Oblicon Case Book

SAINT LOUIS UNIVERSITY

Obligations and Contracts Case Book

Cabson, Claire Ignacio, Regine Kiwang, Chesty Joy Pocais, Laurice Poserio, Chrissan Mae Abad, Kendal Paraan, Brian Jonathan Vehemente, Joseph Harvey

March 7, 2014

Table of Contents MARIANO UN OCAMPO III v PEOPLE OF THE PHILIPPINES ......................................................................... 18 LEUNG BEN v P. J. O'BRIEN ......................................................................................................................... 20 ARTURO PELAYO v MARCELO LAURON ET AL. ............................................................................................ 22 ASJ CORPORATION AND ANTONIO SAN JUAN v SPS. EFREN & MAURA EVANGELISTA .............................. 24 ERNESTO RAMAS UYPITCHING and RAMAS UYPITCHING SONS, INC., v. ERNESTO QUIAMCO .................. 26 NIKKO HOTEL MANILA GARDEN and RUBY LIM vs ROBERTO REYES, a.k.a. “AMAY BISAYA,” .................... 29 ST. MARY’S ACADEMY vs. WILLIAM CARPITANOS and LUCIA S. CARPITANOS et al. .................................. 32 SPOUSES LUIGI M. GUANIO and ANNA HERNANDEZ-GUANIO v. MAKATI SHANGRI-LA ............................ 34 TSPIC CORPORATION v TSPIC EMPLOYEES UNION (FFW) .......................................................................... 36 KHRISTINE REA M. REGINO v PANGASINAN COLLEGES OF SCIENCE AND TECHNOLOGY ........................... 38 PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION v. COURT OF APPEALS ............................................ 40 Cosmo Entertainment Mgmt, Inc. vs. La Ville Commercial Corporation .................................................. 42 AYALA CORP v. ROSA-DIANA REALTY AND DEV’T. CORP. ........................................................................... 44 BRICKTOWN DEVELOPMENT CORP. vs. AMOR TIERRA DEVELOPMENT CORP. .......................................... 46 PILIPINAS HINO, INC. vs. COURT OF APPEALS ............................................................................................. 48 ARTURO SARTE FLORES vs. SPS ENRICO L. LINDO, JR. and EDNA C. LINDO ................................................ 50 PHILIPPINE REALTY AND HOLDINGS CORPORATION vs. LEY CONST. AND DEV’T CORP ............................. 53 Titan-Ikeda Construction v Primetown Property ........................................................................................ 57 PADCOM CONDO v ORTIGAS ASSOC CENTER ............................................................................................ 61 State Investment vs. Court of Appeals........................................................................................................ 65 People v Nufrashir Hashim.......................................................................................................................... 67 FELIXBERTO A. ABELLANA VS. PEOPLE ........................................................................................................ 69 PEOPLE vs. EDWIN MALICSI ........................................................................................................................ 71 PEOPLE vs. ROSAURO SIA............................................................................................................................ 73 PEOPLE OF THE PHILIPPINES vs. LUDOVICO C. DOCTOLERO ...................................................................... 76 PEOPLE vs. ROLLY ABULENCIA ................................................................................................................... 78 REYNALDO BERMUDEZ, SR and ADONITA YABUT BERMUDEZ v. JUDGE A. MELENCIO-HERRERA ............ 79 PEOPLE OF THE PHILIPPINES vs. Hon. Judge BENJAMIN RELOVA ............................................................... 82 GEORGE MANANTAN vs. THE COURT OF APPEALS..................................................................................... 84 PEOPLE OF THE PHILIPPINES vs. ROGELIO BAYOTAS .................................................................................. 87 FAUSTO BARREDO vs. SEVERINO GARCIA ................................................................................................... 89 OSCAR DEL CARMEN, JR., vs. GERONIMO BACOY...................................................................................... 93

LUDO AND LUYM CORPORATION vs. COURT OF APPEALS ......................................................................... 96 THERMOCHEM INC vs. LEONORA NAVAL and CA ....................................................................................... 99 PHILIPPINE HAWK CORP vs VIVIAN TAN LEE ........................................................................................... 101 DY TEBAN TRADING, INC. vs. JOSE CHING ................................................................................................ 104 SAFEGUARD SECURITY AGENCY INC vs. LAURO TANGCO et al ................................................................ 107 NOSTRADAMUS VILLANUEVA vs. PRISCILLA R. DOMINGO and LEANDRO LUIS R. DOMINGO ................. 110 VICENTE CALALAS vs. FRANCISCO SALVA ................................................................................................. 112 AMADO PICART vs. FRANK SMITH, JR. ...................................................................................................... 115 DURBAN APARTMENTS CORP vs PIONEER INSURANCE AND SURETY CORP ............................................ 117 JOSE LAGON vs. HOOVEN COMALCO INDUSTRIES INC ............................................................................ 119 SPS LORENZO G. FRANCISCO and LORENZA D. FRANCISCO vs. COURT OF APPEALS ............................... 121 JACINTO TANGUILIG vs. COURT OF APPEALS and VICENTE HERCE JR. ..................................................... 123 DR. FERNANDO PERIQUET, JR. vs. HEIRS OF THE LATE FELIX R. FRANCISCO ............................................ 126 LEGASPI OIL CO. INC. vs CA and BERNARD OSERAOS ............................................................................... 128 PHILIPPINE CHARTER INSURANCE CORPORATION v CENTRAL COLLEGES OF THE PHILIPPINES............... 130 Titan-Ikeda Construction v Primetown Property ...................................................................................... 133 PNB MADECOR vs. GERARDO C. UY .......................................................................................................... 137 IGNACIO BARZAGA vs. COURT OF APPEALS and ANGELITO ALVIAR......................................................... 139 JOSEFINA TAYAG et al v COURT OF APPEALS ............................................................................................ 141 DR. FERNANDO PERIQUET, JR vs. HEIRS OF FRANCISCO .......................................................................... 143 ARMAND O. RAQUEL-SANTOS vs CA and FINVEST SECURITIES CO., INC .................................................. 145 RCBC vs. CA and FELIPE LUSTRE ................................................................................................................ 147 BPI INVESTMENT CORPORATION vs. CA and ALS MGMT & DEVT CORP .................................................. 149 CARMELITA LEAÑO vs. CA and HERMOGENES FERNANDO ...................................................................... 151 HEIRS OF LUIS BACUS vs. CA and SPS FAUSTINO DURAY and VICTORIANA DURAY ................................. 153 INTEGRATED PACKAGING CORP vs. CA and FIL-ANCHOR PAPER CO., INC. .............................................. 155 ROBERTO Z. LAFORTEZA et al vs. ALONZO MACHUCA ............................................................................. 157 RODOLFO N. REGALA vs. FEDERICO P. CARIN ........................................................................................... 160 THE INTERNATIONAL CORPORATE BANK (UNION BANK) vs. SPS. FRANCIS S. GUECO and MA. LUZ E. GUECO....................................................................................................................................................... 162 REPUBLIC vs. THE COURT OF TAX APPEALS and AGFHA, INCORPORATED ............................................... 164 Antonio Diaz vs. Davao Light and Power Co., Inc...................................................................................... 166 Ms. Violeta Yasona vs. De Ramos ............................................................................................................. 169

Asian Terminals, Inc., vs. Philam Insurance Co., Inc. ................................................................................ 171 Cecilia Yambao vs. Melchorita Zuniga et al. ............................................................................................. 173 Smith Bell Dodwell Shipping Agency Corporation vs. Catalino Borja and International to Wage and Transport Corporation .............................................................................................................................. 175 Ramon Ilusorio vs. Court of Appeals and The Manila Banking Corporation............................................. 177 National Power Corporation vs. Court of Appeals and Engineering Construction, Inc. ........................... 179 Anabelle Muaje-Tuazon and Almer Abing vs. Wenphil Corporation, et al. .............................................. 181 Radio Communication of the Philippines, Inc. vs. Alfonso Verchez, et al................................................. 183 Victory Liner, Inc. vs. Rosalito Gammad, et al .......................................................................................... 185 FGU Insurance Corporation vs. G.P Sarmiento Trucking Corporation and Lambert Eroles...................... 187 Light Rail Transit Authority & Rodolfo Roman vs. Marjorie Navidad, et al............................................... 189 Rodzssen Supply Co., Inc. vs. Far East Bank & Trust Co. ........................................................................... 191 University of the East vs. Romeo Jader ..................................................................................................... 193 Bayne Adjusters and Surveyors, Inc. vs. Court of Appeals and Insurance Company of North America ... 195 Delsan Transport Lines, Inc. vs. C & A Construction, Inc. ......................................................................... 197 Philippine Commercial International Bank vs. Court of Appeals, et al ..................................................... 199 San Miguel Corporation vs. Heirs of Sabiniano Inguito and Julius Ouano ................................................ 201 Heirs of Jose Marcial Ochoa, et al. vs. G & S Transport Corporation........................................................ 203 Alfredo Pacis and Cleopatra Pacis vs. Jerome Jovanne Morales .............................................................. 205 Philippine Hawk Corporation vs. Vivian Tan Lee ...................................................................................... 207 Mercury Drug Corporation and Rolando Del Rosario vs. Spouses Richard Huang, et al. ......................... 208 Flordeliza Mendoza vs. Mutya Soriano, et al. ........................................................................................... 210 Hermana R. Cerezo vs. David Tuazon ....................................................................................................... 212 Filcar Transport Services vs. Jose Espinas ................................................................................................. 214 FEB Leasing and Finance Corporation vs. Spouses Sergio Baylon, et al. .................................................. 216 Filipinas Synthetic Fiber Corporation vs. Wilfredo De Los Santos, et al. .................................................. 218 Viron Transportation Co., Inc. vs. Alberto Delos Santos y Natividad and Rudy Samidan ......................... 220 Mercury Drug Corporation vs. Sebastian Baking ...................................................................................... 222 Safeguard Security Agency, Inc., and Admer Pajarillo vs. Lauro Tangco, et al. ........................................ 224 Ernesto Pleyto and Philippine Rabbit Bus Lines, Inc. vs. Maria Lomboy and Carmela Lomboy ............... 226 Viron Transportation Co., Inc. vs. Alberto Delos Santos y Natividad and Rudy Samidan ......................... 228 Ernesto Syki vs. Salvador Begasa .............................................................................................................. 230 Cecilia Yambao vs. Melchorita Zuniga, et al ............................................................................................. 232

Mindanao Terminal and Brokerage Service, Inc. vs. Phoenix Assurance Company of New York/ MCGEE & Co., Inc....................................................................................................................................................... 234 YHT Realty Corporation, Erlinda Lainez and Anicia Payam vs. Court of Appeals and Maurice McLoughlin .................................................................................................................................................................. 236 Rogelio Ramos, et al vs. Court of Appeals, et al. ...................................................................................... 239 Leah Alesna Reyes, et al vs. Sisters of Mercy Hospital, et al..................................................................... 242 Rogelio Nogales, et al vs. Capitol Medical Center, et al............................................................................ 245 Professional Services, Inc., Juan Fuentes, Miguel Ampil vs. Natividad and Enrique Agana ..................... 247 Professional Services, Inc. vs. Court of Appeals, Natividad and Enrique Agana ....................................... 250 Dr. Milagros Cantre vs. Spouses John David Go and Nora Go .................................................................. 252 Dr. Rubi Li vs. Spouses Reynaldo and Lina Soliman, as parents/heirs of deceased Angelica Soliman ..... 254 People of the Philippines vs. Glenn De Los Santos ................................................................................... 257 L.G. Foods Corporation and Victorino Gabor, Vice-President and General Manager vs. Hon. Philadelfa Pagapong-Agraviador, in her capacity as Presiding Judge of Regional Trial Court, Branch 43, Bacolod City, and Spouses Florentino and Theresa Vallejera ......................................................................................... 260 Victorino Magat vs. Hon. Leo Medialdea and Santiago Guerrero ............................................................ 262 Fidela Del Castillo Vda. De Mistica vs. Spouses Bernardino Naguiat and Maria Paulina Gerona-Naguiat .................................................................................................................................................................. 264 Spouses Henry Co and Elizabeth Co and Melody Co vs. Court of Appeals, et al ...................................... 266 Heirs of Sofia Quirong, represented by Romeo Quirong vs. Development Bank of the Philippines ........ 268 Heirs of Ramon Gaite, et al vs. the Plaza, Inc. and FGU Insurance Corporation....................................... 270 Solar Harvest, Inc. vs. Davao Corrugated Carton Corporation ................................................................. 273 Mila Reyes vs. Victoria Tuparan ................................................................................................................ 275 G.G. Sportswear MFG. Corporation vs. World Class Properties, Inc. ....................................................... 278 Valentin Movido, substituted by Marginito Movido vs. Luis Reyes Pastor .............................................. 280 Spouses Carmen Tongson and Jose Tongson, et al vs. Emergency Pawnshop Bula, Inc. and Danilo Napala .................................................................................................................................................................. 282 Bonifacio Sanz Maceda, Jr. vs. Development Bank of the Philippines...................................................... 284 Armando Raquel-Santos and Annalissa Mallari vs. Court of Appeals and Finvest Securities Co., Inc. ..... 286 Spouses Lino Francisco & Guia Francisco vs. DEAC Construction, Inc. and Geomar Dadula .................... 288 Spouses Felipe and Leticia Cannu vs. Spouses Gil and Fernandina Galang and National Home Mortgage Finance Corporation ................................................................................................................................. 291 Generoso Villanueva and Raul Villanueva, Jr. vs. Estate of Gerardo Gonzaga/Ma. Villa Gonzaga, in her capacity as Administratrix ......................................................................................................................... 293 Spouses Domingo and Lourdes Paguyo vs, Pierre Astorga and St. Andrew Realty, Inc. .......................... 295

Bienvenido Casino, Jr. vs. Court of Appeals and Octagon Realty Development Corporation .................. 298 Fernando Carrascoso, Jr. vs. Court of Appeal, et al. ................................................................................. 300 Goldenrod, Inc. vs. Court of Appeals, et al. .............................................................................................. 303 Roberto Serrano vs. Court of Appeals, et al.............................................................................................. 306 Perla Palma Gil, Vicente Hizon, Jr., and Angel Palma Gil vs. Court of Appeals, et al. ............................... 308 David Reyes vs Jose Lim ............................................................................................................................ 310 Ong Yong, et. al. vs David Tiu .................................................................................................................... 312 Equatorial Realty Dev’t Inc. vs Mayfair Theater, Inc. ................................................................................ 314 Sps. Mariano and Avelina Velarde vs Court of Appeals ............................................................................ 316 Alexander Asuncion vs Eduardo Evangelista ............................................................................................ 318 William Uy vs Court of Appeals ................................................................................................................. 320 Constancia Tamayo, et. al. vs Rosalia Abad Senora, et. al. ....................................................................... 322 Leticia Tan, et. al. vs OMC Carriers, Inc..................................................................................................... 324 Victory Liner, Inc. vs Heirs of Andres Malecdan ....................................................................................... 326 GSIS vs Sps. Gonzalo and Matilde Labung-Deang ..................................................................................... 329 BPI Investment Corp. vs DG Carreon Commercial Corp. .......................................................................... 331 Khe Kong Cheng vs Court of Appeals ........................................................................................................ 333 Philippine Realty and Holdings Corp. vs Ley Construction and Development Corp. ................................ 335 Megaworld Globus Asia, Inc. vs Mila Tanseco .......................................................................................... 337 Roberto Sicam vs Lulu Jorge ..................................................................................................................... 339 Florencia Huibonhua vs Court of Appeals................................................................................................. 341 Ace-Agro Development Corp. vs Court of Appeals ................................................................................... 343 Pedro Dioquino vs Federico Laureano, et. al. ........................................................................................... 345 Bachelor Express, Inc. vs Court of Appeals ............................................................................................... 347 Pedro Vasquez, et. al. vs Court of Appeals ............................................................................................... 349 Alberta & Cresencio Yobido vs Court of Appeals ...................................................................................... 351 Roberto Juntilla vs Clemente Fontanar..................................................................................................... 353 PhilAm Gen Insurance Co. vs MGG Marine Services, Inc. ......................................................................... 355 Mindex Resourced Development vs Ephraim Morillo .............................................................................. 357 NAPOCOR vs Philipp Brothers Oceanic, Inc. ............................................................................................. 359 William Ong Genato vs Benjamin Bayhon, et. al. ..................................................................................... 361 Union Bank of the Philippines vs Edmund Santibañez ............................................................................. 363 Jesus San Agustin vs Court of Appeals ...................................................................................................... 365

Project Builders, Inc. vs Court of Appeals ................................................................................................. 367 Hong Kong and Shanghai Banking Corp. (HSBC) vs Sps. Broqueza ........................................................... 369 Development Bank of the Philippines vs Court of Appeals ...................................................................... 371 Maria Soledad Tomimbang vs Atty. Jose Tomimbang .............................................................................. 372 Felix Gonzales vs Heirs of Cruz .................................................................................................................. 374 Insular Life Assurance Company vs Robert Young, et. al. ......................................................................... 376 Direct Funders Holdings Corp. vs Judge Celso Laviña ............................................................................... 378 Fidela Vda. de Mistica vs Sps. Naguiat ...................................................................................................... 380 Luz Hermosa vs Epifanio Longara ............................................................................................................. 382 Nazario Trillana vs Quezon College, Inc. ................................................................................................... 384 Visayan Sawmill Company, Inc. vs Court of Appeals ................................................................................ 386 Carmelita Leaño vs Court of Appeals ........................................................................................................ 388 Raymundo De Leon vs Benita Ong ............................................................................................................ 390 Heirs of Remedios Sandejas vs Alex Lina .................................................................................................. 392 Commissioner of Internal Revenue vs Primetown Property Group ......................................................... 394 National Marketing Corp. (NAMARCO) vs. Tecson, et. al. ........................................................................ 396 Ernest Berg vs Magdalena Estate, Inc. ...................................................................................................... 398 Lirag Textile Mills, Inc. vs Court of Appeals .............................................................................................. 400 Daguhoy Enterprises, Inc. vs Rita Ponce ................................................................................................... 402 Victoria Planters Association, Inc. vs Victorias Milling Co., Inc. ................................................................ 404 Jespajo Realty Corporation vs Court of Appeals ....................................................................................... 406 Pilar Borromeo et. al. vs Court of appeals ................................................................................................ 408 Benito Gonzales vs Florentino de Jose...................................................................................................... 410 Guillermina Baluyut vs Eulogio Poblete et. al. .......................................................................................... 412 Malayan Realty, Inc. vs Uy Han Yong ........................................................................................................ 414 Kasapian ng Malayang Manggagawa sa Coca-Cola vs Court of Appeals .................................................. 416 Zenaida Santos vs Santos et. al. ................................................................................................................ 418 Manuel Melotindos vs Melecio Tobias ..................................................................................................... 420 LL and Company Development vs Huang Chao Chun ............................................................................... 422 Brent School, Inc. vs Ronaldo Zamora ...................................................................................................... 424 Lourdes Valerio Lim vs People of the Philippines ..................................................................................... 426 Pacific Banking Corporation vs Court of Appeals...................................................................................... 428 Felipe Agoncillo vs Crisanto Javier ............................................................................................................ 430

Ong Guan Can vs The Century Incurance Co., Ltd. ................................................................................... 432 Clara Tambunting de Legards, et. al. vs Victoria Desbarats Miailhe ......................................................... 434 Alejandro Reyes vs Francisco Martinez .................................................................................................... 436 Martina Quizana vs Gaudencio Redugerio ............................................................................................... 437 Marsman vs. Philippine Geoanalytics ....................................................................................................... 439 Purita Alipio vs. the Court of Appeals and Romeo G. Jaring ..................................................................... 441 PH Credit Corporation vs. Court of Appeals and Carlos M. Ferrales ........................................................ 442 Construction Development Corporation of the Philippines vs. Rebecca G. Estrella, et. al. ..................... 443 Republic Glass Corporation and Gervel Inc., vs. Lawrence C. Qua ........................................................... 445 Industrial Management International Development Corp. (INIMACO) vs National Laabor Relations Commission ............................................................................................................................................... 447 Metro Manila Transit Coprporation vs Court of Appeals ......................................................................... 449 Baldomero Inciong, Jr. vs Court of Appeals and Philippine Bank of Communications ............................. 451 Philippine Blooming Mill, Inc. vs Court of Appeals ................................................................................... 452 Queensland Tokyo Commodities, Inc. vs Thomas George........................................................................ 455 Shrimp-Specialist vs. Fuji-Triumph Agri-Industrial Corporation ............................................................... 457 Asset Builders Corporation vs. Stronghold Insurance Company, Inc........................................................ 459 Eparwa Security and Janitorial Services, Inc. vs Liceo de Cagayan University .......................................... 461 P.T. Cerna Corporation vs Court of Appeals ............................................................................................. 463 Natividad P. Nazareno vs Court of Appeals .............................................................................................. 465 Aurelio P. Alonzo vs Jaime and Perlita San Juan ....................................................................................... 467 Jesus T. David vs. Court of Appeals ........................................................................................................... 470 Republic of the Philippines vs. Thi Thu Thuy T. De Guzman ..................................................................... 472 Jose Marques and Maxilite Technologies, Inc. vs Far East Bank and Trust Company .............................. 474 PRISMA Construction and Development Corporation vs Arthur F. Menchavez ....................................... 476 Theresa Macalalag vs People of the Philippines ....................................................................................... 478 Antonio Tan vs. Court of Appeals ............................................................................................................. 479 Eastern Shipping Lines, Inc. vs Court of Appeals ...................................................................................... 481 Rodelo G. Polotan, Sr. vs Court of Appeals ............................................................................................... 483 New Sampaguita Builders Construction, Inc. (NSBCI) vs Philippine National Bank .................................. 484 Dario Nacar vs Gallery Frames and/or Felipe Bordey, Jr. ......................................................................... 486 Land Bank of the Philippines vs Alfredo Ong ............................................................................................ 488 Spouses Florentino T. Mallari and Aurea V. Mallari vs Prudential Bank (now Bank of the Philippine Islands) ...................................................................................................................................................... 491

RGM Industries vs United Pacific Capital Corporation ............................................................................. 493 Philippine National Bank vs Spouses Wilfredo and Estela Encina ............................................................ 495 Restituta M. Imperial vs Alexa Jaucian ..................................................................................................... 497 Teddy G. Pabugais vs Dave P. Sahijwani ................................................................................................... 499 Antonio Lo vs Court of Appeals................................................................................................................. 501 Tolomeo Ligutan vs Court of Appeals ....................................................................................................... 503 Spouses Silvestre vs Rodrigo V. Ramos ..................................................................................................... 505 First Metro Investment Corporation vs Este del Sol Mountain Reserve .................................................. 507 DOMEL Trading Corporation vs Court of Appeals..................................................................................... 509 Leticia Y. Medel, et. al. vs Court of Appeals .............................................................................................. 511 Pacita F. Reformina vs The Honorable Valeriano P. Tomol ...................................................................... 513 Sonny Lo vs KJS Eco-Formwork System Phil., Inc. ..................................................................................... 515 Philippine National Bank vs Court of Appeals and Loreto Tan ................................................................. 517 Cathay Pacific Airways, Ltd. Vs Spouses Daniel Vazquez and Maria Luisa Madrigal Vazquez .................. 519 Citibank, N.A. and Investors’ Finance Corporation vs Modesta R. Sabeniano ......................................... 521 Telengtan Brothers & Sons, INC. vs. United States Lines.......................................................................... 523 C.F. Sharp & Co., Inc. vs Northwest Airlines, Inc. ...................................................................................... 525 Albert R. Padilla vs Spouses Floresco Paredes and Adelina Paredes ........................................................ 526 Norberto Tibajia, Jr. and Armen Tibajia vs Court of Appeals .................................................................... 528 Development Bank of the Philippines vs Court of Appeals ...................................................................... 530 Vitarich Corporation vs. Chona Losin ........................................................................................................ 532 Metropolitan Bank and Trust Company vs Renato D. Cabilzo .................................................................. 534 Almeda vs Bathala Marketing ................................................................................................................... 536 Simplicio A. Palanca vs Ulyssis Guides ...................................................................................................... 538 PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK OF ASIA AND AMERICA) vs. COURT OF APPEALS................................................................................................................................... 540 Jose V. Lagon vs Hooven Comalco Industries, Inc..................................................................................... 542 Audion Electric Co., Inc. vs National Labor Relations Commission ........................................................... 544 BINALBAGAN VS. CA.................................................................................................................................. 546 LORENZO SHIPPING COMPANY v. BJ MARTHEL INTERNATIONAL ............................................................ 548 LUZON DEVELOPMENT BANK vs. ENRIQUEZ ............................................................................................ 549 ESTANISLAO REYES vs. SEBASTIANA MARTINEZ ET AL., ........................................................................... 551 AGRIFINA AQUINTEY vs. SPOUSES FELICIDAD AND RICO TIBONG............................................................ 553

MAMENTA Vda. De JAYME vs. CA ............................................................................................................ 555 Caltex vs. IAC ............................................................................................................................................. 557 Lo vs. CA .................................................................................................................................................... 559 ASJ Corporation vs. Evangelista ................................................................................................................ 561 Paculdo vs. Regalado ................................................................................................................................ 563 CBC vs. CA ................................................................................................................................................. 565 Mobil vs. CA .............................................................................................................................................. 567 Sps. Bonrostro vs. Sps. Luna ..................................................................................................................... 568 Dalton vs. FGR Reality and Development Corp......................................................................................... 570 Benos vs. Lawilao ...................................................................................................................................... 572 People’s Industrial vs. CA .......................................................................................................................... 574 Eternal Gardens vs. CA .............................................................................................................................. 576 Rayos vs. Reyes ......................................................................................................................................... 577 Cebu International vs. CA.......................................................................................................................... 579 De Mesa vs. CA.......................................................................................................................................... 581 Occena vs. CA ............................................................................................................................................ 583 Ortigas vs Feati Bank ................................................................................................................................. 585 So vs. Food Fest Land, Inc. ........................................................................................................................ 587 Magat vs. CA ............................................................................................................................................. 589 PNCC vs. CA ............................................................................................................................................... 591 NATELCO vs. CA......................................................................................................................................... 593 Reyna vs. COA ........................................................................................................................................... 594 Trans Pacific vs. CA.................................................................................................................................... 596 Dalupan vs. Harden ................................................................................................................................... 598 Lopez Liso vs. Tambunting ........................................................................................................................ 600 Testate Estate of Mota vs. Serra ............................................................................................................... 601 Yek Tong Lim Fire vs. Yusingco .................................................................................................................. 603 EGV Realty vs. CA ...................................................................................................................................... 604 AEROSPACE CHEMICAL INDUSTRIES, INC. vs. COURT OF APPEALS .......................................................... 606 ERNESTO M. APODACA vs. NATIONAL LABOR RELATIONS COMMISSION................................................ 609 SPOUSES VICTORIANO CHUNG and DEBBIE CHUNG vs. ULANDAY CONSTRUCTION, INC. ....................... 611 MONDRAGON PERSONAL SALES, INC. vs. VICTORIANO S. SOLA, JR. ........................................................ 613 INSULAR INVESTMENT AND TRUST CORPORATION vs. CAPITAL ONE EQUITIES CORP. .......................... 615

SELWYN F. LAO and EDGAR MANANSALA vs. SPECIAL PLANS, INC. ......................................................... 617 UNITED PLANTERS SUGAR MILLING CO., INC., (UPSUMCO) vs. CA .......................................................... 619 SILAHIS MARKETING CORPORATION vs. IAC ............................................................................................. 622 ENGRACIO FRANCIA vs. IAC ...................................................................................................................... 624 HERMENEGILDO M. TRINIDAD vs. ESTRELLA ACAPULCO ......................................................................... 626 HEIRS OF SERVANDO FRANCO vs. SPOUSES VERONICA AND DANILO GONZALES ................................... 628 CAROLINA HERNANDEZ-NIEVERA vs. WILFREDO HERNANDEZ ................................................................ 630 ST. JAMES COLLEGE OF PARAÑAQUE vs. EQUITABLE PCI BANK ............................................................... 633 MARIA SOLEDAD TOMIMBANG vs. ATTY. JOSE TOMIMBANG ................................................................. 636 MINDANAO SAVINGS AND LOAN ASSOCIATION, INC. vs. EDWARD WILLKOM ........................................ 638 AGRIFINA AQUINTEY vs. SPOUSES FELICIDAD AND RICO TIBONG............................................................ 640 ASIAN TERMINALS, INC. vs. PHILAM INSURANCE CO., INC. ...................................................................... 642 LOADMASTERS CUSTOMS SERVICES, INC. vs. GLODEL BROKERAGE CORPORATION ............................... 643 METROPOLITAN BANK AND TRUST COMPANY vs. RURAL BANK OF GERONA, INC.................................. 645 SWAGMAN HOTELS AND TRAVEL, INC. vs. CA .......................................................................................... 647 AZOLLA FARMS and FRANCISCO R. YUSECO vs. CA .................................................................................. 649 CALIFORNIA BUS LINES, INC. vs. STATE INVESTMENT HOUSE, INC. ......................................................... 651 GLORIA OCAMPO-PAULE vs. CA ................................................................................................................ 654 SPOUSES ARSENIO R. REYES and NIEVES S. REYES vs. CA ......................................................................... 656 SPOUSES FLORANTE and LAARNI BAUTISTA vs. PILAR DEVELOPMENT CORPORATION........................... 658 EVADEL REALTY and DEVELOPMENT CORPORATION vs. SPOUSES ANTERO AND VIRGINIA SORIANO .... 660 FRANCISCO L. ROSARIO, JR. vs. LELLANI DE GUZMAN .............................................................................. 662 VECTOR SHIPPING CORPORATION vs. AMERICAN HOME ASSURANCE COMPANY .................................. 664 ERNESTO VILLEZA vs. GERMAN MANAGEMENT AND SERVICES............................................................... 666 INSURANCE OF THE PHILIPPINE ISLANDS CORPORATION vs. SPOUSES VIDAL S. GREGORIO and JULITA GREGORIO ................................................................................................................................................. 668 ROMEO D. MARIANO vs. PETRON CORPORATION ................................................................................... 670 SPOUSES PATRICIO and MYRNA BERNALES vs. HEIRS OF JULIAN SAMBAAN ........................................... 672 B & I REALTY CO., INC., petitioner, vs. TEODORO CASPE .......................................................................... 674 Felicisima Mesina vs. Atty. Honorio Valisno Garcia .................................................................................. 676 Heirs of Gaudiane vs. Court of Appeals .................................................................................................... 678 Menandro Laureano vs CA ........................................................................................................................ 680 Banco Filipino Savings vs Court of Appeals ............................................................................................... 681

MARIA VDA. DE DELGADO vs. COURT OF APPEALS .................................................................................. 683 Josefa Maestrado vs. CA ........................................................................................................................... 685 F.A.T. KEE COMPUTER SYSTEMS vs. ONLINE NETWORKS INTERNATIONAL ............................................. 686 Tanay Recreation vs Catalina Fausto ........................................................................................................ 688 Danilo Mendoza vs CA .............................................................................................................................. 689 Jefferson Lim vs. Queensland Tokyo ......................................................................................................... 691 Placewell International vs. Ireneo Camote ............................................................................................... 693 Heirs of Ragua vs. CA ................................................................................................................................ 695 Metropolitan Bank vs Court of Appeals .................................................................................................... 697 Spouses Manuel vs. CA ............................................................................................................................. 699 Miguel Cuenco vs. Concepcion cuenco ..................................................................................................... 701 Spouses Hanopol vs SM ............................................................................................................................ 702 Terminal Facilities vs. PPA......................................................................................................................... 704 Mendoza vs. Court of Appeals .................................................................................................................. 706 Roblett Industrial Construction vs. CA ...................................................................................................... 709 Sime Darby Inc. vs. Good Year Philippines ................................................................................................ 711 Kings Properties Corporation vs. Galido ................................................................................................... 713 Metrobank vs. Cabilzo............................................................................................................................... 716 Mesina vs. Garcia ...................................................................................................................................... 718 Pahamatong vs PNB .................................................................................................................................. 720 Shopper’s Paradise Corporation vs. Efren Roques ................................................................................... 721 Meatmaster vs Lelis Integrated ................................................................................................................ 724 Larena vs. Mapili ..................................................................................................................................... 726 Santos vs Santos ..................................................................................................................................... 728 Villanueva-Mijares vs CA ........................................................................................................................ 730 Garcia vs. Villar.......................................................................................................................................... 731 Spouses Edralin vs Philippine Veterans Bank ........................................................................................... 733 University Physicians Services vs. Marian Clinics...................................................................................... 735 MARTIN vs DBS BANK Philippines, INC. .................................................................................................... 737 Heirs of Zabala vs. CA ................................................................................................................................ 739 DUNCAN ASSOCIATION OF DETAILMAN PTGW vs. GLAXOWELLCOM PHILIPPINES ................................. 740 Star Paper vs. Simbol ................................................................................................................................ 742 Tiu vs. Platinum Plans Philippines ............................................................................................................. 744

Avon Cosmetics vs Luna ............................................................................................................................ 746 Del Castillo vs. Richmond .......................................................................................................................... 749 ARWOOD INDUSTRIES, INC. vs. DM CONSUNJI, INC. ................................................................................ 750 Sps. Tecklo v Rural Bank of Pamplona ...................................................................................................... 751 Banate vs. Philippine Countryside ............................................................................................................ 753 Pascual vs. Ramos ..................................................................................................................................... 755 Chua Tee Dee vs. Ca .................................................................................................................................. 757 G.C Garments vs. Miranda ........................................................................................................................ 759 Barcero vs Capitol Development .............................................................................................................. 761 Maxima Hemedes vs. CA........................................................................................................................... 762 PUP vs. Golden Horizon ............................................................................................................................ 764 Joselito and Dominga Villegas vs. CA ........................................................................................................ 767 EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC vs. MAYFAIR THEATER, INC .................................................................................................................................................................. 769 PUP V CA ................................................................................................................................................... 771 Sps. Litonjua vs. L & R Corporation ........................................................................................................... 774 Josefa VS. Zhandong Trading Corporation ................................................................................................ 776 Saludo vs. Security Bank ........................................................................................................................... 777 PCI VS NG Sheung Ngor............................................................................................................................. 779 Teresita Dio vs. St. Ferdinand Memorial Park ........................................................................................... 780 PILITEL vs. Delfino Tecson ......................................................................................................................... 782 PAL vs. CA .................................................................................................................................................. 783 ERMITAÑO VS. COURT OF APPEALS .......................................................................................................... 784 Uniwide vs Titan-Ikeda.............................................................................................................................. 786 Heirs of Augusto Salas, Jr. vs. Laperal ....................................................................................................... 788 BIENVENIDO R. MEDRANO and IBAAN RURAL BANK vs. COURT OF APPEALS, PACITA G. BORBON, JOSEFINA E. ANTONIO and ESTELA A. FLOR.............................................................................................. 790 MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAÑA vs. EDUARDO R. GULLAS and NORMA S. GULLAS ...................................................................................................................................................... 792 JESUS M. GOZUN vs. JOSE TEOFILO T. MERCADO a.k.a. ‘DON PEPITO MERCADO ................................... 794 STA. LUCIA REALTY & DEVELOPMENT, INC. vs. SPOUSES FRANCISCO & EMELIA BUENAVENTURA......... 796 JOSEPH CHAN, WILSON CHAN and LILY CHAN vs. BONIFACIO S. MACEDA, JR. ........................................ 798

TIMOTEO BALUYOT, JAIME BENITO, BENIGNO EUGENIO, ROLANDO GONZALES, FORTUNATO FULGENCIO and CRUZ-NA-LIGAS HOMESITE ASSOCIATION, INC. vs. THE HONORABLE COURT OF APPEALS, THE QUEZON CITY GOVERNMENT and UNIVERSITY OF THE PHILIPPINES ....................................................... 800 SPOUSES ADELINA S. CUYCO and FELICIANO U. CUYCO vs. SPOUSES RENATO CUYCO and FILIPINA CUYCO ....................................................................................................................................................... 802 ALLAN C. GO, doing business under the name and style, “ACG Express Liner” vs. MORTIMER F. CORDERO .................................................................................................................................................................. 804 HERMINIO TAYAG vs. AMANCIA LACSON, ROSENDO LACSON, ANTONIO LACSON, JUAN LACSON, TEODISIA LACSON-ESPINOSA and THE COURT OF APPEALS ..................................................................... 806 SO PING BUN vs. COURT OF APPEALS, TEK HUA ENTERPRISING CORP. and MANUEL C. TIONG ............. 808 INTERNATIONAL FREEPORT TRADERS, INC. vs. DANZAS INTERCONTINENTAL, INC. ................................ 809 ROCKLAND CONSTRUCTION COMPANY, INC. vs. MID-PASIG LAND DEVELOPMENT CORPORATION ...... 811 METROPOLITAN MANILA DEVELOPMENT AUTHORITY vs. JANCOM ENVIRONMENTAL CORPORATION and JANCOM INTERNATIONAL DEVELOPMENT PROJECTS PTY. LIMITED OF AUSTRALIA ............................... 813 ROCKLAND CONSTRUCTION COMPANY, INC. vs. MID-PASIG LAND DEVELOPMENT CORPORATION ...... 815 MANILA METAL CONTAINER CORPORATION vs. PHILIPPINE NATIONAL BANK ........................................ 817 RIDO MONTECILLO vs. IGNACIA REYNES and SPOUSES REDEMPTOR and ELISA ABUCAY ....................... 819 JASMIN SOLER vs. COURT OF APPEALS, COMMERCIAL BANK OF MANILA, and NIDA LOPEZ .................. 821 YOLANDA PALATTAO 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...................................................... 823 ABS-CBN BROADCASTING CORPORATION vs. HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP., VIVA PRODUCTIONS, INC., and VICENTE DEL ROSARIO ..................................... 825 LOURDES ONG LIMSON vs. COURT OF APPEALS, SPOUSES LORENZO DE VERA and ASUNCION SANTOS-DE VERA, TOMAS CUENCA, JR., and SUNVAR REALTY DEVELOPMENT CORPORATION ................................ 827 REYNALDO VILLANUEVA vs. PHILIPPINE NATIONAL BANK (PNB) ............................................................. 829 CORAZON CATALAN, et. al. vs. JOSE BASA, et.al....................................................................................... 831 EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL CAPALUNGAN vs. HON. COURT OF APPEALS, FELIPE C. RIGONAN and CONCEPCION R. RIGONAN ................................................................................. 833 MARIO J. MENDEZONA and TERESITA M. MENDEZONA, et. al. vs. JULIO H. OZAMIZ, et.al..................... 836 MARIANO T. LIM, et. al. vs. COURT OF APPEALS, LORENZO O. TAN and HERMOGENES O. TAN ............. 838 CORAZON G. RUIZ vs. COURT OF APPEALS and CONSUELO TORRES ........................................................ 840 EPIFANIA DELA CRUZ, substituted by LAUREANA V. ALBERTO vs. SPS. EDUARDO C. SISON and EUFEMIA S. SISON......................................................................................................................................................... 842 RURAL BANK OF STA. MARIA, PANGASINAN vs. THE HONORABLE COURT OF APPEALS, ROSARIO R. RAYANDAYAN, CARMEN R.ARCEÑO ......................................................................................................... 843 DOMINGO CARABEO vs. SPOUSES NORBERTO and SUSAN DINGCO ....................................................... 845

FRANCISCO I. CHAVEZ vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT CORPORATION .......................................................................................................................................... 846 DOMINGO CARABEO vs. SPOUSES NORBERTO and SUSAN DINGCO ....................................................... 848 PIO SIAN MELLIZA vs. CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE COURT APPEALS ....... 849 MANUEL CATINDIG, represented by his legal representative EMILIANO CATINDIG-RODRIGO vs. AURORA IRENE VDA. DE MENESES .......................................................................................................................... 851 ANTHONY ORDUÑA, DENNIS ORDUÑA, and ANTONITA ORDUÑA vs. EDUARDO J. FUENTEBELLA, MARCOS S. CID, BENJAMIN F. CID, BERNARD G. BANTA, and ARMANDO GABRIEL, JR. .......................................... 852 CARMELA BROBIO MANGAHAS vs. EUFROCINA A. BROBIO ..................................................................... 853 GOLDEN APPLE REALTY AND DEVELOPMENT CORPORATION and ROSVIBON REALTY CORPORATION vs. SIERRA GRANDE REALTY CORPORATION, MANPHIL INVESTMENT CORPORATION, RENAN V. SANTOS and PATRICIO MAMARIL .................................................................................................................................. 855 ASKAY vs. FERNANDO A. COSALAN ........................................................................................................... 857 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 vs. RODRIGO N. LIM ....................................................................................................................................... 858 RAFAEL G. SUNTAY, substituted by his heirs, namely: ROSARIO, RAFAEL, JR., APOLINARIO, RAYMUND, MARIA VICTORIA, MARIA ROSARIO and MARIA LOURDES, all surnamed SUNTAY vs. THE HON. COURT OF APPEALS and FEDERICO C. SUNTAY .......................................................................................................... 860 WILLIAM UY and RODEL ROXAS vs. COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY ............................................................................................................................................... 862 PENTACAPITAL INVESTMENT CORPORATION vs. MAKILITO B. MAHINAY................................................ 864 HEIRS OF RAMON C. GAITE, CYNTHIA GOROSTIZA GAITE and RHOGEN BUILDERS vs. THE PLAZA, INC. and FGU INSURANCE CORPORATION .............................................................................................................. 866 HICOBLINO M. CATLY (Deceased), Substituted by his wife, LOURDES A. CATLY vs. WILLIAM NAVARRO, ISAGANI NAVARRO, BELEN DOLLETON, FLORENTINO ARCIAGA, BARTOLOME PATUGA, DIONISIO IGNACIO, BERNARDINO ARGANA, AND ERLINDA ARGANA-DELA CRUZ, and AYALA LAND, INC. ............. 868 CONCHITA LIGUEZ vs. THE HONORABLE COURT OF APPEALS, MARIA NGO VDA. DE LOPEZ, ET AL. ....... 870 PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA SANTOS Y CANON FAUSTINO, deceased vs. LUI SHE in her own behalf and as administratrix of the intestate estate of Wong Heng, deceased ................................................................................................................................................... 872 SONIA F. LONDRES, ARMANDO V. FUENTES, CHI-CHITA FUENTES QUINTIA, ROBERTO V. FUENTES, LEOPOLDO V. FUENTES, OSCAR V. FUENTES and MARILOU FUENTES ESPLANA vs. THE COURT OF APPEALS, THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, ELENA ALOVERA SANTOS and CONSOLACION ALIVIO ALOVERA ................................................................................................................................................... 874

SPS. ANTONIO & LETICIA VEGA vs. SOCIAL SECURITY SYSTEM (SSS) & PILAR DEVELOPMENT CORPORATION .......................................................................................................................................... 876 CLARA M. BALATBAT vs. COURT OF APPEALS and Spouses JOSE REPUYAN and AURORA REPUYAN ...... 878 UNIVERSAL ROBINA SUGAR MILLING CORPORATION vs. HEIRS OF ANGEL TEVES................................... 879 RITA SARMING, et.al. vs. CRESENCIO DY, et.al. ........................................................................................ 881 CEBU CONTRACTORS CONSORTIUM CO. vs. COURT OF APPEALS and MAKATI LEASING & FINANCE CORPORATION .......................................................................................................................................... 883 ADR SHIPPING SERVICES, INC. vs. MARCELINO GALLARDO and THE HONORABLE COURT OF APPEALS . 885 VALENTIN MOVIDO, substituted by MARGINITO MOVIDO vs. LUIS REYES PASTOR ................................ 887 TSPIC CORPORATION vs. TSPIC EMPLOYEES UNION (FFW), representing MARIA FE FLORES, et.al. ........ 889 SPS. RAFAEL P. ESTANISLAO AND ZENAIDA ESTANISLAO vs. EAST WEST BANKING ................................. 891 AGRIFINA AQUINTEY vs. SPOUSES FELICIDAD AND RICO TIBONG............................................................ 893 ADORACION E. CRUZ, THELMA DEBBIE E. CRUZ, GERRY E. CRUZ and NERISSA CRUZ-TAMAYO vs. THE HONORABLE COURT OF APPEALS, SUMMIT FINANCING CORP., VICTOR S. STA. ANA, MAXIMO C. CONTRERAS, RAMON G. MANALASTAS, and VICENTE TORRES ................................................................ 895 NAPOLEON H. GONZALES vs. HONORABLE COURT OF APPEALS AND SPOUSES GABRIEL AND LUZVIMINDA CABALLERO ............................................................................................................................................... 897 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 vs. COURT OF APPEALS AND FEDERICO BRIONES .................................................... 899 PHILIPPINE BANK OF COMMUNICATIONS vs. ELENA LIM, RAMON CALDERON, and TRI-ORO INTERNATIONAL TRADING & MANUFACTURING CORPORATION ............................................................ 901 SPOUSES EFREN N. RIGOR and ZOSIMA D. RIGOR, for themselves and as owners of CHIARA CONSTRUCTION vs. CONSOLIDATED ORIX LEASING and FINANCE CORPORATION .................................. 902 RODOLFO P. VELASQUEZ vs. COURT OF APPEALS, and PHILIPPINE COMMERCIAL INTERNATIONAL BANK, INC. ............................................................................................................................................................ 904 HEIRS OF SOFIA QUIRONG, Represented by ROMEO P. QUIRONG vs. DEVELOPMENT BANK OF THE PHILIPPINES ............................................................................................................................................... 906 SAMUEL U. LEE and PAULINE LEE and ASIATRUST DEVELOPMENT BANK, INC. vs. BANGKOK BANK PUBLIC COMPANY, LIMITED .................................................................................................................................. 908 EQUATORIAL REALTY DEVELOPMENT, Inc. vs. MAYFAIR THEATER, Inc. .................................................. 911 MARIA ANTONIA SIGUAN vs. ROSA LIM, LINDE LIM, INGRID LIM and NEIL LIM ...................................... 913 KHE HONG v. COURT OF APPEALS ............................................................................................................ 915 SUNTAY v. COURT OF APPEALS ................................................................................................................. 917 MANGAHAS v. BROBIO ............................................................................................................................. 919 HERNANDEZ v. HERNANDEZ ..................................................................................................................... 921

FUENTES v ROCA ....................................................................................................................................... 923 ASSOCIATED BANK v. MONTANO ET.AL.................................................................................................... 925 WILLIAM ALAIN MIAILHE v. COURT OF APPEALS ...................................................................................... 927 FIRST PHILIPPINE HOLDINGS CORPORATION v. TRANS MIDDLE EAST EQUITIES INC. .............................. 928 SANCHEZ v. MAPALAD .............................................................................................................................. 930 OESMER v. PARAISO DEVELOPMENT CORPORATION ............................................................................... 932 PERPETUA VDA. DE APE v. COURT OF APPEALS........................................................................................ 934 JULIAN FRANCISCO v. PASTOR HERRERA .................................................................................................. 936 ROSARIO L. DE BRAGANZA v. FERNANDO F. DE VILLA ABRILLE ................................................................ 938 MIGUEL KATIPUNAN v. BRAULIO KATIPUNAN, JR. ................................................................................... 939 NILO R. JUMALON v.COURT OF APPEALS.................................................................................................. 941 CABALES, ET. AL vs COURT OF APPEALS ................................................................................................... 942 ANUNCIACION VDA. DE OUANO v. REPUBLIC OF THE PHILIPPINES ......................................................... 943 SHOEMAKER v. LA TONDENA .................................................................................................................... 945 PNB v. PHILIPPINE VEGETABLE OIL COMPANY ......................................................................................... 946 ANUNCIACION VDA. DE OUANO v. REPUBLIC OF THE PHILIPPINES ......................................................... 948 MUNICIPALITY OF HAGONOY v. DUMDUM .............................................................................................. 950 TAN v. VILLAPAZ ........................................................................................................................................ 952 SPOUSES DAVID v. TIONGSON ................................................................................................................. 954 GENARO CORDIAL v. DAVID MIRANDA ..................................................................................................... 955 VILLANUEVA-MIJARES v. THE COURT OF APPEALS ................................................................................... 956 ROSENCOR v. INQUING ............................................................................................................................. 957 FIRME v.BUKAL.......................................................................................................................................... 959 HEIRS OF M. DORONIO v. HEIR OF F. DORONIO ...................................................................................... 960 GURREA v SUPLICO ................................................................................................................................... 961 FRENZEL v. CATITO .................................................................................................................................... 963 LA BUGA’AL-BLAAN v. RAMOS .................................................................................................................. 965 AGAN v. PIATCO ........................................................................................................................................ 967 COMMISSION ON ELECTIONS v. JUDGE MA. LUISA QUIJANO-PADILLA ................................................... 969 SENATOR ROBERT S. JAWORSKI v. PAGCOR ............................................................................................. 971 OESMER v . PARAISO DEVELOPMENT CORPORATION .............................................................................. 972 HEIRS OF BALITE v. RODRIGO N. LIM ........................................................................................................ 974 PINEDA v. COURT OF APPEALS.................................................................................................................. 976

CRUZ vs. BANCOM FINANCE CORPORATION ............................................................................................ 978 CUATON v. REBECCA SALUD ..................................................................................................................... 980 INFOTECH v. COMELEC ............................................................................................................................. 982 PABUGAIS v. SAHIJWANI ........................................................................................................................... 984 LIGUEZ v. COURT OF APPEALS .................................................................................................................. 987 PHILIPPINE BANKING CORPORATION v. LUI SHE ...................................................................................... 989 VIGILAR v. AQUINO ................................................................................................................................... 990 EPG CONSTRUCTION v. VIGILAR ............................................................................................................... 992 GO CHAN v YOUNG ................................................................................................................................... 994 FRANCISCO v. HERRERA ............................................................................................................................ 996 MENDEZONA v. OZAMIZ ........................................................................................................................... 998 MANZANILLA v. CA ................................................................................................................................. 1000 RURAL BANK OF PARAÑÀQUE v. REMOLADO......................................................................................... 1002 COJUANGCO v. REPUBLIC ....................................................................................................................... 1004 RINGOR v. RINGOR .................................................................................................................................. 1006 SALVADOR v. CA ...................................................................................................................................... 1008 SPOUSES RICARDO AND MILAGROS HUANG v. COURT OF APPEALS ..................................................... 1009 VDA. DE ESCONDE v. COURT OF APPEALS .............................................................................................. 1011 TALA REALTY SERVICES CORPORATION vs. BANCO FILIPINO SAVINGS AND MORTGAGE BANK ............ 1012 HEIRS OF MEDINA v. COURT OF APPEALS............................................................................................... 1016 FILIPINAS PORT SERVICES vs. GO ............................................................................................................ 1020 MENDIZABEL v. APAO ............................................................................................................................. 1023 VDA. DE GUALBERTO v. GO..................................................................................................................... 1026 HEIRS OF YAP v. Court of Appeals ........................................................................................................... 1028 HEIRS OF KIONOSALA v. DACUT .............................................................................................................. 1030 RAMOS v. RAMOS ................................................................................................................................... 1032 THE INTESTATE ESTATE OF TY vs. COURT OF APPEALS ........................................................................... 1034 VDA. DE RETUERTO v. BARZ .................................................................................................................... 1036 CHIA LIONG TAN v. COURT OF APPEALS ................................................................................................. 1038 EILIA O’LACO v. CO CHO CHIT ................................................................................................................. 1040

MARIANO UN OCAMPO III v PEOPLE OF THE PHILIPPINES G.R Nos. 156547-51. February 4, 2008 FACTS:  The Department of Budget and Management (DBM) released National Aid for Local Government Units (NALGU) funds in the total amount of P100 million to the Province of Tarlac. The NALGU is a fund set aside in the General Appropriations Act to assist local governments in their various projects and services.  Petitioner Ocampo, provincial governor of Tarlac from February 22, 1988 up to June 30, 1992, loaned out P56.6 million of the P100 million to the Lingkod Tarlac Foundation, Inc. (LTFI) for the implementation of various livelihood projects. The loan was made pursuant to a Memorandum of Agreement (MOA) entered into by the Province of Tarlac, represented by petitioner Ocampo, and LTFI, represented by petitioner Flores, on August 8, 1988.  How the P56.6 million released to LTFI was utilized became the subject matter of 25 criminal cases.  Petitioner Ocampo, as governor of Tarlac, neglected to set up safeguards for the proper handling of the NALGU funds in the hands of LTFI which resulted in the disappearance of P1,132,739 and P58,000 of the said funds.  Petitioners presented five documents to show that LTFI’s obligations to the Province of Tarlac, in the amount of P56.6 million, have been extinguished: the Tripartite Memorandum of Agreement (TMOA) executed by the Province of Tarlac, LTFI and the Barangay Unity for Industrial and Leadership Development (BUILD) Foundation whereby the liability of LTFI in favor of the Province of Tarlac was transferred and assumed by BUILD in the total amount of P40 million; Deed of Assignment between Tarlac and LTFI whereby the latter assigned its loan portfolios (including interests and certificates of time deposit), the Juki embroidery machines and other assignable documents to the Province of Tarlac in the total amount of P16,618,403.

ISSUE: Whether the amount loaned was private in nature. Held: Yes. The MOA shows that LTFI is “allowed to borrow funds directly from the Provincial Government to fund Lingkod Tarlac Foundation projects provided the projects are livelihood projects under the Rural Industrialization Can Happen Program.” Moreover, the agreement stipulates under the “Conditions for Release of Funds” that the Province of Tarlac “shall release in lump sum the appropriate funds for the approved projects covered by individual loan documents upon signing of the respective loan agreement…”

Art. 1953 of the Civil Code provides that “[a] person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality.” Hence, petitioner Ocampo correctly argued that the NALGU funds shed their public character when they were lent to LTFI as it acquired ownership of the funds with an obligation to repay the Province of Tarlac the amount borrowed. The relationship between the Province of Tarlac and the LTFI is that of a creditor and debtor. Failure to pay the indebtedness would give rise to a collection suit.

LEUNG BEN v P. J. O'BRIEN G.R. No. L-13602

April 6, 1918

Facts: 

PJ O’ Brien instituted an action for recovery of the money in the amount of 15,000 which he won from Leung Ben in a series of gambling, banking and percentage games conducted ruing the two or three months prior to the institution of the suit.



In his verified complaint the O’Brien asked for an attachment, under section 424, and 412 (1) of the Code of Civil Procedure, against the property of Leung Ben, on the ground that the latter was about to depart from the Philippine islands with intent to defraud his creditors. This attachment was issued; and acting under the authority thereof, the sheriff attached the sum of P15,000 which had been deposited by the herein plaintiff with the International Banking Corporation



The contention of the petitioner is that the statutory action to recover money lost at gaming is that the statutory action to recover money lost at gaming is no such an action as is contemplated in this provision, and he therefore 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

Issue: Whether or not the statutory obligation to restore money won at gaming an obligation arising from "contract, express or implied.

Held: Upon general principles, recognize both the civil and common law, money lost in gaming and voluntarily paid by the loser to the winner cannot in the absence of statute, be recovered in a civil action. But Act No. 1757 of the Philippine Commission, which defines and penalizes several forms of gambling, contains numerous provisions recognizing the right to recover money lost in gambling or in the playing of certain games (secs. 6, 7, 8, 9, 11). The original complaint in the action in the Court of First Instance is not clear as to the particular section of Act No. 1757 under which the action is brought, but it is alleged that the money was lost at gambling, banking, and percentage game in which the defendant was banker. It must therefore be assumed that the action is based upon the right of recovery given in Section 7 of said Act, which declares that an action may be

brought against the banker by any person losing money at a banking or percentage game. In the case now under consideration the duty of the defendant to refund the money which he won from the plaintiff at gaming is a duty imposed by statute. It therefore arises ex lege. Furthermore, it is a duty to return a certain sum which had passed from the plaintiff to the defendant. By all the criteria which the common law supplies, this a duty in the nature of debt and is properly classified as an implied contract. It is wellsettled by the English authorities that money lost in gambling or by lottery, if recoverable at all, can be recovered by the loser in an action of indebitatus assumpsit for money had and received. This means that in the common law the duty to return money won in this way is an implied contract, or quasi-contract. It is no argument to say in reply to this that the obligation here recognized is called an implied contract merely because the remedy commonly used in suing upon ordinary contract can be here used, or that the law adopted the fiction of promise in order to bring the obligation within the scope of the action of assumpsit. Such statements fail to express the true import of the phenomenon. Before the remedy was the idea; and the use of the remedy could not have been approved if it had not been for historical antecedents which made the recognition of this remedy at one logical and proper. Furthermore, it should not be forgotten that the question is not how this duty but what sort of obligation did the author of the Code of Civil Procedure intend to describe when he sued the term implied contract in section 412.

ARTURO PELAYO v MARCELO LAURON ET AL. G.R. No. L-4089

January 12, 1909

FACTS:  On the 23rd of November, 1906, Arturo Pelayo, a physician residing in Cebu, filed a complaint against Marcelo Lauron and Juana Abella setting forth that on or about the 13th of October of said year, at night, the plaintiff was called to the house of the defendants, situated in San Nicolas, he was requested by them to render medical assistance to their daughter-in-law who was about to give birth to a child; after consultation with the attending physician, Dr. Escaño, it was found necessary, on account of the difficult birth, to remove the fetus by means of forceps which operation was performed by the plaintiff, who also had to remove the afterbirth. 

The just and equitable value of the services rendered by him was P500, which the defendants refuse to pay without alleging any good reason therefor;

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In answer to the complaint counsel for the defendants denied all of the allegation therein contained and alleged as a special defense, that their daughter-in-law had died in consequence of the said childbirth, and that when she was alive she lived with her husband independently and in a separate house without any relation whatever with them, and that, if on the day when she gave birth she was in the house of the defendants, her stay there was accidental and due to fortuitous circumstances

ISSUE: Whether or not the defendants are liable to pay the professional fee. HELD: Obligations arising from law are not presumed. Those expressly determined in the code or in special laws, etc., are the only demandable ones. Obligations arising from contracts have legal force between the contracting parties and must be fulfilled in accordance with their stipulations. (Arts. 1090 and 1091.) The rendering of medical assistance in case of illness is comprised among the mutual obligations to which the spouses are bound by way of mutual support. (Arts. 142 and 143.) If every obligation consists in giving, doing or not doing something (art. 1088), and spouses are mutually bound to support each other, there can be no question but that, when either of them by reason of illness should be in need of medical assistance, the other is under the unavoidable obligation to furnish the necessary services of a physician in order that health may be restored, and he or she may be freed from the sickness by which life is jeopardized; the party bound to furnish such support is therefore liable for all expenses, including the fees of the medical expert for his professional services. This liability originates from the above-cited mutual obligation which the law has expressly established between the married couple.

In the face of the above legal precepts it is unquestionable that the person bound to pay the fees due to the plaintiff for the professional services that he rendered to the daughter-in-law of the defendants during her childbirth, is the husband of the patient and not her father and mother- in-law, the defendants herein. The fact that it was not the husband who called the plaintiff and requested his assistance for his wife is no bar to the fulfillment of the said obligation, as the defendants, in view of the imminent danger, to which the life of the patient was at that moment exposed, considered that medical assistance was urgently needed, and the obligation of the husband to furnish his wife in the indispensable services of a physician at such critical moments is specially established by the law, as has been seen, and compliance therewith is unavoidable; therefore, the plaintiff, who believes that he is entitled to recover his fees, must direct his action against the husband who is under obligation to furnish medical assistance to his lawful wife in such an emergency.

ASJ CORPORATION AND ANTONIO SAN JUAN v SPS. EFREN & MAURA EVANGELISTA G.R. NO. 158086 February 14, 2008 FACTS: 

Respondents, under the name and style of R.M. Sy Chicks, are engaged in the large-scale business of buying broiler eggs, hatching them, and selling their hatchlings (chicks) and egg by-products in Bulacan and Nueva Ecija. For the incubation and hatching of these eggs, respondents availed of the hatchery services of ASJ Corp., a corporation duly registered in the name of San Juan and his family.

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On February 3, 1993, respondent Efren went to the hatchery to pick up the chicks and by-products covered by Setting Report No. 108, but San Juan refused to release the same due to respondents’ failure to settle accrued service fees on several setting reports starting from Setting Report No. 90. Nevertheless, San Juan accepted from Efren 10,245 eggs covered by Setting Report No. 113 and P15,000.00 in cash as partial payment for the accrued service fees.

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On February 10, 1993, Efren returned to the hatchery to pick up the chicks and byproducts, but San Juan again refused to release the same unless respondents fully settle their accounts. In the afternoon of the same day, respondent Maura, with her son Anselmo, tendered P15,000.00 to San Juan, and tried to claim the chicks and byproducts. She explained that she was unable to pay their balance because she was hospitalized for an undisclosed ailment. San Juan accepted the P15,000.00, but insisted on the full settlement of respondents’ accounts before releasing the chicks and byproducts.

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Believing firmly that the total value of the eggs delivered was more than sufficient to cover the outstanding balance, Maura promised to settle their accounts only upon proper accounting by San Juan. San Juan disliked the idea and threatened to impound their vehicle and detain them at the hatchery compound if they should come back unprepared to fully settle their accounts with him.

ISSUE: Whether or not petitioners’ retention of the chicks and by-products on account of respondents’ failure to pay the corresponding service fees unjustified. HELD: Under Article 1248 of the Civil Code, the creditor cannot be compelled to accept partial payments from the debtor, unless there is an express stipulation to that effect. More so,

respondents cannot substitute or apply as their payment the value of the chicks and byproducts they expect to derive because it is necessary that all the debts be for the same kind, generally of a monetary character. Needless to say, there was no valid application of payment in this case. Furthermore, it was respondents who violated the very essence of reciprocity in contracts, consequently giving rise to petitioners’ right of retention. This case is clearly one among the species of non-performance of a reciprocal obligation. Reciprocal obligations are those which arise from the same cause, wherein each party is a debtor and a creditor of the other, such that the performance of one is conditioned upon the simultaneous fulfillment of the other. From the moment one of the parties fulfills his obligation, delay by the other party begins. Nonetheless, San Juan’s subsequent acts of threatening respondents should not remain among those treated with impunity. Under Article 19 of the Civil Code, an act constitutes an abuse of right if the following elements are present: (a) the existence of a legal right or duty; (b) which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another. Here, while petitioners had the right to withhold delivery, the high-handed and oppressive acts of petitioners, as aptly found by the two courts below, had no legal leg to stand on. We need not weigh the corresponding pieces of evidence all over again because factual findings of the trial court, when adopted and confirmed by the appellate court, are binding and conclusive and will not be disturbed on appeal Since it was established that respondents suffered some pecuniary loss anchored on petitioners’ abuse of rights, although the exact amount of actual damages cannot be ascertained, temperate damages are recoverable. [b X (d X e) + c X (d X f)] = Temperate Damages b and c - representing the average rates of conversion of broiler eggs into hatched chicks and egg by-products as tabulated by the trial court based on available statistical data which was unrebutted by petitioners (41% and 17%).d- 68,784 eggs, or the total number of broiler eggs under Setting Report Nos. 109 to 113; and e and f- P14.00 and P1.20, or the then unit market price of the chicks and by-products, respectively. 41% X (68,784 eggs X P14) = P394,820.16 17% X (68,784 eggs X P1.20) = P 14,031.94 [P394,820.16 + P14,031.94] = P408,852.10

ERNESTO RAMAS UYPITCHING and RAMAS UYPITCHING SONS, INC., v. ERNESTO QUIAMCO G.R. No. 146322 December 6, 2006 FACTS: 

In 1982, respondent Ernesto C. Quiamco was approached by Juan Davalan, Josefino Gabutero and Raul Generoso to amicably settle the civil aspect of a criminal case for robbery filed by Quiamco against them. They surrendered to him a red Honda XL-100 motorcycle and a photocopy of its certificate of registration. Respondent asked for the original certificate of registration but the three accused never came to see him again.

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It turned out that, in October 1981, the motorcycle had been sold on installment basis to Gabutero by petitioner Ramas Uypitching Sons, Inc., a family-owned corporation managed by petitioner Atty. Ernesto Ramas Uypitching. To secure its payment, the motorcycle was mortgaged to petitioner-corporation.

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When Gabutero could no longer pay the installments, Davalan assumed the obligation and continued the payments. In September 1982, however, Davalan stopped paying the remaining installments and told petitioner corporation’s collector, Wilfredo Veraño, that the motorcycle had allegedly been “taken by respondent’s men.”

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Nine years later, on January 26, 1991, petitioner Uypitching, accompanied by policemen, went to Avesco-AVNE Enterprises to recover the motorcycle. Uypitching uttered that Quiamco is a thief and he took the motorcycle and left.

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On February 18, 1991, petitioner Uypitching filed a criminal complaint for qualified theft and/or violation of the Anti-Fencing Law against respondent in the Office of the City Prosecutor of Dumaguete City. Respondent moved for dismissal because the complaint did not charge an offense as he had neither stolen nor bought the motorcycle. The Office of the City Prosecutor dismissed the complaint and denied petitioner Uypitching’s subsequent motion for reconsideration.

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Respondent filed an action for damages against petitioners in the RTC of Dumaguete City, Negros Oriental, Branch 37. He sought to hold the petitioners liable for the following: (1) unlawful taking of the motorcycle; (2) utterance of a defamatory remark (that respondent was a thief) and (3) precipitate filing of a baseless and malicious complaint. These acts humiliated and embarrassed the respondent and injured his reputation and integrity.

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RTC Ruling: Petitioner Uypitching was motivated with malice and ill will when he called respondent a thief, took the motorcycle in an abusive manner and filed a baseless complaint for qualified theft and/or violation of the Anti-Fencing Law. Petitioners’ acts were found to be contrary to Articles 19 and 20 of the Civil Code. Hence, the trial court held petitioners liable to respondent for P500,000 moral damages, P200,000 exemplary damages and P50,000 attorney’s fees plus costs.

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CA Ruling: Affirmed the trial court’s decision with modification, reducing the award of moral and exemplary damages to P300,000 and P100,000, respectively. Petitioners sought reconsideration but it was denied

ISSUE: Whether or not petitioner abused the right of respondent

HELD: Petitioner corporation failed to bring the proper civil action necessary to acquire legal possession of the motorcycle. Instead, petitioner Uypitching descended on respondent’s establishment with his policemen and ordered the seizure of the motorcycle without a search warrant or court order. Worse, in the course of the illegal seizure of the motorcycle, petitioner Uypitching even mouthed a slanderous statement. No doubt, petitioner corporation, acting through its co-petitioner Uypitching, blatantly disregarded the lawful procedure for the enforcement of its right, to the prejudice of respondent. Petitioners’ acts violated the law as well as public morals, and transgressed the proper norms of human relations. The basic principle of human relations, embodied in Article 19 of the Civil Code, provides: Art. 19. Every person must in the exercise of his rights and in the performance of his duties, act with justice, give every one his due, and observe honesty and good faith. Article 19, also known as the “principle of abuse of right,” prescribes that a person should not use his right unjustly or contrary to honesty and good faith, otherwise he opens himself to liability. It seeks to preclude the use of, or the tendency to use, a legal right (or duty) as a means to unjust ends. There is an abuse of right when it is exercised solely to prejudice or injure another. The exercise of a right must be in accordance with the purpose for which it was established and must not be excessive or unduly harsh; there must be no intention to harm another. Otherwise, liability for damages to the injured party will attach. In this case, the manner by which the motorcycle was taken at petitioners’ instance was not only attended by bad faith but also contrary to the procedure laid down by law. Considered in conjunction with the defamatory statement, petitioners’ exercise of the right to recover the mortgaged vehicle was utterly prejudicial and injurious to respondent. On the other hand, the precipitate act of filing an unfounded complaint could not in any way be considered to be in accordance with the purpose for which the right to prosecute a crime was established. Thus, the totality of petitioners’ actions showed a calculated design to embarrass, humiliate and publicly ridicule respondent. Petitioners acted in an excessively

harsh fashion to the prejudice of respondent. Contrary to law, petitioners willfully caused damage to respondent. Hence, they should indemnify him.

NIKKO HOTEL MANILA GARDEN and RUBY LIM vs ROBERTO REYES, a.k.a. “AMAY BISAYA,” [G.R. No. 154259. February 28, 2005] 452 S 352 FACTS:  Roberto Reyes alleged that he was humiliated by Ruby Lim during the party of the hotel manager Mr. Masakazu Tsuruoka. In a loud voice and within the presence and hearing of the other guests who were making a queue at the buffet table, Ruby Lim told him to leave the party (“huwag ka nang kumain, hindi ka imbitado, bumaba ka na lang”). 

Mr. Reyes tried to explain that he was invited by Dr. Filart. Dr. Filart, who was within hearing distance, however, completely ignored him thus adding to his shame and humiliation. Not long after, while he was still recovering from the traumatic experience, a Makati policeman approached and asked him to step out of the hotel. Like a common criminal, he was escorted out of the party by the policeman. Claiming damages, Mr. Reyes asked for One Million Pesos actual damages, One Million Pesos moral and/or exemplary damages and Two Hundred Thousand Pesos attorney’s fees.

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Ruby Lim, for her part, admitted having asked Mr. Reyes to leave the party but not under the ignominious circumstance painted by the latter. Ms. Lim narrated that she was the Hotel’s Executive Secretary for the past twenty (20) years. One of her functions included organizing the birthday party of the hotel’s former General Manager, Mr. Tsuruoka.

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Ruby Lim claims that she asked Reyes to leave courteously prior, therefor, inquiring about his presence from Dr. Filart’s sister Zenaida Fruto and she affirmed that her sister did not invite him which Dr.Filart assented to during the trial that she did not invite Reyes he merely offered to carry the fruit basket and started having a conversation with Capt.Batung.

Issues: 1. Whether or not Ruby Lim acted abusively in asking Roberto Reyes, a.k.a. “Amay Bisaya,” to leave the party where he was not invited by the celebrant thereof 2. . Parenthetically, and if Ruby Lim were so liable, whether or not Hotel Nikko, as her employer, is solidarily liable with her. Held: 1. In the absence of any proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and expose him to ridicule and shame, it is highly unlikely that she would shout at him from a very close distance. Ms. Lim having been in the hotel business for twenty years wherein being polite and discreet are virtues to be emulated, the testimony of Mr.

Reyes that she acted to the contrary does not inspire belief and is indeed incredible. Thus, the lower court was correct in observing that – Considering the closeness of defendant Lim to plaintiff when the request for the latter to leave the party was made such that they nearly kissed each other, the request was meant to be heard by him only and there could have been no intention on her part to cause embarrassment to him. It was plaintiff’s reaction to the request that must have made the other guests aware of what transpired between them. Moreover, another problem with Mr. Reyes’s version of the story is that it is unsupported. It is a basic rule in civil cases that he who alleges proves. Mr. Reyes, however, had not presented any witness to back his story up. All his witnesses – Danny Rodinas, Pepito Guerrero and Alexander Silva - proved only that it was Dr. Filart who invited him to the party. 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 to pay 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 employee. Article 19, known to contain what is commonly referred to as the principle of abuse of rights, is not a panacea for all human hurts and social grievances. Article 19 states: Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. Elsewhere, we explained that 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 must be responsible.” The object of this article, therefore, is to set certain standards which must be observed not only in the exercise of one’s rights but also in the performance of one’s duties. These standards are the following: act with justice, give everyone his due and observe honesty and good faith. Its antithesis, necessarily, is any act evincing bad faith or intent to injure. Its elements are the following: (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. When Article 19 is violated, an action for damages is proper under Articles 20 or 21 of the Civil Code. Article 20 pertains to damages arising from a violation of law which does not obtain herein as Ms. Lim was perfectly within her right to ask Mr. Reyes to leave. Article 21, on the other hand, states: Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. Article 21 refers to acts contra bonus mores and has the following elements: (1) There is an act which is legal; (2) but which is contrary to morals, good custom, public order, or public policy; and (3) it is done with intent to injure.

A common theme runs through Articles 19 and 21, and that is, the act complained of must be intentional. 2. Petitioners Lim and Hotel Nikko contend that pursuant to the doctrine of volenti non fit injuria, they cannot be made liable for damages as respondent Reyes assumed the risk of being asked to leave (and being embarrassed and humiliated in the process) as he was a “gate-crasher.” The doctrine of volenti non fit injuria (“to which a person assents is not esteemed in law as injury”) refers to self-inflicted injury or to the consent to injury which precludes the recovery of damages by one who has knowingly and voluntarily exposed himself to danger, even if he is not negligent in doing so. As formulated by petitioners, however, this doctrine does not find application to the case at bar because even if respondent Reyes assumed the risk of being asked to leave the party, petitioners, under Articles 19 and 21 of the New Civil Code, were still under obligation to treat him fairly in order not to expose him to unnecessary ridicule and shame.

ST. MARY’S ACADEMY vs. WILLIAM CARPITANOS and LUCIA S. CARPITANOS et al. [G.R. No. 143363. February 6, 2002] Facts:  From 13 to 20 February 1995, defendant-appellant St. Mary’s Academy of Dipolog City conducted an enrollment drive for the school year 1995-1996. A facet of the enrollment campaign was the visitation of schools from where prospective enrollees were studying. 

As a student of St. Mary’s Academy, Sherwin Carpitanos was part of the campaigning group. Accordingly, on the fateful day, 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.

 RTC & CA Ruling: Petioner is ordered to pay damages to the parents of the deceased Issue: Whether or not St. Mary’s Academy should he held primarily liable. Held: Under Article 218 of the Family Code, the following shall have special parental authority over a minor child while under their supervision, instruction or custody: (1) the school, its administrators and teachers; or (2) the individual, entity or institution engaged in child care. This special parental authority and responsibility applies to all authorized activities, whether inside or outside the premises of the school, entity or institution. Thus, such authority and responsibility applies to field trips, excursions and other affairs of the pupils and students outside the school premises whenever authorized by the school or its teachers. 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. “In order that there may be a recovery for an injury, however, it must be shown that the ‘injury for which recovery is sought must be the legitimate consequence of the wrong done; the connection between the negligence and the injury must be a direct and natural sequence of events, unbroken by intervening efficient causes.’ In other words, the negligence must be the proximate cause of the injury. For, ‘negligence, no matter in what it consists, cannot create a right of action unless it is the proximate cause of the injury complained of.’ And ‘the proximate cause of an injury is that cause, which, in natural and continuous sequence, unbroken by any

efficient intervening cause, produces the injury, and without which the result would not have occurred.’” In this case, the respondents failed to show that the negligence of petitioner was the proximate cause (is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred of) the death of the victim. 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. Significantly, respondents did not present any evidence to show that the proximate cause of the accident was the negligence of the school authorities, or the reckless driving of James Daniel II. Hence, the respondents’ reliance on Article 219 of the Family Code that “those given the authority and responsibility under the preceding Article shall be principally and solidarily liable for damages caused by acts or omissions of the unemancipated minor” was unfounded. Further, there was no evidence that petitioner school allowed the minor James Daniel II to drive the jeep of respondent Vivencio Villanueva. It was Ched Villanueva, grandson of respondent Vivencio Villanueva, who had possession and control of the jeep. He was driving the vehicle and he allowed James Daniel II, a minor, to drive the jeep at the time of the accident. 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 the negligence of the minor’s parents or the detachment of the steering wheel guide of the jeep.

SPOUSES LUIGI M. GUANIO and ANNA HERNANDEZ-GUANIO v. MAKATI SHANGRI-LA G.R. No. 190601 February 7, 2011 Facts:  For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and Anna Hernandez-Guanio (petitioners) booked at the Shangri-la Hotel Makati (the hotel). 

Petitioners claim that during the reception, respondent’s representatives, Catering Director Bea Marquez and Sales Manager Tessa Alvarez, did not show up despite their assurance that they would; their guests complained of the delay in the service of the dinner; certain items listed in the published menu were unavailable; the hotel’s waiters were rude and unapologetic when confronted about the delay; and despite Alvarez’s promise that there would be no charge for the extension of the reception beyond 12:00 midnight, they were billed and paid P8,000 per hour for the three-hour extension of the event up to 4:00 A.M. the next day.

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Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc. (respondent) and received an apologetic reply from Krister Svensson, the hotel’s Executive Assistant Manager in charge of Food and Beverage. They nevertheless filed a complaint for breach of contract and damages before the Regional Trial Court (RTC) of Makati City.

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RTC Ruling: The trial court observed that from “the tenor of the letter . . . the defendant[-herein respondent] admits that the services the plaintiff[-herein petitioners] received were unacceptable and definitely not up to their standards.

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CA Ruling: reversed the trial court’s decision, it holding that the proximate cause of petitioners’ injury was an unexpected increase in their guests Issue: Whether or not there is breach of contract. Held: The pertinent provisions of the Banquet and Meeting Services Contract between the parties read: 4.5. The ENGAGER must inform the HOTEL at least forty eight (48) hours before the scheduled date and time of the Function of any change in the minimum guaranteed covers. In the absence of such notice, paragraph 4.3 shall apply in the event of under attendance. In case the actual number of attendees exceed the minimum guaranteed number by ten percent (10%), the HOTEL shall

not in any way be held liable for any damage or inconvenience which may be caused thereby. The ENGAGER shall also undertake to advise the guests of the situation and take positive steps to remedy the same. Breach of contract is defined as the failure without legal reason to comply with the terms of a contract. It is also defined as the [f]ailure, without legal excuse, to perform any promise which forms the whole or part of the contract. The exculpatory clause notwithstanding, the Court notes that respondent could have managed the “situation” better, it being held in high esteem in the hotel and service industry. Given respondent’s vast experience, it is safe to presume that this is not its first encounter with booked events exceeding the guaranteed cover. It is not audacious to expect that certain measures have been placed in case this predicament crops up. That regardless of these measures, respondent still received complaints as in the present case, does not amuse. Respondent admitted that three hotel functions coincided with petitioners’ reception. To the Court, the delay in service might have been avoided or minimized if respondent exercised prescience in scheduling events. No less than quality service should be delivered especially in events which possibility of repetition is close to nil. Petitioners are not expected to get married twice in their lifetimes. In the present petition, under considerations of equity, the Court deems it just to award the amount of P50,000.00 by way of nominal damages to petitioners, for the discomfiture that they were subjected to during to the event. The Court recognizes that every person is entitled to respect of his dignity, personality, privacy and peace of mind. Respondent’s lack of prudence is an affront to this right.

TSPIC CORPORATION v TSPIC EMPLOYEES UNION (FFW) G.R. No. 163419 545 S 215 Facts:  In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA) for the years 2000 to 2004. The CBA included a provision on yearly salary increases starting January 2000 until January 2002. 

The CBA also provided that employees who acquire regular employment status within the year but after the effectivity of a particular salary increase shall receive a proportionate part of the increase upon attainment of their regular status.

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Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region, issued Wage Order No. NCR-08 (WO No. 8) which raised the daily minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000. Conformably, the wages of 17 probationary employees, were increased to PhP 250.00 effective November 1, 2000.

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In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine employees (first group), who were senior to the above-listed recently regularized employees, received less wages.

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On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective, TSPIC’s Human Resources Department notified 24 employees, namely: Maria Fe Flores, Janice Olaguir, Rachel Novillas, Fe Capistrano, Jerico Alipit, Amy Durias, Glen Batula, Claire Evelyn Velez, Ser John Hernandez, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, and Marie Ann Delos Santos, that due to an error in the automated payroll system, they were overpaid and the overpayment would be deducted from their salaries in a staggered basis, starting February 2001. TSPIC explained that the correction of the erroneous computation was based on the crediting provision of Sec. 1, Art. X of the CBA.

Issue: Whether or not CBA is legal and binding among the parties. Held: It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply with its provisions. We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda: A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work and all

other terms and conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA 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. Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law. As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued. Littera necat spiritus vivificat. An instrument must be interpreted according to the intention of the parties. It is the duty of the courts to place a practical and realistic construction upon it, giving due consideration to the context in which it is negotiated and the purpose which it is intended to serve. Absurd and illogical interpretations should also be avoided. TSPIC granted the salary increases under the condition that any wage order that may be subsequently issued shall be credited against the previously granted increase. The intention of the parties is clear: As long as an employee is qualified to receive the 12% increase in salary, the employee shall be granted the increase; and as long as an employee is granted the 12% increase, the amount shall be credited against any wage order issued after WO No. 7.

KHRISTINE REA M. REGINO v PANGASINAN COLLEGES OF SCIENCE AND TECHNOLOGY [G.R. No. 156109. November 18, 2004]

Facts:  



Petitioner Khristine Rea M. Regino was a first year computer science student at Respondent Pangasinan Colleges of Science and Technology (PCST). In February 2002, PCST held a fund raising campaign dubbed the “Rave Party and Dance Revolution,” the proceeds of which were to go to the construction of the school’s tennis and volleyball courts. Each student was required to pay for two tickets at the price of P100 each. The project was allegedly implemented by recompensing students who purchased tickets with additional points in their test scores; those who refused to pay were denied the opportunity to take the final examinations. Financially strapped and prohibited by her religion from attending dance parties and celebrations, Regino refused to pay for the tickets. On March 14 and March 15, 2002, the scheduled dates of the final examinations in logic and statistics, her teachers -Respondents Rachelle A. Gamurot and Elissa Baladad -- allegedly disallowed her from taking the tests. According to petitioner, Gamurot made her sit out her logic class while her classmates were taking their examinations.

Issue: Whether or not respondent has an obligation to petitioner arising from contract.

Held: The school-student relationship is also reciprocal. Thus, it has consequences appurtenant to and inherent in all contracts of such kind -- it gives rise to bilateral or reciprocal rights and obligations. The school undertakes to provide students with education sufficient to enable them to pursue higher education or a profession. On the other hand, the students agree to abide by the academic requirements of the school and to observe its rules and regulations. The terms of the school-student contract are defined at the moment of its inception -- upon enrolment of the student. Standards of academic performance and the code of behavior and discipline are usually set forth in manuals distributed to new students at the start of every school year. Further, schools inform prospective enrollees the amount of fees and the terms of payment.

In practice, students are normally required to make a down payment upon enrollment, with the balance to be paid before every preliminary, midterm and final examination. Their failure to pay their financial obligation is regarded as a valid ground for the school to deny them the opportunity to take these examinations. The foregoing practice does not merely ensure compliance with financial obligations; it also underlines the importance of major examinations. Failure to take a major examination is usually fatal to the students’ promotion to the next grade or to graduation. Examination results form a significant basis for their final grades. These tests are usually a primary and an indispensable requisite to their elevation to the next educational level and, ultimately, to their completion of a course. Thus, students expect that upon their payment of tuition fees, satisfaction of the set academic standards, completion of academic requirements and observance of school rules and regulations, the school would reward them by recognizing their “completion” of the course enrolled in. The acts of respondents supposedly caused her extreme humiliation, mental agony and “demoralization of unimaginable proportions” in violation of Articles 19, 21 and 26 of the Civil Code. These provisions of the law state thus: “Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.” “Article 21. Any person who wilfully 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.” “Article 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief: (1) (2) (3) (4)

Prying into the privacy of another’s residence; Meddling with or disturbing the private life or family relations of another; Intriguing to cause another to be alienated from his friends; Vexing or humiliating another on account of his beliefs, lowly station in life, place of birth, physical defect, or other personal condition.”

Generally, liability for tort arises only between parties not otherwise bound by a contract. An academic institution, however, may be held liable for tort even if it has an existing contract with its students, since the act that violated the contract may also be a tort.

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION v. COURT OF APPEALS G.R. No. 84698, February 4, 1992 FACTS: 

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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 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. Substantially, 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. 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. Said decision of the respondent appellate court was primarily anchored on the law of quasi-delicts, as enunciated in Articles 2176 and 2180 of the Civil Code. Article 2180, in conjunction with Article 2176 of the Civil Code, establishes the rule of in loco parentis. 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 the acts of its pupils or students while in its custody. However, this material situation does not exist in the present case for the assailants of Carlitos were not students of the PSBA, for whose acts the school could be made liable.

ISSUE: Whether or not petitioner incurs civil liability as regards the death of their student.

HELD:

It does not necessarily follow. When an academic institution accepts students for enrollment, 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.Institutions of learning must also meet the implicit or "built-in" obligation of providing their students with an atmosphere that promotes or assists in attaining its primary undertaking of imparting knowledge. Certainly, no student can absorb the intricacies of physics or higher mathematics or explore the realm of the arts and other sciences where there looms around the school premises a constant threat to life and limb. Necessarily, the school must ensure that adequate steps are taken to maintain peace and order within the campus premises and to prevent the breakdown thereof. Because the circumstances of the present case evince a contractual relation between the PSBA and Carlitos Bautista, the rules on quasi-delict do not apply. However, there is, as yet, no finding that the contract between the school and Bautista had been breached thru the former's negligence in providing proper security measures. Even if there be a finding of negligence, the same could give rise generally to a breach of contractual obligation only. Using the test of Cangco, supra, the negligence of the school would not be relevant absent a contract. In fact, that negligence becomes material only because of the contractual relation between PSBA and Bautista. In other words, a contractual relation is a condition sine qua non to the school's liability. The negligence of the school cannot exist independently of the contract, unless the negligence occurs under the circumstances set out in Article 21 of the Civil Code.

Cosmo Entertainment Mgmt, Inc. vs. La Ville Commercial Corporation G.R. No. 152801, August 20, 2004 437 SCRA 145

FACTS: 

The respondent, La Ville Commercial Corporation, is the registered owner of a parcel of land covered by 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.

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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, 000.00 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.

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The petitioner, however, suffered business reverses and was constrained to stop operations in September 1996. Thereafter, the petitioner defaulted in its rental payments. Consequently, the respondent made a demand on the petitioner to vacate the premises as well as to pay the accrued rentals plus interests which, as of January 31, 1997, amounted to P740, 478.91. In reply to the demand, the petitioner averred that its unpaid rentals amounted to P698, 500 only and since it made a security deposit of P419, 100 with the respondent, the said amount should be applied to the unpaid rentals; hence, the outstanding accounts payable would only be P279, 400. The respondent requested that the interest charges be waived and it be given time to find a solution to its financial problems.

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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 of Makati City 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.

ISSUE: Whether or not the petitioner has the right to sublease the premises.

HELD: The Court is convinced that the findings and conclusions of the court a quo and the RTC are in order. These courts uniformly found that, under the terms of the contract of lease, the respondent, as the owner-lessor of the premises, had reserved its right to approve the sublease of the same. The petitioner, having voluntarily given its consent thereto, was bound by this stipulation. And, having failed to pay the monthly rentals, the petitioner is deemed to have violated the terms of the contract, warranting its ejectment from the leased premises. The Court finds no cogent reason to depart from this factual disquisition of the courts below in view of the rule that findings of facts of the trial courts are, as a general rule, binding on this Court.

AYALA CORP v. ROSA-DIANA REALTY AND DEV’T. CORP. [G.R. No. 134284. December 1, 2000] 346 S 663 Facts:  

Petitioner Ayala Corporation (hereinafter referred to as 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. 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

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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, in April 1989, were able to sell the lot to respondent RosaDiana Realty and Development Corporation (hereinafter referred to as Rosa-Diana) with Ayala’s approval. 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. Needless to say, while the first set of building plans complied with the deed restrictions, the latter set exceeded the same.

During the construction of Rosa-Diana’s condominium project, Ayala filed an action with the Regional Trial Court (RTC) of Makati, Branch 139 for specific performance, with application for a writ of preliminary injunction/temporary restraining order against Rosa-Diana Realty seeking to compel the latter to comply with the contractual

obligations under the deed of restrictions annotated on its title as well as with the building plans it submitted to the latter. In the alternative, Ayala prayed for rescission of the sale of the subject lot to Rosa- Diana Realty. Issue: Whether or not stipulations of a contract is legal and binding. Held: Contractual obligations between parties have the force of law between them and absent any allegation that the same are contrary to law, morals, good customs, public order or public policy, they must be complied with in good faith. Hence, Article 1159 of the New Civil Code provides “Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.” It was inappropriate therefore for the trial court to rule that in the absence of any authority or confirmation from the Board of Directors of respondent Rosa-Diana, its Chairman and the President cannot validly enter into an undertaking relative to the construction of the building on the lot within one year from July 27, 1989 and in accordance with the deed restrictions. Curiously, while the trial court stated that it cannot be presumed that the Chairman and the President can validly bind respondent Rosa-Diana to enter into the aforesaid Undertaking in the absence of any authority or confirmation from the Board of Directors, the trial court held that the ordinary presumption of regularity of business transactions is applicable as regards the Deed of Sale which was executed by Manuel Sy and Sy Ka Kieng and respondent Rosa-Diana. In the light of the fact that respondent Rosa-Diana never alleged in its Answer that its president and chairman were not authorized to execute the Undertaking, the aforesaid ruling of the trial court is without factual and legal basis and surprising to say the least. The fact alone that respondent Rosa-Diana conveniently prepared two sets of building plans with one set which fully conformed to the Deed Restrictions and another in gross violation of the same - should have cautioned the trial court to conclude that respondent Rosa-Diana was under the erroneous impression that the Deed Restrictions were no longer enforceable and that it never intended to be bound by the Undertaking signed by its President and Chairman. We reiterate that contractual obligations have the force of law between parties and unless the same are contrary to public policy morals and good customs, they must be complied by the parties in good faith.

BRICKTOWN DEVELOPMENT CORP. vs. AMOR TIERRA DEVELOPMENT CORP. G.R. No. 112182 December 12, 1994

Facts: 

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On 31 March 1981, Bricktown Development Corporation (herein petitioner corporation), represented by its President and co-petitioner Mariano Z. Velarde, executed two Contracts to Sell in favor of Amor Tierra Development Corporation (herein private respondent), represented in these acts by its Vice-President, Moises G. Petilla, covering a total of 96 residential lots. Private respondent was only able to pay petitioner corporation the sum of P1,334,443.2. 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. 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 installment 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 (Exh. "E") 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.

Issue: Whether or not the contract is validly rescinded. Held: Admittedly, the terms of payment agreed upon by the parties were not met by private respondent. Of a total selling price of P21,639,875.00, private respondent was only able to remit the sum of P1,334,443.21 which was even short of the stipulated initial payment of P2,200,000.00. No additional payments, it would seem, were made. A notice of cancellation was ultimately made months after the lapse of the contracted grace period. Paragraph 15 of the Contracts to Sell provided thusly:

15. Should the PURCHASER fail to pay when due any of the installments mentioned in stipulation No. 1 above, the OWNER shall grant the purchaser a sixty (60)-day grace period within which to pay the amount/s due, and should the PURCHASER still fail to pay the due amount/s within the 60-day grace period, the PURCHASER shall have the right to ex-parte cancel or rescind this contract, provided, however, that the actual cancellation or rescission shall take effect only after the lapse of thirty (30) days from the date of receipt by the PURCHASER of the notice of cancellation of this contract or the demand for its rescission by a notarial act, and thereafter, 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. 3 A grace period is a right, not an obligation, of the debtor. When unconditionally conferred, such as in this case, the grace period is effective without further need of demand either calling for the payment of the obligation or for honoring the right. The grace period must not be likened to an obligation, the non-payment of which, under Article 1169 of the Civil Code, would generally still require judicial or extrajudicial demand before "default" can be said to arise. 4 Verily, in the case at bench, the sixty-day grace period under the terms of the contracts to sell became ipso facto operative from the moment the due payments were not met at their stated maturities. On this score, the provisions of Article 1169 of the Civil Code would find no relevance whatsoever. The cancellation of the contracts to sell by petitioner corporation accords with the contractual covenants of the parties, and such cancellation must be respected. It may be noteworthy to add that in a contract to sell, the non-payment of the purchase price (which is normally the condition for the final sale) can prevent the obligation to convey title from acquiring any obligatory force (Roque vs. Lapuz, 96 SCRA 741; Agustin vs. Court of Appeals, 186 SCRA 375). The forfeiture of the payments thus far remitted under the cancelled contracts in question, given the factual findings of both the trial court and the appellate court, must be viewed differently. While clearly insufficient to justify a foreclosure of the right of petitioner corporation to rescind or cancel its contracts with private respondent, the series of events and circumstances described by said courts to have prevailed in the interim between the parties, however, warrant some favorable consideration by this Court.

PILIPINAS HINO, INC. vs. COURT OF APPEALS [G.R. No. 126570. August 18, 2000] 338 S 335

Facts:  

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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. It is stated in paragraph 6 in the Memorandum of Agreement that an interest equivalent to three (3%) percent per thirty days period shall be imposed on any installment due but not paid for the duration of the delay. Plaintiff's request to return the amount of P924,000.00 to which defendants however refused for reasons that the said amount represents interest due and demandable from the plaintiff when it incurred the delay which by virtue of legal compensation, was setoff by operation of law and the said amount was rightfully deducted from the amount of P7,050,000.00. Since plaintiff failed to pay the third and subsequent installments, defendants' right to the 3% interest, therefore, readily accrued and became demandable at the time of the non-payment. The grace period granted to the plaintiff likewise lapsed. Consequently, the defendants decided to, and in fact did in a letter dated 20 November 1990, terminate the contract to sell. The defendants as agreed upon returned to the plaintiff the amount of P5,906,000.00 representing the amount due to the plaintiff as reimbursement of the installments for the 1st and 2nd installments. Considering that the plaintiff has failed to pay the installments due on time, the interest in the amount of P924,000.00 was charged against the plaintiff (which interest, in turn, represents the unproductive use of the money which should have been made by the defendants had

the payment been made on time). The amount of P220,000.00 was likewise deducted by the defendants representing rentals for the period. Thus, only the amount of P5,906,000.00 was rightfully returned by the defendants.

Issues: Does private respondent have the right to retain the P924,000.00 representing the interest due for the unpaid installments, despite the fact that the respondent has exercised his option to rescind the memorandum of agreement?

Held: No. It may be conceded, as the trial court endeavored to rationalize, that for failure of the buyer to pay the installments, private respondents “were consequently deprived of the productive use of the supposed money they should have received as per contract.” However, the private respondents’ withholding of the amount corresponding to the interest violated the specific and clear stipulation in paragraph 9 of the memorandum of agreement that except for the downpayment, all amounts paid shall be returned to the buyer “with no obligation to pay interest thereon.” The parties are bound by their agreement. Thus, Article 1159 of the Civil Code expressly provides: Obligation arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Paragraph 9 of the memorandum of agreement between the parties, not being contrary to law, morals, good customs, public policy, or public order has therefore the force of law between the parties. Aside from equity considerations, the lower courts failed to provide a basis for the retention by the respondent of the interest. Equity is applied only in the absence of, and never against, statutory law or judicial rules of procedure. The memorandum of agreement, being the law between the parties, must therefore, govern. The distinction between contracts of sale and contracts to sell with reserved title has been recognized by this Court in repeated decisions upholding the power of promisors under contracts to sell in case of failure of the other party to complete payment, to extrajudicially terminate the operation of the contract, refuse conveyance and retain the sums or installments already received, where such rights are expressly provided for, as in the case at bar. Sadly for private respondents, our ruling in the above case defeats rather than sustains their claim. While this Court recognizes that in contracts to sell even if the contract is terminated the seller can retain the sums already received or paid, such can be done only if it is expressly provided for in the contract. Such proviso is not contained in the memorandum of agreement, as what is merely provided for in paragraphs 7 and 9 is the retention of the downpayment.

ARTURO SARTE FLORES vs. SPS ENRICO L. LINDO, JR. and EDNA C. LINDO G.R. No. 183984

April 13, 2011

Facts: 

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On 31 October 1995, Edna Lindo (Edna) 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. In its 30 September 2003 Decision, the 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. The RTC, Branch 33 further ruled that petitioner was not precluded from recovering the loan from Edna as he could file a personal action against her. However, the RTC, Branch 33 ruled that it had no jurisdiction over the personal action which should be filed in the place where the plaintiff or the defendant resides in accordance with Section 2, Rule 4 of the Revised Rules on Civil Procedure. On 8 September 2004, petitioner filed a Complaint for Sum of Money with Damages against respondents.

Issue: Whether or not petitioner has a valid cause of action grounded on unjust enrichment. Held: The rule is that a mortgage-creditor has a single cause of action against a mortgagor-debtor, that is, to recover the debt. The mortgage-creditor has the option of either filing a personal action for collection of sum of money or instituting a real action to foreclose on the mortgage security. An election of the first bars recourse to the second, otherwise there would be multiplicity of suits in which the debtor would be tossed from one venue to another depending on the location of the mortgaged properties and the residence of the parties. Article 124 of the Family Code provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of contract implementing such decision. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors. In this case, the Promissory Note and the Deed of Real Estate Mortgage were executed on 31 October 1995. The Special Power of Attorney was executed on 4 November 1995. The execution of the SPA is the acceptance by the other spouse that perfected the continuing offer as a binding contract between the parties, making the Deed of Real Estate Mortgage a valid contract. Nevertheless, petitioner still has a remedy under the law. In Chieng v. Santos, this Court ruled that a mortgage-creditor may institute against the mortgage-debtor either a personal action for debt or a real action to foreclose the mortgage. The Court ruled that the remedies are alternative and not cumulative and held that the filing of a criminal action for violation of Batas Pambansa Blg. 22 was in effect a collection suit or a suit for the recovery of the mortgage-debt. In that case, however, this Court pro hac vice, ruled that respondents could still be held liable for the balance of the loan, applying the principle that no person may unjustly enrich himself at the expense of another. The principle of unjust enrichment is provided under Article 22 of the Civil Code which provides: Art. 22. 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. 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 main objective of the principle against unjust enrichment is to prevent one from enriching himself at the expense of another without just cause or consideration. The principle is

applicable in this case considering that Edna admitted obtaining a loan from petitioners, and the same has not been fully paid without just cause. The Deed was declared void erroneously at the instance of Edna, first when she raised it as a defense before the RTC, Branch 33 and second, when she filed an action for declaratory relief before the RTC, Branch 93. Petitioner could not be expected to ask the RTC, Branch 33 for an alternative remedy, as what the Court of Appeals ruled that he should have done, because the RTC, Branch 33 already stated that it had no jurisdiction over any personal action that petitioner might have against Edna. 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 Court of Appeals, in the assailed decision, found that Edna admitted the loan, except that she claimed it only amounted to P340,000. Edna should not be allowed to unjustly enrich herself because of the erroneous decisions of the two trial courts when she questioned the validity of the Deed.

PHILIPPINE REALTY AND HOLDINGS CORPORATION vs. LEY CONST. AND DEV’T CORP G. R. No. 165548 June 13, 2011

Facts 

Sometime between April 1988 and October 1989, the two corporations entered into four major construction projects. Ley Construction and Development Corporation (LCDC) was the project contractor for the construction of several buildings 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 vice-president for operations.

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Under the Contract Agreement: ARTICLE IV – 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.

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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. The board of directors turned down the request for an escalation agreement. Neither PRHC nor Abcede gave notice to LCDC of the alleged denial of the proposal.

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However, on 9 August 1991 Abcede sent a formal letter to LCDC, asking for its conformity, to the effect that should it infuse P36 million into the project, a contract price escalation for the same amount would be granted in its favor by PRHC . Notwithstanding the absence of a signature above PRHC’s name, LCDC proceeded with the construction of the Tektite Building, expending the entire amount necessary to complete the project. From August to December 1991, it infused amounts totaling P 38,248,463.92.

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In a letter dated 8 September 1992, when 96.43% of Tektite Building had been completed, LCDC requested the release of the P 36 million escalation price. PRHC did not reply. LCDC, through counsel, demanded payment of the agreed escalation price of P 36 million. In its reply on 16 February 1993, PRHC suddenly denied any liability for the escalation price. In the same letter, it claimed that LCDC had incurred 111 days of delay in the construction of the Tektite Building and demanded that the latter pay P 39,326,817.15 as liquidated damages.

Issue: Whether or not PRHC is liable to pay LCDC for the escalation price. Held: LCDC additionally argues that a subsequent escalation agreement was validly entered into, even on the following assumptions: (a) that Abcede and Santos had no authority to agree to the escalation of the contract price without the approval of the board of directors; and (b) that the 7 December 1992 letter cannot be construed as an acknowledgment by PRHC that it owed LCDC P36 million. It posits that the actions of Abcede and Santos, assuming they were beyond the authority given to them by PRHC which they were representing, still bound PRHC under the doctrine of apparent authority. 1[42] Thus, the lack of authority on their part should not be used to prejudice it, considering that the two were clothed with apparent authority to execute such agreements. In addition, PRHC is allegedly barred by promissory estoppel from denying the claims of the other corporation. In Yao Ka Sin Trading v. Court of Appeals, et al,.1[43] this Court discussed the applicable rules on the doctrine of apparent authority, to wit: The rule is of course settled that “[a]lthough an officer or agent acts without, or in excess of, his actual authority if he acts within the scope of an apparent authority with which the corporation has clothed him by holding him out or permitting him to appear as having such authority, the corporation is bound thereby in favor of a person who deals with him in good faith in reliance on such apparent authority, as where an officer is allowed to exercise a particular authority with respect to the business, or a particular branch of it, continuously and publicly, for a considerable time.” Also, “if a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that such apparent authority is real, as to innocent third persons dealing in good faith with such officers or agents.” 1[44] Consequently, the escalation agreement entered into by LCDC and Abcede is a valid agreement that PRHC is obligated to comply with. This escalation agreement – whether written or verbal – has lifted, through novation, the prohibition contained in the Tektite Building Agreement.

In People’s Aircargo and Warehousing Co. Inc. v. Court of Appeals, et al.,1[45] we held that apparent authority is derived not merely from practice: Its existence may be ascertained through (1) the general manner in which the corporation holds out an officer or agent as having the power to act or, in other words, the apparent authority to act in general, with which it clothes him; or (2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers. In order for novation to take place, the concurrence of the following requisites is indispensable: 1. 2. 3. 4.

There must be a previous valid obligation. The parties concerned must agree to a new contract. The old contract must be extinguished. There must be a valid new contract.

All the aforementioned requisites are present in this case. The obligation of both parties not to increase the contract price in the Tektite Building Agreement was extinguished, and a new obligation increasing the old contract price by P 36 million was created by the parties to take its place. What makes this Court believe that it is incorrect to allow PRHC to escape liability for the escalation price is the fact that LCDC was never informed of the board of directors’ supposed non-approval of the escalation agreement until it was too late. Instead, PRHC, for its own benefit, waited for the former to finish infusing the entire amount into the construction of the building before informing it that the said agreement had never been approved by the board of directors. LCDC diligently informed PRHC each month of the partial amounts the former infused into the project. PRHC must be deemed estopped from denying the existence of the escalation agreement for having allowed LCDC to continue infusing additional money spending for its own project, when it could have promptly notified LCDC of the alleged disapproval of the proposed escalation price by its board of directors. This liability of PRHC, however, has a ceiling. The escalation agreement entered into was for P 36 million—the maximum amount that LCDC contracted itself to infuse and that PRHC agreed to reimburse. Thus, the Court of Appeals was correct in ruling that the P 2,248,463.92 infused by LCDC over and above the P 36 million should be for its account, since PRHC never agreed to pay anything beyond the latter amount. While PRHC benefited from this excess infusion, this did not result in its unjust enrichment, as defined by law. Unjust enrichment exists “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.” Under Art. 22 of the Civil Code, there is unjust enrichment when (1) a person is unjustly benefited, and (2) such benefit is derived at the expense of or with damages to another. The term is further defined thus:

Unjust enrichment is a term used to depict result or effect of failure to make remuneration of or for property or benefits received under circumstances that give rise to legal or equitable obligation to account for them; to be entitled to remuneration, one must confer benefit by mistake, fraud, coercion, or request. In order for an unjust enrichment claim to prosper, one must not only prove that the other party benefited from one’s efforts or the obligations of others; it must also be shown that the other party was unjustly enriched in the sense that the term “unjustly” could mean “illegally” or “unlawfully.”1[52] LCDC was aware that the escalation agreement was limited to P36 million. It is not entitled to remuneration of the excess, since it did not confer this benefit by mistake, fraud, coercion, or request. Rather, it voluntarily infused the excess amount with full knowledge that PRHC had no obligation to reimburse it.

Titan-Ikeda Construction v Primetown Property G.R. No. 158768 February 12, 2008 544 S 466

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. On June 30, 1994, respondent executed a deed of sale (covering 114 condominium units and 20 parking slots of the MPT collectively valued by the parties at P112,416,716.88) in favor of petitioner pursuant to the “full-swapping” payment provision of the supplemental agreement. Shortly thereafter, petitioner sold some o 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 f its units to third persons. 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 balance amounting to P1,779,744.85. petitioner demanded from respondent the delivery of MPT's management certificate and the keys to the condominium units and the payment of its (respondent's) balance. Because respondent ignored petitioner's demand, petitioner, on December 9, 1996, filed a complaint for specific performance in the Housing and Land Use Regulatory Board (HLURB). While the complaint for specific performance was pending in the HLURB, respondent sent a demand letter to petitioner asking it to reimburse the actual costs incurred in finishing the project (or P69,785,923.47).1[30] In view of the pendency of the HLURB case, petitioner did not heed respondent's demands. During trial, the RTC 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 The appellate court found that respondent fully performed its obligation when it executed the June 30, 1994 deed of absolute sale in favor of petitioner. Moreover, ITI's report clearly established that petitioner had completed only 48.71% of the project as of October 12, 1995, the takeover date. Not only did it incur delay in the performance of its obligation but petitioner also failed to finish the project. The CA ruled that

respondent was entitled to recover the value of the unfinished portion of the project under the principle of unjust enrichment Issue: 1. Whether or not petitioner is obliged to return the excess from the overpayment to respondent. 2. Whether or not petitioner is in delay in the performance of the obligation. Held: 1. Because the parties agreed to extinguish the supplemental agreement, they were no longer required to fully perform their respective obligations. Petitioner was relieved of its obligation to complete the project while respondent was freed of its obligation to pay the entire contract price. However, respondent, by executing the June 30, 1994 deed of absolute sale, was deemed to have paid P112,416,716.88. Nevertheless, because petitioner applied part of what it received to respondent’s outstanding liabilities, it admitted overpayment. Because petitioner acknowledged that it had been overpaid, it was obliged to return the excess to respondent. Embodying the principle of solutio indebiti, Article 2154 of the Civil Code provides:

Article 2154. If something is received when there is no right to demand it and it was unduly delivered through mistake, the obligation to return it arises. For the extra-contractual obligation of solutio indebiti to arise, the following requisites must be proven: 1.

the absence of a right to collect the excess sums and

2.

the payment was made by mistake.

With regard to the first requisite, because the supplemental agreement had been extinguished by the mutual agreement of the parties, petitioner became entitled only to the cost of services it actually rendered (i.e., that fraction of the project cost in proportion to the percentage of its actual accomplishment in the project). It was not entitled to the excess (or extent of overpayment). On the second requisite, Article 2163 of the Civil Code provides:

Article 2163. It is presumed that there was a mistake in the payment if something which had never been due or had already been paid was delivered; but, he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause. (emphasis supplied) In this instance, respondent paid part of the contract price under the assumption that petitioner would complete the project within the stipulated period. However, after the supplemental agreement was extinguished, petitioner ceased working on the project. Therefore, the compensation petitioner received in excess of the cost of its actual accomplishment as of October 12, 1995 was never due. The condominium units and parking slots corresponding to the said excess were mistakenly delivered by respondent and were therefore not due to petitioner.

Stated simply, respondent erroneously delivered excess units to petitioner and the latter, pursuant to Article 2154, was obliged to the return them to respondent. Article 2160 of the Civil Code provides: Article 2160. He who in good faith accepts an undue payment of a thing certain and determinate shall only be responsible for the impairment or loss of the same or its accessories and accessions insofar as he has thereby been benefited. If he has alienated it, he shall return the price or assign the action to collect the sum. One who receives payment by mistake in good faith is, as a general rule, only liable to return the thing delivered. If he benefited therefrom, he is also liable for the impairment or loss of the thing delivered and its accessories and accessions. If he sold the thing delivered, he should either deliver the proceeds of the sale or assign the action to collect to the other party. Under Article 2160 in relation to Article 2154, it should return to respondent the condominium units and parking slots in excess of the value of its actual accomplishment (i.e., the amount due to it) as of October 12, 1995. If these properties include units and/or slots already sold to third persons, petitioner shall deliver the proceeds of the sale thereof or assign the actions for collection to respondent as required by Article 2160. 2. 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. The construction contract provided a procedure for protesting delay: Article XIV

DELAYS AND ABANDONMENT 15.1. If at any time during the effectivity of this contract, [PETITIONER] shall incur unreasonable delay or slippages of more than fifteen percent (15%) of the scheduled work program, [RESPONDENT] should notify [PETITIONER] in writing to accelerate the work and reduce, if not erase, slippage. Respondent never sent petitioner a written demand asking it to accelerate work on the project and reduce, if not eliminate, slippage. If delay had truly been the reason why respondent took over the project, it would have sent a written demand as required by the construction contract. Moreover, according to the October 12, 1995 letter-agreement, respondent took over the project for the sole reason that such move was part of its (respondent's) long-term plan. Respondent, on the other hand, relied on ITI's September 7, 1995 report. The construction contract named GEMM, not ITI, as construction manager. Because petitioner did not consent to the change of the designated construction manager, ITI's September 7, 1995 report could not bind it.

PADCOM CONDO v ORTIGAS ASSOC CENTER G.R. No. 146807. May 9, 2002

Facts: 

Petitioner Padcom Condominium Corporation (hereafter PADCOM) owns and manages the Padilla Office Condominium Building (PADCOM Building). 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.



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.



In its answer, PADCOM contended that it is a non-stock, non-profit association, and for it to become a special member of the Association, it should first apply for and be accepted for membership by the latter’s Board of Directors. No automatic membership was apparently contemplated in the Association’s By-laws. PADCOM added that it could not be compelled to become a member without violating its right to freedom of association. And since it was not a member of the Association, it was not liable for membership dues, interests and penalties.

Issue: Whether or not PADCOM is liable to pay the membership fees. Held: Having ruled that PADCOM is a member of the Association, it is obligated to pay its dues incidental thereto. Article 1159 of the Civil Code mandates: Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. 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: Art. 2142. 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. MC Engineering v CA 380 S 116 [G.R. No. 104047. April 3, 2002] MC ENGINEERING, INC., petitioner, vs. THE COURT OF APPEALS, GERENT BUILDERS, INC. and STRONGHOLD INSURANCE CO., INC., respondents. Facts: 

On October 29, 1984, Mc Engineering, Inc. and Surigao Coconut Development Corporation (Sucodeco, for short) 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 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 for P1,665,000.00. 

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, wherein the latter acknowledged complete satisfaction for such payment.



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 subcontract 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, on March 21, 1985, respondent Gerent filed the complaint against petitioner. 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 which plaintiff had earlier forwarded to defendant.

Issue: Whether or not respondent has a share in the increase of the subcontract price. Held: Respondent Gerent claims that petitioner cannot be allowed to evade its lawful obligation arising from the subcontract, citing the well-known principle of law against unjust enrichment. 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. That a main contractor is able to secure a price increase from the project owner does not automatically result in a corresponding price increase to the subcontractor in the absence of an agreement to the contrary. In this case, there is no stipulation in the subcontract that respondent Gerent will automatically receive 74% of whatever price increase petitioner may obtain in the civil works portion of the main contract. Neither has the subcontract been changed to reflect a higher subcontract price. In a subcontract transaction, the benefit of a main contractor is not unjust even if it does less work, and earns more profit, than the subcontractor. The subcontractor should be satisfied with its own profit, even though less than the main contractor’s, because that is what it bargained for and contracted with the main contractor. Article 22 of the Civil Code is not intended to insure that every party to a commercial transaction receives a profit corresponding to its effort and contribution. If a subcontractor knowingly agrees to receive a profit less than its proportionate contribution, that is its own lookout. The fact that a subcontractor accepts less does not make it dumb for that may be the only way to beat its competitors. The winning subcontractor cannot be allowed to later on demand a higher price after bagging the contract and beating competitors who asked for higher prices. Even if the subcontractor incurs a loss because of its low price, it cannot invoke Article 22 of the Civil Code to save it from financial loss. Article 22 is not a safety net against bad or overly bold business decisions. Under the foregoing circumstances, we hold that Gerent is not entitled to any share in the price increase in the main contract. Whatever price increase petitioner obtained in the main contract, whether for the civil works portion or otherwise, was solely for the benefit of petitioner.

State Investment vs. Court of Appeals G.R. No. 90676, June 19, 1991 198 SCRA 392

FACTS: 

Respondent spouses Rafael and Refugio Aquino pledged certain shares of stock to petitioner State Investment House Inc. in order to secure a loan of P120, 000.00. Prior to the execution of the pledge, respondent spouses Jose and Marcelina Aquino signed an agreement with Petitioner for the latter’s purchase of receivables amounting to P375, 000.00.



When the 1st Account fell due, respondent spouses paid the same partly with their own funds and partly from the proceeds of another loan which they obtained also from Petitioner designated as the 2nd Account. This new loan was secured by the same pledge agreement executed in relation to the 1st Account. When the new loan matured, State demanded payment. Respondents expressed willingness to pay, requesting that upon payment, the shares of stock pledged be released. State denied the request on the ground that the loan which it had extended to the spouses Jose and Marcelina Aquino has remained unpaid.



On 29, June 1984, Atty. Rolando Salonga sent to respondent spouses a Notice of Notarial Sale stating that upon request of State and by virtue of the pledge agreement, he would sell at public auction the shares of stock pledged to State. This prompted respondents to file a case before the Regional Trial Court of Quezon City alleging that the intended foreclosure sale was illegal because from the time the obligation under the 2nd Account became due, they had been able and willing to pay the same, but petitioner had insisted that respondents pay even the loan account of Jose and Marcelino Aquino, which had not been secured by the pledge. It was further alleged that their failure to pay their loan was excused because State itself had prevented the satisfaction of the obligation.



On January 29, 1985, the trial court rendered a decision in favor of the plaintiff ordering State to immediately release the pledge and to deliver to respondents the share of stock upon payment of the loan. The Court of Appeals affirmed in toto the decision of the trial court.

ISSUE: Whether or not the conditions to be complied with by the debtor desirous of being released from his obligation in cases where the creditor unjustly refuses to accept payment have been met by the spouses Aquino.

HELD:

The conditions had not been complied with. Article 1256 of the civil code states that: “If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by consignation of the thing or sum due.” Where the creditor unjustly refuses to accept payment, the debtor desirous of being released from his obligation must comply with two (2) conditions: (a) tender of payment; and (b) consignation of the sum due. Tender of payment must be accompanied or followed by consignation in order that the effects of payment may be produced. In the instant case, respondent spouses Aquino, while they are properly regarded as having made a written tender of payment to petitioner state, failed to consign in court the amount due at the time of the maturity of the 2nd Account No. It follows that their obligation to pay principal-cum-regular or monetary interest under the terms and conditions of the said Account was not extinguished by such tender of payment alone.

People v Nufrashir Hashim G.R. No. 194255

June 13, 2012

Facts: 

Accused-appellant Bernadette Pansacala a.k.a Neneng Awid, together with co-accused Nurfrasir Hashim y Saraban a.k.a “Franz/Frans,” Makdul Jamad y Bukin a.k.a. “Macky,” a certain “Tas” and a certain “Jun” for the crime of illegal recruitment as defined under Section 6 in relation to Section 7(b) of Republic Act. No. (R.A.) 8042 or the Migrant Workers and Overseas Filipinos Act of 1995.



The prosecution alleged that, 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.



Private complainants were not aware of the circumstances surrounding their employment at the Golden Lotus. It was only after they agreed to stay there for employment that they 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.



From 21 June 2003 to 13 July 2003, AAA and BBB worked as prostituted women. Each of the girls would be booked to a customer for the whole night for 300 Ringgit at a certain hotel near the Golden Lotus. Meanwhile, during the day, they would be hired by customers for a “short time” for 150 Ringgit in one of the rooms of the Golden Lotus. The girls were told that they would be made to pay a fine of 150 Ringgit if they refused to have sexual intercourse with the customers.

Issue: Whether or not accused are obliged to pay for damages. Held: On 12 May 2003, Congress passed R.A. 9208 or the Anti-Trafficking in Persons Act. This law was approved on 26 May 2003. Ironically, only a few days after, private complainants found themselves in a situation that this law had sought to prevent. In People v. Lalli, we increased the amount of moral and exemplary damages from ₱50,000 to ₱500,000 and from ₱50,000 to ₱100,000, respectively, having convicted the accused therein of the crime of trafficking in persons. In so doing, we said:

The Civil Code describes moral damages in Article 2217: Art. 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 for omission. Exemplary damages, on the other hand, are awarded in addition to the payment of moral damages, by way of example or correction for the public good, as stated in the Civil Code: Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. Art. 2230. In criminal offenses, exemplary damages as a part of the civil liability may be imposed when the crime was committed with one or more aggravating circumstances. Such damages are separate and distinct from fines and shall be paid to the offended party. The payment of ₱500,000 as moral damages and ₱100,000 as exemplary damages for the crime of Trafficking in Persons as a Prostitute finds basis in Article 2219 of the Civil Code, which states: Art. 2219. Moral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries; (3) Seduction, abduction, rape, or other lascivious acts; (4) Adultery or concubinage; (5) Illegal or arbitrary detention or arrest; (6) Illegal search; (7) Libel, slander or any other form of defamation; (8) Malicious prosecution; (9) Acts mentioned in Article 309; (10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover moral damages.

FELIXBERTO A. ABELLANA VS. PEOPLE [G.R. No. 174654 : August 17, 2011] Facts: 

In 1985, petitioner extended a loan to private respondents spouses Diaga and Saapia Alonto (spouses Alonto), secured by a Deed of Real Estate Mortgage over Lot Nos. 6471 and 6472 located in Cebu City. Subsequently, or in 1987, 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.



RTC Ruling: Based on the evidence presented by both parties, the trial court found that petitioner did not intend to defraud the spouses Alonto; that after the latter failed to pay their obligation, petitioner prepared a Deed of Absolute Sale which the spouses Alonto actually signed; but that the Deed of Absolute Sale was notarized without the spouses Alonto personally appearing before the notary public. From these, the trial court concluded that petitioner can only be held 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 (RPC) and not estafa through falsification of public document as charged in the Information.



CA Ruling: the CA opined that the conviction of the petitioner for an offense not alleged in the Information or one not necessarily included in the offense charged violated his constitutional right to be informed of the nature and cause of the accusation against him.

Issue: Whether or not the accused can still be held civilly liable despite the acquittal from an offense charged different from the Information. Held: In Banal v. Tadeo, Jr., we 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. Simply stated, 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, we find that the acts allegedly committed by the petitioner did not cause any damage to spouses Alonto. First, the Information charged petitioner with fraudulently making it appear that the spouses Alonto affixed their signatures in the Deed of Absolute Sale thereby facilitating the transfer of the subject properties in his favor. However, after the presentation of the parties' respective evidence, the trial court found that the charge was without basis as the spouses Alonto indeed signed the document and that their signatures were genuine and not forged. Second, even assuming that the spouses Alonto did not personally appear before the notary public for the notarization of the Deed of Absolute Sale, the same does not necessarily nullify or render void ab initio the parties' transaction. Such non-appearance is not sufficient to overcome the presumption of the truthfulness of the statements contained in the deed. "To overcome the presumption, there must be sufficient, clear and convincing evidence as to exclude all reasonable controversy as to the falsity of the [deed]. In the absence of such proof, the deed must be upheld." And since the defective notarization does not ipso facto invalidate the Deed of Absolute Sale, the transfer of said properties from spouses Alonto to petitioner remains valid. Hence, when on the basis of said Deed of Absolute Sale, petitioner caused the cancellation of spouses Alonto's title and the issuance of new ones under his name, and thereafter sold the same to third persons, no damage resulted to the spouses Alonto. Moreover, we cannot sustain the alternative sentence imposed upon the petitioner, to wit: to institute an action for the recovery of the properties of spouses Alonto or to pay them actual and other kinds of damages. First, it has absolutely no basis in view of the trial court's finding that the signatures of the spouses Alonto in the Deed of Absolute Sale are genuine and not forged. Second, "[s]entences should not be in the alternative. There is nothing in the law which permits courts to impose sentences in the alternative." While a judge has the discretion of imposing one or another penalty, he cannot impose both in the alternative.

PEOPLE vs. EDWIN MALICSI G.R. No. 175833

January 29, 2008 543 S 93

Facts: 

AAA was raped by her uncle the accused-appellant three times, once when she was thirteen and thrice when she was fifteen years old. She was threatened to not say anything to her parents.



In the house of Malicsi her cousin saw them and he told the odious incident to AAA’s mother. It was confirmed by medical findings that AAA lost her virginity there were lacerations in the hymen.



Malicsi refuted the allegations against him saying that she consented to the sexual intercourse and that they were sweethearts and that her lack of outcry and tenacious resistance signify that it was consensual.

Issue: Whether or not there is a civil obligation arising from the crime of rape. The Court of Appeals was correct in affirming with modification the ruling of the trial court that four counts of rape were clearly established by the prosecution witnesses. The findings and observations of the trial court on the credibility of the prosecution witnesses are binding and conclusive on the appellate court unless some facts or circumstances of weight and substance have been overlooked, misapprehended or misinterpreted. This Court is not persuaded by appellant’s contention that the lack of outcry, lack of tenacious resistance, and delay in reporting the incidents signify that the sexual encounters were consensual First, appellant exercised moral ascendancy over AAA, being AAA’s uncle. Second, appellant had instilled fear upon AAA’s young mind during the sexual assaults by using a knife and threatening to kill her. These circumstances have led AAA to keep her ordeals in secret until her mother learned of the incidents from AAA’s cousin. This Court declared in People v. Garcia: [R]ape is committed when intimidation is used on the victim and this includes the moral kind of intimidation or coercion. Intimidation is a relative term, depending on the age, size and strength of the parties, and their relationship with each other. It can be addressed to the mind as well. Moreover, the intimidation must be viewed in the light of the victim’s perception and judgment at the time of rape and not by any hard and

fast rule. It is therefore enough that it produces fear – fear that if the victim does not yield to the lustful demands of the accused, something would happen to her at the moment or thereafter. AAA’s tender age and appellant’s moral ascendancy made AAA subservient to appellant’s sexual desires. This psychological predicament explains why AAA did not give any outcry or offer any resistance when appellant was raping her. Moreover, the physical differences between appellant, who was a man in his early 30’s then, and AAA, a 13 and 15-year-old girl during the rape incidents, afforded appellant the greater advantage such that no amount of resistance from AAA could have overcome the coercive physical force of appellant. The appellate court also correctly affirmed the award by the trial court of P200,000 in moral damages. Moral damages are automatically granted to the rape victim without presentation of further proof other than the commission of the crime. Civil indemnity in the amount of P50,000 for each count of simple rape is automatically granted once the fact of rape is established.

PEOPLE vs. ROSAURO SIA [G.R. No. 137457. November 21, 2001]

Facts: 

Christian Bermudez was beaten to death and the taxicab he was driving was taken by the assailants. His lifeless body, wrapped in a carton box, was recovered several days later in a fishpond in Meycauayan, Bulacan. For the felonies, the above-named accused were indicted for violation of R.A. 6539, otherwise known as the Anti-Carnapping Law, and Murder



The taxi was last seen at the vicinity of the Pegasus Night Club in Quezon City at about 10:30 p.m. on the said date with an unidentified passenger who surfaced later as the accused Rosauro Sia, whose true name is allegedly Antonio Labrador (Mang Tony) and who resides at San Francisco Del Monte. Accused Rosauro Sia appears to have gypped driver Christian Bermudez to service him the following day (August 24, 1995) in the morning and to be paid P150.00 per hour .



In their lone assigned error, accused-appellants contend in sum that the extra-judicial confessions of accused Rosauro Sia and Johnny Balalio, which the trial court heavily relied upon, are inadmissible in evidence since they were executed in violation of their right to counsel.

Issue: Whether or not accused should be acquitted based on inadmissibility of extrajudicial confession.

Held: Direct evidence of the commission of the crime is not the only matrix wherefrom a court may draw its conclusions and findings of guilt. The rules on evidence and case law sustain the conviction of the accused through circumstantial evidence when the following requisites concur: (1) there must be more than one circumstance; (2) the facts from which the inferences are derived are proven; and (3) the combination of all circumstances is such as to produce a conviction beyond reasonable doubt of the guilt of the accused.

First, when the police apprehended accused Rosauro Sia while he was in possession of the carnapped vehicle, he immediately pointed to accused-appellants as his accomplices in taking away the victim’s vehicle By way of exception, the testimony of a co-conspirator may, even if uncorroborated, be sufficient as when it is shown to be sincere in itself, because given unhesitatingly and in a straightforward manner, and is full of details which by their nature could not have been the result of deliberate afterthought Second, defense witness Porferio Fernando testified that accused-appellants were with Rosauro Sia from August 25-28, 1995 Third, upon his arrest, accused-appellant Jimmy Ponce voluntarily surrendered to the police authorities a ring admittedly belonging to the victim In the absence of an explanation of how one has come into the possession of stolen effects belonging to a person wounded and treacherously killed, he must necessarily be considered the author of the aggression and death of the said person and of the robbery committed on him. Anent the civil indemnity award, this Court finds the amount of P50,000.00 as death indemnity proper, following prevailing jurisprudence and 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. Though not awarded by the trial court, the victim’s heirs are likewise entitled to moral damages, pegged at P50,000.00 by controlling case law. The award of P200,000.00 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 the trial court’s award of burial and other expenses incurred in connection with the victim’s death. The rule is that every pecuniary loss must be established by credible evidence before it may be awarded In determining the amount of lost income, the following must be taken into account: (1) the number of years for which the victim would otherwise have lived; and (2) the rate of the loss sustained by the heirs of the deceased. The second variable is computed by multiplying the life expectancy by the net earnings of the deceased, meaning total earnings less expenses necessary in the creation of such earnings or income less living and other incidental expenses. Considering that there is no proof of living expenses of the deceased, net earnings are computed at fifty percent (50%) of the gross earnings. The formula used by this Court in computing loss of earning capacity is: Net Earning Capacity = [2/3 x (80 – age at time of death) x (gross annual income – reasonable and necessary living expenses)]

In this case, the Court notes that the victim was 27 years old at the time of his death and his mother testified that as a driver of the Tamaraw FX taxi, he was earning P650.00 a day. Hence, the damages payable for the loss of the victim’s earning capacity is computed thus: Gross Annual Earnings =

Net Earning Capacity

P650 x 261 working days in a year

=

P169,650.00

=

2/3 x (80-27) x [P169,650.00 – P84,825.00]

=

35.33 x 84,825.00

=

P2,996,867.20

PEOPLE OF THE PHILIPPINES vs. LUDOVICO C. DOCTOLERO G.R. No. 34386 February 7, 1991

Facts: 





 

The evidence for the prosecution tend to show that the three (3) accused, Ludovico, Conrado and Virgilio, all surnamed Doctolero, were responsible for the death(s) of Epifania Escosio and Lolita de Guzman, and in inflicting physical injuries to (sic) Jonathan Oviedo. And immediately thereafter, with their father and co-accused, Antonio Doctolero, they hacked Marcelo Doctolero, with their bolos which caused the death of the latter. According to Marcial Sagun, at about 6:30 in the evening on November 8, 1970, he and his wife, Maria Oviedo-Sagun and Lolita de Guzman-Oviedo (sister-in-law of Maria Oviedo-Sagun) were on their way home to Barrio Binday. They came from the field where they bundled their harvests. Upon reaching a crossing of the road in Bo. Binday they met the accused Ludovico Doctolero who, without warning and without cause or reason, held the left shoulder of Marcial Sagun with his left hand and struck Marcial Sagun with a bolo. Paciencia Sagun-Diamoy (sister of Marcial Sagun) testified that she saw the three accused hacked Marcelo repeatedly with their bolos and that when Marcia Sagun was about to go home to get her children the accused hit 81-year old Epifania Escosio and Jonathan. In their defense, they averred that it was a case of self-defense that Marcelo and his brother in law Antonio Oviedo hit struck Ludovico ergo boloing Maria to escape. During the pendency of this appeal Virgilio died.

Issue: Whether or not the accused Virgilio’s civil liability is extinguished upon his death. Held: The court below, however, erred in the penalty imposed for the physical injuries inflicted on Jonathan Oviedo. The child required medical attention for fifteen (15) days, hence the liability of appellants therefor is for less serious physical injuries punished with arresto mayor under Article 265 of the Revised Penal Code. There being no modifying circumstances, a penalty of twenty (20) days of arresto menor should be imposed for said offense on appellant Conrado Doctolero as an accomplice. The death of appellant Virgilio Doctolero during the pendency of this appeal terminated only his criminal liability but not his civil liability. 27 Also, while the death indemnity has been increased to P50,000.00 under current case law, the same should not apply to Ludovico

Doctolero, he having heretofore withdrawn his appeal and the judgment rendered by the trial court having long since become final and executory with respect to him.

PEOPLE vs. ROLLY ABULENCIA G.R. No. 138403. August 22, 2001

Facts:  

 



On August 4, 1998, a cold-blooded ravager, Rolly Abulencia y Coyos, preyed on ten-year old Rebelyn Garcia. In the early morning of the following day, Rebelyn’s lifeless, naked body was found floating at the Colobong creek in San Manuel, Pangasinan, with marks of bruises, burns and injuries manifesting that she was defiled and later drowned to death. Abulencia invited the victim’s brother to a drinking spree and thereafter went out to buy dilis Rebelyn tagged along and they were never seen again. Abulencia surrendered to the police saying that she followed him all the way to the market where he decided he no longer wanted to buy dilis. Exasperated, he told her to go home because he will go to San Manuel. When they were crossing the bridge she ran towards him and tripped causing her to fall. RTC Ruling: civil indemnity of 75,000.

Issue: Whether or not damages should be modified. Held: With regard to the civil indemnity, the trial court awarded only P75,000.00 Current jurisprudence has fixed at P100,000.00 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 P50,000.00 must be awarded. In People vs. Lagarto, we 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, we grant the award of exemplary damages in the amount of P25,000.00.

REYNALDO BERMUDEZ, SR and ADONITA YABUT BERMUDEZ v. JUDGE A. MELENCIO-HERRERA G.R. No. L-32055 February 26, 1988 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 plaintiffs-appellants, was riding. The boy sustained injuries which caused his death. As a result, Criminal Case No.92944 for Homicide Through Reckless Imprudence was filed against Domingo Pontino by the Manila City Fiscal's Office. Plaintiffs-appellants filed on July 27,1969 in the said criminal case "A Reservation to File Separate Civil Action."



On July 28,1969, the plaintiffs-appellants 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 of May 10, 1969 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.

Issue: Whether the civil action filed by the plaintiffs-appellants is founded on crime or on quasidelict.

Held: In Joaquin vs. Aniceto, the Court held: The issue in this case is: May an employee's primary civil liability for crime and his employer's subsidiary liability therefor be proved in a separate civil action even while the criminal case against the employee is still pending? To begin with, obligations arise from law, contract, quasi-contract, crime and quasi-delict. According to appellant, her action is one to enforce the civil liability arising from crime. With respect to obligations arising from crimes, Article 1161 of the New Civil Code provides:

Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of article 21 77, and of the pertinent provisions of Chapter 2, Preliminary, Title, on Human Relations, and of Title XVIII of this book, regulating damages. It is now settled that for an employer to be subsidiarily liable, the following requisites must be present: (1) that an employee has committed a crime in the discharge of his duties; (2) that said employee is insolvent and has not satisfied his civil liability; (3) that the employer is engaged in some kind of industry. (1 Padilla, Criminal Law, Revised Penal Code 794 [1964]) Without the conviction of the employee, the employer cannot be subsidiarily liable. 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 solidarity 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 b appellant was an action for damages based on quasi-delict. The fact that appellants reserved their right in the criminal case to file an independent civil action did not preclude them from choosing to file a civil action for quasi-delict. The appellants invoke the provisions of Sections 1 and 2 of Rule 111 of the Rules of Court, which provide: Section 1. — Institution of criminal and civil action. — When a criminal action is instituted, the civil action for recovery of civil liability arising from the offense charged is impliedly instituted with the criminal action, unless the offended party expressly waives the civil action or reserves his right to institute it separately. Section 2. — Independent civil action.-In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil Code of the Philippines, an independent civil action entirely separate and distinct from the criminal action, may be brought by the injured party during the pendency of the criminal case, provided the right is reserved as required in the preceding section. Such civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence. Article 2177 of the Civil Code, cited in Section 2, of Rule 111, provides that —

Article 2177. Responsibility for fault or negligence under the preceding article is entirely separate and distinct from the civil liability arising from negligence under the Penal Code. But the plaintiff cannot recover damages twice for the same act or omission of the defendant. The appellant precisely made a reservation to file an independent civil action in accordance with the provisions of Section 2 of Rule 111, Rules of Court. In fact, even without such a reservation, we have allowed the injured party in the criminal 1 case which resulted in the acquittal of the accused to recover damages based on quasi-delict.

In People vs. Ligon, G.R. No. 74041, we held: However, 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 (Article 29, 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 (Padilla vs. Court of Appeals, 129 SCRA 559).

PEOPLE OF THE PHILIPPINES vs. Hon. Judge BENJAMIN RELOVA G.R. No. L-45129 March 6, 1987

Facts: 

On 1 February 1975, members of the Batangas City Police together with personnel of the Batangas Electric Light System, equipped with a search warrant 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."



These electric devices and contraptions were, in the allegation of the petitioner "designed purposely to lower or decrease the readings of electric current consumption in the electric meter of the said electric [ice and cold storage] plant.



The accused Manuel Opulencia pleaded not guilty to the above information. On 2 February 1976, he filed a motion to dismiss the information upon the grounds that the crime there charged had already prescribed and that the civil indemnity there sought to be recovered was beyond the jurisdiction of the Batangas City Court to award which was awarded, it appearing that the offense charged was a light felony which prescribes two months from the time of discovery thereof, and it appearing further that the information was filed by the fiscal more than nine months after discovery of the offense charged in February 1975. Fourteen (14) days later, another information against Manuel Opulencia, this time for theft of electric power under Article 308 in relation to Article 309, paragraph (1), of the Revised Penal Code.





Before he could be arraigned thereon, Manuel Opulencia filed a Motion to Quash alleging that he had been previously acquitted of the offense charged in the second information and that the filing thereof was violative of his constitutional right against double jeopardy.

Issue: Whether or not the extinction of criminal liability carries with it the extinction of civil liability proceeding from prescription and/or double jeopardy.

Held: The civil liability aspects of this case are another matter. Because no reservation of the right to file a separate civil action was made by the Batangas City electric light system, the civil action for recovery of civil liability arising from the offense charged was impliedly instituted with the criminal action both before the City Court of Batangas City and the Court of First Instance of Batangas. 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, as we noted earlier, accused Manuel Opulencia freely admitted during the police investigation having stolen electric current through the installation and use of unauthorized elctrical connections or devices. While the accused pleaded not guilty before the City Court of Batangas City, he did not deny having appropriated electric power. However, there is no evidence in the record as to the amount or value of the electric power appropriated by Manuel Opulencia, the criminal informations having been dismissed both by the City Court and by the Court of First Instance (from which dismissals the Batangas City electric light system could not have appealed) before trial could begin. Accordingly, the related civil action which has not been waived expressly or impliedly, should be remanded to the Court of First Instance of Batangas City for reception of evidence on the amount or value of the electric power appropriated and converted by Manuel Opulencia and rendition of judgment conformably with such evidence.

GEORGE MANANTAN vs. THE COURT OF APPEALS [G.R. No. 107125. January 29, 2001]

Facts: 

The accused was driving at a speed of about 40 kilometers per hour along the Maharlika Highway at Malvar, Santiago, Isabela, at the middle portion of the highway (although according to Charles Cudamon, the car was running at a speed of 80 to 90 kilometers per hours on [the] wrong lane of the highway because the car was overtaking a tricycle) when they met a passenger jeepney with bright lights on. The accused immediately tried to swerve the car to the right and move his body away from the steering wheel but he was not able to avoid the oncoming vehicle and the two vehicles collided with each other at the center of the road.



As a result of the collision the car turned turtle twice and landed on its top at the side of the highway immediately at the approach of the street going to the Flores Clinic while the jeep swerved across the road so that one half front portion landed on the lane of the car while the back half portion was at its right lane five meters away from the point of impact.



Petitioner George Manantan was acquitted by the trial court of homicide through reckless imprudence without a ruling on his civil liability. On appeal from the civil aspect of the judgment , the appellate court found petitioner Manantan civilly liable and ordered him to indemnify private respondents Marcelino Nicolas and Maria Nicolas P104,400.00 representing loss of support, P50,000.00 as death indemnity, and moral damages of P20,000.00 or a total of P174,400.00 for the death of their son, Ruben Nicolas.

Issues: 1. Whether or not the petitioner should be civilly liable despite that his guilt was not proven beyond reasonable doubt. 2. Whether or not the filing fee is included as part of recovery of damages and that damages should be paid eventhough not alleged in the Information.

Held:

1. Our law recognizes two kinds of acquittal, with different 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. This instance closes the door to civil liability, for a person who has been found to be not 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 may be instituted must be based on grounds other than the delict complained of. This is the situation contemplated in Rule 111 of the Rules of Court. 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. This is the situation contemplated in Article 29 of the Civil Code where the civil action for damages is “for the same act or omission.” Although the two actions have different purposes, the matters discussed in the civil case are similar to those discussed in the criminal case. However, the judgment in the criminal proceeding cannot be read in evidence in the civil action to establish any fact there determined, even though both actions involve the same act or omission. The reason for this rule is that the parties are not the same and secondarily, different rules of evidence are applicable. Hence, notwithstanding herein petitioner’s acquittal, the Court of Appeals in determining whether Article 29 applied, was not precluded from looking into the question of petitioner’s negligence or reckless imprudence.

2. At the time of the filing of the information in 1983, the implied institution of civil actions with criminal actions was governed by Rule 111, Section 1 of the 1964 Rules of Court. As correctly pointed out by private respondents, under said rule, it was not required that the damages sought by the offended party be stated in the complaint or information. With the adoption of the 1985 Rules of Criminal Procedure, and the amendment of Rule 111, Section 1 of the 1985 Rules of Criminal Procedure by a resolution of this Court dated July 7, 1988, it is now required that: When the offended party seeks to enforce civil liability against the accused by way of moral, nominal, temperate or exemplary damages, the filing fees for such civil action as provided in these Rules shall constitute a first lien on the judgment except in an award for actual damages.

In cases wherein the amount of damages, other than actual, is alleged in the complaint or information, the corresponding filing fees shall be paid by the offended party upon the filing thereof in court for trial. Thus, where the civil action is impliedly instituted together with the criminal action, the actual damages claimed by the offended parties, as in this case, are not included in the computation of the filing fees. Filing fees are to be paid only if other items of damages such as moral, nominal, temperate, or exemplary damages are alleged in the complaint or information, or if they are not so alleged, shall constitute a first lien on the judgment. Recall that the information in Criminal Case No. 066 contained no specific allegations of damages. Considering that the Rules of Criminal Procedure effectively guarantee that the filing fees for the award of damages are a first lien on the judgment, the effect of the enforcement of said lien must retroact to the institution of the criminal action. The filing fees are deemed paid from the filing of the criminal complaint or information. We therefore find no basis for petitioner’s allegations that the filing fees were not paid or improperly paid and that the appellate court acquired no jurisdiction.

PEOPLE OF THE PHILIPPINES vs. ROGELIO BAYOTAS G.R. No. 102007 September 2, 1994 Facts:  





Rogelio Bayotas y Cordova was charged with Rape and eventually convicted thereof on June 19, 1991 in a decision penned by Judge Manuel E. Autajay. Pending appeal of his conviction, Bayotas died on February 4, 1992 at the National Bilibid Hospital. Consequently, the Supreme Court in its Resolution of May 20, 1992 dismissed the criminal aspect of the appeal. However, it required the Solicitor General to file its comment with regard to Bayotas' civil liability arising from his commission of the offense charged. In his comment, the Solicitor General expressed his view that the death of accusedappellant did not extinguish his civil liability as a result of his commission of the offense charged. The Solicitor General, relying on the case of People v. Sendaydiego, insists that the appeal should still be resolved for the purpose of reviewing his conviction by the lower court on which the civil liability is based. Counsel for the accused-appellant, on the other hand, opposed the view of the Solicitor General arguing that the death of the accused while judgment of conviction is pending appeal extinguishes both his criminal and civil penalties. In support of his position, said counsel invoked the ruling of the Court of Appeals in People v. Castillo and Ocfemia 2 which held that the civil obligation in a criminal case takes root in the criminal liability and, therefore, civil liability is extinguished if accused should die before final judgment is rendered.

Issue: Does death of the accused pending appeal of his conviction extinguish his civil liability?

Held: Yes. 1. Death of the accused pending appeal of his conviction extinguishes his criminal liability as well as the civil liability based solely thereon. As opined by Justice Regalado, in this regard, "the death of the accused prior to final judgment terminates his criminal liability and only the civil liability directly arising from and based solely on the offense committed, i.e., civil liability ex delicto in senso strictiore." 2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if the same may also be predicated on a source of obligation other than delict. Article 1157 of the

Civil Code enumerates these other sources of obligation from which the civil liability may arise as a result of the same act or omission: a) Law b) Contracts c) Quasi-contracts d) . . . e) Quasi-delicts 3. Where the civil liability survives, as explained in Number 2 above, an action for recovery therefor may be pursued but only by way of filing a separate civil action and subject to Section 1, Rule 111 of the 1985 Rules on Criminal Procedure as amended. This separate civil action may be enforced either against the executor/administrator or the estate of the accused, depending on the source of obligation upon which the same is based as explained above. 4. Finally, the private offended party need not fear a forfeiture of his right to file this separate civil action by prescription, in cases where during the prosecution of the criminal action and prior to its extinction, the private-offended party instituted together therewith the civil action. In such case, the statute of limitations on the civil liability is deemed interrupted during the pendency of the criminal case, conformably with provisions of Article 1155 21 of the Civil Code, that should thereby avoid any apprehension on a possible privation of right by prescription. 22 Applying this set of rules to the case at bench, we hold that the death of appellant Bayotas extinguished his criminal liability and the civil liability based solely on the act complained of, i.e., rape.

FAUSTO BARREDO vs. SEVERINO GARCIA G.R. No. L-48006

July 8, 1942

Facts:   



At about half past one in the morning of May 3, 1936, on the road between Malabon and Navotas, Province of Rizal, there was a head-on collision between a taxi of the Malate Taxicab driven by Pedro Fontanilla and a carretela guided by Pedro Dimapalis. The carretela was overturned, and one of its passengers, 16-year-old boy Faustino Garcia, suffered injuries from which he died two days later. Severino Garcia and Timotea Almario, parents of the deceased on March 7, 1939, brought an action in the Court of First Instance of Manila against Fausto Barredo as the sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla., the Court of First Instance of Manila awarded damages in favor of the plaintiffs for P2,000 plus legal interest from the date of the complaint. This decision was modified by the Court of Appeals by reducing the damages to P1,000 with legal interest from the time the action was instituted. It is undisputed that Fontanilla 's negligence was the cause of the mishap, as he was driving on the wrong side of the road, and at high speed. As to Barredo's responsibility, the Court of Appeals found: ... It is admitted that defendant is Fontanilla's employer. There is proof that he exercised the diligence of a good father of a family to prevent damage. In fact it is shown he was careless in employing Fontanilla who had been caught several times for violation of the Automobile Law and speeding -- violation which appeared in the records of the Bureau of Public Works available to be public and to himself. Therefore, he must indemnify plaintiffs under the provisions of article 1903 of the Civil Code.

Issue: Whether the plaintiffs may bring this separate civil action against Fausto Barredo, thus making him primarily and directly, responsible under article 1903 of the Civil Code as an employer of Pedro Fontanilla. Held: Article 1903 of the Civil Code not only establishes liability in cases of negligence, but also provides when the liability shall cease. It says:

"The liability referred to in this article shall cease when the persons mentioned therein prove that they employed all the diligence of a good father of a family to avoid the damage." From this article two things are apparent: (1) That when an injury is caused by the negligence of a servant or employee there instantly arises a presumption of law that there was negligence on the part of the matter or employer either in the selection of the servant or employee, or in supervision over him after the selection, or both; and (2) that presumption is juris tantum and not juris et de jure, and consequently, may be rebutted. It follows necessarily that if the employer shows to the satisfaction of the court that in selection and supervision he has exercised the care and diligence of a good father of a family, the presumption is overcome and he is relieve from liability. This theory bases the responsibility of the master ultimately on his own negligence and not on that of his servant. This Court, applying article 1903 and following the rule in Bahia vs. Litonjua and Leynes, said in part (p. 41) that: The master is liable for the negligent acts of his servant where he is the owner or director of a business or enterprise and the negligent acts are committed while the servant is engaged in his master's employment as such owner. The foregoing authorities clearly demonstrate the separate individuality of cuasi-delitos or culpa aquiliana under the Civil Code. Specifically they show that there is a distinction between civil liability arising from criminal negligence (governed by the Penal Code) and responsibility for fault or negligence under articles 1902 to 1910 of the Civil Code, and that the same negligent act may produce either a civil liability arising from a crime under the Penal Code, or a separate responsibility for fault or negligence under articles 1902 to 1910 of the Civil Code. Still more concretely, the authorities above cited render it inescapable to conclude that the employer — in this case the defendant-petitioner — is primarily and directly liable under article 1903 of the Civil Code. Firstly, the Revised Penal Code in article 365 punishes not only reckless but also simple negligence. If we were to hold that articles 1902 to 1910 of the Civil Code refer only to fault or negligence not punished by law, according to the literal import of article 1093 of the Civil Code, the legal institution of culpa aquiliana would have very little scope and application in actual life. Death or injury to persons and damage to property through any degree of negligence — even the slightest — would have to be indemnified only through the principle of civil liability arising from a crime. In such a state of affairs, what sphere would remain for cuasi-delito or culpa aquiliana? We are loath to impute to the lawmaker any intention to bring about a situation so absurd and anomalous. Nor are we, in the interpretation of the laws, disposed to uphold the letter that killeth rather than the spirit that giveth life. We will not use the literal meaning of the law to smother and render almost lifeless a principle of such ancient origin and such full-

grown development as culpa aquiliana or cuasi-delito, which is conserved and made enduring in articles 1902 to 1910 of the Spanish Civil Code. Secondly, to find the accused guilty in a criminal case, proof of guilt beyond reasonable doubt is required, while in a civil case, preponderance of evidence is sufficient to make the defendant pay in damages. There are numerous cases of criminal negligence which can not be shown beyond reasonable doubt, but can be proved by a preponderance of evidence. In such cases, the defendant can and should be made responsible in a civil action under articles 1902 to 1910 of the Civil Code. Otherwise, there would be many instances of unvindicated civil wrongs. Ubi jus ibi remedium. Thirdly, to hold that there is only one way to make defendant's liability effective, and that is, to sue the driver and exhaust his (the latter's) property first, would be tantamount to compelling the plaintiff to follow a devious and cumbersome method of obtaining relief. True, there is such a remedy under our laws, but there is also a more expeditious way, which is based on the primary and direct responsibility of the defendant under article 1903 of the Civil Code. Our view of the law is more likely to facilitate remedy for civil wrongs, because the procedure indicated by the defendant is wasteful and productive of delay, it being a matter of common knowledge that professional drivers of taxis and similar public conveyance usually do not have sufficient means with which to pay damages. Why, then, should the plaintiff be required in all cases to go through this roundabout, unnecessary, and probably useless procedure? In construing the laws, courts have endeavored to shorten and facilitate the pathways of right and justice. At this juncture, it should be said that the primary and direct responsibility of employers and their presumed negligence are principles calculated to protect society. Workmen and employees should be carefully chosen and supervised in order to avoid injury to the public. It is the masters or employers who principally reap the profits resulting from the services of these servants and employees. It is but right that they should guarantee the latter's careful conduct for the personnel and patrimonial safety of others. As Theilhard has said, "they should reproach themselves, at least, some for their weakness, others for their poor selection and all for their negligence." And according to Manresa, "It is much more equitable and just that such responsibility should fall upon the principal or director who could have chosen a careful and prudent employee, and not upon the injured person who could not exercise such selection and who used such employee because of his confidence in the principal or director." (Vol. 12, p. 622, 2nd Ed.) Many jurists also base this primary responsibility of the employer on the principle of representation of the principal by the agent. Thus, Oyuelos says in the work already cited (Vol. 7, p. 747) that before third persons the employer and employee "vienen a ser como una sola personalidad, por refundicion de la del dependiente en la de quien le emplea y utiliza." ("become as one personality by the merging of the person of the employee in that of him who employs and utilizes him.") Fourthly, because of the broad sweep of the provisions of both the Penal Code and the Civil Code on this subject, which has given rise to the overlapping or concurrence of spheres already discussed, and for lack of understanding of the character and efficacy of the action for culpa

aquiliana, there has grown up a common practice to seek damages only by virtue of the civil responsibility arising from a crime, forgetting that there is another remedy, which is by invoking articles 1902-1910 of the Civil Code. Although this habitual method is allowed by our laws, it has nevertheless rendered practically useless and nugatory the more expeditious and effective remedy based on culpa aquiliana or culpa extra-contractual. This will, it is believed, make for the better safeguarding of private rights because it re-establishes an ancient and additional remedy, and for the further reason that an independent civil action, not depending on the issues, limitations and results of a criminal prosecution, and entirely directed by the party wronged or his counsel, is more likely to secure adequate and efficacious redress.

OSCAR DEL CARMEN, JR., vs. GERONIMO BACOY G.R. No. 173870 April 25, 2012

Facts: 

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At dawn on New Year’s Day of 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 in Poblacion, Sominot, Zamboanga Del Sur. Upon reaching Purok Paglaom in Sominot, they were run over by a Fuso passenger jeep bearing plate number UVPEK-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. During the pendency of said criminal case, Emilia’s father, Geronimo Bacoy (Geronimo), in behalf of the six minor children of the Monsaluds, filed an independent civil action for damages based on culpa aquiliana. Defendants refused to assume civil liability for the victims’ deaths. Oscar Sr. averred that the Monsaluds have no cause of action against them because he and his wife do not own the jeep and that they were never the employers of Allan. For his part, Oscar Jr. claimed to be a victim himself. He alleged that Allan and his friends stole his jeep while it was parked beside his driver’s rented house to take it for a joyride.

Issues: 1. Whether or not damage arising from negligence is attributable to Oscar Jr. 2. Whether or not the registered owner of the vehicle should be liable for damages based on quasi-delict. Held:

1. Under the doctrine of res ipsa loquitur, “[w]here the thing that caused the injury complained of is shown to be under the management of the defendant or his servants; and the accident, in the ordinary course of things, would not happen if those who had management or control used proper care, it affords reasonable evidence – in the absence of a sufficient, reasonable and logical explanation by defendant – that the accident arose from or was caused by the defendant’s want of care.” Res ipsa loquitur is “merely evidentiary, a mode of proof, or a mere procedural convenience, since it furnishes a substitute for, and relieves a plaintiff of, the burden of producing a specific proof of negligence.” It “recognizes that parties may establish prima facie negligence without direct proof, thus, it allows the principle to substitute for specific proof of

negligence. It permits the plaintiff to present along with proof of the accident, enough of the attending circumstances to invoke the doctrine, create an inference or presumption of negligence and thereby place on the defendant the burden of proving that there was no negligence on his part.” The doctrine is based partly on “the theory that the defendant in charge of the instrumentality which causes the injury either knows the cause of the accident or has the best opportunity of ascertaining it while the plaintiff has no such knowledge, and is therefore compelled to allege negligence in general terms.” The requisites of the doctrine of res ipsa loquitur as established by jurisprudence are as follows: 1) the accident is of a kind which does not ordinarily occur unless someone is negligent; 2) the cause of the injury was under the exclusive control of the person in charge and 3) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured.

The above requisites are all present in this case. First, no person just walking along the road would suddenly be sideswiped and run over by an on-rushing vehicle unless the one in charge of the said vehicle had been negligent. Second, the jeep which caused the injury was under the exclusive control of Oscar Jr. as its owner. When Oscar Jr. entrusted the ignition key to Rodrigo, he had the power to instruct him with regard to the specific restrictions of the jeep’s use, including who or who may not drive it. As he is aware that the jeep may run without the ignition key, he also has the responsibility to park it safely and securely and to instruct his driver Rodrigo to observe the same precaution. Lastly, there was no showing that the death of the victims was due to any voluntary action or contribution on their part.

2. The contention is no longer novel. In Aguilar Sr. v. Commercial Savings Bank, the car of therein respondent bank caused the death of Conrado Aguilar, Jr. while being driven by its assistant vice president. Despite Article 2180, we still held the bank liable for damages for the accident as said provision should defer to the settled doctrine concerning accidents involving registered motor vehicles, i.e., that the registered owner of any vehicle, even if not used for public service, would primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle was being driven on the highways or streets. We have already ratiocinated that: 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. Absent the circumstance of unauthorized use or that the subject vehicle was stolen which are valid defenses available to a registered owner, Oscar Jr. cannot escape liability for quasi-delict resulting from his jeep’s use.

LUDO AND LUYM CORPORATION vs. COURT OF APPEALS G.R. No. 125483. February 1, 2001 Facts: 

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Petitioner Ludo & Luym Corporation is a domestic corporation engaged in copra processing with plant and business offices in Cebu City. Private Respondent Gabisan Shipping Lines was the registered owner and operator of the motor vessel MV Miguela, while the other private respondent, Anselmo Olasiman, was its captain. On May 21, 1990, at around 1:30 P.M., while MV Miguela was docking at petitioner’s wharf, it rammed and destroyed a fender pile cluster. Petitioner demanded damages from private respondents. The latter refused. Hence, petitioner filed a complaint for damages before the Regional Trial Court of Cebu. Ireneo Naval, petitioner’s employee, guided the vessel to its docking place. After the guide (small rope) was thrown from the vessel and while the petitioner’s security guard was pulling the big rope to be tied to the bolar, MV Miguela did not slow down. The crew did not release the vessel’s anchor. Naval shouted “Reverse” to the vessel’s crew, but it was too late when the latter responded, for the vessel already rammed the pile cluster. Private respondents denied the incident and the damage. Their witnesses claimed that the damage, if any, must have occurred prior to their arrival and caused by another vessel or by ordinary wear and tear. They averred that MV Miguela started to slow down at 100 meters and the crew stopped the engine at 50 meters from the pier; that Capt. Anselmo Olasiman did not order the anchor’s release and chief mate Manuel Gabisan did not hear Naval shout “Reverse”. Respondents claimed that Naval had no business in the vessels’ maneuvering. RTC Ruling: it found that it was able to prove by preponderance of evidence that MV Miguela rammed and damaged the pile cluster; that petitioner’s witnesses, Naval and Espina, actually saw the incident; that respondents failed to refute the testimony of marine surveyor Degamo and skin diver Alferez on the damages; that the officers and crew of MV Miguela were negligent; and that respondents are solidarily liable for the damages. CA Ruling: petitioner’s eyewitness Naval was incompetent to testify on the negligence of the crew and officers of MV Miguela; that there were other vessels that used the wharf for berthing and petitioner’s evidence did not positively prove that it was MV Miguela that rammed the pile cluster; that the photographs of the pile cluster taken after the incident showed no visible damages; that, as shown by private respondents’ witness, there were seashells and seaweeds directly under the uprooted post, which indicated that the breaking happened a long time ago.

Issue: Whether or not the doctrine of res ipsa loquitor is applicable.

Held: Petitioner argues that the Court of Appeals erred when it reversed the trial court for the latter’s heavy reliance on Naval’s testimony. The appellate court overlooked the fact that aside from Naval’s testimony, the trial court also relied on the principle of res ipsa loquitur to establish private respondents’ negligence. The doctrine of res ipsa loquitur was explained in Batiquin vs. Court of Appeals, 258 SCRA 334 (1996), thus: 1. Where the thing which causes injury is shown to be under the management of the defendant, and 2. the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of an explanation by the defendant, 3. that the accident arose from want of care. The doctrine recognizes that parties may establish prima facie negligence without direct proof and allows the principle to substitute for specific proof of negligence. This is invoked when under the circumstances, direct evidence is absent and not readily available. In our view, all the requisites for recourse to this doctrine exist. First, MV Miguela was under the exclusive control of its officers and crew. Petitioner did not have direct evidence on what transpired within as the officers and crew maneuvered the vessel to its berthing place. We note the Court of Appeals’ finding that Naval and Espina were not knowledgeable on the vessel’s maneuverings, and could not testify on the negligence of the officers and crew. Second, aside from the testimony that MV Miguela rammed the cluster pile, private respondent did not show persuasively other possible causes of the damage. Applying now the above, there exists a presumption of negligence against private respondents which we opine the latter failed to overcome. Additionally, petitioner presented tangible proof that demonstrated private respondents’ negligence. As testified by Capt. Olasiman, from command of “slow ahead” to “stop engine”, the vessel will still travel 100 meters before it finally stops. However, he ordered “stop engine” when the vessel was only 50 meters from the pier. Further, he testified that before the vessel is put to slow astern, the engine has to be restarted. However, Olasiman can not estimate how long it takes before the engine goes to slow astern after the engine is restarted. From these declarations, the conclusion is that it was already too late when the captain ordered reverse. By then, the vessel was only 4 meters from the pier and thus rammed it.

Respondent company’s negligence consists in allowing incompetent crew to man its vessel. As shown also by petitioner, both Captain Olasiman and Chief Mate Gabisan did not have a formal training in marine navigation. The former was a mere elementary graduate while the latter is a high school graduate. Their experience in navigation was only as a watchman and a quartermaster, respectively.

THERMOCHEM INC vs. LEONORA NAVAL and CA G.R. No. 131541. October 20, 2000

Facts: 

(O)n 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 Ortigas Avenue, not far from the Rosario Bridge, to unload a passenger.

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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 with the taxicab.

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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 was then dragged into the nearby Question Tailoring Shop, thus, causing damage to the said tailoring shop, and its driver, Eduardo Eden, sustained injuries as a result of the incident.

Issue: Whether or not petitioner should be held liable for damages. Held: Malfunction or loss of brake is not a fortuitous event. Between the owner and his driver, on the one hand, and third parties such as commuters, drivers and pedestrians, on the other, the former is presumed to know about the conditions of his 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. As petitioner's vehicle was moving downhill, the driver should have slowed down since a downhill drive would naturally cause the vehicle to accelerate. 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. Even assuming arguendo that loss of brakes is an act of God, by reason of their negligence, the fortuitous event became humanized, rendering the Nissan driver liable for the ensuing damages.

As mentioned earlier, the driver of the taxi is contributorily liable. U-turns are not generally advisable particularly on major streets. The taxi was hit on its side which means that it had not yet fully made a turn to the other lane. 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. Most public utility drivers disregard signs and traffic rules especially during the night when traffic enforcers manning the streets disappear with the light. In driving vehicles, the primary concern should be the safety not only of the driver or his passengers, but also his fellow motorists. Considering the contributory negligence of the driver of private respondent's taxi, the award of P47,850.00, for the repair of the taxi, should be reduced in half (P23,925.00 jointly and severally). All other awards for damages are deleted for lack of merit.

PHILIPPINE HAWK CORP vs VIVIAN TAN LEE G.R. No. 166869 February 16, 2010

Facts:  

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Issue:

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. On March 17, 1991, she was riding on their motorcycle in tandem with her husband, who was on the wheel, at a place after a Caltex gasoline station in Barangay Buensoceso, Gumaca, Quezon. They were on a stop position at the side of the highway; and when they were about to make a turn, she saw a bus running at fast speed coming toward them, and then the bus hit a jeep parked on the roadside, and their motorcycle as well. She lost consciousness and was brought to the hospital. Respondent’s husband died due to the vehicular accident. The immediate cause of his death was massive cerebral hemorrhage. For the defense, Margarito Avila, the driver of petitioner’s bus, testified that he was driving his bus at 60 kilometers per hour on the Maharlika Highway. When they were at Barangay Buensoceso, Gumaca, Quezon, a motorcycle ran from his left side of the highway, and as the bus came near, the motorcycle crossed the path of the bus, and so he turned the bus to the right. He heard a loud banging sound. From his side mirror, he saw that the motorcycle turned turtle (“bumaliktad”). He did not stop to help out of fear for his life, but drove on and surrendered to the police. He denied that he bumped the motorcycle. RTC Ruling: 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. RTC 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. CA Ruling: (a) P168,019.55 as actual damages; (b) P10,000.00 as temperate damages; (c) P100,000.00 as moral damages; (d) P590,000.00 as unearned income; and (e) P50,000.00 as civil indemnity.

(1) 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; (2) whether or not the damages awarded by respondent Court of Appeals are proper.

Held: (1) Foreseeability is the fundamental test of negligence. 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 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. (2) As a rule, documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when: (1) the deceased is self-employed and earning less than the minimum wage under current labor laws, in which case, judicial notice may be taken of the fact that in the deceased's line of work no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws In the computation of loss of earning capacity, only net earnings, not gross earnings, are to be considered; that is, the total of the earnings less expenses necessary for the creation of such earnings or income, less living and other incidental expenses. In the absence of documentary evidence, it is reasonable to peg necessary expenses for the lease and operation of the gasoline station at 80 percent of the gross income, and peg living expenses at 50 percent of the net income (gross income less necessary expenses). Net Earning Capacity= Life Expectancy x Gross Annual Income – Reasonable and Necessary Expenses

Life expectancy= 2/3 x (80 minus age of deceased victim at time of death) Reasonable and necessary expenses= 80% of GAI Living expenses= 50% of net income NEC= [{(2/3 x (80-65)} x {1,000,000- (80% x P 1M)}- (50% of Net Income)] NEC= [{(2/3 x (15)} x {P200,000}- (50% x 200,000)] NEC= 10 x 100,000 = 1,000,000.00 Actual damages must be substantiated by documentary evidence, such as receipts, in order to prove expenses incurred as a result of the death of the victim Moreover, the Court of Appeals correctly sustained the award of moral damages in the amount of P50,000.00 for the death of respondent’s husband. Moral damages are not intended to enrich a plaintiff at the expense of the defendant. They are awarded to allow the plaintiff to obtain means, diversions or amusements that will serve to alleviate the moral suffering he/she has undergone due to the defendant’s culpable action and must, perforce, be proportional to the suffering inflicted Under Art. 2224 of the Civil Code, temperate damages “may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty.” The cost of the repair of the motorcycle was prayed for by respondent in her Complaint. However, the evidence presented was merely a job estimate of the cost of the motorcycle’s repair amounting to P17, 829.00. The Court of Appeals aptly held that there was no doubt that the damage caused on the motorcycle was due to the negligence of petitioner’s driver. Under Art. 2219 of the Civil Code, moral damages may be recovered in quasi-delicts causing physical injuries. However, the award of P50,000.00 should be reduced to P30,000.00 in accordance with prevailing jurisprudence. Further, the Court of Appeals correctly awarded respondent civil indemnity for the death of her husband, which has been fixed by current jurisprudence at P50,000.00. The award is proper under Art. 2206 of the Civil Code.

DY TEBAN TRADING, INC. vs. JOSE CHING G.R. No. 161803 February 4, 2008

Facts 

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On July 4, 1995, at around 4:45 a.m., Rogelio Ortiz, with helper Romeo Catamora, was driving a Nissan van owned by petitioner Dy Teban Trading, Inc. along the National Highway in Barangay Sumilihon, Butuan City, going to Surigao City. A Joana Paula passenger bus was cruising on the opposite lane towards the van. In between the two vehicles was a parked prime mover with a trailer, owned by private respondent Liberty Forest, Inc. The night before, at around 10:00 p.m., the prime mover with trailer suffered a tire blowout. The driver, private respondent Cresilito Limbaga, parked the prime mover askew occupying a substantial portion of the national highway, on the lane of the passenger bus. He parked the prime mover with trailer at the shoulder of the road with the left wheels still on the cemented highway and the right wheels on the sand and gravel shoulder of the highway. The prime mover was not equipped with triangular, collapsible reflectorized plates, the early warning device required under Letter of Instruction No. 229. As substitute, Limbaga placed a banana trunk with leaves on the front and the rear portion of the prime mover to warn incoming motorists. It is alleged that Limbaga likewise placed kerosene lighted tin cans on the front and rear of the trailer. To avoid hitting the parked prime mover occupying its lane, the incoming passenger bus swerved to the right, onto the lane of the approaching Nissan van. Ortiz saw two bright and glaring headlights and the approaching passenger bus. He pumped his break slowly, swerved to the left to avoid the oncoming bus but the van hit the front of the stationary prime mover. The passenger bus hit the rear of the prime mover. Ortiz and Catamora only suffered minor injuries. The Nissan van, however, became inoperable as a result of the incident.

The RTC held that the proximate cause of the three-way vehicular collision was improper parking of the prime mover on the national highway and the absence of an early warning device on the vehicle. The CA held that the proximate cause of the vehicular collision was the failure of the Nissan van to give way or yield to the right of way of the passenger bus.

Issue: Whether or not the prime mover is liable for the damages suffered by the Nissan van.

Held: 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 quasidelict. To sustain a claim based on quasi-delict, the following requisites must concur: (a) damage suffered by plaintiff; (b) fault or negligence of defendant; and (c) connection of cause and effect between the fault or negligence of defendant and the damage incurred by plaintiff. Negligence is defined as the failure to observe for the protection of the interests of another person that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury. Private respondent Limbaga was negligent in parking the prime mover on the national highway. Private respondent Liberty Forest, Inc. was also negligent in failing to supervise Limbaga and in ensuring that the prime mover was in proper condition. Proximate cause is defined as that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred. More comprehensively, proximate cause is that cause acting first and producing the injury, either immediately or by setting other events in motion, all constituting a natural and continuous chain of events, each having a close causal connection with its immediate predecessor, the final event in the chain immediately effecting the injury as natural and probable result of the cause which first acted, under such circumstances that the person responsible for the first event should, as an ordinarily prudent and intelligent person, have reasonable ground to expect at the moment of his act or default that an injury to some person might probably result therefrom. Here, We agree with the RTC that the damage caused to the Nissan van was a natural and probable result of the improper parking of the prime mover with trailer. As discussed, the skewed parking of the prime mover posed a serious risk to oncoming motorists. Limbaga failed to prevent or minimize that risk. The skewed parking of the prime mover triggered the series of events that led to the collision, particularly the swerving of the passenger bus and the Nissan van. Even granting that the passenger bus was at fault, its fault will not necessarily absolve private respondents from liability. If at fault, the passenger bus will be a joint tortfeasor along with private respondents. The liability of joint tortfeasors is joint and solidary. This means that petitioner may hold either of them liable for damages from the collision.

In Philippine National Construction Corporation v. Court of Appeals,1[31] this Court held: where the concurrent or successive negligent acts or omission of two or more persons, although acting independently of each other, are, in combination, the direct and proximate cause of a single injury to a third person and it is impossible to determine in what proportion each contributed to the injury, either is responsible for the whole injury, even though his act alone might not have caused the entire injury In Far Eastern Shipping Company v. Court of Appeals, the Court declared that the liability of joint tortfeasors is joint and solidary, to wit: Where several causes producing an injury are concurrent and each is an efficient cause without which the injury would not have happened, the injury may be attributed to all or any of the causes and recovery may be had against any or all of the responsible persons although under the circumstances of the case, it may appear that one of them was more culpable, and that the duty owed by them to the injured person was not the same. No actor’s negligence ceases to be a proximate cause merely because it does not exceed the negligence of other actors. Each wrongdoer is responsible for the entire result and is liable as though his acts were the sole cause of the injury.

SAFEGUARD SECURITY AGENCY INC vs. LAURO TANGCO et al G.R. No. 165732

December 14, 2006

511 S 67

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.

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A complaint for damages against Pajarillo for negligently shooting Evangeline and against Safeguard for failing to observe the diligence of a good father of a family to prevent the damage committed by its security guard.

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In their Answer, petitioners denied the material allegations in the complaint and alleged that Safeguard exercised the diligence of a good father of a family in the selection and supervision of Pajarillo; that Evangeline's death was not due to Pajarillo's negligence as the latter acted only in self-defense.

Issues: Whether (1) quasi-delict only covers negligent acts and not intentional; and (2) Safeguard should be held solidarily liable for the damages awarded to respondents. Held: (1)No. An act or omission causing damage to another may give rise to two separate civil liabilities on the part of the offender, i.e., (1) civil liability ex delicto, under Article 100 of the Revised Penal Code; and (2) independent civil liabilities, such as those: (a) not arising from an act or omission complained of as a felony, e.g., culpa contractual or obligations arising from law under Article 31 of the Civil Code, intentional torts under Articles 32 and 34, and culpa aquiliana under Article 2176 of the Civil Code; or (b) where the injured party is granted a right to file an action independent and distinct from the criminal action under Article 33 of the Civil Code. Either of these liabilities may

be enforced against the offender subject to the caveat under Article 2177 of the Civil Code that the offended party cannot recover damages twice for the same act or omission or under both causes. ARTICLE 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 a quasi-delict and is governed by the provisions of this Chapter. The scope of Article 2176 is not limited to acts or omissions resulting from negligence. In Dulay v. Court of Appeals,17 we held: Article 2176, where it refers to "fault or negligence," covers not only acts "not punishable by law" but also acts criminal in character, whether intentional and voluntary or negligent. Consequently, a separate civil action lies against the offender in a criminal act, whether or not he is criminally prosecuted and found guilty or acquitted, provided that the offended party is not allowed, if he is actually charged also criminally, to recover damages on both scores, and would be entitled in such eventuality only to the bigger award of the two, assuming the awards made in the two cases vary. In other words, the extinction of civil liability referred to in Par. (e) of Section 3, Rule 111, refers exclusively to civil liability founded on Article 100 of the Revised Penal Code, whereas the civil liability for the same act considered as quasi-delict only and not as a crime is not extinguished even by a declaration in the criminal case that the criminal act charged has not happened or has not been committed by the accused. Briefly stated, We here hold, in reiteration of Garcia, that culpa aquiliana includes voluntary and negligent acts which may be punishable by law." The civil action filed by respondents was not derived from the criminal liability of Pajarillo in the criminal case but one based on culpa aquiliana or quasi-delict which is separate and distinct from the civil liability arising from crime. The source of the obligation sought to be enforced in the civil case is a quasi-delict not an act or omission punishable by law. (2) Yes. Article 2180 of the Civil Code provides: 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. xxxx 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.

xxxx The responsibility treated of in this article 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. 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 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. To establish these factors in a trial involving the issue of vicarious liability, employers must submit concrete proof, including documentary evidence. The RTC did not err in ruling that Safeguard fell short of the diligence required in the supervision of its employee, particularly Pajarillo, it had also been established during Camero's cross-examination that Pajarillo was not aware of such rules and regulations. Notwithstanding Camero's clarification on his re-direct examination that these company rules and regulations are lesson plans as a basis of guidelines of the instructors during classroom instructions and not necessary to give students copy of the same the records do not show that Pajarillo had attended such classroom instructions. The records also failed to show that there was adequate training and continuous evaluation of the security guard's performance.

NOSTRADAMUS VILLANUEVA vs. PRISCILLA R. DOMINGO and LEANDRO LUIS R. DOMINGO G.R. No. 144274. September 20, 2004 438 S 485

Facts: 







[Respondent] Priscilla R. Domingo is the registered owner of a silver Mitsubishi Lancer Car model 1980 bearing plate No. NDW 781 ’91 with [co-respondent] Leandro Luis R. Domingo as authorized driver. [Petitioner] Nostradamus Villanueva was then the registered “owner” of a green Mitsubishi Lancer bearing Plate No. PHK 201 ’91. On 22 October 1991, following a green traffic light, [respondent] Priscilla Domingo’s silver Lancer car with Plate No. NDW 781 ’91 then driven by [co-respondent] Leandro Luis R. Domingo was cruising along the middle lane of South Superhighway at moderate speed from north to south. Suddenly, a green Mitsubishi Lancer with plate No. PHK 201 ’91 driven by Renato Dela Cruz Ocfemia darted from Vito Cruz Street towards the South Superhighway directly into the path of NDW 781 ’91 thereby hitting and bumping its left front portion. As a result of the impact, NDW 781 ’91 hit two (2) parked vehicles at the roadside, the second hitting another parked car in front of it. Per Traffic Accident Report prepared by Traffic Investigator Pfc. Patrocinio N. Acido, Renato dela Cruz Ocfemia was driving with expired license and positive for alcoholic breath. Hence, Manila Assistant City Prosecutor Oscar A. Pascua recommended the filing of information for reckless imprudence resulting to (sic) damage to property and physical injuries [Petitioner] Nostradamus Villanueva claimed that he was no longer the owner of the car at the time of the mishap because it was swapped with a Pajero owned by Albert Jaucian/Auto Palace Car Exchange. For her part, Linda Gonzales declared that her presence at the scene of the accident was upon the request of the actual owner of the Mitsubishi Lancer (PHK 201 ’91) [Albert Jaucian] for whom she had been working as agent/seller. On the other hand, Auto Palace Car Exchange represented by Albert Jaucian claimed that he was not the registered owner of the car. Moreover, it could not be held subsidiary liable as employer of Ocfemia because the latter was off-duty as utility employee at the time of the incident. Neither was Ocfemia performing a duty related to his employment.

Issue: May the registered owner of a motor vehicle be held liable for damages arising from a vehicular accident involving his motor vehicle while being operated by the employee of its buyer without the latter’s consent and knowledge?

Held: Yes We have consistently ruled that the registered owner of any vehicle is directly and primarily responsible to the public and third persons while it is being operated. The rationale behind such doctrine was explained way back in 1957 in Erezo vs. Jepte: The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law, the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should be required to prove who the actual owner is. How would the public or third persons know against whom to enforce their rights in case of subsequent transfers of the vehicles? We do not imply by his doctrine, however, that the registered owner may not recover whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or conveyed the vehicle. The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be used or operated upon any public highway unless the same is property registered. It has been stated that the system of licensing and the requirement that each machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce the danger of injury to pedestrians and other travelers from the careless management of automobiles. And to furnish a means of ascertaining the identity of persons violating the laws and ordinances, regulating the speed and operation of machines upon the highways (2 R.C.L. 1176). Not only are vehicles to be registered and that no motor vehicles are to be used or operated without being properly registered for the current year, but that dealers in motor vehicles shall furnish thee Motor Vehicles Office a report showing the name and address of each purchaser of motor vehicle during the previous month and the manufacturer’s serial number and motor number. (Section 5(c), Act No. 3992, as amended.) One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident; and another is that the knowledge that means of detection are always available may act as a deterrent from lax observance of the law and of the rules of conservative and safe operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the primary purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape because of lack of means to discover him. In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendantappellant) has a right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant.

VICENTE CALALAS vs. FRANCISCO SALVA G.R. No. 122039. May 31, 2000 Facts: 

Private respondent Eliza Jujeurche G. Sunga, took a passenger jeepney owned and operated by petitioner Vicente Calalas. As the jeepney was filled to capacity of about 24 passengers, Sunga was given by the conductor an "extension seat," a wooden stool at the back of the door at the rear end of the vehicle.



The jeepney stopped to let a passenger off. As she was seated at the rear of the vehicle, Sunga gave way to the outgoing passenger. Just as she was doing so, an Isuzu truck driven by Iglecerio Verena and owned by Francisco Salva bumped the left rear portion of the jeepney. As a result, Sunga was injured.



On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging violation of the contract of carriage by the former in failing to exercise the diligence required of him as a common carrier.



Calalas, on the other hand, filed a third-party complaint against Francisco Salva, the owner of the Isuzu truck. The lower court rendered judgment against Salva as third-party defendant and absolved Calalas of liability, holding that it was the driver of the Isuzu truck who was responsible for the accident. On appeal to the Court of Appeals, the ruling of the lower court was reversed on the ground that Sunga’s cause of action was based on a contract of carriage, not quasidelict, and that the common carrier failed to exercise the diligence required under the Civil Code.

 

Issue: (1) Whether petitioner is liable based on breach of contract of carriage. (2) Whether petitioner’s liability be extinguished grounded on caso fortuito Held: (1)Yes.

The first, quasi-delict, also known as culpa aquiliana or culpa extra contractual, has as its source the negligence of the tortfeasor. The second, breach of contract or culpa contractual, is premised upon the negligence in the performance of a contractual obligation. Consequently, in quasi-delict, the negligence or fault should be clearly established because it is the basis of the action, whereas in breach of contract, the action can be prosecuted merely by proving the existence of the contract and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination. In case of death or injuries to passengers, Art. 1756 of the Civil Code 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.

It is immaterial that the proximate cause of the collision between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving breach of contract. The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts of carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers. It provides: Slxsc Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1746, Nos. 5,6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756. Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed by articles 1733 and 1755.

Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances" as required by Art. 1755? We do not think so. Several factors militate against petitioner’s contention. First, the jeepney was not properly parked, its rear portion being exposed about two meters from the broad shoulders of the highway, and facing the middle of the highway in a diagonal angle. This is a violation of the R.A. No. 4136, as amended, or the Land Transportation and Traffic Code, which provides: Sec. 54. Obstruction of Traffic. - No person shall drive his motor vehicle in such a manner as to obstruct or impede the passage of any vehicle, nor, while discharging or taking on passengers or loading or unloading freight, obstruct the free passage of other vehicles on the highway. Second, it is undisputed that petitioner’s driver took in more passengers than the allowed seating capacity of the jeepney, a violation of §32(a) of the same law. It provides: Mesm Exceeding registered capacity. - No person operating any motor vehicle shall allow more passengers or more freight or cargo in his vehicle than its registered capacity. (2)NO. A caso fortuito is an event which could not be foreseen, or which, though foreseen, was inevitable. This requires that the following requirements be present: (a) the cause of the breach is independent of the debtor’s will; (b) the event is unforeseeable or unavoidable; (c) the event is such as to render it impossible for the debtor to fulfill his obligation in a normal manner, and (d) the debtor did not take part in causing the injury to the creditor.1[4] Petitioner should have foreseen the danger of parking his jeepney with its body protruding two meters into the highway.

AMADO PICART vs. FRANK SMITH, JR. G.R. No. L-12219

March 15, 1918 37 P 183

Facts: 

The accident occurred in the narrow Carlatan Bridge La Union.



The defendant while approaching the bridge saw the plaintiff riding on his horse. He gave a warning signal and continued without decreasing his speed. 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 as 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.

Issue: Whether or not defendant should be held liable given that he had the last clear chance.

Held: Stated in these terms, the proper criterion for determining the existence of negligence in a given case is this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing conduct or guarding against its consequences. Applying this test to the conduct of the defendant in the present case we think that negligence is clearly established. A prudent man, placed in the position of the defendant, would in our opinion, have recognized that the course which he was pursuing was fraught with risk, and would therefore have foreseen harm to the horse and the rider as reasonable consequence of that course. Under these circumstances the law imposed on the defendant the duty to guard against the threatened harm. It goes without saying that 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 as we have already stated, the defendant was also negligent; and in such case the problem always is to discover which agent is immediately and directly responsible. It will be noted that the negligent acts of the two parties were not contemporaneous, since the negligence of the defendant

succeeded the negligence of the plaintiff by an appreciable interval. Under these circumstances the law is that the person who has the last fair chance to avoid the impending harm and fails to do so is chargeable with the consequences, without reference to the prior negligence of the other party.

DURBAN APARTMENTS CORP vs PIONEER INSURANCE AND SURETY CORP G.R. No. 179419 January 12, 2011

Facts:    



On July 22, 2003, [respondent] Pioneer Insurance and Surety Corporation x x x, by right of subrogation, filed [with the RTC of Makati City] a Complaint for Recovery of Damages against [petitioner] Durban Apartments Corporation. [Respondent averred] that: it is the insurer for loss and damage of Jeffrey S. See’s [the insured’s] 2001 Suzuki Grand Vitara in the amount of P1,175,000.00; See arrived and checked in at the City Garden Hotel in Makati corner Kalayaan Avenues, Makati City before midnight, and its parking attendant, defendant x x x Justimbaste got the key to said Vitara from See to park it. O]n May 1, 2002, at about 1:00 o’clock in the morning, See was awakened in his room by [a] telephone call from the Hotel Chief Security Officer who informed him that his Vitara was carnapped while it was parked unattended at the parking area of Equitable PCI Bank along Makati Avenue between the hours of 12:00 [a.m.] and 1:00 [a.m.]; Durban Apartments and [defendant] Justimbaste filed their Answer with Compulsory Counterclaim alleging that: See did not check in at its hotel, on the contrary, he was a guest of a certain Ching Montero defendant Justimbaste did not get the ignition key of See’s Vitara, on the contrary, it was See who requested a parking attendant to park the Vitara at any available parking space, and it was parked at the Equitable Bank parking area, which was within See’s view, while he and Montero were waiting in front of the hotel;

Issue: Whether or not petitioner is liable for See’s vehicle. Held: 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. If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract.

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 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.

JOSE LAGON vs. HOOVEN COMALCO INDUSTRIES INC [G.R. No. 135657. January 17, 2001] 349 S 363

Facts:  







Petitioner Jose V. Lagon is a businessman and owner of a commercial building in Tacurong, Sultan Kudarat. Respondent HOOVEN on the other hand is a domestic corporation known to be the biggest manufacturer and installer of aluminum materials. Sometime in April 1981 Lagon and HOOVEN entered into two (2) contracts, both 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.1[3] Upon execution of the contracts, Lagon paid HOOVEN P48,00.00 in advance. On 24 February 1987 respondent HOOVEN commenced an action for sum of money with damages and attorney’s fees against petitioner Lagon. HOOVEN alleged in its complaint that on different occasions, it delivered and installed several construction materials in the commercial building of Lagon pursuant to their contracts; that the total cost of the labor and materials amounted to P117,329.00 out of which P69,329.00 remained unpaid even after the completion of the project; and, despite repeated demands, Lagon failed and refused to liquidate his indebtedness. 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. The trial court conducted an ocular inspection of Lagon’s commercial building. In due course the trial court rendered a decision partly on the basis of the result of the ocular inspection finding the total actual deliveries and installations made by HOOVEN cost P87,140.00. Deducting therefrom P48,000.00 which Lagon paid in advance upon execution of their contracts with no further payments appearing to have been made thereafter, only P39,140.00 remained unpaid and where Lagon incurred in delay.

Issue: Whether or not the alleged authorized representative of Lagon is a party to receive the delivery. Held: If, as claimed by HOOVEN, all the materials were completely delivered and installed in petitioner’s building as early as August 1981, why then would it demand partial payment only two (2) years later? This circumstance is very significant especially considering that under the

Proposals the terms of payment should be 50% down "and the balance to be paid in full" upon completion. Moreover, it is surprising that the partial payment demanded was only "to cover operation costs." As correctly observed by petitioner, demand for payment of operation costs is typical of a still on-going project where the contractor needs funds to defray his expenses. If there was complete installation, why would respondent demand payment for operation costs only? Why not enforce the whole amount of indebtedness? All these clearly suggest that there was no full and complete delivery and installation of materials ordered by petitioner. All the delivery receipts did not appear to have been signed by petitioner or his duly authorized representative acknowledging receipt of the materials listed therein. A closer examination of the receipts clearly showed that the deliveries were made to a certain Jose Rubin, claimed to be petitioner’s driver, Armando Lagon, and a certain bookkeeper. Unfortunately for HOOVEN, the identities of these persons were never been established, and there is no way of determining now whether they were indeed authorized representatives of petitioner. Paragraph 3 of each Proposal is explicit on this point The seller’s responsibility ends with delivery of the merchandise to carrier in good condition, to buyer, or to buyer’s authorized "Receiver/Depository" named on the face of this proposal. As above specifically stated, deliveries must be made to the buyer or his duly authorized representative named in the contracts. In other words, unless the buyer specifically designated someone to receive the delivery of materials and his name is written on the Proposals opposite the words "Authorized Receiver/Depository," the seller is under obligation to deliver to the buyer only and to no other person; otherwise, the delivery would be invalid and the seller would not be discharged from liability. In the present case, petitioner did not name any person in the Proposals who would receive the deliveries in his behalf, which meant that HOOVEN was bound to deliver exclusively to petitioner. Notwithstanding the breach of contract by respondent in failing to deliver and install in the premises of petitioner all the stipulated materials, we nevertheless accede to the right of respondent to recover the unpaid balance from petitioner for the materials actually delivered.

SPS LORENZO G. FRANCISCO and LORENZA D. FRANCISCO vs. COURT OF APPEALS G. R. No. 118749. April 25, 2003 401 S 594 Facts: 

On 3 February 1984, the spouses Lorenzo and Lorenza Francisco (“petitioners”) and Engineer Bienvenido C. Mercado (“respondent”) entered into a Contract of Development (“Contract”) 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.



Within the 27-month period granted to respondent, petitioners also contracted a certain Nicasio Rosales, Sr. (“Rosales”) 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.



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 20 January 1987, petitioners granted respondent an authority1[8] 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. 

Respondent informed HSRC that he had stopped development work on the subdivision because the conditional authority issued by petitioners violated the Contract. 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 stopped respondent, without justification, from selling the lots and collecting payments from lot buyers.

Issue: Whether or not contract should be rescinded by reason of delay made by petitioners.

Held: The law provides that delay may exist when the obligor fails to fulfill his obligation within the time expressly stipulated.1[25] In this case, the HSRC 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. Petitioners hampered and interfered with respondent’s development work. Petitioners also stopped respondent from selling lots and collecting payments from lot buyers, which was the primary source of development funds. In effect, petitioners rendered respondent incapable, or at least made it difficult for him, to develop the subdivision within the allotted period. In reciprocal obligations, neither 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. 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.

JACINTO TANGUILIG vs. COURT OF APPEALS and VICENTE HERCE JR. [G.R. No. 117190. January 2, 1997]

Facts: 

Sometime in April 1987 petitioner Jacinto M. Tanguilig doing business under the name and style J. M. T. Engineering and General Merchandising 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 with a one-year guaranty from the date of completion and acceptance by respondent Herce Jr. of the project. Pursuant to the agreement respondent paid petitioner a down payment of P30,000.00 and an installment payment of P15,000.00, leaving a balance of P15,000.00.



On 14 March 1988, due to the refusal and failure of respondent to pay the balance, petitioner filed a complaint to collect the amount.



In his Answer before the trial court 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, exclusive of other incidental materials needed for the project. He also disowned any obligation to repair or reconstruct the system and insisted that he delivered it in good and working condition to respondent who accepted the same without protest. Besides, its collapse was attributable to a typhoon, a force majeure, which relieved him of any liability.

Issues: 1. Whether or not deep well is included in the contract.

2. Whether or not petitioner should be held liable for the replacement or repair. 3. Whether or not SPGMI is a authorized to receive the unpaid amount. Held:

(1) Notably, nowhere in either proposal is the installation of a deep well mentioned, even remotely. Neither is there an itemization or description of the materials to be used in constructing the deep well. There is absolutely no mention in the two (2) documents that a deep well pump is a component of the proposed windmill system. The contract prices fixed in both proposals cover only the features specifically described therein and no other. While the words "deep well" and "deep well pump" are mentioned in both, these do not indicate that a deep well is part of the windmill system. They merely describe the type of deep well pump for which the proposed windmill would be suitable. As correctly pointed out by petitioner, the words "deep well" preceded by the prepositions "for" and "suitable for" were meant only to convey the idea that the proposed windmill would be appropriate for a deep well pump with a diameter of 2 to 3 inches. For if the real intent of petitioner was to include a deep well in the agreement to construct a windmill, he would have used instead the conjunctions "and" or "with." Since the terms of the instruments are clear and leave no doubt as to their meaning they should not be disturbed. Moreover, it is a cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded primordial consideration and, in case of doubt, their contemporaneous and subsequent acts shall be principally considered.

(2) While the law is clear that "payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it.” It does not appear from the record that Pili and/or SPGMI was so authorized. Respondent cannot claim the benefit of the law concerning "payments made by a third person." The Civil Code provisions do not apply in the instant case because no creditordebtor relationship between petitioner and Guillermo Pili and/or SPGMI has been established regarding the construction of the deep well. Specifically, witness Pili did not testify that he entered into a contract with petitioner for the construction of respondent's deep well. If SPGMI was really commissioned by petitioner to construct the deep well, an agreement particularly to this effect should have been entered into. (3) In a long line of cases this 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 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, 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. Interestingly, the evidence does not disclose that there was actually a typhoon on the day the windmill collapsed. Petitioner merely stated that there was a "strong wind." But a strong wind in this case cannot be fortuitous - unforeseeable nor unavoidable. On the contrary, a strong wind should be present in places where windmills are constructed, otherwise the windmills will not turn. The appellate court correctly observed that "given the newly-constructed windmill system, the same would not have collapsed had there been no inherent defect in it which could only be attributable to the appellee.” It emphasized that respondent had in his favor the presumption that "things have happened according to the ordinary course of nature and the ordinary habits of life." This presumption has not been rebutted by petitioner.

DR. FERNANDO PERIQUET, JR. vs. HEIRS OF THE LATE FELIX R. FRANCISCO G.R. No. L-69996 December 5, 1994 ( 238 S 697)

Facts: 

Spouses Fernando Periquet and Petra Francisco were left childless after the death of their only child, Elvira, so they took in a son, herein petitioner, 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. He left a will dated March 28, 1940 wherein he named his wife Petra as his universal heir.



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 for her brothers and sisters.



An affidavit was executed by Petra’s successors-in-interest in favor of petitioner but Felix Francisco retracted and alleged that the assignment was vitiated by fraud that he was forced.

Issue: Whether or not the assignment of interest is void. 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. First, 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. Second, there was valid cause or consideration in the execution of the assignment of hereditary rights. Contrary to the trial court's finding that the amount of P10,000.00 as promised by Dr. Fernando Periquet, Jr. to Felix Francisco is the cause or considereation of the assignment, we find and so rule that it was the generosity or liberality of Felix Francisco that impelled him to

execute the questioned instrument. Pure beneficence, not monetary consideration, was the moving force because Felix wanted to respect the wishes of a deceased sibling.

Third, the allegation of fraud is an afterthought on the part of the assignor, Felix Francisco who filed the instant case to annul the deed of assignment on the ground of fraud only in 1970, almost four (4) years after he executed the instrument. Clearly, Felix slept on his rights and allowed laches to set in. This is fatal to his case. Laches is failure or neglect, for an unreasonable 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 it or declined to assert it. Well-settled is the rule that a compromise agreement, once approved by the court, cannot and should not be disturbed except for vices of consent or forgery, it being the obvious purpose of such compromise agreement to settle, once and for all, the claims of the parties, and bar all future disputes and controversies thereon. A compromise agreement cannot bind persons who are not parties thereto. Neither would a person not party to a compromise agreement be entitled to enforce the same. Similarly, a person who is not a party to an agreement, as in this case, cannot seek the amendment or modification of the same. Neither can a court of law rule that the compromise agreement be amended and modified pursuant only to the wishes of a person not party to the said agreement.

LEGASPI OIL CO. INC. vs CA and BERNARD OSERAOS G.R. No. 96505 July 1, 1993 (224 S 213)

Facts 



 

 



The price at which Oseraos sells the copra varies from time to time, depending on the prevailing market price when the contract is entered into. One of his authorized agents, Jose Llover, had previous transactions with Oseraos for the sale and delivery of copra. On November 6, 1975, another designated agent signed a contract in behalf of Legaspi Oil Inc. for the sale of 100 tons of copra at P79.00 per 100 kilos with the delivery terms of 25 days effective December 15, 1975 (Exhibit G-2). At this point, it must be noted that the price of copra had been fluctuating (going up and down), indicating its unsteady position in the market. 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. As compared to appellant's transaction on November 6, 1975, the current price agreed upon is slightly higher than the last contract. In all these contracts though, the selling price had always been stated as "total price" rather than per 100 kilos. However, the parties had understood the same to be per 100 kilos in their previous transactions. 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 embodied in a letter dated October 6, 1976, 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 the overpriced amount should be paid by appellant due to breach arising from fraud or bad faith. Held: Yes. In general, fraud may be defined as the voluntary execution of a wrongful act, or a wilfull 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 of the Philippines is the deliberate and intentional evasion of the normal fulfillment of obligation; it is distinguished from negligence by the presence of deliberate intent, which is lacking in the latter.

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 tenor thereof, are liable for damages. Pursuant to said article, private respondent is liable for damages. The next point of inquiry, therefore, is the amount of damages which private respondent is liable to pay petitioner. As aforementioned, on account of private respondent's deliberate breach of his contractual obligation, petitioner was compelled to buy the balance of 53,666 kilos of copra in the open market at the then prevailing price of P168 per 100 kilograms thereby paying P46,152.76 more than he would have paid had private respondent completed delivery of the copra as agreed upon. Thus, private respondent is liable to pay respondent the amount of P46,152.76 as damages. In case of fraud, bad faith, malice, or wanton attitude, the guilty party is liable for all damages which may be reasonably attributed to the non performance of the obligation (Magat vs. Medialdea, 121 SCRA 418 [1983]).

PHILIPPINE CHARTER INSURANCE CORPORATION v CENTRAL COLLEGES OF THE PHILIPPINES G.R. Nos. 180631-33 February 22, 2012 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 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).



The Phase 1 of the project was completed without issue. Thereafter, CCP paid DPCC P14,880,000.00 or 12% of the agreed price of P124,000,000.00 with a check dated March 14, 2002 as downpayment for the Phase 2 of the project.



The Phase 2 of the project, however, encountered numerous delays. When CCP audited DPCC on July 25, 2003, only 47% of the work to be done was actually finished.



On November 6, 2003, CCP notified DPCC and PCIC that only 51% of the project was completed, which was way behind the construction schedule, prompting it to declare the occurrence of default against DPCC. It formally requested PCIC to remit the proceeds of the bonds.



CCP notified PCIC that because of DPCC’s inability to complete the project on time, it decided to terminate its contract with the latter and to continue the construction on its own.



Eventually, negotiations to continue on with the construction between CCP and DPCC reached a dead end. CCP hired another contractor to work on the school site.



On August 20, 2004, PCIC denied CCP’s claims against the three bonds.

Issues: 1. Whether or not PCIC incurred delay. 2. Whether or not PCIC is held liable for the surety bonds. Held

1. 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. 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.1[43] 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.

2. Upon notice of default of obligor DPCC, PCIC’s liability, as surety, was already attached. A surety under Article 2047 of the New Civil Code solidarily binds itself with the principal debtor to assure the fulfillment of the obligation:

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.

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 Having acted as a surety, PCIC is duty bound to perform what it has guaranteed on its surety and performance bonds, all of which are callable on demand, occasioned by its principal’s default.

Titan-Ikeda Construction v Primetown Property G.R. No. 158768 February 12, 2008 544 S 466

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. On June 30, 1994, respondent executed a deed of sale (covering 114 condominium units and 20 parking slots of the MPT collectively valued by the parties at P112,416,716.88) in favor of petitioner pursuant to the “full-swapping” payment provision of the supplemental agreement. Shortly thereafter, petitioner sold some o 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 f its units to third persons. 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 balance amounting to P1,779,744.85. petitioner demanded from respondent the delivery of MPT's management certificate and the keys to the condominium units and the payment of its (respondent's) balance. Because respondent ignored petitioner's demand, petitioner, on December 9, 1996, filed a complaint for specific performance in the Housing and Land Use Regulatory Board (HLURB). While the complaint for specific performance was pending in the HLURB, respondent sent a demand letter to petitioner asking it to reimburse the actual costs incurred in finishing the project (or P69,785,923.47).1[30] In view of the pendency of the HLURB case, petitioner did not heed respondent's demands. During trial, the RTC 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 The appellate court found that respondent fully performed its obligation when it executed the June 30, 1994 deed of absolute sale in favor of petitioner. Moreover, ITI's report clearly established that petitioner had completed only 48.71% of the project as of October 12, 1995, the takeover date. Not only did it incur delay in the performance of its obligation but petitioner also failed to finish the project. The CA ruled that

respondent was entitled to recover the value of the unfinished portion of the project under the principle of unjust enrichment Issue: 1. Whether or not petitioner is obliged to return the excess from the overpayment to respondent. 2. Whether or not petitioner is in delay in the performance of the obligation. Held: 1. Because the parties agreed to extinguish the supplemental agreement, they were no longer required to fully perform their respective obligations. Petitioner was relieved of its obligation to complete the project while respondent was freed of its obligation to pay the entire contract price. However, respondent, by executing the June 30, 1994 deed of absolute sale, was deemed to have paid P112,416,716.88. Nevertheless, because petitioner applied part of what it received to respondent’s outstanding liabilities, it admitted overpayment. Because petitioner acknowledged that it had been overpaid, it was obliged to return the excess to respondent. Embodying the principle of solutio indebiti, Article 2154 of the Civil Code provides:

Article 2154. If something is received when there is no right to demand it and it was unduly delivered through mistake, the obligation to return it arises. For the extra-contractual obligation of solutio indebiti to arise, the following requisites must be proven: 1.

the absence of a right to collect the excess sums and

2.

the payment was made by mistake.

With regard to the first requisite, because the supplemental agreement had been extinguished by the mutual agreement of the parties, petitioner became entitled only to the cost of services it actually rendered (i.e., that fraction of the project cost in proportion to the percentage of its actual accomplishment in the project). It was not entitled to the excess (or extent of overpayment). On the second requisite, Article 2163 of the Civil Code provides:

Article 2163. It is presumed that there was a mistake in the payment if something which had never been due or had already been paid was delivered; but, he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause. (emphasis supplied) In this instance, respondent paid part of the contract price under the assumption that petitioner would complete the project within the stipulated period. However, after the supplemental agreement was extinguished, petitioner ceased working on the project. Therefore, the compensation petitioner received in excess of the cost of its actual accomplishment as of October 12, 1995 was never due. The condominium units and parking slots corresponding to the said excess were mistakenly delivered by respondent and were therefore not due to petitioner.

Stated simply, respondent erroneously delivered excess units to petitioner and the latter, pursuant to Article 2154, was obliged to the return them to respondent. Article 2160 of the Civil Code provides: Article 2160. He who in good faith accepts an undue payment of a thing certain and determinate shall only be responsible for the impairment or loss of the same or its accessories and accessions insofar as he has thereby been benefited. If he has alienated it, he shall return the price or assign the action to collect the sum. One who receives payment by mistake in good faith is, as a general rule, only liable to return the thing delivered. If he benefited therefrom, he is also liable for the impairment or loss of the thing delivered and its accessories and accessions. If he sold the thing delivered, he should either deliver the proceeds of the sale or assign the action to collect to the other party. Under Article 2160 in relation to Article 2154, it should return to respondent the condominium units and parking slots in excess of the value of its actual accomplishment (i.e., the amount due to it) as of October 12, 1995. If these properties include units and/or slots already sold to third persons, petitioner shall deliver the proceeds of the sale thereof or assign the actions for collection to respondent as required by Article 2160. 2. 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. The construction contract provided a procedure for protesting delay: Article XIV

DELAYS AND ABANDONMENT 15.1. If at any time during the effectivity of this contract, [PETITIONER] shall incur unreasonable delay or slippages of more than fifteen percent (15%) of the scheduled work program, [RESPONDENT] should notify [PETITIONER] in writing to accelerate the work and reduce, if not erase, slippage. Respondent never sent petitioner a written demand asking it to accelerate work on the project and reduce, if not eliminate, slippage. If delay had truly been the reason why respondent took over the project, it would have sent a written demand as required by the construction contract. Moreover, according to the October 12, 1995 letteragreement, respondent took over the project for the sole reason that such move was part of its (respondent's) long-term plan. Respondent, on the other hand, relied on ITI's September 7, 1995 report. The construction contract named GEMM, not ITI, as construction manager. Because petitioner did not consent to the change of the designated construction manager, ITI's September 7, 1995 report could not bind it.

PNB MADECOR vs. GERARDO C. UY G.R. No. 129598. August 15, 2001

363 S 128

Facts: 

Guillermo Uy, doing business under the name G.U. Enterprises, assigned to respondent Gerardo Uy his receivables due from Pantranco North Express Inc. (PNEI) amounting to P4,660,558.00.



On January 23, 1995, Gerardo Uy filed with the RTC a collection suit with an application for the issuance of a writ of preliminary attachment against PNEI. He sought to collect from PNEI the amount of P8,397,440.00. He alleged that PNEI was guilty of fraud in contracting the obligation sued upon, hence his prayer for a writ of preliminary attachment.



PNB MADECOR claimed PNEI has not been paying its rentals from October 1990 to March 24, 1994 -- when it (PNEI) vacated the property. As of the latter date, PNB MADECOR’s receivables against PNEI amounted to P8,784,227.48, representing accumulated rentals, inclusive of interest;



On the other hand, PNB MADECOR has payables to PNEI in the amount of P7,884,000.00 as evidenced by a promissory note executed on October 31, 1982 by then NAREDECO in favor of PNEI;



PNB MADECOR and PNEI are therefore creditors and debtors of each other; and by force of the law on compensation, both obligations of PNB MADECOR and PNEI are already considered extinguished to the concurrent amount or up to P7,884,000.00 so that PNEI is still obligated to pay PNB MADECOR the amount of P900,227.48.



Respondent alleges that PNEI had already demanded payment. The alleged demand letter reads in part: “We wish to inform you that as of August 31, 1984 your outstanding accounts amounted to P10,376,078.67, inclusive of interest. In accordance with our previous arrangement, we have conveyed in favor of the Philippine National Bank P7,884,921.10 of said receivables from you. With this conveyance, the unpaid balance of your account will be P2,491,157.57.

To forestall further accrual of interest, we request that you take up with PNB the implementation of said arrangement.”

Issue: Whether or not the letter constitutes extrajudicial demand. Held: We agree with petitioner that this letter was not one demanding payment, but one that merely informed petitioner of (1) the conveyance of a certain portion of its obligation to PNEI per a dacion en pago arrangement between PNEI and PNB, and (2) the unpaid balance of its obligation after deducting the amount conveyed to PNB. The import of this letter is not that PNEI was demanding payment, but that PNEI was advising petitioner to settle the matter of implementing the earlier arrangement with PNB. Apart from the aforecited letter, no other demand letter appears on record, nor has any of the parties adverted to another demand letter. 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.

IGNACIO BARZAGA vs. COURT OF APPEALS and ANGELITO ALVIAR G.R. No. 115129. February 12, 1997] 268 S 105 Facts: 

Barzaga ordered costruction materials from Alviar for the construction of his wife’s niche and told the storekeeper, Boncales, that it has to be delivered at the Memorial Cemetery in Dasmariñas, Cavite, by eight o'clock that morning since his hired workers were already at the burial site and time was of the essence. Marina Boncales agreed to deliver the items at the designated time, date and place. With this assurance, Barzaga purchased the materials and paid in full the amount of P2,110.00. Thereafter he joined his workers at the cemetery, which was only a kilometer away, to await the delivery.



The construction materials did not arrive at eight o'clock as promised. At nine o' clock, the delivery was still nowhere in sight. Barzaga returned to the hardware store to inquire about the delay. Boncales assured him that although the delivery truck was not yet around it had already left the garage and that as soon as it arrived the materials would be brought over to the cemetery in no time at all.



After hours of waiting - which seemed interminable to him - Barzaga became extremely upset. He decided to dismiss his laborers for the day.



On 21 January 1991, tormented perhaps by his inability to fulfill his wife's dying wish, Barzaga wrote private respondent Alviar demanding recompense for the damage he suffered. Alviar did not respond. Consequently, petitioner sued him before the Regional Trial Court.



Resisting petitioner's claim, private respondent contended that legal delay could not be validly ascribed to him because no specific time of delivery was agreed upon between them. He pointed out that the invoices evidencing the sale did not contain any stipulation as to the exact time of delivery and that assuming that the materials were not delivered within the period desired by petitioner, the delivery truck suffered a flat tire on the way to the store to pick up the materials.



According to Alviar, it was this obstinate refusal of petitioner to accept delivery that caused the delay in the construction of the niche and the consequent failure of the family to inter their loved one on the twenty-fourth of December, and that, if at all, it was petitioner and no other who brought about all his personal woes.

Issue: Whether or not there has been delay in the absence of demand.

Held: An assiduous scrutiny of the record convinces us that respondent Angelito Alviar was negligent and incurred in delay in the performance of his contractual obligation. This sufficiently entitles petitioner Ignacio Barzaga to be indemnified for the damage he suffered as a consequence of delay or a contractual breach. 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. This case is clearly one of non-performance of a reciprocal obligation. 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.

JOSEFINA TAYAG et al v COURT OF APPEALS G.R. No. 96053 March 3, 1993

Facts: 

The deed of conveyance executed on May 28, 1975 by Juan Galicia, Sr., prior to his demise in 1979, and Celerina Labuguin, in favor of Albrigido Leyva involving the undivided one-half portion of a piece of land is the subject matter of the present litigation between the heirs of Juan Galicia, Sr. who assert breach of the conditions as against private respondent's claim anchored on full payment and compliance with the stipulations thereof. For the sum of P50,000.00 under the following terms: 1. The sum of PESOS: THREE THOUSAND (P3,000.00) is HEREBY acknowledged to have been paid upon the execution of this agreement; 2. The sum of PESOS: TEN THOUSAND (P10,000.00) shall be paid within ten (10) days from and after the execution of this agreement; 3. The sum of PESOS: TEN THOUSAND (P10,000.00) represents the VENDORS' indebtedness with the Philippine Veterans Bank which is hereby assumed by the VENDEE; and 4. The balance of PESOS: TWENTY SEVEN THOUSAND (P27,000.00.) shall be paid within one (1) year from and after the execution of this instrument. (p. 53, Rollo)



There is no dispute that the sum of P3,000.00 listed as first installment was received by Juan Galicia, Sr. According to petitioners, of the P10,000.00 to be paid within ten days from execution of the instrument, only P9,707.00 was tendered to, and received by, them on numerous occasions from May 29, 1975, up to November 3, 1979. Concerning private respondent's assumption of the vendors' obligation to the Philippine Veterans Bank, the vendee paid only the sum of P6,926.41 while the difference the indebtedness came from Celerina Labuguin. Moreover, petitioners asserted that not a single centavo of the P27,000.00 representing the remaining balance was paid to them.

Issue: Whether or not the contract may be rescinded due to breach. Held:

The suggestion of petitioners that the covenant must be cancelled in the light of private respondent's so-called breach seems to overlook petitioners' demeanor who, instead of immediately filing the case precisely to rescind the instrument because of non-compliance, allowed private respondent to effect numerous payments posterior to the grace periods provided in the contract. This apathy of petitioners who even permitted private respondent to take the initiative in filing the suit for specific performance against them, is akin to waiver or abandonment of the right to rescind normally conferred by Article 1191 of the Civil Code. In Development Bank of the Philippines vs. Sarandi: In a perfected contract of sale of land under an agreed schedule of payments, while the parties may mutually oblige each other to compel the specific performance of the monthly amortization plan, and upon failure of the buyer to make the payment, the seller has the right to ask for a rescission of the contract under Art. 1191 of the Civil Code, this shall be deemed waived by acceptance of posterior payments.

DR. FERNANDO PERIQUET, JR vs. HEIRS OF FRANCISCO G.R. No. L-69996 December 5, 1994 ( 238 S 697)

Facts: 

Spouses Fernando Periquet and Petra Francisco were left childless after the death of their only child, Elvira, so they took in a son, herein petitioner, 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. He left a will dated March 28, 1940 wherein he named his wife Petra as his universal heir.



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 for her brothers and sisters.



An affidavit was executed by Petra’s successors-in-interest in favor of petitioner but Felix Francisco retracted and alleged that the assignment was vitiated by fraud that he was forced.

Issue: Whether or not the assignment of interest is void. 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. 13 It must have a determining influence on the consent of the victim. 14 The will of the victim, in effect, is maliciously vitiated by means of a false appearance of reality. First, 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. Second, there was valid cause or consideration in the execution of the assignment of hereditary rights. Contrary to the trial court's finding that the amount of P10,000.00 as promised by Dr. Fernando Periquet, Jr. to Felix Francisco is the cause or considereation of the assignment, we find and so rule that it was the generosity or liberality of Felix Francisco that impelled him to execute the questioned instrument. Pure beneficence, not monetary consideration, was the moving force because Felix wanted to respect the wishes of a deceased sibling.

Third, the allegation of fraud is an afterthought on the part of the assignor, Felix Francisco who filed the instant case to annul the deed of assignment on the ground of fraud only in 1970, almost four (4) years after he executed the instrument. Clearly, Felix slept on his rights and allowed laches to set in. This is fatal to his case. Laches is failure or neglect, for an unreasonable 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 it or declined to assert it. Well-settled is the rule that a compromise agreement, once approved by the court, cannot and should not be disturbed except for vices of consent or forgery, it being the obvious purpose of such compromise agreement to settle, once and for all, the claims of the parties, and bar all future disputes and controversies thereon. 27 A compromise agreement cannot bind persons who are not parties thereto. 28 Neither would a person not party to a compromise agreement be entitled to enforce the same. 29 Similarly, a person who is not a party to an agreement, as in this case, cannot seek the amendment or modification of the same. Neither can a court of law rule that the compromise agreement be amended and modified pursuant only to the wishes of a person not party to the said agreement.

ARMAND O. RAQUEL-SANTOS vs CA and FINVEST SECURITIES CO., INC G.R. No. 174986

July 7, 2009

Facts: 

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. RaquelSantos (Raquel-Santos) was Finvest’s President and nominee to the PSE from February 20, 1990 to July 16, 1998.1[3] 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.



Finvest was duly informed of the SEC’s decision and was advised to refrain from making any payment, delivery of securities, or selling or otherwise encumbering any of its assets without PSE’s approval.



In its Letter of February 23, 1999, PSE informed Finvest that it would only issue a written clearance after Finvest had settled its obligations to PSE and paid all acknowledged liabilities to various clients.



On April 21, 1999, PSE again sent a demand letter to Finvest, reminding the latter of the March 31, 1999 deadline.



Pursuant to its Pledge Agreement with Finvest. Finvest protested the imposition of the deadline for being arbitrary on the ground that the claims against it had not yet been established.

Issue: Whether or not Finvest is already in default.

Held:

Under the law on contracts, mora solvendi or debtor’s default is defined as a delay in the fulfillment of an obligation, by reason of a cause imputable to the debtor. There are three requisites necessary for a finding of default. First, the obligation is demandable and liquidated; second, the debtor delays performance; and third, the creditor judicially or extrajudicially requires the debtor’s performance. In the present petition, PSE insists that Finvest’s liability for fines, penalties and charges has been established, determined and substantiated, hence, liquidated. They plainly show that the parties were negotiating to determine the exact amount of Finvest’s obligations to PSE, during which period PSE repeatedly moved the deadlines it imposed for Finvest to pay the fines, penalties and charges, apparently to allow for more time to thresh out the details of the computation of said penalties. In the middle of those talks, PSE unceremoniously took steps to sell the pledged seat at public auction, without allowing the negotiations to come to a conclusion. This sudden decision of PSE deprived Finvest a sporting chance to settle its accountabilities before forfeiting its seat in the stock exchange. Without that seat, Finvest will lose its standing to trade and do business in the stock exchange. 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.

RCBC vs. CA and FELIPE LUSTRE [G.R. No. 133107. March 25, 1999] 305 S 449

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 10 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, in paragraph 11 thereof, 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.  All the checks dated April 10, 1991 to January 10, 1993 were thereafter encashed and debited by RCBC from private respondent's account, except for RCBC Check No. 279805 representing the payment for August 10, 1991, which was unsigned.  Previously, the amount represented by RCBC Check No. 279805 was debited from private respondent's account but was later recalled and re-credited to him. Because of the recall, the last two checks, dated February 10, 1993 and March 10, 1993, were no longer presented for payment. This was purportedly in conformity with petitioner bank's procedure that once a client's account was forwarded to its account representative, all remaining checks outstanding as of the date the account was forwarded were no longer presented for payment.  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. th

Issue: Whether or not the respondent is in default.

Held:

Article 1170 of the Civil Code states that those who in the performance of their obligations are guilty of delay are liable for damages. The delay in the performance of the obligation, however, must be either malicious or negligent. Thus, assuming that private respondent was guilty of delay in the payment of the value of the unsigned check, private respondent cannot be held liable for damages. There is no imputation, much less evidence, that private respondent acted with malice or negligence in failing to sign the check. Indeed, we agree with the Court of Appeals' finding that such omission was mere "inadvertence" on the part of private respondent. 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. Clearly, appellant bank was remiss in the performance of its functions for it could have easily called the defendant's attention to the lack of signature on the check and sent the check to, or summoned, the latter to affix his signature.

BPI INVESTMENT CORPORATION vs. CA and ALS MGMT & DEVT CORP G.R. No. 133632. February 15, 2002 Facts 

Frank Roa obtained a loan at an interest rate of 16 1/4% per annum from Ayala Investment and Development Corporation (AIDC), the predecessor of petitioner BPIIC, for the construction of a house on his lot. Said house and lot were mortgaged to AIDC to secure the loan.



Sometime in 1980, Roa sold the house and lot to private respondents ALS and Antonio Litonjua for P850,000. They paid P350,000 in cash and assumed the P500,000 balance of Roa’s indebtedness with AIDC. The latter, however, was not willing to extend the old interest rate to private respondents and proposed to grant them a new loan of P500,000 to be applied to Roa’s debt and secured by the same property, at an interest rate of 20% per annum and service fee of 1% per annum on the outstanding principal balance payable within ten years in equal monthly amortization of P9,996.58 and penalty interest at the rate of 21% per annum per day from the date the amortization became due and payable.



On August 13, 1982, ALS and Litonjua updated Roa’s arrearages by paying BPIIC the sum of P190,601.35. This reduced Roa’s principal balance to P457,204.90 which, in turn, was liquidated when BPIIC applied thereto the proceeds of private respondents’ loan of P500,000.



In June 1984, BPIIC instituted foreclosure proceedings against private respondents on the ground that they failed to pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984, amounted to (P475,585.31).



ALS and Litonjua alleged, among others, that they were not in arrears in their payment, but in fact made an overpayment. They maintained that they should not be made to pay amortization before the actual release of the P500,000 loan in August and September 1982. Further, out of the P500,000 loan, only the total amount of P464,351.77 was released to private respondents. Hence, applying the effects of legal compensation, the balance of P35,648.23 should be applied to the initial monthly amortization for the loan.

Issue: Whether or not contract of loan is a reciprocal obligation and that respondent is in default. Held: A loan contract is not a consensual contract but a real contract. It is perfected only upon the delivery of the object of the contract. In the present case, the loan contract between BPI, on the one hand, and ALS and Litonjua, on the other, was perfected only on September 13, 1982, the date of the second release of the loan. Following the intentions of the parties on the commencement of the monthly amortization, as found by the Court of Appeals, private respondents’ obligation to pay commenced only on October 13, 1982, a month after the perfection of the contract. We also agree with private respondents that a contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the consideration for that of the other. As averred by private respondents, the promise of BPIIC to extend and deliver the loan is upon the consideration that ALS and Litonjua shall pay the monthly amortization commencing on May 1, 1981, one month after the supposed release of the loan. 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. Consequently, petitioner could only demand for the payment of the monthly amortization after September 13, 1982 for it was only then when it complied with its obligation under the loan contract. Therefore, in computing the amount due as of the date when BPIIC extrajudicially caused the foreclosure of the mortgage, the starting date is October 13, 1982 and not May 1, 1981.

CARMELITA LEAÑO vs. CA and HERMOGENES FERNANDO G.R. No. 129018

November 15, 2001

Facts 



 

On November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leaño, as vendee executed a contract to sell. In the contract, Carmelita Leaño bound herself to pay Hermogenes Fernando the sum of one hundred seven thousand and seven hundred and fifty pesos (P107,750.00) as the total purchase price of the lot. P10,775.00 as DOWN PAYMENT the balance (P96,975.00) shall be paid within a period of TEN (10) years at a monthly amortization of P1,747.30 to begin from December 7, 1985 with interest at eighteen per cent (18%) per annum based on balances. 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. After the execution of the contract, Carmelita Leaño made several payments in lump sum.7 Thereafter, she constructed a house on the lot valued at P800,000. The last payment that she made was on April 1, 1989. On September 16, 1991, the trial court rendered a decision in an ejectment case9 earlier filed by respondent Fernando ordering petitioner Leaño to vacate the premises and to pay P250.00 per month by way of compensation for the use and occupation of the property from May 27, 1991 until she vacated the premises, attorney's fees and costs of the suit.

Issue: Whether petitioner was in delay in the payment of the monthly amortizations.

Held: While the contract provided that the total purchase price was payable within a ten-year period, the same contract specified that the purchase price shall be paid in monthly installments for which the corresponding penalty shall be imposed in case of default. Petitioner Leaño cannot ignore the provision on the payment of monthly installments by claiming that the ten-year period within which to pay has not elapsed.

Article 1169 of the Civil Code provides that in reciprocal obligations, 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. In the case at bar, respondent Fernando performed his part of the obligation by allowing petitioner Leaño to continue in possession and use of the property. Clearly, when petitioner Leaño did not pay the monthly amortizations in accordance with the terms of the contract, she was in delay and liable for damages. However, we agree with the trial court that the default committed by petitioner Leaño in respect of the obligation could be compensated by the interest and surcharges imposed upon her under the contract in question. It is a cardinal rule in the interpretation of contracts that 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. Thus, as there is no ambiguity in the language of the contract, there is no room for construction, only compliance

HEIRS OF LUIS BACUS vs. CA and SPS FAUSTINO DURAY and VICTORIANA DURAY G.R. No. 127695. December 3, 2001 371 S 295

Facts:  







Luis Bacus leased to private respondent Faustino Duray a parcel of agricultural land in Bulacao, Talisay, Cebu. The lease was for six years, ending May 31, 1990. The contract contained an option to buy clause. Under said option, the lessee had the exclusive and irrevocable right to buy 2,000 square meters of the property within five years from a year after the effectivity of the contract, at P200 per square meter. Close to the expiration of the contract, Luis Bacus died on October 10, 1989. Thereafter, on March 15, 1990, the Duray spouses informed Roque Bacus, one of the heirs of Luis Bacus, that they were willing and ready to purchase the property under the option to buy clause. Due to the refusal of petitioners to sell the property, Faustino Duray’s adverse claim Duray filed a complaint for specific performance against the heirs of Luis Bacus asking that he be allowed to purchase the lot specifically referred to in the lease contract with option to buy. Petitioners alleged that before Luis Bacus’ death, private respondents conveyed to them the former’s lack of interest to exercise their option because of insufficiency of funds, but they were surprised to learn of private respondents’ demand. In turn, they requested private respondents to pay the purchase price in full but the latter refused.

Issues: Whether or not private respondent incurred delay.

Held: Obligations under an option to buy are reciprocal obligations. The performance of one obligation is conditioned on the simultaneous fulfillment of the other obligation. In other words, in an option to buy, 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, when private respondents opted to buy the property, their obligation was to advise petitioners of their decision and their readiness to pay the price. They were not yet obliged to make actual

payment. Only upon petitioners’ actual execution and delivery of the deed of sale were they required to pay. As earlier stated, the latter was contingent upon the former.

In Nietes vs. Court of Appeals, 46 SCRA 654 (1972), we held that 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. 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 instances, where no debt is due and owing, consignation is not proper. Therefore, petitioners’ contention that private respondents failed to comply with their obligation under the option to buy because they failed to actually deliver the purchase price or consign it in court before the contract expired and before they execute a deed, has no leg to stand on. Corollary, private respondents did not incur in delay when they did not yet deliver payment nor make a consignation before the expiration of the contract. In reciprocal obligations, 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 begin.

INTEGRATED PACKAGING CORP vs. CA and FIL-ANCHOR PAPER CO., INC. G.R. No. 115117. June 8, 2000 Facts 

 









Petitioner and private respondent executed on May 5, 1978, an order agreement whereby private respondent bound itself to deliver to petitioner 3,450 reams of printing paper, coated, 2 sides basis, 80 lbs., 38" x 23", short grain, worth P1,040,060.00 u Petitioner entered into a contract with Philippine Appliance Corporation (Philacor) to print three volumes of "Philacor Cultural Books." As of July 30, 1979, private respondent had delivered to petitioner 1,097 reams of printing paper out of the total 3,450 reams stated in the agreement. Petitioner alleged it wrote private respondent to immediately deliver the balance because further delay would greatly prejudice petitioner. From June 5, 1980 and until July 23, 1981, private respondent delivered again to petitioner various quantities of printing paper amounting to P766,101.70. However, petitioner encountered difficulties paying private respondent said amount. Accordingly, private respondent made a formal demand upon petitioner to settle the outstanding account. On July 23 and 31, 1981 and August 27, 1981, petitioner made partial payments totalling P97,200.00 which was applied to its back accounts. Meanwhile, petitioner entered into an additional printing contract with Philacor. Unfortunately, petitioner failed to fully comply with its contract with Philacor for the printing of books VIII, IX, X and XI. Thus, Philacor demanded compensation from petitioner for the delay and damage it suffered on account of petitioner’s failure. Private respondent filed a collection suit against petitioner for the sum of P766,101.70, representing the unpaid purchase price of printing paper bought by petitioner on credit. In its answer, petitioner denied the material allegations of the complaint. By way of petitioner alleged that private respondent was able to deliver only 1,097 reams of printing paper which was short of 2,875 reams, in total disregard of their agreement; that private respondent failed to deliver the balance of the printing paper despite demand therefor, hence, petitioner suffered actual damages and failed to realize expected profits; and that petitioner’s complaint was prematurely filed.

Issue: Whether or not private respondent committed delay in the performance of the obligation.

Held: The transaction between the parties is a contract of sale whereby private respondent (seller) obligates itself to deliver printing paper to petitioner (buyer) which, in turn, binds itself to pay therefor a sum of money or its equivalent (price). Both parties concede that the order agreement gives rise to a reciprocal obligation such that the obligation of one is dependent upon the obligation of the other. Reciprocal obligations are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other. Thus, private respondent undertakes to deliver printing paper of various quantities subject to petitioner’s corresponding obligation to pay, on a maximum 90-day credit, for these materials. Note that in the contract, petitioner is not even required to make any deposit, down payment or advance payment, hence, the undertaking of private respondent to deliver the materials is conditional upon payment by petitioner within the prescribed period. Clearly, petitioner did not fulfill its side of the contract as its last payment There is no dispute that the agreement provides for the delivery of printing paper on different dates and a separate price has been agreed upon for each delivery. It is also admitted that it is the standard practice of the parties that the materials be paid within a minimum period of thirty (30) days and a maximum of ninety (90) days from each delivery. Accordingly, the private respondent’s suspension of its deliveries to petitioner 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 which provides that: "When there is a contract of sale of goods to be delivered by stated installments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more installments, or the buyer neglects or refuses without just cause to take delivery of or pay for one or more installments, it depends in each case on the terms of the contract and the circumstances of the case, whether the breach of contract is so material as to justify the injured party in refusing to proceed further and suing for damages for breach of the entire contract, or whether the breach is severable, giving rise to a claim for compensation but not to a right to treat the whole contract as broken." (Emphasis supplied)

In this case, as found a quo petitioner’s evidence failed to establish that it had paid for the printing paper covered by the delivery invoices on time. Consequently, private respondent has the right to cease making further delivery, hence the private respondent did not violate the order agreement. On the contrary, it was petitioner which breached the agreement as it failed to pay on time the materials delivered by private respondent. Respondent appellate court correctly ruled that private respondent did not violate the order agreement.

ROBERTO Z. LAFORTEZA et al vs. ALONZO MACHUCA [G.R. No. 137552. June 16, 2000] Facts:  

An SPA was signed by some of the heirs in favor of Roberto and Gonzalo. They used the SPA to sell the subject property for 630,000; 30,000 as earnest money which shall be forfeited in favor of the defendants if the sale was not effected due to the fault of the plaintiff and upon full payment of the unpaid balance the TCT. Upon issuance by the proper Court of the new title, the BUYER-LESSEE shall be notified in writing and said BUYER-LESSEE shall have thirty (30) days to produce the balance of P600,000.00 which shall be paid to the SELLER-LESSORS upon the execution of the Extrajudicial Settlement with sale.



  

Plaintiff sent the defendant heirs a letter requesting for an extension of the THIRTY (30) DAYS deadline up to November 15, 1989 within which to produce the balance of SIX HUNDRED THOUSAND PESOS (P600,000.00) Defendant Roberto Z. Laforteza, assisted by his counsel Atty. Romeo L. Gutierrez, signed his conformity to the plaintiff’s letter request. The extension, however, does not appear to have been approved by Gonzalo Z. Laforteza. On November 15, 1989, plaintiff informed the defendant heirs, through defendant Roberto Z. Laforteza, that he already had the balance of P600,000.00 However, the defendants, refused to accept the balance. Defendant Roberto Z. Laforteza had told him that the subject property was no longer for sale.

Issue: Whether or not the memorandum of agreement constitutes reciprocal obligations.

Held: 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. The six-month period during which the respondent would be in possession of the property as lessee, was clearly not a period within which to exercise an option. An option is a contract

granting a privilege to buy or sell within an agreed time and at a determined price. An option contract is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. An option must be supported by consideration. An option contract is governed by the second paragraph of Article 1479 of the Civil Code, which reads: "Article 1479. xxx An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price." In the present case, the six-month period merely delayed the demandability of the contract of sale and did not determine its perfection for after the expiration of the six-month period, there was an absolute obligation on the part of the petitioners and the respondent to comply with the terms of the sale. The parties made a "reasonable estimate" that the reconstitution of the lost title of the house and lot would take approximately six months and thus presumed that after six months, both parties would be able to comply with what was reciprocally incumbent upon them. The fact that after the expiration of the six-month period, the respondent would retain possession of the house and lot without need of paying rentals for the use therefor, clearly indicated that the parties contemplated that ownership over the property would already be transferred by that time. Failure to comply with the first condition results in the failure of a contract, while the failure to comply with the second condition only gives the other party the option either to refuse to proceed with the sale or to waive the condition. Thus, Art. 1545 of the Civil Code states: "Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty. Where the ownership in the things has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing.” In the case at bar, there was already a perfected contract. The condition was imposed only on the performance of the obligations contained therein. Considering however that the title was eventually "reconstituted" and that the petitioners admit their ability to execute the extrajudicial settlement of their father’s estate, the respondent had a right to demand fulfillment of the petitioners’ obligation to deliver and transfer ownership of the house and lot.

Earnest money is something of value to show that the buyer was really in earnest, and given to the seller to bind the bargain. Whenever earnest money is given in a contract of sale, it is considered as part of the purchase price and proof of the perfection of the contract. We do not subscribe to the petitioners’ view that the Memorandum Agreement was a contract to sell. There is nothing contained in the Memorandum Agreement from which it can reasonably be deduced that the parties intended to enter into a contract to sell, i.e. one whereby the prospective seller would explicitly reserve the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the full payment of the price, such payment being a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the obligation from acquiring any obligatory force. There is clearly no express reservation of title made by the petitioners over the property, or any provision which would impose non-payment of the price as a condition for the contract’s entering into force.

RODOLFO N. REGALA vs. FEDERICO P. CARIN G.R. No. 188715

April 6, 2011

Facts:  



Petitioner and respondent are adjacent neighbors. When petitioner decided to renovate his one storey residence by constructing a second floor, he under the guise of merely building an extension to his residence, approached respondent sometime in May 1998 for permission to bore a hole through a perimeter wall shared by both their respective properties, to which respondent verbally consented on condition that petitioner would clean the area affected by the work. Petitioner’s real intention was to build a second floor, in fact with a terrace atop the dividing wall.



In the course of the construction of the second floor, respondent and his wife Marietta suffered from the dust and dirt which fell on their property.



Petitioner, denying respondent’s allegations, claimed in his Answer that he was the sole and exclusive owner of the wall referred to as a perimeter wall, the same having been built within the confines of his property and being part and parcel of the house and lot package he purchased from the developer.



The trial court declared that, apart from the fact that petitioner knowingly commenced the renovation of his house without the requisite building permit from the City Engineer’s Office, he misrepresented to respondent his true intent of introducing renovations. For, it found that instead of just boring a hole in the perimeter wall as originally proposed, petitioner divided the wall into several sections to serve as a foundation for his firewall (which ended up higher than the perimeter wall) and the second storey of his house.

Issue: Whether there is fraud as a source of damages.

Held: Yes. Petitioner is liable to pay respondent P25,000 as nominal damages. 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.

Respondent failed to establish by clear and convincing evidence that the injuries he sustained were the proximate effect of petitioner’s act or omission. It thus becomes necessary to instead look into the manner by which petitioner carried out his renovations to determine whether this was directly responsible for any distress respondent may have suffered since the law requires that a wrongful or illegal act or omission must have preceded the damages sustained by the claimant. 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. 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. Petitioner, however, cannot steer clear from any liability whatsoever. Respondent and his family’s rights to the peaceful enjoyment of their property have, at the very least, been inconvenienced from the incident borne of petitioner’s construction work. Any pecuniary loss or damage suffered by respondent cannot be established as the records are bereft of any factual evidence to establish the same. Nominal damages may thus be adjudicated in order that a right of the plaintiff, respondent herein, which has been violated or invaded by the defendant, petitioner herein, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.

THE INTERNATIONAL CORPORATE BANK (UNION BANK) vs. SPS. FRANCIS S. GUECO and MA. LUZ E. GUECO G.R. No. 141968. February 12, 2001

351 S 516

Facts: 

The respondents Gueco Spouses obtained a loan from petitioner International Corporate Bank (now Union Bank of the Philippines) to purchase a car – a Nissan Sentra.



In consideration thereof, the Spouses executed promissory notes which were payable in monthly installments and chattel mortgage over the car to serve as security for the notes.



The Spouses defaulted in payment of installments.



Desi Tomas, the Bank’s Assistant Vice President demanded payment of the amount of P184,000.00 which represents the unpaid balance for the car loan. After some negotiations and computation, the amount was lowered to P154,000.00, However, as a result of the non-payment of the reduced amount on that date, the car was detained inside the bank’s compound.



Dr. Gueco went to the bank and talked with its Administrative Support. The negotiations resulted in the further reduction of the outstanding loan to P150,000.00.

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Dr. Gueco delivered a manager’s check in the amount of P150,000.00 but the car was not released because of his refusal to sign the Joint Motion to Dismiss. It is the contention of the Gueco spouses and their counsel that Dr. Gueco need not sign the motion for joint dismissal considering that they had not yet filed their Answer. Petitioner, however, insisted that the joint motion to dismiss is standard operating procedure in their bank to effect a compromise and to preclude future filing of claims, counterclaims or suits for damages.

Issue: Whether the signing of the joint motion to dismiss is fraudulent. 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. True, petitioner may have been remiss in informing Dr. Gueco that the signing of a joint motion to dismiss is a standard operating procedure of petitioner bank. However, this can not in anyway 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. 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

REPUBLIC vs. THE COURT OF TAX APPEALS and AGFHA, INCORPORATED G.R. No. 139050. October 2, 2001

366 S 489

Facts: 

A shipment of bales of textile gray cloth arrived at the Manila International Container Port (MICP).

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AGFHA, Incorporated, is 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., to that of AGFHA, Inc.

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FIL-JAPAN forwarded to AGFHA, Inc., the amended Inward Foreign Manifest which the latter, in turn, submitted to the MICP Law Division. The MICP indorsed the document to the Customs Intelligence Investigation Services (CIIS). The CIIS placed the subject shipment under hold on the ground that GQ GARMENTS, Inc., could not be located in its given address at 244 Escolta Street, Binondo, Manila, and was thus suspected to be a fictitious firm.

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The Collector of Customs came up with a draft decision ordering the lifting of the warrant of seizure and detention on the basis of its findings that GQ GARMENTS, Inc., was not a fictitious corporation and that there was a valid waiver of rights over the bales of cloth by GQ GARMENTS, Inc., in favor of AGFHA, Inc.

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The draft decision was submitted to the Deputy Commissioner for clearance and approval, who, in turn, transmitted it to the CIIS for comment. The CIIS opposed the draft decision, insisting that GQ GARMENTS, Inc., was a fictitious corporation.

Issue: Whether or not there is fraud in the forfeiture of the merchandise by petitioner Held:

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. Petitioner asserts that all of these requisites are present in this case. It contends that it did not presume fraud, rather the events positively point to the existence of fraud. Private respondent AGFHA, Inc., on the other hand, maintains that there has only been an inadvertent error and not an intentional wrongful declaration by the shipper to evade payment of any tax due. The resolution of this issue would entail a reevaluation of the attendant circumstances, a matter that cannot be freely undertaken by this Tribunal. It has been a settled rule that the Supreme Court is not a trier of facts. Findings of the appellate court are generally binding and cannot be disturbed by this Court unless it is sufficiently shown that there has been no evidence on record to support such findings. The assessment made by the appellate court carry even more weight when it is consistent with that of the trial court. Consonantly, the factual determination of the Court of Tax Appeals, when supported by substantial evidence, will not be reversed on appeal unless it is clear that the said court has committed gross error in the process. 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. It must be actual, amounting to intentional wrongdoing with the clear purpose of avoiding the tax. Forfeiture is not favored in law nor in equity. Mere negligence is not equivalent to the fraud contemplated by law. 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.

Antonio Diaz vs. Davao Light and Power Co., Inc. G.R. No. 160959 April 3, 2007 Facts: 

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DLPC sent a Notice of Disconnection to Diaz and Co., Inc. informing it that the hotel’s unpaid electric consumption bill amounted to P190,111.02. It also warned that if the amount was not paid, DLPC would be impelled to discontinue its service. Since Diaz and Co., Inc. ignored the letter, Meter No. 36510 was disconnected. Meanwhile, the National Food Authority (NFA) established its KADIWA store at C.M. Recto Avenue, Davao City. It leased a portion of the ground floor of the Imperial Hotel Building from Diaz and Co., Inc. NFA/KADIWA also applied for electricity service with DLPC, and a contract was later executed between the parties. The Kadiwa Center IV closed, and NFA/KADIWA vacated the Doña Segunda Building. In a letter, NFA/KADIWA Provincial Manager, Roberta R. Melendres, informed DLPC that the light and power connection of NFA/KADIWA would be left behind; its right to the connection would be transferred to Diaz. She also informed DLPC that the P1,020.00 deposit of NFA/KADIWA for the power connection had been refunded to it by Diaz. Diaz informed respondent Manuel Orig that he had leased the untenanted portions of the Doña Segunda Building from Diaz and Co., Inc., and requested that a new electrical connection for the building in his name be installed, separate from the one assigned to him by NFA which was denied by DLPC. Diaz filed a petition for mandamus before the RTC, Davao City. The portion of the building formerly leased by NFA/KADIWA was leased to Matias Mendiola. Because he needed more electricity than what could be provided by the existing electrical wirings, Mendiola opted to change the electrical installation from a one-phase meter to a three-phase meter connection. Mendiola’s application was approved by DLPC. DLPC and Mendiola executed a service Contract for electricity service. Diaz filed an application for preliminary injunction to enjoin DLPC from disconnecting the electric connections to Meter No. 84738. Also, an Inter-Office Memo, signed by Officer-in-Charge, Rebecca Madrid, was issued to all security guards of the Doña Segunda Building who were ordered to prevent anyone from disturbing Meter No. 84738. Because of this, DLPC failed to substitute its single-phase meter with a three-

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phase meter. DLPC’s linemen thus installed the three-phase meter without removing the single-phase meter. The RTC denied the motion for issuance of a writ of injunction filed by Diaz. He moved for a reconsideration, which was, however, denied. DLPC then removed its single-phase meter which rendered almost half of the building without power. That same day, Diaz went to the DLPC building and threw stones at it, breaking four glass windows in the process. He then bought his own electric meter, Meter No. 86673509, had it calibrated by the Board of Energy, and unilaterally replaced Meter No. 84738. The electricity in the building was then restored. Diaz filed a Complaint for Damages with Prayer for Preliminary Prohibitory and Mandatory Injunction and Restraining Order before the RTC, Davao City. In the said complaint, Diaz claimed that DLPC arbitrarily and illegally removed Meter No. 84738 in violation of their business franchise and Article 19 of the New Civil Code, and had threatened to remove Meter No. 86673509. The RTC denied the motion and ordered Diaz to immediately remove Meter No. 86673509 and disconnect the electrical wirings he had unilaterally connected to the upper floor rooms. Diaz filed a motion for reconsideration but was denied. Undaunted, DLPC filed a criminal complaint against Diaz for Violation of P.D. 401, as amended by B.P. Blg. 876 with the City Prosecutor’s Office, Davao City but the same was denied and the motion for reconsideration was likewise denied. Diaz, Ramos, and Arguellas, as complainants, filed a criminal complaint with the Office of the Provincial Fiscal of Davao del Norte charging the officers of DLPC with estafa through falsification of public documents. The RTC dismissed the case. The officers of DLPC filed a Complaint before the RTC, Cebu City, for damages and attorney’s fees against the defendants for malicious prosecution.

Issue: Whether or not DLPC acted in bad faith in instituting the criminal cases against Diaz. Held: 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 inferred that malice and want of probable cause must both be clearly established to justify an award of damages based on malicious prosecution. Thus, the element of malice and the absence of probable cause must be proved. There must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person, and that it was initiated deliberately knowing that the charge was false and baseless to entitle the victims to damages. The two elements must simultaneously exist; otherwise, the presence of probable cause signifies, as a legal consequence, the absence of malice. In the instant case, it is evident that respondent DLPC was not motivated by malicious intent or by a sinister design to unduly harass petitioner, but only by a well-founded anxiety to protect its rights. Respondent DLPC cannot therefore be faulted in availing of the remedies provided for by law.

Ms. Violeta Yasona vs. De Ramos G.R. No. 156339 October 6, 2004 Facts: 

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Aurea Yasoña and her son, Saturnino, went to the house of Jovencio de Ramos to ask for financial assistance in paying their loans to Philippine National Bank (PNB), otherwise their residential house and lot would be foreclosed. Jovencio paid Aurea’s bank loan. As agreed upon, Aurea executed a deed of absolute sale in favor of Jovencio over half of the lot consisting of 123 square meters. Twenty-two years later, 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 averred that she never sold any portion of her property to Jovencio and never executed a deed of sale. Assistant Provincial Prosecutor Rodrigo B. Zayenis dismissed the criminal complaint for estafa for lack of evidence. On account of this dismissal, Jovencio and Rodencio filed a complaint for damages on the ground of malicious prosecution with the Regional Trial Court of Sta. Cruz. They alleged that the filing of the estafa complaint against them was done with malice and it caused irreparable injury to their reputation, as Aurea knew fully well that she had already sold half of the property to Jovencio. The trial court rendered a decision in favor of Jovencio and Rodencio which was affirmed by the CA. Hence, the instant petition.

ISSUE: Whether or not the filing of the criminal complaint for estafa by petitioners against respondents constituted malicious prosecution. HELD: In this jurisdiction, the term malicious prosecution has been defined as 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. 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 the present controversy. Petitioners were completely aware that Jovencio was the rightful owner of the lot covered by TCT No. 73251, clearly signifying that they were impelled by 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 dismissal of the charges filed by petitioners with the Provincial Prosecutor’s Office in Siniloan, Laguna. A suit for malicious prosecution will prosper where legal prosecution is carried out without probable cause.

Asian Terminals, Inc., vs. Philam Insurance Co., Inc. G.R. No. 181163 July 24, 2013 Facts: 

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ISSUE:

Nichimen Corporation shipped to Universal Motors Corporation (Universal Motors) 219 packages containing 120 units of brand new Nissan Pickup Truck Double Cab 4x2 model, without engine, tires and batteries, on board the vessel S/S Calayan Iris from Japan to Manila. The shipment, was insured with Philam against all risks. The carrying vessel arrived at the port of Manila and when the shipment was unloaded by the staff of ATI, it was found that the package marked as 03-245-42K/1 was in bad order. The cargoes were stored for temporary safekeeping inside CFS Warehouse in Pier No. 5. The shipment was withdrawn by R.F. Revilla Customs Brokerage, Inc., the authorized broker of Universal Motors, and delivered to the latter’s warehouse in Mandaluyong City. Upon the request of Universal Motors, a bad order survey was conducted on the cargoes and it was found that one Frame Axle Sub without LWR was deeply dented on the buffle plate while six Frame Assembly with Bush were deformed and misaligned. Owing to the extent of the damage to said cargoes, Universal Motors declared them a total loss. Universal Motors filed a formal claim for damages in the amount of P643,963.84 against Westwind, ATIand R.F. Revilla Customs Brokerage, Inc. When Universal Motors’ demands remained unheeded, it sought reparation from and was compensated in the sum of P633,957.15 by Philam. Accordingly, Universal Motors issued a Subrogation Receipt in favor of Philam. Philam, as subrogee of Universal Motors, filed a Complaint for damages against Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. before the RTC of Makati City, Branch 148. On September 24, 1999, the RTC rendered judgment in favor of Philam and ordered Westwind and ATI to pay Philam, jointly and severally, the sum of P633,957.15. On appeal, the CA affirmed with modification the ruling of the RTC. The appellate court directed Westwind and ATI to pay Philam, jointly and severally, the amount of P190,684.48 with interest at the rate of 12% per annum until fully paid, attorney’s fees of P47,671 and litigation expenses.

Whether or not Westwind and ATI are jointly and severally liable. HELD: Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them. Subject to certain exceptions enumerated under Article 1734of the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them. It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier. Since the damage to the cargo was incurred during the discharge of the shipment and while under the supervision of the carrier, the latter is liable for the damage caused to the cargo.This is not to say, however, that petitioner ATI is without liability for the damaged cargo. While it is true that an arrastre operator and a carrier may not be held solidarily liable at all times, the facts of these cases show that apart from ATI’s stevedores being directly in charge of the physical unloading of the cargo, its foreman picked the cable sling that was used to hoist the packages for transfer to the dock. Moreover, the fact that 218 of the 219 packages were unloaded with the same sling unharmed is telling of the inadequate care with which ATI’s stevedore handled and discharged Case No. 03-245-42K/1.

Cecilia Yambao vs. Melchorita Zuniga et al. G.R. No. 146173 December 11, 2003 Facts: 

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The bus owned by the petitioner was being driven by her driver, one Ceferino G. Venturina along the northbound lane of Epifanio delos Santos Avenue (EDSA), within the vicinity of Bagong Barrio, Kalookan City. With Venturina was the bus conductor, Fernando Dumaliang. Suddenly, the bus bumped Herminigildo Zuñiga, 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 damages at the RTC 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 which was affirmed by the appellate court. Yambao then duly moved for reconsideration, but her motion was denied for want of merit. Hence, this petition for review.

Issue: Whether or not 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: Case law teaches that 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 juris tantum 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. 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 seminars on road safety and traffic efficiency. Hence, petitioner cannot claim exemption from any liability arising from the recklessness or negligence of Venturina.

Smith Bell Dodwell Shipping Agency Corporation vs. Catalino Borja and International to Wage and Transport Corporation G.R. No. 143008 June 10, 2002 Facts: 

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Smith Bell 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. While M/T King Family was unloading chemicals unto two (2) barges ITTC 101 and CLC1002 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 for one hour 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. On appeal, the CA affirmed the decision of the lower court. Hence, this Petition.

Issue: Whether or not petitioner can be held liable for the injuries suffered by Borja. Held: 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.

Hence, the owner or the person in possession and control of a vessel and the vessel are liable for all natural and proximate damage caused to persons and property by reason of negligent management or navigation.

Ramon Ilusorio vs. Court of Appeals and The Manila Banking Corporation G.R. No. 139130 November 27, 2002 Facts:

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Eugenio, the secretary of petitioner, was able to encash and deposit to her personal account about seventeen (17) checks drawn against the account of the petitioner at the respondent bank, with an aggregate amount of P119,634.34. Petitioner did not bother to check his statement of account until a business partner apprised him that he saw Eugenio use his credit cards. Petitioner fired Eugenio immediately, and instituted a criminal action against her for estafa thru falsification before the Office of the Provincial Fiscal of Rizal. Private respondent, through an affidavit executed by its employee, Mr. Dante Razon, also lodged a complaint for estafa thru falsification of commercial documents against Eugenio on the basis of petitioner’s statement that his signatures in the checks were forged. 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. Hence, petitioner filed the instant case.

Issue: Whether or not petitioner has a cause of action against private respondent. HELD: Petitioner has no cause of action against Manila Bank. 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, i.e., by submitting his specimen signatures and comparing them with those on the questioned checks. Curiously though, petitioner failed to submit additional specimen signatures as requested by the National Bureau of Investigation from which to draw a conclusive finding regarding forgery. As borne by the records, it was petitioner, not the bank, who was negligent. Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a

prudent and reasonable man would do. 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.

National Power Corporation vs. Court of Appeals and Engineering Construction, Inc. G.R. No. L-47379 May 16, 1988 Facts: 

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Issue:

Respondent 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 respondent corporation already had completed the first major phase of the work, namely, the tunnel excavation work. Some portions of the outworks at the Bicti site were still under construction. 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 petitioner corporation caused the opening of the spillway gates. The appellate court sustained the findings of the trial court that the evidence preponderantly established the fact that due to the negligent manner with which the spillway gates of the Angat Dam were opened, an extraordinary large volume of water rushed out of the gates, and hit the installations and construction works of ECI at the lope site with terrific impact, as a result of which the latter's stockpile of materials and supplies, camp facilities and permanent structures and accessories either washed away, lost or destroyed.

Whether or not petitioner can be held liable for the loss and damage of ECI’s stockpile of materials and supplies, camp facilities and permanent structures and accessories. Held: 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. Thus, it has been held that when the negligence of a person concurs with an act of God in producing a loss, such person is not exempt from liability by showing that the immediate cause of the damage was the act of God. To be exempt from liability for loss because of an act of God, he must be free from any previous negligence or misconduct by which the loss or damage may have been occasioned.

Anabelle Muaje-Tuazon and Almer Abing vs. Wenphil Corporation, et al. G.R. No. 162447 December 27, 2006 Facts: 

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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. Petitioners were summoned to the main office regarding the reported anomaly. Petitioners denied there was cheating. Immediately thereafter, petitioners were notified, in writing, of hearings and of their immediate suspension. Thereafter, petitioners were dismissed. Petitioners filed, with the Regional Arbitration Branch, a complaint for illegal suspension and dismissal against respondent Wenphil Corporation and its General Manager, Elizabeth P. Orbita. Petitioners insisted that they were innocent of the accusations and were dismissed without cause. In their defense, respondents maintained that petitioners were terminated for dishonesty amounting to serious misconduct and willful breach of trust. The Labor Arbiter ruled in favor of the petitioners. 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. Petitioners moved for reconsideration but the same was denied. Hence, this petition.

Issue: Whether or not petitioners were illegally dismissed. Held: In the present case, the tape receipts presented by respondents showed that there were anomalies committed in the branches managed by the petitioners. On the principle of respondeat superior or command responsibility alone, petitioners may be held liable for

negligence in the performance of their managerial duties, unless petitioners can positively show that they were not involved. Their position requires a high degree of responsibility that necessarily includes unearthing of fraudulent and irregular activities. Their bare, unsubstantiated and uncorroborated denial of any participation in the cheating does not prove their innocence nor disprove their alleged guilt. Additionally, some employees declared in their affidavits that the cheating was actually the idea of the petitioners. Petitioners make much of the fact that the affidavits were executed only after the investigation. This is of no moment. For even without the affidavits, sufficient basis exists for respondents' loss of trust and confidence on the petitioners as managerial officers.

Radio Communication of the Philippines, Inc. vs. Alfonso Verchez, et al. G.R. No. 164349 January 31, 2006 Facts: 

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Editha Hebron Verchez (Editha) was confined at the Sorsogon Provincial Hospital due to an ailment. On even date, her daughter Grace Verchez-Infante (Grace) immediately went to the Sorsogon Branch of the Radio Communications of the Philippines, Inc. (RCPI) whose services she engaged to send a telegram to her sister Zenaida Verchez-Catibog (Zenaida) who was residing at 18 Legal St., GSIS Village, Quezon City reading: Send check money Mommy hospital. For RCPI’s services, Grace paid P10.50 for which she was issued a receipt. As three days after RCPI was engaged to send the telegram to Zenaida no response was received from her, Grace sent a letter to Zenaida, this time thru JRS Delivery Service, reprimanding her for not sending any financial aid. Immediately after she received Grace’s letter, Zenaida, along with her husband Fortunato Catibog, left for Sorsogon. On her arrival at Sorsogon, she disclaimed having received any telegram. The telegram was finally delivered to Zenaida 25 days later. Verchez, along with his daughters Grace and Zenaida and their respective spouses, filed a complaint against RCPI before the Regional Trial Court (RTC) of Sorsogon for damages. The RTC rendered a decision in favor of respondents. On appeal, the Court of Appeals affirmed the trial court’s decision.

Issue: Whether or not petitioner is negligent in its failure to deliver the telegram within the shortest possible time Held: 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.

Assuming arguendo that fortuitous circumstances prevented RCPI from delivering the telegram at the soonest possible time, it should have at least informed Grace of the non-transmission and the non-delivery so that she could have taken steps to remedy the situation. But it did not. There lies the fault or negligence. People depend on telecommunications companies in times of deep emotional stress or pressing financial needs. Knowing that messages about the illnesses or deaths of loved ones, births or marriages in a family, important business transactions, and notices of conferences or meetings as in this case, are coursed through the petitioner and similar corporations, it is incumbent upon them to exercise a greater amount of care and concern than that shown in this case. Every reasonable effort to inform senders of the non-delivery of messages should be undertaken.

Victory Liner, Inc. vs. Rosalito Gammad, et al G.R. No. 159636 November 25, 2004 Facts: 

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Marie Grace Pagulayan-Gammad, respondent’s wife, was on board an air-conditioned Victory Liner bus bound for Tuguegarao, Cagayan from Manila. 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. 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. Hence, this petition.

Issue: Whether or not petitioner should be held liable for breach of contract of carriage Held: A common carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard to all the circumstances. In a contract of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence.

In the instant case, there is no evidence to rebut the statutory presumption that the proximate cause of Marie Grace’s death was the negligence of petitioner. Article 1764 in relation to Article 2206 of the Civil Code, holds the common carrier in breach of its contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity, and (3) moral damages.

FGU Insurance Corporation vs. G.P Sarmiento Trucking Corporation and Lambert Eroles G.R. No. 141910 August 6, 2002 Facts: 

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G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver thirty (30) units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant site of Concepcion Industries, Inc., along South Superhighway in Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan City. 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 in the sum of P204,450.00. FGU, in turn, being the subrogee of the rights and interests of Concepcion Industries, Inc., sought reimbursement of the amount it had paid to the latter from GPS. Since the trucking company failed to heed the claim, FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. The RTC rendered a decision in favor of respondents. On appeal, the CA affirmed the decision of the trial court and the motion for reconsideration was likewise denied. Hence, this petition.

Issue: Whether or not respondent GPS, either as a common carrier or a private carrier, may be presumed to have been negligent when the goods it undertook to transport safely were subsequently damaged while in its protective custody and possession. Held: Respondent trucking corporation 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 the burden being on him to establish otherwise. GPS has failed to do so. Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage between petitioner’s principal and defendant, may not be held liable under the agreement. A contract can only bind the parties who have entered into it or their successors who have assumed their personality or their juridical position. Consonantly with the axiom res inter alios acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third person. Petitioner’s civil action against the driver can only be based on culpa aquiliana, which, unlike culpa contractual, would require the claimant for damages to prove negligence or fault on the part of the defendant.

Light Rail Transit Authority & Rodolfo Roman vs. Marjorie Navidad, et al. G.R. No. 145804 February 6, 2003 Facts: 

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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 Navidad. 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 Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously. The widow of Nicanor, herein respondent Marjorie Navidad, along with her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA and Roman filed a counterclaim against Navidad 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 trial court rendered its decision in favor of the respondent. On appeal, The CA affirmed the decision of the trial court with modification that Prudent is exonerated from liability. Petitioners filed a motion for reconsideration but was denied. Hence, this petition.

Issue: Whether or not petitioners are liable for the death of Nicanor. Held: 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. On the part of Prudent, there is nothing to link (Prudent) to the death of Nicanor, for the reason that the negligence of its employee, Escartin, has not been duly proven. There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission, he must also be absolved from liability. Needless to say, the contractual tie between the LRT and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be made liable only for his own fault or negligence.

Rodzssen Supply Co., Inc. vs. Far East Bank & Trust Co. G.R. No. 109087 May 9, 2001 Facts: 

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Rodzssen Supply, Inc. opened with 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. The three units of the hydraulic loaders were delivered to petitioner for which respondent paid Ekman the sum of P114,000.00, which amount petitioner paid respondent before the expiry date of the LC. The shipment of the remaining two units of hydraulic loaders valued at P76,000.00 sent by Ekman was readily received by respondent before the expiry date of the subject LC. Upon Ekman’s presentation of the documents for the P76,000.00 representing final negotiation on the LC before the expiry date, and after a series of negotiations, respondent paid to Ekman the amount of P76,000.00; and that upon respondent’s demand from petitioner to pay for said amount (P76,000.00), petitioner refused to pay without any valid reason. Respondent prays for judgment ordering defendant to pay the abovementioned P76,000.00 plus due interest thereon. The RTC rendered a decision in favor of the respondent. On appeal, the CA affirmed the decision of the trial court. Hence, this petition.

Issue: Whether or not petitioner is liable to respondent. Held: Petitioner should pay respondent bank the amount the latter expended for the equipment belatedly delivered by Ekman and voluntarily received and kept by petitioner. Respondent bank’s right to seek recovery from petitioner is anchored, not upon the inefficacious Letter of Credit, but on Article 2142 of the Civil Code which reads as follows: 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.

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.

University of the East vs. Romeo Jader G.R. No. 132344 February 17, 2000 Facts: 

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Plaintiff was enrolled in the defendant’s College of Law from 1984 up to 1988. In the first semester of his last year, he failed to take the regular final examination in Practice Court 1 for which he was given an incomplete grade. He enrolled for the second semester as fourth year law student and he filed an application for the removal of the incomplete grade given him by Professor Carlos Ortega which was approved by Dean Tiongson. Professor Ortega submitted his grade. The plaintiff’s name appeared in the tentative list of candidates for graduation for the Degree of Bachelor of Laws. The plaintiff attended the investiture ceremonies. He tendered a blow-out that evening which was attended by neighbors, friends and relatives who wished him good luck in the forthcoming bar examinations. He took a leave of absence without pay from his job and enrolled at the pre-bar review class in FEU. Having learned of the deficiency he dropped his review class and was not able to take the bar examination. Respondent sued petitioner for damages alleging that he suffered moral shock, mental anguish, serious anxiety, besmirched reputation, wounded feelings and sleepless nights when he was not able to take the 1988 bar examinations arising from the latter’s negligence. The trial court rendered a decision in favor of the plaintiff. The CA, on appeal, affirmed the decision of the trial court. Hence, this petition.

Issue: Whether or not petitioner is negligent. Held: Petitioner, in belatedly informing respondent of the result of the removal examination, particularly at a time when he had already commenced preparing for the bar exams, cannot be said to have been acting in good faith. Absence of good faith must be sufficiently established for a successful prosecution by the aggrieved party in a suit for abuse of right under Article 19 of the Civil Code.

Considering further, that the institution of learning involved herein is a university which s engaged in legal education, it should have practiced what it inculcates in its students, more specifically the principle of good dealings. Educational institutions are duty-bound to inform the students of their academic status and not wait for the latter to inquire from the former. The conscious indifference of a person to the rights or welfare of the person/persons who may be affected by his act or omission can support a claim for damages. Petitioner’s liability arose from its failure to promptly inform respondent of the result of an examination and in misleading the latter into believing that he had satisfied all requirements for the course.

Bayne Adjusters and Surveyors, Inc. vs. Court of Appeals and Insurance Company of North America G. R. No. 116332 January 25, 2000 Facts: 

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Colgate Palmolive Philippine, Inc., imported alkyl benzene from Japan valued at US$255,802.88. The said liquid cargo was insured with herein private respondent Insurance Company of North America against all risk for its full value. Petitioner Bayne Adjusters and Surveyors Inc., was contracted by the consignee to supervise the proper handling and discharge of the cargo from the chemical tanker to a receiving barge until the cargo is pumped into the consignee’s shore tank. When the cargo arrived in Manila petitioner’s surveyor supervised the transfer of the cargo from the chemical tanker to the receiving barge. Pumping of the liquid cargo from the barge to the consignee’s tank was interrupted several times due to mechanical problems with the pump. When the pump broke down once again, the petitioner’s surveyor left the premises without leaving any instruction with the barge foreman what to do in the event that the pump becomes operational again. No other surveyor was left in the premises and the assigned surveyor did not seal the valves leading to the tank to avoid unsupervised pumping of the cargo. Later that day, the consignee asked the petitioner to send a surveyor to conduct tank sounding. Petitioner sent Amado Fontillas, a cargo surveyor, not a liquid bulk surveyor, to the premises and it was agreed that pumping operation would resume the following day. Fontillas tried to inform both the barge men and the assigned surveyor of the scheduled resumption of pumping operation but he could not find them so he left the premises. When the barge men arrived in the early evening, they found the valves of the tank open and resumed pumping operation in the absence of any instruction from the surveyor to the contrary. The following morning it was found that an undetermined amount of alkyl benzene was lost due to overflow. The consignee filed a claim with the private respondent insurance corporation for the value of the lost liquid cargo. A compromise quantity of 67.649MT of alkyl benzene was agreed to have been lost in the overflow and respondent insurance corporation agreed to pay the consignee the net amount of P811,609.53. Private

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respondent instituted an action for collection of sum of money as subrogee of the consignee after failure to extrajudicially settle the matter with Bayne Adjusters. Both the trial court and the appellate court found the petitioner’s failure to comply with the Standard Operating Procedure for Handling Liquid Bulk Cargo when pumping operation is suspended as the proximate cause of the loss.

Issue: Whether or not petitioner is negligent. Held: The negligence of the obligor in the performance of the obligation renders him liable for damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise due care and prudence in the performance of the obligation as the nature of the obligation so demands. The factual findings and conclusions of the trial and appellate court when supported by substantial evidence are entitled to great respect and will not be disturbed on appeal except on very strong and cogent grounds. The petitioner’s failure to closely supervise the discharge of the cargo in accordance with accepted guidelines is the proximate cause of the loss. There is no cogent reason to overturn the legal conclusion reached by the lower courts that the petitioner is negligent in the performance of its duty as a marine superintendent surveyor under the Standard Operating Procedure in handling liquid cargo and held the petitioner liable for damages for the loss of the cargo.

Delsan Transport Lines, Inc. vs. C & A Construction, Inc. G.R. No. 156034 October 1, 2003 Facts: 

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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. 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. Capt. Jusep tried to seek shelter at the North Harbor but could not enter the area because it was already congested. 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. 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. The damage caused by the incident amounted to P456,198.24. Respondent demanded payment of the damage from petitioner but the latter refused to pay. Consequently, respondent filed a complaint for damages with the Regional Trial Court of Manila, Branch 46. In its answer, petitioner claimed that the damage was caused by a fortuitous event. The complaint filed by respondent was dismissed. The trial court ruled that petitioner was not guilty of negligence because it had taken all the necessary precautions to avoid the accident. 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. Hence, this petition.

Issue: Whether or not petitioner can be held liable for the negligence of Captain Jusep. Held: When Capt. Jusep ignored the weather report notwithstanding reasonable foresight of harm, he showed an inexcusable lack of care and caution which an ordinary prudent person would

have observed in the same situation. Had he moved the vessel earlier, he could have had greater chances of finding a space at the North Harbor considering that the Navotas Port where they docked was very near North Harbor. Even if the latter was already congested, he would still have time to seek refuge in other ports. In the case at bar, however, petitioner presented no evidence that it formulated rules/guidelines for the proper performance of functions of its employees and that it strictly implemented and monitored compliance therewith. Failing to discharge the burden, petitioner should therefore be held liable for the negligent act of Capt. Jusep.

Philippine Commercial International Bank vs. Court of Appeals, et al G.R. No. 121413 January 29, 2001 Facts: 

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Ford had been maintaining a checking account with Citibank; that Citibank Check No. SN-04867 which was drawn and issued by the plaintiff in favor of the Commissioner of Internal Revenue was a crossed check in that, on its face were two parallel lines and written in between said lines was the phrase Payee's Account Only, and that Citibank paid the full face value of the check in the amount of P4,746,114.41 to the defendant IBAA. Citibank Check No. SN-04867, together with the Revenue Tax Receipt No. 18747002, was deposited with petitioner IBAA, through its Ermita Branch. The latter accepted the check and sent it to the Central Clearing House for clearing on the same day. Thereafter, IBAA presented the check for payment to Citibank and the latter paid the face value of the check in the amount of P4,746,114.41. Consequently, the amount of P4,746,114.41 was debited in respondent’s account with the defendant Citibank and the check was returned to the respondent. Upon verification, respondent discovered that its Citibank Check No. SN-04867 in the amount of P4,746,114.41 was not paid to the Commissioner of Internal Revenue. The respondent notified the latter that in case it will be re-assessed by the BIR for the payment of the taxes covered by the said checks, then respondent shall hold the IBAA and Citibank liable for reimbursement of the face value of the same. Both denied liability and refused to pay. IBAA was merged with the Philippine Commercial International Bank (PCI Bank) with the latter as the surviving entity. An investigation by the NBI revealed that Citibank Check No. SN-04867 was recalled by Godofredo Rivera, the General Ledger Accountant of Ford. He purportedly needed to hold back the check because there was an error in the computation of the tax due to the BIR. With Rivera's instruction, PCIBank replaced the check with two of its own Manager's Checks (MCs). Alleged members of a syndicate later deposited the two MCs with the Pacific Banking Corporation. The trial court rendered its decision in favor of respondent which was affirmed by the appellate court. Hence, this petition.

Whether or not PCIBank is liable for negligence. Held: PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of PCIBank employees to verify whether his letter requesting for the replacement of the Citibank Check No. SN-04867 was duly authorized, showed lack of care and prudence required in the circumstances. Banking business requires that the one who first cashes and negotiates the check must take some percautions to learn whether or not it is genuine. And if the one cashing the check through indifference or othe circumstance assists the forger in committing the fraud, he should not be permitted to retain the proceeds of the check from the drawee whose sole fault was that it did not discover the forgery or the defect in the title of the person negotiating the instrument before paying the check. For this reason, a bank which cashes a check drawn upon another bank, without requiring proof as to the identity of persons presenting it, or making inquiries with regard to them, cannot hold the proceeds against the drawee when the proceeds of the checks were afterwards diverted to the hands of a third party. In such cases the drawee bank has a right to believe that the cashing bank (or the collecting bank) had, by the usual proper investigation, satisfied itself of the authenticity of the negotiation of the checks. Thus, one who encashed a check which had been forged or diverted and in turn received payment thereon from the drawee, is guilty of negligence which proximately contributed to the success of the fraud practiced on the drawee bank. The latter may recover from the holder the money paid on the check. Having established that the collecting bank's negligence is the proximate cause of the loss, PCIBank is liable in the amount corresponding to the proceeds of Citibank Check No. SN-04867.

San Miguel Corporation vs. Heirs of Sabiniano Inguito and Julius Ouano G.R. No. 141716 July 4, 2002 Facts:   

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San Miguel Corporation entered into a Time Charter Party Agreement with Julius Ouano, doing business under the name and style J. Ouano Marine Services. During the term of the charter, SMC issued sailing orders to the Master of the MN Doña Roberta, Captain Sabiniano Inguito. 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. Moreno again communicated with Captain Inguito and advised him to take shelter. The captain responded that they can manage. Hearing this, Moreno immediately tried to get in touch with Rico Ouano to tell him that Captain Inguito did not heed their advice. However, Rico Ouano was out of his office, so Moreno left the message with the secretary. 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 M/V Doña Roberta sank. Out of the 25 officers and crew on board the vessel, only five survived. The heirs of the deceased captain and crew, as well as the survivors, of the ill-fated M/V Doña Roberta filed a complaint for tort against San Miguel Corporation and Julius Ouano. Julius Ouano filed an answer with cross-claim, alleging that the proximate cause of the loss of the vessel and its officers and crew was the fault and negligence of SMC, which had complete control and disposal of the vessel as charterer and which issued the sailing order for its departure despite being forewarned of the impending typhoon. Thus, he prayed that SMC indemnify him for the cost of the vessel and the unrealized rentals and earnings thereof. In its answer to the complaint and answer to the cross-claim, SMC countered that it was Ouano who had the control, supervision and responsibilities over the navigation of the vessel. This notwithstanding, and despite his knowledge of the incoming typhoon, Ouano never bothered to initiate contact with his vessel.

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The court a quo rendered judgment finding that the proximate cause of the loss of the M/V Doña Roberta was attributable to SMC. On appeal, the CA rendered a decision modifying the trial court’s decision declaring SMC and Julian Ouano jointly and severally liable to heirs of the deceased and survivors of the M/V Doña Roberta except to the heirs of Capt. Sabiniano Inguito. SMC and Ouano filed separate motions for reconsideration, which were denied by the Court of Appeals for lack of merit. Hence, this petition.

Issue: Whether or not petitioner is negligent. Held: It is very clear that Captain Sabiniano Inguito had sufficient time within which to secure his men and the vessel. But he waited until the vessel was already in distress to seek help in saving his men and the vessel. In any event, Capt. Inguito had full control and responsibility, whether to follow a sailing order or to take shelter when already at sea. In fact, there was an incident when a sailing order was issued by SMC to Inguito but he decided not to proceed with the voyage because of a tropical storm. 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. SMC is not liable for the losses. The contention that it was the issuance of the sailing order by SMC which was the proximate cause of the sinking is untenable. The fact that there was an approaching typhoon is of no moment. It appears that on one previous occasion, SMC issued a sailing order to the captain of the M/V Doña Roberta, but the vessel cancelled its voyage due to typhoon. Likewise, it appears from the records that SMC issued the sailing order before typhoon Ruping was first spotted on that day.

Heirs of Jose Marcial Ochoa, et al. vs. G & S Transport Corporation G.R. No. 170071 July 16, 2012 Facts: 

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A Complaint for Damages was filed by the heirs against G & S with the Regional Trial Court (RTC), Pasig City, Branch 164 on account of Jose Marcial’s death while onboard a taxicab owned and operated by G & S. The RTC adjudged G & S guilty of breach of contract of carriage and ordered it to pay the heirs for damages. On appeal, the Court of Appeals (CA) affirmed the RTC Decision but with the modifications that the awards for loss of income in the amount of P6,537,244.96 be deleted and that moral damages be reduced to P200,000.00. The deletion was ordered on the ground that the income certificate issued by Jose Marcial’s employer, the United States Agency for International Development (USAID), is self-serving, unreliable and biased, and that the same was not supported by competent evidence such as income tax returns or receipts. A Motion for Reconsideration was filed but it was denied by the court. Hence, this petition.

Issue: Whether or not respondent is liable to the heirs. Held: It is true that before a private document offered as authentic be received in evidence, its due execution and authenticity must first be proved. However, it must be remembered that this requirement of authentication only pertains to private documents and does not apply to public documents, these being admissible without further proof of their due execution or genuineness. Two reasons may be advanced in support of this rule, namely: said documents have been executed in the proper registry and are presumed to be valid and genuine until the contrary is shown by clear and convincing proof; and, second, because public documents are authenticated by the official signature and seals which they bear and of which seals, courts may take judicial notice. Hence, in the presentation of public documents as evidence, due execution and authenticity thereof are already presumed.

And, there being no clear and sufficient evidence presented by G & S to overcome the presumptions, the RTC is correct when it admitted in evidence the said document. The USAID Certification could very well be used as basis for the award for loss of income to the heirs. G & S failed to overcome the presumption that the common carrier is at fault or is negligent when a passenger dies or is injured.

Alfredo Pacis and Cleopatra Pacis vs. Jerome Jovanne Morales G.R. No. 169467 February 25, 2010 Facts: 

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Alfred Dennis Pacis, then 17 years old and a first year student at the Baguio Colleges Foundation taking up BS Computer Science, died due to a gunshot wound in the head which he sustained while he was at the Top Gun Firearm[s] and Ammunition[s] Store located at Upper Mabini Street, Baguio City. The gun store was 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. 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. Attracted by the sight of the gun, the young Alfred Dennis Pacis got hold of the same. Matibag asked Alfred Dennis Pacis to return the gun. The latter followed and handed the gun to Matibag. It went off, the bullet hitting the young Alfred in the head. A criminal case for homicide was filed against Matibag before branch VII of this Court. Matibag, however, was acquitted of the charge against him because of the exempting circumstance of accident under Art. 12, par. 4 of the Revised Penal Code. The trial court rendered its decision in favor of petitioners. Respondent appealed to the Court of Appeals. The Court of Appeals reversed the trial court’s 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.

Issue: Whether or not respondent is liable for the death of Alfred Pacis. Held: As a gun store owner, respondent is presumed to be knowledgeable about firearms safety and should have known never to keep a loaded weapon in his store to avoid unreasonable risk of harm or injury to others. Respondent has the duty to ensure that all the guns in his store are not loaded. Firearms should be stored unloaded and separate from ammunition when the firearms are not needed for ready-access defensive use. With more reason, guns accepted by the store for repair should not be loaded precisely because they are defective and may cause an accidental discharge such as what happened in this case. Respondent was clearly negligent when he accepted the gun for repair and placed it inside the drawer without ensuring first that it was not loaded. In the first place, the defective gun should have been stored in a vault. Before accepting the defective gun for repair, respondent should have made sure that it was not loaded to prevent any untoward accident. Indeed, respondent should never accept a firearm from another person, until the cylinder or action is open and he has personally checked that the weapon is completely unloaded. For failing to insure that the gun was not loaded, respondent himself was negligent. 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.

Philippine Hawk Corporation vs. Vivian Tan Lee G.R. No. 166869 February 16, 2010 Facts: 

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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 in Barangay Buensoceso, Gumaca, Quezon. The accident resulted in the death of respondent’s husband, Silvino Tan, and caused respondent physical injuries. 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. The trial court rendered judgment against petitioner and defendant Margarito Avila. On appeal, the Court of Appeals affirmed the decision of the trial court with modification in the award of damages.

Issue: Whether or not petitioner is liable to respondent for damages. Held: 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. 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.

Mercury Drug Corporation and Rolando Del Rosario vs. Spouses Richard Huang, et al. G.R. No. 172122 June 22, 2007 Facts: 

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Petitioner Mercury Drug Corporation (Mercury Drug) is the registered owner of a sixwheeler 1990 Mitsubishi Truck with plate number PRE 641 (truck). It has in its employ petitioner Rolando J. del Rosario as driver. Respondent spouses Richard and Carmen Huang are the parents of respondent Stephen Huang and own the red 1991 Toyota Corolla GLI Sedan with plate number PTT 775 (car). These two vehicles figured in a road accident within the municipality of Taguig, Metro Manila. Respondent Stephen Huang was driving the car, weighing 1,450 kg., while petitioner Del Rosario was driving the truck, weighing 14,058 kg. Both were traversing the C-5 Highway, north bound, coming from the general direction of Alabang going to Pasig City. The car was on the left innermost lane while the truck was on the next lane to its right, when the truck suddenly swerved to its left and slammed into the front right side of the car. The collision hurled the car over the island where it hit a lamppost, spun around and landed on the opposite lane. The truck also hit a lamppost, ran over the car and zigzagged towards, and finally stopped in front of Buellah Land Church. The car, valued at P300,000.00, was a total wreck. Respondent Stephen Huang sustained massive injuries to his spinal cord, head, face, and lung. Despite a series of operations, respondent Stephen Huang is paralyzed for life from his chest down and requires continuous medical and rehabilitation treatment. Respondents 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 petitioners Mercury Drug and Del Rosario jointly and severally liable to pay respondents actual, compensatory, moral and exemplary damages, attorney’s fees, and litigation expenses. The Court of Appeals affirmed the decision of the trial court but reduced the award of moral damages to P1,000,000.00. The appellate court also denied the motion for reconsideration filed by petitioners. Hence, this appeal.

Issue: Whether or not petitioner is liable to respondents. Held: The liability of the employer under Art. 2180 of the Civil Code is direct or 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 of liability, petitioner Mercury Drug 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. Thus, in the selection of its prospective employees, the employer is required to examine them as to their qualifications, experience, and service records. With respect to the supervision of its employees, the employer should formulate standard operating procedures, monitor their implementation, and impose disciplinary measures for their breach. To establish compliance with these requirements, employers must submit concrete proof, including documentary evidence. Petitioner Mercury Drug failed to show that it exercised due diligence on the supervision and discipline over its employees. In fact, on the day of the accident, petitioner Del Rosario was driving without a license. He was holding a TVR for reckless driving. He testified that he reported the incident to his superior, but nothing was done about it. He was not suspended or reprimanded. No disciplinary action whatsoever was taken against petitioner Del Rosario. Petitioner Mercury Drug has failed to discharge its burden of proving that it exercised due diligence in the selection and supervision of its employee, petitioner Del Rosario.

Flordeliza Mendoza vs. Mutya Soriano, et al. G.R. No. 164012 June 8, 2007 Facts: 

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Sonny Soriano, while crossing Commonwealth Avenue near Luzon Avenue in Quezon City, was hit by a speeding Tamaraw FX driven by Lomer Macasasa. Soriano was thrown five meters away, while the vehicle only 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 after checking out the scene of the incident, Macasasa returned to the FX, only to flee. A school bus brought Soriano to East Avenue Medical Center where he later died. Subsequently, the Quezon City Prosecutor recommended the filing of a criminal case for reckless imprudence resulting to homicide against Macasasa. Respondents Mutya Soriano and Julie Ann Soriano, Soriano’s wife and daughter, respectively, filed a complaint for damages against Macasasa and petitioner Flordeliza Mendoza, the registered owner of the vehicle. In her answer, petitioner Mendoza maintained 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, Macasasa. Upon respondents’ motion, the complaint for damages against Macasasa was dismissed. After trial, the trial court also dismissed the complaint against petitioner. It found Soriano negligent for crossing Commonwealth Avenue by using a small gap in the island’s fencing rather than the pedestrian overpass. Respondents appealed. The Court of Appeals reversed the trial court’s decision. Hence, this appeal.

Issue: Whether or not petitioner is liable for damages. Held: While respondents could recover damages from Macasasa in a criminal case and petitioner could become subsidiarily liable, still petitioner, as owner and employer, is directly and separately civilly liable for her failure to exercise due diligence in supervising Macasasa. The damage suit is for the quasi-delict of petitioner, as owner and employer, and not for the delict of Macasasa, as driver and employee.

In this case, petitioner is primarily and solidarily liable for the damages caused by Macasasa. Respondents could recover directly from petitioner since petitioner failed to prove that she exercised the diligence of a good father of a family in supervising Macasasa.

Hermana R. Cerezo vs. David Tuazon G.R. No. 141538 March 23, 2004 Facts: 

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A Country Bus Lines passenger bus with plate number NYA 241 collided with a tricycle bearing plate number TC RV 126 along Captain M. Palo Street, Sta. Ines, Mabalacat, Pampanga. 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. At the time of the incident, Tuazon was in his proper lane when Foronda, being then the driver and person in charge of the Country Bus with plate number NYA 241 without taking the necessary precaution to prevent loss of lives or injuries, his negligence, carelessness and imprudence resulted to severe damage to the tricycle and serious physical injuries to Tuazon thus making him unable to walk and becoming disabled, with his thumb and middle finger on the left hand being cut. Tuazon filed a motion to litigate as a pauper. The trial court rendered a decision in favor of Tuazon. On appeal, the CA affirmed the decision of the trial court.

Issue: Whether or not Cerezo is liable for damages. Held: 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.

Filcar Transport Services vs. Jose Espinas G.R. No. 174156 June 20, 2012 Facts: 

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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. Espinas sent several letters to Filcar and to its President and General Manager Carmen Flor, demanding payment for the damages sustained by his car. Espinas filed a complaint for damages against Filcar and Carmen Flor before the Metropolitan Trial Court of Manila. 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. The MeTC ruled in favor of Espinas, and ordered Filcar and Carmen Flor, jointly and severally, to pay Espinas. The Regional Trial Court of Manila, Branch 20, in the exercise of its appellate jurisdiction, affirmed the MeTC decision. On appeal, the CA partly granted the petition in CA-G.R. SP No. 86603; it modified the RTC decision by ruling that Carmen Flor, President and General Manager of Filcar, is not personally liable to Espinas. Filcar filed a motion for reconsideration which the CA denied. Hence, this petition.

Issue: Whether the driver of the motor vehicle, Floresca, is an employee of Filcar is irrelevant in arriving at the conclusion that Filcar is primarily and directly liable for the damages sustained by Espinas.

Held: While Republic Act No. 4136 or the Land Transportation and Traffic Code does not contain any provision on the liability of registered owners in case of motor vehicle mishaps, Article 2176, in relation with Article 2180, of the Civil Code imposes an obligation upon Filcar, as registered owner, to answer for the damages caused to Espinas’ car. This interpretation is consistent with the strong public policy of maintaining road safety, thereby reinforcing the aim of the State to promote the responsible operation of motor vehicles by its citizens. This does not mean, however, that Filcar is left without any recourse against the actual employer of the driver and the driver himself. Under the civil law principle of unjust enrichment, the registered owner of the motor vehicle has a right to be indemnified by the actual employer of the driver of the amount that he may be required to pay as damages for the injury caused to another. The set-up may be inconvenient for the registered owner of the motor vehicle, but the inconvenience cannot outweigh the more important public policy being advanced by the law in this case which is the protection of innocent persons who may be victims of reckless drivers and irresponsible motor vehicle owners.

FEB Leasing and Finance Corporation vs. Spouses Sergio Baylon, et al. G.R. No. 181398 June 29, 2011 Facts: 

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An Isuzu oil tanker running along Del Monte Avenue in Quezon City and bearing plate number TDY 712 hit Loretta, daughter of respondent spouses 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. (BG Hauler) and was being driven by the latter’s driver, Manuel Y. Estilloso. The oil tanker was insured by FGU Insurance Corp. (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 employeremployee 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. For its part, FGU Insurance 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. The RTC 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. The RTC found that since FGU Insurance already paid the amount of P450,000.00 to the spouses Baylon, BG Hauler, and petitioner, the insurer’s obligation has been satisfactorily fulfilled. The RTC thus dismissed the cross-claim of BG Hauler against FGU Insurance. The Court of Appeals affirmed the RTC Decision but with the modification that the award of attorney’s fees be deleted for being speculative. Dissatisfied, petitioner and BG Hauler, joined by the driver, filed two separate motions for reconsideration. The Court of Appeals denied both motions for lack of merit.

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Unconvinced, petitioner alone filed the present petition for review on certiorari impleading the spouses Baylon, BG Hauler, and the driver as respondents.

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: 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 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.

Filipinas Synthetic Fiber Corporation vs. Wilfredo De Los Santos, et al. G.R. No. 152033 March 16, 2011 Facts: 

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On that same night, at the request of Wilfredo, his brother Armando de los Santos (Armando), husband of respondent Carmina Vda. de los Santos, went to the Rizal Theater to fetch Teresa Elena after the latter's performance. He drove a 1980 Mitsubishi Galant Sigma (Galant Sigma) with Plate No. NSL 559, 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. 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. After trial on the merits, the RTC decided in favor of herein respondents. Petitioner appealed to the CA. The CA affirmed the decision of the trial court. Hence, this petition.

Issue: Whether or not petitioner is liable for the negligent act of the driver. Held: 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. Fylsin did not even sufficiently prove that it exercised the required supervision of Mejia by ensuring rest periods, particularly for its night shift drivers who are working on a time when most of us are usually taking rest. As correctly argued by the plaintiffs-appellees, this is significant because the accident happened at 11:30 p.m., when the shuttle bus was under the control of a driver having no passenger at all. Despite, the lateness of the hour and the darkness of the surrounding area, the bus was travelling at a speed of 70 kilometers per hour. In view of the absence of sufficient proof of its exercise of due diligence, Filsyn cannot escape its solidary liability as the owner of the wayward bus and the employer of the negligent driver of the wayward bus.

Viron Transportation Co., Inc. vs. Alberto Delos Santos y Natividad and Rudy Samidan G.R. No. 138296 November 22, 2000 Facts: 

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Plaintiff, a public utility transportation company, is the registered owner of Viron Transit Bus No. 1080, with Plate No. TB-AVC-332; while the defendant Rudy Samidan is the registered owner of the Forward Cargo Truck with Plate No. TDY-524 which, at the time of the vehicular accident in question, was driven and operated by the defendant Alberto delos Santos y Natividad. The aforesaid bus was driven by plaintiff’s regular driver Wilfredo Villanueva along MacArthur Highway within the vicinity of Barangay Parsolingan, Gerona, Tarlac coming from the North en route to its destination in Manila. It was following the Forward Cargo Truck proceeding from the same direction then being driven, as aforesaid, by the defendant Alberto delos Santos. The cargo truck swerved to the right shoulder of the road and, while about to be overtaken by the bus, again swerved to the left to occupy its lane. It was at that instance that the collision occurred, the left front side of the truck collided with the right front side of the bus causing the two vehicles substantial damages. 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 as mentioned at the outset affirmed in toto the decision of the lower court. Its motion for reconsideration has been denied. Hence, this petition.

Issue: Whether or not petitioner is liable for the negligent acts of Wilfredo. Held: It is plain to see that the fault or negligence was attributable to the driver of the Viron passenger bus. In any event, it is doctrinally entrenched that the assessment of the trial judge as to the issue of credibility binds the appellate court because he is in a better position to decide the issue, having heard the witnesses and observed their deportment and manner of testifying during the trial, except when the trial court has plainly overlooked certain facts of

substance and value, that, if considered, might affect the result of the case, or where the assessment is clearly shown to be arbitrary. Petitioner has not shown this case to fall under the exception. In fine, when the employee causes damage due to his own negligence while performing his own duties, there arises the juris tantum presumption that the employer is negligent, rebuttable only by proof of observance of the diligence of a good father of a family. Petitioner, through its witnesses, namely, Danilo Azardon, a shop supervisor and Fernando Mallare, an administrative officer, failed to rebut such legal presumption of negligence in the selection and supervision of employees, thus, petitioner as the employer is responsible for damages, the basis of the liability being the relationship of pater familias or on the employer’s own negligence. Hence, with the allegations and subsequent proof of negligence against the bus driver of petitioner, the lower courts correctly adjudged petitioner liable for damages.

Mercury Drug Corporation vs. Sebastian Baking G.R. No. 156037 May 25, 2007 Facts: 

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Sebastian M. Baking, respondent, went to the clinic of Dr. Cesar Sy for a medical checkup. 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. Respondent filed with the Regional Trial Court (RTC), Branch 80 of Quezon City a complaint for damages against petitioner. After hearing, the trial court rendered a decision in favor of respondent. On appeal, the Court of Appeals, affirmed in toto the RTC judgment. Petitioner filed a motion for reconsideration but it was denied. Hence, this petition.

Issue: Whether or not petitioner was negligent, and if so, whether such negligence was the proximate cause of respondent’s accident.

Held: It is generally recognized that the drugstore business is imbued with public interest. The health and safety of the people will be put into jeopardy if drugstore employees will not exercise the highest degree of care and diligence in selling medicines. Obviously, petitioner’s employee was grossly negligent in selling to respondent Dormicum, instead of the prescribed Diamicron. Considering that a fatal mistake could be a matter of life and death for a buying patient, the said employee should have been very cautious in dispensing medicines. She should have verified whether the medicine she gave respondent was indeed the one prescribed by his physician. The care required must be commensurate with the danger involved, and the skill employed must correspond with the superior knowledge of the business which the law demands. 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.

Safeguard Security Agency, Inc., and Admer Pajarillo vs. Lauro Tangco, et al. G.R. No. 165732 December 14, 2006 Facts: 

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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. Lauro Tangco, 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 RTC of Quezon City subsequently convicted Pajarillo of Homicide. On appeal to the CA, the RTC decision was affirmed with modification as to the penalty. Meanwhile, respondents filed with RTC, Branch 273, Marikina City, a complaint for damages against Pajarillo for negligently shooting Evangeline and against Safeguard for failing to observe the diligence of a good father of a family to prevent the damage committed by its security guard. In their Answer, petitioners denied the material allegations in the complaint and alleged that Safeguard exercised the diligence of a good father of a family in the selection and supervision of Pajarillo; that Evangeline's death was not due to Pajarillo's negligence as the latter acted only in self-defense. Trial thereafter ensued. The RTC rendered a decision in favor of respondent. Petitioners appealed the RTC decision to the CA. The CA rendered a decision affirming with modification that Safeguard Security Agency, Inc.'s civil liability is only subsidiary. Petitioners filed their Motion for Reconsideration but the CA denied the motion. Hence, this petition.

Whether or not Safeguard should be held solidarily liable for the damages awarded to respondents. Held: Pajarillo failed to substantiate his claim that Evangeline was seen roaming outside the vicinity of the bank and acting suspiciously prior to the shooting incident. Evangeline's death was merely due to Pajarillo's negligence in shooting her on his imagined threat that Evangeline will rob the bank. 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. The records failed to show that there was adequate training and continuous evaluation of the security guard's performance. Pajarillo had only attended an in-service training conducted by Toyota Sta. Rosa, his first assignment as security guard of Safeguard, which was in collaboration with Safeguard. It was established that the concept of such training was purely on security of equipments to be guarded and protection of the life of the employees. It had not been established that after Pajarillo's training in Toyota, Safeguard had ever conducted further training of Pajarillo when he was later assigned to guard a bank which has a different nature of business with that of Toyota. In fact, Pajarillo testified that being on duty in a bank is different from being on duty in a factory since a bank is a very sensitive area.

Ernesto Pleyto and Philippine Rabbit Bus Lines, Inc. vs. Maria Lomboy and Carmela Lomboy G.R. No. 148737 June 16, 2004 Facts: 

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PRBL Bus No. 1539, with Plate No. CVD 556, driven by petitioner Pleyto, was traveling along MacArthur Highway in Gerona, Tarlac bound for Vigan, Ilocos Sur. It was drizzling that morning and the macadam road was wet. Right in front of the bus, headed north, was the tricycle with Plate No. CX 7844, owned and driven by one Rodolfo Esguerra. According to Rolly Orpilla, a witness and one of the bus passengers, Pleyto tried to overtake Esguerra’s tricycle but hit it instead. Pleyto then swerved into the left opposite lane. Coming down the lane, some fifty meters away, was a southbound Mitsubishi Lancer car, with Plate No. PRS 941, driven by Arnulfo Asuncion. The car was headed for Manila with some passengers. Seated beside Arnulfo was his brother-in-law, Ricardo Lomboy, while in the back seat were Ricardo’s 18-year old daughter Carmela and her friend, one Rhino Daba. PRBL Bus No. 1539 smashed head-on the car, killing Arnulfo and Ricardo instantly. Carmela and Rhino suffered injuries, but only Carmela required hospitalization. Petitioners PRBL and Ernesto Pleyto both claimed that the bus was running slowly at the time of the accident. They pointed out that Bus No. 1539 had been inspected by driver Pleyto and examined by a mechanic prior to the trip, in accordance with the company’s standard operating procedure. It was found in good working condition. The trial court rendered a decision in favor of respondents. On appeal, the CA affirmed with modification the decision of the trial court by reducing the award of damages. Petitioners then moved for reconsideration, but the appellate court denied it. Hence, the instant petition.

Issue: Whether or not petitioner was negligent. Held: Petitioner Pleyto violated traffic rules and regulations when he overtook the tricycle despite the presence of an oncoming car in the other lane. Article 2185 of the Civil Code lays down the

presumption that a person driving a motor vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation. As found by both the Court of Appeals and the trial court, petitioners failed to present any convincing proof rebutting such presumption. A driver abandoning his proper lane for the purpose of overtaking another vehicle in an ordinary situation has the duty to see to it that the road is clear and not to proceed if he cannot do so in safety. When a motor vehicle is approaching or rounding a curve, there is special necessity for keeping to the right side of the road and the driver does not have the right to drive on the left hand side relying upon having time to turn to the right if a car approaching from the opposite direction comes into view. 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.

Viron Transportation Co., Inc. vs. Alberto Delos Santos y Natividad and Rudy Samidan G.R. No. 138296 November 22, 2000 Facts: 

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Plaintiff, a public utility transportation company, is the registered owner of Viron Transit Bus No. 1080, with Plate No. TB-AVC-332; while the defendant Rudy Samidan is the registered owner of the Forward Cargo Truck with Plate No. TDY-524 which, at the time of the vehicular accident in question, was driven and operated by the defendant Alberto delos Santos y Natividad. The aforesaid bus was driven by plaintiff’s regular driver Wilfredo Villanueva along MacArthur Highway within the vicinity of Barangay Parsolingan, Gerona, Tarlac coming from the North en route to its destination in Manila. It was following the Forward Cargo Truck proceeding from the same direction then being driven, as aforesaid, by the defendant Alberto delos Santos. The cargo truck swerved to the right shoulder of the road and, while about to be overtaken by the bus, again swerved to the left to occupy its lane. It was at that instance that the collision occurred, the left front side of the truck collided with the right front side of the bus causing the two vehicles substantial damages. 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 as mentioned at the outset affirmed in toto the decision of the lower court. Its motion for reconsideration has been denied. Hence, this petition.

Issue: Whether or not petitioner is liable for the negligent acts of Wilfredo. Held: It is plain to see that the fault or negligence was attributable to the driver of the Viron passenger bus. In any event, it is doctrinally entrenched that the assessment of the trial judge as to the issue of credibility binds the appellate court because he is in a better position to decide the issue, having heard the witnesses and observed their deportment and manner of testifying during the trial, except when the trial court has plainly overlooked certain facts of

substance and value, that, if considered, might affect the result of the case, or where the assessment is clearly shown to be arbitrary. Petitioner has not shown this case to fall under the exception. In fine, when the employee causes damage due to his own negligence while performing his own duties, there arises the juris tantum presumption that the employer is negligent, rebuttable only by proof of observance of the diligence of a good father of a family. Petitioner, through its witnesses, namely, Danilo Azardon, a shop supervisor and Fernando Mallare, an administrative officer, failed to rebut such legal presumption of negligence in the selection and supervision of employees, thus, petitioner as the employer is responsible for damages, the basis of the liability being the relationship of pater familias or on the employer’s own negligence. Hence, with the allegations and subsequent proof of negligence against the bus driver of petitioner, the lower courts correctly adjudged petitioner liable for damages.

Ernesto Syki vs. Salvador Begasa G.R. No. 149149 October 23, 2003 Facts: 

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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 (femur). He also suffered lacerations and abrasions in his left leg. 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, the owner 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, actual and moral damages plus attorney’s fees. Petitioner Syki and his driver appealed to the Court of Appeals. However, the appellate court found no reversible error in the decision of the trial court and affirmed the same in toto. The appellate court also denied their motion for reconsideration. Hence, this petition.

Issue: Whether or not petitioner had exercised the diligence of a good father of a family in the selection and supervision of his employee. Held: 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 employee. 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. The failure of the defendant company to produce in court any record or other documentary proof tending to establish that it had exercised all the diligence of a good father of a family in the selection and supervision of its drivers and buses, notwithstanding the calls therefore by both the trial court and the opposing counsel, argues strongly against its pretensions.

Cecilia Yambao vs. Melchorita Zuniga, et al G.R. No. 146173 December 11, 2003 Facts: 

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The bus owned by the petitioner was being driven by her driver, one Ceferino G. Venturina along the northbound lane of Epifanio delos Santos Avenue (EDSA), within the vicinity of Bagong Barrio, Kalookan City. With Venturina was the bus conductor, Fernando Dumaliang. Suddenly, the bus bumped Herminigildo Zuñiga, 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 damages, 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 petitioner vehemently denied the material allegations of the complaint. She tried to shift the blame for the accident upon the victim, theorizing that Herminigildo bumped into her bus, while avoiding an unidentified woman who was chasing him. 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 trial court rendered judgment in favor of the private respondents. On appeal, the CA affirmed the decision of the trial court. Yambao then duly moved for reconsideration, but her motion was denied for want of merit. Hence, this petition for review.

Issue: Whether or not 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: Petitioner failed to present convincing proof that she went to this extent of verifying Venturina’s qualifications, safety record, and driving history. The presumption juris tantum 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 seminars on road safety and traffic efficiency. Hence, petitioner cannot claim exemption from any liability arising from the recklessness or negligence of Venturina.

Mindanao Terminal and Brokerage Service, Inc. vs. Phoenix Assurance Company of New York/ MCGEE & Co., Inc. G.R. No. 162467 May 8, 2009 Facts: 

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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, Branch 12. The RTC dismissed the complaint and awarded the counterclaim of Mindanao Terminal. Phoenix and McGee appealed to the Court of Appeals. The appellate court reversed and set aside the decision of the RTC. Mindanao Terminal filed a motion for reconsideration, which the Court of Appeals denied. Hence, this present petition for review.

Issue: Whether or not Mindanao Terminal observed the degree of diligence required by law of a stevedoring company. Held: Phoenix and McGee failed to prove by preponderance of evidence that Mindanao Terminal had acted negligently. 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.

YHT Realty Corporation, Erlinda Lainez and Anicia Payam vs. Court of Appeals and Maurice McLoughlin G.R. No. 126780 February 17, 2005 Facts: 

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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. After returning to Manila, he checked out of Tropicana and left for Australia. When he arrived in Australia, he discovered that the envelope with Ten Thousand US Dollars (US$10,000.00) was short of Five Thousand US Dollars (US$5,000). He also noticed that the jewelry which he bought in Hongkong and stored in the safety deposit box upon his return to Tropicana was likewise missing, except for a diamond bracelet. When McLoughlin came back to the Philippines, he asked Lainez if some money and/or jewelry which he had lost were found and returned to her or to the management. However, Lainez told him that no one in the hotel found such things and none were turned over to the management. He again registered at Tropicana and rented a safety deposit box. He noticed that in the envelope containing Fifteen Thousand US Dollars (US$15,000.00), Two Thousand US Dollars (US$2,000.00) were missing and in the envelope previously containing Ten Thousand Australian Dollars (AUS$10,000.00), Four Thousand Five Hundred Australian Dollars (AUS$4,500.00) were missing. When McLoughlin discovered the loss, he immediately confronted Lainez and Payam who admitted that Tan opened the safety deposit box with the key assigned to him. McLoughlin went up to his room where Tan was staying and confronted her. Tan admitted that she had stolen McLoughlin’s key and was able to open the safety deposit box with the assistance of Lopez, Payam and Lainez. Lopez also told McLoughlin that Tan stole the key assigned to McLoughlin while the latter was asleep.

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Meetings were held between McLoughlin and his lawyer which resulted to the filing of a complaint for damages against YHT Realty Corporation, Lopez, Lainez, Payam and Tan (defendants) for the loss of McLoughlin’s money. After filing the complaint, McLoughlin left again for Australia to attend to an urgent business matter. Tan and Lopez, however, were not served with summons, and trial proceeded with only Lainez, Payam and YHT Realty Corporation as defendants. After trial, the RTC of Manila rendered judgment in favor of McLoughlin. The trial court found that defendants acted with gross negligence in the performance and exercise of their duties and obligations as innkeepers and were therefore liable to answer for the losses incurred by McLoughlin. The Court of Appeals affirmed the disquisitions made by the lower court except as to the amount of damages awarded. Petitioners filed a motion for reconsideration but was denied. Hence, this petition.

Issue: Whether or not a hotel may evade liability for the loss of items left with it for safekeeping by its guests, by having these guests execute written waivers holding the establishment or its employees free from blame for such loss in light of Article 2003 of the Civil Code which voids such waivers. Held: In the case at bar, the responsibility of securing the safety deposit box was shared not only by the guest himself but also by the management since two keys are necessary to open the safety deposit box. Without the assistance of hotel employees, the loss would not have occurred. Thus, Tropicana was guilty of concurrent negligence in allowing Tan, who was not the registered guest, to open the safety deposit box of McLoughlin, even assuming that the latter was also guilty of negligence in allowing another person to use his key. To rule otherwise would result in undermining the safety of the safety deposit boxes in hotels for the management will be given imprimatur to allow any person, under the pretense of being a family member or a visitor of the guest, to have access to the safety deposit box without fear of any liability that will attach thereafter in case such person turns out to be a complete stranger. This will allow the hotel to evade responsibility for any liability incurred by its employees in conspiracy with the guest’s relatives and visitors. Petitioners contend that McLoughlin’s case was mounted on the theory of contract, but the trial court and the appellate court upheld the grant of the claims of the latter on the basis of tort. There is nothing anomalous in how the lower courts decided the controversy for this Court

has pronounced a jurisprudential rule that tort liability can exist even if there are already contractual relations. The act that breaks the contract may also be tort.

Rogelio Ramos, et al vs. Court of Appeals, et al. G.R. No. 124354 April 11, 2002 Facts: 

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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. 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. 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. 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 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 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. The doctors explained to petitioner Rogelio that his wife had bronchospasm. Erlinda stayed in the ICU for a month. She was released from the

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hospital only four months later. 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 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.

Issue: Whether or not the doctrine of res ipsa loquitur applies to the case. Held: The doctrine of res ipsa loquitur is appropriate in the case at bar. The damage sustained by Erlinda in her brain prior to a scheduled gall bladder operation presents a case for the application of res ipsa loquitur. In the present case, Erlinda submitted herself for cholecystectomy and expected a routine general surgery to be performed on her gall bladder. On that fateful day she delivered her person over to the care, custody and control of private respondents who exercised complete and exclusive control over her. At the time of submission, Erlinda was neurologically sound and, except for a few minor discomforts, was likewise physically fit in mind and body. However, during the administration of anesthesia and prior to the performance of cholecystectomy she suffered irreparable damage to her brain. Thus, without undergoing surgery, she went out of the operating room already decerebrate and totally incapacitated. Obviously, brain damage, which Erlinda sustained, is an injury which does not normally occur in the process of a gall bladder operation. In fact, this kind of situation does not happen in the absence of negligence of someone in the administration of anesthesia and in the use of endotracheal tube. Normally, a person being put under anesthesia is not rendered decerebrate as a consequence of administering such anesthesia if the proper procedure was followed. Furthermore, the instruments used in the administration of anesthesia, including the endotracheal tube, were all under the exclusive control of private respondents, who are the physicians-in-charge. Likewise, petitioner Erlinda could not have been guilty of contributory negligence because she was under the influence of anesthetics which rendered her unconscious. Considering that a sound and unaffected member of the body (the brain) is injured or destroyed while the patient is unconscious and under the immediate and exclusive control of the physicians, we hold that a practical administration of justice dictates the application of res ipsa loquitur. Upon these facts and under these circumstances the Court would be able to say, as a matter of common knowledge and observation, if negligence attended the management

and care of the patient. Moreover, the liability of the physicians and the hospital in this case is not predicated upon an alleged failure to secure the desired results of an operation nor on an alleged lack of skill in the diagnosis or treatment as in fact no operation or treatment was ever performed on Erlinda. Thus, upon all these initial determination a case is made out for the application of the doctrine of res ipsa loquitur.

Leah Alesna Reyes, et al vs. Sisters of Mercy Hospital, et al G.R. No. 130547 October 3, 2000 Facts: 

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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, 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. 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. 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

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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. Petitioners filed before the Regional Trial Court of Cebu City a complaint for damages against respondents Sisters of Mercy, Sister Rose Palacio, Dr. Marvie Blanes, Dr. Marlyn Rico, and nurse Josephine Pagente. Petitioners amended their complaint to implead respondent Mercy Community Clinic as additional defendant and to drop the name of Josephine Pagente as defendant since she was no longer connected with respondent hospital. Their principal contention was that Jorge did not die of typhoid fever. Instead, his death was due to the wrongful administration of chloromycetin. The trial court rendered its decision absolving respondents from the charges of negligence and dismissing petitioners’ action for damages. The trial court likewise dismissed respondents’ counterclaim, holding that, in seeking damages from respondents, petitioners were impelled by the honest belief that Jorge’s death was due to the latter’s negligence. Petitioners brought the matter to the Court of Appeals. The Court of Appeals affirmed the decision of the trial court. Hence this petition.

Issue: Whether or not petitioners have established specific acts of negligence allegedly committed by respondent doctors. Held: The petitioners were not able to establish the specific acts of negligence allegedly committed by respondent doctors. The two doctors presented by respondents clearly were experts on the subject. They vouched for the correctness of Dr. Marlyn Rico’s diagnosis. Dr. Peter Gotiong, a diplomate whose specialization is infectious diseases and microbiology and an associate professor at the Southwestern University College of Medicine and the Gullas College of Medicine, testified that he has already treated over a thousand cases of typhoid fever. According to him, when a case of typhoid fever is suspected, the Widal test is normally used, and if the 1:320 results of the Widal test on Jorge Reyes had been presented to him along with the patient’s history, his impression would also be that the patient was suffering from typhoid fever. As to the treatment of the

disease, he stated that chloromycetin was the drug of choice. He also explained that despite the measures taken by respondent doctors and the intravenous administration of two doses of chloromycetin, complications of the disease could not be discounted. Indeed, the standard contemplated is not what is actually the average merit among all known practitioners from the best to the worst and from the most to the least experienced, but the reasonable average merit among the ordinarily good physicians. Here, Dr. Marlyn Rico did not depart from the reasonable standard recommended by the experts as she in fact observed the due care required under the circumstances. Though the Widal test is not conclusive, it remains a standard diagnostic test for typhoid fever and, in the present case, greater accuracy through repeated testing was rendered unobtainable by the early death of the patient. The results of the Widal test and the patient’s history of fever with chills for five days, taken with the fact that typhoid fever was then prevalent as indicated by the fact that the clinic had been getting about 15 to 20 typhoid cases a month, were sufficient to give upon any doctor of reasonable skill the impression that Jorge Reyes had typhoid fever.

Rogelio Nogales, et al vs. Capitol Medical Center, et al. G.R. No. 142625 December 19, 2006 Facts: 

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Pregnant with her fourth child, Corazon Nogales, who was then 37 years old, was under the exclusive prenatal care of Dr. Oscar Estrada beginning on her fourth month of pregnancy. While Corazon was on her last trimester of pregnancy, Dr. Estrada noted an increase in her blood pressure and development of leg edema indicating preeclampsia, which is a dangerous complication of pregnancy. During the course of the delivery, Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to extract Corazon’s baby. In the process, a 1.0 x 2.5 cm. piece of cervical tissue was allegedly torn. The baby came out in an apnic, cyanotic, weak and injured condition. Consequently, the baby had to be intubated and resuscitated by Dr. Enriquez and Dr. Payumo. Corazon began to manifest moderate vaginal bleeding which rapidly became profuse. Corazon’s blood pressure dropped from 130/80 to 60/40 within five minutes. There was continuous profuse vaginal bleeding. The assisting nurse administered hemacel through a gauge 19 needle as a side drip to the ongoing intravenous injection of dextrose. Upon being informed that Corazon was bleeding profusely, Dr. Espinola ordered immediate hysterectomy. Rogelio was made to sign a Consent to Operation. Despite Dr. Espinola’s efforts, Corazon. The cause of death was hemorrhage, post partum. Petitioners filed a complaint for damages with the Regional Trial Court of Manila against CMC, Dr. Estrada, Dr. Villaflor, Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr. Espinola, and a certain Nurse J. Dumlao for the death of Corazon. Petitioners mainly contended that defendant physicians and CMC personnel were negligent in the treatment and management of Corazon’s condition. Petitioners charged CMC with negligence in the selection and supervision of defendant physicians and hospital staff. After more than 11 years of trial, the trial court rendered judgment finding Dr. Estrada solely liable for damages. Petitioners appealed the trial court’s decision. Petitioners claimed that aside from Dr. Estrada, the remaining respondents should be held equally liable for negligence. Petitioners pointed out the extent of each respondent’s alleged liability. The Court of Appeals affirmed the decision of the trial court. Petitioners filed a motion for reconsideration but was denied by the Court of Appeals. Hence, this petition.

Issue: Whether or not CMC is vicariously liable for the negligence of Dr. Estrada. Held: 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. CMC’s defense that all it did was to extend to Corazon its facilities is untenable. The Court cannot close its eyes to the reality that hospitals, such as CMC, are in the business of treatment. Even simple negligence is not subject to blanket release in favor of establishments like hospitals but may only mitigate liability depending on the circumstances. When a person needing urgent medical attention rushes to a hospital, he cannot bargain on equal footing with the hospital on the terms of admission and operation. Such a person is literally at the mercy of the hospital. There can be no clearer example of a contract of adhesion than one arising from such a dire situation. Thus, the release forms of CMC cannot relieve CMC from liability for the negligent medical treatment of Corazon.

Professional Services, Inc., Juan Fuentes, Miguel Ampil vs. Natividad and Enrique Agana G.R. No. 126297 January 31, 2007 Facts: 

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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, diagnosed her to be suffering from cancer of the sigmoid. Dr. Ampil, assisted by the medical staff of the Medical City Hospital, performed an anterior resection surgery on Natividad. He found that the malignancy in her sigmoid area had spread on her left ovary, necessitating the removal of certain portions of it. Thus, Dr. Ampil obtained the consent of Natividad’s husband, Enrique Agana, to permit Dr. Juan Fuentes, to perform hysterectomy on her. After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the operation and closed the incision. However, the operation appeared to be flawed. Natividad was released from the hospital. 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 surgery. Dr. Ampil then recommended that she consult an oncologist to examine the cancerous nodes which were not removed during the operation. Natividad, accompanied by her husband, went to the United States to seek further treatment. After four months of consultations and laboratory examinations, Natividad was told she was free of cancer. Hence, she was advised to return to the Philippines. 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. He then assured her that the pains would soon vanish. Dr. Ampil’s assurance did not come true. Instead, the pains intensified, prompting Natividad to seek treatment at the Polymedic General Hospital. While confined there, 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. A recto-vaginal fistula had formed in her reproductive organs which forced stool

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to excrete through the vagina. Another surgical operation was needed to remedy the damage. Thus, in October 1984, Natividad underwent another surgery. Natividad and her husband filed with the RTC, Branch 96, Quezon City a complaint for damages against the Professional Services, Inc. (PSI), owner of the Medical City Hospital, Dr. Ampil, and Dr. Fuentes. They alleged that the latter are liable for negligence for leaving two pieces of gauze inside Natividad’s body and malpractice for concealing their acts of negligence. Pending the outcome of the above cases, Natividad died and was duly substituted by her children. The RTC rendered its Decision in favor of the Aganas, finding PSI, Dr. Ampil and Dr. Fuentes liable for negligence and malpractice. The Court of Appeals rendered a decision affirming the findings of the trial court. Hence, this petition.

Issue: Whether or not petitioners are liable for negligence and malpractice. Held: Dr. Ampil did not inform Natividad about the missing two pieces of gauze. Worse, he even misled her that the pain she was experiencing was the ordinary consequence of her operation. Had he been more candid, Natividad could have taken the immediate and appropriate medical remedy to remove the gauzes from her body. What was initially an act of negligence by Dr. Ampil has ripened into a deliberate wrongful act of deceiving his patient. Under the Captain of the Ship rule, the operating surgeon is the person in complete charge of the surgery room and all personnel connected with the operation. Their duty is to obey his orders. As stated before, Dr. Ampil was the lead surgeon. In other words, he was the Captain of the Ship. That he discharged such role is evident from his following conduct: (1) calling Dr. Fuentes to perform a hysterectomy; (2) examining the work of Dr. Fuentes and finding it in order; (3) granting Dr. Fuentes’ permission to leave; and (4) ordering the closure of the incision. It was this act of ordering the closure of the incision notwithstanding that two pieces of gauze remained unaccounted for, that caused injury to Natividad’s body. Clearly, the control and management of the thing which caused the injury was in the hands of Dr. Ampil, not Dr. Fuentes. In the present case, it was duly established that PSI operates the Medical City Hospital for the purpose and under the concept of providing comprehensive medical services to the public.

Accordingly, it has the duty to exercise reasonable care to protect from harm all patients admitted into its facility for medical treatment. Unfortunately, PSI failed to perform such duty. Not only did PSI breach its duties to oversee or supervise all persons who practice medicine within its walls, it also failed to take an active step in fixing the negligence committed. This renders PSI, not only vicariously liable for the negligence of Dr. Ampil under Article 2180 of the Civil Code, but also directly liable for its own negligence under Article 2176. Once a physician undertakes the treatment and care of a patient, the law imposes on him certain obligations. In order to escape liability, he must possess that reasonable degree of learning, skill and experience required by his profession. At the same time, he must apply reasonable care and diligence in the exercise of his skill and the application of his knowledge, and exert his best judgment.

Professional Services, Inc. vs. Court of Appeals, Natividad and Enrique Agana G.R. No. 126297 February 2, 2010 Facts: 

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PSI, together with Dr. Miguel Ampil (Dr. Ampil) and Dr. Juan Fuentes (Dr. Fuentes), was impleaded by Enrique Agana and Natividad Agana (later substituted by her heirs), in a complaint for damages filed in the Regional Trial Court (RTC) of Quezon City, Branch 96, for the injuries suffered by Natividad when Dr. Ampil and Dr. Fuentes neglected to remove from her body two gauzes which were used in the surgery they performed on at the Medical City General Hospital. PSI was impleaded as owner, operator and manager of the hospital. The RTC held PSI solidarily liable with Dr. Ampil and Dr. Fuentes for damages. On appeal, the Court of Appeals, absolved Dr. Fuentes but affirmed the liability of Dr. Ampil and PSI, subject to the right of PSI to claim reimbursement from Dr. Ampil. On petition for review, the SC, affirmed the CA decision. Hence, this motion for reconsideration.

Issue: Whether or not petitioner can be held liable for the negligence of Dr. Ampil. Held: Control as a determinative factor in testing the employer-employee relationship between doctor and hospital under which the hospital could be held vicariously liable to a patient in medical negligence cases is a requisite fact to be established by preponderance of evidence. Here, there was insufficient evidence that PSI exercised the power of control or wielded such power over the means and the details of the specific process by which Dr. Ampil applied his skills in the treatment of Natividad. There is ample evidence that the hospital (PSI) held out to the patient (Natividad) that the doctor (Dr. Ampil) was its agent. Present are the two factors that determine apparent authority: first, the hospital's implied manifestation to the patient which led the latter to conclude that the doctor was the hospital's agent; and second, the patient’s reliance upon the conduct of the hospital and the doctor, consistent with ordinary care and prudence.

PSI barred itself from arguing in its second motion for reconsideration that the concept of corporate responsibility was not yet in existence at the time Natividad underwent treatment; and that if it had any corporate responsibility, the same was limited to reporting the missing gauzes and did not include “taking an active step in fixing the negligence committed.” An admission made in the pleading cannot be controverted by the party making such admission and is conclusive as to him, and all proofs submitted by him contrary thereto or inconsistent therewith should be ignored, whether or not objection is interposed by a party. The Court therefore maintain the ruling that PSI is vicariously liable for the negligence of Dr. Ampil as its ostensible agent.

Dr. Milagros Cantre vs. Spouses John David Go and Nora Go G.R. No. 160889 April 27, 2007 Facts: 

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Nora gave birth to her fourth child, a baby boy. However, suffered profuse bleeding inside her womb due to some parts of the placenta which were not completely expelled from her womb after delivery. Consequently, Nora suffered hypovolemic shock, resulting in a drop in her blood pressure to 40 over 0. Petitioner and the assisting resident physician performed various medical procedures to stop the bleeding and to restore Nora’s blood pressure. Nora remained unconscious until she recovered. While in the recovery room, her husband, respondent John David Z. Go noticed a fresh gaping wound two and a half (2 ½) by three and a half (3 ½) inches in the inner portion of her left arm, close to the armpit. He asked the nurses what caused the injury. He was informed it was a burn. John David filed a request for investigation. Petitioner said the blood pressure cuff caused the injury. Nora’s injury was referred to a plastic surgeon at the Dr. Jesus Delgado Memorial Hospital for skin grafting. Her wound was covered with skin sourced from her abdomen, which consequently bore a scar as well. Unfortunately, Nora’s arm would never be the same. Aside from the unsightly mark, the pain in her left arm remains. When sleeping, she has to cradle her wounded arm. Her movements now are also restricted. Her children cannot play with the left side of her body as they might accidentally bump the injured arm, which aches at the slightest touch. Respondent spouses filed a complaint for damages against petitioner, Dr. Abad, and the hospital. The trial court rendered a decision in favor of respondents. Petitioner, Dr. Abad, and the hospital all appealed to the Court of Appeals, which affirmed with modification the trial court decision. Petitioner’s motion for reconsideration was denied by the Court of Appeals. Hence, the instant petition.

Issue: Whether or not petitioner liable for the injury suffered by respondent Nora Go.

Held: In cases involving medical negligence, 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. 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. As to the first requirement, the gaping wound on Nora’s arm is certainly not an ordinary occurrence in the act of delivering a baby, far removed as the arm is from the organs involved in the process of giving birth. Such injury could not have happened unless negligence had set in somewhere. Second, whether the injury was caused by the droplight or by the blood pressure cuff is of no moment. Both instruments are deemed within the exclusive control of the physician in charge under the "captain of the ship" doctrine. This doctrine holds the surgeon in charge of an operation liable for the negligence of his assistants during the time when those assistants are under the surgeon’s control. In this particular case, it can be logically inferred that petitioner, the senior consultant in charge during the delivery of Nora’s baby, exercised control over the assistants assigned to both the use of the droplight and the taking of Nora’s blood pressure. Hence, the use of the droplight and the blood pressure cuff is also within petitioner’s exclusive control. Third, the gaping wound on Nora’s left arm, by its very nature and considering her condition, could only be caused by something external to her and outside her control as she was unconscious while in hypovolemic shock. Hence, Nora could not, by any stretch of the imagination, have contributed to her own injury. Based on the foregoing, the presumption that petitioner was negligent in the exercise of her profession stands unrebutted.

Dr. Rubi Li vs. Spouses Reynaldo and Lina Soliman, as parents/heirs of deceased Angelica Soliman G.R. No. 165279 June 7, 2011 Facts: 

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Respondents’ 11-year old daughter, Angelica Soliman, underwent a biopsy of the mass located in her lower extremity at the St. Luke’s Medical Center (SLMC). Results showed that Angelica was suffering from osteosarcoma, osteoblastic type, a high-grade (highly malignant) cancer of the bone which usually afflicts teenage children. Following this diagnosis and as primary intervention, Angelica’s right leg was amputated by Dr. Jaime Tamayo in order to remove the tumor. As adjuvant treatment to eliminate any remaining cancer cells, and hence minimize the chances of recurrence and prevent the disease from spreading to other parts of the patient’s body (metastasis), chemotherapy was suggested by Dr. Tamayo. Dr. Tamayo referred Angelica to another doctor at SLMC, herein petitioner Dr. Rubi Li, a medical oncologist. Angelica was admitted to SLMC. However, just eleven (11) days after the (intravenous) administration of the first cycle of the chemotherapy regimen. Because SLMC refused to release a death certificate without full payment of their hospital bill, respondents brought the cadaver of Angelica to the Philippine National Police (PNP) Crime Laboratory at Camp Crame for post-mortem examination. The Medico-Legal Report issued by said institution indicated the cause of death as “Hypovolemic shock secondary to multiple organ hemorrhages and Disseminated Intravascular Coagulation.” Respondents filed a damage suit against petitioner, Dr. Leo Marbella, Mr. Jose Ledesma, a certain Dr. Arriete and SLMC. Respondents charged them with negligence and disregard of Angelica’s safety, health and welfare by their careless administration of the chemotherapy drugs, their failure to observe the essential precautions in detecting early the symptoms of fatal blood platelet decrease and stopping early on the chemotherapy, which bleeding led to hypovolemic shock that caused Angelica’s untimely demise. In her answer, petitioner denied having been negligent in administering the chemotherapy drugs to Angelica and asserted that she had fully explained to respondents how the chemotherapy will affect not only the cancer cells but also the patient’s normal body parts, including the lowering of white and red blood cells and platelets.

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In dismissing the complaint, the trial court held that petitioner 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 but despite all efforts said patient died. Respondents appealed to the CA which, 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, found that petitioner as her attending physician failed to fully explain to the respondents all the known side effects of chemotherapy. The CA ruled that petitioner is negligent in not informing respondent other side effects which gravely affected their child and therefore petitioner is liable for damages. Petitioner filed a motion for partial reconsideration which the appellate court denied. Hence, this petition.

Issue: Whether or not the petitioner can be held liable for failure to fully disclose serious side effects to the parents of the child patient who died while undergoing chemotherapy, despite the absence of finding that petitioner was negligent in administering the said treatment. Held: Examining the evidence on record, we hold that there was adequate disclosure of material risks inherent in the chemotherapy procedure performed with the consent of Angelica’s parents. Respondents could not have been unaware in the course of initial treatment and amputation of Angelica’s lower extremity, that her immune system was already weak on account of the malignant tumor in her knee. 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 respondents understood very well that the severity of these side effects will not be the same for all patients undergoing the procedure. In other words, by the nature of the disease itself, each patient’s reaction to the chemical agents even with pre-treatment laboratory tests cannot be precisely determined by the physician. That death can possibly result from complications of the treatment or the underlying cancer itself, immediately or sometime after the administration of chemotherapy drugs, is a risk that cannot be ruled out, as with most other major medical procedures, but such conclusion can be reasonably drawn from the general side effects of chemotherapy already disclosed. As a physician, petitioner can reasonably expect the respondents to have considered the variables in the recommended treatment for their daughter afflicted with a life-threatening illness. On the other hand, it is difficult to give credence to respondents’ claim that petitioner

told them of 95% chance of recovery for their daughter, as it was unlikely for doctors like petitioner who were dealing with grave conditions such as cancer to have falsely assured patients of chemotherapy’s success rate. Besides, informed consent laws in other countries generally require only a reasonable explanation of potential harms, so specific disclosures such as statistical data, may not be legally necessary.

People of the Philippines vs. Glenn De Los Santos G.R. No. 131588 March 27, 2001 Facts: 

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Accused-appellant, with deliberate intent to kill, taking advantage of his driven motor vehicle, an Isuzu Elf, and with treachery, killed and inflicted mortal wounds from behind in a sudden and unexpected manner with the use of a vehicle members of the Philippine National Police (PNP), undergoing a Special Training Course (Scout Class 07-95), wearing black T-shirts and black short pants, performing an “Endurance Run” of 35 kilometers coming from their camp in Manolo Fortich, Bukidnon, heading to Regional Training Headquarters in Camp Alagar, Cagayan de Oro City. The accused proceeded to operate his driven vehicle (an Isuzu Elf) on high speed directly towards the joggers, thus forcing the rear guards to throw themselves to a nearby canal, to avoid injuries, then hitting, bumping, or ramming the first four (4) victims, causing the bodies to be thrown towards the windshields of said Isuzu Elf, breaking said windshield, and upon being aware that bodies of the victims flew on the windshield of his driven vehicle, instead of applying his brake, continued to travel on a high speed, this time putting off its headlights, thus hitting the succeeding joggers on said 1st line, as a result thereof the 11 person were killed on the spot. While another trainee/victim, Antonio Palomino Mino, died few days after the incident, while the following eleven (11) other trainee/victims were seriously wounded, the accused thus performing all the acts of execution which would produce the crime of Murder as a consequence but nevertheless did not produce it by reason of some cause other than said accused’s spontaneous desistance, that is, by the timely and able medical assistance rendered on the victims which prevented their death. The evidence for the prosecution disclose that the Special Counter Insurgency Operation Unit Training held at Camp Damilag, Manolo Fortich, Bukidnon, started on 1 September 1995 and was to end on 15 October 1995. The last phase of the training was the “endurance run” from said Camp to Camp Alagar, Cagayan de Oro City. The run on 5 October 1995 started at 2:20 a.m. The PNP trainees were divided into three columns: the first and second of which had 22 trainees each, and the third had 21. The trainees were wearing black T-shirts, black short pants, and green and black combat shoes. At the start of the run, a Hummer vehicle tailed the jogging trainees. When they reached Alae, the driver of the Hummer vehicle was instructed to dispatch advanced security at strategic locations in Carmen Hill. Since the jogging trainees were occupying the right

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lane of the highway, two rear security guards were assigned to each rear column. Their duty was to jog backwards facing the oncoming vehicles and give hand signals for other vehicles to take the left lane. Prosecution witnesses Lemuel Y. Pangca and Weldon Sacro testified that they were assigned as rear guards of the first column. They recalled that from Alae to Maitum Highway, Puerto, Cagayan de Oro City, about 20 vehicles passed them, all of which slowed down and took the left portion of the road when signaled to do so. While they were negotiating Maitum Highway, they saw an Isuzu Elf truck 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. Realizing that the vehicle would hit them, the rear guards told their co-trainees to “retract.” The guards forthwith jumped in different directions. Lemuel and Weldon saw their co-trainees being hit by the said vehicle, falling like dominoes one after the other. Some were thrown, and others were overrun by the vehicle. The driver did not reduce his speed even after hitting the first and second columns. The guards then stopped oncoming vehicles to prevent their comrades from being hit again. The trial court judge, together with the City Prosecutor, GLENN and his counsel, conducted an ocular inspection of the place where the incident happened. The trial court convicted GLENN of the complex crime of multiple murder, multiple frustrated murder and multiple attempted murder, with the use of motor vehicle as the qualifying circumstance. It sentenced him to suffer the penalty of death and ordered him to indemnify each group of the heirs of the deceased in the amount of P75,000; each of the victims of frustrated murder in the amount of P30,000; and each of the victims of attempted murder in the amount of P10,000. Hence, this automatic review.

Issue: Whether or not accused-appelant is guilty of the criminal act and whether he is civilly liable for the act commited. Held: The incident, tragic though it was in light of the number of persons killed and seriously injured, was an accident and not an intentional felony. It is significant to note that there is no shred of evidence that GLENN had an axe to grind against the police trainees that would drive him into deliberately hitting them with intent to kill.

Considering that the incident was not a product of a malicious intent but rather the result of a single act of reckless driving, GLENN should be held guilty of the complex crime of reckless imprudence resulting in multiple homicide with serious physical injuries and less serious physical injuries. As far as the award of damages is concerned, the court find a necessity to modify the same. Conformably with current jurisprudence, the court reduced the trial court’s award of death indemnity from P75,000 to P50,000 for each group of heirs of the trainees killed. Likewise, for lack of factual basis, the awards of P30,000 to each of those who suffered serious physical injuries and of P10,000 to each of those who suffered minor physical injuries is deleted.

L.G. Foods Corporation and Victorino Gabor, Vice-President and General Manager vs. Hon. Philadelfa Pagapong-Agraviador, in her capacity as Presiding Judge of Regional Trial Court, Branch 43, Bacolod City, and Spouses Florentino and Theresa Vallejera G.R. No. 158995 September 26, 2006 Facts: 

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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. An Information for Reckless Imprudence Resulting to Homicide was filed against the driver before the Municipal Trial Court in Cities (MTCC), Bacolod City. Unfortunately, before the trial could be concluded, the accused driver committed suicide, evidently bothered by conscience and remorse. On account thereof, the MTCC, dismissed the criminal case. 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. Petitioner prayed in their Answer for the dismissal of the complaint for lack of cause of action on the part of the Vallejera couple. The trial court denied the motion to dismiss for lack of merit and set the case for pretrial. With their motion for reconsideration having been denied by the same court, the petitioners then went on certiorari to the CA. The CA denied the petition and upheld the trial court.

Issue: Whether or not the spouses Vallejeras’ has cause of action against petitioner.

Held: 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 their 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.

Victorino Magat vs. Hon. Leo Medialdea and Santiago Guerrero G.R. No. L-37120 April 20, 1983 Facts: 

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Isidro Q. Aligada, also acting as agent of the defendant, made representations with the plaintiff herein to the effect that defendant desired to procure from Japan thru the plaintiff herein the needed radio transceivers and to this end, Isidro Q. Aligada secured a firm offer in writing. Believing that the defendant would faithfully fulfill his contract with the plaintiff, considering his signed conformity, the plaintiff took steps to advise the Japanese entity entrusted with the manufacture of the items to the effect that the contract between the defendant and the plaintiff has been perfected and that advice with regards to radio frequency would follow as soon as same is received by the plaintiff from the defendant. It has come to the knowledge of the plaintiff that the defendant has been operating his taxicabs without the required radio transceivers and when the U.S. Navy Authorities of Subic Bay, Philippines, 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 the plaintiff, thus destroying the reputation of the plaintiff with the said Naval Authorities of Subic Bay, Philippines, with whom plaintiff transacts business; Plaintiff wrote a letter thru his counsel to ascertain from the defendant as to whether it is his intention to fulfill his part of the agreement with the plaintiff herein or whether he desired to have the contract between them definitely cancelled, but defendant did not even have the courtesy to answer plaintiff's demand. The defendant entered into a contract with the plaintiff without the least intention of faithfully complying with his obligation, he did so only in order to obtain the concession from the U.S. Navy Exchange, Subic Bay, Philippines, of operating a fleet of taxicabs inside the U.S. Naval Base to his financial benefit and at the expense and prejudice of third parties such as the plaintiff. That in view of the defendant's failure to fulfill his contractual obligations with the plaintiff herein, the plaintiff will suffer damages. Respondent Guerrero filed a motion to dismiss said complaint for lack of cause of action.

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The respondent judge, over petitioner's opposition, issued a minute order dismissing the complaint.

Issue: Whether or not respondent can be held liable for damages. Held: Indisputably, the parties, both businessmen, entered into the aforesaid contract with the evident intention of deriving some profits therefrom. Upon breach of the contract by either of them, the other would necessarily suffer loss of his expected profits. Since the loss comes into being at the very moment of breach, such loss is real, fixed and vested and, therefore, recoverable under the law. The damages which the obligor is liable for includes not only the value of the loss suffered by the obligee but also the profits which the latter failed to obtain. 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. On the basis of the facts alleged in the complaint, the court rendered a valid judgment in accordance with the prayer thereof.

Fidela Del Castillo Vda. De Mistica vs. Spouses Bernardino Naguiat and Maria Paulina Gerona-Naguiat G.R. No. 137909 December 11, 2003 Facts: 

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Eulalio Mistica, predecessor-in-interest of petitioner, is the owner of a parcel of land located at Malhacan, Meycauayan, Bulacan. A portion thereof was leased to Respondent Bernardino Naguiat. Respondent Bernardino Naguiat gave a downpayment of P2,000.00. He made another partial payment of P1,000.00. He failed to make any payments thereafter. Eulalio Mistica died. 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. 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. Respondents also filed a motion to dismiss which was denied by the court. The motion for reconsideration was likewise denied. The trial court rendered a decision in favor of petitioner. On appeal, the CA held that respondents did not breach the Contract of Sale. The appellate court ruled that the only remedy available was to order them to pay petitioner the fair market value of the usurped portion. Hence, this Petition.

Issue: Whether or not petitioner can rescind the contract. Held: In a contract of sale, the remedy of an unpaid seller is either specific performance or rescission. Under Article 1191 of the Civil Code, the right to rescind an obligation is predicated on the violation of the reciprocity between parties, brought about by a breach of faith by one of them. 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. In the Kasulatan, it was stipulated that payment could be made even after ten years from the execution of the Contract, provided the vendee paid 12 percent interest. The stipulations of the contract constitute the law between the parties; thus, courts have no alternative but to enforce them as agreed upon and written.

Spouses Henry Co and Elizabeth Co and Melody Co vs. Court of Appeals, et al G.R. No. 112330 August 17, 1999

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Plaintiff entered into a verbal contract with defendant for her purchase of the latter’s house and lot located at 316 Beata St., New Alabang Village, Muntinlupa, Metro Manila, for and in consideration of the sum of $100,000.00. One week thereafter, and shortly before she left for the United States, plaintiff paid to the defendants the amounts of $1,000.00 and P40,000.00 as earnest money, in order that the same may be reserved for her purchase, said earnest money to be deducted from the total purchase price. Defendant’s counsel, Atty. Leopoldo Cotaco, wrote a letter to the plaintiff demanding that she pay the balance of $70,000.00 and not receiving any response thereto, said lawyer wrote another letter to plaintiff, informing her that she has lost her ‘option to purchase’ the property subject of this case and offered to sell her another property. Atty. Estrella O. Laysa, counsel for plaintiff, wrote a letter to Atty. Leopoldo Cotaco informing him that plaintiff is now ready to pay the remaining balance to complete the sum of $100,000.00, the agreed amount as selling price and for that reason, plaintiff filed the instant complaint. The Regional Trial Court (RTC) ruled in favor of private respondent Adoracion Custodio (CUSTODIO) and ordered the petitioner spouses Henry and Elizabeth Co (COS) to refund the amount of $30,000.00 in CUSTODIO’s favor. Not satisfied with the decision, the COS appealed to the Court of Appeals which affirmed the decision of the RTC. Hence, this appeal.

Issue: Whether or not the contract entered into by the parties can be rescinded. Held: Since it has been shown that the appellee who was not in default, was willing to perform part of the contract while the appellants were not, rescission of the contract is in order. 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, (Article 1191, same Code). 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 x x x x (Article 1385, same Code). In the case at bar, the property involved has not been delivered to the appellee. She has therefore nothing to return to the appellants. The price received by the appellants has to be returned to the appellee as aptly ruled by the lower court, for such is a consequence of rescission, which is to restore the parties in their former situations.

Heirs of Sofia Quirong, represented by Romeo Quirong vs. Development Bank of the Philippines G.R. No. 173441 December 3, 2009 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.

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After the Funcions failed to pay their loan, the DBP foreclosed the mortgage on the lot and consolidated ownership in its name.

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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.

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Two months after that sale, 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, Branch 42.

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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.

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Sofia Quirong having since died, her heirs (petitioner Quirong heirs) filed an answer in intervention 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. 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. The Quirong heirs filed the present action against the DBP before the RTC of Dagupan City, Branch 44, 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 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 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. 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: An 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 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.

Heirs of Ramon Gaite, et al vs. the Plaza, Inc. and FGU Insurance Corporation G.R. No. 177685 January 26, 2011 Facts: 

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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 of P7,600,000.00. 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. The Plaza paid P1,155,000.00 less withholding taxes as down payment to Gaite. Thereafter, Rhogen commenced construction of the restaurant building. 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. Engr. Gonzales informed Gaite that the building permit for the construction of the restaurant was revoked for non-compliance with the provisions of the National Building Code and for the additional temporary construction without permit. 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 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. However, 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 of P63,058.50 from The Plaza representing the work that has already been completed by Rhogen. 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

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on the stipulated date. Reyes argued that the down payment made by The Plaza was more than enough to cover Rhogen’s expenses. The Plaza notified Gaite that it could no longer credit any payment to Rhogen for the work it had completed because the evaluation of the extent, condition, and cost of work done revealed that in addition to the violations committed during the construction of the building, the structure was not in accordance with plans approved by the government and accepted by Ayala. Hence, The Plaza demanded the reimbursement of the down payment, the cost of uprooting or removal of the defective structures, the value of owner-furnished materials, and payment of liquidated damages. Branch 63 of the RTC Makati rendered its decision granting the claims of The Plaza against Rhogen, the Gaites and FGU, and the cross-claim of FGU against Rhogen and the Gaites. The CA affirmed the Decision of the trial court but modified the award of damages. The motion for reconsideration of the decision was denied. Hence, this appeal.

Issue: Whether or not petitioners are liable for breach of contract. Held: Rhogen committed a serious breach of its contract with The Plaza, which justified the latter in terminating the contract. Petitioners are thus liable for damages for having breached their contract with respondent The Plaza. Article 1170 of the Civil Code provides 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. 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. Moreover, after it relinquished the project, the site inspection appraisal jointly conducted by the Project Manager, Building 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.

Solar Harvest, Inc. vs. Davao Corrugated Carton Corporation G.R. No. 176868 July 26, 2010 Facts: 

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Petitioner, Solar Harvest, Inc., entered into an agreement with respondent, Davao Corrugated Carton Corporation, for the purchase of corrugated carton boxes, specifically designed for petitioner’s business of exporting fresh bananas, at US$1.10 each. The agreement was not reduced into writing. To get the production underway, petitioner deposited, US$40,150.00 in respondent’s US Dollar Savings Account with Westmont Bank, as full payment for the ordered boxes. Despite such payment, petitioner did not receive any boxes from respondent. Petitioner wrote a demand letter for reimbursement of the amount paid. Respondent replied that the boxes had been completed and that petitioner failed to pick them up from the former’s warehouse 30 days from completion, as agreed upon. Respondent mentioned that petitioner even placed an additional order of 24,000 boxes, out of which, 14,000 had been manufactured without any advanced payment from petitioner. Respondent then demanded petitioner to remove the boxes from the factory and to pay the balance of US$15,400.00 for the additional boxes and P132,000.00 as storage fee. Petitioner filed a Complaint for sum of money and damages against respondent. The Complaint averred that the parties agreed that the boxes will be delivered within 30 days from payment but respondent failed to manufacture and deliver the boxes within such time. The Regional Trial Court (RTC) ruled that respondent did not commit any breach of faith that would justify rescission of the contract and the consequent reimbursement of the amount paid by petitioner. The RTC said that respondent was able to produce the ordered boxes but petitioner failed to obtain possession thereof because its ship did not arrive. On appeal, the appellate court affirmed the decision of the trial court. Petitioner moved for reconsideration, but the motion was denied by the CA. Hence, this petition.

Issue: Whether or not respondent has breached its obligation and whether rescission of the obligation is the proper remedy.

Held: In reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment of the parties’ respective obligations should be simultaneous. Hence, no demand is generally necessary because, once a party fulfills his obligation and the other party does not fulfill his, the latter automatically incurs in delay. But when different dates for performance of the obligations are fixed, the default for each obligation must be determined by the rules given in the first paragraph of the present article, that is, the other party would incur in delay only from the moment the other party demands fulfillment of the former’s obligation. Thus, even in reciprocal obligations, if the period for the fulfillment of the obligation is fixed, demand upon the obligee is still necessary before the obligor can be considered in default and before a cause of action for rescission will accrue. Evident from the records and even from the allegations in the complaint was the lack of demand by petitioner upon respondent to fulfill its obligation to manufacture and deliver the boxes. The Complaint only alleged that petitioner made a follow-up upon respondent, which, however, would not qualify as a demand for the fulfillment of the obligation. Petitioner’s witness also testified that they made a follow-up of the boxes, but not a demand. Note is taken of the fact that, with respect to their claim for reimbursement, the Complaint alleged and the witness testified that a demand letter was sent to respondent. Without a previous demand for the fulfillment of the obligation, petitioner would not have a cause of action for rescission against respondent as the latter would not yet be considered in breach of its contractual obligation. In sum, the Court finds that petitioner failed to establish a cause of action for rescission, the evidence having shown that respondent did not commit any breach of its contractual obligation.

Mila Reyes vs. Victoria Tuparan G.R. No. 188064 June 1, 2011 Facts: 

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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; that on that property, she put up a three-storey commercial building known as RBJ Building and a residential apartment building; and that 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. 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. 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. 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. 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. The parties and FSL Bank executed the corresponding Deed of Conditional Sale of Real Properties with Assumption of Mortgage. Due to their close personal friendship and business relationship, both parties chose not to reduce into writing the other terms of their agreement. Besides, FSL Bank did not want to incorporate in the Deed of Conditional Sale of Real Properties with Assumption of Mortgage any other side agreement between petitioner and respondent.

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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. Petitioner further averred that despite her success in finding a prospective buyer for the subject real properties within the 3-month period agreed upon, respondent reneged on her promise to allow the cancellation of their deed of conditional sale. Instead, respondent became interested in owning the subject real properties and even wanted to convert the entire property into a modern commercial complex. Nonetheless, she consented because respondent repeatedly professed friendship and assured her that all their verbal side agreement would be honoured. The residential building was gutted by fire which caused the petitioner to lose rental income in the amount of ₱8,000.00 a month. The RTC handed down its decision finding that respondent failed to pay in full the ₱4.2 million total purchase price of the subject real properties leaving a balance of ₱805,000.00. The CA rendered its decision affirming with modification the RTC Decision. The CA agreed with the RTC that the contract entered into by the parties is a contract to sell but ruled that the remedy of rescission could not apply because the respondent’s failure to pay the petitioner the balance of the purchase price in the total amount of ₱805,000.00 was not a breach of contract, but merely an event that prevented the seller (petitioner) from conveying title to the purchaser (respondent).

Issue: Whether or not the obligation between the parties can be rescinded. Held: 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. From the records, it cannot be denied that respondent paid to FSL Bank petitioner’s mortgage obligation in the amount of ₱2,278,078.13, which formed part of the purchase price of the

subject property. Likewise, it is not disputed that respondent paid directly to petitioner the amount of ₱721,921.87 representing the additional payment for the purchase of the subject property. Clearly, out of the total price of ₱4,200,000.00, respondent was able to pay the total amount of ₱3,000,000.00, leaving a balance of ₱1,200,000.00 payable in three (3) installments. Out of the ₱1,200,000.00 remaining balance, respondent paid on several dates the first and second installments of ₱200,000.00 each. She, however, failed to pay the third and last installment of ₱800,000.00. Nevertheless, respondent, through counsel, offered to pay the amount of ₱751,000.00, which was rejected by petitioner for the reason that the actual balance was ₱805,000.00 excluding the interest charges. Considering that out of the total purchase price of ₱4,200,000.00, respondent has already paid the substantial amount of ₱3,400,000.00, more or less, leaving an unpaid balance of only ₱805,000.00, it is right and just to allow her to settle, within a reasonable period of time, the balance of the unpaid purchase price. The Court agrees that the respondent showed her sincerity and willingness to comply with her obligation when she offered to pay the petitioner the amount of ₱751,000.00.

G.G. Sportswear MFG. Corporation vs. World Class Properties, Inc. G.R. No. 182720 March 2, 2010 Facts: 

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Issue:

Petitioner offered to purchase the 38th floor penthouse unit and 16 parking slots for 32 cars in World Class condominium for the discounted , pre-selling price of P89, 624, 272.82. GG Sportswear timely paid its installments due. GG Sportswear requested the return of the outstanding postdated checks it previously delivered to World Class because GG Sportswear intended to replace these old checks with ne 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 delivered the replacement checks and paid the installment payment which had been delayed for 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 25, 1998. GG Sportswear filed a Complaint with the HLURB claiming a refund of the installment payments made to World Class because it was dissatisfied with the completion date found in the Contract to Sell. The HLURB rendered a decision rescinding the Agreement, after finding that the World Class violated Sections 4 and 5 of P.D. No. 957 by entering into the Agreement without the required Certificate of Registration and License to Sell. World Class appealed to the HLURB Board of Commissioners. The Board modified the Arbiter’s decision by ruling that the Agreement could no longer be rescinded for lack of a CR/LS because World Class had already been issued a license to Sell before the complaint was filed. Notwithstanding this pronouncement, the Board still awarded a refund in petitioner’s favor. On appeal to the CA, the CA rendered a decision in favor of World Class. Hence, this petition.

Whether or not rescission is allowed in the case. Held: 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. Petitioner anchors its claim for rescission of a reservation agreement for the purchase of units and parking slots in a condominium property being developed by World Class, on to grounds: a) its dissatisfaction with the completion date; and b) the lack of the Contract to Sell. However, petitioner cannot claim that it did not know the time-frame for the project’s completion when it entered into the Agreement with respondent. Moreover, the provisional Contract to Sell that accompanied the second reservation agreement explicitly provided that the condominium project would be ready for turnover no later than December 15, 1998, a clear expression of the projects completion date. Having known the date, the fact of the dissatisfaction with it does not constitute a breach so substantial as to render the Agreement rescissible. Even if it had been unhappy with the completion date, this ground, standing alone, is not sufficient basis to rescind the Agreement; unhappiness is a state of mind, not a defect available in law as a basis to rescind a contract.

Valentin Movido, substituted by Marginito Movido vs. Luis Reyes Pastor G.R. No. 172279 February 11, 2010 Facts: 

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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. 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 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

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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 reversed the decision of the RTC. Hence, this petition.

Issue: Whether or not respondent has breach its obligation which gives rise to the rescission of the obligation. 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. There is 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.

Spouses Carmen Tongson and Jose Tongson, et al vs. Emergency Pawnshop Bula, Inc. and Danilo Napala G.R. No. 167874 January 15, 2010 Facts: 

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Napala offered to purchase from the Spouses Tongson their 364-square meter parcel of land, situated in Davao City and for P3,000,000. Finding the offer acceptable, the Spouses Tongson executed with Napala a Memorandum of Agreement. 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. 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 of P2,800,000 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. The trial court rendered a decision in favor of petitioner.

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Respondents appealed to the Court of Appeals. The Court of Appeals agreed with the trial court’s finding that Napala employed fraud when he misrepresented to the Spouses Tongson that the PNB check in the amount of P2,800,000 would be properly funded at its maturity. However, the Court of Appeals found that the issuance and delivery of the PNB check and fraudulent representation made by Napala could not be considered as the determining cause for the sale of the subject parcel of land. Hence, such fraud could not be made the basis for annulling the contract of sale. The Spouses Tongson filed a partial motion for reconsideration which was denied by the Court of Appeals. Hence, this petition.

Issue: Whether or not the contract of sale can be annulled based on the fraud employed by Napala. Held: However, while no causal fraud attended the execution of the sales contract, there is fraud in its general sense, which involves a false representation of a fact, when Napala inveigled the Spouses Tongson to accept the postdated PNB check on the representation that the check would be sufficiently funded at its maturity. In other words, the fraud surfaced when Napala issued the worthless check to the Spouses Tongson, which is definitely not during the negotiation and perfection stages of the sale. Rather, the fraud existed in the consummation stage of the sale when the parties are in the process of performing their respective obligations under the perfected contract of sale. 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 paid P200, 000 cash to the Spouses 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.

Bonifacio Sanz Maceda, Jr. vs. Development Bank of the Philippines G.R. No. 174979 August 11, 2010 Facts: 

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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 was P10.5M. 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 Branch 39.. 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, which had previously been approved for release. Maceda also instituted the case a quo for Specific Performance with Damages against defendant DBP before the Makati RTC in 1984. 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 of P3,174,358.38 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 having availed of the total approved amount of their loan. The construction of the hotel was never finished. Finally, DBP allegedly threatened to foreclose the mortgaged properties of the plaintiff.

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The trial court promulgated its Decision in favor of Maceda. On appeal, the appellate court rendered its Decision which affirmed the order of the trial court. The appellate court denied Maceda’s and DBP’s Motions for Reconsideration for lack of merit. Maceda’s Motion for Execution Pending Appeal was likewise denied.

Issue: Whether or not the contract entered into by the parties can be rescinded. Held: Maceda put in cash equity worth P6,153,398.05. Under Article 1191 of the Civil Code, the aggrieved party has a choice between specific performance and rescission with damages in either case. However, 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. The court deems it equitable and practicable to rescind the obligation of DBP to deliver the balance of the loan proceeds to Maceda. In exchange, DBP must 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 ruling comes within the purview of Maceda’s and DBP’s prayers for other reliefs, just or equitable under the premises.

Armando Raquel-Santos and Annalissa Mallari vs. Court of Appeals and Finvest Securities Co., Inc. G.R. No. 175071 July 7, 2009 Facts: 

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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. RaquelSantos (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. Respondent Finvest’s cause of action against petitioners was for accounting and damages, arising from the allegedly missing stock certificates. In relation to such cause of action, Finvest alleged in the Complaint that petitioners had sole authority and custody of the stock certificates and that they took undue advantage of their positions in diverting to their personal benefit the proceeds from the sale of the shares of stock. Finvest, therefore, prayed that Raquel-Santos and Mallari be held jointly and severally liable to account for and/or to pay for all missing stock certificates and payables listed in the Complaint and for any other subsequent claims and the corresponding profits that could have accrued to the corporation; and damages that the corporation may sustain by reason of and/or in relation to such missing or unaccounted stock certificates, payables, and any other subsequent claims.

Issue: Whether or not rescission is the proper remedy in the case. Held: The right of a party to rescission under Article 1191 of the Civil Code is predicated on a breach of faith by the other party who violates the reciprocity between them. In a contract of sale, the seller obligates itself to transfer the ownership of and deliver a determinate thing, and the buyer to pay therefor a price certain in money or its equivalent. In some contracts of sale, such as the sale of real property, prior physical delivery of the thing sold or its representation is not legally required, as the execution of the Deed of Sale effectively transfers ownership of the property to the buyer through constructive delivery. Hence, delivery of the certificate of title covering the real property is not necessary to transfer ownership.

In the sale of shares of stock, physical delivery of a stock certificate is one of the essential requisites for the transfer of ownership of the stocks purchased. 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 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. Mutual restitution entails the return of the benefits that each party may have received as a result of the contract. In this case, it is the purchase price that Finvest must return. The amount paid was sufficiently proven by the buy confirmation receipts, vouchers, and official/provisional receipts that respondents presented in evidence. In addition, the law awards damages to the injured party, which could be in the form of interest on the price paid, as the trial court did in this case.

Spouses Lino Francisco & Guia Francisco vs. DEAC Construction, Inc. and Geomar Dadula G.R. No. 171312 February 4, 2008 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 of P750,000.00 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 plaintiffsappellees’ knowledge and consent.

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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 followed by the payment of P550,000.00. Plaintiff-appellant Guia Francisco likewise paid the amount of P80,000.00 for the requested additional works on the project.

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The construction of the residential building commenced in 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

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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. A Work Stoppage Order was issued against the plaintiff-appellee Lino Francisco pursuant to the previous Notice of Violations. Having learned of such order, the plaintiffs-appellees allegedly immediately proceeded to the Office of the Building Official of Manila to explain that DEAC was the one responsible for such violations, and that the deviations of the approved plan being imputed against Lino Francisco were unilateral acts of DEAC. They also filed a complaint for “NonCompliance of the Building Plan, Illegal Construction, abandonment and other violations of the Building Code” against DEAC with the said Office. The said complaint was endorsed to the City Prosecutor of Manila which culminated in the filing of a criminal case against Geomar A. Dadula and DEAC project engineer Leoncio C. Alambra for deviation and violation of specification plan.

The plaintiffs-appellees also filed a case for Rescission of Contract and Damages with the Regional Trial Court of Manila, Branch 28, against DEAC and its President Geomar A. Dadula.

Issue: Whether or not petitioner can rescind the contract. Held: 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 Spouses Francisco, in their letter to respondents, complained, among others, about the belated release of the building permit, the unauthorized corrections in the building plan, the forgery of petitioner Guia Francisco’s signature on the building plan, and the deletion of the open space/patio in the actual construction of the project. The filing of a criminal case against respondent Dadula and the subsequent filing of this civil case for rescission and damages within a reasonable time after the Spouses Francisco had learned that construction of their building

commenced without the necessary building permit and discovered that there were deviations from the building plan demonstrate the vigilance with which they guarded their rights. The appellate court’s conclusion that the Spouses Francisco should be deemed to have waived their right to seek rescission is clearly unfounded. Finally, 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.

Spouses Felipe and Leticia Cannu vs. Spouses Gil and Fernandina Galang and National Home Mortgage Finance Corporation G.R. No. 139523 May 26, 2005 Facts: 

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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, with an area of 150 square meters. 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 respondentsspouses 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 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 in question Petitioners immediately took possession and occupied the house and lot. Petitioners paid the equity or second mortgage to CERF Realty. 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. Petitioner Leticia Cannu informed Mr. Fermin T. Arzaga, Vice President, Fund Management Group of the NHMFC, that the ownership rights over the land in the names of respondents-spouses had been ceded and transferred to her and her husband per Deed of Sale with Assumption of Mortgage, and that they were obligated to assume the mortgage and pay the remaining unpaid loan balance. Petitioners’ formal assumption of mortgage was not approved by the NHMFC. Because the Cannus failed to fully comply with their obligations, respondent Fernandina Galang, paid P233,957.64 as full payment of her remaining mortgage loan with NHMFC. Petitioners opposed the release of the certificate of title in favor of respondentsspouses insisting that the subject property had already been sold to them. Consequently, the NHMFC held in abeyance the release of said TCT.

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Thereupon, a Complaint for Specific Performance and Damages was filed asking, among other things, that petitioners (plaintiffs therein) be declared the owners of the property involved subject to reimbursements of the amount made by respondents-spouses (defendants therein) in preterminating the mortgage loan with NHMFC. After trial, the lower court rendered its decision in favor of respondents. A Motion for Reconsideration was filed, but same was denied. Petitioners appealed the decision of the RTC to the Court of Appeals. The CA affirmed the decision of the trial court. The motion for reconsideration filed by petitioners was denied by the CA. Hence, this Petition for Certiorari.

Issue: Whether or not petitioner’s breach of the obligation was substantial. Held: 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. In the case at bar, we find petitioners’ failure to pay the remaining balance of P45,000.00 to be substantial. Even assuming arguendo that only said amount was left out of the supposed consideration of P250,000.00, or eighteen (18%) percent thereof, this percentage is still substantial. Taken together with the fact that the last payment made eighteen months before the respondent Fernandina Galang paid the outstanding balance of the mortgage loan with NHMFC, the intention of petitioners to renege on their obligation is utterly clear. The fact that petitioners tendered a Manager’s Check to respondents-spouses Galang in the amount of P278,957.00 seven months after the filing of this case is of no moment. Tender of payment does not by itself produce legal payment, unless it is completed by consignation. Their failure to fulfill their obligation gave the respondents-spouses Galang the right to rescission.

Generoso Villanueva and Raul Villanueva, Jr. vs. Estate of Gerardo Gonzaga/Ma. Villa Gonzaga, in her capacity as Administratrix G.R. No. 157318 August 9, 2006 Facts: 

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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 letterreply 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. 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. In their letter-reply, 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. Respondent Administratrix executed a Deed of Rescission rescinding the MOA on two grounds: (1) petitioners failed to pay the balance of the purchase price despite notice of the lots’ release from mortgage, and (2) petitioners violated the MOA by using the lots as a transloading station without permission from the respondents. The trial court decided the case in favor of respondents.

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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. Hence, this petition.

Issue: Whether or not there is legal, or even a factual, ground for the rescission of the Memorandum of Agreement. Held: 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. We have held in numerous cases that the remedy does not apply to contracts to sell. 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 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. However, petitioners may not demand production by the respondents of the titles to the lots as a condition for their payment. It was not required under the MOA. The MOA merely states that petitioners shall pay the balance "upon approval by the PNB of the release of the lots" from mortgage. Petitioners may not add further conditions now. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

Spouses Domingo and Lourdes Paguyo vs, Pierre Astorga and St. Andrew Realty, Inc. G.R. No. 130982 September 16, 2005 Facts: 

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Spouses Domingo Paguyo and Lourdes Paguyo, were the owners of a small five-storey building known as the Paguyo Building located at Makati Avenue, corner Valdez Street, Makati City. With one (1) unit per floor, the building has an average area of 100 square meters per floor and is constructed on a land belonging to the Armas family. In order for the petitioners to complete their title and ownership over the lot in question, there was an urgent need to make complete payment to the Armases, which at that time stood at P917,470.00 considering that petitioners had previously made partial payments to the Armases. Petitioner Lourdes Paguyo entered into an agreement captioned as Receipt of Earnest Money with respondent Pierre Astorga, for the sale of the former’s property consisting of the lot which was to be purchased from the Armases, together with the improvements thereon, particularly, the existing building known as the Paguyo Building. 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. Nevertheless, the parties maintained their business relationship under the terms and conditions of the Receipt of Earnest Money. Petitioners asked for and were given by respondents an additional P50,000.00 to meet the former’s urgent need for money in connection with their construction business. Due also to the urgent necessity of obtaining money to finance their construction business, petitioner Lourdes Paguyo, who was also the attorney-in-fact of her husband, proposed to the respondents the separate sale of the building in question while she continued to work on the acquisition of the lot from the Armas family, assuring the respondents that she would succeed in doing so. Aware of the risk of buying an improvement on the lot of a third party who appeared ambivalent on whether to dispose their property in favor of the respondents, respondents took a big business gamble and, relying on the assurance of petitioners that they would eventually acquire the lot and transfer the same to respondents in accordance with their undertaking in the Receipt of Earnest Money, respondents agreed to petitioner Lourdes Paguyo’s proposal to buy the building first. The parties executed

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the four documents in question namely, the Deed of Absolute Sale of the Paguyo Building, the Mutual Undertaking, the Deed of Real Estate Mortgage, and the Deed of Assignment of Rights and Interest. Simultaneously with the signing of the four documents, respondents paid petitioners the additional amount of P500,000.00. Thereafter, the respondents renamed the Paguyo Building into GINZA Bldg. and registered the same in the name of respondent St. Andrew Realty, Inc. at the Makati Assessor’s Office after paying accrued real estate taxes in the total amount of P169,174.95. Since 1990, respondents paid the real estate taxes on subject building as registered owners thereof. Further, respondents obtained fire insurance and applied for the conversion of Paguyo Building into a condominium. All of these acts of ownership exercised by respondents over the building were with the express knowledge and consent of the petitioners. Pursuant to their agreement contained in the aforecited documents, particularly in the Mutual Undertaking, respondent company filed an ejectment case and obtained a favorable decision against petitioners in the Metropolitan Trial Court (MeTC) of Makati. Petitioners filed a Complaint for the rescission of the Receipt of Earnest Money with the undertaking to return the sum of P763,890.50. They also sought the rescission of the Deed of Real Estate Mortgage, the Mutual Undertaking, the Deed of Absolute Sale of Building, and the Deed of Assignment of Rights and Interest. After trial, the RTC ruled in favor of respondents. On appeal, the Court of Appeals promulgated its decision affirming the decision of the trial court. Hence, this petition.

Issue: Whether or not petitioner has the right to rescind the contract. Held: Petitioners herein 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 the case at bar, petitioners pray for rescission of the Deed of Sale of the building 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 Supreme Court, however, will not allow

itself to be an instrument to the dissolution of contract validly entered into. 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.

Bienvenido Casino, Jr. vs. Court of Appeals and Octagon Realty Development Corporation G.R. No. 133803 September 16, 2005 Facts: 

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In the Regional Trial Court at Pasig City, respondent Octagon Realty Development Corporation, a corporation duly organized and existing under Philippine laws, filed a complaint for rescission of contract with damages against petitioner Bienvenido M. Casiño, Jr., owner and proprietor of the Casiño Wood Parquet and Sanding Services, relative to the parties’ agreement for the supply and installation by petitioner of narra wood parquet ordered by respondent. The trial court, upon a finding that petitioner is the one who breached the parties’ agreement, rendered judgment in favor of respondent. On petitioner’s appeal to the Court of Appeals, the appellate court affirmed that of the trial court but modified the same by reducing the amount of damages awarded. A motion for reconsideration was filed but the same was denied. Hence, this petition.

Issue: Whether or not the contract entered into between the parties can be rescinded. Held: It is undisputed that under their 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 downpayment 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. Doubtless, it is petitioner who breached the contract. With the reality that petitioner 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.

In fine, respondent acted well within its rights in unilaterally terminating its contract with petitioner and in entering into a new one with a third person in order to minimize its losses, without prior need of resorting to judicial action.

Fernando Carrascoso, Jr. vs. Court of Appeal, et al. G.R. No. 123672 December 14, 2005 Facts:  

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By a Deed of Sale of Real Property, El Dorado, through Feliciano Leviste, sold the property to Fernando O. Carrascoso, Jr. (Carrascoso). Carrascoso and his wife Marlene executed a Real Estate Mortgage over the property in favor of Home Savings Bank (HSB) to secure a loan in the amount of P1,000,000.00. Of this amount, P290,000.00 was paid to Philippine National Bank to release the mortgage priorly constituted on the property and P210,000.00 was paid to El Dorado pursuant to the terms and conditions of the Deed of Sale. The real estate mortgage in favor of HSB was amended to include an additional three year loan of P70,000.00 as requested by the spouses Carrascoso. The Amendment of Real Estate Mortgage was also annotated on TCT No. T-6055 as Entry No. 15486. The 3-year period for Carrascoso to fully pay for the property passed without him having complied therewith. Carrascoso and the Philippine Long Distance Telephone Company (PLDT), through its President Ramon Cojuangco, executed an Agreement to Buy and Sell whereby the former agreed to sell 1,000 hectares of the property to the latter at a consideration of P3,000.00 per hectare or a total of P3,000,000.00. Lauro Leviste (Lauro), a stockholder and member of the Board of Directors of El Dorado, through his counsel, Atty. Benjamin Aquino, 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. Lauro’s desire to rescind the sale was reiterated in two other letters addressed to the Board. Jose P. Leviste, as President of El Dorado, later sent a letter of 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 Deed of Sale of Real Property. Lauro and El Dorado finally filed a complaint for rescission of the Deed of Sale of Real Property between El Dorado and Carrascoso with damages before the Court of First Instance (CFI) of Occidental Mindoro.

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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. Carrascoso, as vendor and PLDT, as vendee forged a Deed of Absolute Sale over the 1,000 hectare portion of the property subject of their Agreement to Buy and Sell. In turn, PLDT, by Deed of Absolute Sale conveyed the aforesaid 1,000 hectare portion of the property to its subsidiary, PLDT Agricultural Corporation (PLDTAC), for a consideration of P3,000,000.00, the amount of P2,620,000.00 of which was payable to PLDT upon signing of said Deed, and P380,000.00 to Carrascoso upon issuance of title to PLDTAC. Branch 45 of the San Jose Occidental Mindoro Regional Trial Court to which the CFI has been renamed, dismissed the complaint on the ground of prematurity. Lauro, in the meantime, died, hence, a Motion for Substitution of Party was filed praying that his heirs, represented by Conrad C. Leviste, be substituted as respondents. The Motion was granted.

Issue: Whether or not there is breach of contract on the part of Carrascoso. Held: 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 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. When Jose Leviste informed him that El Dorado was seeking rescission of the contract by letter, 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. Respecting Carrascoso’s insistence that he was granted verbal extensions within which to pay the balance of the purchase price of the property by El Dorado’s directors and officers Jose and Angel Leviste, the Court finds the same unsubstantiated by the evidence on record.

Goldenrod, Inc. vs. Court of Appeals, et al. G.R. No. 126812 November 24, 1998 Facts: 

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Pio Barretto and Sons, Inc. (BARRETTO & SONS) 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 the United Coconut Planters Bank (UCPB). The obligation of the corporation with UCPB remained unpaid making foreclosure of the mortgage imminent. Goldenrod, Inc. (GOLDENROD), offered to buy the property from BARRETTO & SONS. When the term of existence of BARRETTO & SONS expired, all its assets and liabilities including the property located in Quiapo were transferred to respondent Pio Barretto Realty Development, Inc. (BARRETTO REALTY). Petitioner’s offer to buy the property resulted in its agreement with respondent BARRETTO REALTY that petitioner would pay the following amounts: (a) P24.5 million representing the outstanding obligations of BARRETTO 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. Petitioner did not pay UCPB the P24.5 million loan obligation of BARRETTO REALTY on the deadline set for payment; instead, it asked for an extension of one (1) month to settle the obligation, which the bank granted. Petitioner requested another extension of sixty (60) days to pay the loan.This time the bank demurred. Petitioner sought reconsideration of the denial by the bank of its request for extension of sixty (60) days by asking for a shorter period of thirty (30) days. This was again denied by UCPB. Respondent BARRETTO REALTY sold to Asiaworld Trade Center Phils., Inc. (ASIAWORLD), Lot 2, one of the two (2) consolidated lots, for the price of P23 million. 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. Logarta again wrote respondent Que demanding the return of the earnest money to GOLDENROD. 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

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return of the amount of P1 million and the payment of damages including lost interests or profits. In their answer, private respondents contended that it was the agreement of the parties that the earnest money of P1 million would be forfeited to answer for losses and damages that might be suffered by private respondents in case of failure by petitioner to comply with the terms of their purchase agreement. The trial court rendered a decision in favor of petitioner. Dissatisfied with the decision of the trial court, private respondents appealed to the Court of Appeals which reversed the trial court and ordered the dismissal of the complaint. Hence, this petition.

Issue: Whether or not the seller of real estate can keep the earnest money to answer for damages in the event the sale fails due to the fault of the prospective buyer. 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. By reason of its failure to make payment petitioner, through its agent, informed private respondents that it would no longer push through with the sale. In other words, petitioner resorted to extrajudicial rescission of its agreement with private respondents. Article 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 P1,000,000.00 plus legal interest from the date it received notice of rescission from petitioner, i.e., 30 August 1988, up to the date of the return or payment. It would be most inequitable if respondent BARRETTO REALTY would be allowed to retain petitioner’s payment of P1,000,000.00 and at the same time appropriate the proceeds of the second sale made to another.

Roberto Serrano vs. Court of Appeals, et al. G.R. No. 139420 August 15, 2001 Facts: 

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Respondent Maersk-Filipinas Crewing, Inc., the local agent of respondent foreign corporation A.P. Moller, deployed petitioner Serrano as a seaman to Liberian, British and Danish ships. As petitioner was on board a ship most of the time, respondent Maersk offered to send portions of petitioner’s salary to his family in the Philippines. The amounts would be sent by money order. Petitioner agreed, he instructed respondent Maersk to send money orders to his family. Respondent Maersk deducted the amounts of these money orders totaling HK$4,600.00 and £1,050.00 Sterling Pounds from petitioner's salary. Respondent Maersk, it is also alleged, deducted various amounts from his salary for Danish Social Security System (SSS), welfare contributions, ship club, and SSS Medicare. It appears that petitioner's family failed to receive the money orders petitioner sent through respondent Maersk. Upon learning this in, petitioner demanded that respondent Maersk pay him the amounts the latter deducted from his salary. Respondent Maersk assured him that they would look into the matter, then assigned him again to board one of their vessels. Petitioner wrote to respondent Maersk demanding immediate payment to him of the total amount of the money orders deducted from his salary. Respondent A.P. Moller replied to petitioner that they keep accounting documents only for a certain number of years, thus data on his money claims were no longer available. Likewise, it was claimed that it had no outstanding money orders. A.P. Moller declined petitioner's demand for payment. Petitioner filed a complaint for collection of the total amount of the unsent money orders and illegal salary deductions against the respondent Maersk in the Philippine Overseas Employment Agency (POEA). The case was transferred to the NLRC where Labor Arbiter Arthur Amansec ruled in favor of petitioner. Respondent Maersk appealed to the NLRC the Labor Arbiter's grant of the claim for the amount of unsent money orders. The NLRC reversed and set side Labor Arbiter Amansec's decision and dismissed the case on the ground of prescription. Petitioner filed a motion for reconsideration of the NLRC decision. It was denied for lack of merit.

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Petitioner sought recourse in the Court of Appeals. The appellate court dismissed his petition for having been filed out of time. Hence, this petition.

Issue: Whether or not the claim of the petitioner has prescribed. Held: Petitioner's cause of action accrued upon respondent Maersk's definite denial of his money claims following this Court's ruling in the similar case of Baliwag Transit , Inc. v. Ople. It is settled jurisprudence that a cause of action has three elements, to wit, (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 named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff. The problem in the case at bar is with the third element as the first two are deemed established. The facts in the case at bar are similar to the Baliwag case. Petitioner repeatedly demanded payment from respondent Maersk, respondent Maersk warded off these demands by saying that it would look into the matter until years passed by. Serrano finally demanded in writing payment of the unsent money orders. Then and only then was the claim categorically denied by respondent A.P. Moller. Following the Baliwag Transit ruling, petitioner’s cause of action accrued only upon respondent A.P. Moller's definite denial of his claim. Having filed his action five (5) months thereafter, it was filed within the three-year (3) prescriptive period provided in Article 291 of the Labor Code.

Perla Palma Gil, Vicente Hizon, Jr., and Angel Palma Gil vs. Court of Appeals, et al. G.R. No. 127206 September 12, 2003 Facts: 

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Concepcion Palma Gil, and her sister, Nieves Palma Gil, married to Angel Villarica, were the co-owners of a parcel of commercial land with an area of 829 square meters located in Davao City. The spouses Angel and Nieves Villarica had constructed a two-storey commercial building on the property. 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. In due course, the decision became final and executory. On motion of the plaintiff (Concepcion), the court issued a writ of execution. Nieves, however, refused to execute the requisite deed in favor of her sister. Concepcion executed a deed of absolute sale 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. Concepcion filed a complaint for unlawful detainer against the spouses Angel and Nieves Villarica with the Municipal Trial Court. The court rendered judgment in favor of the plaintiff and against the defendants. The decision became final and executory but the plaintiff did not file any motion for a writ of execution. 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. The spouses Angel and Nieves Villarica executed a real estate mortgage over the said lot in favor of Prudential Bank as security for a loan. Concepcion died intestate and was survived by Nieves Villarica and her nephews and nieces. Iluminada filed a motion 1160

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for her substitution as party-plaintiff in lieu of the deceased Concepcion. The court issued an order granting the motion. Iluminada Pacetes and Agapito Pacetes executed a deed of absolute sale over the same lots in favor of Constancio B. Maglana for P110,000.00. The spouses-vendors undertook to secure title over the lots under the name of the vendee within ninety days.

Issue: Whether or not petitioner can rescind the contract. Held: Iluminada was not yet obliged on August 8, 1977 to pay the balance of the purchase price of the property, but as a sign of good faith, she nevertheless consigned the amount of P11,983.00, part of the balance of the purchase price of P14,000.00, with the court in Civil Case No. 1160. The court accepted the consignation and she was issued receipts therefor. Still, the heirs of Concepcion Gil, including the petitioners, failed to deliver the said title to the vendee. Iluminada was compelled to file, at her expense, a petition with the RTC docketed as Miscellaneous Case No. 4715 for the issuance of an owner’s duplicate of TCT No. 7450 covering the property sold which was granted by the court on March 22, 1978. It was only on May 9, 1978 that Iluminada managed to secure TCT No. 61514 over the property under her name. Upon the failure of the heirs to comply with the decedent’s prestation, Iluminada Pacetes was impelled to resort to legal means to protect her rights and interests. The petitioners, as successors-in-interest of the vendor, are not the injured parties entitled to a rescission of the deed of absolute sale. It was Concepcion’s heirs, including the petitioners, who were obliged to deliver to the vendee a certificate of title over the property under the latter’s name, free from all liens and encumbrances within 120 days from the execution of the deed of absolute sale, but had failed to comply with the obligation. The consignation by the vendee of the purchase price of the property is sufficient to defeat the right of the petitioners to demand for a rescission of the said deed of absolute sale. It bears stressing that when the vendee consigned part of the purchase price with the Court and secured title over the property in her name, the heirs of Concepcion, including the petitioners, had not yet sent any notarial demand for the rescission of the deed of absolute sale to the vendee, or filed any action for the rescission of the said deed with the appropriate court. Although the vendee consigned with the Court only the amount of P11,983.00, P2,017.00 short of the purchase price of P14,000.00, it cannot be claimed that Concepcion was an unpaid seller because under the deed of sale, she was still obligated to transfer the property in the name of the vendee, which she failed to do so.

David Reyes vs Jose Lim GR No. 134241 August 11, 2003

Facts: 

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Petitioner David Reyes filed before the trial court a complaint alleging that Reyes as seller and Lim as buyer entered into a contract to sell a parcel of land located along F.B. Harrison Street, Pasay City. Harrison Lumber occupied the Property as lessee with a monthly rental of P35,000. The complaint claimed that Reyes had informed Harrison Lumber to vacate the Property before the end of January 1995. On 31 May 1995, Lim stated that he was ready and willing to pay the balance of the purchase price on or before 8 March 1995. On 9 March 1995, Reyes offered to return the P10 million down payment to Lim because Reyes was having problems in removing the lessee from the Property. Lim learned that Reyes had already sold the Property to Line One Foods Corporation on 1 March 1995 for P16,782,840. Lim requested in open court that Reyes be ordered to deposit the P10 million down payment with the cashier of the Regional Trial Court of Parañaque. The trial court granted this motion. The trial court ruled 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.

Issue: Whether or not the CA erred in finding the trial court could issue the questioned orders on grounds of equity

Held:

The principle that no person may unjustly enrich himself at the expense of another is embodied in Article 221 of the Civil Code. This principle applies not only to substantive rights but also to procedural remedies. One condition for invoking this principle is that the aggrieved party has no other action based on contract, quasi-contract, crime, quasi-delict or any other provision of law. Courts can extend this condition to the hiatus in the Rules of Court where the aggrieved party, during the pendency of the case, has no other recourse based on the provisional remedies of the Rules of Court.

Thus, a court may not permit a seller to retain, pendente lite, money paid by a buyer if the seller himself seeks rescission of the sale because he has subsequently sold the same property to another buyer. By seeking rescission, a seller necessarily offers to return what he has received from the buyer. Such a seller may not take back his offer if the court deems it equitable, to prevent unjust enrichment and ensure restitution, to put the money in judicial deposit. In this case, it was just, equitable and proper for the trial court to order the deposit of the P10 million down payment to prevent unjust enrichment by Reyes at the expense of Lim.

The SC affirmed the decision of the CA.

Ong Yong, et. al. vs David Tiu GR. No. 144476 & 144629 February 1, 2002

Facts: 

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First Landlink Asia Development Corporation (FLADC) was then fully owned by the Tiu Group. In order to recover from its floundering finances, the Ong Group were invited by the Tius to invest in FLADC. By the Pre-Subscription Agreement, both parties agreed to maintain equal shareholdings in FLADC with the Ongs investing cash while the Tius contributing property. Masagana Telamart, Inc. executed a Deed of Assignment over the 1,902.30 square meter property in favor of FLADC. The controversy between the two parties arose when the Ongs refused to credit the number of FLADC shares in the name of Masagana Telamart, Inc.; also when they refused to credit the number of FLADC shares in favor of the Tius; and when David S. Tiu and Cely Y. Tiu were proscribed from assuming and performing their duties as VicePresident and Treasurer, respectively of FLADC. These became the basis of the Tius' unilateral rescission of the Pre-Subscription Agreement on February 23, 1996. The SEC confirmed the rescission. The Ca affirmed the SEC decision with modifications.

Issue: Whether or not the CA erred in ordering the liquidation of FLADC instead of merely ordering the restitution of the parties’ respective investments

Held: The Court of Appeals in its Resolution of August 17, 2000, clarified thus: "xxx. While the Court in the case at bench ordered the rescission of the Pre-Subscription Agreement, it did not, however, order restitution of what the parties contributed pursuant thereto. What the Court ordered was the liquidation of FLADC in accordance with the actual amount of investment each party made in FLADC. Restitution and liquidation are two different

things. Liquidation includes both the profits and losses each party derived within the duration of their respective investment. Contrary therefore to Willie Ong's contention that the Ongs will simply receive a return of their money without any fruits or interest, the decision assures them that they (the Ong and Tiu Groups) will have a bountiful return of their respective investments derived from the profits of the corporation."

Restoration of the parties to their relative position which they would have occupied had no contract ever been made is not practicable nor possible because we cannot turn back the hands of time when the mall was only "nearing completion" in 1994, when the mall was not fully tenanted yet and they had an existing loan of P190 million with PNB with an interest of 19% per annum. But the Masagana Citimall is now completely constructed/finished, the P190 million loan fully paid without their having to pay enormous interest, and the Tius cannot deny that the Ongs are partly to be credited for the success of the venture. What the Tius want the Court to order would have been fair and just had there been no fault on their part.

Equatorial Realty Dev’t Inc. vs Mayfair Theater, Inc. GR No. 106063 November 21, 1996

Facts: 

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Carmelo owned a parcel of land, together with two 2-storey buildings constructed thereon. Carmelo entered into two contracts of lease with Mayfair for the latter's lease of a portion of Carmelo's property for use by Mayfair as a motion picture theater and for a term of 20 years. Both contracts of lease provide that if the lessor should desire to sell the leased presmises, the lessee shall be given 30 days exclusive option to purchase the same. In the event that the leased premises is sold to someone other than the lessee, the lessor is bound and obligated to stipulate in the Deed of Sale that the purchaser shall recognize this lease and be bound by all the terms and conditions thereof. Sometime in August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, that Carmelo was selling the said property. On September 18, 1974, Mayfair sent another letter to Carmelo offering to buy the entire building if the price is reasonable. However, both Carmelo and Equatorial questioned the authenticity of the second letter. Four years later 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. In September 1978, Mayfair instituted the action for specific performance and annulment of the sale of the leased premises to Equatorial.

Issue: Whether or not the option clause in the contracts of lease is actually a right of first refusal proviso

Held:

The SC agrees with the respondent 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. 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. It must be supported by consideration. In the instant case, the right of first refusal is an integral part of the contracts of lease.

The consideration is built into the reciprocal obligations of the parties. 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.

Sps. Mariano and Avelina Velarde vs Court of Appeals GR No. 108346 July 11, 2001

Facts:    

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David Raymundo (private respondent) is the absolute and registered owner of a parcel of land, together with the house and other improvements thereon. George Raymundo is David’s father who negotiated with plaintiffs Avelina and Mariano Velarde (petitioners) for the sale of said property, which was, however, under lease. On August 8, 1986, a Deed of Sale with Assumption of Mortgage was executed by defendant David Raymundo, as vendor, in favor of plaintiff Avelina Velarde, as vendee. On January 8, 1987, defendants sent plaintiffs a notarial notice of cancellation/rescission of the intended sale of the subject property allegedly due to the latter’s failure to comply with the terms and conditions of the Deed of Sale with Assumption of Mortgage and the Undertaking. Consequently, petitioners filed on February 9, 1987 a Complaint against private respondents for specific performance, nullity of cancellation, writ of possession and damages.

Issue: Whether or not the CA erred in holding that the rescission of the contract by private respondent was justified

Held: The right of rescission of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party who violates the reciprocity between them. The breach contemplated in the said provision is the obligor’s failure to comply with an existing obligation. When the obligor cannot comply with what is incumbent upon it, the obligee may seek rescission and, in the absence of any just cause for the court to determine the period of compliance, the court shall decree the rescission.

In the present case, private respondents validly exercised their right to rescind the contract, because of the failure of petitioners to comply with their obligation to pay the balance of the purchase price. Indubitably, the latter violated the very essence of reciprocity in the contract of sale, a violation that consequently gave rise to private respondents’ right to rescind the same in accordance with law

Alexander Asuncion vs Eduardo Evangelista GR No. 133491 October 13, 1999

Facts: 

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Since 1970, private respondent has been operating a piggery on his landholdings under the trade name Embassy Farms as a single proprietorship. Private respondent obtained several loans and mortgaged several properties to use as working capital for Embassy Farm. On August 2, 1984, petitioner and private respondent executed a Memorandum of Agreement. The total amount thus paid by petitioner to private respondent and invested in Embassy Farms, Inc. as of August 1985 was P3,194,941.88. As to the shares of stock, it was incumbent upon private respondent to endorse and deliver them to petitioner so he could also have them transferred in his name, but private respondent never did. He refused to honor his obligations under the Memorandum of Agreement and even countered with a demand letter of his own. On April 10, 1986, petitioner filed in the Regional Trial Court a complaint for rescission of the Memorandum of Agreement with a prayer for damages.

Issue: Whether or not the memorandum of agreement executed between Asunction and Evangelista was in the nature of a Contract of Sale

Held: The SC held that private respondent failed to perform his substantial obligations under the Memorandum of Agreement. Private respondent 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 SC holds that private respondent's insistence that petitioner execute a formal assumption of mortgage independent and separate from his own execution of a deed of sale 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. In his testimony, private respondent stated that he would be committing economic suicide if he executed a deed of sale

because he would then be transferring his lands to petitioner without the latter first assuming his loan obligations. This posturing is puerile. Even without a formal assumption of mortgage, the mortgage follows the property whoever the possessor may be. It is an elementary principle in civil law that a real mortgage subsists notwithstanding changes of ownership and all subsequent purchases of the property must respect the mortgage, whether the transfer to them be with or without the consent of the mortgagee.

William Uy vs Court of Appeals GR No. 120465 September 9, 1999

Facts: 

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Petitioners are agents authorized to sell eight parcels of land by the owners thereof. By virtue of such authority, petitioners offered to sell the lands, located in Tuba, Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a housing project. On February 14, 1989, the NHA Board passed a resolution approving the acquisition of said lands, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject lands. On 22 November 1991, the NHA issued a resolution cancelling the sale over the three parcels of land. The NHA subsequently offered the amount of P1.225 million to the landowners as daños perjuicios. On 9 March 1992, petitioners filed a Complaint for Damages against NHA. The RTC rendered a decision declaring the cancellation of the contract to be justified. Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a new one dismissing the complaint.

Issue: Whether or not the respondent NHA had any legal basis for rescinding the sale

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 of 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. The power to rescind, therefore, 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. Their obligation was merely to deliver the parcels of land to the NHA, an obligation that they fulfilled. The NHA did not suffer any injury by the performance thereof.

The cancellation, therefore, was not a rescission under Article 1191. Rather, the cancellation was based on the negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing.

Constancia Tamayo, et. al. vs Rosalia Abad Senora, et. al. GR No. 176946 November 15, 2010

Facts:  

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Antonieto M. Señora, then 43 years old and a police chief inspector of the PNP, 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). 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 Amparo, who testified that it was the delivery van that bumped Señora’s motorcycle. The delivery van, on the other hand, was driven by Elmer O. Polloso and registered in the name of Cirilo Tamayo. While trial was ongoing, his wife, petitioner Constancia testified that it was Cirilo who hired their drivers and 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. The RTC found Polloso guilty of negligence and held Amparo similarly guilty of negligence. In addition, the RTC found Cirilo to be solidarily liable for Señora’s death. The RTC modified the formula in determining life expectancy, 2/3 x (80 – age of victim at the time of death). The RTC considered the retirement age of the members of the PNP, which was 55 years old. Thus, the formula that the RTC used was 2/3 x (55 – age of the victim at the time of death). On appeal, the CA affirmed the RTC’s decision, but modified the finding on the deceased’s net earning capacity. The CA used the formula: 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.

Issue: Whether or not the award for damages is proper

Held: The CA correctly modified the RTC’s computation. The RTC had misapplied the formula generally used by the courts to determine net earning capacity, which is, to wit:

Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses).

Life expectancy shall be computed by applying the formula (2/3 x [80 - age at death]) adopted from the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality. Hence, the RTC erred in modifying the formula and using the retirement age of the members of the PNP instead of "80."

On the other hand, gross annual income requires the presentation of documentary evidence for the purpose of proving the victim’s annual income. 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. Consequently, the Court sustains the award of P1,887,847.00 as damages for loss of earning capacity. All other aspects of the assailed Decision are affirmed.

Leticia Tan, et. al. vs OMC Carriers, Inc. GR No. 190521 January 12, 2011

Facts: 

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Arambala was driving a truck with a trailer owned by OMC when he noticed that the truck had suddenly lost its brakes. Both he and his companion 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 claimed that the respondents should be held 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 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. The RTC found OMC and Arambala jointly and severally liable to the petitioners for damages. The CA affirmed the RTC’s findings, however, the CA modified the damages awarded to the petitioners by reducing the actual damages awarded from P355,895.00 to P72,295.00 since only the latter amount was duly supported by official receipts.

Issue: Whether or not the CA erred in modifying the RTC’s awarded damages

Held: The petitioners do not deny that they did not submit any receipt to support their claim for actual damages to prove the monetary value of the damage caused to the house and tailoring shop when the truck rammed into them. Thus, no actual damages for the destruction to petitioner Leticia Tan’s house and tailoring shop can be awarded. Nonetheless, absent competent proof on the actual damages suffered, a party still has the option of claiming temperate damages, which may be allowed in cases where, from the nature of the case, definite proof of pecuniary loss cannot be adduced although the court is convinced that the

aggrieved party suffered some pecuniary loss. The CA was correct in disallowing the award of actual damages for loss of earning capacity. As a rule, documentary evidence should be presented to substantiate the claim for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when: (1) the deceased is self-employed and earning less than the minimum wage under current labor laws, in which case, judicial notice may be taken of the fact that in the deceased's line of work, no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws.

Victory Liner, Inc. vs Heirs of Andres Malecdan GR No. 154278 December 27, 2002

Facts: 

Andres Malecdan was a 75 year-old farmer. On July 15, 1994 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.

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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.

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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.

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The RTC 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 for damages in the amounts of: a. P50,000.00 as death indemnity; b. P88,339.00 for actual damages; c. P200,000.00 for moral damages; d. P50,000.00 as exemplary damages; e. Thirty percent (30%) as attorney’s fees of whatever amount that can be collected by the plaintiff;

f. The costs of the suit

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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 the appealed decision of the RTC granting the award of moral and exemplary damages and attorney’s fees is in accord with law and jurisprudence

Held: To justify an award of actual damages, there should be proof of the actual amount of loss incurred in connection with the death, wake or burial of the victim. We cannot take into account receipts showing expenses incurred some time after the burial of the victim, such as expenses relating to the 9th day, 40th day and 1st year death anniversaries. In this case, the trial court awarded P88,339.00 as actual damages. While these were duly supported by receipts, these included the amount of P5,900.00, the cost of one pig which had been butchered for the 9th day death anniversary of the deceased. This item cannot be allowed. We, therefore, reduce the amount of actual damages to P82,439.00.00. The award of P200,000.00 for moral damages should likewise be reduced. The trial court found that the wife and children of the deceased underwent “intense moral suffering” as a result of the latter’s death. Under Art. 2206 of the Civil Code, the spouse, legitimate children and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased. Under the circumstances of this case an award of P100,000.00 would be in keeping with the purpose of the law in allowing moral damages.

On the other hand, the award of P50,000.00 for indemnity is in accordance with current rulings of the Court.

Exemplary damages are imposed not to enrich one party or impoverish another but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions. In this case, petitioner’s driver Joson, Jr. was grossly negligent in driving at such a high speed along the

national highway and overtaking another vehicle which had stopped to allow a pedestrian to cross. Worse, after the accident, Joson, Jr. did not stop the bus to help the victim. Under the circumstances, we believe that the trial court’s award of P50,000.00 as exemplary damages is proper. Finally, private respondents are entitled to attorney’s fees

GSIS vs Sps. Gonzalo and Matilde Labung-Deang GR No. 135644 September 17, 2001

Facts:    

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The spouses Deang obtained a housing loan from the GSIS. As required by the mortgage deed, the spouses Deang deposited the owner’s duplicate copy of the title with the GSIS. Eleven months before the maturity of the loan, the spouses Deang settled their debt with the GSIS and requested for the release of the owner’s duplicate copy of the title However, personnel of the GSIS were not able to release the owner’s duplicate of the title as it could not be found. GSIS commenced the reconstitution proceedings for the issuance of a new owner’s copy of the same. The spouses Deang filed a complaint against GSIS for damages, claiming that as result of the delay in releasing the duplicate copy of the owner’s title, they were unable to secure a loan 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 RTC rendered a decision ruling for the spouses Deang. The CA affirmed the assailed judgment.

Issue: Whether the GSIS, as a GOCC primarily performing governmental functions, is liable for a negligent act of its employee acting within the scope of his assigned tasks

Held: Under the facts, there was a pre-existing contract between the parties. GSIS and the spouses Deang had a loan agreement secured by a real estate mortgage. The duty to return the owner’s duplicate copy of title arose as soon as the mortgage was released. GSIS insists that it was under no obligation to return the owner’s duplicate copy of the title immediately. This insistence is not warranted. Negligence is obvious as the owners’ duplicate copy could not be returned to the owners.

There is likewise no factual basis for an award of actual damages. Actual damages to be compensable must be proven by clear evidence. A court cannot rely on “speculation, conjecture or guess work” as to the fact and amount of damages, but must depend on actual proof.

However, it is also apparent that the spouses Deang suffered financial damage because of the loss of the owners’ duplicate copy of the title. Temperate damages may be granted. The award of twenty thousand pesos (P20,000.00) in temperate damages is reasonable considering that GSIS spent for the reconstitution of the owners’ duplicate copy of the title.

BPI Investment Corp. vs DG Carreon Commercial Corp. GR No. 126524 November 29, 2001

Facts: 

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On November 15, 1979, D. G. Carreon Commercial Corporation placed with BPI Investments P318,981.59 in money market placement with a maturity term of thirty two days, or up to December 17, 1979, at a maturity value of P323,518.22. BPI Investments issued the corresponding sales order slip for straight sale and confirmation slip. BPI Investments claimed that roll overs were subsequently made from maturing payments on which BPI Investments had made over payments at a total amount of P410,937.09 BPI Investments wrote respondents Daniel Carreon and Aurora Carreon, demanding the return of the overpayment of P410,937.09. The respondents asserted that there was no overpayment and asked for time to look for the papers. Upon the request of BPI Investments, the spouses Daniel and Aurora Carreon sent to BPI Investments a proposed memorandum of agreement On May 10, 1982, BPI Investments, without responding to the memorandum and proposal of D. G. Carreon filed with the Court of First Instance a complaint for recovery of a sum of money against D. G. Carreon with preliminary attachment. The RTC dismissed the petition and the counterclaim. The CA reversed the dismissal of the counterclaim of defendants and ordering plaintiff to pay for damages.

Issue: Whether the Court of Appeals awarded excessive moral and exemplary damages as well as attorney’s fees to respondents

Held: 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. BPI Investments did not act in a wanton, fraudulent, reckless, oppressive, or malevolent manner, when it asked for preliminary attachment. It was just exercising a legal

option. The sheriff of the issuing court did the execution and the attachment. Hence, BPI Investments is not to be blamed for the excessive and wrongful attachment.

As to the finding of the appellate court that the filing of the case aggravated and eventually caused the death of two of the respondents, we agree with the petitioner that such correlation is bereft of basis and is far fetched.

The award of moral damages and attorney’s fees is also not in keeping with existing jurisprudence. Moral damages may be awarded in a breach of contract when the defendant acted in bad faith, or was guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligation. Finally, with the elimination of award of moral damages, so must the award of attorney’s fees be deleted.”

Temperate or moderate damages may be recovered when the court finds that some pecuniary 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

Khe Kong Cheng vs Court of Appeals GR No. 144169 March 28, 2001

Facts: 

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On October 4, 1985, the Philippine Agricultural Trading Corporation shipped on board the vessel M/V PRINCE ERIC, owned by petitioner, 3,400 bags of copra at Masbate for delivery to Dipolog City. The said shipment of copra was covered by a marine insurance policy issued by American Home Insurance Company (respondent Philam's assured). M/V PRINCE ERIC, however, sank somewhere between Negros Island and Northeastern Mindanao, resulting in the total loss of the shipment. Because of the loss, the insurer, American Home, paid the amount of P354,000.00 (the value of the copra) to the consignee. Having been subrogated into the rights of the consignee, American Home instituted a Civil Case in the RTC to recover the money paid to the consignee, based on breach of contract of carriage While the case was still pending petitioner executed deeds of donations of parcels of land in favor of his children, herein co-petitioners Sandra Joy and Ray Steven. The trial court rendered judgment against petitioner Khe Hong Cheng. When the sheriff, accompanied by counsel of respondent Philam, went to Butuan City on January 17, 1997, to enforce the alias writ of execution, they discovered that petitioner Khe Hong Cheng no longer had any property and that he had conveyed the subject properties to his children. Philam filed a complaint with the Regional Trial Court of Makati City, Branch 147, 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

Issue: When did the four (4) year prescriptive period as provided for in Article 1389 of the Civil Code for respondent Philam to file its action for rescission of the subject deeds of donation commence to run

Held:

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, i.e, from the moment the cause of action accrues, therefore, applies. Article 1150 of the Civil Code is particularly instructive: 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.

For an accion pauliana to accrue, the following requisites must concur: 1) That the plaintiff asking for rescission has a credit prior to the alienation, although demandable later; 2) That the debtor has made a subsequent contract conveying a patrimonial benefit to a third person; 3) That the creditor has no other legal remedy to satisfy his claim, but would benefit by rescission of the conveyance to the third person; 4) That the act being impugned is fraudulent; 5) That the third person who received the property conveyed, if by onerous title, has been an accomplice in the fraud

An accion pauliana thus 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.

Philippine Realty and Holdings Corp. vs Ley Construction and Development Corp. GR No. 165548 & 167879 June 13, 2011

Facts: 

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The Ley Construction and Development Corporation (LCDC) and Philippine Realty & Holdings Corporation (PRHC), entered into four major construction projects. Engineer Dennis Abcede was the project construction manager of PRHC. 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. Abcede asked LCDC to advance the amount necessary to complete construction. Its president acceded, on the absolute condition that it be allowed to escalate the contract price. The board of directors turned down the request for an escalation agreement. Neither PRHC nor Abcede gave notice to LCDC of the alleged denial of the proposal. Notwithstanding the absence of a signature above PRHC’s name, LCDC proceeded with the construction of the Tektite Building, expending the entire amount necessary to complete the project. LCDC religiously submitted to PRHC monthly reports that contained the amounts of infusion it made from the period August 1991 to December 1991. PRHC never replied to any of these monthly reports. On 16 February 1993, PRHC suddenly denied any liability for the escalation price. In the same letter, it claimed that LCDC had incurred 111 days of delay in the construction of the Tektite Building. LCDC countered that there were many times when its requests for time extension – although due to reasonable causes sanctioned by the construction agreement such as power failures, water supply interruption, and scarcity of construction materials – were unreasonably reduced to shorter periods by PRHC. Seeking to recover all the above-mentioned amounts, LCDC filed a Complaint with Application for the Issuance of a Writ of Preliminary Attachment

Issue: Whether or not LCDC is not liable for liquidated damages for delay in the construction of the buildings for PRHC

Held: A perusal of the construction agreements shows that the parties never agreed to make LCDC liable even in cases of force majeure. Neither was the assumption of risk required. Thus, in the occurrence of events that could not be foreseen, or though foreseen were inevitable, neither party should be held responsible.

Under Article 1174 of the Civil Code, to exempt the obligor from liability for a breach of an obligation due to an “act of God” or force majeure, the following 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 unforseeable 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.

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.

Further, PRHC is barred by the doctrine of promissory estoppel from denying that it agreed, and even promised, to hold LCDC free and clear of any liquidated damages. Abcede and Santos also promised that the latter corporation would not be held liable for liquidated damages even for a single day of delay despite the non-approval of the requests for extension.

Megaworld Globus Asia, Inc. vs Mila Tanseco GR no. 181206 October 19, 2009

Facts:  

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On July 7, 1995, petitioner Megaworld Globus Asia, Inc. and respondent Tanseco entered into a Contract to Buy and Sell a condominium unit at a pre-selling project, “The Salcedo Park.” The contract stipulated that the construction of the project and the units purchased shall be completed and delivered not later than October 31, 1998 with additional grace period of 6 months within which to complete the project barring delays due to fire, earthquakes, the elements, acts of God, war, civil disturbances, strikes or other labor disturbances, government and economic controls making it, among others, impossible or difficult to obtain the necessary materials, acts of third person, or any other cause or conditions beyond the control of the seller. A few days shy of three years later, Megaworld, by notice of turnover, informed Tanseco that the unit was ready for inspection preparatory to delivery. Tanseco replied through counsel 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 April 30, 1999, the expiration of the six-month grace period. Tanseco pointed out that none of the excepted causes of delay existed. 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.

Issue: Whether or not force majeure was present and that it would warrant the application of April 30, 1999 as an alternative date

Held: Article 1174 of the Civil Code provides: Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the

assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable

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 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.

Roberto Sicam vs Lulu Jorge GR No. 159617 August 8, 2007

Facts: 

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Lulu Jorge pawned several pieces of jewelry with Agencia de R. C. Sicam. On October 19, 1987, two armed men entered the pawnshop and took away whatever cash and jewelry were found inside the pawnshop vault. Petitioner Sicam sent respondent Lulu a letter informing her of the loss of her jewelry due to the robbery incident in the pawnshop. On November 2, 1987, respondent Lulu then wrote a letter to petitioner Sicam expressing disbelief stating that when the robbery happened, all jewelry pawned were deposited with Far East Bank. Respondent Lulu then requested petitioner Sicam to prepare the pawned jewelry for withdrawal but petitioner Sicam failed to return the jewelry. On September 28, 1988, respondent Lulu joined by her husband, Cesar Jorge, filed a complaint against petitioner Sicam seeking indemnification for the loss of pawned jewelry. The RTC ruled that petitioner corporation could not be held liable for the loss of the pawned jewelry since it had not been rebutted by respondents that the loss of the pledged pieces of jewelry in the possession of the corporation was occasioned by armed robbery; that robbery is a fortuitous event which exempts the victim from liability for the loss. The CA held that the corresponding diligence required of a pawnshop is that it should take steps to secure and protect the pledged items and should take steps to insure itself against the loss of articles which are entrusted to its custody as it derives earnings from the pawnshop trade which petitioners failed to do.

Issue: Whether or not the pawnshop is exempted from liability for the loss due to fortuitous event

Held:

The burden of proving that the loss was due to a fortuitous event rests on him who invokes it. And, 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.

Petitioner Sicam had testified that there was a security guard in their pawnshop at the time of the robbery. He likewise testified that when he started the pawnshop business in 1983, he thought of opening a vault with the nearby bank for the purpose of safekeeping the valuables but was discouraged by the Central Bank since pawned articles should only be stored in a vault inside the pawnshop. The very measures which petitioners had allegedly adopted show that to them the possibility of robbery was not only foreseeable, but actually foreseen and anticipated. Petitioner Sicam’s testimony, in effect, contradicts petitioners’ defense of fortuitous event.

Florencia Huibonhua vs Court of Appeals GR Nos. 95897 and 102604 December 14, 1999

Facts: 

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Huibonhoa entered into a memorandum of agreement with the Gojocco siblings stipulating that Huibonhoa would lease from them 3 adjacent commercial lots. The parties inked a contract of lease in which the lessee undertook to complete the construction of a 4-storey building “within 8 months from the date of the execution of the contract of lease.” During the construction of the building, former Senator Benigno Aquino, Jr. was assassinated. The consequent hoarding of construction materials and increase in interest rates allegedly affected adversely the construction of the building such that Huibonhoa failed to complete the same within the stipulated eight-month period. Under the contract, Huibonhoa was supposed to start paying rental in March 1984 but she failed to do so. Consequently, the Gojoccos made several verbal demands upon Huibonhoa for the payment of rental arrearages and, for her to vacate the leased premises. Huibonhoa brought an action for reformation of contract. The RTC held that Huibonhoa had not presented clear and convincing evidence to justify the reformation of the lease contract. It considered as “misplaced” her contention that the Aquino assassination was an “accident” within the purview of Art. 1359 of the Civil Code.

Issue: Whether or not the assassination of former Senator Benigno Aquino, Jr should be considered a fortuitous event

Held: A fortuitous event is that which could not be foreseen, or which even if foreseen, was inevitable. In the case under scrutiny, the assassination of Senator Aquino may indeed be considered a fortuitous event. However, the said incident per se could not have caused the delay in the construction of the building. What might have caused the delay was the resulting escalation of prices of commodities including construction materials. Be that as it may, there is

no merit in Huibonhoa’s argument that the inflation borne by the Filipinos in 1983 justified the delayed accrual of monthly rental, the reduction of its amount and the extension of the lease by three (3) years.

Inflation is the sharp increase of money or credit or both without a corresponding increase in business transaction. While it is of judicial notice that there has been a decline in the purchasing power of the Philippine peso, this downward fall of the currency cannot be considered unforeseeable considering that since the 1970’s we have been experiencing inflation. It is simply a universal trend that has not spared our country.

Ace-Agro Development Corp. vs Court of Appeals GR No. 119729 January 21, 1997

Facts:    

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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. On April 25, 1990, 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. On May 15, 1990, petitioner asked private respondent to allow it to resume its service, but petitioner was advised that on account of the fire, private respondent was terminating their contract. Petitioner requested private respondent to reconsider its decision and allow petitioner to resume its work in order to “cushion the sudden impact of the unemployment of many of its workers.” As it received no reply from private respondent, petitioner informed its employees of the termination of their employment. In response, private respondent advised petitioner that the latter could resume the repair of wooden shells under terms similar to those contained in its contract but work had to be done outside the company premises. Petitioner refused the offer. On January 3, 1991, petitioner brought this case against private respondent for breach of contract and damages. The RTC found private respondent guilty of breach of contract and ordered it to pay damages to petitioner. The appellate court found that it was petitioner which had refused to resume work, after failing to secure an extension of its contract.

Issue: Whether or not the respondent was justified in unilaterally terminating the contract on account of force majeure

Held:

The stipulation that in the event of a fortuitous event or force majeure the contract shall be deemed suspended during the 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. If during six of the thirty years fixed as the duration of a contract, one of the parties is prevented by force majeure to perform his obligation during those years, he cannot after the expiration of the thirty-year period, be compelled to perform his obligation for six more years to make up for what he failed to perform during the said six years, because it would in effect be an extension of the term of the contract. The contract is stipulated to run for thirty years, and the period expires on the thirtieth year; the period of six years during which performance by one of the parties is prevented by force majeure cannot be deducted from the period stipulated.

The Court of Appeals was right that petitioner had no basis for refusing private respondent’s offer unless petitioner was allowed to carry out its work in the company premises. That petitioner would incur additional cost for transportation was not a good reason for its refusal. Petitioner has not shown that on August 28, 1990, when it was notified of the private respondent’s offer, the latter’s premises had so far been restored so as to permit petitioner to resume work there. In fact, even when petitioner was finally allowed to resume work within the plant, it was not in the former work place but in a new one, which shows that private respondent’s reason for not granting petitioner’s request was not just a pretext.

Pedro Dioquino vs Federico Laureano, et. al. GR No. L-25906 May 28, 1970

Facts: 

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Attorney Pedro Dioquino, a practicing lawyer of Masbate, is the owner of a car. On March 31, 1964, he went to the office of the MVO, Masbate, to register the same. On his way to the P.C. Barracks, the car, driven by plaintiff's driver and with defendant Federico Laureano as the sole passenger, was stoned by some 'mischievous boys' and its windshield was broken. One of the boys was caught and taken to Atty. Dioquino. The defendant Federico Laureano refused to file any charges against the boy and his parents because he thought that the stone-throwing was merely accidental and that it was due to force majeure. Defendant Federico Laureano refused to pay the windshield himself and challenged that the case be brought to court for judicial adjudication. The plaintiff tried to convince Laureano just to pay the value of the windshield but Laureano refused to make any settlement, clinging to the belief that he could not be held liable because a minor child threw a stone accidentally on the windshield and therefore, the same was due to force majeure.

Issue: Whether or not the damage on Atty. Dioquino’s car was caused by force majeure

Held: Authorities of repute are in agreement, more specifically concerning an obligation arising from contract "that some extraordinary circumstance independent of the will of the obligor, or of his employees, is an essential element of a caso fortuito." 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."

The error committed by the lower court in holding defendant Federico Laureano liable appears to be thus obvious. Its own findings of fact repel the motion that he should be made to respond in damages to the plaintiff for the broken windshield. What happened was clearly unforeseen. It was a fortuitous event resulting in a loss which must be borne by the owner of the car. An element of reasonableness in the law would be manifestly lacking if, on the circumstances as thus disclosed, legal responsibility could be imputed to an individual in the situation of defendant Laureano. Art. 1174 of the Civil Code guards against the possibility of its being visited with such a reproach. Unfortunately, the lower court was of a different mind and thus failed to heed its command.

Bachelor Express, Inc. vs Court of Appeals Gr No. 85691 July 31, 1990

Facts:  

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The evidence shows that a passenger suddenly stabbed a PC soldier in a bus owned by petitioner which caused commotion and panic among the passengers. When the bus stopped, 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. The passenger assailant alighted from the bus and ran toward the bushes but was killed by the police. Thereafter, the heirs of Ornominio Beter and Narcisa Rautraut filed a complaint for "sum of money" against Bachelor Express, Inc. its alleged owner Samson Yasay and the driver Rivera. In their answer, the petitioners denied liability for the death of Ornominio Beter and Narcisa Rautraut. They alleged that: (a)the driver was able to transport his passengers safely to their respective places of destination except Ornominio Beter and Narcisa Rautraut who jumped off the bus without the knowledge and consent, much less, the fault of the driver and conductor (b) the defendants in this case the defendant corporation had exercised due diligence in the choice of its employees to avoid as much as possible accidents;

Issue: Whether or not the stabbing incident constitutes a fortuitous event, thus absolving petitioner of any liability

Held: The running amuck of the passenger was the proximate cause of the incident as it triggered off a commotion and panic among the passengers such that the passengers started running to the sole exit shoving each other resulting in the falling off the bus by passengers Beter and Rautraut causing them fatal injuries. 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. Considering the factual findings of the Court of Appealsthe 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-it is clear that the petitioners have failed to overcome the presumption of fault and negligence found in the law governing common carriers.

Pedro Vasquez, et. al. vs Court of Appeals GR No. L-42926 September 13, 1985

Facts: 

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When the inter-island vessel MV "Pioneer Cebu" left the Port of Manila in the early morning of May 15, 1966 bound for Cebu, it had on board the spouses Alfonso Vasquez and Filipinas Bagaipo and a four-year old boy, Mario Marlon Vasquez, among her passengers. 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. The aforementioned passengers were unheard from since then. 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. 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 RTC awarded damages to plaintiffs. The CA reversed the RTC’s judgment and absolved private respondent from liability.

Issue: Whether or not the defense of private respondent of a fortuitous event is tenable

Held: Under the circumstances, while, indeed, 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 for the safety of the passengers transported by them with due regard for an circumstances and

unnecessarily exposed the vessel and passengers to the tragic mishap. They failed to overcome that presumption of fault or negligence that arises in cases of death or injuries to passengers.

Despite the total loss of the vessel therefore, its insurance answers for the damages that a shipowner or agent may be held liable for by reason of the death of its passengers. The CA’s judgment was reversed by the Supreme Court.

Alberta & Cresencio Yobido vs Court of Appeals GR No. 113003 October 17, 1997 Facts:  Spouses Tito and Leny Tumboy and their minor children boarded a Yobido Liner bus. Along the way, the left front tire of the bus exploded. The bus fell into a ravine around 3 feet from the road and struck a tree. The incident resulted in the death of Tito Tumboy and physical injuries to other passengers.

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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.

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For their part, the defendants tried to establish that the accident was due to a fortuitous event. Abundio Salce, who was the bus conductor when the incident happened, testified that the 42-seater bus was not full as there were only 32 passengers. He added that the bus was running at a speed of “60 to 50” and that it was going slow because of the zigzag road. He affirmed that the left front tire that exploded was a “brand new tire” that he mounted on the bus only five 5 days before the incident.

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The RTC dismissed the action for lack of merit. The CA reversed the decision of the RTC.

Issue: Whether or not the accident can be attributed to a fortuitous event

Held: Under the circumstances of this case, the explosion of the new tire may not be considered a fortuitous event. 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.

Moreover, a common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. The common carrier must still prove that it was not negligent in causing the death or injury resulting from an accident. Having failed to discharge its duty to overthrow the presumption of negligence with clear and convincing evidence, petitioners are hereby held liable for damages.

The SC affirmed the decision of the CA with modifications.

Roberto Juntilla vs Clemente Fontanar GR No. L-45637 May 31, 1985

Facts: 

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The plaintiff 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. When he came to his senses, he found that he had a lacerated wound on his right palm. Aside from this, he suffered injuries on his left arm, right thigh and on his back. Petitioner Roberto Juntilla filed for breach of contract with damages against Clemente Fontanar, Fernando Banzon and Berfol Camoro. The respondents filed their answer, alleging 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.

Issue: Whether or not the accident in question was due to a fortuitous event

Held: In the case at bar, 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. We agree with the observation of the petitioner that a public utility jeep running at a regular and safe speed will not jump into a ditch when its right rear tire blows up. 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 (3) passengers in the front seat and fourteen (14) 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 sudden blowing-up, therefore, could have been caused by too much air pressure injected into the tire coupled by the fact that the jeepney was overloaded and speeding at the time of the accident.

PhilAm Gen Insurance Co. vs MGG Marine Services, Inc. GR No. 135645 March 8, 2002

Facts: 

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San Miguel Corporation insured several beer bottle cases with petitioner Philippine American General Insurance Company. The cargo were loaded on board the M/V Peatheray Patrick-G. On March 3, 1987 M/V Peatheray Patrick-G subsequently sunk off Cawit Point, Cortes, Surigao del Sur. As a consequence thereof, the cargo belonging to San Miguel Corporation was lost. 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 Corp. filed a case for collection against private respondents to recover the amount it paid to San Miguel Corp. for the loss of the latter's cargo. The Board of Marine Inquiry found that the cause of the sinking of the vessel was the existence of strong winds and enormous waves in Surigao del Sur, a fortuitous event that could not have been for seen at the time the M/V Peatheray Patrick-G left the port of Mandaue City. The RTC found private respondents solidarily liable for the loss of San Miguel Corporation's cargo. The CA reversed the RTC’s decision based on the findings of the Board.

Issue: Whether or not the findings of the Board of Marine Inquiry, which stated that the sinking of the vessel was due to a fortuitous event, should be appreciated in deciding the case

Held: Although the Board of Marine Inquiry ruled only on the administrative liability of the captain and crew of the M/V Peatheray Patrick-G, it had to conduct a thorough investigation of the circumstances surrounding the sinking of the vessel and the loss of its cargo in order to determine their responsibility, if any. The results of its investigation as embodied in its decision on the administrative case clearly indicate that the loss of the cargo was due solely to the

attendance of strong winds and huge waves which caused the vessel accumulate water, tilt to the port side and to eventually keel over. There was thus no error on the part of the Court of Appeals in relying on the factual findings of the Board of Marine Inquiry, for such factual findings, being supported by substantial evidence are persuasive, considering that said administrative body is an expert in matters concerning marine casualties.

Since the presence of strong winds and enormous waves at Cortes, Surigao del Sur on March 3, 1987 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.

Mindex Resourced Development vs Ephraim Morillo GR No. 138123 March 12, 2002

Facts:  

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A verbal agreement was entered into between Ephraim Morillo and Mindex Resources Corporation for the lease of the formers 6 x 6 ten-wheeler cargo truck for use in MINDEXs mining operations. Unknown to Morillo, the truck was burned by unidentified persons while it was parked unattended due to mechanical trouble. Upon learning of the burning incident Morillo sent a letter to Mr. Arni Isberg, the Finance Manager of MINDEX for the payment of the damaged vehicle. MINDEX responded with the counter offers to (a) pay the rental of the 6 x 6 truck in the amount of P76,000.00, (b) repair and overhaul the truck on their own expenses and; (c) return it to Morillo in good running condition after repair. Morillo replied, (a) that he will relinquish to MINDEX the damaged truck; (b) that he is amenable to receive the rental in the amount of P76,000.00; and (c) that MINDEX will pay fifty thousand pesos (P50,000.00) monthly until the balance of P275,000.00 is fully paid. The RTC found petitioner responsible for the destruction or loss of the leased 6 x 6 truck. The appellate court sustained the RTC’s finding.

Issue: Whether or not the petitioner failed to overcome the presumption of negligence against it considering that the facts show that the burning of the truck was a fortuitous event

Held: 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. A review of the records clearly shows that petitioner failed to exercise reasonable care and caution that an ordinarily prudent person would have used in the same situation.

As can be gleaned from the testimony of witness Roxas, who testified that the truck was left in the place where it had engine trouble for 2 weeks, petitioner failed to employ reasonable foresight, diligence and care that would have exempted it from liability resulting from the burning of the truck. Negligence, as commonly understood, is that conduct that naturally or reasonably creates undue risk or harm to others. It may be a failure to observe that degree of care, precaution or vigilance that the circumstances justly demand; or to do any other act that would be done by a prudent and reasonable person, who is guided by considerations that ordinarily regulate the conduct of human affairs.

NAPOCOR vs Philipp Brothers Oceanic, Inc. GR No. 126204 November 20, 2001

Facts: 

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. After the public bidding was conducted, Philipp Brothers Oceanic, Inc.’s (PHIBRO) bid was accepted.

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On July 10, 1987, PHIBRO sent word to 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.

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On August 6, 1987, 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, as agreed upon by the parties in the July contract, PHIBRO effected its first shipment only on November 17, 1987.

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In October 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.

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This prompted PHIBRO to file an action for damages with application for injunction against NAPOCOR. In its answer, NAPOCOR averred that the strikes in Australia could not be invoked as reason for the delay in the delivery of coal because PHIBRO itself admitted that as of July 28, 1987 those strikes had already ceased.

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The RTC rendered a decision in favour of PHIBRO. The Court of Appeals rendered a Decision affirming in toto the Decision of the Regional Trial Court.

Issue: Whether or not the Court of Appeals erred in concluding that PHIBRO’s delay in the delivery of imported coal was due to NAPOCOR’s alleged delay in opening a letter of credit and to force majeure, and not to PHIBRO’s own deliberate acts and faults

Held: The Court of Appeals is justified in sustaining the Regional Trial Court’s decision exonerating PHIBRO from any liability for damages to NAPOCOR as it was clearly established from the evidence, testimonial and documentary, that what prevented PHIBRO from complying with its obligation under the July 1987 contract was the industrial disputes which besieged Australia during that time. Extant in our Civil Code is the rule that no person shall be responsible for those events which could not be foreseeen, or which, though foreseen, were inevitable. This means that when an obligor is unable to fulfill his obligation because of a fortuitous event or force majeure, he cannot be held liable for damages for non-performance.

In addition to the above legal precept, 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.”

The law is clear and so is the contract between NAPOCOR and PHIBRO. Therefore, the SC has no reason to rule otherwise.

William Ong Genato vs Benjamin Bayhon, et. al. GR No. 171035 August 24, 2009

Facts:  

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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 TCT No. 38052. Respondent filed for the reconstitution of TCT No. 38052. Petitioner William Ong Genato filed an Answer in Intervention 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. With respect to the dacion en pago, the trial court held that at the time of the execution of the REM, the wife of respondent, Amparo Mercado, was already dead. It concluded that the said 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. The CA held that both the dacion en pago and the real estate mortgage as being simulated or fictitious contracts. The CA held further that while the principal obligation is valid, the death of respondent Benjamin Bayhon extinguished it. The heirs could not be ordered to pay the debts left by the deceased.

Issue: Whether or not the obligation of the respondent may be transmitted to his heirs

Held: As a general rule, obligations derived from a contract are transmissible. Article 1311, par.1 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 in our successional system the responsibility of the heirs for the debts of their decedent cannot exceed the value of the inheritance they receive from him, the principle remains intact that these heirs succeed not only to the rights of the deceased but also to his obligations. The loan in this case was contracted by respondent. He died while the case was pending before the Court of Appeals. While he 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. Notably, throughout the appellate stage of this case, the estate has been amply represented by the heirs of the deceased.

Union Bank of the Philippines vs Edmund Santibañez GR No. 149926 February 23, 2005

Facts: 

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The First Countryside Credit Corporation (FCCC) and Efraim Santibañez entered into a loan agreement which was intended for the payment of the purchase price of one Ford Tractor. Efraim and his son, Edmund, executed a promissory note in favor of the FCCC. Aside from such promissory note, they also signed a Continuing Guaranty Agreement. Sometime in February 1981, Efraim died, leaving a holographic will. During the pendency of the testate proceedings, the surviving heirs, Edmund and his sister Florence, executed a Joint Agreement wherein they agreed to divide between themselves and take possession of the 3 tractors. Each of them was to assume the indebtedness of their late father to FCCC, corresponding to the tractor respectively taken by them. A Deed of Assignment with Assumption of Liabilities was executed between FCCC and Union Savings and Mortgage Bank, wherein the FCCC assigned all its assets and liabilities to USMB. Demand letters for the settlement of his account were sent by petitioner Union Bank of the Philippines to Edmund, but the latter refused to pay. Thus, the petitioner filed a Complaint for sum of money against the heirs of Efraim Santibañez, Edmund and Florence. Florence alleged that the loan documents did not bind her since she was not a party thereto.

Issue: Whether or not respondents can, in fact, be held jointly and severally liable with the principal debtor the late Efraim Santibañez Held: Perusing the joint agreement, it provides that the heirs as parties thereto “have agreed to divide between themselves and take possession and use the above-described chattel and each of them to assume the indebtedness corresponding to the chattel taken as herein after stated which is in favor of First Countryside Credit Corp.” 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 as earlier discussed, 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. Perusing the records of the case, nothing therein could hold private

respondent Florence S. Ariola 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.

Jesus San Agustin vs Court of Appeals GR No. 121940 December 4, 2001

Facts:  

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GSIS sold to a certain Macaria Vda. de Caiquep, a parcel of residential land of the GSIS Low Cost Housing Project (GSIS-LCHP). A day after the issuance of the TCT Macaria Vda. de Caiquep sold the subject lot to private respondent, Maximo Menez, Jr. Sometime in 1979, for being suspected as a subversive, an Arrest, Search and Seizure Order (ASSO) was issued against private respondent. He was detained for 2 years. When released, another order for his re-arrest was issued so he hid in Mindanao for until March 1984. In December of 1990, he discovered that the subject TCT was missing. An Affidavit of Loss was filed and a petition was filed for the issuance of owner’s duplicate copy of TCT No. 436465 to replace the lost one. To show he was the owner of the contested lot, he showed the Deed of Absolute Sale. The trial court granted Menez’ petition in its decision. However, on October 13, 1992, herein petitioner, Jesus San Agustin, claimed that 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”

Issue: Whether or not the petitioner, as heir of the original owner, is entitled to notice

Held: Here, 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 at the time of the filing or pendency of LRC Case No. R-4659. Clearly, petitioner is not entitled to notice.

According to the SC, the contract of sale remains valid between the parties, unless and until annulled in the proper suit filed by the rightful party, the GSIS. For now, the said contract of sale is binding upon the heirs of Macaria Vda. de Caiquep, including petitioner who alleges to be one of her heirs, in line with the rule that heirs are bound by contracts entered into by their predecessors-in-interest. However, absent the proper action taken by the GSIS as the original vendor referred to, the contract between petitioner’s predecessor-in-interest and private respondent deserves to be upheld.

Project Builders, Inc. vs Court of Appeals GR No. 99433 June 19, 2001

Facts:  

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Industrial Finance Corporation (IFC) and defendant PBI entered into an agreement whereby it was agreed that IFC would provide a maximum amount of P2,000,000.00 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. To secure compliance with the terms and conditions of the agreement, defendants on the 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, hence, this complaint.

Issue: Whether or not the agreement forged by petitioners and private respondent is a simple loan or a financing transaction governed by the provisions of Republic Act No. 5980.

Held: 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. The assignment binds the debtor only upon acquiring knowledge of the assignment but he is entitled, even then, to raise against the assignee the same defenses he could set up against the assignor. Where the assignment is on account of pure liberality on the part of the assignor, the rules on donation would likewise be pertinent; where valuable consideration is involved, the assignment partakes of the nature of a contract of sale or purchase.

Upon an assignment of a contract to sell, the assignee is effectively subrogated in place of the assignor and in a position to enforce the contract to sell to the same extent as the assignor could. An insistence of petitioners that the subject transaction should be considered a simple loan since private respondent did not communicate with the debtors, condominium unit buyers, to collect payment from them, is untenable. In an assignment of credit, the consent of the debtor is not essential for its perfection, his knowledge thereof or lack of it affecting only the efficaciousness or inefficaciousness of any payment he might make.

Hong Kong and Shanghai Banking Corp. (HSBC) vs Sps. Broqueza GR No. 178610 November 17, 2010

Facts: 

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Petitioners Gerong and Broqueza are employees of HSBC. They are also members of respondent HSBC, Ltd. Staff Retirement Plan. Petitioner Editha Broqueza obtained a car loan and an appliance loan. On the other hand, petitioner Gerong applied and was granted an emergency loan. These loans are paid through automatic salary deduction. Meanwhile in 1993, 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. 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 filed civil cases against Gerong and the spouses Boqueza for recovery and collection of sums of money.

Issue: Whether or not the Sps. Broqueza’s obligation to pay HSBCL-SRP is a pure obligation

Held: In ruling for HSBCL-SRP, the first paragraph of Art. 1179 of the Civil Code applies thus: “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.”

The RTC is correct in ruling that since the Promissory Notes do not contain a period, HSBCL-SRP has the right to demand immediate payment. The spouses Broqueza’s obligation to pay HSBCLSRP 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. A definite amount is paid to HSBCL-SRP on a specific date. Editha Broqueza authorized HSBCL-SRP to make deductions from her payroll until her loans are fully paid. Editha Broqueza, however, defaulted in her monthly loan payment due to her dismissal. Despite the spouses Broqueza’s protestations, the payroll deduction is merely a convenient mode of payment and not the sole source of payment for the loans. HSBCL-SRP never agreed that the loans will be paid only through salary deductions. Neither did HSBCL-SRP agree that if Editha Broqueza ceases to be an employee of HSBC, her obligation to pay the loans will be suspended. HSBCL-SRP can immediately demand payment of the loans at anytime because the obligation to pay has no period. Moreover, the spouses Broqueza have already incurred in default in paying the monthly installments.

Development Bank of the Philippines vs Court of Appeals 262 SCRA 245 Facts:  Private respondents are original owners of a parcel of land in Ozamis City. They mortgaged said land to DBP. When private respondents defaulted on their obligation, petitioner foreclosed the mortgage on the land and emerged as sole bidder in the ensuing auction sale.  On April 6, 1984, DBP & PR entered into a deed of conditional sale where DBP agreed to convey the foreclosed property to them.  On April 6, 1990, upon completing the payment of the full repurchase price DBP, private respondents demanded the execution of the deed of conveyance in their favor.  However, DBP denied the execution & delivery because it had become illegally impossible in view of sec. 6 of RA 6657 (CARL) that upon effectivity of this act, any sale lease, management contract / transfer of possession of private / lands executed by the original land owner in violation of this act shall be null & void. Issue: Whether or not the execution and delivery of conveyance is legally impossible Held: According to Manresa, it is a rule that if the obligation depends upon a suspensive condition, the demandability as well as the acquisition or 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 appellee 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 of sale were present. Consequently, the contract of sale was perfected. As such, the said sale does not come under the coverage of R.A. 6657. Under Art 1181, in conditional obligations, the acquisition of rights as well as the extinguishment or loss of those already acquired depend upon the happening of the event which constitutes the conditions. The deed of conditional sale between petitioner and private respondent was executed on April 6 1984. Since private respondent had religiously paid the agreed installment on the property until April 6, 1990, private respondent is entitled to the land.

Maria Soledad Tomimbang vs Atty. Jose Tomimbang GR No. 165116 August 4, 2009

Facts:  

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Petitioner and respondent are siblings. Their parents donated to petitioner an eightdoor apartment 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. Petitioner accepted respondent's offer. Renovations on Units B to G were completed, and the work has just started on Unit A when an altercation broke out between herein parties. Respondent and petitioner entered into a new agreement whereby petitioner was to start making monthly payments on her loan. In 1997, a quarrel also occurred between respondent and another sister, Maricion. Petitioner left Unit H and could no longer be found. Renovations on Unit A were discontinued when her whereabouts could not be located. She also stopped making monthly payments and ignored the demand letter sent by respondent's counsel. Respondent filed a Complaint against petitioner, demanding the latter to pay the former the net amount of P3,989,802.25 plus interest of 12% per annum from date of default. Petitioner contends that the loan is not yet due and demandable because the suspensive condition – the completion of the renovation of the apartment units - has not yet been fulfilled.

Issue: Whether or not petitioner’s obligation is due and demandable

Held: 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 (Unit A) was still pending. Genaro Tomimbang, the younger brother of herein parties, testified that a meeting was held among petitioner, respondent, himself and their eldest sister Maricion, sometime during the first or second quarter of 1997, wherein respondent demanded payment of the loan,

and petitioner agreed to pay. Indeed, petitioner began to make monthly payments from June to October of 1997 totalling P93,500.00. In fact, petitioner even admitted in her Answer with Counterclaim that she had "started to make payments to plaintiff [herein respondent] as the same was in accord with her commitment to pay whenever she was able; x x x ."

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 modificatory or partial novation, of petitioner's obligation.

Felix Gonzales vs Heirs of Cruz GR No. 131784 September 16, 1999

Facts: 

Paula Año Cruz together with the heirs of Thomas and Paula Cruz entered into a Contract of Lease/Purchase with Felix L. Gonzales, the sole proprietor and manager of Felgon Farms. The contract of Lease/Purchase contains the following provisions:

“1.The terms of this Contract is for a period of one year upon the signing thereof. After the period of this Contract, the LESSEE shall purchase the property on the agreeable price of One Million Pesos” xxx xxx

xxx

“9.The LESSORS hereby commit themselves and shall undertake to obtain a separate and distinct T.C.T. over the herein leased portion to the LESSEE within a reasonable period of time which shall not in any case exceed four (4) years, after which a new Contract shall be executed by the herein parties which shall be the same in all respects with this Contract of Lease/Purchase insofar as the terms and conditions are concerned.”

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Gonzales paid the annual rental on the half-portion of the property and thereafter took possession of the property, installing Jesus Sambrano as his caretaker Gonzales did not, however, exercise his option to purchase the property immediately after the expiration of the one-year lease on November 30, 1984. 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 Ricardo Cruz to Gonzales informing him of the lessors’ decision to rescind the Contract of Lease/Purchase due to a breach committed by the defendant. Gonzales refused to vacate the property and continued possession and claimed that the property subject of the Contract of Lease/Purchase is currently the subject of an ExtraJudicial Partition. Title to the property remains in the name of the respondents’ predecessors-in-interest, Bernardina Calixto and Severo Cruz

Issue: Whether or not paragraph 9 of the contract is a condition precedent before the defendant is to pay the down payment

Held: Paragraph 9 of the contract clearly indicates that the lessors-plaintiffs 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. Article 1181 of the New Civil Code states that: ‘In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.’ 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 Court has held that “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.” Furthermore, “the obligatory force of a conditional obligation is subordinated to the happening of a future and uncertain event, so that if that event does not take place, the parties would stand as if the conditional obligation had never existed.”

In the same vein, respondents cannot rescind the contract, because they have not caused the transfer of the TCT to their names, which is a condition precedent to petitioner’s obligation. This Court has held that “there can be no rescission (or more properly, resolution) of an obligation as yet non-existent, because the suspensive condition has not happened.

Insular Life Assurance Company vs Robert Young, et. al. GR No. 140964 & 142267 January 16, 2002

Facts:   

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Issue:

Respondent Robert Young, together with his associates and co-respondents acquired by purchase Home Bankers Savings and Trust Co., now petitioner Insular Savings Bank. On December, 1990, Benito Araneta, a stockholder of the Bank, signified his intention to purchase 99.82% of its outstanding capital stock, subject to the condition that the ownership of all the shares will be consolidated in Young's name In order to carry out the intended sale to Araneta, Young bought from Jorge Go and his group their 45% equity in the Bank. In order to pay this amount, Young obtained a short-term loan of from International Corporate Bank to finance the purchase. However, Araneta backed out from the intended sale and demanded the return of his downpayment. Through the intervention of Asian Oceanic, Young and Insular Life entered into a Credit Agreement. Under its provisions, Insular Life extended a loan to Young in the amount of P200,000,000.00. To secure the loan, Young, acting in his behalf and as attorney-in-fact of the other stockholders, executed on the same day a Deed of Pledge which represented 99.82% of the outstanding capital stock of the Bank. The next day, he also executed a promissory note in favor of Insular Life in the same amount with an interest rate of 26% per annum to mature 120 days from execution. On October 21, 1991, Young signed a letter prepared by Atty. Jacinto Jimenez, counsel of Insular Life, stating that due to business reverses, he shall not be able to pay his obligations under the Credit Agreement between him and Insular Life and that Insular may consider his obligations defaulted. Insular Life instructed its counsel to foreclose the pledge constituted upon the shares. The latter then sent Young a notice informing him of the sale of the shares in a public auction. Young and his associates filed with the RTC a complaint against the Bank, Insular Life and its counsel, Atty. Jacinto Jimenez, for annulment of notarial sale, specific performance and damages alleging that the notarial sale conducted by petitioner Atty. Jacinto Jimenez is void as it does not comply with the requirement of notice of the second auction sale.

Whether or not the MOA is valid and enforceable between the parties despite respondent Young's failure to comply with its terms and conditions

Held: Petitioners contend that the MOA is not enforceable considering that Robert Young committed fraud, misrepresented the warranties and failed to comply with his obligations.

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.

In Mortel vs. Kassco, Inc., the SC held: “In contracts subject to a suspensive condition, the birth or effectivity of such contracts only takes place if and when the event constituting the condition happens or is fulfilled, and if the suspensive condition does not take place or is not fulfilled, the parties would stand as if the conditional obligation had never existed.”

It must be emphasized that the MOA did not convey title of the shares to Insular Life. If ever there was delivery of the said shares to Insular Life, it was because they were pledged by Young to Insular Life under the Credit Agreement.

It would be unfair on the part of Young to demand compliance by Insular Life of its obligations when he himself was remiss in his own. Neither can he feign ignorance of the stipulation in the MOA since it is presumed that he read the same and was satisfied with its provisions before he affixed his signature therein. The fact that no deed of sale was subsequently executed by the parties confirms the conclusion that no sale transpired between them.

Direct Funders Holdings Corp. vs Judge Celso Laviña GR No. 141851 January 16, 2002

Facts: 

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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 RTC in a petition for the issuance of writ of possession thereof way back on October 23, 1997. 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 On January 21, 1998, 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 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 CA promulgated a decision dismissing the petition ruling that the trial court had jurisdiction to issue the injunction that did not interfere with the writ of possession of a coordinate court.

Issue: Whether or not the CA erred in affirming the trial court’s ruling issuing a writ of injunction restraining a writ of possession in another case to place respondent back in possession of the subject property

Held: 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 RTC. The SC found that 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 (No. 12357) covering the subject property. Third, it was executed about eight (8) years after the execution of the real estate mortgage over the subject property.

To emphasize, the mortgagee (United Savings Bank) 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 conditions of the conditional sale agreement were not fulfilled, hence, respondent’s claim to the subject property was ineffectual.

Fidela Vda. de Mistica vs Sps. Naguiat GR No. 137909 December 11, 2003

Facts:     

Eulalio Mistica, predecessor-in-interest of herein petitioner, is the owner of a parcel of land. A portion thereof was leased to respondent Bernardino Naguiat sometime in 1970. On 5 April 1979, Eulalio Mistica entered into a contract to sell with respondent Bernardino Naguiat over a portion of the aforementioned lot containing an area of 200 square meters. Pursuant to said agreement, Naguiat gave a downpayment of P2,000.00. He made another partial payment of P1,000.00 on 7 February 1980. He failed to make any payments thereafter. Eulalio Mistica died sometime in October 1986. On 4 December 1991, 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. Respondent Naguiat alleged that sometime in October 1986, during the wake of the late Eulalio Mistica, he offered to pay the remaining balance to petitioner but the latter refused and hence, there is no breach or violation committed by them and no damages could yet be incurred by the late Eulalio Mistica, his heirs or assigns pursuant to the said document

Issue: Whether or not there is a breach of obligation between the parties

Held: 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. In the Kasulatan, it was stipulated that payment could be made even after ten years from the execution of the Contract, provided the vendee paid 12 percent interest. Petitioner argues that the period cannot be extended beyond ten years, because to do so would convert the buyer’s obligation to a purely potestative obligation that would annul the contract.

This contention is untenable. The Code prohibits purely potestative, suspensive, conditional obligations that depend on the whims of the debtor, because such obligations are usually not meant to be fulfilled. Indeed, to allow the fulfillment of conditions to depend exclusively on the debtor’s will would be to sanction illusory obligations. The Kasulatan does not allow such thing. First, nowhere is it stated in the Deed that payment of the purchase price is dependent upon whether respondents want to pay it or not. Second, the fact that they already made partial payment thereof only shows that the parties intended to be bound by the Kasulatan.

Luz Hermosa vs Epifanio Longara GR No. L-5267 October 27, 1953

Facts: 

Epifanio M. Longara made 3 claims against the testate estate of Fernando Hermosa, namely: (a) P2,341.41 representing credit advances made to the intestate from 1932 to 1944, (b) P12,924.12 made to his son Francisco Hermosa, and (c) P3,772 made to his grandson, Fernando Hermosa, Jr. from 1945 to 1947, after the death of the intestate, which occurred in December, 1944.

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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 P20,000 from the buyer of the property. Upon authorization of the probate court, the same was paid for subsequently. The Claim was filed on October 2, 1948. It is contended on the appeal that the obligation contracted by the intestate was subject to a condition exclusively dependent upon the will of the debtor (a condicion potestativa) and therefore null and void, in accordance with article 1115 of the old Civil Code.

Issue: Whether the obligation contracted by the intestate is null and void

Held: 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. If the condition were "if he decides to sell his house." or "if he likes to pay the sums advanced," or any other condition of similar import implying that upon him (the debtor) alone payment would depend, the condition would be protestativa, dependent exclusively upon his will or discretion.

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, i.e., the presence of a buyer of the property for the price and under the conditions desired by the intestate. The obligation is clearly governed by the second sentence of article 1115 of the old Civil Code. The condition is, besides, a suspensive condition, upon the happening of which the obligation to pay is made dependent. And upon the happening of the condition, the debt became immediately due and demandable.

Nazario Trillana vs Quezon College, Inc. GR No. L-5003 June 27, 1953

Facts:   

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Damasa Crisostomo sent a letter to the Board of trustees of the Quezon College subscribing to 200 shares of capital stock of P100 each. In the letter, she also wrote: “Enclosed 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 P20,000, representing the value of the subscription to the capital stock. 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.

Issue: Whether or not Damasa’s obligation to Quezon College, Inc. is valid

Held: 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. 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 article 1115 of the old Civil Code which provides as follows: "If the fulfillment of the condition should depend upon the

exclusive will of the debtor, the conditional obligation shall be void. If it should depend upon chance, or upon the will of a third person, the obligation shall produce all its effects in accordance with the provisions of this code." It cannot be argued that the condition solely is void, because it would have served to create the obligation to pay, unlike a case wherein only the potestative condition was held void because it referred merely to the fulfillment of an already existing indebtedness.

Visayan Sawmill Company, Inc. vs Court of Appeals GR No. 83851 March 3, 1993

Facts: 

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Ang Tay (Visayan Sawmill) and Ramon Hibionada (RJH Trading) entered into a sale involving scrap iron located at the stockyard of defendant-appellant corporation (RJH Trading) subject to the condition that plaintiff-appellee will open a letter of credit in the amount of P250,000.00 in favor of defendant-appellant corporation on or before May 15, 1983 Ang Tay, through his men, started to gather scrap iron at the defendant-appellant's premises, proceeding with such endeavor until May 30 when defendants-appellants allegedly directed Ang Tay’s men to desist from pursuing the work in view of an alleged case filed against the latter by a certain Alberto Pursuelo. On July 19, 1983, Ang Tay sent a series of telegrams stating that the case filed against him by Pursuelo had been dismissed and demanding that RJH Trading comply with the deed of sale, otherwise a case will be filed against them. In reply to those telegrams, Hibionada's lawyer informed Ang Tay’s lawyer that RJH Trading is unwilling to continue with the sale due to Ang Tay’s failure to comply with essential pre-conditions of the contract.

Issue: Whether or not the contract executed by the parties cancelled and terminated before the Complaint was filed by anyone of the parties Held: In the agreement in question the seller bound and promised itself to sell the scrap iron upon the fulfillment by the private respondent of his obligation to make or indorse an irrevocable and unconditional letter of credit in payment of the purchase price.

The petitioner corporation's obligation to sell is unequivocally subject to a positive suspensive condition, i.e., the private respondent's opening, making or indorsing of an irrevocable and unconditional letter of credit. The former agreed to deliver the scrap iron only upon payment of the purchase price by means of an irrevocable and unconditional letter of credit. Otherwise stated, the contract is not one of sale where the buyer acquired ownership over the property subject to the resolutory condition that the purchase price would be paid after delivery. Thus,

there was to be no actual sale until the opening, making or indorsing of the irrevocable and unconditional letter of credit. Since what obtains in the case at bar is a mere promise to sell, 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.

Carmelita Leaño vs Court of Appeals GR No. 129018 November 15, 2001

Facts: 

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Hermogenes Fernando, as vendor and Carmelita Leaño, as vendee executed a contract to sell involving a piece of land. The contract stipulated that P10,775.00 shall be paid as down payment for the lot, and the balance of P96,975.00 shall be paid within a period of 10 years with a monthly amortization of P1,747.30 to begin from December 7, 1985 with interest at 18% per annum based on balances. The contract also provided that should a period of 90 days elapse from the expiration of the grace period without the overdue and unpaid installments having been paid with the corresponding interests up to that date, respondent Fernando, as vendor, was authorized to declare the contract cancelled and to dispose of the parcel of land, as if the contract had not been entered into. Carmelita Leaño made several payments in lump sum. Thereafter, she constructed a house on the lot. The last payment that she made was on April 1, 1989. On September 16, 1991, the trial court rendered a decision in an ejectment case earlier filed by respondent Fernando ordering petitioner Leaño to vacate the premises.

Issue: Whether or not the transaction between the parties is a conditional sale

Held: First, the contract to sell makes the sale, cession and conveyance "subject to conditions" set forth in the contract to sell. Second, what was transferred was the possession of the property, not ownership. Finally, the ownership of the lot was not transferred to Carmelita Leaño. As the land is covered by a torrens title, the act of registration of the deed of sale was the operative act that could transfer ownership over the lot.

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. The transfer of ownership and title would occur after full payment of the price. As petitioner Leaño was not given then cash surrender value of the payments that she made, there was still no actual cancellation of the contract. Consequently, petitioner Leaño may still reinstate the contract by updating the account during the grace period and before actual cancellation. Should petitioner Leaño wish to reinstate the contract, she would have to update her accounts with respondent Fernando in accordance with the statement of account 39 which amount was P183,687.00.

Raymundo De Leon vs Benita Ong GR No. 170405 February 2, 2010

Facts:  

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Petitioner sold three parcels of land to respondent Benita 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 P415,500 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 Respondent later learned that petitioner sold the same properties to one Leona Viloria and changed the locks, rendering the keys he gave her useless. Respondent 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 filed a complaint for specific performance, declaration of nullity of the second sale and damages against petitioner and Viloria. Petitioner claimed that since the transaction was subject to a condition (i.e., that RSLAI approve the assumption of mortgage), they only entered into a contract to sell. Inasmuch as respondent did apply for a loan from RSLAI, the condition did not arise. The RTC ruled that it was a contract to sell while the CA held that it was a contract of sale.

Issue: Whether or not the obligation arose from a contract to sell

Held: 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. On the other hand, a contract to sell is subject to a positive suspensive condition. The

buyer does not acquire ownership of the property until he fully pays the purchase price. For this reason, if the buyer defaults in the payment thereof, the seller can only sue for damages.

In this instance, 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 acts clearly indicates that he had unqualifiedly delivered and transferred ownership of the properties to respondent. Clearly, it was a contract of sale the parties entered into.

Heirs of Remedios Sandejas vs Alex Lina GR No. 141634 February 5, 2001

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Eliodoro Sandejas, Sr. was appointed by the lower court as administrator of the estate of his wife, the late Remedios Sandejas. An Omnibus Pleading for motion to intervene was filed by Alex Lina alleging that Eliodoro, in his capacity as seller, bound and obligated himself, his heirs, administrators, and assigns, to sell absolutely and in their entirety 4 parcels of land which formed part of the estate of the late Remedios Sandejas On January 7, 1985, the counsel for Eliodoro filed a Manifestation that the administrator, Eliodoro Sandejas, died sometime in November 1984. The lower court issued an Order directing that the counsel for the heirs of Teresita Sandejas to move for the appointment of a new administrator. However, there was no appearance of the aforenamed heirs. Alex A. Lina filed a Motion for his appointment as a new administrator of the Intestate Estate of Remedios R. Sandejas stating that he has not received any motion on the part of the heirs for the appointment of a new administrator. The lower court granted the said motion. On August 28, 1986, the heirs filed a Motion for Reconsideration and the appointment of another administrator Sixto Sandejas, in lieu of Alex Lina. The lower court granted the said Motion and substituted Alex Lina with Sixto Sandejas On November 29, 1993, Lina filed an Omnibus Motion (a) to approve the deed of conditional sale executed between him and Eliodioro Sandejas, Sr. on June 7, 1982; (b) to compel the heirs of Remedios Sandejas and Eliodoro Sandejas, Sr. to execute a deed of absolute sale in favor of Lina pursuant to said conditional deed of sale to which the administrator filed a Motion to Dismiss The lower court granted Lina’s motion. The CA overturned the RTC ruling holding that the contract between Eliodoro Sandejas Sr. and respondent was merely a contract to sell, not a perfected contract of sale.

Issue: Whether or not the CA erred in ordering the conveyance of the disputed 3/5 of the parcels of land, despite the nonfulfillment of the suspensive condition (ie. court approval of the sale)

Held: Petitioners admit that the agreement between the deceased Eliodoro Sandejas Sr. and respondent was a contract to sell. Not exactly. 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.

On the other hand, the agreement between Eliodoro Sr. and respondent is subject to a suspensive condition -- the procurement of a court approval, not full payment. 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.

When a contract is subject to a suspensive condition, its birth or effectivity can take place only if and when the condition happens or is fulfilled.Thus, the intestate court’s grant of the Motion for Approval of the sale filed by respondent resulted in petitioners’ obligation to execute the Deed of Sale of the disputed lots in his favor. The condition having been satisfied, the contract was perfected. Henceforth, the parties were bound to fulfill what they had expressly agreed upon.

Commissioner of Internal Revenue vs Primetown Property Group GR No. 162155 August 28, 2007

Facts:  

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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 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. On May 13, 1999, 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. The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus, its right to claim a refund or credit commenced on that date. On August 1, 2003, the CA reversed and set aside the decision of the CTA. It ruled that Article 13 of the Civil Code did not distinguish between a regular year and a leap year.

Issue: Whether or not Primetown filed its petition for review within the 2-year prescriptive period

Held: 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. Lex posteriori derogat priori.

The SC held that 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.

National Marketing Corp. (NAMARCO) vs. Tecson, et. al. GR No. L-29131 August 27, 1969

Facts: 

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On November 14, 1955, the Court of First Instance of Manila rendered judgment, in the case of Price Stabilization Corporation vs. Miguel D. Tecson and Alto Surety and Insurance Co., Inc. ordering the defendants Tecson and Alto Surety Insurance Co., Inc. to pay jointly and severally PRATRA the sum of P7,200.00 and for Tecson to indemnify Alto Surety Insurance Co., Inc. on the cross-claim for all the amounts it would be made to pay in the decision. Copy of this decision was, on November 21, 1955, served upon the defendants in said case. On December 21, 1965, the National Marketing Corporation, as successor to all the properties, assets, rights, and choses in action of the Price Stabilization Corporation, as plaintiff in that case and judgment creditor therein, filed, with the same court, a complaint against the same defendants, for the revival of the judgment rendered in said Case. Defendant Miguel D. Tecson moved to dismiss said complaint, upon the ground of lack of jurisdiction over the subject matter and prescription of action. The complaint was then dismissed by the CFI.

Issue: Whether or not the present action for the revival of a judgment is barred by the statute of limitations

Held: Plaintiff-appellant alleges that it was December 21, 1965, but appellee Tecson maintains otherwise, because "when the laws speak of years ... it shall be understood that years are of three hundred sixty-five days each" — according to Art. 13 of our Civil Code — and, 1960 and 1964 being leap years, the month of February in both had 29 days, so that ten (10) years of 365 days each, or an aggregate of 3,650 days, from December 21, 1955, expired on December 19, 1965.

Pursuant to Art. 1144(3) of our Civil Code, an action upon a judgment "must be brought within ten years from the time the right of action accrues," which, in the language of Art. 1152 of the same Code, "commences from the time the judgment sought to be revived has become final." This, in turn, took place on December 21, 1955, or thirty (30) days from notice of the judgment — which was received by the defendants herein on November 21, 1955 — no appeal having been taken therefrom. The issue is thus confined to the date on which ten (10) years from December 21, 1955 expired.

The order appealed from was affirmed by the SC.

Ernest Berg vs Magdalena Estate, Inc. GR No. L-3784 October 17, 1952

Facts: 

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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. Defendant claims that on September 22, 1943, it sold to plaintiff one-third 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. Plaintiff filed a reply stating that the transaction referred to by the defendant relative to the property in litigation is not supported by any note or memorandum subscribed by the parties, as in fact no such note or memorandum has been made evidencing the transaction. 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.

Issue: Whether or not the enforcement of the defendant’s right to buy the property is not a term, but a condition

Held: Under article 1125 of said code, obligations, for the fulfillment of which a day certain has been fixed, shall be demandable only when the day arrives. A day certain is understood to be that which must necessarily arrive, even though it is not known when. In order that an obligation may be with a term, it is, therefore, necessary that it should arrive, sooner or later; otherwise, if its arrival is uncertain, the obligation is conditional. To constitute a term the period must end on a day certain. Viewing in this light 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." Finding no error in the decision appealed from, the same is hereby affirmed.

Lirag Textile Mills, Inc. vs Court of Appeals GR No. L-30736 April 14, 1975

Facts: 

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Issue:

On May 11, 1960 and for sometime prior and subsequent thereto, Felix Lirag was a member of the Board of Directors of the Philippine Chamber of Industries. That for about two months, more or less, prior to May 11, 1960, Alcantara worked in a temporary capacity with Lirag Textile Mills, Inc. During this same period of time, Felix Lirag was a director and Chairman of the Board of Directors of Lirag Textile Mills, Inc On May 9, 1960, Lirag Textile Mills, Inc. wrote a letter to Alcantara advising him that, effective May 11, 1960, his temporary designation as Technical Assistant to the Administrative Officer was made permanent. That as Assistant to the Administrative Officer of the Lirag Textile Mills, Inc. plaintiff received a salary of P400.00 and allowance of P100.00 per month. Plaintiff's tenure of employment, per Lirag Textile Mills, Inc.'s above letter was to be 'for an indefinite period, unless sooner terminated by reason of voluntary resignation or by virtue of a valid cause or causes'. On July 22, 1961, Lirag Textile Mills, Inc. wrote Alcantara a letter advising him that because the company 'has suffered some serious reverses, both in terms of pecuniary loss and in market opportunities,' the company was terminating his services and effecting his separation from defendant corporation effective at the close of working hours of August 22, 1961. However, it was shown that Lirag Textile Mills Inc.'s original capital of P5,000,000.00 was, on May 2, 1961, increased to P15,000,000.00 per certification issued by the Security and Exchange Commission. The CFI found that Alcantara was dismissed without cause in violation of his contract of employment. The CA affirmed 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 Alcantara and that Alcantara was correctly awarded back salaries, moral damages and attorney's fees.

Whether or not the CA erred in awarding Alcantara back salaries from the time of dismissal up to final judgment for the dismissal without cause

Held: A "period" has been defined "as a space of time which has an influence on obligation as a result of a juridical act, and either suspends their demandableness or produces their extinguishment." Obligations with a period are those whose consequences are subjected in one way or another to the expiration of said period or term. Art. 1193 of the Civil Code, provides, among others, that "obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. A day certain is understood to be that which must necessarily come, although it may not be known when". In the light of the foregoing provisions We have no doubt that the "indefinite period" of employment expressly agreed upon by and between the parties in this case is really a resolutory period because the employment is bound to terminate on a future "day certain" such as the employee's resignation or employer's termination of employment upon a valid cause or causes, like death of the employee or termination of employer's corporate existence, although it may not be known when.

It is clear that 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 knowing them to be false, thus making itself liable for payment of actual, moral and exemplary damages, plus attorneys fees to private respondent Alcantara. Petitioner Lirag Textile Mills, Inc. cannot with impunity be allowed the absolute and unilateral power to terminate without valid cause a contract of employment with a definite period it voluntarily entered into merely on the basis of its whim or caprice and under the false pretense of financial distress.

The SC affirmed the assailed decision of the CA.

Daguhoy Enterprises, Inc. vs Rita Ponce GR No. L-6515 October 18, 1954

Facts: 

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On June 24, 1950, Rita Ponce, wife of Domingo, executed in favor of plaintiff corporation a deed of mortgage over a parcel of land to secure the payment of a loan of P5,000 granted to her by Daguhoy Enterprises, Inc., payable within six years with interest at 12% per annum. Rita Ponce with the consent of her husband Domingo executed another mortgage deed amending the first one, whereby the loan was increased from P5,000 to P6,190, the terms and conditions of the mortgage remaining the same. Rita and Domingo presented the two mortgage deeds for registration in the office of the register of deeds, but said register noted defects and deficiencies and advised Rita and Domingo to cure the defects and furnish the necessary data. Instead of complying with the suggestion, the two withdrew the two mortgage deeds and then mortgaged the same parcel of land in favor of the Rehabilitation Finance Corporation (RFC) to secure a loan. Potenciano Gapol, the majority stockholder in the Daguhoy Enterprises, Inc., upon learning that the deeds of mortgage were not registered and that they were withdrawn from the office of the register of deeds and the land covered by the two deeds was again mortgaged to the RFC, he filed a civil case against the Ponces. To account for the amount of said loan, Domingo and his son Buhay filed in court a check of the RFC in favor of Daguhoy Enterprises, Inc. and interests. After the deposit of said check and interests, Potenciano Gapol in representation of the Daguhoy Enterprises, Inc. petitioned the court for permission to withdraw the amounts, presumably to apply them to the payment of the loan. Because of the opposition of defendants therein to the withdrawal unless the mortgage by Rita was cancelled the court denied the petition.

Issue: Whether or not the benefit of the period by the debtor has expired

Held:

Although the original loan of P5,000.00 including the increase of P1,190 was payable within six years from June 1950, and so did not become due and payable until 1956, the trial court 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 the 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.

There is no question that said deposit was in favor of the Daguhoy Enterprises, Inc. and eventually would be given to it. But did the said deposit relieve the present defendants from the payment of interests from the time of deposit, on the theory that the deposit amounted to a payment of the loan? The answer must be in the negative. When the plaintiff in said case 13753 petitioned the trial court for permission to withdraw the deposit, presumably to pay the loan involved in the present action, his petition was denied by the court because of the opposition of the defendants therein, one of whom is Domingo Ponce, co-defendant of Rita Ponce in the present case. The result was that the present plaintiff corporation could not take possession and dispose of said amount. In other words, the loan is not yet paid.

Victoria Planters Association, Inc. vs Victorias Milling Co., Inc. GR No. L-6648 July 25, 1955

Facts: 

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Issue:

At various dates, from the year 1917 to 1934, the sugar cane planters 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. The North Negros Sugar Co., Inc. had its first milling during the 1918-1919 crop year, and the Victorias Milling Co., had its first milling during the 1921-1922 crop year. Subsequent millings took place every successive crop year thereafter, except the 6-year period, comprising 4 years of the last World War II and 2 years of post-war reconstruction of respondent's central at Victorias, Negros Occidental. After the liberation, the North Negros Sugar Co., Inc. did not reconstruct its destroyed central at Manapla, Negros Occidental, and in 1946, it advised the North Negros Planters Association, Inc. that it had made arrangements with the respondent Victorias Milling Co., Inc. for said corporation to mill the sugar cane produced by the planters of Manapla and Cadiz holding milling contracts with it. Thus, after the war, all the sugar cane produced by the planters of petitioner associations, in Manapla, Cadiz, as well as in Victorias, who held milling contracts, were milled in only one central, that of the respondent corporation at Victorias Beginning with the year 1948, and in the following years, when North Negros Planters Association, Inc. considered that the stipulated 30-year period of their milling contracts executed in the year 1918 had already expired in the crop year 1947-1948, and 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, repeated representation were made with respondent corporation for negotiations regarding the execution of new milling contracts. Notwithstanding these repeated representations made by the petitioners with the respondent corporation for the negotiation and execution of new milling contracts, the respondent has refused to accede, contending that under the provisions of the milling contract, that their contracts with the planters call for 30 years of milling — not 30 years in time. Victorias Milling Co. also stated that as there was no milling during 4 years of the recent war and two years of reconstruction.

Whether or not the term stipulated in the contracts is 30 milling years and not 30 calendar years

Held: Fortuitious event relieves the obligor from fulfilling a contractual obligation. The fact that the contracts make reference to "first milling" does not make the period of thirty years one of thirty milling years. The term "first milling" used in the contracts under consideration was for the purpose of reckoning the thirty-year period stipulated therein. Even if the thirty-year period provided for in the contracts be construed as milling years, the deduction or extension of six years would not be justified. 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.

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. In order that the central, the herein appellant, may be entitled to demand from the other parties the fulfillment of their part in the contracts, the latter must have been able to perform it but failed or refused to do so and not when they were prevented by force majeure such as war. To require the planters to deliver the sugar cane which they failed to deliver during the four years of the Japanese occupation and the two years after liberation when the mill was being rebuilt is to demand from the obligors the fulfillment of an obligation which was impossible of performance at the time it became due.

Jespajo Realty Corporation vs Court of Appeals GR No. 113626 September 27, 2002

Facts: 

On February 1, 1985, Jespajo Realty Corporation, represented by its President, Jesus L. Uy, entered into separate contracts of lease with Tan Te Gutierrez and Co Tong. The terms of the contract among others are the following: ‘PERIOD OF LEASE- The lease period shall be effective as of February 1, 1985 and shall continue for an indefinite period provided the lessee is up-to-date in the payment of his monthly rentals. The LESSEE may, at his option, terminate this contract any time by giving sixty (60) days prior written notice of termination to the LESSOR. ‘However, violation of any of the terms and conditions of this contract shall be a sufficient ground for termination thereof by the LESSOR. ‘RENT INCREASE - For the duration of this contract, the LESSEE agrees to an automatic 20% yearly increase in the monthly rentals.’

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Since the effectivity of the lease agreement, the lessees religiously paid their respective monthly rentals together with the 20% yearly increase in the monthly rentals. On January 2, 1990, 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 opposed alleging that it 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 xxx demanded that the lessees vacate the premises and pay the amount of P7,000.00 corresponding to the months of February and March, 1990. The lessees exerted effort to pay the rentals due for the months of February and March 1990 at the monthly rate stipulated in the contract but was refused by the lessor so that they instituted before the Metropolitan Trial Court of Manila a case for consignation.

Issue: Whether or not the contract, which stipulated an “indefinite period and shall continue for as long as the lessee is paying the rent” is considered indeterminable

Held: Crucial in the resolution of this case is the construction of the lease agreement, particularly the portion on the period of lease, which reads: “PERIOD OF LEASE- The lease period shall be effective as of February 1, 1985 and shall continue for an indefinite period provided the lessee is up-to-date in the payment of his monthly rentals. xxx” Petitioner insists that the subject contract of lease did not provide for a definite period hence it falls under the ambit of Art. 1687 of the NCC, making the agreement effective on a month-tomonth basis since rental payments are made monthly. The Court of Appeals opined otherwise. It reasoned that the application of Art. 1687 in this case is misplaced because ‘when there is a fixed period for the lease, whether the period be definite or indefinite or when the period of the lease is expressly left to the will of the lessee, Art. 1687 will not apply’

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 xxx 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 upto-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.

Pilar Borromeo et. al. vs Court of appeals GR No. L-22962 September 28, 1972

Facts: 

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Before the year 1933, defendant being a friend and former classmate of plaintiff Canuto O. 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. Plaintiff then pressed the defendant for settlement of his obligation, but defendant instead offered to execute a document promising to pay his indebtedness even after the lapse of ten years. Liquidation was made and defendant signed a promissory note on November 29, 1933 agreeing to pay 'as soon as I have money'. After the execution of the document, plaintiff limited himself to verbally requesting defendant to settle his indebtedness from time to time. Plaintiff did not file any complaint against the defendant within ten years from the execution of the document as there was no property registered in defendant's name. After the last war, plaintiff made various oral demands, but defendant failed to settle his account, hence the present complaint for collection.

Issue: Whether or not there has been a waiver of the defense of prescription

Held: What emerges in the light of all the principles set forth is that the first ten years after November 29, 1933 should not be counted in determining when the action of creditor, now represented by petitioners, could be filed. From the joint record on appeal, it is undoubted that the complaint was filed on January 7, 1953. If the first ten-year period was to be excluded, the creditor had until November 29, 1953 to start judicial proceedings. After deducting the first tenyear period which expired on November 29, 1943, there was the additional period of still

another ten years. Nor could there be any legal objection to the complaint by the creditor Borromeo of January 7, 1953 embodying not merely the fixing of the period within which the debtor Villamor was to pay but likewise the collection of the amount that until then was not paid. The justification became even more apparent in the latter portion of the opinion of Justice Alex Reyes for this Court: "We may add that defendant does not claim that if a separate action were instituted to fix the duration of the term of its obligation, it could present better proofs than those already adduced in the present case. Such separate action would, therefore, be a mere formality and would serve no purpose other than to delay." There is no legal obstacle then to the action for collection filed by the creditor.

Benito Gonzales vs Florentino de Jose GR No. 43429 October 24, 1938

Facts: 

This action was instituted by the plaintiff to recover from the defendant the amount of two promissory notes worded as follows: (1) "I promise to pay Mr. Benito Gonzalez the sum of four hundred three pesos and fiftyfive centavos (P403.55) as soon as possible.” (2) "I promise to pay Mr. Benito Gonzales the sum of the three hundred and seventythree pesos and thirty centavos (P373.30) as soon as possible.” (Sgd.) "FLORENTINO DE JOSE"

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Defendant appealed from the decision of the CFI ordering him to pay the plaintiff the sum of P547.95 within thirty days from the date of notification of said decision, plus the costs. In his answer the defendant interposed that the complaint is uncertain inasmuch as it does not specify when the indebtedness was incurred or when it was demandable, and that, granting that the plaintiff has any cause of action, the same has prescribed in accordance with law. The trial court held that the action for recovery of the amount of the two promissory notes has not prescribed in accordance with article 1128 of the Civil Code, which provides: "ART. 1128. 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 court shall also fix the duration of the term when it has been left to the will of the debtor."

Issue: Whether or not the action by the plaintiff has prescribed

Held:

It is practically admitted by the parties that the obligations arising from the two promissory notes should be governed by said article, inasmuch as it was the intention of the plaintiff, evidenced by the terms of the said notes, to grant the debtor a period within which to pay the debts. The SC held that the promissory notes are governed by article 1128 because under the terms thereof the plaintiff intended to grant the defendant a period within which to pay his debts. As the promissory notes do not fix this period, it is for the court to fix the same. 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 years, which has already elapsed from the execution of the promissory notes until the filing of the action on June 1, 1934. The action which should be brought in accordance with article 1128 is different from the action for the recovery of the amount of the notes, although the effects of both are the same, being, like the civil actions, subject to the rules of prescription. The action brought by the plaintiff having already prescribed, the defendant is absolved from the complaint.

Guillermina Baluyut vs Eulogio Poblete et. al. GR No. 144435 February 6, 2007

Facts: 

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On July 20, 1981, herein petitioner, Guillermina Baluyut, loaned from the spouses Eulogio and Salud Poblete the sum of P850,000.00. As evidence of her indebtedness, Baluyut signed, on even date, a promissory note for the amount borrowed. Under the promissory note, the loan shall mature in one month. To secure the payment of her obligation, she conveyed to the Poblete spouses, by way of a real estate mortgage contract, a house and lot she owns. Upon maturity of the loan, Baluyut failed to pay her indebtedness. The Poblete spouses subsequently decided to extrajudicially foreclose the real estate mortgage. The mortgaged property was sold on auction to the Poblete spouses who were the highest bidders. Baluyut failed to redeem the subject property within the period required by law prompting Eulogio Poblete to execute an Affidavit of Consolidation of Title. Subsequently, TCT No. 43445 was issued in the name of Eulogio and the heirs of Salud. However, Baluyut remained in possession of the subject property and refused to vacate the same. Hence, Eulogio and the heirs of Salud filed a Petition for the issuance of a writ of possession with the RTC.

Issue: Whether or not no prior demand to pay is necessary for a loan to mature when there is conflict between the date of maturity of the loan

Held: Petitioner admits that the issue regarding the date of maturity of the loan which she incurred from the Poblete spouses was first brought up only in her Addendum to the Motion for Reconsideration filed before the CA. It is settled that an issue not raised during trial could not be raised for the first time on appeal as to do so would be offensive to the basic rules of fair play, justice, and due process. Even if petitioner had properly raised the issue regarding the real date of maturity of the loan, it is a long-held cardinal rule that when the terms of an agreement

are reduced to writing, it 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. In the present case, the promissory note and the real estate mortgage are the law between petitioner and private respondents. It is not disputed that under the Promissory Note dated July 20, 1981, the loan shall mature in one month from date of the said Promissory Note. In the instant case, aside from the testimony of Atty. Mendoza, no other evidence was presented to prove that the real date of maturity of the loan is one year. In fact there was not even any allegation in the Complaint and in the Memorandum filed by petitioner with the trial court to the effect that there has been fraud or mistake as to the date of the loan’s maturity as contained in the Promissory Note of July 20, 1981.

Malayan Realty, Inc. vs Uy Han Yong GR No. 163763 November 10, 2006

Facts: 

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In 1958, Malayan entered into a verbal lease contract with Uy Han Yong over the property (an apartment unit known as 3013 Interior No. 90) 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, he refused to vacate the property, prompting Malayan to file before the MeTC of Manila a complaint for ejectment. Malayan prayed for the court to order Uy and all other persons claiming possession under him to vacate the property, to pay P9,000 as fair and reasonable monthly compensation for its use from September 1, 2001 until its possession is turned over to it.

Issue: Whether or not the court has the power to establish a longer term for the lease

Held: In the case at bar, the lease period was not agreed upon by the parties. Rental was paid monthly, and respondent has been occupying the premises since 1958. As earlier stated, a written notice was served upon respondent on January 17, 2001 terminating the lease effective August 31, 2001. As respondent was notified of the expiration of the lease, effectively his right to stay in the premises had come to an end on August 31, 2001.The 2nd paragraph of Article 1687 provides, however, 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. Where a petitioner has been deprived of its possession over the leased premises for so long a time, and it is shown that, indeed, the respondent was the recipient of substantial benefits while the petitioner was unable to have the full use and enjoyment of a considerable portion of its property, such militates against further deprivation by fixing a period of extension.

Kasapian ng Malayang Manggagawa sa Coca-Cola vs Court of Appeals GR No. 159828 April 19, 2006

Facts: 

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On 30 June 1998, the Collective Bargaining Agreement for the years 1995-1998 executed between petitioner union and private respondent company expired. Petitioner submitted its demands to the company for another round of collective bargaining negotiations. However, said negotiations came to a gridlock as the parties failed to reach a mutually acceptable agreement with respect to certain economic and non-economic issues. On 19 December 1998, petitioner held the strike in private respondent’s Manila and Antipolo plants. Both parties executed a MOA providing for salary increases and other economic and non-economic benefits. Said MOA was later incorporated to form part of the 1998-2001 CBA and was thereafter ratified by the employees of the company. Meanwhile, a certification election was conducted on 17 August 1999 pursuant to the order of the Department of Labor and Employment (DOLE) wherein the KASAMMA-CCO Independent surfaced as the winning union and was then certified by the DOLE as the sole and exclusive bargaining agent of the rank-and-file employees of private respondent’s Manila and Antipolo plants for a period of five years from 1 July 1999 to 30 June 2004. Pursuant to the provisions of the MOA, both parties identified 64 vacant regular positions that may be occupied by the existing casual, contractual or agency employees who have been in the company for more than one year. Fifty-eight of those whose names were submitted for regularization passed the screening and were thereafter extended regular employment status, while the other five failed the medical examination and were granted six months within which to secure a clean bill of health. On 9 December 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.

Issue: Whether or not private respondent violated the terms and conditions contained in the MOA

Held: What is necessary in determining whether the private respondent violated the provisions of the MOA with respect to the date of regularization of the 61 employees is an interpretation of the pertinent provision of the MOA as agreed upon by the parties. It must be noted that both parties admit the existence of said MOA and that they have voluntarily entered into said agreement. Furthermore, neither of the parties deny that the 61 employees have indeed been regularized by private respondent. Clearly, as the facts are admitted by the parties, the appellate court does not have to inquire into the veracity of any fact in order to establish the rights of the parties. All that the Court of Appeals must do is to interpret the provisions of the MOA and resolve whether said regularization must be made retroactive to 1 December 1998, which according to petitioner is provided for under the said MOA. The MOA, being a contract freely entered into by the parties, now constitute as the law between them, and the interpretation of its contents purely involves an evaluation of the law as applied to the facts herein.

Moreover, at this point it must be stressed that under Article 280 of the Labor Code, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists. Also, under the law, a casual employee is only casual for one year, and it is the passage of time that gives him a regular status. Hence, even without the subject MOA provision, the 61 employees must be extended regular employment status after the lapse of one year. Even if we were to follow private respondent’s contention that the date 1 December 1998 provided in the MOA is merely a reckoning date to determine who among the non-regular employees have rendered one year of service as of said date, all those who have been with the company for one year by said date must automatically be considered regular employees by operation of law. Therefore, contrary to the interpretation of the NLRC, private respondent violated the provision of the MOA when it did not consider the regularization of the 61 employees effective 1 December 1998, and accorded to them the full benefits of the MOA.

Zenaida Santos vs Santos et. al. GR No. 133895 October 2, 2001

Facts: 

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The spouses Jesus and Rosalia Santos owned a parcel of land registered with an area of 154 square meters. On it was a four-door apartment administered by Rosalia who rented them out. The spouses had five children, Salvador, Calixto, Alberto, Antonio and Rosa. Jesus and Rosalia executed a deed of sale of the properties in favor of their children Salvador and Rosa. Rosa in turn sold her share to Salvador which resulted in the issuance of a new TCT. Despite the transfer of the property to Salvador, Rosalia continued to lease and receive rentals from the apartment units. On November 1, 1979, Jesus died. Six years after, 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 MeTC which eventually decided in Zenaida’s favor. On January 5, 1989, private respondents instituted an action for reconveyance of property with preliminary injunction against petitioner in the RTC, where they alleged that the two deeds of sale executed on January 19, 1959 and November 20, 1973 were simulated for lack of consideration.

Issue: Whether or not a sale through a public instrument is tantamount to delivery of the thing sold

Held: Petitioner in her memorandum invokes Article 1477 of the Civil Code which provides that ownership of the thing sold is transferred to the vendee upon its actual or constructive delivery. Article 1498, in turn, provides that when the sale is made through a public instrument, its execution is equivalent to the delivery of the thing subject of the contract. Petitioner avers that applying said provisions to the case, Salvador became the owner of the subject property by virtue of the two deeds of sale executed in his favor.

Nowhere in the Civil Code, however, does it provide that execution of a deed of sale is a conclusive presumption of delivery of possession. The Code merely said that the execution shall be equivalent to delivery. The presumption can be rebutted by clear and convincing evidence. Presumptive delivery can be negated by the failure of the vendee to take actual possession of the land sold.

Manuel Melotindos vs Melecio Tobias GR No. 146658 October 28, 2002

Facts: 

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Petitioner, Atty. Manuel D. Melotindos, was the lessee of the ground floor of a house at No. 577 Julio Nakpil Street in Malate, Manila. He had been renting the place since 1953 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.

Issue: Whether or not the order to eject petitioner from the leased premises was illegal because he was always up to date in paying the rental fee

Held:

It bears stressing that Art. 1687 does not grant a lessee an absolute right to an extension of the lease term but merely gives the courts the discretion to allow additional time for the lessee to prepare for his eventual ejection. In the instant case we agree with the courts a quo that petitioner's old age and length of his occupancy of the house alone are not just grounds for granting the extension of lease because these circumstances by themselves do not give him the equitable right to insist upon staying on the premises as long as he could pay the rentals. The record plainly illustrates, for example, that he made no substantial or additional improvements on the house which could have hampered his transfer to another residence. We also concur with the observation of the Court of Appeals that petitioner had been effectively granted an extension of five (5) years when respondent did not assiduously pursue the several demands made in 1995 and 1996 for him to return possession of the leased premises until the ejectment complaint was filed in 1999, and significantly we add that he was evicted from the premises in accordance with the MeTC Decision only in 2002. That period of delay is more than enough.

As a lawyer, petitioner should have known better that seniority in age does not authorize us to ride roughshod over the reputable proprietary right of respondent. Notwithstanding his repeated references to his courageous defiance of mother time in his private practice of law, a fact perhaps remarkable, this simple ejectment case as any other case turns upon sensible not blind compassion where the party has to his favor the tilt of equity and law. Our chief resource in resolving cases is legal reasoning and no amount of plea for charitable dole-outs will replace the reckoning of the rule of law.

LL and Company Development vs Huang Chao Chun GR No. 142378 March 7, 2002

Facts: 

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Petitioner alleged that respondents Huang Chao Chun and Yang Tung Fa 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 amended lease contract was entered into by the parties sometime in August, 1991. The same amended the lease contract previously entered into by the parties on August 8, 1991. Respondents and the corporation denied petitioner’s allegations. The MeTC dismissed the case. The RTC affirmed the Decision of the Metropolitan Trial Court (MeTC) dismissing the unlawful detainer case. The RTC likewise agreed that the Contract of Lease entered into by the parties could be extended unilaterally by the lessees for another five years or until September 16, 2001, on the basis of justice and equity. The Court of Appeals affirmed in toto the RTC’s dismissal.

Issue: Whether or not the non-payment of rentals is a ground to eject, in an unlawful detainer

Held: Mere failure to pay rentals does not make possession unlawful, but when a valid demand to vacate the premises is made by the lessor, the lessee’s continued withholding of possession becomes unlawful. Well-settled is the rule that the failure of the owners/lessors to collect or their refusal to accept the rentals is not a valid defense. Respondents justify their nonpayment of rentals on the ground that petitioners refused to accept their payments. Article 1256 of the Civil Code, however, provides that “if the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum.”

Based on the foregoing, respondents should have deposited in a bank or with judicial authorities the rent based on the previous rate. In the instant case, respondents failed to pay the rent from October 1993 to March 1998 or for four (4) years and three (3) months. They should remember that Article 1658 of the Civil Code provides only two instances in which the lessee may suspend payment of rent; namely, in case the lessor fails to make the necessary repairs or to maintain the lessee in peaceful and adequate enjoyment of the property leased. None of these is present in the case at bar.

Brent School, Inc. vs Ronaldo Zamora GR No. L-48494 February 5, 1990

Facts: 

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The root of the controversy at bar is an employment contract in virtue of which Doroteo R. Alegre was engaged as athletic director by Brent School, Inc. at a yearly compensation of P20,000.00. The contract fixed a specific term for its existence, five (5) years, i.e., from July 18, 1971 to July 17, 1976. Subsequent subsidiary agreements reiterated the same terms and conditions, including the expiry date, as those contained in the original contract of July 18, 1971. 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. The stated ground for the termination was "completion of contract, expiration of the definite period of employment." And a month or so later, on May 26, 1976, Alegre accepted the amount of P3,177.71, and signed a receipt therefor containing the phrase, "in full payment of services for the period May 16, to July 17, 1976 as full payment of contract." At the investigation conducted by a Labor Conciliator of said report of termination of his services, Alegre protested the announced termination of his employment. He argued that although his contract did stipulate that the same would terminate on July 17, 1976, since his employment had lasted for five years, he had acquired the status of a regular employee and could not be removed except for valid cause.

Issue: Whether or not Alegre could not be removed by his employer except for valid cause

Held: The question immediately provoked by a reading of Article 319 is whether or not a voluntary agreement on a fixed term or period would be valid where the employee "has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer." The definition seems a non sequitur. From the premise — that the duties of an employee entail "activities which are usually necessary or desirable in the usual business or trade of the employer the" — conclusion does not necessarily follow that the employer and

employee should be forbidden to stipulate any period of time for the performance of those activities. There is nothing essentially contradictory between a definite period of an employment contract and the nature of the employee's duties set down in that contract as being "usually necessary or desirable in the usual business or trade of the employer." The concept of the employee's duties as being "usually necessary or desirable in the usual business or trade of the employer" is not synonymous with or identical to employment with a fixed term. Logically, the decisive determinant in term employment should not be the activities that the employee is called upon to perform, but the day certain agreed upon by the parties for the commencement and termination of their employment relationship, a day certain being understood to be "that which must necessarily come, although it may not be known when."

Lourdes Valerio Lim vs People of the Philippines GR No. L-34338 November 21, 1984

Facts: 

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The appellant is a businesswoman. On January 10, 1966, the appellant went to the house of Maria Ayroso and proposed to sell Ayroso's tobacco. Ayroso agreed to the proposition of the appellant to sell her tobacco consisting of 615 kilos at P1.30 a kilo. The appellant was to receive the overprice for which she could sell the tobacco. This agreement was made in the presence of plaintiff's sister, Salud G. Bantug. Salvador Bantug drew the document. This was signed by the appellant and witnessed by the complainant's sister, Salud Bantug, and the latter's maid, Genoveva Ruiz. Of the total value of P799.50, the appellant had paid to Ayroso only P240.00, and this was paid on three different times. Demands for the payment of the balance of the value of the tobacco were made upon the appellant by Ayroso, and particularly by her sister, Salud Bantug. Salud Bantug further testified that she had gone to the house of the appellant several times, but the appellant often eluded her; and that the "camarin" 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 stating that she had difficulty in collecting payments from her debtors. Pursuant to this letter, the appellant sent a money order for P100.00 and another for P50.00; and she paid P90.00 as evidenced by the receipt dated April 18, 1967, or a total of P240.00. As no further amount was paid, the complainant filed a complaint against the appellant for estafa.

Issue: Whether the receipt is a contract of agency to sell or a contract of sale of the subject tobacco

Held: It is clear in the agreement that the proceeds of the sale of the tobacco 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 was disposed of. Hence, Article 1197 of the New Civil Code, which provides that the courts may fix the duration of the obligation if it does not fix a period,

does not apply. Aside from the fact that Maria Ayroso testified that the appellant asked her to be her agent in selling Ayroso's tobacco, the appellant herself admitted that there was an agreement that upon the sale of the tobacco she would be given something. The appellant is a businesswoman, and it is unbelievable that she would go to the extent of going to Ayroso's house and take the tobacco with a jeep which she had brought if she did not intend to make a profit out of the transaction. Certainly, if she was doing a favor to Maria Ayroso and it was Ayroso who had requested her to sell her tobacco, it would not have been the appellant who would have gone to the house of Ayroso, but it would have been Ayroso who would have gone to the house of the appellant and deliver the tobacco to the appellant.

Pacific Banking Corporation vs Court of Appeals GR No. L-45656 May 5, 1989 Facts:  On April 15, 1955, herein private respondents Joseph and Eleanor Hart discovered 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.  Subsequently Joseph Hart approached businessman John Clarkin, then President of Pepsi-Cola Bottling Co. in Manila, for financial assistance. Joseph Hart and Clarkin signed a Memorandum of Agreement.  Due to financial difficulties, Insular Farms Inc. borrowed P 250,000.00 from Pacific Banking Corporation sometime in July of 1956.  Unfortunately, the business floundered and while attempts were made to take in other partners, these proved unsuccessful. Nevertheless, petitioner Pacific Banking Corporation and its then Executive Vice President, petitioner Chester Babst, did not demand payment for the initial July 1957 installment nor of the entire obligation, but instead opted for more collateral in addition to the guaranty of Clarkin.  On March 7, 1958, Hart received notice that the pledged shares of stocks of Insular Farms Inc. would be sold at public auction on March 10, 1958 at 8:00 A.M. to satisfy Insular Farms' obligation.  The private respondents filed a complaint for reconveyance and damages with prayer for writ of preliminary injunction before the Court of First Instance of Manila  Joseph Hart filed another case for I recovery of sum of money comprising his investments and earnings against Insular Farms, Inc. before the Court of First Instance of Manila Issue: Whether or not the petitioner bank agreed to an indefinite extension of time to pay the loan Held: In the case at bar, the parties to the purported agreement, Hart and Babst, were still alive, and both testified in the trial court regarding the purported extension. that the rule which states that there can be no valid extension of time by oral agreement unless the extension is for a definite time, is not absolute but admits of qualifications and exceptions.

The general rule is that an agreement to extend the time of payment, in order to be valid, must be for a definite time, although it seems that no precise date be fixed, it being sufficient that the time can be readily determined. In case the period of extension is not precise, the

provisions of Article 1197 of the Civil Code should apply. In this case, there was an agreement to extend the payment of the loan, including the first installment thereon which was due on or before July 1957. The pledge executed as collateral security on February 9, 1958 no longer contained the provision on an installment of P 50,000.00 due on or before July 1957. This can mean no other thing than that the time of payment of the said installment of P 50,000.00 was extended. It is settled that bills and notes may be varied by subsequent agreement. Thus, conditions may be introduced and arrangements made changing the terms of payment (10 CJS 758). The agreement for extension of the parties is clearly indicated and may be inferred from the acts and declarations of the parties, as testified to in court.

Felipe Agoncillo vs Crisanto Javier GR No. L-12611 August 7, 1918 Facts:  On February 27, 1904, Anastasio Alano, Jose Alano, and Florencio Alano executed in favor of the plaintiff, Da. Marcela Mariño, a document stating that: “1. We will pay to Da. Marcela Mariño within one year from this date together with interest thereon at the rate of 12 per cent per annum, the sum of P2,730.50, Philippine currency, this being the present amount of indebtedness incurred in favor of that lady on the 20th of April 1897, by our testator, the Rev. Anastasio C. Cruz; 2. To secure the payment of this debt we mortgage to the said Da. Marcela Mariño the house and lot bequeathed to us by the deceased, situated in this town, on calle Evangelista, formerly Asturias, recorded in the register of deeds on the twenty-second of April, 1895, under number 730; 3. In case of insolvency on our part, we cede by virtue of these presents the said house and lot to Da. Marcela Mariño, transferring to her all our rights to the ownership and possession of the lot; and if the said property upon appraisal at the time of the maturity of this obligation should not be of sufficient value to cover the total amount of this indebtedness, I, Anastasio Alano, also mortgage to the said lady my four parcels of land situated in the barrio of San Isidro, to secure the balance, if any; the title deeds of said property, as well as the title deeds of the said house and lot are this day delivered to Sr. Vicente Ilustre, general attorney-in-fact of Da. Marcela Mariño.”  

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No part of the interest or of the principal due upon this undertaking has been paid, except the sum of P200 paid in the year 1908 by the late Anastasio Alano. In 1912, Anastasio Alano died intestate. At the instance of one of his creditors, proceedings upon the administration of his estate were had in the Court of First Instance. The court appointed an administrator and a committee to hear claims. At the instance of the plaintiff, Da. Marcela Mariño, that she was a creditor of the deceased and that her claim was secured by mortgage upon real estate belonging to the said deceased, the court reopened the intestate proceeding, and appointed one Javier to be administrator of the estate. The plaintiffs averred that defendants have paid no part of the indebtedness therein acknowledged, with the exception of the P200 paid on account in 1908. It is further averred that on April 22, 1910, the debtors promised in writing that they would pay the debt in 1911, but that they had failed to do so. The prayer of the complaint is that,

unless defendants pay the debt for the recovery of which the action was brought, they be required to convey to plaintiffs the house and lot described in paragraph two of the said document.

Issue: Whether or not the title to the house 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

Held: The contract now under consideration is not susceptible of the interpretation that the title to the house 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 obligations assumed by the debtors were alternative, and they had the right to elect which they would perform. The conduct of the parties shows that it was not their understanding that the right to discharge the obligation by the payment of money was lost to the debtors by their failure to pay the debt at its maturity. The plaintiff accepted a partial payment from Anastasio Alano in 1908, several years after the debt matured. The prayer of the complaint is that the defendants be required to execute a conveyance of the house and lot, after its appraisal, "unless the defendants pay the plaintiff the debt which is the subject of this action."

It is quite clear, therefore, that under the terms of the contract, as we read it, and as the parties themselves have interpreted it, the liability of the defendants as to the conveyance of the house and lot is subsidiary and conditional, being dependent upon their failure to pay the debt in money. It must follow, therefore, that if the action to recover the debt has prescribed, the action to compel a conveyance of the house and lot is likewise barred, as the agreement to make such conveyance was not an independent principal undertaking, but merely a subsidiary alternative pact relating to the method by which the debt might be paid.

Ong Guan Can vs The Century Incurance Co., Ltd. GR No. L-22738 December 2, 1934

Facts: 

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A building of the plaintiff was insured against fire by the defendant in the sum of P30,000, as well as the goods and merchandise therein contained in the sum of P15,000. The house and merchandise insured were burnt early in the morning of February 28, 1923, while the policies issued by the defendant in favor of the plaintiff were in force. The appellant contends that under clause 14 of the conditions of the policies, it may rebuild the house burnt, and although the house may be smaller, yet it would be sufficient indemnity to the insured for the actual loss suffered by him. The clause cites by the appellant is as follows: “The Company may at its option reinstate or replace the property damaged or destroyed, or any part thereof, instead of paying the amount of the loss of damages, or may join with any other Company or insurers in so doing, but the Company shall not be bound to reinstate exactly or completely, but only as circumstances permit and in reasonable sufficient manner, and in no case shall the Company be bound to expend more in reinstatement that it would have cost to reinstate such property as it was at the time of the occurrence of such loss or damage, nor more than the sum insured by the Company thereon.”

Issue: Whether or not under the obligation arising from the insurance contract is an alternative one

Held: If this clause of the policies is valid, its effect is to make the obligation of the insurance company an alternative one, that is to say, that it may either pay the insured value of house, or rebuild it. It must be noted that in alternative obligations, the debtor, the insurance company in this case, must notify the creditor of his election, stating which of the two prestations he is disposed to fulfill, in accordance with article 1133 of the Civil Code. The object of this notice is to give the creditor opportunity to express his consent, or to impugn the election made by the debtor, and only after said notice shall the election take legal effect when consented by the

creditor, or if impugned by the latter, when declared proper by a competent court. In the instant case, the record shows that the appellant company did not give a formal notice of its election to rebuild, and while the witnesses, Cedrun and Cacho, speak of the proposed reconstruction of the house destroyed, yet the plaintiff did not give his assent to the proposition, for the reason that the new house would be smaller and of materials of lower kind than those employed in the construction of the house destroyed. The election alleged by the appellant to rebuild the house burnt instead of paying the value of the insurance is improper.

Clara Tambunting de Legards, et. al. vs Victoria Desbarats Miailhe GR No. L-3435 April 28, 1951

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On June 3, 1944, plaintiffs filed a complaint against the original defendant William J. B. Burke, alleging defendant's unjustified refusal to accept payment in discharge of a mortgage indebtedness in his favor, and praying that the latter be ordered (1) to receive the sum of P75,920.83 deposited by plaintiff Clara Tambunting de Legarda, the mortgagor, on the same date with the clerk of this court in payment of the mortgage indebtedness of said plaintiff to defendant herein, (2) to execute the corresponding deed of release of mortgage, and (3) to pay damages in the sum of P1,000. The gist of defendant's answer , is that plaintiffs have no cause of action for the reason that at the instance of plaintiff Clara Tambunting de Legarda an agreement was had on May 26, 1944, where defendant condoned the interests due and to become due on the mortgage indebtedness till the termination of the war, in consideration of the undertaking of said plaintiff (with the consent of her husband Vicente L. Legarda, the other plaintiff) to pay her obligation to defendant upon such termination of the war; and that the war then had not yet terminated.

Issue: Whether or not the said agreement was in the sense that the defendant condoned the interests then due and which might hereafter become due on said obligation with the understanding that plaintiff Clara Tambunting de Legarda would pay her obligation upon the termination of the war

Held: There is no dispute that on June 3, 1944, Clara Tambunting de Legarda deposited in court the sum of P75,920.83 for the purpose of satisfying the full amount then due on her obligation. But it is likewise true that the money deposited was in certified check, representing Japanese Military notes, which notes defendant Burke refuse to receive as payment a few days before the consignation. The offer of payment or consignation to be effective must comply with some

legal requirements. As formerly stated, in the mortgage renewal executed by plaintiffs and defendant on March 16, 1940, defendant was given the option to demand payment of the obligation either in Philippine currency, or in English currency. But defendant claims that on that date he could not very well refuse to accept the worthless Japanese Military notes tendered to him, nor insist on the payment of English currency, for he then entertained the fear that, had he done so, he would have been reported to the Japanese authorities, taken to Fort Santiago, and killed. It appears, therefore, that the tender of payment made by the plaintiff in Japanese Military notes was a valid tender because it was the only currency permissible at the time, and the same was made in accordance with the agreement because payment in Japanese Military notes during the occupation is tantamount to payment in the Philippine currency.

Alejandro Reyes vs Francisco Martinez GR No. L-1724 December 11, 1905 Facts:  This is an appeal from a judgment rendered by the Court of First Instance of the city of Manila in an action brought in that court by Alejandro Reyes against Francisco Martinez upon a promissory note.  The decision of the inferior court was in favor of the defendant, and was based upon the theory that said promissory note had been executed and delivered in payment of the sum of 1,200 pesos, which sum had been lost by the defendant to the plaintiff in a game known as "burro;" that "burro" was a game of chance, and prohibited under the laws in force in these Islands. Issue: Whether or not a debt created by a game of luck or chance is enforcible Held: The only defense presented by the defendant in the trial of the cause in the court below was that said promissory note had been executed and delivered in payment of a sum of money lost in a game of chance, called "burro," and that said game was among the prohibited games under the law. Article 1798 of the Civil Code provides that "the law does not permit any action to claim what is won in a game of chance, luck, or hazard; but the person who loses can not recover what he may have voluntarily paid, unless there should have been fraud, or should he be a minor, or incapacitated to administer his property." No proof was introduced in the trial of the cause to show that any fraud had been practiced, or that the defendant was a minor, or was incapacitated to administer his property. The game of "burro" is a common game among the Filipinos, and is generally regarded as a mere parlor game, and is not a game of chance, luck, or hazard, and is therefore not prohibited by law. Therefore a person who executes and delivers a promissory note for money lost in the game of "burro" is liable on such contract, unless fraud had been practiced, or unless such person is a minor or incapacitated to administer his property.

Martina Quizana vs Gaudencio Redugerio GR No. L-6220 May 7, 1954 Facts:  The action was originally instituted in the justice of the peace court of Sta. Cruz, Marinduque, and the same is based on an actionable document attached to the complaint, signed by the defendants-appellants and containing the following pertinent provisions: “Na alang-alang sa aming mahigpit na pangangailangan ay kaming magasawa ay lumapit kay Ginang Martina Quizana, balo, at naninirahan sa Hupi, Sta. Cruz, Marinduque, at kami ay umutang sa kanya ng halagang Limang Daan at Limang Pung Piso (P550.00), Salaping umiiral dito sa Filipinas na aming tinanggap na husto at walang kulang sa kanya sa condicion na ang halagang aming inutang ay ibabalik o babayaran namin sa kanya sa katapusan ng buwan ng Enero, taong 1949.

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Pinagkasunduan din naming magasawa sa sakaling hindi kami makabayad sa taning na panahon ay aming ipifrenda o isasangla sa kanya ang isa naming palagay na niogan sa lugar nang Cororocho, barrio ng Balogo, municipio ng Santa Cruz, lalawigang Marinduque, Kapuluang Filipinas” The defendants-appellants admit the execution of the document, but claim, as special defense, that since the 31st of January, 1949, they offered to pledge the land specified in the agreement and transfer possession thereof to the plaintiff-appellee, but that the latter refused said offer.

Issue: Whether or not the second part of the obligation is valid and binding Held: This second part of the obligation in question is what is known in law as a facultative obligation, defined in article 1206 of Civil Code of the Philippines, which provides: ART. 1206. When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative.

There is nothing in the agreement which would argue against its enforcement. it is not contrary to law or public morals or public policy, and notwithstanding the absence of any legal provision

at the time it was entered into government it, as the parties had freely and voluntarily entered into it, there is no ground or reason why it should not be given effect. It is a new right which should be declared effective at once, in consonance with the provisions of article 2253 of the Civil Code of the Philippines, thus: ART. 2253. But if a right should be declared for the first time in this Code, it shall be effective at once, even though the act or event which gives rise thereto may have been done or may have occurred under the prior legislation, provided said new right does not prejudice or impair any vested or acquired right, of the same origin.

Marsman vs. Philippine Geoanalytics G.R. No. 183374 June 29, 2010 Facts: 

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Marsman Drysdale Land, Inc. (Marsman) and Gotesco Properties, Inc. (Gotesco) entered into a Joint Venture Agreement (JVA) which stipulated that they undertake a condominium building project wherein they would invest on the project on a Fifty-Fifty (50%-50%) basis. Marsman would contribute property in a buildable condition in the amount of Php 420,000,000.00 and Gotesco would contribute Php 50,000,000.00 as initial down payment and the balance of Php 370,000,000.00 would be paid out as needed during construction. It was stipulated that all cash contributions and obligations would be borne by Gotesco. For purposes of the venture Marsman and Gotesco hired Philippine Geonanalytics, Inc. (PGI) to conduct a seismic study on the property prior to the construction of the building. Due to debris left on the property PGI failed to drill all the boreholes necessary for the study but was still able to complete said study. Despite various demands Marsman and Gotesco failed to pay PGI the amount of Php 284,553.50 and Php 250,800.00 as the cost of soil exploration and seismic study. Marsman contends that since according to the JVA, Gotesco is responsible for all cash contributions needed for the project, thus Gotesco should solely pay for the amount payable to PGI. Gotesco contends that Marsman should solely pay for the amount payable to PGI for it was their fault that PGI was unable to complete the boreholes as they failed to remove debris on the property. The RTC ruled that Marsman and Gotesco are jointly liable for the amount payable and that Gotesco should reimburse Marsman the amount of Php 535,353.50. The CA then modified the decision of the RTC removing the part of Gotesco paying Marsman a lump sum amount and instead holding that Gotesco should pay Marsman 50% of the amount due to PGI. Marsman now contends that the court erred in holding both them and Gotesco jointly liable for the amount payable to PGI as the JVA between them and Gotesco stipulated that Gotesco is responsible for all cash liabilities incurred by the project.

Issue: Whether or not Marsman and Gotesco are jointly liable for the amount payable to PGI. Held: Article 1207 of the Civil code provides inter alia “…two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestations…” and Article 1208 of the same code provides inter alia “… the credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors…”, thus if no stipulation is made to make the parties solidarily liable and no stipulation to the division of gains and losses, the law presumes that the parties are joint. The JVA does not affect third parties as it only affects the parties involved which are Gotesco and Marsman, as Gotesco and Marsman entered into the contract of service with PGI jointly then they are jointly liable for any claim that PGI is entitled to against them. Furthermore Article 1797 of the Civil Code which provides that inter alia “…If only the share of each partner in the profits has been agreed upon, the share of each in the losses shall be in the same proportion…”, thus as Marsman and Gotesco agreed to the 5050 percent share in the project the same applies to its liabilities.

Purita Alipio vs. the Court of Appeals and Romeo G. Jaring G.R. No. 134100 September 29, 2000 Facts:  

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Spouses Placido and Purita Alipio and Spouses Bienvenido and Remedios Manuel were sublessees of a 14.5 hectare fishpond leased by Romeo Jaring. They stipulated that the rent amounting to Php 485,600.00 would be paid in two installments of Php 300,000.00 and Php 185,600.00, with the second installment falling due in June 30, 1989. Each of the four sublessees signed the contract. The sublessees however failed to pay the full amount of the second installment and were only able to pay the partial amount of Php 50,600.00. Romeo Jaring filed a case of collection of sum of money on October 13, 1989 against the Alipio and Manuel Spouses. Purita Alipio contends that since her husband died 10 months prior to the filing of the suit, Romeo can no longer file the case against her as stated in Rule 3, section 20 of the 1997 Rules of Civil Procedure which provides that an action for recovery of money is dismissed prior to its final judgment upon the debt of the defendant. The RTC ruled in favor of Romeo and held that since Purita herself is a party in the contract she can be held liable for the collection of money.

Issue: Whether or not the death of Placido releases Purita from the collection of sum of money. Held: The contract of sublease was signed by spouses Alipio and Manuel which bind them to pay the amount of rent to Romeo is governed by Article 161 (1) of the Civil Code which provides that; “All debts and obligations contracted by the husband for the benefit 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”. Thus, the death of Placido automatically extinguished the Conjugal Partnership of the spouses Alipio. Romeo Jaring cannot hold Purita liable in her personal capacity but can hold the estate of Placido liable for the collection of the amount. Furthermore, the judgment of the trial court failed to specify whether the obligation to pay Romeo the balance of the rent was to be paid jointly or solidarily by the spouses Alipio and Manuel, Article 1207 of the Civil Code provides that an obligation is only solidary when there is express stipulation to the same or when the law or the nature of the obligation requires solidarity. Thus, the estate of Placido Alipio and Spouses Manuel are Jointly liable for the amount payable to Romeo Jaring.

PH Credit Corporation vs. Court of Appeals and Carlos M. Ferrales G.R. No. 109648 November 22, 2001 Facts:  

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PH Credit Corporation filed a suit for collection of sum of money against Pacific Lloyd Corp., Carlos Farrales, Thomas H. Van Sebille and Federico C. Lim. A judgment was rendered by the trial court holding all aforementioned liable to pay PH Credit Corporation the amount of Php 118,814.49 at 18% interest per annumstarting December 20, 1982 until fully paid; Surcharge of 16% per annum from December 20, 1982; Penalty Charge of 2% per month from December 20, 1982, computed on interest and principal compounded; Attorney’s fees in an amount equivalent to 25% of the total sum due; and Costs of suit. A writ of execution was issued and the personal properties of Carlos M. Farrales were levied and sold at public auction where PH Credit Corp. was the highest bidder. The judgment failed to specify in the fallo part whether the liability of the aforementioned debtors were joint or solidary. PH Credit Corp. contends that the body of the decision holds that the debtors are jointly and severally liable which should render them solidarily liable.

Issue: Whether or not the aforementioned parties are solidarily liable. Held: Article 1207 and 1208 of the Civil Code provides that in the absence of clear stipulation or of the law or the nature of the obligation does not require solidary liability then the parties are presumed to be jointly liable. The statement holding the aforementioned parties as solidarily liable were only part od the statement of facts of the judgment rendered by the judge, thus in the absence of any express statement in the fallo portion of the judgment holding the parties solidarily liable, they are jointly liable. Furthermore, the sale of Carlos M. Farrales’ property is deemed void for it was made to answer for the whole obligation against PH Credit Corp., when parties are jointly liable an execution sale of their property should only be up to the extent of their liability.

Construction Development Corporation of the Philippines vs. Rebecca G. Estrella, et. al. G.R. No. 147791 September 8, 2006 Facts:  

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Rebecca G. Estrella and her granddaughter, Rachel E. Fletcher boarded a BLTB bus bound for pasay. A tractor-truck of Construction Development Corporation of the Philippines (CDCP) hit the back of the BLBT bus that Rebecca and Rachel were boarding causing them various injuries. Respondents then filed a complaint for damages against BLBT, CDCP, Espiridion Payunan, Jr. and Wilfredo Datinguinoo, the latter two as drivers of the CDCP tractortruck and BLTB bus respectively, for their negligence in disobeying traffic laws, driving recklessly, that CDCP and BLBT did not exercise the diligence of a good father in hiring their employees and that Both Rachel and Rebecca are entitled to moral damages due to physical discomfort, serious anxiety, fright and mental anguish, besmirched reputation and wounded feelings, moral shock, and lifelong social humiliation and actual damages. The lower court held that all the parties impleaded by Rachel and Rebecca shall be jointly and solidarily liable for the award of damages. CDCP now contends that BLBT and their driver should be solely liable for damages against Rebecca and Rachel.

Issue: Whether or not CDCP should be held solidarily liable for the payment of damages. Held: As held in Fabre, Jr. v. Court of Appeals, the owner of the vehicle which collided with the common carrier is held solidarily liable to the injured passenger of the same. The action filed is one arising from quasi-delict, in cases of quasi-delict the Article 2180 provides that the obligation imposed by Article 2176 is demandable for the acts or omissions of those persons for whom one is responsible. Consequently, an action based on quasi-delict may be instituted against the employer for an employee's act or omission. The liability for the negligent conduct of the subordinate is direct and primary, but is subject to the defense of due diligence in the selection and supervision of the employee. In the instant case, the trial court found that

petitioner failed to prove that it exercised the diligence of a good father of a family in the selection and supervision of Payunan, Jr. Thus, the liability of CDCP and BLBT is solidary.

Republic Glass Corporation and Gervel Inc., vs. Lawrence C. Qua G.R. No. 144413 July 30, 2004 Facts: 

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Ladtek Inc. (Ladtek) acquired a loan from Metropolitan Bank and Trust Company (Metrobank) and Private Development Corporation of the Philippines (PDCP) wherein Republic Glass Corporation (RPC), Gervel, Inc., (Gervel), Lawrence C. Qua (Qua) were stockholders of Ladtek and entered the contracts as sureties to Ladtek’s loan. RPC, Gervel and Qua stipulated that as sureties they would reimburse each other for any payment made by one party, regardless of amount, for their respective shares or pro rata. Qua pledged 1,892,360 common shares of General Milling Corporation in favor of RGC and Gervel as security for the payment of any sum which RGC and Gervel may be held liable under the agreements. Ladtek defaulted on its loan obligations to Metrobank and PDCP which led to Metrobank filing a collection case against RPC, Gervel and Qua. During the pendency of the collection case RPC and Gervel paid Metrobank the amount of Php 7,000,000.00. Metrobank issued a quitclaim in favor of RPC and Gervel releasing them from any liability from the payment of the loan. Gervel and RPC now demand that Qua reimburse them for their payment of Php 7,000,000.00 to Metrobank as fulfillment of their stipulation to indemnify each other in case of any payment made by one party. RPC and Gervel gave Qua notices of foreclosure of Qua’s pledged shares. Qua moved for the suspension of the Foreclosure sale, however RPC and Gervel were able to foreclose said shares. Qua states that, on the foreclosure sale, RPC and Gervel’s payment of Php 7,000,000.00 to Metrobank was for the whole obligation, thus RPC and Gervel have no right to foreclose his share. However, on the separate case for collection, Qua states that the payment was not for the entire obligation. The RTC ruled in favor of Qua but this decision was reversed by the CA, and added that there was implied novation of the original payment plan by virtue of the indemnification agreement.

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The CA further stated that payment of the entire obligation is a sine qua non condition before any reimbursement is made.

Issue: 1. Whether or not there was an implied novation. 2. Whether or not full payment Is needed before indemnification by the other parties to the party who paid is needed.

Held: 1. A novation extinguishes an obligation but in its place creates a new obligation. Novation extinguishes an obligation by (1) changing its object or principal conditions; (2) substituting the person of the debtor; and (3) subrogating a third person in the rights of the creditor. Article 1292 of the Civil Code clearly provides that in order that an obligation may be extinguished by another which substitutes the same, it should be declared in unequivocal terms, or that the old and new obligations be on every point incompatible with each other. Novation may either be extinctive or modificatory. Novation is extinctive when an old obligation is terminated by the creation of a new obligation that takes the place of the former. Novation is merely modificatory when the old obligation subsists to the extent it remains compatible with the amendatory agreement. There was no novation as the agreement between the sureties was only to the payment of reimbursement. Their agreement was that of an indemnity of liability where the agreement becomes operative as soon as the liability of the person indemnified arises irrespective of whether or not he has suffered actual loss. Thus, there was no change in the prestation.

2. As stated the agreement was that of an indemnification agreement of liability, Therefore, whether the solidary debtor has paid the creditor, the other solidary debtors should indemnify the former once his liability becomes absolute. However, in this case, the liability of RGC, Gervel and Qua became absolute simultaneously when Ladtek defaulted in its loan payment. As a result, RGC, Gervel and Qua all became directly liable at the same time to Metrobank and PDCP. Thus, RGC and Gervel cannot automatically claim for indemnity from Qua because Qua himself is liable directly to Metrobank and PDCP. However, in solidary obligations the parties who have paid may only recover or reimburse from the other parties overpayment of their respective shares on the obligation. The total obligation of RGC, Gervel and Qua was in the amount of Php 14,200,854.37, the Php 7,000,000.00 they paid was not in excess of their share in the obligation, in fact it is less than what their shares require them to pay. Thus, reimbursement from Qua cannot be obtained by RPC and Gervel.

Industrial Management International Development Corp. (INIMACO) vs National Laabor Relations Commission 331 Scra 640

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Private respondents filed a complaint with the Department of Labor and Employment against Filipinas Carbon Mining Corporation, Gerardo Sicat, Antonio Gonzales, Chin Chin Gin, Lo Kuan Chin, and petitioner Industrial Management Development Corporation (INIMACO), for payment of separation pay and unpaid wages. The decision of the Labor Arbiter held that respondents Filipinas Carbon and Mining Corp., Gerardo Sicat, Antonio Gonzales/INIMACO, Chiu Chin Gin and Lo Kuan Chin to pay complainants Enrique Sulit, Esmeraldo Pegarido, Roberto Nemenzo and Dario Go to be deposited with the Commissionwithin 10 days from receipt of the Decision. All other claims were dismissed. Since no appeal was filed within the reglementary period, the Decision of the Labor Arbiter became final and executor. The Labor Arbiter then issued a writ of execution but was returned unsatisfied. The Labor Arbiter then issued an Alias Writ of Execution commanding the complainants to proceed to the premises of respondents to collect and turn over the ordered amount. Should a failure to collect the said amount in cash be encountered, they were authorized to cause the satisfaction of the same on the movable or immovable property(s) of respondent not exempt from execution. Petitioner then filed a Motion to Quash Alias Writ of Execution and set aside the Decision alleging that the alias writ of execution altered and changed the decision by changing the liability of therein respondents from joint to solidary. The motion was denied by the lAbor Arbiter. The petitioner then filed and appeal and the NLRC dismissed the appeal holding that the Writ of Execution be given due course in all respects. A Motion to Compel Sheriff to Accept Payment representing one sixth pro rate share of petitioner as full and final satisfaction of judgment. The private respondents opposed the motion and the Labor Arbiter denied the motion ruling that the amount offered by INIMACO is to be accepted by the Sheriff as partial satisfaction of the judgment and to proceed with the enforcement of the Alias Writ of Execution. An appeal was again filed to the NLRC which was consequently denied ruling that INIMACO would reopen the issue which was already resolved against it thus, not keeping with the established rules of practice and procedure to allow the attempt of INIMACO to delay final disposition of the case.

Issue: Whether or not petitioner’s liability is solidary or not.

Held:

The court held, NO. INIMACO’s liability is not solidary but merely joint and that the respondent NLRC acted with grave abuse of discretion in upholding the Alias Writ of Execution.

A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation. In a joint obligation each obligor answers only for a part of the whole liability and to each obligee belongs only a part of the correlative rights.

Well-entrenched is the rule that solidary obligation cannot lightly be inferred. There is a solidary liability only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires.

Metro Manila Transit Coprporation vs Court of Appeals G.R. No. 104408

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On August 28, 1979, Nenita Custodio boarded as a paying passenger a public utility jeepney driven by defendant Agudo Calebag and owned by Victorino Lamayo. While in transit, a collision between the said jeepney and a Metro Manila Transit Corp. (MMTC) bus occurred. The collision impact caused Custodio to hit the front windshield of the passenger jeepney and was thrown out therefrom, falling onto the pavement unconscious with serious physical injuries. A complaint for damages was filed by private respondent, a minor, against all of therein named defendants following their refusal to pay the expenses incurred by Custodio as result of the collision. The trial court rendered judgment dismissing the complaint against Metro Manila Transit Corporation and ordering Calebag, Lamayo and Godofredo C. Leonardo to pay the NenitaCustodio jointly and severally. Custodio’s motion to reconsider the portion the of the trial court’s decision absolving MMTC from liability was denied for lack of merit. An appeal was filed with the Court of Appeals, who modified the trial court’s decision by holding MMTC solidarily liable with the other defendants. The Court of Appeals denied subsequent motions for reconsideration of both Custodio and MMTC.

Issue: Whether or not MMTC is vicariously liable for damages based on quasi-delict due to Calebag’s negligence

Held: It is procedurally required for each party in a case to prove his own affirmative assertion by the degree of evidence required by law.In civil cases, the degree of evidence required of a party in order to support his claim is preponderance of evidence, or that evidence adduced by one party which is more conclusive and credible than that of the other party. It is, therefore, incumbent on the plaintiff who is claiming a right to prove his case. Corollarily, defendant must likewise prove own allegation to buttress its claim that it is not liable.

The case at bar is clearly within the coverage of Article 2176 and 2177, in relation to Article 2180, of the Civil Code provisions on quasi-delicts as all the elements thereof are present, to wit: (1) damages suffered by the plaintiff, (2) fault or negligence of the defendant or some other person for whose act he must respond, and (3) the connection of cause and effect between fault or negligence of the defendant and the damages incurred by plaintiff.It is to be noted that petitioner was originally sued as employer of driver Leonardo under Article 2180, the pertinent parts of which provides 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 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…. The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.” The basis of the employer's vicarious liability has been explained under this ratiocination: The responsibility imposed by this article arises by virtue of a presumptionjuristantumof negligence on the part of the persons made responsible under the article, derived from their failure to exercise due care and vigilance over the acts of subordinates to prevent them from causing damage. Negligence is imputed to them by law, unless they prove the contrary. Thus, the last paragraph of the article says that such responsibility ceases if is proved that the persons who might be held responsible under it exercised the diligence of a good father of a family (diligentissimipatrisfamilias) to prevent damage. It is clear, therefore, that it is not representation, nor interest, nor even the necessity of having somebody else answer for the damages caused by the persons devoid of personality, but it is the non-performance of certain duties of precaution and prudence imposed upon the persons who become responsible by civil bond uniting the actor to them, which forms the foundation of such responsibility. Finally, we believe that respondent court acted in the exercise of sound discretion when it affirmed the trial court's award, without requiring the payment of interest thereon as an item of damages just because of delay in the determination thereof, especially since private respondent did not specifically pray therefoer in her complaint. Article 2211 of the Civil Code provides that in quasidelicts, interest as a part of the damages may be awarded in the discretion of the court, and not as a matter of right. We do not perceive that there have been international dilatory maneuvers or any special circumstances which would justify that additional award and, consequently, we find no reason to disturb said ruling.

Baldomero Inciong, Jr. vs Court of Appeals and Philippine Bank of Communications G.R. No. 96405

Facts:  

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Petitioner’s liabitlity resulted from a promissory note which he signed with Rene C. Naybe and Gregorio D. Pantanosas holding themselves jointly and severally liable to private respondent. The promissory note went due and was left unpaid. Private respondent sent telegrams and letters through registered mail letter of demands for payment to Rene C. Naybe. Since the demands were left unanswered, private respondent filed a complaint for collection against the three obligors. The complaint was dismissed for failure to prosecute. And as prayed for by Gregorio Pantanosas, the lower court dismissed the case against him. In serving the summons, the sheriff learned that defendant Rene C. Naybe had gone to Saudi Arabia, thus, only the summons to petitioner was served.

Issue: Whether or not petitioner should be held liable for the obligation to respondent.

Held: Petitioner signed the promissory note as a solidary co-maker and not as a guarantor. A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and each creditor 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 to fulfill the obligation of the principal debtor in case the latter should fail to do so.

Because the promissory note involved in this case expressly states that the three signatories therein are jointly and severally liable, any one, some or all of them may be proceeded against for the entire obligation.

Philippine Blooming Mill, Inc. vs Court of Appeals G.R. No. 142381

FACTS: 

Traders Royal Bank filed suit to compel Alfredo Ching to pay the following amounts: P959,611.96 under Letter of Credit No. 479 AD covered by Trust Receipt No. 106 P1,191,137.13 under Letter of Credit No. 563 AD covered by Trust Receipt No. 113 P3,500,000 under the trust loan covered by a notarized Promissory Note.

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Alferedo Ching was the Sevio Vice President of Philippine Blooming Mill (PBM) and in his personal capacity signed a Deed of Suretyship binding himself as primary obligor and not as guarantor of the loan obtained from TRB.

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The TRB granted letters of credit on application of Ching in his capacity as Senior VP of PBM. Ching later accomplished and delivered to TRB trust receipts. Under the trust receipts, PBM had the right to sell the merchandise for cash with the obligation to turn over the entire proceeds of the sale to TRB as payment of their indebtness.

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PBM defaulted in the payment of the Trust receipts and of their trust loan. PBM and Ching filed a petition for suspension of payments with the SEC that sought to suspend payment of PBM’s obligations and prayed that the SEC allow PBM to continue its normal business operations free from the interference of its creditors. The SEC placed PBM’s assets, liabilities, and obligations under the rehabilitation receivership of Kalaw, Escaler and Associates.

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Ten months after the SEC placed PBM under rehabilitation 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 their indebtedness. The complaint was then withdrawn by the TRB on the ground that SEC had already placed PBM under receivership. The trial court thus dismissed the complaint.

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PBM and Ching also moved for the dismissal of the complaint on the ground that the trial court had no jurisdiction over the subject matter of the case since they assumed the jurisdiction of the SEC over all of PBM’s assets and liabilities. TRB opposed this motion arguing that Ching is being sued in his personal capacity.

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The trial court denied the motion to dismiss with respect to Ching and affirmed its dismissal of the case with respect to PBM. TRB was holding Ching liable under the Deed of Suretyship. As his obligation was solidary, the trial court ruled that TRB could proceed against Ching.

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Upon trial court’s denial of his Motion for Reconsideration, Ching applied for a Petition for Certiorari and Prohibition before the Court of Appeals. The appellate court granted Ching’s petition and ordered the dismissal of the case since SEC assumed jurisdiction over Ching and PBM. The TRB assailed the decision of the CA and on the higher courts ruling upheld that TRB can sue Ching as an individual.

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The trial court found Ching liable to TRB for P19,333,558.16 under the Deed of Suretyship. On appeal, the CA affirmed the decision of the lower court with modifications with respect to Ching’s liability.

Issue: Whether or not Alfredo Ching is liable to TRB.

Held: This Court has already resolved the issue of Ching’s separate liability as a surety despite the rehabilitation proceedings before the SEC. We held in Traders Royal Bank that: Although Ching was impleaded in SEC Case No. 2250, as a co-petitioner of PBM, the SEC could not assume jurisdiction over his person and properties. The Securities and Exchange Commission was empowered, as rehabilitation receiver, to take custody and control of the assets and properties of PBM only, for the SEC has jurisdiction over corporations only [and] not over private individuals, except stockholders in an intra-corporate dispute (Sec. 5, P.D. 902-A and Sec. 2 of P.D. 1758). Being a nominal party in SEC Case No. 2250, Ching’s properties were not included in

the rehabilitation receivership that the SEC constituted to take custody of PBM’s assets. Therefore, the petitioner bank was not barred from filing a suit against Ching, as a surety for PBM. An anomalous situation would arise if individual sureties for debtor corporations may escape liability by simply co-filing with the corporation a petition for suspension of payments in the SEC whose jurisdiction is limited only to corporations and their corporate assets. Ching can be sued separately to enforce his liability as surety for PBM, as expressly provided by Article 1216 of the New Civil Code.

Ching is liable for credit obligations contracted by PBM against TRB before and after the execution of the 21 July 1977 Deed of Suretyship. This is evident from the tenor of the deed itself, referring to amounts PBM “may now be indebted or may hereafter become indebted” to TRB. The law expressly allows a suretyship for “future debts”. Article 2053 of the Civil Code provides: A guaranty may also be given as security for future debts, the amount of which is not yet known; there can be no claim against the guarantor until the debt is liquidated. A conditional obligation may also be secured. Ching is liable for credit obligations contracted by PBM against TRB before and after the execution of the 21 July 1977 Deed of Suretyship. This is evident from the tenor of the deed itself, referring to amounts PBM “may now be indebted or may hereafter become indebted” to TRB. The law expressly allows a suretyship for “future debts”. Article 2053 of the Civil Code provides: A guaranty may also be given as security for future debts, the amount of which is not yet known; there can be no claim against the guarantor until the debt is liquidated. A conditional obligation may also be secured.

Queensland Tokyo Commodities, Inc. vs Thomas George G.R. 172727

Facts: 

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Queensland Tokyo Commodities , Inc. (QTCI), a licensed broker engaged in the trading of commodity futures entered into a Customer’s Agreement with Thomas George. Charlie Collado signed the agreement in behalf of QTCI. Forming part of the agreement was the Special Power of Attorney executed by respondent appointing Guillermo Mendoza, Jr. as his attorney-in-fact with full authority to trade and manage his account. QTCI was issued a Cease-and-Desist Order by the SEC. Alarmed by this, respondent demanded QTCI to return his investment but it was not heeded. He also learned that Mendoza and Oniler Lontoc were not licensed commodity futures salesmen. Respondent files a complainr for Recovery of Investment with Damages with the SEC against petitioners and the unlicensed salesmen. Only the petitioners answered the complaint, as Mendoza and Lontoc had since vanished into thin air. The SEC ruled in favour of the respondent ordering the petitioners to pay the former his investment and moral damages. The petitioners filed an appeal with the Commission en banc, but the appeal was dismissed due to non verification of the Notice of Appeal and the Memorandum on Appeal. Petitioners filed a petition for review with the CA under Rule 43. The CA declared the dismissal of the petitioners appeal by the Commission en banc improper and affirmed the decision of the SEC.

Issue: Whether or not individual petitioners are solidarily liable for the damages and awards due to the respondent

Held: Petitioners allowed unlicensed individuals to engage in, solicit or accept orders in futures contracts, and thus, transgressed the Revised Rules and Regulations on Commodity Futures Trading. Batas Pambansa Bilang (B.P. Blg.) 178 or the Revised Securities Act explicitly provided in Sec. 53:”... (b) Every contract executed in violation of any provision of this Act, or any rule or regulation thereunder, and every contract, including any contract for listing a security on an exchange heretofore or hereafter made, the performance of which involves the violation of, or

the continuance of any relationship or practice in violation of, any provision of this Act, or any rule and regulation thereunder, shall be void.”

It is settled that a void contract is equivalent to nothing; it produces no civil effect. It does not create, modify, or extinguish a juridical relation. Parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or in equal fault. This rule, however, is not absolute. Article 1412 of the Civil Code provides an exception, and permits the return of that which may have been given under a void contract. Thus: Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: (1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking; (2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise.

Shrimp-Specialist vs. Fuji-Triumph Agri-Industrial Corporation G.R. No. 168756 Facts: 

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Shrimp Specialist, through their president Eugene Lim, entered into an agreement with Fuji-Triumph (Fuji) of distributorship, Fuji would supply Shrimp Specialist with prawn feeds on a credit basis. During the course of the agreement Shrimp Specialist issued a Stop Payment order for the nine post-dated checks issued to Fuji for payment of the delivery of the feeds alleging that the feeds were contaminated with aflatoxin. Shrimp Specialist and Fuji then entered into a written agreement where Shrimp Specialist, acting through Eugene Lim, would replace the nine post-dated checks in the event that Fuji would replace the feeds that were contaminated with uncontaminated ones. Upon presentment of the replacement checks, all were dishonoured due to another Stop payment order from Shrimp Specialist stating that Fuji failed to replace the feeds. Fuji filed a case of recovery of sum of money against Shrimp specialist where the RTC ruled in favour of Fuji finding that Shrimp Specialist did not present evidence that the feeds delivered were in fact contaminated and that the written agreement did not expressly state that Fuji admitted to delivering contaminated feeds and holding Shrimp Specialist and Eugene Lim solidarily liable for the amount due. The CA modified the decision by removing Eugene Lim from the obligation and only holding Shrimp Specialist solely liable for the amount due.

Issues: 1) Whether or not the written agreement between Shrimp Specialist and Fuji was am admission in Fuji’s part that the delivered feeds were contaminated. 2) Whether or not Eugene Lim and Shrimp Specialist should be held solidarily liable for the obligation.

Held: 1)

It is a rule that ‘a statement is not competent as an admission where it does not, under a reasonable construction, appear to admit or acknowledge the fact which is sought to be proved by it.’ An admission or declaration to be competent must have

been expressed in definite, certain and unequivocal language; “to inform in advance in case the same checks cannot be deposited for failure to replace the defective feeds” is not expressed in definite, certain and unequivocal language that Fuji admitted to delivering defective feeds. Furthermore, Shrimp Specialist did not in fact include Fuji in the testing of the feeds for contamination and that receipts shown by Fuji that the feeds were received in good condition by Shrimp Specialist contradicts their claim. 2) The general rule is that obligations incurred by the corporation, acting through its directors, officers, and employees, are its sole liabilities. However, solidary liability may be incurred, but only under the following exceptional circumstances:When directors and trustees or, in appropriate cases, the officers of a corporation: (a) vote for or assent to patently unlawful acts of the corporation; (b) act in bad faith or with gross negligence in directing the corporate affairs; (c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons;When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto; When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation; orWhen a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action. None of these circumstances are found in these case and no evidence is present showing that Eugene Lim and Shrimp Specialist are in fact one in the same, the doctrine of piercing the veil is unnecessary.

Asset Builders Corporation vs. Stronghold Insurance Company, Inc. G.R. No. 187116

Facts:  

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Asset Builders Corporation (ABC) entered into an agreement with Lucky Star Drilling & Construction Company (Lucky Star) as part of the completion of its project to construct the ACG Commercial Complex. Lucky Star was to supply labor, materials, tools, and equipment including technical supervision to drill one exploratory production well on the project site. The total contract price was Php 1,150,000.00. Lucky Star engaged respondent Stronghold to guarantee faithful compliance with agreement with ABC which issued two bonds in favor of petitioner. The surety bond dated May 9, 2006, covers the amount of Php 575,000.00 or the required down payment for the drilling work. The performance bond issued on the same date covers the sum of Php 345,000.00. On May 20,2006, ABC paid Lucky Star Php575,000.00 as advance payment, representing 50% of the contract price. Lucky Star, thereafter, commenced the drilling work but only managed to accomplish only 10% of the work by July 18, 2006, just a few days before the agreed completion of 60 calendar days. Petitioner sent a demand letter to Lucky Star on July 18, 2006 for the immediate completion of the drilling work with 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. And on August 16, 2006, ABC sent a Notice of Claim for payment to Stronghold to make good its obligation under its bonds. Despite these notices, 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. On February 27, 2009, the RTC rendered the assailed decision ordering Lucky Star to pay ABC but absolving Stronghold from liability.

Issue: Whether or not Stronghold Insurance, Inc., 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.

In Article 2047, the surety undertakes to be bound solidarily with the principal obligor which makes a surety agreement an ancillary contract as it presupposes the existence of the principal contract. Although the contract of surety is 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 benefit therefrom. The surety assumes liability as a regular party to the undertaking.

Accordingly, after liability has attaché to the principal, the oblige or, in this case, the petitioner, can exercise the right to proceed against Lucky Star or respondent or both. Article 1216 of the New Civil Code states: “The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously.”

In fine, respondent should be answerable to petitioner on account of Lucky Star’s nonperformance of its obligation as guaranteed by the performance bond. Finally, Article 121722 of the New Civil Code acknowledges the right of reimbursement from codebtor (the principal co-debtor, in case of suretyship) in favor of the one who paid (the surety). Thus, respondent is entitled to reimbursement from Lucky Star for the amount it may be required to pay petitioner arising from its bonds.

Eparwa Security and Janitorial Services, Inc. vs Liceo de Cagayan University G.R. No. 150402 Facts:  

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Eparwa dn LDCU, through their representatives entered into a Contract for security services. Eparwa allocated the contracted amount of P5,000.00 per security guard per month. Security guards whom Eparwa assigned to LDCU files a complaint before the NLRC 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, the Labor Arbiter found that the security guards are entitled to wage differentials and premium for holiday and rest day work. It held that Eparwa and LDCU are solidarily liable pursuant to Article 109 of the Labor Code. LDCU and Eparwa, both subsequently filed appeals before the NLRC. 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 differential and premium, it did not require Eparwa to reimburse LDCU fot its payments to the security guards. Eparwa and LDCU again filed separate motions for partial reconsideration. The NLRC declared that although Eparwa and LDCU are solidarily liable for the monetary award, LDCU alone is ultimately liable. LDCU then files a petition for certiorari before the appellate court. 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 then filed a motion for reconsideration which was denied for lack of merit.

Issue: Whether or not LDCU alone is ultimately liable for the wage differentials and premiums of the security guards. Held: The wage differentials and premiums of the security guards id Eparwa’s and LDCU’s solidary liability and LDCU’s ultimate liability. Articles 106, 107 and 109 of the Labor Code read: Art. 106. Contractor or subcontractor. — Whenever an employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the

event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is “labor-only” contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of the employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. Article 107. Indirect employer. — The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project. Article 109. Solidary liability. — The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers. For the security guards, the actual source of the payment of their wage differentials and premium for holiday and rest day work does not matter as long as they are paid. This is the import of Eparwa and LDCU’s solidary liability. Creditors, such as the security guards, may collect from anyone of the solidary debtors. Solidary liability does not mean that, as between themselves, two solidary debtors are liable for only half of the payment. 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 may make to the security guards. However, LDCU cannot claim any reimbursement from Eparwa for any payment it may make to the security guards.

P.T. Cerna Corporation vs Court of Appeals G.R. No. 91622

Facts: 

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The subjects of this case are three personal properties, all of which are “jaw crushers”. The first one is a rock crusher, purchased from Bormaheco, Inc. The other two are US Mfg. jaw crushers, both purchased from the International Tractor Sales. Both parties, petitioner and private respondent Scheider, claim ownership over the three jaw crushers. Petitioner anchored its claim of ownership of the first rock crusher on the Customer’s Copy of an invoice no. 43984 issued in the name of the corporation by Bormaheco, Inc., and another invoice for the other two crushers by the International Tractor and Equipment Sales. All of these purchases were purportedly paid through the corporation checks duly signed by its President and Vice-President. Private respondent Scheider claimed that the three rock crushers were actually purchased by hm and in reality are owned by him. He presented the Sales Department Copy of the same Invoice No. 43984 which was in his name properly countersigned by Mr. Cevantes, the President of Bormaheco. He also presented a notarized deed of sale of said rock crushers executed by Bormaheco in his favor and a further certification by Mr. Cervantes stating that the purchaser and owner of the said equipment was Mr. Peter Scheider. For the other two rock crushers, he managed to present a notarized deed of sale executes by Mr. Virgil Lundberg in his favor. In connection with this, he presented a delivery receipt and a certification by Mr. Lundberg attesting that he Is the purchaser and owner of the two rock crushers. Private respondent however, admitted that the purchase price of the crushers were [aid for by petitioner, but only to off-set outstanding obligations of the same to him for various spare parts sold to petitioner, prior to the dispute.

Issue: Who, between the claimants, is the rightful owner of the three jaw crushers.

Held:

We rule in favor of private respondent Scheider.

Petitioner relies heavily on the invoices as evidence of purchase and delivery. It has been held time and again that the issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and has been considered not a bill of sale. The Deeds of Sale, being notarial documents, are evidence of the facts in clear, unequivocal manner therein expressed. As such, they have in their favor, the presumption of regularity. Petitioner failed miserably to overcome the binding force and effect of the deeds of sale.

In civil cases, the burden of proof rests upon the party who, as determined by the pleadings or the nature of the case, asserts the affirmative of an issue. In this case, the burden lies on the petitioner, who is duty bound to prove the allegations in its complaint. As this Court has held, he who alleges a fact has the burden of proving it and a mere allegation is not evidence. A careful evaluation of the evidence presented by petitioner reveals its insufficiency to detract from the evidentiary force of the public instrument which appears on its face, as having been drawn up with all the formalities prescribed by the law. This leads Us to the inescapable conclusion that private respondent Scheider is the owner of the litigated properties.

Natividad P. Nazareno vs Court of Appeals G.R. No. 138842 Facts:  

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Maximino Nazareno, Sr. and Aurea Poblete, as husband and wife, acquired properties in Quezon City and Cavite Province, during their marriage. They had five children, namely, Natividad, Romeo, Jose, Pacifico, and Maximino Jr. After the death of Maximino Sr., Romeo filed an intestate case in the Court of First Instance in Cavite. Upon the reorganization of the courts, the case was transferred to the RTC of Naic, Cavite. Romeo was appointed administrator of his father’s estate. In the course of the proceedings, Romeo discovered that his parents executed several deeds of sale conveying a number of real properties in favor of his sister, Natividad. Among the lots covered by the Deed of Sale is Lot 3-B. This lot has been occupied by Romeo, his wife Eliza, and Maximino Jr. Unknown to Romeo, Natividad sold the lot to Maximino Jr. for which the latter was issued TCT No. 293701 by the Register of Deeds of Quezon City. When Romeo found out about the ale to Maximino Jr., he and his wife locked Maximino Jr. out of the house. The latter then brought an action for recovery of possession and damages with prayer for writs of preliminary injunction and mandatory injunction with the RTC. The trial court ruled in favor of Maximino Jr. The Court of Appeals affirmed the decision of the trial court. Romeo in turn filed, on behalf of the estate of Maximino Sr., for annulment of sale with damages against Natividad and Maximino Jr. Romeo sought the declaration of nullity of the sale to Natividad and Maximino Jr. on the ground that both sales were void for lack of consideration. Natividad and Maximino Jr., filed a third-party complaint against the spouses Romeo and Eliza alleging that Lot 3 was included in the Deed of Absolute Sale to Natividad and that Romeo secured for himself a new title in his name for the said lot. They therefore sought the annulment and cancellation of the transfer to Romeo and the cancellation of his title, the eviction of Romeo and Eliza and all persons claiming rights from Lot 3, and the payment of damages. The lower court rendered judgment declaring the nullity of the Deed of Sale except Lots 3, 3-B, 13 and 14 which had passed on to third persons, Natividad shall hold the rest in trust for Jose Nazareno to whom the same had been adjucated. The defendants counter-claim and the third-party complaint are dismissed. Natividad and Maximino Jr. filed a motion for reconsideration. As a result, the court modified its decision.On appeal to the Court of Appeals, the trial court’s decision was modified in the sense that titles to Lot 3 and Lot 3-B, as well as Lots 10 and 11 were cancelled and ordered restored to the estate of Maximino Nazareno, Sr. Petitioners filed a motion for reconsideration but the motion was denied.

Issue: Whether or not the lots in question as the prestation are divisible or indivisible. 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. The indivisibility refers to the prestation and not to the object thereof. In the present case, the Deed of Sale of January 29, 1970 supposedly conveyed the six lots to Natividad. The obligation is clearly indivisible because the performance of the contract cannot be done in parts, otherwise the value of what is transferred is diminished. Petitioners are therefore mistaken in basing the indivisibility of a contract on the number of obligors. In any case, if petitioners’ only point is that the estate of Maximino, Sr. alone cannot contest the validity of the Deed of Sale because the estate of Aurea has not yet been settled, the argument would nonetheless be without merit. The validity of the contract can be questioned by anyone affected by it. A void contract is inexistent from the beginning. Hence, even if the estate of Maximino, Sr. alone contests the validity of the sale, the outcome of the suit will bind the estate of Aurea as if no sale took place at all.

Aurelio P. Alonzo vs Jaime and Perlita San Juan G.R. No. 137549 Facts:  

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A complaint for recovery of possession was filed by Aurelio P. Alonzo and Teresita A. Sison against Jaime and Perlita San Juan alleging that they are a the owners of a parcel of land located at Lot 3, Block 11, M. Agoncillo St., Novaliches, Quezon City. The plaintiffs discovered that the portion of the said parcel of land was occupied by the defendants for more than a year, without their prior knowledge or consent. Defendants were sent a demand letter in August of 1996 requiring them to vacate the property but they refused to comply, hence, filing the Complaint. During pendency of the case, the parties agreed to enter into a Compromise Agreement which was approved by the trial court. In the Compromise Agreement, it was expressly stipulated that should any two of the installments of the purchase price be unpaid by the defendants, 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 pat the amounts due thereon, plaintiffs sent a letter demanding that the defendants vacate the premises and subsequently files an Amended Motion for Execution. In the Amended Motion for Execution, the plaintiffs expressly admitted that the defendants failed to pay the installments for July 31, 1997 and August 31, 1997 on their due dates; hence the Compromise Agreement submitted by the parties became null and void. The Amended Motion for Execution and subsequent Motion for Reconsideration filed by the plaintiffs were denied since the Court has no basis to direct the issuance of a writ of execution because the Compromise Agreement submitted by the parties have been rendered null and void.

Issue: Whether or not the trial court’s interpretation of the Compromise agreement entered into by the parties was correct.

Held: A review and examination of payments made by the respondents to the plaintiffs showed that the checks were issued by a Cirila Cruz, whose relation to the respondents was never given

clarification. These checks were accompanied by vouchers with particulars stating that each check issued is additional partial payment to the plaintiffs by the defendants.

The law requires that the party who alleges a fact has the burden of proving it. In this case, the burden of proof is on the respondents because they allege an affirmative defense, namely payment. As a rule, one who pleads payment has the burden of proving it. The debtor has the burden of showing that the obligation has been cleared by payment. Apropos is the rule so well-settled that a receipt of payment is the best evidence of the fact of payment. A receipt is a written and signed acknowledgement that money or goods have been delivered, while a voucher is a documentary record of a business transaction. The references presented to alleged check payments in the vouchers do not vest them with the character of receipts.

Even assuming that the payments were made, it has not been shown to the fu;; satisfaction of the Court whether the payments were made specifically to satisfy respondents’ obligation nor were the circumstances under which payments were made explained, taking into consideration the conditions of the Compromise Agreement.

An obligation may be cleared by payment. However, two requisites must concur: identity of prestation and its integrity. The first means the very thing due must be released and the second that the prestation be fulfilled completely. In this case the creditor must receive and acknowledge full payment from the debtor. No acknowledgement or proof was shown to the satisfaction of the court.

Compromise agreements are contracts, wherein the parties undertake reciprocal obligations to resolve their differences, thus avoiding litigation, or put and end to one already commenced. Article 1374 of the Civil Code requires 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.

In this case, it was an error on the part of the trial court to have interpreted the compromise agreement in the manner it has done so. If we were to follow the argument of the trial court to its logical conclusion, then it would mean that the parties would have to go back to the

beginning and re-litigate what they had already put to rest when they entered the compromise agreement.

The reciprocal concessions are the very heart and life of every compromise agreement. By its nature, it brings the parties to agree to something which neither of them may actually want, but for the peace it will bring them without a protracted litigation. With this, the principle of autonomy of contracts must be respected. The contract between respondent and petitioner have the force of law between them. Respondents are thus bound to fulfill what has been expressly stipulated therein. In the compromise agreement, it was stated clearly that in case of failure to pay on the part of the respondents, they shall vacate and surrender possession of the occupied land and petitioners shall be entitled to immediately obtain from the trial court a writ of execution for the ejectment of the respondents. Once approved, the compromise agreement can not and must not be disturbed except for vices of consent or forgery.

The orders of the trial court dated August 11, 1998 and February 17, 1999 are declared null and void and setaside and a new one entered directing the trial court to issue the writ of execution prayed for by the Petitioner in accordance with the compromise agreement.

Jesus T. David vs. Court of Appeals G.R. No. 115821

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The Regional Trial Court of Manila, Branch 27 issued a writ of attachment over real properties covered bt TCT Nos. 80718 and 10289 of private respondents. Then Presiding Judge Ricardo Diaz, ordered private respondent Afable to pay the petitioner P66,500.00 plus interest plus P5,000.00 as attorney’s fee and the cost of the suit starting from July 24, 1974 until fully paid. Such decision was amended by Judge Diaz so that the legal rate of interest should be computed. Respondent Afable appealed to the Court of Appeals and then the Supreme Court. The decision of the lower court was affirmed in both instances. Judgement entries were made and the record was remanded to Branch 27, presided at that time by respondent Judge Edgardo P. Cruz for final execution of the Decision. Respondent Judge issued an Alias Writ of Execution by virtue of which respondent Sheriff Melchor P. Peña conducted a public auction. Sheriff Peña informed the petitioner of the total amount of judgement but petitioner claimed that the judgement amount should be higher based on compounded interest. Although auctioned properties were sold to petitioner, Sheriff Peña did not issue the Certificate of Sale because there was an excess in the bid price which the petitioner failed to pay despite notice. Petitioner filed a motion prating that respondent Judge Cruz issue an order directing respondent Sheriff Peña to prepare and execute a Certificate of Sale in favor of the petitioner, placing therein the amount of the judgement be the amount he bid during the auction which he won, reasoning that compound interest should apply in this case. This motion was denied by respondent Judge. Upon elevation to appellate court, the Court of Appeals dismissed the petition stipulating that there was no interest stipulated by the parties. No interest was mentioned in the Compromise Agreement signed by private respondent and duly accepted by petitioner.

Issue: Whether or not appellate court erred in affirming respondent Judge’s order for payment of simple interest only rather than compound interest.

Held:

The court held, NO. Article 2212 of the Civil Code contemplates the presence of stipulated or conventional interest which has accrued when demand was judicially made. In cases where no interest had been stipulated by the parties, no accrued conventional interest could further earn interest upon judicial demand.

In the said case, we further held that when the judgment sought to be executed ordered the payment of simple “legal interest” only and said nothing about payment of compound interest, but the respondent judge orders payment of compound interest, then, he goes beyond the confines of a judgment which had become final.

The Court of Appeals made the factual finding that “ . . . no interest was stipulated by the parties. In the promissory note denominated as ‘Compromise Agreement’ signed by the private respondent which was duly accepted by petitioner no interest was mentioned. In his complaint, petitioner merely prayed that defendant be ordered to pay plaintiff the sum of P66,500.00 with interest thereon at the legal rate from the date of the filing of the complaint until fully paid.”

Republic of the Philippines vs. Thi Thu Thuy T. De Guzman G.R. No. 175021 Facts: 

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Thi Thu Thuy T. De Guzman is the proprietor of Montaguz General Merchandise (MGM), she contracted with the Philippine National Police Engineering Services (PNPES) to deliver to the Philippine National Police (PNP) various construction equipment amounting to P2,288,562.60 for the construction of a four-storey condominium in Camp Crame, Quezon City. De Guzman claims that she has not been paid by the PNP for the materials which she has delivered. The PNP admits that in fact the materials have been delivered, but claims that he same has been paid through a check issued by the Landbank of the Philippines (LBP) as evidenced by a receipt issued by De Guzman. De Guzman claims that the receipt presented by the PNP is for Montaguz Builders (MB), another company of hers, and not of MGM. The receipt was signed by one Edgardo Cruz, proprietor of Highland Enterprise, another contractor of the PNP, and that said check was in fact released to Cruz. Cruz states that he received the check because the PNP and him had an agreement to construct the said condominium and that the PNP and the other contractors had an agreement that the PNP would give a 2% commission of the purchase price of materials used for the condominium for use of their business names to remove the implication of monopoly of contracts with Highland Enterprise.

Issue: Whether or not the obligation to pay De Guzman by the PNP has been extinguished. Held: The receipt that was issued was that of MB and not MGM, thus the obligation to pay De Guzman by virtue of MGM has not been extinguished. Also the fact that the statement of Cruz involving the use of other business names for a 2% commission is a disturbing fact of the spurious dealings of our own government. Cruz is not an authorized agent of MGM nor De Guzman, and that MGM did in fact deliver the materials the PNP is obligated to compensate her for the same. 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. PNP failed to show any evidence to support payment to MGM. Furthermore, since the obligation did not rise from a loan or forbearance of money the legal interest of 6% per annum is attached to the amount due.

Jose Marques and Maxilite Technologies, Inc. vs Far East Bank and Trust Company G.R. No. 171379

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Issue:

Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in the importation and trading of equipment for energy-efficient systems. Jose N. Marques is the president and controlling stockholder of Maxilite. Far East Bank and Trust Co. (FEBTC) is a local bank which handles the financing and related requirements of Marques and MAxilite. Marques and MAxilite maintained accounts with FEBTC. FEBTC maintained Maxilite’s capital and operational requirements through loans secured with properties of Marques. Far East Bank Insurance Brokers, Inc. (FEBIBI) is a local insurance brokerage corporation while Makati Insurance Company is a local insurance company, both are subsidiaries of FEBTC. Maxilite and Marques entered into a trust receipt transaction with FEBTC for the shipment of various high-technology equipment from the United States with the merchandise serving as collateral. 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 receipt merchandise. Maxilite paid the premium for theses policies through debit arrangement. FEBTC would debit Maxilite’s account for premium the payments, as reflected by statement of accounts sent to Maxilite. On March 9, 1995, a fire gutted the Aboitiz Sea Transport Building where Maxilite’s office and warehouse were located. AS a result, Maxilite suffered losses which they claimed against the fire insurance policy with Makati Insurance Company. The latter denied the claim due to non-payment of premium. FEBTC and FEBIBI disclaimed any responsibility for the denial. Maxilite and Marques sued FEBTC, FEBIBI, and Makati Insurance Company praying for payment of damages. The defendants countered that Maxilite and Marques have no cause of action against them and essentially denied the allegations. The trial court ruled in favour of Maxilite and Marques ordering the defendants to pay jointly and severally to the plaintiff the full coverage of the fire insurance policy, damages, attorney’s fees and litigation expenses. Subsequently, the counter claims were dismissed. The Court of Appeals affirmed the trial court’s decision with modifications.

Whether or not the premium for the insurance policy has in fact been paid.

Held:

Essentially, Maxilite and Marques invoke estoppel in claiming against FEBTC, FEBIBI, and Makati Insurance Company the face value of the insurance policy. In their complaint, Maxilite and Marques alleged they were led to believe and they in fact believed tha the settlement of Maxilite’s trust receipt account included the payment of the insurance premium. Article 1431 of the Civil Code defines estoppel as follows: Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. Meanwhile, Section 2(a), Rule 131 of the Rules of Court provides: SEC. 2. Conclusive presumptions. – The following are instances of conclusive presumptions: (a) Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing is true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it.

In estoppel, a party creating an appearance of fact, which is false, is bound by that appearance as against another person who acted in good faith on it. Estoppel is based on public policy, fair dealing, good faith and justice. Its purpose is to forbid one to speak against his own act, representations, or commitments to the injury of one who reasonably relied thereon. It springs from equity, and is designed to aid the law in the administration of justice where without its aid injustice might result. The Court agrees with the Court of Appeals in reducing the interest rate from 12% to 6% as the obligation to pay does not arise from a loan or forbearance of money. With respect to Maxilite’s and Marques’ invocation of legal compensation, we find the same devoid of merit. Aside from their bare allegations, there is no clear and convincing evidence that legal compensation exists in this case. In other words, Maxilite and Marques failed to establish the essential elements of legal compensation. Therefore, Maxilite’s and Marques’ claim of legal compensation must fail.

PRISMA Construction and Development Corporation vs Arthur F. Menchavez G.R. No. 160545

Facts: 

Rogelio S. Pantaleon, the President and Chairman of the Board of PRISMA, obtained a loan from the respondent in the amount of P1M with a monthly interest of P40,000.00 payable in six months. To secure the payment of the loan, Pantaleon issued a promissory note.

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As of January 4, 1997, the petitioners had already paid a total of P1,108,772.00. However, the respondent found that the petitioner still had an outstanding balance of P1,364,151.00, to which it applied a 4% monthly interest. Thus, the respondent filed a complaint for the sum of money with the RTC to enforce unpaid balance, monthly interest, attorney’s fees and costs of suit.

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The RTC rendered a decision ordering the petitioners to jointly and severally pay the respondent the amount of P3,526,117.00 plus 4% monthly interest from February 11, 1999 until fully paid.

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The petitioners elevated the case to the CA insisting that there was no express stipulation on the 4% monthly interest. The CA affirmed the RTC’s decision with modifications 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. The petitioners filed a motion for reconsideration but was denied by the appellate court.

Issue: Whether or not the 4% monthly interest on the loan applies to the payment period only or until full payment of the loan.

Held: The court finds the petition meritorious. 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 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.

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. Applying this provision, we find that the interest of P40,000.00 per month corresponds only to the six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed upon by the parties in the promissory note. Thereafter, the interest on the loan should be at the legal interest rate of 12% per annum, , consistent with our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals. The court reversed and set aside the decision of the Court of Appeals and remanded the case to the RTC for proper computation of the amount due.

Theresa Macalalag vs People of the Philippines G.R. No. 164358

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Petitioner Theresa Macalalag obtained loans from Grace Estrella in two separate occasions with an interest rate of 10% per month. Macalalag persistently paid the interests. Finding the interests so burdensome, she requested Estrella for a reduction of the same which the latter agreed. Macalalag then executed Acknowledgment/Affirmation Receipts promising to pay Estrella the face value of the loans within two months from the date of execution plus 6% interest per month. She further obliged herself to pay for the two loans as liquidated damages and attorney’s fees as stipulated by the parties the moment she breaches the terms and conditions thereof. As security for payment, Macalalag issued two checks in favour of Estrella. However, when Estrella presented said checks to drawee bank, the same were dishonoured for the reason that the account was already closed. Estrella then sent notice of dishonour and demand to Macalalag, but the latter failed to do so. Estrella then filed 2 criminal complaints against Macalalag for violation of BP 22. Macalalag pleaded not guilty and attested that she already made payments over and above the value of the checks. The trial court found Macalalag guilty. The Court of Appeals also found her guilty with modification ruling that she is liable for only 1 count of BP 22.

Issue: Whether or not petitioner had already paid her obligations to Estrella.

Held: It was established that Macalalag already made a total payment of P355,837.00. This amount could be very well applied to the value of the first check which is P156,000.00. Thus, Macalalag cannot be held liable for the violation of BP 22 in so far as the first check is concerned. The second check however, Macalalag can still be liable for violation of BP 22 since the check representing payment was dishonoured by the drawee bank for the reason that the account was already closed. Hence, her obligation to Estrella is not fully paid.

Antonio Tan vs. Court of Appeals G.R. No. 116285 Facts:   

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Antonio Tan secured two loans from the Cultural Center of the Philippines (CCP) in the amount of P 4,000,000.00 and P 2,000,000.00. After partial payments Tan defaulted resulting to the restructuring of the payment of the balance to be paid at five equal instalments. Tan failed to pay any instalment and thereafter restructured the loan again that is: (a) twenty percent (20%) of the principal amount of the loan upon the respondent giving its conformity to his proposal; and (b) the balance on the principal obligation payable in thirty-six (36) equal monthly instalments until fully paid, and that the principal would bear interest at 14% per annum plus 3% service charge and a penalty of 2% monthly penalty in case of breach. Tan still failed to pay and asked for a moratorium on his obligation due to the considerable change in his business. CCP filed a case of collection of sum of money against Tan where the trial court and CA ruled in favor of CCP and ordered Tan to pay what is due to CCP and that the amount stated in the judgment shall accrue 12% annual interest from finality until satisfaction.

Issues: 1. Whether or not the penalty of 2% interest should also accrue interest of 12% per annum. 2. Whether or not the penalty of 2% per month is frivolous or usurious.

Held: 1. There is an express stipulation in the promissory note (Exhibit “A”) permitting the compounding of interest. The fifth paragraph of the said promissory note provides that: “Any interest which may be due if not paid shall be added to the total amount when due and shall become part thereof, the whole amount to bear interest at the maximum rate allowed by law.” Therefore, any penalty interest not paid, when due, shall earn the legal interest of twelve percent (12%) per annum, in the absence of express stipulation on the specific rate of interest, as in the case at bar. Article 2212 of the New Civil Code provides that “Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.” In the instant case, interest likewise began to run on the penalty interest upon the filing of the complaint in court by respondent CCP on August 29, 1984. Hence, the courts a quo did not err in ruling that the petitioner is bound

to pay the interest on the total amount of the principal, the monetary interest and the penalty interest.

2. Since Tan has showed good faith in trying to fulfil his obligation evidenced by multiple attempts to restructure the loan and partial payments, the court held that a reduction on the penalty was due and found that the 2% monthly interest as a penalty usurious and reduced it to a straight 12% per annum interest rate.

Eastern Shipping Lines, Inc. vs Court of Appeals G.R. No. 97412

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Two fiber drums of riboflavin were shipped from Yokohama, Japan for delivery along the vessel “SS Eastern Comet” owned by Eastern Shipping Lines. This shipment was insured by Mercantile Insurance Company, Inc. Upon arrival of shipment in Manila, it was discharged unto the custody of Metro Port Service, Inc., who excepted one drum, said to be in bad order of unknown damage. Allied Brokerage Corporation received the shipment from Metro Port Service, Inc., one drum opened and without seal. They then made deliveries of the shipment to consignee’s warehouse, who excepted to one drum which contained spillages, while the rest of the contents was adulterated/fake. Due to the losses/damage sustained by said drum, consignee suffered losses due to the fault and negligence of the shipping company. Claims were then presented and were refused to be paid. The Court of Appeals, after a careful scrutiny of evidence in record, found that the conclusion drawn was correct. As there is sufficient evidence that the shipmen has sustained damage while in the successive possession of appellants, and therefore are liable as subrogee for the amount paid to the consignee.

Issue: Whether or not the Court of Appeals showed error and grave abuse of discretion to petitioner.

Held: The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance by, the person entitled to receive them (Arts. 1736-1738, Civil Code). When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable (Art. 1735, Civil Code). There are, of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated in Article 1734 of the Civil Code, are exclusive, not one of which can be applied to this case.

The decision herein sought to be executed is one rendered in an Action for Damages for injury to persons and loss of property and does not involve any loan, much less forbearances of any money, goods or credits. As correctly argued by the private respondents, the law applicable to the said case is Article 2209 of the New Civil Code.

Rodelo G. Polotan, Sr. vs Court of Appeals G.R. No. 119379

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Petitioner Rodelo S. 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 and any remaining unpaid balance to earn 3% interest per annum plus prime rate of Security Bank and Trust Company. Notably, in the application form, Ofricano Canlas obligated himself to pay jointly and severally with petitioner the latter’s obligation to private respondent. The petitioner incurred credit charges plus appropriate interest and service charges in the amount of P33,819.84 as of May 8, 1987, which has become due and demandable. Demands for payment proved futile, hence, private respondent filed a Complaint for Collection of Sum of Money against petitioner before the lower court. The lower court rendered judgment ordering Rodelo Polotan, Sr. And Ofricano Canlas to pay jointly and severally the private respondent. Upon appeal, the Court of Appeals affirmed the ruling of the lower court.

Issue: Whether or not petitioner had an obligation to pay private respondent.

Held: Petitioner’s claim that since the contract he signed with Diners Club was a contract of adhesion, the obscure provision on interest should be resolved in his favour. A contract of adhesion is one in which one of the contracting parties imposes a ready-made form of contract which the other party may accept or reject, but 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. These types of contracts have been declared as binding as ordinary contracts, the reason being that the party who adheres to the contract is free to reject it entirely.

New Sampaguita Builders Construction, Inc. (NSBCI) vs Philippine National Bank G.R. No. 148753

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On February 11, 1989, Board Resolution No. 05 was approved by NSBCI (petitioner) authorizing the company to apply for or secure a commercial loan with the PNB in an aggregate amount of P8.0M, using or mortgaging the real estate properties registered in the name of its President and Chairman of the Board 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 petitioners shall act as sureties or co-obligors who shall be jointly and severally liable with NSBCI for the payment of any and all obligations. The loan was approved and was secured by a firts mortgage on the following: a) 3 parcels of residential land located at Mangaldan, Pangasinan; b) 6 parcels of residential land situated at San Fabian, Pangasinan, and c) a residential lot and improvements thereon located at Mangaldan, Pangasinan. The loan was further secured by the joint and several signatures of petitioner spouses who signed as accommodation-mortgagors since all the collaterals were owned by them and registered in their names. Petitioner also executed several promissory notes with different payment dates. The first promissory note had a 19.5% interest rate, the 2nd and 3rd had a 21.5% interest rate. Included in the promissory note is a uniform clause that permitted PNB to increase the rate “within the limits allowed by law at any time depending on whatever policy it may adopt in the future,” even without giving petitioners prior notice. Subsequently, there was also a clause stating that if the same is not paid in 2 years after release, it shall be converted to a medium term loan and the interest rate for such loan will apply. NSBCI defaulted on its payments and failed to comply with obligations and promissory notes, thus, they requested for a 90 day extension. Even with the extension, they again defaulted and asked that the loan be restructured. The loan was paid in part and the balance was promised to be paid later on. Due to failure of NSBCI to pay PNB again, the latter extrajudicially foreclosed the mortgaged properties and was sold for P10M. Respondent bank then files a complaint with the court with the prayer that NSBCI pay the deficiency of P2M since the respondent bank claimed that the petitioners owed them P12M The lower court ruled that NSBCI was entitled to the debt relief package of the PNB and ruled that respondent bank had no cause of action. Upon appeal, the CA reversed the decision of the lower court stating that NSBCI was not entitled to loan relief thus ordering the petitioner to pay the respondent bank the sum of money that they still owe.

Issue: Whether or not the loan was bloated by respondent bank.

Held: Respondent’s Circular is not an outright grant of assistance or extension of payment, but a mere offer subject to specific terms and conditions. Petitioner NSBCI failed to establish satisfactorily that it had been seriously and directly affected by the economic slowdown in the peripheral areas of the then US military bases. Its allegations, devoid of any verification, cannot lead to a supportable conclusion. In fact, for short-term loans, there is still a need to conduct a thorough review of the borrower’s repayment possibilities. After the foreclosure and sale of the mortgaged property, the Real Estate Mortgage is extinguished. Although the mortgagors, being third persons, are not liable for any deficiency in the absence of a contrary stipulation, the action for recovery of such amount -- being clearly sureties to the principal obligation -may still be directed against them. However, respondent may impose only the stipulated interest rates of 19.5 percent and 21.5 percent on the respective availments -- subject to the 12 percent legal rate revision upon automatic conversion into medium-term loans -- plus 1 percent attorney’s fees, without additional charges on penalty, insurance or any increases thereof. Accordingly, the excessive interest rates in the Statements of Account sent to petitioners are reduced to 19.5 percent and 21.5 percent, as stipulated in the Promissory Notes; upon loan conversion, these rates are further reduced to the legal rate of 12 percent.

The “unilateral determination and imposition” of increased rates is “violative of the principle of mutuality of contracts ordained in Article 1308 of the Civil Code.” One-sided impositions do not have the force of law between the parties, because such impositions are not based on the parties’ essential equality

Dario Nacar vs Gallery Frames and/or Felipe Bordey, Jr. G.R. No. 189871

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Dario Nacar filed a complaint for constructive dismissal before the Arbitration Branch of the NLRC against respondent Gallery Frames and/or Felipe Bordey, Jr. The Labor Arbiter rendered a decision in favor of petitioner and found that he was dismissed from employment without a valid or just cause entitling him to be awarded back wages and separation pay. Respondents appealed to NLRC but was dismissed for lack of merit. The NLRC sustained the decision of the Labor Arbiter. Respondents then filed a motion for reconsideration, but was denied. Respondents frilled a Petition for Review on Certiorari before the Court of Appeals. The CA issued a Resolution dismissing the petition. A Motion for Reconsideration was then filed but likewise denied. The respondents sought relief from the Supreme Court but the latter found no reversible error on the part of the CA, thus denying the petition. An Entry of Judgment was later issued certifying that the resolution became final and executor. The case was referred back to the Labor Arbiter. Petitioner filed a Motion for Correct Computation praying that his back wages be computed from the date of his dismissal up to the finality of the Resolution of the Supreme Court. The Computation and Examination Unit of the NLRC arrived at an updated amount in the sum of P471,320.31. A Writ of Execution was issued by the Labor Arbiter ordering the Sheriff to collect from the respondents the recomputed amount. Respondents filed a Motion to Quash Writ of Execution claiming that after the decision becomes final and executor, the same cannot be altered. The Labor Arbiter denied the motion and issued an Alias Writ of Execution. Respondents again appealed to the NLRC who granted the appeal in favor of the respondents and ordered the recomputation of the judgment award. Upon recomputation, the judgment award of petitioner was reassessed to be in the total sum of P147,560.19. The Labor Arbiter then issued an Alias Writ of Execution to satisfy the judgment award that was due to the petitioner, which the petitioner eventually received. Petitioner the filed a Manifestation and Motion praying for the re-computation of monetary award to include appropriate interests. The Labor Arbiter issued an order granting the motion, nut only up to the amount of P11,459.73 reasoning that the decision that should be enforced was that of October 15, 1998 considering that it as the one that became final and executory. Petitioner appealed before the NLRC which the latter denied. He then filed a Motion for reconsideration but was likewise denied. Petitioner then sought recourse before the CA,

who also denied the petition. The CA reasoned that since petitioner no longer appealed the October 15, 1998 decision, a correction thereof is no longer allowed.

Issue: Whether or not the payment of back wages should be paid with interest.

Held: The petition is meritorious.

The decision of the Court of Appeals and the Resolution dated October 9, 2009 are reversed and set aside. Respondents are ordered to pay petitioner: (1) backwages computed from the time petltwner was illegally dismissed on January 24, 1997 up to May 27, 2002, when the Resolution of this Court in G.R. No. 151332 became final and executory; (2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one month pay per year of service; and (3) interest of twelve percent ( 12%) per annum of the total monetary awards, computed from May 27, 2002 to June 30, 2013 and six percent (6%) per annum from July 1, 2013 until their full satisfaction.

The Labor Arbiter is hereby ORDERED to make another recomputation of the total monetary benefits awarded and due to petitioner in accordance with this Decision.

Land Bank of the Philippines vs Alfredo Ong G.R. No. 190755

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Spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi City. The loan was secured by three residential lots, five cargo trucks, and a warehouse. Under the agreement, part of the loan would be a short-term loan and the remaining part would be payable in seven years. The Notice of Loan Approval contained an acceleration clause wherein any default in payment of amortizations or other charges would accelerate the maturity of the loan. When the spouses Sy could no longer pay for their loan, they sold three of their mortgaged parcels of land to Angelina Gloria Ong, under a Deed of Sale with Assumption of Mortgage. Alfredo Ong, Evangeline’s Father, who is also the respondent, then went to Land Bank to inform them about the sale and assumption of mortgage. Branch Head Atty. Edna Hingco told him and his counsel that there was nothing wrong with the agreement but provided them with requirements for the assumption of mortgage. When the requirements and payments were met, Atty. Hingco informed petitioner that the certificate of land title would be transferred in his name but never materialized. Respondent later found out that his application for assumption of mortgage was not approved by Land Bank. Petitioner foreclosed the mortgage of the Spouses Sy. Alfredo Ong learned about the foreclosure when he saw the subject mortgage propertied included in an Auction Sale. Through his other counsel, Atty. Madrilejos, talked to Land Bank and was told that the amount he paid as principal foe the assumption of mortgage would be returned to him. Alfredo initiated an action for recovery of sum of money with damages against Land Bank as the payment was not returned by Land Bank. He maintained that the foreclosure of the mortgaged parcels of land without informing him of the denial of his assumption of mortgage was done in bad faith. The RTC held that the contract approving the assumption or mortgage was not perfected as a result of the credit investigation conducted on Alfredo. It ruled that under the principle of equity and justice, the bank should return the amount Alfredo had paid with interest. It further held that he was entitled to attorney’s fees and litigation expenses. On appeal, The CA affirmed the decision of the RTC. It found that Alfredo and Land Bank’s active preparations for Alfredo’s assumption of mortgage essentially novated the agreement. The subsequent motion of reconsideration by Land Bank was denied by the CA for lack of merit.

Issue: Whether or not the CA erred in holding that Art, 1236 of the Civil Code does not apply.

Held: The appealed decision is affirmed with modification. Land Bank contends that Art. 1236 of the Civil Code backs their claim that Alfredo should have sought recourse against the Spouses Sy instead of Land Bank. Art. 1236 provides: The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary. 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.

We agree 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. However, in the context of the second part of said paragraph, Alfredo was not making payment to fulfill the obligation of the Spouses Sy. Alfredo made a conditional payment so that the properties subject of the Deed of Sale with Assumption of Mortgage would be titled in his name. 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. Land Bank also faults the CA for finding that novation applies to the instant case. It reasons that a substitution of debtors was made without its consent; thus, it was not bound to recognize the substitution under the rules on novation.

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. 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.

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, or that the old and the new obligations be on every point incompatible with each other. The test of incompatibility is whether or not the two obligations can stand together, each one having its independent existence. Furthermore, Art. 1293 of the Civil Code states: 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.

Spouses Florentino T. Mallari and Aurea V. Mallari vs Prudential Bank (now Bank of the Philippine Islands) G.R. No. 197861

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Florentino T. Mallari obtained from respondent Prudential Bank a loan as evidenced by promissory note which states that the loan is subject to an interest rate of 21% per annum, attorney’s fees equivalent to 15% of the total amount due and, in case of default, a penalty and collection charges of 12% per annum of the total amount due. Petitioner Florentino executed a Deed of Assignment where he authorized the respondent bank to pay his loan with his time deposit with the latter in the amount of P300,000.00. Petitioner spouses obtained again from respondent bank another loan of P1.7 million stipulating that the loan will bear 23% interest per annum, attorney’s fees equivalent to 15% p.a. of the total amount due, and penalty and collection charges of 12% p.a. Petitioners executed a Deed of Real Estate Mortgage in favour of respondent bank covering petitioners’ property under TCT No. T-215175 to answer for the said loan. Petitioners failed to settle their loan obligation with respondent bank, thus prompting the latter, through their lawyer, to send a demand letter to the petitioners for them to pay their obligation. Respondent bank then filed with the RTC a petition for extrajudicial foreclosure of petitioners’ mortgaged property for the satisfaction of the petitioners obligation secured by such mortgage. Provincial Sheriff set auction sale on April 23, 1992. Petitioners filed a complaint for annulment of mortgage, deeds, injunction, preliminary injunction, temporary restraining order and damages. Petitioners asked the court to restrain respondent bank from proceeding with the foreclosure sale. The RTC denied the Application for a Writ of Preliminary Injunction. However, later reversed itself and issued the restraining order. Respondent bank then filed its Motion to Lift Restraining Order and proceeded with the extrajudicial foreclosure of the mortgaged property. A Certificate of Sale was issued to respondent bank being the highest bidder. Subsequently, respondent bank files a Motion to Dismiss Complaint for failure to prosecute action for unreasonable length of time to which petitioners filed their Opposition. RTC denied this motion. Trial ensued and the RTC issued its Order granting respondent’s demurrer to evidence stating in its disposition that “there is no evidence of bad faith”. Petitioners appealed the RTC decision to the CA which issued its assailed Decision denying the instant appeal and affirming the Order issued by the RTC. A Motion for Reconsideration was then filed by the petitioners which was denied by the appellate court.

Issue: Whether or not the Court of Appeals erred in the affirming the Order of the RTC.

Held: The court held that the petition is denied and affirms the decision and resolution of the Court of Appeals.

Parties are free to enter into agreements and stipulate as to the terms and conditions of their contract, but such freedom is not absolute. Article 1306 of the Civil Code provide, “The contracting parties may establish such stipulations, clauses, terms and conditions, as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.” Hence, if stipulations in the contract are valid, the parties are bound to comply with them, since contract is the law between the parties.

RGM Industries vs United Pacific Capital Corporation G.R. No. 194781

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The respondent, who is involved in the business of lending and financing, granted a P30M short-term credit facility in favour of the petitioner. 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. Petitioner failed to satisfy the said promissory notes. Consequently, petitioner issued in favour of respondent a consolidated promissory note in the principal amount for a term of 14 days. The stipulated interest was 32& per annum. In case of default, penalty charge was imposed in an amount equivalent to 8% per month. The petitioner again failed to satisfy the consolidated promissory note. The respondent then sent demand letters to the petitioner but the latter failed to pay and instead asked for loan restructuring. The respondent declined and then filed a compliant for collection of the sum of money. The petitioner claimed that the agreed interest rate was fixed at 15.5% per annum and not varying interest rates as imposed by the respondent which reached as high as 40% per annum. The respondent argued that the increased interest rates were mutually agreed upon and are not considered usurious The trial court ruled in favour of the respondent. On appeal, the CA affirmed the RTC’s judgment but modified the interest rates and penalty charges imposed.

Issue: Whether or not the imposed interest rates and penalty charges are exhorbitant.

Held: 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.

However, pursuant to Bank of the Philippine Islands, Inc. v. Yu, we deem it proper to further reduce the penalty charge decreed by the CA from 2% per month to 1% per month or 12% per annum in view of the following factors: (1) respondent has already received P7,504,522.27 in penalty charges, and (2) the loan extended to respondent was a short-term credit facility. On the basis of the same precedent, the attorney's fees must likewise be equitably reduced considering that: (1) the petitioner has already made partial payments; (2) the attorney's fees are not an integral part of the cost of borrowing but a mere incident of collection; and (3) the attorney's fees were intended as penal clause to answer for liquidated damages, hence, the rate of 10% of the unpaid obligation is too onerous. Under the premises, attorney’s fees equivalent to one percent (1%) of the outstanding balance is reasonable.

Philippine National Bank vs Spouses Wilfredo and Estela Encina G.R. No. 174055 Facts:  

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On September 13, 1995, respondent spouses Encina obtained a P500,000.00 loan with petitioner PNB, secured by a promissory note, a real estate mortgage, and a credit agreement, on parcels of land located at Occidental Mindoro The Encina’s obtained an additional P200,000.00 loan with PNB embodied in a credit agreement and promissory note, secured by the same parcels of land. The loan obligations of the Encina’s were fully paid on February 4, 1997. Another loan was obtained by spouses Encina secured by a promissory note and a time loan commercial credit agreement, likewise secured by the same parcels of land. PNB subsequently granted an all purpose credit facility to respondent spouses. The spouses availed of part of the credit facility, as evidenced by a promissory note secured by the same parcels of land as well. The remaining amount of money left in the credit facility, was then availed of by the spouses secured by a promissory note dated May 22, 1998. The respondent spouses failed to pay their obligation upon its maturity. Demands from the petitioner were left unheeded, prompting them to file for a petition for the sale of mortgaged properties. The extra-judicial sale of the mortgaged properties was published, a foreclosure sale was thereafter conducted with PNB as the highest bidder. A certificate of sale was then issued in favor of PNB. On November 15, 2001, a contract of lease was executed between the Espouses Encina and PNB over the subject properties, pursuant to a request made by the Encina’s that they be allowed to lease the subject properties at P7,500.00 a month. The Encina spouses sued PNB in an action for the nullification and foreclosure sale and damages with prayer for extension and/or grace period alleging that their loan obligations should have been restructured because they were agricultural loans, and that no penalties should be imposed. Further, they claimed that the extra-judicial foreclosure and sale of the mortgaged properties was null and void. PNB filed a motion to dismiss and was granted by the lower court. On appeal, The Court of Appeals reversed the trial courts dismissal on the finding that there was no definite agreement as to the interest rate to imposed on the loan.

Issue: Whether or not the interest rate imposed on the loan is proper.

Held: Assuming the facts alleged in the complaint to be true, i.e., that the Encina spouses incurred an agricultural loan which, under the Agricultural Modernization Act of 1997, has a long gestation period and is not subject to imposition of penalties, the trial court may render a valid judgment. It should be definitively ruled in this regard that the Usury Law had been rendered legally ineffective by Resolution No. 224 dated 3 December 1982 of the Monetary Board of the Central Bank, and later by Central Bank Circular No. 905 which took effect on 1 January 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 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 ruling that the second cause of action was without basis. In sum, in view of the factual issues raised by PNB in its motion to dismiss, the just and fair resolution of the present controversy demands further proceedings in the RTC with regard to the first cause of action mentioned in the complaint. We shall refrain from taking them up in this Decision. The petition is partly granted. The decision of the Court of Appeals are reversed and set aside. The case id ordered remanded to the court of origin to resolve the same.

Restituta M. Imperial vs Alexa Jaucian G.R. No. 149004

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Controversy Arose from a case of collection of money, filed by Alex Jaucian against Restituta Imperial. The complaint alleges that petitioner obtained from respondent 6separate loans for which the former executed in favor of the latter 6 separate promissory notes and issued several checks as guarantee for payment. When said loans became overdue and unpaid, petitioner’s checks were dishonored, respondent made repeated oral and written demands for payment. RTC and CA held that the respondents clear and detailed computation of petitioner’s outstanding obligation was convincing and satisfactory.

Issues: 1. Whether or not the petitioner has fully paid her obligations even before filing of the case. 2. Whether or not the charging of 28% interest per annum without any writing is legal. 3. Whether or not charging of excessive penalties is a guise of hidden interest.

Held: 1. Involves a question of fact. Such question exists when a doubt or difference arises as to the truth or the falsehood of alleged facts; and when there is need for a calibration of the evidence, considering mainly the credibility of witnesses and the existence and the relevancy of specific surrounding circumstances, their relation to each other and to the whole, and the probabilities of the situation. It is a well-entrenched rule that pure questions of fact may not be the subject of an appeal by certiorari under Rule 45 of the Rules of Court, as this remedy is generally confined to questions of law.

2. The records show that there was a written agreement between the parties for the payment of interest on the subject loans at the rate of 16 percent per month. As decreed by the lower courts, this rate must be equitably reduced for being iniquitous, unconscionable and exorbitant. “While the Usury Law ceiling on interest rates was lifted by C.B. Circular No. 905, 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.”

3. Article 1229 of the Civil Code states thus: “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.” Nevertheless, it appears that petitioner’s failure to comply fully with her obligation was not motivated by ill will or malice. The 29 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 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.

Teddy G. Pabugais vs Dave P. Sahijwani G.R. No. 156846

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Pursuant to an “Agreement and Undertaking”, petitioner Teddy G. Pabugais, agreed to sell to respondent Dave P. Sahijwani a lot located at North Forbes Park, Makati, Metro Manila. The sum of money amounting to P600,000.00 was paid by respondent to petitioner as option/reservation fee and the balance will be paid within 60 days from execution of contract, simultaneous with the delivery of the owner’s Transfer Certificate of Title, the Deed of Absolute Sale, Certificate of Non-Tax Delinquency and Clearance on Payment of Association dues. In addition, the parties agreed that failure on the part of the respondent to pay the balance of the purchase price, the option/reservation fee will be forfeited; while non-delivery of the necessary documents obliges him to return to the respondent the said reservation fee with interest at 18% per annum. Petitioner failed to deliver the required documents, thus returned the respondent’s option/reservation fee by way of Far East Bank and Trust Company Check, which was dishonoured. What transpired after is disputed by both parties. The trial court rendered a decision declaring the consignation was invalid for failure to prove that petitioner tendered payment to respondent and that the latter refused to receive the same. The trial court ordered petitioner to pay respondent the reservation fee with 18% interest per annum plus moral damages and attorney’s fees. Petitioner appealed the decision of the lower court with the Court of Appeals. On a Motion for Reconsideration, the court reconsidered their first decision and reversed and set aside the trial courts decision. Entering a new one declaring “that as valid as the consignation by the plaintiff-appelant in favour of defendant-appellee the amount of reservation plus interest and declaring as extinguished appellant’s observation in favour of the appellee.”

Issues: 1. Whether or not there was a valid consignation. 2. Whether or not petitioner can withdraw the amount consigned.

Held: 1. 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. There being a valid tender of payment in an amount sufficient to extinguish the obligation, the consignation is valid.

2. With regards to petitioner’s right to withdraw the amount consigned, reliance on Article 1260 of the Civil Code is misplaced. The said Article provides – Art. 1260. Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation. Before the creditor has accepted the consignation, or before a judicial confirmation that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force. 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.

Antonio Lo vs Court of Appeals G.R. No. 138677

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Two parcels of land with an office building constructed thereon was acquired by petitioner in an auction sale from the Land Bank of the Philippines. Private respondent was the occupant of the disputed parcels of land under a subsisting contract of lease with Land Bank which was valid until December 31, 1995. Upon expiration of the lease of 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 contesting petitioner’s acquisition of the parcels of land in question. Petitioner then files an action for ejectment before the Metropolitan Trial Court. He asked for the imposition of the contractually stipulated penalty of P5,000.00 per day of delay in surrendering the possession of the property to him. The trial court decided the case in favour of the petitioner. On appeal, the RTC of Malabon affirmed the decision of the MTC. Private respondent’s subsequent motion for reconsideration of the RTC decision was denied. Private respondent elevated the case to the Court of Appeals via a petition for review. The CA affirmed the decision of the trial court, with modification.

Issue: Whether or not the Court of Appeals had authority to reduce the penalty awarded by the trial court.

Held: The court held that, petition has no merit.

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.

Tolomeo Ligutan vs Court of Appeals G.R. No. 138677

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Petitioners obtained a loan 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 and to pay a penalty of 5% every month 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 endorsed to a lawyer for collection. Despite several demands from the bank, petitioners failed to settle the debt. A final demand letter was sent to petitioners informing them that they had five days to make full payment. Still, petitioners defaulted on their obligation, thus prompting the bank to file a complaint with the RTC for the recovery of the due amount. Instead of introducing evidence, the petitioners had the hearing of the case reset on two consecutive occasions. In view of their absence on the third hearing date, the bank moved, and the trial court resolved, to consider the case submitted for decision. Two years later, petitioners filed a motion for reconsideration of the order of the trial court declaring them as having waived their right to present evidence and prayed that they be allowed to prove their case. The court denied the motion and issued a judgment in favour of the bank. Petitioners posed an appeal with the CA, questioning the rejection of the trial court of their motions to present evidence. The appellate court affirmed the judgment of the trial court except on the matter of the 2% service charge which was deleted pursuant to Central Bank Circular No. 783. The decision of the trial court was modified. Petitioners filed a motion for reconsideration presenting new evidence and contended that the execution of a real estate mortgage had the effect of novating the contract between them and the bank. The appellate court denied the motion and rationalized that newly discovered evidence cannot be admitted or entertained under Section 2, Rule 52 of the Rules of Civil Procedure.

Issue: Whether or not the Court of Appeals erred in not holding that there was a novation of the cause of action of private respondent’s complaint due to subsequent execution of real estate mortgage

Held: Extinctive novation requires, first, a previous valid obligation; second, the agreement of all the parties to the new contract; third, the extinguishment of the obligation; and fourth, the validity of the new one. 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, or that the old and the new obligation be on every point incompatible with each other. An obligation to pay a sum of money is not extinctively novated by a new instrument which merely changes the terms of payment or adding compatible covenants or where the old contract is merely supplemented by the new one. When not expressed, incompatibility is required so as to ensure that the parties have indeed intended such novation despite their failure to express it in categorical terms. The incompatibility, to be sure, should take place in any of the essential elements of the obligation, i.e., (1) the juridical relation or tie, such as from a mere commodatum to lease of things, or from negotiorum gestio to agency, or from a mortgage to antichresis, or from a sale to one of loan, (2) the object or principal conditions, such as a change of the nature of the prestation; or (3) the subjects, such as the substitution of a debtor or the subrogation of the creditor. Extinctive novation does not necessarily imply that the new agreement should be complete by itself; certain terms and conditions may be carried, expressly or by implication, over to the new obligation.

Spouses Silvestre vs Rodrigo V. Ramos G.R. No. 144712

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Spouses Silvestre and Celia Pascual executed in the favor of Ramos a Deed of Absolute Sale with Right to repurchase over two parcels of land and the improvements thereon. The Pascuals did not exercise the right to repurchase the property within the stipulated one year period, so, Ramos prayed that the title or ownership of the parcels of land and improvements thereon be consolidated in his favor. As a counterclaim, the Pascuals prayed that Ramos be ordered to execute a Deed of Cancellation, Release or Discharge of the Deed of Absolute Sale with Right to repurchase or a Deed of Real Estate Mortgage, deliver the owner’s duplicate of the TCT, return the amount they had overpaid, and pay each of them moral and exemplary damages. The trial court found that the transaction between the parties was a loan, the payment of which was secured by a mortgage of the properties involved. It also found that the Pascuals had made payments with interset at 7% per annum, and has over-payed the loan by P141,500.00. The trial court rendered judgment in favor of the Pascuals and against Ramos. Ramos moved for reconsideration alleging that the trial court erred in using the interst of 7% per annum because what was in the stipulated Sinumpaang Salaysay was 7% per month. Finding merit to this motion, the trial court issued an order modifying its decision by deleting the award of overpayment of the loan and interest and ordered the Pascuals to pay Ramos P511,000.00 representing the principal loan plus interest. The Pascuals contented that the interest of 7% per month is exorbitant and burdensome. While Ramos contends that there was nothing illegal with the interest rate agreed upon by both parties since the ceilings of interests under the Usury Law had been removed.

Issue: Whether or not the 7% per month interest charge is illegal.

Held: 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.

First Metro Investment Corporation vs Este del Sol Mountain Reserve G.R. No. 141811

Facts: 

Petitioner FMIC granted respondent a loan to finance the construction and development of the Este del Sol Mountain Reserve.

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Under the terms of the Loan Agreement, the proceeds of the loan were to be releases on staggered basis. Interest on the loan was pegged at 16% per annum based on diminishing balance. The loan was payable in 36 equal and consecutive monthly amortizations. In case of default, an acceleration clause was provided and the amount due was made subject to a 20% one-time penalty on the amount due and such amount shall bear interest at the highest rate permitted by law.

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As a guarantee for payment, respondent executed a REM, individual continuing suretyship and underwriting agreement where FMIC shall underwrite at the public offering of common shares of respondent’s capital stock.

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When respondent failed to pay its obligation, FMIC caused foreclosure of the REM and was the highest bidder at the public auction. Petitioner then filed to collect for alleged deficiency balance from respondents since they failed to collect from the sureties, plus interest.

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The trial court ruled in favour of petitioner. Respondents then appealed before the CA which found that the fees provided for in the Undertaking and Consultancy Agreements were present to camouflage the usurious interest charged. The CA then ordered FMIC to reimburse what is due to respondent.

Issue:

Whether or not the interests are lawful.

Held: The court held, NO. A loan is usurious when it is intended that additional compensation due the loan be camouflaged by an unrelated contract for payment by the borrower for the lender’s services. Article 1957 states that contracts and stipulations, under any cloak or device, intended to circumvent the law against usury shall be void.

DOMEL Trading Corporation vs Court of Appeals G.R. 84813

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Private respondent ordered from petitioner 22,000 bundles of buri midribs to be delivered within 30 working days from the date of the opening of a letter of credit. Private respondent again ordered 300,000 pieces of rattan poles to be delivered within 60 days from the date of 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 to their agreement, private respondent opened two letters of credit with Philippine National Bank in favor of DOMEL to cover its order of rattan poles and buri midribs. In violation of their agreement, DOMEL failed to deliver the buri midribs and rattan poles within he stipulated period. Both parties agreed to restructure the purchase orders of private respondent in a Memorandum of Agreement. However, no deliveries were again made. Consequently, private respondent demanded payment of damages from petitioner which were ignored by the latter. NNRMC (private respondent) filed a complaint before the Regional Trial Court which rendered a judgment in their favor and against DOMEL. On appeal, the Court of Appeals modified the decision of the lower court.

Issue: Whether or not the modification of the lower court’s decision by the Court of Appeals is just.

Held: While we do not agree with the Court of Appeals that the failure of NNRMC to conduct the inspection mitigated DOMEL’s liability for liquidated damages, nevertheless, we agree in the reduction of the amount of liquidated damages to only P150,000.00. The amount of P2,000.00 as penalty for every day of delay is excessive and unconscionable.

Article 1229 of the Civil Code states, thus: “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.”

Article 2227 of the Civil Code likewise states, thus: “Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or 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 its own from its funding source

Leticia Y. Medel, et. al. vs Court of Appeals G.R. No. 131622

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Servando Franco and Leticia Medel obtained a loan from Veronica R. Gonzales who was engaged in money lending business under the name “Gonzales Credit Enterprises”. A promissory note was executed to evidence the loan, which will mature on January 7, 1986. Servando and Leticia obtained another loan from Veronica and executed another promissory note to evidence the loan which will mature on January 19, 1986. Upon maturity, the borrowers failed to pay their indebtedness. However, Servando and Leticia still obtained another loan from Veronica, which was secured by a real estate mortgage over a property belonging to Leticia Makalintal Yaptinchay, who issued a SPA in favor of Leticia Medel, authorizing her to execute the mortgage. Servando and Medel failed to pay the third loan on maturity. Then, Servando and Leticia with the latter’s husband, Dr. Rafael Medel, consolidated all their previous unpaid loans and sought from Veronica another loan evidenced by a promissory note. Upon maturity, the borrowers again failed to pay the indebtedness plus interests and penalties. Veronica Gonzales, joined by her husband Danilo G. Gonzales, then filed a complaint with the RTC for collection of the full amount of the loan including interests and charges.

Issue: Whether or not the interest rate stipulated is valid.

Held: The court found that the petition was meritorious. The court reversed and set aside the decision of the Court of Appeals, reviving and affirming the decision of the lower court. 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 can not consider the rate "usurious" because this Court has consistently held that Circulr 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.

Pacita F. Reformina vs The Honorable Valeriano P. Tomol G.R. No. L-59096

Facts:

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On June 7, 1972, the Court of First Instance of Cebu, rendered a judgment as follows: Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay jointly and severally the following persons: (g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of P131,084.00 which is the value of the boat F B Pacita Ill together with its accessories, fishing gear and equipment minus P80,000.00 which is the value of the insurance recovered and the amount of P10,000.00 a month as the estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up to the time they are actually paid or already the total sum of P370,000.00 as of June 4, 1972 with legal interest from the filing of the complaint until paid and to pay attorney's fees of P5,000.00 with costs against defendants and third party plaintiffs. On appeal, the trial courts judgment was modified as follows: Shell Refining Co. (Phils.), Inc. and Michael, Incorporated are hereby ordered to pay ... The two (2) defendants- appellants are also directed to pay P100,000.00 with legal interests from the filing of the complaint until paid as compensatory and moral damages and P41,000.00 compensation for the value of the lost boat with legal interest from the filing of the complaint until fully paid to Pacita F. Reformina and the heirs of Francisco Reformina. The decision, having become final, was remanded to the lower court for execution. Petitioners claim that the legal interest to be executed should be at the rate of 12% per annum invoking in support Central Bank of the Philippines Circular No. 416. Private respondents on the other hand, insist that legal interest be at the rate of 6% per annum pursuant to Article 2209 of the New Civil Code in relation to Articles 2210 and 2211 thereof. The petition is devoid of merit and dismissed.

Issue: Whether or not the legal interest should be at 6%. Held: In the case at bar, the decision herein sought to be executed is one rendered in an Action for Damages for injury to persons and loss of property and does not involve any loan, much less forbearances of any money, goods or credits. As correctly argued by the private respondents, the law applicable to the said case is Article 2209 of the New Civil Code which reads— Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in

delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest which is six percent per annum.

Sonny Lo vs KJS Eco-Formwork System Phil., Inc. G.R. No. 149420

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Petitioner ordered scaffolding equipments from respondent, paying respondent a down payment with the balance payable in ten monthly instalments. Respondent delivered scaffoldings to petitioner. Petitioner was able to pay first two monthly installments. However, he encountered financial difficulties and was unable to settle his obligation despite oral and written demands. Petitioner and respondent executed a Deed of Assignment whereby petitioner assigned to respondent his receivables from Jomero Realty Corporation. Respondent tried to collect from Jomero Realty Corporation but the latter refused to honor the Deed of Assignment claiming that the petitioner was also indebted to it. Respondent sent a letter to petitioner demanding payment, but petitioner refused to pay claiming that his obligation had been extinguished when the Deed of Assignment was executed. Respondent filed an action for recovery of the sum of money against petitioner before the RTC of Makati. The trial court dismissed the complaint on the ground that the assignment of credit extinguished the obligation. Respondent appealed to the Court of Appeals. The CA rendered a decision finding merit in the appeal, reversed the appealed Decision and enters judgment ordering Sonny Lo to pay KJS Eco-Formwork System Phils., Inc.

Issues: Whether or not the CA erred in holding that the Deed of Assignment was null and void.

Held: An assignment of credit is an agreement by virtue of which the owner of a credit, known as 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, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor. In dacion en pago, as a special mode of payment, the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. In order that there be a valid dation in payment, the following are the requisites: (1) There must be the performance of the prestation in lieu of payment (animo solvendi) which

may consist in the delivery of a corporeal thing or a real right or a credit against the third person; (2) There must be some difference between the prestation due and that which is given in substitution (aliud pro alio); (3) There must be an agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a prestation different from that due. Furthermore, we find that petitioner breached his obligation under the Deed of Assignment. by warranting the existence of the credit, petitioner should be deemed to have ensured the performance thereof in case the same is later found to be inexistent. He should be held liable to pay to respondent the amount of his indebtedness

Philippine National Bank vs Court of Appeals and Loreto Tan G.R. No. 108630

Facts: 

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Loreto Tan owns a parcel of land abutting the national highway in Bacolod City. Expropriation proceedings were instituted by the government against Tan and other property owners. Tan filed a motion requesting issuance of an order for the release to him of the expropriation price of P32,480.00. Petitioner, through its Assistant Branch Manager Juan Tagamolila, issued a check for the said amount and delivered the same to one Sonia Gonzaga without Tan’s knowledge, consent or authority. She then deposited it in her account with Far East Bank and Trust Co. (FEBTC) and later on withdrew the same. Tan subsequently demanded payment from petitioner, but the same refused on the grounds that they had already paid and delivered the said amount to Sonia Gonzaga on the strength of a Special Power of Attorney allegedly executer in her favor by Tan. Tan executed an affidavit before the petitioner’s lawyer stating that he had never executed and SPA in favor of Sonia Gonzaga. Petitioner then filed an opposition that Sonia Gonzaga presented a copy of the May 28, 1978 order and a SPA. The matter was heard, and upon direction of the court to petitioner to produce the said SPA, the petitioner failed to do so. The trial court rendered judgment ordering petitioner and Tagamolila to pay the private respondent jointly and severally the said amount with legal interest, damages and attorney’s fees. Both petitioner and Tagamolila appealed the case to the Court of Appeals who dismissed the appeal of Tagamolila for failure to pay the docket fee and affirmed the decision of the trial court against petitioner, with modifications.

Issue: Whether or not the existence of the SPA need to be proved to release PNB from payment of the amount due to Loreto Tan.

Held:

When the court ordered petitioner to pay private respondent the amount of P3 2,480.00, it had the obligation to deliver the same to him. Under Art. 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 such payment lies with the debtor. In the instant case, neither the SPA nor the check issued by petitioner was ever presented in court Section 2, Rule 130 of the Rules of Court states that: “SEC. 2. Original writing must be produced; exceptions. - There can be no evidence of a writing the contents of which is the subject of inquiry, other than the original writing itself, except in the following cases: (a) When the original has been lost, destroyed, or cannot be produced in court; (b) When the original is in the possession of the party against whom the evidence is offered, and the latter fails to produce it after reasonable notice; (c) When the original is a record or other document in the custody of a public officer; (d) When the original has been recorded in an existing record a certified copy of which is made evidence by law; (e) When the original consists of numerous accounts or other documents which cannot be examined in court without great loss of time and the fact sought to be established from them is only the general result of the whole.”

Considering that the contents of the SPA are also in issue here, the best evidence rule applies. Hence, only the original document (which has not been presented at all) is the best evidence of the fact as to whether or not private respondent indeed authorized Sonia Gonzaga to receive the check from petitioner. In the absence of such document, petitioner’s arguments regarding due payment must fail.

Cathay Pacific Airways, Ltd. Vs Spouses Daniel Vazquez and Maria Luisa Madrigal Vazquez G.R. No. 150843

Facts: 

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Cathay, a common carrier of passengers and goods by air, as part of its marketing strategy accords its frequent flyers membership in its Marco Polo Club. The members enjoy several privileges, such as priority for upgrading of booking without any extra cost when an opportunity arises. Respondent spouses are frequent flyers of Cathay and are Gold Card members of its Marco Polo Club. Along with their maid and two friends, they went to Hongkong for pleasure and Business. On their return flight to Manila on 28 September 1996, Dr. Vazquez presented his boarding pass to the ground stewardess and upon inserting it into an electronic machine, saw a message that there was a “seat change” from Business Class to First Class for the Vazquezes. Ms. Chiu, the ground attendant, approached Dr. Vazquez and informed him of the upgrade but the latter refused, reasoning that it would not look nice for their guests and moreover, they were going to discuss business matters during the flight. Taken aback by his refusal, Ms. Chiu consulted with her supervisor and was advised to handle the situation and convince the Vazquezes to accept the upgrading. Eventually, Dr. Vazquez gave in and he and Mrs. Vazquez then proceeded to the First Class Cabin.

Issue: Whether or not Cathay breached its contract of carriage with the Vazquezes by upgrading seat accommodation.

Held: A contract is a meeting of minds between two persons whereby one agrees to give something or render some service to another for a consideration. There is no contract unless the following requisites concur: (1) consent of the contracting parties; (2) an object certain which is the subject of the contract; and (3) the cause of the obligation which is established.

Breach of contract is defined as the “failure without legal reason to comply with the terms of a contract.” In this case, we have ruled that the breach of contract of carriage, which consisted in the involuntary upgrading of the Vazquezes’ seat accommodation, was not attended by fraud or bad faith. The Court of Appeals’ award of moral damages has, therefore, no leg to stand on. The deletion of the award for exemplary damages by the Court of Appeals is correct. The most that can be adjudged in favor of the Vazquezes for Cathay’s breach of contract is an award for nominal damages under Article 2221 of the Civil Code, which reads as follows: “Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.”

Citibank, N.A. and Investors’ Finance Corporation vs Modesta R. Sabeniano G.R. No. 156132

Facts: 

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Citibank is a banking corporation duly authorized to do commercial banking activities and perfoem trust functions in the Philippines. Investor’s Finance Corporation, which did business under the name and style of FNCB Finance, was an affiliate company of petitioner Citibank, specifically handling money market placements for its clients. Sabeniano was a client of both Citibank and FNCB Finance. Respondent filed a complaint against petitioners claiming that she has substantial deposits with them, the proceeds of which were supposedly transferred automatically and directly to her account with Citibank and that allegedly petitioner refused to so despite demands. Petitioner alleged that respondent has several loans from Citibank and by default, it exercised its right to set-off respondent’s outstanding loans with her deposits and money. Trial court declared the said act of petitioner illegal, and null and void and ordered the petitioner to return the amount plus interest. On the other hand, trial court ordered respondent to pay Citibank her debt. The Court of Appeals affirmed the trial court’s decision entirely in favor of the respondent.

Issue: Whether or not compensation was warranted with regard to loan and deposit account.

Held: Article 1278 states that “Compensation shall take place when two persons, intheir own right, are creditors and debtors of each other.” And in order for that compensation to 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 consists 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 are due, (4) That they be liquidated and demandable, and (5) That neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

Thus, the petition is partly granted with modification. Citibank is ordered to return to the respondent the principal amount and was ordered to refund the remittance from respondent’s Citibank-Geneva account since such remittance was declared illegal, and null and void, using the Philippine currency or its equivalent based on the exchange rate at the time of payment. Citibank was also ordered to pay respondent moral damages, exemplary damages and attorney’s fees. Respondent was ordered to pay petitioner the balance of her outstanding loans and interest.

Telengtan Brothers & Sons, INC. vs. United States Lines G.R. No. 132284 Facts: 

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United States Lines (US Lines) filed a case against Telengtan seeking payment for demurrage charges plus interest and damages for their failure to collect their goods from the container vans of US Lines within the 10-day free period. Telengtan contends that it did not enter into an agreement with US Lines for payment of demurrage and that US Lines did not make any demand for the payment thereof, and that it presented Bills of Lading B/L for the delivery of their goods wherein it was then found out that US Lines has removed such products from the container vans and has placed them in a warehouse without Telengtan’s approval. The Trial court and the CA ruled in US Lines favor ordering Telengtan to pay the former the demurrage charges. Telengtan now contends that their agreement with US Lines requires the latter to deliver the shipped goods to the former’s facilities and that the latter is liable for damages for placing said goods in a warehouse. Telengtan also contends that the payment of demurrage shall be recomputed for inflation based on Article 1250 of the civil code.

Issues: 1. Whether or not it is US Lines who is at fault for storing the goods at a warehouse. 2. Whether or not a recomputation of the demurrage charges and its interest shall be made in light of inflation as Article 1250 of the civil code provides.

Held: 1. Based on the records it shows that in previous business dealings Telengtan has in fact been paying demurrage charges to US Lines and thus is now estopped from claiming that it has no obligation to pay the latter. In the matter of the goods being transferred to a warehouse, said transfer was authorized by the Bureau of Customs based on the B/L states in its Section 17 that “Also if the consignee does not take possession or delivery of the goods as soon as the goods are at the disposal of the consignee for removal, the goods shall be at their own risk and expense, delivery shall be considered complete and the carrier may, subject to carrier's liens, send the goods to store, warehouse, put them on lighters or other craft, put them in possession of authorities, dump, permit to lie where landed or otherwise dispose of them, always at the risk and expense of the

goods, and the shipper and consignee shall pay and indemnify the carrier for any loss, damage, fine, charge or expense whatsoever suffered or incurred in so dealing with or disposing of the goods, or by reason of the consignee's failure or delay in taking possession and delivery as provided herein.” The shipper is the consignor and the person to whom the delivery to be made is the consignee. Thus, US Lines was justified in transferring said goods to the warehouse.

2. Article 1250 of the Civil Code states: “In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary.”Extraordinary inflation or deflation, as the case may be, exists when there is an unusual increase or decrease in the purchasing power of the Philippine peso which is beyond the common fluctuation in the value of said currency, and such increase or decrease could not have been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation. And while the Court may take judicial notice of the decline in the purchasing power of the Philippine currency in that span of time, such downward trend of the peso cannot be considered as the extraordinary phenomenon contemplated by Article 1250 of the Civil Code. Furthermore, absent an official pronouncement or declaration by competent authorities of the existence of extraordinary inflation during a given period, as here, the effects of extraordinary inflation, if that be the case, are not to be applied.

C.F. Sharp & Co., Inc. vs Northwest Airlines, Inc. G.R. No. 133498

Facts: 

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Petitioner was authorized sale and dispensing of tickets of Northwest Airlines Japan, but subsequently failed to remit the proceeds of such sales. Failure of remittance prompted NWA to file suit against petitioner in Tokyo and judgment was rendered that petitioner should pay and found judgement in the favor of respondent. Thereafter, the RTC issued a writ of execution for foreign court’s decision. The petitioner,filed for certiorari, attesting that it has already made partial payments to respondent. The CA lowered the payable amount and held that the amount may be paid in local currency at rate prevailing at time of payment.

Issue: What conversion rate will be the basis of the amount payable in local currency.

Held: Under RA 529, satisfaction of obligations in foreign currency are void. Payments of monetary obligations, subject to certain exceptions, shall be payed in the currency which is the legal tender of the Philippines. But since the law doesn't provide for the rate of exchange for the payment of foreign currency obligations incurred after its enactment, jurisprudence held that the exchange rate should be the prevailing rate at time of payment. Amendment of this law allows payments for obligations to be made in currency other than Philippine currency but again failed to state what exchange rate should be used. This being the case, the use of the exchange rate at time of payment shall be used.

Albert R. Padilla vs Spouses Floresco Paredes and Adelina Paredes G.R. No. 124874 Facts: 

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Petitioner Albert R. Padilla and private respondents Floresco and Adelina Paredes entered into a contract to sell a parcel of land. Under the contract, petitioner undertook to secure title of the property in private respondents’ names. Upon signing of the contract, the petitioner was to pay P50,000.00 downpayment, and the balance was due within ten days from the issuance of a court order declaring issuance of a decree of registration for the property. The court ordered the issuance of land registration for the subject property. Private respondents then demanded the payment of the balance of the purchase price as per agreement but petitioner failed to pay the full purchase price even after the expiration of the period set. Petitioner was still unable to pay the full purchase price of the property despite demand from counsel of private respondents. Private respondents then offered the petitioner one-half of the property for all the payments the petitioner has made, instead of rescinding the contract. If the proposal is not agreed upon, they would take steps to enforce the automatic rescission of the contract. Petitioner did not accept the proposal but instead offered to pay the balance in full for the entire property, plus interest and attorney’s fees which the respondents refused. The lower court ruled in favor of the petitioner, saying that the breach of contract by the petitioner was only casual and slight and did not warrant the rescission of the contract. Acceptance of the installments made by petitioner to private respondents, modified the contract. Acceptance of delayed payments stopped private respondents from exercising their right of rescission. Upon appeal, the Court of Appeals ruled that private respondents are entitled to rescission under Article 1191 of the Civil Code, but with the obligation to return to petitioner the payments the latter had made.

Issue: Whether or not the private respondents are entitled to rescind their “contract to sell”.

Held: Private respondents may validly cancel the contract to sell their land to petitioner. However, the reason for this is not that private respondents have the power to rescind such contract, but because their obligation thereunder did not arise. Article 1191 of the Civil Code, on rescission, is

inapplicable in the present case. This is apparent from the text of the article itself: "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. 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." Article 1191 speaks of obligations already existing, which may be rescinded in case one of the obligors fails to comply with what is incumbent upon him. However, in the present case, there is still no obligation to convey title of the land on the part of private respondents. There can be no rescission of an obligation that is non-existent, considering that the suspensive condition therefore has not yet happened.

The Court of Appeals is correct in ordering the return to petitioner of the amounts received from him by private respondents, on the principle that no one may unjustly enrich himself at the expense of another.

Norberto Tibajia, Jr. and Armen Tibajia vs Court of Appeals G.R. No. 100290

Facts:   

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Eden Tan filed a suit for collection of a sum of money against the petitioners. The RTC rendered its decision in favour of Eden Tan ordering the Tibajia spouses to pay her an amount in excess of P300,000.00. On appeal, the Court of Appeals modified the decision by reducing the award of moral and exemplary damages. Since the decision is already final, Eden Tan filed the corresponding motion for execution and thereafter. The Tibajia spouses, on Deccember 14, 1990, delivered to Deputy Sheriff Eduardo Bolima in total money the judgment in the form of a cashier’s check and cash. Private respondent refused to accept the payment and insisted that the garnished funds deposited with the cashier of the RTC of Pasig be withdrawn to satisfy judgment obligation. Spouses filed a motion to lift the writ of execution on the ground that judgment debt had already been paid. The motion was denies by the trial court on the ground that payment in cashier’s check is not legal tender and that payment was made by a third party. On appeal, the CA dismissed the petition holding that payment by cashier’s check is not legal tender as required by Republic Act No. 529. Motion for Consideration was subsequently denied.

Issue: Whether or not cashier’s check is legal tender.

Held: Article 1249 of the Civil Code which provides: Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines. 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. In the meantime, the action derived from the original obligation shall be held in abeyance.; Section 1 of Republic Act No.

529, as amended, which provides: Sec. 1. Every provision contained in, or made with respect to, any obligation which purports to give the obligee the right to require payment in gold or in any particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby, shall be as it is hereby declared against public policy null and void, and of no effect, and no such provision shall be contained in, or made with respect to, any obligation thereafter incurred. Section 63 of Republic Act No. 265, as amended (Central Bank Act) which provides: Sec. 63. Legal character — Checks representing deposit money do not have legal tender power and their acceptance in the payment of debts, both public and private, is at the option of the creditor: Provided, however, that a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account.

Development Bank of the Philippines vs Court of Appeals G.R. No. 138703

Facts: 

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The Development Bank of the Philippines granted to respondents Philippine United Foundry and Machineries Corporation and Philippine Iron Manufacturing Company, Inc. an industrial loan in cash and DBP Progress Bonds which was evidenced by a promissory note and secured by a mortgage executed by respondents over their present and future properties. DBP granted to respondents another loan in the form of a five-year revolving guarantee which was reflected in the amended mortgage contract. According to respondents, the loan guarantee was extended to them when they encountered difficulty in negotiating the DBP Progress Bonds. The outstanding accounts of the respondents were restructured in view of their failure to pay. The outstanding principal balance of the loans and advances were consolidated into a single account which was evidenced by a new promissory note and payable within seven years, wit partial payments on the principal to be made beginning on the third year plus an interest per annum payable every month. All accrued interest and charges due were denominated as “Notes Taken for Interests” and evidenced by a separate promissory note. Respondents were still unable to comply with the terms and conditions of the new promissory notes and requested DBP to refinance the matured obligation. The request was granted, pursuant to which three foreign currency denominated loans sourced from DBP’s own foreign borrowings were extended to respondents on various dates. These loans were secured by mortgages and were evidenced by promissory notes. Respondents claim that DBP was collecting from them an unconscionable if not unlawful or usurious obligation since they have remitted to DBP money to repay their original debt. They also asserted that since loans were procured for the Self-Reliant Defense Posture Program of the Armed Forces of the Philippines, the latter’s breach of its commitment to purchase military armaments and equipment from respondents amount to a failure of consideration that would justify the annulment of the mortgage on their properties. Regional Trial Court issued a temporary restraining order. Subsequently, a Writ of Preliminary Injunction was issued and the court rendered decision in favor of the respondents. Upon appeal by the DBP and PMO, the appellate court affirmed the decision of the RTC.

Issue: Whether or not the prestation to collect by petitioner is usurious.

Issue: In usurious loans, the entire obligation does not become void due to an agreement for usurious interest; the unpaid principal debt still stands and remains valid but the stipulation as to interest is void. The debt is then considered without stipulation as to the interest. The absence of an express stipulation as to interest rate, imposes that the legal rate of 12% per annum shall be applied.

Determination whether the DBP applied an interest rate higher than what is prescribed cannot be done. With the assumption that it exceeded the 12% in addition to the other penalties imposed, should be removed for being usurious.

The petition is partly granted. The case is remanded to the trial court for determination of the amount of respondent’s obligation based on the promissory notes, according to the interest rate agreed upon on the interest rate of 12% per annum, whichever is lower.

Vitarich Corporation vs. Chona Losin G.R. No. 181560 Facts:  

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ChonaLosin operates a fastfood and catering business and Vitarich Corporation is her supplier of poultry meat. ChonaLosin was 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. When the three aforementioned employees of Vitarich left the company they failed to also turn over pertinent invoices covering Losin’s account. Vitarich then sent Losin demand letters covering her alleged unpaid account amounting to P921,083.10. Because of said demands, she checked her records and discovered that she had an overpayment to Vitarich in the amount of P500,000.00. She relayed this fact to Vitarich and further informed the latter that checks were issued and the same were collected by Directo. Losin had three checks which were dishonoured amounting to P288,463.30 either for the reason of Drawn Against Insufficient Funds (DAIF) or a Stop Payment Order (SPO). Vitarich then filed a collection of money suit against Losin where the Trial court ruled in favour of Vitarich basing their decision on the fact of the three checks that were dishonoured. The CA however, reversed the decision and based their decision on Article 1921 of the civil code which provides that “Art. 1921. If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof”, also stating that indeed Directo, Rosa, and Baybay were agents of Vitarich in accordance with the provisions of the civil code. Vitarich now brings the issue to the SC stating that the CA has erred in appreciating the facts of the case by contradicting the findings and rulings of the trial court.

Issue: Whether or not the CA erred in appreciating that facts of the case by reversing the decision of the trial court. Held: The general rule is that the SC shall not disturb the factual findings of the lower courts as they are more inclined to test the credibility of the witnesses and evidence presented, however there are exceptions that is: (1) when the findings are grounded entirely on speculations,

surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is a grave abuse of discretion; (4) when the judgment is based on misappreciation of facts; (5) when the findings of fact are conflicting; (6) when in making its findings, the same are contrary to the admissions of both appellant and appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record. The 7th exception is pertinent to this case.

The CA erred in holding that Losin is not liable to pay the amount due to Vitarich. As a general rule, one who pleads payment has the burden of proving it. In Jimenez v. NLRC, the Court ruled that the burden rests on the debtor to prove payment, rather than on the creditor to prove non-payment. 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 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 Directo, a Statement of Payments Made to Vitarich, and apparently copies of the pertinent history of her checking account with Rizal Commercial BankingCorporation (RCBC). At best, these may only serve as documentary records of her business dealings with Vitarich to keep track of the payments made but these are not enough to prove payment. Furthermore, Inasmuch as the case at bar involves an obligation not arising from a loan or forbearance of money, but consists in the payment of a sum of money, the legal rate of interest is 6% per annum of the amount demanded.

Metropolitan Bank and Trust Company vs Renato D. Cabilzo G.R. No. 154469

Facts: 

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Metropolitan Bank and Trust Company (Metrobank) is a banking institution duly organized and existing as such under Philippine laws. Renato D. Cabilzo is one of Metrobank’s clients who maintained a current account with Metrobank Pasong Tamo Branch. Cabilzo issued a post dated check dated November 24, 1994 payable to “CASH” in the amount of P1,000.00 and was paid by Mr. Cabilzo to a certain Mr. Marquez as his sales commission.The check was presented to Westmont Bank for payment. In turn, the check was endorsed to Metrobank for appropriate clearing. After proper examination of entries, including availability of funds and authenticity of signatures, 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 the Pasong Tamo Branch of Metrobank when he was asked by a bank personnel if Cabilzo had issued a check for P91,000.00 to which the representative replied in the negative. That same day, Cabilzo called Metrobank to reiterate that he did not issue a check in that amount and requested that the check in question be returned to him fore verification. Upon receipt of the check, he discovered that the check number was issues on November 12, 1994 in the amount of P1,000.00 and was altered to P91,000.00 and the date changed to November 14, 1994. Cabilzo demanded that Metrobank re0credit the amount of P91,000.00 t his account. Metrobank refused reasoning tha the matter will be referred first to its Legal Division. Failure or refusal of Metrobank to comply with its obligation after demand compelled Cabilzo to file a civil action before the RTC, who rendered a decision in favor of Cabilzo. Metrobank filed an appeal with the Court of Appeals but the latter affirmed with modifications the ruling of the lower court. Further motions for reconsideration was also denied by the appellate court.

Issue: Whether or not Metrobank should be held liable for its negligence.

Held:

An alteration is said to be material if it changes the effect of the instrument. It means that an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party. In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law. Section 1 of the Negotiable Instruments Law provides: Section 1. Form of negotiable instruments. - An instrument to be negotiable must conform to the following requirements: (a) It must be in writing and signed by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand or at a fixed determinable future time; (d) Must be payable to order or to bearer; and (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.

Now, having laid the premise that the present petition is a case of material alteration, it is now necessary for us to determine the effect of a materially altered instrument, as well as the rights and obligations of the parties thereunder. The following provision of the Negotiable Instrument Law will shed us some light in threshing out this issue: Section 124. Alteration of instrument; effect of. – Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized, and assented to the alteration and subsequent indorsers. But when the instrument has been materially altered and is in the hands of a holder in due course not a party to the alteration, he may enforce the payment thereof according to its original tenor.

In the present case, it is obvious that Metrobank was remiss in that duty and violated that relationship. As observed by the Court of Appeals, there are material alterations on the check that are visible to the naked eye. The decision of the Court of Appeals are affirmed with modification.

Almeda vs Bathala Marketing G.R. No. 150806 Facts: 

In May 1997, respondent Bathala Marketing Industries, Inc. (lessee), represented by its president Ramon H. Garcia, entered into a contract of lease with Ponciano L. Almeda (Ponciano), as lessor, husband of petitioner Eufemia and father of petitioner Romel Almeda. Provisions of the contract of lease include: 6th – Rental rate stipulated is based on the present rate of assessment of the property, and that in case the assessment should hereafter be increased or any new tax, charge, or burden be imposed by authorities on the lot and building where the premises are located, LESSEE shall pay, when the rental becomes due, the additional rental or charge corresponding to the portion leased; provided, however, that in the event that the present assessment or tax on the property be reduced, LESSEE shall be entitled to reduction in the stipulated rental on proportion to the portion leased by him. 7th - In case of supervening extraordinary inflation or devaluation of Philippine Currency, the value of Philippine peso at the time of the establishment of the obligation shall be the basis of payment

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Petitioners later demanded payment of VAT and 73% adjusted rentals pursuant to the foregoing provisions. Respondent refused and filed an action for declaratory relief. Petitioners filed an action for ejectment.

Issue: Whether the amount of rentals due the petitioners should be adjusted by reason of extraordinary inflation or devaluation.

Held:

Petitioners insist that respondent was already in breach of the contract when the petition was filed, thus, respondent is barred from filing an action for declaratory relief. However, after petitioners demanded payment of adjusted rentals and in the months that followed, respondent complied with the terms and conditions set forth in their contract of lease by paying the rentals stipulated therein. Respondent religiously fulfilled its obligations to petitioners even during the pendency of the present suit. There is no showing that respondent committed an act constituting a breach of the subject contract of lease. Thus, respondent is not barred from instituting before the trial court the petition for declaratory relief.

Petitioners further claim that the instant petition is not proper because a separate action for rescission, ejectment and damages had been commenced before another court; thus, the construction of the subject contractual provisions should be ventilated in the same forum.

As a rule, the petition for declaratory relief should be dismissed in view of the pendency of a separate action for unlawful detainer. In this case, however, the trial court had not yet resolved the rescission/ejectment case during the pendency of the declaratory relief petition. In fact, the trial court, where the rescission case was on appeal, initiated the suspension of the proceedings pending the resolution of the action for declaratory relief.

As to the liability of respondent for the payment of VAT, petitioners are stopped from shifting to respondent the burden of paying the VAT.

The petitioners’ reliance on the sixth condition of the contract is unavailing. This provision clearly states that respondent can only be held liable for new taxes imposed after the effectivity of the contract of lease, that is, after May 1997, and only if they pertain to the lot and the building where the leased premises are located. Considering that RA 7716 took effect in 1994, the VAT cannot be considered as a “new tax” in May 1997, as to fall within the coverage of the sixth stipulation.

Neither can petitioners legitimately demand rental adjustment because of extraordinary inflation or devaluation. The factual circumstances obtaining in the present case do not make out a case of extraordinary inflation or devaluation as would justify the application of Article 1250 of the Civil Code.

Simplicio A. Palanca vs Ulyssis Guides G.R. No. 146365

Facts:  

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Simplicio Palance executed a Contract to Sell a parcel of land on installment with Josefa A. Jopson. Jopson then assigned and transferred all her rights and interests over the property in question in favor of the respondent Ulyssis Guides. Believing that she had fully paid her obligation, respondent verified the status of the lot with the Register of Deeds, only to find out that the title was not in the name of the petitioner as it was covered by the Transfer Certificate of Title in the name of a certain Carissa T. de Leon. A complaint was filed with the trial court and the parties were allowed to make their cases and show evidence. But at the last scheduled hearing for the case, no one appeared for the petitioner without any explanation of their non-appearance. The trial court, upon motion of respondent, considered petitioner to have waived his right to present evidence and have rested the case and declared the case submitted for decision. Petitioner sought reconsideration twice, but was denied both times. The trial court rendered decision in favor of the plaintiff and against the defendant Simplicio A. Palanca. Petitioner claimed that the trial court erred in denying his right to present evidence in support of his cause. In its decision, the CA held that petitioner was afforded due process, having been given the opportunity to present and submit evidence in support of his defense. A Subsequent Motion for Reconsideration was also denied by the CA.

Issue: Whether or not petitioner was deprived of his right to present evidence.

Held: Well-settled is the rule that the negligence of counsel binds the client. The Court agrees with the trial court that notice to Atty. Cario is in fact notice to both petitioner and Atty. Novero in the light of the recorded fact that Atty. Cario had actively participated in the presentation of petitioner’s evidence during the previous proceedings. No clearer proof of notice can be had than the signature of Atty. Cario assenting to the resetting of the case. Indeed, neither he nor Atty. Novero can feign ignorance of the said arrangement. The most basic tenet of due process

is the right to be heard. A court denies a party due process if it renders its orders without giving such party an opportunity to present its evidence. Thus, in the application of this principle, what is sought to be safeguarded against is not the lack of previous notice, but the denial of the opportunity to be heard. The question is not whether petitioner succeeded in defending his interest, but whether he had the opportunity to present his side. Petitioner was provided opportunities to present his case but these he utterly squandered. The questioned decision and resolution of the Court of Appeals are affirmed with modification. Petitioner is ordered to return the overpayment in the amount of P1,527.10 to respondent.

PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK OF ASIA AND AMERICA) vs. COURT OF APPEALS G.R. No. 121413 Facts:       

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Ford Philippines (Ford) maintained with Citibank a checking account Ford then issued a check amounting to P 4,746,114.41 for its tax payments for the last quarter of 1979. The check was presented to Philippine Commercial International Bank (PCIB) as an authorized collector of the Bureau of Internal Revenue. The check was crossed check and named to The BIR. The amount of the check however was not deposited in favour of the account of BIR which forced Ford to write a new check of the same amount for payment of the same. Ford then filed an action for recovery of the sum against Citibank and (PCIB). It was later discovered that the check and amount was lost due to a syndicate formed by employees of Ford and PCIB, two more checks, in 1978 and 1979, of Ford were lost this way amounting to P12,163,298.10. Citibank contends that Ford was negligent in selecting and supervising their employees thus had contributory negligence for the loss of the amount. PCIB contends that Ford’s right to file the action has prescribed for filing the action only in 1983. The trial court found both solidarily liable, while the CA modified the decision stating that only PCIB is liable.

Issues: 1. Whether or not Citibank and PCIB are solidarily liable for reimbursing Ford. 2. Whether or not Ford’s right to recover has prescribed.

Held: 1. For the first check it was found that PCIB allowed the Ford to employee to recall such check and replace it in turn with two of its Manager’s Checks which allowed the syndicate to encash the amount even though the check was crossed checked to the name of BIR. When a check is

crossed check it is the duty of the bank to ensure that such check and its proceeds would only be deposited to the account in which it was intended for, by allowing its substitution to two Manager’s Chekcks, PCIB was solely negligent for the loss of the proceeds of the check. Thus, PCIB is solely liable for the amount of the first check. The subsequent checks, however were intercepted during the clearing process by the syndicate and replaced with worthless checks. Citibank has contributed negligence as it failed to ensure that such checks were in fact cleared and that it broke its trust with Ford for allowing the money of the same to be lost through the syndicate. PCIB is negligent as it did not ensure that the crossed checks were deposited straight to the account foe which it was intended, and that it was two of their employees that led to the checks interception. Thus, Citibank and PCIB are both liable on equal shares for the amount of the proceeds of the lost two checks.

2. In Philippine law the prescription period for written contracts is ten years. The prescription period in these cases is counted once the check that has gone through clearing is returned to the drawer, usually a month later in the bank statements. Since the first check was returned to Ford on December 29, 1977 and the action was filed on 1983, barely six years have passed. Thus, the action has not prescribed.

Jose V. Lagon vs Hooven Comalco Industries, Inc. G.R. No. 135657

Facts:  

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Jose V. Lagon, a businessman and owner of a commercial building, and HOOVEN, a domestic corporation who manufactures and installs aluminium materials entered into 2 contracts, both named Proposal. HOOVEN agreed to sell and install various aluminium material’s in petitioners commercial building. An advance payment was given by Lagon upon the execution of the contracts. Lagon alleged that HOOVEN was in breach of their contract for failure to deliver and install some of the materials specified in the proposals, thus he was forced to buy the undelivered materials from other sources. In addition, all material that were delivered and installed by HOOVEN in his commercial building was paid in full.

Issue: Whether or not all said materials specified in the contracts had been delivered and installed by HOOVEN.

Held: The decision of the Court of Appeals is Modified.

The quantity of materials specified in the contracts and the amounts stated in the delivery receipts does not tally with those in the invoices covering them, when according to HOOVEN, the invoices were based on the delivery receipts. The total value of the materials reflected in the invoices as compared to the delivery receipts has a difference of P4,458.00. All the delivery receipts did not appear to be signed by petitioner or his duly authorized representative. A closer examination of the receipts clearly shows that the deliveries were made to a certain Jose Rubin, the petitioner’s driver, Armando Lagon, and a bookkeeper. The identities of these persons were never established and there is now no way of determining whether they were authorized by the petitioner.

Thus, the petitioner Jose Lagon is ordered to pay HOOVEN Comalco Industries, Inc. the value of the unpaid materials admittedly delivered to him. On the other hand, HOOVEN is ordered to pay petitioner moral and actual damages, attorney’s fees, and litigation costs.

Audion Electric Co., Inc. vs National Labor Relations Commission G.R. No. 106648

Facts:  

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Petitioner seeks the annulment of the resolution of the National Labor Relations Commission in NLRC NCR-CA dated July 31, 1992, denying petitioner’s motion for reconsideration. Nicolas Madolid, respondent, claims that he was dismissed without justifiable cause and due process and that his dismissal was done in bad faith which renders the dismissal illegal. He claims to be entitled to reinstatement with full backwages, and moral and exemplary damages. The NLRC ruled in favor of Nicolas Madolid. Petitioner filed an appeal and motion for reconsideration to the National Labor Relations Commission which were both denied. Petitioner filed a civil action raising that the respondent commission acted with grave abuse of discretion in rendering its decision.

Issue: Whether or not petitioner was denied due process when all money claims of private respondent were granted

Held: Private respondent’s employment status was established by the Certificate of Employment dated April 10, 1989 issued by petitioner which certified that private respondent is a bonafide employee of the petitioner from June 30, 1976 up to the time the certification was issued. This proves that private respondent was regularly and continuously employed by petitioner in various job assignments from 1976 to 1989, a total of 13 years. The alleged gap in service cited by the petitioner does not defeat respondents regular status as he was rehired for many more projects without interruption and performed functions which are vital, necessary and indispensable to the usual business of the petitioner.

Policy Instruction No. 20 of the Department of Labor is explicit that employers of project employees are exempted from the clearance requirement but nt from the submission of termination report. Failure of the employer to file termination reports after every project

completion with the nearest public employment office is an indication that private respondent was not and is not a project employee. Department Order No. 19 expressly provides that the repot of termination is one of the indications of project employment.

The rule in our jurisdiction is that findings of facts of the NLRC affirming those of the Labor Arbiter are entitled to great weight and will not be disturbed if they are supported by substantial evidence. We find no grave abuse of discretion committed by NLRC in finding that private respondent was not a project employee.

BINALBAGAN VS. CA G.R. No. 100594 March 10, 1993

Facts: 

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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. o In turn Binalbagan, through its president, petitioner Hermilo J. Nava, executed an Acknowledgment of Debt with Mortgage Agreement, mortgaging said lots in favor of the estate of Puentevella. Upon the transfer to Binalbagan of titles to the 42 subdivision lots, said petitioner took possession of the lots and the building and improvements thereon. Binalbagan started operating a school on the property from 1967 when the titles and possession of the lots were transferred to it. It appears that there was a pending case in RTC. o 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. Javellana having failed to pay the installments for a period of five years, Civil Case No. 7435 was filed by defendant Puentevella against Raul Javellana and the Southern Negros Colleges which was impleaded as a party defendant it being in actual possession thereof, for the rescission of their contract to sell and the recovery of possession of the lots and buildings with damages.

Issue: Whether or not the petition is with merit.

Held: In a contract of sale, the vendor is bound to transfer the ownership of and deliver, as well as warrant, the thing which is the object of the sale (Art. 1495, Civil Code); he warrants that the buyer shall, from the time ownership is passed, have and enjoy the legal and peaceful possession of the thing. As afore-stated, petitioner was evicted from the subject subdivision lots in 1974 by virtue of a court order in Civil Case No. 293 and reinstated to the possession thereof only in 1982. During the period, therefore, from 1974 to 1982, seller private respondent Angelina Echaus' warranty against eviction given to buyer petitioner was breached though, admittedly, through no fault of her own. It follows that during that period, 1974 to 1982, private respondent Echaus was not in a legal position to demand compliance of the prestation of petitioner to pay the price of said subdivision lots. In short, her right to demand payment was suspended during that period, 1974-1982.

LORENZO SHIPPING COMPANY v. BJ MARTHEL INTERNATIONAL G.R. No. 145483 November 19, 2004

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 postdated 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”. RTC 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: 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.

LUZON DEVELOPMENT BANK vs. ENRIQUEZ G.R. No. 168646 January 12, 2011

Facts: 

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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. REM was amended 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.

Issue: Whether 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 the 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. The contractual intention determines whether the property subject of the dation will be considered as the full equivalent of the debt and will therefore serve as full satisfaction for the debt. "The dation in payment extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement, express or implied, or by their silence, consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished."

ESTANISLAO REYES vs. SEBASTIANA MARTINEZ ET AL., G.R. No. 32226 December 29, 1930.

Facts: 

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Estanislao Reyes filed an action against the Martinez heirs in which the plaintiff seeks, among others, to recover five parcels of land, containing approximately one thousand coconut trees, and to obtain a declaration of ownership in his own favor as against the defendants with respect to said parcels. This cause of action is founded upon the contract, and the claim by the plaintiff is to have the five parcels adjudged to him in lieu of another parcel formerly supposed to contain one thousand trees and described in paragraph 8 of the contract 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 said clause, the parties contracting with Reyes agreed to assure to him certain other land containing an equivalent number of trees in case he should so elect.

Issue:

Whether or not Reyes is entitled to the recovery of ownership of the five parcels of land subject of this case.

Held: The prior history of the litigation shows that Reyes elected to take and hold the parcel described in clause 8, and his right thereto has all along been recognized in the dispositions made by the court with respect to said land. In our decision in Martinez vs. Graño (51 Phil., 287, 301), it was a basal assumption that Reyes would obtain the thousand trees referred to; and we are of the opinion that, from various steps taken in the prior litigation, Reyes must be taken to have elected to take that particular parcel and he is now estopped from asserting a contrary election to take the five parcels of land described in paragraph IX of his complaint.

However, the title to the parcel of land elected by Reyes is in the heirs of Inocente Martinez and it does not appear that they have transferred said title to Reyes. It results therefore that Reyes now has a claim for damages against the parties signatory to the contract of March 5, 1921, for the value of the aforesaid property. We therefore reach the conclusion that Reyes should either have the land originally set apart for him under clauses 4 and 8 of the contract, or, in case his right thereto should fail, he should not be required to pay the judgment for P8,000 which was awarded to the Martinez heirs in Martinez vs. Graño (51 Phil., 287, 302).

AGRIFINA AQUINTEY vs. SPOUSES FELICIDAD AND RICO TIBONG G.R. No. 166704 December 20, 2006

Facts: 

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On May 6, 1999, petitioner Agrifa filed before RTC a complaint for sum of money and damages against respondents. o 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.

Issues: Whether or not dacion en pago is present in this case.

Held: The Court held that dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. It is a special mode of payment where the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. The undertaking really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtor's obligation. As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present. In its modern concept, what actually takes place in dacion en pago is an objective novation of

the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. In any case, common consent is an essential prerequisite, be it sale or novation, to have the effect of totally extinguishing the debt or obligation. The requisites for dacion en pago are: (1) there must be a performance of the prestation in lieu of payment (animo solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third person; (2) there must be some difference between the prestation due and that which is given in substitution (aliud pro alio); and (3) there must be an agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a prestation different from that due. All the requisites for a valid dation in payment are present in this case. As gleaned from the deeds, respondent Felicidad assigned to petitioner her credits "to make good" the balance of her obligation. Felicidad testified that she executed the deeds to enable her to make partial payments of her account, since she could not comply with petitioner's frenetic demands to pay the account in cash. Petitioner and respondent Felicidad agreed to relieve the latter of her obligation to pay the balance of her account, and for petitioner to collect the same from respondent's debtors.

MAMENTA Vda. De JAYME vs. CA G.R. No. 128669 October 4, 002

Facts: 

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On January 8, 1973, spouses Jayme entered into a contract of lease with George Neri, President of Asian Cars covering one-half of Lot 2700 for 20 years. o Under the contract, Asian Cars used the leased premises as a collateral to secure payment of loan which Asian Cars may obtain from any bank, provided, the proceeds of the loans shall be used solely for the construction of the building which upon the termination of lease shall automatically become the property of the Jayme spouses. In October1977, Asian Cars obtained a loan of six million from Metrobank. o The entire lot 2700 was offered as one of the several properties given as collateral for the loan. Due to financial difficulties, Asian Cars conveyed ownership of the building on the leased premises to MBTC by way of dacion en pago. Eventually, MBTC extrajudicially foreclosed the mortgage and MBTC was the highest bidder in a public auction. Heirs of Graciano Jayme filed an action for annulment of contract with damages and issuance of preliminary injunction against Asian Cars. RTC declared that the REM executed by Jayme in favor of Metrobank as valid and binding. CA affirmed the decision declaring valid also the foreclosure of the mortgage and the foreclosure sale.

Issue: Whether or not the dacion en pago by Asian Cars in favor of MBTC is valid and binding despite the stipulation in the lease contract

Held: Court of Appeal did not err in considering MBTC as a purchase in good faith, MBTC had no knowledge of the stipulation in the lease contract. There was no annotation on the title of

any encumbrance. Thus, the transfer of the building in favor of MBTC was properly held valid and binding by respondent CA. CA decision is affirmed with modification ordering that private respondent MBTC pay petitioner’s rentals amounting to P602,083.33. with 6 % interest per annum until fully paid.

Caltex vs. IAC G.R. No. 72703 November 13, 1992

Facts: 

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Asia Pacific Airways Inc. (private respondent), entered into an agreement with Caltex (Philippines) Inc. (petitioner), whereby petitioner agreed to supply private respondent's aviation fuel requirements for two (2) years, covering the period from January 1, 1978 until December 31, 1979. As of June 30, 1980, private respondents had an outstanding obligation to petitioner in the total amount of P4,072,682.13, representing the unpaid price of the fuel supplied. o To settle this outstanding obligation, private respondent executed a Deed of Assignment, wherein it assigned to petitioner its receivables or refunds of Special Fund Import Payments from National Treasury of the Philippines to be applied as payment of the amount of P4,072,682.13 which private respondent owed to petitioner. Pursuant to the Deed of Assignment, Treasury Warrant No. B04708613 in the amount of P5,475,294.00 representing the refund to respondent of Special Fund Import Payment on its fuel purchases was issued by the National Treasury in favor of the petitioner. o Four days later, on February 16, 1981, private respondent, having learned that the amount remitted to petitioner exceeded the amount covered by the Deed of Assignment, wrote a letter to petitioner, requesting a refund in the amount of P900,000.00 plus in favor of private respondent.  The latter, believing that it was entitled to a larger amount by way of refund, wrote a petitioner anew, demanding the refund of the remaining amount.  In response thereto, petitioner informed private respondent that the amount not returned (P510,550.63) represented interest and service charges at the rate of 18% per annum on the unpaid and overdue account of respondent from June 1, 1980 to July 31, 1981.

Issue: Whether or not the Deed of Assignment constituted dacion en pago.

Held: The Deed of Assignment speaks of three (3) obligations — (1) the outstanding obligation of P4,072,682.13 as of June 30, 1980; (2) the applicable interest charges on overdue accounts; and (3) the other avturbo fuel lifting and deliveries that assignor (private respondent) may from time to time receive from assignee (Petitioner). 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 as equivalent to the obligation. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered (Art. 1253, Civil Code). The foregoing subsequent acts of the parties clearly show that they did not intend the Deed of Assignment to have the effect of totally extinguishing the obligations of private respondent without payment of the applicable interest charges on the overdue account.

Lo vs. CA G.R. No. 141434 September 23, 2003

Facts: 

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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, located at Bo. Potrero, Malabon, Metro Manila and covered by TCT Nos. M-13166 and M-13167. o Antonio Lo (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). o National Onion Growers Cooperative Marketing Association, Inc. (private respondent), 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. On February 23, 1996, petitioner filed an action for ejectment. 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.

Issue: Whether or not the imposed penalty should be reduced for being unconscionable and iniquitous.

Held: 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. As provided in the Contract of Lease, private respondent was obligated to pay a monthly rent of P30,000. On the other hand, the stipulated penalty was pegged at P5,000 for each day of delay or P150,000 per month, an amount five times the monthly rent. This penalty was not only exorbitant but also unconscionable, taking into account that private respondent’s delay in surrendering the leased premises was because of a wellfounded belief that its right of preemption to purchase the subject premises had been violated. Considering further that private respondent was an agricultural cooperative, collectively owned by farmers with limited resources, ordering it to pay a penalty of P150,000 per month on top of the monthly rent of P30,000 would seriously deplete its income and drive it to bankruptcy.

ASJ Corporation vs. Evangelista G.R. No. 158086 February 14, 2008

Facts: 

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Respondents, under the name and style of R.M. Sy Chicks, are engaged in the large-scale business of buying broiler eggs, hatching them, and selling their hatchlings (chicks) and egg by-products in Bulacan and Nueva Ecija. For the incubation and hatching of these eggs, respondents availed of the hatchery services of ASJ Corp., a corporation duly registered in the name of San Juan and his family. On February 3, 1993, respondent Efren went to the hatchery to pick up the chicks and by-products covered by Setting Report No. 108, but San Juan refused to release the same due to respondents’ failure to settle accrued service fees on several setting reports starting from Setting Report No. 90. Nevertheless, San Juan accepted from Efren 10,245 eggs covered by Setting Report No. 113 and P15,000.00 in cash as partial payment for the accrued service fees. On February 10, 1993, Efren returned to the hatchery to pick up the chicks and byproducts, but San Juan again refused to release the same unless respondents fully settle their accounts. In the afternoon of the same day, respondent Maura, with her son Anselmo, tendered P15,000.00 to San Juan, and tried to claim the chicks and byproducts. She explained that she was unable to pay their balance because she was hospitalized for an undisclosed ailment. San Juan accepted the P15,000.00, but insisted on the full settlement of respondents’ accounts before releasing the chicks and byproducts. Believing firmly that the total value of the eggs delivered was more than sufficient to cover the outstanding balance, Maura promised to settle their accounts only upon proper accounting by San Juan. San Juan disliked the idea and threatened to impound their vehicle and detain them at the hatchery compound if they should come back unprepared to fully settle their accounts with him.

Issue: Whether or not there was application of payment.

Held:

Petitioners’ obligation to deliver the chicks and by-products corresponds to three dates: the date of hatching, the delivery/pick-up date and the date of respondents’ payment. On several setting reports, respondents made delays on their payments, but petitioners tolerated such delay. When respondents’ accounts accumulated because of their successive failure to pay on several setting reports, petitioners opted to demand the full settlement of respondents’ accounts as a condition precedent to the delivery. However, respondents were unable to fully settle their accounts. Respondents’ offer to partially satisfy their accounts is not enough to extinguish their obligation. Under Article 1248[27] of the Civil Code, the creditor cannot be compelled to accept partial payments from the debtor, unless there is an express stipulation to that effect. More so, respondents cannot substitute or apply as their payment the value of the chicks and byproducts they expect to derive because it is necessary that all the debts be for the same kind, generally of a monetary character. Needless to say, there was no valid application of payment in this case.

Paculdo vs. Regalado G.R. No. 123855 November 20, 2000

Facts: 

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Issues:

On December 27, 1990, Nereo J. Paculdo (petitioner) and Bonifacio C. Regalado (respondent) entered into a contract of lease over a 16,478 square meter parcel of land with a wet market building, located along Don Mariano Marcos Avenue, Fairview Park, Quezon City. o The contract was for twenty five (25) years, commencing on January 1, 1991 and ending on December 31, 2015. o For the first five (5) years of the contract beginning December 27, 1990, Nereo would pay a monthly rental of P450,000.00, payable within the first five (5) days of each month at Bonifacio’s office, with a 2% penalty for every month of late payment. Aside from the above lease, petitioner leased eleven (11) other property from respondent, ten (10) of which were located within the Fairview compound, while the eleventh was located along Quirino Highway, Quezon City. Petitioner also purchased from respondent eight (8) units of heavy equipment and vehicles in the aggregate amount of P1,020,000.00. Petitioner made a total payment of P10,949,447.18, to respondent as of July 2, 1992. 2 letters: o In November 19, 1991 letter, respondent proposed that petitioner’s security deposit for the Quirino lot, in the amount of P643,276.48, be applied as partial payment for his account under the subject lot as well as to real estate taxes on the Quirino lot. Petitioner interposed no objection, as evidenced by his signature signifying his conformity thereto. o In an earlier letter, dated July 15, 1991, respondent informed petitioner that the payment was to be applied not only to petitioner’s accounts under both the subject land and the Quirino lot but also to heavy equipment bought by the latter from respondent. Petitioner claimed that the amount applied as payment for the heavy equipment was critical because it was equivalent to more than two (2) months rental of the subject property, which was the basis for the ejectment case in the Metropolitan Trial Court.

1. Whether or not petitioner’s failure to object the earlier letter constitutes consent for the application of payment for other debts. 2. Whether or not payment to the most onerous debt should be paid first in the absence the declaration of the debtor to which debt should be paid first.

Held: 1. Article 1252 states that “he who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the application of payment is made by the party for whose benefit the term has been constituted, application shall not be made as to debts which are not yet due.” At the time petitioner made the payments, he made it clear to respondent that they were to be applied to his rental obligations on the Fairview wet market property. All the payments made, about P11, 000,000.00, were to be applied to rental and security deposit on the Fairview wet market property. There was no clear assent by petitioner to the change in the manner of application of payment. The petitioner’s silence as regards the application of payment by respondent cannot mean that he consented thereto. There was no meeting of the minds. Though an offer may be made, the acceptance of such offer must be unconditional and unbounded in order that concurrence can give rise to a perfected contract. 2. Under the law, if the debtor did not declare at the time he made the payment to which of his debts with the creditor the payment is to be applied, the law provided the guideline--no payment is to be made to a debt that is not yet due and the payment has to be applied first to the debt most onerous to the debtor. In the instant case, the purchase price of the eight (8) heavy equipment was not yet due at the time the payment was made, for there was no date set for such payment. Neither was there a demand by the creditor to make the obligation to pay the purchase price due and demandable. Hence, the application made by respondent is contrary to the provisions of the law.

CBC vs. CA G.R. No. 121158 December 5, 1996

Facts:      

China Banking Corporation (China Bank) extended several loans to Native West International Trading Corporation (Native West) and to So Ching, Native West’s president. Native West in turn executed promissory notes in favor of China Bank. So Ching, with the marital consent of his wife, Cristina So, additionally executed two mortgages over their properties. The promissory notes matured and despite due demands by China Bank neither private respondents Native West nor So Ching paid. Pursuant to a provision embodied in the two mortgage contracts, China Bank filed petitions for the extra-judicial foreclosure of the mortgaged properties, copies of which were given to the spouses So Ching and Cristina So. After due notice and publication, the notaries public scheduled the foreclosure sale of the spouses’ real estate properties on April 13, 1993.

Issue: Whether or not petitioners have right to foreclosure the mortgages.

Held: Where a debt is secured by a mortgage and there is a default in payment on the part of the mortgagor, the mortgagee has a choice of one (1) or two (2) remedies, but he cannot have both. The mortgagee may: 1) foreclosure the mortgage; or 2) file an ordinary action to collect the debt. When the mortgagee chooses the foreclosure of the mortgage as a remedy, he enforces his lien by the sale on foreclosure of the mortgaged property. The proceeds of the sale will be applied to the satisfaction of the debt. With this remedy, he has a prior lien on the property. In case of a deficiency, the mortgagee has the right to claim for the deficiency resulting from the

price obtained in the sale of the real property at public auction and the outstanding obligation at the time of the foreclosure proceedings. On the other hand, if the mortgagee resorts to an action to collect the debt, he thereby waives his mortgage lien. He will have no more priority over the mortgaged property. If the judgment in the action to collect is favorable to him, and it becomes final and executory, he can enforce said judgment by execution. He can even levy execution on the same mortgaged property, but he will not have priority over the latter and there may be other creditors who have better lien on the properties of the mortgagor.

Mobil vs. CA G.R. No. 103052 May 23, 1997

Facts: 

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Sometime in May 1982, petitioner Mobil Oil Philippines, Inc. ("MOPI"), a firm engaged in the marketing of petroleum products to industrial users, entered into a supply agreement with private respondent Continental Cement Corporation ("CCC"), a cement producer, under which the former would supply the latter's industrial fuel oil ("IFO") or bunker fuel oil ("BFO") requirements. MOPI extended to CCC an unsecured credit line of P2,000,000.00 against which CCC's purchases of oil could initially be charged. MOPI had a "hauling contract" with Century Freight Services ("CFS") whereby CFS undertook the delivery of Mobil products to designated consignees of MOPI. During the period starting from 12 July to 07 October 1982, MOPI made a total of sixtyseven deliveries of BFO, each delivery consisting of 20,000 liters, to CCC's cement factory. o On October 8, 1982, CCC discovered that what should have been MOPI's 20,000 BFO delivery to CCC's Norzagaray plant was in fact, pure water. o CCC at once informed MOPI of this anomaly and of its intention to meanwhile hold in abeyance all payments due to MOPI on its previous deliveries until such time as the parties would have ascertained that those deliveries were not themselves adulterated.

Issue: Whether or not MOPI should be held accountable for CFS.

Held: The Court held that CFS was the contractor of MOPI, not CCC, and the contracted price of the BFO that CCC paid to MOPI included hauling charges. The presumption laid down under Article 1523 of the Civil Code that delivery to the carrier should be deemed to be delivery to the buyer would have no application where, such as in this case, the sale itself specifically called for delivery by the seller to the buyer at the latter's place of business.

Sps. Bonrostro vs. Sps. Luna G.R. No. 172346 July 24, 2013

Facts:  

In 1992, respondent Constancia Luna (Constancia), as buyer, entered into a Contract to Sell with Bliss Development Corporation (Bliss) involving a house and lot. Constancia, this time as the seller, entered into another Contract to Sell with petitioner Lourdes Bonrostro (Lourdes) concerning the same property under the following terms and conditions: o The stipulated price of P1,250,000.00 shall be paid by the VENDEE to the VENDOR in the following manner: (a) P200,000.00 upon signing x x x [the] Contract To Sell, (b) P300,000.00 payable on or before April 30, 1993, (c) P330,000.00 payable on or before July 31, 1993, (d) P417,000.00 payable to the New Capitol Estate, for 15 years at [P6,867.12] a month,

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Issue:

o x x x [I]n the event the VENDEE fails to pay the second installment on time, the VENDEE will pay starting May 1, 1993 a 2% interest on the P300,000.00 monthly. Likewise, in the event the VENDEE fails to pay the amount of P630,000.00 on the stipulated time, this CONTRACT TO SELL shall likewise be deemed cancelled and rescinded and x x x 5% of the total contract price of P1,250,000.00 shall be deemed forfeited in favor of the VENDOR. Unpaid monthly amortization shall likewise be deducted from the initial down payment in favor of the VENDOR. Immediately after the execution of the said second contract, the spouses Bonrostro took possession of the property. However, except for the P200,000.00 down payment, Lourdes failed to pay any of the stipulated subsequent amortization payments. On November 24, 1993, Lourdes sent Atty. Carbon a letter expressing her desire to pay the balance, but received no response from the latter.

Whether or not there is a valid tender of payment.

Held: The Court held that the subject letter merely states Lourdes’ willingness and readiness to pay but it was not accompanied by payment. She claimed that she made numerous telephone calls to Atty. Carbon reminding the latter to collect her payment, but, neither said lawyer nor Constancia came to collect the payment. After that, the spouses Bonrostro took no further steps to effect payment. They did not resort to consignation of the payment with the proper court despite knowledge that under the contract, non-payment of the installments on the agreed date would make them liable for interest thereon. The spouses Bonrostro erroneously assumed that their notice to pay would excuse them from paying interest. Their claimed tender of payment did not produce any effect whatsoever because it was not accompanied by actual payment or followed by consignation. Hence, it did not suspend the running of interest. The spouses Bonrostro are therefore liable for interest on the subject installments from the date of default until full payment of the sums of P300,000.00 and P330,000.00.

Dalton vs. FGR Reality and Development Corp. G.R. No. 172577 January 19, 2011

Facts:     

Flora R. Dayrit (Dayrit) owned a 1,811-square meter parcel of land. Petitioner Soledad Dalton (Dalton), and Sasam, et al. 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. In a complaint Dalton and Sasam, et al. consigned the rental payments with the RTC. They failed to notify Dayrit and FGR about the consignation. Dayrit and FGR withdrew the rental payments through several motions.

Issues: 1. Whether or not Dayrit and FGR expressly reserved the right to question the validity of the consignation. 2. Whether or not all the requisites of consignation should be properly made to make it valid.

Held: 1. In withdrawing the amounts consigned, Dayrit and FGR expressly reserved the right to question the validity of the consignation. When the creditor’s acceptance of the money consigned is conditional and with reservations, he is not deemed to have waived the claims he reserved against his debtor. If creditor accepted with reservation the amount consigned in court by the petitioner-debtor, the creditor is not barred from raising his other claims. Consignation is completed at the time the creditor accepts the same without objections, or, if he objects, at the time the court declares that it has been validly made in accordance with law. 2. 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.

Benos vs. Lawilao G.R. No. 172259 December 5, 2006

Facts: 

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On February 11, 1999, petitioner-spouses Jaime and Marina Benos ("the Benos spouses") and respondent-spouses Gregorio and Janice Gail Lawilao ("the Lawilao spouses") executed a Pacto de Retro Sale for P300,000.00, one half of which was to be paid in cash to the Benos spouses and the other half to be paid to the bank to pay off the loan of the Benos spouses which was secured by the same lot and building. o Under the contract, the Benos spouses could redeem the property within 18 months from date of execution by returning the contract price, otherwise, the sale would become irrevocable without necessity of a final deed to consolidate ownership over the property in the name of the Lawilao spouses. After paying the P150,000.00, the Lawilao spouses immediately took possession of the property and leased out the building thereon. However, instead of paying the loan to the bank, Janice Lawilao restructured it twice. Eventually, the loan became due and demandable. On August 14, 2000, a son of the Benos spouses paid the bank P159,000.00 representing the principal and interest. o The Lawilao spouses also went to the bank and offered to pay the loan, but the bank refused to accept the payment. The Lawilao spouses then filed with the Municipal Circuit Trial Court a petition for consignation against the bank and simultaneously deposited the amount of P159,000.00. Upon the bank’s motion, the court dismissed the petition for lack of cause of action. Subsequently, the Lawilao spouses filed with the Municipal Circuit Trial Court a complaint for consolidation of ownership. This complaint is the precursor of the instant petition.

Issue: Whether or not the Lawilao spouses made a valid consignation.

Held:

The Lawilao spouses filed the petition for consignation against the bank without notifying the Benos spouses. The petition was dismissed for lack of cause of action against the bank. Hence, the Lawilao spouses failed to prove their offer to pay the balance of the purchase price and consignation. In fact, even before the filing of the consignation case, the Lawilao spouses never notified the Benos spouses of their offer to pay. 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 the contract pursuant to Articles 1191 in relation to Article 1592 of the Civil Code.

People’s Industrial vs. CA G.R. No. 112733 October 24, 1997

Facts:     

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Private respondents Mar-ick Investment Corporation is the exclusive and registered owner of Mar-ick Subdivision. On May 29, 1961, private respondents entered into six (6) agreements with petitioner People’s Industrial and Commercial Corporation whereby it agreed to sell to petitioner six (6) subdivision lots. After the lapse of ten years, petitioner still had not fully paid for the six lots; It had paid only the down payment and eight (8) installments, even after private respondents had given petitioner a grace period of four months to pay the arrears. As of May 1, 1980, the total amount due to private respondents under the contract was P214,418.00. After a series of negotiations between the parties, they agreed to enter into a new contract to sell involving seven (7) lots, namely, Lots Nos. 2, 3, 4, 5, 6, 7 and 8. The contract stipulates that the previous contracts involving the same lots (minus Lot No.2) “have been cancelled due to the failure of the PURCHASER to pay the stipulated installments.” The parties agreed that the contract price would be P423,250.00 with a down payment of P42,325.00 payable upon the signing of the contract and the balance of P380,925.00 payable in forty-eight (48) equal monthly amortization payments of P7,935.94. The new contract bears the date of October 11, 1983 but neither of the parties signed it. Thereafter, Tomas Siatianum issued the following checks in the total amount of P37,642.72 to private respondent. Private respondent received but did not encash those checks. Instead, it filed in the Regional Trial Court a complaint for accion publicianan de posesion against petitioner and Tomas Siatianum.

Issue: Whether or not tender of payment alone can extinguish the obligation

Held:

Petitioner did not lift a finger towards the performance of the contract other than the tender of down payment. There is no record that it even bothered to tender payment of the installments or to amend the contract to reflect the true intention of the parties as regards the number of lots to be sold. By petitioner’s inaction, private respondents may not be judicially enjoined to validate a contract that the former appeared to have taken for granted. As in the earlier agreements, petitioner ignored opportunities to resuscitate a contract to sell that was rendered moribund and inoperative by its inaction. A contract to sell involves the performance of an obligation, not merely the exercise of the privilege or a right. Consequently, performance or payment may be effected not by tender of payment alone but by both tender and consignation.

Eternal Gardens vs. CA G.R. No. 124554 December 9, 1997

Facts: 

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Petitioner Eternal Gardens Memorial Park Corporation (EGMPC) and private respondent North Philippine Union Mission of the Seventh Day Adventists (NPUM) entered into a Land Development Agreement. o Under the agreement, EGMPC was to develop a parcel of land owned by NPUM into a memorial park subdivided into lots. o EGMPC under the agreement had the obligation to remit monthly to NPUM forty percent (40%) of its net gross collection from the development of a memorial park on property owned by NPUM. Later, two claimants of the parcel of land surfaced - Maysilo Estate and the heirs of a certain Vicente Singson Encarnacion. EGMPC thus filed an action for interpleader against Maysilo Estate and NPUM, docketed as Civil Case No. 9556 before the Regional Trial Court. The Singson heirs in turn filed an action for quieting of title against EGMPC and NPUM.

Issue: Whether or not consignation is an option in case of dispute regarding the rightful owner of the property.

Held: EGMPC cannot suspend payment on the pretext that it did not know who among the subject property’s claimants was the rightful owner. Consignation is a remedy under the New Civil Code which can be applied in this case. Consignation produces the effect of payment. The rationale for consignation is to avoid the performance of an obligation becoming more onerous to the debtor by reason of causes not imputable to him. For its failure to consign the amounts due, Eternal Gardens’ obligation to NPUM necessarily became more onerous as it became liable for interest on the amounts it failed to remit.

Rayos vs. Reyes G.R. No. 150913 February 20, 2003

Facts: 

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Issue:

The three (3) parcels were formerly owned by the spouses Francisco and Asuncion Tazal who 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. Two (2) of the three (3) parcels were again sold 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. The conventional right of redemption in favor of spouses Francisco and Asuncion Tazal expired without the right being exercised by either the Tazal spouses or the vendee Blas Rayos. After the expiration of the redemption period, Francisco Tazal attempted to repurchase the properties from Mamerto Reyes by asserting that the deed of sale with right of repurchase was actually an equitable mortgage and offering the amount of P724.00 to pay for the alleged debt. o Mamerto Reyes refused the tender of payment and vigorously claimed that their agreement was not an equitable mortgage. Francisco Tazal filed a complaint with the Court of First Instance against Mamerto Reyes, for the declaration of the transaction as a contract of equitable mortgage. Francisco Tazal again sold the third parcel of land previously purchased by Mamerto Reyes to petitioner-spouses Teofilo and Simeona Rayos for P400.00. Petitioner-spouses bought from Blas Rayos for P400.00 the two (2) lots that Tazal had sold at the first instance to Mamerto Reyes and thereafter to Blas Rayos. o These contracts of sale in favor of petitioner-spouses were perfected while the complaint for the declaration of the transaction as a contract of quitable mortgage was pending before the trial court. The trial court acknowledged the consignation of P724.00 in the Court of First Instance and the payment of taxes by Mamerto Reyes on the three (3) parcels of land.

Whether or not there was a valid consignation.

Held: Petitioners failed, (1) to offer a valid and unconditional tender of payment; (2) to notify respondents of the intention to deposit the amount with the court; (3), 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.

Cebu International vs. CA G.R. No. 123031 October 12, 1999

Facts:  

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Petitioner Cebu International Finance Corporation (CIFC), a quasi-banking institution, is engaged in money market operations. On April 25, 1991, private respondent, Vicente Alegre, invested with CIFC, five hundred thousand (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 (20.5%) percent for thirty-two (32) days. On May 27, 1991, CIFC issued BPI Check for P514,390.94 in favor of the private respondent as proceeds of his matured investment plus interest. On June 17, 1991, private respondent's wife deposited the Check with Rizal Commercial Banking Corp. (RCBC). 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. 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. o Private respondent, through counsel, made a formal demand for the payment of his money market placement. o CIFC promised to replace the Check but required an impossible condition that the original must first be surrendered. Private respondent Alegre filed a complaint for recovery of a sum of money against the petitioner.

Issue: Whether or not a check is a valid legal tender and that the creditor can be compelled to accept the same.

Held:

In a loan transaction, the obligation to pay a sum certain in money may be paid in money, which is the legal tender or, by the use of a check. 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. Tender of payment involves a positive and unconditional act by the obligor of offering legal tender currency as payment to the obligee for the former's obligation and demanding that the latter accept the same.

De Mesa vs. CA G.R. No. 106467-68 October 19, 1999

Facts:    

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Petitioner Dolores Ligaya de Mesa owns several parcels of land in 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. In a letter, petitioner de Mesa requested DBP that she be allowed to repurchase her foreclosed properties. Mrs. de Mesa, under a “Deed of Sale with Assumption of Mortgage,” sold the foreclosed properties to private respondent OSSA House, Inc. under the condition that the latter was to assume the payment of the mortgage debt by the repurchase of all the properties mortgaged on installment basis, with an initial payment of P90,000.00 representing 20% of the total obligation. o Private respondent OSSA remitted to DBP the initial payment of P90,000.00, in addition to the amount of P10,000.00 previously paid to the petitioner. DBP granted petitioner’s request to repurchase the foreclosed properties and a “Deed of Conditional Sale” was executed under which DBP agreed to sell the said properties to the petitioner for the sum of P363,408.20, P90,000.00 of which was to be paid as initial payment and the balance in seven (7) years on a quarterly amortization plan, with a first quarterly installment of P15,475.17. o Private respondent OSSA paid DBP the first to eight quarterly installments in the total amount of P137,595.31, which installment payments were applied to petitioner’s obligation with DBP pursuant to the Deed of Conditional Sale. Petitioner de Mesa notified OSSA that she was rescinding the Deed of Sale with Assumption of Mortgage she executed in favor of the latter on the ground that OSSA failed to comply with the terms and conditions of their agreement, particularly the payment of installments to the Development Bank of the Philippines, the discharge and cancellation of the mortgage on the property listed in item IV of the first whereas clause, and the payment of the balance of more or less P45,000.00 to petitioner, representing the difference between the purchase price of subject properties and the actual obligation to the DBP. OSSA offered to pay the amount of P34,363.08, which is the difference between the purchase price of P500,000.00 and the mortgage obligation to DBP of P455,636.92, after

deducting the down payment of P10,000.00 stipulated in said Deed of Sale with Assumption of Mortgage, but the petitioner refused to accept such payment. o OSSA brought a Complaint for Consignation against the petitioner, and at the same time, deposited the amount of P34,363.08 with said court.

Issue: Whether or not OSSA tendered the right amount.

Held: The Deed of Sale with Assumption of Mortgage, was for a consideration of P500,000.00, from which shall be deducted de Mesas’s outstanding obligation, with the DBP pegged as by the parties themselves, at P455,636.92. This amount of P455,636.92 owing DBP, is what OSSA agreed to assume. What remained to be paid de Mesa was P44,636.08, but OSSA made an advance payment of P10,000.00, hence the remaining amount payable to de Mesa is P34,363.08, which OSSA tendered in cash. Thus, OSSA tendered the right amount.

Occena vs. CA G.R. No. L-44349 October 29, 1976

Facts:  

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Private respondent Tropical Homes, Inc. filed a complaint for modification of the terms and conditions of its subdivision contract with petitioners. Respondent made the following allegations: “that due to the increase in price of oil and its derivatives and the concomitant worldwide spiraling of prices, the cost of development has risen to levels which are unanticipated, unimagined and not within the remotest contemplation of the parties at the time said agreement was entered into and to such a degree that the conditions and factors which formed the original basis of said contract have been totally changed; That further performance by the plaintiff under the contract, will result in situation where defendants would be unjustly enriched at the expense of the plaintiff; will cause an 583niquitous distribution of proceeds from the sales of subdivided lots in manifest actually result in the unjust and intolerable exposure of plaintiff to implacable losses, all such situations resulting in an unconscionable, unjust and immoral situation contrary to and in violation of the primordial concepts of good faith, fairness and equity which should pervade all human relations. Under the subdivision contract, respondent “guaranteed (petitioners as landowners) as the latter’s fixed and sole share and participation an amount equivalent to forty (40%) percent of all cash receipts from the sale of the subdivision lots”

Issue: Whether or not Article 1267 of the Civil Code should be applied.

Held: Article 1267 of the Civil Code cannot be applied since respondent's complaint seeks not release from the subdivision contract but that the court render judgment in modifying the terms and Conditions of the Contract by fixing the proper shares that should pertain to the herein parties out of the gross proceed, from the sales of subdivided lots of subject subdivision. The cited article does not grant the courts this authority to remake, modify or revise the contract or to fix the division of shares between the parties as contractually stipulated with the

force of law between the parties, so as to substitute its own terms for those covenanted by the parties themselves. Respondent's complaint for modification of contract manifestly has no basis in law and therefore states no cause of action. Under the particular allegations of respondent's complaint and the circumstances therein averred, the courts cannot even in equity grant the relief sought.

Ortigas vs Feati Bank G.R. No. L-24670 December 14, 1979

Facts: 

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Plaintiff (formerly known as "Ortigas, Madrigal y Cia") is a limited partnership and defendant Feati Bank and Trust Co., is a corporation duly organized and existing in accordance with the laws of the Philippines. Plaintiff is engaged in real estate business, developing and selling lots to the public. Plaintiff, and Augusto Padilla and Natividad Angeles, entered into separate agreements of sale on installments over two parcels of land, the said vendees transferred their rights and interests over the aforesaid lots in favor of one Emma Chavez. o Upon completion of payment of the purchase price, the plaintiff executed the corresponding deeds of sale in favor of Emma Chavez. Both the agreements (of sale on installment) and the deeds of sale contained the stipulations or restrictions that: 1. The parcel of land subject of this deed of sale shall be used the Buyer exclusively for residential purposes, and she shall not be entitled to take or remove soil, stones or gravel from it or any other lots belonging to the Seller. 2. All buildings and other improvements (except the fence) which may be constructed at any time in said lot must be, (a) of strong materials and properly painted, (b) provided with modern sanitary installations connected either to the public sewer or to an approved septic tank, and (c) shall not be at a distance of less than two (2) meters from its boundary lines.

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Eventually, defendant-appellee acquired Lots Nos. 5 and 6 issued in its name, respectively and the building restrictions were also annotated therein. o Defendant-appellee bought Lot No. 5 directly from Emma Chavez. o Lot No. 6 was acquired from Republic Flour Mills through a "Deed of Exchange". Defendant-appellee maintains that the area along the western part of EDSA from Shaw Boulevard to Pasig River, has been declared a commercial and industrial zone under Resolution No. 27. Defendant-appellee began laying the foundation and commenced the construction of a building on Lots Nos. 5 and 6, to be devoted to banking purposes, but which defendantappellee claims could also be devoted to, and used exclusively for, residential purposes. Plaintiff-appellant demanded in writing that defendant-appellee stop the construction of the commercial building on the said lots. The latter refused to comply with the

demand, contending that the building was being constructed in accordance with the zoning regulations, defendant-appellee having filed building and planning permit applications with the Municipality of Mandaluyong, and it had accordingly obtained building and planning permits to proceed with the construction.

Issue: Whether or not the restrictions laid by the plaintiff is still effective despite Resolution No. 27.

Held: Even if the subject building restrictions were assumed by the defendant-appellee as vendee of Lots Nos. 5 and 6, in the corresponding deeds of sale, the contractual obligations so assumed cannot prevail over Resolution No. 27, of the Municipality of Mandaluyong, which has validly exercised its police power through the said resolution. Accordingly, the building restrictions, which declare Lots Nos. 5 and 6 as residential, cannot be enforced.

So vs. Food Fest Land, Inc. G.R. No. 183628 & 183670 April 7, 2010

Facts:  

Food Fest Land Inc. (Food Fest) entered into a Contract of Lease with Daniel T. So (So) over a commercial space 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 stated: 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. We shall promptly make an application for permits, licenses and authority for our business and shall exercise due diligence to obtain it, provided, however, that you shall assist us by submitting such documents and papers and comply with such other requirements as the governmental agencies may impose. We shall give notice to you when the permits, license and authorities have been obtained. We shall also notify you if any of the required permits, licenses and authorities shall not be be (sic) given or granted within fifteen days (15) from your conform (sic)hereto. In such case, the agreement may be canceled and all rights and obligations hereunder shall cease.

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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. 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. o Food Fest wrote requests addressed to city officials for assistance to facilitate renewal. In August 2000, Food Fest, for the second time, purportedly informed So of its intent to terminate the lease, and it in fact stopped paying rent. So later sent a demand letter to Food Fest for the payment of rental arrearages and reiterated his offer to help it secure clearance from the barangay. So again demanded payment of rentals from Food Fest from September 2000 to March 2001 amounting to P123,200.00. Food Fest denied any liability, however, and started to remove its fixtures and equipment from the premises.

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On April 2, 2001, So sent Food Fest a Final Notice of Termination with demand to pay and to vacate.

Issue: Whether or not the principle of rebus sic stantibus should be acknowledged in this case.

Held: 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, suffice to declare the lease functus officio, nor can it be construed as an unforeseen event to warrant the application of Article 1267. Contracts, once perfected, are binding between the contracting parties. Obligations arising therefrom have the force of law and should be complied with in good faith. Food Fest cannot renege from the obligations it has freely assumed when it signed the lease contract.

Magat vs. CA G.R. No. 124221 August 4, 2000

Facts: 

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Sometime in 1972, Guerrero Transport Services won a bid for the operation of a fleet of taxicabs within the Subic Naval Base, in Olongapo. As highest bidder, Guerrero was to "provide radio-controlled taxi service within the U.S. Naval Base, Subic Bay, utilizing as demand requires . . . 160 operational taxis consisting of four wheel, four-door, four passenger, radio controlled, meter controlled, sedans, not more than one year . . . " On September 22, 1972, with the advent of martial law, President Ferdinand E. Marcos issued Letter of Instruction No. 1. The subject is “SEIZURE AND CONTROL OF ALL PRIVATELY OWNED NEWSPAPERS, MAGAZINES, RADIO AND TELEVISION FACILITIES AND ALL OTHER MEDIA OF COMMUNICATION”. On September 25, 1972, Guerrero and Victorino D. Magat, as General Manager of Spectrum Electronic Laboratories, a single proprietorship, executed a letter-contract for the purchase of transceivers at a quoted price of US$77,620.59, FOB Yokohoma. Victorino was to deliver the transceivers within 60 to 90 days after receiving notice from Guerrero of the assigned radio frequency, "taking note of Government Regulations." On October 4, 1972, middle man and broker Isidro Q. Aligada of Reliance Group Engineers, Inc., wrote Victorino, informing him that a radio frequency was not yet assigned to Guerrero and that government regulations might complicate the importation of the transceivers. On October 7, 1972, Aligada informed Magat of the assigned frequency number. Aligada also advised Victorino to "proceed with the order upon receipt of letter of credit." On March 27, 1973, Victorino, represented by his lawyer, informed Guererro that the order with the Japanese supplier has not been canceled. Should the contract be canceled, the Japanese firm would forfeit 30% of the deposit and charge a cancellation fee in an amount not yet known, Guerrero to bear the loss. Further, should the contract be canceled, Victorino would demand an additional amount equivalent to 10% of the contract price. Unable to get a letter of credit from the Central Bank due to the refusal of the Philippine government to issue a permit to import the transceivers, Guerrero commenced operation of the taxi cabs within Subic Naval Base, using radio units borrowed from the U.S. government. Victorino thus canceled his order with his Japanese supplier. On May 22, 1973, Victorino filed with the RTC a complaint for damages arising from breach of contract against Guerrero.

Issue: Whether or not there was breach of obligation.

Held: The law provides that "[w]hen the service (required by the contract) has become so manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part." Here, Guerrero's inability to secure a letter of credit and to comply with his obligation was a direct consequence of the denial of the permit to import. Even if we assume that there was a breach of contract, damages cannot be awarded. There was no bad faith. Guerrero honestly relied on the representations of the Radio Control Office and the Office of the President.

PNCC vs. CA G.R. No. 116896 May 5, 1997

Facts:    

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A lease contract between petitioner and private respondents was executed on November 18, 1985. On 7 January 1986, petitioner obtained from the Ministry of Human Settlements a Temporary Use Permit for the proposed rock crushing project. o The permit was to be valid for two years unless sooner revoked by the Ministry. On 16 January 1986, private respondents wrote petitioner requesting payment of the first annual rental in the amount of P240,000 which was due and payable upon the execution of the contract. Petitioner argued that under paragraph 1 of the lease contract, payment of rental would commence on the date of the issuance of an industrial clearance by the Ministry of Human Settlements, and not from the date of signing of the contract. o It then expressed its intention to terminate the contract, as it had decided to cancel or discontinue with the rock crushing project “due to financial, as well as technical, difficulties.” Private respondents refused to accede to petitioner’s request for the pretermination of the lease contract. o They insisted on the performance of petitioner’s obligation and reiterated their demand for the payment of the first annual rental. Petitioner objected to private respondents’ claim and argued that it was “only obligated to pay . . . the amount of P20,000.00 as rental payments for the one-month period of lease, counted from 07 January 1986 when the Industrial Permit was issued by the Ministry of Human Settlements up to 07 February 1986 when the Notice of Termination was served” 6 on private respondents. On 19 May 1986, private respondents instituted with the RTC an action against petitioner for Specific Performance with Damages.

Issue: Whether or not petitioner should be released from the obligatory force of the contract of lease because the purpose of the contract did not materialize due to unforeseen events and causes beyond its control under Article 1266 of the Civil Code and the principle of rebus sic stantibus.

Held: Petitioner cannot, successfully take refuge in Article 1266 of the Civil Code, since it is applicable only to obligations "to do," and not to obligations "to give." The obligation to pay rentals 16 or deliver the thing in a contract of lease falls within the prestation "to give"; hence, it is not covered within the scope of Article 1266. At any rate, the unforeseen event and causes mentioned by petitioner are not the legal or physical impossibilities contemplated in the said article. Besides, petitioner failed to state specifically the circumstances brought about by "the abrupt change in the political climate in the country" except the alleged prevailing uncertainties in government policies on infrastructure projects. Article 1267 which enunciates the doctrine of unforeseen events, is not an absolute application of the principle of rebus sic stantibus. 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. Petitioner PNCC entered into the contract of lease with private respondents with open eyes of the deteriorating conditions of the country.

NATELCO vs. CA G.R. No. 107112 February 24, 1994

Facts: 

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NATELCO is a telephone company rendering local and long distance services in Naga. It entered into contract with Camarines Sur II Electric Cooperative (electric power service): o “For the use in operation of its telephone service, electric light posts of CASURECO II”. o In return, free use of 10 telephone connections. o Period – as long as NATELCO needs electric light posts, CASURECO understands that contract will terminate when they are forced to stop, abandon operation and remove light posts. CASURECO, after 10 years, filed for reformation of contract with damages, not conforming to guidelines of National Electrification Administration (NEA) reasonable compensation for use of posts. o Compensation is P10/posts but consumption of telephone cables costs P2630. o NATELCO used 319 posts without any contract at P10.00; refused to pay. o Poor servicing- damage not less than P100,000.

Issue: Whether or not Article 1267 is applicable.

Held: Art. 1267. 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. Petitioners assert earnestly that Article 1267 of the New Civil Code is not applicable primarily because the contract does not involve the rendition of service or a personal prestation and it is not for future service with future unusual change. The Court ruled releasing the parties from their correlative obligations under the contract.

Reyna vs. COA G.R. No. 167219 February 8, 2011

Facts: 

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Issue:

Petitioners Ruben Reyna (Reyna) and Lloyd Soria (Soria) are Senior Field Operations Specialist and Loans and Credit Analyst II, respectively, of the Land Bank’s branch in Ipil, Zamboanga del Sur. In December 1993 the Ipil Branch received loan applications from four farmers’ cooperatives under the bank’s cattle financing program. In December 1993 the Ipil Branch of Land Bank received loan applications from four farmers’ cooperatives under the bank’s cattle financing program. To process the applications, each cooperative accomplished a Credit Facility Proposal (CFP), which required that they execute a Memorandum of Agreement (MOA) with their proposed cattle supplier, Remad Livestock Corporation (Remad). o The CFP provided that the bank may release the proceeds of the loans 60 days prior to the delivery of the stocks. o After approval of the loan applications, the Ipil Branch issued to Remad three checks totaling P3,115,000.00 as advance payment for the cattle. o Because of foot-and-mouth disease that broke out among its herds, Remad failed to make the deliveries when they fell due. During a post audit, the Land Bank resident auditor, Belen Oranu-Lu, disallowed the advance payment and Notices of Disallowance. o She pointed out that the Ipil Branch paid for the cattle in advance in violation of the Land Bank Manual on Field Office Group (FOG) Lending Operations and Commission on Audit (COA) rules and regulations. Notably, the disallowance was not on account of evidence of dishonest connivance with the farmers’ cooperatives and their cattle supplier. The bank branch’s resident auditor held Reyna and Soria, together with four other employees of the Ipil Branch, personally liable for the disallowed advances. Reyna and Soria wrote the COA Regional Office, seeking to have the auditor’s disallowance of the loan advances set aside. o They pointed out that the Bangko Sentral ng Pilipinas already approved the write-off of the loans given to the farmers’ cooperatives. Rather than act on Reyna and Soria’s letter, the regional office forwarded it to the COA Head Office.

Whether or not there was a valid condonation which extinguished the obligation.

Held: The write-off provided by the Bangko Sentral is not a condonation of the debt and that the obligation remains, subject to future collection if possible. But it does not follow that Reyna, Soria, and the other employees with them should pay for the debt that they did not contract for themselves. The Cattle Breeding and Buy-Back Marketing Agreement between Remad and the cooperatives provides that “both parties shall be liable to Land Bank of the Philippines for whatever breach of contract entered into by the cooperative and REMAD LIVESTOCK CORPORATION in relation to the loan with the bank.” Consequently, the Land Bank may still institute a civil suit for collection against the proper parties to recover the loss.

Trans Pacific vs. CA G.R. No. 109172 August 19, 1994

Facts: 

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In 1979, petitioner applied for and was granted several financial accommodations amounting to P1,300,000.00 by respondent Associated Bank. o The loans were evidenced 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. To secure the re-structured loan of P1,213,400.00, three new promissory notes were executed by Trans-Pacific. 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. o 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. 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. o According to the bank, the promissory notes were erroneously released. Initially, Trans-Pacific expressed its willingness to pay the amount demanded by respondent bank. Later, it initiated an action before the RTC for specific performance and damages. There it prayed that the mortgage over the two parcels of land be released and its stock inventory be lifted and that its obligation to the bank be declared as having been fully paid.

Issue: Whether or not petitioner paid its whole obligation to the bank evidenced by the “paid” mark on the promissory notes.

Held: The presumption created by the Art. 1271 of the Civil Code is not conclusive but merely prima facie. If there be no evidence to the contrary, the presumption stands. Conversely, the presumption loses its legal efficacy in the face of proof or evidence to the contrary. In the case at bar, we find sufficient justification to overthrow the presumption of payment generated by the delivery of the documents evidencing petitioners indebtedness. Article 1271 of the Civil Code raises a presumption, not of payment, but of the renunciation of the credit where more convincing evidence would be required than what normally would be called for to prove payment. The rationale for allowing the presumption of renunciation in the delivery of a private instrument is that, unlike that of a public instrument, there could be just one copy of the evidence of credit. Where several originals are made out of a private document, the intendment of the law would thus be to refer to the delivery only of the original rather than to the original duplicate of which the debtor would normally retain a copy. It would thus be absurd if Article 1271 were to be applied differently.

Dalupan vs. Harden G.R. No. L-3975 November 27, 1951

Facts: 

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Issue:

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% 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 of the case and the wife of the defendant, filed an answer in intervention claiming that the amount sought by the plaintiff was exorbitant and prayed that it be reduced to 10% of the rebate. o 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 after the final liquidation and partition thereof, without pronouncement as to costs and interests.”  The court rendered judgment in accordance with this stipulation. Almost one year thereafter, plaintiff filed a motion for the issuance of a writ of execution to satisfy the balance of P91,069.74, which was favorably acted upon. At that time the receiver had in his possession two checks payable to Fred M. Harden amounting to P33,574.50, representing part of the proceeds of the sale of two lots belonging to the conjugal partnership which was ordered by the court upon the joint petition of the spouses in order that they may have funds with which to defray their living and other similar expenses. At the outset, it should be stated that the amount which plaintiff is seeking to recover is P91,069.74, as originally demanded in the complaint. This amount, is however, has already been reduced to P42,069.74 because of certain partial payments made by the defendant during the pendency of this case in his desire to extend aid to the plaintiff. Plaintiff claims that they should be applied to his judgment to pay in full balance of the claim which defendant still owes them.

Whether or not condonation was present.

Held: A proffer made by the plaintiff to the defendant to the effect that "in the event you lose your case with your wife, and that after adjudication of the conjugal property what is left with you will not be sufficient for your livelihood. I shall be pleased to write off as bad debt the balance of your account in the sum of P42,069.74". This proffer was contained in a letter sent by the plaintiff to the defendant on March 23, 1949, which was accepted expressly by Fred M. Harden. Harden regarded this proffer as a binding obligation and acted accordingly. This is an added circumstance which confirms the view of the Court that the understanding between the plaintiff and the defendant is really to defer payment of the balance of the claim until after the final liquidation of the conjugal partnership.

Lopez Liso vs. Tambunting G.R. No. 9806 January 19, 1916

Facts: 

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These proceedings were filed by Leonides Lopez Liso (plaintiff) to recover from Manuel Tambunting (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. CFI rendered judgment ordering the defendant to pay to the plaintiff the sum of P700, without express finding as to costs.

Issue: Whether or not the mere possession of the receipt by the defendant is sufficient to prove that he already paid the plaintiff.

Held: Article 1188 of the Civil Code prescribes that the voluntary surrender, by a creditor to his debtor, of a private instrument proving a credit, implies the renunciation of his right of action against the debtor; and article 1189 of the same Code likewise prescribes that whenever the private instrument which evidences the debt is in the possession of the debtor it shall be presumed that the creditor delivered it of his own free will. Nevertheless, pursuant to Art. 1188, this presumption cannot stand, when from the evidence it appears that the evidence of the obligation was not returned to the debtor, but was sent to him solely for the purpose of collecting the debt, and that the creditor’s purpose was not to leave the instrument evidencing the credit in the possession of the debtor, if the latter did not forthwith pay the amount mentioned therein.

Testate Estate of Mota vs. Serra G.R.No. 22825 February 14, 1925

Facts:    

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On February 1, 1919, plaintiffs and defendant entered into a contract of partnership 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 agreed that the parties should pay this amount in equal parts and the plaintiffs were entrusted with the administration of the partnership. On 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. o 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

RULING:

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.

Yek Tong Lim Fire vs. Yusingco G.R. No. L-43608 July 20, 1937

Facts:     

Pelagio Yusingco (defendant) authorized Yu Seguioc to administer his properties and mortgaged the steamship to Yek Tong Lin Fire & Marine Insurance Co (petitioner) on account of a promissory note for P45,000. The steamship was repaired by Earnshaw Docks & Honolulu Iron Works and Vincente Madrigal was the guarantor and was asked to pay P8,000. Since petitioner was not able to pay Vincente Madrigal, a judicial proceeding was instituted assigning the rights to Vicente Madrigal to sell the steamship. Petitioner filed a 3rd-party claim as it was mortgaged to him, however auction was done and petitioner won the bid. The lower court ordered defendant Pelgio Yusingco to pay P17,000, Vincente Madrigal to turn over the money received by him from the sheriff.

Issue: Whether or not there was merger of rights which extinguishes the obligation.

Held: After the steamship Yusingco had been sold by virtue of the judicial writ for the execution of the judgment rendered in favor of Vincente Madrigal, the only right left to the petitioner 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 11922, Civil Code).

EGV Realty vs. CA G.R. No. 120236 July 20, 1999

Facts: 

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Petitioner EGV Realty Development Corporation is the owner/developer of a sevenstorey condominium building known as Cristina Condominium. o Cristina Condominium Corporation (CCC) 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. 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 compensation was present.

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.

AEROSPACE CHEMICAL INDUSTRIES, INC. vs. COURT OF APPEALS G.R. No. 108129. September 23, 1999

Facts:  

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On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace) purchased 500 MT 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. o Petitioner as buyer committed to secure the means of transport to pick-up the purchases from private respondent’s loadports. o Per agreement, 100 MT of sulfuric acid should be taken from Basay, Negros Oriental storage tank, while the remaining 400 MT should be retrieved from Sangi, Cebu. On August 6, 1986, private respondent sent an advisory letter to petitioner to withdraw the sulfuric acid purchased at Basay because private respondent had been incurring incremental expense of P2,000.00 for each day of delay in shipment. On October 3, 1986, petitioner paid P553,280.00 for 500 MT of sulfuric acid. On November 19, 1986, petitioner chartered M/T Sultan Kayumanggi, owned by Ace Bulk Head Services. o M/T Kayumanggi withdrew only 70.009 MT of sulfuric acid from Basay because said vessel heavily tilted on its port side. Consequently, the master of the ship stopped further loading. Thereafter, the vessel underwent repairs. In a demand letter, private respondent asked petitioner to retrieve the remaining sulfuric acid in Basay tanks so that said tanks could be emptied on or before December 15, 1986. o Private respondent said that it would charge petitioner the storage and consequential costs for the Basay tanks, including all other incremental expenses due to loading delay, if petitioner failed to comply. On December 18, 1986, M/T Sultan Kayumanggi docked at Sangi, Cebu, but withdrew only 157.51 MT of sulfuric acid. The vessel tilted and further loading was aborted. 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. 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.

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On January 25, 1988, petitioner’s counsel sent a demand letter to private respondent for the delivery of the 272.49 MT of sulfuric acid paid by his client, or the return of the purchase price of P307,530.00. o Private respondent in reply, instructed petitioner to lift the remaining 30 MT of sulfuric acid from Basay, or pay maintenance and storage expenses commencing August 1, 1986. On July 6, 1988, petitioner wrote another letter, insisting on picking up its purchases consisting of 272.49 MT and an additional of 227.51 MT of sulfuric acid. According to petitioner it had paid the chartered vessel for the full capacity of 500 MT. By telephone, petitioner requested private respondent’s Shipping Manager, to get its additional order of 227.51 MT of sulfuric acid at Isabel, Leyte. On July 25, 1988, petitioner’s counsel wrote to private respondent another demand letter for the delivery of the purchases remaining, or suffer tedious legal action his client would commence. On May 4, 1989, petitioner filed a complaint for specific performance and/or damages before RTC. o Private respondent filed its answer with counterclaim, stating that it was the petitioner who was remiss in the performance of its obligation in arranging the shipping requirements of its purchases and, as a consequence, should pay damages. The trial court held that the petitioner was absolved in its obligation to pick-up the remaining sulfuric acid because its failure was due to force majeure. According to the trial court, it was private respondent who committed a breach of contract when it failed to accommodate the additional order of the petitioner, to replace those that sank in the sea. There was advanced payment by Aerospace as of October 3, 1986 in the amount of P553,280.00.

Issue: Whether or not petitioner is exempted from paying rental expenses and other damages by arguing that expenses for the preservation of fungible goods must be assumed by the seller.

Held: Considering, however, that petitioner made an advance payment for the unlifted sulfuric acid in the amount of P303,483.37, it is proper to set-off this amount against the rental expenses initially paid by private respondent. It is worth noting that the adjustment and allowance of private respondent’s counterclaim or set-off in the present action, rather than by another independent action, is encouraged by the law. Set-off in this case is proper and

reasonable. It involves deducting P272,000.00 (rentals) from P303,483.37 (advance payment), which will leave the amount of P31,483.37 refundable to petitioner.

ERNESTO M. APODACA vs. NATIONAL LABOR RELATIONS COMMISSION G.R. No. 80039 April 18, 1989

Facts:    

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Ernesto Apodaca (petitioner) was employed in National Labor Relations Commission (respondent corporation). On August 28, 1985, private respondent Jose M. Mirasol persuaded petitioner to subscribe to 1,500 shares of respondent corporation at 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. o He resigned on January 2, 1986. 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. o 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 subscription in the amount of P95,439.93. o Petitioner questioned the set-off alleging that there was no call or notice for the payment of the unpaid subscription and that, accordingly, the alleged obligation is not enforceable. In a decision dated April 28, 1987, the labor arbiter sustained the claim of petitioner for P17,060.07 on the ground that the employer has no right to withhold payment of wages already earned under Article 103 of the Labor Code. The NLRC held that a stockholder who fails to pay his unpaid subscription on call becomes a debtor of the corporation and that the set-off of said obligation against the wages and others due to petitioner is not contrary to law, morals and public policy.

Issue: Whether or not the set-off was valid.

Held: 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. What the records show is that the respondent corporation deducted the amount due to petitioner from the amount receivable from him for the unpaid subscriptions. No doubt such set-off was without lawful basis, if not premature. As there was no notice or call for the payment of unpaid subscriptions, the same is not yet due and payable. The NLRC cannot validly set it off against the wages and other benefits due petitioner. Article 113 of the Labor Code allows such a deduction from the wages of the employees by the employer, only in three instances: ART. 113. Wage Deduction. — No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of his employees, except: (a) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by him as premium on the insurance; (b) For union dues, in cases where the right of the worker or his union to checkoff has been recognized by the employer or authorized in writing by the individual worker concerned; and (c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.

SPOUSES VICTORIANO CHUNG and DEBBIE CHUNG vs. ULANDAY CONSTRUCTION, INC. G.R. No. 156038 October 11, 2010

Facts: 

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Issue:

In February 1985, the petitioners contracted with respondent Ulanday Construction, Inc. (respondent) to construct, within a 150-day period, the concrete structural shell of the formers two-storey residential house at the contract price of P3,291,142.00. Subsequently, the parties agreed to exclude from the contract the roofing and flushing work, for P321,338.00, reducing the contract price to P2,969,804.00. On March 17, 1995, the petitioners paid the P987,342.60 down payment, with the balance of P1,982,461.40 to be paid based on the progress billings. As the actual construction started on March 7, 1995 and went on, the respondent submitted 12 progress billings. While the petitioners settled the first 7 progress billings, amounting to P1,270,641.59, payment was made beyond the 7-day period provided in the contract. The petitioner subsequently granted the respondent a P100,000.00 cash advance, leaving the unpaid progress billings at P445,922.13.22. During the construction, the respondent also effected 19 change orders without the petitioners prior written approval, amounting to P912,885.91. The petitioners, however, paid P42,298.61 for Change Order No. 1 and partially paid P130,000.00 for Change Order Nos. 16 and 17. Petitioner Debbie Chung acknowledged in writing that the balance for Change Order Nos. 16 and 17 would be paid upon completion of the contract. The outstanding balance on the change orders totaled P740,587.30. On July 4, 1995, the respondent notified the petitioners that the delay in the payment of progress billings delays the accomplishment of the contract work. On March 28, 1996, the respondent demanded full payment for progress billings and change orders. On April 8, 1996, the respondent demanded payment of P1,310,670.56 as outstanding balance on progress billings and change orders. The petitioners denied liability, asserting that the respondent violated the contract provisions by, among others, failing to finish the contract within the 150-day stipulated period, failing to comply with the provisions on change orders, and overstating its billings.

Whether or not compensation was applicable in this case.

Held: The Court ordered 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 ruling 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.

MONDRAGON PERSONAL SALES, INC. vs. VICTORIANO S. SOLA, JR. G.R. No. 174882 January 21, 2013

Facts: 

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Petitioner Mondragon Personal Sales Inc., a company engaged in the business of selling various consumer products through a network of sales representatives, entered into a Contract of Services with respondent Victoriano S. Sola, Jr. for a period of 3 years. o Under the said contract, respondent, as service contractor, would provide service facilities to petitioner’s products, sales force and customers in General Santos City and as such, he was entitled to commission or service fee The agreement then came into effect when petitioner’s goods were delivered to respondent’s bodega and were sold by petitioner’s employees. Prior to the execution of the contract, respondent’s wife, had an existing obligation with petitioner arising from her Franchise Distributorship Agreement with the latter. On January 26, 1995, respondent wrote a letter addressed to petitioner’s Vice-President for Finance wherein he acknowledged and confirmed his wife’s indebtedness to petitioner in the amount of P1,973,154.73 and, together with his wife, bound himself to pay on installment basis the said debt. Petitioner withheld the payment of respondent’s service fees and applied the same as partial payments to the debt which he obligated to pay. On April 29, 1995, respondent closed and suspended operation of his office cum bodega where petitioner’s products were stored and customers were being dealt with. On May 24, 1995, respondent filed with the RTC a Complaint for accounting and rescission against petitioner alleging that petitioner withheld portions of his service fees and his whole service fees for the succeeding months, the total amount of which was P222,202.84.

Issue: Whether or not there was compensation under Article 1279 of the Civil Code.

Held:

The Court found petitioner's act of withholding respondent's service fees/commissions and applying them to the latter's outstanding obligation with the former is merely an acknowledgment of the legal compensation that occurred by operation of law between the parties. Compensation is a mode of extinguishing to the concurrent amount the obligations of persons who in their own right and as principals are reciprocally debtors and creditors of each other. Legal compensation takes place by operation of law when all the requisites are present, as opposed to conventional compensation which takes place when the parties agree to compensate their mutual obligations even in the absence of some requisites. All the requisites for legal compensation are present. Petitioner and respondent are both principal obligors and creditors of each other. Their debts to each other consist in a sum of money. Respondent acknowledged and bound himself to pay petitioner the amount of P1,973,154.73 which was already due, while the service fees owing to respondent by petitioner become due every month. Respondent's debt is liquidated and demandable, and petitioner's payments of service fees are liquidated and demandable every month as they fall due. There is no retention or controversy commenced by third persons over either of the debts. Thus, compensation is proper up to the concurrent amount where petitioner owes respondent P125,040.01 for service fees, while respondent owes petitioner P1,973,154.73. As legal compensation took place in this case, there is no basis for respondent to ask for rescission since he was the first to breach their contract when he suddenly closed and padlocked his bodega cum office in General Santos City occupied by petitioner.

INSULAR INVESTMENT AND TRUST CORPORATION vs. CAPITAL ONE EQUITIES CORP. G.R. No. 183308 April 25, 2012

Facts: 

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Insular Investment and Trust Corporation (IITC) and Capital One Equities Corp. (COEC) and Planters Development Bank (PDB) have been regularly engaged in trading, sale and purchase of Philippine Treasury bills. On various dates, IITC had purchased from COEC. IITC purchased from COEC treasury bills worth P260,683, 392.51 and was able to deliver only P121,050,000. On May 2, 1994, COEC purchased from IITC P186,790,000 worth of treasury bills. On May 10, 1994, COEC demanded a letter from IITC the physical delivery of the securities last May 2, 1994. On its May 18, 1994 letter to PDB, IITC requested, on behalf of COEC, the delivery of IITC treasury bills, which had been fully paid. On May 30, 1994, COEC protested the tenor of IITC’s letter to PDB and took exception to IITC’s assertion that it merely acted as a facilitator with regard to the sale of the treasury bills. IITC sent COEC a letter, demanding that COEC deliver to IITC the P139,833,392.00 worth of treasury bills or return the full purchase price. In either case, IITC also demanded that COEC to pay IITC the amount of P1,729,069.50 representing business opportunity lost due to the non-delivery of the treasury bills, and deliver treasury bills worth P121,050,000 with the same maturity dates originally purchased by IITC. COEC sent a letter-reply dated June 9, 1994 to IITC in which it acknowledged its obligation to deliver the treasury bills worth P139,833,392.00 which it sold to IITC and formally demanded the delivery of the treasury bills worth P186,774,739.49 which it purchased from IITC. o COEC also demanded the payment of lost profits in the amount ofP3,253,250.00. Considering that COEC and IITC both have claims against each other for the delivery of treasury bills, COEC proposed that a legal set-off be effected, which would result in IITC owing COEC the difference of P46,941,446.49. In its June 13, 1994 letter to COEC, IITC rejected the suggestion for a legal setting-off of obligations, alleging that it merely acted as a facilitator between PDB and COEC. 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.

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COEC was likewise unable to deliver the remaining IITC T-Bills amounting to P119,633,392.00. Neither PDB and COEC returned the purchase price for the duly paid treasury bills. Thus COEC filed a complaint with the RTC which found that COEC still has obligations to pay IITC P119,633,392.00 worth of treasury bills. However, since IITC and COEC were both debtors and creditors of each other, the RTC off-set their debts, resulting in a difference of P17,056,608.00 in favor of COEC. As to PDB’s liability, it ruled that PDB had the obligation to pay P136,790,000.00 to IITC. Thus, the trial court ordered (a) IITC to pay COEC P17,056,608.00 with interest at the rate of 6% from June 10, 1994 until full payment and (b) PDB to pay IITC P136,790,000.00 with interest at the rate of 6% from March 21, 1995 until full payment.

Issue: Whether or not COEC can set-off its obligation to IITC as against the latter’s obligation to it.

Held: The Court ruled that the set-off compensation is allowed. As against the contention of IITC, COEC had proven that IITC is a principal on its sale of the treasury bills thus holding them liable for paying such. Therefore, 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. The court ruled the applicable provisions of law are Articles 1278, 1279 and 1290 of the Civil Code of the Philippines. In Article 1278 states that compensation shall take place when two persons, in their own right, are creditors and debtors of each other. Also, in Article 1290, states that 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. The requisites of a valid compensation are present in the cases of the debts between IITC and COEC. As stated in Article 1279 of the Civil Code of the Philippines, such requisites are (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; and (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. Therefore, both shall be allowed to set-off their obligations with each other.

SELWYN F. LAO and EDGAR MANANSALA vs. SPECIAL PLANS, INC. G.R. No. 164791 June 29, 2010

Facts: 

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Petitioners Selwyn F. Lao (Lao) and Edgar Manansala (Manansala), together with Benjamin Jim (Jim), entered into a Contract of Lease with respondent Special Plans, Inc. (SPI) over SPI’s building 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 rental rate of P23,000.00 per month. 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 claiming that Jim and petitioners have accumulated unpaid rentals of P118,000.00. Petitioners filed their Verified Answer faulting SPI for making them believe that it owns the leased property. They likewise asserted 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.

Issue: Whether or not legal compensation is applicable in this case.

Held: Petitioners failed to properly discharge their burden to show that the debts are liquidated and demandable. Consequently, legal compensation is inapplicable. A claim is liquidated when the amount and time of payment is fixed. If acknowledged by the debtor, although not in writing, the claim must be treated as liquidated. When the defendant, who has an unliquidated claim, sets it up by way of counterclaim, and a judgment is

rendered liquidating such claim, it can be compensated against the plaintiff’s claim from the moment it is liquidated by judgment.

UNITED PLANTERS SUGAR MILLING CO., INC., (UPSUMCO) vs. CA G.R. No. 126890 April 2, 2009

Facts: 

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In 1974, as UPSUMCO commenced operations, it obtained a set of loans from respondent Philippine National Bank (PNB) referred herein as the “takeoff loans,” were intended to finance the construction of a sugar milling plant. o The takeoff loans were embodied in a Credit Agreement dated November 5, 1974, which was thrice restructured through Restructuring Agreements dated 24 June and 10 December 1982, and 9 May 1984. The takeoff loans were secured a real estate mortgage over two parcels of land where the milling plant stood and chattel mortgages over the machineries and equipment. o As another condition to the takeoff loans, UPSUMCO agreed to “open and/or maintain a deposit account with the (PNB) and the bank is authorized at its option to apply to the payment of any unpaid obligations of the client any/and all monies, securities which may be in its hands on deposit.” Between 1984 to 1987, UPSUMCO contracted another set of loans from PNB, these ones oriented towards financing the operations of the Company referred as “operational loans,” also contained setoff clauses relative to the application of payments from UPSUMCO’s bank accounts. They were likewise secured by pledge contracts whereby UPSUMCO assigned to PNB all its sugar produce for PNB to sell and apply the proceeds to satisfy the indebtedness arising from the operational loans. 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. o 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). Thereafter, it is alleged that APT and UPSUMCO entered into talks concerning the disposal of UPSUMCO’s mortgaged assets. The Decision stated that the parties then agreed to an “uncontested or ‘friendly foreclosure’ of these mortgaged assets, in exchange for UPSUMCO’s waiver of its right of redemption.” o A Petition for Extrajudicial Foreclosure Sale dated 28 July 1987 was filed with the Ex-Officio Regional Sheriff with PNB identified therein as “Mortgagee” and APT as “Assignee and Transferee of PNB’s rights, titles and interests.”

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o PNB and APT manifested in the petition their intent to foreclose on the real estate and chattel mortgages which notably were executed to secure the takeoff loans. o The foreclosure sale was conducted on 27 August 1987, whereby APT purchased the auctioned properties for P450 Million. 7 days after the foreclosure sale, UPSUMCO executed a Deed of Assignment wherein it assigned to APT its right to redeem the foreclosed properties, in exchange for or in consideration of APT “condoning any deficiency amount it may be entitled to recover from the Corporation under the Credit Agreement dated November 5, 1974, and the Restructuring Agreements dated June 24 and December 10, 1982, and May 9, 1984, respectively, executed between (UPSUMCO) and PNB…” On even date, the Board of Directors of UPSUMCO agreed to a Board Resolution authorizing Joaquin Montenegro, its President, to enter into the said Deed of Assignment. Notwithstanding this Deed of Assignment, UPSUMCO later filed a complaint for sum of money and damages against PNB and APT before the RTC. It was alleged therein that PNB and APT had illegally appropriated funds belonging to UPSUMCO, through the following means: (1) withdrawals made from the bank accounts opened by UPSUMCO beginning 27 August 1987 until 12 February 1990; (2) the application of the proceeds from the sale of the sugar of UPSUMCO beginning 27 August 1987 until 4 December 1987; (3) the payment from of the funds of UPSUMCO with PNB for the operating expenses of the sugar mill after 3 September 1987, allegedly upon the instruction of APT with the consent of PNB.

Issue: Whether or not a valid legal compensation or conventional compensation was present in this case.

Held: Under Article 1279 (1), it is necessary for compensation that the obligors “be bound principally, and that he be at the same time a principal creditor of the other.” There is, concededly, no mutual creditor-debtor relation between APT and UPSUMCO. However, we recognize the concept of conventional compensation, defined as occurring “when the parties agree to compensate their mutual obligations even if some requisite is lacking, such as that provided in Article 1282.” It is intended to eliminate or overcome obstacles which prevent ipso jure extinguishment of their obligations. Legal compensation takes place by operation of law when all the requisites are present, as opposed to conventional compensation which takes place when the parties agree to

compensate their mutual obligations even in the absence of some requisites. The only requisites of conventional compensation are (1) that each of the parties can dispose of the credit he seeks to compensate, and (2) that they agree to the mutual extinguishment of their credits.

SILAHIS MARKETING CORPORATION vs. IAC G.R. No. L-74027 December 7, 1989

Facts: 

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Gregorio de Leon (De Leon) doing business under the name and style of Mark Industrial Sales sold and delivered to Silahis Marketing Corporation (Silahis for short) various items of merchandise covered by several invoices in the aggregate amount of P 22,213.75 payable within 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 CFI a complaint for the collection of the said accounts including accrued interest thereon in the amount of P661.03 and attorney’s fees of P 5,000.00 plus costs of litigation. The answer admitted the allegations of the complaint insofar as the invoices were concerned but presented as affirmative defenses; (a) a debit memo for P22,200.00 as unrealized profit for a supposed commission that Silahis should have received from de Leon for the sale of sprockets in the amount of P111,000.00 made directly to Dole Philippines, Incorporated by the latter sometime in August 1975 without coursing the same through the former allegedly in violation of the usual practice concerning sale of merchandise to Dole Philippines, Inc.; and (b) Silahis’ claim that it is entitled to return the stainless steel screen which was found defective by its client, Borden International, and to have the corresponding amount cancelled from its account with de Leon. In a decision dated August 25, 1978, 1 the lower court confirmed the liability of Silahis for the claim of de Leon but at the same time ordered that it be partially offset by Silahis’ counterclaim as contained in the debit memo for unrealized profit and commission.

Issue: Whether or not compensation is present in this case.

Held: There was nothing contained in the debit memo to show that private respondent obligated himself to set-off or compensate petitioner's outstanding accounts with the alleged

unrealized commission from the assailed sale of sprockets in the amount of P 111,000.00 to Dole Philippines, Inc. 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. 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 the set-off against the other is not clear nor liquidated; compensation cannot extend to unliquidated, disputed claim existing from breach of contract.

ENGRACIO FRANCIA vs. IAC G.R. No. L-67649 June 28, 1988

Facts:   

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Engracio Francia is the registered owner of a residential lot and a two-story house built upon it. 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. o 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. On March 3, 1979, Francia received a notice of hearing filed by Ho Fernandez, seeking the cancellation of TCT No. 4739 (37795) and the issuance in his name of a new certificate of title. Upon verification through his lawyer, Francia discovered that a Final Bill of Sale had been issued in favor of Ho Fernandez by the City Treasurer on December 11, 1978. The auction sale and the final bill of sale were both annotated at the back of TCT No. 4739 (37795) by the Register of Deeds. On March 20, 1979, Francia filed a complaint to annul the auction sale.

Issue: Whether or not Francia’s tax delinquency of P2,400.00 has been extinguished by legal compensation.

Held: 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 Court 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 taxpayer cannot refuse to pay his tax when called upon by the collector because he has a claim against the governmental body not included in the tax levy.

HERMENEGILDO M. TRINIDAD vs. ESTRELLA ACAPULCO G.R. No. 147477 June 27, 2006

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. o She alleged: Sometime in February 1991, a certain Primitivo Cañete requested her to sell a Mercedes Benz for P580,000.00. o Cañete also said that if respondent herself will buy the car, Cañete was willing to sell it for P500,000.00. o 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. o 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. o Respondent thereafter executed a deed of sale in favor of petitioner even though petitioner did not pay her any consideration for the sale. o 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. o 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.

Issue: Whether or not the purchase price of the car had been automatically offset by respondent’s own monetary obligation of P566,000.00.

Held:

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. The claim of respondent that there could be no legal compensation in this case as one of the obligations consists of delivery of a car and not a sum of money must also fail. Respondent sold the car to petitioner on March 4, 1991 for P500,000.00 while she filed her complaint for nullification of the sale only on May 6, 1991. As legal compensation takes place ipso jure, and retroacts to the date when its requisites are fulfilled, legal compensation has already taken place at the time of the sale. At such time, petitioner owed respondent the sum of P500,000.00 which is the price of the vehicle. Consequently, by operation of law, the P500,000.00 which petitioner owed respondent is off-set against the P566,000.00 owed by respondent to petitioner, leaving a balance of P66,000.00, which respondent should pay with 12% interest per annum from date of judicial or extrajudicial deed. Since there was no extrajudicial deed in this case, the interest shall be resolved from the date petitioner filed its Supplemental Motion for Reconsideration invoking for the first time legal compensation, that is, May 20, 1992.

HEIRS OF SERVANDO FRANCO vs. SPOUSES VERONICA AND DANILO GONZALES G.R. No. 159709 June 27, 2012

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On November 7, 1985, Servando Franco and Leticia Medel obtained a loan from Veronica R. Gonzales, 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 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. On July 23, 1986, Servando and Leticia with the latter’s husband, 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. 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. Veronica R. Gonzales, joined by her husband filed with the RTC a complaint for collection of the full amount of the loan including interests and other charges.

Whether or not a novation of the August 23, 1986 promissory note when respondent Veronica Gonzales issued the February 5, 1992 receipt was present.

Held: The Court held that novation did not transpire because no irreconcilable incompatibility existed between the promissory note and the 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. 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. There is incompatibility when the two obligations cannot stand together, each one having its independent existence. If the two obligations cannot stand together, the latter obligation novates the first. Changes that breed incompatibility must be essential in nature and not merely accidental. The incompatibility must affect any of the essential elements of the obligation, such as its object, cause or principal conditions thereof; otherwise, the change is merely modificatory in nature and insufficient to extinguish the original obligation. In light of the foregoing, 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.

CAROLINA HERNANDEZ-NIEVERA vs. WILFREDO HERNANDEZ G.R. No. 171165 February 14, 2011

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Project Movers Realty & Development Corporation (PMRDC), one of the respondents herein, is a duly organized domestic corporation engaged in real estate development. o In 1995, it entered through its president, respondent Mario Villamor, into various agreements with co-respondents Home Insurance & Guaranty Corporation (HIGC) and Land Bank of the Philippines (LBP), in connection with the construction of the Isabel Homes housing project and of the Monumento Plaza commercial and recreation complex. o In its Asset Pool Formation Agreement, PMRDC conveyed to HIGC the constituent assets of the two projects, whereas LBP agreed to act as trustee of the resulting Asset Pool for a consideration. The execution of the projects would be funded largely through securitization whereby LBP would act as the nominal issuer of such certificates with the Asset Pool itself acting as the real issuer. HIGC, in turn, would provide guaranty coverage to these participation certificates in accordance with its Contract of Guaranty with PMRDC and LBP. On November 13, 1997, PMRDC 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. o Demetrio, under authority of a Special Power of Attorney to Sell or Mortgage, signed the MOA also in behalf of Carolina and Margarita. As an implementation of the MOA, the lands within Area I were then mortgaged to Solid Bank for which petitioners received consideration from PMRDC. 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) whereby the lands within Area II were transferred and assigned to the Asset Pool in exchange for a number of shares of stock which supposedly had already been issued in the name and in favor of Demetrio. o These pieces of land are the subject of the present controversy as far as they are affected by the explicit provision in the DAC which dispensed with the stipulated obligation of PMRDC in the MOA to pay option money should it opt to buy the properties. PMRDC admittedly did not avail of its option to purchase the lands in Area II in the twelve months that passed after the execution of the MOA. On January 8, 1999, petitioners demanded the return of the corresponding TCTs.

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o In its January 21, 1999 letter to Demetrio, however, PMRDC, through Villamor, stated 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 DAC. Petitioners disowned Demetrio’s signature in the DAC and labeled it a mere forgery. o They explained 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. Boldly, they asserted that the fraudulent execution of the DAC was made possible through the connivance of all the respondents. Petitioners instituted an action before the RTC for the rescission of the MOA, as well as for the declaration of nullity of the DAC. They prayed for the issuance of a writ of preliminary injunction and for the payment of damages.

Issue: Whether or not there was novation

Held: The powers conferred on Demetrio were exclusive only to selling and mortgaging the properties. However, the power conferred on Demetrio to sell “for such price or amount” is broad enough to cover the exchange contemplated in the DAC between the properties and the corresponding corporate shares in PMRDC, with the latter replacing the cash equivalent of the option money initially agreed to be paid by PMRDC under the MOA. Suffice it to say that “price” is understood to mean “the cost at which something is obtained, or something which one ordinarily accepts voluntarily in exchange for something else, or the consideration given for the purchase of a thing.” 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. In California Bus Lines, Inc. v. State Investment House, Inc., the Court held that: 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. Corollarily, changes that breed incompatibility must be essential in nature and not merely accidental. The incompatibility must take place in any of the essential elements of the obligation such as its object, cause or principal conditions thereof; otherwise, the change would be merely modificatory in nature and insufficient to extinguish the original obligation.

ST. JAMES COLLEGE OF PARAÑAQUE vs. EQUITABLE PCI BANK G.R. No. 179441 August 9, 2010

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Petitioners-spouses Jaime and Myrna Torres owned and operated St. James College of Parañaque (St. James College), a sole proprietorship educational institution. In 1995, the Philippine Commercial and International Bank (PCIB) granted the Torres spouses and/or St. James College a credit line facility of up to P25,000,000. This accommodation or any of its extension or renewal was secured by a real estate mortgage (REM) over a parcel of land in the name of St. James College PCIB eventually merged with Equitable Bank with the surviving bank known as Equitable PCI Bank (EPCIB) (now Banco de Oro). The credit line underwent several annual renewals, the last being effected in 2001. As 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 P18,300,000. In a bid to settle its loan availment, petitioners first proposed to EPCIB that they be allowed to pay their account in equal quarterly installments for five years. EPCIB informed petitioners that it is denying their request for the reinstatement of their credit line, but proposed a restructuring package with a soft payment scheme for the outstanding loan balance of P18,300,000. o Under the counter-proposal, the bank would book the accumulated past due loans to current status and charge interest at a fixed rate of 13.375% per annum, payable in either of the ensuing modes and level, at petitioners’ options: payment of the P18,300,000 principal either at a monthly rate of P508,333.33; or equal annual amortizations of P6,100,000 payable every May.  Petitioner Jaime Torres chose and agreed to the second option. Petitioners failed to pay the stipulated annual amortization of P6,100,000 agreed upon. o Whereupon, EPCIB addressed to petitioners a demand letter requiring them to settle their obligation. o On June 23, 2003, petitioners tendered, and EPCIB accepted, a partial payment of P2,521,609.62,

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o In the covering letter, which came with the tender, petitioners promised to make another payment in October 2003 and that the account would be made current in June 2004. They manifested, however, that St. James College is not subject to the 10% value-added tax (VAT) which EPCIB assessed against the school in its June 15, 2003 statement of account. Petitioners accordingly requested the deletion of the VAT portion. On September 15, 2003, petitioners requested that the bank allow a partial payment of the May 2003 amortization balance of P5,100,000. EPCIB responded denying petitioners’ request, but nonetheless proposed a new repayment scheme to which petitioners were not amenable. Petitioners made a second check remittance, this time in the amount of P921,535.42, the P500,000 portion of which represented payment of the principal and P421,535.42 for interest due on October 15, 2003. On November 6, 2003, petitioners issued a Stop Payment Order for their P921,535.42 check. Jaime, adverting to EPCIB’s November 5, 2003 letter, told the bank, “You cannot just unilaterally decide/announce that you did not approve our proposal/request for restructuring of our loan after receiving our payment, which was based on said proposal/request.” On November 10, 2003, EPCIB, through counsel, demanded full settlement of petitioners’ loan obligation in the total amount of P24,719,461.48. On November 27, 2003, EPCIB filed before the Office of the Clerk of Court and Ex-Officio Sheriff of the RTC its Petition for Sale to extra-judicially foreclose the mortgaged property. On December 8, 2003, in the RTC, petitioners instituted against EPCIB a complaint for Declaratory Relief, Injunction and Damages, with application for a temporary restraining order (TRO) and/or writ of preliminary injunction.

Issue: Whether or not there was novation of the contract.

Held: The Court held that there was no novation in the contract. 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. Contrary to what petitioners would want the Court to believe, there is clearly no incompatibility between EPCIB’s receipt of the partial payments of the principal amounts and what was due in May 2003. As it were, EPCIB accepted the partial payments remitted, but demanded, at the same time, the full payment of what was otherwise due in May 2003, as the parties agreed upon. As the CA observed correctly, precisely EPCIB was demanding the full payment of the PhP 5,100,000 principal due in May 2003 which had not yet been settled. Novation is never presumed. Consequently, that which arises from a purported modification in the terms and conditions of the obligation must be clear and express. On petitioners thus rests the onus of showing clearly and unequivocally that novation has indeed taken place. To us, petitioners have not discharged the burden. Moreover, we fail to see the presence of the concurring requisites for a novation of contract, as enumerated above. Indeed, petitioners have not shown an express modification of the terms of payment of the obligation. It has often been said that the minds that agree to contract can agree to novate. And the agreement or consent to novate may well be inferred from the acts of a creditor, since volition may as well be expressed by deeds as by words. In the instant case, however, the acts of EPCIB before, simultaneously to, and after its acceptance of payments from petitioners argue against the idea of its having acceded or acquiesced to petitioners’ request for a change of the terms of payments of the secured loan. Far from it. Thus, a novation through an alleged implied consent by EPCIB, as proffered and argued by petitioners, cannot be given imprimatur by the Court.

MARIA SOLEDAD TOMIMBANG vs. ATTY. JOSE TOMIMBANG G.R. No. 165116 August 4, 2009

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Petitioner and respondent are siblings. Their parents donated to petitioner an eightdoor apartment 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. Petitioner accepted respondent's offer. Renovations on Units B to G were completed, and the work has just started on Unit A when an altercation broke out between herein parties. Respondent and petitioner entered into a new agreement whereby petitioner was to start making monthly payments on her loan. In 1997, a quarrel also occurred between respondent and another sister, Maricion. Petitioner left Unit H and could no longer be found. Renovations on Unit A were discontinued when her whereabouts could not be located. She also stopped making monthly payments and ignored the demand letter sent by respondent's counsel. Respondent filed a Complaint against petitioner, demanding the latter to pay the former the net amount of P3,989,802.25 plus interest of 12% per annum from date of default. Petitioner contends that the loan is not yet due and demandable because the suspensive condition – the completion of the renovation of the apartment units - has not yet been fulfilled.

Issue: Whether or not there was novation in the contract.

Held: 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 modificatory or partial novation, of petitioner's obligation. An extinctive novation would thus have the twin effects of, first, extinguishing an existing obligation and, second, creating a new one in its stead. This kind of novation

presupposes a confluence 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 new valid obligation. Novation is merely modificatory where the change brought about by any subsequent agreement is merely incidental to the main obligation; in this instance, the new agreement will not have the effect of extinguishing the first but would merely supplement it or supplant some but not all of its provisions. Extinctive novation is applicable in this case. 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.

MINDANAO SAVINGS AND LOAN ASSOCIATION, INC. vs. EDWARD WILLKOM G.R. No. 178618 October 11, 2010

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The First Iligan Savings and Loan Association, Inc. (FISLAI) and the Davao Savings and Loan Association, Inc. (DSLAI) are entities duly registered with the Securities and Exchange Commission (SEC) primarily engaged in the business of granting loans and receiving deposits from the general public, and treated as banks. FISLAI and DSLAI entered into a merger, with DSLAI as the surviving corporation. The articles of merger were not registered with the SEC due to incomplete documentation. On August 12, 1985, DSLAI changed its corporate name to MSLAI. On May 26, 1986, the Board of Directors of FISLAI passed and approved Board Resolution No. 86-002, assigning its assets in favor of DSLAI which in turn assumed the former’s liabilities. The Monetary Board of the Central Bank of the Philippines ordered its closure and placed it under receivership per Monetary Board Resolution No. 922 due to failure. o The Monetary Board found that MSLAI’s financial condition was one of insolvency, and for it to continue in business would involve probable loss to its depositors and creditors. On May 24, 1991, the Monetary Board ordered the liquidation of MSLAI, with PDIC as its liquidator. Prior to the closure of MSLAI, Uy filed with the RTC an action for collection of sum of money against FISLAI. o On October 19, 1989, 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, plus interest until full payment, 25% as attorney’s fees, and the costs of suit. The decision was modified by the CA by further ordering the third-party defendant therein to reimburse the payments that would be made by the defendants. The decision became final and executory on February 21, 1992. A writ of execution was thereafter issued.[10] During the public auction on May 17, 1993, Willkom was the highest bidder. On September 20, 1994, Willkom sold one of the subject parcels of land to Go.

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On June 14, 1995, MSLAI, represented by PDIC, filed before the RTC a complaint for Annulment of Sheriff’s Sale, Cancellation of Title and Reconveyance of Properties against respondents.

Issue: Whether or not novation by substitution of the debtor exists in this case.

Held: According to the Court, petitioner cannot anchor its right to annul the execution sale on the principle of novation. While it is true that DSLAI (now MSLAI) assumed all the liabilities of FISLAI, such assumption did not result in novation as would release the latter from liability, thereby exempting its properties from execution. It is a rule that novation by substitution of debtor must always be made with the consent of the creditor. 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.

AGRIFINA AQUINTEY vs. SPOUSES FELICIDAD AND RICO TIBONG G.R. No. 166704 December 20, 2006

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On May 6, 1999, petitioner Agrifa filed before RTC a complaint for sum of money and damages against respondents. o 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.

Issues: Whether or not the dead of assignment extinguished the obligation.

Held: Novation which consists in substituting a new debtor (delegado) in the place of the original one (delegante) 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 (delegatario), 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 codebtor or a surety. If there is no agreement as to solidarity, the first and the new debtor are considered obligated jointly. The theory of novation is that the new debtor contracts with the old debtor that he will pay the debt, and also to the same effect with the creditor, while the latter agrees to accept the new debtor for the old. Moreover, the agreement must be based on the consideration of the creditor's agreement to look to the new debtor instead of the old. CA correctly 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.

ASIAN TERMINALS, INC. vs. PHILAM INSURANCE CO., INC. G.R. No. 181163 July 24, 2013

Facts: ***consolidate with previous facts

Issue: Whether or not subrogation to the rights of the creditor was valid in this case.

Held: The Court held that payment by the insurer to the insured operates as an equitable assignment to the insurer of all the remedies that the insured may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract. It accrues simply upon payment by the insurance company of the insurance claim. The doctrine of subrogation has its roots in equity. It is designed to promote and accomplish justice; and is the mode that equity adopts to compel the ultimate payment of a debt by one who, in justice, equity, and good conscience, ought to pay.

LOADMASTERS CUSTOMS SERVICES, INC. vs. GLODEL BROKERAGE CORPORATION G.R. No. 179446 January 10, 2011

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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. 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. o Six (6) truckloads of copper cathodes were to be delivered to Balagtas, Bulacan, while the other six (6) truckloads were destined for Lawang Bato, Valenzuela City. o The cargoes in six truckloads for Lawang Bato were duly delivered in Columbia’s warehouses there. o One (1) truck, loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo. 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 of P1,903,335.39. o R&B Insurance paid Columbia the amount of P1,896,789.62 as insurance indemnity. R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel before the RTC seeking 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.”

Whether or not R&B Insurance has the right to seek reimbursement from either or both Loadmasters or Glodel as subrogee of the rights and interest of the consignee.

Held: Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities. R&B Insurance is subrogated to the rights of the insured to the extent of the amount it paid the consignee under the marine insurance, as provided under Article 2207 of the Civil Code. As subrogee of the rights and interest of the consignee, R&B Insurance has the right to seek reimbursement from either Loadmasters or Glodel or both for breach of contract and/or tort.

METROPOLITAN BANK AND TRUST COMPANY vs. RURAL BANK OF GERONA, INC. G.R. No. 159097 July 5, 2010

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In the 1970s, the Central Bank and the Rural Bank of Gerona, Inc. 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. o The agreement required RBG to open a separate bank account where the IBRD loan proceeds shall be deposited. 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 farmersborrowers; Metrobank, in turn, credited the proceeds to RBG’s special savings account for the latter’s release to the farmersborrowers. Cental banked released credit advice 3 times. During the last credit advice, RBG only withdrew P75,375.00 out of the P220,000. On November 3, 1978, the Central Bank issued debit advices reversing all the approved IBRD loans. The Central Bank implemented the reversal by debiting from Metrobank’s demand deposit account the amount corresponding to all three IBRD loans. Metrobank claimed that the amounts debited from RBG were insufficient to cover all the credit advices that were reversed by the Central Bank. o Metrobank demanded payment from RBG which could make partial payments. As of October 17, 1979, Metrobank claimed that RBG had an outstanding balance of P334,220.00. To collect this amount, it filed a complaint for collection of sum of money against RBG before the RTC. RTC ruled in favor of Metrobank saying that legal subrogation had occurred.

Whether or not legal subrogation occurred as found by the RTC.

Held: After Metrobank received the Central Bank’s debit advices in November 1978, it (Metrobank) accordingly debited the amounts it could from RBG’s special savings account without any objection from RBG. That RBG’s tacit approval came after payment had been made does not completely negate the legal subrogation that had taken place. Article 1303 of the Civil Code states that subrogation transfers to the person subrogated the credit with all the rights thereto appertaining, either against the debtor or against third persons. As the entity against which the collection was enforced, Metrobank was subrogated to the rights of Central Bank and has a cause of action to recover from RBG the amounts it paid to the Central Bank, plus 14% per annum interest.

SWAGMAN HOTELS AND TRAVEL, INC. vs. CA G.R. No. 161135 April 8, 2005

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Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc. obtained from private respondent Neal B. Christian loans evidenced by three promissory notes o 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. o 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 RTC 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. o According to them, Christian had no cause of action because the three promissory notes were not yet due and demandable.

Issue: Whether or not a valid novation was present in this case.

Held: Under Article 1253 of the Civil Code, if the debt produces interest, payment of the principal shall not be deemed to have been made until the interest has been covered. In this case, the private respondent would not have signed the receipts describing the payments made by the petitioner as “capital repayment” if the obligation to pay the interest was still subsisting. 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. 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. 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.

AZOLLA FARMS and FRANCISCO R. YUSECO vs. CA G. R. No. 138085 November 11, 2004

Facts:  

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Issue:

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. o 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). o The Board of Directors of Azolla Farms passed a board resolution 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 promising to pay Savings Bank the sum of P1,400,000.00. o The net proceeds of P1,225,443.31 was released to FNCB Finance. o FNCB Finance released the mortgage, and in turn, the property was mortgaged to Savings Bank as collateral for the loan. o Yuseco then executed two other promissory notes for the amount of P300,000.00 each. The Azolla Farms project collapsed. o Petitioners Yuseco and Azolla Farms filed with the RTC a complaint for damages. 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. o Respondent Savings Bank filed its Answer denying the allegations in the complaint. It contends that there was evidence that Yuseco was using the loan proceeds for expenses totally unrelated to the project and they decided to withhold the remaining amount until Yuseco gave the assurance that the diversion of the funds will be stopped.

Whether or not a valid novation occurred rendering the promissory notes and real estate mortgage invalid and not binding.

Held: Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or, by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. All the requisites of novation are not present. There is no new obligation that supposedly novated the promissory notes or the real estate mortgage, or a pre-existing obligation that was novated by the promissory notes and the real estate mortgage. In fact, there is only one agreement between the parties in this case, i.e., petitioners’ P2,000,000.00 loan with respondent, as evidenced by the 3 promissory notes and the real estate mortgage. It cannot be said that the loan application of plaintiffs or their initial representations with Credit Manila’s Michael de Guzman was already in itself a binding original contract that was later “novated” by defendant. Plaintiff Yuseco cannot pretend to have been unaware of banking procedures that normally recognize a “loan application” as just that, a mere application. Only upon the bank’s approval of the loan application in the amount and under such terms it deems viable and acceptable, that a binding and effective loan agreement comes into existence. Without any such first or original “loan agreement” as approved in the amount and under specified terms by the bank, there can be nothing whatsoever that can be subsequently novated.

CALIFORNIA BUS LINES, INC. vs. STATE INVESTMENT HOUSE, INC. G.R. No. 147950 December 11, 2003

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In 1979, Delta Motors Corporation—M.A.N. Division (Delta) applied for financial assistance from respondent State Investment House, Inc. (SIHI), a domestic corporation engaged in the business of quasi-banking for P25,000,000.00 in three separate credit agreements. Delta eventually became indebted to SIHI in the amount of P24,010,269.32. From April 1979 to May 1980, petitioner California Bus Lines, Inc. (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. o In each promissory note, CBLI promised to pay Delta or order, P2,314,000 payable in 60 monthly installments with interest at 14% per annum. o 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 on October 7, 1981 with Delta to cover its overdue obligations under the promissory notes. o The restructuring agreement provided for a new schedule of payments of CBLI’s past due installments, extending the period to pay, and stipulating daily remittance instead of the previously agreed monthly remittance of payments.  In case of default, Delta would have the authority to take over the management and operations of CBLI until CBLI and/or its president remitted and/or updated CBLI’s past due account. CBLI and Delta also increased the interest rate to 16% p.a. and added a documentation fee of 2% p.a. and a 4% p.a. restructuring fee. Delta executed a Continuing Deed of Assignment of Receivables in favor of SIHI as security for the payment of its obligations to SIHI per the credit agreements. CBLI continued having trouble meeting its obligations to Delta. This prompted Delta to threaten CBLI with the enforcement of the management takeover clause. To pre-empt the take-over, CBLI filed a complaint for injunction. On September 15, 1983, pursuant to the Memorandum of Agreement, Delta executed a Deed of Sale assigning to SIHI five (5) of the sixteen (16) promissory

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notes from California Bus Lines, Inc. At the time of assignment, these five promissory notes had a total value of P16,152,819.80 inclusive of interest at 14% per annum. SIHI subsequently sent a demand letter to CBLI requiring CBLI to remit the payments due on the five promissory notes directly to it. CBLI replied informing SIHI of Civil Case No. 0023-P and of the fact that Delta had taken over its management and operations. When SIHI was unable to take possession of the buses, SIHI filed a petition for recovery of possession with prayer for issuance of a writ of replevin before the RTC. Thereafter, Delta and CBLI entered into a compromise agreement. CBLI agreed that Delta would exercise its right to extrajudicially foreclose on the chattel mortgages over the 35 bus units. o CBLI refused to pay SIHI the value of the five promissory notes, contending that the compromise agreement was in full settlement of all its obligations to Delta including its obligations under the promissory notes. SIHI filed a complaint against CBLI in the RTC to collect on the five (5) promissory notes with interest at 14% p.a. SIHI also prayed for the issuance of a writ of preliminary attachment against the properties of CBLI.

Issue: Whether 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: There was no novation in this case. 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. However, in reviewing its terms yields no incompatibility between the promissory notes and the restructuring agreement. The restructuring agreement, instead of containing provisions “absolutely incompatible” with the obligations of the judgment, expressly ratifies previous obligations and contains provisions for satisfying them. There was no change in the

object of the prior obligations. The restructuring agreement merely provided for a new schedule of payments and additional security giving Delta authority to take over the management and operations of CBLI in case CBLI fails to pay installments equivalent to 60 days. Where the parties to the new obligation expressly recognize the continuing existence and validity of the old one, there can be no novation. Moreover, the Court has ruled that an agreement subsequently executed between a seller and a buyer that provided for a different schedule and manner of payment, to restructure the mode of payments by the buyer so that it could settle its outstanding obligation in spite of its delinquency in payment, is not tantamount to novation.

GLORIA OCAMPO-PAULE vs. CA G.R. No. 145872 February 4, 2002

Facts: 

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Petitioner received from private complainant Felicitas M. Calilung several pieces of jewelry with a total value of P163,167.95. o 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. Petitioner failed to turn over the proceeds of the sale or to return the unsold pieces of jewelry upon receipt of demand letter. During the barangay conciliation proceedings, petitioner acknowledge having received from private complainant several pieces of jewelry worth P163,167.95. o Both parties eventually executed an agreement entitled “Kasunduan sa Bayaran,” whereby petitioner promised to pay private complainant P3,000.00 every month to answer for the jewelry which she received from the latter. o When petitioner failed to comply with the terms of the Kasunduan sa Bayaran, private complainant sent her another demand letter but she still failed to comply with her obligation. Private complainant then filed a criminal complaint against petitioner in the Office of the Provincial Prosecutor. Consequently, an information charging petitioner with estafa was filed in the RTC Petitioner contends, among others, that the Kasunduan executed by her and private complainant, which stipulate that she was to pay for the pieces of jewelry received by her in monthly installments of P3,000.00 resulted in the novation of her obligation and extinguished her criminal liability.

Issue: Whether or not the “Kasunduan” executed by her and private complainant resulted in the novation of her obligation and extinguished her criminal liability.

Held: 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 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.

SPOUSES ARSENIO R. REYES and NIEVES S. REYES vs. CA G.R. No. 147758 June 26, 2002

Facts:    

Petitioner-spouses borrowed from private respondent P600,000.00 with interest at five percent (5%) per month, which 656otaled P1,726,250.00 at the time of filing of the Complaint. Petitioners also turned over to private respondent their Nissan pickup truck worth P400,000.00 in partial payment of the loan, and petitioner Arsenio executed a deed of absolute sale over the vehicle in favor of respondent. Petitioners failed to make any further payments despite written demand for payment. 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. o According to petitioner Nieves, sometime in 1989 respondent Pablo went to their house and proposed to petitioner Arsenio the formation of a partnership to develop the property petitioners planned to buy. He agreed and they executed their Articles of Partnership of Feliz Casa Realty Development, Ltd. Each partner was to contribute a capital of P2,000,000.00. Arsenio’s contribution was his P1,000,000.00 investment with the owner of the real property to be purchased.  Respondent Pablo contributed only P500,000.00.

Issue: Whether or not the amount loaned was converted into private respondent’s contribution to the partnership which novated the previous contract.

Held: In the case at bar, the third requisite that there must be the extinguishment of the old contract 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.

SPOUSES FLORANTE and LAARNI BAUTISTA vs. PILAR DEVELOPMENT CORPORATION G.R. No. 135046 August 17, 1999

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In 1978, petitioner spouses Florante and Laarni Bautista purchased a house and lot. To partially finance the purchase, they obtained from the Apex Mortgage & Loan Corporation (Apex) a loan in the amount of P100,180.00. o They executed a promissory note 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.  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. They executed another promissory note in favor of Apex. o It 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. o Payment was to be made for a period of 196 months or 16.33 years in monthly installments of P2,576.68, inclusive of principal and interest. o Petitioner spouses also authorized Apex to "increase/decrease the rate of interest and/or service charges" on the note in the event any law or Central Bank regulation shall be passed increasing or decreasing the same. In November 1983, petitioner spouses again failed to pay the installments. Apex assigned the second promissory note to respondent Pilar Development Corporation without notice to petitioners.

Issue:

1st

Whether or not the 2nd promissory note novated the contract stipulated in the promissory note.

Held: All four requisites of novation 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.

EVADEL REALTY and DEVELOPMENT CORPORATION vs. SPOUSES ANTERO AND VIRGINIA SORIANO G.R. No. 144291 April 20, 2001

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Spouses Antero and Virginia Soriano, as sellers, entered into a “Contract to Sell” with Evadel Realty and Development Corporation, as buyer, over a parcel of land which was part of a huge tract of land known as the Imus Estate. Respondent spouses discovered that the area fenced off by petitioner exceeded the area subject of the contract to sell by 2,450 square meters. The area encroached upon was later on segregated from the mother title and issued a new transfer certificate of title in the name of respondent spouses. Respondent spouses successively sent demand letters to petitioner to vacate the encroached area. Petitioner admitted receiving the demand letters but refused to vacate the said area. A complaint for accion reinvindicatoria was filed by respondent spouses against petitioner with the RTC. o In its Answer, petitioner argued, among others, that there was a novation of contract because of the encroachment made by the national road on the property subject of the contract by 1,647 square meters.

Issue: Whether or not there was 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

Held: 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.

Since the alleged agreement between the plaintiffs [herein respondents] and defendant 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.

FRANCISCO L. ROSARIO, JR. vs. LELLANI DE GUZMAN G.R. No. 191247 July 10, 2013

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In August 1990, Spouses Pedro and Rosita de Guzman engaged the legal services of Atty. Francisco L. Rosario, Jr. as defense counsel in the complaint filed against them by one Loreta A. Chong (Chong) for annulment of contract and recovery of possession with damages involving a parcel of land. Petitioner’s legal services commenced from the RTC and ended up in this Court. Spouses de Guzman, represented by petitioner, won their case at all levels. While the case was pending before this Court, Spouses de Guzman died in a vehicular accident. o They were substituted by their children, namely: Rosella de Guzman-Bautista, Lellani de Guzman, Arleen de Guzman, and Philip Ryan de Guzman (respondents). On September 8, 2009, petitioner filed the Motion to Determine Attorney’s Fees before the RTC. He alleged, among others, that he had a verbal agreement with the deceased Spouses de Guzman that he would get 25% of the market value of the subject land if the complaint filed against them by Chong would be dismissed. Despite the fact that he had successfully represented them, respondents refused his written demand for payment of the contracted attorney’s fees. Petitioner insisted that he was entitled to an amount equivalent to 25% percent of the value of the subject land on the basis of quantum meruit. On November 23, 2009, the RTC rendered the assailed order denying petitioner’s motion on the ground that it was filed out of time. The RTC stated that the said motion was filed after the judgment rendered in the subject case, as affirmed by this Court, had long become final and executory on October 31, 2007. The RTC wrote that considering that the motion was filed too late, it had already lost jurisdiction over the case because a final decision could not be amended or corrected except for clerical errors or mistakes. There would be a variance of the judgment rendered if his claim for attorney’s fees would still be included.

Issue: Whether or not petitioner’s cause of action had already been prescribed.

Held: The records show that the August 8, 1994 RTC decision became final and executory on October 31, 2007. There is no dispute that petitioner filed his Motion to Determine Attorney’s Fees on September 8, 2009, which was only about one (1) year and eleven (11) months from the finality of the RTC decision. Because petitioner claims to have had an oral contract of attorney’s fees with the deceased spouses, Article 1145 of the Civil Code allows him a period of six (6) years within which to file an action to recover professional fees for services rendered. Respondents never asserted or provided any evidence that Spouses de Guzman refused petitioner’s legal representation. For this reason, petitioner’s cause of action began to run only from the time the respondents refused to pay him his attorney’s fees.

VECTOR SHIPPING CORPORATION vs. AMERICAN HOME ASSURANCE COMPANY G.R. No. 159213 July 3, 2013

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Vector was the operator of the motor tanker M/T Vector, while Soriano was the registered owner of the M/T Vector. Respondent is a domestic insurance corporation. On September 30, 1987, Caltex entered into a contract of Affreightment with Vector for the transport of Caltex’s petroleum cargo through the M/T Vector. Caltex insured the petroleum cargo with respondent for P7,455,421.08 In the evening of December 20, 1987, the M/T Vector and the M/V Doña Paz, the latter a vessel owned and operated by Sulpicio Lines, Inc., collided in the open sea. The collision led to the sinking of both vessels. The entire petroleum cargo of Caltex on board the M/T Vector perished. On July 12, 1988, respondent indemnified Caltex for the loss of the petroleum cargo in the full amount of P7,455,421.08. On March 5, 1992, respondent filed a complaint against Vector, Soriano, and Sulpicio Lines, Inc. to recover the full amount of P7,455,421.08 it paid to Caltex. On December 10, 1997, the RTC issued a resolution dismissing the case stating that the action is upon a quasi-delict and as such must be commenced within four 4 years from the day they may be brought. [Art. 1145 in relation to Art. 1150, Civil Code] “From the day [the action] may be brought” means from the day the quasi-delict occurred. The tort complained of in this case occurred on 20 December 1987. The action arising therefrom would under the law prescribe, unless interrupted, on 20 December 1991. When the case was filed against defendants Vector Shipping and Francisco Soriano on 5 March 1992, the action not having been interrupted, had already prescribed. Under the same situation, the cross-claim of Sulpicio Lines against Vector Shipping and Francisco Soriano filed on 25 June 1992 had likewise prescribed.

Issue: Whether or not the cause of action of respondent was already barred by prescription for bringing it only on March 5, 1992.

Held: The court found and hold that that the present action was not upon a written contract, but upon an obligation created by law. Hence, it came under Article 1144 (2) of the Civil Code in which the action must be brought within 10 years from the time the cause of action acrues. This is because the subrogation of respondent to the rights of Caltex as the insured was by virtue of the express provision of law embodied in Article 2207 of the Civil Code. Thus, the action of the respondent has not yet prescribed.

ERNESTO VILLEZA vs. GERMAN MANAGEMENT AND SERVICES G.R. No. 182937 August 08, 2010

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Present petition arose from an earlier Supreme Court ruling in German Management v. Court of Appeals which has already become final and executory. The decision, however, remains unenforced due to the prevailing party's own inaction. 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, befofe the MeTC. The Decision of the SC favoring the petitioner became final and executory on October 5, 1989. On May 27, 1991, the petitioner filed a Motion for Issuance of Writ of Execution with the MeTC. On February 27, 1992, he filed a Motion to Defer Resolution thereon because "he was permanently assigned in Iloilo and it would take quite sometime before he could come back." On February 28, 1992, the MeTC issued an order holding in abeyance the resolution of his motion to issue writ of execution until his return. o Three years later, as there was no further movement, the said court issued an order dated January 9, 1995 denying petitioner's pending Motion for Issuance of Writ of Execution for lack of interest. More than 3 years had passed before petitioner filed a Motion for Reconsideration dated May 29, 1998 alleging that he had retired from his job in Iloilo City and was still interested in the issuance of the writ. On October 8, 1998, the MeTC issued a writ of execution. As the sheriff was implementing the writ, an Opposition with Motion to Quash Writ of Execution was filed by German Management and Services, Inc. o Considering the provision of Section 6, Rule 39 of the 1997 Rules of Civil Procedure, after the lapse of five years from the date of entry, judgment may no longer be enforced by way of motion but by independent action. On October 3, 2000, Villeza filed with the MeTC a Complaint for Revival of Judgment of the Decision of the Supreme Court dated September 14, 1989. o Respondent German Management moved to dismiss the complaint. It alleged that it had been more than 10 years from the time the right of action accrued, that is, from October 5, 1989, the date of the finality of the Court's decision to October 3, 2000, the date of the filing of the complaint for its revival.

o It further argued that, pursuant to Section 6, Rule 39 of the Rules of Court in relation to Article 1144 of the Civil Code, the complaint is now barred by the statute of limitations.

Issue: Whether or not petitioner’s cause of action had already beed prescribed.

Held: An action for revival of judgment is governed by Article 1144 (3), Article 1152 of the Civil Code and Section 6, Rule 39 of the Rules of Court. 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 11 years from the finality of the judgment he sought to revive. Clearly, the statute of limitations had set in.

INSURANCE OF THE PHILIPPINE ISLANDS CORPORATION vs. SPOUSES VIDAL S. GREGORIO and JULITA GREGORIO G.R. No. 174104 February 14, 2011

Facts: 

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Spouses Vidal Gregorio and Julita Gregorio obtained a loan from the Insurance of the Philippine Islands Corporation (formerly known as Pyramid Insurance Co., Inc.) 3 times. All of the loans were secured with corresponding Real Estate Mortgages. Respondents failed to pay their loans, as a result of which the mortgaged properties were extrajudicially foreclosed. o The extrajudicial foreclosure sale was conducted on December 11, 1969 where petitioner was the highest bidder. Since respondents failed to redeem the property, petitioner consolidated its ownership over the properties. On February 20, 1996, petitioner filed a Complaint for damages against respondents alleging that in 1995, when it was in the process of gathering documents for the purpose of filing an application for the registration and confirmation of its title over the foreclosed properties, it discovered that the said lots were already registered in the names of third persons and transfer certificates of title (TCT) were issued to them.

Issue Whether or not petitioner’s cause of action in the complaint for damages on February 20, 1996 had already been prescribed.

Held Petitioner filed an action for damages on the ground of fraud committed against it by respondents. Under the provisions of Article 1146 of the Civil Code, actions upon an injury to the rights of the plaintiff or upon a quasi-delict must be instituted within four years from the time the cause of action accrued. Petitioner's cause of action accrued at the time it discovered the alleged fraud committed by respondents. 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 ruling that the discovery of the

fraud should be reckoned from the time of registration of the titles covering the subject properties. The Court notes that what has been given by respondents to petitioner as evidence of their ownership of the subject properties at the time that they mortgaged the same are not certificates of title but tax declarations, in the guise that the said properties are unregistered. On the basis of the tax declarations alone and by reason of respondent's misrepresentations, petitioner could not have been reasonably expected to acquire knowledge of the fact that the said properties were already titled. As a consequence, petitioner may not be charged with any knowledge of any subsequent entry of an encumbrance which may have been annotated on the said titles, much less any change of ownership of the properties covered thereby. As such, the Court agrees with petitioner that the reckoning period for prescription of petitioner's action should be from the time of actual discovery of the fraud in 1995. Hence, petitioner's suit for damages, filed on February 20, 1996, is well within the four-year prescriptive period.

ROMEO D. MARIANO vs. PETRON CORPORATION G.R. No. 169438 January 21, 2010

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On 5 November 1968 Pacita V. Aure, Nicomedes Aure Bundac, and Zeny Abundo (Aure Group), owners of a parcel of land, leased the Property to ESSO Standard Eastern, Inc. o The lease period is 90 years and the rent is payable monthly for the first 10 years, and annually for the remaining period. o The lease 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. On 23 December 1977, 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. On 18 November 1993, petitioner Romeo D. Mariano 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. On 17 December 1998, petitioner sent to Petron a notice to vacate the Property. o Petitioner informed Petron that PD 471 reduced the Contract’s duration from 90 to 25 years, ending on 13 November 1993. o Despite receiving the notice to vacate on 21 December 1998, Petron remained on the Property. On 18 March 1999, petitioner sued Petron in the RTC 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. o Petron countered that the Contract was not breached because PNOC merely acquired ESSO Eastern’s shares in ESSO Philippines, a separate corporate entity. Alternatively, Petron argued that petitioner’s suit, filed on 18 March 1999, was barred by prescription under Article 1389 and Article 1146(1) of the Civil Code as petitioner should have sought rescission within four years from PNOC’s purchase of ESSO Philippines on 23 December 1977 or before 23 December 1981.

Issue: Whether or not petitioner’s cause of action was barred by prescription.

Held: Petitioner’s waiver of Petron’s contractual breach was compounded by his long inaction to seek judicial redress. Petitioner filed his complaint nearly 22 years after PNOC acquired the leasehold rights to the Property and almost six years after petitioner bought the Property from the Aure Group. The more than two decades lapse puts this case well within the territory of the 10 year prescriptive bar to suits based upon a written contract under Article 1144 (1) of the Civil Code.

SPOUSES PATRICIO and MYRNA BERNALES vs. HEIRS OF JULIAN SAMBAAN G.R. No. 163271 January 15, 2010

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Julian Sambaan Julian was the registered owner of a property certain property. The respondents herein 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. In 1975, Julian was ambushed and was hospitalized due to a gunshot wound. On April 11, 1975, Julian allegedly requested his children to gather so that he could make his last two wishes. o Julian’s first wish was for the children to redeem the subject property which was mortgaged to Myrna and her husband Patricio Bernales (Patricio), o His second wish was for his remains not to be brought to the house of Myrna at Nazareth, Cagayan de Oro City. In 1982, respondent Absalon Sambaan, one of Julian’s children, 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 information that the property was already transferred to petitioners’ name. Whereupon, they secured a copy of the Deed of Absolute Sale dated December 7, 1970 which bore the signatures of their parents and had it examined by NBI. o The result of the examination revealed that the signatures of their parents, Julian and Guillerma, were forged.

Issue: Whether or not respondent’s cause of action had already been prescribed.

Held:

The supposed vendor's signature having been proved to be a forgery, the instrument is totally void or inexistent as "absolutely simulated or fictitious" under Article 1409 of the Civil Code. According to Article 1410, "the action or defense for the declaration of the inexistence of a contract does not prescribe". The inexistence of a contract is permanent and incurable which cannot be cured either by ratification or by prescription. Thus, Prescription did not bar respondents’ action to recover ownership of the subject property.

B & I REALTY CO., INC., petitioner, vs. TEODORO CASPE G.R. No. 146972 January 29, 2008

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Consorcia L. Venegas was the owner of a certain parcel of land. o She delivered said title to, and executed a simulated deed of sale in favor of, Datuin for purposes of obtaining a loan with the Rizal Commercial Banking Corporation (RCBC). o 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. Datuin prepared a deed of absolute sale and, through forgery, made it appear that the spouses Venegas executed the document in his favor. He was then able to have the TCT transferred to his name. Consequently, TCT No. 247434 was cancelled and a new title, TCT No. 377734, was issued to him by the register of deeds. Thereafter, he obtained a loan from petitioner in the amount of P75,000 using the title of the property as collateral for the loan. The mortgage was annotated at the back of the title. Venegas learned of Datuin's fraudulent scheme when she sold the lot (subject of the mortgage) 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 CFI 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. Thereafter, Venegas and her husband, respondents and Datuin entered into a compromise agreement whereby the Venegases agreed to sell and transfer the property to respondents with the condition that respondents would assume and settle Datuin's mortgage debt to petitioner. The amount corresponding to the unpaid mortgage would be deducted from the consideration. As provided for in the agreement, Datuin executed a deed of absolute sale over the property covered by TCT No. 377734 in favor of respondents. On February 12, 1976, the respondents started paying their assumed mortgage obligation to petitioner. On August 27, 1980, Venegas brought a new action before the CFI for annulment of the transfer of the property to Datuin and the declaration of nullity of all transactions

involving and annotated on TCT No. 377734, including the mortgage executed in favor of petitioner, as well as the cancellation of the conditional deed of sale to respondents.

Issue Whether or not the computation of the prescriptive period of the cause of action in this case starts from the date when the cause of action accrues.

Held: Although the deed of real estate mortgage and the promissory note executed by Datuin expressly declared that the date of maturity of the loan was May 14, 1974 or one year after the real estate mortgage was entered into between Datuin and petitioner, the same could not be the reckoning point for purposes of counting the prescriptive period of the mortgage. This is because Datuin and respondents executed a deed of absolute sale on October 30, 1975 whereby the latter acknowledged and assumed the mortgage obligation of the former in favor of petitioner. Under Article 1155 of the Civil Code, the written acknowledgment and assumption of the mortgage obligation by respondents had the effect of interrupting the prescriptive period of the mortgage action. A perusal of the evidence for the petitioner, as may be gleaned from the statement of account of respondents prepared by petitioner itself, revealed that respondents made payments to the former beginning February 12, 1976 up to January 14, 1980. No other payments were made thereafter. The Court have held in a number of cases that the computation of the prescriptive period of any cause of action (the same as prescription of actions) starts from the date when the cause of action accrues. Here, petitioner's cause of action accrued from the time respondents stopped paying the mortgage debt they assumed from Datuin, in accordance with Article 1151 of the Civil Code: Art. 1151. The time for the prescription of actions which have for their object the enforcement of obligations to pay principal with interest or annuity runs from the last payment of the annuity or of the interest.

It was then that respondents committed a breach of duty to pay their remaining obligation to the former. Thus, the ten-year prescriptive period should be reckoned from January 14, 1980. Petitioner had until January 14, 1990 to file suit so that, when it sued on August 27, 1993, the action had already prescribed.

Felicisima Mesina vs. Atty. Honorio Valisno Garcia 509 SCRA 431 November 27, 2009 Facts: 

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Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, entered 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. T-31643 in the name of Felicisima Mesina which title was cancelled and TCT No. T-78881 was issued in the name of Atty. Honorio Valisno Garcia. 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 seven (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 one percent (1%) per month. The Contract also stipulated, among others, that: Should the spouses Garcia fail to pay five (5) successive monthly installments, Felicisima Mesina shall have a right to rescind the Contract to Sell. All paid installments to be recomputed as rental for usage of lot shall be at the rate of P100.00 a month and that Felicisima Mesina shall have the further option to return the down payment and whatever balance spouses Garcia paid, thereby rescinding the Contract to Sell. Upon rescission of the Contract to sell, spouses Garcia agree to remove all the improvements built on the lot within three (3) months from rescission of this contract, spouses Garcia shouldering all expenses of said removal. Instituting this case at bar, respondent asserts that despite the full payment made on February 7, 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 respondent’s cause of action had already prescribed Held: The right of action of the respondent accrued on the date that the full and final payment of the contract price was made. Accordingly, as the full payment of the purchase price on the subject Contract to Sell had been effected on 7 February 1984 thus, respondent had from said date until February 7, 1994 within which to bring an action to enforce the written contract, the Contract to Sell. It was then the contention of the petitioners that when the respondent

instituted her Complaint for Specific Performance with Damages on 20 January 1997, the same had already been barred by prescription. The contention of the petitioners is untenable. 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. Hence the action has not yet prescribed.

Heirs of Gaudiane vs. Court of Appeals G.R NO. 119879 March 11,2004 Facts 

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On November 4, 1927, Felix executed a document entitled Escritura de CompraVenta (Escritura) whereby he sold to his sister Juana his one-half share in Lot No. 4156 covered by Transfer Certificate of Title No. 3317-A. What muddled the otherwise clear contract of sale was a statement in the Escritura that Lot No. 4156 was declared under Tax Declaration No. 18321. However, said tax declaration was for another parcel of land, Lot 4389 and not Lot 4156. 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 Lot4156 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.” 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 Lot4156 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.” The Isos again tried their luck to acquire title in their name by filing in 1975 a case for quieting of title of Lot 4389 but the same was dismissed without prejudice. The Isos later filed another action for quieting of title, docketed as Civil Case No. 6817, but it was again dismissed

Issue Whether the respondents lost by prescription their right to their share in the lot Held Petitioners argue that they acquired Felix’ share in the lot in question through prescription and laches. As a general rule, ownership over titled property cannot be lost through prescription.[12] Petitioners, however, invoke our ruling 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 ruling 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. A title, once registered, could not be defeated even by adverse, open and notorious possession. Laches did not also set in because, when petitioners repudiated the respondents’ share in the second case for quieting of title, the latter immediately opposed the move. They were therefore never negligent in pursuing their rights.

Menandro Laureano vs CA Gr No. 114776 February 2, 2002 Facts   

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Sometime in 1978, Laureano was employed on a contractual basis for two years as an expatriate B-707 Captain by defendant company Singapore Airlines. His first term was then extended for two years. However, defendant was hit by a recession and initiated a cost cutting measure. Plaintiff was advised to take advance leave. Realizing that the recession would not be for a short time, Singapore airlines decided to terminate its excess personnel including plaintiff. Laureano instituted a case and claim for damages due to illegal termination of contract of services before the court a quo Singapore airlines filed a motion to dismiss alleging iner alia tahat the court has no jurisdiction over the subject matter of the case and that Philiipine courts have no jurisdiction over the case. The defendant postulated that Singapore laws should apply

Issue Whether or not the contract in question prescribes in ten years under Article 1144 of the New Civil Code or in four years under Article 1146 of the same Code Held In illegal dismissal, it is settled, that the ten-year prescriptive period fixed in Article 1144 of the Civil Code may not be invoked by petitioners, for the Civil Code is a law of general application, while the prescriptive period fixed in Article 292 of the Labor Code [now Article 291] is a SPECIAL LAW applicable to claims arising from employee-employer relations.

Banco Filipino Savings vs Court of Appeals GR No. 129227 May 30, 2000 Facts 

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Elsa Arcilla and her husband, Calvin Arcilla, the Appellees in the present recourse, secured, on three (3) occasions, loans from the Banco Filipino Savings and Mortgage Bank, the Appellant in the present recourse, in the total amount of P107,946.00 as evidenced by "Promissory Note” To secure the payment of said loans, the Appellees executed "Real Estate Mortgages" in favor of the Appellants over their parcels of land Under said deeds, the Appellant may increase the rate of interest, on said loans, within the limits allowed by law, as Appellant’s Board of Directors may prescribe for its borrowers. In the meantime, the Skyline Builders, Inc., through its President, Appellee Calvin Arcilla, secured loans from the Bank of the Philippine Islands in the total amount of P450,000.00. To insure payment of the aforesaid loan, the FGU Insurance Corporation, issued PG Bond No. 1003 for the amount of P225,000.00 in favor of the Bank of the Philippine Islands. Skyline Buildings, Inc., and the Appellees executed an "Agreement of Counter-Guaranty with Mortgage" in favor of the FGU Insurance Corporation covering the aforesaid parcels of land to assure payment The Appellees failed to pay their monthly amortizations to Appellant. The latter forthwith filed, on April 3, 1979, a petition, with the Provincial Sheriff, for the extrajudicial foreclosure of Appellees’ "Real Esate Mortgage" in favor of the Appellant for the amount of P342,798.00 inclusive of the 17% per annum which purportedly was the totality of Appellees’ account with the Appellant on their loans. The Appellant was the purchaser of the property at public auction for the aforesaid amount of P324,798.00. On May 25, 1979, the Sheriff executed a "Certificate of Sale" over the aforesaid properties On September 2, 1985, the Appellees filed a complaint in the Court a quo for the "Annulment of the Loan Contracts, Foreclose Sale with Prohibition and Injunction, Etc." The Appellees averred that the loan contracts and mortgages between the Appellees and the Appellant were null and void

Issue Whether or not the filing of the complaint for annulment of the contracts was already barred by prescription Held

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.

MARIA VDA. DE DELGADO vs. COURT OF APPEALS GR No. 125728 August 28, 2001 Facts 

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Delgado was the absolute owner of a parcel of land with an area of 692,549 square meters, situated in the Municipality of Catarman, Samar. On October 5, 1936, said Carlos Delgado granted and conveyed, by way of donation or gift with quitclaim, all his rights, title, interest, claim and demand over a portion of said land consisting of 165,000 square meters in favor of the Commonwealth of the Philippines or its successors. Acceptance3 was made by then President Manuel L. Quezon in his capacity as Commander-in-Chief of the Philippine Army The condition of the donation was the land shall be for the exclusive benefit of the Commonwealth of the Philippines to be used as military reservation for training cadres or for such other uses of the Philippine Army as the Commander-in-Chief or Chief of Staff thereof may determine, provided that when the Commonwealth of the Philippines no longer needs this parcel of land for any military purposes, then said land shall automatically revert to the donor or its heirs or assigns. 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 on July 4, 1946, the Commonwealth of the Philippines passed out of existence. It was replaced by the existing Republic of the Philippines, which took over the subject land and turned portions of it over to the then Civil Aeronautics Administration (CAA), later renamed Bureau of Air Transportation Office (ATO) 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 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.

Josefa Maestrado vs. CA GR No. 133345 March 9, 2000 Facts 

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These consolidated cases involve the status of Lot No. 5872 and the rights of the contending parties thereto. The said lot which has an area of 57.601 square meters, however, is still registered in the name of the deceased spouses Ramon and Rosario Chaves. The spouses Ramon and Rosario died intestate in 1943 and 1944, respectively. They were survived by the following heirs, namely: Carmen ChavesAbaya, Josefa Chaves-Maestrado, Angel Chaves, Amparo Chaves-Roa, Concepcion Chaves-Sanvictores and Salvador Chaves. To settle the estate of the said deceased spouses, Angel Chaves 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. 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. 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. Ruling 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.

F.A.T. KEE COMPUTER SYSTEMS vs. ONLINE NETWORKS INTERNATIONAL GR NO. 171238 FEBRUARY 2, 2011 Facts 

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Petitioner F.A.T. Kee Computer Systems, Inc. (FAT KEE) is a domestic corporation engaged in the business of selling computer equipment and conducting maintenance services for the units it sold. ONLINE is also a domestic corporation principally engaged in the business of selling computer units, parts and software. ONLINE filed a Complaint[4] for Sum of Money against FAT KEE ONLINE alleged that sometime in November 1997, it sold computer printers to FAT KEE for which the latter agreed to pay the purchase price ofUS$136,149.43. The agreement was evidenced by Invoice receipts containing a stipulation that “interest at 28% per annum is to be charged on all accounts overdue” and “an additional sum equal to 25% of the amount will be charged by vendor for attorney’s fees plus cost of collection in case of suit It was further asserted in the Complaint that thereafter, FAT KEE, through its President Frederick Huang, Jr., offered to pay its US dollar obligations in Philippine pesos using the exchange rate of P40:US$1. ONLINE claimed to have duly accepted the offer. FAT KEE then made several payments amounting to P2,502,033.06 between the periods of March and May 1998. As of May 12, 1998, the balance of FAT KEE purportedly amounted to P2,943,944.14. As the obligations of FAT KEE matured in December 1997, ONLINE applied the 28% interest on the unpaid amount. However, in view of the good business relationship of the parties, ONLINE allegedly applied the interest on the balance for a period of three months only. Thus, the total amount due, plus interest, was P3,012,636.17. FAT KEE subsequently made additional payments in the amount of P2,256,541.12. A balance of P756,095.05, thus, remained according to ONLINE’s computations. Despite repeated demands, FAT KEE failed to pay its obligations to ONLINE without any valid reason FAT KEE duly answered the complaint alleging, inter alia, that it did not reach an agreement with ONLINE for the payment of its obligations in US dollars. FAT KEE claimed that the invoice receipts of the computer printers, which quoted the purchase price in US dollars, were unilaterally prepared by ONLINE. While FAT KEE admitted that it offered to pay its obligations in Philippine pesos, it averred that the amount owing to ONLINE was only P5,067,925.34

Issue Whether or not estoppel may be invoked against ONLINE as FAT KEE did not act or rely on the representations in the SOA Held Estoppel, an equitable principle rooted in natural justice, prevents persons from going back on their own acts and representations, to the prejudice of others who have relied on them. The principle is codified in Article 1431 of the Civil Code, which provides: Through estoppel, an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon.

Estoppel can also be found in Rule 131, Section 2 (a) of the Rules of Court, viz:

Sec. 2. Conclusive presumptions. — The following are instances of conclusive presumptions:

(a) Whenever a party has by his own declaration, act or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission be permitted to falsify it.

The elements of estoppel are: first, the actor who usually must have knowledge, notice or suspicion of the true facts, communicates something to another in a misleading way, either by words, conduct or silence; second, the other in fact relies, and relies reasonably or justifiably, upon that communication;third, the other would be harmed materially if the actor is later permitted to assert any claim inconsistent with his earlier conduct; and fourth, the actor knows, expects or foresees that the other would act upon the information given or that a reasonable person in the actor's position would expect or foresee such action. FAT KEE cannot invoke estoppel against ONLINE for the latter’s issuance of the SOA on December 9, 1997. The Court agrees with the Court of Appeals’ ruling that any misconception on the part of FAT KEE engendered by the issuance of the SOA should have already been rectified when the parties subsequently met on January 15, 1998.

Tanay Recreation vs Catalina Fausto G.R. No. 140182 April 12, 2005 Facts 

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Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee of a 3,090-square meter property owned by Catalina Matienzo Fausto. On this property stands the Tanay Coliseum Cockpit operated by petitioner. The lease contract provided for a 20-year 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. Petitioner wrote Fausto informing her of its intention to renew the lease. [3] 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. Despite efforts, the matter was not resolved. Hence, on September 4, 1991, 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 What are the elements of estoppel? 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.

Danilo Mendoza vs CA GR No. 116710 June 25, 2001 Facts 

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Issue

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). Sometime in 1978 he was granted by respondent Philippine National Bank (PNB) a P500,000.00 credit line and a P1,000,000.00 Letter of Credit/Trust Receipt (LC/TR) line. As security for the credit petitioner mortgaged to respondent PNB the following: 1) 3 parcels of land with improvements 2) his house and lot in Quezon City; and 3) several pieces of machinery and equipment in his Pasig coco-chemical plant. The REM for an escalation clause that rate of interest be charged on the obligation secured shall be subject to an increase of 12% per annum until paid. Then, PNB advised Mendoza that the bank raised its interest rate Two promissory notes were signed by Mendoza and his wife. They aver that respondent allegedly inserted in the first promissory note an interest rate of 21% instead of 18% covering the principal amount and on the second promissory note the interest of 18% instead of 12% representing accrued interest. On March 9, 1981, Branch Manager Fil S. Carreon Jr 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 P2,000,000.00. 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 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 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 loans. According to petitioner, respondent PNB approved his proposal. He further claimed that he and his wife were asked to sign two (2) blank promissory note forms. According to petitioner, they were made to believe that the blank promissory notes were to be filled out by respondent PNB to conform with the 5-year restructuring plan allegedly agreed upon

Whether or not Estoppel will lie against the petitioner regarding the increase in the stipulated interest on the subject Promissory Notes. Held An estoppel may arise from the making of a promise, even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice. In this respect, the reliance by the promisee is generally evidenced by action or forbearance on his part, and the idea has been expressed that such action or forbearance would reasonably have been expected by the promissor. 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. 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.[21] It does not operate to create liability where it does not otherwise exist. Estoppel will not lie against the petitioner regarding the increase in the stipulated interest on the subject Promissory Notes Nos. 127/82 and 128/82 inasmuch as he was not even informed beforehand by respondent bank of the change in the stipulated interest rates.

Jefferson Lim vs. Queensland Tokyo GR No. 136031 January 4, 2002 Facts 

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Sometime in 1992, Benjamin Shia, a market analyst and trader of Queensland, was introduced to petitioner Jefferson Lim by Marissa Bontia,[3] 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. 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 the blank order forms. During the first day of trading or on October 22, 1992, Lim made a net profit of P6,845.57. He agreed to continue trading. During the second day of trading or on October 23, 1992, they lost P44,465. Meanwhile, on October 22, 1992, respondent learned that it would take seventeen (17) days to clear the manager’s check given by petitioner. Hence, onOctober 23, 1992, at about 11:00 A.M., upon management’s request, Shia returned the check to petitioner who informed Shia that petitioner would rather replace the manager’s check with a traveler’s check. Later, the traveler’s check was deposited with Citibank. Shia informed petitioner that they incurred a floating loss of P44,695. 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. He demanded for a liquidation of his account and said he would get back what was left of his investment. Respondent asked Shia to talk to petitioner for a settlement of his account but petitioner refused to talk with Shia. Shia made follow-ups for more than a week beginning October 27, 1992. Because petitioner disregarded this request, respondent was compelled to engage the services of a lawyer, who sent a demand letter to petitioner. This letter went unheeded. Thus, respondent filed a complaint against petitioner.

Issue Whether or not petitioner is estopped from questioning the validity of the Customer’s Agreement that he signed. 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. Here, 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. More significantly, petitioner already availed himself of the benefits of the Customer’s Agreement whose validity he now impugns. As found by the CA, even before petitioner’s initial marginal deposit (in the form of the PCI manager’s check dated October 22, 1992) was converted into cash, he already started trading on October 22, 1992, thereby making a net profit of P6,845.57. On October 23, he continued availing of said agreement, although this time he incurred a “floating loss” of P44,645. While he claimed he had not authorized respondent to trade on those dates, this claim is belied by his signature affixed in the order forms. Clearly, by his own acts, petitioner is estopped from impugning the validity of the Customer’s Agreement. For a party to a contract cannot deny the validity thereof after enjoying its benefits without outrage to one’s sense of justice and fairness.

Placewell International vs. Ireneo Camote G.R. NO. 169973 JUNE 26, 2006 Facts 

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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. Respondent filed a sworn Complaint4 for monetary claims against petitioner alleging he and his fellow Filipino workers were required to sign another employment contract written in Arabic, 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 everyday.

Issue Whether or not respondent is guilty of laches. Held 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, the party must have been afforded an opportunity to pursue his claim in order that the delay may sufficiently constitute laches. The doctrine of laches is based upon grounds of public policy which requires, for the peace of society, the discouragement of stale claims, and is principally a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted. There is no absolute rule as to what constitutes laches; each case is to be determined according to its particular circumstances. The question of laches is addressed to the sound discretion of the court, and since it is an equitable doctrine, its application is controlled by equitable considerations. It cannot be worked to defeat justice or to perpetrate fraud and injustice.

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.

Heirs of Ragua vs. CA GR No. 88521-22 January 31. 2000 Facts 

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Eulalio Ragua, claiming to be the registered owner, together with co-owners Anatalio B. Acuña, Catalina Dalawantan, and other co-owners, filed a petition for reconstitution of (OCT) No. 632 of the Registry of Deeds of Rizal, covering a parcel of land with an area of 4,399,322 square meters. On September 9, 1964, J. M. Tuason & Co., Inc. (Tuason) filed an opposition to the petition alleging that OCT No. 632 was fictitious and the land was covered by TCT No. 1356 in the name of People’s Homesite and Housing Corporation (PHHC). The People Homesite and Housing Corporation (PHHC), later succeeded by the National Housing Authority (NHA), filed with the same trial court its opposition to Ragua’s petition for reconstitution of OCT No. 632. PHHC averred that Ragua’s petition did not comply with the requirements of the law on judicial reconstitution. PHHC likewise contended that OCT No. 632 in the name of Eulalio Ragua was fictitious, and that the property was covered by TCT No. 1356 in the name of PHHC. Petitioner Eulalio Ragua filed with another court another petition for reconstitution of OCT No. 632, G. L. R. O. No. 7984. In sum, the petition for reconstitution filed by Eulalio Ragua was opposed by several parties, to wit: the Tuasons, the National Housing Authority (formerly PHHC), Department of National Defense, Department of Agriculture and Natural Resources, Parks and Wildlife, Philippine American Life Insurance Company, et. al., among other parties, which claimed to have purchased portions of the Diliman Estate from the Tuasons. Rtc ruled in favor of the raguas. In due time, oppositors, including the Republic, filed with the trial court a motion for reconsideration of the decision. The Republic appealed the trial court’s decision to the Court of Appeals. The Court of Appeals held that the trial court had no jurisdiction over the petition for reconstitution for failure to comply with the jurisdictional requirements of publication and posting of notices. on March 24, 1980, the Court of First Instance of Rizal, Quezon City rendered decision in favor of Ragua, ordering the Register of Deeds, Quezon City, to reconstitute OCT 632 in the name of Ragua. On October 28, 1980, petitioners filed with the Court of First Instance, Quezon City a motion for execution of the judgment rendered by it, contending that the judgment had become final after the Register of Deeds and Land Registration Commission failed to file an appeal within the prescribed period. On January 5, 1981, the trial court denied the

motion for execution and approved the record on appeal filed by the Republic of the Philippines. 

In the course of this controversy, portions of the contested property had been the subject of sales to different persons, some of whom moved to intervene in the cases, or t

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On October 7, 1997, the surviving heirs of Eulalio Ragua, assisted by judicial administratrix Norma G. Aquino, filed with this Court a manifestation offering to execute deeds of donations in favor of the government and its instrumentalities, of all portions of the real property actually occupied by offices performing governmental functions, including roads and parking areas

Issue Whether or not petitioners were guilty of laches since it took them 19 years to file a petition for reconstitution Ruling 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.

Metropolitan Bank vs Court of Appeals GR No. 88866 February 18, 1991 Facts 

The Metropolitan Bank and Trust Co. is a commercial bank with branches throughout the Philippines and even abroad. Golden Savings and Loan Association was, at the time these events happened, operating in Calapan, Mindoro, with the other private respondents as its principal officers.

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Eduardo Gomez opened an account with Golden Savings and deposited over a period of two months 38 treasury warrants with a total value of P1,755,228.37. They were all drawn by the Philippine Fish Marketing Authority and purportedly signed by its General Manager and countersigned by its Auditor.

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On various dates between June 25 and July 16, 1979, all these warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account No. 2498 in the Metrobank branch in Calapan, Mindoro. They were then sent for clearing which forwarded them to the Bureau of Treasury for special clearing.

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Accordingly, Gomez was meanwhile not allowed to withdraw from his account.

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Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury on July 19, 1979, and demanded the refund by Golden Savings of the amount it had previously withdrawn, to make up the deficit in its account.

Issue Whether or not Metrobank was negligence. Held Metrobank was indeed negligent in giving Golden Savings the impression that the treasury warrants had been cleared and that, consequently, it was safe to allow Gomez to withdraw the proceeds thereof from his account with it. Without such assurance, Golden Savings would not have allowed the withdrawals; with such assurance, there was no reason not to allow the withdrawal. Indeed, Golden Savings might even have incurred liability for its refusal to return the money that to all appearances belonged to the depositor, who could therefore withdraw it any time and for any reason he saw fit.

Metrobank exhibited extraordinary carelessness. The amount involved was not trifling — more than one and a half million pesos (and this was 1979). There was no reason why it should not have waited until the treasury warrants had been cleared; it would not have lost a single centavo by waiting. Yet, despite the lack of such clearance — and notwithstanding that it had not received a single centavo from the proceeds of the treasury warrants, as it now repeatedly stresses — it allowed Golden Savings to withdraw — not once, not twice, but thrice — from the uncleared treasury warrants.

Spouses Manuel vs. CA GR No. 153652 February 1, 2001 Facts 

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Salome, Consorcia, Alfredo, Maria, Rosalia, Jose, Quirico and Julita, all surnamed Bornales, were the original co-owners of Lot 162 of the Cadastral Survey of Pontevedra, Capiz under Original Certificate of Title No. 18047. Salome sold part of her 4/16 share in Lot 162 for P200.00 to Soledad Daynolo. In the Deed of Absolute Sale signed by Salome and two other co-owners, Consorcia and Alfredo, the portion of Lot 162 sold to Soledad 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 Lot 162 as security for a P400.00 debt to Jose Regalado, Sr. 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 heirs sold the redeemed portion of Lot 162 for P1,500.00 to herein petitioners, the spouses Manuel Del Campo and Salvacion Quiachon.1âwphi1.n Meanwhile, Jose Regalado, Sr. caused the reconstitution of Original Certificate of Title No. 18047. The reconstituted OCT No. RO-4541 initially reflected the shares of the original co-owners in Lot 162. However, title was transferred later to Jose Regalado, Sr. who subdivided the entire property into smaller lots, each covered by a respective title in his name. Petitioners Manuel and Salvacion del Campo brought this complaint for "repartition, resurvey and reconveyance" against the heirs of the now deceased Jose Regalado, Sr. Petitioners claimed that they owned an area of 1,544 square meters located within Lot 162-C-6 which was erroneously included in TCT No. 14566 in the name of Regalado. Petitioners alleged that they occupied the disputed area as residential dwelling ever since they purchased the property from the Distajos

Issue Whether or not Regalado is estopped from denying the right and title to the spouses Manuel. Held Respondents are estopped from asserting that they own the subject land in view of the Deed of Mortgage and Discharge of Mortgage executed between Regalado and petitioners’ predecessor-in-interest. As petitioners correctly contend, respondents are barred from making this assertion under the equitable principle of estoppel by deed, whereby a party to a deed and his privies are precluded from asserting as against the other and his privies any right or title in

derogation of the deed, or from denying the truth of any material fact asserted in it. A perusal of the documents evidencing the mortgage would readily reveal that Soledad, as mortgagor, had declared herself absolute owner of the piece of land now being litigated. This declaration of fact was accepted by Regalado as mortgagee and accordingly, his heirs cannot now be permitted to deny it.

Miguel Cuenco vs. Concepcion cuenco GR No. 149884 October 13, 2004 Facts 

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On September 19, 1970, the respondent filed the initiatory complaint herein for specific performance against her uncle, Miguel Cuenco which averred, inter alia that her father, the late Don Mariano Jesus Cuenco 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 2 cases entitled ‘Valeriano Solon versus Zoilo Solon’ and ‘Valeriano Solon versus Apolonia Solon’ involving a dispute among relatives over ownership of lot 903 of the Banilad Estate That at the time of distribution of said three (3) lots, w in Manila, and so he entrusted his share (Lot 903-A) to his brother law partner (petitioner); that on September 10, 1938, petitioner was able to obtain in his own name a title for Lot 903-A On June 3, 1966, the petitioner wrote a letter petitioning the Register of Deeds of Cebu to transfer Lot 903-A-6 to his name on the ground that Lot 903-A-6 is a portion of Lot 903-A That on April 6, 1967, respondent requested the Register of Deeds to annotate an affidavit of adverse claim against the [petitioner’s] TCT RT-6999 (T-21108) which covers Lot 903-A

Issue: Whether or not the Court of Appeals erred in not finding that even where implied trust is admitted to exist the respondent’s action for relief is barred by laches and prescription. Held 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. In the present case, respondent has persistently asserted her right to Lot 903-A-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.

Spouses Hanopol vs SM GR No. 137774 October 4, 2002 Facts: 

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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 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 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 them 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 should be held liable for damages. Ruling: 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 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.

Terminal Facilities vs. PPA February 27, 2002 378 SCRA 82 Facts: 

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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. 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 inter-agency committee to study the plan. The committee recommended approval. 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 passed on October 1, 1976 Resolution No. 50 under which TEFASCO, without asking for one, was compelled to submit an application for construction permit which imposed additional conditions. 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, it 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. TEFASCO and PPA executed a Memorandum of Agreement (MOA) providing among others for (a) acknowledgment of TEFASCO's arrears in government share at 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 third-party 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, 1984 MOA and all other PPA issuances modifying the terms and conditions of the April 21, 1976 Resolution No. 7 above-mentioned. 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.

Mendoza vs. Court of Appeals G.R. No. 81909 June 25, 2001 Facts: 

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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 three parcels of land with improvements in F. Pasco Avenue, Santolan, Pasig and his house and lot in Quezon City; and several pieces of machinery and equipment in his Pasig coco-chemical plant. Petitioner executed in favor of respondent PNB 3 promissory notes covering the P500,000.00 credit line, one dated March 8, 1979 for P310,000.00; another dated March 30, 1979 for P40,000.00; and the last dated September 27, 1979 for P150,000.00. 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. 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 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 Audited Financial Statements for 1979 and 1980; projected cash flow (cash in - cash out) for 5 years detailed yearly; and List of additional machinery, equipment, and proof of ownership thereof before the bank would act on his request. Cura also suggested that petitioner reduce his total loan obligations to P3,000,000.00. On September 25, 1981, petitioner sent another letter addressed to PNB Vice-President Jose Salvador, regarding his request for restructuring of his loans. He offered

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respondent PNB the following proposals: 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; the capitalization and conversion of the balance into a 5-year term loan payable semi-annually or on annual installments; a new Two Million Pesos (P2,000,000.00) LC/TR line in order to enable Atlantic Exchange Philippines to operate at full capacity; assignment of all his receivables to PNB from all domestic and export sales generated by the LC/TR line; and maintenance of the existing 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: 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; payment of P400,000.00 upon the approval of the proposal; reduction of penalty from 3% to 1%; capitalization of the interest component with interest rate at 16% per annum; establishment of P1,000,000.00 LC/TR line against the mortgaged properties. 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 P3,798,719.50. The petitioner filed a complaint for specific performance, nullification of the extrajudicial 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.

ISSUE: Whether or not the doctrine of promissory estoppel is applicable in this case. Held:

No. 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. On the basis of the evidence adduced, 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 the communication letters of the parties that there is a categorical statement of the respondent PNB that it had approved the petitioner’s proposed five-year restructuring plan. 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.

Roblett Industrial Construction vs. CA 266 SCRA 71 January 2, 1997 FACTS: 

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ISSUE:

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. RICC incurred unpaid accounts amounting to P342,909.38. RICC through 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 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

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 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).

Sime Darby Inc. vs. Good Year Philippines G.R. No. 182148 June 08, 2011 FACTS: 

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Macgraphics owned several billboards across Metro Manila and other surrounding municipalities, one of which was a 35' x 70' neon billboard located at the Magallanes Interchange in Makati City. The Magallanes billboard was leased by Macgraphics to Sime Darby in April 1994 at a monthly rental of P120,000.00. The lease had a term of four years and was set to expire on March 30, 1998. Upon signing of the contract, 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, Macgraphics configured the Magallanes billboard to feature Sime Darby's name and logo. On April 22, 1996, Sime Darby executed a Memorandum of Agreement (MOA) with Goodyear, whereby it agreed to sell its tire manufacturing plants and other assets to the latter for a total of P1.5 billion. On May 9, 1996, Sime Darby and Goodyear executed a deed entitled "Deed of Assignment in connection with Microwave Communication Facility and in connection with Billboard Advertising in Makati City and Pulilan, Bulacan" (Deed of Assignment), through which Sime Darby assigned, among others, its leasehold rights, and deposits made to Macgraphics pursuant to its lease contract over the Magallanes billboard. Sime Darby then notified Macgraphics of the assignment of the Magallanes billboard in favor of Goodyear through a letter-notice dated May 3, 1996. After submitting a new design for the Magallanes billboard to feature its name and logo, Goodyear requested that Macgraphics submit its proposed quotation for the production costs of the new design. In a letter dated June 21, 1996 Macgraphics informed Goodyear that the monthly rental of the Magallanes billboard is P250,000.00 and explained that the increase in rental was in consideration of the provisions and technical aspects of the submitted design. Goodyear replied on July 8, 1996 stating it could not accept Macgraphics' offer to integrate the cost of changing the design to the monthly rental. It then requested that Macgraphics send its quotation for the simple background repainting and re-lettering of the neon tubing for the Magallanes billboard. 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. Macgraphics explained that the transfer of Sime Darby's leasehold rights to Goodyear would necessitate drastic changes to the design and the structure of the neon display of the

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Magallanes billboard and would entail the commitment of manpower and resources that it did not foresee at the inception of the lease. As Sime Darby refused to accede to Goodyear's demand for partial rescission, the latter commenced Civil Case No. 97-561 with the RTC.

ISSUE: Whether or not laches may be applied. RULING: No. 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. In sum, it is clear that by its failure to secure the consent of Macgraphics to the assignment of lease, Sime Darby failed to perform what was incumbent upon it under the Deed of Assignment. The rescission of the Deed of Assignment pursuant to Article 1191 of the New Civil Code is, thus, justified.

Kings Properties Corporation vs. Galido G.R. No. 170023 November 27, 2009 FACTS: 

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 (Antipolo property).  The Antipolo property was registered under Original Certificate of Title (OCT) No. 535. The issuance of the homestead patent was subject to the following conditions: To have and to hold the said tract of land, with the appurtenances thereunto of right belonging unto the said Heirs of Domingo Eniceo and to his heir or heirs and assigns forever, subject to the provisions of sections 118, 121, 122 and 124 of Commonwealth Act No. 141, as amended, which provide that except in favor of the Government or any of its branches, units or institutions, the land hereby acquired shall be inalienable and shall not be subject to incumbrance for a period of five (5) years next following the date of this patent, and shall not be liable for the satisfaction of any debt contracted prior to the expiration of that period; that it shall not be alienated, transferred or conveyed after five (5) years and before twenty-five (25) years next following the issuance of title, without the approval of the Secretary of Agriculture and Natural Resources; that it shall not be incumbered, alienated, or transferred to any person, corporation, association, or partnership not qualified to acquire public lands under the said Act and its amendments. 

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On 10 September 1973, a deed of sale covering the Antipolo property was executed between Rufina Eniceo and Maria Eniceo as vendors and respondent as vendee. Rufina Eniceo and Maria Eniceo 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 (Eniceo heirs) 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 (Registry of Deeds) 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 (RTC) of Antipolo, Rizal. The case was docketed as LRC Case No. 584-A. On 31 January 1989, 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

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favor of the Eniceo heirs and declared the original owner’s copy of OCT NO. 535 cancelled and considered of no further value. 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 (Bolinas) for giving false testimony upon a material fact during the trial of LRC Case No. 584-A.[14] Petitioner alleges that sometime in February 1995, Bolinas came to the office of Alberto Tronio Jr. (Tronio), petitioner’s general manager, and offered to sell the Antipolo property. During an on-site inspection, Tronio saw a house and ascertained that the occupants were Bolinas’ relatives. Tronio also went to the Registry of Deeds to verify the records on file. 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 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 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.[20] 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.

ISSUE: Whether or not laches may be applied. RULING: No. 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.

Metrobank vs. Cabilzo 510 SCRA 259 December 6, 2006 Facts: 

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Issue:

On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988, payable to “CASH” and postdated on 24 November 1994 for 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, endorsed 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.

Whether equitable estoppel may be appreciated in favor of petitioner. 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 vs. Garcia 509 SCRA 431 November 27, 2009 Facts: 

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Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, entered 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. T-31643 in the name of Felicisima Mesina which title was cancelled and TCT No. T-78881 was issued in the name of Atty. Honorio Valisno Garcia. 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 seven (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 one percent (1%) per month. The Contract also stipulated, among others, that: Should the spouses Garcia fail to pay five (5) successive monthly installments, Felicisima Mesina shall have a right to rescind the Contract to Sell. All paid installments to be recomputed as rental for usage of lot shall be at the rate of P100.00 a month and that Felicisima Mesina shall have the further option to return the down payment and whatever balance spouses Garcia paid, thereby rescinding the Contract to Sell. Upon rescission of the Contract to sell, spouses Garcia agree to remove all the improvements built on the lot within three (3) months from rescission of this contract, spouses Garcia shouldering all expenses of said removal. Instituting this case at bar, respondent asserts that despite the full payment made on February 7, 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.

 Issues: Whether petitioners are in estoppel Held: This Court, upon reviewing the records of the case at bar, finds no reason to overturn the findings of the appellate court that, indeed, petitioners are estopped from avowing that they never had knowledge as to the acceptance of the delayed payments made by the respondent, and that they never induced respondent to believe that she had validly effected full payment. Evidence on record show that petitioners can no longer deny having accepted the late payments made by the respondent because in a letter dated April 10, 1986 sent to petitioner Simeon Mesina by Engineer Danilo Angeles, who is the husband of petitioners’ authorized

collection agent Angelina Angeles, he told petitioner Simeon Mesina that the title and the Deed of Sale were both ready for their signature, and respondent was willing and ready to pay for the excess area. Hence, if petitioners did not accept the late payments of the respondent, and if they did not consider such as full payment of the purchase price on the subject property as they claimed it to be, the title as well as the Deed of Sale could not have been prepared for their signature. In the same way, respondent could not have sent a demand letter to ask for the execution of those documents had they not been induced to believe that the late payments were validly accepted and that the purchase price had already been paid in full. There were statements, which were made under oath, which made it crystal clear that the late payments were accepted by the petitioners, and that the payments corresponded to the purchase value of the subject property; therefore, petitioners cannot deny the fact that the full payment of the purchase value of the lot in question had in fact been made by the respondent.

Pahamatong vs PNB G.R. No. 156403 March 21, 2005 Facts: 

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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. In his petition, Agustin identified petitioners Josephine and Eleonor as among the heirs of his deceased spouse. On December 7, 1972, the court issued an order granting Agustin’s petition. Agustin then executed several mortgages and later sold 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 or not the Court of Appeals is right in appreciating laches against petitioners Ruling: 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 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.

Shopper’s Paradise Corporation vs. Efren Roques G.R. No. 148775 January 13, 2004 Facts: 

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Shopper's Paradise Realty & Development Corporation, represented by its president, Veredigno Atienza, entered into a twenty-five year lease with Dr. Felipe C. Roque, 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 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 crossexamination. Issue: Whether or not the respondent is barred by laches and estoppel from denying the contracts. Ruling: 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. 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.

Meatmaster vs Lelis Integrated 452 SCRA 626 February 28, 2005 Facts 

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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. 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 motion for reconsideration was filed by respondent on December 22, 1998, but the same was denied. Respondent filed its notice of appeal on March 29, 1999. 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 petitioner is estopped from raising the issue of the late payment of the docket fee Ruling: 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 vs. Mapili 408 SCRA 484 August 7, 2003 Facts: 

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Hipolito Mapili 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. RULING: 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.

Santos vs Santos 366 SCRA 395 January 4, 1995 Facts:  

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Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of private respondents Calixto, Alberto, Antonio, all surnamed Santos and Rosa Santos-Carreon. 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 four-door 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. 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 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.

Isue: Whether or not the cause of action of the respondents had prescribed and/or barred by laches. RULING: 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 (4th) 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.

Villanueva-Mijares vs CA G.R. No. 108192 April 12, 2000 Facts:  

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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. 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. 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. Ruling: 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. 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.

Garcia vs. Villar G.R. No. 158891 June 27, 2012 Facts: 

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Lourdes V. Galas (Galas) was the original owner of a piece of property (subject property) located at Malindang St., Quezon City, covered by Transfer Certificate of Title (TCT) No. RT-67970(253279) 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 in the amount of Two Million Two Hundred Thousand Pesos (P2,200,000.00) 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 for One Million Five Hundred Thousand Pesos (P1,500,000.00), and declared in the Deed of Sale[9] that such property was “free and clear of all liens and encumbrances of any kind whatsoever.”

Issue: Whether or not the second mortgage to Garcia was valid Held: At the onset, this Court would like to address the validity of the second mortgage to Garcia and the sale of the subject property to Villar. We agree with the Court of Appeals that both are valid under the terms and conditions of the Deed of Real Estate Mortgage executed by Galas and Villar.

While it is true that the annotation of the first mortgage to Villar on Galas’s TCT contained a restriction on further encumbrances without the mortgagee’s prior consent, this restriction was nowhere to be found in the Deed of Real Estate Mortgage. As this Deed became the basis for the annotation on Galas’s title, its terms and conditions take precedence over the standard, stamped annotation placed on her title. If it were the intention of the parties to impose such restriction, they would have and should have stipulated such in the Deed of Real Estate Mortgage itself.

Neither did this Deed proscribe the sale or alienation of the subject property during the life of the mortgages. Garcia’s insistence that Villar should have judicially or extrajudicially foreclosed the mortgage to satisfy Galas’s debt is misplaced. The Deed of Real Estate Mortgage merely provided for the options Villar may undertake in case Galas or Pingol fail to pay their loan. Nowhere was it stated in the Deed that Galas could not opt to sell the subject property to Villar, or to any other person. Such stipulation would have been void anyway, as it is not allowed under Article 2130 of the Civil Code, to wit: Art. 2130. A stipulation forbidding the owner from alienating the immovable mortgaged shall be void.

Spouses Edralin vs Philippine Veterans Bank G.R. No. 168523 March 09, 2011 Facts: 

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Veterans Bank granted petitioner spouses Fernando and Angelina Edralin (Edralins) a loan in the amount of 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 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, the foreclosure sale was held on September 8, 1983, in which the ExOfficio 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. 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. Veterans Bank caused the consolidation of ownership of the subject property in its name on January 19, 1994. 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 on February 3, 1994. 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 ExParte Petition for the Issuance of a Writ of Possession, docketed as Land Registration Case (LRC) 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.

Issue: What is pactum commissorium and is it applicable in this case? Held: Pactum commissorium is "a stipulation empowering the creditor to appropriate the thing given as guaranty for the fulfillment of the obligation in the event the obligor fails to live up to his undertakings, without further formality, such as foreclosure proceedings, and a public sale." "The elements of pactum commissorium, which enable the mortgagee to acquire ownership of the mortgaged property without the need of any foreclosure proceedings, are: (1) there should

be a property mortgaged by way of security for the payment of the principal obligation, and (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period." The second element is missing to characterize the Deed of Sale as a form of pactum commissorium. Veterans Bank did not, upon the petitioners' default, automatically acquire or appropriate the mortgaged property for itself. On the contrary, the Veterans Bank resorted to extrajudicial foreclosure and was issued a Certificate of Sale by the sheriff as proof of its purchase of the subject property during the foreclosure sale. That Veterans Bank went through all the stages of extrajudicial foreclosure indicates that there was no pactum commissorium

University Physicians Services vs. Marian Clinics Gr No. 152303 September 1, 2010 Facts 

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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. 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. PSI sent a letter to MCI, informing it of the filing of the complaint and the suspension of payment of the monthly rentals until the resolution of the case During the pendency of these cases, on September 1, 1980, MCI ceded to the Development Bank of the Philippines (DBP) some of the leased buildings, including certain facilities, furniture, fixtures and equipment found therein, in full settlement of MCI’s debt to DBP.

Issue What is the principle of the parties’ freedom of contract? Held Under the principle of the parties’ freedom of contract, the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. Obligations arising from contracts have the force of law between the parties. The provisions in the lease contract that:

(1) All pillows, linen, sheets, mattresses, rubber sheets, x x x and such other similar breakable, losable or deteriorating items x x x shall upon termination of this Agreement, be replaced by the LESSEE in the same quantity as turned over herewith by the LESSORS; and

(2) All medical equipment also, if deteriorated upon termination hereof, shall be replaced in the same quantity and quality in which they were received by the LESSEE. x x x.

clearly show the parties’ binding covenant that, upon the termination of the lease, certain types of movable properties subject of the lease will not simply be returned but replaced in the same quantity and/or quality in case of loss or deterioration.

MARTIN vs DBS BANK Philippines, INC. G.R. No. 174632 June 16, 2010 FACTS: 

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Felicidad T. Martin, Melissa M. Isidro, Grace M. David, Caroline M. Garcia, Victoria M. Roldan, and Benjamin T. Martin, Jr. (the Martins), as lessors, entered into a lease contract with the DBS Bank Philippines, Inc. (DBS), formerly known as Bank of Southeast Asia and now merged with Bank of the Philippine Islands, as lessee, 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. 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 (RTC) of Makati City, Branch 141, in Civil Case 99-1266. Claiming that the leased premises had become untenable, DBS demanded rescission of the lease contract as well as the return of its deposit of P1,200,000.00. On November 12, 2001 the Makati City RTC rendered a decision, dismissing the complaint against the Martins. On appeal to the Court of Appeals (CA) in CA-G.R. CV

76210, the latter court rendered judgment dated April 26, 2006, reversing and setting aside the RTC decision. ISSUE: Whether or not the CA erred in holding that the Martins allowed the leased premises to remain untenantable after the floods, justifying DBS’ rescission of the lease agreement between them. 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. Here, paragraph VIII of the lease contract between DBS and the Martins permitted rescission by either party should the leased property become untenable 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 untenable, 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 point out that paragraph X of the contract forbade the pre-termination of the lease. But, as the Court held in Manila International Airport Authority v. Gingoyon,[20] the various stipulations in a contract must be read together and given effect as their meanings warrant. Here, paragraph X, which barred pre-termination of the lease agreement, cannot be read in isolation. Paragraph VIII gave DBS and the Martins the right to rescind the agreement in the event the property becomes untenable due to natural causes, including floods, unless proper repairs and rehabilitation are carried out.

Heirs of Zabala vs. CA G.R. No. 189602 May 6, 2010 Facts: 

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Vicente T. Manuel filed a Complaintfor ejectment with damages against Alfredo Zabala before the Municipal Trial Court in Cities (MTCC) 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. 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 ruling to the Balanga, Bataan Regional Trial Court which reversed the MTCC’s. On December 19, 2008, the CA promulgated a Decision upholding the RTC’s reversal of the MTCC’s Order

Issue: Whether or not a compromise agreement may validly terminate the case Held: Yes. 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, the Court approved the same. The case is now deemed terminated.

DUNCAN ASSOCIATION OF DETAILMAN PTGW vs. GLAXOWELLCOM PHILIPPINES G.R. No. 162994 September 17, 2004 Facts: 

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Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training and orientation. Tecson signed a contract of employment which stipulates, among others, that he agrees to study and abide by existing company rules; to disclose to management any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies and should management find that such relationship poses a possible conflict of interest, to resign from the company. The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform management of any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies. If management perceives a conflict of interest or a potential conflict between such relationship and the employee’s employment with the company, the management and the employee will explore the possibility of a “transfer to another department in a non-counterchecking position” or preparation for employment outside the company after six months. Tecson was initially assigned to market Glaxo’s products in the Camarines SurCamarines Norte sales area. Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals (Astra), a competitor of Glaxo. Bettsy was Astra’s Branch Coordinator in Albay. She supervised the district managers and medical representatives of her company and prepared marketing strategies for Astra in that area. Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of interest which his relationship with Bettsy might engender. Still, Tec son married Bettsy in September 1998. Tecson was later reassigned at Butuan-Surigao-Agusan area to prevent conflict of interest but he refused and argued that he was constructively dismissed.

Issue: Whether or not the prohibition to marry clause of the contract is valid Held: Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors, especially so that it and Astra

are rival companies in the highly competitive pharmaceutical industry. The prohibition against personal 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. In laying down the assailed company policy, Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures. Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns on investments and to expansion and growth. Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play. In this case, there were notices and advises given to the petitioner regarding his romantic relationship to his marriage regarding the conflict of interest.

Star Paper vs. Simbol 487 SCRA 228 April 12, 2006 Facts: 

Under the policy of Star Paper employees are governed by the following contract:

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 the 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. 

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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 co-employee. 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 cutter-machine. 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 coemployee, 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 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.

Tiu vs. Platinum Plans Philippines G.R. No. 163512 February 28, 2007 Facts:  

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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 ruling. It reasoned that petitioner entered into the contract on her own will and volition. Thus, she bind 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 or not the non-involvement clause is valid. 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 Vice-President 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 non-involvement 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.

Avon Cosmetics vs Luna 511 SCRA 376 December 20, 2006 FACTS:  

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According to Luna, 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 states 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 that caused her termination for the alleged violation of the terms of the contract.

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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.

Issues: Whether 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 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.

n 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. 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 vs. Richmond 45 PHIL. REPORTS 679 February 9, 1924 Facts: 

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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, 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. In his 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, 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 INDUSTRIES, INC. vs. DM CONSUNJI, INC. 394 SCRA 11 December 11, 2002 Facts: 

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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. RULING: 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.

Sps. Tecklo v Rural Bank of Pamplona G.R. No. 171201 June 18, 2010 Facts 

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Spouses Roberto and Maria Antonette Co obtained from respondent Rural Bank of Pamplona, Inc. a P100,000.00 loan[5] due in three months or on 20 April 1994. The loan was secured by a real estate mortgage One of the stipulations in the mortgage contract was that the mortgaged property would also answer for the future loans of the mortgagor. Pursuant to this provision, spouses Co obtained on 4 March 1994 a second loan from respondent bank in the amount of P150,000.00 due in three months or on 2 June 1994 spouses Benedict and Maricel Dy Tecklo, meanwhile instituted an action for collection of sum of money against spouses Co. In the said case, petitioners obtained a writ of attachment on the mortgaged property of spouses Co. The notice of attachment was annotated on the TCT of the mortgaged property When the two loans remained unpaid after becoming due and demandable, respondent bank instituted extrajudicial foreclosure proceedings. 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 espondent bank objected to the non-inclusion of the second loan. It also claimed that the applicable interest rate should be the rate fixed in the mortgage, which was 24% per annum plus 3% service charge per annum and 18% penalty per annum.

Issue Whether 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 For its failure to include the second loan in its application for extrajudicial foreclosure as well as in its bid at the public auction sale, respondent bank is deemed to have waived its lien on the mortgaged property with respect to the second loan. Of course, respondent bank may still collect the unpaid second loan, and the interest thereon, in an ordinary collection suit before the right to collect prescribes.

After the foreclosure of the mortgaged property, the mortgage is extinguished and the purchaser at auction sale acquires the property free from such mortgage. Any deficiency amount after foreclosure cannot constitute a continuing lien on the foreclosed property, but must be collected by the mortgagee-creditor in an ordinary action for collection. In this case, the second loan from the same mortgage deed is in the nature of a deficiency amount after foreclosure.

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 vs. Philippine Countryside GR No. 163825 July 13, 2010 Facts 

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Spouses Rosendo Maglasang and Patrocinia Monilar (spouses Maglasang) obtained a loan (subject loan) from PCRB for P1,070,000.00. 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 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 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. Accordingly, PCRB claimed that full payment of the three loans, obtained by the spouses Maglasang, was necessary before any of the mortgages could be released; the settlement of the subject loan merely constituted partial payment of the total obligation. Thus, the payment does not authorize the release of the subject properties from the mortgage lien. PCRB considered Banate as a buyer in bad faith as she was fully aware of the existing mortgage in its favor when she purchased the subject properties from the spouses Maglasang and the spouses Cortel

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 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 as the "blanket mortgage clause" In the present case, the mortgage contract indisputably provides that the subject properties serve as security, not only for the payment of the subject loan, but also for "such other loans or advances already obtained, or still to be obtained." The cross-collateral stipulation in the mortgage contract between the parties is thus simply a variety of a dragnet clause. After agreeing to such stipulation, the petitioners cannot insist that the subject properties be released from mortgage since the security covers not only the subject loan but the two other loans as well.

Pascual vs. Ramos 384 SCRA 105 July 4, 2002 Facts: 

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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 Pascual’s 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 Pascual’s 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 Pascuals could validly neglect the interest rate of 7% per month. Ruling: 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 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 vs. Ca Gr No. 135721 May 27, 2004 Facts  

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Agricom and Dee entered into a 15-year lease contract over the rubber plantation of Agricom. Alba met with the employees of the rubber plantation 6 and updated them on the impending termination of their employment due to the company’s contract of lease with Chua Tee Dee. The employees were told that they would be given separation pay The severed employees filed a complaint for illegal dismissal and unfair labor practice against Agricom, Amado Dee and Pioneer, docketed as NLRC Case No. 1815-LR-XI-85. The labor arbiter rendered his decision on August 22, 1986, holding that the termination of the complainants’ employment was illegal. The respondents were ordered to pay its employees’ separation pay and backwages, but the complaint for unfair labor practice was dismissed for lack of merit Because Pioneer was dragged into labor disputes not of its own making, it wrote Agricom, through its counsel, on October 20, 1987 suggesting a conference to settle the labor case, otherwise, it would consider the contract of lease as rescinded. As Pioneer was unable to pay its monthly rentals, Agricom filed, on September 4, 1990, a civil complaint for sum of money, damages and attorney’s fees against Chua Tee Dee While the case was pending, Dee extended a personal loan to Lilian Carreido. When judgment was rendered, the complaint was dismissed and the lease contract terminate. The court held that it was Agricom;s duty as a lessor to maintain the lessee in peaceful possession and enjoyment of the premises

Issue Whether or not the suspension of the payment of rentals is justified by the fact that the private respondent Agricom breached its lease contract Held In the case at bar, petitioner Chua Tee Dee is the lessee of the private respondent Agricom. As lessor, the Agricom had the duty to maintain the petitioner in the peaceful and adequate enjoyment of the leased premises. Such duty was made as part of the contract of lease entered into by the parties. Even if it had not been so, the lessor is still duty-bound under Art. 1654 of the Civil Code, thus: Art. 1654. The lessor is obliged:

(1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended; (2) To make on the same during the lease all the necessary repairs in order to keep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary: (3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract. The duty "to maintain the lessee in the peaceful and adequate enjoyment of the lease for the duration of the contract" mentioned in no. 3 of the article is merely a warranty that the lessee shall not be disturbed in his legal, and not physical, possession. Thus, in the case of Goldstein v. Roces,58 the Court ruled in favor of the lessor and denied the lessee's claim for damages which resulted from the opening of holes in the roof, as the lessor had allowed another lessee to construct another floor to the leased building. The Court had the occasion to state: Article 1554 provides that the lessor is obliged to maintain the lessee in the peaceful enjoyment of the lease during all the time covered by the contract. In sum, then, the petitioner failed to prove that the private respondent breached any of the provisions of the contract of lease. Thus, the petitioner had no valid reason to suspend the payment of rentals under Art. 1658.

G.C Garments vs. Miranda 495 SCRA 484 July 20, 2006 Facts 

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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%. 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. It vacated the leased premises, but the accrued rentals remained unpaid. 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 lease[4] 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.

Issue Whether or not Angel is liable for damages for failing to maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract Held A lessor is obliged to maintain petitioner’s peaceful and adequate enjoyment of the premises for the entire duration of the lease. In case of noncompliance with these obligations, the lessee may ask for the rescission of the lease contract and indemnification for damages or only the

latter, allowing the contract to remain in force 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 contract is merely a warranty that the lessee shall not be disturbed in having legal and not physical possession of the property.[36] 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.

Barcero vs Capitol Development GR No 154765 March 29, 2007 Facts 

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.

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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 three-year period

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For failure to pay rent, respondent filed an ejectment case against R.C. Nicolas

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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.

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Nicolas had been lawfully terminated because of the latter’s non-payment of rent; and that the sublessees 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.

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On October 21, 1988, respondent and petitioner, as well as several other sub-lessees 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 partiesdefendants be dropped and excluded

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Nicolas filed a complaint for ejectment and collection of unpaid rentals against petitioner

During the pendency of Civil Case No. 52933, several sub-lessees including petitioner, entered into a compromise settlement with respondent.

Issue Whether the the lease contract between petitioner and respondent is void Held 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.32 Thus, the lease contract entered into between petitioner and respondent, during the pendency of the lease contract with R.C. Nicolas, is void.

Maxima Hemedes vs. CA G.R. No. 108472 October 8, 1999 Facts: 

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The instant controversy involves a question of ownership over an unregistered parcel of land. It was originally owned by the late Jose Hemedes, father of Maxima Hemedes and Enrique D. Hemedes. On March 22, 1947 Jose Hemedes executed a document entitled “Donation Inter Vivos With Resolutory Conditions” whereby he conveyed ownership over the subject land, together with all its improvements, in favor of his third wife, Justa Kausapin. Maxima Hemedes, through her counsel, filed an application for registration and confirmation of title over the subject unregistered land. Subsequently, an Original Certificate of Title (OCT) was issued in the name of Maxima Hemedes married to Raul Rodriguez by the Registry of Deeds of Laguna on June 8, 1962, with the annotation that “Justa Kausapin shall have the usufructuary rights over the parcel of land herein described during her lifetime or widowhood.” Enrique D. Hemedes sold the property to Dominium Realty and Construction Corporation (Dominium). On April 10, 1981, Justa Kausapin executed an affidavit affirming the conveyance of the subject property in favor of Enrique D. Hemedes as embodied in the “Kasunduan” dated May 27, 1971, and at the same time denying the conveyance made to Maxima Hemedes. Dominium and Enrique D. Hemedes filed a complaint for the annulment of the TCT issued in favor of R & b Insurance and/or the reconveyance to Dominium of the subject property. Specifically, the complaint alleged that Dominium was the absolute owner of the subject property by virtue of the February 28, 1979 deed of sale executed by Enrique D. Hemedes, who in turn obtained ownership of the land from Justa Kausapin, as evidenced by the “Kasunduan” dated May 27, 1971. The Plaintiffs asserted that Justa Kausapin never transferred the land to Maxima Hemedes and that Enrique D. Hemedes had no knowledge of the registration proceedings initiated by Maxima Hemedes. The trial court rendered judgment in favor of plaintiffs Dominium and Enrique D. Hemedes. Both R & B Insurance and Maxima Hemedes appealed from the trial court’s decision. The Court of Appeals affirmed the assailed decision in toto. Hence, this petition.

Which of the two conveyances by Justa Kausapin, the first in favor of Maxima Hemedes and the second in favor of Enrique D. Hemedes, effectively transferred ownership over the subject land?

Ruling: Public respondent’s finding that the “Deed of Conveyance of Unregistered Real Property By Reversion” executed by Justa Kausapin in favor of Maxima Hemedes is spurious and not supported by the factual findings in this case. It is grounded upon the mere denial of the same by Justa Kausapin. A party to a contract cannot just evade compliance with his contractual obligations by the simple expedient of denying the execution of such contract. If, after a perfect and binding contract has been executed between the parties, it occurs to one of them to allege some defect therein as a reason for annulling it, the alleged defect must be conclusively proven, since the validity and fulfillment of contracts cannot be left to the will of one of the contracting parties. In upholding the deed of conveyance in favor of Maxima Hemedes, the Court must concomitantly rule that Enrique D. Hemedes and his transferee, Dominium, did not acquire any rights over the subject property. 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 predecessor-in-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.

PUP vs. Golden Horizon G.R. No. 183612 March 15, 2010 Facts: 

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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 (10)-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. 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 (10) years, renewable for another ten (10) years with mutual consent of the parties.3 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 that 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.5 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 (10) 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.6 NDC still did not reply but continued to accept rental payments from GHRC and allowed the latter to remain in possession of the property.

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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.7 In the meantime, then President Corazon C. Aquino issued Memorandum Order No. 214 dated January 6, 1989, ordering the transfer of the whole NDC Compound to the National Government, which in turn would convey the said property in favor of PUP at acquisition cost. The memorandum order cited the serious need of PUP, considered the "Poor Man’s University," to expand its campus, which adjoins the NDC Compound, to accommodate its growing student population, and the willingness of PUP to buy and of NDC to sell its property. The order of conveyance of the 10.31-hectare property would automatically result in the cancellation of NDC’s total obligation in favor of the National Government in the amount of P57,193,201.64.8 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. NDC and PUP separately appealed the decision to the CA.19 By Decision of June 25, 2008, the CA affirmed in toto the decision of the RTC.

Issue: Whether or not the right of refusal is applicable HELD: When a lease contract contains a right of first refusal, the lessor has the legal duty to the lessee not to sell the leased property to anyone at any price until after the lessor has made an offer to sell the property to the lessee and the lessee has failed to accept it. Only after the lessee has failed to exercise his right of first priority could the lessor sell the property to other buyers under the same terms and conditions offered to the lessee, or under terms and conditions more favorable to the lessor. Records showed that during the hearing on the application for a writ of preliminary injunction, respondent adduced in evidence a letter of Antonio A. Henson dated 15 July 1988 addressed to Mr. Jake C. Lagonera, Director and Special Assistant to Executive Secretary Catalino Macaraeg, reviewing a proposed memorandum order submitted to President Corazon C. Aquino transferring the whole NDC Compound, including the premises leased by respondent, in favor of petitioner PUP. This letter was offered in evidence by respondent to prove the existence of documents as of that date and even prior to the expiration of the second lease contract or the lapse of the ten (10)-year period counted from the effectivity of the rental payment -- that is, one hundred and fifty (150) days from the signing of the contract (May 4, 1978), as provided in Art. I, paragraph (b) of C-12-78, or on October 1, 1988.

Respondent thus timely exercised its option to purchase on August 12, 1988. However, considering that NDC had been negotiating through the National Government for the sale of the property in favor of PUP as early as July 15, 1988 without first offering to sell it to respondent and even when respondent communicated its desire to exercise the option to purchase granted to it under the lease contract, it is clear that NDC violated respondent’s right of first refusal. Under the premises, the matter of the right of refusal not having been carried over to the impliedly renewed month-to-month lease after the expiration of the second lease contract on October 21, 1988 becomes irrelevant since at the time of the negotiations of the sale to a third party, petitioner PUP, respondent’s right of first refusal was still subsisting.

Joselito and Dominga Villegas vs. CA G.R. No. 129977 February 1, 2001 Facts: 

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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-A-2 was registered and TCT No. T131808 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 Tobacco is the real owner of the property.

Ruling: 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 enshrined rule that even a registered owner may be barred from recovering possession of property by virtue of laches.

EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC vs. MAYFAIR THEATER, INC G.R. No. 106063 November 21, 2006 Facts: 

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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. 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.

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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 letter.

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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.

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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.

Issue: Whether or not Mayfair has the right of first refusal. 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 “30day 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.

PUP V CA G.R. No. 143590. November 14, 2001 Facts: 

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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-3065 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 "co-extensive 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”.

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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. 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.

Sps. Litonjua vs. L & R Corporation G.R. No. 130722. December 9, 1999 Facts: 

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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 mortgageconstituted 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.

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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 28055in 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. 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.

Josefa VS. Zhandong Trading Corporation 417 SCRA 269 DECEMBER 8, 2003 Facts: 

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Respondent Zhandong delivered to petitioner Josefa, who was introduced to it as a client by Mr. Tan, the total volume of 313 crates of boards valued at P4,558,100.00 payable within 60 days from delivery. Instead of paying respondent, petitioner remitted his payments to Tan who in turn delivered various checks to respondent, who accepted them upon Tan’s assurance that said checks came from petitioner. When a number of the checks bounced, Tan issued his own checks and those of his mother, but Tan later stopped payments. Respondent demanded payment from Tan and petitioner but was ignored; hence he filed the instant complaint. In his answer petitioner averred, that he had already paid all his obligations to respondent through Tan. Furthermore, he claimed he is not privy to the agreements between Tan and respondent, and hence, in case his payments were not remitted to respondent, then it was not his (petitioner) fault and that respondent should bear the consequences.

Issue: Whether or not petitioner is liable for payment of the boards to respondent when he did not negotiate the transaction with it, rather through Tan as intermediary. Held: No. The transaction was negotiated between Tan and petitioner who only received the goods delivered by respondent. Petitioner was not privy to the arrangement between Tan and respondent. Petitioner has fully paid for the goods to Tan with whom he had arranged the transaction. 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 and thus, no cause of action arises. Petitioner, being not privy to the transaction between Tan and respondent, should not be made liable for the failure of Tan to deliver the payment to respondent. Therefore, respondent should recover the payment from Tan.

Saludo vs. Security Bank G.R. No. 184041 October 13, 2010 Facts: 

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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, both documents dated 1 August 1996, to secure full payment and performance of the obligations arising from the credit accommodation. Booklight avail 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 promissory notes in 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 at P10,487,875.41, 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. 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 ruling of the RTC.

ISSUE: Whether or not petitioner should be held solidarily liable for the second credit facility extended to Booklight HELD: Yes. 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.

PCI VS NG Sheung Ngor A.M. No. P-05-1973. March 18, 2005 Facts 

Complainant EPCIB is the defendant in Civil Case No. CEB-26983 before the Regional Trial Court (RTC), Branch 16, Cebu City, entitled, “Ng Sheung Ngor, doing business under the name and style ‘Ken Marketing,’ Ken Appliance Division, Inc. and Benjamin Go, Plaintiffs, vs. Equitable PCI Bank, Aimee Yu and Ben Apas, Defendants” for Annulment and/or Reformation of Documents and Contracts.

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Respondents Antonio A. Bellones and Generoso B. Regalado are the sheriffs in Branches 9 and 16, respectively, of the RTC of Cebu City.

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For garnishing accounts maintained by Equitable PCI Bank, Inc. (EPCIB) at Citibank, N.A., and Hongkong and Shanghai Bank Corporation (HSBC), allegedly in violation of Section 9(b) of Rule 39 of the Rules of Court, a complaint for grave abuse of authority was filed by Atty. Paulino L. Yusi against Sheriffs Antonio A. Bellones and Generoso B. Regalado. There was an offer of other real property by petitioner.

ISSUE: Did respondents violate the Rules of Court? Held: By serving notices of garnishment on Citibank, N.A., HSBC and PNB, Sheriff Regalado violated EPCIB’s right to choose which property may be levied upon to be sold at auction for the satisfaction of the judgment debt. Thus, it is clear that when EPCIB offered its real properties, it exercised its option because it cannot immediately pay the full amount stated in the writ of execution and all lawful fees in cash, certified bank check or any other mode of payment acceptable to the judgment obligee. In the case at bar, EPCIB cannot immediately pay by way of Manager’s Check so it exercised its option to choose and offered its real properties. With the exercise of the option, Sheriff Regalado should have ceased serving notices of garnishment and discontinued their implementation. This is not true in the instant case. Sheriff Regalado was adamant in his posture even if real properties have been offered which were sufficient to satisfy the judgment debt.

Teresita Dio vs. St. Ferdinand Memorial Park G.R. No. 169578 November 30, 2006 Facts:  

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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 purchase was evidenced by a Pre-Need Purchase Agreement. 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. 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. According to the Rules (Rule 69) Mausoleum building and memorials should be constructed by the Park Personnel. Lot Owners cannot contract other contractors for the construction of the said buildings and memorial, however, the lot owner is free to give their own design for the mausoleum to be constructed, as long as it is in accordance with the park standards. The construction shall be under the close supervision of the Park Superintendent. The mortal remains of Dio’s husband, father and daughter were interred in the lot at her own expense, without the knowledge and intervention of SFMPI.. In 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 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 issued on May 25, 1972. The total amount excluded certain specific designs in the approved plan which if included would cost Dio much more. 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. Dio filed a Complaint for Injunction with Damages against SFMPI and Tantoco before the RTC. 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

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preventing the construction of any improvement upon her property in the park. The court issued a cease and desist order against defendants. The trial court rendered judgment in favor of defendants. On appeal, the CA affirmed the decision of the trial court.

Issue: 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 and whether the said rule is valid and binding upon petitioner. Ruling: Plaintiff’s allegation that she was not aware of the said Rules and Regulations lacks credence. Admittedly, in her Complaint and during the trial, plaintiff testified that she informed the defendants of her intention to construct a mausoleum. Even counsel for the plaintiff, who is the son of the plaintiff, informed the Court during the trial in this case that her mother, the plaintiff herein, informed the defendants of her plan to construct and erect a mausoleum. This act of the plaintiff clearly shows that she was fully aware of the said rules and regulations otherwise she should not consult, inform and seek permission from the defendants of her intention to build a mausoleum if she is not barred by the rules and regulations to do the same. When she signed the contract with the defendants, she was estopped to question and attack the legality of said contract later on. Further, a contract of adhesion, wherein one party imposes a readymade form of contract on the other, is not strictly against the law. A contract of adhesion is as binding as ordinary contracts, the reason being that the party who adheres to the contract is free to reject it entirely. Contrary to petitioner’s contention, not every contract of adhesion is an invalid agreement.

PILITEL vs. Delfino Tecson G.R. No. 156966. May 7, 2004 Facts: 

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On various dates in 1996, Delfino C. Tecson applied for 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 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 filed a petition for certiorari before the Court of Appeals. The Court of Appeals saw no merit in the petition and affirmed the assailed orders of the trial court.

Issue: Whether or not the contract in this case is one of a contract of adhesion Ruling: 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 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.

PAL vs. CA G.R. No. 119706 March 14, 1996 Facts: 

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On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine Airlines, one (1) unit microwave oven under PAL Air Waybill No. 0-79-1013008-3, 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. This is because, according to petitioner, was filed out of time under paragraph 12, a (1) of the Air Waybill which provides: "(a) the person entitled to delivery must make a complaint to the carrier in writing in case: (1) of visible damage to the goods, immediately after discovery of the damage and at the latest within 14 days from the receipt of the goods. On September 25, 1990, Gilda C. Mejia filed an action for damages against the petitioner in the lower court. The latter rendered a decision rendering PAL liable to pay, actual, moral and exemplary damages as well as attorney’s fees. On appeal, the 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 and its provisions should be strictly construed against herein petitioner. Held: 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. In the earlier case of Angeles v. Calasanz, the Supreme Court ruled that the terms of a contract of adhesion must be interpreted against the party who drafted the same.

ERMITAÑO VS. COURT OF APPEALS 306 SCRA 218 April 21, 2009 Facts: 

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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 card holder. The spouses were given credit limit of P10, 000.00. They often exceeded this credit limit without protest from BCC. On August 9, 1989, Manuelita’s bag was snatched from her as she was shopping at the greenbelt mall in Makati. 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 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 wrote again BECC disclaiming responsibility for those charges, which were made after she had served BECC with notice of loss of her card. However, BECC, in a letter dated July 13, 1990, pointed to Luis the stipulation in their contract. However, 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 continued to bill the spouses for said purchases.

Issue: Whether or not petitioners have no chance to contest the stipulations appearing in the credit card application that was drafted entirely by private respondent, thus, a clear contract of adhesion. Held:

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 in to such contracts are free to reject the stipulations entirely. In this case, the cardholder, Manuelita, has complied with what was required of her under the contract with BECC, She immediately notified BECC of 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. 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.

Uniwide vs Titan-Ikeda G.R. No. 126619 December 20, 2006 Facts: 

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The case originated from an action for a sum of money filed by Titan-Ikeda Construction and Development Corporation (Titan) against Uniwide Sales Realty and Resources Corporation (Uniwide) arising fromUniwide’s non-payment of certain claims billed by Titan after completion of three projects covered by agreements they entered into with each other. The agreements between Titan and Uniwide are briefly described below.

PROJECT 1. The first agreement 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 1992 and turned over to Uniwide. PROJECT 2. Sometime in July 1992, Titan and Uniwide entered into the second agreement 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. PROJECT 3. The parties executed the third agreement in May 1992. In a written “Construction Contract,” Titan undertook to construct the Uniwide Sales Department Store Building in Kalookan City for the price of P118,000,000.00 payable in progress billings to be certified to by Uniwide’s representative. It was stipulated that the project shall be 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 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.

Issue What are the mutual liabilities of the parties with each other? Held On Project 1 – Libis: Uniwide is absolved of any liability for the claims made by Titan on this Project. Project 2 – Edsa Central:Uniwide is absolved of any liability for VAT payment on this project, the same being for the account of 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. On Project 3 – Kalookan: Uniwide is held liable for the unpaid balance in the amount of P5,158,364.63 which is ordered to be paid to Titan with 12% interest per annum commencing from 08 September 1993 until the date of payment. 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. The BIR is hereby notified that Uniwide Sales Realty and Resources Corporation has assumed responsibility and is held liable for VAT payment on this project. This accordingly exempts Claimant Titan-Ikeda Construction and Development Corporation from this obligation.

Heirs of Augusto Salas, Jr. vs. Laperal G.R. NO. 135362. December 13, 1999 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.  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 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.  On February 3, 1998, petitioners as heirs of Salas, Jr. filed in the Regional Trial Court a Complaint for declaration of nullity of sale, reconveyance, cancellation of contract, accounting and damages against herein respondents. Laperal Realty filed a Motion to Dismisson the ground that petitioners failed to submit their grievance to arbitration as required under Article VI of the Agreement. Spouses Abrajano and Lava and respondent Dacillo filed a Joint Answer with Counterclaim and Crossclaim praying for dismissal of petitioners’ Complaint for the same reason.  The trial court issued an Order dismissing petitioners’ Complaint for non-compliance with the arbitration clause. Issue: Whether or not the trial court erred in dismissing the complaint. Held: A submission to arbitration is a contract. As such, the Agreement, containing the stipulation on arbitration, binds the parties thereto, as well as their assigns and heirs.But only they.

Petitioners, as heirs of Salas, Jr., and respondent Laperal Realty are certainly bound by the Agreement. If respondent Laperal Realty, had assigned its rights under the Agreement to a third party, making the former, the assignor, and the latter, the assignee, such assignee would also be bound by the arbitration provision since assignment involves such transfer of rights as to vest in the assignee the power to enforce them to the same extent as the assignor could have enforced them against the debtoror in this case, against the heirs of the original party to the Agreement. However, respondents Rockway Real Estate Corporation, South Ridge Village, Inc., Maharami Development Corporation, spouses Abrajano, spouses Lava, Oscar Dacillo, Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capellan are not assignees of the rights of respondent Laperal Realty under the Agreement to develop Salas, Jr.’s land and sell the same. They are, rather, buyers of the land that respondent Laperal Realty was given the authority to develop and sell under the Agreement. As such, they are not “assigns” contemplated in Art. 1311 of the New Civil Code which provides that “contracts take effect only between the parties, their assigns and heirs”. 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. Hence, the trial court’s decision was nullified and set aside. Said court was ordered to proceed with the hearing.

BIENVENIDO R. MEDRANO and IBAAN RURAL BANK vs. COURT OF APPEALS, PACITA G. BORBON, JOSEFINA E. ANTONIO and ESTELA A. FLOR G.R. No. 150678 February 18, 2005

Facts:

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When the 17-hectare mango plantation priced at P2,200,000.00 was foreclosed by the bank, petitioner asked his cousin-in-law Estela Flor to look for a buyer. Mr. Dominador Lee, through Pacita Borbon, and through Flor’s recommendation, was able to buy the mango plantation. A Letter of Authority was executed between Medrano and the respondents expressly stating that respondents shall be given 5% of the total purchase price of the land as commission if they could help in looking for a buyer. Despite payment of the purchase price and execution of the Deed of Sale however, the respondents remained unpaid and were not given the commission they were told of. Judgment was rendered by the trial court in favor of the respondents, and petitioners were ordered to pay, jointly and severally, the 5% broker’s commission to them. On appeal to the Court of Appeals, petitioners reiterate that the Letter of Authority was not binding and enforceable because Medrano, who signed the same, was not the owner of the party. They likewise allege that respondents have no right to be granted commission because they did not perform any act to consummate the sale. Still, the CA affirmed the ruling of the trial court. For petitioners, the respondents did not actually perform any acts of “negotiation” as required in the letter.

Issue:

Whether or not respondents are entitled to broker’s commission of 5%

Held:

Yes. 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 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 procuring cause of the sale. 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. As such, Medrano cannot renege on the promise to pay commission on the flimsy excuse that he is not the registered owner of the property.

MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAÑA vs. EDUARDO R. GULLAS and NORMA S. GULLAS G.R. No. 143978 December 3, 2002

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Private respondents, Spouses Eduardo R. Gullas and Norma S. Gullas executed a special power of attorney authorizing petitioners Manuel Tan, a licensed real estate broker, and his associates Gregg Tecson and Alexander Saldaña, to negotiate for the sale of their parcels of 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. The property was sold to the Sisters of Mary of Banneaux, Inc. at the rate of P220.00 per square meter through the assistance of Eufemia Cañete who was granted a special power of attorney in to sell, transfer and convey the land. Petitioners filed a complaint for recovery of broker's fee against the private respondents when the latter refused to give them their commission, alleging that another group of agents are responsible for the sale of the land. Petitioners argue that they are the efficient procuring cause in bringing about the sale of the property. Private respondents however claim that it was another broker, Roberto Pacana who introduced the Sisters of Mary ahead of petitioners. The lower court ruled in favor of herein petitioners and ordered the respondents in this case to pay the former P624,684.00 as broker’s fee with legal interest at the rate of 6% per annum from the date of filing of the complaint. On appeal of both parties to the CA, the lower court’s decision was reversed and set aside, and another judgment was rendered dismissing the complaint.

Issue:

Whether or not petitioners are entitled to broker’s fees

Held:

Yes. Private respondents failed to prove their contention that Pacana began negotiations with private respondents way ahead of petitioners. The only piece of evidence that the private respondents were able to present is an undated and unnotarized Special Power of Attorney in favor of Pacana. Petitioners, on the other hand, were given the written authority to sell by the private respondents.

In the case of Alfred Hahn v. Court of Appeals and Bayerische Motoren Werke Aktiengesellschaft (BMW) we 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.

Concerning the rate of commission, equity considerations dictate that petitioners’ commission must be based on the actual price for which the land was sold (P200.00 per square meter), and not the price at which the land was offered for sale (P530.00 per square meter). To rule otherwise would constitute unjust enrichment on the part of petitioners as brokers.

JESUS M. GOZUN vs. JOSE TEOFILO T. MERCADO a.k.a. ‘DON PEPITO MERCADO G.R. No. 167812 December 19, 2006

Facts:

 When respondent vied for the gubernatorial post in Pampanga during the 1995

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local elections, he requested petitioner, who was the owner of JMG Publishing House to submit to him draft samples and price quotation of campaign materials. Petitioner claimed that he was told by respondent’s wife that respondent already approved the price quotation so he immediately started printing and making the campaign materials. Due to the urgency and limited time to do the job, petitioner availed of the services and facilities of Metro Angeles Printing and of St. Joseph Printing Press, owned by his daughter and mother, respectively. Meanwhile, respondent’s sister-in-law, Lilian Soriano obtained from petitioner cash advance of P253,000 allegedly for the allowances of poll watchers and for related expenses. Petitioner later sent to 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 respondent’s sister-in-law. Only P1,000,000 has been paid by respondent’s wife, but respondent failed to settle the balance. Petitioner filed a complaint against respondent to collect the remaining amount of P1,177,906 plus "inflationary adjustment" and attorney’s fees. Respondent claimed that he never entered into a contract with petitioner for the printing of campaign materials and that those delivered to him were donations from various sources. The CA held that other than petitioner’s testimony, there was no evidence to support his claim that Lilian was authorized by respondent to borrow money on his behalf.

 It noted that the acknowledgment receipt signed by Lilian did not specify in what capacity she received the money; thus, applying Article 1317 of the Civil Code, it held that petitioner’s claim for P253,000 is unenforceable. Issue: Whether or not petitioner can enforce claims for the P253,000 against respondent Held: No. The receipt issued by petitioner presented by plaintiff-appellee to support his claim unfortunately only indicates the Two Hundred Fifty Three Thousand Pesos (P253,0000.00) was received by one Lilian R. Soriano on 31 March 1995, but without specifying for what reason the said amount was delivered and in what capacity did Lilian R. Soriano received the money. 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. The trial court’s decision is modified in that the amount payable by respondent to petitioner is reduced to P924,906.

STA. LUCIA REALTY & DEVELOPMENT, INC. vs. SPOUSES FRANCISCO & EMELIA BUENAVENTURA G.R. No. 177113 October 2, 2009

Facts:

 Petitioner originally sold the subject lot to Loida Gonzales Alfonso, and the latter 

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subsequently sold the same to herein respondents. They filed a complaint for Specific Performance, Damages and Attorney’s Fees before the Housing and Land Use Regulatory Board (HLURB) against petitioner, upon learning that their lot has been subdivided and occupied by two other persons; and that like respondents, the two occupants were also issued a construction permit by petitioner. Petitioner averred, among others, that the lot was owned by its joint-venture partner – ACL Development Corporation; and that it was RCD Realty Corporation which caused the subdivision of the lot and constructed separate residential buildings thereon. Petitioner thus filed a third-party complaint against ACL and RCD so that they may be held jointly and severally liable in case the judgment would be decided against them. The HLURB Arbiter ruled in favor of the spouses, holding in part that it was petitioner’s neglect that ultimately led to the instant dispute.

Issue: Whether or not petitioner has privity of contract with respondents Held: Yes. 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.

JOSEPH CHAN, WILSON CHAN and LILY CHAN vs. BONIFACIO S. MACEDA, JR. G.R. No. 142591 April 30, 2003 Facts: 

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Respondent Bonifacio S. Maceda, Jr. 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. Respondent consequently entered into a building construction contract with Moreman Builders Co., Inc. Moreman deposited the construction materials bought by respondent in the warehouse of herein petitioners Wilson and Lily Chan free of charge. The building construction contract was rescinded by the court due to Moreman’s inability to finish. Meanwhile, during the pendency of the case, respondent ordered petitioners to return to him the construction materials deposited by Moreman in their warehouse. Upon being told by petitioners that Moreman withdrew the construction materials in 1977, respondent filed a complaint for damages with an application for a writ of preliminary attachment against petitioners. The trial court rendered its decision in favor of respondent, ordering the award of actual, moral and exemplary damages, and attorney’s fees.

Issue: Whether or not respondent has the right to demand the return of the construction materials, and to demand damages Held: No. Considering that respondent failed to prove (1) the existence of any contract of deposit between him and petitioners, nor between the latter and Moreman in his favor, and (2) that there were construction materials in petitioners’ warehouse at the time of respondent’s demand to return the same, we hold that petitioners have no corresponding obligation or liability to respondent with respect to those construction materials. Hence, respondent likewise has no right whatsoever to claim for damages.

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. Every cause of action ex-contractu must be founded upon a contract, oral or written, express or implied.

TIMOTEO BALUYOT, JAIME BENITO, BENIGNO EUGENIO, ROLANDO GONZALES, FORTUNATO FULGENCIO and CRUZ-NA-LIGAS HOMESITE ASSOCIATION, INC. vs. THE HONORABLE COURT OF APPEALS, THE QUEZON CITY GOVERNMENT and UNIVERSITY OF THE PHILIPPINES G.R. No. 122947 July 22, 1999 Facts: 

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Petitioners are residents of Barangay Cruz-na-Ligas, Diliman, Quezon City which land was the subject of a land registration case praying that the same land shall be excluded from the technical description in the Certificate of Title of the University of the Philippines. To settle the case, UP made an assurance that an area of 15.8379 hectares of the land to be donated in favor of Quezon City Government shall be subdivided and distributed for the benefits of the petitioners. A Deed of Conditional Donation was executed but UP President Jose Abueva failed to deliver the Certificate of Title covering the property to enable the Quezon City Government to register the Deed. Upon expiration of the eighteen months period for alleged non-compliance of the Quezon City Government with the terms and conditions, Mr. Abueva revoked the Deed of Donation by issuing Administrative Order No. 21. The petitioners filed an action for specific performance with preliminary injunction against the UP and the Quezon City Government. The Court of Appeals ordered for the dismissal of the case.

Issue: Whether or not petitioners have a cause of action Held: Yes. We find all the elements of a cause of action 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. The following requisites must be present in order to have a stipulation pour atrui under Article 1311, paragraph two, of the Civil Code: (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 obligor before its revocation; and (5) neither of the contracting parties bears the legal representation or authorization of the third party. The allegations in the following paragraphs of the amended complaint are sufficient to bring petitioners’ action within the purview of the aforementioned provision: 1. Paragraph 17, that the deed of donation contains a stipulation that the Quezon City government, as donee, is required to transfer to qualified residents of Cruz-na-Ligas, by way of donations, the lots occupied by them; 2. The same paragraph, that this stipulation is part of conditions and obligations imposed by UP, as donor, upon the Quezon City government, as donee; 3. Paragraphs 15 and 16, that the intent of the parties to the deed of donation was to confer a favor upon petitioners by transferring to the latter the lots occupied by them; 4. Paragraph 19, that conferences were held between the parties to convince UP to surrender the certificates of title to the city government, implying that the donation had been accepted by petitioners by demanding fulfillment thereof[16] and that private respondents were aware of such acceptance; and 5. All the allegations considered together from which it can be fairly inferred that neither of private respondents acted in representation of the other; each of the private respondents had its own obligations, in view of conferring a favor upon petitioners. The case is ordered remanded to the trial court for further proceedings.

SPOUSES ADELINA S. CUYCO and FELICIANO U. CUYCO vs. SPOUSES RENATO CUYCO and FILIPINA CUYCO G.R. No. 168736 April 19, 2006 Facts: 

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Petitioners obtained an initial loan of P1.5M from respondents, payable within 1 year at 18% interest per annum, and secured by a Real Estate Mortgage over a parcel of land with improvements; and a subsequent loan in the aggregate amount of P1.2M on different dates. Only P291,700 of the debt was paid, thus prompting respondents to file a complaint for foreclosure of mortgage. The RTC rendered judgment in favor of respondents, holding that all the additional loans were secured by the real estate mortgage, stating in part that “It is extremely difficult for the court to perceive that the plaintiffs required the defendants to execute a mortgage on the first loan and thereafter fail to do so on the succeeding loans. Such contrary behavior is unlikely.” The Court of Appeals modified the RTC Decision, holding that only three of the loans are secured by the mortgage, i.e., the P1,500,000.00 loan obtained on 25 November 1991; the P150,000.00 loan obtained on 01 July 1992; and the P500,000.00 loan obtained on 05 September 1992.

Issue: Whether or not the mortgage secures all the loans obtained Held: No. As a general rule, a mortgage liability is usually limited to the amount mentioned in the contract. 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. It is clear from a perusal of the real estate mortgage between the parties that there is no stipulation that the mortgaged realty shall also secure future loans and advancements. Thus, what applies is the general rule above stated. Even if the parties intended the additional loans of P150,000.00 obtained on May 30, 1992, P150,000.00 obtained on July 1, 1992, and P500,00.00 obtained on September 5, 1992 to be secured by the same real estate mortgage, as shown in the acknowledgement receipts, it is not sufficient in law to bind the realty for it was not made substantially in the form prescribed by law.

Besides, by express provisions of Section 127 of Act No. 496, a mortgage affecting land, whether registered under said Act or not registered at all, is not deemed to be sufficient in law nor may it be effective to encumber or bind the land unless made substantially in the form therein prescribed. It is required, among other things, that the document be signed by the mortgagor executing the same, in the presence of two witnesses, and acknowledged as his free act and deed before a notary public. A mortgage constituted by means of a private document obviously does not comply with such legal requirements. What the parties could have done in order to bind the realty for the additional loans was to execute a new real estate mortgage or to amend the old mortgage conformably with the form prescribed by the law. Failing to do so, the realty cannot be bound by such additional loans, which may be recovered by the respondents in an ordinary action for collection of sums of money.

ALLAN C. GO, doing business under the name and style, “ACG Express Liner” vs. MORTIMER F. CORDERO G.R. No. 164703 May 4, 2010

Facts:

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Issue:

Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation (Pamana), ventured into the business of marketing inter-island passenger vessels. Tony Robinson, an Australian national based in Brisbane, Australia, who is the Managing Director of Aluminum Fast Ferries Australia (AFFA), appointed Cordero as the exclusive distributor of AFFA catamaran and other fast ferry vessels in the Philippines. 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. Per agreement between Robinson and Cordero, the latter shall receive commissions 22.43% of the purchase price, from the sale of each vessel. However, Cordero later discovered that Go was dealing directly with Robinson in canvassing for a second catamaran engine. 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 from the sale of the vessels and causing him actual, moral and exemplary damages and attorney’s fees. The trial court ruled in favor of herein respondent and held Go, Robinson, Landicho and Tecson jointly and solidary liable. The CA sustained the trial court in ruling that Cordero is entitled to damages for the breach of his exclusive distributorship agreement with AFFA.

Whether or not petitioner and his lawyers can be held liable for Cordero’s unpaid commissions, considering that the same is the sole obligation of AFFA Held: Yes. The act of Go, Landicho and Tecson in inducing Robinson and AFFA to enter into another contract directly with ACG Express Liner to obtain a lower price for the second vessel resulted in AFFA’s breach of its contractual obligation to pay in full the commission due to Cordero and unceremonious termination of Cordero’s appointment as exclusive distributor. Following our pronouncement in Gilchrist v. Cuddy (supra), such act may not be deemed malicious if impelled by a proper business interest rather than in wrongful motives. The attendant circumstances, however, demonstrated that respondents transgressed the bounds of permissible financial interest to benefit themselves at the expense of Cordero.

Respondents furtively went directly to Robinson after Cordero had worked hard to close the deal for them to purchase from AFFA two (2) SEACAT 25, closely monitored the progress of building the first vessel sold, attended to their concerns and spent no measly sum for the trip to Australia with Go, Landicho and Go’s family members. But what is appalling is the fact that even as Go, Landicho and Tecson secretly negotiated with Robinson for the purchase of a second vessel, Landicho and Tecson continued to demand and receive from Cordero their “commission” or “cut” from Cordero’s earned commission from the sale of the first SEACAT 25.

Go, Robinson, Tecson and Landicho clearly connived not only in ensuring that Cordero would have no participation in the contract for sale of the second SEACAT 25, but also that Cordero would not be paid the balance of his commission from the sale of the first SEACAT 25. This, despite their knowledge that it was commission already earned by and due to Cordero. Thus, the trial and appellate courts correctly ruled that the actuations of Go, Robinson, Tecson and Landicho were without legal justification and intended solely to prejudice Cordero.

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 that “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. All such elements are present in this case.

HERMINIO TAYAG vs. AMANCIA LACSON, ROSENDO LACSON, ANTONIO LACSON, JUAN LACSON, TEODISIA LACSON-ESPINOSA and THE COURT OF APPEALS G.R. No. 134971 March 25, 2004

Facts:

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   

Respondents were the original owners of three parcels of land located in Mabalacat, Pampanga. A group of original farmers or direct tillers of landholdings over the lands owned by the Lacsons individually executed in favor of the petitioner separate Deeds of Assignment, assigning to 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; further granting petitioner the exclusive right to buy the property if and when the respondents, with the concurrence of the defendantstenants, agreed to sell the property. Convinced that they were deceived by petitioner into signing the Deeds of Assignment, the defendants-tenants decided to sell their rights and interests over the landholdings to the respondents. Petitioner was prompted to file a complaint for the court to fix a period within which to pay the agreed purchase price of P50.00 per square meter. The trial court held that petitioner was entitled to injunctive relief; but the CA ruled otherwise, enjoining the trial court from proceeding with the case. Petitioner avers, among others, that respondents induced the defendantstenants to violate the deeds of assignment, contrary to Article 1314 of the New Civil Code.

Issue: Whether or not the respondents are liable to pay petitioner damages based on Article 1314 of the New Civil Code/ Whether or not there is tort interference in this case Held:

No. In So Ping Bun v. Court of Appeals, we held that for the said law to apply, the pleader is burdened to prove the following: (1) the existence of a valid contract; (2) knowledge by the third person of the existence of the contract; and (3) interference by the third person in the contractual relation without legal justification. 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. In fine, one who is not a party to a contract and who interferes thereon is not necessarily an officious or malicious intermeddler. Also, the defendants-tenants did not allege therein that the respondents induced them to breach their contracts with the petitioner. The petitioner himself admitted when he testified that his claim that the respondents induced the defendants-assignees to violate contracts with him was based merely on what “he heard”. Even if the respondents received an offer from the defendants-tenants to assign and transfer their rights and interests on the landholding, the respondents cannot be enjoined from entertaining the said offer, or even negotiating with the defendants-tenants. The respondents could not even be expected to warn the defendants-tenants for executing the said deeds in violation of P.D. No. 27 and Rep. Act No. 6657. Under Section 22 of the latter law, beneficiaries under P.D. No. 27 who have culpably sold, disposed of, or abandoned their land, are disqualified from becoming beneficiaries.

SO PING BUN vs. COURT OF APPEALS, TEK HUA ENTERPRISING CORP. and MANUEL C. TIONG G.R. No. 120554 September 21, 1999

Facts: 

  

Tek Hua Trading Co. was the original lessee of Dee C. Chuan & Sons, Inc. (DCCSI) in the latter’s property in Binondo; but petitioner So Ping Bun occupied the warehouse for his own textile business. Members of the dissolved Tek Hua Trading Co. formed Tek Hua Enterprising Corp. and asked So Ping Bun to vacate the property. The trial court nullified the four contracts of lease between DCCSI and petitioner. The Court of Appeals upheld the decision of the trial court, finding, among others, that petitioner is guilty of tortuous interference of the contract.

Issue:

Whether or not the CA is correct in holding that petitioner is a tortuous interference

Held: Yes. 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 contract; and (3) interference of the third person is without legal justification or excuse. 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 abovementioned are present in the instant case.

INTERNATIONAL FREEPORT TRADERS, INC. vs. DANZAS INTERCONTINENTAL, INC. G.R. No. 181833 January 26, 2011

Facts:

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    

Petitioner IFTI ordered a shipment of Toblerone chocolates and assorted confectioneries from Jacobs Suchard Tobler Ltd. Of Switzerland. Respondent is the agent of Danmar Lines of Switzerland who handled the shipment of the confectioneries by processing the release of the goods from the port and making sure that it will be delivered to Clark. Before the goods could be delivered, respondent 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. Respondent acceded to these demands. Respondent agreed to charge IFTI only the electric charges and storage fees totaling P56,000 but it later demanded payment of P181,809.45 for its services. The MeTC rendered judgment in favor of Danzas and ordered payment of the amount demanded. Petitioner asserts that it cannot be held liable to pay because it was not privy to the hiring of Danzas. The Court of Appeals held that the bank guarantee procured by IFTI in favor of respondent contained all the requisites of a perfected contract.

Issue: Whether or not a contract of lease of service exists between IFTI and Danzas Held: Yes. 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.

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.

ROCKLAND CONSTRUCTION COMPANY, INC. vs. MID-PASIG LAND DEVELOPMENT CORPORATION G.R. No. 164587 February 4, 2008

Facts:

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Petitioner offered to lease from respondent’s 3.1-hectare property. After addressing the offer to the Presidential Commission on Good Governance (PCGG) who has control over the property, petitioner sent Metropolitan Bank and Trust Company check 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. Petitioner presumed that respondent received its letter; however Mid-Pasig denied that it received the check, neither did it accept petitioner’s offer to lease the property. The trial court ordered that a written lease of contract be executed in favor of Rockland. On appeal however, the Court of Appeals reversed and set aside the trial court’s decision, holding in sum that there was no contract of lease perfected between the parties.

Issue: Whether or not there was a perfected contract of lease Held: No. To produce a contract, the offer must be certain and the acceptance absolute. In this case, Mid-Pasig was not aware that Rockland deposited the P1 million check in its account. It only learned of Rockland’s check when it received Rockland’s February 2, 2001 letter. MidPasig, upon investigation, also learned that the check was deposited at the Philippine National Bank (PNB) 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. Furthermore, as noted by the Court of Appeals, if indeed Rockland believed that Mid-Pasig impliedly accepted the offer, then it should have taken possession of the property

and paid the monthly rentals. But it did not. For estoppel to apply, the action giving rise thereto must be unequivocal and intentional because, if misapplied, estoppel may become a tool of injustice. A contract has three distinct stages: preparation, perfection, and consummation. Preparation or negotiation begins when the prospective contracting parties manifest their interest in the contract and ends at the moment of their agreement. Perfection or birth of the contract occurs when they agree upon the essential elements thereof. Consummation, the last stage, occurs when the parties “fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof.”

METROPOLITAN MANILA DEVELOPMENT AUTHORITY vs. JANCOM ENVIRONMENTAL CORPORATION and JANCOM INTERNATIONAL DEVELOPMENT PROJECTS PTY. LIMITED OF AUSTRALIA G.R. No. 147465 January 30, 2002

Facts:

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The Executive Committee (EXECOM) created by virtue of Presidential Memorandum Order No. 202 was tasked to oversee the build-operate-transfer (BOT) implementation of solid waste management projects. Petitioner JANCOM, as the highest bidder, was awarded the San Mateo Waste-to-Energy project. The BOT contract between petitioner and the Philippine government was excited but was however not signed due to the change in administration. The composition of the EXECOM was likewise changed. The San Mateo landfill was closed. Subsequently, the Greater Manila Solid Waste Management Committee adopted a resolution not to pursue the BOT contract with JANCOM. Petitioner assails the decision of the Court of Appeals, contending that there is no valid and binding contract between the Republic of the Philippines and respondents because: a) the BOT contract does not bear the signature of the President of the Philippines; b) the conditions precedent specified in the contract were not complied with; and that c) there was no valid notice of award.

Issue: Whether or not there is a valid and binding contract between the parties

Held:

Yes. 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. 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 the contract. The execution and signing of the contract is not disputed by the parties.

Admittedly, the notice of award has not complied with the requirements set forth in the Implementing Rules and Regulations of Republic Act No. 6957, otherwise known as the BOT Law. However, the defect was cured by the subsequent execution of the contract entered into and signed by authorized representatives of the parties. Moreover, the contract itself provides that the signature of the President is necessary only for its effectivity (not perfection), pursuant to Article 19 of the contract. As to the contention that there is no perfected contract due to JANCOM’s failure to comply with several conditions precedent, the same is, likewise, unmeritorious. The two-month period within which JANCOM should comply with the conditions has not yet started to run. It cannot thus be said that JANCOM has already failed to comply with the “conditions precedent” mandated by the contract.

ROCKLAND CONSTRUCTION COMPANY, INC. vs. MID-PASIG LAND DEVELOPMENT CORPORATION G.R. No. 164587 February 4, 2008

Facts:

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  

Petitioner offered to lease from respondent’s 3.1-hectare property. After addressing the offer to the Presidential Commission on Good Governance (PCGG) who has control over the property, petitioner sent Metropolitan Bank and Trust Company check 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. Petitioner presumed that respondent received its letter; however Mid-Pasig denied that it received the check, neither did it accept petitioner’s offer to lease the property. The trial court ordered that a written lease of contract be executed in favor of Rockland. On appeal however, the Court of Appeals reversed and set aside the trial court’s decision, holding in sum that there was no contract of lease perfected between the parties.

Issue: Whether or not there was a perfected contract of lease Held: No. To produce a contract, the offer must be certain and the acceptance absolute. In this case, Mid-Pasig was not aware that Rockland deposited the P1 million check in its account. It only learned of Rockland’s check when it received Rockland’s February 2, 2001 letter. MidPasig, upon investigation, also learned that the check was deposited at the Philippine National Bank (PNB) 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. Furthermore, as noted by the Court of Appeals, if indeed Rockland believed that Mid-Pasig impliedly accepted the offer, then it should have taken possession of the property

and paid the monthly rentals. But it did not. For estoppel to apply, the action giving rise thereto must be unequivocal and intentional because, if misapplied, estoppel may become a tool of injustice.

MANILA METAL CONTAINER CORPORATION vs. PHILIPPINE NATIONAL BANK G.R. No. 166862 December 20, 2006

Facts:

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Petitioner obtained several loans from respondent bank, the first he secured through a real estate mortgage of his lot in Mandaluyong. Due to petitioners failure to pay, respondent filed a petition to foreclose the mortgage. The property was sold at public auction, with respondent bank being the highest bidder. Petitioner failed to redeem the land within the required period. Respondent rejected petitioner’s offers of repurchasing the land. Petitioner thus filed a complaint against respondent PNB for “Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages.” Respondent claimed that no contract of sale was perfected between it and petitioner after the period to redeem the property had expired. The trial court found that there was no perfected contract; hence it ordered that respondent return the deposit that petitioner made for the sale of the property. The CA affirmed the ruling of the court , likewise holding that there was no contract because there was no meeting of the minds between the parties.

Issue: Whether or not there is a perfected contract for petitioner to repurchase the property from respondent

Held: No. A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without acceptance of the other, there is no contract. When the contract of sale is not perfected, it cannot, as an independent source of

obligation, serve as a binding juridical relation between the parties. The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. Unless and until the respondent accepted the offer on these terms, no perfected contract of sale would arise. 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.

RIDO MONTECILLO vs. IGNACIA REYNES and SPOUSES REDEMPTOR and ELISA ABUCAY G.R. No. 138018 July 26, 2002

Facts:

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Respondent Reynes signed a Deed of Sale of the lot situated in Mabolo in favor of Montecillo. Montecillo promised to pay the agreed P47,000.00 purchase price within one month from the signing of the Deed of Sale. Due to non-payment after the lapse of the one-month period, Reynes asked for the return of the Deed of Sale, and later caused the revocation of the Deed due to respondent’s refusal to return the same. The entire lot was later transferred in the name of the respondent spouses. Still, respondents learned that the Register of Deeds in Cebu City issued a certificate of title in Montecillo’s name. Respondents argue that the Deed of Sale should be declared null and void due to lack of mutual consent; Montecillo countered, saying that the consideration for the lot was paid to Cebu Ice and Cold Storage Corporation. The trial court and the Court of Appeals were unanimous in holding that the Deed of Sale was void ab initio for lack of consideration.

Issue: Whether or not the Deed of Sale was indeed void Held: Yes. Montecillo’s Deed of Sale is null and void ab initio not only for lack of consideration, but also for lack of consent.

On its face, Montecillo’s Deed of Absolute Sale appears supported by a valuable consideration. However, based on the evidence presented by both Reynes and Montecillo, the

trial court found that Montecillo never paid to Reynes, and Reynes never received from Montecillo, the P47,000.00 purchase price. There was indisputably a total absence of consideration contrary to what is stated in Montecillo’s Deed of Sale. A contract of sale is void and produces no effect whatsoever where the price, which appears thereon as paid, has in fact never been paid by the purchaser to the vendor.

In a contract of sale, the parties 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 lack of consent. This lack of consent is separate and distinct from 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.

JASMIN SOLER vs. COURT OF APPEALS, COMMERCIAL BANK OF MANILA, and NIDA LOPEZ G.R. No. 12389 May 21, 2001

Facts:

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Jasmin Soler, a well-known licensed professional interior designer, talked to Commercial Bank (COMBANK) Manager Nida Lopez regarding the latter’s plans of having the bank renovated. Despite short notice, Lopez assured her that she would be compensated for her services so she acceded to the request. They had a meeting, discussing what parts of the bank were to be renovated; again, Lopez assured her that the bank would pay her fees. Petitioner even requested for the blue print of the bank so that the proper design, plans and specifications could be given to Ms. Lopez in time for the board meeting in December 1986. Petitioner likewise paid the engineers and architects who helped Soler. When Soler demanded payment for her services, petitioner ignored and even said 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. In petitioner’s complaint against COMBANK and Ms. Lopez for collection of professional fees and damages, the trial court rendered judgment in her favor. The Court of Appeals reversed the judgment of the trial court, holding that the bank never gave its consent to the contract because it was under privatization.

Issue: Whether or not there was a perfected contract between petitioner and respondents Held: Yes. 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 ten thousand pesos

(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. Also, petitioner may be paid on the basis of quantum meruit. We note that 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.

YOLANDA PALATTAO 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 G.R. No. 131726 May 7, 2002

Facts:        

Petitioner Palattao leased to private respondent a house and a lot registered in her name, for the duration of three years. During the last year of the contract, the parties began negotiations for the sale of the leased premises to private respondent. Petitioner gave private respondent on or before November 24, 1993, within which to pay the 50% downpayment in cash or manager’s check; failure to do so 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. Respondent did not accept the terms proposed by petitioner; instead he manifested his intention to renew the lease contract. Petitioner refused and demanded respondent to vacate the premises. Due to respondent’s refusal, petitioner filed an ejectment case against him. 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.

Issue: Whether or not there was a perfected contract of sale between Palattao and Co Held: No. 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. 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. Also,

even assuming that the parties reached an agreement as to the size of the lot subject of the sale, the records show that there was subsequently a mutual withdrawal from the contract.

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 terms 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.

In the case at bar, the continued occupation by private respondent of the leased premises is conditioned upon his right to acquire ownership over said property. Considering that the lease contract was not renewed after its expiration on December 31, 1991, private respondent has no more right to continue occupying the leased premises. Consequently, his ejectment therefrom must be sustained.

ABS-CBN BROADCASTING CORPORATION vs. HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP., VIVA PRODUCTIONS, INC., and VICENTE DEL ROSARIO G.R. No. 128690 January 21, 1999

Facts:

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ABS-CBN and VIVA executed a Film Exhibition Agreement whereby the latter gave the former an exclusive right to exhibit 24 VIVA Films for TV telecast. Later, VIVA, through respondent Vincent del Rosario, offered ABS-CBN a list of 3 film packages (36 titles) from which the latter may exercise its right of first refusal under their agreement. Then Del Rosario offered ABS-CBN airing rights over a package of 104 movies for P60 million, but according to Lopez, what they agreed upon was ABS-CBN’s exclusive film rights to 14 films for P36 million. Del Rosario insisted that the discussion was on VIVA’s offer of 104 films for P60 million, to which ABS-CBN later made a counterproposal but rejected by VIVA’s Board of Directors. Due to this disagreement, VIVA granted RBS the exclusive right to air the 104 VIVA films, including the 14 films supposedly granted to ABS-CBN. ABS-CBN then filed a complaint for specific performance with prayer for injunction. The RTC rendered a decision in favor of RBS and VIVA, ordering ABS-CBN to pay RBS the amount it paid for the print advertisement and premium on the counterbond, moral damages, exemplary damages and attorney’s fee. ABS-CBN appealed to the Court of Appeals. The Court of Appeals affirmed the RTC decision and sustained the monetary awards, VIVA’s and Del Rosario’s appeals were denied.

Issue: Whether or not there was a perfected contract between VIVA and ABS-CBN Held:

No. When any of the elements of the contract is modified upon acceptance, such alteration amounts to a counter-offer. In the case at bar, ABS-CBN made no unqualified 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 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.

Contracts that are consensual in nature are perfected upon mere meeting of the minds. Once there is concurrence between the offer and the acceptance upon the subject matter, consideration, and terms 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 what is proposed in the offer, such acceptance is not sufficient to generate consent because any modification or variation from the terms of the offer annuls the offer.

LOURDES ONG LIMSON vs. COURT OF APPEALS, SPOUSES LORENZO DE VERA and ASUNCION SANTOS-DE VERA, TOMAS CUENCA, JR., and SUNVAR REALTY DEVELOPMENT CORPORATION G.R. No. 135929 April 20, 2001

Facts:

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Respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera, through their agent Marcosa Sanchez, offered to sell to petitioner a parcel of land consisting of 48,260 square meters, more or less. No transaction was formalized because the spouses de Vera and the Ramoses (mortgagees) failed to attend the meeting. Petitioner allegedly gave respondent Lorenzo three checks for the settlement of the back taxes and quitclaims on the property but was surprised to know later that the property was the subject of the negotiation sale to respondent SUNVAR. Petitioner maintained that SUNVAR was in bad faith as it knew of her "contract" to purchase the subject property from respondent spouses. Respondents countered by saying that they did not know nor were informed of petitioner’s interest or claim over the property and that there was no perfected contract to sell between them. The RTC annulled and rescinded the Deed of Absolute Sale executed in favor of SUNVAR. The CA completely reversed the ruling of the trial court.

Issue: Whether or not there was respondents

a perfected contract to sell between petitioner and

Held: No. A scrutiny of the facts as well as the evidence of the parties overwhelmingly leads to the conclusion that the agreement between the parties was a contract of option and not a contract to sell. The agreement between respondent spouses and petitioner was an "option contract" or what is sometimes called an "unaccepted offer." During the option period the

agreement was not converted into a bilateral promise to sell and to buy where both respondent spouses and petitioner were then reciprocally bound to comply with their respective undertakings as petitioner did not timely, affirmatively and clearly accept the offer of respondent spouses. The rule is that except where a formal acceptance is not required, although the acceptance must be affirmatively and clearly made and evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an informal manner, and may be shown by acts, conduct or words by the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. But there is nothing in the acts, conduct or words of petitioner that clearly manifest a present intention or determination to accept the offer to buy the property of respondent spouses within the 10-day option period. Certainly, there was no concurrence of private respondent spouses’ offer and petitioner’s acceptance thereof within the option period.

REYNALDO VILLANUEVA vs. PHILIPPINE NATIONAL BANK (PNB) G.R. No.154493 December 6, 2006

Facts:

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The Special Assets Management Department (SAMD) of the Philippine National Bank (PNB) issued an advertisement for the sale thru bidding of certain PNB properties in Calumpang, General Santos City, subject to the following conditions: 1) that cash bids be submitted not later than April 27, 1989; 2) that said bids be accompanied by a 10% deposit in manager’s or cashier’s check; and 3) that all acceptable bids be subject to approval by PNB authorities. PNB agreed to petitioner’s offer of purchasing Lot Nos. 17 and 19 but the same was later deferred upon orders of the PNB Board to conduct another appraisal and public bidding of Lot No. 19. Villanueva thus filed with the RTC a complaint for specific performance and damages. The RTC anchored its judgment on the finding that there existed a perfected contract of sale between PNB and Villanueva. The RTC also pointed out that Villanueva’s downpayment was actually in the nature of earnest money acceptance of which by PNB signified that there was already a sale. The CA reversed the ruling of the trial court, and held that there was no perfected contract of sale because the July 6, 1990 letter of Guevara constituted a qualified acceptance of the June 28, 1990 offer of Villanueva, and to which Villanueva replied on July 11, 1990 with a modified offer.

Issue: Whether or not there was a perfected contract of sale between Villanueva and PNB Held: No. 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 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. While it is impossible to expect the acceptance to echo every nuance of the offer, it is imperative that it assents to those points in the offer which, under the operative facts of each contract, are not only material but motivating as well. Anything short of that level of mutuality produces not a contract but a mere counter-offer awaiting acceptance. More particularly on the matter of the consideration of the contract, the offer and its acceptance must be unanimous both on the rate of the payment and on its term.

An acceptance of an offer which agrees to the rate but varies the term is ineffective. Respondent’s reply that only Lot No. 19 is available and that the price therefor is now P2,883,300.00 was certainly not an acceptance of the June 28, 1990 offer but a mere counteroffer.

Moreover, petitioner’s conformity to the quoted price not as an acceptance of the counter-offer but a further counter-offer for, while petitioner accepted the P2,883,300.00 price for Lot No. 19, he qualified his acceptance by proposing a two-year payment term. Acceptance of petitioner’s payments did not amount to an implied acceptance of his last counter-offer. To begin with, PNB-General Santos Branch, which accepted petitioner’s P380,000.00 payment, and PNB-SAMD, which accepted his P200,000.00 payment, had no authority to bind respondent to a contract of sale with petitioner.

CORAZON CATALAN, et. al. vs. JOSE BASA, et.al. G.R. No. 159567 July 31, 2007

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A document was executed, titled “Absolute Deed of Donation,” wherein Feliciano allegedly donated to his sister Mercedes Catalan one-half of the real property he owns in Pangasinan. People’s Bank and Trust Company, now BPI, was appointed as Feliciano’s guardian after the after was declared incompetent. Mercedes later sold the property in issue in favor of her children Delia and Jesus Basa. 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, alleging that the Deed of Absolute Donation to Mercedes was void ab initio, as Feliciano was not of sound mind and was therefore incapable of giving valid consent. BPI likewise 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 The trial court upheld the validity of the deed of donation because the presumption of sanity was not overcome. The appellate court affirmed the decision of the trial court. Petitioners maintain that Feliciano had been suffering from a mental condition (schizoprenia) since 1948 which incapacitated him from entering into any contract thereafter.

Issue: Whether or not the deed of donation and the subsequent deed of absolute sale are valid Held: No. 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.

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. The burden of proving incapacity rests upon the person who alleges it; if no sufficient proof to this effect is presented, capacity will be presumed.

A person suffering from schizophrenia does not necessarily lose his competence to intelligently dispose his property. By merely alleging the existence of schizophrenia, petitioners failed to show substantial proof that at the date of the donation, June 16, 1951, Feliciano Catalan had lost total control of his mental faculties. 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.

EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL CAPALUNGAN vs. HON. COURT OF APPEALS, FELIPE C. RIGONAN and CONCEPCION R. RIGONAN G.R. No. 127540 October 17, 2001

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Paulina Rigonan owned three (3) parcels of land, with a house and warehouse in one parcel, which she allegedly sold to spouses Felipe and Concepcion Rigonan, all for P 870.00. The spouses claim to be her closest relatives, alleging further that Paula is their father's cousin. Petitioners Eugenio Domingo, Crispin Mangabat and Samuel Capalungan then took possession over the properties and refused to vacate the same, contradicting the spouses' allegations and claiming that they are the closest kins of Paulina: Eugenio is her nephew because his father and Paulina are cousins. Petitioners also aver that the deed of absolute sale was spurious because Paulina did not sell her property to anyone; and that they have inherited the property when Paulina died. The trial court gave its decision in favor of the respondents (petitioners in the instant case). On appeal, the Court of Appeals reversed the trial court's ruling rendering Felipe and Concepcion as the rightful owners of the property.

Issue: Whether or not the Deed of Absolute Sale is valid

Held: No. Paulina has been proven to be undeniably incapacitated making her incompetent to enter into a contract. It was shown that Paulina was already of advanced age and senile at the time the contract was executed. Such age and infirmities have impaired her mental faculties, making her unable to function properly and intelligently. This is justified by the testimony of one of the witnesses that Paulina played with her waste and urinated in bed. There was even no receipt shown that the fictitious and shockingly inadequate P870 paid for the property was

given to Paulina. These circumstances, among others, led the Court to render judgment in favor of the petitioners.

MARIO J. MENDEZONA and TERESITA M. MENDEZONA, et. al. vs. JULIO H. OZAMIZ, et.al. G.R. No. 143370 February 6, 2002

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The petitioners initiated the suit to remove a cloud on their respective titles caused by the inscription of a notice of lis pendens, which came about due to the proceeding for guardianship over the person and properties of Carmen Ozamiz initiated by the respondents. The petitioners ultimately traced their titles of ownership over their respective properties from a notarized Deed of Absolute Sale executed in their favor by Carmen Ozamiz. Respondents however allege that the sale is void because Carmen Ozamiz, then 86 years old, was no longer of sound mind to enter into any contract. The respondents opposed the petitioners’ claim of ownership of the Lahug property and alleged that the titles issued in the petitioners names are defective and illegal, and the ownership of the said property was acquired in bad faith and without value inasmuch as the consideration for the sale is grossly inadequate and unconscionable. The trial court upheld the validity of the deed. The CA ruled against herein petitioners, holding that the deed was a simulated contract reasoning, among others, that at the time of the execution of the contract the mental faculties of Carmen Ozamiz were already seriously impaired.

Issue:

Whether or not the notarized Deed of Absolute Sale was a simulated contract because Carmen Ozamiz’s mental faculties were seriously impaired when she executed the same Held:

No. Respondents failed to discharge the burden of proving their allegations attacking the validity and due execution of the Deed of absolute Sale; hence, the presumption in favor of the said deed stands. The respondents’ core witnesses all made sweeping statements which failed to show the true state of mind of Carmen Ozamiz at the time of the execution of the disputed document. The testimonies of the respondents’ witnesses on the mental capacity of Carmen Ozamiz are far from being clear and convincing, to say the least.

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. 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.

MARIANO T. LIM, et. al. vs. COURT OF APPEALS, LORENZO O. TAN and HERMOGENES O. TAN G.R. No. L-55201 February 3, 1994 Facts:

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The case involves the partition of the properties of the deceased spouses Tan Quico and Josefa Oraa who both died intestate and left some ninety six (96) hectares of land located in the municipality of Guinobatan and Camalig Albay. The late spouses were survived by four (4) children: Cresencia, Lorenzo, Hermogenes and Elias. Petitioners are the widower and children of Cresencia, demanding their partition from Lorenzo who has remained as the administrator of the land in dispute. 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. The trial court decided in favor of petitioners, rejecting the alleged oral partition of the property and declaring as void the "Deed of Confirmation of Extra Judicial Settlement of the Estate of Tan Quico and Josefa Oraa and Sale” on the ground that it was not understood by the late Cresencia when she signed it. The Court of Appeals ruled otherwise, holding that there was evidence to establish that the subject properties had been previously partitioned. It ruled that respondent Lorenzo was not shown to have exercised any undue influence over the late Crescencia when she signed the said Deed of Confirmation, etc.

Issue: Whether or not the Deed of Confirmation is valid Held: No. We take our mandate from Article 1332 of the Civil Code which provides: "When one of the parties is unable to read, or if the contract is in 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." this substantive law came into being due to the finding of the Code Commission that there is still a fairly large number of illiterates in this country, and documents are usually drawn up in English or Spanish. It is also in accord with our state policy of promoting social justice.

In the petition at bench, the questioned Deed is written in English, a language not understood by the late Crescencia, an illiterate. It was prepared by the respondent Lorenzo, a lawyer and CPA. For reasons difficult to divine, respondent Lorenzo did not cause the notarization of the deed. Petitioners alleged that the Deed was signed by the late Crescencia due to mistake, fraud or undue influence. They postulated that respondent Lorenzo took advantage of the late Crescencia's trust and confidence. Considering these circumstances, the burden was on private respondents to prove that the content of the Deed was explained to the illiterate Crescencia before she signed it. In this regard, the evidence adduced by the respondents failed to discharge their burden.

CORAZON G. RUIZ vs. COURT OF APPEALS and CONSUELO TORRES G.R. No. 146942 April 22, 2003

Facts:

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Petitioner Corazon G. Ruiz is engaged in the business of buying and selling jewelry. She obtained loans from private respondent Consuelo Torres on different occasions. Prior to their maturity, the loans were consolidated under one (1) promissory note. The consolidated loan of P750,000.00 was secured by a real estate mortgage on a 240square meter lot in New Haven Village, Novaliches, Quezon City, registered in the name of petitioner. Thereafter, petitioner obtained three (3) more loans from private respondent, evidenced by three promissory notes, and secured by P571,000.00 worth of jewelry pledged by petitioner to private respondent. When petitioner failed to pay, private respondent sought the extra-judicial foreclosure of the aforementioned real estate mortgage. In its Decision, the Clerk of Court and Ex-Officio SheriffIt held that the real estate mortgage is unenforceable because of the lack of the participation and signature of petitioner‟s husband. It noted that although the subject real estate mortgage stated that petitioner was “attorney-in-fact for herself and her husband,” the Special Power of Attorney was never presented in court during the trial. The trial court further held that the promissory note in question is a unilateral contract of adhesion drafted by private respondent. It struck down the contract as repugnant to public policy because it was imposed by a dominant bargaining party (private respondent) on a weaker party (petitioner). The appellate court set aside the decision of the trial court and ruled that the real estate mortgage is valid despite the non-participation of petitioner’s husband in its execution because the land on which it was constituted is paraphernal property of petitioner-wife. Consequently, she may encumber the lot without the consent of her husband.

Issue: Whether or not the Court of Appeals gravely erred in ruling that the promissory note is not a contract of adhesion despite the clear showing that the same is a ready-made contract

prepared by (the) respondent and did not reflect their true intentions as it weighed heavily in favor of respondent and against petitioner Held: No. In the case at bar, the promissory note in question did not contain any fine print provision which could not have been examined by the petitioner. Petitioner had all the time to go over and study the stipulations embodied in the promissory note. Aside from the March 22, 1995 promissory note for P750,000.00, three other promissory notes of different dates and amounts were executed by petitioner in favor of private respondent. These promissory notes contain similar terms and conditions, with a little variance in the terms of interests and surcharges. The fact that petitioner and private respondent had entered into not only one but several loan transactions shows that petitioner was not in any way compelled to accept the terms allegedly imposed by private respondent. Moreover, petitioner, in her complaint dated October 7, 1996 filed with the trial court, never claimed that she was forced to sign the subject note. To be required is certainly different from being compelled. She could have rejected the conditions made by private respondent. As an experienced business-woman, she ought to understand all the conditions set forth in the subject promissory note. As held by this Court in Lee, et al. vs. Court of Appeals, et al., it is presumed that a person takes ordinary care of his concerns. Hence, the natural presumption is that one does not sign a document without first informing himself of its contents and consequences. This presumption acquires greater force in the case at bar where not only one but several documents were executed at different times by petitioner in favor of private respondent.

EPIFANIA DELA CRUZ, substituted by LAUREANA V. ALBERTO vs. SPS. EDUARDO C. SISON and EUFEMIA S. SISON G.R. No. 163770 February 17, 2005 Facts:     

Before her death, Epifania instituted the instant case upon discovering that her rice land in Salomague Sur, Bugallon, Pangasinan, has been transferred and registered in the name of her nephew, Eduardo C. Sison, without her knowledge and consent. 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 asserted that they have been in open, continuous, and peaceful possession of the land since November 24, 1989; in fact, they have been receiving the fruits and produce of the land since they purchased the same from Epifania. The trial court declared the deed invalid, finding that Eduardo deceived Epifania into signing the assailed deed. The Court of Appeals reversed and declared that Epifania’s allegation of trickery and fraud in the execution of the questioned deed of sale, was bare and unsupported.

Issue: Whether or not the deed of sale is valid Held: Yes. 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. It is well settled that a party who alleges a fact has the burden of proving it. Consequently, the provisions of Art. 1332 of the Civil Code, which states that: “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“, does not apply. In addition, the questioned deed of sale was duly notarized. Hence, we apply the rule that documents acknowledged before notaries public are public documents which are admissible in evidence without necessity of preliminary proof as to their authenticity and due execution. They have in their favor the presumption of regularity, and to contradict the same, there must be evidence that is clear, convincing and more than merely preponderant. The burden of proof to overcome the presumption of due execution of a notarial document lies on the one contesting the same. Petitioner failed to discharge this burden.

RURAL BANK OF STA. MARIA, PANGASINAN vs. THE HONORABLE COURT OF APPEALS, ROSARIO R. RAYANDAYAN, CARMEN R.ARCEÑO G.R. No. 110672 September 14, 1999 Facts:

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Manuel Behis mortgaged a parcel of land in favor of the Rural Bank of Sta. Maria, Pangasinan but after being delinquent in paying his debts, he sold the land to plaintiffs Rosario Rayandayan and Carmen Arceño in a Deed of Absolute Sale with Assumption of Mortgage. On the same date, they executed another agreement whereby the plaintiffs were indebted to Manuel in the amount of P2,400,000.00, which was the real consideration of the sale. After Manuel Behis died, the bank consented to the substitution of Rayandayan and Arceño as mortgage debtors in place of Behis in a Memorandum of Agreement with restructured and liberalized terms for the payment of the mortgage debt. However, when the bank came to know the real consideration of the agreement, it transacted the Behis mortgage with Halsema, Inc.. and considered the contract it had with Behis, cancelled. In petitioner’s action for specific performance, the lower court declared that the Deed of Sale with Assumption of Mortgage and the Agreement between the bank and plaintiffs was valid until annulled or cancelled, but plaintiffs were liable to pay the bank damages as litigation expenses because of plaintiffs’ bad faith in deceiving the bank to enter into the Memorandum of Agreement by concealing the real purchase price of the land sold to them by Manuel Behis. The Court of Appeals affirmed the validity of the Memorandum of Agreement between the parties, but reversed the finding that there was bad faith on the part of the plaintiffs when the bank entered into the Memorandum of Agreement.

Issue: Whether or not respondents acted in bad faith in concealing the consideration of the sale from Rural Bank Held:

No. pursuant to Article 1339 0f the Civil Code,[16] silence or concealment, by itself, does not constitute fraud, unless there is a special duty to disclose certain facts, or unless according to good faith and the usages of commerce the communication should be made. Verily, private respondents Rayandayan and Arceño had no duty, and therefore did not act in bad faith, in failing to disclose the real consideration of the sale between them and Manuel Behis. Consequently, not all 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.

DOMINGO CARABEO vs. SPOUSES NORBERTO and SUSAN DINGCO G.R. No. 190823 April 4, 2011 Facts:     

Petitioner entered into a contract with respondents whereby petitioner agreed to sell his rights over a 648 square meter parcel of unregistered land. When respondents were about to pay the balance, petitioner told them to keep It first because there was an ongoing problem over the land. Upon finding that the alleged problem was over, respondents offered to pay the balance; however, petitioner refused. Respondents thus filed an action for specific performance. Petitioner’s son, Antonio Carabeo filed the present petition for review, faulting the decision of the Court of Appeals in ruling in respondents’ favor.

Issue: Whether or not petitioner’s death rendered respondents’ complaint against him dismissible Held: Yes. In the present case, respondents are pursuing a property right arising from the kasunduan, whereas petitioner is invoking nullity of the kasunduan to protect his proprietary interest. Assuming arguendo, however, that the kasunduan is deemed void, there is a corollary obligation of petitioner to return the money paid by respondents, and since the action involves property rights, it survives.

FRANCISCO I. CHAVEZ vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT CORPORATION G. R. No. 133250 May 6, 2003 Facts:     

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In 1973, the Comissioner on Public Highways entered into a contract to reclaim areas of Manila Bay with the Construction and Development Corportion of the Philippines (CDCP). PEA (Public Estates Authority) was created by President Marcos under P.D. 1084, tasked with developing and leasing reclaimed lands. These reclaimed lands were transferred to the care of PEA under P.D. 1085 as part of the Manila Cavite Road and Reclamation Project (MCRRP). CDCP and PEA entered into an agreement that all future projects under the MCRRP would be funded and owned by PEA. In 1988, President Aquino issued Special Patent No. 3517 transferring lands to PEA, followed by the transfer of three Titles (7309, 7311 and 7312) by the Register of Deeds of Paranaque to PEA covering the three reclaimed islands known as the Freedom Islands. Subsequently, PEA entered into a joint venture agreement (JVA) with AMARI, a ThaiPhilippine corporation to develop the Freedom Islands. Along with another 250 hectares, PEA and AMARI entered the JVA which would later transfer said lands to AMARI. This caused a stir especially when Sen. Maceda assailed the agreement, claiming that such lands were part of public domain (famously known as the “mother of all scams”). Peitioner Frank J. Chavez filed case as a taxpayer praying for mandamus, a writ of preliminary injunction and a TRO against the sale of reclaimed lands by PEA to AMARI and from implementing the JVA. Following these, under President Estrada’s admin, PEA and AMARI entered into an Amended JVA and Mr. Chaves claim that the contract is null and void.

Issue: Whether or not the transfer of the lands to Amari is valid Held: No. To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the public domain.

The Supreme Court affirmed that the 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of the public domain. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34 hectares of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain. Furthermore, since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares of still submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the public domain.

DOMINGO CARABEO vs. SPOUSES NORBERTO and SUSAN DINGCO G.R. No. 190823 April 4, 2011 Facts:     

Petitioner entered into a contract with respondents whereby petitioner agreed to sell his rights over a 648 square meter parcel of unregistered land. When respondents were about to pay the balance, petitioner told them to keep It first because there was an ongoing problem over the land. Upon finding that the alleged problem was over, respondents offered to pay the balance; however, petitioner refused. Respondents thus filed an action for specific performance. Petitioner’s son, Antonio Carabeo filed the present petition for review, faulting the decision of the Court of Appeals in ruling in respondents’ favor.

Issue: Whether or not an object certain is the subject of the contract 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. As the above-quoted portion of the kasunduan shows, there is no doubt that the object of the sale is determinate.

PIO SIAN MELLIZA vs. CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE COURT APPEALS G.R. No. L-24732 April 30, 1968 Facts:         

Juliana Melliza owned three parcels of land registered in her name. In 1931, she donated to the then Municipality of Iloilo, 9,000 square meters of Lot 1214, to serve as site for the municipal hall. The donation was however revoked by the parties because the area was deemed insufficient for the “Arellano Plan” of development by the municipality. Nonetheless, Juliana made an instrument without any caption, selling some of the lots to the Municipality. Juliana sold her remaining interest in Lot 1214 to Remedios San Villanueva, who also later transferred her rights to the said land to Pio Sian Melliza. The City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall site together with the building thereon to the University of the Philippines. UP enclosed the site donated with a wire fence, prompting petitioner to demand payment or recovery of a portion of the lot (Lot 1214-B). Since no recovery was made due to the city’s lack of funds, petitioner brought the issue to the court. The parties claim their ownership to the portion of the lot.

Issue: Whether or not the Lot 1214-B is included in the lots donated to the City of Iloilo Held: Yes. The requirement of the law that a 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 capable of being made determinate without the necessity of a new or further agreement between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). 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, avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the time of the execution of the contract, for rendering determinate said lots without the need of a new and further agreement of the parties. It should be stressed, also, that the sale to Remedios Sian Villanueva — from which Pio Sian Melliza derived title — did not specifically designate Lot 1214-B, but only such portions of Lot 1214 as were not included in the previous sale to Iloilo municipality thus, if said Lot 1214-B

had been included in the prior conveyance to Iloilo municipality, then it was excluded from the sale to Remedios Sian Villanueva and, later, to Pio Sian Melliza.

MANUEL CATINDIG, represented by his legal representative EMILIANO CATINDIG-RODRIGO vs. AURORA IRENE VDA. DE MENESES G.R. No. 165851 February 2, 2011 Facts: 

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Respondent is the surviving spouse of the registered owner of the Masusuwi Fishpond, alleging that in 1975, petitioner Catindig, the first cousin of her husband, deprived her of the possession of the Masusuwi Fishpond, through fraud, undue influence and intimidation, and unlawfully leased the same to Silvino Roxas, Sr. Petitioner Catindig maintains that he bought the fishpond from respondent and her children. The trial court granted respondent’s suit to recover the property and demand of payment of unearned income, damages, attorney’s fees, and costs of litigation, due to the finding that the Deed of Absolute Sale executed between respondent and petitioner was simulated and fictitious and has no consideration. The court a quo was convinced that the Deed of Absolute Sale lacked consideration, because respondent and her children never received the stipulated purchase price for the Masusuwi Fishpond which was pegged at PhP150,000.00.

Issue: Whether or not the Deed of Absolute Sale had no consideration Held: Yes. Since the title to the disputed property was still in the name of Rosendo Meneses, Sr., and the owner’s duplicate copy of the title is still in the possession of respondent, what can be inferred is the fact that the consideration of P150,000.00 as so stated in the document allegedly paid was never actually given. If petitioner Catindig was really a legitimate buyer of the property who paid the consideration with good money, he should have registered the document of sale or had it annotated at the back of the title, or better still, he should have had the name of Rosendo cancelled so that a new title can be issued in his name. It is a well-entrenched rule that where the deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and void ab initio for lack of consideration. Moreover, Article 1471 of the Civil Code, provides that “if the price is simulated, the sale is void,” which applies to the instant case, since the price purportedly paid as indicated in the contract of sale was simulated for no payment was actually made.

ANTHONY ORDUÑA, DENNIS ORDUÑA, and ANTONITA ORDUÑA vs. EDUARDO J. FUENTEBELLA, MARCOS S. CID, BENJAMIN F. CID, BERNARD G. BANTA, and ARMANDO GABRIEL, JR. G.R. No. 176841 June 29, 2010 Facts:      

Gabriel Sr. sold the subject lot to petitioner Antonita, with the purchase price payable by installments, but no formal deed was executed to document the sale. Antonita and her sons, Dennis and Anthony occupied the subject lot and even constructed their house thereon while constantly paying for the lot. Gabriel Jr. later sold the property to Bernard Banta due to the former’s failure to pay his loan to the latter. A Deed of Sale was later executed in his favor. Bernard in turn sold the lot to the Cids; then the Cids sold the lot to Eduardo Fuentebella. Antonita later discovered that the signature of Gabriel Jr’s estranged wife, Teresita in the deed of sale was a forgery. Petitioners filed a complaint for Annulment of Title, Reconveyance with Damages but both the trial court and the Court of Appeals dismissed such complaint.

Issue: Whether or not the verbal sale contract between Gabriel Sr. and Antonita had adequate consideration Held: Yes. The trial court’s posture, with which the CA effectively concurred, is patently flawed. For starters, they equated incomplete payment of the purchase price with inadequacy of price or what passes as lesion, when both are different civil law concepts with differing legal consequences, the first being a ground to rescind an otherwise valid and enforceable contract. Perceived inadequacy of price, on the other hand, is not a sufficient ground for setting aside a sale freely entered into, save perhaps when the inadequacy is shocking to the conscience. 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.

CARMELA BROBIO MANGAHAS vs. EUFROCINA A. BROBIO G.R. No. 183852 October 20, 2010 Facts:    

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Pacifico S. Brobio died intestate, leaving three parcels of land to his wife, herein respondent, and four legitimate and three illegitimate children, petitioner being one of the latter. In consideration of their love and affection for the respondent and the sum of P150,000, petitioner and Pacifico’s other children waived their right over the parcels of land in favor of respondent. Petitioner particularly asserted that she agreed to waive her rights over the property due to respondent’s promise that she would give petitioner an additional amount. Respondent refused to pay the additional amount, until time came when she asked petitioner to countersign a copy of the Deed. Petitioner agreed to sign only if respondent would later pay her P600,000 as bargained price for the additional amount promised. Respondent executed a promissory note to that effect but payment was never made, insisting that she no longer had any money. Petitioner thus filed a complaint for specific performance with damages, to which the trial court granted in her favor. The CA reversed the decision and dismissed the complaint.

Issue: Whether or not the promissory note was not supported by any consideration Held: No. 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 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.

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. However, none of these grounds have been proven in this case.

GOLDEN APPLE REALTY AND DEVELOPMENT CORPORATION and ROSVIBON REALTY CORPORATION vs. SIERRA GRANDE REALTY CORPORATION, MANPHIL INVESTMENT CORPORATION, RENAN V. SANTOS and PATRICIO MAMARIL G.R. No. 119857 July 28, 2010 Facts: 

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To secure a loan from Manphil Investment Corporation, Hayari Trading Corporation, Valiant Realty and Development Corporation, represented by its General Manager Bernardino Villanueva, and Sierra Grande Realty Corporation, represented by Terry Villanueva Yu, executed a Third Party Real Estate Mortgage in favor of Manphil over a parcel of land, otherwise known as the Roberts property. Eventually, Villanueva executed a contract to sell the Roberts property with Golden Apple Realty and Development, Inc., majority of its stocks are owned by Elmer Tan, a first cousin of the Villanueva brothers and sisters, and Rosvibon Realty Corporation. Sierra Grande, through Bernardino Villanueva, finally executed a Deed of Sale to Golden Apple, and another to Rosvibon. Meanwhile, Sierra Grande's Board, on August 29, 1985, passed a resolution revoking the authority of Bernardo Villanueva to sell the Roberts property. Consequently, the Deeds of Absolute Sale between “Golden Apple” and “Rosvibon,” as vendees, and “Sierra Grande,” as vendor, were invalidated on the primordial premise that “badges of fraud” attended their execution. The Court of Appeals reversed the ruling of the trial court which rendered judgment in favor of herein petitioners, alleging, among others, that the contracts are invalid for insufficiency of consideration.

Issue: Whether or not the court erred in invalidating the contract for insufficiency of consideration Held: No. 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 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 pre-termination. 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, 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 consideration or price as the same is shown on the very face of the Contract to Sell.

ASKAY vs. FERNANDO A. COSALAN G.R. No. 21943 September 15, 1924 Facts:    

Plaintiff-appellant Askay, an illiterate Igorot, between 70 and 80 years of age, sold his claim over Pet Kel Mineral to his nephew by marriage, Cosalan. Nine years later, Askay instituted action to secure possession of the mineral claim and to obtain damages from the defendant-appellee. Judgment was rendered dismissing the complaint. Askay assigns to errors, the first is whether Judge George R. Harvey had jurisdiction to try the case; and the second is whether the plaintiff has established his cause of action by a preponderance of the evidence.

Issue: Whether or not plaintiff has established his cause of action Held: No. One facts exists in plaintiff's favor, and this is the age and ignorance of the plaintiff who could be easily duped 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 suggests fraud and 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.

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 vs. RODRIGO N. LIM G.R. No. 152168 December 10, 2004 Facts:      

Due to her illness and dire need of money for her hospital expenses, Esperanza Balite, through one of her daughters, offered respondent Rodrigo Lim her undivided share in the parcels of land that she and her husband own. Esparanza and Rodrigo agreed that, under the Deed of Absolute Sale, they would make it appear that the purchase price is P150,000, although the actual price agreed upon by them is P1M. Two of Esperanza’s children learned of the transaction and expressed their disagreement to the sale of the property. Later, Rodrigo secured a P2M loan from the Rizal Commercial Banking Corporation and executed a real estate mortgage over the property as security for the loan. Both the trial court and the Court of Appeals upheld the validity of the sale, even without the lack of consent of the co-owners. Petitioners claim, among others, that the sale was void allegedly because the actual purchase price of the property was not stated in the Deed of Absolute Sale, intended for the unlawful purpose of avoiding payment of higher taxes.

Issue: Whether or not the sale is void because of the undervalued consideration of the property Held: No. We have before us 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 in the contract to conceal their real agreement, such a contract 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. 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 children prompted Esperanza to unilaterally withdraw from the transaction.

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.

RAFAEL G. SUNTAY, substituted by his heirs, namely: ROSARIO, RAFAEL, JR., APOLINARIO, RAYMUND, MARIA VICTORIA, MARIA ROSARIO and MARIA LOURDES, all surnamed SUNTAY vs. THE HON. COURT OF APPEALS and FEDERICO C. SUNTAY G.R. No. 114950 December 19, 1995

Facts:

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Federico Suntay, a rice miller, applied as a miller-contractor of the then National Rice and Corn Corporation (NARIC) but was disapproved due to his several unpaid loans. Federico then allowed his counsel and nephew, Rafael Suntay to do the application for him. In view thereof, Federico, for and in consideration of P20,000 conveyed to Rafael the parcel of land he owns with all its existing structures. A counter sale was later executed, causing the parcel of land to be sold back to Federico; but it was neither dated nor notarized. Consequently, the Certificate of Title in favor of Federico was cancelled, and the TCT was issued in the name of Rafael. Significantly, notwithstanding the fact that Rafael became the titled owner of said land and rice mill, he never made any attempt to take possession thereof at any time, while Federico continued to exercise rights of absolute ownership over the property. Represented by a new counsel, Federico requested that Rafael deliver his copy of the TCT so that Federico can proceed with executing the counter sale. Rafael refused, holding that the second deed of sale was insufficient to transfer real rights because it was not notarized. After a thirteen-year trial, judgment was rendered, holding that the deed of sale was not simulated, and was in fact valid.

Issue: Whether or not the deed of sale executed in favor of Rafael is valid Held:

No. 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 second deed of sale executed by the late Rafael in favor of his uncle, should be considered ineffective and unavailing. The failure of the late Rafael to take exclusive possession of the property allegedly sold to him is a clear badge of fraud. The fact that, notwithstanding the title transfer, Federico remained in actual possession, cultivation and occupation of the disputed lot from the time the deed of sale was executed until the present, is a circumstance which is unmistakably added proof of the fictitiousness of the said transfer, the same being contrary to the principle of ownership.

WILLIAM UY and RODEL ROXAS vs. COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY G.R. No. 120465 September 9, 1999

Facts:

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Petitioners, being the agents authorized to sell 8 parcels of land by the owners thereof, offered the same to the National Housing Authority for the latter’s house development project. NHA paid for 5 of the 8 parcels, asserting that the remaining area is located at an active landslide area which is therefore not suitable for the house development project. For cancelling the sale over the three parcels of land, NHA offered the amount of P1.225 million to the landowners as daños perjuicios. Petitioners filed a complaint for damages against NHA and its General Manager, Robert Balao. The RTC declared the cancellation of the contract as valid. The Court of Appeals dismissed the case.

Issue:

Whether or not the cancellation over the three parcels of land amounted to the rescission of the contract

Held:

No. The cancellation was not a rescission under Article 1191. Rather, the cancellation was based on the negation of the cause arising from the realization that the lands, 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 it. In other words, the cause is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the contracting parties. Cause, which is the essential reason for the contract, should be distinguished from motive, which is the particular reason of a contracting party which does not affect the other party. For example, in a contract of sale of a piece of land, such as in this case, the cause of the vendor (petitioner’s principals) in entering into the contract is to obtain the price. For the vendee, NHA, it is the acquisition of the land. The motive of the NHA, on the other hand, is to use said lands for housing. This is apparent from the portion of the Deeds of Absolute Sale. Ordinarily, a party’s motives for entering into the contract do not affect the contract. However, when the motive predetermines the cause, the motive may be regarded as the cause. In this case, it is clear, and petitioners do not dispute, that NHA 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. On the part of the NHA, therefore, the motive was the cause for its being a party to the sale.

PENTACAPITAL INVESTMENT CORPORATION vs. MAKILITO B. MAHINAY G.R. No. 171736 July 5, 2010 Facts:       

Respondent was the counsel of Ciudad Real Development, Inc. (CRDI). Pentacapital Realty Corporation offered to buy parcels of land known as the Molino Properties, owned by CRDI. CRDI allegedly instructed Pentacapital to pay the former’s creditors, including respondent. 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 ofP10,277,040.00. Respondent instituted an action for specific performance against Pentacapital Realty, praying for the payment of his commission on the sale of the Molino Properties. Petitioner filed a complaint for sum of money against respondent based on two separate loans obtained by the latter, evidenced by two promissory notes. The trial court and the Court of Appeals found that respondent was able to prove by preponderance of evidence that it was the intent of Pentacapital and CRDI to give him his commission.

Issue: Whether or not respondent should be made liable despite his allegation that the promissory notes lacked consideration as he did not receive the proceeds of the loan Held: Yes. 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. Contrary to the conclusions of the RTC and the CA, we find such proof insufficient to overcome the presumption of consideration. The presumption that a contract has sufficient consideration cannot be overthrown by the bare, uncorroborated and self-serving assertion of respondent that it has no consideration. The alleged lack of consideration must be shown by preponderance of evidence.

Nowhere in the notes was it stated that they were subject to a condition. As correctly observed by petitioner, respondent is not only a lawyer but a law professor as well. He is, therefore, legally presumed not only to exercise vigilance over his concerns but, more importantly, to know the legal and binding effects of promissory notes and the intricacies involving the execution of negotiable instruments including the need to execute an agreement to document extraneous collateral conditions and/or agreements, if truly there were such. This militates against respondent’s claim that there was indeed such an agreement. Thus, the promissory notes should be accepted as they appear on their face.

HEIRS OF RAMON C. GAITE, CYNTHIA GOROSTIZA GAITE and RHOGEN BUILDERS vs. THE PLAZA, INC. and FGU INSURANCE CORPORATION G.R. No. 177685 January 26, 2011 Facts:    

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The Plaza, Inc. (The Plaza), 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. Sometime later, the engineer of the project 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. Gaite decided to suspend all construction works until Reyes and the Project Manager cooperate to resolve the issue. The Plaza then notified Gaite that it could no longer credit any payment to Rhogen for the work it had completed because the evaluation of the extent, condition, and cost of work done revealed that in addition to the violations committed during the construction of the building, the structure was not in accordance with plans approved by the government and accepted by Ayala. Hence, The Plaza demanded the reimbursement of the down payment, the cost of uprooting or removal of the defective structures, the value of owner-furnished materials, and payment of liquidated damages through a civil case for breach of contract, sum of money and damages against petitioners. Having failed to complete the project within the stipulated period and comply with its obligations, Rhogen was thus declared guilty of breaching the Construction Contract and is liable for damages under Articles 1170 and 1167 of the Civil Code. The CA sustained the RTC decision, holding in the main that Rhogen cannot blame The Plaza for failing to perform its part on the contractual obligation because it obliged itself to comply with “all the laws, city and municipal ordinances and all government regulations insofar as they are binding upon or affect the parties [to the contract], the work or those engaged thereon.”

Issue: Whether or not Rhogen’s down payment should be returned on the basis of quantum meruit Held:

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. In this case, however, 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 showed that Rhogen has 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. In addition, Article 122 of the Articles of General Conditions provides that the contractor shall not be entitled to receive further payment “until the work is finished.” As the works completed by Rhogen were not in accordance with approved plans, it should have been executed at its cost had it not relinquished the project in January 1981. The CA thus did not err in sustaining the trial court’s order for the return of the down payment given by The Plaza to Rhogen.

HICOBLINO M. CATLY (Deceased), Substituted by his wife, LOURDES A. CATLY vs. WILLIAM NAVARRO, ISAGANI NAVARRO, BELEN DOLLETON, FLORENTINO ARCIAGA, BARTOLOME PATUGA, DIONISIO IGNACIO, BERNARDINO ARGANA, AND ERLINDA ARGANA-DELA CRUZ, and AYALA LAND, INC. G.R. No. 167239 May 5, 2010 Facts:  

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Respondents Navarro, et.al through petitioner lawyer, filed a complaint for annulment of Transfer Certificate of Title and recovery of possession with damages against Las Piñas Ventures, Inc., now Ayala Land, Inc. Respondents alleged that after conducting a relocation survey, a portion of their land was included in a parcel of land owned by Ayala Land, the same land which originated from Original Certificate of Title No. 1421 ordered null and void by the RTC in a partial judgment. The respondents and Ayala later executed a Memorandum of Agreement, assisted by petitioner, to waive, renounce and cede in favor of Ayala any and all rights of exclusive ownership over the subject properties. Petitioner claims that he was not consulted when the respondents signed the MOA. He claims that, should there be an amicable settlement of the case, his attorney’s fees should still be paid in full to fully compensate him in representing herein respondents and their heirs. Conformably, the respondents, Ayala, and petitioner executed an Amendatory Agreement incorporating the provision that petitioner would be paid P20M or P30M as attorney’s fees. The trial court issued a separate judgment granting the payment of P20M as attorney’s fees, for which petitioner filed an ex-parte Writ of Execution of Judgment. The respondents opposed the same, contending that the amount is unconscionable and excessive. The trial court ruled that it can only execute payment for the amount of P1M and not the entire P20M because the compromise agreement and MOA was not of his own efforts, and that he did not represent the heirs of his clients in the case.

Issue: Whether or not petitioner is entitled to the P30M attorney’s fees as agreed upon in their MOA and amendatory agreement Held:

Verily, the determination of the amount of reasonable attorney’s fees requires the presentation of evidence and a full-blown trial. Hence this case is ordered remanded to the trial court to determine the amount of attorney’s fees, on quantum meruit basis, for which petitioner is entitled to. The principle of quantum meruit (as much as he deserves) may be a basis for determining the reasonable amount of attorney’s fees. 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. It is applicable even if there was a formal written contract for attorney’s fees as long as the agreed fee was found by the court to be unconscionable. In fixing a reasonable compensation for the services rendered by a lawyer on the basis of quantum meruit, factors such as the time spent, and extent of services rendered; novelty and difficulty of the questions involved; importance of the subject matter; skill demanded; probability of losing other employment as a result of acceptance of the proferred case; customary charges for similar services; amount involved in the controversy and the benefits resulting to the client; certainty of compensation; character of employment; and professional standing of the lawyer, may be considered. Indubitably entwined with a lawyer’s duty to charge only reasonable fee is the power of the Court to reduce the amount of attorney’s fees if the same is excessive and unconscionable in relation to Sec. 24, Rule 138 of the Rules. Attorney’s fees are unconscionable if they affront one’s sense of justice, decency or unreasonableness.

CONCHITA LIGUEZ vs. THE HONORABLE COURT OF APPEALS, MARIA NGO VDA. DE LOPEZ, ET AL. G.R. No. L-11240 December 18, 1957 Facts:       

During his lifetime, Salvador P. Lopez donated a parcel of land in favor of herein petitioner. The deed of donation was found to have been made in view of the desire of Lopez to have sexual relations with Conchita who was at that time, only 16 years of age. Lopez remarked that Conchita’s parents told him that they would not allow him to live with Conchita unless he donates the land. The CA affirmed that the property belonged to the conjugal partnership of Lopez and his wife, Maria Ngo. Petitioner-appelant filed a complaint against the widow and heirs of the late Salvador P. Lopez to recover a parcel of land, interposing that the donation was null and void for having an illicit causa or consideration. The CA held that the deed was inoperative. Appellant argues that the CA erred in declaring the deed as inoperative, considering that, under the law (Art. 1274 of the Civil Code of 1889), "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.

Issue: Whether or not the deed is valid Held: 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. However, donation made by the husband in contravention of law is not void in its entirety, but only in so far as it prejudices the interest of the wife. In this regard, as Manresa points out the law asks no distinction between gratuitous transfers and conveyances for a consideration. Once again, only the court of origin has the requisite date to determine whether the donation is inofficious or not Appellant Conchita Liguez declared 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 records are ordered remanded to the court of origin for further proceedings in accordance with this opinion.

PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA SANTOS Y CANON FAUSTINO, deceased vs. LUI SHE in her own behalf and as administratrix of the intestate estate of Wong Heng, deceased G.R. No. L-17587 September 12, 1967 Facts:    

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In grateful acknowledgment of the personal services of the lessee Wong Heng to her, Justina Santos executed a contract of lease in his favor. Justina later gave Wong the option to buy the leased premises conditioned on his obtaining Philippine citizenship. Wong Heng was not able to obtain Philippine citizenship. In the two wills executed, Justina told her legatees to respect the contracts she entered into with Wong; however, she later ordered her executor to secure the annulment of the contracts, which she allegedly made due to machinations and inducements practiced by Wong. The trial court declared that the assailed documents were null and void, except the lease contract. When both parties died, Wong was substituted by his wife, Lui She, and Justina was substituted by the Philippine Banking Corporation because she had no other relative.

Issue: (1) Whether or not the contracts have been entered into with the use of undue influence, fraud and misrepresentation (2) Whether or not the contracts are valid Held: (1) No. Wong might indeed have supplied the data which Atty. Yumol embodied in the lease contract, but to say this is not to detract from the binding force of the contract. For the contract was fully explained to Justina Santos by her own lawyer. One incident, related by the same witness, makes clear that she voluntarily consented to the lease contract. This witness said that the original term fixed for the lease was 99 years but that as he doubted the validity of a lease to an alien for that length of time, he tried to persuade her to enter instead into a lease on a month-to-month basis. She was, however, firm and unyielding. Instead of heeding the advice of the lawyer, she ordered him, "Just follow Mr. Wong Heng."

Indeed, the charge of undue influence in this case rests on a mere inference drawn from the fact that Justina Santos could not read (as she was blind) and did not understand the English language in which the contract is written, but that inference has been overcome by her own evidence. Nor is there merit in the claim that her consent to the lease contract, as well as to the rest of the contracts in question, was given out of a mistaken sense of gratitude to Wong who, she was made to believe, had saved her and her sister from a fire that destroyed their house during the liberation of Manila. (2) No. 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 prohibits – the transfer of lands to an alien. “The illicit purpose then becomes the illegal causa, rendering the contracts void.” The land subject-matter of the contracts is ordered returned to the estate of Justina Santos as represented by the Philippine Banking Corporation.

SONIA F. LONDRES, ARMANDO V. FUENTES, CHI-CHITA FUENTES QUINTIA, ROBERTO V. FUENTES, LEOPOLDO V. FUENTES, OSCAR V. FUENTES and MARILOU FUENTES ESPLANA vs. THE COURT OF APPEALS, THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, ELENA ALOVERA SANTOS and CONSOLACION ALIVIO ALOVERA G.R. No. 136427 December 17, 2002 Facts:    

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Paulina Arcenas originally owned Lots 1320 and 1333. After death, ownership passed to her daughter, Filomena Vidal. Petitioners in this case are the surviving children of Filomena, now claiming ownership over the two lots. Private respondents Consolacion Alovera and her daughter Elena Santos are claiming just compensation from respondents. Private respondents doubt the validity of the Absolute Sale because it was tampered, so that the second parcel of lot sold, Lot 2034 would read as Lot 1333, whereas the unaltered copy kept by the Records Management and Archives Office shows that the objects of the sale were Lots 1320 and 2034. Both the trial court and the Court of Appeals upheld the validity of the contracts.

Issue: Whether or not the Absolute Sale was valid Held: Yes. The Court held that when one sells or buys real property, one sells or buys the property as he sees it, in its actual setting and by its physical metes and bounds, and not by the mere lot number assigned to it in the certificate of title. As long as the true intentions of the parties are evident, the mistake will not vitiate the consent of the parties, or affect the validity and binding effect of the contract between them. In this case, the evidence shows that the designation of the second parcel of land sold as Lot 2034 was merely an oversight or a typographical error. The intention of the parties to the Absolute Sale became unmistakably clear when private respondents, as vendees, took possession of Lots 1320 and 1333 in the concept of owners without the objection of Filomena, the vendor. Proof of the conveyance of ownership is the fact that from the time of the sale, or after more than 30 years, private

respondents have been in possession of Lots 1320 and 1333. Petitioners on the other hand have never been in possession of the two lots. We disagree on petitioners’ argument that the notarized and archived copy should 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. Noncompliance with formal requirements does not adversely affect the validity of the contract or the contractual rights and obligations of the parties.

SPS. ANTONIO & LETICIA VEGA vs. SOCIAL SECURITY SYSTEM (SSS) & PILAR DEVELOPMENT CORPORATION G.R. No. 181672 September 20, 2010 Facts:  

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Magdalena Reyes asked petitioner spouses Antonio and Leticia Vega to assume her housing loan from SSS, with her land as security, since she wanted to emigrate. Upon learning that SSS did not approve of members transferring their mortgaged homes but they can make a private agreement with Reyes provided they pay the monthly amortizations on time, the Vegas agreed for Reyes to execute in their favor a deed of assignment of real property with assumption of mortgage. Since Reyes did not readily execute the deed of assignment, it was her sister Ofilada who executed the same in favor of the Vegas. Ofilada kept the original and gave the Vegas two copies – one of which they gave to the Home Development Mortgage Fund. Unfortunately, a storm in 1984 resulted in a flood that destroyed the copy left with them. Due to the outstanding debt of Reyes to respondent Pilar Development Corporation (PDC), a writ of execution concerning the property was issued by the court. Consequently, SSS released the mortgage to PDC and the Vegas were evicted from the property. The Court of Appeals reversed the ruling of the trial court in granting the Vegas’ action for consignation, damages and injunction with application for preliminary injunction and temporary restraining order against the SSS, the PDC, the sheriff, and the Register of Deeds, because the Vegas were unable to produce the deed of assignment of the property in their favor and that such assignment was not valid as to PDC.

Issue: Whether or not the Vegas presented adequate proof of Reyes’ sale of the subject property to them Held: Yes. The rule requiring the presentation of the original of that deed of assignment is not absolute. Secondary evidence of the contents of the original can be adduced, as in this case, when the original has been lost without bad faith on the part of the party offering it. Here, 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.

CLARA M. BALATBAT vs. COURT OF APPEALS and Spouses JOSE REPUYAN and AURORA REPUYAN G.R. No. 109410 August 28, 1996 Facts:      

Aurelio Roque sold his 6/10 share of the lot acquired by him and his wife Maria Mesina during their conjugal union, to the spouses Aurora Tuazon-Repuyan and Jose Repuyan as evidenced by a “Deed of Absolute Sale”. Aurora Repuyan later caused the annotation of her affidavit of adverse claim on the Transfer Certificate of Title of said lot. Aurelio Roque filed a complaint for “Rescission of Contract” against the spouses, grounded on the latter’s failure to pay the balance of the purchase price, but it was dismissed by the court. Later, a deed of absolute sale was executed between Aurelio, Corazon, Feliciano, Severa and Osmundo, all surnamed Roque, and Clara Balatbat. A writ of possession was thereafter granted by the trial court in Clara Balatbat’s favor. Petitioner filed the instant complaint for the delivery of the owner’s duplicate copy against private respondents.

Issue: Whether or not the sale in favor of the spouses is merely executory for the reason that there was no delivery of the subject property and that consideration/price was not fully paid Held: No. We find the sale as consummated, hence, valid and enforceable. Article 1498 of the Civil Code provides that - when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot be inferred. The execution of the public instrument, without actual delivery of the thing, transfers the ownership from the vendor to the vendee, who may thereafter exercise the rights of an owner over the same. In the instant case, vendor Roque delivered the owner’s certificate of title to herein private respondent. It is not necessary that vendee be physically present at every square inch of the land bought by him, possession of the public instrument of the land is sufficient to accord him the rights of ownership. Thus, delivery of a parcel of land may be done by placing the vendee in control and possession of the land (real) or by embodying the sale in a public instrument (constructive). 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.

UNIVERSAL ROBINA SUGAR MILLING CORPORATION vs. HEIRS OF ANGEL TEVES G. R. No. 128574 September 18, 2002 Facts:       

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Andres Abanto’s heirs adjudicated unto themselves the two lots owned by the former and sold the (a) unregistered lot to the United Planters Sugar Milling Company, Inc. (UPSUMCO), and the (b) registered lot to Angel M. Teves. The sale was not registered. Teves verbally allowed UPSUMCO to use the lot free of charge, subject to the condition that UPSUMCO shall shoulder the payment of real property taxes and that its occupation shall be coterminous with its corporate existence. UPSUMCO built a guesthouse and pier facilities on the property. The Philippine National Bank (PNB) acquired UPSUMCO’s properties and transferred the same to the Asset Privatization Trust (APT), which sold it to the Universal Robina Sugar Milling Corporation (URSUMCO). URSUMCO then took possession of UPSUMCO’s properties, including that of Teves. URSUMCO refused to turn over the possession of the property to Teves, claiming that it acquired the right to occupy the property from UPSUMCO which purchased it from Andres Abanto, and that it was UPSUMCO which has been paying the corresponding realty taxes. Teves, substituted by his heirs, are claiming recovery of possession of the lot. The RTC rendered judgment finding that URSUMCO has no personality to question the validity of the sale of the property, on the ground, among others that Teves’ failure to have the sale registered with the Registry of Deeds would not vitiate his right of ownership, unless a third party has acquired the land in good faith and for value and has registered the subsequent deed. The Court of Appeals affirmed, likewise holding that Teves’ failure to cause the registration of the sale is not fatal because it is perfected by mere consent of the parties.

Issue: Whether or not Teves legally acquired ownership over the lot Held: Yes. 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. Article 1358 of the New Civil Code, which requires the embodiment of certain contracts in a public

instrument, is only for convenience, and the registration of the instrument would merely affect third persons. 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.

RITA SARMING, et.al. vs. CRESENCIO DY, et.al. G.R. No. 133643 June 6, 2002 Facts:         

Petitioners are the successors-in-interest of original defendant Silveria Flores, while respondents Cresencio Dy and Ludivina Dy-Chan are the successors-in-interest of the original plaintiff Alejandra Delfino, the buyer of one of the lots subject of this case. Lot 4163 which was solely registered in the name of Silveria Flores was later sub-divided between her and her brother Jose. The grandchildren of Jose and now the owners of his one-half share of Lot 4163, sold such share to Alejandra Delfino. TCT No. 578 allegedly covering Lot 4163 was issued in the names of Silveria Flores and Alejandra Delfino, with one-half share each. Upon finding that the what was designated in the deed, Lot 5734, was the wrong lot, and that the Original Certificate of Title (OCT) covering Lot 4163 was still on file. Alejandra Delfino paid the necessary fees so that the title to Lot 4163 could be released to Silveria Flores, who promised to turn it over for the reformation of the deed of sale. However, despite repeated demands, Silveria did not do so. Silveria claims that she is the rightful and sole owner of Lot 4163 as shown by the OCT; and consequently, respondents had no right to sell the lot. The trial court ruled against Silveria’s successors-in-interest, and ordered the reformation of the contract. In affirming the decision of the trial court, the Court of Appeals agreed that the real intention of the parties was for the sale of Lot 4163 which Alejandra Delfino had been occupying, and the designation of Lot 5734 in the deed was a mistake in the preparation of the document.

Issue: Whether or not reformation of the subject deed is proper by reason of mistake in designating the correct lot number Held: Yes. 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 contact; (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, in our view, are present in this case. There was a meeting of the minds between the parties to the contract but the deed did not express the true intention of the parties due to mistake in the designation of the lot subject of the deed. There is no dispute as to the intention of the parties to sell the land to Alejandra Delfino but there was a mistake as to the designation of the lot intended to be sold as stated in the Settlement of Estate and Sale. The totality of the evidence clearly indicates that what was intended to be sold to Alejandra Delfino was Lot 4163 and not Lot 5734. As found by both courts below, there are enough bases to support such conclusion.

CEBU CONTRACTORS CONSORTIUM CO. vs. COURT OF APPEALS and MAKATI LEASING & FINANCE CORPORATION G.R. No. 107199 July 22, 2003 Facts:   

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A lease agreement relating to various equipment was entered into between Makati Leasing & Finance Corporation (MLFC), as lessor, and Cebu Contractors Consortium CO. (CCCC), as lessee. 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. When CCCC began defaulting on the lease rentals and ignoring MLFC’s demand letters, the latter 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. CCCC alleges that MLFC induced it to adopt and apply a sale and lease back scheme instead of a customary loan secured by a security. CCCC’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 CCCC’s liabilities. The trial court and the Court of Appeals upheld the lease agreement and found CCCC liable to pay MLFC. CCCC argues that the sale and lease back scheme is nothing more than an equitable mortgage and, consequently, asks for its reformation.

Issue: Whether or not the reformation of the sale and lease back scheme is proper Held: Yes. MLFC admits that the transaction with CCCC involved the purchase of alreadyowned equipment. Consequently, there can be no doubt that the transaction between the parties is not one of financial leasing, as defined by law, but simply a loan secured by a chattel mortgage over CCCC’s equipment. When the true intention of the parties to a contract is not expressed in the instrument purporting to embody their agreement by reason of mistake, fraud, inequitable conduct or accident, the remedy of the aggrieved party is to ask for reformation of the instrument under Articles 1359 and 1362 of the Civil Code, to the end that their true agreement may be expressed therein. Under Article 1144 of the Civil Code, the prescriptive period for actions based upon a written contract and for reformation of an

instrument is ten years. The right of action for reformation accrued from the date of execution of the contract of lease in 1976. This was properly exercised by CCCC when it filed its answer with counterclaim to MLFC’s complaint in 1978 and asked for the reformation of the lease contract.

ADR SHIPPING SERVICES, INC. vs. MARCELINO GALLARDO and THE HONORABLE COURT OF APPEALS G.R. No. 134873 September 17, 2002 Facts: 

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Marcelino Gallardo, a timber concessionaire and log dealer doing business under the name “Mar Gallardo Trading”, entered into a charter agreement with ADR Shipping Services, Inc., through its president Abraham Rodriguez, for the use of the MV Pacific Breeze to transport 60,000 cubic meters of logs to Kaoshung, Taiwan. Under the charter agreement, the boat should be ready to load by February 5, 1988. MV Pacific Breeze failed to arrive on time. Consequently, Gallardo informed ADR that the charter contract is cancelled and that the P242,000 advanced as payment to ADR is withdrawn. ADR refused to return the advanced payment, thus prompting Gallardo to file a case for sum of money and damages. The trial court ruled in Gallardo’s favor, ordering ADR to pay P242,000 plus 6% interest per annum, attorney’s fees and costs of suit. Petitioner assails the affirmation of the decision made by the Court of Appeals, asserting that under the terms of the Charter Party for MV Pacific Breeze, Gallardo as the charterer had the option to cancel the Charter Party only when the vessel failed to arrive or was not ready to load after February 16, 1988. Petitioner argues that the date “5 February 1988”, written in Box No. 9 of the charter party, merely indicates a “reference commencing date” from which the chartered vessel is expected and ready to load, and not the exact date when the vessel has to arrive as indicated in paragraph 10 of the charter party. Private respondent, on the other hand, contends that the charter party, in Box No. 9 thereof, has unequivocally fixed February 5, 1998 as the date when MV Pacific Breeze is expected ready to load.

Issue: Whether or not Gallardo is entitled to the refund Held: Yes. Paragraph 10 of the “Gencon” Charter Party, in our view, contains a typographical error where “Box 19” was erroneously written instead of “Box 9”. But more importantly, paragraph 10 presents an ambiguity. 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, such ambiguity must be construed strictly against ADR,

the party that drafted and caused the inclusion of the subject clause. Also, more decisive is the stipulation in Box No. 9 of the Charter Party which explicitly states that February 5, 1988 is the date when the vessel is “expected ready to load.” February 16, 1988 is merely the “cancelling date” as specified in Box 19 of the said contract. That February 5, 1988 is the intended date when the ship is expected ready to load, is buttressed by the provision of paragraph 1 of the “Gencon” Charter. Considering that the subject contract contains the express provision that February 5, 1988 is the date when the vessel is expected ready to load, that provision leaves the parties with no other recourse but to apply the literal meaning of such stipulation. The cardinal rule is that where the terms of the contract are clear, leaving no doubt as to the intention of the contracting parties, the literal meaning of its stipulations is controlling.

VALENTIN MOVIDO, substituted by MARGINITO MOVIDO vs. LUIS REYES PASTOR G.R. No. 172279 February 11, 2010 Facts:  

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Respondent Luis Pastor alleged that he and petitioner executed a kasunduan sa bilihan ng lupa where the latter agreed to sell a parcel of land. Respondent also alleged that another kasunduan was later executed supplementing the kasunduan sa bilihan ng lupa, which provided that, if a Napocor power line traversed the subject lot, the purchase price would be lowered to P200/sq. m. and that 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 further claimed that 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. Luis Reyes Pastor filed a complaint for specific performance, praying that petitioner Valentin Movido be compelled to cause the survey of a parcel of land subject of their contract to sell. The trial court ruled in favor of herein petitioner and held that the kasunduan preceded the kasunduan sa bilihan ng lupa. On appeal, the Court of Appeals reversed the RTC and held that the kasunduan sa bilihan ng lupa was the first document executed by the parties, not the kasunduan.

Issue: Whether the kasunduan is controlling and not the kasunduan sa bilihan ng lupa Held: Neither. 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 CORPORATION vs. TSPIC EMPLOYEES UNION (FFW), representing MARIA FE FLORES, et.al. G.R. No. 163419 February 13, 2008 Facts:         

TSPIC and the Union entered into a Collective Bargaining Agreement (CBA) for the years 2000 to 2004 which included a provision on yearly salary increases starting January 2000 until January 2002. Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10% increase in their salary. The CBA also provided that employees who acquire regular employment status within the year but after the effectivity of a particular salary increase shall receive a proportionate part of the increase upon attainment of their regular status. Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region, issued Wage Order No. NCR-08 (WO No. 8) which raised the daily minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000. Conformably, the wages of 17 probationary employees were increased to Php 250.00 effective November 1, 2000. Then the 17 probationary employees attained regular employment and received 25% of 10% of their salaries as granted under the provision on regularization increase. In January 2001, TSPIC implemented the new wage rates as mandated by the CBA causing the nine employees, who were senior to the 17 recently-regularized employees, to receive less wages. Then after such salary increase, 24 of the employees were told that due to an error in the automated payroll system, they were overpaid and the overpayment would be deducted from their salaries in a staggered basis. The Union asserted that there was no overpayment and that deduction would mean diminution of pay.

Issue: Whether or not the deduction of the alleged overpayment constitutes diminution in violation of the Labor Code Held: No. If the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of their stipulations shall control. As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued. Littera necat spiritus vivificat. An instrument must be interpreted according to the intention of

the parties. It is the duty of the courts to place a practical and realistic construction upon it, giving due consideration to the context in which it is negotiated and the purpose which it is intended to serve. Absurd and illogical interpretations should also be avoided. Considering that the parties have unequivocally agreed to substitute the benefits granted under the CBA with those granted under wage orders, the agreement must prevail and be given full effect. It is a familiar rule in interpretation of contracts that conflicting provisions should be harmonized to give effect to all. Likewise, when general and specific provisions are inconsistent, the specific provision shall be paramount to and govern the general provision. Thus, it may be reasonably concluded that TSPIC granted the salary increases under the condition that any wage order that may be subsequently issued shall be credited against the previously granted increase. The intention of the parties is clear: As long as an employee is qualified to receive the 12% increase in salary, the employee shall be granted the increase; and as long as an employee is granted the 12% increase, the amount shall be credited against any wage order issued after WO No. 7. Respondents should not be allowed to receive benefits from the CBA while avoiding the counterpart crediting provision. They have received their regularization increases under Art. X, Sec. 2 of the CBA and the yearly increase for the year 2001. They should not then be allowed to avoid the crediting provision which is an accompanying condition.

SPS. RAFAEL P. ESTANISLAO AND ZENAIDA ESTANISLAO vs. EAST WEST BANKING CORPORATION G.R. No. 178537 February 11, 2008 Facts:   

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Petitioners obtained a loan from the respondent in the amount of evidenced by a promissory note and secured by two deeds of chattel mortgage: one covering two dump trucks and a bulldozer, and another covering a bulldozer and a wheel loader. When petitioners defaulted in their amortizations, respondent bank filed a suit for replevin with damages, praying that the equipment covered by the first deed of chattel mortgage be seized and delivered to it. During the suspension of the proceedings, a deed of assignment was executed between the parties. Petitioners affixed their signatures on the deed of assignment. However, for some unknown reason, respondent bank’s duly authorized representative failed to sign the deed. Petitioners completed the delivery of the heavy equipment covered in the first chattel mortgage. Later, respondent demanded delivery of the two other heavy equipment covered by the second chattel mortgage that its representative failed to include in the deed of assignment. Petitioners claim that their total loan obligation has been extinguished upon the delivery of the heavy equipment (2 dump trucks; 1 bulldozer).

Issue: Whether or not the deed of assignment – which expressly provides that the transfer and conveyance to respondent of the three units of heavy equipment, and its acceptance thereof, shall be in full payment of the petitioners’ total outstanding obligation to the latter – operate to extinguish petitioners’ debt to respondent, such that the replevin suit could no longer prosper Held: Yes. The deed of assignment was a perfected agreement which extinguished petitioners’ total outstanding obligation to the respondent. The deed explicitly provides that the assignor (petitioners), “in full payment” of its obligation in the amount of P7,305,459.52, 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 petitioners’ aggregate indebtedness of P7,305,459.52 would then be considered to have been paid in full as well. The legal presumption is always on the validity of contracts. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. When respondent accepted delivery of all three units of heavy equipment under the deed of assignment, there could be no doubt that it intended to be bound under the agreement.

AGRIFINA AQUINTEY vs. SPOUSES FELICIDAD AND RICO TIBONG G.R. No. 166704 December 20, 2006

Facts:

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Agrifina alleged that Felicidad had secured loans from her on several occasions, totaling P773,000 but the spouses failed to pay despite repeated demands. The spouses, for their part, admitted that they had secured loans from Agrifina but they assert that the proceeds of the loan were re-lent to other borrowers at higher interest rates. They likewise alleged that they had executed deeds of assignment in favor of petitioner, and that their debtors had executed promissory notes in Agrifina’s favor. It is now the spouses’ contention that re-lending the loan resulted in a novation of the original obligation to Agrifina; as such, she became the new collector of the debtors, and the spouses’ obligation to pay the balance has been extinguished. The trial court ruled that the deeds of assignment and promissory notes did not contain any express agreement to novate and extinguish Felicidad’s obligation. The CA affirmed with modification the decision of the RTC and stated that, the secured loans amount to P637,000, and not P773,000.

Issue: Whether or not respondents obligation is extinguished through the assignment of credit

Held: No. Case law is that, an assignment will, ordinarily, be interpreted or construed in accordance with the rules of construction governing contracts generally, the primary object being always to ascertain and carry out the intention of the parties. This intention is to be derived from a consideration of the whole instrument, all parts of which should be given effect, and is to be sought in the words and language employed. Indeed, the Court must not go beyond the rational scope of the words used in construing an assignment, words should be construed according to their ordinary meaning, unless something in the assignment indicates that they are

being used in a special sense. So, if the words are free from ambiguity and expressed plainly the purpose of the instrument, there is no occasion for interpretation; but where necessary, words must be interpreted in the light of the particular subject matter. And surrounding circumstances may be considered in order to understand more perfectly the intention of the parties. Thus, the object to be accomplished through the assignment, and the relations and conduct of the parties may be considered in construing the document.

Although it has been said that an ambiguous or uncertain assignment should be construed most strictly against the assignor, the general rule is that any ambiguity or uncertainty in the meaning of an assignment will be resolved against the party who prepared it; hence, if the assignment was prepared by the assignee, it will be construed most strictly against him or her. One who chooses the words by which a right is given ought to be held to the strict interpretation of them, rather than the other who only accepts them. Considering all the foregoing, we find that respondents still have a balance on their account to petitioner in the principal amount of P33,841.00.

ADORACION E. CRUZ, THELMA DEBBIE E. CRUZ, GERRY E. CRUZ and NERISSA CRUZ-TAMAYO vs. THE HONORABLE COURT OF APPEALS, SUMMIT FINANCING CORP., VICTOR S. STA. ANA, MAXIMO C. CONTRERAS, RAMON G. MANALASTAS, and VICENTE TORRES G.R. No. 122904 April 15, 2005

Facts:

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Petitioner Adoracion Cruz is the mother of her co=petitioners, as well as Arnel Cruz, who was one of the defendants. After executing a Deed of Partial Partition, petitioners and Arnel Ctuz agreed in writing, and through a Memorandum of Agreement (MOA) to share equally in the proceeds of the sale of the properties although they had been subdivided and individually titled. Subsequently, petitioners learned that Arnel obtained a loan from Summit, secured by a real estate mortgage on the parcel of land adjudicated to Cruz. The loan remained unpaid, causing Summit to institute extrajudicial proceedings where it was also the highest bidder. The subject lot was registered in the name of Summit. Petitioners assert that they remained as co-owners of the property, pursuant to the MOA. The Court of Appeals upheld the validity of the mortgage of the subject property although it provides that the parties thereto are entitled to share in the proceeds of the sale.

Issue: Whether or not the mortgaged property is the exclusive property of Arnel Cruz Held:

Yes. From a reading of the provisions of the Deed of Partial Partition, no other meaning can be gathered other than that petitioners and Arnel Cruz had put an end to the co-ownership. 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. It is well-settled in both law and jurisprudence, that contracts are the law between the contracting parties and should be fulfilled, if their terms are clear and leave no room for doubt as to the intention of the contracting parties.

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 parties.

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 petitioners. Thus, this Court holds that the real estate mortgage on the disputed property is valid and does not contravene the agreement of the parties.

NAPOLEON H. GONZALES vs. HONORABLE COURT OF APPEALS AND SPOUSES GABRIEL AND LUZVIMINDA CABALLERO G.R. No. 122611 March 8, 2001

Facts:

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Private respondents obtained a loan from the Cavite Development Bank and secured the same by mortgaging the lots that they own. To pay the loan, they offered Lot 1 for sale and advertised the offer in the Bulletin Today. Petitioner Gonzales offered to buy the lot at a bargained price. Respondents signed the deed of sale covering only Lot 1 but refused to deliver its title until petitioner paid the remaining balance. This prompted petitioner to file a complaint for specific performance and damages, asking for the deeds of sale of the two lots and delivery of the titles to him. The RTC ordered the spouses to deliver the TCT of Lot 1 upon payment by petitioner; the Court of Appeals affirmed the ruling of the RTC.

Issue: Whether or not the contract of sale between the parties involved Lots 1 and 2 as claimed by petitioner Held: No. On the basis of documentary evidence on record, we agree with the trial and appellate courts that the weight of evidence presented during trial favor private respondents’ claim that what was agreed upon by the parties was the sale of only Lot 1 covered by TCT 247309. 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. 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. The reasons and the surrounding circumstances behind a contract’s execution are of paramount importance to place the interpreter in the situation occupied by the parties concerned at the time the writing was executed.

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 vs. COURT OF APPEALS AND FEDERICO BRIONES G.R. No. 115966 March 20, 2003

Facts:

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Petitioners are the wife and the children of the late Julio Garcia who inherited from his mother Maria Libudbud, Lot 1462. Lot 1462 was co-owned and registered in the names of the three other persons with their corresponding shares. There was no separate title in the name of Julio Garcia but there were tax declarations in his name to the extent of his grandfather’s share, covering an area of 21,460 square meters. Petitioners and respondent Briones then entered into a Kasunduan ng Pagbibilihan over the 21,460 square meters portion. Petitioners allegedly informed respondent that the TCT was in the possession of their cousin but still, respondent willingly entered into the Kasunduan. When petitioners failed to deliver the TCT to respondent, the latter stopped paying. Consequently, petitioners filed a complaint asking for the rescission of the Kasunduan and the return of the parcel of land. Petitioners allege that the kaukulang titulo ng lupang nabanggit in the Kasunduan refers to TCT No. RT 1076 and not a separate title in the name of Julio Garcia. Respondent avers otherwise.

Issue: Whether or not payment of the balance of the purchase price is conditioned upon delivery of a separate title in the name of Julio Garcia Held:

No. The Kasunduan itself in its opening paragraph refers to the subject property being sold as “buong lawak na 21,640 metrong parisukat, x x x at sa kasalukuyan may nabibinbing kahilingan sa hukuman upang magkaroon ng sariling titulo; x x x.” The next paragraph of the Kasunduan, therefore, which speaks of “ang kaukulang titulo sa lupang nabanggit,” clearly refers to the separate title being applied for, even without resort to extraneous evidence.

Article 1377 of the Civil Code, which states that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity does not apply in this case where the evident intention of the parties can be readily discerned by their subsequent and contemporaneous acts.

It is basic in the interpretation and construction of contracts that the literal meaning of the stipulations shall control if the terms of the contract are clear and leave no doubt on the intention of the contracting parties. However, if the terms of the agreement are ambiguous, resort is made to contract interpretation which is the determination of the meaning attached to written or spoken words that make the contract.[10] To ascertain the true intention of the parties, their subsequent or contemporaneous actions must be principally considered.

The tenor of the correspondence between petitioners and respondent shows that the parties intended that a separate title to the property in the name of Julio Garcia shall be delivered to respondent as a condition for the latter’s payment of the balance of the purchase price.

PHILIPPINE BANK OF COMMUNICATIONS vs. ELENA LIM, RAMON CALDERON, and TRI-ORO INTERNATIONAL TRADING & MANUFACTURING CORPORATION G.R. No. 158138 April 12, 2005 Facts:      

Petitioner Philippine Bank of Communications (Philbank) alleged that respondents obtained a loan from it and executed a continuing surety agreement. The loan was evidenced by a Promissory Note. It was expressly stipulated in the surety agreement that the venue for any legal action that may arise out of the promissory note shall be Makati City, ‘to the exclusion of all other courts’. Petitioner filed a suit for collection of the unpaid balance before the RTC of Manila. Respondents moved to dismiss the complaint on the ground of improper venue but the trial court denied said motion, holding that the venue was merely permissive. The CA held that the parties’ Surety Agreement, though silent as to venue, was an accessory contract that should have been interpreted in consonance with the Promissory Note.

Issue: Whether or not the stipulation on venue does not apply to the surety agreement Held: No. In enforcing a surety contract, the “complementary-contracts-construed-together” doctrine finds application. 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 no-segregation principle is based on Article 1374 of the Civil Code, which states 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.” The circumstances that related to the issuance of the PN and the SA are so intertwined that neither one could be separated from the other. It makes no sense to argue that the parties to the SA were not bound by the stipulations in the PN. By inserting the provision 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 actions against the sureties. The legal action against the sureties arose not only from the SA, but also from the PN.

SPOUSES EFREN N. RIGOR and ZOSIMA D. RIGOR, for themselves and as owners of CHIARA CONSTRUCTION vs. CONSOLIDATED ORIX LEASING and FINANCE CORPORATION G.R. No. 136423 August 20, 2002 Facts:     

Petitioners obtained a loan from private respondent Consolidated Orix Leasing and Finance Corporation, secured by a deed of chattel mortgage over two dump trucks. The petitioners also executed a promissory note, with the express provision 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.” Petitioners failed to pay several installments despite demand from private respondent, prompting the latter to seek foreclosure of the chattel mortgage before the RTC of Dagupan City. Petitioners moved to dismiss the complaint on the ground of improper venue. 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.”

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. Applying the “complementary contracts construed together” doctrine laid down under Article 1374 of the Civil Code, which states 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.”, 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 chattel

mortgage constituted over the two dump trucks is an accessory contract to the loan obligation as embodied in the promissory note. The chattel mortgage cannot exist as an independent contract since its consideration is the same as that of the principal contract.

RODOLFO P. VELASQUEZ vs. COURT OF APPEALS, and PHILIPPINE COMMERCIAL INTERNATIONAL BANK, INC. G.R. No. 124049 June 30, 1999 Facts:       

Rodolfo Velasquez, as an officer and stockholder of Pick-up Fresh Farms (PUFFI) obtained a loan from private respondent Philippine Commercial International Bank (PCIB). As security for the loan, petitioner and two others executed a deed of suretyship in favor of PCIB. When PUFFI defaulted in payment, PCIB foreclosed the chattel mortgage. PCIB then filed an action to recover the remaining balance of the entire obligation including interests, penalties and other charges. The trial court rendered a summary judgment in favor of PCIB holding petitioner and Canilao solidarily liable. Petitioner insists, among others, the denial of personal liability on his part in the deed of suretyship since he signed thereon as an officer of ARII is a triable issue of fact. Petitioner further avers that any ambiguity in the contract should be decided against PCIB under the contract of adhesion doctrine.

Issue: Whether or not the summary judgment should be lifted Held:

No. A mere perusal of the deed of suretyship readily shows petitioner’s personal liability under the loan contract, hence, proper for summary judgment. Moreover, the appropriate doctrine in this case is that of the “complementary contracts construed together” doctrine which we enunciated in National Power Corporation v. CA — The surety bond must be read in its entirely and together with the contract between the NPC and the contractors. The provisions must be construed together to arrive at their true meaning. Certain stipulations cannot be segregated and then made to control. That the “complementary contracts construed together” doctrine applies in this case finds support in the principle that the surety contract is merely an accessory contract and must be interpreted with its principal contract, which in this case was the loan agreement.

This doctrine closely adheres to the spirit of Art. 1374 of the Civil Code which states that — Art. 1374. 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.

HEIRS OF SOFIA QUIRONG, Represented by ROMEO P. QUIRONG vs. DEVELOPMENT BANK OF THE PHILIPPINES G.R. No. 173441 December 3, 2009

Facts:

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Issue:

To enable Rosa Dalope-Function and her husband Antonio Funcion (the Funcions) get a loan from respondent Development Bank of the Philippines (DBP), Felisa Dalope (Rosa’s mother) sold the 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, the latter waiving any warranty against eviction. The contract also 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. Felisa and her eight children (the Dalopes), filed an action for partition and declaration of nullity of documents with damages against the DBP and the Funcions. Notwithstanding the suit, the DBP executed a deed of absolute sale of the subject lot in Sofia Quirong’s favor, carrying substantially the same waiver of warranty against eviction and of any adverse lien or encumbrance. 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. The RTC rendered a decision, rescinding the sale between Sofia Quirong and the DBP. On appeal, the CA dismissed the heirs’ action on the ground of prescription.

Whether or not the heirs of Quirong were entitled to the rescission of the DBP’s sale of the subject lot to the late Sofia Quirong as a consequence of her heirs having been evicted from it Held: Yes. However, since it accrued on January 28, 1993 when the decision in Civil Case D7159 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. Their 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.

“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.

SAMUEL U. LEE and PAULINE LEE and ASIATRUST DEVELOPMENT BANK, INC. vs. BANGKOK BANK PUBLIC COMPANY, LIMITED G.R. No. 173349 February 9, 2011

Facts:

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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). 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. The Lee family executed guarantees in favor of Bangkok Bank, one for the CLA for MDEC and another for the CLA of MHI. Under the guarantees, the Lee family irrevocably and unconditionally guaranteed, as principal debtors, the payment of any and all indebtedness of MDEC and MHI with Bangkok Bank. In time, the advances, which MDEC and MHI had taken out from the CLAs, amounted to three million dollars. MDEC was likewise granted a loan facility by Asiatrust Development Bank, Inc. (Asiatrust). Samuel bought several parcels of land in Cupang, Antipolo, (subjectproperties in this case) and later entered into a joint venture with Louisville Realty and Development Corporation to develop the properties into a residential subdivision, called Louisville Subdivision. Throughout 1997, MDEC availed itself of the omnibus credit line granted by Asiatrust on three occasions. When MDEC had defaulted in the payment of its loan, Asiatrust initiated negotiations with MDEC and required the Lee family to provide additional collateral that would secure the loan. The negotiation was concluded when Asiatrust had agreed to Samuel’s proposition that he would mortgage the subject Antipolo properties to secure the loan, and therefore execute a REM over the properties. While the titles of the Antipolo properties had been delivered by Samuel to Asiatrust and the REM had been executed in January 1998, spouses Samuel and Pauline Lee (spouses Lee) were requested to sign a new deed of mortgage on February 23, 1998, and, thus, it was only on that date that the said mortgage was actually notarized,

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registered, and annotated at the back of the titles. Bangkok Bank instituted an action before the RTC, Branch 141 in Makati City to recover the loans extended to MDEC and MHI under the guarantees. With MDEC still unable to make payments on its defaulting loans with Asiatrust, the latter foreclosed the subject mortgaged Antipolo properties. The sale was registered on April 21, 1998. Believing the REM and the foreclosure sale to be fraudulent, Bangkok Bank did not redeem the subject properties. Bangkok Bank filed the instant case for the rescission of the REM over the subject properties, annulment of the foreclosure sale, cancellation of the new TCTs issued in favor of Asiatrust, and damages. In its action, Bangkok Bank alleged, among others, that the presumption of fraud under Article 1387 of the Civil Code applies, considering that a writ of preliminary attachment was issued in January 1998 in favor of SBC against Samuel. The RTC explained that a mortgage contract is an onerous undertaking to secure payment of an obligation and cannot be considered as a gratuitous alienation; thus, Art. 1387 of the Civil Code does not apply The CA held that fraud was perpetrated through the REM executed and registered on February 23, 1998 pursuant to the presumption in the second paragraph of Art. 1387 of the Civil Code, which provides that “alienations by onerous title are also presumed fraudulent when made by persons against whom x x x some writ of attachment has been issued.”

Issue: Whether or not Bangkok Bank can maintain an action to rescind the REM on the subject Antipolo properties despite its failure to exhaust all legal remedies to satisfy its claim

Held: No. the REM cannot be rescinded and shall, therefore, stand, as Asiatrust—the third party, in favor of which the REM was executed, and which subsequently foreclosed the subject properties—acted in good faith and without any badge of fraud. As a general rule, whether the person, against whom a judgment was made or some writ of attachment was issued, acted with or without fraud, so long as the third person who is in legal possession of the property in question did not act with fraud and in bad faith, an action for rescission cannot prosper. Art. 1385 of the Civil Code explicitly states this, thus: “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.”

In this case, it is clearly established that there was a bona fide transaction between the spouses Lee and Asiatrust that necessitated the negotiations resulting from the former’s default in the payment of its obligations; and which brought about the execution of the REM to secure their pre-existing obligations. The requisite (1) good faith on the part of the third person and (2) fraud, necessary for an action to rescind under Art. 1381 of the Civil Code, were not complied with. Moreover, as between Asiatrust and Bangkok Bank, the former has a better right over the subject Antipolo properties, it being the first to annotate its lien on the titles of the properties.

EQUATORIAL REALTY DEVELOPMENT, Inc. vs. MAYFAIR THEATER, Inc. G.R. No. 133879 November 21, 2001 Facts:  

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Carmelo & Bauermann, Inc. (“Camelo” ) used to own a parcel of land with two 2-storey buildings constructed thereon, located at Claro M. Recto Avenue, Manila, which it leased to Mayfair Theater Inc. (“Mayfair”) for a period of 20 years. The Contract of Lease contained a provision granting Mayfair a right of first refusal to purchase the subject properties. However, on July 30, 1978 — within the 20-year-lease term — the subject properties were sold by Carmelo to Equatorial Realty Development, Inc. (“Equatorial”) for the total sum of P11,300,000, without first offering to Mayfair. Mayfair filed a Complaint before the RTC of Manila for (a) the annulment of the Deed of Absolute Sale between Carmelo and Equatorial, (b) specific performance, and (c) damages. The lower court rendered a Decision in favor of Carmelo and Equatorial but the CA reversed such decision rescinding the sale and ordered to allow Mayfair Theater, Inc. to buy the aforesaid lots for P11,300,000.00. Mayfair bought the property. However, Equatorial filed an action for the collection of a sum of money against Mayfair, claiming payment of rentals or reasonable compensation for Mayfair’s use of the subject premises after its lease contracts had expired. Equatorial alleged that representing itself as the owner of the subject premises by reason of the Contract of Sale; it claimed rentals arising from Mayfair’s occupation thereof. The trial court dismissed the Complaint holding that the rescission of the Deed of Absolute Sale did not confer on Equatorial any vested or residual proprietary rights.

Issue: Whether or not the right to the fruits belonged to, and remained enforceable by, Equatorial despite the judgment rescinding the sale Held: No. Article 1385 of the Civil Code provides, “[r]escission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; x x x.” Not only the land and building sold, but also the rental payments paid, if any, had to be returned by the buyer.

At bottom, it may be conceded that, theoretically, a rescissible contract is valid until rescinded. However, this general principle is not decisive to the issue of whether Equatorial ever acquired the right to collect rentals. What is decisive is the civil law rule that ownership is acquired, not by mere agreement, but by tradition or delivery. Under the factual environment of this controversy as found by this Court in the mother case, Equatorial was never put in actual and effective control or possession of the property because of Mayfair‟s timely objection.

MARIA ANTONIA SIGUAN vs. ROSA LIM, LINDE LIM, INGRID LIM and NEIL LIM G.R. No. 134685 November 19, 1999 Facts:     

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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.” Petitioner filed a criminal case for violation of Batas Pambansa Blg. 22 against Lim; Lim was convicted as charged. Meanwhile, before the criminal case, a Deed of Donation conveying parcels of land was purportedly executed by Limin favor of her children, Linde, Ingrid and Neil, which was registered with the Office of the Register of Deeds of Cebu City. Petitioner filed an accion pauliana against LIM and her children before Branch 18 of the RTC 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. Petitioner claimed therein that sometime in July 1991, LIM, through a Deed of Donation, fraudulently transferred all her real property to her children in bad faith and in fraud of creditors, including her; that LIM conspired and confederated with her children in antedating the questioned Deed of Donation, to petitioner’s and other creditors’ prejudice; and that LIM, at the time of the fraudulent conveyance, left no sufficient properties to pay her obligations. Lim maintained that the Deed of Donation was not antedated but was made in good faith at a time when she had sufficient property. The trial court ordered the rescission of the questioned deed of donation; (2) declared null and void the transfer certificates of title issued in the names of private respondents Linde, Ingrid and Neil Lim; (3) 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 (4) directed the LIMs to pay the petitioner, jointly and severally. The Court of Appeals reversed the ruling of the trial court and dismissed the complaint because the two requisites of accion pauliana were absent.

Issue: Whether or not the questioned Deed of Donation was made in fraud of petitioner and, therefore, rescissible Held:

No. The general rule is that rescission requires the existence of creditors at the time of the alleged fraudulent alienation, and this must be proved as one of the bases of the judicial pronouncement setting aside the contract. Without any prior existing debt, there can neither be injury nor fraud. While it is necessary that the credit of the plaintiff in the accion pauliana must exist prior to the fraudulent alienation, the date of the judgment enforcing it is immaterial. Even if the judgment be subsequent to the alienation, it is merely declaratory, with retroactive effect to the date when the credit was constituted. 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 10 August 1989. We are 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. Under Article 1381 of the Civil Code, contracts entered into in fraud of creditors may be rescinded only when the creditors cannot in any manner collect the claims due them. Also, Article 1383 of the same Code provides that the action for rescission is but a subsidiary remedy which cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. The term “subsidiary remedy” has been defined as “the exhaustion of all remedies by the prejudiced creditor to collect claims due him before rescission is resorted to.” It is, therefore, essential that the party asking for rescission prove that he has exhausted all other legal means to obtain satisfaction of his claim. Petitioner neither alleged nor proved that she did so. On this score, her action for the rescission of the questioned deed is not maintainable even if the fraud charged actually did exist.” For presumption of fraud laid down in article1987, first paragraph, and Article 759, of the Civil Code to apply, it must be established that the donor did not leave adequate properties which creditors might have recourse for the collection of their credits existing before the execution of the donation. As earlier discussed, petitioner’s alleged credit existed only a year after the deed of donation was executed. She cannot, therefore, be said to have been prejudiced or defrauded by such alienation.

KHE HONG v. COURT OF APPEALS G.R. No. 144169 March 28, 200

Facts: 

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Petitioner Khe Hong Chang 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 Sandra and Ray. The trial court rendered its decision in favor of the plaintiff however when the Sheriff executed the writ of executuin they found out that petitioner no longer had any property and that he conveyed the subject propertiues 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. It alleged, inter alia, that petitioner Khe Hong Cheng executed the aforesaid deeds in fraud of his creditors, including respondent Philam. The RTC rendered its decision in favoir of Philam. The Ca affirmed the decision of RTC.

ISSUE: When does accion pauliano accrue?

Held: 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. The accion pauliana is an action of a last resort. For as long as the creditor still has a remedy at law for the enforcement of his claim against the debtor, the creditor will not have any cause of action against the creditor for rescission of the contracts entered into by and between the debtor and another person or persons. Indeed, an accion pauliana presupposes a judgment and the issuance by the trial court of a writ of execution for the satisfaction of the judgment and the

failure of the Sheriff to enforce and satisfy the judgment of the court. It presupposes that the creditor has exhausted the property of the debtor. The date of the decision of the trial court against the debtor is immaterial. What is important is that the credit of the plaintiff antedates that of the fraudulent alienation by the debtor of his property. After all, the decision of the trial court against the debtor will retroact to the time when the debtor became indebted to the creditor.

WHEREFORE, premises considered, the petition is hereby DENIED for lack of merit.

SUNTAY v. COURT OF APPEALS G.R. No. 114950 December 19, 1995

Facts:

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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 that 3 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 propert. The CA rendered its decision in favor of Federico.

ISSUE: Whether or not said second deed of absolute sale is null and void.

Held: 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 not 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 SC 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 second deed of sale executed by the late Rafael in favor of his uncle, should be considered ineffective and unavailing.

MANGAHAS v. BROBIO G.R. No. 183852 October 20, 2010

Facts: 

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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. In the Deed, petitioner and Pacificos 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 fathers 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. 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 damagesaw against respondent. The Regional Trial Court (RTC) rendered a decision in favor of petitioner. The CA reversed the RTC decision and dismissed the complaint. Hence, this petition.

Issue: The Honorable Court of Appeals erred in the appreciation of the facts of this case when it found that intimidation attended the execution of the promissory note subject of this case.

Held: The Supreme Court ruled that contracts are voidable where consent thereto is given through mistake, violence, intimidation, undue influence, or fraud. In determining whether consent is vitiated by any of these circumstances, courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in favor of what they believe actually occurred, considering the age, physical infirmity, intelligence, relationship, and conduct of the parties at the time of the execution of the contract and subsequent thereto, irrespective of whether the contract is in a public or private writing. 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 remedy suggested by the CA is not the proper one under the circumstances. An action for partition implies that the property is still owned in common. Considering that the heirs had already executed a deed of extrajudicial settlement and waived their shares in favor of respondent, the properties are no longer under a state of co-ownership; there is nothing more to be partitioned, as ownership had already been merged in one person.

Wherefore, the decision of the CA is reversed and set aside and the decision of the RTC is reinstated.

HERNANDEZ v. HERNANDEZ G.R. No. 158576 March 09, 2011

Facts: 

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This case involves the controversy between the parties which began when the Republic of the Philippines, through the Department of Public Works and Highways (DPWH), offered to purchase a portion of a parcel of land with an area of 80,133 square meters, covered by the Registry of Deeds for Tanauan, Batangas, located at San Rafael, 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, also deceased and represented by her heirs. The initial purchase price that was offered by the government was allegedly at ThirtyFive pesos (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 Seventy Pesos (P70.00) per square meter. They still did not accept the offer and the government was forced to file an expropriation case. On 9 August 1993, an expropriation case was filed by the Republic of the Philippines, through the DPWH, before the Regional Trial Court, Tanauan, Batangas. During the course of the expropriation proceedings, an Order dated 13 September 1996 was issued by the RTC Branch 83, informing the parties of the appointment of commissioners to help determine the just compensation. On 18 October 1996, Cornelia, and her other co-owners who were also signatories of the 11 November 1993 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. The trial court even gave Cecilio ten (10) more days, from his refusal to accept the

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summons, to file his answer. Upon the motion of the petitioner, respondent Cecilio was declared in default. The RTC denied the motion and nullified the quitclaim in favor of Cecilio. Cecilio appealed the Decision of the trial court. The appellate court, in its Decision dated 29 May 2003 reversed and set aside the ruling of the trial court. Hence, this petition.

Issue: Whether or not the CA erred in holding the validity of the receipt and quitclaim document contrary to law and jurisprudence.

Held: The supreme court ruled that a contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. In determining whether consent is vitiated by any of the circumstances mentioned, courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in their favor what they believe to have actually occurred, considering the age, physical infirmity, intelligence, relationship, and the conduct of the parties at the time of the making of the contract and subsequent thereto, irrespective of whether the contract is in public or private writing. And, in order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or those conditions which have principally moved one or both parties to enter the contract.

It was the rejection likewise of the last offer that led to the filing of the expropriation case on 9 August 1993. Clear as day, the conditions that moved the parties to the contract were the base price at P70.00 per square meter, the increase of which would be compensated by 20% of whatever may be added to the base price; and the ceiling price of P300.00 per square meter, which was considerably high reckoned from the base at P70.00, which would therefore, allow Cecilio to get all that which would be in excess of the elevated ceiling. The ceiling was, from the base, extraordinarily high, justifying the extraordinary grant to Cornelio of all that would exceed the ceiling.

In view of this case, the decision of the CA is reversed and set aside. The decision of the RTC is reinstated with modification.

FUENTES v ROCA G.R. NO. 178902 21 APRIL 2010

Facts: On October 11, 1982, Sabrina Taroza sold to her own son Tarciano T. Roca her titled of 358 sq.m lot located at canelar, zamboanga under a deed of absolute sale. Six years later, Tarciano T. Roca offered to the spouses Fuentes the same titlle of land bought to her mother with stipulations that Fuentes should pay a downpayment of Php 60,000.00 for the trnasfer of lot to them and within 6 months Tarciano would have to vacate the lot of structures, occupants and secure the consent of his estranged wife upon compliance, Fuentes spouses must have to pay Tarciano the amount of 140,000.00 php. On January 11, 1989 a document of absolute sale as issued to the Fuentes. One year after, Tarciano T. Roca died, which was followed by his wife 9 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 upon her husband and that fraud and forgery. Spouses Fuentes denied such allegations and claim that the forgery case is personal to Rosario the wife of Tarciano and she alone could claim it besaides the 4-year prescriptive period for nullifying the sale on the ground of fraud had already elapsed. The RTC ruled in favor of the Fuentes, however the Court of Appelas reversed the decision of the RTC.

Issue: 1. Whether or not Rosario's signature was forged. 2. Whether or not, Roca's action for declaration nullity of that sale to the spouses Fuentes had already prescribed.

Held: 1. Yes, the Supreme Court agrees with CA's observation that Rosario's signature strokes on the affidavit apperas heavy, deliberate and forced. Her specimen signature on the other hand are, consitently of a lighter stroke and more fluid. The way the letter "R" and "S" were written is also remarkably different. The variance is obvious even to the untrained eye.

2. For the second issue, the SC held its decision based on Art. 173 which provides that inorder that the wife may bring an action for annulment of sale on the ground of lack os spousal consent during the marriage within 10 years from the transaction. Consequently, the action that the Rocas, her heirs, brought in 1997 fell within ten years of the January 11, 1989 sale. Therefore it did not yet prescribe. Even if the claim of the spouses for prescription was based on fraud and forgery and that the prescriptive period to be applied is 4 years, the answer is still No, because the sale was void from the beginning and thus the land remained the property of Tarciano and Rosario despite that sale. When the two died, they passed on the ownership to their heirs, namely the Rocas, and as lawful owners thaey had the right to exclude any person from its enjoyment and disposal (Art 429 of the Civil Code). In fairness to the Fuentes, the SC held that they should be entitled among other things, to be recovered from the Tarciano's heirs the amount of 200, 000.00php with legal interest until fully paid chargeable against his estate. They are also to be entitled to a reimbursement with the improvements they inroduced with a right of retention until reimbursement is made (Art. 448).

ASSOCIATED BANK v. MONTANO ET.AL. G.R.NO. 166383 16 OCTOBER, 2009

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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.

Issue: 1. Whether or not motion to dismiss is on its propriety. 2. Whether or not the complaint for reconveynace should be dismissed.

HELD:

1. The SC held that the rule is based on practicality, as when the issues involved in a particular case can be disposed of in a preliminary hearing and if there is no motion to dismiss was filed then the pleading gorund as affirmative defenses can be heard in a preliminary hearing as that of the motion to dismiss. Respondent on the other hand fails to oppose the motion to dismiss despite having been given the opportunity to do so, any right to contest the same was already waived by them.

2. 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.

WILLIAM ALAIN MIAILHE v. COURT OF APPEALS G.R. No. 108991 March 20, 2001

Facts: 

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Petitioner, William Alain Miailhe, on his own behalf and on behalf of Victoria DesbaratsMiailhe, Monique Miailhe-Sichere and Elaine Miailhe-Lencquesaing 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.12 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.13

FIRST PHILIPPINE HOLDINGS CORPORATION v. TRANS MIDDLE EAST EQUITIES INC. G.R. NO. 179505 04 DECEMBER 2009

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FHPC is 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 un forceable. FHPC filed then its motion for leave to intervene and admit complaint in intervention and was granted by the court. On the otehr 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 laready 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: The SC found that the sale is not void for a suit for the annulment of voidbale 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 SC therefore denied the instant petition and affirmed the resolution of the SB with cost against the petitioner.

SANCHEZ v. MAPALAD 541 SCRA 397

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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. RTC ruled in favour of Nordelak. The Ca reversed the decision of RTC.

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.

WHEREFORE, the petition is hereby DENIED and the appealed Court of Appeals decision AFFIRMED in toto.

OESMER v. PARAISO DEVELOPMENT CORPORATION G.R. No. 157493 February 5, 2007

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. 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 ot 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.

PERPETUA VDA. DE APE v. COURT OF APPEALS G.R. No. 133638 April 15, 2005

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Generosa Cawit de Lumayno (private respondent herein), joined by her husband, Braulio, instituted a case for "Specific Performance of a Deed of Sale with Damages" against Fortunato and his wife Perpetua (petitioner herein). She supposedly demanded that Fortunato execute the corresponding deed of sale and to receive the balance of the consideration. However, Fortunato unjustifiably refused to heed her demands. Private respondent, therefore, prayed that Fortunato be ordered to execute and deliver to her "a sufficient and registrable deed of sale involving his one-eleventh (1/11) share or participation in Lot No. 2319 of the Escalante Cadastre. Private respondent testified that Fortunato went to her store at the time when their lease contract was about to expire. He allegedly demanded the rental payment for his land but as she was no longer interested in renewing their lease agreement, they agreed instead to enter into a contract of sale which Fortunato acceded to provided private respondent bought his portion of Lot No. 2319 for P5,000.00. Thereafter, she asked her son-in-law Flores to prepare the aforementioned receipt.

ISSUE: Whether or not the receipt signed by Fortunato proves the existence of a contrct of sale between him and private respondent.

Held: Under Article 1332 of the Civil Code which provides that "[w]hen 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."

As can be gleaned from Flores's testimony, while he was very much aware of Fortunato's inability to read and write in the English language, he did not bother to fully explain to the latter the substance of the receipt (Exhibit "G"). He even dismissed the idea of asking somebody else to assist Fortunato considering that a measly sum of thirty pesos was involved. Evidently, it did not occur to Flores that the document he himself prepared pertains to the transfer altogether of Fortunato's property to his mother-in-law. It is precisely in situations such as this when the wisdom of Article 1332 of the Civil Code readily becomes apparent which is "to protect a party to a contract disadvantaged by illiteracy, ignorance, mental weakness or some other handicap

JULIAN FRANCISCO v. PASTOR HERRERA G.R. No. 139982 November 21, 2002

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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 RTC rendered its decision in favor of the children that Ca 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.

ROSARIO L. DE BRAGANZA v. FERNANDO F. DE VILLA ABRILLE G.R. No. L-12471 April 13, 1959

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Rosario L. de Braganza and her sons Rodolfo and Guillermo petition for review of the Court of Appeal's decision whereby they were required solidarily to pay Fernando F. de Villa Abrille the sum of P10,000 plus 2 % interest from October 30, 1944. Because payment had not been made, Villa Abrille sued them in March 1949. The RTC and CA rendered its decision in favor of Abrile despite the fact tht Guillermo and Rodolfo are minors.

ISSUE: Whether or not Guillermo and Rodolfo can be held liable to pay the loan.

Held: The SC held that being minors, Rodolfo and Guillermo could not be legally bound by their obligation.These minors may not be entirely absolved from monetary responsibility. In accordance with the provisions of Civil Code, even if their written contact is unenforceable because of non-age, they shall make restitution to the extent that they have profited by the money they received. (Art. 1340) There is testimony that the funds delivered to them by Villa Abrille were used for their support during the Japanese occupation. Such being the case, it is but fair to hold that they had profited to the extent of the value of such money, which value has been authoritatively established in the so-called Ballantine Schedule: in October 1944, P40.00 Japanese notes were equivalent to P1 of current Philippine money.

MIGUEL KATIPUNAN v. BRAULIO KATIPUNAN, JR. G.R. No. 132415 January 30, 2002

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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 Sale 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 TRC dismissed the complaint. The 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.

NILO R. JUMALON v.COURT OF APPEALS G.R. No. 127767 January 30, 2002

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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 is 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 judgement in favor of De Leon. The Board of Commissioners of HLURB affirmed the decision of arbiter. The CA affirmed the appealed decision.

ISSUE: Whether 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 SC agrees 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.

CABALES, ET. AL vs COURT OF APPEALS August 31, 2007

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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 slae entered into is valid and binding.

Held: 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.

ANUNCIACION VDA. DE OUANO v. REPUBLIC OF THE PHILIPPINES G.R. NO. 168770 9 FEBRUARY 2011

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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 MactanCebu 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:

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.

SHOEMAKER v. LA TONDENA 68 Phil 24

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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 ocurt a quo ered 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: 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.

PNB v. PHILIPPINE VEGETABLE OIL COMPANY 49 Phil 897

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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: 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.

ANUNCIACION VDA. DE OUANO v. REPUBLIC OF THE PHILIPPINES G.R. NO. 168770 9 FEBRUARY 2011

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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 MactanCebu 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: 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.

MUNICIPALITY OF HAGONOY v. DUMDUM G.R. NO. 168289 22 MARCH 2010

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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 former 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: 1. Whether or not complaint is unenforceable under the Statutes of Fraud. 2. Whether or not there is valid reason to deny petitioners’ motion to dismiss the Writ of Preliminary Attachment.

Held: 1. 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.

2. For the second issue, the Sc held that the Writ of Preliminary Attachment should be dismissed because it writ of attachment in this case would only prove to be useless and unnecessary under the premises since the property of the Municipality may not, in the event that respondent’s claim is validated unless there has been a valid appropriation provided by law.

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.

TAN v. VILLAPAZ 475 SCRA 720 November 22, 2005

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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: 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 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.

SPOUSES DAVID v. TIONGSON G.R. No. 108169 August 25, 1999

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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 agreed 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: 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.

GENARO CORDIAL v. DAVID MIRANDA December 14, 2000

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David Miranda, a businessman from Angeles City, was engaged in rattan business. Gener Buelva was the supplier of David but the former met an accident and died. Genero Cordial and Miranda met through Buelva’s widow, Cecilla. 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: 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.

VILLANUEVA-MIJARES v. THE COURT OF APPEALS G.R. No. 1089 21 April 12, 2000

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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.

ISSUE: Whether or not the appellate court erred in declaring the Deed of Sale unenforceable against the private respondent fro being unauthorized contract.

Held: 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.

ROSENCOR v. INQUING G.R. No. 140479 March 8, 2000

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Plaintiffs and plaintiffs-intervenors averred that they are the lessess since 1971 of a twostory 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.

FIRME v.BUKAL G.R. No. 146608 October 23, 2003

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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.

HEIRS OF M. DORONIO v. HEIR OF F. DORONIO 541 SCRA 479

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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.

GURREA v SUPLICO G.R. No. 144320 April 26, 2006

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Ricardo Gurrea, represented by and through his counsel Atty. Enrique Suplico (the defendant), filed an Opposition in Special Proc. No. 7185. Inconsideration of said representation, Ricardo Gurrea agreed to pay Atty. Suplico "a contingent fee of twenty (20%) of whatever is due me, either realor personal property" (Exhibit "5"). During the pendency of the proceedings and upon the oral instructions of Ricardo Gurrea, Atty. Supliconegotiated with the other heirs of Adelina Gurrea regarding the transfer of the piso (apartment building) in Spain to Ricardo Gurrea’s daughter, JulietGurrea de Melendres. Ricardo Gurrea further instructed Atty. Suplico not to enter into any settlement with the heirs unless the piso is transferred tohis daughter. Finally, the transfer of the piso worth P64,000.00 was executed and the heirs arrived at an amicable settlement regarding the estate of Adelina Gurrea. Hence, Ricardo Gurrea withdrew his Opposition and the heirs then drew up a project of partition which was eventually approved bythe probate court. As payment of his attorney’s fees, Ricardo Gurrea offered the San Juan lot to Atty. Suplico who was initially hesitant to accept the same as the property is occupied by squatters. However, in order not to antagonize his client, Atty. Suplico agreed to Ricardo Gurrea’s proposal with the further understanding that he will receive an additional commission of 5% if he sells the Baguio property. Thereafter, the deed of Transfer of Rights andInterest was drafted. The said deed was presented to Ricardo Gurrea for his signature.. On August 20, 1975, the deed was finally signed by RicardoGurrea at the office of Atty. Pama, in the presence of the latter, Atty. Suplico, Victor Tupas and another person, the last two acting as witnesses.Later, on October 7, 1980, Atty. Suplico registered the deed and obtained a title/TCT to the San Juan property under his name. Ricardo Gurrea diedon October 22, 1980. After his death, his heirs instituted Special Pro. No. 2722 for the settlement of Ricardo Gurrea’s estate. In the said proceedings,Atty. Suplico filed several claims for unpaid attorney’s fees (no claim was filed relative to Special Proc. No. 7185); however, all were dismissed withfinality (Exhibits "I" and "J"). Also in the same case, the estate’s administrator, Carlos Gurrea, filed an Inventory of Properties left by the decedent,which did not initially include the property subject of

this case. The said lot was included only subsequently in the Amended Inventory (Exhibit "G").

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.

FRENZEL v. CATITO G.R. No. 143958 July 11, 2003

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Petitioner Alfred Fritz Frenzel is an Australian citizen of German descent. He arrived in the Philippines and engaged in businesses. After two years, he married Teresita Santos, a Filipino citizen. In 1981, Alfred and Teresita separated from bed and board without obtaining a divorce. Sometime in 1983 he arrived in Sydney and met Ederlina Catito, a Filipina and a native of Bajada, Davao City. Unknown to Alfred, she was married to Klaus Muller when she was in Germany. Alfred was so enamored with Ederlina that he persuaded her to stop working, move to the Philippines and get married. They bought several properties in Manila and Davao using the money of Alfred. He also sold all his properties in Australia before moving in the country. They also opened an HSBC Savings Account in Hong Kong in the name of Ederlina. Ederlina went to Germany to file a divorce however Ederlina had not been able to secure a divorce from Klaus. The latter could charge her for bigamy and could even involve Alfred, who himself was still married. Alfred and Ederlina’s relationship started deteriorating. They lived separately. Alfred filed a Complaint dated October 28, 1985, against Ederlina, with the Regional Trial Court of Quezon City, for recovery of real and personal properties located in Quezon City and Manila. Alfred alleged, inter alia, that Ederlina, without his knowledge and consent, managed to transfer funds from their joint account in HSBC Hong Kong, to her own account with the same bank. In the meantime, on November 7, 1985, Alfred also filed a complaint against Ederlina with the Regional Trial Court, Davao City, for specific performance, declaration of ownership of real and personal properties, sum of money, and damages. Quezon City Trial Court decided in favor of Alfred but the Davao Trial Court is in favor of Ederlina. The trial court ruled that based on documentary evidence, the purchaser of the three parcels of land subject of the complaint was Ederlina. The court further stated that even if Alfred was the buyer of the properties, he had no cause of action against Ederlina for the recovery of the same because as an alien, he was disqualified from acquiring and owning lands in the Philippines. The sale of the three parcels of land to the petitioner was null and void ab initio. Applying the pari delicto doctrine, the

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petitioner was precluded from recovering the properties from the respondent. CA affirmed the decision of Davao City Court.

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. 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: "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."

LA BUGA’AL-BLAAN v. RAMOS December 1, 2004

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The Petition for Prohibition and Mandamus before the Court challenges the constitutionality of (1) Republic Act 7942 (The Philippine Mining Act of 1995); (2) its Implementing Rules and Regulations (DENR Administrative Order [DAO] 96-40); and (3) the Financial and Technical Assistance Agreement (FTAA) dated 30 March 1995, executed by the government with Western Mining Corporation (Philippines), Inc. (WMCP). On 27 January 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. The Decision struck down the subject FTAA for being similar to service contracts,[9] which, though permitted under the 1973 Constitution, were subsequently denounced for being antithetical to the principle of sovereignty over our natural resources, because they allowed foreign control over the exploitation of our natural resources, to the prejudice of the Filipino nation. The Decision quoted several legal scholars and authors who had criticized service contracts for, inter alia, vesting in the foreign contractor exclusive management and control of the enterprise, including operation of the field in the event petroleum was discovered; control of production, expansion and development; nearly unfettered control over the disposition and sale of the products discovered/extracted; effective ownership of the natural resource at the point of extraction; and beneficial ownership of our economic resources. According to the Decision, the 1987 Constitution (Section 2 of Article XII) effectively banned such service contracts. Subsequently, Victor O. Ramos (Secretary, Department of Environment and Natural Resources [DENR]), Horacio Ramos (Director, Mines and Geosciences Bureau [MGB-DENR]), Ruben Torres (Executive Secretary), and the WMC (Philippines) Inc. filed separate Motions for Reconsideration.

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.

AGAN v. PIATCO January 21, 2004

Facts: 

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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.

COMMISSION ON ELECTIONS v. JUDGE MA. LUISA QUIJANOPADILLA 389 SCRA 353

Facts: 

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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.” 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.

SENATOR ROBERT S. JAWORSKI v. PAGCOR G.R. No. 144463 January 14, 2004

Facts: 

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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.

OESMER v . PARAISO DEVELOPMENT CORPORATION G.R. No. 157493 February 5, 2007

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 ot 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. RODRIGO N. LIM G.R. No. 152168 December 10, 2004

Facts: 

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The spouses Aurelio and Esperanza Balite were the owners of a parcel of land. When the spuoses died intestate, and their children, the petitioners, inherited the subject property and became co-owners thereof, with Esperanza inheriting an undivided share of 9,751 square meters. Esperanza became ill and in 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 P1M. 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 beP150K, although the actual price was P1,000,000.00. Esperanza executed a "Deed of Absolute Sale" in favor of Lim over a portion of the property, with an area of 10,000 square meters, for the price of P150K. They also executed a "Joint Affidavit" under which they declared that the real price of the property was P1,000,000.00, payable to Esperanza, by installments. The other children learned of the sale, and, they wrote a letter to the Register of Deeds, saying that they were not informed of the sale nor did they give their consent thereto.

ISSUE: 1. When the other children knew about it, 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.

2. Whether or not Deed of Absolute Sale is null and void.

Held:

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 children prompted Esperanza to unilaterally withdraw from the transaction.

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.

PINEDA v. COURT OF APPEALS G.R. No. 127094 February 6, 2002

Facts: 

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Appellees Nelson Bañez and Mercedes Bañez and the appellees and Alejandria Pineda, together with the latter’s spouse Alfredo Caldona, executed an Agreement to Exchange Real PropertiesIn 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. 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 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.

ISSUE: Whether petitioners validly acquired the subject property.

Held: 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.

CRUZ vs. BANCOM FINANCE CORPORATION 397 SCRA 490

Facts:  

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Brothers Rev. Fr. Edilberto Cruz and Simplicio Cruz, plaintiffs herein, were the registered owners of a parcel of agricultural land together with improvements located in 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 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 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.

ISSUE: Whether or not the Deeds of Sale and Mortgage are valid.

Held: 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 1409of 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.

CUATON v. REBECCA SALUD G.R. No. 15838 January 27, 2004

Facts:  

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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. 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 of Appeals rendered the assailed decision affirming the judgment of the trial court.

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: 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.

Moreover, the contention regarding the excessive interest rates cannot be considered as an issue presented for the first time on appeal. The records show that petitioner raised the validity of the 10% monthly interest in his answer filed with the trial court. To deprive him of his right to assail the imposition of excessive interests would be to sacrifice justice to technicality.

Furthermore, an appellate court is clothed with ample authority to review rulings even if they are not assigned as errors. This is especially so if the court finds that their consideration is necessary in arriving at a just decision of the case before it. We have consistently held that an unassigned error closely related to an error properly assigned, or upon which a determination of the question raised by the error properly assigned is dependent, will be considered by the appellate court notwithstanding the failure to assign it as an error. Since respondents pointed out the matter of interest in their Appellants’ Brief before the Court of Appeals, the fairness of the imposition thereof was opened to further evaluation. The Court therefore is empowered to review the same.

INFOTECH v. COMELEC January 13, 2004

Facts: 

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Before us is a Petition4 under Rule 65 of the Rules of Court, seeking (1) to declare null and void Resolution No. 6074 of the Commission on Elections (Comelec), which awarded "Phase II of the Modernization Project of the Commission to Mega Pacific Consortium (MPC);" (2) to enjoin the implementation of any further contract that may have been entered into by Comelec "either with Mega Pacific Consortium and/or Mega Pacific eSolutions, Inc. (MPEI);" and (3) to compel Comelec to conduct a re-bidding of the project. Congress passed Republic Act 8046,5 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.

ISSUE: Whether the Commission on Elections, the agency vested with the exclusive constitutional mandate to oversee elections, gravely abused its discretion when, in the exercise of its administrative functions, it awarded to MPC the contract for the second phase of the comprehensive Automated Election System.

Held: In the case of a consortium or joint venture desirous of participating in the bidding, it goes without saying that the Eligibility Envelope would necessarily have to include a copy of the joint venture agreement, the consortium agreement or memorandum of agreement -- or a business plan or some other instrument of similar import -- establishing the due existence, composition and scope of such aggrupation. Otherwise, how would Comelec know who it was dealing with,

and whether these parties are qualified and capable of delivering the products and services being offered for bidding.

In the instant case, no such instrument was submitted to Comelec during the bidding process. This fact can be conclusively ascertained by scrutinizing the two-inch thick "Eligibility Requirements" file submitted by Comelec last October 9, 2003, in partial compliance with this Court?s instructions given during the Oral Argument. This file purports to replicate the eligibility documents originally submitted to Comelec by MPEI allegedly on behalf of MPC, in connection with the bidding conducted in March 2003. Included in the file are the incorporation papers and financial statements of the members of the supposed consortium and certain certificates, licenses and permits issued to them. However, there is no sign whatsoever of any joint venture agreement, consortium agreement, memorandum of agreement, or business plan executed among the members of the purported consortium.

Comelec had no basis at all for determining that the alleged consortium really existed and was eligible and qualified, that the arrangements among the members were satisfactory and sufficient to ensure delivery on the Contract and to protect the government’ interest. Hence, had the proponent MPEI been evaluated based solely on its own experience, financial and operational track record or lack thereof, it would surely not have qualified and would have been immediately considered ineligible to bid, as respondents readily admit. At any rate, it is clear that Comelec gravely abused its discretion in arbitrarily failing to observe its own rules, policies and guidelines with respect to the bidding process, thereby negating a fair, honest and competitive bidding.

PABUGAIS v. SAHIJWANI G.R. No. 156846 February 23, 2004

FACTS: 

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Pursuant to an “Agreement And Undertaking” 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, 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 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, dishonored. 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. 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. 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.

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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. Unfazed, petitioner filed the instant petition for review contending 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 thereof, the Court of Appeals has yet to rule on the consignation’s validity and the respondent had not yet accepted the same.

Issue: Whether or not assigning the amount of P672, 900.00 to Atty. De Guzman is prohibited.

Held: 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. Furthermore, Rule 10 of the Canons of Professional Ethics provides that “the lawyer should not purchase any interest in the subject matter of the

litigation which he is conducting.” The assailed transaction falls within the prohibition because the Deed assigning the amount of P672,900.00 to Atty. De Guzman, Jr., as part of his attorney’s fees was executed during the pendency of this case with the Court of Appeals. In his Motion to Intervene, Atty. De Guzman, Jr., not only asserted ownership over said amount, but likewise prayed that the same be released to him. That petitioner knowingly and voluntarily assigned the subject amount to his counsel did not remove their agreement within the ambit of the prohibitory provisions. To grant the withdrawal would be to sanction a void contract.

The instant petition for review was DENIED.

LIGUEZ v. COURT OF APPEALS 102 PHIL 577

FACTS: 

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Petitioner filed a complaint for the recovery of parcel of land against the widow and heirs of Salvador Lopez. Petitioner averred that he is the owner of the aforementioned parcel of land pursuant to a Deed of Donation executed in her favor by the late owner, Salvador Lopez. The defense interposed that the donation was null and void for having illicit cause or consideration which was the petitioner’s entering into a marital relations with Salvador, a married man, and that the property had been adjudicated to the appellees as heirs of Salvador Lopez by the Court of First Instance. Meanwhile, the Court of Appeals found that the Deed of Donation was prepared by a Justice of Peace and was ratified and signed when petitioner Liquez was still a minor, 16 years of age. It was the ascertainment of the Court of Appeals that the donated land belonged to the conjugal partnership of Salvador and his wife and that the Deed of Donation was never recorded. Hence, the Court of Appeals held that the Deed of Donation was inoperative and null and void because the donation was tainted with illegal cause or consideration.

Issue: Whether or not the Deed of Donation is void for having illicit cause or consideration.

Held: Under Article 1279 of the Civil Code of 1989, which was the governing law during the execution of the Deed of Donation, the liberality of the donor is deemed cover only in those contracts that are pure beneficence. In these contracts, the idea of self interest is totally absent in the part of the transferee. Here, the facts as found demonstrated that in making the donation, Salvador Lopez was not moved exclusively by the desire to benefit the petitioner but also to secure her cohabiting with him. Petitioner seeks to differentiate between the liberality of Lopez as cause and his desire as a motive. However, motive may be regarded as cause when it predetermined the purpose of the contract. The Court of Appeals rejected the claim of petitioner on the ground on the rule on pari delicto embodied in Article 1912 of the Civil Code.

However, this rule cannot be applied in the case because it cannot be said that both parties had equal guilt where petitioner was a mere minor when the donation was made and that it was not shown that she was fully aware of the terms of the said donation.

PHILIPPINE BANKING CORPORATION v. LUI SHE 21 SCRA 52 Facts:  Justina 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. She 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. Issue: Whether or not the contracts entered into by the parties are void. Held: The contract is 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. It does not follow from what has been said that because the parties are in pari delicto they will be left where they are, without relief. For one thing, the original parties who were guilty of violation of fundamental charter have died and have since substituted by their administrators to whom it would e unjust to impute their guilt. For another thing, 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.

VIGILAR v. AQUINO G.R. No. 180388 January 18, 2011

Facts: 

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On 19 June 1992, petitioner Angelito M. Twaño, then Officer-in-Charge (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, 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. 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. Petitioners avers 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. On appeal, the CA reversed and set aside the decision of the lower court ,disposing 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 2nd Engineering District, is declared null and void ab initio.

Issue: Whether or not the contract agreement is valid, thus making respondent liable.

Held: 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, "the 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. The government project involved in this case, the construction of a dike, was completed way back on 9 July 1992. For almost two decades, the public and the government benefitted from the work done by respondent. Petitioners cannot 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 that the doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice to a citizen. Justice and equity sternly demand that the State's cloak of invincibility against suit be shred in this particular instance, and that petitionerscontractors be duly compensated — on the basis of quantum meruit — for construction done on the public works housing project.

EPG CONSTRUCTION v. VIGILAR GR No. 131544. March 16, 2001

Facts: 

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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.

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.

GO CHAN v YOUNG GR No. 131889 March 12, 2001

Facts:  

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Felix Gochan Sr.’s daughter, Alice, mother of [herein respondents], 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. When their all their children reached the age of majority, John, Sr. requested Gochan Realty to partition the shares of his late wife by issuing the shares of stock to [herein respondents] and cancelling it in his name. Respondent corporation refused. On 1990, John, Sr. died, leaving the shares to the [respondents]. On February 8, 1994, [respondents] Cecilia Gochan Uy and Miguel Uy filed a complaint with the SEC for issuance of shares of stock to he rightful owners, nullification of shares of stock, reconveyance of property impressed with rust, accounting, removal of officers and directors and damages against petitioners. Petitioners then assert that respondents were not the real parties in interest and had no capacity to sue, and respondents causes of action had already been barred by the Statute of limitations.

Issue: Do respondents have legal standing to push through with their complaint?

Held: On November 21, 1979, respondents Felix Gochan & Sons Realty Corporation did not have unrestricted earnings in its books to cover the purchase price of the 208 shares of stock it was then buying from complainant Cecilia Gochan Uy, thereby rendering said purchase null and void ab initio for being violative of the trust fund doctrine and contrary to law, morals, good customs, public order, and public policy.

Thus, Cecilia remains a stockholder of the corporation in view of the nullity of the Contract of Sale. Necessarily, petitioner’s contention that the action has prescribed cannot be sustained. Prescription cannot be invoked as a ground if the contract is alleged to be void ab initio. It is axiomatic that the action or defense for the declaration of nullity of a contract does not prescribe.

In Section 2 of Rule 87, while permitting an executor or administrator to represent or to bring suits on behalf of the deceased, do not prohibit the heirs from representing the deceased. The heirs can thusly represent Young in the present case.

Given the circumstances, the claim of petitioners was then dismissed and the case remanded to the RTC for trial.

FRANCISCO v. HERRERA GR No. 139982 November 21, 2002

Facts:    

Eligio Herrera, Sr., father of the respondent, was the owner of two parcels of land. At two incidents on 1991, petitioner bought the two parcels of land for Php1,000,000.00 and PhP750,000.00. Contending that the purchase price was inadequate, the children of Eligio, Sr., namely, Josefina Cavettany, Eligio Herrera, Jr., and respondent Pastor Herrera tried to negotiate for an increase of the purchase price. When petitioner refused respondents then filed a complaint for annulment of sale on the ground that at the time of sale, Eligio Sr., was already afflicted with senile dementia, characterized by deteriorating mental and physical condition including loss of memory. Both the RTC and CA decided in favor of respondent.

Issue: Is the disputed contract void and therefore unenforceable?

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, 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 benefit of a contract. This is what happened in this case. Respondent negotiated for the increase of the purchase price while receiving the installment payments.

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.

MENDEZONA v. OZAMIZ GR No. 39752 February 6, 2002

Facts:     

Respondents (Montalvan and Ozamiz) were granted by the court with the guardianship of properties over the person of Carmen Ozamiz. As guardians, they filed the “inventories and accounts” of Carmen Ozamiz’s properties, cash, shares of stocks, vehicles and fixed assets, including a property known as the Lahug property. The said property is the same property covered by the Deed of Absolute Sale executed by Carmen Ozamiz in favor of the petitioners (Mendezona). Respondents opposed the petitioner’s claim of ownership of the Lahug property and alleged that the titles issued were defective and illegal. Further, they alleged that at the time of the sale Carmen was already ailing and not in full possession of her mental faculties, she was then incapacitated to enter into a contract.

Issue: Whether the property in question was sold to the petitioners.

Held: It is significant to note that the Deed of Absolute Sale dated April 28, 1989 is a notarized document duly acknowledge before a notary public. As such, it has in its favor the presumption of regularity, and it carries the evidentiary weight conferred upon it with respect to its due execution.

It has been held that a person is not incapacitated to contract merely because of advanced years or by reason of physical infirmities. The respondents utterly failed to show adequate

proof hat at the time of the sale Carmen lost her control of mental facilities. They want to impugn one document, the Lahug property, however, there are nine other important documents that were signed by Carmen either before or after April 28, 1989.

Thus, the said property in question was duly proven to be sold by Carmen Ozamiz to the petitioners Mendezona.

MANZANILLA v. CA GR No. L-75342 March 15, 1990

Facts:           

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. 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 redeem, the Manzanilla spouses executed a Deed of Absolute Sale of 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 issued in its name. The Manzanilla spouses succeeded in re-acquiring the property from the GSIS. An Absolute Deed of Sale was executed by GSIS in favor of the Manzanilla spouses and a new certificate of title was issued to them. The 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 the said portion of land with the Register of Deeds of Quezon City. On the other hand, petitioner Ines Carpio filed an ejectment case against private respondent Justina. Private respondent Justina Campo filed a case for quieting of title against the Manzanilla spouses and Ines Carpio praying for the issuance to her of a certificate of title over the undivided one-half portion of the property in question.

Issue: Whether petitioners Manzanillas are under any legal duty to reconvey the undivided one-half portion of the property to private respondent Justina Campo.

Held: In view of the failure of either the Manzanilla spouses or the Campo spouses to redeem the property from GSIS, title to the property was consolidated in the name of GSIS. The new title cancelled the old title in the name of the Manzanilla spouses. GSIS at this point had a clean title free from any lien in favor of any person including that of the Campo spouses. Art. 1456. 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 benefit of the person from whom the property comes. There was no mistake or 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 to explore further than what the Torrens Title upon its face indicates in quest for any hidden defect or inchoate right thereof. Thus Quieting of title is dismissed.

RURAL BANK OF PARAÑÀQUE v. REMOLADO GR No. L-62051 March 18, 1985

Facts:      

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This case is about the repurchase of mortgage property after the period of redemption and had expired. Isidra Remolado, 64, a widow, and resident of Makati, Rizal, owned a lot with an area of 308 square meters, with a bungalow thereon, which was leased to Beatriz Cabagnot. On April 17, 1971 she mortgaged it again to petitioner. She eventually secured loans totalling P18,000 (Exh. At D). The loans become overdue. The bank foreclosed the mortagage on July 21, 1972 and bought the property at the foreclosure sale for P22,192.70. The one-year period of redemption was to expire on August 21, 1973. On August 9, 1973 or 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. On September 3, 1973 the bank consolidated its ownership over the property. Remolado's title was cancelled. Remolado was offered a period until October 31, 1973 from which she could repurchase the lot. She only exercised that option on November 5. Remolado then filed an action for reconveyance which the lower courts granted her.

Issue: Is Remolado entitled to reconveyance?

Held: There was no binding agreement for its repurchase. Even on the assumption that the bank should be bound by its commitment to allow repurchase on or before October 31, 1973, still Remolado had no cause of action because she did not repurchase the property on that date.

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.

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. The decision of the CA affirming the decision of the RTC was reversed.

COJUANGCO v. REPUBLIC GR No. 166859 April 12, 2011

Facts: 

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Jacobo Ringor and his wife Gavina sired two children, Juan and and Catalina. Catalina pre-deceased her father, thereby leaving Juan as the lone heir of 3 lots owned by Jacobo. Juan married Gavina and sired 7 children with her. One of the children was Jose (the father and predecessors-in-interest of herein petitioners). 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 undivided interest in Parcel 1 covered by OCT No. 25885. Jacobo's thumbmark appeared on the Compraventa. During trial, witnesses attested that even after the decisions in the three land registration cases and the Compraventas, Jacobo remained in possession of the lands and continued administering them as he did prior to their registration. According to witness Julio Monsis, Jacobo did not partition the lands since the latter said that he still needed them. When Jacobo died on June 7, 1935, the lands under the three land registration applications, including those which petitioners sought to partition in their counterclaim before the trial court, remained undivided. Jose continued to function as administrator over said land and promised to divide it equally/ When he died sometime on 1971, Respondents demanded from Jose's children, herein petitioners, the partition and delivery of their share in the estate left by Jacobo and under Jose's administration. The petitioners refused and attempts at amicable settlement failed. On March 27, 1973, respondents filed a Complaint for partition and reconveyance

Issue: Is the exercise by Juan and Jose in the form of trust?

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. 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.

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.

A trustee who obtains a Torrens title over a property held in trust for him by another cannot repudiate the trust by relying on the registration. A Torrens Certificate of Title in Jose's name did not vest ownership of the land upon him. The Torrens system does not create or vest title. It only confirms and records title already existing and vested. The SC upheld the decision of the lower courts in favoring the respondents’ claims.

RINGOR v. RINGOR GR No. 147863 August 13, 2004

Facts:    

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Jacobo Ringor and his wife Gavina sired two children, Juan and and Catalina. Catalina pre-deceased her father, thereby leaving Juan as the lone heir of 3 lots owned by Jacobo. Juan married Gavina and sired 7 children with her. One of the children was Jose (the father and predecessors-in-interest of herein petitioners). 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 undivided interest in Parcel 1 covered by OCT No. 25885. Jacobo's thumbmark appeared on the Compraventa. During trial, witnesses attested that even after the decisions in the three land registration cases and the Compraventas, Jacobo remained in possession of the lands and continued administering them as he did prior to their registration. According to witness Julio Monsis, Jacobo did not partition the lands since the latter said that he still needed them. When Jacobo died on June 7, 1935, the lands under the three land registration applications, including those which petitioners sought to partition in their counterclaim before the trial court, remained undivided. Jose continued to function as administrator over said land and promised to divide it equally/ When he died sometime on 1971, Respondents demanded from Jose's children, herein petitioners, the partition and delivery of their share in the estate left by Jacobo and under Jose's administration. The petitioners refused and attempts at amicable settlement failed. On March 27, 1973, respondents filed a Complaint for partition and reconveyance

Issue: Is the exercise by Juan and Jose in the form of trust?

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. 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. 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. A trustee who obtains a Torrens title over a property held in trust for him by another cannot repudiate the trust by relying on the registration. A Torrens Certificate of Title in Jose's name did not vest ownership of the land upon him. The Torrens system does not create or vest title. It only confirms and records title already existing and vested. The SC upheld the decision of the lower courts in favoring the respondents’ claims.

SALVADOR v. CA 313 PHIL 369(1995)

Facts: 

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On November 9, 1991, at around 11:00 o’clock in the evening, along the MacArthur Highway in Valenzuela, Metro Manila, the Suzuki Supercarry Mini-van driven by private respondent Sameul King Sagaral III collided with a passenger bus onwed and operated by petitioner Five Star Bus Co. and driven by co-petitioner Ignacio Torres. Private respondent Sagaral filed a civil action for damges against petitioner. To simplify the proceedings due to the various motions filed by petitioners, Judge Bautista cancelled the 8 August 1996 hearing and reset it to 20 August 1996. He also set for hearing petitioner’s motion for reconsideration on 20 August 1996. The hearing set for 20 August 1996 was cancelled and the trial court on that day issued instead its order denying petitioner’s motion for reconsideration of its order dated 16 July 1996 which considered the case submitted for resolution. They applead to CA but the same was dismissed.

Issue: Whether or not appellate court erred in affirming the order of the trial court.

Held: A review of the records shows that the trial court had scheduled a total six hearing dates for the prosecution of evidence. From those repeated resetting, it can be gleaned that the delay in the proceedings was largely, if not mainly, due to petitioners. Thus there could be no grave abuse of discretion when the trial court finally ordered petitioners’ right to present evidence as waived to put an end to their footdragging. Indeed, it is never too often to say that justice delayed is justice denied.

SPOUSES RICARDO AND MILAGROS HUANG v. COURT OF APPEALS G.R. No. 108525 September 13, 1994

Facts: 

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Respondent Dolores Sandoval purchased Lot 21 and registered it in her name Dasmariñas Village, Makati. She also purchased the adjacent lot, Lot 20, but heading 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 onLot 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 actualy 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 letter obliged. The 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. 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. They alleged that the Sandovals made them sign blank papers which turned out to be a deed of sale with assumption of mortgage over Lot 20.

Issue: Whether or not the Court of Appeals erred in stating that there was an implied trust between them and Dolores is not supported by evidence. The exhaustive decision of the trial court based as it is on a painstaking review of the entire records deserves our affirmance. Indeed, we find no reason to disturb the factual conclusions therein.

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.

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 for the property. A resulting trust arises because of the presumption that he who pays for a thing intends a beneficial interest therein for himself. Wherefor the petition is denied.

VDA. DE ESCONDE v. COURT OF APPEALS G.R. No. 103635 February 1, 1996

Facts:  

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Petitioner Catalina Vda. De Esconde received two transfer of certificates of land from the partition of the estate of the brother of her deceased husband. The partition was made in 1947, thus, due to the minority of her children of the petitioner except Constancia, she divided the land, where the second title containing CTC 1700 (547 SQ.M) was given exclusively to Pedro Esconde while the first lot containing CTC 1208 (20, 285 SQ.M) was given to the co petitioners Benjamin, Elenita, and Constancia. However, when lot 1700 was given to Pedro Esconde, his brother Benjamin, has introduced improvements on a portion of the said lot owned by Pedro but the latter has constructed fences over the property. Benjamin noticed that the lot was named only to his brother Pedro but the former believed that all of them as children of Catalina have the share to the lot. The action for reconveyance of the land was made on June 29, 1987 more than 30 years after the partition.

Issue: Whether the reconveyance of the land has already prescribed.

Held: Yes. The action over immovable properties prescribes in thirty (30) years if the property was held by trust in bad faith. Thus, in this case, the action prescribed in 1977, thirty (30) years after the partition. The action was already because there was a document of partition stating the transfer of the certificate of title to Pedro Esconde, in which, the property was not given in trust to Pedro but as the exclusive owner of the lot. However, he shall indemnify his brother Benjamin for the improvement the latter has introduced to the land.

TALA REALTY SERVICES CORPORATION vs. BANCO FILIPINO SAVINGS AND MORTGAGE BANK G.R. No. 137533 November 22, 2002

Facts: 

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Petitioner Tala Realty Services Corporation alleges that it is the absolute owner of nine parcels of land and their improvements by virtue of separate Deeds of Absolute Sale executed between Tala and the respondent Banco Filipino Savings and Mortgage Bank on August 25, 1981. The Bulacan property is the subject matter of the case. Thereafter, Tala and the Bank entered into separate lease contracts over the nine properties. The contracts had the same form and terms, except for the description of the property and the amount of the monthly rentals. The contracts provided for twenty-year lease periods renewable for another twenty years at the option of the Bank. The monthly rental for the Bulacan property was P9,800.00. Later that same day, the parties revised the nine lease contracts. The terms of the lease were shortened to eleven years renewable for a period of nine years “at the option of the lessee under terms and conditions mutually agreeable to both parties”, but the monthly rental for the Bulacan property remained P9,800.00. Almost eleven years after the execution of the nine lease contracts, Tala’s director, Elizabeth H. Palma, wrote to the Bank reminding the latter that the contracts were about to expire on August 31, 1992, and that the Bank had earlier signified its interest to renew the lease contracts. Meantime, Tala would lease the properties to the Bank on a month-to-month basis until the agreement was finalized. On January 20, 1993, the Bank requested Tala to send its representative to the Bank’s office to negotiate the renewal of the lease. Tala’s director, Elizabeth Palma, negotiated the renewal and submitted a proposal for increased rental. Tala reiterated the increased rental which was agreed upon in the previous negotiation. Thus, the new monthly rental rate for the Bulacan property was P31,800.00. However, for several months from the time of negotiation, the Bank failed to take action on Tala’s proposed terms for the renewal of the lease contract. Tala also informed the Bank that since it had been ten months since the expiration of the lease contracts in August 1992 and the Bank had not taken any definite action to renew the contracts despite being furnished copies of the same in December 1992, Tala declared itself free to “lease, dispose, sell and/or in any way alienate the bank branch sites subject of the lease agreement.”

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However, the Bank clarified that it is the one which had the option to renew the lease and that it had communicated to Tala it was exercising its option to do so. From the time the lease contract over the Bulacan property expired in August 1992 until March 1994, the Bank continued to occupy the subject Bulacan property. It paid Tala monthly rentals at the old rate of P9,800.00 from September 1, 1992 until March 1994, but refused to pay the P22,000.00 difference between the old monthly rate and the new rate of P31,800.00. Beginning April 1994 until the filing of the, the Bank did not pay any rent at all. Nor did it pay the goodwill money and deposit Tala required for the renewal of the lease. On April 14, 1994, Tala wrote to the Bank demanding payment of the latter’s outstanding obligations over the Bulacan property, consisting of unpaid rental adjustment, deposit, and goodwill money. It also informed the Bank that at the end of the month, the month-to-month lease would no longer be renewed, thus, it should vacate the premises by that time, otherwise, petitioner would resort to legal action. Still, the Bank refused to pay its outstanding obligations, prompting Tala’s lawyer to demand the latter to vacate the premises and to pay its outstanding obligation within five days from receipt of the letter, otherwise a legal action would be filed against it. The Bank still did not comply with Tala’s demands, the latter filed complaints for ejectment and/or unlawful detainer. The Bank’s liquidator, on he other hand asserts that the amended 11-year lease contracts of August 25, 1981 provided for the payment of security deposits and not advance rentals so that said payment could not be used to cover unpaid rentals during the period that the Bank was closed and under receivership and liquidation. According to Tala’s lawyer, the only time that said security deposits may be applied to unpaid rents is when the rentals for the last year of the lease contracts were not paid, but the lease contracts were still due to expire in 1992. The Bank, therefore, could not apply the security deposits to the payment of rentals and thus had to pay its accrued rentals. The MTC ruled in favor of the Bank. Based from the evidences, defendant has a better right of possession over the subject property on the basis of a Contract of Lease. It cannot be said that the defendant failed to comply with the terms and conditions of the said Contract of Lease because payment was made to the plaintiff on December 18, 1981 P487,500.00 as advance rentals, to be applied to the rentals due from the eleventh through the twentieth years of the lease or from 1992 through the year 2001. Thus, the RTC dismissed petitioner’s appeal of the decision of the MTC for lack of merit. On appeal to the Court of Appeals, the decision of the RTC of Malolos was affirmed.

Issue: Whether or not the implied trust created under the obligation was valid.

Held: Tala’s right to lease the property to the Bank proceeds from its (Tala’s) claim of ownership of the property based on a contract of sale executed between it and the Bank on August 25, 1981. The Bank, however, disputes Tala’s ownership “in fee simple” as stated in its 20-year lease contract with Tala as it (the Bank) alleges that there is an implied trust relationship between the Bank as trustor and beneficiary and Tala as trustee. Pursuant to this implied trust, the Bank in April 1994 demanded Tala to perform its obligation as trustee and return the disputed property to the Bank as trustor and beneficiary. The Bank is of the view, therefore, that since it had already sought enforcement of the implied trust and reconveyance of the subject property, the Bank had the right to its possession and Tala did not have a right to eject it from the property.

The Bank alleged that the sale and twenty-year lease of the disputed property were part of a larger implied trust “warehousing agreement.” Concomitant with the Court’s factual finding that the 20-year contract governs the relations between the parties, the court finds the Bank’s allegation of circumstances surrounding its execution worthy of credence; the Bank and Tala entered into contracts of sale and lease back of the disputed property and created an implied trust “warehousing agreement” for the reconveyance of the property. However, the implied trust is inexistent and void for being contrary to law.

The Bank claims to be both the trustor and beneficiary while Tala is the trustee. It alleges the existence of an implied trust between it and Tala, relies on Articles 1448 and 1453 of the New Civil Code. However, an implied trust could not have been formed between the Bank and Tala as the 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.”

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. 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).” 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 the sale and lease of the subject property genuine and binding upon the parties, the implied trust cannot be enforced even assuming the parties intended to create it. The Bank cannot thus demand reconveyance of the property based on its alleged implied trust relationship with Tala.

WHEREFORE, the petition is dismissed.

HEIRS OF MEDINA v. COURT OF APPEALS G.R. No. L-26107 1981 November 27

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On March 6, 1957, petitioners filed the complaint in the trial court seeking to recover from respondents a parcel of land situated in the sitio of Oac, municipality of Milagros, province of Masbate, containing an area of 321.1156 hectares and praying that respondents be ordered to deliver to them possession and ownership thereof with accounting, damages and costs and litigation expenses. Complaint alleged that petitioner Margarita Medina as plaintiff inherited with her sister Ana Medina the said parcel of land from their father Pedro Medina. Upon their father's death, she and her sister Ana Medina being then minors were placed under the care and custody of the spouses Sotero Medina and Restituta Zurbito, as guardians of their persons and property. The land in dispute was placed under the management of Sotero Medina as administrator thereof, and upon Sotero's death, under the management of his widow, Restituta Zurbito. Complainant later discovered that the land in question was surreptitiously declared for taxation purposes in the name of Andres Navarro, Jr., grandson of Restituta Zurbito, however, respondents as defendants had without color of title denied petitioners' ownership and instead had claimed ownership thereof since the year 1948 and exercised acts of possession and ownership thereon to the exclusion of petitioners. Petitioners demanded the respondents to vacate the premises and deliver possession and ownership thereof, but the latter failed and refused to do so. On the other hand, respondent Andres Navarro, Jr. had excavated soil from the land in question and sold the same to the Provincial Government of Masbate without the knowledge and consent of petitioners and appropriated the proceeds thereof to his personal benefit to the damage and prejudice of the plaintiff. Respondent Restituta Zurbito Vda. de Medina never rendered an accounting of the income of the property in question in spite of their repeated demands and instead appropriated all the income therefrom to her personal use and benefit. However, the other party states otherwise. In its decision, the court declared petitioner Margarita Medina with her co-heirs as the lawful owners of the land in question and ordered respondents to deliver unto them the "titulo real No. 349581" and to restore to them the actual possession thereof; and also ordered them to pay them certain amounts representing the produce of the land. Upon appeal, respondent Court of Appeals reversed the trial court's decision sustaining respondents' defenses of prescription of action and acquisitive prescription, ordered the

dismissal of the complaint.

Issues: 1. Whether or not petitioners' action for recovery thereof has been barred by prescription. 2. Whether or not an express trust over the property in litigation has been constituted by petitioners' father Pedro Medina, upon his brother Sotero and Sotero's wife Restituta Zurbito for the benefit of his children, petitioner Margarita Medina and her deceased sister Ana Medina and the latter's heirs.

Held: 1. Petitioners' cause of action had prescribed upon the lapse of the ten-year period of acquisitive prescription provided by the then applicable statute for unregistered lands such as the land herein involved.

As found by the Court of Appeals, the land was sold to Sotero Medina on June 29, 1924 from which date Sotero and his wife took open, public, continuous and adverse possession of the land in the concept of owner. In 1957 when the present action was filed, thirty-three years, much more than the 10-year statutory period for acquisitive prescription, had already elapsed.

The appellate court further held that petitioners' action to recover was likewise time-barred, pointing out that "the ten-year period under the statute of limitation within which plaintiffs could file an action for recovery of real property commenced to run in 1933 when plaintiff Margarita Medina was informed that the land in dispute belonged to her father Pedro Medina, for in that year she could have brought an action for reconveyance. The period of prescription commences to run from the day the action may be brought (Article 1150, Civil Code of the Philippines), and in an action based on fraud, as is the basis of the present action, the period of prescription begins from the discovery of the fraud the reasons a party might have had for not immediately taking judicial action is immaterial and does not stop the running of the period.

2. A property held in trust cannot be acquired by prescription. Section 38 of Act 190 provides that the law of prescription does not apply `in the case of continuing and subsisting trust.'

However,if the prescriptibility of an action for reconveyance is based on constructive trust, prescription may supervene in an implied trust.

Therefore, the appellate court correctly held that the facts and evidence of record do not support petitioners' claim of the creation of an express trust and imprescriptibility of their claim. Although no particular words are required for the creation of an express trust, a clear intention to create a trust must be shown, and the proof of fiduciary relationship must be clear and convincing.

In the case, 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 owner-buyer for thirty-three years.

Express trusts are those intentionally created by the direct and positive act of the trustor, by some writing, deed or will, or oral declaration. The creation of an express trust must be manifested with reasonable certainty and cannot be inferred from loose and vague declarations or from ambiguous circumstances susceptible of other interpretations. Nowhere in the record is there any evidence, and the plaintiffs do not even raise the pretention, that the original owner of the property Pedro Medina, father of plaintiff Margarita Medina, appointed, designated or constituted Sotero Medina (the husband of defendant Restituta Zurbito Medina) as the trustee of the land in dispute. Thus, it is concluded that there was realy no express trust.

The circumstances presented by the respondents do not make out the creation of an express trust. Respondents' possession of the Spanish title issued in the late Pedro Medina's name may just be the consequence of the sale of the land by Narciso (to whom it had been adjudicated in the partition) to the spouses Sotero Medina and Restituta Zurbito on June 29, 1924 and is by no means an evidence of an express trust created for the benefit of petitioners. Spanish titles are defeasible, and although evidences of ownership may be lost through prescription. Neither is the deed of partition (which apparently excluded Pedro Medina) entered into earlier any indication of an express creation of a trust. In fact, the documents are adverse to petitioners' cause, and are evidences of transfer of ownership of the land from one owner/owners to another or others and they in fact negate the creation or existence of an express trust.

Neither does the testimony of Sotero's widow, Restituta Zurbito, to the effect that her husband and then later she herself "administered" the land support petitioners' claim of an express trust. There is no showing that the term "administration" as used by said respondent in her testimony is by reason of an appointment as such on behalf of another owner or beneficiary, such as to support the existence of an express trust. On the contrary, it appears clear from the context of her testimony that her use of the term "administer" was in the concept of an ownerbuyer "administering" and managing his/her property.

Thus, the appealed decision is affirmed.

FILIPINAS PORT SERVICES vs. GO G.R. No. 161886 March 16, 2007

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The case is actually an intra-corporate dispute involving Filport, a domestic corporation engaged in stevedoring services with principal office in Davao City. It was initially instituted with the Securities and Exchange Commission (SEC) where the case hibernated and remained unresolved for several years until it was overtaken by the enactment into law, on 19 July 2000, of Republic Act (R.A.) No. 8799, otherwise known as the Securities Regulation Code. From the SEC and consistent with R.A. No. 8799, the case was transferred to the RTC of Manila, Branch 14, sitting as a corporate court. Subsequently, upon respondents’ motion, the case eventually landed at the RTC of Davao City where it was docketed as Civil Case No. 28,552-2001. RTC-Davao City, Branch 10, ruled in favor of the petitioners prompting respondents to go to the CA in CA-G.R. CV No. 73827. In the same petition, docketed as SEC Case No. 06-93-4491, Cruz alleged that despite demands made upon the respondent members of the board of directors to desist from creating the positions in question and to account for the amounts incurred in creating the same, the demands were unheeded. Cruz thus prayed that the respondent members of the board of directors 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. In the same Answer, respondents further averred that Cruz and his co-petitioner Minterbro, while admittedly stockholders of Filport, have no authority nor standing to bring the so-called “derivative suit” for and in behalf of the corporation; that respondent Mary Jean D. Co has already ceased to be a corporate director and so with Fortunato V. de Castro, one of those holding an assailed position; and that no demand to cease and desist from further committing the acts complained of was made upon the board. By way of affirmative defenses, respondents asserted that (1) the petition is not duly verified by petitioner Filport which is the real party-in-interest; (2) Filport, as represented by Cruz and Minterbro, failed to exhaust remedies for redress within the corporation before bringing the suit; and (3) the petition does not show that the stockholders bringing the suit are joined as nominal parties. o In support of their counterclaim, respondents averred that Cruz filed the alleged derivative suit in bad faith and purely for harassment purposes on account of his

non-reelection to the board in the 1991 general stockholders’ meeting.

Issue: Whether the CA erred in holding that Filport’s Board of Directors acted within its powers in creating the executive committee and the positions of AVPs for Corporate Planning, Operations, Finance and Administration, and those of the Special Assistants to the President and the Board Chairman, each with corresponding remuneration, and in increasing the salaries of the positions of Board Chairman, Vice-President, Treasurer and Assistant General Manager

Held: In the present case, the board’s creation of the positions of Assistant Vice Presidents for Corporate Planning, Operations, Finance and Administration, and those of the Special Assistants to the President and the Board Chairman, was in accordance with the regular business operations of Filport as it is authorized to do so by the corporation’s by-laws, pursuant to the Corporation Code.

The election of officers of a corporation is provided for under Section 25 of the Code which reads: Sec. 25. Corporate officers, quorum. – Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines and such other officers as may be provided for in the by-laws.

As a matter of fact, it was during the term of appellee Cruz, as president and director, that the executive committee was created. What is more, it was appellee himself who moved for the creation of the positions of assistant vice presidents for operations, for finance, and for administration. He should not be heard to complain thereafter for similar corporate acts.

The increase in the salaries of the board chairman, president, treasurer, and assistant general manager are indeed reasonable enough in view of the responsibilities assigned to them, and the special knowledge required, to be able to effectively discharge their respective functions and duties.

By claiming that Filport suffered damages because the directors appointed to the assailed positions are not doing anything to deserve their compensation, petitioners are saddled with the burden of proving that salaries were actually paid. Since the trial court, in effect, found that the petitioners successfully proved payment of the salaries when it directed the reimbursements of the same, respondents necessarily have to raise the issue on appeal. And the CA rightly resolved the issue when it found that no evidence of actual payment of the salaries in question was actually adduced.

MENDIZABEL v. APAO G.R. No. 143185 February 20, 2006

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On 21 March 1955, Fernando Apao (“Fernando”) purchased from spouses Alejandro and Teofila Magbanua (“vendors”) a parcel of land with an area of 61,616 square meters (“property”) situated in Malangas, Zamboanga del Sur. Fernando bought the property for P400. The vendors executed a deed of sale which stated inter alia that they could purchase back the property 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. On 1 April 1958, Fernando had the property surveyed by Engr. Ernesto Nuval together with the piece of land adjacent to it, which he had previously purchased from one Leopoldo Carloto. The Bureau of Lands approved the survey on 2 July 1959 resulting in the issuance of Survey Plan Psu-173083 covering both lots. Upon receipt of the approved survey plan, Fernando immediately filed an application with the Bureau of Lands for a free patent over the entirety of Psu-173083. His application was docketed as F.P.A. No. 18-1481. After the survey of Fernando’s land, the Survey Party of the Bureau of Lands surveyed the same area. This latter survey 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, docketed as H.A. No. 18-8905 (E-18-8521). On 11 May 1962, the Bureau of Lands Regional Office in Zamboanga City rendered a decision awarding Lot No. 1080 to Ignacio.

Issue: Whether there is implied trust exists in this case

Held:

The act of petitioners in misrepresenting that they were in actual possession and occupation of the property, obtaining patents and original certificates of title in their names] created an implied trust in favor of the actual possessors of the property. The Civil Code provides:

ART. 1456. 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 benefit of the person from whom the property comes.

In other words, if the registration of the land is fraudulent, the person in whose name the land is registered holds it as a mere trustee, and the real owner is entitled to file an action for reconveyance of the property.

Petitioners would nonetheless insist that respondents failed to present any proof of fiduciary relation between them and respondents and “breach of such trust by petitioners. A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical trust, confidence is reposed in one person who is named a trustee for the benefit of another who is called the cestui que trust, respecting property which is held by the trustee for the benefit of the cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary. Implied trusts are those which, without being expressed, 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. Fernando testified that he was in actual, open, peaceful, and 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.

Petitioners’ assertion has no merit. All documents attached to a complaint, the due execution and genuineness of which are not denied under oath by the defendant, must be considered as part of the complaint without need of introducing evidence. In petitioners’ answer, there was no denial under oath of the due execution and genuineness of the deed of sale. Thus, the deed of sale is not only incorporated into respondents’ complaint, it is also deemed admitted by petitioners. This has the effect of relieving respondents from the duty of expressly presenting such document as evidence. The court, for the proper resolution of the case, may and should consider without the introduction of evidence the facts admitted by the parties

VDA. DE GUALBERTO v. GO G.R. No. 139843 July 21, 2005

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Petitioners are the heirs of the late Generoso Gualberto, former registered owner of a parcel of land situated at Redor Street, Barangay Redor, Siniloan, Laguna under Transfer Certificate of Title (TCT) No. 9203, containing an area of 169.59 square meters, more or less, and declared for taxation purposes under Tax Declaration No. 4869. Sometime in 1965, the subject parcel of land was sold by Generoso Gualberto and his wife, herein petitioner Consuelo Natividad Vda. De Gulaberto (Consuelo, for brevity), to respondents’ father Go S. Kiang for P9, 000.00, as evidenced by a deed entitled “Kasulatan ng Bilihang Tuluyan” dated January 15, 1965 (“Kasulatan”, for brevity), which deed appears to have been duly notarized by then Municipal Judge Pascual L. Serrano of the Municipal Court of Siniloan, Laguna and recorded in his registry as Doc. No. 9, Page No. 12, Book No.12, Series of 1965. On April 1, 1973, petitioner Consuelo executed an Affidavit attesting to the fact that the aforementioned parcel of land had truly been sold by her and her husband Generoso to the spouses Go S. Kiang and Rosa Javier Go, as borne by the said “Kasulatan”. Evidently, the affidavit was executed for purposes of securing a new tax declaration in the name of the spouses Go. In December, 1973, in a case for Unlawful Detainer filed by a certain Demetria Garcia against herein petitioners, the latter alleged that therein plaintiff Garcia “is not a real party in interest and therefore has no legal capacity and cause of action to sue the defendants; that the real parties in interest of the parcel of commercial land and the residential apartment in question are Generoso Gualberto and Go S. Kiang respectively as shown by TCT No. 9203 issued by the Register of Deeds of Laguna. In a Forcible Entry case filed by respondents against petitioners before the Municipal Circuit Trial Court of Siniloan-Famy, Siniloan, Laguna docketed as Civil Case No. 336, a decision was rendered in favor of respondents, which decision was affirmed in toto by the RTC of Siniloan, Laguna. When elevated to the Court of Appeals, that same decision was affirmed by the latter court, saying that “the Court finds that the judgment of the court a quo affirming the previous judgment of the municipal court is supported by sufficient and satisfactory evidence and there is no reason for the Court to hold otherwise.

Issue: Whether an action for reconveyance of property based on nullity of title prescribes

Held: Petitioners insist that their action for reconveyance is imprescriptible. An action for reconveyance of real property based on implied or constructive trust is not barred by the aforementioned 10-year prescriptive period only if the plaintiff is in actual, continuous and peaceful possession of the property involved. Generally, an action for reconveyance based on an implied or constructive trust, such as the instant case, prescribes in 10 years from the date of issuance of decree of registration. However, this rule does not apply when the plaintiff is in actual possession of the land. Thus, it has been held:

An action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property, but this rule applies only when the plaintiff or the person enforcing the trust is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property, as the defendants are in the instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession.”

Here, it was never established that petitioners remained in actual possession of the property after their father’s sale thereof to Go S. Kiang in 1965 and up to the filing of their complaint in this case on August 10, 1995. On the contrary, the trial court’s factual conclusion is that respondents had actual possession of the subject property ever since. The action for reconveyance in the instant case is, therefore, not in the nature of an action for quieting of title, and is not imprescriptible.

HEIRS OF YAP v. Court of Appeals G.R.No. 133047 August 17, 1999

Facts:   

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Ramon Yap purchased a parcel of land situated at 123 Batanes Street, Galas, Quezon City, covered by Transfer Certificate of Title No. 82001/T-414, 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 3-door 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. 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.

Issue: Whether or not there was implied trust in the instant case?

Held: The court found there was none. The Court of Appeals, sustaining the court a quo, has found the evidence submitted by petitioners to be utterly wanting, consisting mainly of the selfserving testimony of Sally Yap. She herself admitted that the business establishment of her husband Lorenzo was razed by fire in 1964 that would somehow place to doubt the claim that he indeed had the means to purchase the subject land about two years later from the Nery spouses. Upon the other hand, Ramon Yap was by then an accountant with apparent means to

buy the property himself. At all events, findings of fact by the Court of Appeals, particularly when consistent with those made by the trial court, should deserve utmost regard when not devoid of evidentiary support. No cogent reason had been shown by petitioners for the Court to now hold otherwise.

One 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.

HEIRS OF KIONOSALA v. DACUT G.R.No. 147379 February 27, 2002

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On 19 December 1995 private respondents filed a complaint for declaration of nullity of titles, reconveyance and damages against petitioners. This complaint involved 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, located in Pongol, Libona, Bukidnon. On 7 September 1990 Lot No. 1017 was granted a free patent to petitioners Heirs of Ambrocio Kionisala under Free Patent No. 603393, and on 13 November 1991 Lot 1015 was bestowed upon Isabel Kionisala, one of the impleaded heirs of Ambrocio Kionisala under Free Patent No. 101311-91-904. Thereafter, on 19 November 1990 Lot 1017 was registered under the Torrens system and was issued Original Certificate of Title No. P-19819 in petitioners’ name, while on 5 December 1991 Lot No. 1015 was registered in the name of Isabel Kionisala under Original Certificate of Title No. P-20229. In support of their causes of action for declaration of nullity of titles and reconveyance, private respondents claimed absolute ownership of Lot 1015 and 1017 even prior to the issuance of the corresponding free patents and certificates of title.

Issue: Whether or not the action for reconveyance based on an implied trust of the lots has prescribed?

Held: The action for reconveyance based on implied trust prescribes only after ten (10) years from 1990 and 1991 when the free patents 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.

In such a case, the cause of action is truly imprescriptible.

RAMOS v. RAMOS G.R. No. L-19872 December 3, 1974

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The spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26, 1888, respectively. On December 10, 1906 a special proceeding was instituted in the Court of First Instance of Negros Occidental for the settlement of the intestate estate of the said spouses. Rafael O. Ramos, a brother of Martin, was appointed administrator. The estate was administered for more than six years. A project of partition dated April 25, 1913 was submitted. It was signed by the three legitimate children, Jose, Agustin and Granada; by the two natural children, Atanacia and Timoteo, and by Timoteo Zayco in representation of the other five natural children who were minors. It was sworn to before the justice of the peace. Plaintiffs, however, did not know of any proceedings. They never received any sum of money in cash the alleged insignificant sum of P1,785.35 each from said alleged guardian as their supposed share in the estate of their father under any alleged project of partition.

Issue: Whether or not a trustee can acquire by prescription the ownership of property entrusted to him?

Held: There is a rule that a trustee cannot acquire by prescription the ownership of property entrusted to him, or that an action to compel a trustee to convey property registered in his name in trust for the benefit of the cestui qui trust does not prescribed or that the defense of prescription cannot be set up in an action to recover property held by a person in trust for the benefit of anothe, or that property held in trust can be recovered by the beneficiary regardless of the lapse of time.

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 a continuing and subsisting trust.

THE INTESTATE ESTATE OF TY vs. COURT OF APPEALS G.R. No. 112872 APRIL 19, 2001

Facts:  

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Petitioner Sylvia S. Ty was married to Alexander T. Ty. Alexander died of leukemia on May 19, 1988 and was survived by his wife, petitioner Sylvia, 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. Private respondent, the father of the deceased filed two complaints for the recovery of said property. He prayed for the recovery of the pieces of property that were placed in the name of deceased Alexander by private respondent, the same property being sought to be sold out, mortgaged, or disposed of by petitioner. Private respondent claimed in both cases that even if said property were placed in the name of deceased Alexander, they were acquired through private respondent’s money, without any cause or consideration from deceased Alexander.

Issue: Is the petitioner correct in her contention that there was an express trust between the deceased and private respondent?

Held: Petitioner is in error when she contends that an express trust was created by private respondent when he transferred the property to his son. Express trust is those that are 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. On the other hand, implied trusts are those which, without being expressed, are deducible from the nature of the transaction by operation of law as matters of equity, independently of the particular intention of the parties. Thus, if the intention to establish a trust is clear, the trust is express; if the intent to establish a trust is to be taken from circumstances or other matters indicative of such intent, then the trust is implied.

In the cases at hand, 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. A resulting trust arises in favor of one who pays the purchase money of an estate and places the title in the name of another, because of the presumption that he who pays for a thing intends a beneficial interest therein for himself. The trust is said to result in law from the acts of the parties. Such a trust is implied in fact. Petitioner’s assertion that private respondent’s action is barred by the statute of limitations is erroneous. The statue of limitations cannot apply in this case. Resulting trusts generally do not prescribe except when the trustee repudiates the trust.

VDA. DE RETUERTO v. BARZ G.R. No. 148180 DECEMBER 19, 2001

Facts: 

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When Spouses Esteban Perez and Lorenza Sanchez died intestate, their rights over the property were inherited by their daughter, Juana Perez, married to Numeriano Barz, who then declared the properly, for taxation purposes, under her name but with an area of only 13,160 square meters, more or less. On April 16, 1929, Juana Perez, widow Barz, executed a deed confirming her execution of a "Deed of Absolute Sale," in favor of Panfilo Retuerto, married to Catalina Ceniza, over a portion of the "Hacienda de Mandaue.” However, on April 26, 1935, Panfilo Retuerto purchased the aforementioned parcel of land, this time, from the Archbishop of Cebu. In the meantime, the San Carlos Seminary in Cebu filed a Petition with the Regional Trial Court for the issuance of titles over several parcels of land in "Hacienda de Mandaue," including Lot No. 896-A, earlier purchased by Panfilo Retuerto from Juana Perez and from the Archbishop of Cebu. 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.

Issue: Who has a right of ownership over the subject lot?

Held: 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. 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.

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. Since registration of real property is considered a constructive notice to all persons, then the ten-year prescriptive period is reckoned from the time of such registering, filing or entering. 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. In the 1966 decision of the Land Registration Court in LRC No. 529, it was found that Pedro Barz, private respondents' predecessor-in-interest, was the lawful owner of the subject property as he and his predecessors-in-interest had been in peaceful, continuous and open possession thereof in the concept of owner since 1915.

CHIA LIONG TAN v. COURT OF APPEALS G.R. No. 106251 November 11, 1993

Facts:   

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Petitioner claims to be the registered owner of the motor vehicle, Elf van which was purchased by his brother Tan Ban Yong, the private respondent. The petitioner principally relies on the fact that the vehicle is registered in his name. He testified that the said vehicle was purchased, that he sent his brother to pay for it and the receipt of payment was placed in petitioner’s name because it was his money that was used to pay for the vehicle, that he allowed his brother to use it and that his brother refused to return the same. RTC, as affirmed by the CA ruled that ownership belongs to the private respondent as the testimonies of Tan Pit Sin, the one whom he borrowed money fro for the sad purchase and the employee of the Isuzu motors were given weight.

Issue: Whether or not the petitioner has ownership of the property n question

Held: A certificate of registration of a motor vehicle in one’s name indeed creates a strong presumption of ownership. The person in whose favor it, has been issued is virtually the owner thereof unless proved otherwise. Such presumption is rebuttable by competent proof.

It was undeniable that an implied trust was created when the certificate of registration of the vehicle was placed in the petitioner’s name although the price thereof was paid by private respondent. A trust, which drives its strength from the confidence one reposes on another

especially between brothers, does not lose that character simply because of what appears is a legal document. Petition is denied.

EILIA O’LACO v. CO CHO CHIT G.R. No. 58010 March 31, 1993

Facts:    

On May 17, 1060, private respondent-spouses Valentin Co Cho Chit and O Lay Kia learned fro the newspaper that O’ laco sold the Oroquieta property to the Roman Catholic archbishop for P230,000. Respondent-spouses sued petitioners to recover the purchase price, asserting that petitioner knes that they were the real vendees and that the legal title thereto was merely placed in her name. They contend that O’ laco breached the trust when she sold the land. While petitioners assert that she merely left the certificate of title covering the property with private respondent for safekeeping.

Issue: Whether a resulting trust between the parties in the acquisition of the property has prescribed

Held: It has been established that a resulting trust between the parties occurred. Although the property was bought by the respondent-spouses, the legal title was placed n the name of O’ laco. The transfer of the Torrens title in her name was only in consonance with the deed of sale n her favor. The second requisite is absent., hence prescription did not begin to run until the sale of the subject property which was clearly an act of repudiation.

But immediately after O’ laco sold the property which is a disavowal of the resulting trust, respondent-spouses instituted the present suit for breach of trust. Correspondingly, laches cannot lie against them.

Costs against petitioners.