ObliConCaseDigestsMarch2016-January2017

OBLIGATIONS AND CONTRACTS Compilation of Case Digest of Supreme Court’s Decision from March 2016 to January 2017

Acuyong • Alcantara • Alvarez • Barroso • Contreras • Cruz • Hosaka • Lopez • Paras • Resurreccion

Ateneo de Manila University School of Law

TABLE OF CONTENTS March 2016 Cases Joey R. Peña vs. Jesus Delos Santos Spouses De Guzman, Jr. Lydia S. De Guzman vs. Court of Appeals Industrial Personnel & Management Services vs. Jose G. De Vera Caltex, Inc., et al. vs. Ma. Flora A. Singzon Aguirre

4 5 7 8

April 2016 Cases Sps. Florante E. Jonsay, et al. vs. Solidbank Corporation Sps. Primo Inalvez and Juliana Inalvez vs. Bayang Nool, et al

11 13

June 2016 Cases Mactan-Cebu International Airport Authority vs. Richard E. Unchuan Interport Resources Corporation vs. Securities Specialist, Inc. Spouses Jaime and Matilde Poon vs. Prime Savings Bank Heirs of Jose Extremadura vs. Manuel Extremadura Vil-Rey Planners and Builders vs. Lexber, Inc. Florita Liam vs. United Coconut Planters Bank Republic of the Philippines vs. Alberto Looyuko Republic of the Philippines vs. Mega Pacific eSolutions Inc. Nympha Odiamar vs. Linda Odiamar Valencia Jennefer Figuera vs. Maria Remedios Ang Trifonia D. Gabutan, et al. vs. Dante D. Nacalaban, et al

17 19 21 23 25 27 29 31 33 34 37

July 2016 Cases Century Properties, Inc. vs. Edwin J. Babiano and Emma B. Concepcion Phil-Nippon Kyoei, Corp. vs. Rosalia T. Gudelosao, et al

40 42

August 2016 Cases Bonifacio Dana vs. Spouses Gregorio Serrano and Adelaida Reyes Ever Electrical Manufacturing, Inc. vs. Philippine Bank of Communications (PBCOM) Teresita I. Buenaventura vs. Metropolitan Bank and Trust Company Development Bank of the Philippines vs. Clarges Realty Corporation AFP Retirement and Separation Benefits System (AFPRSBS) vs. Eduardo Sanvictores Spouses Juan Chuy Tan and Mary Tan vs. China Banking Corporation Sta. Fe Realty, Inc. and Victoria Sandejas Fabregas vs. Jesus M. Sison

45 47 48 49 51 53 55

September 2016 Cases Edgardo A. Quilo and Adnaloy Villahermosa vs. Teodula Bajao Doroteo C. Gaerlan vs. Philippine National Bank Philippine Science High School - Cagayan vs. Pirra Construction Enterprises Marphil Export Corporation and Ireneo Lim vs. Allied Banking Corporation

58 59 61 64 1

Rizal Commercial Banking Corporation vs. Teodoro G. Bernardino Philippine Economic Zone Authority vs. Pilhino Sales Corporation

65 67

October 2016 Cases Dr. Restituto C. Buenviaje vs. Spouses Jovito R. and Lydia B. Salonga Sergio Osmeña III vs. Power Sector Assets and Liabilities Management Corporation Republic of the Philippines and HUDCC vs. Gonzalo Roque Jr. PNB vs. Heirs of Benedicto and Azucena Alonday People of the Philippines vs. Ariel Layag Norma c. Magsano, et al. vs. Pangasinan Savings and Loan Bank, inc., et al

70 73 75 77 79 80

November 2016 Cases Universal International Investment (BVI) Limited vs. Ray Burton Development Corp UCPB General Insurance Company, Inc. Vs. Hughes Electronics Corporation Spouses Domingo v Spouses Tita Manzano Fruehauf Electronics Philippines Corporation v Technology Electronics White Marketing Development Corporation vs. Grandwood Furniture & Woodwork Nestor Cabrera vs. Arnel Clarin

83 85 87 89 91 92

December 2016 Cases Sps. Luisito Pontigon and Leodegaria Sanchez-Pontigon vs. Heirs of Meliton Sanchez Philippine Stock Exchange, Inc. vs. Antonio K. Litonjua and Aurelio K. Litonjua, Jr Pryce Properties Corporation vs. Sps. Sotero Octobre, Jr., et al. B.F. Corporation and Honorio Pineda vs. Form-Eze Systems, Inc.

94 97 99 101

January 2017 Cases Iloilo Jar Corporation vs. Comglasco Corporation/Aguila Glass Rutcher T. Dagasdas vs. Grand Placement and General Services Corporation Kabisig Real Wealth Dev., Inc. and Fernando C. Tio vs. Young Builders Corp Madag Buisan, et al. vs. Commission of Audit and DPWH

104 106 108 110

Index

112

Contributors

116

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MARCH 2016 March 2, 2016 ● Joey R. Peña vs. Jesus Delos Santos and The Heirs of Rosita Delos Santos Flores G.R. No. 202223 ● Spouses Virgilio De Guzman, Jr. Lydia S. De Guzman vs. Court of Appeals, Mindanao Station, Lamberto Bajao, Heir of Spouses Leoncio Bajao and Anastacia Z. Bajao G.R. No. 185757 March 7, 2016 ● Industrial Personnel & Management Services, Inc. (IPAMS), et al. vs. Jose G. De Vera and Alberto B. Arriola G.R. No. 205703 March 9, 2016 ● Caltex, Inc., et al. vs. Ma. Flora A. Singzon Aguirre, et al. G.R. Nos. 170746-47

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March 2016 Joey R. Peña vs. Jesus Delos Santos and The Heirs of Rosita Delos Santos Flores G.R. No. 202223 March 2, 2016 Topic: Estoppel Facts: Jesus Delos Santos (Jesus) and Rosita Delos Santos Flores (Rosita) were the judgment awardees of the two-thirds portion or 9,915 square meters of four adjoining lots measuring 14,771 sq m, located in Boracay Island, Malay, Aldan. The losing parties in the case, Vicente Delos Santos, et al. (plaintiffs) and Spouses Fred and Joan Elizalde (appellants), appealed the foregoing judgment to the CA. Both appeals were dismissed and considered withdrawn in the CA Resolution dated May 11, 1999 upon the appellants' motion to withdraw appeal. In the subsequent CA Resolution dated January 31, 2000, the motion for reconsideration and motion to reinstate appeal filed by the plaintiffs were denied for being time-barred as it was filed nine days late. The plaintiffs sought recourse with the Court via a petition for review on certiorari. In a Decision dated February 2, 2007, the Court denied the petition on the ground that the plaintiffs already lost their right of appeal to the CA when they failed to file an appellant's brief during the more than 180-day extension. An Entry of Judgment in the case was forthwith issued. The case was then remanded to the RTC of Kalibo, Aklan for the execution proceedings during which a Motion for Substitution with a Motion for a Writ of Execution and Demolition dated March 14, 2008 was filed by Peña. Peña averred that he is the transferee of Jesus and Rosita's adjudged allotments over the subject lots. He claimed that he bought the same from Atty. Romeo Robiso (Atty. Robiso) who in turn, acquired the properties from Jesus and Rosita through assignment and sale. The plaintiffs opposed Peña's motion claiming that the conveyance made by Jesus and Rosita in favor of Atty. Robiso was null and void for being a prohibited transaction because the latter was their counsel in the case. RTC ruled in favor of Peña while CA reversed it. Issue: Whether or not Peña has right to the said lands on the ground of estoppel despite the fact that Atty. Robiso procured the property via a prohibited transaction? Held: NO. Peña cannot rely on Article 1437 by claiming that Jesus and Rosita are already estopped from questioning the validity of their deeds of conveyance with Atty. Robiso. Estoppel is a principle in equity and pursuant to Article 1432 it is adopted insofar as it is not in conflict with the provisions of the Civil Code and other laws. Otherwise speaking, estoppel cannot supplant and contravene the provision of law clearly applicable to a case. Conversely, it cannot give validity to an act that is prohibited by law or one that is against public policy. The rationale advanced for the prohibition in Article 1491(5) is that public policy disallows the transactions in view of the fiduciary relationship involved, i.e., the relation of trust and confidence and the peculiar control exercised by these persons. It is founded on public policy because, by virtue of his office, an attorney may easily take advantage of the credulity and ignorance of his client and unduly enrich himself at the expense of his client. The principle of estoppel runs counter to this policy and to apply it in this case will be tantamount to sanctioning a prohibited and void transaction.

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Spouses Virgilio De Guzman, Jr. Lydia S. De Guzman vs. Court of Appeals, Mindanao Station, Lamberto Bajao, Heir of Spouses Leoncio Bajao and Anastacia Z. Bajao G.R. No. 185757 March 2, 2016 Topic: Prescription; Trust Facts: The property subject of this case is a 480-square meter lot that formed part of Lot No. 532 located at North Poblacion, Medina, Misamis Oriental. On May 24, 1969, Spouses Bajao sold 200 square meters of Lot No. 532 to Spouses de Guzman for P1,000.9 On June 18, 1970, Spouses Bajao sold another 280 square meters of Lot No. 532 to petitioners for P1,400. Both transactions were evidenced by separate Deeds of Absolute Sale. Spouses Bajao allegedly promised to segregate the property from the remaining area of Lot No. 532 and to deliver a separate title to petitioners covering it. However, because the promise was not forthcoming, petitioner Lydia S. de Guzman executed an Affidavit of Adverse Claim on April 21, 1980 covering the property. This was annotated on the title covering Lot No. 532, Original Certificate of Title (OCT), on April 25, 1980. On December 16, 1980, respondent caused the cancellation of petitioner's' annotated adverse claim over the property and later obtained Transfer Certificate of Title. Petitioners thereafter requested respondent to deliver TCT No. T-7133 so they could present it to the Register of Deeds, together with the two Deeds of Absolute Sale, for proper annotation. Respondent, however, refused to heed their request. Thus, on January 21, 2000, petitioners filed a Complaint for Reconveyance with Writ of Preliminary Mandatory Injunction and Damages. They alleged that they were innocent purchasers for value who took possession of the property after the sale and religiously paid its real property taxes. Petitioners also alleged that respondent was in bad faith since he knew about the sale of the property between them and his parents, and the existing survey and segregation over the area, yet he fraudulently included the same in his share upon the issuance of TCT No. T-7133. In his Answer with Defenses and Counterclaims, respondent argued that the action is time barred and there is no more trust to speak of. He pointed out that more than 10 years have lapsed from the date of the registration of the Extrajudicial Settlement on December 10, 1980 and the registration of TCT No. T-7133 on February and October 1981, to the date of filing of the Complaint. Respondent also countered that there was no mistake or fraud in including the property in TCT No. T-7133 since his rights arose from the Extrajudicial Settlement. Issue: 1) Whether or not Spouses de Guzman are barred by prescription and laches from instituting the action against Spouses Bajao? 2) Whether or not Spouses de Guzman can avail of the exception to the ten-year rule on prescription? Held: 1) YES. Petitioners allege that respondent fraudulently included the property in TCT No. T-7133, which was issued on February 13 and October 2, 1981. Article 1456 of the Civil Code provides that a person acquiring property through mistake or fraud becomes, by operation of law, a trustee of an implied trust for the benefit of the real owner of the property. An action for reconveyance based on an implied trust generally prescribes in 10 years, the reckoning point of which is the date of registration of the deed or the date of issuance of the certificate of title over the property. Thus, petitioners had 10 years from 1981 or until 1991 to file their complaint for

5

reconveyance of property. The Complaint, however, was filed only on January 21, 2000, or more than 10 years from the issuance of TCT No. T-7133. Hence, the action is already barred by prescription. 2) NO. The exception to the ten-year rule on prescription is when the plaintiff is in possession of the land to be reconveyed. In such case, the action becomes one for quieting of title, which is imprescriptible. Here, petitioners allege that they were in juridical possession of the property from the time they put up a fence on it until the filing of the Complaint. Respondent disputes this claim, countering that petitioners are not in actual and material possession of the property. Whether petitioners have actual possession of the lot is a question of fact. We have repeatedly ruled that a petition for review on certiorari under Rule 45 of the Rules of Court shall raise only questions of law and not questions of facts. When supported by substantial evidence, the findings of fact of the CA are conclusive and binding on the parties and are not reviewable by us, unless the case falls under any of the recognized exceptions. Petitioners never raised any of these exceptions. Assuming they did, none of the exceptions would apply. We affirm the CA's finding that petitioners were not able to establish their actual possession of the lot except by bare allegations not substantiated by evidence.

6

Industrial Personnel & Management Services, Inc. (IPAMS), et al. vs. Jose G. De Vera and Alberto B. Arriola G.R. No. 205703 March 7, 2016 Topic: General Provisions on Contracts Facts: Arriola was hired by SNC-Lavalin and his overseas employment contract was processed with the Philippine Overseas Employment Agency (POEA). SNC-Lavalin confirmed Arriola's assignment in the Ambatovy Project. On June 9, 2008, Arriola started working in Madagascar. After three months, Arriola received a notice of pre-termination of employment from SNCLavalin. It stated that his employment would be pre-terminated effective September 11, 2009 due to diminishing workload in the area of his expertise and the unavailability of alternative assignments. Consequently, on September 15, 2009, Arriola was repatriated. SNC-Lavalin deposited in Arriola's bank account his pay amounting to CA$2,636.80, based on Canadian labor law. Aggrieved, Arriola filed a complaint against the petitioners for illegal dismissal and nonpayment of overtime pay, vacation leave and sick leave pay before the Labor Arbiter (LA). He claimed that SNC-Lavalin still owed him unpaid salaries equivalent to the three-month unexpired portion of his contract, amounting to, more or less, P1,062,936.00. He asserted that SNC-Lavalin never offered any valid reason for his early termination and that he was not given sufficient notice regarding the same. Arriola also insisted that the petitioners must prove the applicability of Canadian law before the same could be applied to his employment contract. Issue: Whether or not the foreign law stipulated for the employment contract is contrary to law, morals, good customs, public order or public policy, thus making the Philippine laws govern? Held: YES. Granting arguendo that the labor contract expressly stipulated the applicability of Canadian law, still, Arriola's employment cannot be governed by such foreign law because Article 1306 of the Civil Code, which states that the stipulations, clauses, terms and conditions in a contract must not be contrary to law, morals, good customs, public order, or public policy, is not satisfied. A perusal of the ESA will show that some of its provisions are contrary to the Constitution and the labor laws of the Philippines. First, the ESA does not require any ground for the early termination of employment. At its own pleasure, the foreign employer is endowed with the absolute power to end the employment of an employee even on the most whimsical grounds. Second, the ESA allows the employer to dispense with the prior notice of termination to an employee. The employee under the ESA could be immediately dismissed without giving him the opportunity to explain and defend himself. The provisions of the ESA are patently inconsistent with the right to security of tenure. Both the Constitution and the Labor Code provide that this right is available to any employee. In a host of cases, the Court has upheld the employee's right to security of tenure in the face of oppressive management behavior and management prerogative. Security of tenure is a right which cannot be denied on mere speculation of any unclear and nebulous basis. Not only do these provisions collide with the right to security of tenure, but they also deprive the employee of his constitutional right to due process by denying him of any notice of termination and the opportunity to be heard. Thus, the Court concurs with the CA that the ESA is not applicable in this case as it is against our fundamental and statutory laws.

7

Caltex, Inc., et al. vs. Ma. Flora A. Singzon Aguirre, et al. G.R. Nos. 170746-47 March 9, 2016 Topic: Prescription Facts: Dubbed as the Asia's Titanic,1 the M/V Dofia Paz was an inter-island passenger vessel owned and operated by Sulpicio Lines, Inc. (Sulpicio) traversing its Leyte to Manila route on the night of December 20, 1987, when it collided with MIT Vector, a commercial tanker owned and operated by Vector Shipping Corporation, Inc., (Vector Shipping). On that particular voyage, MIT Vector was chartered by Caltex (Philippines) Inc., et al. 2 (petitioners) to transport petroleum products. The collision brought forth an inferno at sea with an estimate of about 4,000 casualties, and was described as the "world's worst peace time maritime disaster." The heirs of the victims of the tragedy (respondents), composed of 1,689 claimants, filed on March 6, 2001 a civil action for damages for breach of contract of carriage and quasi-delict with the Regional Trial Court (RTC) of Catbalogan, Samar, Branch 28 (RTC of Catbalogan), against the herein petitioners, Sulpicio, Vector Shipping, and Steamship Mutual Underwriting Association, Bermuda Limited (Steamship). The RTC of Catbalogan, motu proprio dismissed the complaint pursuant to Section 1, Rule 9 of the 1997 Rules of Civil Procedure as the respondents’ cause of action had already prescribed. In an unusual turn of events however, the petitioners as defendants therein, who were not served with summons, filed a motion for reconsideration, alleging that they are waiving their defense of prescription, among others. On July 2, 2002, the RTC of Manila issued its Order denying the respondents’ motion to intervene for lack of merit. The RTC of Manila ruled that the RTC of Catbalogan had already dismissed the case with finality; that a final and executory prior judgment is a bar to the filing of the complaint in intervention of the respondents; and that the waivers of the defense of prescription made by the petitioners, Sulpicio and Steamship are of no moment. Issue: Whether or not Caltex have rightly waived their defense of prescription? Held: NO. The petitioners cannot be permitted to assert their right to waive the defense of prescription when they had foregone the same through their own omission. The rationale behind the prescription of actions is to suppress fraudulent and stale claims from springing up at great distances of time when all the proper vouchers and evidence are lost or the facts have become obscure from the lapse of time or defective memory or death or removal of witnesses. There is no dispute that the respondents’ cause of action against the petitioners has prescribed under the Civil Code. The respondents brought their claim before a Philippine court only on March 6, 2001, more than 13 years after the collision occurred. Article 1139 of the Civil Code states that actions prescribed by the mere lapse of time fixed by law. Accordingly, the RTC of Catbalogan cannot be faulted for the motu proprio dismissal of the complaint filed before it. It is settled that prescription may be considered by the courts motu proprio if the facts supporting the ground are apparent from the pleadings or the evidence on record. The peculiarity in this case is that the petitioners, who were the defendants in the antecedent cases before the RTCs of Catbalogan and Manila, are most adamant in invoking their waiver of the defense of prescription while the respondents, to whom the cause of action belong, have acceded to the dismissal of their complaint. In the instant case, not only once did the petitioners expressly renounce their defense

8

of prescription. Nonetheless, the Court cannot consider such waiver as basis in order to reverse the rulings of the courts below as the dismissal of the complaint had become final and binding on both the petitioners and the respondents. Not having been served with summons, the petitioners were not initially considered as under the jurisdiction of the court. However, the petitioners voluntarily submitted themselves under the jurisdiction of the RTC of Catbalogan by filing their motion for reconsideration. Thus, although the order was already final and executory with regard to the respondents; it was not yet, on the part of the petitioners. Consequently, it was only after the petitioners’ failure to appeal or seek any other legal remedy to challenge the subsequent Order dated September 4, 2001, that the dismissal became final on their part. It was from the date of the petitioners’ receipt of this particular order that the reglementary period under the Rules of Court to assail it commenced to run for the petitioners. But neither the petitioners nor the respondents resorted to any action to overturn the orders of the RTC of Catbalogan, which ultimately led to their finality. Since the dismissal of the complaint was already final and executory, the RTC of Manila can no longer entertain a similar action from the same parties. The bone of contention is not regarding the petitioners’ execution of waivers of the defense of prescription, but the effect of finality of an order or judgment on both parties. The petitioners offered no other acceptable excuse on why they did not raise their oppositions against the orders of the RTC of Catbalogan when they had the opportunity to do so. Thus, the only logical conclusion is that the petitioners abandoned their right to waive the defense of prescription.

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APRIL 2016 April 6, 2016 ● Sps. Florante E. Jonsay, et al. vs. Solidbank Corporation G.R. No. 206459 April 18, 2016 ● Sps. Primo Inalvez and Juliana Inalvez vs. Bayang Nool, et al. G.R. No. 188145

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April 2016 Sps. Florante E. Jonsay, et al. vs. Solidbank Corporation G.R. No. 206459 April 6, 2016 Topic: Payment or Performance; General Provisions on Contracts Facts: Momarco, controlled and owned by the Spouses Jonsay, is an importer, manufacturer and distributor of animal health and feedmill products catering to cattle, hog and poultry producers. Momarco obtained loans from Solidbank for which the Spouses Jonsay executed a blanket mortgage over three parcels of land they owned in Calamba City, Laguna. the loans were consolidated under one promissory note7 for the combined amount of P60,000,000.00, signed by Florante as President of Momarco, with his wife Luzviminda also signing as co-maker. The stipulated rate of interest was 18.75% per annum, along with an escalation clause tied to increases in pertinent Central Bank-declared interest rates, by which Solidbank was eventually able to unilaterally increase the interest charges up to 3 0% per annum. Claiming business reverses brought on by the 1997 Asian financial crisis, Momarco tried unsuccessfully to negotiate a moratorium or suspension in its interest payments. Due to persistent demands by Solidbank, Momarco made its next, and its last, monthly interest payment in April 1998 in the amount of Pl,000,000.00. Momarco sought a loan from Landbank of the Philippines to pay off its aforesaid debt but its application fell through. Solidbank proceeded to extrajudicially foreclose on the mortgage, and at the auction sale held on March 5, 1999, it submitted the winning bid of P82,327,249.54, 12 representing Momarco's outstanding loans, interests and penalties. Issue: 1) Whether or not Solidbank can refuse the Spouses proposal of extinguishing their obligation via a dacion en pago? 2) Whether or not the escalation clause was valid? Held: 1) YES. On the question of the petitioners' failed proposal to extinguish their loan obligations by way of dacion en pago, no bad faith can be imputed to Solidbank for refusing the offered settlement as to render itself liable for moral and exemplary damages after opting to extrajudicially foreclose on the mortgage. Dacion en pago is a special mode of payment whereby the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding obligation. The undertaking is really one 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 debt. As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present. It is only when the thing offered as an equivalent is accepted by the creditor that novation takes place, thereby, totally extinguishing the debt. 2) NO. 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. Although escalation clauses are valid in maintaining fiscal stability and retaining the value of money on long-term contracts, giving respondent an unbridled right to adjust the interest independently and upwardly would completely take away

11

from petitioners the "right to assent to an important modification in their agreement" and would also negate the element of mutuality in their contracts. The clause cited earlier made the fulfillment of the contracts "dependent exclusively upon the uncontrolled will" of respondent and was therefore void.After annulling the foreclosure of mortgage, the RTC reduced the interest imposable on the petitioners' loans to 12%, the legal interest allowed for a loan or forbearance of credit, citing Medel v. CA. In effect, the RTC voided not just the unilateral increases in the monthly interest, but also the contracted interest of 18.75%. The implication is to allow the petitioners to recover what they may have paid in excess of what was validly due to Solidbank, if any. Thus, the Court disregarded the unilaterally escalated interest rates and imposed the mutually stipulated rates, which it applied up to the maturity of the loans. Thereafter, the Court imposed the legal rate of 12% per annum on the outstanding loans, or 6% per annum legal rate on the excess of the borrower's payments.

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Sps. Primo Inalvez and Juliana Inalvez vs. Bayang Nool, et al. G.R. No. 188145 April 18, 2016 Topic: Trust Facts: The records showed that the subject property was originally covered by TCT No. 583986 originally registered in the names of Spouses Nicolas and Francisca Nool and Spouses Cornelio and Bayang, with an area of 15.1441 ha. On May 3, 1965, Spouses Cornelio and Bayang sold a large portion of their one-half share of the landholding to the petitioners and Maria Zamora (Zamora). Then, on April 16, 1980, the new set of owners, namely, Spouses Macayanan, Zamora, Spouses Cornelio and Bayang, and the petitioners executed a Real Estate Mortgage (REM) over the whole property in favor of Tarlac Development Bank (TDB) to secure a loan of Pl0,000.00. Unfortunately, the mortgage was foreclosed, and the title to the subject property was consolidated with TDB, together with the corresponding issuance of TCT No. 188251.13 On April 17, 1985, TDB sold the parcel of land to the petitioners and Spouses Jim and Liberty Baluyot (Spouses Baluyot). Hence, TCT No. 188251 was cancelled and TCT No. 1882521 was issued in the names of the petitioners and Spouses Baluyot. Meanwhile, the respondents continued possession of the subject lot. On June 16, 2000, the petitioners instituted a complaint for ejectment, collection of shares and damages, against the respondents alleging that since Bayang is Juliana's sister, they allowed the respondents to cultivate 2-ha portion of the subject property with the obligation to share the landowners 25% of the harvest proceeds thereof. The respondents' cultivation thereof was purportedly conditioned upon the payment to the petitioners of a rightful share in the produce. Thus, when the respondents failed to fulfil their undertaking, the petitioners instituted an ejectment complaint against them. For her part, Bayang averred that she and her late husband were the actual and registered co-owners of the subject property, which they inherited from her father, together with the petitioners. Bayang denied having sold portions of their property to the petitioners and Zamora. Issue: Whether or not the Bayang is a co-owner since she inherited the land from her father and thus made the petitioners a trustee of the land as co-owners? Held: YES. Records show that the subject property was originally owned by Juliana and Bayang's father, Cleto Macayanan under Original Certificate of Title No. 1665. "Pursuant to Article 1451 of the Civil Code, when land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner." Bayang, being an heir and a co-owner, is thus entitled to the possession of the subject property. This was confirmed by the issuance of TCT No. 58439 in the names of Spouses Nicolas and Francisca for one-half share, Spouses Cornelio and Bayang for one-eighth share, Zamora for one-fourth share, and the petitioners for one-eighth share. Evidently, a co-ownership existed between the parties prior to the foreclosure and consolidation of title in favor of TDB and the subsequent re-acquisition thereof by the petitioners. Coownership is a form of trust and every co-owner is a trustee for the others.Before the partition of a land or thing held in common, no individual or co-owner can claim title to any definite portion thereof. All that the co-owner has is an ideal or abstract quota proportionate share in the entire land or thing. Should a co-owner alienate or mortgage the co-owned property itself, the

13

alienation or mortgage shall remain valid but only to the extent of the portion which may be allotted to him in the division upon the termination of the co-ownership. In case of foreclosure, a sale would result in the transmission only of whatever rights the seller had over of the thing sold. Indeed, a co-owner does not lose his part ownership of a co-owned property when his share is mortgaged by another co-owner without the farmer's knowledge and consent as in the case at bar. The mortgage of the inherited property is not binding against co-heirs who never benefited. As correctly emphasized by the CA, the petitioners' right in the subject property is limited only to their share in the co-owned property. When the subject property was sold to and consolidated in the name of TDB, the latter merely held the subject property in trust for the respondents. the rights of the respondents as co-owners of the subject property were never alienated despite TDB's consolidation of ownership over the subject property.

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JUNE 2016 June 1, 2016  Mactan-Cebu International Airport Authority vs. Richard E. Unchuan G.R. No. 182537 June 6, 2016  Interport Resources Corporation vs. Securities Specialist, Inc. and R.C. Lee Securities, Inc.. G.R. No. 154069 June 13, 2016  Spouses Jaime and Matilde Poon vs. Prime Savings Bank represent by the Philippine Deposit Insurance Corporation as Statutory Liquidator G.R. No. 183794 June 15, 2016  Heirs of Jose Extremadura, represented by Elena H. Extremadura vs. Manuel Extremadura and Marlon Extremadura G.R. No. 211065 

Vil-Rey Planners and Builders vs. Lexber, Inc./Stronghold Insurance Company, Inc. vs. Lexber, Inc. G.R. No. 189401

● Florita Liam vs. United Coconut Planters Bank G.R. No. 194664 June 22, 2016  Republic of the Philippines represented by the Department of Agriculture vs. Alberto Looyuko, doing business under the name and style of Noah's Ark Sugar Holdings and Wilson T. Go G.R. No. 170966 June 27, 2016 ● Republic of the Philippines vs. Mega Pacific eSolutions Inc, G.R. No. 184666 June 28, 2016  Nympha Odiamar vs. Linda Odiamar Valencia G.R. No. 213582

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June 29, 2016 ● Jennefer Figuera vs. Maria Remedios Ang G.R. No. 204264 

Trifonia D. Gabutan, et al. Vs. Dante D. Nacalaban, et al./Dante D. Nacalaban, et al. Vs. Trifonia D. Gabutan, et al. G.R. NOS. 185857-58/G.R. NOS. 194314-15

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June 2016 Mactan-Cebu International Airport Authority vs. Richard E. Unchuan G.R. No. 182537 June 1, 2016 Topic: General Provisions on Contracts, Meeting of the Minds Facts: On March 5, 2004, respondent Richard Unchuanfiled a complaint for Partial Declaration of Nullity of the Deed of Absolute Sale with Plea for Partition, Damages and Attorney's Fees before the RTC against MCIAA. In his complaint, Unchuan alleged, among others, that he was the legal and rightful owner of several lots. Unchuan further alleged that he came to know that Atanacio Godinez, the supposed attorney-infact of all the registered owners and their heirs, already sold both lots to Civil Aeronautics Administration (CAA), the predecessor of MCIAA; that the sale covered by the Deed of Absolute Sale, dated April 3, 1958, was null and void because the registered owners and their heirs did not authorize Atanacio to sell their undivided shares in the subject lots in favor of CAA; that no actual consideration was paid to the said registered owners or their heirs, despite promises that they would be paid; that the deed of absolute sale did not bear the signature of the CAA representative; that there was no proof that the Secretary of the Department of Public Works and Highways approved the sale; and that his predecessors-in-interest merely tolerated the possession by CAA and, later, by MCIAA. MCIAA moved for the dismissal of the said complaint citing prescription, laches and estoppel as its grounds. The RTC, however, denied the motion CA affirmed the RTC decision. The CA explained that Atanacio had no authority to act as an agent for the other registered owners and their heirs absent the special power of attorney specifically executed for such purpose. Also, no evidence was adduced to show that the purchase price for the said lots was paid. For being a void contract, the heirs' deed of partition acknowledging the purported sale in favor of CAA was found by the CA to have produced no legal effects and not susceptible of ratification. It was of the view that prescription, estoppel or laches did not set in because a void contract could be questioned anytime and an action or defense for the declaration of its inexistence or absolute nullity was imprescriptible. It also noted that the deed of absolute sale was not signed by the then CAA authorized representative. Issue: Whether or not the contract was void or not? Held: It is void. The Court finds that the sale transaction executed between Atanacio, acting as an agent of his fellow registered owners, and the CAA was indeed void insofar as the other registered owners were concerned. They were represented without a written authority from them clearly in violation of the requirement under Articles 1874 and 1878 of the Civil Code. Without a special

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power of attorney specifying his authority to dispose of an immovable, Atanacio could not be legally considered as the representative of the other registered co-owners of the properties in question. Atanacio's act of conveying the lots cannot be a valid source of obligation to bind all the other registered co-owners and their heirs because he was not clothed with any authority to enter into a contract with CAA. The other heirs could not have given their consent as required under Article 1475 of the New Civil Code because there was no meeting of the minds among the other registered co-owners who gave no written authority to Atanacio to transact on their behalf. Therefore, no contract was perfected insofar as the portions or shares of the other registered coowners or their heirs were concerned. The rule is that a void contract produces no effect either against or in favor of anyone and cannot be ratified. Similarly, laches will not set in against a void transaction, as in this case, where the agent did not have a special power of attorney to dispose of the lots co-owned by the other registered owners. In fact, Article 1410 of the Civil Code specifically provides that an action to declare the inexistence of a void contract does not prescribe.

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Interport Resources Corporation vs. Securities Specialist, Inc. and R.C. Lee Securities, Inc. G.R. No. 154069 June 6, 2016 Topic: Extinguishment of Obligations, Novation Facts: In January 1977, Oceanic Oil & Mineral Resources, Inc. entered into a subscription agreement with R.C. Lee, a domestic corporation engaged in the trading of stocks and other securities. Thereupon, R.C. Lee paid 25% of the subscription, leaving 75% unpaid. On July 28, 1978, Oceanic merged with Interport, with the latter as the surviving corporation. Under the terms of the merger, each share of Oceanic was exchanged for a share of Interport. SSI, a domestic corporation registered as a dealer in securities, received in the ordinary course of business Oceanic Subscription Agreements all outstanding in the name of R.C. Lee, and Oceanic official receipts showing that 25% of the subscriptions had been paid. The Oceanic subscription agreements were duly delivered to SSI through stock assignments indorsed in blank by R.C. Lee. On February 8, 1989, Interport issued a call for the full payment of subscription receivables, setting March 15, 1989 as the deadline. SSI tendered payment prior to the deadline however, Interport refused to honor the Oceanic subscriptions. Interport originally rejected the tender of payment for all unpaid subscriptions on the ground that the Oceanic subscription agreements should have been previously converted to shares in Interport. However, Interport failed to show any proof of any notice requiring the conversion of shares and SEC also confirmed having no record of a board resolution requiring said conversion. Despite that, Interport still rejected SSI's tender of payment for the 5,000,000 shares. SSI learned that Interport had issued the 5,000,000 shares to R.C. Lee, relying on the latter's registration as the owner of the subscription agreements in the books of the former, and on the affidavit executed by the President of R.C. Lee stating that no transfers or encumbrances of the shares had ever been made. Thus, on April 27, 1989, SSI wrote R.C. Lee demanding the delivery of the 5,000,000 Interport shares on the basis of a purported assignment of the subscription agreements covering the shares made in 1979. R.C. Lee failed to return the subject shares inasmuch as it had already sold the same to other parties. SSI commenced this case in the SEC to compel the respondents to deliver the 5,000,000 shares and to pay damages. It alleged fraud and collusion between Interport and R.C. Lee in rejecting the tendered payment and the transfer of the shares covered by the subscription agreements. Issues: Whether or not Interport was liable to deliver to SSI the Oceanic Shares of stock? 19

Held: Yes Interport is liable. The SEC correctly categorized the assignment of the subscription agreements as a form of novation by substitution of a new debtor and which required the consent of or notice to the creditor. We agree. Under the Civil Code, obligations may be modified by: (1) changing their object or principal conditions; or (2) substituting the person of the debtor; or (3) subrogating a third person in the rights of the creditor. 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. In this case, the change of debtor took place when R.C. Lee assigned the Oceanic shares to SSI so that the latter became obliged to settle the 75% unpaid balance on the subscription. The SEC likewise did not err in appreciating the fact that Interport was duly notified of the assignment when SSI tendered its payment for the 75% unpaid balance, and that it could not anymore refuse to recognize the transfer of the subscription that SSI sufficiently established by documentary evidence. Yet, Interport claims that SSI waived its rights over the 5,000,000 shares due to its failure to register the assignment in the books of Interport; and that SSI was estopped from claiming the assigned shares, inasmuch as the assignor, R.C. Lee, had already transferred the same to third parties. Interport's claim cannot be upheld. It should be stressed that novation extinguished an obligation between two parties. Clearly, the effect of the assignment of the subscription agreements to SSI was to extinguish the obligation of R.C. Lee to Oceanic, now Interport, to settle the unpaid balance on the subscription. As a result of the assignment, Interport was no longer obliged to accept any payment from R.C. Lee because the latter had ceased to be privy to Subscription Agreements for having been extinguished insofar as it was concerned. On the other hand, Interport was legally bound to accept SSI's tender of payment for the 75% balance on the subscription price because SSI had become the new debtor under Subscription Agreements.

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Spouses Jaime and Matilde Poon vs. Prime Savings Bank represent by the Philippine Deposit Insurance Corporation as Statutory Liquidator G.R. No. 183794 June 13, 2016 Topic: Forfeiture of Contract, Fortuitous and Unforeseen Event, Penal Clause Facts: Petitioners owned a commercial building in Naga City. On November 3, 2006, Matilde Poon and Respondent executed a 10-year Contract of Lease over the building for the latter’s use as its branch office in Naga City. They agreed to a fixed monthly rental of 60,000 pesos, with advanced payment of rentals for the first 100 months, in the amount of 6,000,000, to be applied immediately. Paragraph 24 of the Contract provides that should the leased premises be closed, deserted, or vacated by lessee, the lessor shall have the right to terminate the lease without necessity of serving a court order and to immediately repossess the leased premises. The lessor shall thereupon have the right to enter into a new contract with another party and all advanced rentals shall be forfeited in favor of the lessor. Three years later, BSP placed respondent under the receivership of Philippine Deposit Insurance Corporation. The BSP eventually ordered respondent’s liquidation. Respondent vacated the leased premises on May 12, 2000. PDIC then issued petitioners a demand later asking for the return of the unused advance rentals amounting to 3,480,000 pesos on the ground that the lease agreement had become inoperative because of respondent’s closure, which constitutes force majeure. The petitioners refused the PDIC’s demand and maintained that they were entitled to retain the reminder of the advance rentals following Paragraph 24 of their Contract. Issues: 1. Whether respondent may be released from its contractual obligations on grounds of fortuitous event under Article 1174 of the Civil Code and unforeseen event under Article 1267 of the Civil Code? 2. Whether Paragraph 24 in the contract was a penal clause? Held: 1. The closure of respondent’s business was neither a fortuitous nor an unforeseen event that rendered the leased agreement functus officio. Respondent cites the case of Provident Savings Bank wherein the closure of its business upon BSP’s order constituted a fortuitous event. However, the context of that case is different form the case at bar. The Court ruled in that case that the Monetary Board had acted arbitrarily and in in bad faith in ordering the closure of Provident Savings Bank. In this case, there is no indication or allegation that the BSP’s action was tainted with arbitrariness or bad faith. It was made pursuant to R.A. No. 7653. Respondent was also partly accountable for the closure of its business. The legal effect is analogous to that

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created by contributory negligence in quasi-delict actions. Therefore, the period during which the bank cannot do business due to insolvency is not a fortuitous event. Respondent lessee invokes the doctrine of unforeseen event under Article 1267 of the Civil Code as an alternative justification for its premature termination of the contract. Article 1267 provides that when the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. However, Article 1267 cannot be applied in all cases; otherwise, it would endanger the security of contractual relations. Parties to a contract are presumed to have assumed the risk of unfavorable developments. It is only in exceptional changes of circumstance that equity demands assistance for the debtor. The difficulty of the performance should be such that the party seeking to be released from the contractual obligation would be placed at a disadvantage by the unforeseen event. Mere inconvenience, unexpected impediments, increased expenses, or even pecuniary inability to fulfil an engagement, will not relieve the obligor from an undertaking that it has knowingly and freely contracted. The closure of respondent’s business was not an unforeseen event. As the lease was long-term, it was not lost on the parties that such an eventuality might occur. 2. Petitioner claims that paragraph 24 was not intended as a penal clause and that respondent has not even presented any proof of the intent. It is settled that a provision is a penal clause if it calls for the forfeiture of any remaining deposit still in the possession of the lessor in the event of the termination or cancellation of agreement by reason of the lessee’s violation of any terms and conditions thereof. This kind of agreement may be validly entered into by the parties. Paragraph 24 is a penal clause in the sense that it provides for liquidated damages when it stipulated the forfeiture of advance rentals.

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Heirs of Jose Extremadura, represented by Elena H. Extremadura vs. Manuel Extremadura and Marlon Extremadura G.R. No. 211065 June 15, 2016. Topic: Delivery Facts: Jose, now deceased filed for quieting of title with recovery of possession, rendition of accounting, and damages against his brother, Manuel, and his nephew, Marlon, claiming that he (Jose) purchased three (3) parcels of agricultural land located in Sitio Ponong, Barrio Rizal, Casiguran, Sorsogon from his aunt, Corazon S. Extremadura (Corazon), the widow of his uncle, Alfredo H. Extremadura (Alfredo), through a Deed of Absolute Sale dated December 18, 1984. Since Jose resided in Manila, he placed one parcel in Manuel's care, in exchange for which, the latter and his son, Marlon, religiously delivered the produce of said land from 1984 until 1995. Unfortunately, respondents (Manuel and Marlon) continuously refused to deliver the produce of the land or vacate the same despite his repeated demands; hence the complaint. Respondents averred that they have been in open, continuous, peaceful, adverse, and uninterrupted possession of the subject land, where their residential house stands, and in the concept of owner for almost fifty (50) years; thus, Jose's action was already barred by prescription or laches. Also, they argued that the deed of absolute sale presented by Jose is not the legal or beneficial title contemplated by Article 476 of the civil code RTC held that Jose is owner of the land and has better right to it as proven by deed of absolute sale, which was notarized in his favor and thus enjoys a presumption of regularity. CA granted respondents appeal. It held that Jose failed to establish legal and equitable title over the subject land, observing that the notarized deed of sale executed in Jose's favor did not transfer the land's ownership to him given that he was never placed in possession and control thereof. Moreover, having found that the subject land was not in the possession of the alleged vendor, Corazon, the C A debunked Jose's claim that he is a buyer in good faith, charging him of failing to probe the rights of the actual possessors of the land and to clarify the true nature of the latter's possession before purchasing the same. Issue: Whether or not CA was right in dismissing the case? Held: The CA was mistaken. Article 1477 of the Civil Code recognizes that the "ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof." Related to this article is Article 1497 of the same Code which provides that "[t]he thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee."

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Article 1498 of the Civil Code lays down the general rule that the execution of a public instrument "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 clearly be inferred." However, the execution of a public instrument gives rise only to a prima facie presumption of delivery, which is negated by the failure of the vendee to take actual possession of the land sold. A person who does not have actual possession of the thing sold cannot transfer constructive possession by the execution and delivery of a public instrument. In this case, the prima facie presumption of constructive delivery to Jose was not successfully negated by proof that the subject land was not actually placed in the latter's control and possession. Primarily, it should be stressed that "[possession is acquired by the material occupation of a thing or the exercise of a right, or by the fact that it is subject to the action of our will, or by the proper acts and legal formalities established for acquiring such right." Jose exercised possession of the subject land through Manuel (and eventually, his son, Marlon) whom he allowed to stay and care for the land in exchange for the delivery of the produce thereof. Possession may be exercised in the name of another according to article 524 of the Civil Code.

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Vil-Rey Planners and Builders Vs. Lexber, Inc. Stronghold Insurance Company, Inc. Vs. Lexber, Inc. G.R. No. 189401 June 15, 2016 Topic: General Provisions on Obligations, Reciprocal obligations Facts: Vil-Rey and Lexber entered into several Construction Contracts whereby the former undertook to work on the compacted backfill of the latter’s property in Cabanatuan City. Two of its contracts, 1st and 3rd, were secured by security bonds issued by Stronghold. Vil-Rey agreed to indemnify stronghold for whatever the latter might be adjuged to pay Lexber. It is important to note that under the first contract, Vil-Rey shall complete the project in 60 days for a consideration of P5,100,000 and that Lexber released to Vil-Rey a mobilization downpayment of P500,000 secured by Surety Bond issued by stronghold. Under the third contract a consideration of P1,168,728.37 shall be paid on the following basis: 50% downpayment to be secured by a surety bond in the same amount issued by Stronghold upon approval of the work order and 50% balance upon completion of the works. Vil-Rey requested the extension of the contract period. Lexber granted the request for extension. However, Vil-Rey failed to complete the works by the end of the extended period, or even after Lexber gave it another five days to finish the works. Lexber then wrote Stronghold seeking to collect on the two surety bonds issued in favor of the former. Vil-Rey denied that it was guilty of breach of contract and insisted that it was Lexber that owed the amount of P1,960,558.40 to the former. Vil-Rey alleged that under the first contract, it was able to finish 75.33% of the works, but that Lexber paid an amount equivalent to only 50% of the contract, thereby leaving a balance of PI,291,830 in Vil-Rey's favor. Furthermore, considering that almost 100% of the works were finished under the third contract, Vil-Rey had receivables of P668/728.40 representing the contract amount of P1,168,728.37 less the downpayment of P500,000. It also prayed for the payment of moral damages and attorney's fees. RTC ruled that they were liable. CA also ruled that they were liable but lowered the amount rewarded. Issue: Whether or not Villa-Rey violated the contract? Held: Yes they did. The parties clearly took on reciprocal obligations. These are obligations that arise from the same cause, such that the obligation of one is dependent upon that of the other. The reciprocal obligation in this case was Lexber's payment of the 50% balance upon Vil-Rey's completion of the works on or before 15 January 1997. However, despite the grant of extension until 31 January 1997, and even after the lapse of another five-day grace period, Vil-Rey failed to finish the works under the third contract. The law, according to civil code article 1167, provides that the obligation of a person who fails to fulfill it shall be executed at that person's cost.

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Note that, under the third contract, Vil-Rey shall acquire a surety bond from Stronghold equivalent to 50% of the contract price of P1,168,728.37 upon Lexber's downpayment of the same amount. Accordingly, on 24 December 1996, Vil-Rey secured the second surety bond in the amount of P584,364.19. On the same day, Lexber made a downpayment of only P500,000. Lexber did not pay the full 50% of the contract price for downpayment. Under article 1169 of the Civil Code provides that in reciprocal obligations, delay by one of the parties begins from the moment the other fulfills the obligation. In this case, Lexber is guilty of delay with regard to the amount of P84,364.19, which should be paid. The parties shall be allowed to compensate the amounts due them to the extent of their respective obligations.

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Florita Liam vs. United Coconut Planters Bank G.R. No. 194664 June 15, 2016 Topic: Interpretation of Contracts Facts: On April 11, 1996, Liam entered into a contract to sell with Primetown Property Group, Inc. (PPGI) for the purchase of a condominium unit of the latter’s Makati Prime City condominium project. The parties stipulated that the unit will be delivered not later than 35 months from the date of actual construction. PPGI obtained a loan from UCPB to finance the construction and thereafter transferred to UCPB its right to collect all receivables form condominium buyers, executed under a Memorandum of Agreement. PPGI notified Liam of the sale of its receivables to UCPB and directed her to remit any remaining balance to UCPB. PPGI further stated that the payment arrangement shall in no way cause any amendment nor the cancellation of the Contract to Sell. Liam wrote UCPB asking for the deferment of her amortization payments until the time of the delivery of the unit, which was delayed. Her requests were left unanswered. Thus, Liam demanded for the refund of all payments she made for PPGI’s failure to deliver the unit on the stipulated date. UCPB proposed a financing package to Liam for the full settlement of the balance of the purchase price. However, Liam saw UCPB’s advertisement offering to the public the sale of “ready for occupancy” units in Palm Tower of MPC condominium project at a much lower price. Liam requested UCPB to suspend the restructuring of her loan and instead asked for downgrading of her purchased unit to another unit equivalent in value to the total payments she already made. However, her requests remained unheeded. Liam filed a complaint for specific performance. PPGI denied receiving any demand from Liam and averred that she is already estopped from making any claims against PPGI because she agreed to the substitution of PPGI by UCPB. UCPB averred that it had no legal obligation to deliver the unit to Liam because it is not the developer of the project and is only a mere creditor of PPGI. It maintained that it only acquired PPGI’s right to collect its receivables from Liam and other condominium buyers. UCPB contends that the newspaper advertisement pertained to the units it acquired from PPGI as payment from the latter’s loan and did not have any connection with the contract to sell between Liam and PPGI. Issue: Whether or not the transaction between UCPB and PPGI was an assignment of credit? Held: The transaction between UCPB and PPGI was an assignment of credit and not subrogation. An assignment of credit is an agreement by virtue of which the owner of credit, by a legal cause, and without the consent of the debtor, transfers his credit and accessory rights to another who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor. It may at times be in the form of dation in payment, such as when a debtor, in

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order to obtain a release form his debt, assigns to his creditor a credit he has against a third person. The crucial distinction between assignment and subrogation deals with the necessity of the consent of the debtor in the original transaction. In assignment of credit, mere notice of the assignment and not consent is required. Meanwhile, in subrogation, agreement among the three parties concerned – the original creditor, the debtor, and the new creditor – is required. It is a new contractual relations based on the mutual agreement among all necessary parties. The terms of the MOA and Deed of Assignment show that the parties intended an assignment of PPGI’s credit in favor of UCPB. Article 1370 of the Civil Code provides that the primary consideration in determining the true nature of a contract is the intention of the parties. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of tis stipulation shall control. The provisions of the agreement between PPGI and UCPB are clear, explicit and unambiguous as to leave no doubt about their objective of executing an assignment of credit instead of subrogation. Therefore, UCPB should not be held liable for the obligation and liabilities of PPGI under its contract to sell with Liam, considering that the bank is a mere assignee of the rights and receivables under the agreement it executed with PPGI.

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Republic of the Philippines represented by the Department of Agriculture vs. Alberto Looyuko, doing business under the name and style of Noah's Ark Sugar Holdings and Wilson T. Go G.R. No. 170966 June 22, 2016 Topic Under: Compensation (under extinguishment of obligation) Facts: Due to the sugar crisis in 1985, President Ramos authorized the emergency importation of 100,000 metric tons of raw sugar from Thailand and Guatemala. National Sugar Refineries Corporation (Nasurefco) was tasked by the government through Department of Agriculture to handle the importation. Noah’s Ark Holding, along with two other refineries, were given allocations to process and refine raw sugar. Nasurefco contracted the services of Maubeni to source the raw sugar and deliver it to said refineries with the stipulation that in case of nondelivery, short-delivery or loss of raw sugar, the latter would be liable therefor. Noah’s Ark, represented by Wilson Go, executed a Refining Contract with Nasurefco. The delivery of Noah’s Ark’s allocation of raw sugar was never completed. Petitioner adduced evidence to the effect that there was a discrepancy between the registered weight at the port at the weighing scale at Noah’s Ark prompting Marubeni to suspend delivery. Nasurefco notified Noah’s Ark to recalibrate its weighing scale, which was done on December 1995. The recalibration was questioned by Noah’s Ark. Marubeni resumed delivery on January 1996 but respondents refused to accept the raw sugar. Petitioner demands delivery of the refined sugar withheld by respondents or payment of the peso value thereof plus damages. Respondents, on the other hand, take exception to any blame for the delay in the calibration of the weighing scale. They contend that it only took one day to recalibrate the same and petitioner had no justification to delay the delivery of the raw sugar. Respondents refused the delivery because of the inferior quality of the raw sugar due to the undue delay in delivery. Respondent demanded payment for damages Issue: Whether or not petitioner and respondents are entitled to actual or compensatory damages? Held: Petitioner obviously incurred delay in the performance of its obligation under the Refining Contract when it failed to complete its delivery of raw sugar to respondents in time for the scheduled withdrawal by petitioner of the refined sugar. It must be emphasized that it was petitioner who gave respondents a timetable within which the processed sugar was to be withdrawn, which was to start around the first week of December 1995. Evidently, petitioner should have completed its delivery of raw sugar to respondents before this date. The records of this case clearly show, however, that the delivery of raw sugar to respondents ended on February 14, 1996 without petitioner having delivered the entire sugar allocations due respondents under the Refining Contract.

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Both parties failed to present any persuasive proof that they are entitled to actual or compensatory damages. Their claims remain unsubstantiated and unproven. It is a fundamental principle of the law on damages that, while one injured by a breach of contract shall be awarded fair and just compensation commensurate with the loss sustained as a consequence of the defendant’s acts or omission, a party is entitled only to such compensation for the pecuniary loss that he has duly proven. Actual damages cannot be presumed and cannot be based on flimsy, remote, speculative and non-substantial proof. Neither petitioner nor respondent is thus entitled to actual or compensatory damages in this case. It is significant to note that the Refining Contract between petitioner and respondent did not state the amount of the contract which may be a basis for an award of actual damages. Considering the incomes to have been lost in the case at bar (80,000,000 pesos for petitioner and 52,000,000 for respondents), the Court deems the amount of 4,000,000 as temperate damages for each party reasonable under the circumstance. Article 1283 of the Civil Code provides that if one of the parties to a suit over an obligation has a claim for damages against the other, the former may set it off by proving his right to said damages and the amount thereof.

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Republic of the Philippines vs. Mega Pacific eSolutions Inc. G.R. No. 184666 June 27, 2016 Topic: Void Contracts; Fraud Facts: The COMELEC attempted to implement the automated election system for the 2004 elections. Respondent MPEI formed a joint venture with We Solv, SK C & C, ePLDT, Election.com, and Oracle known as the Mega Pacific Consortium (MPC). MPEI, on behalf of MPC, submitted its bid proposal for the procurement of supplies, equipment, and services for the automated election to COMELEC. After assessment and evaluation, the Bids and Awards Committee (BAC) recommended that the project be awarded to MPC, which the COMELEC favorably acted upon. Despite the award to MPC, COMELEC and MPEI executed the Automated Counting and Canvassing Project Contract where MPEI agreed to supply such equipment and materials necessary for the automated elections. The automation contract was not fully implemented because the Court, in its 2004 decision, declared the contract null and void. The Court held that the COMELEC committed grave abuse of discretion when it awarded the project to MPC, who did not participate in the bidding, and entered into the actual contract with MPEI, a company who joined the bidding process but did not meet the eligibility requirements. The Court also said that the essence of public bidding is violated when the COMELEC required the accuracy requirement of 99.9994 percent, an unrealistic specification that could not be met. Such scheme, which discourages the entry of bona fide bidders, is a sure indication of fraud in the bidding designed to eliminate fair competition. It was categorically ruled by the Court that the whole bidding process was void and fraudulent. Respondent MPEI filed a complaint for damages before the RTC Makati, claiming that COMELEC was still bound to pay the amount corresponding to the ACMs it delivered but remains unpaid notwithstanding the nullification of the automation contract. Petitioner argued that the unpaid balance from the void contract could no longer be recovered since the payments made were illegal disbursements of public funds. It contended that a null and void contract vests no rights and creates no obligations, and thus produces no legal effects at all. Petitioner prayed for the issuance of a writ of preliminary attachment to cause the attachment of the properties owned by MPEI in order to secure the petitioner’s interest and to ensure recovery of the payments it made to respondents for the invalidated automation contract. Issue: Whether or not the petitioner has sufficiently established fraud on the part of respondents to justify the issuance of a writ of preliminary attachment in its favor? Held: A writ of preliminary attachment should issue in favor of petitioner over the properties of respondents. Fraud on the part of Respondents has been established. The provisional remedy of attachment is available in order that the defendant may not dispose of the property attached, and thus prevent the satisfaction of any judgment that may be secured by the plaintiff from the former. Section 1 (d), Rule 57 of the Rules of Court provides attachment may issue there is fraud in contracting the debt or in the performance thereof. The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. In the case at bar, the petitioner has sufficiently discharged the burden of demonstrating the commission of fraud by respondent in the execution 31

of automation contract in two ways: (a) respondent MPEI had perpetrated a scheme against petitioner to secure the automation contract by using MPC as supposed bidder and eventually succeeding in signing the automation contract as MPEI alone, and entity which was ineligible to bid in the first place and; (b) fraud on the part of respondent MPEI was further shown by the fact that despite the failure of its ACMs to past the tests conducted by the DOSY, respondent still acceded to being awarded the automation contract. These circumstances reveal respondent’s ploy to gain undue advantage over other bidders in general, even to the extent of cheating the government.

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Nympha Odiamar vs Linda Odiamar Valencia G.R. No. 213582 June 28, 2016 Topic: Extinguishment of Contracts; Novation Facts: On August 20, 2003, respondent filed a complaint for sum of money and damages against petitioner, alleging that the latter owed her P2,100,000.00. Petitioner purportedly issued a Check for the said amount to guarantee the payment of the debt, but upon presentment, the same was dishonored. For her part, petitioner sought the dismissal of the complaint on the ground that it was her deceased parents who owed respondent money. Accordingly, respondent's claim should be filed in the proceedings for the settlement of their estates. Petitioner averred that respondent had, in fact, participated in the settlement proceedings and had issued a certification stating that it was petitioner's deceased parents who were indebted to respondent for P2,000,000.00. Respondent countered that petitioner personally borrowed almost half of the P2,100,000.00 from her, as evidenced by the check which she issued after agreeing to settle the same in installments. While respondent conceded that petitioner made several installment payments from December 29, 2000 until May 31, 2003, she pointed out that the latter failed to make any succeeding payments. She also denied participating in settlement proceedings and making said certification. RTC and CA ruled that petitioner was liable in view of her admission that she borrowed money from the respondent several times. RTC even ruled that a novation took place in view of her assuming the liability of her deceased parents and agreeing to pay their debt in installments which she in fact paid from December 29, 2000 to May 31, 2003. CA concurred with the RTC that novation took place insofar as petitioner was substituted in place of petitioner's late parents, considering that petitioner undertook to pay her deceased parents' debt. However, the CA opined that there was no novation with respect to the object of the contract, following the rule that an obligation is not novated by an instrument which expressly recognizes the old obligation and changes only the terms of paying the same, as in this case where the parties merely modified the terms of payment of the P2,100,000.00 Issue: Whether or not respondent should be liable for the whole debt amounting to 2.1 Million PHP because novation took place? Held: No she is not and novation did not take place. At the outset, it must be emphasized that the fact of petitioner's liability to respondent is wellestablished. As correctly pointed out by the RTC and the CA, while respondent acknowledged that petitioner's deceased parents owed her money, petitioner also admitted obtaining loans from respondent. However, based on the records of this case, respondent, for her part, admitted that petitioner's deceased parents owed her P700,000.00 of the P2,100,000.00 debt and that petitioner owed her P1,400,000.00 only. Thus she is liable for her part only.

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At this juncture, the Court finds it apt to correct the mistaken notions that: (a) novation by substitution of the debtor took place so as to release the estates of the petitioner's deceased parents from their obligation, which, thus, rendered petitioner solely liable for the entire P2,100,000.00 debt; and (b) the P100,000.00 of the P2,100,000,00 debt was in the nature of accrued monetary interests. The Court held that to constitute novation by substitution of debtor, the former debtor must be expressly released from the obligation and the third person or new debtor must assume the former's place in the contractual relations. Moreover, the Court ruled that the "fact that the creditor accepts payments from a third person, who has assumed the obligation, will result merely in the addition of debtors and not novation. At its core, novation is never presumed, and the animus novandi, whether totally or partially, must appear by express agreement of the parties, or by their acts that are too clear and unequivocal to be mistaken. Here, the intent to novate was not satisfactorily proven by respondent. At best, petitioner only manifested her desire to shoulder the debt of her parents, which, as above-discussed, does not amount to novation. Thus, the courts a quo erred in holding petitioner liable for the debts obtained by her deceased parents on account of novation by substitution of the debtor.

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Jennefer Figuera vs. Maria Remedios Ang G.R. No. 204264 June 29, 2016 Topic: Tender of Payment and Consignation; Novation Facts: Maria Remedios Ang (Ang) is the registered owner of a single proprietorship business named "Enhance Immigration and Documentation Consultants" (EIDC). On December 16, 2004, Ang executed a "Deed of Assignment of Business Rights" (Deed) transferring all of her business rights over the EIDC to Figuera for One Hundred Fifty Thousand Pesos (P150,000.00). In addition to the assignment of rights, the parties also agreed that Ang shall pay the bills for electricity, telephone, office rentals, and the employees' salaries up to the month of December 2004. Without Ang's consent, Figuera paid all the utility bills amounting to P107,903.21 as of December 2004. On January 17, 2005, Figuera tendered only the amount of P42,096.79 to Ang, after deducting the amount paid for the utility bills from the P150,000.00 consideration of the Deed. Ang refused to accept Figuera's payment. Figuera mailed the Formal Tender of Payment and gave Ang five (5) days to accept the amount. Despite the lapse of the 5-day period, however, Ang still refused to accept the payment. Thus, Figuera filed a complaint for specific performance before the Regional Trial Court (RTC), Branch 9 of Cebu City against Ang. Figuera consigned the amount of P42,096.79 to the RTC. In her answer, Ang maintained that the amount due pursuant to the Deed is P150,000.00 and not just P42,096.79. She argued that she cannot be compelled to accept the amount because it is not what was agreed upon. Issue: Whether or not there was a valid tender of payment and consignation? Held: YES. Article 1291 of the New Civil Code provides that the subrogation of a third person to the rights of the creditor is one of the means to modify obligations. Subrogation, sometimes referred to as substitution, is "an arm of equity that may guide or even force one to pay a debt for which an obligation was incurred but which was in whole or in part paid by another." It transfers to the person subrogated the credit, with all the rights appertaining thereto, either against the debtor or against third persons. Subrogation of a third person in the rights of a creditor may either be legal or conventional. There is legal subrogation when: (a) a creditor pays another preferred creditor, even without the debtor's knowledge; (b) a third person who is not interested in the obligation pays with the express or tacit approval of the debtor; and (c) a person interested in the fulfilment of the obligation pays, even without the knowledge of the debtor. In the present case, Figuera based her claim on the third type of subrogation. She claims that as the EIDC's new owner, she is interested in fulfilling Ang's obligation to pay the utility bills. Since the payment of the bills was long overdue prior to the assignment of business rights to Figuera, the failure to settle the bills would eventually result in "the disconnection of the electricity and telephone services, ejectment from the office premises, and resignation by some, if not all, of the company's employees with the possibility of subsequent labor claims for sums of money." These utilities are obviously necessary for the continuation of Figuera's business transactions. A person interested in the fulfilment of the obligation is one who stands to be benefited or injured in the enforcement of the obligation. The Court agrees with Figuera that it became absolutely necessary for her to pay the bills since Ang did not do so when the obligation became due. Moreover, the consent or approval of the debtor is required only if a third person who is not interested in the

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fulfillment of the obligation pays such. On the other hand, no such requirement exists in cases of payment by a creditor to another creditor who is preferred, and by a person interested in the fulfillment of the obligation. Notably, Article 1302 (1) and (3) does not require the debtor's knowledge. Therefore, legal subrogation took place despite the absence of Ang's consent to Figuera's payment of the EIDC bills. Figuera is now deemed as Ang's creditor by operation of law. Thus, Figuera's tender of the remaining amount to Ang is valid and Ang offered no valid justification in refusing to accept the tender of payment. Due to the creditor's refusal, without any just cause, to the valid tender of payment, the debtor is released from her obligation by the consignation of the thing or sum due.

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Trifonia D. Gabutan, et al. Vs. Dante D. Nacalaban, et al./Dante D. Nacalaban, et al. Vs. Trifonia D. Gabutan, et al. G.R. NOS. 185857-58/G.R. NOS. 194314-15 June 29, 2016 Topic: General Provisions on Contracts; Implied trusts Facts: On January 25, 1957, Godofredo Nacalaban (Godofredo) purchased an 800-square meter parcel of prime land (property) in Poblacion, Cagayan de Oro City. Pursuant to the sale, Transfer Certificate of Title (TCT) No. T-2259covering the property was issued in the name of Godofredo. He thereafter built a house on it. Godofredo died on January 7, 1974. He was survived by his wife, Baldomera, and their children, Dante, Helen, and Susan. On March 19, 1979, Baldomera issued a Certification in favor of her mother, Melecia. It provided, in effect, that Baldomera was allowing her mother to build and occupy a house on the portion of the property. Accordingly, the house was declared for taxation purposes. The tax declaration presented in evidence showed that Melecia owned the building on the land owned by Godofredo.

Baldomera died on September 11, 1994. On July 3, 1996, her children executed an Extrajudicial Settlement with Sale where they adjudicated unto themselves the property and sold it to Cagayan Capital College. On August 22, 1996, TCT No. T-2259 was cancelled and TCT No. T-111846 covering the property was issued in the name of the College. Melecia died and was survived by her children who continued living in the house, Gabutan was one of these children. College demanded that said heirs vacate the premises. On July 7, 1997, Gabutan, et al. filed a Complaint for Reconveyance of Real Property, Declaration of Nullity of Contracts, Partition and Damages with Writ of Preliminary Attachment and Injunction against Nacalaban, et al. and the College. They alleged that: (1) Melecia bought the property using her own money but Godofredo had the Deed of Absolute Sale executed in his name instead of his mother-in-law;(2) Godofredo and Baldomera were only trustees of the property in favor of the real owner and beneficiary, Melecia;(3) they only knew about the Extrajudicial Settlement with Sale upon verification with the Registry of Deeds;and (4) the College was a buyer in bad faith, being aware they were co-owners of the property. Issues: 1. Whether or not the action for reconveyance is proper? 2. Whether or not the college is a buyer in good faith? Held: 1. Gabutan, et al., through the testimonies of Felisia, Crisanta, and Trifonia, established that Melecia's money was used in buying the property, but its title was placed in Godofredo's name.

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She purchased the property because Felisia wanted to build a pharmacy on it. On one occasion in Melecia's house, and when the entire family was present, Melecia gave Godofredo the money to purchase the property. Melecia entrusted the money to Godofredo because he was in Cagayan de Oro, and per Melecia's instruction, the deed of sale covering the property was placed in his name. It was allegedly her practice to buy properties and place them in her children's name, but it was understood that she and her children co-own the properties. Melecia built a residential building on the property, where her daughter Crisanta and some of her grandchildren resided. Godofredo also thereafter built a house on the property. Twice, he also mortgaged the property to secure loans. Melecia allowed him to do so because she trusted him. After Godofredo's death, and when Baldomera fell ill, there were family discussions to transfer the title in Melecia's name so Melecia's children can divide it together with the rest of Melecia's properties. The plans, however, always fell through. Article 1448 of the Civil Code provides in part that there is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. The trust created here, which is also referred to as a purchase money resulting trust, occurs when there is (1) an actual payment of money, property or services, or an equivalent, constituting valuable consideration; (2) and such consideration must be furnished by the alleged beneficiary of a resulting trust. These two elements are present here. Having established the creation of an implied resulting trust, the action for reconveyance filed by Gabutan, et al., the heirs of Melecia in whose benefit the trust was created, is proper. An action for reconveyance is a legal and equitable remedy granted to the rightful landowner, whose land was wrongfully or erroneously registered in the name of another, to compel the registered owner to transfer or reconvey the land to him. 2. College is not a buyer in good faith. To prove good faith, a buyer of registered and titled land need only show that he relied on the face of the title to the property. He need not prove that he made further inquiry for he is not obliged to explore beyond the four corners of the title. Such degree of proof of good faith, however, is sufficient only when the following conditions concur: first, the seller is the registered owner of the land; second, the latter is in possession thereof; and third, at the time of the sale, the buyer was not aware of any claim or interest of some other person in the property, or of any defect or restriction in the title of the seller or in his capacity to convey title to the property. Thus, the College, which has the burden to prove the status of being a purchaser in good faith, is required to prove the concurrence of the above conditions. This onus probandi cannot be discharged by mere invocation of the legal presumption of good faith.We find that the College failed to discharge this burden. They knew that the heirs of Melecia lived on the property yet did not conduct a proper inquiry into it. The "honesty of intention" which constitutes good faith implies a freedom from knowledge of circumstances which ought to put a person on inquiry. If the land purchased is in the possession of a person other than the vendor, the purchaser must be wary and must investigate the rights of the actual possessor. Without such inquiry, the purchaser cannot be said to be in good faith and cannot have any right over the property.

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JULY 2016 July 5, 2016  Century Properties, Inc. vs. Edwin J. Babiano and Emma B. Concepcion G.R. No. 220978 July 13, 2016  Phil-Nippon Kyoei, Corp. vs. Rosalia T. Gudelosao, et al. G.R. No. 181375

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JULY 2016 Century Properties, Inc. v. Edwin J. Babiano G.R. No. 220978 July 5, 2016 Topic: Interpretation of Contracts Facts: Babiano was hired by CPI as Director of Sales, and was eventually appointed as Vice President for Sales. His employment contract also contained a “Confidentiality of Documents and Non-Compete Clause” which, among others, barred him from disclosing confidential information and from working in any business enterprise that is in direct competition with CPI while he is employed and for a period of one year from date of his resignation or termination from CPI. Should he breach any of the terms thereof, his forms of compensation, including commissions and incentives will be forfeited. After receiving reports that Babiano provided a competitor with information regarding CPI's marketing strategies, spread false information regarding CPI and its projects, recruited CPI's personnel to join the competitor, and for being AWOL for five days, CPI sent Babiano a Notice to Explain directing him to explain why he should not be charged with disloyalty, conflict of interest, and breach of trust and confidence for his actuations. Babiano tendered his resignation and revealed that he had been accepted as Vice President of First Global, a competitor of CPI. On March 3, 2009, Babiano was served a Notice of Termination for: (a) incurring AWOL; (b) violating the "Confidentiality of Documents and Non-Compete Clause" and (c) recruiting CPI personnel to join a competitor. On the other hand, Concepcion resigned as CPI's Project Director. Respondents filed a complaint for non-payment of commissions and damages against CPI before the NLRC. For its part, CPI maintained to have validly withheld Babiano's commissions, considering that they were deemed forfeited for violating the "Confidentiality of Documents and Non-Compete Clause." Issue: Whether or not CA erred in holding petitioner liable for the unpaid commissions of respondent? Held: Petitioner is not liable for the unpaid commissions of respondent. Article 1370 of the Civil Code provides 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 stipulations shall control." Thus, in the interpretation of contracts, the Court must first determine whether a provision or stipulation therein is ambiguous. Absent any ambiguity, the provision on its face will be read as it is written and treated as the binding law of the parties to the contract. In the case at bar, CPI primarily invoked the "Confidentiality of Documents and Non-Compete Clause" found in Babiano's employment contract to justify the forfeiture of his commissions The foregoing clause is not only clear and unambiguous in stating that Babiano is barred to work for whatsoever capacity with any person whose business is in direct competition with CPI while employed and for a period of one year from date of resignation or termination from the company, 40

it also expressly provided in no uncertain terms that should Babiano breach any term of the employment contract, forms of compensation including commissions and incentives will be forfeited. Indubitably, obligations arising from contracts, including employment contracts, have the force of law between the contracting parties and should be complied with in good faith. Corollary thereto, parties are bound by the stipulations, clauses, terms, and conditions they have agreed to, provided that these stipulations, clauses, terms, and conditions are not contrary to law, morals, public order or public policy, as in this case. A judicious review of the records reveals that in his resignation, Babiano categorically admitted to CPI Chairman Jose Antonio that on February 12, 2009, he sought employment from First Global, and five days later, was admitted thereto as vice president. From the foregoing, it is evidently clear that when he sought and eventually accepted the said position with First Global, he was still employed by CPI as he has not formally resigned at that time. This is a glaring violation of the "Confidentiality of Documents and Non-Compete Clause" in his employment contract with CPI, thus, justifying the forfeiture of his unpaid commissions.

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Phil-Nippon Kyoei, Corp. Vs. Rosalia T. Gudelosao, et al. G.R. No. 181375 July 13, 2016 Topic Under: Solidary Obligation Facts: Petitioner, a domestic shipping corporation, purchased passenger/cargo vessel MV Mahlia in Japan. Petitioner, as local principal, and TMCL, as foreign principal, hired respondents as crew members for the vessel’s on month conduction voyage from Japan to the Philippines. They were hired through the local manning agency of TMCL, TEMMPC. The crew members signed separate contracts of employment. Petitioner secured a Marine Insurance Policy from SSSICI over the vessel for 10,800,000 against loss, damage, and third part liability or expense arising from occurrence of perils of the sea during the voyage. The insurance policy included Personal Accident Policies for the eight members for 3,240,000 each in case of accidental death or injury. While still within Japanese waters, the vessel sank due to bad weather condition. Only the chief engineer survived the incident. The heirs of the crew members filed separate complaints for death benefits and other damages. The Labor Arbiter found solidary liability among petitioner, TEMMPC, TMCL, and Capt. Orbeta. The LA also found SSSICI liable to the respondents for the proceeds of the Personal Accident Policies and attorney’s fees. The LA ruled that the liabilities of petitioner shall be extinguished only upon SSSICI’s payment of insurance proceeds. The NLRC modified the ruling of LA. It absolved petitioner, TEMMPC, TMCL, and Capt. Orbeta from any liability while it affirmed SSSICI’s liability after finding that the Personal Accident Policies answer for the death benefit claims under the POEA Standard Employment Contract. CA reinstated the LA’s ruling. The CA also granted the motion to dismiss filed by TEMMPC and TMCL based on the execution of the Release of All Rights and Full Satisfaction Claim (Release and Quitclaim) on December 14, 2007 between respondents and TEMMPC, TMCL, and Capt. Orbeta. Issue: Whether petitioner is solidarily liable with TEMMPC and TMCL? Held: Petitioner is solidarily liable with TEMMPC and TMCL for the death benefits under the POEA-SEC. The basis of the solidary liability of the principal with the local manning agent is found in the second paragraph of Section 10 of the Migrant Workers and Overseas Filipino Act of 1995, which, in part, provides: "the liability of the principal/employer and the recruitment/placement agency for any and all claims under this section shall be joint and several." This provision, is in turn, implemented by Section 1 ( e )(8), Rule 2, Part II of the POEA Rules and Regulations Governing the Recruitment and Employment of Seafarers, which requires the undertaking of the manning agency to "assume joint and solidary liability with the employer for all claims and liabilities which may arise in connection with the implementation of the employment contract." The Civil Code provisions on solidary obligations, specifically Articles 121756 and 1222, has been consistently applied to labor cases. The Court explained the nature of the solidary liability in labor cases in Varorient Shipping Co., Inc. v. NLRC: Each of the solidary debtors, insofar as the creditors are concerned, is the debtor of the entire amount; it is only with respect to his co-debtors that he/she is liable to the extent of

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his/her share in the obligation. Such being the case, the Civil Code allows each solidary debtor, in actions filed by the creditor/s, to avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertaining to his share. Thus, the rule is that the release of one solidary debtor redounds to the benefit of the others. Considering that petitioner is solidarily liable with TEMMPC and TMCL, the Release and Quitclaim executed by respondents in favor of TEMMPC and TMCL redounded to petitioner's benefit. Accordingly, the liabilities of petitioner under Section 20(A)(l) and (4)(c) of the POEASEC to respondents are now deemed extinguished. However, this pronouncement does not foreclose the right of reimbursement of the solidary debtors who paid (i.e., TEMMPC and TMCL) from petitioner as their co-debtor.

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AUGUST 2016 August 1, 2016  Bonifacio Dana vs. Spouses Gregorio Serrano and Adelaida Reyes G.R. No. 195072 August 3, 2016  Ever Electrical Manufacturing, Inc. Vicente C. Go and George C. Go vs. Philippine Bank of Communications (PBCOM) G.R. Nos. 187822-23 

Teresita I. Buenaventura vs. Metropolitan Bank and Trust Company G.R. No. 167082

August 17, 2016 ● Development Bank of the Philippines vs. Clarges Realty Corporation G.R. No. 170060 ● AFP Retirement and Separation Benefits System (AFPRSBS) vs. Eduardo Sanvictores G.R. No. 207586 ● Spouses Juan Chuy Tan and Mary Tan Susbtituted by Surviving Heirs Joel Tan and Eric Tan vs. China Banking Corporation G.R. No. 200299 August 31, 2016 ● Sta. Fe Realty, Inc. and Victoria Sandejas Fabregas vs. Jesus M. Sison G.R. No. 199431

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Bonifacio Dana vs. Spouses Gregorio Serrano and Adelaida Reyes G.R. No. 195072 August 1, 2016 Topic: Rescissible Contracts Facts: Respondents Gregorio Serrano and Adelaida Reyes (Spouses Serrano) are the registered owners of a parcel of land. Sometime in the years 1940 and 1950, when the property was still coowned by respondent Gregorio and his siblings, Gregorio's sisters, Marciana and Felicidad, gave petitioner Bonifacio Dana and a certain Artemio Vitug permission to possess 400 square meters each of the total estate and to build their homes thereon in exchange for one cavan of palay every year. Thereafter, in separate documents denominated as "Agreement in Receipt Form" dated June 27, 1976, Gregorio sold to Bonifacio and Artemio their respective 400-square-meter portions of the property. The documents of sale provide for the purchase price of P6,000 payable in three equal payments of P2,000 with the first installment to be paid upon execution of Conditional Deed of Sale on July 2, 1976. The succeeding installments were due on or before June 30, 1977 and June 30, 1978. It is further agreed that in June 1978, upon the completion of the full payment of the agreed price, the vendor will deliver to the vendee a title corresponding to the lot or portion sold. While Bonifacio and Artemio paid the P2,000.00 upon the signing of the Agreement, they were both unable to pay the balance of the purchase price when they fell due on June 30, 1977 and June 30, 1978. Nevertheless, they remained in possession of their respective Lots. On September 10, 1998, the Spouses Serrano instituted ejection proceedings against Bonifacio and Artemio. The complaint, however, was dismissed on the ground of lack of jurisdiction by the Municipal Trial Court. On November 3, 1998, a complaint for Specific Performance was filed by Bonifacio and Artemio alleging that they purchased their respective portions of land via the Agreement in Receipt Form dated June 27, 1976 and since then, stopped paying the yearly rental of one cavan of palay. While they admitted to their failure to pay the remaining balance of the purchase price in the amount of P4,000.00, they claimed that such was due to the continuous absence of the Spouses Serrano. As special and administrative defenses, the Spouses Serrano raised prescription, alleging that any right of action, if any, arising from the agreements dated June 27, 1976, had long prescribed when the complaint was filed in 1998. The RTC granted the Complaint of Bonifacio and Artemio and ordered the Spouses Serrano to execute and sign the proper Deed of Sale, deliver the corresponding titles after receiving the P4,000.00 balance. The CA, however, reversed and set aside the RTC Decision finding that the trial court seemed to have failed to properly determine the true nature of the agreement between the parties. This is because by the express terms of the agreement, the title was reserved and remained with the Spouses Serrano, to be transferred only when Bonifacio and Artemio paid the last installment of the purchase price in June 1978. The failure by Bonifacio and Artemio to pay prevented the obligation of the Spouses Serrano to convey the title from acquiring binding force. In the instant petition, Bonifacio argues that since he did not receive any formal demand from the

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Spouses Serrano, he did not incur delay. In addition, Bonifacio also raises the provisions of Republic Act (RA) No. 6552, otherwise known as the Realty Installment Buyer Protection Act, insofar as his rights as a buyer of real property are concerned. Issue: Whether or not the cancellation of Contract to Sell made by Spouses Serrano conforms to the requirement prescribed under RA 6552? Held: No. There is no showing that the Spouses Serrano complied with the requirements prescribed by RA 6552. A cursory reading of the "Agreement in Receipt Form" would readily reveal that the same is a contract to sell and not a contract of sale. As expressly stipulated therein, the parties "agreed that in June 1978, upon the completion of the full payment of the agreed price, the herein vendor will deliver to the vendee a title corresponding to the lot or portion sold." Clearly, the title to the property was to remain with the Spouses Serrano, to pass only to Bonifacio until his full payment of the purchase price. It is imperative to note, however, that in view of the nature of the agreement herein, a contract to sell real property on installment basis, the provisions of RA No. 6552 must be taken into account insofar as the rights of the parties in cases of default are concerned.

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Ever Electrical Manufacturing, Inc. Vicente C. Go and George C. Go vs. Philippine Bank of Communications (PBCOM) G.R. Nos. 187822-23 August 3, 2016 Topic: Novation Facts: On December 13, 2002, Ever, represented by Vicente, took out a loan from PBCom in the amount of P65,000,000.00 for its working capital. As security, Ever mortgaged two parcels of land. On February 14, 2003, the parties entered into a compromise agreement whereby Vicente voluntarily undertook to pay for Ever's loan with PBCom. Under the terms of the compromise agreement, Vicente would make partial payments as stated in the promissory note with a caveat that any failure on his part to pay the installment due would make the whole amount immediately demandable. However, Vicente was not able to make the necessary payments as stipulated in the compromise agreement. PBCom, thus, filed with the RTC a motion for execution. PBCom alleged that Vicente violated the terms of the compromise agreement for non-payment of installments from September to December 2003 and the first quarter of 2004. It prayed that a writ of execution be issued per the terms of the compromise agreement. Issue: Whether or not there was novation of the Partial Judgment dated July 23, 2001? Held: Novation is never presumed. It must be established that the old and new contracts are incompatible on all points, or that the will to novate appear by express agreement of the parties or acts of equivalent import. In the absence of an express provision, a contract may still be considered novated impliedly if it passes the test of incompatibility, that is, whether the contracts can stand together, each one having an independent existence. In the early case of Santos v. Reyes, et al., the Court held that there was no novation where under the original contract consisting of a principal debtor and a surety, the latter subsequently made an agreement with the creditor to be bound as a principal for the same obligation. There, the Court stated that there can be no effective novation if the contract was not extinguished by an instrument subsequently executed therefor.

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Teresita I. Buenaventura vs. Metropolitan Bank and Trust Company G.R. No. 167082 August 3, 2016 Topic: General Provisions on Contracts Facts: On January 20, 1997 and April 17, 1997, Teresita Buenaventura executed Promissory Notes in the amount of P1,500,000.00 and payable to Metropolitan Bank and Trust Company . Both PNs provide for penalty of 18% per annum on the unpaid principal from date of default until full payment of the obligation. Despite demands, there remained unpaid amounts of P2,061,208.08 and PI,492,236.37. Consequently, appellee filed an action against appellant for recovery of said amounts, interest, penalty and attorney's fees. In answer, appellant averred that in 1997, she received from her nephew, Rene Imperial three postdated checks drawn against appellee in the amount of PI,200,000.00, Check No. 1270482455PA dated March 31, 1998 in the amount of PI,197,000.00 and Check No. TA1270482451PA dated March 31, 1998 in the amount of P500,000.00 as partial payments for the purchase of her properties; that she rediscounted the subject checks with appellee (Timog Branch), for which she was required to execute the PNs to secure payment thereof; and that she is a mere guarantor and cannot be compelled to pay unless and until appellee shall have exhausted all the properties of Imperial. Issue: Whether or not petitioner is liable under the promissory notes? Held: As a rule, indeed, the contract of adhesion is no different from any other contract. Its interpretation still aligns with the literal meaning of its terms and conditions absent any ambiguity, or with the intention of the parties. The terms and conditions of the promissory notes involved herein, being clear and beyond doubt, should then be enforced accordingly. Accordingly, no court, even this Court, can "make new contracts for the parties or ignore those already made by them, simply to avoid seeming hardships. Neither abstract justice nor the rule of liberal construction justifies the creation of a contract for the parties which they did not make themselves or the imposition upon one party to a contract of an obligation not assumed. The CA was correct. A contract of guaranty is one where a person, the guarantor, binds himself or herself to another, the creditor, to fulfill the obligation of the principal debtor in case of failure of the latter to do so. It cannot be presumed, but must be express and in writing to be enforceable, especially as it is considered a special promise to answer for the debt, default or miscarriage of another. It being clear that the promissory notes were entirely silent about the supposed guaranty in favor of Imperial, we must read the promissory notes literally due to the absence of any ambiguities about their language and meaning. In other words, the petitioner could not validly insist on the guaranty. Under such established circumstances, she was directly and personally liable for the obligations under the promissory notes.

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Development Bank of the Philippines v. Clarges Realty Corporation G.R. No. 170060 August 17, 2016 Topic: Extinguishment of Obligations; Loss of the Thing Due Facts: Marinduque Mining and Industrial Corporation mortgaged a Makati City property to Caltex Philippines, Inc. to secure a loan. A second mortgage was constituted over the property, this time in favor of the Development Bank of the Philippines (DBP) and the Philippine National Bank (PNB). When Marinduque Mining and Industrial Corporation failed to pay its loan obligations, the DBP and the PNB jointly instituted extrajudicial foreclosure proceedings over the property. The mortgagee banks emerged as the highest bidders during the public sale but were unable to redeem the property because of Caltex Philippines, Inc.’s first mortgage. First mortgagee Caltex then foreclosed its mortgage on the property. As second mortgagee, the DBP redeemed the property from Caltex and such property formed part of DBP’s physical assets. The DBP offered the property for public sale, where Clarges Realty Corporation emerged as the highest bidder. Clarges offered P24,070,000.00 as payment for the property. The DBP, as vendor, and Clarges, as vendee, executed a Deed of Absolute Sale. The DBP bound itself under Clause 6 of the Deed of Absolute Sale to deliver a title to the property “free from any and all liens and encumbrances on or before December 15, 1987.” The DBP succeeded in having the property registered under its name, however the title contained annotations, specifically the mortgage lien of the PNB and a tax lien for unpaid taxes incurred by Marinduque Mining and Industrial Corporation. The DBP delivered to Clarges the owner’s duplicate TCT with the mortgage and tax liens still annotated on it. Clarges demanded a clean title but the DBP failed to deliver it. Clarges then filed before the RTC of Makati a complaint for specific performance and damages, praying that the DBP be ordered to deliver a title to the property free of liens and encumbrances as agreed upon in Clause 6 of the Deed of Absolute Sale. The DBP answered, contending that Clarges had no cause of action. Clarges allegedly knew that the payment of the tax liability and the corresponding cancellation of the tax lien had devolved to the Asset Privatization Trust (APT) after the latter acquired the assets of the Marinduque Mining and Industrial Corporation under Proclamation No. 50. Trial on the merits ensues. Clarges had the mortgage lien cancelled. DBP and the APT had the tax lien partially cancelled, with the tax liability reduced. A new TCT was issued under the name of Clarges but there was still an annotation of the reduced tax lien. DBP moved for leave of court to file a third-party complaint against the APT as it maintained that the latter had assumed direct and personal obligation to pay for Marinduque Mining and Industrial Corporation’s tax liability and to have the partially reduced tax lien cancelled. The trial court denied the Motion for Leave. The RTC ruled in favor of Clarges and granted the complaint for specific performance and damages. It found that the DBP breached Clause 6 of the Deed of Absolute Sale. Regardless of whether the APT undertook to have the tax lien cancelled, the RTC held that Clarges could only demand the delivery of a clean title from the DBP under the principle of relativity of contracts. The DBP elevated the case to the Court of Appeals, but the CA only affirmed with modification the trial court’s decision. The CA held that compliance with Clause 6 cannot be made to depend on the willingness - or lack thereof - of the APT to assume the obligation of having the tax lien cancelled, the APT being a non-party to the contract of sale. The DBP then filed before the Supreme Court this

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petition. The DBP insists that the APT acquired the assets of the now defunct Marinduque Mining and Industrial Corporation and by operation of law, the APT assumed the obligations and liabilities attached to these assets. Thus, it became legally and physically impossible for petitioner to deliver a clean title to respondent since the obligation had devolved to the APT. Issue: Whether or not the DBP should be held liable for breach of Clause 6 of the Deed of Absolute Sale, notwithstanding APT’s acquisition of liabilities attached to the assets of Marinduque Mining and Industrial Corporation? Held: Yes. While the Asset Privatization Trust would have been a valid third-party defendant as it acquired the liabilities attached to the assets of Marinduque Mining and Industrial Corporation, the DBP may not escape its obligation to deliver a clean title to the property to Clarges. Petitioner may ask the APT for contribution for the payment of the unpaid tax, but it need not wait for such contribution to fulfill its existing obligation. The DBP, as mortgagee of the property, can very well pay the tax liability and cause the cancellation of the tax lien. There was no legal impossibility to speak of. The DBP cannot invoke Articles 1266 and 1267 of the Civil Code. These provisions - which release debtors from their obligations if they become legally or physically impossible or so difficult to be manifestly beyond the contemplation of the parties only apply to obligations to do. They do not apply to obligations to give as when a party is obliged to deliver a thing which, in this case, is a certificate of title to a real property free from liens and encumbrances. Interestingly, petitioner contends that it would have been liable for violating the Anti-Graft and Corrupt Practices Act if it paid the tax liability of Marinduque Mining and Industrial Corporation to cancel the tax lien on the property. Such argument is untenable as a lien is a legal claim or charge on property, either real or personal, as a collateral or security for the payment of some debt or obligation. A lien, until discharged, follows the property. When the DBP acquired the property, it also acquired the liabilities attached to it, among them the tax liability to the BIR. Thus, should petitioner pay the remaining tax liability on the property, it would not be paying the taxes of a private corporation but it would be paying the liability attached to its own property. The DBP cannot escape liability in this case.

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AFP Retirement and Separation Benefits System (AFPRSBS) v. Eduardo Sanvictores G.R. No. 207586 August 17, 2016 Topic: Different Kinds of Obligations; Joint and Solidary Obligations Facts: Sometime in 1994, PEPI, formerly Antipolo Properties, Inc., offered to Eduardo Sanvictores for sale on installment basis a parcel of land in Village East Executive Homes designated as Lot 5, Block 64, Phase II, situated in Tayuman, Pantok, Binangonan, Rizal. Sanvictores paid the required downpayment. A Contract to Sell was executed by and between PEPI and AFP Retirement and Separation Benefits System (AFPRSBS), as the seller, and Sanvictores, as the buyer. In 1999, Sanvictores paid the full purchase price. Despite full payment, PEPI and AFPRSBS failed to execute the corresponding deed of absolute sale on the subject property and deliver the corresponding title thereto. In 2000, Sanvictores demanded from PEPI the execution of the deed of sale and the delivery of the transfer certificate of title. PEPI claimed that the title was still with the Philippine National Bank (PNB) and could not be released due to economic crisis. Sanvictores followed up with PEPI but the latter did not communicate with Sanvictores for a period of 4 years. Sanvictores then filed a complaint for rescission of the contract to sell, refund of payment, damages, and attorney’s fees against PEPI and AFPRSBS before the HLURB. AFPRSBS countered that it was not the owner and developer of Village East Executive Homes but PEPI, that PEPI alone was the seller, and that the signatory to the contract, Norma Espina, was neither the treasurer nor the authorized representative of AFPRSBS but the Treasurer of PEPI. The HLURB Arbiter rendered a decision in favor of Sanvictores and ordered PEPI and AFPRSBS to pay jointly and severally the complainant. On appeal of PEPI and AFPRSBS, the HLURB Board affirmed the decision of the Arbiter. The OP upheld the decision of the HLURB Board, holding that PEPI and AFPRSBS should indeed be jointly and severally liable because PEPI and AFPRSBS were referred to singly as the seller in the contract and there were no delineations whatsoever as to their rights and obligations. AFPRSBS filed a petition for review before the CA. The appellate court merely affirmed the decision of the OP and echoed the view that the two liable entities ought to be jointly and severally liable as they came to the contracting table with the intention to be bound jointly and severally. The CA concluded that the nature of the obligation of PEPI and AFPRSBS under the subject contract was solidary pursuant to Article 1207 of the Civil Code. Issue: Whether or not petitioner AFPRSBS is jointly and severally liable with PEPI to Sanvictores? Held: Yes. In Spouses Berot v. Siapno, the Court defined solidary obligation as one in which each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. On the other hand, a joint obligation is one in which each debtor is liable only for a proportionate part of the debt, and the creditor is entitled to demand only a proportionate part of the credit from each debtor. The well-entrenched rule is that solidary obligations cannot be inferred lightly. They must be positively and clearly expressed. Article 1207 of the Civil Code does not presume solidary liability unless the obligation expressly so states or the law or the nature of the obligation

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requires solidarity. In the case at bar, there is no doubt that the nature of the obligation of PEPI and AFPRSBS under the subject contract to sell was solidary. In the said contract, PEPI and AFPRSBS were expressly referred to as the seller while Sanvictores was referred to as the buyer. The contract to sell did not state sellers but seller. This could only mean that PEPI and AFPRSBS were considered as one seller in the contract. There was no delineation as to their rights and obligations. Also, the signatories were Espina, representing PEPI, and Mena, representing AFPRSBS. The signatures of Espina and Mena were affixed again in the last portion of the Deed of Restrictions under the word owner. AFPRSBS repeatedly argues that the contract was not signed by any of its authorized representative. Conveniently, however, it remained silent as to Mena. It never denied that Mena was its representative. AFPRSBS is estopped from denying Mena’s authority to represent it. It is quite obvious that AFPRSBS clothed Mena with apparent authority to act on its behalf in the execution of the contract to sell. There is estoppel when the principal has clothed the agent with indicia of authority as to lead a reasonably prudent person to believe that the agent actually has such authority. A corporation may be held in estoppel from denying as against innocent third persons the authority of its officers or agents who have been clothed by it with ostensible or apparent authority.

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Spouses Juan Chuy Tan and Mary Tan (Deceased) Substituted by the Surviving Heirs, Joel Tan and Eric Tan v. China Banking Corporation G.R. No. 200299 August 17, 2016 Topic: Extinguishment of Obligations; Payment or Performance Facts: Lorenze Realty and Development Corporation is a domestic corporation engaged in real estate business. On several occasions in 1997, Lorenze Realty obtained from China Bank various amounts of loans and credit accommodations. It was expressly stipulated in the Promissory Notes that Lorenze Realty agreed to pay the additional amount of 1/10 of 1% per day of the total amount of obligation due as penalty to be computed from the day default was incurred up to the time that the loan obligations are fully paid. Lorenze Realty also undertook to pay an additional 10% of the total amount due including interests, surcharges and penalties as attorney’s fees. As security for the said obligations, Lorenze Realty executed real estate mortgages over 11 parcels of land. Subsequently, Lorenze Realty incurred in default in the payment of its amortization prompting China Bank to cause the extrajudicial foreclosure of the mortgage constituted on the securities after Lorenze Realty failed to heed to the demand to settle the obligation. China Bank emerged as the highest bidder at the public auction, evidenced by a certificate of sale. As shown by the Statement of Account, the indebtedness of Lorenze Realty already reached the amount of P114,258,179.81 inclusive of the principal, interest, penalties, registration expenses, filing fee, publication fee, sheriff’s fee, and posting fee. After deducting the total amount of loan obligation the proceeds of the public sale, there remained a balance in the amount of P29,258,179.81. China Bank then demanded Lorenze Realty for payment of the remaining loan but such demand just went to naught. China Bank initiated an action for the collection of sum of money against Lorenze Realty and its officers, including spouses Juan Chuy Tan and Mary Tan now substituted by their heirs in this action. While conceding that they have voluntarily signed the promissory notes, defendants in the action disclaimed liability by alleging that the surety agreements did not express the true intention of the parties. The officers of Lorenze Realty claimed that they just signed the surety contracts without reading the fine terms as they were made to believe by the bank manager that the collaterals they offered to obtain the loans were already sufficient to cover the entire obligation should they incur in default. They averred that the penalty in the amount of 1/10 of 1% per day of the total amount due is usurious and shocking to the conscience and should be nullified. They also prayed that the RTC declare the obligation fully settled on account of the sale of securities. The RTC found for China Bank and declared defendants jointly and severally liable for the amount of the deficiency judgment. The CA affirmed with modification the judgment of the RTC by reducing the rate of the penalty surcharge. Issue: Whether Lorenze Realty’s obligation is fully settled when the real properties constituted as securities for the loan were sold at the public auction for P85,000,000.00? Held: No. Obligations are extinguished, among others, by payment or performance. Under Article 1232 of the Civil Code, payment means not only the delivery of money but also the performance, in any other manner, of an obligation. Article 1233 of the Civil Code states that 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. In contracts of loan, the

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debtor is expected to deliver the sum of money due the creditor. These provisions must be read in relation with other rules on payment under the Civil Code, such as the application of payment. Article 1252 provides 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. If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract. In Premiere Development Bank v. Central Surety & Insurance Company Inc., the Court held that the right of the debtor to apply payment is merely directory in nature and must be promptly exercised, lest, such right passes to the creditor. It is noteworthy that after the sale of the foreclosed properties at the public auction, Lorenze Realty failed to manifest its preference as to which among the obligations that were all due the proceeds of the sale should be applied. Its silence can be construed as acquiescence to China Bank’s application of the payment first to the interest and penalties and the remainder to the principal which is sanctioned by Article 1253 of the Civil Code, which provides that if the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered.

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Sta. Fe Realty, Inc. and Victoria Sandejas Fabregas v. Jesus M. Sison G.R. No. 199431 August 31, 2016 Topic: General Provisions on Contracts; Different Kinds of Obligations; Pure and Conditional Obligations; Rescission Facts: Sta. Fe Realty Inc. (SFRI) agreed to sell to Jesus Sison a portion of land. SFRI executed a Deed of Sale over the subject property to Victoria Fabregas. Fabregas then executed another deed of sale in favor of Sison for the same amount. Sison caused the segregation of the corresponding lot from the whole land and this was designated as Lot 1-B-1 in the subdivision plan. Sison took possession of the subject property and introduced improvements thereon such as fencing the property, putting a no trespassing sign, barbed wires, and hedges of big trees. He also constructed a fishpond and a resort on the subject property. Sison however was not able to register the sale and secure a title in his name because petitioners herein refused to pay realty taxes and capital gains tax, as well as to turn over the owner’s copy of transfer certificate of title and the subdivision plan. Sison was constrained to pay the said taxes to protect his interest. Nevertheless, petitioners herein still refused to surrender the mother title and all pertinent documents necessary for the transfer of title in Sison’s name. Meanwhile, SFRI caused the subdivision of the entire property. SFRI sold Lot 1-B-3-C to Orosa. Orosa was able to transfer the property in his name. Sison claimed that this Lot 1-B-3-C is practically the same as his Lot 1B-1 except for the excess of 402 sq. m. Sison tried to settle amicably with the other concerned parties but no agreement was reached. He then instituted an action for reconveyance of property. Petitioners herein denied that they agreed to sell the property to Sison. They averred that Sison persuaded Fabregas to sell to him a portion of Lot 1-B in exchange of P700,000.00 and Sison will be the one to shoulder the capital gains tax. They contended that they merely accommodated Sison’s request to sign another set of deeds over the subject property with a reduced price of P10,918.00 so that the capital gains tax would be reduced. They also asserted that Sison did not pay the consideration agreed upon thus Fabregas rescinded the sale by sending a notice to Sison who did not contest the rescission of the sale. Orosa claimed that he is a buyer in good faith as there was nothing annotated in the title which would warn him of any lien or encumbrance or adverse claim on the property. The RTC ruled in favor of Sison. On appeal, the CA affirmed the findings of the RTC but reduced the award of moral damages and attorney’s fees. Issue: Whether the deed of absolute sale by and between SFRI and Fabregas, as well as the deed of absolute sale between Fabregas and Sison are valid and enforceable, thus entitling Sison to reconveyance? Held: Yes. The deeds are valid and enforceable and Sison is entitled to reconveyance. Sison anchors his cause of action upon the two deeds of sale and his possession and occupation of the subject property. Petitioners however counter that (1) the deeds of sale were simulated; (2) Fabregas had unilaterally rescinded the sale; and (3) the subject property is now registered in the hands of an innocent purchaser for value. Petitioners argue that the deeds were simulated because of its alleged failure to reflect the true purchase price of the sale which is P700,000. They contend that there is an apparent gross

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disproportion between the stipulated price and the value of the subject property which demonstrates that the deeds stated false consideration. The Court finds that the deeds of sale were executed freely and voluntarily. All the elements for a contract to be valid are present. A perfected contract of absolute sale exists between SFRI and Fabregas and then Fabregas and Sison. There was meeting of the minds between the parties when they agreed on the sale of a determinate subject matter and the price is certain. Gross inadequacy of price does not affect the validity of a contract of sale unless it signifies a defect in the consent or that the parties actually intended a donation or some other contract. Inadequacy of cause will not invalidate a contract unless there has been fraud, mistake, or undue influence. Fabregas failed to judicially rescind the contract. The Court had already ruled that in the absence of a stipulation, a party cannot unilaterally and extrajudicially rescind a contract. A judicial or notarial act is necessary before a valid rescission can take place. The party entitled to rescind should apply to the court for a decree of rescission. The right cannot be exercised solely on a party’s own judgment that the other committed a breach of the obligation. The operative act which produces the resolution of the contract is the decree of the court and not the mere act of the vendor. The alleged notice of rescission that Fabregas sent to Sison declaring her intention to rescind the sale did not operate to validly rescind the contract because there is absolutely no stipulation giving Fabregas the right to unilaterally rescind the contract in case of non-payment. Orosa cannot be considered a buyer in good faith considering that Sison introduced improvements on the property such as fencing it, putting a no trespassing sign, barbed wires, and hedges of big trees. He also constructed a fishpond and a resort on the subject property. Presence of these structures should have alerted Orosa to the possible flaw in the title of SFRI.

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SEPTEMBER 2016 September 7, 2016 ● Edgardo A. Quilo and Adnaloy Villahermosa vs. Teodula Bajao G.R. No. 186199 ● Doroteo C. Gaerlan vs. Philippine National Bank G.R. No. 217356

September 14, 2016 ● Philippine Science High School - Cagayan Valley Campus vs. Pirra Construction Enterprises G.R. No. 204423 September 21, 2016 ● Marphil Export Corporation and Ireneo Lim vs. Allied Banking Corporation substituted by Philippine National Bank G.R. No. 187922 ● Rizal Commercial Banking Corporation vs. Teodoro G. Bernardino G.R. No. 183947 September 28, 2016  Philippine Economic Zone Authority vs. Pilhino Sales Corporation G.R. No. 185765

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Edgardo A. Quilo and Adnaloy Villahermosa v. Teodula Bajao G.R. No. 186199 September 7, 2016 Topic: Prescription Facts: Bajao filed an ejectment complain against Saclag. On 20 November 1998, MeTC ruled in favor of Bajao. RTC affirmed the MeTC. SC issued an entry of judgment declaring that the resolution has become final and executory on 28 July 2000. Bajao filed a motion for execution on 8 August 2000. 7 years thereafter, RTC ordered the remand of the records of the case to the MeTC. MeTC issued a writ of execution. Quilo received a notice to pay / vacate and demolish premises, directing the to vacate the property and remove their houses. Quilo filed a motion to quash claiming that the writ of execution was issued beyond the lapse of the 5-year period within which to execute a judgment. Issue: Whether the issuance of the writ of execution on 28 November 2007 to implement the decision rendered on 20 November 1998 is beyond the period to implement judgment? Held: As the Decision became final and executory on 28 July 2000, Bajao has 5 years within which to move for its execution. Indeed, Bajao, in compliance with Rule 39, timely moved for the execution of the Decision when he filed a Motion for Execution on 8 August 2000. However, as mandated by Section 6, Rule 39, if the prevailing party fails to have the decision enforced by a motion after the lapse of 5 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 10 years from the time the judgment becomes final. In the case at bar, the Decision, despite the timely motion to execute the same, was not implemented by the court. The failure to implement the Decision impelled Bajao to again file another motion to execute. However, Bajao's course of action to execute the Decision is not in accordance with Section 6, Rule 39; Bajao merely filed a motion. The correct remedy is to file a complaint for revival of judgment in a regular court within ten 10 years from the time the judgment becomes final. Actions for revival of judgment are governed by Article 1144 (3), Article 1152 of the Civil Code and Section 6, Rule 39 of the Rules of Court. Thus: Art. 1144. The following actions must be brought within ten years from the time the right of action accrues: xxx (3) Upon a judgment. Art. 1152. The period for prescription of actions to demand the fulfillment of obligation declared by a judgment commences from the time the judgment became final. Clearly, the proper remedy is to file a complaint for revival of judgment, which Bajao did not avail of. Application of the aforesaid rules would dictate that this Court must rule in favor of the petitioners and grant the petition on the ground of failure to comply with Section 6, Rule 39. However, the circumstances of the present case are replete with peculiarities which impel this Court to exercise its equity jurisdiction. This case has been raised to this Court for the second time, and there is nothing more imperative than for the Court to finally settle all controversies and dispose of a protracted and long dragging case. In pursuit of equity justice this Court considers Bajao's second Motion for Execution as a complaint for revival of judgment. The action, therefore, was filed well-within the ten-year period in accordance with the rules.

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Doroteo C. Gaerlan v. Philippine National Bank G.R. No. 217356 September 7, 2016 Topic Under: Different Kinds of Obligations; Joint and Solidary Obligations Facts: Supreme Marine Company (SMCI) and MCG Marine Services (MCG) obtained from PNB a 5 year Foreign Currency Deposit Unit (FCDU) term loan of not exceeding $4M and a domestic bills purchase line (DBP line) not exceeding P10M. This agreement was signed by Robert Jaworski (president of SMCI) and Doroteo Gaerlan (president of MCG) as borrowers and Inocencio Deza Jr (EVP of PNB) as lender. The loan had an annual interest rate equivalent to 90day London inter-bank offered rate plus spread of 2.5% from initial drawdown until its full payment. To secure the loan, Gaerlan and Jaworski executed the Chattel Mortgage with Power of Attomey over the an oil tanker and, as additional security and by way of payment to the loan, Gaerlan, as president of MGG, executed the Deed of Assignment in favor of PNB, pertaining to its monthly income of at least P6,000,000.00 arising from the proceeds of the Consecutive Voyage Charter Party between Petron Corporation (Petron) and MGG. To personally guarantee the loan, Jaworski and his wife, Evelyn (Spouses Jaworski), together with Gaerlan and his wife Marilen (Spouses Gaerlan), executed the Joint and Solidary Agreement (JSA), whereby the parties absolutely, unconditionally and irrevocably bound themselves, jointly and severally, to pay PNB in case the principal debtors defaulted in the payment of the loan. When SMCI and PCG defaulted in the payment of their loan obligation, PNB sent a demand letter but it was unheeded. To protect its interest, PNB instituted a petition for the extrajudicial foreclosure sale of Spouses Gaerlan’s real property. Gaerlan filed a complaint before the RTC-QC for the nullification of contracts of loan, real estate mortgage and extrajudicial foreclosure sale. Gaerlan alleged that the stipulated interests and penalties were must higher than 12% per annum and that all loans secured by the promissory notes and real estate mortgage was null and void as they violated the Usury Law and in view of the nullity of the contracts of loan and the promissory notes, the real estate mortgage and the extrajudicial foreclosure sale were likewise null and void. Meanwhile, Spouses Jaworski filed an action for declaratory relief before the RTC-Manila contending that Jaworski and Gaerlan had executed a Memorandum of Agreement whereby the parties had entered into a business divorce and agreed that the ownership of the oil tanker would be transferred to Gaerlan in favor of the latter’s assumption of all the loans extended by PNB. RTC-Manila granted the action and released the spouses from their duties and responsibilities under the Joint and Solidary Agreement. Finally, RTC-QC declared the contracts of loan and extrajudicial foreclosure sale null and void and releasing Gaerlan from liability. The RTC-QC stated that because the JSA was declared void

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in the January 13, 2004 Order of the RTC-Manila, the principal obligation, guaranteed by the said agreement, and the real estate mortgage were likewise void pursuant to the principle of res judicata in the concept of conclusiveness of judgment. Issue: Whether the decision of the RTC-Manila, which released Spouses Jaworski from liability constitutes res judicata redounding to the benefit of petitioner? Held: NO. The DOCTRINE OF RES JUDICATA provides that a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits on points and matters determined in the former suit. In the present case, neither of the two concepts of res judicata finds relevant application. There is no identity of subject matter and cause of action. The case filed in RTC-Manila was a complaint for declaratory relief filed by Spouses Jaworski for the extinguishment of their liability under the JSA on the basis of the MOA stating their business divorce; whereas the present case stemmed from a complaint for nullification of loan contracts, real estate mortgage and extrajudicial foreclosure sale questioning the alleged usurious interest imposed by PNB and the latter’s noncompliance with the requirements of publication and posting of notices. Furthermore, nowhere in the said order did it pronounce the entire Joint and Solidary Agreement invalid as to render it without force and effect. As surety to the contract of loan, Gaerlan’s liability subsists. It must be emphasized that a surety is bound equally and absolutely with the principal and his liability is immediate and direct. The Court has no alternative but to enforce the contractual stipulations in the manner they have been agreed upon and written. It could not relieve the parties from obligations voluntarily assumed simply because their contract turned out to be disastrous or unwise investments. Hence, in view of the principal borrowers' failure to pay their outstanding obligation upon demand, it was proper for PNB to exercise its right to foreclose on the mortgaged property. This right of PNB to extrajudicially foreclose on the real estate mortgage is provided under the various contracts ofthe parties. With respect to the claim of petitioner that the stipulated interest on the contract of loan was usurious, the Court finds the same untenable. The law and jurisprudence empowers the courts to temper interest rates and penalty charges that are iniquitous, unconscionable and exorbitant. In exercising this vested power, however, the Court must consider the circumstances of the case for what may be iniquitous and unconscionable in one may be totally just and equitable in another.
In the present case, petitioner failed to show that the stipulated rate of interest was indeed exorbitant. He did not present the Omnibus Agreement after the loan contract was restructured or any other evidence to support his claim.

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Philippine Science High School - Cagayan Valley Campus v. Pirra Construction Enterprises G.R. No. 204423 September 14, 2016 Topic under: Extinguishment of Obligations; Payment or Performance Facts: Pirra Construction Enterprises filed with the Construction Industry Arbitration Commission (CIAC) a Complaint for Damages against Philippine Science High School (PSHS) relative to the construction contracts for PSHS’ Project A (consisting of a few phases of Academic Building I and Girls’ Dormitory Building I) and Project C (consisting of a few phases of Academic Building II, Boys’ Dormitory Building, and School Canteen). Project A: Pirra participated in and won the bidding for Project A. Pirra and PSHS then entered into a Contract Agreement. The duration of Project A was for 180 days from December 20, 2008, with approved 65-day extension until August 22, 2009. PSHS paid Pirra 15% of the contract price and an amount of P23,194,020.95 for Partial Billing Nos. 1 to 4. Subsequently, Pirra requested payment for Partial Billing No. 5. It sent PSHS a letter requesting for substantial acceptance and completion of Project A and submitted its Summary of Accomplishment Report stating that completion of Project A was already at 94.09%. PSHS reminded Pirra that the due date of the contract as a month later but the power distribution activities had not yet been installed. PSHS created an Inspectorate Team which conducted punch listing on Project A. PSHS then replied to Pirra’s request for substantial acceptance and completion and for payment of PB No. 5. It however stated that the payment could not yet be made pending correction of the noted defects and remaining work activities, the final inspection of concerned agencies, among other reasons. PSHS also declared that it considered PB No. 5 as Pirra’s final billing so it had to account Pirra’s liabilities relating to the project. To validate Pirra’s accomplishment, the COA proceeded to inspect the project. Pirra failed to attend because it allegedly received the notice late. PSHS informed Pirra that its PB No. 5 could not be processed yet as it was awaiting the COA Report. Pirra and PSHS entered into a Joint Inspection Agreement and agreed to jointly request the COA for a re-inspection of a portion of Project A. PSHS informed Pirra that it would take over Project A in the interest of the government and to prepare for its occupancy for School Year 2010-2011. It also stated that it would implement the repair of the identified defects through a third party, the expenses of which would be deducted from Pirra’s final billing. Pirra questioned PSHS’ takeover of the project and claimed that such takeover is violative of its rights as the winning contractor. Project C: Pirra participated in and won the bidding for Project C. The parties entered into a Contract Agreement. The project duration was 150 days. PSHS paid Pirra 15% of the contract price as mobilization fee. Pirra requested a time suspension on Project C because of affected footings, columns, and footing tie beams. PSHS informed Pirra that suspension was not the solution, there being no changes in the structural design. Instead, it directed Pirra to file a variation order (VO) with time extension. The parties agreed that Pirra shall submit to the Consultant the shop drawing for the foundation and the Consultant shall submit the crosssections of the foundation and evaluate Pirra’s claim. Pirra sent a letter to PSHS stating that delay was incurred on Project C because it received no response from PSHS or from the

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Consultant on its request for time suspension. PSHS, in its reply, alleged that it found out that Pirra suspended work on Project C without its approval. PSHS informed Pirra that it was terminating the Project C contract because of Pirra’s delay, default, and abandonment. PSHS then issued an Order of Termination against Pirra. Pirra contended that the termination is unjustified as PSHS failed to give it the intended revisions of the building plan as well as the necessary documents to secure a building permit, thus as a result, Project C was stopped and Pirra incurred a slippage of 75.99%. Ruling of the CIAC: The tribunal ruled in favor of Pirra. PSHS is held liable for delay in paying PB No. 5 and in taking over Project A without any legal basis. It is also held liable for delay in submitting the revised drawings and extra work order to Pirra. CIAC held that PSHS breached its obligations and invalidly terminated the contract for Project C. Ruling of the CA: As regards Project A, the CA ruled that when PSHS created an Inspectorate Team, it treated Project A substantially completed, thus PSHS should be held liable for PB No. 5 less the defective works. Anent Project C, the CA held that PSHS validly terminated the contract. There was no showing that the affected work fell on critical path so there was no reason for suspension of work. Nevertheless, PSHS is liable for the value of the work done on Project C because otherwise there would be unjust enrichment on the part of PSHS. Issues: 1) Whether PSHS treated Project A as substantially completed such that it is liable for the residual value of PB No. 5? 2) Whether PSHS validly terminated the contract for Project C? Held: 1. PSHS accepted and treated Project A as a substantially completed project. When Pirra requested substantial acceptance and completion of Project A, PSHS did not object to such request. It acted upon it and even created an Inspectorate Team for punch listing. PSHS also repeatedly referred to PB No. 5 as the final billing for Project A. In fact, PSHS initially expressed its willingness to pay only to put it on hold because of the COA Report. Nonetheless, such report cannot affect PSHS’ obligation to pay Pirra because the existence of the defective or undelivered items was not an excuse to avoid payment of the progress billing, as the payment was due on the performed items that were completed or were otherwise performed, save for the defects. As provided for under Article 1234 of the Civil Code, if the obligation had been substantially performed in good faith, the obligor, in this case Pirra, may recover as if it had strictly and completely fulfilled its obligation, less the damages suffered by the obligee or in this instance, PSHS. PSHS is thus liable to pay Pirra the residual value of PB No. 5. 2. The Court agrees with the CA that the contract for Project C was validly terminated. The parties agreed on how to proceed with the contract for Project C in November 20, 2009. While records reveal that PSHS failed to submit the revised drawing for the preparation of a variation order, Pirra is not entirely faultless. After the November 20, 2009 agreement, Pirra no longer coordinated with PSHS. Neither did it explain why it did not demand from PSHS the submission of the needed drawing. Both parties here failed to

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abide by the November 20, 2009 agreement. The suspension of work made by Pirra on Project C without PSHS’ approval cannot be ignored. Pursuant to the General Conditions of Contract, PSHS may terminate the contract if Pirra incurs delay, abandons the project, causes stoppage of work without the authority of PSHS, among other grounds. Indeed, by reason of Pirra’s delay, suspension of work without any approval from PSHS, and abandonment of the project, PSHS has sufficient basis to terminate the contract for Project C. Nonetheless, Pirra is entitled to the value of the work done on Project C pursuant to the principle of quantum meruit (in an action for work and labor, payment shall be made in such amount as the plaintiff reasonably deserves) and to avoid unjust enrichment.

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Marphil Export Corporation and Ireneo Lim v. Allied Banking Corporation substituted by Philippine National Bank G.R. No. 187922 September 21, 2016 Topic: Legal Compensation Facts: Marphil Export Corporation (Marphil) is engaged in the exportation of cuttlefish, cashew nuts and similar agricultural products. To finance its purchase and export of these products, Allied Bank granted a credit line from which it availed of several loans evidenced by promissory notes. Upon negotiations of export bills/drafts that Allied Bank purchases from Marphil, the amount of the face value of the letters of credit is credited in favor of the latter. Marphil exported cashew nuts to Intan Tading Ltd. Hongkong (Intan). Intan applied for and opened Letter of Credit No. 21970 with Nanyang Bank in China for $185,000.00, with Marphil as beneficiary and Allied Bank as correspondent bank. After receiving the export documents, Allied Bank credited Marphil in the amount of Php1,913,763.45. However, Allied Bank received a cable from Nanyang Bank noting discrepancies in the shipping documents and that Intan refused to accept the discrepancies. Nanyang Bank refused to reimburse Allied Bank. The latter informed Marphil of the dishonor of L/C No. 21970 and that it was reversing its earlier credit of entry. Both the RTC and the CA held Marphil liable for the amount of Php1,913,763.45, the amount equal to the face value of L/C No. 21970. Issue: Whether or not Allied Bank may unilaterally debit the amount it credited to Marphil’s account? Held: Allied bank, the collecting bank, has a right to debit Marphil’s account for the value of a dishonored check it previously credited by virtue of the principle of legal compensation. Since the relationship between banks and depositors is that of creditor and debtor in a simple loan, legal compensation may take place when the conditions in Article 1279 of the Civil Code are present: (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. When Allied Bank credited Marphil's account, it became the debtor of Marphil. However, once Nanyang Bank dishonored the export documents, Marphil became the debtor of Allied Bank for the amount by virtue of its obligation to reimburse the bank under the Letter Agreement. This obligation consisting of sum of money became demandable upon notice of the dishonor by Nanyang Bank. Thus, legal compensation may take place between the two debts. Allied Bank properly exercised its right to set off. Firstly, having signed the Letter Agreement, Marphil expressly undertook that in case of dishonor of the draft for the letter of the credit, it will refund to Allied Bank whatever the latter has credited in its favor. Secondly, prior to debiting the amount, Allied Bank informed Marphil twice of Nanyang Bank's refusal to honor. Thirdly, it immediately informed Marphil that it was debiting the amount of the dishonored draft from the credit line.

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Rizal Commercial Banking Corporation v. Teodoro G. Bernardino G.R. No. 183947 September 21, 2016 Topic Under: Extinguishment of an Obligation; Novation Facts: Marcopper Mining Corporation (MMC) obtained an unsecured bridge loan from RCBC. Payment of the bridge loan was supposed to be sourced from the proceeds of a long term loan MMC was seeking from Export-Import Bank (EXIM Bank). EXIM Bank, however, failed to approve the long term loan due to a tailing spill in MMC’s mining area in Marinduque which caused the stoppage of MMC’s operations. Concerned that the short term loan it extended to MMC was unsecured, RCBC negotiated with MMC to provide collateral or security and so MMC decided to mortgage their equipment. Additionally, MMC pledged shares of stocks covered by Deeds of Pledge. RCBC later expressed interest in substituting these collaterals with MMC’s residential property in Forbes Park which was mortgaged with ADB. After a year, MMC proposed 2 options for the payment of its loan to RCBC: foreclose the mortgaged assets or a repayment plan wherein they would assign the Forbes property to RCBC and pay the rest cash. RCBC agreed to the 2nd option. MMC sent RCBC the surety agreement duly executed by Bernardino, together with 2 PNs covering the remaining obligation of MMC after effecting partial payment through the assignment of the Forbes Park property to RCBC. MMC failed to settle its obligations and so a final demand was sent declaring the whole obligation under the PN due and payable. Demand was also made on Bernardino, as surety for MMC, to pay the amount plus penalty. Bernardino instituted a complaint for specific performance and for the declaration of nullity or unenforceability of surety agreements against RCBC. RCBC alleged that contrary to Bernardino’s assertion, the parties did not agree to execute an agreement on Bernardino’s subrogation rights and a release of mortgage and pledge over MMC’s properties. RCBC prayed that Bernardino be declared jointly and severally liable with MMC to pay RCBC the principal amount due under the PN. Issue: Whether there was a condition precedent, a subrogation agreement, to the surety agreements Bernardino executed in favor of RCBC? Ruling: NO. Bernardino failed to establish the existence of a subrogation agreement that operates as a condition precedent to the surety agreement. Atty. Dueñas' testimony shows that in a series of meetings, the parties discussed a possible "arrangement on the transfer of the collateral" once Bernardino is called to pay the obligation Atty. Dueñas testified that Bernardino proposed "that collateral be given him." While this may pertain to the subrogation agreement Bernardino is claiming, what is glaringly absent from the

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discussions is the final agreement reached by the parties. For an offer to be binding, the acceptance must be absolute and must not qualify the terms of the offer. Where there is only a proposal and a counter-proposal that did not add up to a final arrangement, there is no meeting of the minds between the parties. Thus, the surety agreements remain unconditional and their validity stands. The surety agreements do not include or refer to the execution of a subrogation agreement as a condition precedent before Bernardino could be held liable. Bernardino cannot now come to court asking for the enforcement of an agreement which clearly does not appear in the written contract between him and RCBC. As surety, Bernardino is principally and solidarily liable for the obligations arising from the PN. Suretyship is a contractual relation resulting from ·an agreement whereby one person, the surety, engages to be answerable for the debt, default or miscarriage of another, known as the principal. The surety's obligation is not an original and direct one for the performance of his own act, but merely accessory or collateral to the obligation contracted by the principal. Nevertheless, although the contract of a surety is in essence secondary only to a valid principal obligation, his liability to the creditor or promisee of the principal is said to be direct, primary and absolute, in other words, he is directly and equally bound with the principal. The surety therefore becomes liable for the debt or duty of another although he possesses no direct or personal interest over the obligations nor does he receive any benefit therefrom. Bernardino cannot now renege on his obligation to pay the promissory notes under the claim that there was a previous agreement between the parties for RCBC to execute a subrogation agreement before Bernardino could be held liable under the surety agreements. We stress that the right to subrogation of a paying surety is by operation of law. Article 2067 of the Civil Code provides in part that the guarantor who pays is subrogated to all the rights which the creditor had against the debtor. Although Article 2067 explicitly pertains to guarantors, the right to subrogation extends as well to sureties. Similarly, under Article 2701 of the Civil Code, a remedy available to a guarantor (or surety), even before having paid, is to demand a security from the principal debtor that shall protect the guarantor (or surety) from any proceedings by the creditor and the danger of insolvency of the debtor in certain cases. It is clear, therefore, that whatever right to security Bernardino may have can only be demanded from MMC and not from RCBC.

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Philippine Economic Zone Authority v. Pilhino Sales Corporation G.R. No. 185765 September 28, 2016 Topic: Rescission Facts: PEZA published an invitation to bid for its acquisition of 2 brand new fire truck units. Philno secured the contract, which stipulated that it was to deliver 2 FF3HP brand fire trucks within 45 days of receipt of a purchase order. A further stipulation stated that "in case of failure to deliver the . . . good on the date specified . . . , the Supplier agrees to pay penalty at the rate of 1/10 of 1% of the total contract price for each days commencing on the first day after the date stipulated above." Philno failed to deliver. PEZA filed a complain for rescission of contract and damages. Philno claimed there was no starting date from which its obligation to deliver could be reckoned, considering that the complaint supposedly failed to allege acceptance by Pilhino of the purchase order and that there was not even a meeting of minds. The RTC and CA held the contract rescinded and awarded liquidated damages in favor of PEZA. Issue: Whether or not liquidated damages may be awarded notwithstanding the rescission of the contract stipulating it? Held: A contract of sale entails reciprocal obligations, 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." Rescission on account of breach of reciprocal obligations is provided for in Article 1191 of the Civil Code: Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with 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. Rescission under Article 1911 results in mutual restitution. Restoration of the contracting parties to their original state is the very essence of rescission. This is however not a license for the negation of contractually stipulated liquidated damages. Article 1191 itself clearly states that the options of rescission and specific performance come with "with the payment of damages in either case." The very same breach or delay in performance that triggers rescission is what makes damages due.

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When the contracting parties, by their own free acts of will, agreed on what these damages ought to be, they established the law between themselves. Their contemplation of the consequences proper in the event of a breach has been articulated. When courts are, thereafter, confronted with the need to award damages in tandem with rescission, courts must not lose sight of how the parties have explicitly stated, in their own language, these consequences. While petitioners are indeed obliged to return the said amount to respondent under Article 1385, assuming said figure is correct, respondent is at the same time liable to petitioners in the same amount as liquidated damages by virtue of the forfeiture/penalty clause as freely stipulated upon by the parties.

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OCTOBER 2016 October 5, 2016 ● Dr. Restituto C. Buenviaje v. Spouses Jovito R. and Lydia B. Salonga, Jebson Holdings Corporation and Ferdinand Juat Bañez G.R. No. 216023 ● Sergio Osmeña III v. Power Sector Assets and Liabilities Management Corporation, Emmanuel R. Ledesma Jr., SPC Power Corporation and Therma Power Visayas Inc. G.R. No. 212686 October 10, 2016 ● Republic of the Philippines and Housing and Urban Development Coordinating Council v. Gonzalo Roque Jr., Eduvigus A. Paredes, Michael A. Paredes, Purification Almeda, Jose A. Almeda, Michelle A. Almeda, Michael A. Almeda, Alberto Delura and Theresa Almeda G.R. No. 203610 October 12, 2016 ● PNB v. Heirs of Benedicto and Azucena Alonday G.R. No. 171865 October 17, 2016 ● People of the Philippines vs. Ariel Layag G.R. No. 214875 ● Norma c. Magsano, et al. Vs. Pangasinan Savings and Loan Bank, inc., et al. G.R. No. 215038

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Dr. Restituto C. Buenviaje v. Spouses Jovito R. and Lydia B. Salonga, Jebson Holdings Corporation and Ferdinand Juat Bañez G.R. No. 216023 October 5, 2016 Topic: Pure and Conditional Obligations; Rescissible Contracts Facts: Jebson, an entity engaged in the real estate business, through its EVP Bañez, entered into a JVA with Spouses Salonga. Under the JVA, the spouses who owned the land would allow Jebson to construct on the land 10 high-end single detached residential villas. They would subdivide the property into individual titles and Jebson shall assume the liability to pay their mortgage loan with Metrobank. Jebson would also be liable to secure the buildings and development permits and the license to sell from the HLURB. Out of the 10 units, 7 will belong to Jebson with the remaining 3 belonging to the spouses. Jebson was allowed to sell its allocated units under such terms as it may deem fit, subject to the condition that the price agreed upon was with the conformity of the spouses. Eventually Jebson entered into a Contract to Sell with Buenvaje over one unit without the consideration of the spouses. Out of the purchase price, a part of it was paid through a “swapping arrangement” whereby Beunviaje conveyed to Jebson a house and lot, clubhouse membership shares and more. However, despite fill payment, Jebson was unable to complete the construction in violation of the contractual stipulation to finish the same within 12 months from the issuance of the building permit. Thus, Buenviaje formally demanded the immediate completion and delivery of his unit. To no avail, Buenviaje filed before the HLURB a complaint for specific performance. HLURB-RIV rescinded the respective contracts to sell entered into by Jebson and found the respondents were not legally authorized to sell the units as they have not secured the necessary Registration Certificate and License to Sell. Furthermore, Jebson failed to complete the construction of the units as well as to deliver the units to the Buenviaje entitling him to the refund of their payments. HLURB further found the spouses to be solidarily liable with Jebson and Bañez as joint venture partners liable to the general buying public. Upon appeal, HLURB-BOC reversed and set aside the HLURB-RIV’s ruling. HLURB-BOC held that there was no substantial breach but only a slight or casual one, which did not justify a rescission of the contracts to sell, especially in view of the fact that the residential units covered by the said contracts were already at their finishing stages. The proper remedy, therefore, was to fix the period for completion of the concerned units. Nonetheless, the HLURB-BOC also invalidated the swapping arrangements and found no basis to hold the spouses solidarily liable with Jebson and Bañez considering that the JVA does not provide for solidarity for any act or omission of either party and, in fact, expressly provides that the Spouses shall be free from any liability from any 3rd party. OP and CA affirmed by finding that the OP correctly sustained the HLURB Decision holding the recission of the contracts to sell to be impractical.

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Issues: 1. Whether or not the grant of the remedy of specific performance in Buenviaje’s favor was proper under the prevailing circumstances of the case? 2. Whether or not spouses Salonga are not solidarily liable with Jebson and Bañez to Buenviaje for completion for the completion of the construction and delivery of the unit? 3. Whether or not the “swapping arrangment” was invalid? Held: 1. YES. The grant of the remedy of specific performance in Buenviaje’s favor was proper. Specific Performance is defined as the remedy of requiring exact performance of a contract in the specific form in which it was made, or according to the precise terms agreed upon. It pertains to the actual accomplishment of a contract by a party bound to fulfill it. On the other hand, resolution is defined as the “unmaking of a contract for a legally sufficient reason.” Resolution does not merely terminate the contract and release the parties from further obligations to each other, but abrogates the contract from its inception and restores the parties to their original positions as if no contract has been made. Consequently, mutual restitution, which entails the returm of the benefits that each party may have received as a result of the contract, is thus required. Notably, resolution under Article 1191 of the Civl Code will not be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties in making the agreement. In this case, the HLURB-BOC, OP, and the CA all pointed out that Buenviaje primarily prayed for the remedy of specific performance and only prayed for the remedy of rescission as an alternative remedy. Thus, it remains apparent that as between the two remedies made available to him, Buenviaje, had, in fact, chosen the remedy of specific performance and therefore, ought to be bound by the choice he had made. To add, the fundamental rule is that reliefs granted a litigant are limited to those specifically prayed for in the complaint; other reliefs prayed for may be granted only when related to the specific prayers in the pleadings and supported by the evidence on record. Hence, based on this postulate, the lower tribunals could hardly be faulted for granting the proper relief in accordance with what Buenviaje himself had claimed. Relatedly, it is observed that Buenviaje's alternative prayer for resolution is textually consistent with that portion of Article 1191 of the Civil Code which states that an injured party "may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible." Nevertheless, the impossibility of fulfillment was not sufficiently demonstrated in the proceedings conducted in this case. As the HLURB- BOC pointed out, "[t]here is no finding that specific performance has become impossible or that there are insuperable legal obstacles to the completion of the constructed units so as to justify [resolution]." 2. NO. Buenviaje’s claim to be restituted the alleged purchase price of the unit – for which the spouses were claimed to be solidarily liable – this, holds NO BASIS.

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Mutual restitution is the proper consequence of the remedy of resolution. It cannot arise – as it is, in fact, theoratically incompatible – with the remedy of specific performance, which is the relief prayed for and consequently, granted to the injured party. In this case, it is undisputed that Spouses Salonga were not parties to the contract. between Jebson and Buenviaje. Under Article 1311 of the Civil Code, it is a basic principle in civil law on relativity of contracts, that contracts can only bind the parties who had entered into it and it cannot favor or prejudice 3 persons. Contracts take effect only between the parties, their successors in interest, heirs and assigns. Thus, absent and privity of contract as to them, there is no basis to hold Spouses Salonga liable for any of the obligations stated under the said contract. 3. NO. The court finds no basis to rescind the aforesaid “swapping arrangement.” Creditors are given remedies whenever their debtors perform acts or omissions or enter into contracts that tend to defraud the creditor of what is due to them. Such remedy comes in the form of rescission under Articles 1381(3) in relation to Articles 1383 and 1384 of the Civil Code. Rescission is a remedy granted by law to the contracting parties and even to 3 rd persons, to secure the reparation of damages caused to them by a contract, even if this should be valid, by restoration of things to their condition at the moment prior to the celebration of the contract. It implies a contract, which even if initially valid, produces a lesion or a pecuniary damage to someone. In the rescission by reason of lesion or economic prejudice, the cause of action is subordinated to the existence of that prejudice, because it is the raison d’etre as well as the measure of the right to rescind. Hence, where the defendant makes good the damages caused, the action cannot be maintained or continued. The records do not support the HLURB-BOC’s finding that this separate arrangement was entered into in order to defraud Jebson’s creditors under the JVA. The act of Jebson in accepting non-cash assets as suitable payments was a business decision made by it. While such may have been the cause of Jebson's inability to timely complete the project (possibly due to the lack of immediate access to liquid capital at that time), the soundness or unsoundness of that business decision is not enough for the Court to conclude that the said swaps were entered into to defraud Spouses. Salonga, notwithstanding the resulting "economic prejudice" to them. As the records show, Jebson was, in fact, able to receive both cash and non-cash asset payments made by Buenviaje, and hence, could have properly managed the same to meet its obligations in light of its financial position.

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Sergio Osmeña III v. Power Sector Assets and Liabilities Management Corporation, Emmanuel R. Ledesma Jr., SPC Power Corporation and Therma Power Visayas Inc. G.R. No. 212686 October 5, 2106 Topic: Pure and Conditional Obligations Facts: The Board of Directors of the Power Sector Assets and Liabilities Management Corporation (PSALM) approved the commencement of the 3 rd round of bidding for the sale of the 153.1 MW Naga Power Plant Complex (NPPC). In due course, PSLALM issued a Notice of Award in favor of Therma Power Visayas Inc. (TPVI), declaring the latter as the Winning Bidder. The execution of a Land Lease Agreement (LLA) and Assets Purchase Agreement (APA) in favor of TPVI, however, was subject to SPC’s non-exercise of its Right to Top. On the assumption that SPC Power Corporation (SPC) validly exercised its Right to Top, PSALM executed the NPPC-APA and NPPC-LLA in SPC’s favor, cancelling TPVI’s Notice of Award in the process. The Right to Top and the resultant agreement from its exercise, however, were subsequently nullified by the Court. Issue: Whether or not the nullity of TPVI’s Notice of Award was valid? Held: NO. The Bidding Procedures contain a severability clause that allows the award in favor of TPVI to survive. Contrary to the postulations of respondents PSALM and SPC, the nullification of the Right to Top did not change the complexion of the bidding. By no means should this be considered an alteration of the terms of the public bidding, let alone a material one, for it was clearly a contingency expressly covered by the provisions of the Bidding Procedure as evidenced by the severability clause. The afore-quoted severability clause conveys the clear intention to isolate and detach any invalid provision from the rest so that the latter may continue to be in force and effect. It operates to salvage the surviving provisions of the Bidding Procedures as valid, legal, and enforceable, despite the nullity of a component part. Our Decision nullifying SPC’s Right to Top ought not then be construed as the nullification of the entire third round of the public bidding. It merely called for the application of the severability clause to prevent PSALM, as much as possible, from having to repeat the process for the fourth time. Consistently, the Court never expressly declared the third round of bidding as invalid. Clear from the language of the dispositive portion of the Court’s Decision is that the nullification was limited only to SPC’s Right to Top and the NPPC-LLA and NPPC-APA in its favor, nothing more. Articles 1181 and 1185 of the Civil Code find application in this case. In the case at bar, PSALM’s obligation to award the contract in TPVI’s favor was dependent on the non-occurrence of an event: SPC’s legal and valid exercise of its Right to Top. As phrased by PSALM: “the

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approval of the sale to TPVI was a conditional one, the consummation of which is dependent on the non-exercise by SPC of its right to top.” It has become apparent, however, that such event will never occur. SPC can never legally and validly invoke its Right to Top in view of its nullity. The condition, therefore, is deemed complied with by operation of law, and the obligation to execute the purchase contracts in favor of TPVI, due and demandable. SPC did not legally and validly exercise its Right to Top. Regardless of whether or not the Right to Top was nullified, however, the award of the purchase contracts to TPVI would still be in order, for it appears that SPC did not validly exercise its erstwhile advantage. The exercise of the Right to Top is no different from the manner of perfecting any other sales contract. It is perfected by mere consent, upon a meeting of the minds on the offer and the acceptance thereof based on subject matter, price and terms of payment. It is clear from the tenor of SPC’s letter that its acceptance of PSALM’s offer can never be categorized as unqualified. Instead, what SPC communicated was its counter-offer for a longer lease period. This is further made evident by our pronouncement in Development Bank of the Philippines v. Medrano (Medrano), to wit: …a contract is perfected by mere consent, that is, from the moment that there is a meeting of the offer and the acceptance upon the thing and the cause that constitute the contract. The law requires that the offer must be certain and the acceptance absolute and unqualified. To be considered certain, must be definite, while an acceptance is considered absolute and unqualified when it is identical in all respects with that of the offer so as to produce consent or a meeting of the minds.

It can readily be seen that there is no identity between what was offered and what was accepted. There is a glaring difference not only in the term of the lease but also in its reckoning period. It cannot then meet the criteria of an “unqualified acceptance” as discussed in the Medrano case. When the 30-day period to exercise the Right to Top was about to lapse, the standing offer to SPC was for a lease expiring on January 29, 2020. Without SPC communicating its unqualified acceptance of such offer before the Right to Top expired, the award of the purchase contracts to TPVI became due. It was incumbent upon SPC to seek judicial intervention to toll the running of the 30-day period pending the resolution of the issue. No recourse, however, was interposed by SPC.

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Republic of the Philippines and Housing and Urban Development Coordinating Council v. Gonzalo Roque Jr., Eduvigus A. Paredes, Michael A. Paredes, Purification Almeda, Jose A. Almeda, Michelle A. Almeda, Michael A. Almeda, Alberto Delura and Theresa Almeda G.R. No. 203610 October 10, 2016 Topic: Prescription of Actions Facts: Gonzalo Roque Jr., Manuela Almeda-Roque, Eduvigis A. Paredes, Michael A. Paredes, Purificacion Almeda, Jose A. Almeda, Michelle A. Almeda, Michael A. Almeda, Alberto Delura, and Theresa Almeda, owned several parcels of land which they sold to the Republic in 1978, through DPWH. According to the petitioners, the republic approached them and asked them to sell a portion of the land at government-dictated prices lower than market value. The republic was suppose to use the land for President Marcos’ National Government Center Project. The republic assured the respondents that, in the remote possibility that it abandons the project, they will have the right to buy back the land. The republic did not immediately take possession of all the land it had bought from the respondents, thus, the respondents continued to occupy portions of the sold properties. After several years, the respondents felt that the Republic was never going to takeover the land so Gonzalo sent letters to then DPWH Secretary offering to buy back the properties. Gonzalo received no response. The respondents' suspicion was confirmed in December 2003. Armando A. De Castro (De Castro), then undersecretary of the Housing and Urban Development Coordinating Council (HUDCC), wrote a letter to the respondents, requesting them to vacate all portions ofthe sold land that they were still occupying, because the government would use the properties for socialized housing pursuant to Republic Act (R.A.) No. 9207. Realizing that the republic had completely abandoned its initial plan to use the land for the National Government Center project, the respondents in 2005 filed a complaint for the annulment of the sale of the properties. In their answer, the republic argues that the respondents’ action for the annulment of sale is barred by prescription. Issues: 1. Whether the republic is immune from suit? 2. Whether the action is barred by prescription or laches? Held: 1. NO. We rule that the republic is not immune from suit in the present case. A suit against the state is allowed when the state gives its consent either expressly or impliedly. Express consent is given through a statute while implied consent is given when the state enters

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into a contract or commences litigation. Although not all contracts entered into by the government operates as a waiver of its non-suitability, the Court held in previous cases that the state effectively gave its consent when it entered into contracts and committed breach. The State's failure to abide by the conditions of the contract constitutes the State's implied waiver of its immunity. We reiterate that the doctrine of state immunity from suit cannot serve to perpetrate an injustice on a citizen. If we rule otherwise, we will be tolerating unfair dealing in contract negotiation. 2. NO. Prescription can either be a question of law or fact. It is a question of fact when there is a need to determine the veracity of factual matters. Laches is also evidentiary in nature. Resolving the issues of prescription and laches in the present case requires a factual review, specifically whether the presidential proclamations that reduced the land allotted for the NGC Project covered the subject properties and when the prescription period should start to run under the circumstances. These are questions of fact that this Court need not delve into. Nevertheless, the RTC found and concluded, with the CA affirming, that the respondents’ action to annul the sale is not barred either by prescriptions or laches. Both court ruled that the enactment of RA 9207 was the earliest time that the respondents could have known about the government's plans to officially use the land for socialized housing. Thus, the respondents were not barred by prescription when they filed their complaint in 2005, within four (4) years from the enactment of RA 9207. As to laches, both the RTC and the CA found that the respondents' letters to the DP\VH showed that they were vigilant in asserting their alleged right to repurchase the properties from the Republic. This vigilance negates the Republic's claim of laches. We are bound and accordingly adopt these findings and conclusions by the lower courts. HOWEVER, we grant the republic’s petition and reverse the CA’s ruling annulling the sale contract between the parties. The parties entered into a negotiated sale transaction; thus, the republic did not acquire the property through expropriation. In expropriation, the Republic's acquisition of the expropriated property is subject to the condition that the Republic will return the property should the public purpose for which the expropriation was done did not materialize. On the other hand, a sale contract between the Republic and private persons is not subject to this same condition unless the parties stipulate it. The respondents in this case failed to prove that the sale was attended by a similar condition. Hence, the parties are bound by their sale contract transferring the property without the condition applicable in expropriation cases.

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PNB v. Heirs of Benedicto and Azucena Alonday G.R. No. 171865 October 12, 2016 Topic: General Provisions on Contracts Facts: Spouses Benedicto and Azucena Alonday (Spouses Alonday) obtained an agricultural loan of P28,000.00 from the petitioner at its Digos, Davao del Sur Branch, and secured the obligation by constituting a real estate mortgage on their parcel of land. After several years, they also obtained a commercial loan for Pl6,700.00 from the petitioner's Davao City Branch, and constituted a real estate mortgage over their 598 square meter residential lot. The spouses made partial payments on the commercial loan which they renewed on December 23, 1983 and was fully paid on July 5, 1984. Eventually, their children demanded the release of the mortgage over the property covered in the commercial loan. However, PNB informed them that the mortgage could not be released because the agricultural loan had not yet been fully paid and that as a consequence of the failure to pay, it had foreclosed the mortgage over the property. According to PNB, the deed of mortgage relating to the property covered by the agricultural loan included an "all-embracing clause" whereby the mortgage secured not only the commercial loan contracted with its Davao City Branch but also the earlier agricultural loan contracted with its Digos Branch. Issue: Whether the all-embracing or dragnet clause contained in the first mortgage contract executed between the parties for the security of the first loan could authorize the foreclosure of the property under the mortgage to secure a second loan despite the full payment of the second loan? Held: NO. There is no question, indeed, that all-embracing or dragnet clauses have been recognized as valid means to secure debts of both future and past origins. Even so, we have likewise emphasized that such clauses were an exceptional mode of securing obligations, and have held that obligations could only be deemed secured by the mortgage if they came fairly within the terms of the mortgage contract. For the all-embracing or dragnet clauses to secure future loans, therefore, such loans must be sufficiently described in the mortgage contract. The mere fact that the mortgage constituted on the property covered by TCT No. T- 66139 made no mention of the pre-existing loan could only strongly indicate that each of the loans of the Spouses Alonday had been treated separately by the parties themselves, and this sufficiently explained why the loans had been secured by different mortgages. Another indication that the second mortgage did not extend to the agricultural loan was the fact that the second mortgage was entered into in connection only with the commercial loan.

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We further concur in their holding that the mortgage contracts executed by the Spouses Alonday were contracts of adhesion exclusively prepared by the petitioner. Under Article 1306 of the Civil Code, 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." This is an express recognition by the law of the right of the people to enter into all manner of lawful conventions as part of their safeguarded liberties. The objection against a contract of adhesion lies most often in its negation of the autonomy of the will of the parties in contracts. A contract of adhesion, albeit valid, becomes objectionable only when it takes undue advantage of one of the parties - the weaker party - by having such party just adhere to the terms of the contract. In such situation, the courts go to the succor of the weaker party by construing any obscurity in the contract against the party who prepared the contract, the latter being presumed as the stronger party to the agreement, and as the party who caused the obscurity.

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People of the Philippines v Ariel Layag GR 214875 October 17, 2016 Topic: Extinguishment of Civil Liabilities; Sources of Obligations Facts: On August 3, 2015, the Court of Appeals found Ariel Layag guilty beyond reasonable doubt of 1 count of Qualified Rape by Sexual Intercourse, 2 counts of Qualified Rape by Sexual Assault, and 1 count of Acts of Lasciviousness. The dispositive portion of his civil liabilities which reads: as to the award of damages, sentencing him to suffer the following penalties: (a) in Crim. Case No. 2007-9591-MK for Qualified Rape by Sexual Intercourse, he is sentenced to suffer the penalty of reclusion perpetua without eligibility for parole, and ordered to pay the amounts of Pl00,000.00 as civil indemnity, Pl00,000.00 as moral damages, and Pl00,000.00 as exemplary damages; (b) in Crim. Case Nos. 2007-9592-MK and 2007-9593-MK for Qualified Rape by Sexual Assault, he is sentenced to suffer the penalty of imprisonment for the indeterminate period of eight (8) years and one (1) day of prision mayor, as minimum, to seventeen (17) years of reclusion temporal, as maximum, and ordered to pay the amounts of P30,000.00 as civil indemnity, P30,000.00 as moral damages, and P30,000.00 as exemplary damages, for each count; and (c) in Crim. Case No. 2007-9594-MK for Acts of Lasciviousness, he is sentenced to suffer the penalty of imprisonment for the indeterminate period of six (6) months of arresto mayor, as minimum, to four (4) years and two (2) months of prision correccional, as maximum, and ordered to pay the amounts of P20,000.00 as civil indemnity, P30,000.00 as moral damages, and P30,000.00 as exemplary damages. In addition, all monetary awards shall earn legal interest of six percent ( 6%) per annum, to be reckoned from the date of finality of this Resolution until full payment. The Court of Appeals declared the aforesaid resolution had become final and executory. However, the CA received a letter from the Bureau of Corrections that the accused-appellant had passed away on July 30, 2015, days before the promulgation of the CA decision. The Supreme Court affirmed that based on Article 89 of the Revised Penal Code, criminal liability is totally extinguished by the death of the accused. That being said, the issue in this case is civil liability of the deceased accused-appellant. Issue: Whether or not death of the accused-appellant extinguish civil liability? Held: Yes. 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: xxx d) Delicts That being said, the civil action instituted therein for the recovery of the civil liability ex delicto is ipso facto extinguished, grounded as it is on the criminal action. When the criminal liability was extinguished because of the death of the accused-appellant, his civil liabilities arising from the criminal action is also extinguished. However, this does not bar the victim from filing a separate civil action against the estate of the deceased accused-appellant based on sources other than delicts.

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Norma C. Magsano, et al. v Pangasinan Savings and Loan Bank, Inc. GR 215038 October 17, 2016 Topic: Prescription and estoppel Facts: On July 1, 1991, spouses Roque Magsano and Susana Capelo, parents of herein petitioners, executed a Real Estate Mortgage in favor of herein respondent bank over a 418 square-meter parcel of land in Dagupan City, as a security of the Php 35,000.00 loan. The mortgagors then defaulted on their loan obligation when it was then due. The respondent bank then extra-judicially foreclosed the mortgaged property. A public auction was held on March 21, 1994, and the respondent bank won as the highest bidder, with a bid price of Php 65.826.69. The TCT No. 48754 of Roque and Susana was then cancelled and was replaced with TCT No. 65394 in the name of respondent bank. The bank then sold the property to the Sps. Manuel and were issued TCT No. 67491. Despite repeated demands from the bank, the family of the mortgagors refused to vacate the premises, hence the bank applied and was granted a writ of possession over the subject property. The petitioners, on September 6, 2004, filed a complaint for the annulment of the Real Estate Mortgage, the Certificate of Sale, the Sheriff's Final Sale, the Deed of Sale and TCT No. 48754, against the bank and the Sps. Manuel. The petitioners claimed that the Real Estate Mortgage was null and void because Roque passed away on April 17, 1991, while the Mortgage Contract was executed on July 1, 1991. The petitioners likewise asserted that Sps. Manuel were aware of such infirmities regarding the original Real Estate Mortgage contract. In response, the respondents stated that they had no knowledge of the death of Roque. Also, assuming arguendo that the petitioners did have a cause of action, the same had prescribed pursuant to Articles 1144, 1149, and 1150 of the Civil Code. Art. 1144. The following actions must be brought within ten years from the time the right of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment. (n) Art. 1149. All other actions whose periods are not fixed in this Code or in other laws must be brought within five years from the time the right of action accrues. (n) 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. (1969) The respondents further argued that the petitioners are estopped from questioning the validity of the Real Estate Mortgage, considering that they: (a) are bound by the acts of their mother, Susana, who signed the same, and is presumed to be the author of the

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misrepresentation/falsification, and benefited from the proceeds of the loan; and (b) participated in the proceedings for the issuance of the writ of possession. The Sps. Manuel also argued that the were buyers in good faith. Issues: 1) Whether or not the petitioners are barred from questioning the validity of the Real Estate Mortgage? 2) Whether or not the Spouses Manuel were purchasers in good faith? Held: 1) No. The Real Estate Mortgage contract was declared void, hence the petitioners' right to action has yet to prescribe. However, only the part of the property that Susana did not have the right to dispose of is void. When Roque passed away, the subject land was, by operation of law, co-owned by his children and his wife. That being said, Susana had the right to mortgage her part of the property, granted that there was already a proper partition of the estate of the deceased. 2) No. On the second issue, Spouses Manuel cannot claim to be a buyer in good faith. Sps. Manuel did not show proof that they did their due diligence in checking the status of the land in dispute. However, Spouses Manuel merely stepped into the shoes of respondent bank and acquired only the rights and obligations appertaining thereto. As such, the Real Estate Mortgage Contract is void as regards to the portion of Roque. The case is remanded to the RTC to determine the shares of each party involved.

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NOVEMBER 2016 November 14, 2016  Universal International Investment (BVI) Limited Vs. Ray Burton Development Corporation/Universal International Investment (BVI) Limited Vs. Ray Burton Development Corporation G.R. No. 182201/G.R. No. 185815 November 16, 2016  UCPB General Insurance Company, Inc. Vs. Hughes Electronics Corporation G.R. No. 190385 

Spouses Desiderio and Teresa Domingo v Spouses Tita Manzano, Franklin Estabillo and Carmelita Aquino GR No. 201883

November 23, 2016 ● Fruehauf Electronics Philippines Corporation v Technology Electronics Assembly and Management Pacific Corporation GR No. 204197 ● White Marketing Development Corporation vs. Grandwood Furniture & Woodwork G.R. No. 222407 November 28, 2016 ● Nestor Cabrera vs. Arnel Clarin GR No. 215640

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Universal International Investment (BVI) Limited vs. Ray Burton Development Corp. G.R. No. 182201 November 14, 2016 Topic: Breach of Contract Facts: Ray Burton Development Corp (RBDC) owned and developed Elizabeth Place, a condominium located at Salcedo Village, Makati City. Universal International Investment (Universal) and RBDC entered into separate Contracts to Sell covering the purchase of ten condominium units and ten parking slots. Universal paid RBDC the full purchase price of the properties amounting to ₱52,836,781.50. Universal demanded RBDC the cancellation of the sale after RBDC failed to deliver possession of the properties and reneged on its obligation to transfer the Condominium Certificates of Title (CCT) to Universal’s name. Universal subsequently discovered that the mother title to the lot of Elizabeth Place is mortgaged to China Banking Corporation (China Bank). The securities were foreclosed by China Bank. Universal filed a Complaint for Specific Performance or Rescission of Contract and Damages with the Expanded National Capital Region Field Office (ENCRFO) of the HLURB. The ENCRFO rendered a decision in favor of Universal. When the case reached the Court of Appeals (CA), Universal manifested that China Bank had released the subject properties and Universal had already obtained their CCTs. When RBDC moved for dismissal of the case, Universal claimed that it is RBDC is still liable for damages and compensation for property losses supposedly to cover the depreciation costs and expenses it had incurred for the release of the properties from China Bank under Section 6 of the Contract to Sell. Section 6 reads: SECTION 6. BREACH AND/OR VIOLATIONS OF THE CONTRACT. This agreement shall be deemed cancelled, at the option of the BUYER, in the event that SELLER, for the reasons of force majeure, decide not to continue with the Project or the Project has been substantially delayed. In such a case, the BUYER shall be entitled to refund all the payments made with interest at one-and-ahalf (1½) percent per month on the amount paid computed from the date of cancellation until the payments have been fully refunded. Substantial delay is defined as six (6) months from date of estimated date of completion. The parties agree that the estimated date of completion shall be December 31, 1998. CA denied Universal’s claim for damages. Issue: Whether or not RBDC committed a breach of contract? Held: RBDC committed breach of contract. Both parties entered into a contract to sell, not a contract of sale. In a contract to sell, ownership is reserved by the vendor. The obligation of the seller becomes demandable only upon the happening of the suspensive condition which is the full payment of the purchase price. Such full payment gives rise to the right to demand the execution of the contract of sale. It is only upon the existence of the contract of sale that the

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seller becomes obligated to transfer the ownership of the thing sold to the buyer. Under the contract to sell, RBDC only has two obligations: (1) to deliver deeds of absolute sale; and (2) to deliver the corresponding CCTs. RBDC did not have any contractual obligation to surrender possession of the properties. Neither did RBDC have to cause the transfer of the CCT to Universal’s name. However, RBDC did fail to deliver the deeds of absolute sale and to give the corresponding CCTs. RBDC invokes as an excuse Section 5(a) of the contract where Universal is obliged to pay the transfer charges. RBDC’s excuse fails. In order that the debtor may be held to be in default, the following conditions must be present: (1) obligation is demandable and already liquidated; (2) the debtor delays performance of the obligation; and (3) the creditor requires the performance judicially or extrajudicially. RBDC did not make any demand to Universal to tender any payment for the expenses connected with the execution of the Deed of Absolute Sale or transfer of title. Universal cannot be considered to have defaulted on the payment of transfer charges. Under the aforementioned provision of the contract, Universal cannot be obliged to pay the transfer charges when RBDC did not aver to undertake the responsibility of transferring the title of the properties. RBDC is left with no just reason not to perform its obligations to Universal.

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UCPB General Insurance vs. Hughes Electronics Corporation G.R. No. 190385 November 16, 2016 Topic: Interpretation of Contracts Facts: Philippine Charity Sweepstakes Office issued a resolution approving the use in its lottery operations a facility called a Very Small Aperture Terminal lines (VSAT lines) being offered by One Virtual Corporation (OVC). When Hughes Electronics found out about this, it offered OVC its VSAT equipment and services. Hughes and OVC entered into a contract whereby Hughes agreed to provide OVC the necessary equipment and services set forth in the technical specifications in the contract. The contract contained an arbitration clause wherein parties must undergo an arbitration in accordance with the International Arbitration Rules of the International Chamber of Commerce before filing a suit in court in case of resolving a dispute or breach of the contract. Hughes Electronics and OVC agreed that the consideration will be US$743,457.95 secured by OVC’s letter of credit issued in favor of Hughes Electronics. The terms of payment were modified upon issuance of a surety bond with OVC as principal and UCPB Insurance as surety in favor of Hughes Electronics. The chairman and CEO of OVC, Mel Velarde, executed an agreement of Counter-Guaranty in his personal capacity in favor of UCPB where he and OVC solidarily undertook to indemnify UCPB for any damages and expenses of whatever kind and nature it may sustain or incur as a consequence of the surety bond executed. OVC paid Hughes Electronics the amount of US$60,000 but failed to comply with subsequent schedules of payment. It was also discovered by OVC that Hughes Electronics failed to provide the functioning equipment and components needed to conform to the system or protocol required by the PCSO. Due to OVC’s failure to pay, Hughes Electronics went after UCPB based on the surety bond. UCPB failed to heed the demand. Hughes Electronics filed a Complaint for Sum of Money with Damages against OVC as principal and UCPB Insurance as surety. UCPB and OVC sought the dismissal of the complaint due to non-compliance with the arbitration clause. They claimed that Hughes Electronics disregarded a stipulated agreement to submit all disputes arising from the contract to arbitration. The trial court denied the dismissal of the case. It also rendered a decision in favor of Hughes Electronics. The Court of Appeals (CA) affirmed in toto the decision of the trial court. The CA ruled that the arbitration clause is permissive in character. Issue: Whether or not in interpreting the contract, the arbitration clause is mandatory before a suit can be filed in court? Held: In interpreting a contract, its provisions should not be read in isolation but in relation to each other and in their entirety so as to render them effective, having in mind the intention of the parties and the purpose to be achieved. 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.

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Article 1370 of the Civil Code states 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 stipulations shall control. However, it is clearly added that if the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former. Furthermore, Article 1374 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 important task in contract interpretation is always the ascertainment of the intention of the contracting parties and that task is to be discharged by looking to the words they used to project that intention in their contract, all the words not just a particular word or two, and words in context not words standing alone. In interpreting the contract between Hughes Electronics and OVC, it can be concluded that the arbitration clause is mandatory in character. The Court found that Hughes Electronics failed to exercise good faith in resolving its dispute with OVC over the latter’s complaint for wrongful installation of the contracted system and its subsequent failure to comply with the schedule of payment. Hughes Electronics should have followed the letter of the contract and should have made efforts to settle the dispute with OVC amicably instead of directly resorting to judicial action. Also, while the word “may” implies that it is discretionary and not mandatory, the intent of the parties in crafting the stipulations of the contract must also be recognized. This is especially true when one part on dispute resolution provides for a cordial out-of-court settlement couched in mandatory language and the other part implies a permissive referral to arbitration. Thus, upon meticulous review of the entire stipulations on dispute resolution in the contract and taking into consideration the intention of the parties, it is necessary that arbitration proceedings be complied before resorting to court action. This is especially true since arbitration is essential in settlement of commercial disputes involving issues technical in nature.

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Spouses Desiderio and Teresa Domingo v Spouses Tita Manzano, Franklin Estabillo and Carmelita Aquino GR 201883 November 16, 2016 Topic: Contract to sell vs Contract of sale Facts: On June 1, 2001, the Manzanos, through their duly appointed attorney-infact and herein co-respondent Franklin Estabillo (Estabillo), executed a notarized agreement with petitioners Desiderio and Teresa Domingo which provided, among others, that Ako, si Desiderio Domingo na nakatira sa 188 Gen. Mascardo St. Bagong Barrio Kalookan City. Na bibilhin ko ang lupa at bahay ni Tita Manzano sa 168 Gen. Mascardo St. Bagong Barrio Kalookan City. Na ang may Special Power of Attorney si Franklin Estabillo sa halagang (P900,000.00) nine hundred thousand pesos. Sa aming napagkasunduan ako ay magbibigay ng halagang (P100,000.00) one hundred thousand pesos para sa Reservision [sic] Fee. Ayon sa aming napagkasunduan ililipat lamang ang Titulo ng lupa na may no. 160752 at bahay pag nabayaran ko ng lahat ang (P900,000.00) Nine Hundred Thousand Pesos hanggang Marso ng 2001. Kami ay maghahati sa Gain Tax at documentary stamps na babayaran sa B.I.R. ayon sa aming napagkasunduan. Kalakip nito ang xerox title ng titulo ng lupa at bahay. The petitioners the paid the 100,000 reservation fee, the another 160,000 sometime later. However, when the March 2001 deadline came, the petitioners were not able to pay the full amount of the remaining balance. Be that as it may the petitioner still paid 85,000, bringing their total payment to Php345,500.00. In December 2001, the petitioners offered to pay the remaining balance in full, but the respondents refused to accept such offer. Respondent Tita then said that the property was no longer for sale and she was forfeiting petitioners' payments. It was then discovered that respondent Aquino bought the subject land property on May 7, 2002, and a new title was issued and the adverse claim was carried over to Aquino's new title. Issue: Whether or not Article 1544 of the Civil Code is applicable in this case? Held: It has been previously held that in a contract to sell, payment of the price is a positive suspensive condition, failure of which is not a breach of contract warranting rescission but rather just an event that prevents the prospective buyer from compelling the prospective seller to convey the title. The non-fulfillment of the condition of full payment renders the contract to sell ineffective and without force and effect.

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It is clear from the conditions set in the contract between Domingo and Manzano that it is a contract to sell. That said, Art. 1544 cannot apply in this case because there was no double sale. The first contract of Domingo and Manzano, being a contract to sell, the sale was not perfected because of the non-payment of the Domingo of the full amount. Aquino on the other hand, paid the amount due and was able to transfer the title in her name. As far as the court is concerned that is the only valid sale.

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Fruehauf Electronics Philippines Corporation vs Technology Electronics Assembly and Management Pacific Corporation GR 204197 November 23, 2017 Topic: Consequences and Obligation under a perfected contract Facts: In 1978, Fruehauf leased several parcels of land in Pasig City to Signetics for a period of 25 years. In 1983, ceased its operations and in 1986 was bought be Team Holdings. In March 1987, Fruehauf filed an unlawful detainer case against TEAM. To settle the dispute, both parties signed a MOA in June 9, 1988. Under said MOA, TEAM was to pay Fruehaur Php 14.7 million as unpaid rent from December 1986 to June 1988. Both parties also entered in a 15-year lease contract expiring on June 9, 2003, that was renewable for another 25 years. Said contract included an arbitration agreement which states: 17. ARBITRATION In the event of any dispute or disagreement between the parties hereto involving the interpretation or implementation of any provision of this Contract of Lease, the dispute or disagreement shall be referred to arbitration by a three (3) member arbitration committee, one member to be appointed by the LESSOR, another member to be appointed by the LESSEE, and the third member to be appointed by these two members. The arbitration shall be conducted in accordance with the Arbitration Law (R.A. No. 876). TEAM then subleases the property to Capitol Publishing House on 1996. In 2003, TEAM decided not to renew the lease agreement, in effect also ending the sublease between TEAM and Capitol. However, Capitol only vacated the property on 2005 and left the property with substantial damage. On March 9, 2004, Fruehauf instituted SP Proc. No. 11449 before the I Regional Trial Court (RTC) for "Submission of an Existing Controversy for Arbitration." Pursuant to the arbitration agreement, the dispute was referred to a three-member arbitration tribunal. The tribunal then awarded 8.2 million pesos in back rentals and 46.8 million pesos as damages to Fruehauf. TEAM the elevated the matter to the RTC, in which the RTC refused to decide, stating that it was not the proper body for appeal. TEAM then elevated the matter to the Court of Appeals, and the CA reversed the RTC decision and arbitrators' decision. Hence the present issue at the Supreme Court. Issue: Whether or not the Arbitration is a quasi-judicial function? Held: (For contracts) No. Alternative dispute resolution is outside the regular court system. It is the voluntary process in which one or more arbitrators resolve a dispute. It requires consent from all parties in the form of an arbitration clause the pre-existed the controversy.

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Quasi-judicial or administrative adjudicatory power is the power to hear and determine questions of fact to which legislative policy is to apply and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same law. In the case at bar, the arbitral tribunal acquires jurisdiction over the parties and the subject matter through stipulation. Once the rendition of the award, the tribunal becomes functus officio, and ceases to have any further jurisdiction over the dispute. The tribunal's power and very existence stem from the obligatory force of the arbitration agreement and its ancillary stipulations. Article 1315 of the Civil Code provides that: Contracts are perfected by mere consent, and 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.

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White Marketing Development Corporation vs. Grandwood Furniture & Woodwork G.R. 222407 November 23, 2016 Topic: Assignment of credit/subrogation Facts: Grandwood Furniture & Woodwork (Grandwood) obtained a loan in the amount of ₱40 Million from Metropolitan Bank and Trust Company (Metrobank). The loan was secured by a real estate mortgage. Metrobank sold its rights and interests over the loan and mortgage contract to Asia Recovery Corporation (ARC). The loan was subsequently assigned to Cameron Granville 3 Asset Management (CGAM3). CGAM3 extrajudicially foreclosed the real estate mortgage with White Marketing Development (White Marketing) as the highest bidder. White Marketing was informed that Grandwood wanted to redeem the property. White Marketing replied that Grandwood no longer had the right to redeem. Grandwood wrote a letter to the clerk of court that the clerk has the ministerial duty to recognize the right to redemption, accept the tender of payment and issue a certificate of redemption. The clerk of court of the trial court refused to accept the tender of payment because of the conflicting applicable laws on the matter of redemption period. Grandwood filed a petition for consignation, mandamus, and damages before the RTC claiming its right to redeem the property. The trial court dismissed the petition and ruled that White Marketing acquired all the rights of Metrobank in the mortgage contract assigned to CGAM3. The case was appealed to the Court of Appeals (CA). The CA reversed the RTC and remanded the case back to the RTC for the determination of the redemption price. The CA ruled that the clerk of court should have accepted the consigned amount for the redemption of the property. Since White Marketing was not privy to the contract between Issue: Whether or not White Marketing was subrogated to Metrobank and therefore entitled to a shorter redemption period under the General Banking Law? Held: White Marketing stepped into the shoes of Metrobank by virtue of the assignment of credit. A contracting party's assignees, although seemingly a third party to the transaction, remain bound by the original party's transaction under the relativity principle because of the concept of subrogation, which inheres in assignment. Jurisprudence states that when a person assigns his credit to another person, the latter is deemed subrogated to the rights as well as to the obligations of the former. By virtue of the Deed of Assignment, the assignee is bound by exactly the same conditions as those which bound the assignor. Accordingly, an assignee cannot acquire greater rights than those pertaining to the assignor and simply stands into the shoes of the latter. In an assignment of credit, the assignee acquires the power to enforce it to the same extent as the assignor could have enforced it against the debtor. Through the assignment of credit, the new creditor is entitled to the rights and remedies available to the previous creditor, and includes accessory rights such as mortgage or pledge. Consequently, ARC acquired all the rights, benefits and obligations of Metrobank under its mortgage contract with Grandwood. The same could be said for subsequent assignees or successors-in-interest after ARC like White Marketing. And due to the subrogation of White Marketing to the rights of Metrobank, White Marketing is entitled to the shorter redemption period under Section 47 of the General Banking Law.

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Nestor Cabrera vs. Arnel Clarin GR 215640 November 28, 2016 Topic: Estoppel Facts: The petition originated from a Complaint for accion publiciana with damages file before the RTC by Cabrera against respondents Clarin, Barrios, Serafin, and Moreno. Petitioner is the lawful and registered owner of a parcel of agricultural land in Calumpit Bulacan with a total area of 60,000 square meters covered by TCT T-4439. He was in actual and physical possession of the land until he discovered the encroachment of the respondents sometime in December 2005. They failed to settle amicable when the case was brought before the barangay. The respondents claimed that the complaint failed to state the assessed value of the property which is needed in determining the docket fees. The respondents also claim that he petitioner did not submit a government approved technical survey of actual encroachment on their part. The RTC denied the respondent motion and directed them to file an answer. The respondent failed to file an answer on time and the RTC declared them in default, and allowed the petitioner to present his evidence ex parte. The RTC then ruled in favor of the petitioner. The respondents elevated the matter to the court of appeals which then reversed and set aside the decision of the RTC. Issue: Whether or not estoppel bars respondents from raising the issue of lack of jurisdiction? Held: Cabrera alleges that the CA erred in concluding the RTC did not have jurisdiction over the action for this is contrary to the doctrine of estoppel. Estoppel sets in when the respondents participated in all stages of the case and voluntarily submitting to its jurisdiction seeking affirmative relief in addition to their motion to dismiss due to lack of jurisdiction. This assumption lacks merit. A court's jurisdiction may be raised at any point of the proceeding, even on appeal for the same conferred by law, and lack of it affects the very authority of the court to take cognizance of and to render judgement on the actions. It applies even if the issue on jurisdiction was raised for the first time on appeal or even after final judgment. The general rule is that the lack of a court's jurisdiction is a non-waivable defense that a party can raise at any stage of the proceedings in a case, even on appeal; the doctrine of estoppel, being the exception to such non-waivable defense, must be applied with great care and the equity must be strong in its favor.

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DECEMBER 2016 December 5, 2016  Sps. Luisito Pontigon and Leodegaria Sanchez-Pontigon vs. Heirs of Meliton Sanchez, et al. G.R. No. 221513 

Philippine Stock Exchange, Inc. vs. Antonio K. Litonjua and Aurelio K. Litonjua, Jr G.R. No. 204014

December 7, 2016  Pryce Properties Corporation vs. Sps. Sotero Octobre, Jr., et al. G.R. No. 186976 

B.F. Corporation and Honorio Pineda vs. Form-Eze Systems, Inc. G.R. No. 192948

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Spouses Luisito Pontigon and Leodegaria Sanchez-Pontigon vs. Heirs of Meliton Sanchez G.R. No. 221513 December 5, 2016 Topic: Prescription; Private documents; Relativity of Contracts; Voidable Contracts Facts: Meliton Sanchez (Meliton) owned a 24-hectare parcel of land in Floridablanca, Pampanga covered by OCT 207 registered in his name. Meliton died intestate leaving the subject property to his three children: Apolonio, Flaviana, and Juan. Petitioner Leodegaria is the daughter of Juan and Luisito is her husband. The respondents are Meliton’s grandchildren with Flaviana. The respondents filed a Complaint for Declaration of Nullity of Title and Real Estate Mortgage with Damages against petitioners. The subject property had never been partitioned among the heirs of Meliton but upon verification with the Register of Deeds (RD), OCT 207 is nowhere to be found and only an owner’s copy of OCT 207 free from any annotation of cancellation or description of a document justifying the transfer of the property is in the RD. Despite this, the petitioners transferred the title to their names even without a document of conveyance. Respondents argue the transfer of title to petitioners was fraudulent and invalid and that petitioners merely hold the title over the property in trust for the Meliton’s heirs. Petitioners countered that the conveyance in their favor is evidenced by an Extrajudicial Settlement of Estate of Meliton Sanchez and Casimira Baluyut with Absolute Sale (extrajudicial settlement) of the Meliton’s estate. They also claimed that there is already a 1979 trial court decision that approved an extrajudicial settlement filed by the children of Meliton. Petitioners also filed a motion to dismiss on the ground that the action of the respondents is already barred by prescription. There were circumstances asserted by the respondents to question the validity of the extrajudicial settlement. First, when the document was executed, Flaviana was 69 years old and therefore, was in her advanced age and already senile. There could have been no valid consent to the sale of the property. The respondents admit that there is no document to prove the status of the Flaviana’s mental condition. Second, it was alleged that Flaviana refused to affix her signature and was only coerced to sign the extrajudicial settlement. RTC denied the motion to dismiss and ruled that the action of the respondent has not prescribed. The RTC ruled in favor of the respondents and declared the title of the petitioners null and void. The RTC ratiocinated the fraudulent acquisition of the title resulted to a creation of a trust relation and because of this, the action based on the trust relation is imprescriptible. The RTC also found irregularities in the notarization of the extrajudicial settlement. The Court of Appeals (CA) affirmed the ruling of the trial court. The CA also ruled that the extrajudicial settlement cannot be considered a public document because it was not properly notarized. It cannot bind third persons including the respondents. The document is also bereft of any probative value for failure on the part of the petitioners to comply with the rules on the admissibility of private documents as proof. Due to the irregularities of the extrajudicial settlement, it could not have conveyed title to the petitioners.

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Issues: 1. Whether or not the action is barred by prescription? 2. Whether or not the extrajudicial settlement is a private document binding on the respondents? 3. Whether or not extrajudicial settlement is void? Held: 1. The respondents’ action is barred by prescription. The Court held that the action of respondents is an action for reconveyance based on an implied or constructive trust. Such action is not imprescriptible. An action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten (10) years, the point of reference being the date of registration of the deed or the date of issuance of the certificate of title over the property. An action for reconveyance may only be permitted to be filed beyond the ten-year period when the plaintiff is in actual possession of the disputed land, converting the action from reconveyance into a quieting of title. Imprescriptibility is accorded to cases for quieting of title since the plaintiff has the right to wait until his possession is disturbed or his title is questioned before initiating an action to vindicate his right. 2. The extrajudicial settlement is a private document that is binding on the respondents. The document is binding to the respondents because of the principle of relativity of contracts provided in Article 1311 of the Civil Code. The extrajudicial settlement is a private document because it was not properly notarized due to the absence of Flaviana’s residence certificate number and the lack of identification presented by Flaviana. However, the irregularity is not fatal to the validity of the extrajudicial settlement. The defect renders the written contract as a private instrument rather than a public one. While Article 1358 of the Civil Code seemingly requires transmission and extinguishment of real rights over immovable property should be in a public document, it is hornbook doctrine that the embodiment of certain contracts in a public instrument is only for convenience. Non-observance of the prescribed formalities does not necessarily excuse the contracting parties from complying with their respective obligations under their covenant and merely grants them the right to compel each other to execute the proper deed. A contract of sale has the force of law between parties who are expected to abide in good faith by their contractual commitments notwithstanding the failure to comply with Article 1358. The principle of relativity of contracts dictates that contractual agreement can only bind the parties who entered into them and cannot favor or prejudice third persons, even if he is aware such contract and has acted with knowledge thereof. This doctrine finds basis in Article 1311 of the Civil Code. The law is categorical in declaring that as a general rule, the heirs of the contracting parties are precluded from denying the binding effect of the valid agreement entered into by their predecessors-in-interest. The heirs are not deemed “third persons” to the contract. The provision also does not make a distinction on whether the contract adverted to is oral or written, and even more so whether it is embodied in a public or private instrument. It is then immaterial that the Extrajudicial Settlement executed by Flaviana is properly notarized for the said document to be binding on her heirs, the respondents in this case. 3. The extrajudicial settlement is only voidable, not void. On the allegations of the respondents of the coercion of Flaviana into signing the extrajudicial settlement, such circumstance renders the extrajudicial settlement voidable. A voidable contract retains the

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binding effect of a valid one unless otherwise annulled. The action for annulment shall be brought within four (4) years in cases of intimidation, violence, or undue influence, from the time the defect of the consent ceases. The prescriptive period for annulment had long since expired before they filed their complaint. They cannot be permitted to circumvent the law by belatedly attacking collaterally the voidable document in the present action for declaration of nullity of title. The extrajudicial settlement had been ratified by the inaction of the respondents and is therefore binding upon them despite the irregularities of the petition for approval of the extrajudicial settlement.

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Philippine Stock Exchange vs. Antonio Litonjua and Aurelio Litonjua G.R. No. 204014 December 5, 2016 Topic: Consent; Estoppel; Payment Facts: Trendline, as a member of the Philippine Stock Exchange (PSE), owns a trading seat with a right to conduct trading activities in the PSE. Trendline violated some PSE rules and failed to pay its cash settlement payables to the Securities Clearing Corporation of the Philippines. PSE was compelled to assume Trendline’s obligation. PSE suspended Trendline’s trading privileges. The Litonjua Group and Trendline entered into an agreement where the Litonjua Group acquired 85% majority equity of Trendline’s membership in PSE. In exchange of the Trendline’s membership seat in the PSE, the Litonjua Group undertook to pay Trendline’s outstanding liability to PSE in the amount of ₱18,547,643.81 and upon payment, Trendline’s membership suspension will be lifted and its resumption to normal trading operation. Litonjua claimed the Business Conduct and Ethics Committee of PSE has resolved to accept the amount of ₱19 Million as full and final settlement of Trendline’s outstanding obligation. Litonjua delivered to PSE three check payments payable to PSE amounting to ₱ 19 Million. PSE received the checks as an advance payment for full settlement of Trendline’s outstanding obligation to PSE. The payor indicated in the checks was Trendline, not the Litonjua Group. Despite such payment and exchange of letters of conformity, PSE failed to lift the suspension imposed on Trendline’s seat. Thereafter, Litonjua requested PSE to reimburse the ₱19 Million it had paid. PSE refused to refund said amount. Litonjua filed a complaint for collection of sum of money with damages against PSE before the RTC. The trial court rendered a decision in favor of the Litonjua Group. The trial court ruled that the Litonjua group is entitled to a refund from PSE based on solutio indebiti. The Court of Appeals (CA) affirmed the decision of the trial court relied on the principle of constructive trust instead of solutio indebiti. The CA ruled Article 1236 of the Civil Code is inapplicable in this case. It ruled that the acts of PSE subsequent to the agreement between the Litonjua Group and Trendline were tantamount to consent. Issues: 1) Whether or not the PSE is a party to the agreement between the Litonjua Group and Trendline absent its consent manifested through a board resolution? 2) If PSE is not a party, whether or not PSE is still liable to return the money it received? 3) Whether or not Article 1236 of the Civil Code is applicable? Held: 1. PSE is not a party to the agreement between the Litonjua Group and Trendline absent its consent manifested through a board resolution. The Supreme Court, citing Article 1305 of the Civil Code, held that for a contract to be binding, there must be consent of the contracting parties. Consent, as a requisite to have a valid contract, is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. In corporations, consent is manifested through a

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board resolution since powers are exercised through the board of directors under the Corporation Code. As a general rule, in the absence of the authority from the board of directors, no person, not even its officers, can validly bind a corporation. Since there is no board resolution was issued to authorize PSE to become a party to the agreement or to bind itself to the said obligations or to lift the suspension over Trendline’s PSE seat, PSE is not considered as a party to the agreement of the Litonjua Group and Trendline. 2. PSE is still liable to return the money to Litonjua on the basis of unjust enrichment and estoppel. It is only rightful to return the money received since PSE has no intention from the beginning to be a party to the agreement. The principle of unjust enrichment requires PSE to return the money it had received at the expense of another without just cause or consideration. In addition, the principle of estoppel finds merit. Estoppel has its roots in equity. It is a response to the demands of moral right and natural justice. Its purpose is to forbid one to speak against its own act, representations or commitment to the injury of one to whom they were directed and who reasonably relied thereon. The Litonjua Group was led to believe the payment of ₱19 Million will be the full settlement of all the obligations due in order to lift of the suspension of the seat. By accepting Litonjua’s payment, PSE is now estopped from claims that Trendline still has a penalty obligation that must be settled before the transfer of the seat. Since it has been made clear PSE is not a party due to the lack of consent, it is now estopped from claiming the right to be paid. 3. Article 1236 of the Civil Code is inapplicable. PSE was arguing that the Litonjua Group should demand reimbursement to Trendline under Article 1236. The Supreme Court held that contrary to PSE’s argument, Article 1236 is inapplicable in this case. Under Article 1236 of the Civil Code, the creditor is not bound to accept the payment or performance by a third person who has no interest in the fulfillment of obligation. 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. PSE is not bound to accept the payment of a third person who has no interest in the fulfillment of the obligation. However, the Litonjua Group is an interested party. There was a clear understanding that the Litonjua Group has the intention settle the outstanding obligation of Trendline in consideration of its acquisition of 85% seat ownership and PSE’s lifting of suspension of the trading seat.

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Pryce Properties Corporation vs. Spouses Octobre and China Banking Corporation G.R. No. 186976 December 7, 2016 Topic: Breach of Contract Facts: Spouses Octobre and Pryce Properties (Pryce) executed a Contract to Sell for purchase of two lots with a total of 742 square meters located in Puerto Heights Village, Puerto Heights, Cagayan de Oro City for the price of ₱2,897,510.00 Pryce certified that Spouses Octobre fully settled all the payments in relation to the property, amounting to a total of ₱4,292,297.92. Spouses Octobre formally demanded Pryce the delivery of the certificates of title but Pryce failed to comply. This prompted Spouses Octobre to file a complaint for specific performance, revocation of certification, refund of payments, damages and attorney’s fees before the HLURB. The reason behind Pryce’s non-compliance is a Deed of Assignment Pryce executed with China Bank. Under the Deed of Assignment, Pryce assigned and transferred its accounts receivable in form of contracts to sell as security and deliver the corresponding owner’s duplicate copies of the TCTs relating to the Puerto Heights development project. In exchange, China Bank extended a ₱200 Million credit facility to Pryce. Pryce defaulted in its loan obligation to China Bank which led to China Bank refusing to return the titles to Pryce. The HLURB Arbiter rendered a decision rescinding the contract between Pryce and the Spouses Octobre and ordered Pryce to refund the payments made by the spouses and also to pay compensatory damages. On appeal, the HLURB Board of Commissioner modified the decision and ordered Pryce to pay the redemption value to China Bank so that the bank may release the titles covering the lots purchased by the Spouses Octobre. In default thereof, Pryce shall refund the payments with legal interest. The HLURB Board upheld the grant of compensatory damages.The Office of President (OP) affirmed in full the HLURB Board’s decision. Likewise, the Court of Appeals (CA) affirmed the decision of the OP. The CA found that Pryce acted in bad faith for not disclosing the titles were in custody of China Bank. The CA held Pryce’s contractual breach justified the award of compensatory damages in the amount of ₱30,000. Issue: Whether or not a breach of contract automatically triggers the award of actual or compensatory damages? Held: No. To be entitled to compensatory damages, the amount of loss must be capable of proof and must be actually proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable. Its award must be based on evidence presented, not on the personal knowledge of the court; and certainly, not on flimsy, remote, speculative and nonsubstantial proof. The amount paid by Spouses Octobre as purchase price for the lots has been adequately proved. Therefore, Spouses Octobre are entitled to such amount. However, the compensatory damages in the amount of ₱30,000 is bereft of any evidentiary basis. In absence of adequate proof, compensatory damages should not have been awarded. Nonetheless, nominal damages, in lieu of compensatory damages, are proper in this case.

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Nominal damages are recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind. It could also be awarded where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown. So long as there is a violation of the right of the plaintiff – whether based on law, contract or other sources of obligation – an award of nominal damages is proper. Proof of bad faith is not required. The HLURB Arbiter and the CA appear to have confused nominal damages with compensatory damages. Contractual breach is sufficient to justify an award for nominal damages but not compensatory damages.

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B.F. Corporation & Honorio Pineda v Form-Eze Systems, Inc GR 192948 December 7, 2016 Topic: Reformation Facts: Petitioner B.F. Corporation (BFC) is a corporation engaged in general engineering and civil works construction. Petitioner Honorio H. Pineda (Pineda) is the President of BFC. Respondent Form-Eze Systems Inc. (Form-Eze) is a corporation engaged in highway and street construction. On 29 August 2006, SM Prime Holdings, Inc. awarded the contract for general construction of the SM City-Marikina mall (the Project) to BFC whereby the latter undertook to supply materials, labor, tools, equipment and supervision for the complete construction of the Project. 3 In turn, BFC engaged Form-Eze for the lease of formwork system and related equipment for and needed by the Project. Accordingly, five (5) contracts and two (2) letter-agreements were executed by the BFC. The contracts: CONTRACT NO. 1: Contract for the Lease of the Equipment for the Beam and Slab Hardware for the Formwork on SM Marikina Mall Project dated 20 December 2006 CONTRACT NO. 2: Contract for Stripping and Moving Form-Eze Systems Inc. Equipment from Location to Location on SM Marikina Mall Project dated 20 December 2006 CONTRACT NO. 3: Contract for Column Formwork on the SM Marikina Mall Project dated 20 December 2006 CONTRACT NO. 4: Contract for the Lease of the Heavy Duty Galvanized Scaffold Frames and Related Accessories on SM Marikina Mall Project dated 29 January 2007 CONTRACT NO. 5: Contract for the Purchase and Lease of the Heavy Duty Galvanized XBracing on SM Marikina Mall Project dated 29 January 2007 On 2007, Form-Eze filed a Request for Arbitration11 before the CIAC. In its Complaint, FormEze alleged that BFC has an unpaid obligation amounting to P9,189,024.58; that BFC wanted to re-negotiate the equipment leases; and that it was not complying with the contractual and supplemental agreements in effect In its answer, BFC sought for reformation of Contract #1 to incorporate a provision that BFC shall deduct from said billing the cost of labor supplied by it for the fabrication and assembly of the forming system and for the stripping, cleaning, resetting thereof at the rate of P60.00 per man-hour. BFC also demanded the refund ofn as expenses for the manufacture of additional hardware to complete the 7,000 square meters of formwork required in Contract #1. CIAC rendered an award in favor of Form-Eze. BFC filed a petition for review before the CA. CA denied the petition for lack of merit.

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Issues: 1. Whether or not Contract 1 can be reformed? 2. Whether or not the contract expressed their true intention; and, if not, whether it was due to mistake, fraud, inequitable conduct or accident? Held: 1. Yes, the Contract 1 may be reformed. An action for reform a contract is grounded on Article 1359 of the New Civil Code which provides: ARTICLE 1359. When, there having been a meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed. Reformation is a remedy in equity, whereby a written instrument is made or construed so as to express or conform to the real intention of the parties, where some error or mistake has been committed. In granting reformation, the remedy in equity is not making a new contract for the parties, but establishing and perpetuating the real contract between the parties which, under the technical rules of law, could not be enforced but for such reformation. In order that an action for reformation of instrument may prosper, the following requisites must concur: (1) there must have been a meeting of the minds of the parties to the contract; (2) the instrument does not express the true intention of the parties; and (3) the failure of the instrument to express the true intention of the parties is due to mistake, fraud, inequitable conduct or accident BFC relies on the Form-Eze Proposed SM Marikina Mall Project Elevated Beam and Slab Formwork dated 7 December 2006 to support its contention that Contract No. 1 should have a provision on the cost of labor. Indeed, in the aforementioned proposal, BFC has agreed "to furnish the labor required for fabrication and assembly of the forming equipment" and that "BFC will deduct from the total contract amount 50.00 per man-hour each carpenter or laborer supplied to Form-Eze." Notably, Contracts No. 2 and 3 contain labor-guarantee provisions considering that BFC has committed to provide the necessary labor for both contracts. As a matter of fact, Mr. James Franklin, the President of Form-Eze conceded that Contract No. 1 should be modified to include a labor-guarantee provision. 2. This admission by Form-Eze bolsters the conclusion that the parties intended to include a labor-guarantee provision in Contract No. 1. Both Contracts No. 2 and 3 set the labor rate at P60.00 per carpenter man-hour. BFC fixed the cost of labor at P453,294.50. Considering that both parties admitted that there should be a labor- guarantee clause in Contract No. 1, it can be reasonably inferred that the failure to include said provision was due to mistake. A reformation is in order to include a cost of labor provision in Contract No. 1.

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JANUARY 2017 January 18, 2017  Iloilo Jar Corporation vs. Comglasco Corporation/Aguila Glass G.R. No. 219509 ● Rutcher T. Dagasdas vs. Grand Placement and General Services Corporation G.R. No. 205727 January 25, 2016  Kabisig Real Wealth Dev., Inc. and Fernando C. Tio vs. Young Builders Corporation G.R. No. 212375 January 31, 2016  Madag Buisan, et al. vs. Commission of Audit and Department of Public Works and Highways G.R. No. 212376

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Iloilo Jar Corporation vs. Comglasco Corporation/Aguila Glass G.R. No. 219509 January 18, 2017 Topic: Rebus Sic Stantibus; Kinds of Prestation Facts: In August 2000, Iloilo Jar (lessor), and Comglasco (lessee) entered into a lease contract over a portion of a warehouse building. The term of the lease was for a period of 3 years or until August 2003. On December 2001, Comglasco requested for the pre-termination of the lease effective on the same date. Iloilo Jar rejected the request on the ground that the pre-termination of the lease contract was not stipulated. Despite the denial of the request for pre-termination, Comglasco still removed all its stock, merchandise and equipment from the leased premises on January 15, 2002. From the time of the withdrawal of the equipment, and despite several demand letters, Comglasco no longer paid all rentals accruing from the said date. Iloilo Jar sent a final demand letter to Comglasco, but it was again ignored. Consequently, Iloilo Jar filed a civil action for breach of contract and damages before the RTC Comglasco argued that by virtue of Article 1267 of the Civil Code, it was released from its obligation from the lease contract. It explained that the consideration had become so difficult due to the global and regional economic crisis that had plagued the economy. It admitted that it had removed its stocks and merchandise but it did not refuse to pay the rentals because the lease contract was already deemed terminated. RTC rendered a decision for Iloilo Jar. Comglasco moved for reconsideration to the CA, who reversed the order of the RTC. Iloilo Jar filed a MR but was denied. Issue: Whether or not there was a valid termination of contract? Held: No, there was no valid termination. To evade responsibility, Comglasco explained that by virtue of Article 1267, it was released from the lease contract. It cited the existing global and regional economic crisis for its inability to comply with its obligation. Comglasco's position fails to impress because Article 1267 applies only to obligations to do and not to obligations to give. An obligation "to do" includes all kinds of work or service; while an obligation "to give" is a prestation which consists in the delivery of a movable or an immovable thing in order to create a real right, or for the use of the recipient, or for its simple possession, or in order to return it to its owner. The obligation to pay rentals or deliver the thing in a contract of lease falls within the prestation "to give".

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The principle of rebus sic stantibus neither fits in with the facts of the case. Under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist, the contract also ceases to exist. This article, which enunciates the doctrine of unforeseen events, is not, however, an absolute application of the principle of rebus sic stantibus, which would endanger the security of contractual relations. The parties to the contract must be presumed to have assumed the risks of unfavorable developments. It is therefore only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor. Considering that Comglasco's obligation of paying rent is not an obligation to do, it could not rightfully invoke Article 1267 of the Civil Code. Even so, its position is still without merit as financial struggles due to an economic crisis is not enough reason for the courts to grant reprieve from contractual obligations. In COMGLASCO Corporation/Aguila Glass v. Santos Car Check Center Corporation, the Court ruled that the economic crisis which may have caused therein petitioner's financial problems is not an absolute exceptional change of circumstances that equity demands assistance for the debtor. It is noteworthy that Comglasco was also the petitioner in the above-mentioned case, where it also involved Article 1267 to pre-terminate the lease contract. Thus, the RTC was correct in ordering Comglasco to pay the unpaid rentals because the affirmative defense raised by it was insufficient to free it from its obligations under the lease contract.

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Rutcher T. Dagasdas vs. Grand Placement and General Services Corporation G.R. No. 205727 January 18, 2017 Topic: Parties may stipulate terms and agreements in their contract Facts: Grand Placement and General Services Corp (GPGS) is a licensed recruitment or placement agency in the Philippines while Saudi Aramco (Aramco) is its counterpart in Saudi Arabia. On the other hand, Industrial & Management Technology Methods Co. Ltd. (ITM) is the principal of GPGS, a company existing in Saudi Arabia. In November 2007, GPGS, on behalf of ITM, employed Dagasdas as Network Technician. He was to be deployed in Saudi Arabia under a one-year contract. Before leaving the Philippines, Dagasdas underwent skill training and pre-departure orientation as Network Technician. Nonetheless, his Job Offer indicated that he was accepted by Aramco and ITM for the position of “Supt.” Dagasdas contended that although his position under his contract was as a Network Technician, he actually applied for and was engaged as a Civil Engineer. Purportedly, the position of Network Technician was only for the purpose of securing a visa for Saudi Arabia because ITM could not support visa application for Civil Engineers. Dagasdas arrived in Saudi and signed a new contract with ITM who contracted him as Superintendent. Under this contract, Dagasdas shall be placed under a three-month probationary period; and, this new contract shall cancel all contracts prior to its date from any source. He was allegedly given tasks suited for a Mechanical Engineer. Seeing that he would not be able to perform well in his work, Dagasdas raised his concern to his Supervisor. Consequently, he was transferred to the Civil Engineering Department. However, before Dagasdas’ case was investigated, Siddiqui, Site Coordinator Manager,had severed his employment with ITM. Later on, ITM gave him a termination notice indicating that his last day of work was on April 30, 2008, and he was dismissed pursuant to clause 17.4.3 of his contract, which provided that ITM reserved the right to terminate any employee within the three-month probationary period without need of any notice to the employee. Dagasdas signed a Statement of Quitclaim with Final Settlement23 stating that ITM paid him all the salaries and benefits for his services from February 11, 2008 to April 30, 2008 and ITM was relieved from all financial obligations due to Dagasdas. Upon returning to the PH, he filed an illegal dismissal case against GPGS, ITM and Amarco. The Labor Arbiter dismissed the case for lack of merit. It was pointed out that Dagasdas signed a new contract which was more advantageous for him, making the contract not prohibited by law. Dagasdas appealed to the NLRC which found that his dismissal was illegal. They stated that GPGS erroneously recruited Dagasdas.

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GPGS filed a Petitioner for Certiorari. CA reversed the NLRC decision and reinstated the LA decision Issue: Whether or not the new contract is valid? Held: NO, the new contract signed in Saudi is not valid. It is well-settled that employers have the prerogative to impose standards on the work quantity and quality of their employees and provide measures to ensure compliance. Non-compliance with work standards may thus be a valid cause for dismissing an employee. Nonetheless, to ensure that employers will not abuse their prerogatives, the same is tempered by security of tenure whereby the employees are guaranteed substantive and procedural due process before they are dismissed from work. Since the employment contracts of OFWs are perfected in the Philippines, and following the principle of lex loci contractus (the law of the place where the contract is made), these contracts are governed by our laws, primarily the Labor Code. Our laws generally apply even to employment contracts of OFWs as our Constitution explicitly provides that the State shall afford full protection to labor, whether local or overseas. Even if a Filipino is employed abroad, he or she is entitled to security of tenure, among other constitutional rights. In this case, prior to his deployment and while still in the Philippines, Dagasdas was made to sign a POEA-approved contract with GPGS, on behalf of ITM, and, upon arrival in Saudi Arabia, ITM made him sign a new employment contract. Nonetheless, this new contract, which was used as basis for dismissing Dagasdas, is void ITM terminated him for violating clause 17.4.3 of his new contract 17.4 The Company reserves the right to terminate this agreement without serving any notice to the Consultant in the following cases: 17.4.3 If the Consultant is terminated by company or its client within the probation period of 3 months Dagasdas’ new contract is in clear violation of his right to security of tenure. There is no clear justification for the dismissal of Dagasdas other than the exercise of ITM's right to terminate him within the probationary period While our Civil Code recognizes that parties may stipulate in their contracts such terms and conditions as they may deem convenient, these terms and conditions must not be contrary to law, morals, good customs, public order or policy. The contract is contrary to law because as discussed, our Constitution guarantees that employees, local or overseas, are entitled to security of tenure. To allow employers to reserve a right to terminate employees without cause is violative of this guarantee of security of tenure.

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Kabisig Real Wealth Dev. Inc & Fernando Tito vs. Young Corporation Builders G.R. No. 212375 January 25, 2017 Topic: Requisites of a Valid Contract Facts: In April 2001, Kabisig Real, through Ferdinand Tito, contracted the services of Young Builders Corporation (Young Builders) to supply labor, tools, equipment, and materials for the renovation of its building in Cebu City. Young Builders then finished the work in September 2001 and billed Kabisig for P4,123,320.95. However, despite numerous demands, Kabisig failed to pay. The parties did not enter into a written contract, and there was no estimate as to the cost of the renovation. Young Builders filed a collection of sum of money suit against kabisig. RTC-Cebu rendered a decision ordering Kabisig to pay Young Builders. Kabisig elevated the case to the CA, who affirmed the decision of the RTC. Young Builders and Kabisig moved for reconsideration but were denied. Kabisig filed the current petition. Issue: Whether or not Kabisig is liable to Young Builders for the damages claimed? Held: Yes, Kabisig is liable to Young Builders. Under the Civil Code, a contract is a meeting of minds, with respect to the other, to give something or to render some service. Article 1318 reads: Art. 1318. There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; and (3) Cause of the obligation which is established. Accordingly, for a contract to be valid, it must have the following essential elements: (1) consent of the contracting parties; (2) object certain, which is the subject matter of the contract; and (3) cause of the obligation which is established. Consent must exist, otherwise, the contract is non-existent. Consent is manifested by the meeting of the offer and the acceptance of the thing and the cause, which are to constitute the contract. By law, a contract of sale, is perfected at the moment there is a meeting of the minds upon the thing that is the object of the contract and upon the price. Indeed, it is a consensual contract which is perfected by mere consent. Kabisig's claim as to the absence of a written contract between it and Young Builders simply does not hold water. It is settled that once perfected, a contract is generally binding in whatever form, whether written or oral, it may have been entered into, provided the aforementioned essential requisites for its validity are present. Article 1356 of the Civil Code provides:

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Art. 1356. Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. There is nothing in the law that requires a written contract for the agreement in question to be valid and enforceable. Also, the Court notes that neither Kabisig nor Tio had objected to the renovation work, until it was already time to settle the bill. To determine the compensation due and to avoid unjust enrichment from resulting out of a fulfilled contract, the principle of quantum meruit may be used. Under this principle, a contractor is allowed to recover the reasonable value of the services rendered despite the lack of a written contract. The measure of recovery under the principle should relate to the reasonable value of the services performed. The principle prevents undue enrichment based on the equitable postulate that it is unjust for a person to retain any benefit without paying for it. Being predicated on equity, said principle should only be applied if no express contract was entered into, and no specific statutory provision was applicable.11 The principle of quantum meruit justifies the payment of the reasonable value of the services rendered and should apply in the absence of an express agreement on the fees. Considering the absence of an agreement, and in view of the completion of the renovation, the Court has to apply the principle of quantum meruit in determining how much is due to Young Builders. Under the established circumstances, the total amount of P2,400,000.00 which the CA awarded is deemed to be a reasonable compensation under the principle of quantum meruit since the renovation of Kabisig's building had already been completed in 2001.

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Madag Buisan, et al vs. Commission on Audit and Department of Public Works and Highways G.R. No. 212376 January 31, 2017 Topic: Laches Facts: In 1989, the DPWH undertook the construction of the Liguasan Cut-off Channel (Project) in Tunggol, Pagalungan, Maguindanao, to minimize the perennial problem of flooding in the area. In 2001, the DPWH received various claims from land owners for damages allegedly caused to their properties, crops and improvements by the premature opening of the Project. In 2004, DPWH Regional Office recommended to pay just compensation to the claimants. However since the event occurred in 1989, it could not account physically the actual quantity of damaged crops and property. DPWH did not have a final resolution and the claims was forwarded to COA. The Petitioners, represented by Mayor Bai Anne Montawal, filed a petitioner with COA, praying that DPWH pay compensation for the damaged crops, and properties. Later on, Buisan filed a Motion to Dismiss the Petition alleging that Montawal was not authorized to represent them. In fact, Buisan and the other claimants filed a separate petition with the COA based on that same money claim COA denied the money claims of the petitioners. It held that they are barred by laches for failure to file the money claims within reasonable time. Issue: Whether or not COA gravely abused its discretion in finding that the petitioners’ claim was barred by laches and prescription? Held: Yes, petitioner’s cause of action has been barred by laches. COA denied the petition primarily on the ground that the petitioners filed their money claims only on 2014, or 15 years after their cause of action arose in 1989. The petitioners’ statement that there were already heavy rains since 1989 that caused flooding in the area negates their previous claim that the cause of action arose in 1992. If in fact there were already heavy rains since 1989, then it can also be argued that prior to 1992, their properties were already damaged by the floods and that would be the reckoning point of their cause of action. This further establishes that their cause of action has already prescribed. While it may be argued that the petitioners have a cause of action against the DPWH, the same has already prescribed in view of Article 1146 of the Civil Code; viz.: ART. 1146. The following actions must be instituted within four years: (1) Upon an injury to the rights of the plaintiff; (2) Upon a quasi-delict. Undeniably, the petitioners’ money claims which were only filed with the DPWH in 2004 or even in 2001 had already prescribed. As correctly pointed out by the Office of the Solicitor

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General, “it will be the height of injustice for respondent DPWH to be confronted with stale claims, where verification on the plausibility of the allegations remains difficult, either because the condition of the alleged inundation of crops has changed, or the physical impossibility of accounting for the lost and damaged crops due to the considerable lapse of time” On the other hand, “laches has been defined as 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” In the case at bar, laches has set in as the elements are present. Firstly, the premature opening by the DPWH of the Project allegedly causing flash floods, and damaging the petitioners’ properties took place in 1989 or even in 1992. Secondly, the petitioners took 15 years to assert their rights when they formally filed a complaint in 2004 against the DPWH. Thirdly, as the petitioners failed to file a formal suit for their claims before the COA, there is an apparent lack of notice that would give the DPWH the opportunity to defend itself.

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INDEX Assignment of Credit/Subrogation White Marketing Development Corporation vs. Grandwood Furniture & Woodwork

91

Breach of Contract Universal International Investment (BVI) Limited vs. Ray Burton Development Corp. Pryce Properties Corporation vs. Spouses Octobre and China Banking Corporation

83 99

Compensation Republic of the Philippines vs. Alberto Looyuko Marphil Export Corporation and Ireneo Lim v. Allied Banking Corporation

29 64

Consignation Jennefer Figuera vs. Maria Remedios Ang

35

Contract to Sell vs Contract of Sale Spouses Desiderio and Teresa Domingo v Spouses Tita Manzano

87

Delivery Heirs of Jose Extremadura vs. Manuel Extremadura and Marlon Extremadura

23

Estoppell Joey R. Peña vs. Jesus Delos Santos and The Heirs of Rosita Delos Santos Flores Norma C. Magsano, et al. v Pangasinan Savings and Loan Bank, Inc. Nestor Cabrera vs. Arnel Clarin Philippine Stock Exchange vs. Antonio Litonjua and Aurelio Litonjua

4 80 92 97

Extinguishment of Obligations Interport Resources Corporation vs. Securities Specialist, Inc. Republic of the Philippines vs. Alberto Looyuko Nympha Odiamar vs Linda Odiamar Valencia Development Bank of the Philippines v. Clarges Realty Corporation Spouses Juan Chuy Tan and Mary Tan (Deceased) vs. China Banking Corporation Philippine Science High School - Cagayan Valley Campus v. Pirra Construction Rizal Commercial Banking Corporation v. Teodoro G. Bernardino People of the Philippines v Ariel Layag

19 29 33 49 53 61 65 79

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Fortuitous and Unforeseen Event Spouses Jaime and Matilde Poon vs. Prime Savings Bank

21

Fraud Republic of the Philippines vs. Mega Pacific eSolutions Inc.

31

General Provisions on Contracts Industrial Personnel & Management Services, Inc. et al. vs. Jose G. De Vera Sps. Florante E. Jonsay, et al. vs. Solidbank Corporation Mactan-Cebu International Airport Authority vs. Richard E. Unchuan Vil-Rey Planners and Builders vs. Lexber, Inc. Stronghold Insurance Company Trifonia D. Gabutan, et al. vs. Dante D. Nacalaban, et al. Teresita I. Buenaventura vs. Metropolitan Bank and Trust Company Sta. Fe Realty, Inc. and Victoria Sandejas Fabregas v. Jesus M. Sison PNB v. Heirs of Benedicto and Azucena Alonday Fruehauf Electronics Philippines Corp vs Technology Electronics Rutcher T. Dagasdas vs. Grand Placement and General Services Corporation Kabisig Real Wealth Dev. Inc & Fernando Tito vs. Young Corporation Builders

7 11 17 25 37 48 55 77 89 106 108

Interpretation of Contracts Florita Liam vs. United Coconut Planters Bank Century Properties, Inc. v. Edwin J. Babiano UCPB General Insurance vs. Hughes Electronics Corporation

27 40 85

Laches Madag Buisan, et al vs. Commission on Audit and DPWH

110

Loss of the Thing Due Development Bank of the Philippines v. Clarges Realty Corporation

49

Novation Interport Resources Corporation vs. Securities Specialist, Inc. Nympha Odiamar vs Linda Odiamar Valencia Jennefer Figuera vs. Maria Remedios Ang Ever Electrical Manufacturing, Inc. vs. Philippine Bank of Communications Rizal Commercial Banking Corporation v. Teodoro G. Bernardino

19 33 35 47 65

Payment Sps. Florante E. Jonsay, et al. vs. Solidbank Corporation Jennefer Figuera vs. Maria Remedios Ang Spouses Juan Chuy Tan and Mary Tan (Deceased) vs. China Banking Corporation

11 35 53

113

Philippine Science High School - Cagayan Valley Campus v. Pirra Construction Philippine Stock Exchange vs. Antonio Litonjua and Aurelio Litonjua

61 97

Penal Clause Spouses Jaime and Matilde Poon vs. Prime Savings Bank

21

Prescription Spouses De Guzman vs. Court of Appeals, Mindanao Caltex, Inc., et al. vs. Ma. Flora A. Singzon Aguirre, et al. Edgardo A. Quilo and Adnaloy Villahermosa v. Teodula Bajao Republic of the Philippines v. Gonzalo Roque Jr. Norma C. Magsano, et al. v Pangasinan Savings and Loan Bank, Inc. Spouses Luisito Pontigon & Leodegaria Sanchez-Pontigon vs. Heirs of Meliton Sanchez

5 8 58 75 80 94

Prestation Iloilo Jar Corporation vs. Comglasco Corporation/Aguila Glass

104

Pure and Conditional Obligations Sta. Fe Realty, Inc. and Victoria Sandejas Fabregas v. Jesus M. Sison Dr. Restituto C. Buenviaje v. Spouses Jovito R. and Lydia B. Salonga Sergio Osmeña III v. Power Sector Assets and Liabilities Management Corp.

55 70 73

Reciprocal Obligations Vil-Rey Planners and Builders vs. Lexber, Inc. Stronghold Insurance Company

25

Reformation B.F. Corporation & Honorio Pineda v Form-Eze Systems, Inc

101

Rescission Bonifacio Dana vs. Spouses Gregorio Serrano and Adelaida Reyes Sta. Fe Realty, Inc. and Victoria Sandejas Fabregas v. Jesus M. Sison Philippine Economic Zone Authority v. Pilhino Sales Corporation Dr. Restituto C. Buenviaje v. Spouses Jovito R. and Lydia B. Salonga

45 55 67 70

Solidary Obligations Phil-Nippon Kyoei, Corp. Vs. Rosalia T. Gudelosao, et al. AFP Retirement and Separation Benefits System (AFPRSBS) v. Eduardo Sanvictores Doroteo C. Gaerlan v. Philippine National Bank

42 51 59

114

Sources of Obligations People of the Philippines v Ariel Layag

79

Trust Spouses De Guzman vs. Court of Appeals, Mindanao Sps. Primo Inalvez and Juliana Inalvez vs. Bayang Nool, et al. Trifonia D. Gabutan, et al. vs. Dante D. Nacalaban, et al.

5 13 37

Void Contracts Republic of the Philippines vs. Mega Pacific eSolutions Inc.

31

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CONTRIBUTORS: 1. Acuyong, Sidharta 2. Alcantara, Katrine 3. Alvarez, Alexandra Czarina Louise 4. Barroso, Frances Angelie 5. Contreras, Cesar Clarence 6. Cruz, Mary Abigail 7. Hosaka, Orlino Enrique 8. Lopez, Robynne 9. Paras, Erika Bianca 10. Resurreccion, Leandro IV

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