No. 1698-B. Hence, on June 29, 1987, petitioners herein filed a complaint before the Regional Trial Court of Bataan against private respondent for the annulment of TCT No. 394. The lower court dismissed the complaint and ruled that that the action had been barred by both prescription and laches. The Court of Appeals affirmed the decision of the lower court. Hence, petition for review was filed. ISSUE: Whether or not trust exist. HELD: Trust is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property. the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
870
Trusts are either express or implied. An express trust is created by the direct and positive acts of the parties, by some writing or deed or will or by words evidencing an intention to create a trust. No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. On the other hand, implied trusts are those which, without being expressed, are deducible from the nature of the transaction as matters of intent or which are superinduced on the transaction by operation of law as matters of equity, independently of the particular intention of the parties. In turn, implied trusts are either resulting or constructive trusts. Resulting trusts are based on the equitable doctrine that valuable consideration and not legal title determines the equitable title or interest and are presumed always to have been contemplated by the parties. They arise from the nature or circumstances of the consideration involved in a transaction whereby one person thereby becomes invested with legal title but is obligated in equity to hold his legal title for the benefit of another. On the other hand, constructive trusts are created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold. While the deed of extrajudicial partition and the registration of Lot No. 1700 occurred in 1947 when the Code of Civil Procedure or Act No. 190 was yet in force, we hold that the trial court correctly applied Article 1456. In Diaz et al. v. Gorricho and Aguado, 16 the Court categorically held that while it is not a retroactive provision of the new Civil Code, Article 1456 "merely expresses a rule already recognized by our courts prior to the Code's promulgation." In the case at bench, petitioner Catalina Buan vda de Esconde, as mother and legal guardian of her children, appears to have favored her elder son, private respondent, in allowing that he be given Lot No. 1700 in its entirety in the extrajudicial partition of the Esconde estate to the prejudice of her other children. Although it does not appear on record whether Catalina intentionally granted private respondent that privileged bestowal, the fact is that, said lot was registered in private respondent's name. After TCT No. 394 was handed to him by his mother, private respondent exercised exclusive rights of ownership therein to the extent of even mortgaging the lot when he needed money. If, as petitioners insist, a mistake was committed in allotting Lot No. 1700 to private respondent, then a trust relationship was created between them and private respondent. However, private respondent never considered himself a trustee. If he allowed his brother Benjamin to construct or make improvements thereon, it appears to have been out of tolerance to a brother. The rule that a trustee cannot acquire by prescription ownership over property entrusted to him until and unless he repudiates the trust, applies to express trusts 19 and resulting implied trusts. 20 However, in constructive implied trusts, prescription may supervene 21 even if the trustee does not repudiate the relationship. Necessarily, repudiation of the said trust is not a condition precedent to the running of the prescriptive period. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
871
TALA REALTY SERVICES CORPORATION, petitioner, vs. BANCO FILIPINO SAVINGS AND MORTGAGE BANK, respondent., G.R. No. 147997, 2002 Apr 5, 2nd Division) MENDOZA, J.: FACTS: TALA is composed of 4 major stockholders of Banco Filipino. It was formed for the purpose of unloading & then leasing back from petitioners properties which it cannot retain under banking laws & regulations. Petitioner leased 12 properties to Banco Filipino. In this particular case, the property is located in Lucena City. The 1st contract of lease contract of lease executed was for a period of 20 years & renewable for another 20 years at the option of respondent. A 2nd contract of lease was allegedly executed involving the property in Lucena for a period of 11 years & renewable for another 9 years at the option of respondent. After the expiration of the 2nd contract, no new lease contract was executed because the parties failed to reach an agreement. Respondent, in its answer to the ejectment complaint, alleged that petitioner is a mere trustee of the property and the second contract was fabricated. The MTC dismissed the complaint & the counterclaim on the ground that the issues raised, validity of the 2nd contract & whether petitioner is a mere trustee of respondent, are incapable of pecuniary estimation. The RTC affirmed the decision. The Court of Appeals held the 1st contract to be the valid contract and the refusal of respondent to pay the new demanded was justified because the 20 years contract has not yet expired. It also held that non payment was not the ground for petitioner‘s for ejectment, thus, it could not be raised for the first time on appeal. ISSUE: Whether or not it is necessary to settle the question of ownership based on the alleged ―warehousing agreement‖ or trustor-trustee relationship in order to settle the issue of possession. HELD: Trust is either express or implied. Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. Art. 1453. When property is conveyed to a person in reliance upon his declared intention to hold it for, or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefit is contemplated. An implied trust could not have been formed between the Bank and Tala as this Court has held that ―where the purchase is made in violation of an existing statute and in evasion of its express provision, no trust can result in favor of the party who is guilty of the fraud.‖ A resulting trust is an ‗intent-enforcing‘ trust, based on a finding by the court that in view of the relationship of the parties their acts express an intent to have a trust, even though they did not use language to that effect. The trust is said to result in law from the acts of the parties. However, if the purpose of the payor of the consideration in having title placed in the name of another was to evade some rule of the common or statute law, the courts will not assist the payor in achieving his improper purpose by enforcing a resultant trust for him in accordance with the ‗clean hands‘ doctrine. The court generally refuses to give aid to claims from rights arising out of an illegal transaction, such as Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
872
where the payor could not lawfully take title to land in his own name and he used the grantee as mere dummy to hold for him and enable him to evade the land laws Applying the Ramos HELD to the case at bar, the Bank cannot use the defense of nor seek enforcement of its alleged implied trust with Tala since its purpose was contrary to law. As admitted by the Bank, it ―warehoused‖ its branch site holdings to Tala to enable it to pursue its expansion program and purchase new branch sites including its main branch in Makati, and at the same time avoid the real property holdings limit under Sections 25(a) and 34 of the General Banking Act which it had already reached.[70] The Bank stated in its Memorandum that ―the (n)ew branch sites which the Respondent (Bank) will be disqualified from buying, by reason of the aforecited limitations under existing banking laws and regulations, will be acquired for it by the Petitioner (Tala) which will forthwith lease them to the Respondent (Bank).‖[71] The Bank also admitted that the agreement that the branch sites ―will be returned to the bank anytime at its pleasure at the same transfer price‖ was differently stated in the lease contracts as a ―first preference to buy‖ because the Bank was apprehensive that the agreement to return property, ―if spelled out as-is in the documents, might provide basis for the Central Bank to question the sale and simultaneous lease back of the branch sites as simulated and accordingly, derail the expansion program of the Respondent.‖ Clearly, the Bank was well aware of the limitations on its real estate holdings under the General Banking Act and that its ―warehousing agreement‖ with Tala was a scheme to circumvent the limitation. Thus, the Bank opted not to put the agreement in writing and call a spade a spade, but instead phrased its right to reconveyance of the subject property at any time as a ―first preference to buy‖ at the ―same transfer price.‖ This arrangement which the Bank claims to be an implied trust is contrary to law. Thus, while we find the sale and lease of the subject property genuine and binding upon the parties, we cannot enforce the implied trust even assuming the parties intended to create it. In the words of the Court in the Ramos case, ―the courts will not assist the payor in achieving his improper purpose by enforcing a resultant trust for him in accordance with the ‗clean hands‘ doctrine.‖[73] The Bank cannot thus demand reconveyance of the property based on its alleged implied trust relationship with Tala. Petition dismiss.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
873
Medina v. Court of Appeals THE HEIRS OF PEDRO MEDINA, represented by MARGARITA MEDINA, petitioners, vs. THE HON. COURT OF APPEALS*, RESTITUTA ZURBITO VDA. DE MEDINA and ANDRES NAVARRO, JR., respondents., G.R. No. L26107, 1981 Nov 27, 1st Division) TEEHANKEE, J.: FACTS: The late Francisco Medina had eight children all of whom are deceased. Petitioner Margarita Medina, who filed the complaint on behalf of the heirs of Pedro Medina is the daughter of Pedro Medina 1 who predeceased his father Francisco Medina. Restituta Zurbito Vda. de Medina, herein private respondent, and defendant in the trial court, is the widow of Sotero Medina (brother of Pedro Medina); and Andres Navarro, Jr., her herein co-respondent and co-defendant in the trial court, is her grandson. petitioners filed the complaint in the trial court seeking to recover from herein respondents a parcel of land and praying that respondents be ordered to deliver to them possession and ownership thereof with accounting, damages and costs and litigation expenses. Judgment was rendered declaring petitioner Margarita Medina with her co-heirs as the lawful owners of the land in question. Respondent Court of Appeals reversed the trial court's decision and sustaining respondents' defenses of prescription of action and acquisitive prescription, ordered the dismissal of the complaint. Hence, petition for review was filed. ISSUE: Whether or not trust was validly established. HELD: Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties. Implied trusts come into being by operation of law." (Art. 1441) "No express trusts concerning an immovable or any interests therein may be proven by parol evidence." (Art. 1443) "An implied trust may be proven by oral evidence." (Art. 1457) That rule applies squarely to express trusts. The basis of the rule is that the possession of a trustee is not adverse. Not being adverse, he does not acquire by prescription the property held in trust. Thus, Section 38 of Act 190 provides that the law of prescription does not apply `in the case of continuing and subsisting trust. With respect to constructive trusts, the rule is different. The prescriptibility of an action for reconveyance based on constructive trust is now settled. Prescription may supervene in an implied trust. Applied to the case at bar, if an express trust had been constituted upon the occupancy of the property by respondents in favor of the petitioners, prescription of action would not lie, the basis of the rule being that the possession of the trustee is not adverse to the beneficiary. But if there were merely a constructive or implied trust, the action to recover may be barred by prescription of action or by acquisitive prescription by virtue of respondents' continuous and adverse possession of the property in the concept of ownerbuyer for thirty-three years. Judgment affirmed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
874
Filipinas Port v. Go FILIPINAS PORT V. GO
G.R. No. 161886 March 16, 2007 FACTS: Sept 4 1992: Eliodoro C. Cruz, Filport‘s president from 1968-1991, wrote a letter to the corporation‘s BOD questioning the creation and election of the following positions with a monthly remuneration of P13, 050.00 each. Cruz requested the board to take necessary action/actions to recover from those elected to the aforementioned positions the salaries they have received. Jun 4 1993: Cruz, purportedly in representation of Filport and its stockholders, among which is herein co-petitioner Mindanao Terminal and Brokerage Services, Inc. (Minterbro), filed with the SEC a derivative suit against Filport's BOD for acts of mismanagement detrimental to the interest of the corporation and its shareholders at large. Cruz prayed that the BOD be made to pay Filport, jointly and severally, the sums of money variedly representing the damages incurred as a result of the creation of the offices/positions complained of and the aggregate amount of the questioned increased salaries. RTC: BOD have the power to create positions not in the by-laws and can increase salaries. But Edgar C. Trinidad under the third and fourth causes of action to restore to the corporation the total amount of salaries he received as assistant vice president for corporate planning; and likewise ordering Fortunato V. de Castro and Arsenio Lopez Chua under the fourth cause of action to restore to the corporation the salaries they each received as special assistants respectively to the president and board chairman. In case of insolvency of any or all of them, the members of the board who created their positions are subsidiarily liable. Appealed: creation of the positions merely for accommodation purposes GRANTED ISSUES: Whether or not there was mismanagement. HELD: NO Section 35 of the Corporation Code, the creation of an executive committee (as powerful as the BOD) must be provided for in the bylaws of the corporation Notwithstanding the silence of Filport‘s bylaws on the matter, we cannot rule that the creation of the executive committee by the board of directors is illegal or unlawful. One reason is the absence of a showing as to the true nature and functions of executive committee But even assuming there was mismanagement resulting to corporate damages and/or business losses, respondents may not be held liable in the absence of a showing of bad faith in doing the acts complained of. ("dishonest purpose","some moral obliquity","conscious doing of a wrong", "partakes of the nature of fraud") determination of the necessity for additional offices and/or positions in a corporation is a management prerogative which courts are not wont to review in the absence of any proof that such prerogative was exercised in bad faith or with malice.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
875
Mendizabel v. Apao NESTOR MENDIZABEL, ELIZABETH MENDIZABEL, IGNACIO MENDIZABEL, and ADELINA VILLAMOR, Petitioners, versus FERNANDO APAO and TEOPISTA PARIDELA-APAO, Respondents., G.R. No. 143185, 2006 Feb 20, 3rd Division) CARPIO, J.: FACTS: Fernando Apao (―Fernando‖) purchased from spouses Alejandro and Teofila Magbanua (―vendors‖) a parcel of land for P400. The vendors executed a deed of sale with right of repurchase within six months for P400, failing which, the sale would become absolute. The vendors failed to repurchase the property. Fernando thus took possession of the same. Fernando had the land surveyed which resulted in a subdivision of the land into two separate and distinct lots identified as Lot Nos. 407 and 1080. Fernando learned that Ignacio Mendizabel (―Ignacio‖) had filed prior to the Bureau of Lands‘ survey a homestead application over Lot No. 1080. Fernando became the claimant-protestant in Ignacio‘s application. The lot was awarded to Ignacio which the Secretary of Agriculture and Natural Resources set aside and ruled that the free patent application No. 18-1481 of Fernando Apao shall be given due course for Lot No. 407 and Homestead Application No. 18-8905 of Ignacio Mendizabel for Lot No. 1080. Dissatisfied with the decision of the Secretary of Agriculture and Natural Resources, Fernando appealed to the Office of the President. Fernando did not receive any notice of the decision on his appeal. Barely 10 days after he filed his appeal, Fernando found out from the Office of the Register of Deeds of Pagadian City that Lot No. 1080 had been partitioned between Ignacio and his son Nestor Mendizabel (―Nestor‖). Fernando learned that Lot No. 1080 was already titled separately as Lot No. 1080-A covered by Original Certificate of Title No. P-29 822 in the name of Nestor, and Lot No. 1080-B covered by Original Certificate of Title No. P-29 823 in the name of Ignacio. The Register of Deeds issued the certificates of title on 14 December 1982. Fernando talked to Nestor and Ignacio, pleading with them to reconvey the property to him. Nestor and Ignacio rejected Fernando‘s request. Fernando and his wife Teopista Paridela-Apao filed for Annulment of Titles, Reconveyance and Damages against spouses Nestor and Elizabeth Mendizabel and spouses Ignacio Mendizabel and Adelina Villamor. The trial court ruled in favor of Fernando hold trust in the latter's benefit to which the Court of Appeals affirmed. Hence, petition for review was filed. ISSUE: Whether or not implied trust exist. HELD: "Implied trusts are those without being expressed, which are deducible from the nature of the transaction, as matters of intent, or which are super induced on the transaction by operation of law, as matters of equity, independently of the particular intention of the parties." In turn, implied trusts are either resulting or constructive trusts. Constructive trusts are created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold. The records show that respondents bought the property from spouses Alejandro and Teofila Magbanua on 21 March 1955 as evidenced by a deed of sale.[55] Fernando testified that he was in actual, open, peaceful, and Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
876
continuous possession of the property at the time he filed his application for a free patent and was then enjoying its fruits. These facts were corroborated by the testimonies of Brañanula and Lizardo, residents of Barangay Mabini, Malangas, Zamboanga del Sur. Petitioners, however, assert that the deed of sale, ―although Annex A of respondents‘ complaint,‖ should not be given weight for it was not offered in evidence. Considering the circumstances in the present case, therefore, we hold that respondents have a better right to the property since they had long been in possession of the property in the concept of owners. In contrast, petitioners were never in possession of the property. Despite the irrevocability of the Torrens titles issued in their names, petitioners, even if they are already the registered owners under the Torrens system, may still be compelled under the law to reconvey the property to respondents. Petition dismiss.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
877
Heirs of Yap v. Court of Appeals HEIRS OF LORENZO YAP, namely SALLY SUN YAP, MARGARET YAP-UY and MANUEL YAP, petitioners, vs. THE HONORABLE COURT OF APPEALS, RAMON YAP and BENJAMIN YAP, respondents., G.R. No. 133047, 1999 Aug 17, 3rd Division) VITUG, J.: FACTS: Ramon Yap purchased a parcel of land from the spouses Carlos and Josefina Nery. The lot was thereupon registered in the name of Ramon Yap under Transfer Certificate of Title No. 102132; forthwith, he also declared the property in his name for tax purposes and paid the real estate taxes due thereon from 1966 to 1992. In 1967, Ramon Yap constructed a two storey 3door apartment building for the use of the Yap family. One-fifth (1/5) of the cost of the construction was defrayed by Ramon Yap while the rest was shouldered by Chua Mia, the mother of Lorenzo, Benjamin and Ramon. Upon its completion, the improvement was declared for real estate tax purposes in the name of Lorenzo Yap in deference to the wishes of the old woman. Lorenzo Yap died. A few months later, his heirs (herein petitioners) left their family dwelling in Lucena City to reside permanently in Manila. Ramon Yap allowed petitioners to use one unit of the apartment building. Ramon Yap sold the land and his share of the 3-door apartment to his brother, his herein co-respondent Benjamin Yap, for the sum of P337,500.00 pursuant to a Deed of Sale, recorded on even date in the Memorandum of Encumbrances of the title to said property. Transfer Certificate of Title No. 73002 was in due time issued in the name of Benjamin Yap. The controversy started when herein petitioners, by a letter of 08 June 1992, advised respondents of the former‘s claim of ownership over the property and demanded that respondents execute the proper deed necessary to transfer the title to them. At about the same time, petitioners filed a case for ejectment against one of the bonafide tenants of the property. Respondents filed an action for quieting of title against petitioners. Trial court ruled in favor of respondents, which was affirmed by the Court of Appeals. Hence, a petition for review was filed. ISSUE: Whether or not a trust exist. HELD: A trust may either be express or implied. Express trusts are those which are created by the direct and positive acts of the parties, by some writing or deed, or will, or by words evincing an intention to create a trust. Implied trusts are those which, without being express, are deducible from the nature of the transaction as matters of intent or, independently of the particular intention of the parties, as being super induced on the transaction by operation of law basically by reason of equity. These species of implied trust are ordinarily subdivided into resulting and constructive trusts. A resulting trust is one that arises by implication of law and presumed always to have been contemplated by the parties, the intention as to which can be found in the nature of their transaction although not expressed in a deed or instrument of conveyance. Resulting trusts are based on the equitable doctrine that it is the more valuable consideration than the legal title that determines the equitable interest in property.Upon the other hand, a constructive trust is a trust not created by any word or phrase, either expressly or impliedly, evincing a direct intention to create a trust, but one that arises in order to satisfy the demands of justice. It does not come about by agreement or intention but in main by operation of law construed against one who, by fraud, duress or abuse of Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
878
confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold. ne basic distinction between an implied trust and an express trust is that while the former may be established by parol evidence, the latter cannot. Even then, in order to establish an implied trust in real property by parol evidence, the proof should be as fully convincing as if the acts giving rise to the trust obligation are proven by an authentic document. An implied trust, in fine, cannot be established upon vague and inconclusive proof. Furthermore, is the long standing and broad doctrine of clean hands that will not allow the creation or the use of a juridical relation, a trust whether express or implied included, to perpetrate fraud or tolerate bad faith nor to subvert, directly or indirectly, the law. The trust agreement between Ramon and Lorenzo, if indeed extant, would have been in contravention of, in fact, the fundamental law. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
879
Heirs of Kionisala v. Heirs of Dacut HEIRS OF AMBROCIO KIONISALA, namely, ANA, ISABEL, GRACE, JOVEN and CARMELO, all surnamed KIONISALA, petitioners, vs. HEIRS OF HONORIO DACUT, namely: VISAMINDA D. OREVILLO, VIOLETA DACUT, JOSEPHINE DACUT and ELIZABETH DACUT, respondents., G.R. No. 147379, 2002 Feb 27, 2nd Division) BELLOSILLO, J.: FACTS: This complaint for declaration of nullity of titles, reconveyance and damages against petitioners involved two (2) parcels of land known as Lot No. 1017 and Lot No. 1015 with areas of 117,744 square meters and 69,974 square meters respectively. Lot No. 1017 was granted a free patent to petitioners Heirs of Ambrocio Kionisala under Free Patent No. 603393, and Lot 1015 was bestowed upon Isabel Kionisala, one of the impleaded heirs of Ambrocio Kionisala under Free Patent No. 101311-91-904. Thereafter, Lot 1017 was registered under the Torrens system and was issued Original Certificate of Title No. P-19819 in petitioners‘ name; while, Lot No. 1015 was registered in the name of Isabel Kionisala under Original Certificate of Title No. P-20229. Private respondents claimed absolute ownership of Lot 1015 and 1017 even prior to the issuance of the corresponding free patents and certificates of title. The trial court dismissed the complaint on the ground that the cause of action of private respondents was truly for reversion so that only the Director of Lands could have filed the complaint. A motion for reconsideration was filed but was denied. The Court of Appeals reversed the order of dismissal. Petitioners then moved for a motion for reconsideration but were denied due to lack of merit. Hence, petition for review on certiorari was filed. ISSUE: Whether or not the enforceability of the implied trust had prescribed. HELD: Private respondents have sufficiently pleaded (in addition to the cause of action for declaration of free patents and certificates of title) an action for reconveyance, more specifically, one which is based on implied trust. An implied trust arises where the defendant (or in this case petitioners) allegedly acquires the disputed property through mistake or fraud so that he (or they) would be bound to hold and reconvey the property for the benefit of the person who is truly entitled to it.[18] In the complaint, private respondents clearly assert that they have long been the absolute and exclusive owners and in actual possession and cultivation of Lot 1015 and Lot 1017 and that they were fraudulently deprived of ownership thereof when petitioners obtained free patents and certificates of title in their names. These allegations certainly measure up to the requisite statement of facts to constitute an action for reconveyance. neither the action for declaration of nullity of free patents and certificates of title of Lot 1015 and Lot 1017 nor the action for reconveyance based on an implied trust of the same lots has prescribed. We have ruled that ―a free patent issued over private land is null and void, and produces no legal effects whatsoever. Quos nullum est, nullum producit effectum.‖[21] Moreover, private respondents‘ claim of open, public, peaceful, continuous and adverse possession of the two (2) parcels of land and its illegal inclusion in the free patents of petitioners and in their original certificates of title also amounts to an action for quieting of title which is imprescriptible. The action for reconveyance based on implied trust, on the other hand, prescribes only after ten (10) years from 1990 and 1991 when the free patents Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
880
and the certificates of title over Lot 1017 and Lot 1015, respectively, were registered. Obviously the action had not prescribed when private respondents filed their complaint against petitioners on 19 December 1995. At any rate, the action for reconveyance in the case at bar is also significantly deemed to be an action to quiet title for purposes of determining the prescriptive period on account of private respondents‘ allegations of actual possession of the disputed lots.[23] In such a case, the cause of action is truly imprescriptible. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
881
Ramos v. Ramos RAMOS V. RAMOS 61 SCRA 284 FACTS: Spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26, 1880, respectively. They were survived by their 3 children. Moreover, Martin was survived by his 7 natural children. In December 1906, a special proceeding for the settlement of the intestate estate of said spouses was conducted. Rafael Ramos, a brother of Martin, administered the estate for more than 6 years. Eventually, a partition project was submitted which was signed by the 3 legitimate children and 2 of the 7 natural children. A certain Timoteo Zayco signed in representation of the other 5 natural children who were minors. The partition was sworn to before a justice of peace. The conjugal hereditary estate was appraised at P74,984.93, consisting of 18 parcels of land, some head of cattle and the advances to the legitimate children. ½ thereof represented the estate of Martin. 1/3 thereof was the free portion or P12,497.98. The shares of the 7 natural children were to be taken from that 1/3 free portion. Indeed, the partition was made in accordance with the Old Civil code. Thereafter, Judge Richard Campbell approved the partition project. The court declared that the proceeding will be considered closed and the record should be archived as soon as proof was submitted that each he3ir had received the portion adjudicated to him. On February 3, 1914, Judge Nepumoceno asked the administrator to submit a report showing that the shares of the heirs had been delivered to them as required by the previous decision. Nevertheless, the manifestation was not in strict conformity with the terms of the judge‘s order and with the partition project itself. 8 lots of the Himamaylan Cadastre were registered in equal shares in the names of Gregoria (widow of Jose Ramos) and her daughter, when in fact the administrator was supposed to pay the cash adjudications to each of them as enshrined in the partition project. Plaintiffs were then constrained to bring the suit before the court seeking for the reconveyance in their favor their corresponding participations in said parcels of land in accordance with Article 840 of the old Civil Code. Note that 1/6 of the subject lots represents the 1/3 free portion of martin‘s shares which will eventually redound to the shares of his 7 legally acknowledged natural children. The petitioners‘ action was predicated on the theory that their shares were merely held in trust by defendants. Nonetheless, no Deed of Trust was alleged and proven. Ultimately, the lower court dismissed the complaint on the grounds of res judicata, prescription and laches. ISSUE: Whether or not the plaintiffs‘ action was barred by prescription, laches and res judicata to the effect that they were denied of their right to share in their father‘s estate. HELD: YES, there was inexcusable delay thereby making the plaintiffs‘ action unquestionably barred by prescription and laches and also by res judicata. Inextricably interwoven with the questions of prescription and res judicata is the question on the existence of a trust. It is noteworthy that the main thrust of plaintiffs‘ action is the alleged holding of their shares in trust by defendants. Emanating from such, the Supreme Court elucidated on the nature of trusts and the availability of prescription and laches to bar the action for reconveyance of property allegedly held in trust. It is said that trust is the Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
882
right, enforceable solely in equity to the beneficial enjoyment of property, the legal title to which is vested in another. It may either be express or implied. The latter ids further subdivided into resulting and constructive trusts. Applying it now to the case at bar, the plaintiffs did not prove any express trust. Neither did they specify the kind of implied trust contemplated in their action. Therefore, its enforcement maybe barred by laches and prescription whether they contemplate a resulting or a constructive trust.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
883
Ty v. Court of Appeals THE INTESTATE ESTATE OF ALEXANDER T. TY, represented by the Administratrix, SYLVIA S. Ty, petitioner, VS. COURT OF APPEALS, HON. ILDEFONSO E. GASCON, and ALEJANDRO B. TY, respondents G.R. No. 112872 April 19, 2001 FACTS: Petitioner Sylvia S. Ty was married to Alexander T. Ty, son of private respondent Alejandro b. ty, on January 11, 1981. Alexander died of leukemia on May 19, 1988 and was survived by his wife, petitioner Silvia, and only child, Krizia Katrina. In the settlement of his estate, petitioner was appointed administratrix of her late husband‘s intestate estate. On November 4, 1992, petitioner filed a motion for leave to sell or mortgage estate property in order to generate funds for the payment of deficiency estate taxes in the sum of P4,714,560.00. Privite respondent Alejandro Ty then filed two complaints for the recovery of the above-mentioned property, praying for the declaration of nullity of the deed of absolute sale of the shares of stock executed by private respondent in favor of the deceased Alexander, praying for the recovery of the pieces of property that were placed in the name of deceased Alexander, they were acquired through private-respondent‘s money, without any cause or consideration from deceased Alexander. The motions to dismiss were denied. Petitioner then filed petitions for certiorari in the Courts of Appeals, which were also dismissed for lack of merit. Thus, the present petitions now before the Court. ISSUE: Whether or not an express trust was created by private respondent when he transferred the property to his son. HELD: Private respondent contends that the pieces of property were transferred in the name of the deceased Alexander for the purpose of taking care of the property for him and his siblings. Such transfer having been effected without cause of consideration, a resulting trust was created. WHEREFORE, the petition for certiorari in G.R. No. 112872 is DISMISSED, having failed to show that grave abuse of discretion was committed in declaring that the regional trial court had jurisdiction over the case. The petition for review on certiorari in G.R. 114672 is DENIED, having found no reversible error was committed.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
884
Vda. De Retuerto v. Barz CATALINA VDA. DE RETUERTO as surviving widow of the late PANFILO RETUERTO; LORETO RETUERTO, represented by his surviving heirs namely: ROMEO RETUERTO; ANTONIA RETUERTO, NARCISA RETUERTO, CORAZON RETUERTO, and PATROCINIO RETUERTO; GAUDENCIO, FRANCISCA, CRUZ, FRANCISCO, EFIGENIA and GUILLERMO, all surnamed RETUERTO; and Spouses JOSE and ROSA GESALEM, petitioners, vs. ANGELO P. BARZ and MERLINDA BARZ, respondents., G.R. No. 148180, 2001 Dec 19, 1st Division) KAPUNAN, J.: FACTS: Juana Perez, widow of Numeriano Barz, executed a deed to confirm her execution of a Deed of Absolute Sale in favor of Panfilo Retuerto, married to Catalina Ceniza, over a parcel of land. However, on April 26, 1935, Panfilo Retuerto purchased the aforementioned parcel of land, this time, from the Archbishop of Cebu, under a "Deed of Absolute Sale," for the price of P150.00 Meanwhile, San Carlos Seminary in Cebu filed a Petition for the issuance of titles over several parcels of land including the lot earlier purchased by Retuerto. The Court promulgated a Decision finding and declaring Panfilo Retuerto the owner of the said lot. The Court issued an Order directing the General del Registro de Terrenos (later the Land Registration Commission) for the issuance of the appropriate Decree in favor of Panfilo Retuerto over the said parcel of land. However, no such Decree was issued as directed by the Court because the Second World War ensued in the Pacific. However, Panfilo Retuerto failed to secure the appropriate decree after the war. Two (2) decades elapsed. Subsequently, Juana Perez Barz died intestate and was survived by her son, Pedro Barz, who filed an application for the confirmation of his title over Lot subject of this case to which Retuerto did not oppose. Hence, the decision was rendered in favor of Pedro. By virtue thereof, Pedro sold the subject lot to Jose Gesalem for P7,000.00. In the interim, Retuerto was able to declare the property in his name. He then died intestate and was survived by his widow, Catalina Retuerto and their children. The subject property was said to have been included in the estate and was divided among the heirs in the extrajudicial partition as done. Angelo P. Barz and Merlinda Barz filed a complaint against Catalina Retuerto and the other heirs of Panfilo Retuerto and the Spouses Jose Gesalem, with the Regional Trial Court of Mandaue for Quieting of Title, Damages and Attorney‘s Fees. RTC declared the property as owned by the respondents to which the Court of Appeals affirmed. Hence, petition for review on certiorari was filed in the Supreme Court. ISSUE: Whether or not the period in which to enforce implied trust had prescribed. HELD: The contention is bereft of merit. Constructive trusts are created in equity to prevent unjust enrichment, arising against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold.[6] Petitioners failed to substantiate their allegation that their predecessor-in-interest had acquired any legal right to the property subject of the present controversy. Nor had they adduced any evidence to show that the certificate of title of Pedro Barz was obtained through fraud. Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
885
Even assuming arguendo that Pedro Barz acquired title to the property through mistake or fraud, petitioners are nonetheless barred from filing their claim of ownership. An action for reconveyance based on an implied or constructive trust prescribes within ten years from the time of its creation or upon the alleged fraudulent registration of the property.[7] Since registration of real property is considered a constructive notice to all persons, then the tenyear prescriptive period is reckoned from the time of such registering, filing or entering.[8] Thus, petitioners should have filed an action for reconveyance within ten years from the issuance of OCT No. 521 in November 16, 1968. This, they failed to do so. Relying on the case of Heirs of Jose Olviga vs. Court of Appeals,[9] petitioners argue that the ten-year period for filing an action for reconveyance of property arising from an implied or constructive trust applies only when the person enforcing the trust is not in possession of the property, since if a person claiming to be the owner is in actual possession of the property, the action to seek reconveyance or to quiet title does not prescribe. Petitioners claim that they and their predecessors-in-interest were the ones in actual possession of the subject property alleging that in the survey made by Geodetic Engineer Leopoldo Tuastumban, it was reported that there were nine houses and one rattan shop owned by the heirs of Loreto Retuerto constructed thereon. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
886
Chia Liong Tan v. Court of Appeals Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
887
CHIAO LIONG TAN, petitioner, vs. THE HONORABLE COURT OF APPEALS, HON. MANUEL T. MURO, Presiding Judge, RTC of Manila, Branch 54 and TAN BAN YONG, respondents., G.R. No. 106251, 1993 Nov 19, 2nd Division) NOCON, J.: FACTS: Petitioner Chiao Liong Tan Claims to be the owner of an Isuzu Elf van As owner thereof, petitioner says he has been in possession, enjoyment and utilization of the said motor vehicle until it was taken from him by his older brother, Tan Ban Yong, the private respondents herein. Petitioner relies principally on the fact that the Isuzu Elf van is registered in his name under Certificate of Registration No. 1501909. He claims in his testimony before the trial court that the said vehicle was purchased from Balintawak Isuzu Motor Center for a price of over P100,000.00; that he sent his brother to pay for the van and the receipt for payment was placed in his (petitioner's) name because it was his money that was used to pay for the vehicle; that he allowed his brother to use the van because the latter was working for his company, the CLT Industries; and that his brother later refused to return the van to him and appropriated the same for himself. Judgment was rendered declaring Tan Ban Yong as owner, which the Court of Appeals affirmed. ISSUE: Whether or not the trust be repudiated. HELD: Other than those enumerated, the New Civil Code had acknowledged the cases of implied trust. Thus, although no specific provision could be cited to apply to the parties herein, it is undeniable that an implied trust was created when the certificate of registration of the motor vehicle was placed in the name of petitioner although the price thereof was not paid by him but by private respondent. The principle that a trustee who puts a certificate of registration in his name cannot repudiate the trust by relying on the registration is one of the well-known limitations upon a title. A trust, which derives its strength from the confidence one reposes on another especially between brothers, does not lose that character simply because of what appears in a legal document. Even under the Torrens System of land registration, this Court in some instances did away with the irrevocability or indefeasibility of a certificate of title to prevent injustice against the rightful owner of the property. It is true that the judgment in a replevin suit must only resolve in whom is the right of possession. Primarily, the action of replevin is possessory in character and determines nothing more than the right of possession. However, when the title to the property is distinctly put in issue by the defendant's plea and by reason of the policy to settle in one action all the conflicting claims of the parties to the possession of the property in controversy, the question of ownership may be resolved in the same proceeding. Procedure-wise, the Court observes that the action by petitioner as plaintiff in the trial court was only one for Replevin and Damages. Since replevin is only a provisional remedy where the replevin plaintiff claims immediate delivery of personal property pending the judgment of the trial court in a principal case, the petitioner should have filed in the trial court as a main case an action to recover possession of the Isuzu Elf van which was in the possession of the private respondent. Logically, the basis of petitioner's cause of action should have been his ownership of said van. Petition denied.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
888
O'laco v. Co Cho Chit EMILIA O'LACO and HUCO LUNA, petitioners, vs. VALENTIN CO CHO CHIT, O LAY KIA and COURT OF APPEALS, respondents., G.R. No. 58010, 1993 Mar 31, 1st Division) BELLOSILLO, J.: FACTS: This case involves half-sisters, each claiming ownership over a parcel of land. Petitioner Emilia O'Laco asserts that she merely left the certificate of title covering the property with private respondent O Lay Kia for safekeeping, the latter who is the former's older sister insists that the title was in her possession because she and her husband bought the property from their conjugal funds. To be resolved therefore is the issue of whether a resulting trust was intended by them in the acquisition of the property. The trial court declared that there was no trust relation of any sort between the sisters. The Court of Appeals ruled otherwise. Hence, the instant petition for review on certiorari of the decision of the appellate court together with its resolution denying reconsideration. ISSUE: Whether or not trust between them prescribe. HELD: As differentiated from constructive trusts, where the settled rule is that prescription may supervene, in resulting trust, the rule of imprescriptibility may apply, for as long as the trustee has not repudiated the trust. Once the resulting trust is repudiated, however, it is converted into a constructive trust and is subject to prescription. A resulting trust is repudiated if the following requisites concur: (a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui qui trust; (b) such positive acts of repudiation have been made known to the cestui qui trust; and, (c) the evidence thereon is clear and convincing. Neither the registration of the Oroquieta property in the name of petitioner Emilia O'Laco nor the issuance of a new Torrens title in 1944 in her name in lieu of the alleged loss of the original may be made the basis for the commencement of the prescriptive period. For, the issuance of the Torrens title in the name of Emilia O'Laco could not be considered adverse, much less fraudulent. Precisely, although the property was bought by respondentspouses, the legal title was placed in the name of Emilia O'Laco. The transfer of the Torrens title in her name was only in consonance with the deed of sale in her favor. Consequently, there was no cause for any alarm on the part of respondent-spouses. As late as 1959, or just before she got married, Emilia continued to recognize the ownership of respondent-spouses over the Oroquieta property. Thus, until that point, respondent-spouses were not aware of any act of Emilia which would convey to them the idea that she was repudiating the resulting trust. The second requisite is therefore absent. Hence, prescription did not begin to run until the sale of the Oroquieta property, which was clearly an act of repudiation. But immediately after Emilia sold the Oroquieta property which is obviously a disavowal of the resulting trust, respondent-spouses instituted the present suit for breach of trust. Correspondingly, laches cannot lie against them. After all, so long as the trustee recognizes the trust, the beneficiary may rely upon the recognition, and ordinarily will not be in fault for omitting to Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
Obligations and Contracts
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bring an action to enforce his rights. 44 There is no running of the prescriptive period if the trustee expressly recognizes the resulting trust. 45 Since the complaint for breach of trust was filed by respondent-spouses two (2) months after acquiring knowledge of the sale, the action therefore has not yet prescribed. Petition granted.
Pic-it, Christian; Aguilar, Joana Rose; Balusdan, Septfonette; Belvis, Eunice Fleur; Bondad, Nicole; Cortez, Kimberly Agniezka R.; Datario, Mary Ruth; De Guzman, Chanell; Fango-ok, Cita
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