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PEN v.

SPOUSES SANTOS AND LINDA JULIAN

G.R. No. 160408, January 11, 2016

FACTS: The Julians obtained a P60,000.00 loan from Adelaida Pen. They were again extended
loans in the amounts of P50,000.00 and PI0,000.00. The initial interests were deducted by
appellant Adelaida.
Appellees failed to pay despite several demands. As such, appellant Adelaida decided to institute
foreclosure proceedings. However, she was prevailed upon by appellee Linda not to foreclose the
property because of the cost of litigation and since it would cause her embarrassment as the
proceedings will be announced in public places at the City. Instead, appellee Linda offered their
mortgaged property as payment.

ISSUE: Whether the deed of sale is valid

HELD: No. Article 2088 of the Civil Code prohibits the creditor from appropriating the things
given by way of pledge or mortgage, or from disposing of them; any stipulation to the contrary
is null and void. The elements for pactum commissorium to exist are as follows, to wit: (a) that
there should be a pledge or mortgage wherein property is pledged or mortgaged by way of
security for the payment of the principal obligation; and (b) that there should be a stipulation for
an automatic appropriation by the creditor of the thing pledged or mortgaged in the event of non-
payment of the principal obligation within the stipulated period. The first element was present
considering that the property of the respondents was mortgaged by Linda in favor of Adelaida as
security for the former's indebtedness. As to the second, the authorization for Adelaida to
appropriate the property subject of the mortgage upon Linda's default was implied from Linda's
having signed the blank deed of sale simultaneously with her signing of the real estate mortgage.
The haste with which the transfer of property was made upon the default by Linda on her
obligation, and the eventual transfer of the property in a manner not in the form of a valid dacion
en pago ultimately confirmed the nature of the transaction as a pactum commissorium.

It is notable that in reaching its conclusion that Linda's deed of sale had been executed
simultaneously with the real estate mortgage, the CA first compared the unfilled deed of sale
presented by Linda with the notarized deed of sale adduced by Adelaida. The CA justly deduced
that the completion and execution of the deed of sale had been conditioned on the non-payment
of the debt by Linda, and reasonably pronounced that such circumstances rendered the
transaction pactum commissorium. The Court should not disturb or undo the CA's conclusion in
the absence of the clear showing of abuse, arbitrariness or capriciousness on the part of the
CA.10chanroblesvirtuallawlibrary

The petitioners insist that the parties agreed that the deed of sale would not yet contain the date
and the consideration because they had still to agree on the price.13 Their insistence is not
supported by the established circumstances. It appears that two days after the loan fell due on
October 15, 1986,14Linda offered to sell the mortgaged property; 15 hence, the parties made the
ocular inspection of the premises on October 18, 1986. By that time, Adelaida had already
become aware that the appraiser had valued the property at P70,000.00. If that was so, there was
no plausible reason for still leaving the consideration on the deed of sale blank if the deed was
drafted by Adelaida on October 20, 1986, especially considering that they could have
conveniently communicated with each other in the meanwhile on this significant aspect of their
transaction. It was also improbable for Adelaida to still hand the unfilled deed of sale to Linda as
her copy if, after all, the deed of sale would be eventually notarized on October 22, 1986.

In a sale, the contract is perfected at the moment when the seller obligates herself to deliver and
to transfer ownership of a thing or right to the buyer for a price certain, as to which the latter
agrees.19The absence of the consideration from Linda's copy of the deed of sale was credible
proof of the lack of an essential requisite for the sale. In other words, the meeting of the minds of
the parties so vital in the perfection of the contract of sale did not transpire. And, even assuming
that Linda's leaving the consideration blank implied the authority of Adelaida to fill in that
essential detail in the deed of sale upon Linda's default on the loan, the conclusion of the CA that
the deed of sale was a pactum commisorium still holds, for, as earlier mentioned, all the elements
of pactum commisorium were present.
NISSAN CAR LEASE PHILS., INC. v. LICA MANAGEMENT, INC. AND PROTON
PILIPINAS, INC.

G.R. No. 176986, January 13, 2016

FACTS: LMI is the absolute owner of a property It entered into a contract with NCLPI for the
latter to lease the property for a term often (10) years. NCLPI, with LMFs consent, allowed its
subsidiary Nissan Smartfix Corporation (NSC) to use the leased premises. ySubsequently,
NCLPI became delinquent in paying the monthly rent. Nissan and Lica verbally agreed to
convert the arrearages into a debt to be covered by a promissory note and twelve (12) postdated
checks,. While NCLPI was able to deliver the postdated checks per its verbal agreement with
LMI, it failed to sign the promissory note and pay the checks. Thus, in a letter dated October 16,
1996, which was sent on October 18, 1996 by registered mail, LMI informed NCLPI that it was
terminating their Contract of Lease due to arrears in the payment of rentals. It also demanded
that NCLPI (1) pay the amount of P2,651,570.39 for unpaid rentals and (2) vacate the premises
within five (5) days from receipt of the notice.
NCLPI entered into a Memorandum of Agreement with Proton whereby the former agreed to
allow Proton "to immediately commence renovation work even prior to the execution of the
Contract of Sublease LMI, entered into a Contract of Lease with Proton over the subject
premises.
LMI filed a Complaint for sum of money with damages seeking to recover from NCLPI the
amount of P2,696,639.97, equivalent to the balance of its unpaid rentals. NCLPI demanded
Proton to vacate the leased premises. However, Proton replied that it was occupying the property
based on a lease contract with LMI. In a letter of even date addressed to LMI, NCLPI asserted
that its failure to pay rent does not automatically result in the termination of the Contract of
Lease nor does it give LMI the right to terminate the same. NCLPI also informed LMI that since
it was unlawfully ousted from the leased premises and was not deriving any benefit therefrom, it
decided to stop payment of the checks issued to pay the rent. Proton further asserted that NCLPl
had vacated the premises as early as during the negotiations for the sublease and, in fact,
authorized the former to enter the property and commence renovations. When NCLPl ultimately
failed to obtain LMI's consent to the proposed sublease and its lease contract was terminated,
Proton, having already incurred substantial expenses renovating the premises, was constrained to
enter into a Contract of Lease with LMI. The trial court found that NCLPI purposely violated the
terms of its contract with LMI when it failed to pay the required rentals and contracted to
sublease the premises without the latter's consent. Under Article 1191 of the Civil Code, LMI
was therefore entitled to rescind the contract between the parties and seek payment of the unpaid
rentals and damages. In addition, the trial court ruled that LMFs act of notifying NCLPI of the
termination of their lease contract due to non-payment of rentals is expressly sanctioned under
paragraphs and of their contract. Aggrieved,

ISSUE: Whether a contract can be rescinded extra judicially despite the absence of a special
contractual stipulation.

HELD: YES. It is true that NCLP1 and LMI's Contract of Lease does not contain a provision
expressly authorizing extrajudicial rescission. LMI can nevertheless rescind the contract, without
prior court approval, pursuant to Art. 1191 of the Civil Code.

Art. 1191 provides that the power to rescind is implied in reciprocal obligations, in cases where
one of the obligors should fail to comply with what is incumbent upon him. Otherwise stated, an
aggrieved party is not prevented from extra judicially rescinding a contract to protect its
interests, even in the absence of any provision expressly providing for such right. [T]he law
definitely does not require that the contracting party who believes itself injured must first file suit
and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, the
party injured by the other's breach will have to passively sit and watch its damages accumulate
during the pendency of the suit until the final judgment of rescission is rendered when the law
itself requires that he should exercise due diligence to minimize its own damages (Civil Code,
Article 2203) We are aware of this Court's previous rulings in Tan v. Court of Appeals, Iringan v.
Court of Appeals, and EDS Manufacturing, Inc. v. Healthcheck International, Inc., for example,
wherein we held that extrajudicial rescission of a contract is not possible without an express
stipulation to that effect.chanroblesvirtuallawlibrarWhether a contract provides for it or not, the
remedy of rescission is always available as a remedy against a defaulting party. When done
without prior judicial imprimatur, however, it may still be subject to a possible court review.
G.R. No. 201264, January 11, 2016

FLORANTE VITUG, Petitioner, v. EVANGELINE A. ABUDA, Respondent.

FACTS:

Parties who have validly executed a contract and have availed themselves of its benefits may not,
to escape their contractual obligations, invoke irregularities in its execution to seek its
invalidation.

On March 17, 1997, Abuda loaned P250,000.00 to Vitug and his wife, Narcisa Vitug. As security
for the loan, Vitug mortgaged to Abuda his property in Tondo Foreshore along R-10, Block A-
50-3, Del Pan to Kagitingan Streets, Tondo, Manila. The property was then subject of a
conditional Contract to Sell between the National Housing Authority and Vitug.

That, Mortgagor, is the owner, holder of a Conditional Contract to Sell of the National Housing
Authority (NHA) over a piece of property located at the Tondo Foreshore along R-10, Block "A-
50-3, Delpan to Kagitingan Streets in the district of Tondo, Manila;

That, with the full consent of wife Narcisa Vitug, hereby mortgage to Evangeline A. Abuda, with
full consent of husband Paulino Abuda, said property for TWO HUNDRED FIFTY
THOUSAND PESOS ONLY (P250,000.00), in hand paid by Mortgagee and in hand received to
full satisfaction by Mortgagor, for SIX MONTHS (6) within which to pay back the full amount
plus TEN PERCENT (10%) agreed interest per month counted from the date stated hereon;

That, upon consummation and completion of the sale by the NHA of said property, the title-
award thereof, shall be received by the Mortgagee by virtue of a Special Power of Attorney,
executed by Mortgagor in her favor, authorizing Mortgagee to expedite, follow-up, cause the
release and to received [sic] and take possession of the title award of the said property from the
NHA, until the mortgage amount is fully paid for and settled
cralawlawlibrary

On November 17, 1997, the parties executed a "restructured"4 mortgage contract on the property
to secure the amount of P600,000.00 representing the original P250,000.00 loan, additional
loans, and subsequent credit accommodations given by Abuda to Vitug with an interest of five
(5) percent per month. By then, the property was covered by Transfer Certificate of Title No.
234246 under Vitug's name.

Spouses Vitug failed to pay their loans despite Abuda's demands.

The Court of Appeals found that Vitug failed to pay his obligation within the stipulated six-
month period under the March 17, 1997 mortgage contract. As a result of this failure, the parties
entered into a restructured mortgage contract on November 17, 1997. The new mortgage contract
was signed before a notary public by Vitug, his wife Narcisa, and witnesses Rolando Vitug,
Ferdinand Vitug, and Emily Vitug.

The Court of Appeals also found that all the elements of a valid mortgage contract were present
in the parties' mortgage contract. The mortgage contract was also clear in its termsthat failure
to pay the P600, 000.00 loan amount, with a 5% interest rate per month from November 17, 1997
to November 17, 1998, shall result in the foreclosure of Vitug's mortgaged property. No evidence
on record showed that Vitug was defrauded when he entered into the agreement with Abuda.

However, the Court of Appeals found that the interest rates imposed on Vitug's loan were
"iniquitous, unconscionable [,] and exorbitant. It instead ruled that a legal interest of 1% per
month or 12% per annum should apply from the judicial demand on November 21, 2003.
ISSUES

Whether the restriction clause in petitioner's title rendered invalid the real estate mortgage he and
respondent Evangeline Abuda executed;

HELD:
The court deny the Petition. Petitioner argues that not all the requisites of a valid mortgage are
present. A mortgagor must have free disposal of the mortgaged property. The existence of a
restriction clause in his title means that he does not have free disposal of his property. The
restriction clause does not allow him to mortgage the property without the National Housing
Authority's approval. Since the National Housing Authority never gave its consent to the
mortgage, the mortgage contract between him and respondent is invalid.
ORIX METRO LEASING AND FINANCE CORPORATION v. CALUBAD

G.R. No. 201417, January 13, 2016

FACTS: Cardline leased four machines from Orix. Cardlirte's principal stockholders and officers,
Mary C. Calubad, Sony N. Calubad, and Ng Beng Sheng signed the suretyship agreements in
their personal capacities to guarantee Cardline's obligations under each lease agreement. Cardline
defaulted in paying the rent. Orix formally demanded payment from Cardline but the latter
refused to pay. Orix filed a complaint for replevin, sum of money, The RTC issued a writ of
seizure allowing Orix to recover the machines from Cardline. The RTC rendered judgment in
Orix's favor and ordered the respondents to pay Orix. The CA,and subsequently this Court,
denied the respondents' appeal. The CA granted the petition, annulled the RTC's and prohibited
the sheriff from executing the judgment.

ISSUE: Whether the individual respondents are entitled to the benefit of excussion.

HELD: No. The terms of a contract govern the parties' rights and obligations. When a party
undertakes to be "jointly and severally" liable, it means that the obligation is
solidary. Furthermore, even assuming that a party is liable only as a guarantor, he can be held
immediately liable without the benefit of excussion if the guarantor agreed that his liability is
direct and immediate. In effect, the guarantor waived the benefit of excussion pursuant to Article
2059(1) of the Civil Code.

In the present case, the records show that the individual respondents bound themselves solidarity
with Cardline. Section 31. of the lease agreements states that the persons who sign separate
instruments to secure Cardline's obligations to Orix shall be jointly and severally liable with
Cardline.

Even assuming arguendo that the individual respondents signed the continuing surety
agreements merely as guarantors, they still cannot invoke the benefit of excussion. The surety
agreements provide that the individual respondents' liability is "solidary, direct, and
immediate and not contingent upon" Orix's remedies against Cardline. The continuing suretyship
agreements also provide that the individual respondents "individually and collectively waive(s)
in advance the benefit of excussion xxx under Articles 2058 and 2065 of the Civil Code."Without
any doubt, the individual respondents can no longer avail of the benefit of excussion.
MANILA ELECTRIC COMPANY v. SPOUSES SULPICIO AND PATRICIA RAMOS

G.R. No. 195145, February 10, 2016

FACTS: MERALCO entered into a contract of service with the respondents agreeing to supply
the latter with electric power. MERALCO's service inspector inspected the respondents'
electrical facilities and found an outside connection attached to their electric meter. The service
inspector traced the connection, an illegal one, to the residence and appliances of Nieves. Nieves
was the only one present during the inspection and she was the one who signed the Metering
Facilities Inspection Report. Due to the discovery of the illegal connection, the service inspector
disconnected the respondents' electric services on the same day. The inspection and
disconnection were done without the knowledge of the respondents as they were not at home and
their house was closed at the time. The respondents denied that they had been, using an illegal
electrical connection and they requested MERALCO to immediately reconnect their electric
services. Despite the respondents' request, MERALCO instead demanded from them the
payment of P179,231.70 as differential billing. The respondents filed a complaint for breach of
contract with preliminary mandatory injunction and damages against MERALCO before the
RTC. The RTC ordered MERALCO to reconnect the respondents' electric service and awarded
damages. MERALCO appealed the RTC's decision to the CA. The CA denied the appeal for lack
of merit and affirmed the RTC's order of reconnection and award for payment of damages.

With MERALCO in bad faith for its failure to follow the strict requirements under R.A. 7832 in
the disconnection of the respondents' electric service, we agree with the CA that the award of
damages is in order. However, we deem it proper to modify the award in accordance with
prevailing jurisprudence.

ISSUE: Whether the respondent is entitled to Actual, Moral and Exemplary damages.

HELD: YES. Actual damages, to be recoverable, must not only be capable of proof, but must
actually be proved with a reasonable degree of certainty. Courts cannot simply rely on
speculation, conjecture or guesswork in determining the fact and amount of damages. To justify
an award of actual damages, there must be competent proof of the actual amount of loss,
credence can be given only to claims which are duly supported by receipts. In this case, Patricia
stated that her family's food expenses doubled after MERALCO disconnected their electric
services as they could no longer cook at home. We note, however, that there is no- sufficient
proof presented to show the actual food expenses that the respondents incurred. Nevertheless,
Patricia also testified that they were forced to move to a new residence after living without
electricity for eight (8) months at their home in Tondo, Manila. They proved this allegation
through the presentation of a contract of lease and receipts for payment of monthly rentals for 42
months amounting to P210,000.00. Moral damages are designed to compensate and alleviate the
physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar harm unjustly caused to a person. The
damage to the respondents' reputation and social standing was aggravated by their decision to
move to a new residence following the absolute refusal of MERALCO to restore their electric
services.
Exemplary or corrective damages are imposed by way of example or correction for the public
good, in addition to moral, temperate, liquidated, or compensatory damages. The award of
exemplary damages is allowed by law as a warning to the public and as a deterrent against the
repetition of socially deleterious actions. In this case, MERALCO totally failed to comply with
the two requirements under R.A. 7832 before disconnecting the respondents' electric service.
While MERALCO insists that R.A. 7832 gives it the right to disconnect the respondents' electric
service, nothing in the records indicates that it attempted to comply with the statutory
requirements before effecting the disconnection.
TOMAS P. TAN, JR v. JOSE G. HOSANAD
G.R. No. 190846, February 03, 2016

FACTS: During their marriage, Jose and Milagros bought a house and lot. Milagros sold to the
petitioner Tomas P. Tan, Jr. the subject property, as evidenced by a deed of sale executed by
Milagros herself and as attorney-in-fact of Jose, by virtue of a Special Power of Attorney (SPA)
executed by Jose in her favor. Jose filed a Complaint for Annulment of Sale/Cancellation of
Title/Reconveyance and Damages against Milagros, Tomas, and the Register of Deeds of Naga
City.The complaint was filed before the Regional Trial Court. In the complaint, Jose averred that
while he was working in Japan, Milagros, without his consent and knowledge, conspired with
Tomas to execute the SPA by forging Jose's signature making it appear that Jose had authorized
Milagros to sell the subject property to Tomas.chanroblesvirtuallawlibrary
The RTC decided in favor of Jose and nullified the sale of the subject property to Tomas. The
RTC held that the SPA wherein Jose supposedly appointed Milagros as his attorney-in-fact, was
actually null and void. Tomas appealed the RTC's ruling to the CA. The CA affirmed the RTC
ruling that the deed of sale and the SPA were void

ISSUE: Whether the deed of sale can be used as the basis for the amount of consideration paid.

HELD: Yes. The deed of sale as documentary evidence may be used as a means to ascertain the
truthfulness of the consideration stated and its actual payment. The purpose of introducing the
deed of sale as evidence is not to enforce the terms written in the contract, which is an obligatory
force and effect of a valid contract. The deed of sale, rather, is used as a means to determine
matters that occurred in the execution of such contract, i.e., the determination of what each party
has given under the void contract to allow restitution and prevent unjust enrichment.
VILLARTA, v. TALAVERA

G.R. No. 208021, February 03, 2016

FACTS: Appellant Oscar Villarta filed the complaint a quo for reformation of contracts appellee
Gaudioso Talavera, Jr. He alleged: he owned four parcels of land. He obtained several loans from
appellee who was a distant relative; as of 1996, his loan already reached P800,000.00, inclusive
of 3% interest per month; he religiously paid the interest, but when the 1997 financial crisis
struck, appellee raised the interest to a rate between 7% and 10%. Appellee employed insidious
words and machinations in convincing him to execute a deed of absolute sale. However, the real
agreement was that the lot would only serve as security for the several loans he obtained.

ISSUE: Whether the transaction between the parties was an equitable mortgage.

HELD: No. Not an Equitable Mortgage. Respondent was able to sufficiently explain why the
presumption of an equitable mortgage does not apply in the present case. The inadequacy of the
purchase price in the two deeds of sale dated 18 May 2001 was supported by an Affidavit of True
Consideration of the Absolute Sale of the Property. Respondent did not tolerate petitioner's
possession of the lots. Respondent caused the registration and subsequent transfer of TCT No. T-
214950 to TCT No. T-333921 under his name, and paid taxes thereon. There were no extensions
of time for the payment of petitioner's loans; rather, petitioner offered different modes of
payment for his loans. Art. 1602. The contract shall be presumed to be an equitable mortgage, in
any of the following cases:

1. When the price of a sale with a right to repurchase is unusually inadequate;

2. When the vendor remains in possession as lessee or otherwise;

3. When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;

4. When the purchaser retains for himself a part of the purchase price;

5. When the vendor binds himself to pay the taxes on the thing sold;

6. In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits or other benefit to be received by the vendee as
rent or otherwise shall be considered as interest which shall be subject to the usury laws.
ROSALINA CARODAN v. CHINA BANKING CORPORATION

G.R. No. 210542, February 24, 2016

FACTS: China Banking Corporation instituted a Complaint for a sum of money against Barbara
Perez. Barbara and Rebecca, for value received, executed and delivered Promissory Note. China
Bank further claimed that as security for the payment of the loan, Barbara, Rebecca and Rosalina
also executed a Real Estate Mortgage over a property registered in the name of Rosalina.
Respondent alleged that a Surety Agreement in favor of China Bank as creditor was also
executed by Barbara and Rebecca as principals and Rosalina and her niece Madeline as sureties.
Through that agreement, the principals and sureties warranted the payment of the loan obligation
amounting to F2.8 million including interests, penalties, costs, expenses, and attorney's
fees.Barbara and Rebecca failed to pay their loan obligation despite repeated demands from
China Bank.

ISSUE: Whether Rosalina is liable as a surety to the bank.

HELD: Yes. When Rosalina affixed her signature to the Real Estate Mortgage as mortgagor and
to the Surety Agreement as surety which covered the loan transaction represented by the
Promissory Note, she thereby bound herself to be liable to China Bank in case the principal
debtors, Barbara and Rebecca, failed to pay. She consequently became liable to respondent bank
for the payment of the debt of Barbara and Rebecca when the latter two actually did not pay.
China Bank, on the other hand, had a right to proceed after either the principal debtors or the
surety when the debt became due. It had a right to foreclose the mortgage involving Rosalina's
property to answer for the loan.
CARAVAN TRAVEL AND TOURS INTERNATIONAL, INC. v. ERMILINDA R. ABEJAR

G.R. No. 170631, February 10, 2016

FACTS: Jesmariane R. Reyes (Reyes) was walking along the west-bound lane of Sampaguita
Street, United Paraaque Subdivision IV, Paraaque City.A Mitsubishi L-300 van with plate
number PKM 195 was travelling along the east-bound lane, opposite Reyes.To avoid an
incoming vehicle, the van swerved to its left and hit Reyes. Alex Espinosa (Espinosa), a witness
to the accident, went to her aid and loaded her in the back of the van.Espinosa told the driver of
the van, Jimmy Bautista (Bautista), to bring Reyes to the hospital. Instead of doing so, Bautista
appeared to have left the van parked inside a nearby subdivision with Reyes still in the
van.Fortunately for Reyes, an unidentified civilian came to help and drove Reyes to the hospital.
Upon investigation, it was found that the registered owner of the van was Caravan. Caravan is a
corporation engaged in the business of organizing travels and tours. Bautista was Caravan's
employee assigned to drive the van as its service driver. Caravan shouldered the hospitalization
expenses of Reyes.Despite medical attendance, Reyes died two (2) days after the accident.

Respondent Ermilinda R. Abejar (Abejar), Reyes' paternal aunt and the person who raised her
since she was nine (9) years old, filed before the Regional Trial Court a Complaint for damages
against Bautista and Caravan. Abejar alleged that Bautista was an employee of Caravan and that
Caravan is the registered owner of the van that hit Reyes. The Regional Trial Court found that
Bautista was grossly negligent in driving the vehicle. It awarded damages in favor of Abejar. The
Court of Appeals affirmed with modification the Regional Trial Court.

ISSUE: Whether petitioner should be held liable as an employer, pursuant to Article 2180 of the
Civil Code.

HELD: No. But the petitioner is liable under the principle of registered owner rule. Contrary to
petitioner's position, it was not fatal to respondent's cause that she herself did not adduce proof
that Bautista acted within the scope of his authority. It was sufficient that Abejar proved that
petitioner was the registered owner of the van that hit Reyes. The resolution of this case must
consider two (2) rules. First, Article 2180's specification that "[e]mployers shall be liable for the
damages caused by their employees . . . acting within the scope of their assigned tasks" Second,
the operation of the registered-owner rule that registered owners are liable for death or injuries
caused by the operation of their vehicles. These rules appear to be in conflict when it comes to
cases in which the employer is also the registered owner of a vehicle. Article 2180 requires proof
of two things: first, an employment relationship between the driver and the owner; and second,
that the driver acted within the scope of his or her assigned tasks. On the other hand, applying the
registered-owner rule only requires the plaintiff to prove that the defendant-employer is the
registered owner of the vehicle.
Thus, it is imperative to apply the registered-owner rule in a manner that harmonizes it with
Articles 2176 and 2180 of the Civil Code. Rules must be construed in a manner that will
harmonize them with other rules so as to form a uniform and consistent system of jurisprudence.
Cabanting vs BPI
(GR 201927 February 17, 2016)

Facts:

Cabanting bought from Diamond Motors / BPI a car on installment basis for which a promissory
note with chattel mortgage was executed. One of the stipulations was that any failure to pay an
amount on schedule will make the entire outstanding sum to become due and payable without
prior notice and demand. When the two Cabantings failed to pay some monthly amortizations,
BPI sued them for replevin and damages. Decision was rendered ordering them to pay the cars
unpaid value with damages. The respondents appealed the decision claiming that there has been
no proof of prior demand and that the stipulation on its waiver must be deemed invalid for being
a contract of adhesion.

Issue 1: W/N a stipulation waiving the necessity of notice and demand is valid

Held:

Yes. Article 1169 of the Civil Code provides that one incurs in delay or is in default from the
time the obligor demands the fulfillment of the obligation from the obligee. However, Article
1169 (1) also expressly provides that demand is not necessary under certain circumstances, and
one of these circumstances is when the parties expressly waive demand.

Issue 2: W/N a contract of adhesion such as in this case is valid

Held:

Yes. A contract of adhesion is just as binding as ordinary contracts. Such are not invalid per se
and are not entirely prohibited because the one who adheres to the contract is in reality free to
reject it entirely. If the other party adheres, he gives his consent.

The court may strike down such contracts as void when the weaker party is deprived of the
opportunity to bargain at an equal footing. Here, there is no proof that petitioners were
disadvantaged, uneducated or utterly inexperienced in dealing with financial institutions; thus,
there is no reason for the court to step in and protect the interest of the supposed weaker party.

Issue 3: W/N a prior demand is required in actions for replevin

Held:

No. Prior demand is not a condition precedent to an action for a writ of replevin, since there is
nothing in Section 2, Rule 60 of the Rules of Court that requires the applicant to make a demand
on the possessor of the property before an action for a writ of replevin could be filed.
DESIGNER BASKETS, INC v. AIR SEA TRANSPORT, INC. AND ASIA CARGO
CONTAINER LINES, INC

G.R. No. 184513, March 09, 2016

FACTS:

DBI is a domestic corporation engaged in the production of housewares and handicraft items for
export. Ambiente, a foreign-based company, ordered from DBI 223 cartons of assorted wooden
items (the shipment). DBI delivered the shipment to ACCLI for sea transport from Manila and
delivery to Ambiente To acknowledge receipt and to serve as the contract of sea carriage, ACCLI
issued to DBI triplicate copies of ASTI Bill of Lading.

DBI then made several demands to Ambiente for the payment of the shipment, but to no avail.
Thus, on DBI filed the Original Complaint against ASTI, ACCLI and ACCLFs incorporators.
The trial court found ASTI, ACCLI, and Ambiente solidarity liable to DBI for the value of the
shipment.
The trial court declared that the liability of Ambiente is "very clear." As the buyer, it has an
obligation to pay for the value of the shipment. The trial court noted that "[the case] is a simple
sale transaction which had been perfected especially since delivery had already been effected and
with only the payment for the shipment remaining left to be done. The CA affirmed the trial
court's finding that Ambiente is liable to DBI, but absolved ASTI and ACCLI from liability. The
CA found that the pivotal issue is whether the law requires that the bill of lading be surrendered
by the buyer/consignee before the carrier can release the goods to the former. It then answered
the question in the negative.
chanRoblesvirtualLawlibrary
There is nothing in the applicable laws that require the surrender of bills of lading before
the goods may be released to the buyer/consignee.
ISSUE: Whether Article 1503 of the Civil Code applies to contracts for carriage of goods.

HELD: No. DBFs assertion is untenable. Article 1503 is an exception to the general presumption
provided in the first paragraph of Article 1523, which reads:Article 1523. Where, in pursuance
of a contract of sale, the seller is authorized or required to send the goods to the buyer,
delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the
cases provided for in Articles 1503, first, second and third paragraphs, or unless a contrary
intent appears.

Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on
behalf of the buyer as may be reasonable, having regard to the nature of the goods and the other
circumstances of the case. If the seller omit so to do, and the goods are lost or damaged in the
course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to
himself, or may hold the seller responsible in damages.

Unless otherwise agreed, where goods are sent by the seller to the buyer under circumstances in
which the seller knows or ought to know that it is usual to insure, the seller must give such notice
to the buyer as may enable him to insure them during their transit, and, if the seller fails to do so,
the goods shall be deemed to be at his risk during such transit. Article 1503, on the other hand,
provides:
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Article 1503. When there is a contract of sale of specific goods, the seller may, by the terms of
the contract, reserve the right of possession or ownership in the goods until certain conditions
have been fulfilled. The right of possession or ownership may be thus reserved notwithstanding
the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of
transmission to the buyer.

Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his
agent, or to the order of the seller or of his agent, the seller thereby reserves the ownership in the
goods. But, if except for the form of the bill of lading, the ownership would have passed to the
buyer on shipment of the goods, the seller's property in the goods shall be deemed to be only for
the purpose of securing performance by the buyer of his obligations under the contract.

Where goods are shipped, and by the bill of lading the goods are deliverable to order of the
buyer or of his agent, but possession of the bill of lading is retained by the seller or his
agent, the seller thereby reserves a right to the possession of the goods as against the buyer.

Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and
bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the
buyer is bound to return the bill of lading if he does not honor the bill of exchange, and if he
wrongfully retains the bill of lading he acquires no added right thereby. If, however, the bill of
lading provides that the goods are deliverable to the buyer or to the order of the buyer, or is
indorsed in blank, or to the buyer by the consignee named therein, one who purchases in good
faith, for value, the bill of lading, or goods from the buyer will obtain the ownership in the
goods, although the bill of exchange has not been honored, provided that such purchaser has
received delivery of the bill of lading indorsed by the consignee named therein, or of the goods,
without notice of the facts making the transfer wrongful.

Articles 1523 and 1503, therefore, refer to a contract of sale between a seller and a buyer. In
particular, they refer to who between the seller and the buyer has the right of possession or
ownership over the goods subject of the sale. Articles 1523 and 1503 do not apply to a contract
of carriage between the shipper and the common carrier. The third paragraph of Article 1503,
upon which DBI relies, does not oblige the common carrier to withhold delivery of the goods in
the event that the bill of lading is retained by the seller. Rather, it only gives the seller a better
right to the possession of the goods as against the mere inchoate right of the buyer. Thus, Articles
1523 and 1503 find no application here. The case before us does not involve an action where the
seller asserts ownership over the goods as against the buyer. Instead, we are confronted with a
complaint for sum of money and damages filed by the seller against the buyer and the common
carrier due to the non-payment of the goods by the buyer, and the release of the goods by the
carrier despite non-surrender of the bill of lading. A contract of sale is separate and distinct from
a contract of carriage.
PEA, v. DELOS SANTOS.

G.R. No. 202223, March 02, 2016

FACTS:
Jesus Delos Santos and Rosita Delos Santos Flores were the judgment awardees of the two-
thirds portion or 9,915 square meters of four adjoining lots . Pea 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
Atty. Robiso later on sold Lots No. 393-A and 394-D to Pea
The plaintiffs opposed Pea'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. The RTC partially granted Pea's motion and ruled that Jesus and
Rosita lost their standing in the case upon the conveyance of their adjudged 2,000 sq m portion
in favor of Atty. Robiso whose ownership rights were afterwards acquired by Pea. The RTC
upheld that the conveyance made by Jesus and Rosita in favor of Atty. Robiso is valid since it
was not made during the pendency of litigation but after judgment has been rendered. The CA
reversed the RTC and ruled that the conveyance made by Jesus and Rosita in favor of Atty.
Robiso was null and void because it is a prohibited transaction under Article 1491(5) of the Civil
Code. When the two Deeds of Sale in favor of Atty. Robiso were executed on May 4, 2005 and
December 5, 2005 and the Confirmation of Sale on December 15, 2006, the case was still
pending with the Supreme Court, before which Jesus and Rosita were still represented by Atty.
Robiso.

ISSUE: Whether the sale is a prohibited sale.

HELD: Yes. Article 1491(5) of the Civil Code expressly prohibits lawyers from acquiring
property or rights that may be the object of any litigation in which they may take part by virtue
of their profession,
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Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial
auction, either in person or through the mediation of another:

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other
officers and employees connected with the administration of justice, the property and rights in
litigation or levied upon an execution before the court within whose jurisdiction or territory they
exercise their respective functions; this prohibition includes the act of acquiring by assignment
and shall apply to lawyers, with respect to the property and rights which may be the object of any
litigation in which they may take part by virtue of their profession.

Clearly then, since the property conveyed to Atty. Robiso by Jesus and Rosita was still the object
of litigation, the deeds of conveyance executed by the latter are deemed inexistent. Under Article
1409 of the Code, contracts which are expressly prohibited or declared void by law are
considered inexistent and void from the beginning. 28 This being so, Atty. Robiso could not have
transferred a valid title in favor of Pea over the lots awarded to Jesus and Rosita in Civil Case
No. 3683. Consequently, Pea has no legal standing to be substituted in the stead of or joined
with Jesus and Rosita as the first set of intervenors and to move for issuance of a writ of
execution in Civil Case No. 3683.

This is notwithstanding the fact that the sale to Atty. Robiso was made pursuant to a contingency
fee contract. It is true that contingent fee agreements are recognized in this jurisdiction as a valid
exception to the prohibitions under Article 1491(5) of the Civil Code. The Court cannot extend a
similar recognition to the present case, however, since the payment to Atty. Robiso of his
contingency fees was made during the pendency of litigation. "A contingent fee contract is an
agreement in writing where the fee, often a fixed percentage of what may be recovered in the
action, is made to depend upon the success of the litigation. The payment of the contingent fee is
not made during the pendency of the litigation involving the client's property but only after the
judgment has been rendered in the case handled by the lawyer."
Pea 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.35 Conversely, it cannot give validity to an act
that is prohibited by law or one that is against public policy.36

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. 37 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.
CALTEX (PHILIPPINES), INC. v. MA. FLOR A. SINGZON AGUIRRE

G.R. No. 170746-47, March 07, 2016

FACTS: M/V Dona Paz was an inter-island passenger vessel owned and operated by Sulpicio
Lines, Inc. Traversing its Leyte to Manila when it collided with M/T Vector, a commercial tanker.

The heirs of the victims instituted a class action with the Civil District Court for the Parish of
Orleans, State of Louisiana. The Louisiana Court entered a conditional judgment dismissing the
said case on the ground of forum non-conveniens. A civil action for damages for breach of
contract of carriage and quasi-delict with the Regional Trial Court against petitioners, Sulpicio,
Vector Shipping, and Steamship Mutual Underwriting Association, Bermuda Limited
(Steamship). The RTC of 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. The dismissal of the complaint prompted the respondents to have the
case reinstated with the Louisiana Court. The Louisiana Court once again conditionally
dismissed the respondents' action, ordering the latter to bring their claims to the RTC of Manila
by intervening in the consolidated cases filed before the latter court. It was also stated in the
judgment that the Louisiana Court will allow the reinstatement of the case if the Philippine court
"is unable to assume jurisdiction over the parties or does not recognize such cause of action or
any cause of action arising out of the same transaction or occurrence." 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. The CA concurred with the RTC of Manila that the finality of the
Order issued by the RTC of Catbalogan has the effect of res judicata, which barred the
respondents' motion to intervene and complaint-in-intervention with the RTC of Manila.

ISSUE: Whether the petitioners has the right to waive the prescription.

HELD : No. he petitioners cannot be permitted to assert their right to waive the defense of
prescription when they had foregone the same through their own omission, as will be discussed
below. The Court shall first discuss the prescription of the respondents' cause of action against
the petitioners. Article 1106 of the Civil Code provides that "[b]y prescription, one acquires
ownership and other real rights through the lapse of time in the manner and under the conditions
laid down by law. In the same way, rights and conditions are lost by prescription." The first
sentence refers to acquisitive prescription, which is a mode of "acquisition of ownership and
other real rights through the lapse of time in the manner and under the conditions provided by
law." The second sentence pertains to extinctive prescription "whereby rights and actions are lost
by the lapse of time." It is also called limitation of action. This case involves the latter type of
prescription, the purpose of which is to protect the diligent and vigilant, not the person who
sleeps on his rights, forgetting them and taking no trouble of exercising them one way or another
to show that he truly has such rights. 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. In fact, the same is
evident on the complaint itself. 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 prescribe by the mere lapse of time fixed by law. Accordingly, the RTC
of Catbalogan cannot be faulted for the motuproprio dismissal of the complaint filed before it. It
is settled that prescription may be considered by thecourts motu proprio if the facts supporting
the ground are apparent from the pleadings or the evidence on record.

SPOUSES VIRGILIO DE GUZMAN v. COURT OF APPEALS

G.R. No. 185757, March 02, 2016

FACTS: The property subject of this case is a 480-square meter lot. Spouses Bajao sold 200
square meters for P1,000. Spouses Bajao sold another 280 square meters of Lot . Both
transactions were evidenced by separate Deeds of Absolute Sale. Petitioners initiated the
segregation of the property from through a survey. As a result of the survey, petitioners acquired
Lot. They allegedly acquired possession over the land immediately, fenced the area, introduced
improvements, and planted it with fruit-bearing trees. Respondent and Anastacia Bajao executed
an Extrajudicial Settlement Among Heirs. 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.
The trial court found the two Deeds of Absolute Sale free from infirmities. It ruled that their
execution was equivalent to the delivery of the thing sold; registration not being necessary to
make the contract of sale valid and effective as between the parties. The trial court also found
respondent in bad faith. Respondent admitted that he was aware of the adverse claim annotated at
the back of the title when he went to the Register of Deeds to register the Extrajudicial
Settlement. The CA dismissed the complaint and noted that an implied trust between the parties
under Article 1456 of the Civil Code was created at the time Anastacia Bajao and respondent
executed the Extrajudicial. The CA held that an action for reconveyance based on an implied
trust prescribes in 10 years from the registration of title in the Office of the Register of Deeds.

ISSUE: Whether the CA erred in dismissing the Complaint on the ground of prescription.

HELD No. 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 reconveyance of property. The Complaint, however,
was filed only on January 21, 2000, or more than 10 years from the issuance of TCT .Hence, the
action is already barred by prescription.
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.
EQUITABLE SAVINGS BANK v. ROSALINDA C. PALCES

G.R. No. 214752, March 09, 2016

FACTS: Respondent purchased a Hyundai Starex through a loan granted by petitioner in the
amount of P1,196,100.00. Respondent executed a Promissory' Note with Chattel Mortgage in
favor of petitioner. Respondent paid the monthly installment of P33,225.00 per month. However,
she failed to pay the monthly installments in January and February 2007, thereby triggering the
acceleration clause contained in the Promissory Note with Chattel Mortgage and prompting
petitioner to send a demand. As the demand went unheeded, petitioner filed the instant
Complaint for Recovery of Possession with Replevin.
Respondent nevertheless insisted that she called petitioner regarding such delay in payment and
spoke to a bank officer, a certain Rodrigo Dumagpi, who gave his consent thereto. Respondent
then maintained that in order to update her installment payments, she paid petitioner the amounts
of P70,000.00 on March 8, 2007 and P33,000.00 a total of P103,000.00.The RTC ruled in
petitioner's favor and, accordingly, confirmed petitioner's right and possession over the subject
vehicle. The RTC found that respondent indeed defaulted on her installment payments. The CA
affirmed the RTC. CA opined that by choosing to recover the subject vehicle via a writ of
replevin, petitioner already waived its right to recover any unpaid installments, pursuant to
Article 1484 of the Civil Code. As such, the CA concluded that respondent is entitled to the
recovery of the aforesaid amount.

ISSUE: Whether correctlyordered petitioner to return to respondent the amount of P103,000.00


representing the latter's late installment payments.

HELD: Yes. Citing Article 1484 of the Civil Code, specifically paragraph 3 thereof, the CA
ruled that petitioner had already waived its right to recover any unpaid installments when it
sought - and was granted - a writ of replevin in order to regain possession of the subject vehicle.
As such, petitioner is no longer entitled to receive respondent's late partial payments in the
aggregate amount of P103,000.00.
barArticle 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies:

(1) Exact fulfilment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should
the vendee's failure to pay cover two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the price. Any agreement to the
contrary shall be void. (Emphases and underscoring supplied) In this case, there was no vendor-
vendee relationship between respondent and petitioner. A judicious perusal of the records would
reveal that respondent never bought the subject vehicle from petitioner but from a third party,
and merely sought financing from petitioner for its full purchase price. In order to document the
loan transaction between petitioner and respondent, a Promissory Note with Chattel
Mortgage dated August 18, 2005 was executed wherein, inter alia, respondent acknowledged her
indebtedness to petitioner in the amount of P1,196,100.00 and placed the subject vehicle as a
security for the loan. Indubitably, a loan contract with the accessory chattel mortgage contract -
and not a contract of sale of personal property in installments - was entered into by the parties
with respondent standing as the debtor-mortgagor and petitioner as the creditor-mortgagee.
Therefore, the conclusion of the CA that Article 1484 finds application in this case is misplaced,
and thus, must be set aside.The Promissory Note with Chattel Mortgage subject of this case
expressly stipulated, among others, that: (a) monthly installments shall be paid on due date
without prior notice or demand; (b) in case of default, the total unpaid principal sum plus the
agreed charges shall become immediately due and payable; and (c) the mortgagor's default will
allow the mortgagee to exercise the remedies available to it under the law. In light of the
foregoing provisions, petitioner is justified in filing his Complaint before the RTC seeking for
either the recovery of possession of the subject vehicle so that it can exercise its rights as a
mortgagee, i.e., to conduct foreclosure proceedings over said vehicle; or in the event that the
subject vehicle cannot be recovered, to compel respondent to pay the outstanding balance of her
loan. Since it is undisputed that petitioner had regained possession of the subject vehicle, it is
only appropriate that foreclosure proceedings, if none yet has been conducted/concluded, be
commenced in accordance with the provisions of Act No. 1508, otherwise known as "The
Chattel Mortgage Law," as intended. Otherwise, respondent will be placed in an unjust position
where she is deprived of possession of the subject vehicle while her outstanding debt remains
unpaid, either in full or in part, all to the undue advantage of petitioner - a situation which law
and equity will never permit.
Further, there is nothing in the Promissory Note with Chattel Mortgage that bars petitioner from
receiving any late partial payments from respondent. If at all, petitioner's acceptance of
respondent's late partial payments in the aggregate amount of P103,000.00 will only operate to
reduce her outstanding obligation to petitioner from P664,500.00 to P561,500.00. Such a
reduction in respondent's outstanding obligation should be accounted for when petitioner
conducts the impending foreclosure sale of the subject vehicle. Once such foreclosure sale has
been made, the proceeds thereof should be applied to the reduced amount of respondent's
outstanding obligation, and the excess of said proceeds, if any, should be returned to her.
MALAYAN INSURANCE COMPANY, INC. v. DIANA P. ALIBUDBUD

G.R. No. 209011, April 20, 2016

FACTS: Alibudbud was employed by Malayan as Senior Vice President. As SVP, she was issued
a 2004 Honda Civic sedan conditioned on the following stipulations: (1) she must continuously
stay and serve Malayan for at least three full years from the date of the availment of the Car
Financing Plan; and (2) that in case of resignation, retirement or termination before the three-
year period, she shall pay in full 100% share of Malayan and the outstanding balance of his/her
share of the cost of the motor vehicle. Alibudbud also executed a Promissory Note and a Deed of
Chattel Mortgage in favor of Malayan wherein it was expressly stated that: (1) the loan of
P360,000.00 shall be payable in 60 equal monthly installments at the rate of P7,299.50 each.
Alibudbud was dismissed from Malayan due to redundancy. In view thereof, Malayan demanded
that she surrender the possession of the car to the company. Alibudbud sternly refused to do so.
Malayan instituted a Complaint for replevin and/or sum of money before the Regional Trial
Court (RTC) of Manila and prayed for the seizure of the car from Alibudbud, or that she be
ordered to pay P552,599.93 representing the principal obligation plus late payment charges and
P138,149.98 as attorney's fees, should said car be no longer in running and presentable condition
when its return be rendered impossible. The RTC denied Alibudbud's motion. It was opined that:
(1) reference shall be made only on the Promissory Note which Alibudbud executed in favor of
Malayan in determining the rights and obligations of the parties; (2) the cause of action in the
replevin case is rooted from the Promissory Note; and (3) the issue in the labor dispute is in no
way connected with the rights and obligations of the parties arising out of the Promissory Note.
The RTC rendered a Decision which granted the complaint for replevin. Alibudbud's ownership
over the car is not yet absolute for it bears the notation "encumbered", thereby signifying her
obligation to pay its value within the period set forth in the Promissory Note and Deed of Chattel
Mortgage; and the replevin action was converted into a money claim in view of Alibudbud's
vehement refusal to surrender the possession of the car. The CA. set aside RTCs Decision.

ISSUE: What is the relationship of the parties here.

HELD: The status of being an employee and officer of [Alibudbud] in [Malayan] was, therefore,
one of the pre-condition before she could avail of the benefits of the Car Financing Plan. Such
being the case, there is no doubt that [Alibudbud's] availing of the Car Financing Plan being
offered by [Malayan] was necessarily and intimately connected with or related to her
employment in the aforesaid Company."alawred
It should be noted, however, that the present action involves the parties' relationship as debtor
and creditor, not their "employer-employee" relationship. Malayan's demand for Alibudbud to
pay the 50% company equity over the car or, to surrender its possession, is civil in nature.
CENTURY PROPERTIES, INC v. CONCEPCION

G.R. No. 220978, July 05, 2016

FACTS: Babiano was hired by CPI as Director of Sales As CPFs Vice President for Sales,
Babiano was remunerated the following benefits: (a) monthly salary of P70,000.00; (b)
allowance of P50,000.00; and (c) 0.5% override commission for completed 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 resignation or termination from [CPI]." Should Babiano
breach any of the terms thereof, his "forms of compensation, including commissions and
incentives will be forfeited." nroblesla

During the same period, Concepcion was initially hired as Sales Agent by CPI and was
eventuallypromoted as Project Director. As such, she signed an employment agreement,
denominated as "Contract of Agency for Project Director" which provided, among others, that
she would directly report to Babiano, and receive, a monthly subsidy of P60,000.00, 0.5%
commission, and cash incentives. On March 31, 2008, Concepcion executed a similar contract
anew with CPI in which she would receive a monthly subsidy of P50,000.00, 0.5% commission,
and cash incentives as per company policy. Notably, it was stipulated in both contracts that no
employer-employee relationship exists between Concepcion and CPI. Babiano tendered his
resignation and revealed that he had been accepted as Vice President of First Global BYO
Development Corporation (First Global), a competitor of CPI.
On the other hand, Concepcion resigned as CPFs Project.
On August 8, 2011, respondents filed a complaint for non-payment of commissions and damages
against CPI and Antonio before the NLRC. CPI claimed to have validly withheld Babiano's
commissions, considering that they were deemed forfeited for violating the "Confidentiality of
Documents and Non-Compete Clause.On Concepcion's money claims, CPI asserted that the
NLRC had no jurisdiction to hear the same because there was no employer-employee relations
between them, and thus, she should have litigated the same in an ordinary civil action.

The LA ruled in favour of CPI. Babiano's acts of providing information on CPI's marketing
strategies to the competitor and spreading false information about CPI and its projects are blatant
violations of the "Confidentiality of Documents and Non-Compete Clause" of his employment
contract, thus, resulting in the forfeiture of his unpaid commissions in accordance with the same
clause. The NLRC reversed the ruling of LA and ruled that the forfeiture of all earned
commissions of Babiano under the "Confidentiality of Documents and Non-Compete Clause" is
confiscatory and unreasonable and hence, contrary to law and public policy. The CA affirmed
the NLRC.

ISSUE: Whether the non involvement clause contained in the contract is ambiguous.

HELD: No. Article 1370 of the Civil Code provides that "[i]f 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. the foregoing clause is not only clear and unambiguous in stating that
Babiano is barred to "work for whatsoever capacity x x x with any person whose business 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 the company," 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." Here, the contracting
parties - namely Babiano on one side, and CPI as represented by its COO-Vertical, John Victor
R. Antonio, and Director for Planning and Controls, Jose Carlo R. Antonio, on the other
-indisputably wanted the said clause to be effective even during the existence of the employer-
employee relationship between Babiano and CPI, thereby indicating their intention to be bound
by such clause by affixing their respective signatures to the employment contract. More
significantly, as CPFs Vice President for Sales, Babiano held a highly sensitive and confidential
managerial position as he "was tasked, among others, to guarantee the achievement of agreed
sales targets for a project and to ensure that his team has a qualified and competent manpower
resources by conducting recruitment activities, training sessions, sales rallies, motivational
activities, and evaluation programs." Hence, to allow Babiano to freely move to direct
competitors during and soon after his employment with CPI would make the latter's trade secrets
vulnerable to exposure, especially in a highly competitive marketing environment. As such, it is
only reasonable that CPI and Babiano agree on such stipulation in the latter's employment
contract in order to afford a fair and reasonable protection to CPI. 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.
AMBRAY v. TSOUROUS

G.R. No. 209264, July 05, 2016

FACTS: The subject matter of the present controversy is a parcel of land. Petitioners and
respondents Sylvia A. Tsourous,Carmencita Ambray-Laurel, Hedy Ambray-Azores, Vivien
Ambray-Yatco, Nancy Ambray-Escudero, Maristela Ambray-Ilagan (Maristela), Elizabeth
Ambray-Soriano, Ma. Fe Luisa Ambray-Arcilla (Ma. Fe Luisa), and Cristina Ambray-Labit are
siblings. With the exception of Sylvia, they are the children of the late Ceferino Ambray
(Ceferino, Sr.) and Estela Trias (Estela), who passed away on February 5, 1987 and August 15,
2002, respectively.

During their lifetime, Ceferino, Sr. and Estela owned several properties, one of which was a
parcel of land. Ceferino, Sr. mortgaged Lot 2 with Manila Bank for the amount of P180,000.00.
The mortgage was discharged. Prior to the discharge of the mortgage, Lot 2 was subdivided into
three (3) lots: Lot 2-A, Lot 2-B, and the subject property, Lot 2-C.

In June 1996, Maristela discovered that TCT No. T-22749 covering Lot 2-C had been cancelled
and in its stead, TCT No. T-41382 was issued in the name of petitioners. It appears that by virtue
of a notarized Deed of Absolute Sale Ceferino, Sr., with the consent of Estela, allegedly sold "a
portion of lot 2 of the consolidation subd. Plan to petitioners for a consideration of P150,000.00.
The Deed of Sale was registered with the Register of Deeds. This prompted respondents to file a
criminal case for falsification of public document against petitioners. The MTCC acquitted
petitioners of the charge for failure of the prosecution to prove their guilt beyond reasonable
doubt.

Respondents filed the instant complaint for annulment of title, reconveyance, and damages
against petitioners and, alleging that the Deed of Sale were null and void because the signatures
of Ceferino, Sr. and Estela thereon were forgeries. Defendants claimed that the issue on the
authenticity of the signatures of Ceferino, Sr. and Estela on the Deed of Sale had already been
passed upon in the falsification case where petitioners were eventually acquitted; hence, the
matter was res judicata. The RTC granted the motion and dismissed the case on said ground.

On appeal, however, the CA reversed the said disposition in a Decision finding that res
judicata does not apply. Thus, it remanded the case to the RTC for further proceedings.

The RTC nullified the Deed of Sale. The RTC found that respondents were able to prove, by a
preponderance of evidence, that the Deed of Sale executed by Ceferino, Sr. conveying Lot 2-C in
favor of petitioners was spurious and of dubious origin. The CA affirmed the RTC Decision and
found that respondents were able to sufficiently discharge the required burden of proof that the
subject Deed of Sale is spurious.

ISSUE: Whether the the disposition of Lot 2-C to petitioners was valid.

HELD: YES. The RTC noted, and found it puzzling, that the Deed of Sale did not specifically
mention the exact area that was being sold to petitioners, disposing only of "a portion of lot 2"
without specifying the metes and bounds thereof. As such, the RTC concluded that Ceferino, Sr.
could not have sold a specific portion of Lot 2 to petitioners, having been subdivided only in
1984. However, Article 1463 of the Civil Code expressly states that "[t]he sole owner of a thing
may sell an undivided interest therein." As Ceferino, Sr. was the sole owner of the original Lot 2
from whence came Lot 2-C, he is therefore allowed by law to convey or sell an unspecified
portion thereof. Hence, the disposition of Lot 2-C to petitioners, a portion of Lot 2 yet to be
subdivided in 1978, was therefore valid.

LOGARTA v. MANGAHIS

G.R. No. 213568, July 05, 2016

FACTS: Respondent Catalino M. Mangahis is the registered owner of a parcel of land. He


authorized a certain Venancio Zamora to sell the subject property, who, in turn, delegated his
authority to Victor Pea. Pea entered into a Memorandum of Agreement(MOA) with Carmona
Realty and Development Corporation (Carmona Realty), represented by petitioner Alicia P.
Logarta (petitioner), for the sale to Carmona Realty of contiguous parcels of land in Malitlit, Sta.
Rosa, Laguna (Malitlit Estate) which included the subject property. The Malitlit Estate had a
total area of 1,194,427 square meters and Carmona Realty agreed to deposit in escrow the total
consideration of P1,476,834,000.00 within thirty (30) days from the execution of the MOA. The
release of the escrow deposits was subject to Pea's submission of a number of documents,
among others, the order of conversion from the Department of Agrarian Reform (DAR) allowing
the use of the Malitlit Estate for residential, industrial, commercial, or a combination of the
foregoing uses, the transfer of the TCTs and the Certificates of Land Ownership (CLOAs) in
Carmona Realty's name, and the release waiver and quitclaim executed by complainants and/or
order of dismissal of pending cases involving any of the lands constituting the Malitlit Estate.The
parties also agreed to make the same effective unless Carmona Realty withdraws from it by
reason of force majeure or fails to make the escrow deposits within the period specified therein,
in which case the MOA shall be considered automatically null and void.chanrobRespondent filed
a petition to cancel the subject entries on the ground that the MOA was a private document that
had no legal effect because the Notary Public before whom it was acknowledged was not
commissioned as such in the City of Manila for the year 2001. In the same petition, respondent
also sought the revocation of Zamora's authority to sell the subject property.aw In opposition,
petitioner contended that the MOA was duly notarized. She also maintained that Pea had the
authority to enter into the MOA at the time it was executed, considering that respondent
expressed his intention to revoke the same only in the petition. nrobleslaw

During the trial, respondent's brother and authorized representative, Emiliano M. Mangahis,
asserted that the subject entries should be cancelled because the purpose for which they were
made is no longer present since petitioner did nothing to enforce the MOA. On the other hand,
petitioner argued that she is not the proper party to the case as she merely acted as representative
of Carmona Realty in the MOA.

The RTC granted the petition and ordered the cancellation of the subject entries. It found that the
subject entries are adverse claims which ceased to be effective 30 days after registration and
should, therefore, be cancelled, pursuant to Section 70 of Presidential Decree No. (PD) 1529
The CA dismissed petitioner's appeal and affirmed the RTC ruling. It agreed with the trial court
that the subject entries are akin to an annotation of adverse claim which is a measure designed to
protect the interest of a person over a piece of real property and governed by Section 70 of PD
1529.

ISSUE: Whether CA and the RTC erred in ordering the cancellation of the subject entries.

HELD: YES. An adverse claim is a type of involuntary dealing designed to protect the interest of
a person over a piece of real property by apprising third persons that there is a controversy over
the ownership of the land. It seeks to preserve and protect the right of the adverse claimant
during the pendency of the controversy, where registration of such interest or right is not
otherwise provided for by the Property Registration Decree. An adverse claim serves as a
notice to third persons that any transaction regarding the disputed land is subject to the outcome
of the dispute. It is settled that in a deed of conditional sale, ownership is transferred after the full
payment of the installments of the purchase price or the fulfillment of the condition and the
execution of a definite or absolute deed of sale. Verily, the efficacy or obligatory force of the
vendor's obligation to transfer title in a conditional sale is subordinated to the happening of a
future and uncertain event, such that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed. Given the foregoing, the MOA is
essentially a dealing affecting less than the ownership of the subject property that is governed by
Section 54 of PD 1529. Moreover, being a conditional sale, the MOA is a voluntary instrument
which, as a rule, must be registered as such and not as an adverse claim.
Magsano, et al. vs. Pangasinan Savings and Loan Bank, Inc.,

G.R. No. 215038, October 17, 2016

FACTS: Spouses Roque Magsano and Susana Capelo executed in favor of respondent bank a
Real Estate Mortgage over a 418 square-meter parcel of land located in Dagupan City as well as
the improvements, as security for the payment of their P35, 000.00 loan. The mortgagors,
however, defaulted in the payment of their loan obligation causing respondent bank to extra-
judicially foreclose the mortgaged property in accordance with Act No. 3135. Despite repeated
demands, the mortgagors refused to vacate the premises; hence, respondent bank applied for and
was granted a writ of possession over the subject property. Petitioners filed a complaint for
annulment of Real Estate Mortgage against respondent bank, Sps. Manuel, and Sheriff Daroy
before the RTC, They averred that Roque had already passed away on April 17, 1991, 28 or prior
to the execution of the Real Estate Mortgage on July 1, 1991; hence, the said mortgage was null
and void, and could not have conferred any right on the subject property in favor of respondent
bank which it could pass to Sps. Manuel. They further claimed that the said property is their
family home, but the consent of the majority of the beneficiaries had not been secured. They
likewise asserted that Sps. Manuel were aware that: the foreclosure proceedings were invalid;
and petitioners were in possession of the subject property, hence, purchasers in bad faith.
Defendants denied knowledge of the death of Roque, and averred that petitioners have no cause
of action to seek the annulment of the Real Estate Mortgage since they were not parties thereto.
They contended that assuming that the latter have a cause of action, the same had prescribed
pursuant to Articles 1144, 1149, and 1150 of the Civil Code. They further argued that petitioners
are estopped from questioning the validity of the Real Estate Mortgage. The RTC dismissed the
complaint for lack of merit. The CA affirmed the RTC's findings.

ISSUE: (a) Whether the Real Estate Mortgage was void.

(b) Whether Sps. Manuel were purchasers in good faith.

HELD: 1. Yes, the mortgage is void. While she herself as the co-owner had the right to
mortgage or even sell her undivided interest in the subject property, she could not mortgage or
otherwise dispose of the same in its entirety without the consent of the other co-owners.
Consequently, the validity of the subject Real Estate Mortgage and the subsequent foreclosure
proceedings therefor conducted in favour of respondent bank should be limited only to the
portion which may be allotted to it, as Susana's successor-in-interest, in the event of partition,
thereby making it a co-owner with petitioners pending partition.

2. No. While the rule is that every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige him to go
beyond the certificate to determine the condition of the property, where the land sold is in the
possession of a person other than the vendor, as in this case, the purchaser must go beyond the
certificate of title and make inquiries concerning the actual possessor. Furthermore, as correctly
pointed out by petitioners, the claim that one is an innocent purchaser for value is a matter of
defense. Hence, while petitioners alleged that Sps. Manuel were purchasers in bad faith, the rule
is that he who asserts the status of a purchaser in good faith and for value has the burden of
proving the same, and this onus probandi cannot be discharged by mere invocation of the legal
presumption of good faith, i.e. that everyone is presumed to act in good faith.

PNB vs. Heirs of Benedicto and Azucena Alonday,

G.R. No. 171865, October 12, 2016

FACTS: The 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 situated in
Sta. Cruz, Davao del Sur. On June 11, 1980, the Spouses Alonday obtained a commercial loan
for Pl6, 700.00 from the petitioner's Davao City Branch, and constituted a real estate over their
598 square meter residential lot situated in Ulas, Davao. The Spouses Alonday made partial
payments on the commercial loan, which they renewed on December 23, 1983 for the balance of
Pl 5,950.00. The renewed commercial loan, although due on December 25, 1984, was fully paid
on July 5, 1984.3 On August 6, 1984, respondents Mercy and Alberto Alonday, the children of
the Spouses Alonday, demanded the release of the mortgage over the property. The petitioner
informed them, however, that the mortgage could not be released because the agricultural loan
had not yet been fully paid, and that as the consequence of the failure to

Pay, it had foreclosed the mortgage over the property. The petitioner applied for the extrajudicial

Foreclosure of the mortgage on the property. The respondents instituted a complaint


Against the petitioner in RTC to recover damages averring that the foreclosure and sale of the
property was illegal. The RTC ruled in favour of respondents. The CA likewise rules in favor of
the respondent.

ISSUE: Whether the dragnet clause securing the past and future obligations is valid?

HELD: Yes. 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. If the
requirement could be imposed on a future loan that was uncertain to materialize, there is a
greater reason that it should be applicable to a past loan, which is already subsisting and known
to the parties.

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 expression 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.